Chen v Zeng
[2017] NZHC 1721
•25 July 2017
NOTE: PURSUANT TO S 35A OF THE PROPERTY (RELATIONSHIPS) ACT 1976, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B TO 11D OF THE FAMILY COURTS ACT 1980. FOR FURTHER INFORMATION, PLEASE SEE
THE-FAMILY-COURT/LEGISLATION/RESTRICTION-ON-PUBLISHING- JUDGMENTS.
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2016-404-002997 [2017] NZHC 1721
UNDER THE Property (Relationships) Act 1976 IN THE MATTER OF
an appeal against a decision of the Family
CourtBETWEEN
YING CHEN Appellant
AND
WEN ZENG Respondent
Hearing: 29 June 2017 Appearances:
A Manuson for the Appellant
L Kearns for the RespondentJudgment:
25 July 2017
JUDGMENT OF DUFFY J
This judgment was delivered by me on 25 July 2017 at 3.00 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors/Counsel:
Prestige Lawyers Ltd, Auckland
Philip Lee Law, Auckland
L Kearns, Auckland
CHEN v ZENG [2017] NZHC 1721 [25 July 2017]
[1] The parties in this appeal are former spouses who are presently engaged in a relationship property dispute in the Family Court. The issue on appeal is whether the respondent, Mr Zeng, has provided adequate discovery.
[2] The appellant, Ms Chen, considers that Mr Zeng has not properly complied with directions made by Judge Manuel requiring Mr Zeng to provide discovery of certain material.1 Ms Chen asserts this material is required by her forensic accounting expert (Mr Sutherland) and without it he cannot form a view on the value of certain property held by Mr Zeng.
[3] Ms Chen made her complaint about the inadequacy of Mr Zeng’s discovery to the Family Court. Judge Malosi rejected Ms Chen’s complaint and found that there was sufficient information available for both parties to be assured of a fair trial.2 The completion of Mr Sutherland’s report was delaying progress of the dispute. Judge Malosi directed Ms Chen to have Mr Sutherland finalise his report. Ms Chen appealed against this decision.
[4] On appeal Mr Zeng argued that he has provided all that he has been required to provide to Ms Chen by way of discovery. Accordingly he opposed the appeal.
[5] The short point for me to determine on appeal was whether Judge Malosi was right to refuse to make further orders for discovery against Mr Zeng.
[6] At the appeal hearing I was faced with competing arguments from the parties’ counsel regarding the adequacy of the discovery by Mr Zeng. Mr Sutherland provided an affidavit (dated 17 April 2017) in which he said he had not seen sufficient information to enable him to form an opinion on the value of some property in Mr Zeng’s possession.
[7] I was faced with an assertion by an independent expert witness that he had insufficient information to enable him to prepare evidence on value. I considered the
1 The required material is identified in [5] of Judge Manuel’s minute dated 20 May 2016 in Chen v
Zeng FC Auckland FAM-2015-004-1068.
2 See [10] of Judge Malosi’s minute dated 9 November 2016 in Chen v Zeng FC Auckland FAM-
2015-004-1068.
best approach would be if I appointed an independent inquirer with expertise in the same field as Mr Sutherland to assess the information provided to date for the purpose of advising me if further discovery was required or not. The parties agreed with this course of action. Accordingly, I appointed Keith Goodall, chartered accountant of Auckland, pursuant to s 38 of the Property (Relationships) Act 1976
(PRA).3
[8] On 31 May 2017 Mr Goodall prepared his first report. He recorded that he had spoken with Mr Sutherland and with Charles Tang (a forensic accounting expert for Mr Zeng). Mr Goodall also reviewed written communications and extensive documents provided to date. He formed the view that there had not been sufficient disclosure. At paragraph [14] of his first report he listed further information that needed to be provided. The information was:
(a) the Chancellor Construction Ltd 2016 (being a company in which
Mr Zeng held shares) general ledger journal transactions report; and
(b)in respect of the individual transactions listed in Exhibit C to Mr Sutherland’s affidavit dated 11 April 2017 (also known as individual transactions listed in Schedule 10), supporting documentation in respect of each transaction, and the name of each property the transaction related to, where such transactions related to a property. Mr Goodall noted that many of the transactions listed in Exhibit C were for an amount of less than $3,000, and he considered these could be excluded from further discovery due to lack of materiality.
