Bangma v Bangma
[2020] NZHC 2080
•18 August 2020
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2019-409-000155
[2020] NZHC 2080
IN THE MATTER of claims of breach of fiduciary duty and duty of care by the trustees and executors of the estate of JACOB BANGMA BETWEEN
JOHN CHARLES ANDREW BANGMA
Plaintiff
AND
PAUL MARTIN DAVID BANGMA and MICHAEL JOHN FRENCH
Defendants
Hearing: Determined on the papers Counsel:
B Nevell and S M D Guest for Plaintiff
J R Pullar and A E Kennerley for first-named Defendant C Milne for second-named Defendant
Judgment:
18 August 2020
JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 18 August 2020 at 12.30 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
BANGMA v BANGMA [2020] NZHC 2080 [18 August 2020]
The application
[1] The plaintiff applies for further and better discovery from the defendants under r 8.19 High Court Rules 2016 and also challenges claims to privilege made by the defendants in their affidavits of documents. The application is opposed.
The claim
[2] The plaintiff, John Bangma (John), and the first-named defendant, Paul Bangma (Paul), are brothers. Their father died in 2011 leaving a will dated 4 August 1999. The defendants, Paul and Michael French, a retired solicitor and formerly with the firm Corcoran French, are executors and trustees under the will. John and Paul are the residuary beneficiaries under the will.
[3] From an early stage conflicts arose between John and Paul in relation to the administration of the estate. Here, John alleges various breaches of fiduciary duty by the defendants. The breaches include the failure to distribute the estate in a timely manner, refusing to make interim distributions and failing to act in the best interests of the beneficiaries. Broadly, John considers Paul has acted in his own interests in matters concerning the estate and that Mr French allowed this to occur. Substantial damages are sought.
[4] The parties were ordered to provide standard discovery. Affidavits of documents have been filed. John alleged the defendants’ affidavits of documents were substantially incomplete which resulted in this application for further and better discovery. In addition, John challenges privilege claims by the defendants for emails and letters between Paul and Mr Martin Bell of Corcoran French. Privilege is claimed on the basis the documents are communications between Paul as a beneficiary and Corcoran French as his legal advisors.1
[5] John’s application sought particular discovery relating to 14 categories of documents. The application was set down to be heard on 4 August 2020. On 3 August 2020, Mr Nevell filed a memorandum stating the application was not pursued except
1 Evidence Act 2006, s 54.
in relation to only some of the documents in categories a, c, and d of the application. A challenge to the claim to privilege in respect of some documents in category g of the application was maintained also.
Categories a, c and d
[6] I do not need to describe the documents that are in issue. Mr Nevell acknowledges the documents sought in categories a, c and d do not relate to any matter raised in the present pleadings but says a further amended statement of claim will be filed and the documents will be relevant to issues raised in the amended pleading. He submits an order can be made that the documents be disclosed but that order should be contingent upon the filing of an amended pleading.
[7]Rule 8.19 provides:
8.19Order for particular discovery against party after proceeding commenced
If at any stage of the proceeding it appears to a Judge, from evidence or from the nature or circumstances of the case or from any document filed in the proceeding, that there are grounds for believing that a party has not discovered 1 or more documents or a group of documents that should have been discovered, the Judge may order that party –
(a) to file an affidavit stating –
(i)whether the documents are or have been in the party’s control; and
(ii)if they have been but are no longer in the party’s control, the party’s best knowledge and belief as to when the documents ceased to be in the party’s control and who now has control of them; and
(b) to serve the affidavit on the other party or parties; and
(c) if the documents are in the person’s control, to make those documents available for inspection, in accordance with rule 8.27, to the other party or parties.
[8] The relevant principles are not in dispute. A party may bring an application under this rule at any stage after discovery has been provided. An applicant must establish grounds for a belief that the other party is in, or has been in, control of a document or class of documents that should have been discovered. The documents
sought must be relevant by reference to those matters which are actually in issue before the Court. Relevance is to be assessed according to the pleadings.2
[9] I raised with Mr Nevell the possibility of adjourning the application as it relates to these categories of documents until such time as an amended statement of claim has been filed. He supported that approach. It was opposed by counsel for the defendants and I accept they were correct to do so.
