Taylor v Vernon
[2024] NZHC 2449
•29 August 2024
NOTE: PURSUANT TO S 35A OF THE PROPERTY (RELATIONSHIPS) ACT 1976, ANY REPORT OF THIS PROCEEDING MUST COMPLY WITH SS 11B,
11C AND 11D OF THE FAMILY COURT ACT 1980. FOR FURTHER INFORMATION, PLEASE SEE
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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-1350
[2024] NZHC 2449
UNDER Part 18 of the High Court Rules 2016 and the Property (Relationships) Act 1976 IN THE MATTER OF
Declarations of a constructive trust
BETWEEN
DIANNE FAYE TAYLOR
Applicant
AND
SCOTT FRANCIS VERNON
First Respondent
cont:/
Hearing: 2 July 2024 Appearances:
J McCartney KC and Mr J Oliver-Hood for Applicant
V A Crawshaw KC, S M Wilson and P Baine for First Respondent
Judgment:
29 August 2024
JUDGMENT OF O’GORMAN J
[Applications for an interim distribution and to exclude privileged evidence]
This judgment was reissued by me on 27 September 2024 pursuant to r 11.10 of the High Court Rules 2016.
Registrar/Deputy Registrar
…………………………………
Solicitors/Counsel:
J McCartney KC, Auckland Rennie Cox, Auckland
V A Crawshaw KC, Auckland Wilson Harle, Auckland
TAYLOR v VERNON [2024] NZHC 2449 [29 August 2024]
…cont’d
ANDSCOTT VERNON and HORIZON HURSTMERE TRUSTEE LIMITED as
trustees of the Scott F R Trust Second Respondents
SCOTT VERNON and HORIZON HURSTMERE TRUSTEE LIMITED as
trustees of the Horizon Hurstmere Trust Third Respondents
HORIZON THORNES TRUST LTD as
trustees of the Horizon Thornes Trust Fourth Respondents
SCOTT VERNON and HORIZON HURSTMERE TRUSTEE LIMITED as
trustees of the Horizon Family Trust Fifth Respondents
[1] This judgment determines two interlocutory applications in the context of substantive proceedings involving claims by Ms Taylor against her former partner, Mr Vernon, and related trusts and trustee companies. The two interlocutory applications are:
(a)an application by Ms Taylor seeking an interim distribution under s 25(3) of the Property (Relationships) Act 1976 (PRA) of $2 million; and
(b)an application by Mr Vernon for the exclusion of evidence under s 67(1) of the Evidence Act 2006, on the grounds that Ms Taylor has obtained copies of his legally privileged communications and has improperly referred to and sought to use those communications, plus without prejudice settlement negotiation material, in breach of privilege.
[2] Ms Taylor and Mr Vernon were in a de facto relationship for approximately 15 years from November 2006 to March 2022 (with a period of separation). During the relationship, the parties entered into two agreements under ss 21 and 21A of the PRA.1 Ms Taylor is applying to set aside those agreements under ss 21F and 21J of the PRA (for non-compliance with the requisite formalities and for serious injustice) and also for fraudulent misrepresentations under the Contracts and Commercial Law Act 2017 (CCLA).
[3] If the two agreements are set aside, Ms Taylor submits this will substantially increase the property pool available for distribution as relationship property under the PRA. Ms Taylor alleges that the resulting value of the property pool (including trust interests) would be about $170 million, of which about $145 million arises from asset values increasing during the relationship.
1 These are more correctly described as compromise agreements rather than contracting out agreements (COAs), because they were entered into after Property (Relationships) Act 1976 entitlements had already accrued: see Wells v Wells [2006] NZFLT 870 (HC) at [37].
Procedural background
[4] The PRA claims were initially filed in the Family Court. On 8 December 2023, Judge Muir granted orders transferring the Family Court proceeding (FAM-2023-404-325) to the High Court under s 38A of the PRA. Those claims are yet to be re-pleaded in this jurisdiction.
[5] By a statement of claim dated 13 June 2023, the plaintiff commenced these proceedings in the High Court seeking a constructive trust for her contributions to trust assets over the course of the parties’ relationship. An amended claim was filed on 30 August 2023 to include causes of action seeking declarations cancelling the two agreements for fraudulent misrepresentations under s 37 of the CCLA.
[6] Orders have been made to consolidate the claims into this proceeding. Following the determination of the present two interlocutory applications, a new amended claim will be filed, pleading all causes of action. The defendant has applied for a separate determination of the application to set aside the two agreements (under ss 21F and 21J). That application is opposed, so a hearing needs to be scheduled for determining whether those matters will be determined separately.2
[7] Meanwhile, a substantive fixture has been allocated for three weeks commencing on 6 October 2025.
Factual background
[8] Mr Vernon and Ms Taylor met in about October 2005, when they were 56 and 49 years old respectively. They spent Christmas 2005 together and introduced each other to family members. Ms Taylor says the relationship was exclusive from the end of 2005. On Ms Taylor’s evidence, in April 2006 Mr Vernon proposed marriage. The de facto relationship commenced in about August/September 2006, when Ms Taylor rented out her property because they agreed to live together at the Hurstmere Road property.
2 Taylor v Vernon CIV-2023-404-1350, 19 December 2023 at [10](d); and Taylor v Vernon
CIV-2023-404-1350, 1 February 2024 at [8].
[9] As at 2005/2006, Mr Vernon had interests in two retirement villages owned through personal shareholdings in two companies. Fairview Village was owned through Albany Holdings Ltd and Settlers Village was owned through Scofair Holdings Ltd, later renamed Premier Lifestyle Villages Ltd.
[10] At some point,3 the interests in Fairview Village and Settlers Village were transferred to Horizon Holdings Albany Ltd, which was owned by a trust called Horizon Family Trust. The trust deed gives certain powers to Mr Vernon (a general power of appointment), which Ms Taylor submits amount to control.4 Ms Taylor says further restructuring steps were taken by Mr Vernon following receipt of accounting advice from Pieter Holl & Associates Ltd, including accounting advice about how management services should be provided and paid. Ms Taylor seeks to set aside these dispositions under s 44 of the PRA as dispositions made with intent to defeat her claims under the PRA.
[11] From 2009, the parties were in discussion about a relationship property compromise agreement. Mr Vernon’s legal adviser throughout was Mr Tony Sweetman, then at McVeagh Fleming. However, it was not until March/April 2011 that progress was made with finalising the first compromise agreement.
