The Court of Appeal issued a judgment on Friday in the ongoing battle for control of the late Hugh Green’s property & business empire between his eldest 2 children, John & Maryanne.
It’s unambiguous, but it doesn’t end the battle over a business empire worth an estimated $400 million, best known for its land subdivisions around Auckland.
The 3 judges – Stephen Kós, appointed president of the court shortly before the hearing in July, with Justices Rhys Harrison & Christine French – went into detail in support of Justice Helen Winkelmann’s High Court finding against John Green of undue influence resulting in will & role changes in his father’s final 2 years. Justice French wrote the court’s reasons.
Justice Winkelmann is also now on the Court of Appeal bench, appointed on 1 June 2015, 2 days before issuing her decision in this case. She heard the Greens’ dispute in 2014, when she was chief judge of the High Court.
Hugh Green wanted John Green and another sister, Frances, to become more involved in running the family business. But Maryanne, who’d joined it in 1987 and was chief executive for most of the time since then, questioned John’s honesty over cattle transactions before he left for Australia in the 1990s and rejected her father’s desire for her to run the group with John.
Hugh Green emigrated from Ireland in 1951 and formed Green & McCahill Ltd with another Irishman, Barney McCahill. In the early 2000s they dissolved their partnership, by then a complex group with wide property, trading & investment interest, and the Green family carried on under the Hugh Green Group name. Mr Green was diagnosed with a terminal illness in 2010 and, over the next 2 years, tried to work through family plans for the businesses’ future. He died in July 2012, aged 80.
Justice Winkelmann held that trust resolutions in December 2011 appointing John & Frances as directors weren’t validly passed by the required majority. She also held that grounds were made out for the removal of John & Frances as trustees on the grounds that the level of hostility they felt & exhibited toward Maryanne and her adopted daughter Alice “is sufficient to undermine the execution of the trusts for the benefit of all beneficiaries”.
Over a period of 9 months Hugh made a number of decisions, the combined effect of which was to remove Maryanne completely from control of any aspect of the Green Group and to put John & Frances & Auckland barrister Michael Fisher – who was also John Green’s golfing partner – in charge.
The level of influence
In the Court of Appeal judgment, Justice French wrote: From 7 November 2011 onwards, Mr Fisher purported to act as Hugh’s primary legal advisor. He played a central role in the events at issue. It was Mr Fisher who advised Hugh that Maryanne was in breach of her duty as a trustee for refusing to co-operate, even though he did not know the detail of just how Maryanne’s refusal to co-operate had manifested itself.
“It was Mr Fisher who suggested and then drafted a letter from Hugh purporting to put Maryanne on notice that she was at risk of being removed. And it was Mr Fisher who was responsible for drafting the formal documents effecting Maryanne’s removal and his own appointment as trustee & director. He organised critical meetings, expressed strong antipathy to Maryanne and generally aligned himself with John.”
Justice Winkelmann had already noted that Mr Fisher’s involvement was irregular from the outset. Justice French: “Although he had acted from time to time for the family & their interests, he was not the usual lawyer acting for the [family] trusts. He was a barrister specialising in civil litigation. He had no instructing solicitor and he did not obtain a letter of engagement.
“Another irregular feature of Mr Fisher’s involvement was that most of his instructions, including the initial instruction to act, came not from Hugh but from John. John & Mr Fisher had known each other since teenage years and played golf together. In addition to taking his instructions from John, Mr Fisher also used John as a post box for documents he had prepared for signing by Hugh & [Hugh’s wife] Moira.
“John claimed in evidence that when instructing Mr Fisher he was simply passing on Hugh’s instructions. John further claimed that Mr Fisher ‘always’ confirmed with Hugh the instructions he had received from John.
“Justice Winkelmann did not, however, accept John’s claims and we consider with good reason. Mr Fisher did not have any file notes of discussions with Hugh. His phone records did not contain evidence of any telephone discussions with Hugh. Nor did his time sheets, apart from 2 or 3 entries. In contrast, his records showed extensive contact with John. The communications between the 2 include a very telling email in which John asks Mr Fisher to meet to discuss ‘tactics’.
“Another troubling feature of Mr Fisher’s conduct is that he acted at John’s direction even when it was John (and indeed Mr Fisher himself) who stood to benefit personally from those directions.”
The judges noted evidence that, “within 24 hours of signing the deeds removing Maryanne as trustee, Hugh was both denying having removed Maryanne and giving the impression he really did not know why she had been removed, did not know who had prepared the papers and who had brought them to him to be signed. He caused the deed of removal to be torn out of the trust minute book and handed it to Maryanne, saying ‘You are my trustee’.