[10] The documents are not relevant to any matter raised in the pleadings and there is therefore no basis to make an order under r 8.19. The defendants have been put to the cost of opposing the application and are entitled to have it determined. The Court does not have before it a proposed amended statement of claim against which it might assess the relevance of the documents to issues arising in the amended pleading. The parties have an ongoing obligation to give discovery and there is no suggestion the defendants will not comply with that obligation to the extent required upon the filing of an amended pleading.3 To adjourn the application would needlessly add to the parties’ costs.
Category g
[11] As noted above, John challenges the claim to privilege for correspondence between Paul and Mr Bell of Corcoran French. A party may challenge a claim to privilege or confidentiality under r 8.25 which provides:
8.25 Challenge to privilege or confidentiality claim
(1)If a party challenges a claim to privilege or confidentiality made in an affidavit of documents, the party may apply to the court for an order setting aside or modifying the claim.
(2)In considering the application, a Judge may require the document under review to be produced to the Judge and may inspect it for the purpose of deciding the validity of the claim.
(3)The Judge may –
(a) set aside the claim to privilege or confidentiality; or
2 Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd [2015] NZHC 2760, [2018] NZAR 600 at [9] and [14].
3 High Court Rules 2016, r 8.18.
(b) modify the claim to privilege or confidentiality; or
(c) dismiss the application; or
(d) make any other order with respect to the document under review that the Judge thinks just.
[12] The defendants claim legal professional privilege for category g documents that are in issue. The common law right to claim privilege on this ground is now reflected in s 54 of the Evidence Act 2006 which relevantly provides in s 54(1):
Privilege for communications with legal advisers
(1)A person who requests or obtains professional legal services from a legal adviser has a privilege in respect of any communication between the person and the legal adviser if the communication was –
(a) intended to be confidential; and
(b)made in the course of and for the purpose of –
(i)the person requesting or obtaining professional legal services from the legal adviser; or
(ii)the legal adviser giving such services to the person.
[13] The protections afforded by privilege are set out in s 53 of the Evidence Act 2006 as follows:
53 Effect and protection of privilege
(1)A person who has a privilege conferred by any of sections 54 to 59 in respect of a communication or any information has the right to refuse to disclose in a proceeding –
(a) the communication; and
(b) the information, including any information contained in the communication; and
(c) any opinion formed by a person that is based on the communication or information.
…
(3)A person who has a privilege conferred by any of sections 54 to 59 and 64 in respect of a communication, information, opinion, or document may require that the communication, information, opinion, or document not be disclosed in a proceeding –
(a) by the person to whom the communication is made or the information is given, or by whom the opinion is given or the information or document is prepared or compiled; or
(b) by any other person who has come into possession of it with the authority of the person who has the privilege, in confidence and for purposes related to the circumstances that have given rise to the privilege.
[14] Mr Nevell raises two grounds of challenge. First, he argues that in providing legal services and advice to Paul, Corcoran French put itself in a position of conflict. The existence of the conflict of interest meant privilege cannot be claimed as against him. In his written submissions, Mr Nevell argues that the claim for privilege:
… cuts against the obligations of trustees to act with [sic] impartially. [Paul’s] claim amounts to a position that he was being advised independently by the other Trustee (Mr Michael French) or Martin Bell.
…
Mr Paul Bangma has not provided evidence that he paid for the independent advice. Regardless, even if such evidence did exist it would fail to address the conflict of interest that existed.
[15] The only authority Mr Nevell provides is Burgess v Monk where Brewer J said:4
It is well established, however, that if there is a claim for breach of fiduciary duty, the impugned trustees cannot assert legal privilege to protect themselves. The privilege belongs to the trust. As Lord Justice Harman put it in In Re Londonderry’s Settlement:
The case and opinion were, of course, trust papers, having come into existence ante litem motam. Counsel was advising the trustees as to their rights and duties and every beneficiary must be entitled to see advice of that sort. It is paid for out of the trust money and is the property of the beneficiaries.
[16] What I understand is being asserted is that Corcoran French acted as solicitors for and owed fiduciary obligations to Paul as a trustee and beneficiary and to John as a beneficiary. This created a conflict of interest situation and the claim for privilege is not available as that would deny the fiduciary duties owed to John. I do not accept this submission.
