Cuthbert v Humphries HC Auckland CIV-2003-404-7071

[2007] NZHC 1788

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2003-404-7071

BETWEEN  BEVERLY LOUISE CUTHBERT Plaintiff

AND  RODNEY JOHN HUMPHRIES Defendant

AND  RODNEY JOHN HUMPHRIES AND TRUSTEE MANAGEMENT LIMITED Second Defendants

AND  MANU CHHOTUBHAI BHANABHAI AND DOUGLAS MARK ANDREW BURGESS

Third Defendants

Hearing:         1 June 2007

Appearances: P J Dale for Plaintiff

D Hollings for First Defendant and first named Second Defendant

W G C Templeton for Trustee Management

Judgment:      5 June 2007 at 4:30 pm

RESERVED JUDGMENT OF COURTNEY J [Application to amend pleadings]

This judgment was delivered by Justice Courtney on 5 June 2007 at 4:30 pm

pursuant to Rule 540(4) of the High Court Rules

Registrar / Deputy Registrar

Date………………………..

Solicitors:           Grove Darlow & Partners, P O Box 2882, Auckland

Fax: [phone]

Barrie Hopkins, P O Box 106027, Auckland

Fax: [phone]

Counsel:             P J Dale, P O Box 130, Shortland Street, Auckland

Fax: [phone]

D Hollings, Level 22 Lumley Centre, 88 Shortland Street, Auckland email: [email protected]

CUTHBERT V HUMPHRIES& ORS HC AK CIV-2003-404-7071  5 June 2007

Introduction

[1]      The trial of this proceeding is scheduled to begin before Priestley J on 11

June 2007.  On 31 May 2007 Ms Cuthburt filed an application for leave to amend her statement of claim.  It is opposed by Mr Humphries. After lengthy argument I allowed almost all the amendments, with my reasons to follow.

[2]      The  proceeding  concerns  complicated  relationship  property  issues  arising from Ms Cuthbert’s and Mr Humphries’ long de facto relationship, which ended in

2003.  Many of the  issues  arise  from the  Ms  Cuthbert’s  claim  that  relationship property was transferred to Edgewater Motel Ltd (EML),a company controlled by Mr Humpheries and then onto the Portland Trust which was also controlled by Mr Humpheries. Portland Trust now holds very substantial assets, which Ms Cuthbert claims  were  effectively  acquired  using  relationship  property.  Ms  Cuthbert  also makes claims relating to the transfer of assets to two other trusts associated with Mr Humpheries of which she is not a beneficiary.

[3]      The statement of claim alleges raises causes of action under the Relationship (Property) Act 1976 and misrepresentation against Mr Humpheries and constructive trust against the trustees of the Portland Trust. Ms Cuthbert has complained several times about the difficulty she has had in obtaining financial information about the various corporate and trust  entities that  are relevant  to  the determination of the proceedings. Mr Dale asserted that most of the proposed amendments are the result of financial information that has only been made available by Mr Humphries over the last several weeks. Ms Hollings resisted all but the very minor amendments and says that the significant amendments have come too late for her to deal with them in the time available and that if the amendments were to be allowed then the trial date would, inevitably, be lost.

Proposed amendments

[4]      The proposed amendments were contained in the draft amended statement of claim attached to Ms Cuthbert’s affidavit. There were minor amendments which Ms Hollings had no difficulty with. However, there was real opposition to the proposed

new paragraph 77(iii) - (xix) and 77B, D and E. The effect of these amendments would be:

a)       Paragraphs 77(iii)-(xix) - add further chattels to those identified as being relationship property;

b)       Paragraph 77B - alleges that the Portland Trust is Mr Humpheries alter ego and relies on the fact that EML has made advances to it on a non-commercial basis;

c)       Paragraph 77D - alleges post separation conduct by Mr Humphries that has materially diminished the value of the relationship property;

d)Paragraph  77E  seeks  an  order  under  s15  on  the  basis  that  Mr Humpheries’ living standards are likely to be significantly higher than Ms Cuthbert’s  because of the division of functions in the relationship.

[5]      Mr  Dale  submitted  that  the  lateness  of  this  application  is  due  to  the defendant’s own failures to provide proper financial information in relation to the various relevant entities that are the subject of Ms Cuthbert’s claim.  Interrogatories directed towards establishing some of this information were administered in November 2006 but not answered until early March 2007.  Even then the financial information sought was not fully provided, with Mr Humphries indicating that the relevant financial statements would be provided shortly.  However, it is only within the last several weeks that financial statements have been made available.

