Gavin v Powell
[2020] NZHC 3017
•16 November 2020
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2018-409-000272
[2020] NZHC 3017
BETWEEN CHARLOTTE TERESA GAVIN
Plaintiff
AND
DANIEL JOHN POWELL
First Defendant
AND
PAUL JOSEPH DORRANCE
Second Defendant
Hearing: 29 October 2020 Appearances:
J Moss for Plaintiff
T C Weston QC and W J Palmer for Defendants
Judgment:
16 November 2020
JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 16 November 2020 at 11.30 am pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
GAVIN v POWELL [2020] NZHC 3017 [16 November 2020]
Introduction
[1] The plaintiff (Charlotte) and the first defendant (Daniel) are siblings. They have been in litigation for several years over the affairs of trusts called the Daniel Powell Family Trust (DPFT) and the Charlotte Powell Trust (CPT).
[2] Charlotte’s and Daniel’s father instigated the establishment of the trusts. The terms of the trusts mirror each other. While both Charlotte and Daniel, along with their respective children and grandchildren, are discretionary beneficiaries of both trusts it has been determined in other proceedings that the DPFT is intended to effectively be Daniel’s inheritance and the CPT is effectively Charlotte’s inheritance but Charlotte and Daniel can have recourse to the other’s trust if his or her trust fails.1
[3] The history of this and prequel litigation between the parties can be found in several judgments of this Court and the Court of Appeal.2
[4] Daniel and the second defendant (Mr Dorrance) are the current trustees of the DPFT. Here, Charlotte alleges numerous breaches of trust by them and, ultimately, seeks their removal as trustees and their replacement by the New Zealand Guardian Trust Ltd.
[5] The application presently before me is by Charlotte for an order the defendants give particular discovery of documents that relate to Daniel’s financial position at the time distributions were made to him as a beneficiary of the DPFT (the documents).
[6] Broadly, Charlotte argues in support of the application that the documents are relevant to the criteria the defendants used when deciding whether to make distributions to her and Daniel and will show they have favoured Daniel and his family over her and her family when making distribution decisions.
[7] The stimulus for this application are requests by Charlotte for distributions from the DPFT which, she says, were rejected by the defendants. The defendants deny
1 Powell v Powell [2014] NZHC 476, [2014] 3 NZTR 24-011.
2 Powell v Powell, above n 1; Powell v Powell [2014] NZHC 2096; Powell v Powell [2015] NZCA 133, [2015] NZAR 1886; Powell v Powell [2015] NZHC 1984; Gavin v Powell [2018] NZHC 2866; Gavin v Powell [2019] NZHC 1277; and Gavin v Powell [2020] NZHC 1224.
the contention that Charlotte’s requests were rejected and say money has been set aside for that purpose.
[8] The defendants qua trustees have deposed they do not hold the documents but, obviously, it is not disputed Daniel has them in his possession qua beneficiary. The defendants’ primary opposition to the application is that the documents are not relevant. Specifically, they contend:
(a)the application is based on an erroneous premise the defendants have a duty to give equal consideration and equivalency of treatment to Charlotte and Daniel as beneficiaries of the DPFT; and
(b)the documents do not relate to any issue raised in Charlotte’s pleadings.
[9] The parties have filed affidavits in support and opposition to this application. The defendants take issue with Charlotte’s affidavits which substantially contain argument or submission. I understand Charlotte may have written the affidavits herself but a more critical filter should have been applied to them. They are substantially unhelpful. The defendants do not seek a ruling on their specific objections trusting that I will use my judgement in assessing the evidence.
The statement of claim
[10] Charlotte’s statement of claim is in its fifth iteration (the statement of claim). The argument advanced by Mr Moss that I should look to the substance rather than the form of Charlotte’s pleadings when considering this application is difficult to support given the number of amendments to date, the detailed nature of the pleadings and the time taken to get Charlotte’s pleadings in order. Mr Moss advises that the statement of claim will be subject to yet further amendment. I do not know what an amended statement of claim will contain. I deal with the application on the basis of the statement of claim as it presently stands.
[11] There are seven causes of action. The first two causes of action are not relevant to this application. The remaining causes of action allege breaches of duty by the
defendants as trustees de son tort or, in the alternative, as trustees if validly appointed. The duties the defendants are said to have owed as trustees (paragraphs 26 and 33 of the statement of claim) and the allegations of breach of those duties (paragraphs 28 to 31 and 35 to 38 of the statement of claim) mirror each other and are common to all these causes of action. In respect of all causes of action Charlotte is, in effect, seeking the removal of the defendants as trustees and the appointment of the New Zealand Guardian Trust Company Ltd as sole trustee of the DPFT.
The issue
[12] On 12 March 2020, Nation J ordered tailored discovery but without directions as to the categories of documents to be discovered. The parties were to consult to reach agreement on the extent of tailored discovery. The parties have filed affidavits by way of discovery.
