Peguero v Jess
[2019] NZHC 3188
•4 December 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2018-404-2615
[2019] NZHC 3188
BETWEEN RAEWYN ELIZABETH PEGUERO, ALISTAIR VAN SCHALKWYK as
executors of the Estate of George William Emil Henry
PlaintiffsAND
ULRIKE ELISABETH JOHANNA JESS
First Defendant
CHAIRE CHRISTINE ENDEAN and WILLIAM ARTHUR ENDEAN
Second Defendants
Hearing: 4 November 2019 Appearances:
K Davenport QC and J Nedeljkov for Plaintiffs P Rice for first Defendant
No appearance by or on behalf of the Second Defendants
Judgment:
4 December 2019
JUDGMENT OF ASSOCIATE JUDGE SMITH
This judgment is delivered by me on 4 December 2019 at 4.30pm pursuant to r 11.5 of the High Court Rules.
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Registrar / Deputy Registrar
Counsel/Solicitors:
Kate Davenport QC, Auckland
J Nedeljkov, Barrister, AucklandASCO Legal Limited, Howick, Auckland P Rice, Barrister, Auckland
Parshotam Lawyers, Mt Roskill, Auckland
PEGUERO v JESS [2019] NZHC [3188] [4 December 2019]
[1] This is an application by the plaintiffs for particular discovery of the first defendant’s bank accounts. Some bank statements have been provided, but there are redactions. No statements have been provided for some periods. The plaintiffs want discovery of all (unredacted) statements for the period from 2010 to December 2017.
Background
[2] The plaintiffs are the executors in the estate of the late George William Emil Henry (the deceased). The deceased died at the age of 96 on or about 6 August 2018.
[3] The first defendant, Ulrike Jess, is a businesswoman who the plaintiffs say befriended the deceased from about 2010.
[4] The plaintiffs allege, and Ms Jess does not dispute, that in the course of the friendship the deceased transferred assets to Ms Jess for which she gave no (or less than market) consideration. First, in mid-July 2014, the deceased transferred his house at Falstaff Place, Auckland (the home) to Ms Jess for a stated consideration that was substantially below market value, on the basis that the deceased would have the right to occupy the home for the rest of his life. Ms Jess paid no money to acquire the home
— she provided an Acknowledgement of Debt for the full purchase price, but that Acknowledgement of Debt was almost immediately extinguished by a Deed of Extinction executed by the deceased on 22 July 2014.
[5] In addition, it is accepted that the deceased paid significant amounts of money to Ms Jess during his lifetime. It is common ground that the deceased paid Ms Jess
$154,604.03 by cheque, and the plaintiffs say that Ms Jess has admitted that there were some (unquantified) additional sums of money paid in cash. The plaintiffs say that the total cash sum paid by the deceased to Ms Jess is unknown, as the book in which the deceased recorded the cash payments has been misplaced. Ms Jess says that she has no knowledge of this book, and she denies that she ever received cash payments from the deceased (as opposed to cheques made out to “cash”).
[6] Following the transaction relating to the sale of the home to Ms Jess, Ms Jess sold a property she owned in Titirangi and moved in to live with the deceased at the home, as his primary care-giver. She retained the net proceeds of the sale of her
Titirangi property. At this stage, the deceased employed a care-giver, Julie, but the plaintiffs say that Julie’s role in caring for the deceased was reduced by Ms Jess. Ms Jess lived with the deceased at the home from 1 June 2015 to 17 December 2017.
[7] A review of the deceased’s ASB Bank account statements carried out by Philip Peguero, the husband of the plaintiff Raewyn Peguero, shows that the deceased withdrew an average of $479.44 per week in cash during this period. Mr Peguero contrasted that figure with the deceased’s earlier cash withdrawals — between 1 January 2013 and 31 May 2015, he had withdrawn an average of $212.92 per week in cash. Mr Peguero calculated that the deceased withdrew $105,581 in cash from his bank account between 14 March 2011 and 26 February 2018 (the date on which Raewyn Peguero, who is the deceased’s daughter, took control of the deceased’s banking affairs).
[8] Between 9 February 2016 and 17 December 2017, Ms Jess had authority to operate the deceased’s bank account. However, in her answers to interrogatories administered by the plaintiffs, she deposed that she never transferred money from the deceased’s account to her own account during this period.
[9] The plaintiffs say that in April 2017 Ms Peguero took the deceased to visit a member of the second defendant firm of solicitors, which had acted for the deceased on the transfer of the home to Ms Jess. The lawyer told the deceased that the sale of the home to Ms Jess was irrevocable.
