Winton v Winton

[2019] NZHC 1394

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2016-485-419

[2019] NZHC 1394

IN THE MATTER

of a claim for damages for breach of contract

BETWEEN

JAMES ANDREW WINTON, VICTORIA HOLLY LIBERTY WINTON AND JAMES HARRIS SAMUEL WINTON

Plaintiffs

AND

VIRGINIA RUTH WINTON as executor of the estate of RACHEL MAY WINTON Defendant

Hearing:

12 June 2019

Appearances:

J D Haig for Plaintiffs

C S Chapman for Defendant

Judgment:

18 June 2019

JUDGMENT OF COOKE J

(Particulars, discovery and interrogatories)

[1]    This is a further interlocutory argument arising in a long-standing dispute between family members. The dispute is now focused on the estate of Rachel Winton, and compliance with a settlement agreement dated 26 March 2012 entered before Mrs Winton’s death.

[2]Before me there are effectively two sets of interlocutory applications:

(a)An application by the defendant that the plaintiffs provide particulars of a key allegation made in the plaintiffs’ fifth amended statement of claim.

WINTON v WINTON [2019] NZHC 1394 [18 June 2019]

(b)Applications by the plaintiffs for discovery, and for answers for interrogatories, which the plaintiffs say need to be provided and answered before particulars can be given.

[3]    The applications first proceeded before Grice J on 21 February 2019, but after initial argument they were adjourned to allow counsel for the defendant to take time to assess a change to the pleadings now formulated in the fifth amended statement of claim.1

Background

[4]    Mrs Winton died on 17 August 2016 aged 93. The first plaintiff is her son, and the defendant is her daughter. The other plaintiffs are the first plaintiff’s children. The defendant is the executor of Mrs Winton’s estate. The defendant lives in Australia, as did Mrs Winton before her death.

[5]    The original disputes emerged in association with family trusts that had been earlier established. It would appear that when first established they were to benefit the first plaintiff and the defendant. But steps were taken that appeared to substantially remove the first plaintiff’s entitlements. Three new trusts had been established named the Riviera Trust, the Petone Trust and the Terrace Trust in that connection.

[6]    The parties then attended a mediation, and a proposed settlement emerged. Unfortunately, there was then disagreement as to whether the matter had been settled at that mediation. The defendant then took proceedings attempting to enforce the settlement (CIV-2011-485-854). During the hearing of those proceedings before Gendall J the parties were encouraged by the Court to resolve their dispute. The agreement that had emerged from the mediation was then further amended and then entered by the parties (the Settlement Agreement).

[7]    The terms of the Settlement Agreement effectively identify an interest that the first plaintiff would have in Mrs Winton’s estate, and included clauses directed to that end. For example, one of the important clauses provided as follows:

1      Winton v Winton [2019] NZHC 403.

7.5     Rachel agrees she will not gift to any family member either of the following significant assets or share therein, other than in her will. Those significant assets consist of:

(i)      house in Lane Cove, Sydney;

(ii)     the one-third interest in Terrace/Petone Trusts;

(iii)    any debt owing to her from Riviera Trust.

This clause shall not prevent sale and transposition of any of those assets. Nothing in this clause shall prevent Rachel spending her own money.

[8]    These further proceedings were commenced by the plaintiffs on 9 June 2016. The plaintiffs allege that the terms of the Settlement Agreement have not been honoured. One of the key allegations is that Mrs Winton entered into interest free loans with family members on the defendant’s side which the plaintiffs say are a breach of the Settlement Agreement. There is then a further allegation, which is now put in the following terms in the fifth amended statement of claim:

79.     After the date of the agreement Mrs Winton disposed of the proceeds of the nominated assets in the approximate sum of $576,404.08 to other family members, namely Virginia Winton, Alex Surace or Joseph Surace.

Particulars

(a)To be provided prior to trial.

