RHH Ltd v Anderson

[2018] NZHC 2032

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-2066

[2018] NZHC 2032

BETWEEN

RHH LIMITED

First Plaintiff

JOSEF CHRISTOPHER ROBERTS
Second Plaintiff

AND

SANDRINE ANDERSON
First Defendant

HELICE PROPERTIES LIMITED

Second Defendant

Hearing:	9 August 2018
Appearances:	K Davenport QC and P Devereux for the Plaintiffs L Taylor QC and E Watt for the Defendants
Judgment:	9 August 2018

ORAL JUDGMENT (No.2) OF ASSOCIATE JUDGE R M BELL

Plaintiffs’ application for further discovery

Solicitors:

Corporate Counsel (P Devereux), Parnell, Auckland, for the Plaintiffs

Grove Darlow & Partners (TJG Allan/SF Powrie), Auckland, for the Defendants Haigh Lyon (B Molloy) Auckland, for Ms Miriam Roberts

Copy for:

Kate Davenport QC Auckland, for the Plaintiffs Les Taylor QC, Wellington, for the Defendants

Robert Hollyman, Auckland, for Ms Miriam Roberts, non-party

RHH LIMITED v SANDRINE ANDERSON [2018] NZHC 2032 [9 August 2018]

[1]    The plaintiffs apply for further discovery under r 8.19 and ancillary orders against the first and second defendants. The proceeding is about a property at 9 Springcombe Road, St Heliers, Auckland. In 2003 the property belonged to the Sandrine Trust, a trust associated  with  the  first  defendant,  a  practising  lawyer. Mr Roberts, the second plaintiff, was a friend and client of Ms Anderson,  as  was Mr Roberts’ wife. RHH Ltd is a company associated with Mr Roberts. Helice Properties Ltd was established later. In September 2003, the trustees sold the Springcombe Road property to RHH Ltd for $950,000. Settlement took place in October 2003. RHH Ltd took title.

[2]     Ms Anderson had been married to as Mr Grayson Wood. There had been a pre-nuptial agreement. In 2002 they separated. In 2003 Mr Wood brought a proceeding in the Family Court under the Property (Relationships) Act 1976. In that proceeding Ms Anderson contended that Mr Wood had no interest or any claim to an interest in the Springcombe Road property, relying on its status as property held in a trust and on a pre-nuptial agreement.

[3]    After RHH Ltd took title in 2003, there were discussions. Ms Anderson contends that an oral agreement was made under which she was to buy the property back. A price of $1.1 million was agreed. Ms Anderson was given time to buy the property. Helice Properties Ltd was incorporated with Mr Roberts the sole director and shareholder. Helice Properties Ltd was the corporate trustee of the Willow Trust which was established under a deed of 2 November 2003. The beneficiaries of the trust included Mr Roberts, his wife Miriam, Ms Anderson and others. Ms Anderson was the protector under the trust deed. That gave her powers to add or remove trustees. The role of protector did not, however, give her any power to make distributions. That lay with the trustees. Any resettlement could be made only with the consent of protector. In November 2003 the Springcombe Road property was transferred to Helice Properties Ltd as trustee of the Willow Trust.

[4]    Ms Anderson’s case is that she has paid for the property but the plaintiffs do not necessarily accept that. They say that between November 2003 and July 2008 the

property was managed as if it were their property.  Their case is that in July 2008  Mr Roberts was removed as director and shareholder of Helice. Ms Gomes, an accountant who does accounting work for Ms Anderson, became sole director and shareholder of Helice Properties Ltd. In September 2008 Ms Anderson established the Willow Trust 2. The asset of the original Willow Trust, the Springcombe Road property, was resettled into the Willow Trust 2. In July 2014, shares in Helice Properties Ltd held by Ms Gomes were transferred to Ms Anderson. She sold the property in 2015 at a substantial capital gain. The plaintiffs’ case is that she has received the benefit of the sale of the property and they want her to account to them for the profit on the sale.