[6]      Financial  statements  for  Portland  Trust  are  apparently  final  statements. However, there are only draft financial statements available for the R J Humphries Trust, I P Limited, Awataieri Holdings Limited, Consultant Management Services Limited, Properties Waikato Limited and Edgewater Motel Limited.  There are other entities for which no financial statements have been provided such as I P Limited and Dancys Pass Coach Inn Limited.    Ms Cuthbert’s accountant,  Mr  Ross,  has advised that he has been unable to properly analyse the ownership and value of the various entities without these accounts.

[7]      Whilst Ms Hollings pointed out that some of the amendments relate to assets that  pre-date  separation  and  of  which  Ms  Cuthbert  must  have  had  adequate knowledge on which to base a pleading, I accepted that the most significant issues that are the subject of the proposed amendment have required financial information and that this has only been made available quite recently.  However, I do not intend to embark on a consideration of which party is at fault and to what extent.   This claim has a very long history.   It was plain to me that the trial date 11 June 2007 must be preserved, almost at any cost.  My objective was solely to identify whether these amendments were needed to do justice between the parties and if so whether that can be achieved without jeopardising the trial.

[8]      I formed the view that most of the amendments actually fell within the ambit of the general factual dispute that has been known to the parties for a long time. For example, Ms Cuthbert has always asserted that Portland Trust’s assets were acquired using EML money which she claims was relationship property. Mr Dale advised that he has already provided all of the plaintiff’s evidence and did not intend to adduce any further evidence if the amendments were allowed.

[9]      Ms Hollings accepted that had the allegations been made at an earlier stage there could have been no objection to them.  Her main concern was that, coming so late,  the  new  allegations  would  make  it  very  difficult  for  her  to  assemble  the necessary evidence to deal with them prior to trial.   She and Mr Templeton were particularly concerned by the prospect of having to deal with assertions that Mr Humphries acted unreasonably and in breach of various obligations in continuing to arrange advances to the Blue Sky group.  They were worried that this might involve fresh evidence from Blue Sky’s lenders in the South Island and open up a wide inquiry into the mangement and failure of the group.  Had that been the case I would certainly have agreed that the amendment was not appropriate because it would place an unrealistic burden on the defendants so close to trial.  However, Mr Dale assured me that it is not his intention to open up that line of enquiry.

[10]     I am satisfied that all of the amendments do relate to issues that are already live between the parties. The nub of Ms Cuthbert’s case is that relationship property was  moved  into  EML  and  in  turn  to  Portland  Trust  and  it  is  the  transactions involving those entities and the use of that money that is the main focus of the

proposed amendments. After argument I indicated that it was my intention to allow most of the pleadings for this reason and asked Ms Hollings to  consider which amendments she felt would really cause difficulties. She did this over the lunch adjournment and was able to agree to a number of the amendments. After further discussion I indicated that I would allow nearly all of the amendments, subject in some cases to further particulars being provided.

Paragraph 77(iii) – (xviii)

[11]     Following  discussion,  Ms  Hollings  agreed  that  the  additional  chattels identified in paragraph 77(iii) - (x) could be incorporated into an amended pleading with minimal inconvenience to her and her client.

[12]     The proposed amendment to paragraph 77(xi) - (xii) relate to a company, Awataieri Holdings Limited (AHL) of which Mr Humphries is the sole shareholder. Ms Cuthbert claims that advances made to AHL and shares in AHL are relationship property.  Mr Humphries maintains that he holds the shares in AHL as a trustee for Portland Trust and that the company is not relationship property.  Quite plainly the value of AHL is relevant to the live issues between the parties.   On the facts the shares in the company must be owned either by Mr Humphries personally (in which case there is a real issue as to whether it is relationship property) or by Portland Trust, in which case it falls into the issue as to whether Ms Cuthbert should have an interest  in it because Portland Trust’s asssets were acquired with EML’s money which, in turn, came from relationship property.  It is therefore appropriate that these amendments be allowed.

[13]     The issues raised by the proposed paragraph 77(xiii) - (xiv) are the same and it is appropriate to allow them.

