Hoeberechts v Sprott
[2019] NZHC 3045
•21 November 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-000960
[2019] NZHC 3045
BETWEEN LINDSAY ANNE HOEBERECHTS
Plaintiff/Applicant
AND
ADRIAN JAMES SPROTT
Defendant/Respondent
Hearing: 31 October 2019
Further submissions received 12 November 2019
Appearances:
V Bruton QC and P Brown for Plaintiff/Applicant K M Wakelin for Defendant/Respondent
Judgment:
21 November 2019
JUDGMENT OF ASSOCIATE JUDGE P J ANDREW
HOEBERECHTS v SPROTT [2019] NZHC 3045 [21 November 2019]
Introduction
[1] The plaintiff, Lindsay Hoeberechts (Lindsay), makes an application, pursuant to rr 8.19 and 8.20 of the High Court Rules 2016, for particular discovery. It is yet a further interlocutory application in these estate proceedings involving sibling parties.
[2] The deceased died in 2014, and his estate remains unadministered. The major asset of the estate, namely the deceased’s former home in Coombes Road, Remuera, with a capital value (CV) of $5.7 million, remains unsold despite the direction for sale in the will. The home has provided no income to the beneficiaries during that time.
[3] The defendant, Adrian Sprott (Adrian), is one of the executors of the estate. He is the brother of Lindsay and of the interested party, Alison Sprott (Alison). Adrian and Alison contest the application for discovery on the grounds of relevance and proportionality. They say that the application is a wide-ranging “fishing expedition”.
[4] The critical issue of relevance is to be assessed by reference to the following claims made by Lindsay:
(a)That Adrian has failed to obtain the necessary legal valuation and marketing advice and has not listed the Coombes Road property for sale within a reasonable time; and
(b)That Adrian and Alison are trustees de son tort in relation to the Sprott Family Trust and the Rodleigh Family Trust (these are fresh allegations contained for the first time in a fourth amended statement of claim).
Relevant legal principles
[5] In Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd, this Court adopted a four-stage approach in considering an application under r 8.19:1
(a)Are the documents sought relevant, and if so how important will they be?
1 Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd [2015] NZHC 2760 at [14].
(b)Are there grounds for belief that the documents sought exist? This will often be a matter of inference. How strong is that evidence?
(c)Is discovery proportionate, assessing proportionality in accordance with Part 1 of the Discovery Checklist in the High Court Rules?
(d)Weighing and balancing these matters, in the Court’s discretion applying r 8.19, is an order appropriate?
[6]The relevance of documents sought is, of course, determined by the pleadings.2
Background facts
[7] The background facts are set out in the earlier interlocutory judgments of Associate Judge Bell of 27 May 20193 and Associate Judge Smith of 31 October 2018 (successful application by the defendant for further particulars).4
[8] For the purposes of these applications, the following brief chronology will suffice.
[9]The mother, Marion Sprott (Mrs Sprott), died on 31 October 2008.
[10] The father, Dr Jim Sprott, died in April 2014. Probate of his will was granted to Adrian and to Richard Nowacki, scientist, of Auckland, on 30 June 2014. Dr Sprott left his net estate to his children in equal shares.
[11] The Sprott Family Trust (associated with the father) was domiciled in Jersey and was wound up in 2016. The Rodleigh Family Trust (associated with the mother) remains in existence and is domiciled in Jersey. The trustee of both trusts was/is a Jersey trust company.
[12] In May 2016, Lindsay received funds of USD32,476.94, which were deposited into her Canadian bank account by a foreign wire transfer recording the ordering customer as the “Sprott Family Trust 10 Coombes Road”. The ordering bank was Charles Schwab & Co, San Francisco, USA.
2 Robert v Foxton Equities Ltd [2014] NZHC 726, [2015] NZAR 1351 at [8(b)].
3 Hoeberechts v Sprott [2019] NZHC 1236 (an unsuccessful strike-out application).
4 Hoeberechts v Sprott [2018] NZHC 2818.
[13] In May 2017, the plaintiff filed interlocutory applications for orders to remove Adrian and Mr Nowacki as executors. In a judgment dated 14 August 2017, Woodhouse J dismissed the plaintiff’s application.5 Mr Nowacki was given leave to retire as executor and Barry Stafford was appointed as executor in his place.
