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Taylor v Inder [2022] NZHC 73 (2 February 2022)

Last Updated: 12 May 2022

JUDGMENT OF CULL J

TAYLOR v INDER and Others [2022] NZHC 73 [2 February 2022]

Table of Contents

Para No.

• [1] Mr Taylor is a consumer beneficiary of the Marlborough Electric Power Trust (the Trust), which holds all the shares in the Marlborough Electricity Lines Company (the Company). He seeks disclosure of trust information that dates back six years and primarily concerns the acquisition by the Company of the Yealands Wine Company Group (the Yealands Group).

Background Facts

• [2] The Company was established in 1993. It transmits and distributes electricity within the Marlborough region. In the same year, the Trust was also established. The beneficiaries of the Trust are the electric power customers of the Company. In 2015, the Company acquired 80 per cent of the Yealands Group and, by July 2018, the remaining shares.

Mr Taylor’s claim

• [3] Mr Taylor, the plaintiff, is a Marlborough resident and a consumer beneficiary as defined in the Trust Deed. He is also a current director and board chair of Astrolabe

Wines Ltd. He has expressed his concerns publicly both at the risk taken by the Company in buying a wine business and in the operations of both the Company and the Trust. He contends that his concerns are shared by a portion of the public. He claims the acquisition should not have occurred, and that the Trustees:

(a) were not adequately involved in the acquisition of the Yealands Group;

(b) should not have approved the purchase;

(c) should have ensured that appropriate directors were appointed to the Company; and

(d) caused the Company and the Yealands Group to suffer serious financial problems as a result.

• [4] Mr Taylor has publicly stated that he has an intention to bring substantive proceedings against the Trustees for breach of their duties as trustees, a double- derivative action against the directors of the Company for breach of their duties as directors, and a claim for breach of the Fair Trading Act (for alleged misrepresentations) against both Trustees and the Company.

• [5] When Mr Taylor issued these proceedings, he advanced three causes of action seeking:

(a) directions that the Trustees disclose specified documents and other information;

(b) a declaration providing guidance on the Trustees’ duties and powers contained within the Trust Deed and the future conduct of the Trustees; and

(c) a declaration that the Company’s statements of corporate intent should include the information required by the Energy Companies Act 1992 in relation to the Yealands Group.

• [6] During the hearing, Mr Wigley advised the Court that the second cause of action was not pursued, save one of the directions sought, namely, that the binding memorandum of understanding (MOU) between the Company and Trustees

erroneously states the Trustees’ disclosure obligations. Counsel sought a direction that his own characterisation of the actual duties owed by the plaintiffs (the “actual position”), contrary to the MOU, is correct. I indicated to Counsel during the hearing that the direction sought was problematic. It was framed in the abstract, would serve no useful purpose in the context of this hearing, and there was no basis for such an order or direction to be made in the context of this hearing. This issue was taken no further. The third cause of action seeking directions about the content of the Company’s statements of corporate intent was no longer pursued.

• [7] Mr Taylor also seeks a prospective costs order that his costs incurred up to and including the issue of this proceeding are paid out of the trust fund on an indemnity basis, and that he is not liable to pay the costs of any other party in the proceedings. He claims this is public interest litigation brought in the interests of all 25,000 current and future consumers to clarify the obligations of the Trustees.

• [8] Following argument and at the close of the hearing, Mr Wigley advised the Court that he would revise Mr Taylor’s request for disclosure. On 20 September, he filed a memorandum substantially reducing the disclosure request to the following documents:

(a) As to the initial acquisition of Yealands in 2015:

(i) the PWC investment assessment;

(ii) the PWC project valuations;

(iii) the Argyll Capital investment appraisal;

(iv) the Winstanley Kerridge investment analysis; and

(v) the agreements and settlement documents for the sale and purchase of shares.

(b) As to the acquisition of the second tranche of shares from Yealands:

(i) the agreement for sale and purchase of those shares; and

(ii) the “settlement document as to claims against Yealands’ interests”.

(c) The redacted passages in the trustee minutes of 2 December 2019 and 25 May 2020:

(i) marked with square brackets in the unredacted copies annexed to the plaintiff’s memorandum; and

(ii) a copy of the unredacted minutes at the following meetings approving the above minutes.

The defendant’s counter-claim

• [9] Both the Trust and the Company resist providing the requested disclosure to Mr Taylor. They have filed a counter-claim against Mr Taylor for breach of confidence in respect of (c) above, namely the redactions in the trustee minutes.

• [10] Mr Taylor has pleaded four affirmative defences to the defendants’ counter- claim.

Structure of this judgment

• [11] I will deal with the principle claim, the counter-claim and the defences of the parties as follows:

(a) The legal framework;

(b) The categories of documents sought;

(c) Acquisition documents;

(d) Redacted Minutes; and

(e) The affirmative defences.

The legal framework

• [12] These proceedings were issued in February 2020, prior to the commencement of the Trusts Act 2019 (the Act).¹ At this time, ss 67 and 68 of the Trustee Act 1956 governed the disclosure of information to beneficiaries.

¹ The Trusts Act 2019 came into effect on 30 January 2021.

• [13] Since 30 January 2021, the Trust has been subject to the 2019 Act. The Act provides clearer statutory guidance of the obligations on Trustees to provide trust information to beneficiaries. The same principles of law that were applicable under the 1956 Act apply now, with the 2019 Act essentially codifying the Supreme Court decision in Erceg v Erceg.² However, relevantly, the current Act has expanded the class of beneficiaries able to seek information from Trustees to include discretionary beneficiaries who had previously been excluded from any standing under the 1956 Act.³

• [14] Both parties agreed that the 2019 Act and the principles of Erceg applied to these proceedings. I canvass then the following relevant provisions of the Act.