[12] The first agreement was signed on 4 April 2011 (2011 COA). Mr Simon Palmer certified that he had given Ms Taylor independent legal advice as to the agreement and explained to her the effect and implications of it. Despite this, it is common ground that Ms Taylor signed without any disclosure, or any detailed knowledge of the extent and value of Mr Vernon’s asset position. Prior to signing, Ms Taylor asked Mr Vernon about the value of the retirement villages. She was told by Mr Vernon that only a “small portion” of the value is the proprietors’ interest. Mr Vernon also told Ms Taylor that he could not afford a payment of more than
$500,000 cash as part of the settlement. Based on these representations, Ms Taylor says that she agreed to the 2011 COA providing that Ms Taylor would receive a lump sum of $500,000 plus $100,000 per annum for five years in the event of a separation.
3 Mr Moriarty expresses the view that the transfer of the shares in one company occurred earlier than March 2007, as shown in records registered with the Companies Office.
4 See Clayton v Clayton [2016] NZSC 29, [2016] 1 NZLR 551 at [70]–[75].
[13][redacted]
[14] The 2011 COA had a commitment in cl 14 to review the terms within five years, to ensure the provisions remained fair to both in light of the then existing circumstances. There was a delay in undertaking this review. On 14 November 2016, Mr Vernon wrote to Mr Palmer, recognising Mr Vernon had been remiss in not attending to this review earlier and that tension had thereby resulted, to the extent that they had decided to separate. That email set out a full and final settlement proposal.
[15] Mr Palmer again acted for Ms Taylor in the negotiations that followed. No disclosure of Mr Vernon’s asset position was sought or provided. On behalf of Mr Vernon, a letter from Mr Sweetman to Ms Taylor dated 14 November 2016 set out the “without prejudice” settlement proposal. The advice from Mr Palmer to Ms Taylor has been disclosed, saying “my sense is that we should accept this”. On 24 November 2016, Ms Taylor gave those instructions, and acceptance was confirmed by email 14 minutes later.
[16] That settlement was documented in the agreement dated 12 December 2016 (2016 Agreement). Ms Taylor received a settlement of AUD 2 million in accordance with the provisions of the 2016 Agreement, and the 2011 COA was amended. The 2016 Agreement provided that, in the event of reconciliation, the 2011 COA as varied would continue to apply. Clause 5.1 of the 2016 Agreement also provides that, pursuant to s 7A of the PRA, the laws of New Zealand shall apply to the classification and division of the Queensland property and the New Zealand courts shall have exclusive jurisdiction to address any claims between the parties relating to all property owned by them, whether located in New Zealand or overseas.
[17] Ms Taylor and Mr Vernon reconciled in April 2017. In March 2018, the parties purchased the Sanctuary Cove property in Australia as joint tenants. Ms Taylor sold her property at Dover Place, Remuera and contributed AUD 500,000 for the purchase. The purchase price was AUD 2.4 million, plus stamp duty. That property now has an estimated value of around AUD 5 million. Ms Taylor has resided at this Sanctuary Cove property since separation.
[18] In October/November 2021, another five years had passed since the 2016 Agreement, and Ms Taylor told Mr Vernon that she would like to negotiate another property sharing contract. Ms Taylor retained a new firm, Rennie Cox, to advise her. Her new lawyers told her they needed disclosure to understand her entitlements to recommend a fair division.
[19] With that objective in mind, Ms Taylor undertook her own investigations by deliberately accessing Mr Vernon’s emails, without his knowledge or permission, on the following occasions:
(a)On 13 December 2021, Ms Taylor searched “with reference to communications with Tony Sweetman [Mr Vernon’s lawyer for PRA purposes], James Varney [another of Mr Vernon’s lawyers, and a co-trustee], and James Varney’s PA”. In that search she located privileged letters of advice dated 19 October 2016, 1 November 2016 and the email from Scott seeking advice dated 16 November 2021.
(b)On 6 February 2022, after Mr Vernon told Ms Taylor that Ross Devitt (Scott’s previous lawyer and personal friend) was assisting with the variation of the relationship property agreement, Ms Taylor searched Mr Vernon’s emails again to look for communications with Mr Devitt.
(c)On 16 February 2022, Ms Taylor searched Mr Vernon’s emails a third time and found a letter dated 14 February 2022 that Mr Vernon had written to Mr Devitt.
[20]Ms Taylor copied the privileged documents and gave them to her lawyer.
[21] Meanwhile, on 15 February 2022, Mr Vernon provided a draft agreement setting out his proposal. Rennie Cox requested further disclosure on 21 February 2022. Some disclosure was provided by Mr Vernon through Mr Sweetman on 7 March 2022. The relationship did not survive these negotiations, with the parties separating for the final time on 3 April 2022.
[22] Negotiations nevertheless continued, with the parties committing to a mediation on 25 May 2023. However, the mediation was called off on 16 May 2023 after 5 pm, because of non-provision of requested information.
[23] Since separation, Mr Vernon has complied with the terms of the 2011 COA as varied. In addition to the 2016 lump sum payment to Ms Taylor, he had made fortnightly payments from mid-February 2023 as ongoing spousal maintenance.
Expert evidence
[24] The expert evidence on behalf of Ms Taylor has been given by Mr Dent, a chartered accountant and consultant employed by Deloitte at Wellington. His evidence sets out a valuation summary table, estimating the value of the equity in the retirement villages, plus Mr Vernon’s other assets and investments:
$000 Nov-06 Apr-11 Nov-16 Mar-23 Retirement villages (50%) Mr Vernon Loan Net RV investments Mr Vernon Loan (asset) Trust current accounts [Redacted] Other financial assets Residential property Shares TOTAL $23,867 $40,450 $99,482 $170,758
[25] Mr Dent emphasises that his valuation analysis is indicative only, because of critical information requested from Mr Vernon’s solicitors that is still outstanding, and revisions that might be needed depending on the detail of disputed issues.
[26]Mr Dent emphasised two matters in his evidence:
(a)During the relationship, Mr Vernon disposed of his personally held shareholdings in Scofair Holdings Ltd and in Fairview Lifestyle Villages 2 Ltd. Those shareholdings were transferred to Mr Vernon’s trust interests. Mr Dent expresses the view that the value disposed of was at least [redacted] as at March 2023, whereas there does not appear to have been proper consideration paid for the transfer of those shares. In relation to Fairview Lifestyle Villages 2 Ltd, there was a debt back
of [redacted] for the disposition in 2012, which was a personal asset of Mr Vernon. By the financial year 2019, after reductions that Mr Dent was not yet able to fully analyse, a balance of in excess of [redacted] was personally owed to Mr Vernon. Mr Dent says that this was transferred to Horizon Family Trust ([redacted]) and to the Scott FR Trust ([redacted]) during the financial year 2020.
(b)Mr Dent has analysed the movement in Mr Vernon’s current account with HHAL over the period from the financial year 2012 to the financial year 2022. Because of incomplete disclosure of inter-entity advances and transactions, he is unable to identify the exact nature of all movements. He says it is not apparent how drawings have been treated and what is meant by the phrase “loan simplification”. He has identified management fees paid by PLVL in 2015 and 2016, some of which were on-paid to HHAL as income and then on-paid at a slightly reduced amount to Mr Vernon in his current account. Mr Dent contrasts the amounts now recorded in the accounts with different figures referred to in privileged correspondence between Mr Vernon and his solicitor.