…

81. Mrs Winton breached her contractual obligations by:

…

(f) By disposing of the proceeds of the nominated assets (excluding her interest in the RT and TT) to other family members, reducing the net value of the defendant’s estate in the approximate sum of NZD$576,404.08 in breach of clauses 7.1, 7.2 and 7.5 of the agreement.

Particulars

Paragraph 47(a), 77 – 79 above are expressly repeated.

…

[9]    It is these allegations that has resulted in the defendant’s application that the plaintiffs provide particulars. In response the plaintiffs say they cannot provide particulars until further discovery, and the answers to interrogatories, are provided.

[10]   Multiple written submissions have been filed by each party for the purpose of the argument before me on each of the topics of particulars, discovery, and interrogatories. They include amended versions of those submissions following the adjournment of the hearing before Grice J, and one written submission in reply.

[11]   Whilst a number of issues are raised in the written submissions, it seems to me that the applications turn on two key points which were the primary focus of the oral argument.

Requirements for varying discovery orders

[12]   A discovery order was earlier made in this proceeding. By a consent memorandum dated 8 November 2017 the parties agreed the defendant would give tailored discovery, and such an order was duly made. Through its application the plaintiffs now seek broader categories of discovery.

[13]This situation is regulated by the High Court Rules 2016 which provide:

8.17     Variation of discovery order

(1)Subject to rule 7.18, a party may apply for an order varying the terms of a discovery order.

(2)The variation may be granted by a Judge on the ground that—

(a)compliance or attempted compliance with the terms of the order has revealed a need for a variation; or

(b)there has been a change of circumstances that justifies reconsideration.

…

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.

[14]   In Lyttleton Port Co Ltd v Aon New Zealand the Court considered that a four stage test was appropriate under both rules, albeit the Court suggested that it may not be helpful to focus on jurisdictional issues.2 I take a similar approach in the present case, although it is not necessary to address each of the four steps here given what is in dispute.

[15]   Mr Chapman first argues for the defendant that there has been no relevant change in circumstances, and that the plaintiffs should not be permitted to obtain further discovery orders. Mr Haig argues that there has been a significant change in circumstances, in particular the defendant’s request that the plaintiffs provide particulars of its allegations identified above, resulting in the need for discovery in order to respond to that request.

[16]   There is an unfortunate disagreement between counsel relating to the allegations in the fifth amended statement of claim referred to above. Mr Haig for the plaintiff contends that these allegations were always part of the plaintiffs’ claims.  Mr Chapman does not accept that given the way that the paragraph in the former pleadings was formulated, and particularly because of the way the particulars were identified.  It  seems  clear  there  has  been  a  misunderstanding.   I  accept  that   Mr Chapman did not understand the allegation to extend beyond the provision of interest free loans, and I equally accept that Mr Haig had intended the pleading to go beyond that.

[17]   It seems appropriate to focus on whether it is reasonable to require the further discovery in those circumstances. If I apply the requirements of r 8.17 and 8.19 it

2      Lyttleton Port Co Ltd v Aon New Zealand [2016] NZHC 2996 at [6]–[7].

seems to me that there has been a change in circumstances. The misunderstandings influenced the earlier order by way of consent. It is now clear that the plaintiffs’ allegations extend beyond the interest free loans, and include an allegation that proceeds have been disposed of to family members reducing the value of Mrs Winton’s estate by $576,404.08. The clarification of that allegation has led to the request for particulars, and the corresponding application for further discovery and interrogatories.

[18]   Accordingly, provided the Court concludes that the other requirements under r 8.17 and 8.19 are met, I am satisfied that orders should be made.

Which step should be ordered first?

[19]   That brings me to what seems to me to be the key issue. The defendant says that it is necessary for there to be a properly particularised allegation before discovery and interrogatories can be ordered, and that discovery and answers to interrogatories cannot be used to fish for information to support allegations that the plaintiffs have no proper grounds to make. This is said to be an abuse of process. The plaintiffs say that the allegations are already properly made in their claim, and that they cannot be compelled to give particulars which reside exclusively within the defendant’s knowledge, and that discovery and interrogatories are necessarily dealt with first before they can be obliged to particularise their claim.