[14] Subsequent to the judgment of Associate Judge Smith of 31 October 2018, the plaintiff filed a second amended statement of claim.
[15] On 19 March 2019, the plaintiff filed a memorandum with the Court, seeking, amongst other matters, discovery of categories of documents from Adrian, including those now sought in the current discovery application.
[16] In a minute issued on 21 March 2019, the Court directed the parties to provide standard discovery with affidavits of documents to be filed and served by 26 July 2019.
[17]On 15 May 2019, the plaintiff filed a third amended statement of claim.
[18] On 27 May 2019, Associate Judge Bell, in dismissing the defendant’s strike- out application, declined the plaintiff’s application for a revision of the standard discovery order.
[19]A fourth amended statement of claim was filed on 30 August 2019.
Analysis and decision
[20] One of the primary aims of the various processes of discovery is to ensure that the parties are not taken by surprise if the proceeding ultimately goes to trial; each party should be able to assess the strengths and weaknesses of the other’s case at a relatively early stage. The discovery procedures are aspects of the rules intended to prevent parties keeping their cards close to their chest.6
[21] I accept the submission of Ms Bruton QC, for Lindsay, that there is a need, particularly at this stage of the process, for me to adopt a robust approach. The
5 Hoeberechts v Sprott [2017] NZHC 1928.
6 Green v Commissioner of Inland Revenue [1991] 3 NZLR 8 (HC) at 11.
substance of Lindsay’s claims is that she seeks to hold Adrian to account for alleged breaches of his role as executor. It is clear on the evidence that Adrian and Alison are privy to information about family affairs, including the interests of Lindsay, and that Lindsay, who has an undisputed one-third share in the estate, has, and continues to have, difficulty in accessing that information. Naturally enough, Lindsay wishes to know what the total family wealth is.
[22] Clearly, there is a high level of mistrust between the parties but, in my view, that simply reinforces the need, in the circumstances here, to ensure that Lindsay has full and proper access to the documents, to ensure that she is not denied her right to hold Adrian to account. Although the facts are yet to be assessed and determined at trial, on the face of the pleadings, there are very real questions as to why the property, some five-and-a-half years after the death of Dr Sprott, has not been sold and provided no income during that time.
[23] I further note that there have been some tentative steps by the parties to try and settle all outstanding matters between them. There is obvious merit to Lindsay’s contention that, before pursuing settlement, she wishes to have all the relevant information so that she can make a fully informed decision on such matters as the total family wealth and what has happened in the management of assets of the estate to which she has a legitimate interest.
[24] I accept that these general comments cannot displace the critical inquiry of relevance and an assessment of proportionality. However, they are part of the context in which those factors are to be weighed and balanced as a matter of discretion.
[25] I turn now to address the particular categories of documents sought in the amended application dated 22 October 2019.
Category 1: All documents, including but not limited to emails, relating to the estates of Dr Sprott and Mrs Sprott authorised/sent/or received by any one or more of the defendant (Adrian), Alison, Mr Nowacki or Barry Stafford/Geoff Stafford from 31 October 2008
[26] I find that the documents sought in this category are relevant, and there are grounds for the belief that the documents sought exist (that is not really in dispute).
However, I accept the submission of Adrian and Alison that the scope of the category is “overly broad” and that, framed in its current form, the order sought fails to meet the proportionality test.
[27] I find that I should order some discovery of documents in this category, but the scope is to be narrowed in the following manner. The start date for the documents is to be the date of Dr Sprott’s death in 2014 and their subject matter is to be confined to:
(a)the sale, use and management of the Coombes Road property;
(b)those outstanding personal items at paragraph 17 of the fourth amended statement of claim of 30 August 2019 that have not to date been given to Lindsay; and
(c)any documents relating to the discharge of the mortgage and the position of Lindsay that the property be sold promptly.