[27] Mr Dent finishes his report with a summary of the complexity involved, given that there are at least four trusts associated with Mr Vernon and two with Ms Taylor, 12 items of real estate and at least 15 entities involved in the ownership structure of Fairview and Settlers Village. Given these complexities and some missing information and documents, he concluded that he could not fully analyse the property pool.
[28] Mr Moriarty is a chartered accountant and principal in his own company through which he provides business valuation and forensic accounting services. He originally qualified as a chartered accountant with KPMG in the United Kingdom in 1992 and has over 30 years of accounting and valuation experience. Mr Moriarty has also given indicative valuation opinions based on his consideration of limited information. In respect of the allegations about dispositions of property with intent to defeat claims, Mr Moriarty expresses the view that:
(a)there was no disposition of property by Mr Vernon in March 2007 because Mr Vernon did not have a shareholding interest in Settlers at that time;
(b)the January 2012 sale by Mr Vernon of his separate property of a shareholding in Fairview Lifestyle Villages 2 Ltd was at a price above the fair value, and the separate property debt then owed to Mr Vernon allowed him to raise and use funds for the benefit of the relationship;
(c)there were no dispositions of property relating to Mr Vernon’s current accounts:
(i)Mr Vernon has not forgiven any debts owed to him;
(ii)while debts owed to Mr Vernon have at times been reassigned between entities, the reassignments are “look through” transactions that did not impact on any party associated with the reassignments; and
(iii)the reductions in the value of Mr Vernon’s current accounts simply reflect the withdrawal of funds used to the benefit of the relationship.
[29] Mr Moriarty asserts that the foundation (springboard) of the retirement village wealth pre-dated the relationship as Fairview was already fully established and operating, and the development of Settlers was already underway. He says the increase in value relates to property revaluations that are passive in nature, driven by non-relationship factors. This increase in value was unrelated to the actions or inaction of either Mr Vernon or Ms Taylor. In Mr Moriarty’s opinion, the commercial, accounting and valuation aspects of this matter are not complex.
[30] In contrast with Mr Dent’s evidence that Mr Vernon indirectly owned 100 per cent of Settlers when the relationship commenced and disposed of this in March 2007 for no consideration, Mr Moriarty says that Horizon Family Trust held a 50 per cent interest in Settlers when the relationship commenced, and Mr Vernon had no personal interest in the retirement home at that time or since.
[31] Mr Dent’s third affidavit responds to the evidence of Mr Moriarty. Mr Dent expresses surprise that Mr Moriarty simply critiqued Mr Dent’s report and did not provide his own valuation of the property pool at the relevant dates. He responds to various of Mr Moriarty’s questions and assertions, including 11 further issues (excluding sub-issues) introduced by Mr Moriarty’s evidence. On the issue of whether the proprietors’ interest in the retirement villages was only a “small portion” of the value as at 8 March 2011, Mr Dent’s assessment is that the ownership interest of the proprietors over the period from 2010–2012 shows that the proprietors’ interest in the combined value of the villages was more than 50 per cent and, in any event, was never a “small portion” of the overall value of the villages.
Certification and disclosure
[32] In Coxhead v Coxhead, the Court of Appeal discussed the certification requirement under s 21(6) of the Matrimonial Property Act 1976 (now subss 21F(3) and (5) of the PRA), under which the lawyer who witnesses the signature of a party must certify that, before that party signed the agreement, the lawyer explained to that party the effect and implications of the agreement. Generally this requires adequate disclosure of all relevant information:5
Each party must receive professional opinion as to the fairness and appropriateness of the agreement at least as it affects that party’s interests. The touchstone will be the entitlement that the Act gives, and the requisite advice will involve an assessment of that entitlement, and a weighing of it against any other considerations that are said to justify a departure from it. Advice is thus more than an explanation of the meaning of the terms of the agreement. Their implications must be explained as well. In other words the party concerned is entitled to an informed professional opinion as to the wisdom of entering into an agreement in those terms. This does not mean however that the adviser must always be in possession of all the facts. It may not be possible to obtain them. There may be constraints of time or other circumstances, or the other spouse may be unable or unwilling to give the necessary information. The party being advised may be content with known inadequate terms. He or she may insist on signing irrespective of advice to the contrary. In such circumstances, provided the advice is that the information is incomplete, and that the document should not be signed until further information is available, or should not be signed at all, the requirements of subs (5) have been satisfied.
5 Coxhead v Coxhead [1993] 2 NZLR 397 (CA) at 403.
[33] In Clayton v Clayton, the Court of Appeal held that parties to relationship property proceedings are under an obligation to make full and frank disclosure of all relevant information to ensure that the court is in a position to make appropriate orders for the ascertainment and division of relationship property under the PRA, otherwise an adverse inference may be available.6
[34] In Biggs v Biggs, the Court of Appeal considered the discovery standard in relationship property cases,7 emphasising that the focus must remain on the rules, for which any judicial restatement is likely to be an imperfect substitute.8 Relationship property litigation may exhibit characteristics that bear on discovery and may call for judicial management, but this is always a question of fact.9
Interim distributions
Legal principles
[35] The Court has power under s 25(3) of the PRA to make orders at any time relating to the ownership or vesting of any specific property “as it considers just”. The Court’s discretion under s 25(3) is wide but must be exercised “subject to the other provisions of [the] Act”.10 An order under s 25(3) must relate to a specific item of property;11 it cannot be made “on a global basis disregarding the provisions of the Act and the specific assets which are involved”.12
[36] The Court must generally be satisfied that the amount sought by way of interim distribution will be less than the applicant’s ultimate share of relationship property.13 The challenge for the Court is to determine the amount which can be safely released at a preliminary stage without putting the Court in any difficulty when it comes to make its final determination under the PRA.14
6 Clayton v Clayton [2015] NZCA 30, [2015] 3 NZLR 293 at [186].
7 Biggs v Biggs [2018] NZCA 546, [2018] NZFLR 854.
8 At [34].
9 At [31].
10 Property (Relationships) Act, s 25(5); and Burton v Burton (2001) 21 FRNZ 454 (HC) at [15].
11 Burton v Burton, above n 10, at [15].
12 At [16].
13 SM v LFDB [2013] NZHC 1056 at [29].
14 Burton v Burton HC Auckland AP132-SW01, 17 December 2001 at [23].
[37]Other matters for the Court to consider include:15
(a)any possible prejudice;
(b)the purpose and principles of the PRA;
(c)the needs and circumstances of the applicant;
(d)the purpose for which the interim distribution is sought;
(e)the applicant’s likely share of relationship property;
(f)the respondent’s ability to give effect to an order;
(g)the length of time until the hearing of the substantive issues;
(h)delays in proceedings to date, and who has caused them;
(i)any uncertainty as to the applicant’s entitlement under the PRA; and
(j)the effect of an order on the parties’ willingness and determination to finalise their claims.
