Rosamund v Ferdinand

[2023] NZHC 2329

ORDER OF THE COURT PROHIBITING PUBLICATION OR DISCLOSURE OR REPORTING OF THE MATTERS REFERRED TO. THE REDACTED PARTS OF PARAGRAPHS [4], [5], [7], [8], [12], [14], [22], [28], [29] AND [31] ARE PERMANENTLY SUPPRESSED.

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2022-409-563

[2023] NZHC 2329

UNDER

the Property (Relationships) Act 1976

BETWEEN

[ROSAMUND]

Applicant

AND

[FERDINAND]

Respondent

Hearing:

9 August 2023

Appearances:

M J Radich for Applicant

M K Prendergast for Respondent B R D Burke for non-party

Judgment:

25 August 2023

Reissued:

27 September 2023

JUDGMENT OF ASSOCIATE JUDGE LESTER [REDACTED COPY]

This Judgment has been re-issued under the Slip Rule to anonymise the names of the applicant and respondent throughout.

[ROSAMUND] v [FERDINAND] [2023] NZHC 2329 [25 August 2023]

[1]    The applicant [Rosamund], and the respondent [Ferdinand], are wife and husband. While they separated in July 2021, their marriage has not yet been dissolved.

[2]    [Rosamund] commenced proceedings in the Family Court under the Property (Relationships) Act 1976 (the Act). That proceeding was transferred to this Court at the end of 2022.

[3]    [Rosamund] alleges that [Ferdinand] has legal interests in 18 companies and that those interests are prima facie relationship property. [Rosamund] says those interests were acquired by [Ferdinand] during their marriage. The 18 companies own land and carry debt for which [Ferdinand] has provided personal guarantees. [Rosamund] says that from the commencement of these proceedings in the Family Court she has endeavoured to obtain financial information about the companies which [Ferdinand] has refused to provide.

[4]    [Ferdinand] says any interest he has in the companies is held by him on trust for a third party, [X redacted]. [Ferdinand] was, in respect of each of the 18 companies, a director of and the sole shareholder either personally, or via a company of which he is the sole shareholder.

[Rosamund]’s discovery application against [Ferdinand]

[5]    [Rosamund] has applied for orders requiring [Ferdinand] to produce financial and other information relating to the companies and for non-party discovery against [X redacted] to obtain what will be substantially the same information.

[6]    [Ferdinand] says he has fulfilled his obligations under the standard discovery order that has been made and asserts the documents [Rosamund] seeks are not relevant.

[7]    I do not agree. The statement of claim alleges that [Ferdinand]’s shares in the companies are subject to equal division under the Act.   There is a pleading that     the shares, having been acquired during [Rosamund] and [Ferdinand]’s marriage, are relationship property. That is denied by [Ferdinand] who asserts the shares are held on trust for [X redacted].

[8]    Mr Prendergast, counsel for [Ferdinand], submits [Ferdinand] admits the shareholdings are held by him but denies that any interest in the companies is relationship property or indeed his separate property; the shareholdings held on trust for [X redacted]. Mr Prendergast submits that [Ferdinand] has provided evidence of [Ferdinand]’s status as bare trustee, which has not been refuted.

[9]    Mr Prendergast submits there is no positive allegation by [Rosamund] that [Ferdinand] has a beneficial interest in the companies. I do not accept that submission. The statement of claim pleads the shares were acquired by [Ferdinand] during the relationship and are therefore relationship property. This allegation is that the shares are [Ferdinand]’s own property and therefore subject to the Act.

[10]   Further, Mr Prendergast submits the discovery provided by [Ferdinand], that is, copies of the relevant deeds of trust is sufficient and proportionate and meets his discovery obligations. Mr Prendergast submits the deeds confirm the status of the property, that is, how they are held by [Ferdinand]. Mr Prendergast submits that [Rosamund] has not refuted or pleaded any challenge to the veracity of the deeds of trust and is therefore not entitled to discovery on this issue.

[11]   Again, I do not accept that submission is relevant to a discovery application. It amounts to an invitation to the Court to find, as a matter of fact, that [Ferdinand]’s case as to how he holds the shares is correct and therefore discovery is not required. Discovery is driven by what is relevant to the matters in issue. The issues are determined by the pleadings not what one party puts up as an answer to an issue that exists in the pleadings.

[12]   [Rosamund] produces a diagram which she says was written by [Ferdinand], which [Rosamund] says she was told sets out the nature and extent of their involvement in various entities associated with [X redacted]. Ms Radich, counsel for [Rosamund], submits the diagram:

… shows various companies being established, various payments being made to [X redacted] and to [Ferdinand] and those payments as being ultimately intended for purposes of the relationship (for example to reduce mortgage debt owing in relation to [Ferdinand] and [Rosamund]’s home).