Trusts Act 2019

• [15] Both parties drew the Court’s attention to the Act’s purposes and the guiding principles of the Trustees in performing their duties. The Act’s purposes are set out in s 3. They are to “restate and reform” trust law by setting out core principles relating to express trusts, providing for default administrative rules, providing mechanisms for resolving trusts dispute and making the law more accessible. The Act is to be applied having regard to core principles under s 4, being that:

(a) a trust should be administered in a way that is consistent with its terms and objectives; and

(b) a trust should be administered in a way that avoids unnecessary cost and complexity.

• [16] The guiding principle for Trustees in performing their duties is to have regard to the context and objectives of the Trust.⁴

Principles of disclosure

• [17] Sections 49–55 of the Act govern the provision of trust information to beneficiaries. “Trust information” is defined under s 49 as follows:

² Erceg v Erceg [2017] NZSC 28, [2017] 1 NZLR 320.

³ Trusts Act 2019, ss 9, 51(1) and 52(1). For the approach under the 1956 Act, see Little v Howick Trustee DL Ltd [2018] NZHC 1884.

⁴ Trusts Act, s 21.

trust information—

(a) means any information—

(i) regarding the terms of the trust, the administration of the trust, or the trust property; and

(ii) that it is reasonably necessary for the beneficiary to have to enable the trust to be enforced; but

(b) does not include reasons for trustees’ decisions.

• [18] The purpose of the disclosure provisions is identified in s 50 of the Act as “ensuring beneficiaries have sufficient information to enable the terms of the trust and the trustees’ duties to be enforced against the trustees”. Section 13(b) of the Act provides that trustees are accountable for the way in which they carry out the duties imposed on them by law. Thus, the disclosure provisions enable beneficiaries to hold their trustees to account.

• [19] As noted in the definition above, the trust information covered by the disclosure provisions includes the terms of the trust, its administration and the trust property but excludes reasons for Trustees’ decisions. It is only trust information that the beneficiary reasonably needs to enable the trust to be enforced. Commentators caution that not all information held by a Trustee is necessarily trust information.⁵

• [20] There is a presumption that a trustee will provide “basic trust information” ⁶ and any requested trust information,⁷ subject to consideration of s 53 mandatory factors.⁸ If after taking those factors into account the trustee reasonably considers that the information should not be provided, the presumption will not apply, and the trustee may decide to withhold basic trust information or refuse the request.⁹

• [21] The s 53 factors reflect the Supreme Court’s decision in Erceg v Erceg, where disclosure of information was considered in relation to the 1956 Act. A trustee must consider the following factors when making a disclosure decision:¹⁰

(a) the nature of the interests in the trust held by the beneficiary and

⁵ Nicola Peart (ed) Brookers Family Law Brookers — Family Property (online ed, Thomson Reuters) at [TU52.01].

⁶ Trusts Act, s 51(1).

⁷ Section 52(1).

⁸ Sections 51(2)(a) and 52(2)(a).

⁹ Sections 51(2)(b) and 52(2)(b).

¹⁰ Section 53; see also Erceg v Erceg, above n 2, at [56].

the other beneficiaries of the trust, including the degree and extent of the beneficiary’s interest in the trust and the likelihood of the beneficiary receiving trust property in the future:

(b) whether the information is subject to personal or commercial confidentiality:

(c) the expectations and intentions of the settlor at the time of the creation of the trust (if known) as to whether the beneficiaries as a whole and the beneficiary in particular would be given information:

(d) the age and circumstances of the beneficiary:

(e) the age and circumstances of the other beneficiaries of the trust:

(f) the effect on the beneficiary of giving the information:

(g) the effect on the trustees, other beneficiaries of the trust, and third parties of giving the information:

(h) in the case of a family trust, the effect of giving the information on—

(i) relationships within the family:

(ii) the relationship between the trustees and some or all of the beneficiaries to the detriment of the beneficiaries as a whole:

(i) in a trust that has a large number of beneficiaries or unascertainable beneficiaries, the practicality of giving information to all beneficiaries or all members of a class of beneficiaries:

(j) the practicality of imposing restrictions and other safeguards on the use of the information (for example, by way of an undertaking, or restricting who may inspect the documents):

(k) the practicality of giving some or all of the information to the beneficiary in redacted form:

(l) if a beneficiary has requested information, the nature and context of the request:

(m) any other factor that the trustee reasonably considers is relevant to determining whether the presumption applies.

• [22] The Act is not intended to be an exhaustive code of the law relating to express Trusts.¹¹ Rather, it is intended to be complemented by the rules of common law and equity relating to Trusts.¹² In this regard, the parties are also in agreement that the principles expressed in Erceg apply.

¹¹ Trusts Act, s 5(8)(a).

¹² Section 5(8)(b). See also s 7(1)(c).

• [23] Mr Taylor places reliance on ss 126 and 127 of the Act. Under s 126 of the Trusts Act 2019, the Court may review the acts, omissions or decisions of a Trustee on the ground that it was not reasonably open to the Trustee in the circumstances and such review must be undertaken in accordance with s 127. Under s 127, any applicant must produce evidence that there is a genuine and substantial dispute. The onus is then on the Trustee to show that the act, omission or decision was available to the Trustee.

• [24] Mr Taylor pleads that there is a “genuine and substantial dispute” and thus s 127(2) of the Act that the onus of proof on the Trustees is therefore triggered under s 127(2) of the Act. The Law Commission emphasised that the role of the Court under s 127 should continue to be a supervisory one, ensuring that actions and decisions by Trustees are properly exercised by them. Importantly, the Commission added the rider that the Court should not be invited to review the merits of the Trustee’s decision or impose its own view as to what was reasonable in the circumstances.¹³

The Trust Deed

• [25] Given that s 4 of the Act requires a Trust to be administered in a way that is consistent with its terms and objectives, the terms of the Trust Deed are relevant. Mr Taylor relies on the terms of the Trust Deed in full but highlights certain clauses of the Trust Deed as being material.