[28] In limiting the scope of the orders, I do not accept the submission of Adrian and Alison that there are no claims relating to the financial administration of the estates or the mortgage over the Coombes Road property. Lindsay has put at issue, and made claims in relation to, the executor’s fees that Adrian has received (albeit that they appear to be of modest levels) (see 20(d) of the fourth amended statement of claim) and the mortgage over the Coombes Road property.
[29] This paragraph is redacted and will be omitted from all copies of this decision other than the original on the Court file and the copy delivered to counsel.
Category 2: All communications with any third parties (including, but not limited to, neighbours, real estate agents, valuers, Trade Me and prospective purchasers) relating to the marketing and sale of the Coombes Road property, including valuation advice and reports, agents’ reports, feedback and recommendations7
[30] In my view, the documents sought in this category are relevant. It may be that, in the fourth amended statement of claim, Lindsay has, for the first time, expressly pleaded that Adrian has ignored valuation advice, agents’ reports, recommendations and buyers’ feedback. However, I do not accept the contention that this is an entirely speculative and cynical pleading made without any specificity. There is evidence before the Court that tends to suggest that Adrian has unrealistic price expectations for the property and has ignored, contrary to his obligations, more realistic assessments from agents and possibly others. Of course, I cannot determine whether the allegations Lindsay makes will ultimately prove to be correct or not, but she has, in my view, established a proper basis for the Court to make the order sought.
[31] I also note that it is now nearly two-and-a-half years since the proceedings were commenced and the Coombes Road property has still not been sold. There would appear to be some good reason for Lindsay to now claim that Adrian has failed to follow valuation and real estate agent’s advice. I further note that Associate Judge Bell declined to strike out the pleadings.
[32] At the hearing, Lindsay tabled further documentation suggesting that one of the two titles of the Coombes Road property had recently been taken off the market. However, it is clear from the affidavit of Adrian dated 12 November 2019 that both titles are currently on the market. While Adrian’s affidavit might ameliorate Lindsay’s concerns as to the current state of marketing, it does not, in my view, provide an excuse or reason for declining to order documents in this category.
[33]I find that documents in category 2 should be discovered.
7 Amended Interlocutory Application by Plaintiff (dated 22 October 2019) at 1(a)(ii).
Category 3: All communications relating to the artwork bequeathed by Mrs Sprott to the plaintiff (Lindsay), including, but not limited to, those relating to the Protected Objects Act 19758
[34] I accept, in a broad sense, the documents sought in this category might have some relevance to the general allegation of a lack of even-handedness. However, I decline to order discovery of any documents in this category. As Adrian and Alison submit, the artwork has been distributed to the plaintiff, and the issue of Adrian and Alison raising the issue of the Protected Objects Act 1975 is apparent from the documents already discovered. The pleadings relating to the artwork are, as submitted, relatively narrow and, in terms of the Assa Abloy principles, in my view, these documents are no longer of great importance.
Category 4: All documents relating to the defendant’s personal use of the Coombes Road property for his BabeSafe and Matta Products, including payments received/profits derived from those enterprises since Dr Sprott’s death
[35] I accept the submission of Lindsay that documents sought in this category are relevant. An executor has a duty not to benefit personally from an estate. Lindsay, as plaintiff, claims that Adrian has, and continues to, benefit from his use of the Coombes Road property for his personal and business use. The evidence establishes that Coombes Road was the registered office for TJ Sprott Ltd, Adrian and Alison’s company, until June 2018. TJ Sprott Ltd traded as BabeSafe and Matta Products.
[36] I find that Adrian and Alison should provide discovery of documents in this category. I do, however, accept that the profits derived from these enterprises are not relevant; the relevant issue is whether Adrian and Alison personally used the Coombes Road property for the running of the businesses rather than the profitability or the extent of profitability of the separate enterprises (owned by Adrian and Alison).
Category 59
[37]This category has been withdrawn from the application.
8 At 1(a)(iii).
9 At 1(a)(v).
Category 6: A copy of all bank and credit card statements for Dr Sprott’s estate10
[38] Lindsay accepts Adrian’s claim in his affidavit in support that there are no credit card statements for Dr Sprott’s estate. Accordingly, she does not take that particular request any further.