[5]    While she was director and shareholder of Helice Properties Ltd, Ms Gomes gave a mortgage over the Springcombe Road property as security for personal advances by the ASB Bank to her. It seems to be common ground that Ms Anderson found out about this in 2010 and she was ultimately successful in having the mortgage discharged. She was only able to sell the property once that had been done.

[6]    The proceeding  started  in  late  2017.  The  close  of  pleadings  date  was  23 July 2018. It is set down for hearing for five days beginning 15 October 2018.

[7]    The defendants have provided two affidavits  of  documents:  one  in February 2018 and another in April 2018. Standard discovery was ordered. The plaintiffs made the present application on 11 April 2018. It was to be heard on 30 July 2018, but I dealt with other applications on that date. The plaintiffs did not want to pursue their application then. I recorded then that I reserved liberty to them to apply further. The case was called in a chambers list on 3 August 2018, when I gave directions for the hearing today. Given that the close of pleadings date has passed it is important that a prompt ruling is given on the discovery application. The discovery application was made well before the close of pleadings date; and it does require determination.

[8]    The application seeks orders for the defendants to provide further discovery of classes of documents as follows:

(a)Any statements of position given by the first defendant to any bank from 2003 to the date of issue of the proceedings;

(b)VGA Ltd's file regarding the second defendant;

(c)All documentation and correspondence surrounding the transfer of the directorship and shareholding of the second defendant from the second plaintiff to Ms Gomes in 2008;

(d)The second defendant’s company register from 2004 to the date of issue of the proceeding;

(e)All Family Court pleadings;

(f)The first defendant’s letter to the ASB dated 9 January 2014;

(g)The notes made of a meeting of 17 January 2014 referred to in the bank’s letter;

(h)Any correspondence, including texts, between the first defendant and Miriam Roberts from 2003 to 2004 and after 1 May 2016 relating to any matters in issue at the time when the second plaintiff was removed as director of the second defendant in 2008, and the resettlement of the property into the Willow Trust 2.

[9]    The plaintiffs also seek an order directing Helice Properties to depose in a supplementary affidavit document as to the existence of the above documents and also whether Ms Anderson made any back-ups when she changed her email server in May 2013.

[10]Rule 8.19 of the High Court Rules says:

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

(b)to serve the affidavit on the other party or parties; and

(c)if the documents are in the person's control, to make those documents available for inspection, in accordance with rule 8.27, to the other party or parties.

[11]   In cases under r 8.19 it is common to follow the four-stage approach set out by Asher J in Assa Abloy New Zealand Ltd v Allegion (NZ) Ltd:1

(a)Are the documents sought relevant, and if so how important will they be?

(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 under  r 8.19 is an order appropriate?

[12]   Relevance is determined by the pleadings. In standard discovery, a document is relevant if the document or its contents could be used as evidence in the proceeding. In other words, if a document or the information in the document (even if the document is hearsay), would have a tendency to prove or disprove a matter in issue in the proceeding, it will be relevant. Accordingly, the relevance test under s 7(3) of the

1      Assa Abloy New Zealand Ltd v Allegion (NZ) Ltd [2015] NZHC 276 at [14].

Evidence Act 2006 bears on relevance for standard discovery. Standard discovery does not require a party to disclose documents that are no more than background. Equally, if a matter is no longer in issue between the parties, for example, if a matter is common ground, there is no requirement for documents on that matter to be disclosed.2 The court does not try the merits of a case before deciding the relevance of documents. Instead, it assumes that the case of the party seeking discovery is true. As a rider to that, if it is clear that a party is on a hiding to nothing on a particular issue discovery will not be ordered for documents on that matter because that will be disproportionate.

[13]   In an application under r 8.19 there is an onus on the party seeking further discovery to show that there are grounds for believing that a party has not discovered one or more documents that should have been discovered. The matter does not have to be proved on the balance of probabilities. It is necessary to show only that there are grounds for belief. Yet there is still an onus on the party seeking discovery to show that there may be documents in existence that are relevant but have not been disclosed so far. It is not sufficient for a party applying under r 8.19 to nominate possible documents and then require the party resisting discovery to show that those documents are not relevant or do not exist. To allow that would reverse the onus set out in r 8.19 and can lead to speculative applications.

