Harvey v Harvey
[2020] NZHC 1886
•31 July 2020
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2019-419-021
[2020] NZHC 1886
UNDER the Family Protection Act 1955 IN THE MATTER
of the estate of MARTIN LEONARD HARVEY
BETWEEN
BRYCE CHARLES HARVEY
Plaintiff
AND
PAUL MARTIN HARVEY and CLARK
ROWLAND HARVEY as executors of the estate of Martin Leonard Harvey Defendants
Hearing: 30 July 2020 Appearances:
K, K and L Badcock for Plaintiff
No appearance for Defendants (abide decision of Court) D R I Gay for B A Harvey Ltd
A MacMillan for New Zealand Watermelon Distributors Ltd
Judgment:
31 July 2020
JUDGMENT OF LANG J
[on application for non-party discovery]
This judgment was delivered by me on 31 July 2020 at 3.30 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors:
Badcock Law, RotoruaAllen Needham & Co Ltd, Morrinsville Barbara Knowles, Auckland
Counsel:
D R I Gay, Auckland
A MacMillan, Auckland
HARVEY v HARVEY [2020] NZHC 1886 [31 July 2020]
[1] Mr Martin Harvey (Mr Harvey) died on 6 April 2016. He was survived by his wife Margaret and his five children Paul, Clark, Brett, Bryce and Delwyn.
[2] Disputes regarding Mr Harvey’s estate are currently the subject of no fewer than six separate proceedings in this Court brought by the surviving members of his family.1
[3] In the present proceeding Mr Harvey’s son Bryce brings a claim under the Family Protection Act 1955 seeking further provision from his father’s estate. The issue I am required to decide is whether Bryce should be permitted to obtain orders requiring two non-parties, B A Harvey Limited (BAHL) and New Zealand Watermelon Distributors Limited (NZWDL) to provide discovery of their financial statements going back to 2009. Both companies oppose Bryce’s application.
Bryce’s claim in this proceeding
[4] BAHL2 and NZWDL have always been owned by members of Bryce’s family. Bryce’s claim in the present proceeding has its genesis in a series of transactions that occurred between 1999 and 2002. At that time Bryce owned 3,900 shares in NZWDL having an agreed value of $18,033.06. NZWDL also owed Bryce the sum of
$4,767.46 by way of the credit balance in his shareholders current account.
[5]Bryce also owned 1,225 shares in BAHL having an agreed value of
$127,184.85. In addition, his shareholders current account with BAHL had a credit balance of $75,694.22.
[6] Between 1999 and 2002 Mr and Mrs Harvey undertook a restructuring of their family’s affairs. The arrangements were recorded in a deed of distribution signed by all members of the family, including Bryce, dated 17 May 2002. This recorded the redistribution of assets, including shares in family companies, into the sole names of the children. As a result of this arrangement Bryce’s shares in NZWDL and BAHL were transferred to his brothers Paul and Brett respectively. In addition, Bryce assigned the credit balances in the two shareholders current accounts to a trust called
1 Although one of these, a claim by Paul, has recently been discontinued.
2 BAHL was formerly called M L Harvey & Sons Ltd.
the Harvey Family Trust (the Trust). The Trust was formed by a deed of trust dated 17 May 2002 as part of the family’s restructuring arrangements.
[7] The deed of distribution recorded that Bryce transferred assets having a value of $225,679.59. Bryce then entered into a gifting arrangement that extinguished this debt over the following years. As a result, Bryce effectively surrendered the ownership of both his shares and current accounts without receiving any payment in return.
[8] Bryce says his father expressly acknowledged on several occasions that he had received significantly less than his siblings as a result of this arrangement. He says his father assured him that he would “even up”, or compensate, Bryce for this imbalance either during his father’s lifetime or on his father’s death.
[9] Mr Harvey’s last will provided for Bryce to receive the shares owned by his father in a company called Ohinewai Holdings Limited (OHL), together with all amounts owing to Mr Harvey by OHL as at the date of his death. Bryce was also to receive a legacy equal to any amount in excess of $200,000 that might be owing by OHL to any bank at the date of his father’s death.
[10] The will made provision for Mr Harvey’s wife Margaret to remain living in a house property until the date of her death. Thereafter, Mr Harvey’s residuary estate was to be divided equally between his five children.
[11] Bryce acknowledges he received more than his siblings under his father’s will. He is concerned, however, that the size of his father’s residuary estate may decrease significantly because of the competing claims by his mother and his siblings. He contends that, if this should occur, it may undermine his father’s endeavour to compensate him for the fact that he received significantly fewer assets during his father’s lifetime than did his siblings. In that event he seeks further provision from his father’s estate to address this issue.
