MacKenzie v MacKenzie
[2017] NZHC 2893
•23 November 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2014-419-415 [2017] NZHC 2893
BETWEEN MALCOLM OWEN MACKENZIE
Plaintiff
AND
MALCOLM OWEN MACKENZIE IAN SCOTT MACKENZIE BARRY ANDREW MACKENZIE MARION ANNE LINES AS
EXECUTORS AND EXECUTRIX OF THE WILL OF DONALD MALCOLM MACKENZIE
Defendants
Hearing: 2 October 2017 Appearances:
R O Parmenter for the Plaintiff
P J Wright for the DefendantsJudgment:
23 November 2017
JUDGMENT OF ASSOCIATE JUDGE R M BELL
This judgment was delivered by me on 23 November 2017 at 4:00pm
pursuant to Rule 11.5 of the High Court Rules
………………………………………………….
Registrar/Deputy Registrar
Solicitors:
Daniel Overton & Goulding, Auckland, for the Plaintiff Sellar Bone (Colin Lucas), Auckland, for the Defendants Copy for:
R O Parmenter, Auckland, for the Plaintiff
PJ Wright/Stephen Laing, Auckland, for the Defendants
MACKENZIE v MACKENZIE [2017] NZHC 2893 [23 November 2017]
[1] Each side applies under r 8.19 of the High Court Rules for further discovery. After the hearing, the plaintiff filed a supplementary affidavit of documents on 31
October 2017. That reduced the matters to be decided on the defendants’
application.
What the case is about
[2] The plaintiff claims under the Law Reform (Testamentary Promises) Act
1949. He and the defendants are the children of the late Donald Malcolm Mackenzie who died on 27 December 2013. They are the executors of his estate. They are also the trustees of the Pencarrow Trust, a trust 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 the defendants equally. The defendants 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 Pencarrow Trust.
[3] The plaintiff’s case is that in 1981 he was pressed by creditors. He owned a property at Pencarrow Road, Tamahere divided into two lots. He agreed to sell the property to his father. While the father would have legal title, the plaintiff 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 father would return the Tamahere to the plaintiff in his will. This is described as a “warehousing” arrangement.
[4] The plaintiff and the father made an agreement for sale and purchase dated
15 November 1981 under which the plaintiff sold the property to the father for
$235,000. Under a deed of variation of the agreement and acknowledgment of debt dated 10 August 1982 the father acknowledged that the unpaid balance of the
purchase price was $142,905. The father would pay interest on that sum at 11.5% per annum upon demand by the plaintiff. The plaintiff continued to live in the Tamahere property and paid the outgoings. He did not seek payment of the debt or interest.
[5] 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 Tamahere property back to him. From 1991 until 2006 his father assured him that the plaintiff would receive “like for like” under his will by way of compensation for the plaintiff not receiving the Tamahere land. From 2006 until
2012 the plaintiff lived with his father and looked after him. He gave up the opportunity for employment in Fiji.
[6] The defendants say that the father took title to the Tamahere property subject to mortgages which he discharged. They dispute the claims that the plaintiff cared for his father. They also say that payments the plaintiff received from the father and from the Pencarrow Trust during the father’s lifetime satisfied any claim that the plaintiff might have under any testamentary promise.
The defendants’ discovery application
[7] The plaintiff’s first affidavit of documents of 1 March 2017 listed
28 documents. His replacement affidavit of documents of 6 June 2017 listed
540 documents. In their application, the defendants sought discovery of these documents:
[a] All trust and/or estate accounting records concerning the Pencarrow Trust and/or the financial affairs of Donald Malcolm Mackenzie for the period 1978 to 1992 and in particular all bank statements relating to the Pencarrow Trust and to Donald Malcolm Mackenzie’s personal bank accounts, and all cheque butts relating to the Pencarrow Trust and to Donald Malcolm Mackenzie’s personal bank accounts;
[b] a copy of the agreement for sale and purchase of the land at Pencarrow Road, Tamahere, 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 Donald Malcolm Mackenzie and the
Pencarrow Trust from 1978 to 1995.
[8] The defendants ask for both substantive disclosure and procedural discovery. Procedural discovery is for a court case. But for the proceeding, the party required to make discovery could otherwise resist disclosing the documents to the other side. Documents discovered may be used only for that proceeding. The scope of procedural discovery may be limited by questions of relevance and proportionality. Under substantive disclosure a person is required to disclose documents to another, even in the absence of any proceeding because there is substantive entitlement to disclosure. Examples are:
[a] Trustees are entitled to ask co-trustees to provide trust documents.1
[b] Executors are entitled to ask co-executors for access to estate documents.