[10] The deceased moved into a private hospital in December 2017, and he died on 6 August 2018. Probate of his last will was granted to the plaintiffs on 13 September 2018.
The plaintiffs’ claims
[11] The plaintiffs plead a number of causes of action against Ms Jess. First, they plead that she was guilty of undue influence in obtaining the transfer of the home and the cash and cheques. They seek an order for the transfer of the home to them, reimbursement for the cheques and the cash paid by the deceased to Ms Jess, and an order accounting for rents received by Ms Jess from the home.
[12] Similar relief is sought against Ms Jess in separate causes of action in misrepresentation, breach of contract and “unconscionable advantage”. The last cause of action, with which I am not concerned in this judgment, is a negligence claim against the solicitors who acted for the deceased in the transfer of the home to Ms Jess.
Ms Jess’ defence
[13] Ms Jess generally denies the allegations of undue influence or other breaches of duty. She says that all payments made to her or on her behalf by the deceased were intended by the deceased to be gifts. In an alternative, affirmative, defence, she pleads that if the deceased did intend his financial assistance to her to be by way of loan (which Ms Jess denies), he nevertheless encouraged her to believe that he would support her financially without expectation of repayment. In reliance on that expectation, Ms Jess says that she acted to her detriment in selling her Titirangi property and moving in to live with the deceased and care for him. In those circumstances, she says that it would be unconscionable for the plaintiffs to now insist on repayment of the financial support the deceased gave her during their friendship.
Ms Jess’ discovery
[14] By order made on 22 February 2019, the parties were directed to provide standard discovery. Ms Jess filed a verified list of documents on 12 April 2019, and on 6 September 2019 she filed a short supplementary list.
The plaintiffs’ application for particular discovery and Ms Jess’ notice of opposition.
[15] The plaintiffs seek particular discovery of Ms Jess’ personal bank statements from 2010 to 2017.
[16] They say that documents showing the extent of monetary gifts/loans the deceased gave to Ms Jess will provide evidence supporting their claim that Ms Jess exerted undue influence on the deceased, or took unconscionable advantage of the deceased. The plaintiffs refer in support to certain answers given by Ms Jess to interrogatories administered by the plaintiffs, in which Ms Jess deposed that the only written records of transfers made to her by the deceased were her bank statements.
[17] The plaintiffs say that Ms Jess’ April 2019 discovery list did not list her bank statements at all, even though the bank statements were relevant and should have been disclosed.
[18] In her notice of opposition, Ms Jess says that the order sought is unnecessarily wide. She agrees that she has admitted receipt of $154,604.03 in cheques from the deceased, and says the plaintiffs have details of those cheques. She says that that is all she received — she never received any cash from the deceased. As she had admitted receipt of the cheques, Ms Jess says that she did not think it necessary to list her bank statements showing the cheque deposits in her April 2019 discovery list.
Ms Jess’ supplementary discovery list
[19] Ms Jess swore a supplementary discovery list on 6 September 2019. In the supplementary list, Ms Jess listed what she said were all of the relevant pages of her personal bank statements in the period 2010–2017 showing deposits into her bank account sourced from the deceased. She admitted receiving significant amounts of money from the deceased, but went on to say:
I never received any cash from [the deceased]. I only ever received cheques, some of which were cashed rather than deposited in my bank accounts. The plaintiffs have details of those cheques.
[20] Ms Jess contends that any further discovery and disclosure would be irrelevant to the issues in the proceeding.
The law relating to particular discovery
[21]Rule 8.19 of the High Court Rules 2016 provides:
8.19Order for particular discovery against party after proceeding commenced
If at any stage of the proceeding it appears to a Judge, from evidence or from the nature or circumstances of the case or from any document filed in the proceeding, that there are grounds for believing that a party has not discovered
1 or more documents or a group of documents that should have been discovered, the Judge may order that party—
(a)to file an affidavit stating—
(i)whether the documents are or have been in the party’s control; and
(ii)if they have been but are no longer in the party’s control, the party’s best knowledge and belief as to when the documents ceased to be in the party’s control and who now has control of them; and
…
[22] The Courts have applied the following four-stage approach from Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd, when considering an application under r 8.19:1
(a)Are the documents sought relevant, and if so how important will they be (a criterion described as “materiality” in Robert Jones Holdings Ltd v McCullagh)?2
(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 (balancing the time and cost of discovery against the potential value of discovery)?3
(d)Weighing and balancing these matters, in the Court’s discretion applying r 8.19, is an order appropriate?
