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Could this be the end for Stokes v Insight Legal?

Some cases go on for ever.  Long after reason leaves the building, there is a determination that eventually right will prevail.  Sometimes that doesn’t happen.  Sometimes that doesn’t happen because the original perception of what was right was wrong.  Sometimes it is because there simply isn’t proof of what it is believed to have happened.

Stokes v Insight Legal is one of those cases.  In what it is hoped is the final instalment the Court of Appeal has yet again found for the trustees because there was no evidence that all of the trustees of the RM Colebrook Family Trust consented to the acquisition of a property originally purchased by Mrs Coleman or nominee.

The facts of the case are simple enough and can be summarised as follows:

  • Mrs Colebrook entered into a contract to purchase a property subject only to her being able to borrow the deposit
  • the contract was subsequently confirmed after the RM Colebrook Family Trust  (“the Trust”) provided mortgage security for a loan advance on account of the deposit.  The trustees at this time were Mrs Colebrook and her sister Mrs Carr
  • the settlement of the purchase of the new property was to occur on the same day as the sale of an existing property owned by the Trust
  • the sale did not settle, neither did the purchase
  • it was not disputed that the failure of the sale to settle led to the failure of the settlement of the purchase
  • the vendor trust (Stokes Family Trust) ultimately sold the property at a substantially reduced price and, in due course, obtained judgment against Mrs Colebrook in the amount of over $943,000 on account of her failure to settle the purchase

Proceedings history

The vendors unsurprisingly were deeply aggrieved at the failure to settle the purchase price.

The vendor’s first trip to court was was heard by Ellis J in the High Court. In that excursion Ellis J accepted that Mrs Colebrook signed the Bucklands Beach Road agreement in her capacity as trustee with the intention of binding the RM Colebrook Family Trust to settle. The Judge also found that in doing so she was acting with Mrs Carr’s authority and as her agent.

In round 2  the Court of Appeal upheld Ellis J’s factual finding as to Mrs Colebrook’s intention but considered it was wrong to analyse the matter as one of agency.  See Undisclosed Agency Decision overturned. The case was then remitted back to the High Court to determine the question of Mrs Carr’s consent.  In that court Peters J refused to make a declaration to the effect that Mrs Carr had consented to the acquisition of the property as an asset of the RM Colebrook Family Trust.  That decision was then appealed back to the Court of Appeal.

The Court of Appeal noted at [30] that “the evidence showed there was an expectation as between the two sisters that Mrs Carr’s consent as trustee would need to be obtained. The manner in which the two operated in this respect was sloppy: there were, for example, no formal resolutions. But the essential requirement of trustee consent was something the two appear to have kept in mind. That is perhaps not surprising given Mrs Carr is an experienced lawyer having worked as a senior solicitor for over 20 years at the Ministry of Business, Innovation and Employment.”

Importantly it was noted at [49] that (referring to Hansard v Hansard) that when considering whether a trustee had ratified a decision it “must be shown that there was more than a passive acquiescence to a decision made by another trustee. The ratifying act must show that the trustee considered the exercise of his or her power as a trustee and consented to the action taken.”

Arguably, the trustees’ sloppy attention to trust management also meant that there was not sufficient for any decision to be properly ratified.  Of course it could also mean that the trustees did not in fact ever formally commit to the purchase.

An entirely unsatisfactory outcome for the vendors.  Although that said it is difficult to form the view that the decision is not correct.  One facet of the decisions which remains unclear is why the vendors did not pursue Mrs Colebrook personally. She is noted as being insolvent(see [2]).  However, comment is also made as to the debts owed to her by the trustees of the RM Colebrook Family Trust (see [34]).  References here to the 2015 Court of Appeal decision.  It is unclear why the vendors have not sought to bankrupt Mrs Colebrook as this might have allowed greater consideration of the debts owed to her by the trustees of the RM Colebrook Family Trust – whether or not these debts were formally recorded.  One having to wonder that if the trustees were “sloppy” at maintaining trustee resolutions, were they equally sloppy with regarding debts owing to Mrs Colebrook?

A long hard lesson for all the players in differentiating between what trustees can be shown as having been decided to do and what we want them to have decided to do.

For further background also see Round 5 to the Trustees,  And on it goes and Round 7 and Counting on related trips to court.



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