[38] In Biggs v Biggs,16 Mrs Biggs appealed against the High Court’s decision to refuse her a further interim distribution of $1.1 million, to be paid from Mr Biggs’ separate property and accounted for in the ultimate settlement of Mrs Biggs’ claims. The Court of Appeal ordered a (further) interim distribution out of Mr Biggs’ separate property, to be reimbursed from relationship property (when the family home sold). In those circumstances, it sufficed that the wife had “a pleaded and plausible claim” and “the only reason to take a conservative approach was that the payment had to be funded, in the short term, from property that the husband maintain[ed] [was] his own”.17
15 SM v LFDB, above n 13, at [30].
16 Biggs v Biggs [2020] NZCA 231, [2020] NZFLR 87.
17 At [9].
[39] In Turner v del la Varis, Gordon J confirmed an interim distribution out of separate property on the grounds it was “property susceptible to being drawn into the pool of relationship property”.18 The Court was satisfied that the interim distribution ordered would not exceed the amount Mr Turner would receive on final distribution. In those circumstances, the Court was willing to order the sale of a property held in Ms de la Varis’ sole name (the classification of which was disputed) and equal sharing of the proceeds of sale by way of interim distribution.19
Application to facts
[40] Ms Taylor says she requires an interim distribution of $2 million so that she can meet her legal and expert costs, some immediate deferred maintenance, living costs, and for contingencies.
[41] She has funded her costs to date from the sale of an investment property at Biggera Waters, Australia, sold for about AUD 900,000. In November 2022 (when the mediation was pending and she was more hopeful of resolution), Ms Taylor advanced AUD 500,000 of those funds to her son for the building of his home on the Gold Coast. The balance of funds have been spent on legal costs, expert costs, and some miscellaneous living costs.
[42] Remaining property owned by Mrs Taylor and her trust interests are valued at approximately AUD 4.8 million. Mr Vernon contends that Ms Taylor could liquidate those assets, so it is unnecessary to order an interim distribution from his separate property as an interim measure. He considers that her need for funds is partly a situation of her own making, given the proceeds given to her son in 2022. He also questions the need to provide for building maintenance and contingencies.
[43] Ms Taylor does not want to sell her other properties in Australia because this would cause capital gains tax at 33 per cent plus real estate agent’s commissions and conveyancing costs. Only one property can be sold in each financial year without attracting a tax liability, the properties are tenanted (some for fixed terms) and would require renovation before sale, and the net rent provides Ms Taylor’s only income.
18 Turner v del la Varis [2021] NZHC 776, [2021] NZFLR 418 at [67], quoting O v T [2014] NZHC 2200.
19 At [69]–[70].
[44] Ms McCartney KC submits that the requested interim distribution is less than Ms Taylor’s half share of the relationship property, even if Mr Vernon’s succeeds entirely in his arguments. The non-disputed relationship property assets include:
Harbour Terrace, Sanctuary Cove 5,000,000 Household chattels 250,000 Cars (x4) 320,000 Tax refund 12,853 Total $5,582,853
[45] In support of the application for an interim distribution, Ms Taylor has offered an undertaking to repay the sum paid to her by way of an interim distribution of property. She refers to the fact that the parties jointly own the Harbour Terrace property at Sanctuary Cove. They both have rights to the property, either under the Australian legislation for division of property or under the New Zealand legislation.
[46] Ms Crawshaw KC argues that this Court’s jurisdiction over the Harbour Terrace property in Australia is derived from cl 5.1 of the 2016 Agreement, which is said to be an agreement under s 7A of the PRA. If Ms Taylor succeeds in setting aside the 2016 Agreement (Mr Vernon denies any grounds to do so), then this undermines any jurisdiction of this Court to make orders in respect of that asset under the PRA. This would leave only negligible relationship property in New Zealand for division. Ms Taylor’s constructive trust arguments in respect of trust assets are strongly disputed and too speculative as a basis for interim orders.
[47] I consider this jurisdiction argument to be a red herring. This Court has a personal jurisdiction to award a judgment against Ms Taylor to enforce an undertaking. Any personal judgment could be enforced against her assets in Australia relatively simply, under the Trans-Tasman Proceedings Act 2010. As the Harbour Terrace, Sanctuary Cove property is already jointly owned, I do not anticipate any difficulties with that enforcement, regardless of whether or not the PRA applies to assets in Australia. Furthermore, if the 2011 COA and the 2016 Agreement are set aside, then I expect that Ms Taylor’s PRA entitlements would be higher (not lower), so in that scenario I do not accept that Mr Vernon will have been prejudiced by an interim distribution.
[48]I assess the relevant factors for a decision under s 25(3) as follows:
(a)Possible prejudice: Mr Vernon has admitted that he is able to pay
$2 million dollars as an interim distribution (if ordered despite his opposition). His concern is whether this might prejudice him if he succeeds entirely in his arguments and Ms Taylor is entitled to less than the $2 million payment (including costs). This risk can be addressed by the undertaking offered by Ms Taylor to account for the interim payment on any final determination of the relationship property issues, including repaying any amount that the Court might require (if her share of the divided property is less than $2 million).
(b)Purpose and principles: I accept that a just division of relationship property cannot be assessed without reference to the applicable sections of the PRA. Section 25(3) is intended to permit interim access to relationship property pending final division, with caution exercised not to prejudice the final division. The PRA principles include the ability to contract out of the default entitlements, and the starting position is that separately owned trust assets do not form part of the relationship property for division. Therefore, it cannot be assumed that trust and separate property is available as the “property pool”. However, I also accept the submissions on behalf of Ms Taylor that the interim payment is less than what the applicant’s ultimate share of relationship property will be, given the value of the jointly owned Sanctuary Cove property (whichever law substantively applies). Allowing the interim distribution will ensure that both parties can fund their legal expenses and meet their other financial commitments while awaiting a final distribution. It would impose an unreasonable capital expense on Ms Taylor to leave her in a position where she must continue liquidating other property in the interim, when this may not be required in the long term, even if Mr Vernon were to succeed on the disputed issues.
(c)Needs and circumstances: I accept Ms Taylor’s evidence that the spousal maintenance payments and other sources of income are insufficient to meet her current needs, including the anticipated legal expenses of this proceeding, and maintenance requirements on her other properties. In contrast, Mr Vernon is in a comfortable position and not facing any financial difficulties — see [24] above.
(d)Purpose of interim distribution: This has been addressed above. Most of the funds are sought by Ms Taylor in order to meet ongoing legal expenses for this proceeding.