• [26] The object and purpose of the Trust, relied on by all counsel, are as follows:

(a) The object of the Trust is to hold the shares in the Company (and any other investments in the Trust Fund) on behalf of the Consumers, and to distribute to the Consumers in their capacity as owners, the benefits of ownership of the shares in the Company, and to carry out future ownership reviews involving public consultation in accordance with the terms of this Deed.

(b) This Trust has been established to enable the Trustees [among other things] To encourage and facilitate the Company in meeting its objective of being a successful business as required by section 36 of the Energy Companies Act 1992 and to require the business of the Company to be operated on a commercial, for profit, basis (as opposed

¹³ Te Aka Matua o te Ture | Law Commission Review of the Law of Trusts: A Trust Act for New Zealand (NZLC R130, 2013) at [11.10]–[11.12].

to a non-commercial basis) with a view to earning an optimal return on its assets and, in their capacity as legal owners of the shares in the Company, to distribute to Consumers in their capacity as beneficial owners of the Trust Fund, the benefits of ownership of the shares in the Company, by means which are efficient and appropriate in the circumstances. For the purposes of this clause, “optimal” means “best or most favourable, but not necessarily the maximum.

• [27] The Trustees have the power to do all acts and things, subject to the provisions of the Deed, that they may consider proper or advantageous for accomplishing the purposes and objects of the Trust. In addition to the Trustees’ general powers and duties in equity, the Trustees’ express powers and duties materially include:

(i) to appoint directors of the Company (cl 9.1);

(ii) subject to the provisions of this Deed, to exercise as the Trustees in their absolute discretion think fit all the voting powers attaching to any shares in the Company forming part of the Trust Fund (cl 9.8);

(iii) to make public the Trust’s audited accounts immediately on completion of the audit (cl 12.4);

(iv) to engage with the Company board as to drafting, modification and completion of the Company Statement of Corporate Intent (SCI), which is the same requirement, but in less detail, set out in the Energy Companies Act 1992 as outlined below (cl 12.8- 12.11);

(v) at the annual public meeting of the Trust, to comment on the Company’s compliance with the then current SCI (cl 12.10).

• [28] Of significance to this proceeding, these general powers are subject to the express proviso in cl 8.1, that the Trustees are not permitted to participate in the Company’s management but are restricted to their rights as a shareholder only:

For the avoidance of doubt, the Trustees shall have no general power, authority or discretion to participate in the management or operation of the Company. In exercising [their powers] the Trustees shall be restricted to exercising their rights as a shareholder subject always to the provisions of this Deed.

• [29] In the exercise of these powers, the Trustees are to act as a diligent shareholder and monitor the performance of the Directors of the Company with respect to the Company’s statement of corporate intent. They are also to exercise the rights of

shareholders for the benefit of the Trust Fund and with due regard to the objective of the Company to be a successful business.

• [30] The Trustees have a duty to exercise the care, diligence and skill that a prudent person of business would exercise in managing the affairs of others and they must prepare financial statements for the Trust, have them audited and make those financial statements and auditor’s report publicly available. In doing so, they must advertise the availability of those documents in local newspapers. The Trustees must hold an annual public meeting of consumers each financial year to:

(i) have the consumers appoint the auditor;

(ii) report on the operation of the trust during the preceding financial year and on the trust’s financial statements for that year; and

(iii) comment on the Company’s compliance with its then current statement of corporate intent.

• [31] It is worth noting, in relation to the Trustees’ obligations and powers under the Trust Deed, that the Trustees and the Company entered into a non-binding memorandum of understanding dated 23 September 2019 (MOU). This recorded their “understandings and intentions with regard to the provision of information by [the Company] to [the Trustees].” The MOU was intended to improve the flow of information to the Trustees by supplementing earlier guidelines for monitoring company performance. I return to consider the MOU under the relief sought by Mr Taylor.

• [32] The Trustees and the Directors of the Company must also operate within the statutory framework of the Energy Companies Act 1992 and Electricity Industry Act 2010.

• [33] The Energy Companies Act provides that the principal objective of an energy company is to operate as a successful business.¹⁴ Relevantly, it requires the directors

¹⁴ Energy Companies Act 1992, s 36(1).

of every energy company to share particular information with its shareholders (in this case, the Trustees), including:

(a) a draft statement of corporate intent provided no later than one month after the commencement of each financial year containing a range of information, including, amongst other categories, the Company’s objectives, the nature and scope of its activities, accounting policies, and performance targets;¹⁵

(b) a completed statement of corporate intent considering any comments the shareholders may have had on the draft, to be made publicly available within three months of commencement of the financial year;¹⁶

(c) end of year reports on the Company’s operations containing sufficient information to enable an informed assessment of the operations of the Company and its subsidiaries,¹⁷ with half yearly reports on the Company’s operations;¹⁸ and

(d) audited financial statements.¹⁹

• [34] Importantly, the directors’ reporting and disclosure obligations do not oblige them to include in any statement of corporate intent, annual report, financial statement, or half-yearly report any information that could be properly withheld if the Local Government Official Information and Meetings Act 1987 applied to energy companies.²⁰

• [35] The Electricity Industry Act 2010 requires the Trust to prepare annual financial statements²¹ and make these publicly available following their audit, advertising the availability of the audited statement in a newspaper “widely read” by consumers.²²:

¹⁵ Sections 39(1) and (2).

¹⁶ Section 39(3).

¹⁷ Section 44(3)(a) and 44(4).

¹⁸ Section 44(1).

¹⁹ Section 44(3).

²⁰ Section 46.

²¹ Electricity Industry Act 2010, s 99.

²² Section 100.

The information sought

• [36] As noted, Mr Taylor’s revised request for Trust information is threefold. He seeks:

(a) documents relating to the Yealands’ Group acquisition in 2015;

(b) documents relating to the remaining share acquisition by 2018; and

(c) copies of redacted Minutes.