4 Burgess v Monk [2016] NZHC 527, [2016] NZAR 438 at [9].
[17] Paul claims privilege for the correspondence in issue because, he says, he was independently advised by Corcoran French in his personal capacity. That Corcoran French also acted in the administration of the estate did not of itself create a conflict of interest situation. Importantly, Corcoran French was not acting for John and did not owe fiduciary duties to him as he was not the firm’s client. It is difficult to understand why Paul was not entitled to obtain legal advice from Corcoran French as a beneficiary or why confidential communications between Paul and Corcoran French should not be privileged. It cannot be the case that Paul is entitled to less protection under the law to obtain confidential legal advice simply because he sought that advice from Corcoran French. It could not be asserted that he could not have claimed privilege for legal advice had he chosen to consult solicitors other than Corcoran French. Burgess v Monk does not assist John. There, the communications were between the trustees in that capacity and the estate’s lawyers and were undoubtedly “trust papers” paid for out of the trust and subject to the Court’s supervisory jurisdiction.
[18] There is case law that holds that except where clients have joint interests the fact that a solicitor has acted for them in a conflict of interest situation will not remove their ability to claim privilege from disclosure. In Equiticorp Finance Group Ltd v Collett defendants sought discovery of documents from the third party firm of solicitors.5 Privilege was claimed on the basis they consisted of communications between solicitor and client with a view to obtaining legal advice. In response it was argued the solicitors had been acting for the defendants at the time the documents were prepared, and the solicitors were therefore under a fiduciary obligation to disclose them. It was held the existence of a conflict of interest did not remove the ability of one party to claim privilege from disclosure. Henry J said:6
A conflict of interest situation does not of itself remove protection as between the two parties, neither does the co-existence of a fiduciary relationship. Public policy does not require otherwise.
5 Equiticorp Finance Group Ltd v Collett (1991) 3 PRNZ 509. See also Gemini Personnel Ltd v Morgan & Banks Ltd [2001] 1 NZLR 672.
6 At 512.
[19] In Churchill Group Holdings Ltd v Aral Property Holdings Ltd, Williams J relied upon Equiticorp Finance Group Ltd v Collett and held:7
It is also commonplace in the operation of joint ventures that solicitors for the parties may also, from time to time, advise the joint venture or copy documents addressed to their client to other participants in the joint venture as well, at least as long as the joint venture continues to operate harmoniously. Even afterwards, where a solicitor has received instructions from two clients who may be in conflict, communications are protected “if made to or by the solicitor in his capacity as such to that party exclusively” (Equiticorp Finance Group Ltd v Collett (1991) 3 PRNZ 509, 512).
[20] I therefore do not accept John’s first ground of challenge, at least in the manner that it was advanced. I note, however, that Mr Nevell did not rely on s 66 of the Evidence Act 2006 concerned with joint interests in privileged material. As no submissions were addressed to me I am making no finding in respect of the possible relevance of that provision.
[21] Mr Nevell’s second argument is that privilege cannot be maintained as Corcoran French was not acting as Paul’s legal advisers in his capacity as beneficiary but as a trustee. He notes that throughout the relevant period Paul was represented by other solicitors and there is little in the affidavits to substantiate that Corcoran French was instructed by Paul in his capacity as a beneficiary. Mr Nevell relies on the absence of evidence that Paul paid for independent advice from Corcoran French. He also referred me to correspondence between Paul and Corcoran French indicating that Paul drew no sharp line between estate administration and personal matters.
[22] All counsel agreed that I should inspect the documents before making a ruling on this issue. I have the power to require the documents to be produced for my inspection under r 8.25 High Court Rules 2016 and I am satisfied that it is appropriate to do so.
7 Churchill Group Holdings Ltd v Aral Property Holdings Ltd HC Auckland CIV-2001-404-2302, 26 October 2006 at [58].
Result
[23] John’s application for further and better discovery is dismissed. In so far as John challenges the defendants’ claim to privilege in respect to documents in category g of the application my decision is reserved pending an inspection of those documents.
[24] Under r 8.25 High Court Rules 2016, I require the defendants to produce for my inspection within 21 days the emails and letters between Paul Bangma and Corcoran French between the dates of March 2013 and February 2017 (inclusive) for which they have claimed privilege.
[25] Once I have inspected the documents I shall issue a further judgment as to whether the claim to privilege is or is not properly made or, if necessary, convene a further hearing.
[26]I reserve costs pending final resolution of the application.
O G Paulsen Associate Judge
Solicitors:
Guest Carter Law Limited, Dunedin for Plaintiff
Taylor Shaw, Christchurch for first-named Defendant
Duncan Cotterill, Christchurch for second-named Defendant
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