MacKenzie v MacKenzie

[2018] NZHC 1744

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2014-419-000415

[2018] NZHC 1744

BETWEEN

MALCOLM OWEN MACKENZIE

Plaintiff

AND

MALCOLM OWEN MACKENZIE, IAN SCOTT MACKENZIE, BARRY ANDREW MACKENZIE and MARION ANNE LINES

as executors of the last will of Donald Malcolm MacKenzie

Defendants

Hearing:	13 July 2018
Appearances:	Ray Parmenter for the Plaintiff Peter Wright for the Defendants
Judgment:	16 July 2018

JUDGMENT OF MOORE J

This judgment was delivered by me on 16 July 2018 at 3:00 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/ Deputy Registrar Date:

MACKENZIE v MACKENZIE & ORS [2018] NZHC 1744 [16 July 2018]

Introduction

[1]        The six day trial for these proceedings is scheduled to commence on 23 July 2018.

[2]        The plaintiff has issued subpoenas requiring each of the second, third and fourth defendants (“the defendants”) to attend the trial to give evidence and to produce certain documents.

[3]        Pre-trial, the defendants apply to set aside the subpoenas on the grounds they amount to an abuse of process. The plaintiff opposes the application.

Respective factual claims

[4]        The background to these proceedings is fully set out in Associate Judge Bell judgment of 23 November 2017.1 The following narrative is drawn from that decision.

[5]        The plaintiff, Malcolm Owen MacKenzie, brings his claim under the Law Reform (Testamentary Promises) Act 1949 (“the Act”). He and the defendants are the children of the late Donald MacKenzie (“the father”) who died on 27 December 2013. They are the executors of his estate and are also trustees of the Pencarrow Trust (“the Trust”) which was established by their father under a deed dated 29 July 1980. The father’s estate is said to be worth $900,000. After bequests to grandchildren and extended family the will left the residue to the plaintiff and defendants equally.

[6]        The plaintiff’s case is that in 1981 he was pressed by creditors. He owned a property at Pencarrow Road, Tamahere (“the Tamahere property”) which was divided into two lots. He agreed to sell the property to his father. While the father would have legal title, his son would continue to treat the property as his own, live on it and meet all the outgoings. He would not require his father to pay any money owing under the agreement for sale and purchase. The agreement was that the father would return the Tamahere property to the plaintiff in his will. Associate Judge Bell described this as the “warehousing” arrangement.

1      MacKenzie v MacKenzie [2017] NZHC 2893.

[7]        The plaintiff and his father executed an agreement for sale and purchase on 15 November 1981 under which the former sold the property to his father for

$235,000. In 1982, under a deed of variation and acknowledgment of debt, the father acknowledged that the unpaid balance of the purchase price was $142,905. The father would pay interest on that sum upon demand by his son. The plaintiff continued to live in the property and meet the outgoings. At no time did he demand repayment of the debt or interest from his father.

[8]        In 1989 the father reconfigured the lots by a boundary adjustment subdivision. He sold the property in 1991. The plaintiff says that his father did not make any pecuniary provision for him in his will to compensate for the failure to transfer the property back to him. From 1991 until 2006 he says his father assured him that he would receive “like-for-like” under his will by way of compensation for not receiving the Tamahere property. The plaintiff claims that from 2006 to 2012 he lived with his father and looked after him.

[9]        The defendants’ case is that their father took title to the Tamahere property subject to mortgages which he discharged. They dispute the claims that their brother cared for their father. They also say that payments which the plaintiff received from his father and from the Trust during their father’s life time satisfied any claim that the plaintiff might have under any testamentary promise. They say that at the date of their father’s death, the plaintiff owed him over $526,000. Under the will the father forgave that debt. In August 2016 the plaintiff received a distribution of approximately

$935,000 from the Trust.

Judgment of Associate Judge Bell

[10]      On 2 October 2017 Associate Judge Bell dealt with cross applications brought by the parties for further discovery. In order to fully understand the context of the present application to set aside the subpoenas, it is necessary to describe the discovery argument and Associate Judge Bell’s judgment in some detail.

The defendants’ application

[11]      The defendants’ application related to some 540 documents which the plaintiff listed in his second affidavit of documents.2 The defendants sought discovery and in particular:

(a)all Trust and/or estate accounting records regarding the Trust and/or the financial affairs of the father for the period 1978 to 1992 and in particular all bank statements relating to the Trust and to the father’s personal bank accounts, and all cheque butts relating to the Trust and to the father’s personal bank accounts;

(b)a copy of the agreement for sale and purchase of the Tamahere property, to which the plaintiff’s claim relates and by which he purchased that land;

(c)the plaintiff’s tax returns from 1978 to 2015;

(d)all bank statements and cheque butts relating to the Pencarrow Trust No. 2 account operated and/or controlled by the plaintiff at the ANZ Bank; and

(e)annual financial statements for the father and the Trust from 1978 to 1995.