• [37] I will deal first with the parties’ submissions and my conclusions on the acquisition information in (a) and (b) above. I will then deal with the redacted Minutes request, the defendants/trustees’ counterclaim for breach of confidence and Mr Taylor’s suggested disclosure conditions.

Is the requested information reasonably necessary?

• [38] Each of the Trust and the Company have specific objections to the release of the information sought by Mr Taylor.

• [39] The principle objection raised by the Trustees is that these documents do not constitute Trust information that is “reasonably necessary” to enable the Trust to be enforced. They contend that Mr Taylor is attempting to “all but take a seat at the Trustee’s table” and is essentially seeking this information in order to bring the proceedings he has threatened against the Trustees for their conduct and the resulting breaches of Trust, which is beyond the scope of both Erceg and the 2019 Act.

• [40] The Trustees say they have already provided a substantial amount of information to Mr Taylor in response to his requests and in addition, the Trustees say, they convene annual meetings of beneficiaries and publish audited financial statements for the Trust every year. In addition, the Company has published its statement of corporate intent and annual report, including annually audited financial statements.
• [41] Finally, the Trustees say they do not hold the agreements for sale and purchase or any of the settlement documents for either of the 2015 or 2018 acquisition of the Yealands Group shares.

Information provided

• [42] The information already disclosed to Mr Taylor goes well beyond that envisaged in s 51(3). The Trustees have described the information which has already been disclosed to Mr Taylor as follows:

(a) minutes of all trustee meetings between January 2015 and May 2020 (redacted as appropriate);

(b) three letters from the Trust to Marlborough Lines regarding the draft statements of corporate intent for 2015, 2016 and 2018;

(c) an internal Trust procedure document called “Monitoring Company Performance”;

(d) a copy of the MOU between the Trust and Marlborough Lines;

(e) copies of the Trust’s consolidated financial reports for 2013, 2014 and 2018 (all of which were made publicly available at the time); and

(f) the Trust Deed as it stood in November 2004 and March 2014.

• [43] In addition, the Trustees detailed the following actions they took to discharge their obligations:

(a) the Trustees have convened annual meetings of beneficiaries and published audited financial statements for the Trust every year.

(b) Marlborough Lines has published its statement of corporate intent and annual report (including audited financial statements) every year.

(c) Mr Taylor has attended the annual meetings in recent years and addressed questions and comments to the Trustees and the directors.

(d) the Trustees occasionally report on Trust matters to consumers through the regular Marlborough Lines newsletter to its customers and by posting information to the Trust’s website.

(e) the Trustees also make themselves available to speak with individual consumer beneficiaries from time to time.

• [44] The Trustees have also considered ad hoc requests for information from Mr Taylor, mindful of their obligation to act in the interests of the beneficiaries as a whole consistent with the Supreme Court approach in Erceg.

• [45] Mr Dew, former Chairman of the Board of Directors of the Company between 2006–2021, has sworn two affidavits, in which he describes the nature of the documents sought and opposes their disclosure because of their commercial sensitivity and the prejudice which would occur to the Company and beneficiaries of the Trust, if such information was disclosed. He deposed that the Company engaged leading experts to advise on the proposed transaction, including on financial, legal, tax, vineyard and winery operations, and capital structure areas. He explained that the third party expert reports were provided by the Company to the Trustees strictly on a confidential basis and their content remains commercially sensitive. Restrictions were also placed by the authors of the reports on the disclosure by the Company to parties other than those to whom the report authors had specifically provided consent for disclosure.

• [46] He says the disclosure of confidential documents relating to business acquisition would be likely to damage the Company’s ability to take up future opportunities in his view. He considers that potential targets for investment may not wish to involve themselves with the Company given the risk of potential exposure of confidential information and the media attention likely to be generated by the publication of the confidential information sought as the forecasts, information and strategy in the PWC valuation report (the PWC Investment Assessment) remain very commercially sensitive and could be used to harm the Yealands Group.

Reasons why disclosure of acquisition documents should not be ordered

• [47] I have reached the view that the documents relating to the Trust’s acquisition of the Yealands Group shares both in 2015 and 2018 should not be provided to Mr Taylor for three reasons:

(a) the information is not reasonably necessary to enforce the Trust;

(b) the nature of an energy trust is distinctive; and

(c) disclosure would likely inhibit free and frank communication between the Trustees and the Company.

Information not reasonably necessary to enforce the trust

• [48] First, the information sought is not reasonably necessary for Mr Taylor to enforce the Trust, or to hold the Trustees to account. Mr Taylor has received considerable Trust information on request, as detailed above. He himself has acknowledged to the defendants that he has “substantial information” already. The information he now seeks, identified above as expert advice prior to the acquisition of the Yealands Group shares does not assist in enforcing the Trust now, focused on the past conduct of Trustees and what he says are alleged breaches by the Directors and Trustees. As Mr Wigley described himself, albeit in the context of the confidentiality arguments, “this is old history anyway, being some six years ago.”

• [49] The information sought by Mr Taylor now appears to be somewhat of a “fishing expedition” for the purpose of finding a basis for challenging the actions of the Trustees, as the Supreme Court described the conduct of the party seeking disclosure in Erceg.²³ The Court specifically referred to the Court of Appeal of Jersey which said: ²⁴

...an order for disclosure will not ordinarily be made ... if the order would amount to pre-action disclosure, that is to say disclosure designed to enable the applicant to see if he has grounds for hostile action.

• [50] Mr Taylor clearly intends to obtain this information for the purpose of filing proceedings against the Trustees and Directors for breach of duties. The plaintiff, on behalf of a group of unnamed clients, has repeatedly threatened proceedings against the Trust, the Trustees, the Company, or the Directors for alleged breaches of duties, focusing on the Company’s acquisition of the Yealands Group in 2015. There have been advertisements in local papers in Marlborough seeking support for a class action, with Mr Wigley advising he had instructions to issue proceedings in April 2019. The local media had reported that Mr Wigley had expected to bring proceedings before Christmas 2019. In a memorandum of Counsel dated 31 May 2021, Mr Wigley said:

²³ Erceg v Erceg, above n 2, at [77].