(e)Applicant’s likely share: Ms Taylor’s likely share of the property will exceed the proposed interim distribution amount, given the non-disputed relationship property assets listed in [44] above. Beyond that, it is not for me to determine, but I accept there are genuinely disputed issues being pursued in this proceeding that have the chance of increasing Ms Taylor’s entitlements, including whether the 2011 COA and 2016 Agreement should be set aside under ss 21F and 21J of the PRA, and the proper calculation of Mr Vernon’s income and other personal entitlements from the retirement village investments.20
(f)Respondent’s ability to comply: There is no dispute that Mr Vernon has the ability to access $2 million from his separate property if he were required to do so.
(g)Time until hearing: There will be a lengthy delay until trial, which has been set down to begin on 6 October 2025.
(h)Cause of delays: Ms Taylor alleges that Mr Vernon has caused most of the delays (such as by failing to provide full disclosure and challenging the High Court’s jurisdiction); Mr Vernon does not accept such blame for delay. Regardless, the delays have increased costs and pressures on
20 Clause 11.1 of the 2011 COA acknowledged that income derived from personal services supplied was to be treated as relationship property.
Ms Taylor — if anything, this is neutral or supports an interim distribution.
(i)Uncertainty: I am satisfied that there is sufficient certainty that Ms Taylor’s entitlement to assets exceeds the proposed interim distribution amount, and that the Court undertaking sufficiently addresses any risks for Mr Vernon.
(j)Effect on settlement prospects: I do not consider that an interim distribution would detrimentally affect settlement prospects. To the extent that it better ensures equal ability to fund legal expenses, if anything it should facilitate settlement on a principled basis, to reflect the merits of the issues for determination in this proceeding.
[49] Accordingly, I grant the application for an interim distribution to Ms Taylor in the sum of $2 million, conditional on Ms Taylor executing a suitable written undertaking.
Exclusion of privileged evidence
Legal principles — legal advice privilege
[50] The Evidence Act provides the Court with broad powers to prevent the use of privileged material in proceedings, without valid waiver by the person who hold the privilege. A Judge may order that privileged materials be excluded from evidence,21 including when documents privileged to one person have fallen into the hands of someone else.22 A person who has a privilege in respect of a communication has the right to restrain or prevent another person from disclosing material covered by the privilege in a proceeding.23
[51] Section 12A of the Family Court Act 1980 provides that the court hearing a proceeding under the PRA may receive any evidence, whether or not admissible under the Evidence Act, that the court considers may assist it to determine the proceeding.
21 Evidence Act 2006, s 52(1).
22 Section 53(4).
23 Section 53(3).
However, s 12A “is not intended to override privileged communications”.24 In any event, that flexibility does not apply to the claims in constructive trust and for cancellation of contract.
[52] Privilege is waived when communications are treated inconsistently with a claim to confidentiality. Involuntary disclosure, or disclosure without the consent of the person who holds the privilege, is not a waiver.25
(a)In Imerman v Tchenguiz, the United Kingdom Court of Appeal held that a partner in a married or de facto relationship cannot “pre-empt” the other partner’s disclosure in relationship property proceedings through using “self-help” measures.26
(b)In Marwood v Commissioner of Police, the Supreme Court held that there is jurisdiction in civil proceedings to exclude the evidence obtained improperly in breach of rights under the New Zealand Bill of Rights Act 1990, such as freedom from unreasonable search or seizure.27 Accordingly, it is now clear that s 8 of the Evidence Act may apply to exclude the admissibility of improperly obtained evidence in a civil proceeding on the grounds of its unfairly prejudicial effect on the proceeding, in terms of s 8.28
(c)In addition, the Court has an express power under ss 52 and 53 of the Evidence Act to order that privileged materials not be disclosed in a proceeding.
[53] Section 67 of the Evidence Act codifies the common law fraud or iniquity exception.29 It provides that a Judge must disallow a claim to privilege if satisfied
24 R L Fisher Fisher on Relationship Property (online ed, Lexis Nexis) at [19.29]. See also Banda v Hart [1998] NZFLR 930, adopted in Lipinski v Weiss HC Nelson CIV-2005-442-322, 8 September 2005 at [21] and Blake v Scott [2017] NZFC 7267 at [10].
25 Evidence Act, s 65(4).
26 Imerman v Tchenguiz [2010] EWCA Civ 908, [2011] 2 WLR 592.
27 Marwood v Commissioner of Police [2016] NZSC 139, [2017] 1 NZLR 260 at [35]–[38] and [60]−[61].
28 Andru Isac (ed) Cross on Evidence (online ed, LexisNexis) at [EVA8.8].
29 Kea Investments Ltd v Wikeley Family Trustee Ltd (in interim liq) [2024] NZHC 163 at [30].
there is a prima facie case that the communication was made or received, or the information was compiled or prepared:
(a)for a dishonest purpose; or
(b)to enable or aid anyone to commit or plan to commit what the person claiming the privilege knew, or reasonably should have known, to be an offence.
[54] Only the first category is relevant in this case. Given that it is a distinct category, a “dishonest purpose” can be something less than the intended commission of a crime. However, the threshold set by s 67(1) is higher than at common law — privilege is not destroyed merely because the purpose of the communication amounted to a civil wrong.30 It requires dishonesty in the sense of an intention to deceive, or to commit “sharp practice” as by intentionally taking advantage of a misapprehension.31
[55] A communication for the purpose of requesting or obtaining professional legal services is not made or received for a dishonest purpose unless “the right of access is abused so as to assist in an act of dishonesty”.32 As under common law, advice had to be part of the instrumentation of the dishonest purpose before losing its ordinary protection.33 In other words, the legal adviser’s participation must be essential or desirable to effect the dishonesty, or the adviser must be a willing participant in that dishonesty.34 Under the first of those two, it is not a requirement that the lawyer be complicit — a client’s dishonest purpose in making or receiving the communication can suffice.35
30 Cross on Evidence, above n 28, at [EVA67.3], referencing McCulloch v Quinn [2012] NZHC 2469 at [22].
31 At [EVA67.3], referencing Fullerton-Smith v Fullerton-Smith HC Hamilton CIV-2011-419-615, 26 August 20118; McCulloch v Quinn [2012] NZHC 2469; Spackman v Martin [2021] NZHC 157 at [41] and O’Brien v Parkinson [2021] NZHC 3161 at [15]; and Moeke v Raukawa Iwi Development Ltd [2023] NZHC 1952 at [29].
32 Kea Investments Ltd v Wikeley Family Trustee Ltd (in interim liq), above n 29, at [31], referencing
Rollex Group (2010) Ltd v Chaffers Group Ltd [2012] NZAR 746; [2012] NZHC 1332 at [35] .