[12]      Associate Judge Bell determined that the defendants, as executors and trustees, were entitled as of right to the documents under (a), (d) and (e). As for the documents under (b) and (c) he noted they were the plaintiff’s and may be the subject of orders for procedural discovery only.

2      The second affidavit of documents was dated 6 June 2017. The plaintiff’s first affidavit of documents of 1 March 2017 listed 28 documents.

[13]      At the hearing, the plaintiff had maintained that his affidavit of documents was complete and he had no further documents in his control. He also asserted that if there were missing estate or Trust documents they must be in the possession of the defendants because he had cleared out all the documents in his father’s house. He did supply tax returns for 2011 and the 2013 to 2017 period, but not 2012. He claimed he had no older tax returns.

[14]      But as Associate Judge Bell recorded, the plaintiff then engaged a forensic accountant to investigate the transactions between the plaintiff, the Trust and the father. A report from the forensic accountant was provided. Counsel for the defendants, Mr Wright, used this to demonstrate that the forensic accountant plainly had access to more extensive materials than the plaintiff had disclosed in his affidavits of documents.

[15]      The plaintiff accepted this and filed a supplementary affidavit of documents which listed the voluminous contents of two boxes, one relating to accounts of the deceased from 1978 to 2013 and the other relating to accounts of the Trust from 1982 to 2013. These were covered under (a) and (e) of the defendants’ application. The plaintiff also disclosed some of the tax returns under (c).

[16]      Associate Judge Bell accepted the plaintiff no longer had the agreement for sale and purchase referred to at (b) but, in any event, he questioned its relevance and determined there was no need to order its discovery.

[17]      This left only (d), the bank statements and cheque butts relating to the Pencarrow Trust No. 2 account. The Judge assumed that the plaintiff no longer had possession of these documents and observed that, in any event, it was open to the defendants as trustees to obtain copies themselves from the bank. He could see no reason to make any formal directions.

[18]      The Judge also dismissed the plaintiff’s suggestion that his siblings were responsible for removing documents from the house. He described the evidence as speculative and for that reason determined that the plaintiff had not persuaded him

there existed grounds to believe the defendants had documents in their control which were the subject of their application against him for further discovery.

The plaintiff’s application

[19]      Associate Judge Bell observed the plaintiff’s application was a “tit-for-tat” response to his siblings’ application; that if they could press him for disclosure of financial records going back decades then he should be able to require them to do the same. The plaintiff sought documents including the defendants’ tax returns, bank statements and letters detailing gifts going back 40 years.

[20]      The plaintiff claimed these documents were relevant by reason of the Court’s discretionary power under s 3(1) of the Act. He claimed that if any inter vivos benefits he received from his father were to be brought into account then similar benefits which his siblings had received should also be considered.

[21]      Associate Judge Bell observed that it may sometimes be necessary to rank claims against the estate and give priority to some over others. Under the will, the four children rank equally as residual beneficiaries but the plaintiff contends his claim should rank ahead of the claims of his siblings. The Judge accepted that the father’s inter vivos provision for the defendants could be relevant at trial, but also observed that the extent of his request appeared disproportionate.

[22]      The Judge therefore postponed consideration of the discovery application until the evidence had been exchanged to permit a more focused consideration of the plaintiff’s discovery application and save considerable time and expense. Only after the plaintiff had given evidence, including on his knowledge of inter vivos benefits received by his siblings, and the defendants had responded (or not), would it be possible to assess whether the defendants should make further disclosure. Mr Parmenter, for the plaintiff, did not disagree with this approach.

[23]      Significantly, in his case management directions, the Judge recorded that he would resume the hearing of the plaintiff’s discovery application on a date to be allocated by the Registrar. In determining the application he would analyse whether disclosure was “necessary for the resolution of the real issues in dispute”.3

The discovery application is dismissed

[24]      The plaintiff was late in serving his briefs of evidence. The defendants made a request for the plaintiff to file a memorandum seeking to vary the timetabling directions, which was not responded to by counsel for the plaintiff. They also inquired whether the plaintiff intended to proceed with his discovery application, again without response. This prompted the defendants to file a memorandum dated 28 March 2018 seeking orders varying the timetable and dispensing with the plaintiff’s discovery application.