[14]Now for the classes of documents are sought.

Any statements of position given by the first defendant to any bank from 2003 to the date of issue of these proceedings.

[15]   There is no evidence that Ms Anderson did apply for finance to any financial institution, including any banks. The suggestion that she provide statements of position is speculative. There is no ground to believe that she would have made any statements of position at any relevant times. In the absence of any evidence or the circumstances of the case, I see no reason to require her to depose as to the existence of any statements of position.

2      DHC Assets Limited v Arnerich [2018] NZHC 1865 at [23].

The file of Virginia Gomes and Associates Limited regarding the second defendant

[16]   Virginia Gomes acted as director of Helice Properties Ltd and held its shares. She was the accountant for Ms Anderson and Helice Properties Ltd. Those circumstances suggest that she would have documents relating to Helice Properties Ltd. The issue here is whether there are documents in the control of Helice Properties Ltd and Ms Anderson. I refer to the definition of "control" under r 1.31 of the High Court Rules. That is not only a right of possession of a document but includes a right otherwise than under the rules to inspect a copy of the document. The circumstances of the case suggest that Ms Gomes will have produced financial statements for Helice Properties Ltd. I was advised - and this is not controversial - that a file relating to tax returns had been given to Ms Anderson, and that has apparently been discovered. If tax returns have been filed, it is plausible that financial statements have been prepared as well. Financial statements are relevant because they go to show assets held by Helice Properties Ltd. As Helice Properties Ltd was a corporate trustee, details of trusteeship may also appear in the financial statements. I find that financial statements held by Virginia Gomes and Associates Ltd are relevant. There are grounds to believe that they exist. They should be disclosed.

[17]   I emphasise, however, that the documents to be disclosed are only documents to which Helice Properties Ltd or Ms Anderson have a right of inspection under the control test. There may be other documents of Ms Gomes which she held as accountant and which are her own property. They are not discoverable in the hands of the defendants.

All documentation and correspondence surrounding the transfer of the directorship and shareholding of the second defendant from Mr Roberts to Ms Gomes in 2008

[18]   This question was canvassed in correspondence between the parties before the discovery application was filed.   The plaintiffs’ lawyers raised it in a letter dated   13 March 2018. In a reply dated 5 April 2018, the defendants' solicitors stated that Ms Anderson would be swearing a supplementary affidavit. The letter also indicated that there were documents which the defendants did not hold. The letter referred to classes of documents sought by the plaintiffs and addressed the classes of documents, stating whether they were held or not.

[19]   The defendants have addressed the matter. They have considered the matter and provided a supplementary affidavit of documents, having checked whether there is anything further. In those circumstances, I see no basis for looking beyond the supplementary affidavit of documents of the defendants, given that they have considered the point, checked again, and satisfied themselves that they hold no further documents under that head.

The second defendant's company records from 2004 onwards

[20]   The plaintiffs seek disclosure of documents which a company is required to hold at its registered office under s 189 of the Companies Act 1993, which says:

189.     Company records

(1)Subject to subsection (3) of this section and to section 88 and section 195 of this Act, a company must keep the following documents at its registered:

(a)The constitution of the company;

(b)Minutes of all meetings and resolutions of shareholders within the last 7 years;

(c)An interests register;

(d)Minutes of all meetings and resolutions of directors and directors' committees within the last 7 years;

(e)Certificates given by directors under this Act within the last 7 years;

(f)The full names and addresses of the current directors;

(g)Copies of all written communications to all shareholders or all holders of the same class of shares during the last 7 years, including annual reports made under section 208 of this Act;

(h)copies of all financial statements and group financial statements required to be completed by this Act or any other enactment for the last 7 completed accounting periods of the company;

(i)The accounting records required by section 194 of this Act for the current accounting period and for the last 7 completed accounting periods of the company;

(j)The share register.

(2)The references in paragraphs (b), (d), (e), and (g) of subsection (1) of this section to 7 years and the references in paragraphs (h) and (i) of that subsection to 7 completed accounting periods include such lesser periods as the Registrar may approve by notice in writing to the company.