[20]   The ultimate question is which step must proceed the other in terms of the normal rules of engagement. This is not an unfamiliar issue, and each side is able to rely on authority to support its position. For the defendant Mr Chapman relied on the following observations of Neazor J in Public Trustee v Mahar:3

… it is no objection to a request for particulars of a pleading that knowledge of the matter is in the hands of the opposing party; nor that the defendants are trying to bind the plaintiff to a definite story. The purpose of the statement of claim is to give notice of what the plaintiff alleges so that the defendant knows what has to be met, is not taken by surprise at trial, and can prepare evidence within the framework of the issues raised and defined by the statement of claim: the Supreme Court Practice 1988 para 18112/44.

3      Public Trustee v Mahar HC Wellington CP818/88, 7 February 1990 at 4.

[21]Likewise in Hodgson v Inverell Properties Ltd, Associate Judge Gendall said:4

Mrs Hodgson, must have some idea why she claims that Inverell failed to keep proper accounts and did not comply with audit requirements. If she does not, and intends to use discovery as a tool to verify a base-less and vague suspicion, then her request must be treated as a pure “fishing expedition.”

[22]On the other hand Mr Haig relied on authorities taking an opposite view. In

Kawarau Village Holdings Ltd v Yuen Associate Judge Bell held:5

[13]   There is a line of cases that recognises that parties may not be required to give particulars before discovery where the party seeking particulars is the only one with the information on which the other party could rely. In Sachs v Speilman, North J said:

... it is suggested by the notice of motion that the Defendants are embarrassed by the form in which this pleading is framed. But how can it be said that the Defendants are embarrassed by not knowing these details? The Plaintiff has told them in his statement of claim that he has not the means of giving these details. They, on the other hand, are the persons who carried through the transactions, and have in their possession the books containing the full accounts; therefore they have full knowledge and means of knowledge, and can shew precisely what the cases are, if any, in which they did do what the statement of claim alleges they did. I do not see how they can possibly be embarrassed by not obtaining from the Plaintiff the information they have in their own possession. Of course I can see well enough why they press for these particulars. If the Plaintiff were obliged to condescend upon particulars, and to specify the instances in which the Defendants have done what he charges them with, the result might be that from his imperfect knowledge he would not be able to point out in the particulars some cases in which they had actually done what he says they have done; and inasmuch as, after particulars were given, their defence would be addressed only to those points, the ignorance of the Plaintiff might relieve the Defendants from being held responsible as to certain matters with respect to which they are open to the charge contained in the statement of claim.

[14]   Edwards J followed that reasoning in Hickson v Scales. In Truck Master Ltd v Mastagard Waste Ltd, Associate Judge Osborne said:

In some circumstances, particulars can neither be reasonably expected nor appropriately sought by order from a plaintiff. The cases recognise that the usual expectation as to detailed particulars of a claim will give way in cases where the party which would be entitled to particulars has knowledge concerning those particulars which the other party does not have. This is an approach to the requirements of pleading recognised in both England and in New Zealand. The Courts recognise as adequate a pleading which pleads all material particulars other than those which

4      Hodgson v Inverell Properties HC Wellington CIV 2010-485-2343, 29 September 2010 at [84].

5      Kawarau Village Holdings Ltd v Yuen [2015] NZHC 1379 (citations omitted).

can be derived only from information within the particular knowledge or control of the defendant.