“Another telling piece of evidence relates to events in January 2012 regarding Maryanne’s status as trustee. As mentioned, Hugh had said he wanted her to continue. That was said on 21 December 2011. Yet in January 2012 John was pressing ahead to implement her removal as trustee. On 12 January 2012 Mr Fisher received instructions from John to prepare documents that referred to Maryanne as having been removed as trustee. John’s instructions to Mr Fisher were not only at odds with what Hugh had said on 21 December, they were also at odds with what Hugh had told Mr [Robert] Narev [another trustee] on 11 January 2012. Hugh had told Mr Narev he assumed Maryanne had been reappointed. Hugh later reiterated to Maryanne on 2 separate occasions in April 2012 that she remained a trustee.”
Summing up this aspect of the case, Justice French said the presence or absence of independent advice is often a critical factor when deciding whether to draw an inference of undue influence: “In this case there was compelling evidence Hugh was not receiving independent advice. His chief advisor throughout the relevant period was a man who was not his usual lawyer, who had minimal contact with him and who was doing the bidding of the person exerting the pressure.
“In those circumstances we consider the judge [Justice Winkelmann] was correct to characterise Mr Fisher’s role as facilitating John’s influence, instead of neutralising it and protecting Hugh as he should have done.”
Justice French said that, although Hugh undoubtedly wanted to appoint John & Frances as trustees and for the children (now in their 50s & 60s) to work together, “it does not logically follow he also wanted to remove Maryanne completely”.
In conclusion on the substantive judgment, Justice French wrote emphatically: “The High Court judgment contains a thorough & comprehensive analysis of the evidence. In our assessment, there was a solid evidential basis for all the findings and they are findings with which we agree, having ourselves independently reviewed the evidence. The findings are supported not only by Maryanne’s narrative, but also importantly by contemporaneous documentation, including John’s own written communications. The judge did not misapply the law. Nor did she misconstrue the facts. The appeal against the substantive judgment is dismissed.”
The appointment & removal orders
Justice Winkelmann made an order recalling the grant of probate for the will dated 26 April 2012, and a series of orders on appointments:
- Declarations that Mr Fisher & lawyer John Gosney weren’t validly appointed as trustees of the Hugh Green Trust or the Hugh Green Property Trust
- An order removing John & Frances as trustees of the 2 trusts
- A declaration that Maryanne is a director of all group companies from which she was removed as a director from 2 April 2012, and a declaration that she shouldn’t be liable as a director for any directors’ decisions or actions between 2 April 2012 and the date of the relief decision
- A declaration that John, Frances, Mr Fisher & Mr Gosney weren’t validly appointed and were & are not directors of any of the companies in the Green Group
- A declaration that Maryanne is a trustee of the 2 trusts
- An order appointing 2 independent interim trustees of the 2 trusts until further order of the court, and
- An order restraining Maryanne from exercising her power to vote as a trustee pending further order of the court and from attending trustee meetings unless called upon to do so by the interim trustees.
The continuing hostilities
Justice French said the Appeal Court had been told Mr Fisher & Mr Gosney did not intend to resume office as trustees. The judge added: “The reports show the interim trustees have put appropriate governance structures in place, are dealing with beneficiaries in a fair & even-handed manner, communicating with them and working well with Maryanne as their co-trustee.
“Notwithstanding this, the appellants say they are ‘devastated’ by the High Court decision because the outcome is the very antithesis of what Hugh wanted. Strangers are running the business and the only trustee who is a family member is Maryanne, and she does not enjoy the support of the rest of the family and therefore does not represent their interests. We were told that, apart from Maryanne & Alice, all the other beneficiaries (15 in total) support John & Frances and want the High Court decision quashed.”
At the Appeal Court hearing, they sought the reinstatement of either: both John & Frances, or one of them with the retention of Maryanne and the 2 independent interim trustees. An alternative & less favoured option was the removal of Maryanne, leaving the trust to be run solely by the independent trustees.
“After the hearing, counsel for John & Frances filed a memorandum dated 6 September 2016. The memorandum advised John & Frances wished to withdraw the submission that both or either of them should be trustees together with Maryanne. Removing Maryanne and having the trust operated by independent trustees only was now the preferred option.
“This possibility had not been advocated by the appellants at the hearing until it was raised by us. We raised it because of the obvious need for there to be a long-term solution and because of concern that Maryanne’s continued participation as trustee could fuel yet more discord & more litigation. This concern was shared by Justice Winkelmann and was the reason the judge made an order imposing interim limitations on Maryanne’s trusteeship.