[39] I do, however, accept that the bank statements sought are relevant to the pleadings and potentially of some importance to Lindsay’s claim. The bank statements may contain information relevant to Lindsay’s pleaded claim that Adrian has preferred his and Alison’s personal interest over hers and has not acted even-handedly. It is not correct to contend, as Ms Wakelin, for Adrian, did, that there is no claim before the Court relating to the financial administration of Dr Sprott’s estate.
[40] I agree with the submission of Ms Bruton that the bank statements should be provided to enable Lindsay to hold the executor/trustee to account and that the bank statements (presumably held together in one place) should be able to be provided with relative ease. No issue of proportionality arises.
[41]I find that the bank statements for Dr Sprott’s estate should be discovered.
Category 7: All documents and information held or obtainable by the defendant (Adrian) as executor relating to the Sprott Family Trust and the Rodleigh Family Trust, including information held by/available to Dr and Mrs Sprott as either settlors, beneficiaries, trustees and/or protectors of those trusts11
[42] In relation to this category, Lindsay seeks an order that Adrian and Alison provide an affidavit stating whether the following specific trust-related documents are in their control:
(a)the Trust Deed;
(b)Deeds of Retirement and Appointment of Trustees;
(c)the financial and investments statements;
10 At 1(a)(vi).
11 At 1(a)(vii).
(d)trustee resolutions and minutes;
(e)loan and mortgage documents;
(f)memoranda and letters of wishes from the settlors;
(g)communications (including emails and correspondence) between Adrian, Alison and/or anyone else relating to the trust in this litigation;
(h)all bank statements and asset details;
(i)tax returns;
(j)documents relevant to advances and/or distributions to any beneficiary; and
(k)legal advice paid for by the trusts.
[43] The documents sought in this category are, as Adrian submits, in effect the same remedy as the new second, third, fourth and fifth causes of action in the plaintiff’s fourth amended statement of claim, namely disclosure of trusts documents. In those causes of action, Lindsay seeks a finding, effectively a declaration, that Adrian and/or Alison are a trustee or a trustee de son tort.
[44] Adrian and Alison contend that Lindsay’s application for trust documents in this category is misguided and without foundation. In particular, they contend:
(a)The orders for discovery sought are a contrivance and an abuse of process because Lindsay is effectively putting “the cart before the horse” as the order for production of the specified documents sought is effectively the substantive relief she seeks in the main proceeding.
(b)Alison is not a party to the proceedings and no order for discovery can be made against her.
(c)There is no tenable claim that Adrian and Alison are trustees de son tort
(and thus they are not constructive trustees of the trusts).
(d)Lindsay cannot establish that Adrian and/or Alison is in control, or has been in control, of the trust documents sought.
(e)As both trusts are/were domiciled in Jersey, this Court has no jurisdiction over their affairs. The application for discovery of trust documents is an attempt to circumvent jurisdictional issues and is an abuse of process.
[45]I address each of the objections in turn.
Contrivance and abuse of process
[46] I accept that it is somewhat unusual that the order for discovery sought is effectively seeking the same remedy as the relief sought in the substantive claim. However, I do not see that as fatal to the application.
[47] The documents sought are clearly relevant to the allegations of trustee de son tort and clearly important to establishing the contentions in the fourth amended statement of claim. I do not regard Lindsay’s application as either a contrivance or an abuse of process; she is entitled, in my view, to have access to the documents to assess the strengths and weaknesses of her opponent’s case, in circumstances where she is, at least on the evidence before me, clearly at a disadvantage in having not been privy to information apparently enjoyed by her siblings. I note that Lindsay has been unable thus far even to ascertain the names of the Jersey trustees.