²⁴ At [77], citing BC Trust Company (Jersey) Ltd v E [2010] JCA 231 at [34(ii)].

The plaintiff will issue substantive proceedings next month, being a claim for breach of duties by the Trustees, a double-derivative claim against the [Company] Directors, and a Fair Trading Act claim as to misrepresentations in late 2009 by [Company] Directors and the Trustees to beneficiaries.

• [51] While substantive proceedings are yet to be issued, Mr Taylor’s current statement of claim in these proceedings and the submissions on his behalf foreshadow allegations of breaches of trustees’ duty for past conduct.

• [52] The purpose of the disclosure provisions within the Act is to ensure that beneficiaries have sufficient information to ensure the trustees are performing their duties in accordance with the terms of the Trust. There is a distinction, in my view, between having sufficient information in order to hold Trustees to account and seeking recompense for past conduct of Trustee action by litigation.

• [53] This distinction becomes more obvious when observing the differences between the disclosure rules under the Act and the discovery rules contained in Part 8 of the High Court Rules.²⁵ While confidentiality s 53 of the Act is a key consideration, once a beneficiary has issued proceedings in the High Court, the focus under discovery rules shifts to relevance and proportionality considerations. Documents that may not be disclosed under the 2019 Act, such as a trustee’s reasons, may in such situations become discoverable. In Burgess v Monk, the residuary beneficiary of an estate was entitled to all the information held by the trustees and executors, including legal communications, on commencing legal action against the executors for alleged breaches of fiduciary duties.²⁶

• [54] I consider that, given the historic nature of the documents sought and the amount of information Mr Taylor has already received, Mr Taylor’s request goes beyond what is reasonably necessary to hold the trustees to account. Documents, such as those which Mr Taylor now seeks to be disclosed, may well be discoverable under the High Court Rules upon the filing of substantive proceedings, but would have to be assessed in the context of the proceedings issued.

²⁵ This difference has been the subject of both Court decisions and commentary: see Peart, above n 5, at [TU50.04].

²⁶ Burgess v Monk [2016] NZHC 527.

The distinctive nature of an energy trust

• [55] Second, both the nature of the Trust, being an energy trust with a large number of beneficiaries, and the commercially sensitive nature of the information sought mitigates against a presumption that the Trustees must give information on request. In any event, beneficiaries of energy trusts already have access to a significant body of financial and other information.

• [56] The Law Commission, in its review of the law of trusts, recognised that there were certain types of trusts where there will be a high likelihood that it will be reasonable for the presumptions of disclosure not to apply. Energy trusts were identified as one such category:²⁷

Another example is the energy trusts, which have the “Guidelines for access to information by beneficiaries of electricity community and consumer trusts”, a form of self-regulation supported by the government when energy trusts were developed. They were introduced as an alternative to regulations to address this issue.

• [57] The Commission’s view is reflected in s 53 of the Act, containing the procedure for trustees deciding whether the presumption applies. Under s 53(a), the trustee can consider the nature of the interests in the trust held by the beneficiary and the other beneficiaries of the trust, including the degree and extent of the beneficiary’s interests in the trust and the likelihood of the beneficiary receiving trust property in the future, makes the degree of proximity of the beneficiary to the trust a relevant factor.

• [58] More importantly, in the context of these proceedings, is s 53(b) of the Act, namely whether the information is subject to commercial confidentiality.

• [59] In Erceg, the Court recognised the need to protect the confidentiality of personal and commercial matters and to the existence of a confidentiality clause in the trust deed. The Court said specifically:²⁸

Recognition should be given to the need to protect confidential matters of a personal or commercial nature. The court should also take

²⁷ Te Aka Matua o te Ture, above n 13, at [5.53].

²⁸ Erceg, above n 2, at [56(d)].

into account any indications in the trust deed itself about the need for confidentiality in relation to commercial dealings or private matters in relation to particular beneficiaries.

• [60] The third party reports, as Mr Dew deposes, were provided to the Trustees on a confidential basis. Much of the information is commercially sensitive and has been provided to the trustee-shareholders by the Company on a confidential basis, including information about the Company’s bank, group funding arrangements, expenditure, revenue and dividend forecasts, investment policies and capability and potential new ventures.

• [61] Relevantly, the Court in Erceg declined to order disclosure of the information sought, which included share valuation reports and other financial material that supported a trustee resolution in relation to a trust investment. The nature of the information sought here similarly includes substantial financial material and forecasts.

• [62] I also consider it relevant that the Act expressly excludes the reasons for a trustee’s decision in the definition of “trust information.”²⁹ The fact that the Trustees received copies of the Company’s expert advice is indicative of the material that was provided in support of a Trustee resolution here. The disclosure of such advice, in my view, is tantamount to requiring disclosure of the Trustee’s reasons, which the Court in Erceg said “would not normally be appropriate.”³⁰

• [63] Mr Wigley had suggested that where commercial confidentiality is in issue, the Trustees can propose terms such as restricting access to counsel and experts. He confirmed that Mr Taylor is not seeking confidential commercial information being released into the public domain but that the commercially sensitive reports be released to Counsel and experts only.

• [64] I accept the defendant’s submission that if Mr Taylor issues proceedings, pre- commencement discovery and discovery of the further documents will have the protection of the High Court Rules, ensuring that discovery is used for the purposes of the litigation and not for ulterior purposes, with Court sanctioned protections for the

²⁹ Trusts Act, s 49(b).