“There is, however, a separate proceeding, as yet undetermined, that has been brought by the appellants in the High Court seeking to remove Maryanne as trustee. Maryanne consented to the interim limitations on the basis the appellants’ application for her removal as trustee would be promptly heard & determined. That has not happened.
“On further reflection, we consider that, quite apart from possible jurisdictional problems, it would be wrong for us to consider removing Maryanne without there having been a proper process where that issue has been directly & fully ventilated. Like Justice Winkelmann, we also wish to stress that our raising the possibility should not be taken to suggest we think Maryanne is unfit to be a trustee. The interim trustees report that Maryanne has demonstrated ‘a fair-minded, objective & responsible approach to all matters affecting the trusts & the beneficiaries’.”
Justice French said that, when Hugh Green’s 1 November 2011 will again takes effect, the power of appointment & removal of trustees will vest in Moira & Mr Narev, and Moira at least is closely aligned with John & Frances. That raised the prospect of the removed trustees being reappointed anyway, regardless of the outcome of this appeal.
However their counsel, Mark O’Brien, said that if the Court of Appeal upheld the High Court orders, “his clients could not & would not reinstate those whom a court did not consider fit to be a trustee”.
Control, and unequal treatment
The court action goes well beyond animosity between 2 siblings or the running of a business, extending to the treatment of their children, including Maryanne’s adopted daughter, and of one of Hugh & Moira Green’s 5 children, one of whom was a nephew who was adopted.
Justice Winkelmann found not only that hostility existed, but that it was of such intensity it was sufficient to undermine the proper execution of the trusts for the benefit of all beneficiaries.
“In support of that conclusion, the judge pointed to evidence of unwillingness on the part of the trustees to communicate directly with Maryanne & Alice, unwillingness to provide them with information and the failure to make any inquiry into Alice’s circumstances to establish her needs, despite her being a young mother who had recently separated from her partner. The judge considered this contrasted sharply with the way the trustees had considered and met the needs of John & Frances’ children….
“We note too that after Hugh’s death an issue was raised about Alice’s eligibility as a beneficiary under the Hugh Green Trust on the ground she is adopted. Proceedings have been issued (the interpretation proceedings). If Alice were to be excluded along with Hugh’s adopted nephew and the nephew’s children, it would mean that most of the wealth Hugh created would ultimately go to the 6 children of John & Frances.”
Permanent solution still not in sight
Justice French said the appellants might have been expected to deal with the matter by way of a consent court order & a deed of indemnity or family arrangement. After the court expressed disquiet that the appellants wanted to take this to a fresh High Court hearing, they filed a memorandum on 6 September advising that John, Frances & Moira would agree to consent orders.
Justice French said the Court of Appeal considered the issuing of these proceedings and the position taken by the appellants until very recently to be significant in 2 respects: “First, it reinforces Justice Winkelmann’s view that John & Frances cannot be relied upon as trustees to act in Alice’s interests and, second, it sits uneasily with the appellants’ claim to be only wanting to honour Hugh’s wishes.
“During his lifetime, Hugh made no distinction between family members who were adopted and those who were not. He treated all equally and, in particular, made distributions from the Hugh Green Trust to them all, including Alice.”
With that, the court saw no grounds for interfering with the orders Justice Winkelmann made in her relief decision.
The higher court also said the measures Justice Winkelmann put in place were working well, but were only a stopgap: “There is a need for a permanent solution, which ultimately can only be achieved by the family itself.”
On the contents of these 2 judgments, a permanent solution seems unlikely.
Hellaby millions may be cashed up
One large Green Group investment which might be turned to cash soon is its 27.2% holding in NZX-listed Hellaby Holdings Ltd. Australian automotive aftermarket parts company Bapcor Ltd made a full takeover offer for it at $3.30/share, which prices the Green interest at $87.7 million. Hugh Green Group has accepted the offer, but the independent committee of the Hellaby board has advised shareholders to wait until an independent report by Grant Samuel is received.
Managing director, chief executive & board committee member Alan Clarke said on Friday: “The preliminary view of the independent directors is that the proposed offer is opportunistic and does not represent fair value for Hellaby.”
Hugh Green bought his initial investment in Hellaby in the 1980s when it was the high-flying Renouf Corp Ltd and headed by Sir Frank Renouf.
27 September 2016: Australian auto parts company Bapcor bids for Hellaby
22 June 2015: Judge rules on Hugh Green family’s feud
Attribution: Judgments, NZX.