[c] Shareholders are entitled to inspect certain company records.2
[d] Partners are required to disclose accounts and full information of matters affecting the partnership to their each other.3
1 Daniel v Cundall [2017] NZHC 2339.
2 Companies Act 1993, ss 216-218.
3 Partnership Act 1908, s 31.
Under substantive disclosure, so long as the documents are within the class of documents to be disclosed, questions of irrelevance and proportionality do not arise.
[9] In this case, the defendants, as executors and trustees, are entitled to the documents under (a), (d) and (e) in [7] above as of right and independently of this proceeding. On the other hand, documents under (b) and (c) are the plaintiff’s and may be the subject only of orders for procedural discovery.
[10] The plaintiff initially maintained that his affidavit of documents was complete and he had no further documents in his control which he had failed to disclose. He also asserted that if there were missing estate or trust documents, they must be in the possession of the defendants because they had cleared out documents in the house of the deceased. He did supply tax returns for 2011 and 2013-17, but not 2012. He had obtained those from Inland Revenue. He did not have any older tax returns.
[11] The plaintiff engaged a forensic accountant, Mr Wylie, to investigate transactions between the plaintiff, the Pencarrow Trust and the deceased. Mr Wylie provided a report dated 13 November 2015. By referring to that report, Mr Wright demonstrated that Mr Wylie had access to more extensive materials than the plaintiff had disclosed in his affidavits of documents. These documents were clearly in the plaintiff’s control.
[12] The plaintiff accepted the point and filed a supplementary affidavit of documents on 31 October 2017. The affidavit lists the contents of two boxes, one relating to accounts of the deceased from 1978 to 2013, and the other relating to accounts of the Pencarrow Trust from 1982 to 2013. These are under (a) and (e) of the defendants’ application. The plaintiff has disclosed some of the tax returns under (c). I accept that he no longer has any personal tax returns in his possession.
[13] I accept that the plaintiff no longer has the document in (b) - the agreement under which the plaintiff bought the property at Pencarrow Road at Tamahere. The titles show that the plaintiff apparently bought the property in 1971. There is no
dispute that he was the registered proprietor of the property in 1981. The relevance of the agreement is not apparent. I see no need to order discovery of that document.
[14] That leaves (d) – bank statements and cheque butts for the Pencarrow Trust No.2 account which were operated and controlled by the plaintiff at the ANZ Bank. His latest discovery affidavit does not refer to any documents in this class. I assume in his favour that he does not have any. It is open the defendants as trustees of the Pencarrow Trust to obtain copies of those documents from the ANZ Bank. I see no need for further directions under this head.
[15] With his supplementary affidavit of documents the plaintiff has correctly anticipated that I would have ordered further discovery, but I am now satisfied that that is no longer required.
[16] The plaintiff has suggested that his siblings were responsible for removing documents from the house of the deceased. His evidence is speculative. One of his brothers, Ian, has answered explaining that he and others spent a week cleaning the house of the deceased. The plaintiff made access difficult. Ian says that the plaintiff kept the deceased’s office and bedroom locked, because there were important documents in those rooms. He did allow them to clean the office but before he did so he removed documents and kept them in the deceased’s bedroom, denying them access to those documents. In the light of that evidence, the plaintiff has not persuaded me that under r 8.19 there are grounds to believe that the defendants had documents in their control that were the subject of their application against him for further discovery.
The plaintiff’s application for further discovery against the defendants
[17] The plaintiff’s application is tit-for-tat. If his siblings can press him for disclosure of financial records going back decades, then he should be able to require them to do the same. As an example, he requires that Ian disclose the following documents:
[a] Tax returns for the last 40 years;
[b] bank statements for the last 40 years;
[c] documents such as cheque forms, bank statements and letters detailing gifts that he has received from the deceased for the last
40 years;
[d] documents such as cheque forms, bank statements and letters relating
to payments made by the father to Ian for Ian’s benefit over the last
40 years, particularly following Ian’s accident and his stopping work;
[e] documents such as cheque forms, bank statements and letters relating to financial assistance from the father towards:-
(i) Ian’s purchase of the Palmerston North student house;
(ii) Ian’s working trip in the UK and his travel in South Africa, including the purchase of a motor vehicle to bring back to New Zealand;
(iii) Ian’s purchase of a house at Old Taupo Road, Rotorua, after his return from overseas;
(iv) Ian’s purchase of land in Rotorua and the setting up of Ian’s veterinary clinic including construction of the clinic and purchase of equipment;
(v) Ian’s later purchase of properties including at Mount
Maunganui.
He seeks disclosure of similar categories of documents by Barry and Anne.
[18] These documents are said to be relevant because of the court’s discretionary
power under s 3(1) of the Law Reform (Testamentary Promises) Act:
3Estate 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.