³⁰ Erceg v Erceg, above n 3, at [56(f)].

release of confidential and commercially sensitive information. Particularly, in the context of hostile proceedings, the Court can make specific orders regarding confidentiality, the provisions of sensitive commercial information to named experts, counsel, or specified individuals.

• [65] For example, under High Court Rule 8.30, any party who obtains a document by way of inspection during the discovery process may not use the document for a purpose other than that of the proceeding,³¹ or make it available to any other person.³² Further, where a document proffered for inspection contains confidential information, the party providing the document may limit inspection of that document to specified persons.³³ If a party contests another’s confidentiality claim, it can apply to the Court for an order setting aside or modifying the claim.³⁴ These rules apply to both pre- commencement and ordinary discovery.

• [66] I conclude therefore that the reports sought are outside the disclosure obligations on the Trustees under the Act. Both the request and the suggested way of protecting the confidential information are more appropriately dealt with in the context of pre-commencement discovery on the basis of a pleading. As the commentators observe, discovery can be sought when the beneficiaries have commenced legal proceedings against a trustee challenging the trustee’s administration and that is the more appropriate course here in my view.³⁵

• [67] I address the issues of confidentiality further in relation to the request for redacted Minutes. Nevertheless, the nature of an energy trust, with 25,000 beneficiaries and sensitive commercial information, reinforces my view that the Trust information sought by Mr Taylor should not be disclosed.

Inhibiting free and frank communication of Trustees

• [68] Third, there is significant concern expressed by both the Company and the Trustees that requiring disclosure of the reports will inhibit free and frank

³¹ High Court Rules 2016, r 8.30(4)(a).

³² Rule 8.30(4)(b).

³³ Rule 8.28(3).

³⁴ Rule 8.25.

³⁵ Peart, above n 5, at [TU50.04].

communications between the Trustees and the Company and will prejudice the interests of the Company, the Trust and its beneficiaries. Their concern is that the information may potentially damage the reputation and credibility of the Company, the Yealands Group and its investors, and prejudice the Company’s future investment capability by deterring sellers from disclosing sensitive information is a legitimate concern.

• [69] I accept that the wine industry in New Zealand is relatively small and is concentrated in Marlborough. It is also relevant, in my view, that Mr Taylor’s position as the Chair of a competing vineyard puts the Company at a material competitive disadvantage. Mr Harris for the Company stressed that the provision of the expert reports, containing as they do commercially sensitive competitive information and financial forecasting, should not be disclosed to the other wine industry competitors. Added to this concern is the fact that if information is disclosed to Mr Taylor, quite apart from his position as Chair of a competing vineyard, that it should not be received by others. He is a beneficiary in the same group as 25,000 others, many of whom are also involved in the competitive wine industry in Marlborough.

• [70] I uphold the submission from the Company and the Trustees, that the interests of the beneficiaries are better served by the release of confirmed, verified and cogent information, such as that contained in an annual report and discussed at the annual meetings. The information sought is to further hostile litigation against the Trustees and potentially the Directors, and should be governed by the High Court discovery rules.

• [71] I conclude therefore, that the information sought, being documents relating to the Trust’s acquisition of shares in the Yealands Group both in 2015 and 2018 as specifically requested, should not be provided to Mr Taylor.

Redacted Minutes

• [72] Following several requests from Mr Taylor and his Counsel, the Trustees have provided the plaintiff with Minutes of all Trustee meetings between January 2015 and

May 2020, redacted as appropriate.³⁶ Relevant to the current application is the access provided to Mr Taylor of Minutes from the periods July 2018 to July 2019³⁷ and August 2019 to May 2020.³⁸

• [73] On 21 August 2019, the Trustees provided Mr Taylor with the electronic copies of the 2018/2019 Minutes. The Trustees notified Mr Taylor in an email attaching the Minutes, that the Minutes had been redacted on the grounds of commercial confidentiality; personal confidentiality, including matters relating to personal employment relationships; legal professional privilege and records of Trustee reasoning.

• [74] The Trustees again on 4 August 2020, provided Mr Taylor at his request, electronic copies of the 2019/2020 Minutes. The Trustees intended to redact information from the second set of electronic copies of the Minutes notifying Mr Taylor in an email that the Minutes had been redacted.

• [75] By letter dated 11 August 2020, Mr Taylor through his Counsel, notified the Trustees that the information in the second intended redactions could be viewed on an Iphone. The Trustees by return letter on 12 August notified Mr Taylor that the information in the second intended redactions was confidential and should not be disseminated further. Mr Taylor through his solicitor, notified the Trustees that he did not accept that the information in the second intended redactions was confidential.

• [76] Both the Trust and the Company sought urgent interim orders from this Court to prevent further disclosure and/or use by Mr Taylor of confidential information concerning the Company until further order of the Court. Mr Taylor advised the Trust and the Company that he had already disclosed the information in the second intended redactions to a number of relevant parties.

³⁶ Mr Martella, the Trust’s former Chair, described in his affidavit the Trustees’ approach to disclosure of Trust information, including ad hoc requests. All Board Minutes were provided but some of those were provided in redacted form.

³⁷ The 2018/2019 Minutes.

³⁸ The 2019/2020 Minutes.

• [77] On 25 September 2020, this Court made urgent interim orders restraining the plaintiff from publishing or otherwise disclosing the information in the second intended redactions and required the plaintiff to give notice of the orders to any person to whom the plaintiff had already disclosed the information.

• [78] Subsequent to those orders it transpired that one of the persons to whom Mr Taylor had provided the information was a reporter for the NZ Herald but the names of other recipients of the information have not been disclosed by Mr Taylor.

• [79] It also became apparent that the redactions made to the 2018/2019 Minutes disclosed to Mr Taylor were made visible by his manipulating redacted electronic copies to reveal the contents of the redactions.