[48] Furthermore, as Ms Bruton submitted, Lindsay is, arguably, entitled, as a beneficiary, to the trust information that she seeks, subject to the jurisdictional issue discussed below. That is apparent from the Supreme Court decision Erceg v Erceg12 and the recent Court of Appeal decision Addleman v Lambie Trustee Ltd.13
12 Erceg v Erceg [2017] NZSC 28, [2017] 1 NZLR 320.
13 Addleman v Lambie Trustee Ltd [2019] NZCA 480.
[49] I accept that a distinction is legitimately to be made between a beneficiary’s right to trust information and to discovery which constitutes a function of relevance, proportionality and discretion.14 Equally, the discovering party is only obliged to provide discovery of documents in his or her control. However, the prima facie entitlement that Lindsay enjoys, at least under New Zealand law, to have access to some of the documents sought provides some support for my finding that the application for trust documents is not a contrivance or an abuse of process.
Alison is not a “party” to the proceeding
[50] Alison has not been added as a party to the proceedings. She has been granted the status of an “interested party”.15
[51] Ms Wakelin submitted that an interested party is not a “party to the proceeding or a defendant who is required to provide discovery” (High Court Rules, r 1.3). She contended that for Alison to be added to the proceeding would first require an order pursuant to r 4.56 of the High Court Rules and that no such order has been made.
[52] Ms Wakelin further contended that, in the circumstances, the application for particular discovery against Alison is deficient, irregular and misconceived. She also submitted that, as they presently stand, the third and fifth causes of action in the fourth amended statement of claim are simply a nullity, the proceeding having not properly been brought against Alison.
[53] I find that these objections are largely of a technical kind without any real substantive merit; in particular, it is hard to see that Alison is prejudiced in any real way.
[54]Rule 1.3 of the High Court Rules defines “defendant” and “party” as follows:
defendant means a person served or intended to be served a proceeding (other than a third or subsequent party served with a proceeding under rule 4.12)
…
14 Robert Jones Holdings Ltd v McCullagh [2016] NZHC 2529 at [35], citing Assa Abloy NZ Ltd v Allegion (New Zealand) Ltd, above n 1.
15 Hoeberechts v Sprott HC Auckland CIV-2017-404-960, 8 June 2017 (minute of Wylie J).
party means a person who is a plaintiff or a defendant or a person added to a proceeding
(emphasis added)
[55]Furthermore, r 18.6 states:
A person who becomes a defendant to a proceeding by being served under a direction of the court need not be named as defendant.
[56] In the circumstances, it is difficult to see why the Court should not be able to make an order for discovery against Alison. It is clear from the fourth amended statement of claim that relief is expressly sought against Alison and that, in substance, she should be regarded as a defendant in relation to the allegations of trustee de son tort. Furthermore, she has been put on notice, has had the opportunity to object to the orders for discovery sought against her and, indeed, has taken that opportunity.
[57] If there is doubt about her status in the proceedings and whether in a jurisdictional sense an order for discovery can be made against her as an interested party, then the appropriate course, which I adopt, is to make an order pursuant to r 4.56 and add her as a second defendant to the proceedings. On that basis, I do not see there is any valid basis for declining to make an order for discovery against her.
Trustee de son tort
[58] In support of the contention that Adrian and Alison are not trustees de son tort of the trusts, Ms Wakelin referred to the following passage from Geraint Thomas and Alastair Hudson’s The Law of Trusts:16
… trustees de son tort are not expressly declared by the settlor to be trustees but rather are deemed to be constructive trustees by operation of law; it is due to their meddling with trust affairs that they are deemed to be constructive trustees.
(footnotes omitted)
[59] In order for a person to become a trustee de son tort, it is essential that he or she consciously takes on the role of trustee and intends to become a trustee.17 As a
16 Geraint Thomas and Alastair Hudson The Law of Trusts (2nd ed, Oxford University Press, Oxford, 2010) at [30.04].
17 Nolan v Nolan [2004] VSCA 109 at [29].
minimum, the “meddling” must involve the receiving or taking control of trust property; and the person must have sufficient control over the trust property to enable him or her to dispose of it. To be a trustee de son tort, a person who intermeddles in a trust must be one not having authority from a trustee or who takes in upon himself to act as a trustee. So, a delegate acting with the authority of a duly appointed trustee is not “meddling” in the trust such as to constitute him or her a trustee de son tort.18
[60] Adrian and Alison contend that, if this case was really about their meddling in the trusts, Lindsay, as plaintiff, would have pleaded these matters from the outset, and the only purpose of this “throw-away” pleading is to secure discovery of documents not relevant to any substantive issue in the claim.