[25]      In a memorandum the following day Mr Parmenter agreed with the revised timetable, which included abandoning the discovery application. Associate Judge Bell recorded this agreement in his Minute of 5 April 2018 and made the timetabling variations sought.

[26]He accordingly dismissed the plaintiff’s discovery application.

Legal principles4

[27]      Although the subpoenas were administratively issued by the Registry, the Court may control cases of abuse and prevent wrongful use of subpoenas. The Court possesses an inherent, discretionary, jurisdiction to set aside subpoenas.5

[28]      To set aside a subpoena a witness should show it was irregularly issued, illegally procured or is being used oppressively or for an improper purpose (grounds which will often overlap). In the absence of such abuse the sole question is “whether

3      MacKenzie v MacKenzie, above n 1, at [30]. This is a reference to a practice adopted by the Equity Division of the Supreme Court of New South Wales which permits deferral of disclosure until after the parties have served their evidence. See Disclosure in the Equity Division, Practice Note SC EQ 11.

4      See generally McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HR9.52].

5      Re Golightly [1974] 2 NZLR 297 (SC).

or not any admissible evidence can properly be given in answer to the witness summons”.6

Defendants’ submissions

[29]      Mr Wright, for the defendants, submits that the subpoenas should be set aside because:

(a)in respect of Ian MacKenzie it would be oppressive to require him to answer the summons; he is medically unfit to participate in a trial having suffered a serious neurological incident in 2011;

(b)in respect of all defendants the subpoenas are oppressive and/or an abuse of process because:

(i)the documents are not relevant to any fact in issue and/or the plaintiff is in possession of the relevant documents or those containing the best record of any such information he may seek;

(ii)serving subpoenas on the defendants amounts to a collateral attack on Associate Judge Bell’s decision dismissing the plaintiff’s application for discovery after it was not pursued; and

(iii)there was no prior contact with counsel regarding the plaintiff’s intention to call the defendants as witnesses, contrary to r 9.7(6) of the High Court Rules 2016.

Analysis

[30]      The analysis set out below deals first with the position of Ian MacKenzie. This is considered separately because the ground relied on to set aside his summons is based on circumstances which are unique to him and which Mr Wright submits amount to oppression.

6      At 302.

[31]      I shall then go on to consider the position of all defendants and whether the issuing of the subpoenas are oppressive, an abuse of process and/or whether any admissible evidence may properly be given in answer to the witness summonses.

Would it be oppressive to require Ian MacKenzie to answer his summons?

[32]      Ian MacKenzie suffered a subarachnoid haemorrhage in 2011. He has significant cognitive impairment and emotional incontinence, including uncontrollable anxiety which affects his daily functioning. His responses in Court may be affected by this.

[33]      Furthermore, the medical evidence is that he is at risk of another intra-cranial bleed if submitted to extreme stress which could lead to serious impairment or death.

[34]      At the time of the hearing this information was not  before  me.  However,  Mr Parmenter properly and responsibly accepted that if there was evidence which tended to support Mr Wright’s submission that giving evidence in this matter may have life threatening implications for Ian MacKenzie, he would accept it would be oppressive for Ian MacKenzie to answer his summons.

[35]      On the basis of the information now available to me I am satisfied it would be oppressive for Ian MacKenzie to be required to give evidence in this matter and for that reason I make an order setting aside the subpoena issued in respect of him.

[36]      In any event, for reasons set out below, I am satisfied that it is appropriate to set aside all the subpoenas issued.

Are the documents relevant?

[37]The essence of the plaintiff’s claim is contained in s 3(1) of the Act:

“3 Estate of deceased person liable to remunerate persons for work  done under promise of testamentary provision

(1)Where in the administration of the estate of any deceased person a   claim is made against the estate founded upon the rendering of services to or the performance of work for the deceased in his lifetime, and the claimant proves an express or implied promise by the

deceased to reward him for the services or work by making some testamentary provision for the claimant, whether or not the provision was to be of a specified amount or was to relate to specified real or personal property, then, subject to the provisions of this Act, the claim shall, to the extent to which the deceased has failed to make that testamentary provision or otherwise remunerate the claimant (whether or not a claim for such remuneration could have been enforced in the lifetime of the deceased), be enforceable against the personal representatives of the deceased in the same manner and to the same extent as if the promise of the deceased were a promise for payment by the deceased in his lifetime of such amount as may be reasonable, having regard to all the circumstances of the case, including in particular the circumstances in which the promise was made and the services were rendered or the work was performed, the value of the services or work, the value of the testamentary provision promised, the amount of the estate, and the nature and amounts of the claims of other persons in respect of the estate, whether as creditors, beneficiaries, wife, husband, civil union partner, children, next-of-kin, or otherwise.”

