Lee v Lee
[2016] NZHC 1073
•23 May 2016
IN THE HIGH COURT OF NEW ZEALAND
ROTORUA REGISTRY
CIV 2010-463-000430
[2016] NZHC 1073
BETWEEN ROBERT LEE as trustee of the Estate of J G Lee
First Plaintiff
HELEN HEARD as trustee of the Estate of J G Lee
Second Plaintiff
AND
GREGORY LEE
First Defendant
AND
GREGORY LEE and JANE LOIS LEE
Second Defendant
Hearing: 19 May 2016 Appearances:
R Lee in person the First Plaintiff D Chambers QC for the Defendants
Judgment:
23 May 2016
JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN
This judgment was delivered by me on
23.05.16 at 4:30pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date……………
R LEE AND H HEARD v G LEE AND J L LEE [2016] NZHC 1073 [23 May 2016]
Applications
[1] The defendants have applied for security for costs, particular discovery, and seek directions as to separate trials and representation.
[2] The first plaintiff (Mr Lee) has filed on behalf of he and the second plaintiff a notice of opposition to the defendants’ applications. As well he files his own application for particular discovery and an application for orders for discovery from non-parties.
Mr Lee’s applications
Particular discovery
[3] Discovery is sought of the completed financial statements for High Duty Plastics Limited (HDP) for the years:
(a) 1998, 1999 and 2000.
(b) 2001 and 2002
(c) 2003 to 2016 (inclusive).
Non-party discovery
[4]The non-party discovery application seeks the recovery of:
(a)Medical records of the parties’ father from Dr MacLean of the Western Heights Medical Centre; and
(b)From the law firm Reeder Smith & Co and its principal Mr Smith documents “which may be relevant to these proceedings”.
Considerations
[5] In discussion with Ms Chambers and Mr Lee the Court was advised the defendants do not oppose the non-party orders application. However as Ms Chambers noted the orders cannot be made because the non-parties in question have not been served with any notice of an application.
[6] For the reasons identified by Ms Chambers the Court could not consider those applications.
[7] Regarding Mr Lee’s particular discovery applications the Court heard the submissions of the parties and ruled that the HDP financial statements for the years 1998 – 2000, 2001 and 2002 were discoverable by the defendants. In the Court’s view those might be relevant to the transactions recorded by deeds completed in 1997 and 2000 which are the primary documents for consideration in this proceeding. The Court considers the other financial statements concern issues of quantum and not liability and as this judgment will later note the Court’s present focus is upon issues of liability only.
The defendants’ applications
Whether Mr Lee be permitted to represent the second plaintiff
[8] This matter, requiring direction, is about the second plaintiff who is Mr Lee’s sister. Together they are the executors of their late mother’s estate.
[9] Mr Lee supports his sister’s request. Mr Lee says he has represented her until now. The Court of Appeal did not oppose Mr Lee appearing for both plaintiffs in their successful appeal of High Court orders striking out the plaintiffs’ proceeding.
[10] The second plaintiff resides in Australia. Mr Lee says there is no conflict of interest affecting the plaintiffs. He says she is impecunious and has health issues which affect her ability to travel to New Zealand including serious knee problems. He says she also suffers from Crohn’s disease, the symptoms of which are aggravated by stress and which requires frequent access to toilet facilities.
[11] Having heard from Ms Chambers and Mr Lee on the point the Court rules that Mr Lee will not be authorised to represent the second plaintiff. As Ms Chambers points out, apart from statutory exceptions no one has a right to present a case in any Court unless in person or by a qualified lawyer. The Court retains discretion to allow non lawyers to appear and represent others in exceptional circumstances. Frequently a Court will permit insolvent companies to be represented by a director or shareholder in a straightforward proceeding.
[12] This proceeding has complexities. As earlier noted it has already been to the Court of Appeal – on a challenge to an order for strike out.
[13] The Court of Appeal concluded Mr Lee ought not to be deprived of the opportunity of access to equitable remedies.
[14] The Court believes the present case involves issues beyond the capacity of Mr Lee. The Court agrees with Ms Chambers’ assessment that the law to be applied is not simple – and that even the plaintiffs have previously submitted that the factual matrix is complicated. Also, evidence is likely to be required on medical issues.
[15] There will not be a trial until 2017. Mr Lee expresses clear visions of distrust of the defendants. In the Court’s view the second plaintiff ought to have the opportunity of consulting independent counsel. Regarding health claims on behalf of the second plaintiff, a trial judge can schedule breaks if and when these are needed to assist with any health issues.
Separate trials
[16] The Court has a broad discretion to order questions of liability and quantum to be determined separately. As Ms Chambers acknowledges there is a moderate presumption against splitting a trial. Much depends on whether there is a sufficient demarcation between issues of liability and quantum. A separate trial may be appropriate if the determination of liability will bring an end to the proceeding. In this case the Court agrees with Ms Chambers’ submission that determination of a quantum in an account of profits is a distinct issue from questions of liability.
[17] The former requires a consideration of post-2000 financial performance and involves issues of accounting and valuation. In this case that would require financial experts to be engaged to review HDP’s operations post-2000 to-date. Conceivably the cost of engaging those experts for this purpose would be very significant.