33 Cross on Evidence, above n 28, at [EVA67.3], referencing Spackman v Martin, above n 31, at [69];
Kea Investments Ltd v Wikeley Family Trustee Ltd (in interim liq), above n 29, at [31].
34 Rollex Group (2010) Ltd v Chaffers Group Ltd, above n 32, at [45]. See also Spackman v Martin, above n 31.
35 Kea Investments Ltd v Wikeley Family Trustee Ltd (in interim liq), above n 29, at [37].
Application to facts — Legal advice privilege
[56] Mr Vernon applies for orders, under ss 52 and 53 of the Evidence Act that the following privileged communications not be disclosed in the proceeding:
(a)the unsigned letter of advice dated 19 October 2016 from Tony Sweetman to Scott Vernon;
(b)the letter of advice dated 1 November 2016 from Mr Sweetman to James Varney; and
(c)the email of 16 November 2021 from Mr Vernon to Mr Sweetman seeking legal advice.
[57] Consequentially, Mr Vernon seeks orders striking out any plaintiff evidence and pleadings referring to, relying on or reproducing the above privileged communications.
[58] I accept that Mr Vernon had a reasonable expectation that his emails would be treated as personal and not searched by Ms Taylor without permission, so that any legally privileged communications with legal advisers would remain confidential to him. It is no excuse that he might not have used lock-screen protection or other security measures specifically to prevent Ms Taylor’s targeted and unauthorised searches. Vulnerability to unauthorised search does not constitute waiver. This is particularly the case when they were actively engaged in negotiating a variation to a property agreement, and each receiving independent legal advice on those issues.
[59] I reject Ms Taylor’s arguments that s 67 of the Evidence Act applies to disallow privilege for these three documents on the grounds of instrumentation of a dishonest purpose. The documents were in the context of seeking and receiving legal advice about a proposed agreement under s 21 of the PRA and/or advice about structuring of affairs that could reasonably be expected to be kept confidential, rather than instrumentation of Mr Vernon’s dishonest purpose. In terms of the three documents:
(a)Letter from Tony Sweetman to Mr Vernon dated 19 October 2016: This letter contains a brief comparison of the property position of each trust
between that recorded in the 2011 COA and what is recorded in the financial statements for the year ended 31 March 2016. It also contains some advice on Mr Vernon’s position in the context of 2016 Agreement negotiations. Mr Sweetman observes that a large amount of remuneration for services allocated to Mr Vernon’s client’s shareholder loan account for 2015 and 2016 “may have unintended consequences for you as income for services [under the 2011 COA]”. Ms Taylor says the matter is not about “classification” of the fees, but about “the dishonesty of the advice to change and restructure to avoid Ms Taylor’s entitlement”. I do not read Mr Sweetman’s comment as having that dishonest purpose. The amount referred to seems much higher than normal for personal services — Mr Sweetman in effect questions whether there has been a classification or other type of error and, as Mr Vernon’s lawyer, is highlighting that it has material consequences for him personally. He is not advising to make any dishonest change. Any claim by Ms Taylor that Mr Vernon was entitled to payment for personal services should be based on primary evidence, not his privileged legal advice. I appreciate Ms Taylor’s complaint is that such material has not yet been disclosed adequately (e.g. ledger and journal entries relating to the current account, going beyond the financial statements), but that alone does not trigger s 67. In a proceeding like this, remaining concerns of non-disclosure are addressed by interrogatories, discovery orders and potential adverse inferences. As for the allegation that this document substantiates Mr Sweetman’s assistance to Mr Vernon in concealing relationship property rights and claims from Ms Taylor, again I do not read the letter in that way, particularly given the wider context of Ms Taylor not asking for disclosure at the time.
(b)Letter from Tony Sweetman to James Varney dated 1 November 2016: Mr Sweetman advised Mr Varney (a co-trustee of family trusts) how affairs may be best structured (in the context of the evolving law at that time) and suggested that a sum owing to Mr Vernon by Horizon Holdings Albany Ltd may need to be assigned to a new trust or a family trust. Ultimately, the advice was not followed, and the debt remained
within the Horizon Family trust group. I accept that a restructuring that is neutral from the group’s perspective (because it is internal within the group), may still have important financial significance to Ms Taylor personally. However, in terms of the s 67 dishonesty requirement, there is a distinction between advice on restructuring that takes into account relationship property issues, and sham contrivances designed to conceal the true position. I see no evidence in this letter of the latter intent. Nor do I see evidence that the underlying transactions have been concealed. Therefore, any claim by Ms Taylor in respect of these transactions can be advanced on that primary evidence (as opposed to this legal advice). The plaintiff refers in this context to C v C (Privilege), but in that case privilege was maintained after an assessment of whether there was sufficient evidence of a fraudulent design to sell the family home at undervalue and/or squirrel away and hide the proceeds (which there was not).36
(c)Email from Mr Vernon to Tony Sweetman dated 16 November 2021: This email from Mr Vernon to his solicitor updates him on the relationship and recent property acquisitions/expenditure for the purpose of seeking legal advice in relation to his will and potential separation with Ms Taylor. Ms Taylor relies on a particular passage in which Mr Vernon quotes her and then concludes “I guess she became aware of what my net worth was…”. Ms Taylor says this email has a dishonest purpose to advise/assist Mr Vernon to take steps to dispose of property that Ms Taylor was entitled to claim; and secondly, to advise/assist in concealment of the existence of relationship property assets. I see nothing in the document of that nature. Mr Vernon does not direct Mr Sweetman to conceal information from Ms Taylor, nor does he seek advice on whether he could do so.
[60] Overall, I accept the submissions for Mr Vernon that the solicitor-client communications are within the acceptable range of advice that spouses and de facto partners are entitled to seek and receive from their lawyers in the context of
36 C v C (Privilege) [2008] 1 FLR 115, [2006] EWHC 336 (Fam).
negotiating contracting out agreements — a review of their assets, how they might be structured, and possible claims against them.37 Disallowing privilege for advice of this kind would cut against the requirement to obtain independent legal advice as a pre-condition of entering into a valid agreement under ss 21 and 21A of the PRA.
[61] In maintaining privilege in these specified letters, I do not in any way seek to diminish the legitimate arguments Ms Taylor may seek to pursue about non-disclosure, discovery, and the proper classification of her entitlements based on the underlying factual evidence (as opposed to legal advice). It is simply that she cannot use another person’s legally privileged advice obtained in this unauthorised manner.
Legal principles — settlement negotiations
[62] Section 57 of the Evidence Act creates privilege for any communications between the parties to a dispute, for which relief may be given in a civil proceeding, which were intended to be confidential, and were made in a connection with an attempt to settle or mediate the dispute between the parties.