[61] The submission of Ms Wakelin that Adrian and Alison are not trustees de son tort may ultimately prove to be correct (that is a matter for trial), but I find at this interlocutory stage that Lindsay has established a genuinely arguable claim that they are, as alleged, trustees de son tort. This is not a case that is similar to Dold v Murphy, where there was no need to order discovery because it would “serve no useful purpose”.19 It cannot be said that it is obvious from the pleadings or the circumstances of this case that the party seeking discovery (Lindsay) is pursuing wholly meritless claims and thus “fishing” in the hope of locating documents of relevance (whether to an existing or a new claim).
[62] It is clear from the evidence that both Adrian and Alison are privy to information about both trusts, including details as to the names of the trustees, to which Lindsay has had no access. I accept that that fact on its own is not sufficient to establish a claim of trustee de son tort. However, the evidence adduced by Lindsay goes further than that and does, to at least an arguable basis standard, establish that there is the necessary meddling and taking control of the trust. This includes the fact that the receipt that Lindsay signed acknowledging the payment of funds from the Sprott Family Trust is a matter that the co-beneficiaries, Adrian and Alison, dealt with and where Lindsay had no direct contact with the trustees. It seems clear that Adrian and Alison have taken steps to make sure that all communications between the trustees
18 Cunningham v Cunningham [2009] JRC 124 (Royal Court of Jersey) at [25].
19 Dold v Murphy [2018] NZHC 994 at [32].
and Lindsay goes through them for scrutiny. It is arguable that they are in control of information and payments to Lindsay.
[63] It is also important to place the allegations of trustee de son tort in the context of Lindsay’s claims against the estate. As Ms Bruton submitted, the trust was provided as one excuse, the first in a series of excuses, by Adrian for his refusal to sell the property because the father’s (Dr Sprott’s) affairs were said to run across three tax returns; his personal return, the company return and the trust return. Adrian advised that all three tax returns had to be dealt with before the executors could be sure about the tax situation. Furthermore, the Coombes Road property has a registered mortgage (first registered in 1994) in the name of Reads Trustee Ltd. That corporate trustee was the sole trustee of the Rodleigh Family Trust. The mortgage secures a loan of CAD450,000. The evidence suggests that the Reads Trustee Ltd/successor companies are no longer the trustee of the Rodleigh Family Trust.
[64] I also accept the submission of Ms Bruton that there is a proper basis for inferring that the parents, Dr and Mrs Sprott, would have held various trust information, in their personal capacities, and that Adrian, as executor, now has title to all such information, it being part of their personal property.20 Furthermore, it is expressly pleaded that the estate information includes information relating to the trusts and that documentation held by Adrian, as executor, is also relevant to the allegation of a lack of even-handedness (namely, that the information was shared and enjoyed by Adrian and Alison to the exclusion of Lindsay).
[65] Subsequent to the hearing, Lindsay filed a further affidavit addressing the issue of the payment to her of USD32,476.94 from the Sprott Family Trust in May 2016 (see [12] above). That was accompanied by a further submission from Ms Bruton dated 1 November 2019. I then gave Adrian and Alison the opportunity to respond to that further affidavit and submission.
[66] Adrian then filed a further affidavit sworn 12 November 2019 accompanied by a submission of Ms Wakelin of the same date.
20 See Laery v Grout [2014] NZHC 2495 at [19]. See also the letter of indemnity to the trustees of the Rodleigh Family Trust signed by members of the Sprott family (dated 5 April 1995).