[9] Following the release of Mr Goodall’s first report there was a telephone conference, and the respondent agreed to provide the information identified by Mr Goodall. Then Mr Sutherland filed another affidavit (dated 20 June 2017) in which he identified other transactions about which he asserted more discovery was required before he could provide his expert opinion on the value of the property in
question. These transactions were listed in a schedule identified as “Schedule 11”.
3 See my Order and Minute in Chen v Zeng HC Auckland 2016-404-2997, 1 May 2017.
Like the Schedule 10 transactions, Mr Sutherland sought documentation in respect of each Schedule 11 transaction, including the name of each property the transaction related to. In essence, Mr Sutherland was still asserting there was information required to be discovered that was yet to be discovered.
[10] In the 20 June 2017 affidavit, Mr Sutherland deposed that he had drawn Mr Tang’s attention to the need to discover material relevant to the Schedule 11 transactions on 4 April 2017. Mr Sutherland also deposed that between 29 and 31
May 2017 he had advised Mr Goodall of the need for discovery regarding the
Schedule 11 transactions.
[11] Faced with those assertions, I directed Mr Goodall to provide a second report in response to Mr Sutherland’s assertions.4 Specifically, I directed Mr Goodall to comment on statements by Mr Sutherland in his affidavit in which Mr Sutherland said he had advised Mr Goodall about the need for the Schedule 11 transactions to be discovered.
[12] In response to my directions, Mr Goodall prepared a second report dated 27
June 2017. Mr Goodall acknowledged that the transactions listed in Schedule 10 were the subject of discussion between him and Mr Sutherland, but not the Schedule
11 transactions. Mr Goodall stated that he did not recall a specific discussion expressly regarding the Schedule 11 transactions.
[13] Mr Goodall went on to say in his report that he agreed with Mr Sutherland that there was a need to allocate the expenditure listed in Schedule 11 to a particular property or properties, which could require further discovery by Mr Zeng.
[14] At the time of the hearing of the appeal, and during the subsequent telephone conferences that followed it, Mr Zeng had made numerous submissions along the lines that he had difficulty complying with Ms Chen’s requests for discovery because they were ongoing and seemingly, for him, never-ending. In short he portrayed the
requests as oppressive.
4 See Chen v Zeng HC Auckland CIV-2016-404-2997, 22 June 2017 (Telephone Conference
Minute).
[15] One of my reasons for appointing Mr Goodall to carry out his inquiries was to find out for myself through the actions of an independent inquirer whether the repeated requests for discovery from Ms Chen were simply renewed requests for the same material, which Mr Zeng was being dilatory in discovering, or whether she was in fact making continued fresh requests for further discovery. If it was the latter I could well understand the frustration expressed by Mr Zeng.
[16] Indeed, as Judge Malosi had expressed in her minute of 9 November 2016:5
… the discovery process could go on indefinitely, and at some point the Court must make a determination that sufficient evidence is before the Court for both parties to be assured of a fair trial.
[17] Ms Chen’s legal advisors were under a duty at all times to identify the transactions they thought should be discovered, and to seek material relating to those transactions in an expeditious way. That is not achieved by making ongoing requests for additional material. Such conduct can become oppressive, which is something the Court will not permit. Such conduct is likely over time to lead to a Court concluding enough is enough.
[18] My view in the appeal was that the appointment of Mr Goodall provided the parties with the opportunity for Ms Chen’s advisors to liaise with Mr Goodall for the purpose of identifying for him where they contended the discovery was deficient, and to outline, to the best they could, the material they thought was available to Mr Zeng which he was yet to disclose.