[63] A broad and unquibbling approach is adopted to assess whether the privilege applies:38
Under both the common law, and with reference to this section of the Evidence Act, New Zealand courts have made it clear that a broad and unquibbling approach is required that does not look to be overly analytical about each and every word or utterance made as part of a without prejudice communication. To do so, would, or course, undermine the benefit that the public policy behind the rule seeks to embrace.
[64] The purpose of the rule is to protect admissions against interest in settlement negotiations should the matter go to trial.39 The rationale is founded both on public policy (that parties should be encouraged to settle disputes out-of-court, secure in the knowledge that whatever is said for that purpose will remain confidential and will not
37 I distinguish this case on the facts from O’Brien v Parkinson, above n 31, in which the Court recognised it is legitimate to seek advice in relation to ownership options in the light of relationship property issues, but four documents were evidence of sham contrivances designed to conceal the true position.
38 Cross on Evidence, above n 28, at [EVA57.4] (footnotes omitted).
39 New Zealand Institute of Chartered Accountants v Clarke [2009] 3 NZLR 264 (HC) at [47], referencing Unilever plc v Procter & Gamble Co [2001] 1 All ER 783 (CA) at 792 per Robert Walker LJ.
be used against them in later proceedings), and on the principle that the law should
respect the parties’ agreement to communicate on a without prejudice basis.40
[65] The privilege will generally protect the entirety of the communication because statements in negotiation are not to be dissected to protect only admissions against interest. That would create “huge practical difficulties” and would offend the underlying objective of the rule.41
[66] The ultimate issue is one of intention.42 Whether the communications are protected is not necessarily dependant on use of the phrase “without prejudice”. However, where an initial letter forming part of a series of negotiations is marked “without prejudice”, it will usually be reasonable to infer an intention that privilege would attach to the series of communication that follows, unless clearly indicated otherwise in a bilateral sense (such as saying expressly that this letter is written on an “open basis”).43
[67] Section 57(3)(d) codifies the previous common law exceptions to settlement privilege into a general “interests of justice” exception.44 It provides that settlement privilege does not apply to:
… the use in a proceeding of a communication or document made or prepared in connection with any settlement negotiations or mediation if the court considers that, in the interests of justice, the need for the communication or document to be disclosed in the proceeding outweighs the need for the privilege, taking into account the particular nature and benefit of the settlement negotiations or mediation.
40 Law Commission Te Arotake Tuatoru i te Evidence Act 2006 | The Third Review of the Evidence Act 2006 (NZLC IP50, 2023) at [13.25], referencing Morgan v Whanganui College Board of Trustees [2014] NZCA 340, [2014] 3 NZLR 713 at [11]; and Sheppard Industries Ltd v Specialised Bicycle Components Inc [2011] NZCA 346, [2011] 3 NZLR 620 at [23]–[32].
41 New Zealand Institute of Chartered Accountants v Clarke, above n 39, at [50], referencing Unilever plc v Procter & Gamble Co, above n 39, at 796 per Robert Walker; and Cooper v van Heeren [2007] 3 NZLR 783 (CA) at [32], [39], [41] and [64].
42 Westgate Transport Ltd v Methanex New Zealand Ltd (2000) 14 PRNZ 81 (HC) at [20], [21] and [38]; and Minister of Education v Reidy McKenzie Ltd [2016] NZCA 326, (2016) 23 PRNZ 439 at [37].
43 Cheddar Valley Engineering Ltd v Chaddlewood Homes Ltd [1992] 4 All ER 942 at 947, referenced in Westgate Transport Ltd v Methanex New Zealand Ltd, above n 42, at [20(c)].
44 Te Arotake Tuatoru i te Evidence Act 2006 | The Third Review of the Evidence Act 2006, above n 40, at [13.24].
[68] Cases applying the previous common law exception (requiring “unambiguous impropriety”) remain relevant, to inform the court’s exercise of discretion under the statutory “interests of justice” exception.45
Application to facts — settlement negotiations
[69] Mr Vernon applies for orders excluding the use of any without prejudice communications between the parties and/or their legal representatives for the purposes of the mediation from October 2022. The mediation correspondence was exchanged at a time after the parties had separated, in advance of an intended mediation regarding division of property.
[70] Rennie Cox’s letter dated 17 October 2022 to Tony Sweetman contended that the 2011 COA and the 2016 Agreement might be invalid as unfair. It offered to engage a mediator and advised that further disclosure was sought, which would be subject to confidentiality undertakings. Those signed undertakings were provided with a letter dated 15 November 2022. Under those terms, the recipient agreed to preserve the confidentiality of the documents and information, and not to use or disclose any of the documents or any information obtained from the documents other than as provided for in the undertaking. One of the exceptions was “When attached to an affidavit and produced to a Court in proceedings between [Mr Vernon and Ms Taylor]”.
[71] Mr Sweetman’s letter dated 21 November 2022 in reply is expressly labelled “without prejudice”. I accept that the communications that follow up until 16 May 2023 are all for the purposes of that intended mediation, with the objective of reaching a settlement at mediation rather than having to litigate the dispute. Mr Sweetman’s letter of 16 May 2023, written on the day that the mediation was abandoned, reiterated that “all correspondence relating to the mediation is without prejudice and follows the chain of correspondence to that effect.”
45 At [13.29] and [13.30]–[13.34], referencing Nina Khouri “Mediation” [2021] NZ L Rev 169 at 195; Smith v Shaw [2020] NZHC 238, [2020] 3 NZLR 661 at [34] and [45]; Body Corporate 212050 v Covekinloch Auckland Ltd (in liq) [2017] NZHC 2642 at [94]; and TPT Forests Ltd v Penfold [2022] NZEmpC 236 at [31], but noting the potential for a broader approach suggested in Smith v Shaw [2020] NZHC 238, [2020] 3 NZLR 661 at [45]–[46]; Smith v Shaw [2020] NZHC 1229 at [17]; Gibbs v Windmeyer [2021] NZHC 2582; and Smith v Claims Resolution Service Ltd [2021] NZHC 3424 at [39].
[72] Rennie Cox say that no settlement offers were made within that correspondence (so no s 57 privilege applies), and they intended the communications to be open communications, to show Ms Taylor’s difficulties in obtaining full disclosure, which has still not been achieved.
[73] In any event, they say that the statutory exception in s 57(3)(d) of the Evidence Act applies. Ms Taylor relies on two grounds:
(a)The emails show Mr Vernon’s continuingly obstructive approach to disclosure and demonstrate ongoing concealment of relevant documents. This supports Ms Taylor’s claims to set aside the relationship property agreements. In this sense, the communications have real probative value.
(b)Providing for the communications to be disclosed does not harm the policy objectives of the privilege.