[13]   Mr Prendergast submitted [Rosamund]’s claim for the disclosure of financial accounts for each of  the  companies  is  disproportionate.  I  accept  that  collating the financial accounts for all 18 companies will involve not insignificant costs but the capacity in which the shares are held is one of the key, if not the issue, in this proceeding as it stands.

[14]   Mr Prendergast’s submission was that if [Rosamund] wants the material then she should obtain it from [X redacted] by way of non-party discovery. Mr Prendergast submits that in short, the costs of providing the discovery should not fall on [Ferdinand].

Capacity in which documents are held

[15]   To the extent that [Ferdinand] might hold the documents or have access to them by virtue of him being, or having been, a director of the 18 companies, as opposed to in his personal capacity, I do not consider that to be a relevant factor.

[16]   Whether the capacity in which documents are held is relevant to whether      a party is obliged to disclose them was considered by Justice Asher in the Auckland High Court decision WHK (NZ) Ltd v Retail Media Ltd (in rec and liq). Asher J said:1

[40]      It is correct that the fifth and sixth defendants have been joined to the proceedings in their capacity as trustees. I also entirely accept Mr Farrands’ submission as to the fundamental distinction between a person acting in his or her legal capacity as a trustee, and that person acting in their personal capacity. I accept Mr Scott has been joined in his capacity as a trustee.

[41]      However, under r 8.18, which sets out the default terms of the discovery order, a party must make discovery of all documents in that party’s control which relate to a matter in question in the proceeding. There is no qualification in the rule that discovery must be limited to documents held by the party in the capacity in which that party is sued.  Thus, on the fact of it,   r 8.18(2) may extend to documents held in a party’s control even when the documents are held by that party in a different legal capacity to that in which he or she is sued.

1      WHK  (NZ)  Ltd  v  Retail  Media  Ltd  (in  rec  and  liq)  HC  Auckland  CIV-2009-303-3898,  17 December 2009.

[17]   Both standard discovery and tailored discovery require a party to discover documents in that party’s control.2

[18]   Control means possession of the document, a right to possess it, or a right other than under the High Court Rules 2016 (the Rules) to inspect it.3 The question is whether the document is, in a practical way, under the control of the party.4

[19]   I am satisfied that the issue of capacity is not relevant to whether a person is in control of a document. Control is a question of fact and had the Rules intended to add a requirement that control had to be in a certain capacity, such would have been made express.

[20]   Accordingly, I am satisfied the fact the information sought by [Rosamund] is under [Ferdinand]’s control as a director is not relevant to whether he must produce the documents. It is not an answer for [Ferdinand] to say that he has produced evidence as to the existence of the trust relationship and therefore that issue need not be taken further. [Rosamund] is entitled to view the documents she seeks to assist her challenge to [Ferdinand]’s proposition that he holds the shares on trust.

[21]   If the material is discoverable by [Ferdinand], [Rosamund] does not, to the extent of any overlap, have to seek it via non-party discovery. It is not suggested the material is not available. It is not disputed that accessing the material may take some time and/or incur costs. Disbursements that [Ferdinand] incurs in obtaining the material from third parties, such as the companies’ accountants and lawyers, will be recoverable [from Rosamund] if he is successful in the proceeding.

[22]   In short, [Rosamund] is not required to accept [Ferdinand] or [X redacted]’s assurances that [Ferdinand] has no financial interest in the property. [Rosamund] is entitled to test that through discovery. Nor is it an answer for [Ferdinand] to say that as he is a trustee he is not permitted to disclose the information. Again, [Ferdinand]’s

2      Hagaman v Hagaman [2022] NZHC 2695 at [135], referring to High Court Rules 2016, rr 8.7 and 8.8.

3      High Court Rules, r 1.3.

4      B v B [1978] 3 WLR 624 (fam).

disclosure obligations are governed by the Rules and the discovery orders that have been made.

[23]   Mr Prendergast raised concerns as to the confidentiality of the information sought. All counsel are aware of the obligations that apply to the use of documents obtained on discovery. The discovery orders that follow are subject to counsel agreeing the terms of confidentiality orders on which counsel are to confer and to file a joint memorandum with the confidentiality orders sought. If there is a dispute as to the orders, separate memoranda may be filed within 10 working days and I will deal with the terms of confidentiality on the papers.

[24]   There is an order that [Ferdinand] is to provide discovery, verified by affidavit, of the documents sought  in  the  amended  schedule  annexed  to  the  submissions of Ms Radich, counsel for [Rosamund], dated 28 July 2023, save for the documents set out in paragraph d(i). Paragraph (d) is modified so that the obligation on [Ferdinand] is to provide a copy of the solicitors’ trust account ledger in respect of the property transactions identified at paragraph d(ii)-(vii).

