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

[2007] NZHC 1771

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:         31 May 2007

Appearances: P J Dale for Plaintiff

D Hollings for First Defendant and first named Second Defendant No appearance for second named Second Defendant and Third Defendants

Judgment:      31 May 2007 at 4:30 pm

RESERVED JUDGMENT OF COURTNEY J

This judgment was delivered by Justice Courtney on 31 May 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  31 May 2007

Introduction

[1]      The  trial of this  proceeding,  which  involves  a  claim  under  the  Property Relationships Act 1976 and also alleges constructive trust and misrepresentation, is scheduled to commence before Priestley J on 11 June 2007.  This morning I heard, at short notice, an application by the plaintiff, Ms Cuthbert, for orders for further and better discovery and an order under s 331(3) High Court Rules.

Application under R331

[2]      The trigger for this application is the imminent settlement of an agreement between the defendant, Mr Humphries, and interests associated with a Mr Carr.  Mr Carr  and  Mr  Humphries  and  their  respective  interests  have  been  involved  in  a number of businesses, the most significant being Big Sky Dairy Farms Limited (in receivership).  All outstanding matters between them have now been settled and are recorded in an Amended Settlement Agreement, which is annexed to Ms Cuthbert’s affidavit sworn in support of this application.

[3]      Under the Amended Settlement Agreement Mr Carr is to purchase the assets of the Big Sky group from four companies, Main Farm Limited (in receivership), Cascade Capital Limited (in receivership), Consultant Management Services Limited (in receivership) and Big Sky Dairy Farms Limited (in receivership).  The amount to be paid is just over $25m.  Of that money some $14m will be paid to the BNZ, the primary secured lender.  Today’s application relates to the balance.

[4]      A company of which Mr Humphries is a director and shareholder, Edgewater Motel Limited (EML),  has  lent  approximately $9m to the  Big  Sky group.   Ms Cuthbert considers that upon clearance of the BNZ debt and any receivership costs, the balance of the money paid under the Amended Settlement Agreement should be applied to the EML debt.  The reason is as follows; she and Mr Humphries were in a de facto relationship  for  some  24  years  and  she  maintains  that  she  contributed substantially to various assets acquired during that time.   She asserts that some of that relationship property was transferred to EML (of which she is neither a director nor shareholder) and, in turn, to Portland Trust (of which she is not a beneficiary)

and used by those entities to build up their substantial assets, now represented in the debt owing by Big Sky group. She claims a direct interest in the money and says that, given the nature of her claim and the history of this proceeding she can have no confidence that the money will be held by or on behalf EML as it should be. She is concerned that upon receipt of the sale proceeds the money will not be applied as it should and will instead make its way to Mr Humphries personally or to Portland Trust.

[5]      Rule 331(3) provides:

In a proceeding concerning the right of any party to a fund, the Court may order that the fund be paid into Court or otherwise secured.

[6]      Mr Dale submitted that the sale proceeds constitute a fund, to which (on the basis of the pleadings) Ms Cuthbert has an interest.   Ms Hollings submits that the proceeds are not a fund in the sense that it was considered by McGechan J in Rapid Metal Developments (NZ) Limited v Rusher (1987) 2 PRNZ 85, that Ms Cuthbert does not have an interest in the money that her claim is one against Mr Humphries personally which, at best, could result in a compensation order in respect of the assets of the trust but not on a claim on the assets themselves.

[7]      The purpose of R 331 is, as observed by McGechan J in Rapid Metal, to preserve property or a fund that is the subject of litigation itself or evidence relating to the litigation.   In the present case I see two difficulties with the plaintiff’s application.   First, as things currently stand, there is no fund of money.   This of course if only a matter of timing because settlement is expected to be implemented this afternoon and if it proceeds there will be a fund of money but I note that, in Neale & Haddow Limited v Strawbridge (1988) 2 PRNZ 569 which involved an application under R 331 made in the anticipation of sale proceeds coming into the hands of the defendant Tipping J declined to make an order on the ground that there was no jurisdiction to so. That would seem to be the case here as well.

[8]      However, I see a more fundamental problem for the plaintiff.  Clearly R 331 is directed towards a fund that is the subject of the litigation.  I do not accept that Ms Cuthbert’s claim falls into that category.  It is apparent from both the pleadings and

the way the claim was explained to me in submission, that Ms Cuthbert cannot have an interest in the actual monies paid to EML pursuant to the sale of the Big Sky assets. Her complaint is that those monies were obtained by EML and Portland Trust through the use of her share of relationship property.  This assertion gives rise to a claim against Mr Humphries personally or a claim by way of a constructive trust against Portland Trust in respect of the assets it may have acquired at her expense but it cannot realistically be asserted as claim in respect of the money itself.   The application must fail for that reason.

Discovery

[9]      After discussion during this mornings hearing counsel were able to agree on the terms of an order for further and better discovery of various files held by Dyer Whitechurch & Bhanabhai (Mr Humphries’ solicitors).and counsel instructed by that firm as follows:

a)       Dyer Whitechurch & Bhanabhai is to discover all files and records relating to the receipt and actual or proposed disbursement of funds paid  pursuant  to  the Amended  Settlement  Agreement  between  Mr Carr and Mr Humphries, including but not limited to:

•   Documents  evidencing  the  receipt  and  disbursement   by  the receiver of the vendor companies under the amended settlement agreement

•   Documents evidencing the terms on which EML’s security is to be or has been released

•  Documents evidencing the basis for any actual or proposed disbursement.

Discovery is to be provided on an informal basis by 5 pm Tuesday 5 June

2007;

b)       Dyer Whitechurch & Bhanabhai is to discover its files and records relating to Mr Mark Bryers and his interests by 12 pm Friday 1 June

2007 save for the settlement agreement between Mr Bryers and his interests and Mr Humphries, discovery of which is to be given by 5 pm Tuesday 5 June 2007 unless Mr Bryers applies prior to that time to have the order set aside.

[10]     I was not addressed on the issue of costs.  Costs are to be reserved.

P Courtney J