[19] However, I also considered that once Ms Chen’s advisors had the opportunity of communicating their views on discovery to Mr Goodall, they would do so all at once, and there would not be continued requests for further material to be discovered.
[20] As matters turned out, Mr Goodall did identify material that, in his view, required further discovery, in the form of the material relevant to the Schedule 10
transactions.
5 At [10].
[21] Mr Zeng had complained that Mr Sutherland’s affidavit, in which he listed the transactions in Schedule 10 which Mr Goodall found should be discovered, was not before Judge Malosi. I accept the affidavit itself was prepared after Judge Malosi considered the matter before her. However, the transactions listed in Schedule 10 seem to me to pre-date when the affidavit was sworn. It may well have been possible for that information to be drawn to Judge Malosi’s attention. One of the best ways to identify if discovery already given is complete or not is to identify the existence of other relevant material that has not been discovered. This is essentially what Mr Sutherland did in his first affidavit.
[22] On the other hand it was clear to me after I received Mr Goodall’s second report that the transactions contained in Schedule 11 had not been drawn to his attention before he wrote his first report. I considered that they should have been. Mr Goodall’s appointment provided Ms Chen with the opportunity to identify material relevant to all transactions that was yet to be discovered. But she needed to do this once rather than on a drip feed basis.
[23] Before I received Mr Goodall’s second report I had issued a minute in which I had directed there were to be no further requests for extension of the scope of discovery.6 This direction was given to meet the concerns of Mr Zeng that he was facing continual and seemingly never-ending requests for further discovery, which in turn was delaying the substantive hearing of the relationship property dispute. I had stated that the opportunity for Ms Chen to outline further areas where discovery was
required was provided at the appeal hearing, at earlier telephone conferences, and in discussion with Mr Goodall before he prepared his first report. I further stated that Mr Goodall had now prepared his first report, and it was for Mr Zeng to provide the further discovery as outlined by Mr Goodall in his first report, but that no further discovery beyond that would be ordered. My view was that if I allowed further requests for fresh discovery, the process would be oppressive of Mr Zeng.
[24] Once I received Mr Goodall’s second report, it became clear to me that the
request by Ms Chen for discovery of the material relevant to transactions listed in
Schedule 11 was a new request that had not been made to Mr Goodall before. The
6 Chen v Zeng HC Auckland CIV-2016-404-2997, 16 June 2017 (Telephone Conference Minute).
fact this information existed informed me that Judge Malosi was wrong to find sufficient discovery had been completed when the matter was before her. However, it seemed to me that the dilatory action of Ms Chen in not bringing the Schedule 11 information to Mr Goodall’s attention before he had prepared his first report was a disqualifying factor for an order for discovery of the Schedule 11 material.
[25] Ms Chen’s conduct looked to me to be consistent with the complaints Mr Zeng had made earlier about finding himself facing continual requests for fresh discovery. At the same time I recognised that Mr Goodall considered the further discovery regarding the Schedule 11 transactions was required to enable Mr Sutherland to prepare his report on value.
[26] At a telephone conference on 29 June 2017 I raised with Ms Chen the probability that her failure to make her request for discovery of the Schedule 11 transactions in an efficient and expeditious manner was likely to be reflected in an award of costs against her.
[27] Subsequent to the conference Ms Chen filed a memorandum in which she disavowed a request for discovery of the transactions listed in Schedule 11. Her stance was that:
3.Mr Sutherland identified a number of unallocated expenses, which need to be allocated to specific properties subsequent to the filing of the appeal. He set these out in Schedule 11. He requested these from the respondent’s accountant. This was not identified in Mr Goodall’s first report.
4.In his second report, Mr Goodall has noted that there is a need to allocate these expenses to a particular property or properties.
5.However, the issue regarding the discovery of Schedule 11 was not before Her Honour Judge Malosi. It is therefore not within the scope of the appeal as pleaded.