[23] The learned authors of McGechan on Procedure note that the first three stages from Assa Abloy are each necessary but not of themselves sufficient conditions of jurisdiction under r 8.19, as they are still subject to the weighing and balancing exercise in the fourth stage.4
Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd [2015] NZHC 2760 at [14]. See also
Lighter Quay Residents’ Society Inc v Waterfront Property (2009) Ltd [2017] NZHC at [16].
2 Robert Jones Holdings Ltd v McCullagh [2016] NZHC 2529.
3 Southland Building Society v Barlow Justice Ltd [2013] NZHC 1125 at [17].
4 McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HR8.19.03], citing Lyttleton Port Co Ltd v Aon New Zealand [2016] NZHC 2996 at [8].
[24] There is no obligation on a party served with an application under r 8.19 to file any evidence in response — the burden is on the applicant to make out its case that there are relevant grounds for belief.5
[25] In GE Capital Corporate Finance Group Ltd v Bankers Trust Co, the Court of Appeal of England and Wales confirmed that a party providing discovery is entitled to seal up or cover up parts of a disclosed statement on the grounds of irrelevance, provided that the irrelevant part can be covered up without destroying the sense of the rest or making it misleading.6 The test to be applied in deciding whether material is relevant is whether it is not unreasonable to suppose that the redacted passages contain information which might either directly or indirectly enable the other party to advance its own case or damage the disclosing party’s case.7 The Court will not normally disregard the oath of the party that the parts concealed are irrelevant, unless it appears from the documents produced that that is not the case.8
[26] GE Capital was applied in New Zealand by Wylie J in Radio Tarana (NZ) Ltd v 5TUNZ Communications Ltd.9
Discussion and conclusions
[27] It is common ground between the parties that a party providing discovery is entitled to make redactions in the documents produced for inspection to cover over irrelevant matter.10 And as Leggatt LJ noted in the GE Capital case, the Court will not ordinarily disregard the oath of the party providing discovery that the concealed parts do not relate to the matters in question in the proceeding.11 The application of this principle is the key issue on the present application.
5 Plumpton v Terry [2016] NZHC 988 at [26].
6 GE Capital Corporate Finance Group Ltd v Bankers Trust Co [1995] 1 WLR 172 (CA) at 995– 996.
7 At 998 per Leggatt LJ.
8 At 996 per Hoffman LJ and 998 per Leggatt LJ.
9 Radio Tarana (NZ) Ltd v 5TUNZ Communications Ltd [2014] NZHC 1870 at [82].
10 GE Capital Corporate Finance Group Ltd v Bankers Trust Co, above n 6, at 995–996
11 At 998
Ms Jess’ evidence of what she received
[28] With her answers to interrogatories, Ms Jess attached a schedule listing payments made by the deceased to her or on her behalf, all by way of cheque, between 2012 and 2017. The schedule listed payments totalled $155,304.03. In response to a question asking whether she had written records of transfers or receipts for these payments, Ms Jess responded, “No, other than bank statements showing payments into my bank account”.
[29] Ms Jess deposed that she did not receive any cash payments from the deceased (that is, not payments by way of cheque) between 2012 and 2017. She acknowledged that she had authority over the deceased’s ASB cheque account between 9 February 2016 and December 2017, but said she did not transfer any money to her own bank account from the deceased’s bank account during the period.
[30] In her supplementary affidavit of documents, Ms Jess admitted receiving significant amounts of money from the deceased, but said that she never received any cash from him. She said that she only received cheques, some of which were cashed rather than deposited into her bank account. She said that the plaintiffs have details of those cheques.
[31] Ms Jess said that she had not considered it necessary to discover her bank accounts (showing receipt of the deceased’s cheques) originally because she had already admitted receiving the amounts in question. However, she deposed that she has now been through her bank statements from 2010 to 2017 to identify any deposits paid into her account sourced from the deceased. She then listed all pages from her bank statements between 2010 and 2017 showing deposits of the deceased’s cheques into her account. There were 10 deposits listed in the date range 14 February 2013 to
31 October 2016. Ms Jess objected to disclosing any information in the bank statements other than the deposits themselves.
Counsel’s submissions
[32] In her submissions, Ms Davenport QC, for the plaintiffs, referred to the evidence of Mr Peguero that between 14 March 2011 and 26 February 2018 the deceased withdrew a total of $105,581 in cash from his bank account. She also referred to certain notes taken by the deceased’s financial adviser, which have been produced on discovery by the plaintiffs, including a note made on 23 January 2018 in which the deceased advised the financial adviser that he now realised that Ms Jess had taken advantage of him. The note recorded that the deceased told the adviser that he paid Ms Jess $100,000 to re-roof and renovate her Titirangi property before she sold it, and that that sum was never repaid. The note also recorded the deceased’s statement that a loan of $10,000 for repairs to her Volkswagen motor vehicle was never repaid, and that, by 2017, the deceased had increased his cash payments for household and other expenses to $1,000 per month.