[67] I acknowledge the very full explanation provided by Adrian as to how the foreign wire transfer came about and that Jersey family trusts differ from typical New Zealand family trusts in respect of the inter-relationship between trustees, beneficiaries and trust assets (although some of the emails from Adrian suggest otherwise, referring for example to “informality”). However, in my view, these are issues for trial and the foreign wire transfer, on its own, is not determinative of whether there is an arguable claim of trustee de son tort or whether the trusts documentation in Adrian’s possession is relevant to the allegations made against him by Lindsay in relation to the administration of the estate. In any event, the documentation gives rise to more questions than answers about the status of the trust.
[68] Ms Wakelin further submitted that the Court has already held that neither Adrian nor Alison is, or ever has been, a trustee of the Sprott Family Trust or the Rodleigh Family Trust. Accordingly, they can have no duty to provide trust documents to the plaintiff.
[69]In an earlier decision in these proceedings, Woodhouse J held:21
[45] … To the extent that the executors may have information relating to these trusts, there has been no breach of duty by them in failing to pass this information on to Lindsay. The responsibility in that regard, in a legal sense, rests with the trustees of those trusts. Those trustees are not parties to this proceeding. …
…
[47] … I am not persuaded that an order can be made in this proceeding, against the executors of the two estates, to disclose information in respect of two trusts for which they have no legal responsibility. …
[70] I acknowledge there is some force in that submission. However, the comments of Woodhouse J were made in 2017, before the current pleading which contains fresh allegations of trustee de son tort. The trustee de son tort causes of action allege that Adrian and Alison are in fact in control of the trusts and taking responsibility for the administration of the trusts’ affairs (albeit on a de facto basis). It would be wrong for the defendant parties to hide the de jure status of the trusts, if there are genuine trustee de son tort causes of action and in circumstances where there appears to be steps to
21 Hoeberechts v Sprott, above n 5.
try and thwart Lindsay from having any information about the trusts (including the names of the trustees).
[71] Adrian and Alison further oppose disclosure of trust documents on the basis that such documents are not within their control. They rely on the conclusion of Katz J in Lighter Quay Residents’ Society Inc v Waterfront Properties (2009) Ltd:22
[32] “Control”, in relation to a document, is defined in r 1.3 of the High Court Rules. It means possession, a right to possess, or a right (otherwise than under the Rules) to inspect or copy the relevant document. This definition embraces the concept of “power”, which the House of Lords considered to mean a “presently enforceable legal right to obtain from whoever actually holds the document inspection of it without the need to obtain the consent of anyone else”.23
[72] Katz J held, in Lighter Quay, that since documents were not in the legal control of the party from whom they were sought, it would be inappropriate for the Court to order their discovery.
[73] However, as I have already concluded, Lindsay makes claims of trustee de son tort and has provided some evidence to establish that relevant trust documents are in fact in the possession of Adrian and Alison.
[74] As to the objection by Adrian and Alison that this Court lacks jurisdiction to make discovery of trust documents because the trusts at issue are domiciled in Jersey (and in the case of the Sprott Family Trust was wound up in 2016), I find that it is not a valid basis for my declining to make the orders sought. The trustee de son tort allegations are of course an allegation (supported by some evidence) that in fact the trusts are New Zealand-based and run from New Zealand by Adrian and Alison – or, at the least, that they are meddling in the trusts’ affairs. That the trusts are formally domiciled in Jersey is not an answer to the trustee de son tort cause of action.
[75] I therefore conclude that trust documents are relevant, are of importance to the case and that the relevant criteria (including weighing matters in the balance), as set out in Assa Abloy, have been established.24 There remains, however, the issue of the
22 Lighter Quay Residents’ Society Inc v Waterfront Properties (2009) Ltd [2017] NZHC 818.
23 Lonrho Ltd v Shell Petroleum Co Ltd [1980] 1 WLR 627 (HL) at 635 per Lord Diplock.
24 Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd, above n 1.
scope (which involves an assessment of proportionality) of any orders I might properly make.