[25]   Ms Radich is to, in respect of the properties listed at paragraph (d)(ii)-(vii) of the amended schedule, identify which firm of solicitors acted on the purchase and the date the purchase settled, to assist in the collation of the relevant trust account ledgers.

[26]   The disclosure  of  the  trust  account  ledgers  is  to  be  completed  by Friday 1 September 2023. The balance of the discovery is to be completed by Friday 15 September 2023.

[27]   Leave is reserved to amend the timeframe in respect of the provision of the financial accounts for which physical copies do not exist to be produced should delays in restoring the relevant accounting software mean the 15 September 2023 deadline cannot be met.

Application for joinder of [Rosamund]’s co-trustee

[28]   [Ferdinand] wishes to bring a counterclaim against [Rosamund]’s Family Trust known as the [X redacted]Trust. [Rosamund], along with a company, is one of the two trustees of the [X redacted] Trust.

[29]The application filed by [Ferdinand] records:

[Rosamund] intends to file an amended statement of claim. In response, [Ferdinand], intends to file an amended statement of defence including a counterclaim seeking relief against [Rosamund] and the [X redacted] trustees. The relief sought will include (amongst other things) that the [X redacted] Family Trust is a nuptial settlement under s 182 of the Family Proceedings Act 1980. [Ferdinand] will also seek relief under the Property (Relationships) Act 1976 regarding [Rosamund]’s interest in the [X redacted] Trust and the disposition of property to the [X redacted] trustees during the parties’ marriage.

[30]   While this part of the application is directed at the filing of a counterclaim, the application is said to be made in reliance of r 4.56 of the Rules. However, what [Ferdinand] seeks to do is to file a counterclaim out of time  – such is governed by    r 5.57. The granting of leave to [Ferdinand] to bring a counterclaim out of time would bring in the co-trustee as a party, essentially by default.

[31][Rosamund], in her affidavit in opposition to the application, said:

As I understand it, [Ferdinand] is intending to amend his proceeding to allege that the [X redacted] Trust is a nuptial trust for purposes of the Family Proceedings Act 1980. I have no objection to that …

[32]   Ms Radich’s submissions opposing the application recognised the effect of    r 5.57 submitting that if [Ferdinand] had leave to file a counterclaim against [Rosamund] and another party out of time then in terms of r 5.57, the issue of joinder would not arise. However, Ms Radich submitted: “The real issue is an argument under HCR5.57 which is not before the Court”.

[33]   At a technical level, I accept Ms Radich’s submission about the application referring to r 4.56 but then again, paragraph 2(b) of the application made it clear that the “joinder” sought was for the purposes of adding a counterclaim defendant.

[34]   Immediately prior to the hearing I was advised that counsel had come to an agreement on this issue.

[35]By consent, the following orders are made:

(1)The applicant consents to the respondent being granted an extension of time under r 1.19 to file an amended statement of defence containing a counterclaim under r 5.57 seeking relief under the Act and (when jurisdiction is invoked) the Family Proceedings Act 1980.

(2)For the avoidance of doubt, this will mean that [Rosamund]’s co-trustee will be named as a counterclaim defendant and become a party to the proceeding. This  agreed  order  subsumes  the  existing  order  under r 4.56. No other direction in respect of that application is required.

Costs

[36]   Costs on both applications are reserved. If no agreement is reached then [Rosamund] may file a memorandum regarding costs by Friday 1 September 2023 and [Ferdinand] by Friday 8 September 2023 – to be no more than five pages and to be determined on the papers.

[37]   Counsel will confer on the timing of the filing of an amended statement of claim by [Rosamund] (if such is required) and the counterclaim by [Ferdinand].

Non-party discovery

[38]   Given the overlap between the discovery sought by [Rosamund] from [Ferdinand] with the discovery sought from the non-party, at my suggestion, the non-party discovery application is adjourned. In short, there was no point making a discovery application against the non-party that would duplicate the discovery to be provided by [Ferdinand].

[39]All costs issues in relation to the application for non-party discovery are

reserved.

The non-party discovery application will only need to be revisited in the event the discovery provided by [Ferdinand] does not address all of the documents sought by [Rosamund]. If that is the case then, in the event that there are relatively few documents left, counsel may well be able to resolve that issue directly with the benefit of the indication I have given that it would be unlikely the Court would not expect [Rosamund] to meet the third party’s costs of providing discovery in the normal way. This application will be revisited along with all other issues at a telephone conference to be held with me on Friday 13 October 2023 at 12pm. The timing of that conference is to permit Ms Radich to have reasonable time to consider the volume of material that is likely to be produced through the above orders.

Associate Judge Lester

Solicitors:

Radich Law, Blenheim (for Applicant)

Tom Evatt & Co, Christchurch (for non-party)