[13] Charlotte brings her application under r 8.19 High Court Rules 2016 but the defendants argue the application is, in essence, for non-party discovery under r 8.21. They submit the application fails to recognise the defendants are sued qua trustee. As they do not hold the documents the application can only be against Daniel as a non- party (i.e. in his personal capacity).
[14] Whether the application proceeds under r 8.19 or r 8.21 relevance remains the touchstone. The issue before me is whether the documents are relevant.
[15] The pleadings set the outer limits of what is relevant. The issues arising on the pleadings must be identified and the documents assessed as to their relevance to those issues.3 The criteria for assessing relevance is set out in r 8.7 and requires disclosure of documents of actual and direct relevance. The concept of relevance is broader than the test for admissibility and can include “something that is directly connected, related or pertinent to ‘the matter in hand’.”4 An inadequately particularised pleadings may
3 McGechan on Procedure (online loose-leaf ed, Thomson Reuters) at HR8.07.01.
4 Attorney-General v Institution of Professional Engineers New Zealand Inc [2018] NZHC 74, [2018] NZAR 275 at [28]. See also Intercity Group (NZ) Ltd v Nakedbus NZ Ltd [2013] NZHC 1054 at [15]; Chatfield & Co Ltd v Commissioner of Inland Revenue [2016] NZCA 614, (2016) 27 NZTC 22-084 at [21].
not trigger a particular discovery obligation if the defect means that a matter has not been sufficiently put in issue.5
Relevance
[16] It is instructive to consider the reasons advanced by Charlotte to support her contention the documents are relevant. It is plain, both from Charlotte’s evidence and Mr Moss’s submissions on her behalf, that at the forefront of her concerns are four matters:
(a)she was asked to provide information as to her financial circumstances and to establish her need for distributions;
(b)her requests for distributions were rejected;
(c)the defendants made distributions to Daniel; and
(d)the defendants did not consider Daniel’s financial circumstances or his needs when deciding to make distributions to him.
[17]Charlotte says in her first affidavit in support of this application:
I am seeking the financial information relating to Daniel and his family that was available to the trustees at the time of making distributions to Daniel.
I have been told by the solicitor for the trustees that they do not have any financial information. That means that whereas they asked me for a mountain of financial information about me and my family it seems the professional trustee did not ask for anything of Daniel’s and together they did not consider it when making distributions to him
…
The professional trustee and Daniel have asked me for information relating to my needs and it follows that they should have sought the same information in respect of Daniel’s before making any distribution to him. Otherwise they are favouring Daniel and his family over mine.
5 Hoyle v Hoyle [2017] NZCA 516 at [19] and [42].
[18]Charlotte says in her reply affidavit:
I believe the documents will show that Daniel had no financial need at the time of the distributions of around $2m and simply made those distributions to further his own personal financial interest and it will assist the Court in understanding what criteria the trustees of the DPFT used (or did not use) in assessing the appropriateness of a distribution for Daniel as compared with me.
[19]Mr Moss, in his written submission, says:
Prior to rejecting [Charlotte’s] requests [for distributions], the trustees made Charlotte run around providing a significant amount of financial information such as her taxable income, bank statements, insurance schedules, valuations of property, her husband’s income and any other benefits, information relating to any other trusts, and evidence that her parents had not provided any support in the past or future…
and
Charlotte’s claims are that Daniel (and Mr Dorrance) have not acted fairly, or in the best interests of all the beneficiaries, and have favoured Daniel and his family over Charlotte and her family when making distribution decisions. This includes not only denying requests for distributions to Charlotte but accepting requests for distributions of over $2.14 million to Daniel.
and
The financial information is relevant to the argument that Daniel has not acted in the best interests of [all of] the beneficiaries, and favoured himself over Charlotte and her family because he has made his decisions on distributions in the knowledge of his own financial position and being able to compare that position with Charlotte’s…
and
… how can Charlotte argue, and how can the Court determine whether or not the trustees have acted fairly, whether or not they have acted capriciously (ie unpredictably), whether or not they have favoured Daniel over Charlotte, whether or not they have taken into account different criteria when making assessments, and if so, whether they are entitled to do so, without knowing both of Daniel and Charlotte’s financial position.
[20] It is readily apparent Charlotte sees matters in terms of the defendants having unfairly favoured Daniel in a contest between her and him for distributions. She considers the defendants were obliged to treat requests by her and Daniel even-
handedly.6 She is effectively arguing that because she was required to disclose her finances when seeking distributions then so too should Daniel.
[21] This binary comparison, as it was referred to by Mr Weston, as to the manner in which the defendants dealt with requests for distributions by Charlotte and Daniel must be considered in the context of the prior judgments of the Court where it was held that although Charlotte and Daniel were discretionary beneficiaries of each other’s trusts the entitlement to have recourse to the other’s trust arose if his or her trust should fail for any reason.7
[22] Charlotte’s entitlement to seek distributions from the DPFT is necessarily dependent upon the failure, or at least the substantial impairment, of the CPT. Her requests for distributions from the DPFT must necessarily be needs based. This is reflected in the statement of claim which throughout speaks of her needs and the needs of her children. There is, however, nothing that supports a view requests for distributions by Daniel must be needs based or that the defendants were required to consider distributions made to him when considering Charlotte’s requests for distributions.