• [80] Mr Taylor now seeks “disclosure” of these redacted parts of the minutes to him, his counsel and his experts, by way of variation to the existing injunction, “for use solely in Court as to proceedings” that are to “include[e], to avoid doubt, a r 4.24 representative application and an application for a prospective costs order”. This is a reference to further proceedings. In his memorandum dated 20 September 2020, Mr Taylor narrowed his request for redacted information to that contained in the Trustee Minutes of 2 December 2019 and 25 May 2020. The contest between Mr Taylor and the Trustees therefore is over the redacted material, as well as the request for “In- Committee Minutes plus Board papers”.

• [81] The principle redaction that Mr Taylor seeks of the Minutes is the comments made by one of the Trustees, Mr Romano in relation to an AGM and the content of an annual report. In his last memorandum, Mr Wigley submits that the injunction sought by the Trust and the Company would not permit disclosure of the Minutes in any future Court action. He says this is fatal to Mr Taylor’s future action, even though there has been disclosure to the Court of the redactions. He submits that the interim injunction orders do not permit the issue of proceedings without particulars, which would then lead to problems in extracting the Minutes by discovery. Mr Wigley seeks clarification from the Court that the injunction would not have that effect.
• [82] There are two issues which arise in relation to the redacted Minutes’ request. The first is whether it even constitutes Trust information and is disclosable. The second is whether Mr Taylor’s use and disclosure to others was in breach of an obligation of confidence.

Are the redacted minutes disclosable?

• [83] I consider that the information, although recorded as part of the Trustees’ meetings, reflect the Trustees’ reasons for their ultimate decisions. Many of the excerpts contain comments by one of the Trustees in a free and frank discussion among fellow Trustees. The information is not reasonably necessary for Mr Taylor to have the Trustees being held accountable for carrying out the objects of the Trust, or to have the Trust enforced. This is Trustees in action at Board meetings discussing matters, with frank comments, before decisions are made. I consider that the information is excluded from disclosure by s 49(b) of the Act and is not “Trust information”.

• [84] In making that finding, I now address Mr Wigley’s submission that without disclosure of the information in the redactions, it will be fatal to any hostile litigation or action being taken by Mr Taylor and others. I am unable to uphold that submission.

• [85] There is a distinction to be drawn between information that is necessary for the beneficiaries to enforce the Trust and the objects of the Trust deed and obtaining evidence to support a hostile claim against the Trustees (and Directors) personally. As noted earlier, Mr Taylor has considerable information, which enables him to file a proceeding against the Trustees and Directors for breach of duties, as he has said publicly.

• [86] The pleading, if issued in terms above, does not require the detail of evidence to be pleaded but an allegation in generic terms. It is then for the plaintiff/s to provide evidence in support of their claims against the Trustees. In such proceedings, the plaintiff can seek pre-action discovery, which will have the restraints and requirements under the High Court Rules, as identified previously.

• [87] In the context of hostile proceedings, if issued, the Court can make specific orders regarding confidentiality, the provision of sensitive commercial information to

named experts, counsel or specified individuals. The constraints of the High Court Rules would ensure that the discovered material can be used only for the purposes of the Court proceedings. I do not accept therefore that the lack of disclosure under the Trust Act and the Erceg principles is fatal to Mr Taylor’s claims as alleged. In the event that the content of the redacted Minutes is required for the evidential purposes of the hostile proceedings, it is open to the parties to seek leave of the Court to vary the existing restraining orders.

• [88] I decline Mr Taylor’s request for disclosure of the redacted information in the Trustees’ Minutes of August 2020 and May 2021.

The Counterclaim

• [89] Both the Trust and the Company have filed counterclaims against Mr Taylor in these proceedings, for breach of confidence in Mr Taylor’s use and disclosure of the information in the redactions in both the first and second redacted Trust Minutes. The Trust and the Company seeks a permanent injunction restraining Mr Taylor, his agents or anyone on his behalf, from publishing or otherwise disclosing the information in the redactions; a declaration that Mr Taylor’s use and disclosure of the information in the redacted material was in breach of an obligation of confidence and therefore unlawful; and an order requiring Mr Taylor to file an affidavit with the Court listing the names and contact details of any person to whom the plaintiff has disclosed the information.

• [90] Mr Taylor pleads the following four affirmative defences to the defendant’s counterclaim as follows:

(1) the information lacks the necessary quality of confidence;

(2) there is a public interest in disclosure of the redacted information;

(3) the Trustees have acted improperly by withholding information that should have been disclosed to the beneficiaries; and

(4) as there is no “material confidentiality” the names of the recipients of the confidential information should not be disclosed.

Is there a duty of confidence?

• [91] To establish the equitable doctrine of breach of confidence, there are three requirements:³⁹

(a) The information must be confidential;

(b) The information must be communicated in circumstances importing a duty of confidence;

(c) There must have been actual or threatened unauthorised use or disclosure of that information.

• [92] I have traversed the background to the counterclaim that Mr Taylor breached his duty of confidence. I am satisfied that the three elements required for the imposition of a duty of confidence have been met in this case.

• [93] First, the redacted information contains commercially sensitive information including the negotiation of the Memorandum of Understanding between the Company and the Trustees; personal information about individuals employed by the Company or the Trustees, or those hired by the Trustees as professional advisors; information relating to third parties of a sensitive nature; the Trustees’ reasons for certain decisions and information that is legally privileged. As noted above, Trustees must have the ability to have free and frank discussion of matters affecting the Trust in reaching reasons for making their final decisions. I note the Trustees’ meetings are not open to the public, including the beneficiaries, and this provides an opportunity for the Trustees to have robust discussions and express opinions in private.

• [94] Second, the electronic meetings were sent to Mr Taylor with the express advice that the Minutes had been redacted. It is plain that Mr Taylor must have known that the Trustees did not intend to disclose the redacted information to him. The redacted information was therefore imparted in circumstances importing an obligation of confidence.