[74] It is unfortunate that the parties may have been at cross-purposes about whether the correspondence for the mediation was intended to be “without prejudice”. On balance, I accept that “without prejudice” privilege does apply to documents newly created for the purposes of the mediation. That is the default position under s 57(1) and (2), and such a “without prejudice” status is expressly noted in the 21 November 2022 letter, without any objection by Rennie Cox. The documents do not need to include offers or admissions against interest for the privilege in s 57 to apply.46 If Rennie Cox wished to conduct the exchanges about disclosure on an open basis, then this should have been made clear to Mr Sweetman so he could adapt accordingly (such as writing separate open and privileged letters).
[75] However, this does not confer any privilege on the pre-existing documents that were disclosed,47 or third party communications responding to document requests. Those underlying evidential documents may be referred to in the proceeding, consistent with the terms of the confidential undertakings.
46 See [63]–[66] above.
47 This material does not fall within the scope of s 57(2) of the Evidence Act.
[76] I do not accept that maintaining privilege for the settlement communications unfairly prejudices Ms Taylor’s interests in any way, nor do the circumstances qualify as an exception under s 57(3)(d):
(a)Non-disclosure at the time of the 2011 COA and 2016 Agreement is established by the facts applicable at that earlier time.
(b)Any remaining non-disclosure can be established directly and falls to be addressed by the Court’s usual procedures, including interrogatories and discovery.
(c)Ms Taylor has not substantiated any unambiguous impropriety in the mediation correspondence itself that would justify overriding settlement negotiation privilege under the statutory “interests of justice” exception. Mr Vernon denies any allegation of concealment, and the correspondence does not substantiate any such dishonest intent. For example, those exchanges include an email from an accounting firm advising that they have searched their electronic storage files and offsite paper storage files and have not retained the files referred to because of their age.
(d)Mere relevance does not suffice for s 57(3)(d) to apply, and overriding the settlement negotiation privilege would be harmful because it would undermine the public policy that parties should be encouraged to settle disputes out-of-court, secure in the knowledge that whatever is said for that purpose will remain confidential and will not be used against them in later proceedings.
[77] Accordingly, I accept that Mr Vernon retains s 57 privilege in the communications between the parties and/or their legal representatives from October 2022 to 16 May 2023.
Confidentiality
[78] Mr Vernon also seeks that the letter of 15 March 2011 to Premier Lifestyle Village Management Ltd be treated as confidential and not be available to any third parties seeking access to the documents filed in this proceeding.
[79] Access to documents on the Court file is governed by the Senior Courts (Access to Court Documents) Rules 2017. If any non-party seeks access to evidence on the Court file, r 11 will apply. That would trigger advance notice to the parties under r 11(3), and a Judge would determine the request taking into account the matters in r 12, including the protection of confidentiality and privacy interests. I consider that this adequately protects the position.
Relief for use of privileged documents
[80] Counsel for Mr Vernon suggested that potential relief for use of privileged documents in the proceeding might include enjoining Ms Taylor’s counsel from acting for her further. In Re Z48 the husband instructed Mrs F to act for him in divorce proceedings. After about a year, the husband changed solicitors. The husband and wife then reconciled. About eight years later, the husband and wife finally separated. The wife sought to instruct the firm where Mrs F worked as a partner. The husband obtained orders preventing the firm from acting for her, on the grounds of his previous solicitor-client relationship with Mrs F. Those facts are not analogous to the present circumstances.
[81] Counsel for Mr Vernon submits that, if successful in the application to exclude privileged material, they expect at the very least for Ms Taylor and her advisers to return all solicitor-client privileged material and destroy all copies. While that might be a reasonable expectation in principle, I am concerned that it is no longer practical given the inclusion of it in the documents for this hearing, including electronic bundles.
48 Re Z (Restraining Solicitors From Acting) [2010] 2 FLR 132, referenced in Imerman v Tchenguiz, above n 26, at [121]. See also The Maritime Apartments Ltd (In Liq) v Rachelle Linda Christian [2021] NZHC 1219 at [74]–[75].
[82] I consider that the appropriate relief is an order that privilege applies, and any reference to the privileged content is inadmissible. Accordingly, if relevant for the ongoing proceeding, any evidence and pleadings already filed by the plaintiff referring to, relying on or reproducing the privileged materials must be replaced with copies redacting out such references, or superseded by documents without that material. Otherwise, I am not satisfied that it is practical or that the cost is justified to retrospectively address all documents on the Court file that are historic only, although it would clearly be inappropriate for any of those documents to be searchable.
Result
[83]In respect of Ms Taylor’s application for an interim distribution, I order:
(a)Conditional on the provision of the undertaking on (c) below, Mr Vernon shall pay to Ms Taylor the sum of $2,000,000 as an interim distribution, that sum to be paid within four weeks;
(b)that sum is to be brought into account against Ms Taylor’s share of relationship property or any other sum that might be due to her from Mr Vernon on the ultimate resolution of these proceedings; and
(c)Ms Taylor is to file and serve a written undertaking that:
(i)she will comply with any order that the Court may make for repayment of the interim distribution, in whole or in part, if on the ultimate resolution of these proceedings a sum is due from Ms Taylor to Mr Vernon (including costs); and
(ii)without prior leave from the Court she will not transfer, encumber, or otherwise deal with her interest in the property at Harbour Terrace, Sanctuary Cove.
[84] In respect of Mr Vernon’s application for exclusion of privileged material, I order:
(a)The following privileged material is inadmissible and may not be referred to in the proceeding:
(i)The following communications to which legal professional privilege attaches under s 54 of the Evidence Act:
(1)the unsigned letter of advice dated 19 October 2016 from Mr Sweetman to Mr Vernon;
(2)the letter of advice dated 1 November 2016 from Mr Sweetman to James Varney; and
(3)the email of 16 November 2021 from Mr Vernon to Mr Sweetman seeking legal advice;
(ii)the communications between the parties and/or their legal representatives from October 2022 to 16 May 2023 that is subject to privilege under s 57 of the Evidence Act;
(b)Any evidence and pleadings already filed by the plaintiff referring to, relying on or reproducing the privileged materials referred to in (a) above:
(i)may not be accessed by any non-party (counsel are to identify those documents for the Registry); and
(ii)if required for the purposes of this ongoing proceeding, must be replaced with copies redacting out such references, or superseded by documents without that material;
(c)To the extent practicable, the plaintiff and her legal advisers are to destroy any copies they hold of the privileged materials referred to in (a)(i) above.
[85] The parties have achieved mixed results (each succeeding on their own applications), which might justify costs lying where they fall. If costs cannot be agreed, then memoranda should be filed and served within 15 working days, and any memoranda in reply filed and served within a further 10 working days.
[86] This judgment has been re-issued with the correction of a slip in para [44], and redactions in paras [13], [24] and [26](a) of the public version, after the parties made submissions about the protection of commercially sensitive information that was immaterial to the analysis and reasoning in my judgment. I make an order that publication of the unredacted version of this judgment (other than to counsel/the parties) is prohibited.
O’Gorman J
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