[38]      Generally the focus of an application is the existence of any promise and the extent of existing testamentary provision or remuneration. Other claims will typically be relevant in considering whether there are competing moral claims which limit the quantum of an award.7 As Associate Judge Bell observed, insofar as the defendants’ case is that the plaintiff’s claim is adequately recognised by his residuary interest and inter vivos payments made to him, the inter vivos provisions the father made to the defendants will be relevant to whether payments to him should be treated in this way.

[39]      Associate Judge Bell observed the discovery application appeared disproportionate. The same conclusion is even more readily available in respect of the subpoenas.

[40]      Detailed records of the accounts maintained by the father have been provided, and there is expert evidence from an accountant engaged by the plaintiff commenting on the accounts.

[41]      Mr Parmenter submits that if the defendants gave evidence he would cross- examine them as to any inter vivos gifts they received from their father which may not be listed in the expert’s schedules. He accepts he does not know whether there were

7      See for example Re Welch [1990] 3 NZLR 1 (PC) at 8 per Lord Cooke, and generally Byrne v Bishop [2001] 3 NZLR 780 (CA).

any such gifts. Furthermore, in argument he accepted that if the defendants denied receiving gifts or could not remember whether they had or not he has no evidential basis to contradict them. He would thus be bound by their answers. For these reasons I agree with Mr Wright’s description that such a strategy amounts to a fishing expedition.

[42]      Furthermore, it would always be available to Mr Parmenter to invite the Court to draw an adverse inference in respect of any of the defendants who elected not to give evidence if circumstances arise at trial creating an expectation they could explain those circumstances.

[43]      With the benefit of the accounting records, and given Mr Parmenter’s inability to identify with precision how the subpoenas would serve to resolve real issues in dispute, I am satisfied the admission of the documents sought by subpoena is unnecessary, and amounts to oppressive conduct in the circumstances.

Does the issue of subpoenas amount to a collateral attack on Associate Judge Bell’s decision?

[44]      Mr Parmenter submits the Court should not look behind the fact he elected not to pursue the plaintiff’s discovery application. The Court made no final determination of the merits of the point and there can be no bar to effectively achieving the same result albeit via a different procedural avenue.

[45]      I cannot agree. Associate Judge Bell made the order dismissing the application because the plaintiff advised it no longer wished to pursue it. The plaintiff now seeks by subpoena what he originally sought in the discovery application. An inference can be drawn that at that time, the plaintiff did not see the relevance of discovery the documents now sought.

[46]      Against that background, I agree with Mr Wright that the subpoenas operate to serve a collateral purpose; to achieve what was originally sought in the now dismissed discovery application. Having brought about that dismissal through tardiness, and having consented to its dismissal, it is an abuse of process to now seek those same documents be admitted via subpoena.

Did the plaintiff follow the procedure prescribed in r 9.7(6)?

[47]      Rule 9.7(6) of the High Court Rules sets out what a party intending to call a person as a witness who has not filed a brief of evidence must do:

“(a)serve a notice on the other parties to the proceeding informing them that the party intends to call the person as a witness; and

(b)include the following information in the notice:

(i)the name of the intended witness:

(ii)the steps that have been taken to obtain a brief from the intended witness:

(iii)the reasons for the intended witness not providing a brief:

(iv)an explanation of the relevance of the evidence of the intended witness:

(v)details of the evidence that the party expects the intended witness to give.”

[48]      This rule exists to balance the interests of justice in having all relevant evidence before the court, with the risk of trial by ambush where a party seeks to call evidence at trial without having given notice to the other side of an intention to do so.8 As counsel acknowledged at the hearing, it is only relevant by way of analogy.

[49]      Nevertheless, the fact few if any, of the steps envisaged by this rule have been taken by the plaintiff reveals a lack of serious endeavour in obtaining the information now sought. This reinforces my conclusion that the issue of subpoenas amounts to an abuse of process.

Conclusion

[50]      For these reasons I am satisfied that the subpoenas issued in respect of each of the defendants should be set aside on the grounds the subpoenas are being used oppressively and/or for an improper purpose. In any event, I am satisfied at best marginally relevant admissible evidence can properly be given in answer to the summonses.

8      See NZX Ltd v Ralec Commodities Pty Ltd [2016] NZHC 799, and Rules Committee Minutes of meeting held on 13 February 2017 at 2.

Result

[51]      The application is granted. The subpoenas issued to the defendants are set aside.

[52]The second, third and fourth defendants are entitled to costs on a 2B basis.

Moore J

Solicitors/Counsel:

Mr Parmenter, Auckland Mr Wright, Auckland