³⁹ Coco v A N Clark (Engineers) Ltd [1969] RPC 41 (Ch) at [47]; and Hunt v A [2007] NZCA 332; [2008] 1 NZLR 368 (CA).

• [95] Third, there is evidence of actual and threatened unauthorised use and disclosure of redacted information. Mr Taylor admitted disclosing the redacted information in the 2019/2020 Minutes to “a number” of people but has declined to identify them. Further, Mr Taylor says he does not regard the information as confidential and does not consider himself bound by any duty of confidentiality in relation to it.

• [96] I am satisfied that Mr Taylor owed a duty of confidence to the Trust and to the Company in relation to the 2019/2020 Minutes and this was breached by the unauthorised disclosure of the information to third parties. I now turn to Mr Taylor’s defences.

• [97] In support of Mr Taylor’s defence, Mr Wigley argues that the information contained in the redactions does not have the necessary quality of confidence because confidentiality is substantially more limited in the trust context, as trustees have a duty of disclosure, subject to the s 53 factors and the threshold step under the Act.

• [98] I do not uphold Mr Wigley’s submission. I have concluded that the information does not qualify as trust information and given the nature and context of it, does not fall to be disclosed under the Act or the Erceg principles. My reasons for rejecting Mr Taylor’s defence is twofold:

(a) the information did have the necessary quality of confidence and was imparted to Mr Taylor on that specific premise.

(b) confidentiality is not limited, because it is information from Trustees to beneficiaries. Mr Taylor was bound by the obligation of confidence to the Trustees and imparting that confidential information to others, breached his duty to them.

• [99] The Trustees here were not obliged to disclose the detailed information to the beneficiaries. It would not otherwise be publicly available. In making it available to Mr Taylor, following the Erceg principles, the Trustees took the step of releasing such information as they thought appropriate but redacting material that fell into the

categories of commercially sensitive and Trustee discussions amounting to reasoning. Not only was that material redacted, but the Trustees took the step of specifically advising Mr Taylor that it was confidential and was it imparted to him on that basis. Mr Taylor chose to manipulate the electronic content in relation to the first set of Minutes and was able to read the redacted portions in the second set of Minutes. Despite the caution on both occasions that the information was confidential, Mr Taylor chose to impart it to unnamed others, one of whom was a news reporter. The duty of confidentiality is not limited because it was information from Trustees to beneficiaries.

• [100] I now turn to the plaintiff’s second defence, namely that there is an overriding public interest in sharing this information. The defence of public interest in disclosure arises where, in all the circumstances it is in the public interest that the duty of confidence should be breached. The test for the defence of public interest is whether in all the circumstances it is in the public interest that the duty of confidence should be breached.⁴⁰

• [101] There is no overriding public interest that takes precedence over the equitable duty of confidence in this case. Mr Taylor’s issue here is with the conduct of the Trustees and the Directors of the Company, the remedy for which is hostile litigation seeking damages. Mr Taylor received the information and could have kept it confidential until he had issued his proceedings as he has publicly stated he will. Recourse to the Courts for a release from the duty of confidence, or a variation of interim orders already made, would have been available to him. There is no public interest in having the discussions and frank opinions of the Trustees published. The Courts have drawn a distinction between matters that are in the public interest and those that are merely of interest to the public.

• [102] I am not satisfied that it is in the public interest that the duty of confidence should be breached here. The detail of the evidence in support of any such action does not have the necessary qualification of public interest to outweigh Mr Taylor’s obligation to keep the material confidential. He has an interest in seeking more

⁴⁰ Blum v ANZ Bank Limited [2015] NZCA 335 at [55].

plaintiffs to join in his stated intention to bring legal proceedings by way of a representative action against the Trustees and/or the Directors of the Company.

• [103] Measured against the assessment of public interest is the resulting prejudice to the Trustees and the Company occasioned by publishing the redacted material. This in turn will affect the 25,000 beneficiaries, as there is potential for damaging not only the Company’s reputation and brand but will harm the interests of the Company’s consumers.

• [104] Mr Taylor also alleges that the Trustees have acted improperly and therefore come to the Court with “unclean hands.” Mr Wigley’s concern relates to matters that were reported to the beneficiaries as opposed to what appears in the Trustee Minutes. The question of whether Trustees have acted improperly cannot be resolved in the basis of one Trustee’s frank opinion being recorded in the Minutes. Although the allegation is repeated in submission, there is insufficient evidence to support the contention that the Trustees have acted improperly, such that they do not have “clean hands” in seeking the final injunctive orders.

• [105] What is before the Court is evidence of Mr Taylor disclosing information which he has been told is confidential. His decision to provide the confidential information to a journalist in those circumstances was mischievous. On balance, such actions weigh against Mr Taylor and favour the making of the equitable remedies sought by the Trust and Company.

• [106] In summary therefore, I decline Mr Taylor’s request for disclosure of the redacted material and make final injunctive orders by way of relief.

• [107] An injunction by way of final orders is granted:

(1) Restraining Mr Taylor, his agents or anyone on his behalf from publishing or otherwise disclosing the information in the first redactions and second intended redactions of the 2019 and 2020 Trust Minutes.

(2) Restraining any person to whom Mr Taylor may have disclosed the information, and their agents, from publishing or otherwise disclosing the information in the first redactions and second intended redactions of the 2019/2020 Trust Minutes.

(3) Requiring Mr Taylor to file an affidavit with the Court listing the names and contact details of any person to whom he has disclosed the information in the first redaction and second intended redactions and confirming that each such person has been given notice of these orders. He is to file the affidavit by 1 March 2022.

(4) Leave is reserved to the parties to seek to amend the orders if required.

Costs

• [108] The parties are to file no more than a five-page memorandum on costs. The defendants and interested parties are to file their submissions within six weeks of the date of this judgment. The plaintiff is to file as response within a further three weeks and any reply is to be filed within a further two weeks.

Cull J