[14]     In relation to the proposed paragraph (xvi) - (xviii) the issue is whether Mr Humphries’ power to appoint the trustee in respect of the R J Humphries Family Trust and the Portland Trust and his position as trustee of the Portland Trust is in itself an asset which is to be regarded as relationship property. This real issue here is the  time  required  for  the  defendant  to  obtain  valuation  evidence,  which  his accountant, Mr McLoughlin will need to consider. There is no other factual evidence

needed. I am satisfied that this is evidence that could be obtained through allowing some further time for the provision of the defendant’s briefs.

Paragraph 77B

[15]     In relation to 77B, Ms Hollings’ main concern was that this introduced a completely fresh cause of action and was too wide.   The assertion is that Portland Trust was Mr Humphries alter ego. Although it is a new legal issue, it is based on facts that are well known to the parties.   However, I did agree that the particulars were too wide and accordingly allowed paragraph 77B only on the condition that proper particulars are provided.

Paragraph 77D

[16]     Paragraph 77D also raises a new cause of action, asserting that the value of the relationship property had been diminished post-separation by Mr Humphries’ conduct.  However, three of the allegations (77(a) (c) and (e)) are virtually the same as those allegations contained at 77B(i) - (iii) and I intend to allow those, subject to the proper particularisation of them.

[17]     I do not intend to allow the allegation at paragraph 77D(b) because Mr Dale has advised that there is currently no evidence to support that pleading.   Nor do I intend to allow the allegation at paragraph 77D(d).  This not an allegation that could have had any causative effect.

Orders made

[18]     I gave leave for Ms Cuthbert to file an amended statement of claim and made orders allowing the following amendments:

a)        The proposed amendments at paragraphs 14-16, 47,49,49A and B, 52,

53 and 66 (these were the minor amendments to which Ms Hollings had no objection);

b)       The proposed amendments to paragraph 77(iii) - (xviiii)

c)        The  addition  of  paragraph  77B,  provided  that  the  allegations  are particularised so as to identify:

i)        In relation to paragraph 77B(i) the advances alleged to have been made by EML to the Portland Trust on non-commercial terms;

ii)       In relation to paragraph 77B(ii) the transactions between EML and the Portland Trust that were not conducted on an arms length and commercial basis;

iii)      In  relation  to   paragraph  77B(iii)  the   manner   in  which, including reference to any specific transaction, the interests of the Portland Trust were preferred to the interests of the EML shareholders.

d)The  addition  of  paragraph  77D,  provided  that  the  allegations  are particularised so as to identify:

i)        In relation to paragraph 77D(a), the advances said to be made by EML to Portland Trust on non-commercial terms are identified;

ii)       In relation to paragraph 77D, the transactions between EML and Portland Trust alleged not to have been conducted on an arms length and commercial basis are identified;

iii)      In relation to paragraph 77D(e), the way in which the first defendant failed to act in the best interests of the shareholders, including the identification of transactions.

[19]     As noted, I did not allow the proposed amendment  in 77D(b) or (d).   In relation to 77D(b) I note that Mr Dale reserved his position to re-apply in respect of that allegation if the further discovery to be provided by the defendant produces something that would support such an allegation.

[20]     Nor did I  allow  the  proposed  amendment  at  77D(d) but  note Mr Dale’s assertion that Mr Humphries’ failure to keep or seek proper records and accounts of EML is a part of the general criticism he will be levelling at the defendant.

[21]     The parties agreed to the following revised timetable:

a)        The defendant would file and serve the evidence of his fact witnesses by 5 pm Friday 1 June 2007;

b)       The plaintiff would file and serve an amended statement of claim by

2 pm Tuesday 5 June 2007;

c)        The defendant will file and serve the brief of his evidence by 10 am

Wednesday 6 June 2007;

d)The defendant will file and serve Mr McLaughlin’s brief of evidence by 5 pm Wednesday 6 June 2007;

e)        The plaintiff will file and serve briefs in reply by 10 am Tuesday 12

June 2007 (if there is any difficulty with this the matter can be raised with the trial judge).

[22]     The agreed bundle of documents will be provided by 5 pm Friday 8 June

2007 (if counsel can provide that earlier he will).

Discovery

[23]     I omitted to include in my decision 31 May 2007 the fact that in relation to discovery of documents relating  to  Mr Bryers,  Dyer  Whitechurch  &  Bhanabhai would advise by 12 pm Tuesday 5 June 2007 what its position was regarding its trust account records.

P Courtney J