[33] Ms Davenport invited the Court to infer that some of the material redacted from the bank statements by Ms Jess must be relevant. She also submitted that what Ms Jess did with the money paid to her by the deceased is relevant to the undue influence cause of action pleaded by the plaintiffs — if Ms Jess asked for a large sum for a particular purpose, and then did not spend the money for that purpose, that would be relevant in showing that Ms Jess had improperly used her influence over the deceased to take his money.
[34] Ms Davenport noted that Ms Jess did not discover any bank statements at all in her initial discovery list. And when the bank statements were eventually produced, there were only 10 pages, with redactions, covering the period from 2010 to 2017. No bank statements have been produced for 2015, and none have been produced for the period after the end of 2016.
[35] Ms Davenport acknowledged in her submissions that a number of very small receipts and payments are probably not relevant, and she accepted that a significant number of the receipts and payments listed in the bank statements will not be relevant to the matters in issue. But in view of (i) Ms Jess’ failure to include the bank statements in her first discovery list (when they were clearly relevant), and (ii) the general
circumstances in which Ms Jess received over $150,000 plus the home for no or very little consideration, the truth of what she now says is relevant to the nature of the influence she had over the deceased. That in turn is at the heart of the plaintiffs’ undue influence cause of action.
[36] There was an issue traversed at the hearing over an admission at [12] of Ms Jess’ statement of defence. In that paragraph, Ms Jess admits the plaintiffs’ allegation (in respect of the significant sums of money paid by the deceased to Ms Jess between 21 April 2012 and 2017) that “[the deceased] provided the sums in cash and cheques”. At the hearing, Mr Rice, for the first defendant, submitted that, insofar as Ms Jess’ pleading admitted the receipt of “cash”, it should be understood as a reference to cheques written by the deceased to “cash”, or which were otherwise able to be cashed by Ms Jess. Mr Rice pointed to the fact that the deceased, who swore an affidavit relating to the matters now in issue in the proceeding shortly before he died, himself described as “cash transactions” certain payments that were in fact made by cheque.
[37] Mr Rice submitted, relying on GE Capital, that there is no basis for the Court to go beyond Ms Jess’ sworn statements that she has discovered all bank entries relating to payments received from the deceased. He said that nothing has been redacted from Ms Jess’ bank statement entries relating to payments received from the deceased, and he submitted that other deposits (that is, deposits not sourced from the deceased) have no relevance to the proceeding. Nor, in his submission, do the payments made out of the account by Ms Jess: what Ms Jess elected to do with the money received from the deceased is not relevant to any of the plaintiffs’ causes of action (outgoing payments from the bank could only have been relevant if the plaintiffs had made some claim relating to them, for example, that Ms Jess did not spend the money received from the deceased for the purposes for which it was paid to her. There is no such pleading in the statement of claim).
[38] In all those circumstances, Mr Rice submitted that, with one exception, there is no possible basis for the particular discovery sought: it was for the plaintiffs to produce some evidence giving the Court a basis to look beyond Ms Jess’ sworn statements, and they have failed to do so.
[39] The exception acknowledged by Mr Rice relates to a payment of $20,000 Ms Jess received from the deceased to be applied towards the purchase of a new car. Ms Jess pleads that although the payment (made on 17 November 2011) was intended by the deceased to be a gift, at her insistence the payment was treated as a loan. She says she repaid the loan on 18 November 2015. Ms Jess has not produced the pages from her bank statement evidencing either the receipt of the $20,000 from the deceased or the repayment of that sum on 18 November 2015.
Analysis
[40]Apart from the bank statements evidencing the payment and repayment of the
$20,000 relating to the acquisition of a new car for Ms Jess, I am not persuaded that the plaintiffs have produced sufficient evidence to justify looking beyond Ms Jess’ sworn affidavits and directing her to disclose all of the bank statements in unredacted form.