(3)The records referred to in paragraphs (a) to (i) of subsection (1) of this section may be kept at a place in New Zealand, notice of which is given to the Registry in accordance with subsection (4) of this section.

(4)If any records are not kept at the registered office the company, or the place at which they are kept is changed, the company must ensure that within 10 working days their first being kept elsewhere or moved, as the case may be, notice is given to the Registry for registration of the places where the records are kept.

(5)If a company fails to comply with subsection (1) or subsection (4) of this section,—

(a)The company commits an offence and is liable on conviction to the penalty set out in section 373(2) of this Act;

(b)Every director of the company commits an offence and is liable on conviction to the penalty set out in section 374(2) of this Act.

[21]   It is implausible that Helice Properties Ltd would not hold documents of that sort. The question instead is whether it holds documents relevant to the issues in this case. That was canvassed in correspondence, the plaintiffs' lawyers’ letters of 13 and 14 March 2018, and the response of 5 April 2018. In particular, the defendants' lawyers noted that they held documents relating to the appointment of Mr Roberts as a director of Helice Properties Ltd, his consent to being a shareholder, as well as documents relating to his resignation and the transfer of shares. Given those matters, I do not require the defendants to depose as to any further documents, which the second defendant is required to hold at its registered office under s 189 and which have not already been disclosed. I am satisfied with the supplementary affidavit of documents.

All Family Court pleadings

[22]   The requisition here is for pleadings in the property relationship proceeding between Ms Anderson and Mr Wood. Some of the affidavits have already been disclosed: Mr Robert's affidavit, a narrative affidavit by Ms Anderson and extracts from an assets and liabilities affidavit.

[23]   The proceeding was about a relationship that ended in 2002. Mr Wood was seeking orders in respect of relationship property, while Ms Anderson contended that his claims were barred by reason of a pre-nuptial agreement. Mr Roberts’ affidavit describes RHH Limited’s acquisition of the Springcombe Road property in 2003. The assets and liabilities affidavit by Ms Anderson is also available. Springcombe Road was in issue in that proceeding, Ms Anderson was concerned to show that it was not owned by the parties but in a trust, and that it was, in any event, not relationship property and was outside the scope of any orders that might be made by the Family Court under the Property (Relationships) Act 1976. Nevertheless, the evidence shows that the transactions with Mr Roberts were traversed in the Family Court proceeding.

[24]   For the defendants, it was submitted that what has been disclosed is all there is. Without requiring it, I invite the defendants to check that position again. If there are further affidavits in that proceeding which have not been disclosed so far, they may consider it in their interests to provide them. They may otherwise be subject to submissions that inferences  can  be  drawn  from  the  absence  of  disclosure  by  Ms Anderson of facts that may have been relevant in that proceeding and would also be relevant here.

[25]   The affidavits in evidence here do not appear to refer to the transfer to Helice Properties Ltd, the establishment of the Willow Trust or the fact that Ms Anderson was a protector under the Willow Trust and a beneficiary. Under the Property (Relationships) Act those matters might be thought to be property under the approach of the Supreme Court in Clayton v Clayton.3 If Ms Anderson filed further affidavits, they may show how she addressed the Springcombe Road property.

[26]   In short, I do not order discovery but I offer the defendants the opportunity to disclose any further Family Court pleadings if they wish to avoid submissions at the substantive hearing as to inferences from the absence of such affidavits.

[27]   The defendants will be entitled to redact the pleadings so as to address only Springcombe Road. It is unnecessary for this proceeding that the parties or the court know about other matters that passed between Ms Anderson and Mr Wood. I was

3      Clayton v Clayton [2016] NZSC 29, [2016] 1 NZLR 551.

advised from the bar that the proceeding subsequently settled. I queried whether it would be unduly intrusive to require the Family Court pleadings to be disclosed in this proceeding. It seemed to be common ground that pleadings did exist, were relevant, and that they dealt with transactions at issue in this case. Mr Woods’ interests are protected by the directions for redaction. It is not disproportionate for Ms Anderson to disclose affidavits in that proceeding given that it dealt with transactions in issue in this proceeding.