The application for non-party discovery
[12] Bryce seeks non-party discovery from his brothers Brett and Paul of the financial statements for both BAHL and NZWDL for the financial years from 1999 to
the present day. He says this will enable him to calculate the extent to which his current account in each company may have increased since 2002 through the payment of dividends from profits. It will also enable him to calculate the current value of the shares in both companies. This, in turn, will enable him to ascertain the extent to which his father compensated him in his will for the imbalance in the value of the assets he gave away in 2002.
Relevant principles
[13] It is common ground that an order for non-party discovery should only be made if the Court is satisfied the non-party is likely to hold documents that are relevant to the proceeding. Relevance in this context is determined having regard to the pleadings. Furthermore, the discovery and inspection processes are designed to ensure principles relating to proportionality are applied.3 Non-parties should not be put to the time and expense of providing discovery of documents when to do so would be disproportionate to the likely relevance of those documents to the issues to be determined in the proceeding.
Decision
[14] Bryce’s application is based on the premise that the Court will have regard to the current value of the redistributed assets, namely the shares and current accounts, in determining whether his father compensated him adequately for the imbalance of assets distributed during his father’s lifetime. Such a process would be fraught with practical difficulty. Some of the financial statements are no longer available. Furthermore, more than 15 years have now passed since Bryce transferred the assets to his brothers and the Trust. During that period his brothers have been responsible for operating the two companies and Bryce has played no part in that process. Any increase in the value of the companies since 2002 has therefore been achieved solely through his brothers’ efforts and not through any effort on Bryce’s behalf.
[15] Brett and Paul have also no doubt made decisions since 2002 on the basis that Bryce no longer holds shares in the two companies. They may have made those
3 Westpac New Zealand Ltd v Adams [2013] NZHC 3113 at [27].
decisions differently if Bryce had retained his shares. By way of example, decisions as to whether to declare dividends may have been different if Bryce was still a shareholder after 2002.
[16] More importantly, I do not consider the current value of the two companies will be relevant to the issue of whether Bryce is entitled to further provision from his father’s estate under the Family Protection Act 1955. The evidence overwhelmingly suggests Mr Harvey intended the legacy of the OHL assets to be the means by which he “evened up” the disparity in value between the assets Bryce received during his father’s lifetime and those received by his siblings. The value of the OHL assets can be readily calculated and, as matters currently stand, it appears that Bryce accepts it is sufficient to compensate him for having been treated differently to his siblings during his father’s lifetime. An issue may, however, arise if Bryce’s mother succeeds in establishing she is entitled to an interest in OHL. In that event the legacy will have failed to achieve its purpose and the Court may need to have resort to his siblings’ shares in the residuary estate to rectify the position so far as Bryce is concerned.
[17] Even if this occurs, however, the current value of the shares that Bryce formerly owned in BAHL and NZWDL will have no relevance. Bryce cannot now revisit the events that occurred in 2002. Under the deed of distribution he freely transferred his shares and current accounts in the two companies to his brothers and the Trust at an agreed value. Had he been paid that sum in 2002 he could not have complained later. What he subsequently gave up, however, was not the shares in BAHL and NZWDL. He had already divested himself of those when he signed the deed of distribution. Rather, he subsequently lost the benefit of the sale price because he progressively gifted it away. That is the imbalance his father sought to “even up” through the legacy in the will. Bryce may therefore argue that the current value of the sum he ought to have received in 2002 is less than the value of the interest he will now hold in the OHL assets if his mother successfully establishes an interest in those assets. That argument does not, however, depend in any way on the current value of the shares in BAHL and NZWDL.
[18] It follows that the documents Bryce seeks have no relevance to the issues to be determined in this proceeding.
Result
[19]The application for non-party discovery is dismissed.
Costs
[20] The non-parties have succeeded in resisting Bryce’s application and are entitled to an award of costs in their favour. Although I indicated during the hearing that I would endeavour to fix costs in my judgment I consider it is preferable in the first instance if the parties endeavour to reach agreement on costs having regard to the usual principles that apply in cases involving non-party discovery. If they cannot reach agreement, they have leave to file concise memoranda ( no more than three pages in length) and I will determine costs on the papers.
Further evidence
[21] Bryce anticipated filing and serving further evidence if his application for non- party discovery was successful. He may still wish to do so to provide the Court with evidence as to the current value of the sum he ought to have received in 2002. Any application for leave to file and serve additional evidence should be filed and served before the proceedings are the subject of a further case management conference in September 2020.
Lang J