(emphasis added)
[19] The plaintiff says that if any inter vivos benefits he received from his father are to be brought into account, inter vivos benefits his siblings received should also be considered. The defendants disagree. They say that inter vivos benefits the plaintiff received from his father can be considered to assess whether, in the circumstances of the case, there should be any order for further provision from the estate in favour of the plaintiff. A comparison with benefits received by other beneficiaries is not required. The plaintiff’s claim for his unremunerated balance does not require a consideration of the benefits received by others. The Court of
Appeal’s decision in Powell v Public Trustee was cited:4
[31] There can be no doubt that reciprocal benefits must be brought to account. Section 3(1) of the Act itself requires a plaintiff to account for any remuneration already received. A claim can be made only to the extent to which the deceased has failed to make the promised testamentary provision “or otherwise remunerate the claimant.” A claim for services or work, which have already been partially remunerated in money, can succeed only to the extent of the shortfall.
[20] That point is sound as far as it goes. But it does not answer the plaintiff’s case entirely. Under s 3(1), the Court must consider claims of other persons against the estate. That is because a successful plaintiff’s claim may have to abate because of other worthy claims. Sometimes it may be necessary to rank claims against the estate and to give some priority over others. Under the will, the four children rank equally as residuary beneficiaries. Under his testamentary promises claim, the plaintiff says that his claim should rank ahead of the claims of his siblings as residuary beneficiaries. Insofar as his siblings may say that his interest as residuary beneficiary, sharing equally with them, is adequate recognition of his claim, he may be able to ask that inter vivos provisions his father made for them count against his ranking equally with them. To that extent, the father’s inter vivos provision for the defendants may be relevant.
[21] On the other hand, the extent of his request appears disproportionate. I postpone consideration of this discovery application until after evidence has been exchanged. That will allow a more focused consideration of the plaintiff’s discovery application. The plaintiff clearly knows something about inter vivos benefits received by his siblings. He will be able to give evidence about that. The defendants’ evidence may or may not respond to it. After those responses, it may be possible to assess whether the siblings should make further disclosure. The basis for this deferred approach comes from a practice in the equity division of the Supreme
Court of New South Wales. A practice note says:5
Purpose
3.This Practice Note is for the guidance of practitioners in preparing cases for hearing in the Equity Division with the aim of achieving the just, quick and cheap resolution of the real issues dispute in the proceedings.
Disclosure
4.The Court will not make an order for disclosure of documents (disclosure) until the parties to the proceedings have served their evidence, unless there are exceptional circumstances necessitating the disclosure.
5There will be no order for disclosure in any proceedings in the Equity Division unless it is necessary for the resolution of the real issues in dispute in the proceedings.
6Any application for an order for disclosure, consensual or otherwise, must be supported by an affidavit setting out:
the reason why disclosure is necessary for the resolution of the real issues in dispute in the proceedings;
the classes of documents in respect of which disclosure is sought; and
the likely cost of such disclosure. …
[22] For the plaintiff, Mr Parmenter did not disagree with this approach. It is likely to save both sides considerable time and expense.
Costs
[23] The defendants have been vindicated in their application by the plaintiff’s discovery affidavit filed after the hearing. They are entitled to costs on their application on a category 2 basis. If counsel cannot agree, memoranda may be filed.
[24] Costs on the plaintiff’s application are reserved as it has not yet been fully decided. If there is no further hearing on that application, leave is reserved to apply for costs.
Case management directions
[25] The parties agreed that directions could be given for a substantive hearing. [26] The close of pleadings date is 12 February 2018.
[27] The plaintiff is to serve his evidence, a list of documents for the bundle and a draft chronology by 12 March 2018.
[28] The defendants are to serve their evidence, a list of further documents for the bundle, and responses to the draft chronology by 9 April 2018.
[29] By 23 April 2018 the plaintiff is to file and serve a memorandum and any further affidavits addressing what further documents the plaintiff requires the defendants to disclose.
[30] I will resume hearing the plaintiff’s discovery application in the week beginning 7 May 2018 on a day to be allocated by the Registrar. The test for disclosure I will use will be “necessary for the resolution of the real issues in dispute” under the New South Wales Practice Note.
[31] By 25 June 2018 the plaintiff is to file and serve any evidence in reply. That reply evidence may refer to documents disclosed following any hearing in the week of 7 May 2018.
[32] By 9 July 2018 the plaintiff is to file and serve the common bundle of documents, and a chronology which incorporates any significant differences of fact in the parties’ chronologies.
[33] The plaintiff is to file and serve his opening by 16 July 2018. [34] The case will be heard for 6 days beginning 23 July 2018. [35] Leave is reserved to apply for further orders.
……………………………….
Associate Judge R M Bell
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