[41] First, it is high likely that the majority of the entries in the bank statements will be irrelevant, and discovery of those items will not advance either party’s case in the proceeding. Secondly, and subject to what I say below about the payment of $20,000 for the new car, I have no basis to disregard Ms Jess’ sworn evidence (in her supplementary discovery affidavit) that she has been through her bank statements for the years 2010 to 2017 and has listed all pages showing deposits of cheques from the deceased. Thirdly, any cheques received from the deceased that were made out to “cash” and/or were not marked “not transferable”, were presumably cashed or otherwise negotiated by Ms Jess. There is no particular reason to believe those cheques were paid into Ms Jess’ bank account and (dishonestly) not discovered by her, and even less reason to believe Ms Jess would have cashed the cheques and then paid the cash into her bank account. In the normal course, a person cashes a cheque for the purpose of spending the cash on something immediately. One does not ordinarily cash a cheque and then deposit the cash in one’s bank account.
[42] The plaintiffs’ investigations have disclosed that, between 21 April 2012 and 2017, the deceased wrote cheques totalling $154,604.03 in favour of, or for the benefit of, Ms Jess. Presumably the plaintiffs have been able to trace all cheques written by
the deceased in favour of Ms Jess, and to the extent cheques written by the deceased in favour of the third parties (for Ms Jess’ benefit) may have been written, those cheques would not show up in Ms Jess’ bank statements.
[43] I do not consider payments made out of Ms Jess’ bank account could assist the plaintiffs on their undue influence cause of action. I accept Mr Rice’s submission that there is presently no pleading that Ms Jess told the deceased that she wanted money for one purpose and then spent the money on some other purpose. In the absence of such a pleading, I think that particular request for further discovery comes into the “fishing” category.
[44] With respect to the contention that Ms Jess received other relevant payments into her bank account that have not been disclosed, I do not consider there is enough for the Court to conclude that Ms Jess has been dishonest in her discovery and failed to produce copies of her bank statements evidencing additional payments received from the deceased. The onus of proof is on the plaintiffs to establish reasonable grounds exist to believe that relevant documents exist that have not been discovered,12 and, in my view, that onus has not been discharged (except to the extent of bank entries relating to the new car). In my view the omission of any bank entries relating to the new car does not justify an inference that other relevant bank entries have also been omitted. The receipt of the $20,000 is acknowledged by Ms Jess, and her failure to disclose the corresponding bank statement entry or entries was always going to be obvious to the plaintiffs (and result in further enquiries from them to which Ms Jess would have to respond). In those circumstances, the most likely explanation for the omission is a simple error on the part of Ms Jess, and I do not consider that that error provides a sufficient basis for the Court to believe that other, similar, errors have been made.
12 I accept that once a person claiming undue influence has established both a relationship of trust and confidence with the person who is said to have exercised the undue influence, and that there is a transaction calling for an explanation, the evidential burden shifts to the person seeking to uphold the transaction to show that the transaction was not the result of undue influence. See, for example, the recent judgment of Ellis J in Sinclair v Sinclair [2019] NZHC 2640 at [100] and following. However, what is in issue here is whether or not there were additional transactions, beyond those pleaded, and whether particular discovery of all bank statements should be ordered in the face of sworn evidence from Ms Jess that there were no additional transactions (at least none involving a receipt into her bank account). I do not think cases such as Sinclair v Sinclair assist the plaintiffs on those issues.
[45] The discovery process generally requires parties, with the assistance of their legal advisers, to make decisions as to whether particular documents are relevant or irrelevant, and I do not think it permissible for the plaintiffs to seek wide-ranging discovery of all deposits received into Ms Jess’ bank account merely for the purpose of finding out whether or not she has been honest in discharging her discovery obligations. While any such dishonesty might assist an undue influence cause of action in a broad sense, r 8.19 still requires the Court to be satisfied that there are grounds for believing that the party has not discovered one or more documents that should have been discovered. The purpose of particular discovery is not, in my view, to direct a party to disclose additional documents with a view to finding out whether the party has or has not been honest in making his or her initial discovery.
[46] For all of those reasons, I am not satisfied the plaintiffs have made out the case for particular discovery, except in respect of the payment and repayment of the
$20,000 relating to the car (being the payment and repayment referred to by Ms Jess at [15] of her statement of defence).
Result
[47]I make the following orders:
(a)Within 10 working days, Ms Jess is to file and serve a further supplementary affidavit stating whether she has in her control bank statement entries relating to the payment and repayment of the $20,000 referred to at [15] of her statement of defence dated 29 January 2019. If and to the extent that she has such document(s) in her control, copies are to be made available to the plaintiffs at the same time as the further supplementary affidavit is served.
(b)Subject to order (a) above, the plaintiffs’ application is dismissed.
(c)Ms Jess has been substantially successful on the application, subject only to order (a) above. However, further information was provided by way of supplementary discovery after the application was filed. In those circumstances, I think the fairest course is to reserve costs on the application. I make an order accordingly.
Associate Judge Smith
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