The first defendant's letter to the ASB Bank dated 9 January 2014 and notes of a meeting of 17 January 2014 referred to in the bank’s letter

[28]   I was shown a copy of a letter from the ASB Bank in January 2014 that referred to a letter by Ms Anderson to the ASB Bank dealing with Ms Gomes mortgaging Springcombe Road as security for her own personal borrowing. I was also advised that this had led to Ms Anderson instructing lawyers and counsel to take steps to have the mortgage removed. I accept Mr Taylor's submission that this correspondence is not relevant to this proceeding. It is common ground that Helice Properties Ltd held Springcombe Road as a corporate trustee; first, as trustee of the Willow Trust, and then in 2008 as trustee of the Willow Trust 2. It is not disputed that Mr Roberts resigned as director and transferred his shares to Ms Gomes, but that Helice Properties Ltd continued as a corporate trustee throughout.

[29]   Given those matters, the fact that Ms Gomes used the property as security for her own personal borrowings is peripheral to this case. The fact that Ms Anderson may have told the bank about the trusteeship is neither here nor there for this case because it is common ground that Helice Properties Ltd always owned the property as a corporate trustee.

[30]   Ms Davenport has interrupted to say that one matter in issue is whether there was a trusteeship. That does not require discovery of the dealings with the ASB Bank in 2014.   If the plaintiffs’ case is that they did not know of the trusteeship, what    Ms Anderson told a bank about the trusteeship in 2014 will be neither here or there. I do not require discovery under this head.

[31]   I take the same approach with the requisition for notes of a meeting on       17 January 2014. The defendants say that there were no notes of the meeting but, even if there were, I do not regard them as discoverable.

Texts and correspondence between Miriam Roberts and Ms Anderson at specified times

[32]   The background, which I set out in my decision of 30 July 2018, is that      Mr Roberts and his wife separated. Following the separation Ms Anderson remained on friendly turns with Ms Roberts and, if anything, Ms Roberts might be considered to be more aligned with Ms Anderson than with Mr Roberts. The suggestion here is that because Ms Anderson and Ms Roberts were close there could have been relevant disclosure of information.

[33]   I have already required Ms Roberts to disclose relevant documents under this head. I emphasise that the documents need to be relevant to the matters in issue in this proceeding. It is not clear that Ms Anderson has checked for documents with particular reference to Ms Roberts. What I envisage is that Ms Anderson check emails during the relevant periods relating to:

(a)the sale of Springcombe Road and the buy-back arrangement;

(b)Mr Roberts resigning as director of Helice Properties Ltd and transferring his shares to Ms Gomes, and

(c)the resettlement of the property onto the Willow Trust 2.

[34]   I envisage a desktop search of computer records. I do not require a deeper examination of electronically-stored information which would require engaging outside experts to examine the contents of computer hardware or software.

Reasonable search

[35]   There remains the question of reasonable search. That is relevant under r 8.14 of the High Court Rules. Ms Anderson has explained that she has no email

correspondence before 15 May 2013 because she moved servers. The plaintiffs raise the point that when servers are changed back-ups are often made. They ask the question whether Ms Anderson did save back-up material and whether, to comply with discovery, she tried to access back-up material.

[36]   While the defendants' lawyers responded to the discovery requisitions, they did not expressly address this question. I am unable to draw any inference one way or the other as to the adequacy of the search by Ms Anderson under this head. For good order, she should depose whether she did back-up when she changed servers, whether she still has access to those materials; whether she has searched them: and whether any relevant documents are available. That is a requisition to ensure that she has satisfied the requirements of reasonable search under r 8.14 of the High Court Rules.

[37]In summary, the defendants are required to file and serve by 22 August 2018

a further affidavit of documents as to these documents:

(a)VGA Ltd's file regarding the second defendant;

(b)Texts and correspondence between Miriam Roberts and Ms Anderson. at specified times

[38]   They may also include any further affidavits in the relationship property proceeding with Mr Wood, but they are not required to do so. Those affidavits may be redacted to show only information relevant to this proceeding.

……………………………….

Associate Judge R M Bell