[76] The scope of the orders sought should, in my view, be confined to a narrower category of documents than those contained in Lindsay’s application. I have determined the scope of any orders by reference to the following factors:
(a)The relief sought in respect of the trustee de son tort causes of action is confined to having access to documents;
(b)As to proportionality, the trustee de son tort pleadings have been brought at a relatively late stage and the trial is scheduled to commence in March 2020; and
(c)The list of matters that the Supreme Court, in Erceg v Erceg, held should be considered on an application for disclosure of trust documents, and the comments made by the Supreme Court about the minimum disclosure required to scrutinise the trustees’ actions in order to hold them to account.25
[77] Against that background, the trust documents, to the extent that Adrian and Alison are in control of them, that they are required to discover are as follows:
(a)copies of the trust deeds (both the Sprott Family Trust and the Rodleigh Family Trust);
(b)deeds of retirement and appointment of trustees since 2014;
(c)the financial and investment statements for the trusts for the years 2014 until the present;
(d)loan and mortgage documents relating to the Coombes Road property since 2014;
25 Erceg v Erceg, above n 12; and Addleman v Lambie Trustee Ltd, above n 13, at [22] and [23].
(e)communications between Adrian and Alison relating to distributions and advances from the trusts since 2014;
(f)all bank statements and asset details of the trusts since 2014;
(g)tax returns for the trusts since 2014; and
(h)documents generated by the trustees relevant to advances and/or distributions to either Adrian, Alison or Lindsay since 2014.
[78] Even if I am wrong in concluding that there is an arguable case against Adrian and Alison that they are trustees de son tort, I would, in any event, make an order for discovery pursuant to r 8.20 (an order for discovery before proceedings commence). As Ms Bruton submitted, Lindsay cannot formulate her claims without knowing who the trustees are and what the terms of the trust are.
Category 8: All documents relating to the mortgage registered over the Coombes Road titles, including the source loan and mortgage documents, all loan statements, details of all repayments and further advances, change of lender, communications with the lender, either by or on behalf of Dr and Mrs Sprott, or their executors
[79] I accept that some mortgage documents may be relevant, although it is difficult to see that the allegation that Adrian has breached his duty to ensure that the Coombes Road titles reflect the loans secured by the mortgage is, in the circumstances, a matter of any great significance or importance to the overall litigation.
[80] I find that some documents in this category should be discovered by Adrian but confined in the following manner. I note that I have already ordered disclosure of some mortgage documentation in relation to category 7 (trusts) above.
[81] I order that discovery is to be provided of documents relating to the mortgage registered over the Coombes Road title since 2014 but that such documents are to be confined to:
(a)the mortgage document itself;
(b)the most recent loan statement recording the outstanding debt; and
(c)documents relating to any change to the lender since 2014.
Category 9: The estate tax returns
[82] I accept that documents in this category are relevant and that they ought to be able to be provided to the plaintiff without any great difficulty.
[83] I order that the estate tax returns for the period from 2014 until the present are to be discovered by Adrian.
Conclusion
[84] In the main, Lindsay has established the relevant principles in Assa Abloy (that is, relevance, proportionality and discretion) and, subject to the qualifications recorded above in this judgment, her amended interlocutory application seeking orders for particular discovery dated 22 October 2019 is granted.
Result
[85] I order that the defendants, Adrian Sprott and Alison Sprott, are to file and serve affidavits by 13 December 2019, stating whether the following documents are or have been in their control, listing all such documents in an affidavit, and making all such documents available to the plaintiff, Lindsay, for inspection:
(a) this paragraph is redacted and will be omitted from all copies of this decision, other than the original on the Court file and the copy delivered to counsel;
(b)documents in category 2, as set out at [30] above;
(c)documents in category 4, as qualified by [36] above;
(d)documents in category 6, as set out at [39] above, namely the bank statements;
(e)documents in category 7, confined to the documents set out at [77];
(f)documents in category 8, confined to the documents specified at [81]; and
(g)documents in category 9, as described in [83] above.
[86] I note that the close of pleadings date is 6 December 2019. The orders I am now making require the filing of a further affidavit of documents after that date. It may be necessary for counsel to confer on timetable issues.
[87] As to costs, I am of the preliminary view that the plaintiff, Lindsay, has in the main succeeded and is entitled to costs on a 2B basis. If the parties cannot agree then memoranda are to be filed within 14 days.
Associate Judge P J Andrew
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