6.We will therefore not be seeking Schedule 11 to be provided by the respondent as part of this appeal. Whether it should be provided is a matter to be determined by the Family Court as part of the substantive proceedings.
[28] Accordingly, the stance now taken by Ms Chen is that the discovery of the
Schedule 11 transactions was not before Judge Malosi (which is consistent with the
discovery not being complete at that time), and is therefore not within the scope of the appeal as pleaded.
[29] My understanding of the appeal as pleaded was that Judge Malosi had wrongly refused to order further discovery. If the Schedule 11 transactions had not been discovered at that time, they would necessarily have fallen within the realm of material yet to be discovered. Had their existence become known to me earlier (through disclosure to Mr Goodall before he wrote his first report), I would have ordered material relevant to the Schedule 11 transactions be discovered.
[30] Despite the indication in the minute of 16 June 2017 that I would not accept further requests for extension of the scope of discovery, once I received Mr Goodall’s second report which included his advice that the Schedule 11 items did need to be allocated to a specific property or properties (for which discovery was required), I would have made that direction. But given the dilatory approach taken by Ms Chen, I would also have given serious consideration to requiring her to pay costs for the delay and inconvenience she had caused to Mr Zeng. This is why I raised the question of costs with Ms Chen at the conference on 29 June 2017.
[31] However, the memorandum filed by Ms Chen dated 29 June 2017 indicated to me she no longer pursued the discovery of Schedule 11 transactions as part of the appeal. For that reason alone I make no orders in respect of discovery of material relevant to and including the Schedule 11 transactions.
[32] I also find that given the way the appeal was run before me, that apart from providing any genuine updating of information, which is part of the ongoing obligations of discovery, the ambit of discovery by Mr Zeng is now closed. The appeal came about as a result of Ms Chen wanting further discovery, which led her to challenge Judge Malosi’s decision refusing to order further discovery. Accordingly, the appeal provided Ms Chen with the opportunity to pursue all complaints she had regarding the adequacy of discovery by Mr Zeng.
[33] When the issue of the adequacy of Mr Zeng’s discovery arose in the Family
Court, Ms Chen’s expert on value, Mr Sutherland, was late in filing his affidavit
evidence, which in turn delayed the substantive hearing of the parties’ dispute in the Family Court. Continual requests for more discovery cannot be permitted, as inevitably they delay the substantive disposition of the dispute before the Court.7
[34] Nonetheless, Ms Chen had satisfied me that Mr Sutherland required further information (in the form of the Schedule 10 transaction) before he could prepare his expert evidence. To the extent Mr Goodall identified in his first report the need for discovery of the material relevant to Schedule 10 transactions, Ms Chen has been successful in establishing additional discovery was needed.
[35] The transactions in Schedule 11 have ultimately not been obtained by her as part of the discovery appeal process, but only as a result of Ms Chen electing not to pursue discovery of that material. At all times in the context of the appeal it would have been open for her to do so, but there was the risk of an award of costs against her, due to the dilatory manner in which she had made the request for this material.
[36] Accordingly, Ms Chen has had ample opportunity to obtain court orders for discovery of all the material that may be required for Mr Sutherland to provide his expert evidence. Insofar as discovery of any of that information has been curtailed, it is by her own election.
[37] I am satisfied, therefore, that the discovery process to enable Mr Sutherland to provide his opinion on value is now complete, and no further discovery other than genuinely updating material is required.
Result
[38] The appeal is allowed. The order of Judge Malosi refusing further discovery is set aside.
[39] Mr Zeng is required (if he has not already done so) to provide discovery of material relevant to and including the Schedule 10 transactions.
7 See discussion in Dixon v Kingsley [2015] NZHC 2044, [2015] NZFLR 1012 at [12]–[20].
[40] My preliminary view is that costs on the appeal should lie where they fall. However, the parties have leave to file memoranda on costs. They are also to file memoranda on the question of whether the costs of obtaining Mr Goodall’s reports should be shared equally by each of them.