[23] Turning to the statement of claim, the distributions made to Daniel are mentioned in two respects only as follows:
(a)paragraphs 28(g)(iii) and 35(g)(ii) allege the defendants have made distributions of more than $2.14m to Daniel and his family between March 2017 and June 2018 while not distributing anything to Charlotte and her family; and
(b)paragraphs 29(c) and 36(c) allege the defendants have not acted “even- handedly” as between “competing beneficiaries” and have acted unfairly against Charlotte and her children to whom they have not made any distributions while favouring Daniel and his family by making distributions to them of more than $2.14m.
6 There is a pleading at 29(c) and 36(c) of the statement of claim that the defendants have not acted even-handedly but in respect of this see Kain v Hutton [2007] NZCA 199, at [276].
7 Powell v Powell, above n 1, at [12]; Powell v Powell [2015] NZCA 133, [2015] NZAR 1886.
[24] Mr Moss submits these pleadings squarely put in issue the distributions made to Daniel but it is only the fact of the distributions that is put in issue and about that there is no dispute. A pleading the defendants made distributions to Daniel while making none to Charlotte does not put Daniel’s financial circumstances in issue. There is, for instance, no pleading the defendants were required to take into account Daniel’s financial circumstances when making distributions to him. There is no pleading the defendants took into account Daniel’s financial circumstances when responding to a request for distributions. There is no pleading the defendants were required to consider distributions made to Daniel or his financial circumstances when determining requests by Charlotte. There is no pleading that impugns the distributions to Daniel at all and no claim to recover them. There is, in fact, no allegation in the statement of claim that puts Daniel’s financial circumstances in issue.
[25] Mr Moss relies upon a decision of Nation J which concerned an earlier successful application by Charlotte for particular discovery.8 There, Charlotte sought discovery of documents relating to the removal of a Ms Ballinger as a trustee of the DPFT, the appointment of Mr Dorrance in her place and, a client file that Ms Ballinger maintained while acting as a trustee. The defendants resisted discovery on the basis the documents were not relevant to any matter raised by the pleadings, discovery was unnecessary, and the claim could be decided on the basis of admissions and denials without the need for further specific discovery. Nation J ordered discovery of some of the documents sought.
[26] Mr Moss submits the defendants are advancing the same arguments they relied upon before Nation J in opposing this application and they should again be rejected. He acknowledges relevance is defined by the pleadings but, relying on Nation J’s judgment, submits it is the substance, rather than the form, of the pleadings that is important. Developing this argument, he contends the documents should be disclosed because it is information the Court will want to know in deciding whether the defendants have acted fairly and in the best interests of the beneficiaries.
8 Gavin v Powell [2018] NZHC 2866.
[27] Nation J’s decision is not authority that discovery can be ordered untethered from the pleadings. Nation J ordered discovery because he considered the documents were relevant to issues that were put in issue by the pleadings and had to be determined when the proceeding is heard. He said:9
Despite those matters, I consider it likely there will be documents on the Cavell Leitch file relevant to matters that will be at issue when the current proceedings are heard.
… If the Court accepts Charlotte’s challenge to the appointment of Mr Dorrance, the Court would have to decide whether or not Daniel should now continue as a trustee or be replaced, as Charlotte seeks with her pleadings. The Court would need to consider whether Daniel had in fact been able to cooperate with an independent professional trustee.
[28] The important difference here is Charlotte has not satisfied me that Daniel’s financial circumstances are relevant to any matter that will be in issue when this proceeding is heard.
[29] Finally, Mr Moss argues Daniel does not want to disclose the documents because he has something to hide. I am unable to accept the submission. There are good reasons Daniel would not wish to disclose the documents. The documents would not ordinarily be available to a discretionary beneficiary if sought outside the context of a court proceeding10 and in the context of litigation parties are not required to disclose irrelevant documents. To order discovery of the documents would be to sanction Charlotte undertaking a fishing expedition as to matters she has not put in issue, would raise the prospect of the hearing being diverted into irrelevant areas of enquiry and unnecessarily add to the parties’ costs.
Result
[30]Charlotte’s application is dismissed.
9 Gavin v Powell, above n 8, at [45] and [46].
10 At [51]; Erceg v Erceg [2017] NZSC 28, [2017] 1 NZLR 320.
[31] I reserve costs. If costs are sought, then I will receive memoranda within 21 days with seven days for replies.
O G Paulsen Associate Judge
Solicitors:
Shaun Cottrell Law, Christchurch Buddle Findlay, Christchurch
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