[18]Issues of liability focus on transactions which occurred nearly 20 years ago.
[19]Issues of quantum focus on everything that has happened since.
[20] Issues of liability focus on the process by which ownership of the shares in HDP were transferred to the first defendant. Mr Lee says elements of bad faith, misleading conduct, indeed even conspiracy surrounds those events. Mr Lee says the price paid by the first defendant was grossly undervalued. At the time he says their parents suffered very significant health issues, and that the first defendant took advantage of these. Separately the question of remedies/damages would be assessed only if these various claims by Mr Lee were upheld on a liability assessment.
[21] The Court is reluctant to sever issues of liability and quantum but there is sufficient precedent for that approach being adopted when appropriate. In this case there will be orders for separate trials dealing first with liability and secondly with quantum.
[22] Previously herein the Court has refused Mr Lee’s application for discovery of HDP’s financial statements for the years 2003 – 2016. If in the outcome of a trial of liability issues Mr Lee succeeds with his claim then the Court may reconsider Mr Lee’s application for that documentation.
Discovery
[23] The defendants have requested the plaintiffs discover all chequebook stubs in regard to the bank account of R B and J G Lee and family trust for the period from settlement of the trust until Joyce’s death in June 2004. Also requested are copies of all personal bank statements for Joyce, copies of all chequebook stubs in regard to Joyce’s cheque account, and copies of all memoranda of issues by Joyce or Ray Lee.
[24] Mr Lee’s response has been to advise that he will provide all that he is able to. Indeed that may already have occurred. In any event, the application was not pursued any further by the submissions of counsel for the defendants.
[25] It is agreed by both sides that tailored discovery is to be provided. There will be an order accordingly.
Security for costs
[26] Applications for security are about whether in all the circumstances the Court should order the giving of security for costs, and if so in what amount security should be fixed. Usually if security is ordered, a proceeding is stayed until security has been provided.
[27] Security may be ordered if it appears a plaintiff would be unable to pay costs if unsuccessful in the proceeding. The Court may refuse to order security if it accepts that impecuniosities were significantly connected to matters in issue between the parties. In that regard the Court sometimes embarks on an assessment of a plaintiff’s prospects of success. Trial costs are expensive, sometimes very much so. A plaintiff’s entitlement to pursue a claim must be balanced by considerations that costs ought to be paid if the plaintiff is unsuccessful, notwithstanding the confidence and vigour with which the claim is pursued.
[28] The Court has no doubt about Mr Lee’s commitment to pursuing a ‘just’ outcome. He says he is impecunious and could not pay costs if he lost, but that should not prevent him from pursuing his claim – such is his confidence in the outcome.
[29] Commonly in this issue of things opposing parties embark upon their assessment of the strengths of their case and the weaknesses of the other party’s case.
[30] While hearing from both sides in this regard the Court considers it should not endeavour to draw any outcome conclusions. Also the Court of Appeal has already ruled the plaintiffs are entitled to their opportunity to pursue their claims for equitable relief.
[31] The Court’s focus is upon the plaintiffs claims of impecuniosities. In that regard it is significant that the second plaintiff has, during the course of this proceeding, received a significant inheritance in the sum of not less than A$230,000. Also she has business interests.
[32] Mr Lee occupies a property owned by a trust of which he is a trustee and beneficiary. It is his home.
[33] During the course of this hearing the Court agreed with Ms Chambers suggestion of a brief adjournment to enable Mr Lee to obtain records of the capital value of his property and regarding the mortgage debt owed on that property. When the hearing resumed Mr Lee provided evidence of a capital value of $624,000. A bank mortgage over that property secures borrowings of $256,000. In light of that information Ms Chambers submitted security may be provided by Mr Lee in the form of a second registered mortgage over his trust’s property at 101 Springfield Road Rotorua, to provide security in a maximum sum of $150,000 which counsel calculated ought to be sufficient to pay all costs in the outcome of any judgment against the plaintiffs.
[34] Ms Chambers suggested that security would only be able to be enforced in respect of sealed costs orders arising in this litigation. The Court accepts in the circumstances that suggestion is appropriate for it does not require the plaintiffs to provide any cash up front whilst enabling the defendants, if successful, to obtain enforcement of the full responsibility for costs the plaintiffs may incur if unsuccessful.
[35] Ms Chambers submits and the Court directs such registered mortgage be provided within 21 days and until it is provided, the plaintiffs’ proceeding be stayed. The security terms of such a mortgage will require the approval of defendants’ counsel.
[36] Any issues arising in this regard will be resolved by the Court upon receipt of memoranda from the parties. Any reply memorandum is to be filed and served within five days. The Court will deal with the matter on the papers.
Costs
[37] The costs of today’s hearing will be fixed on a 2B basis. Costs are reserved for determination in the proceeding outcome.
[38] Any issues arising from the orders ruled by this judgment are to be addressed in memoranda for filing and service in the expectation that those issues can be dealt with on the papers.
[39] The Registry is to schedule a telephone conference in July 2016, on a date and time to be advised. Its purpose will be to review progress and to schedule a trial – matters to be addressed in memoranda to be filed at least three working days before the conference.
Associate Judge Christiansen