[23]Similarly the commentary of McGechan on Procedure states:6

The starting point in a consideration of appropriate tailored discovery orders will be an analysis of the issues as pleaded; “fishing” will not be condoned: Commerce Commission v Cathay Pacific Airways Ltd [2012] NZHC 726 at

[13] and Nathans Finance New Zealand Ltd (in rec) v AIG Insurance New Zealand Ltd [2013] NZHC 3137 at [34]. That said, fishing is permissible if the categories of documents sought can be assumed to relate to a matter at issue; it becomes impermissible when what is sought is not relevant to any pleaded cause of action, but might reveal material that could be the basis of a new head of claim: Intercity Group (NZ) Ltd v Nakedbus NZ Ltd [2013] NZHC 1054 at [34] citing AMP Society v Architectural Windows Ltd [1986] 2 NZLR 190 (HC) at 196. Concepts of pursuing what is relevant and of avoiding “fishing” are inter-related; analysis of both is driven by the identity of the parties and the pleadings: Lyttelton Port Company Ltd v Aon New Zealand [2016] NZHC 2996 at [ 44].

[24]   Mr Chapman responds to this passage by relying on AMP Society v Architectural Windows Ltd cited therein, as Chilwell J held:7

An applicant is fishing when he seeks to obtain information or documents by interrogatories or discovery in order to discover a cause of action different from that pleaded or in order to discover circumstances which may or may not support a baseless or speculative cause of action.

[25]   Similar principles arise in relation to the request that the defendant answers interrogatories. In terms of the request for answers to interrogatories, this is governed by r 8.42, which provides:

8.42Insufficient answer

If a party fails to answer an interrogatory sufficiently, a Judge may, in addition to acting under rule 7.48,—

(a)      if the party has made an insufficient answer, order the party to make a further answer verified by affidavit in accordance with rule 8.38; or

(b)      order the party, or any of the persons mentioned in rule 8.41(1)(b) to (d), as the case requires, to attend to be orally examined.

6      McGechan on Procedure at [HR8.10.01].

7      AMP Society v Architectural Windows Ltd [1986] 2 NZLR 190 at 196 (emphasis added).

[26]   Rule 8.40 sets out the basis for objecting to providing answers. As with discovery, one legitimate ground of objection is that the requests amount to “fishing”.8

[27]   It seems to me that the decision on the appropriate approach as a matter of principle determines what orders should now be made. If I accept the plaintiffs’ position, the requested discovery and interrogatories should be ordered, following which the particulars can then be required. If I follow the defendant’s approach, the plaintiffs must be required to have a particularised basis for their claim, and if they are not able to provide them interrogatories and discovery should not be ordered.

Basis for the allegations

[28]   Mr Haig argued that the allegations of disposal of assets/proceeds were squarely raised in the plaintiffs’ claim and there had been no application to strike out the allegations, and accordingly the plaintiffs are entitled to take it to trial and obtain disclosure relating to them. However, I accept Mr Chapman’s submission that the Court’s inquiry is not limited to whether the discovery and interrogatories relate to a matter that is already pleaded in a statement of claim. That is clearly relevant, but the situation calls for a broader assessment, including whether there is a proper basis for the party to advance the allegations in question. That seems to me to be part of the exercise to ascertain whether the discovery/interrogatories involve “fishing”, and whether disclosure is fairly required.

[29]   I also accept Mr Chapman’s submission that the fact that the defendant has not applied to strike out the paragraph is not decisive. Parties to litigation have various reasons for the steps that they take. A defendant may prefer to avoid the complexity and cost of pursuing a strike out application. That does not prevent the party arguing that particular allegations are without a proper foundation, and that discovery/interrogatories should not be ordered.

[30]   So it seems to me that there needs to be some inquiry as to whether there is a proper foundation for the plaintiffs’ claims in order to decide whether their requests

8      Re Securitibank Ltd (No 31) (1984) 1 PRNZ 514 at 519–520 (HC).

for discovery and answers to interrogatories involve an unfair requirement for the defendant to disclose materials given that the allegations have no real substance.

[31]   There are essentially four justifications for the allegations in the paragraphs of the fifth amended statement of claim at issue. These were identified during Mr Haig’s submissions. They are:

(a)That there was an established pattern of the defendant depriving the plaintiffs of fair entitlements and accordingly reasonable cause to suspect that such behaviour is occurring again.

(b)It was admitted that there had been interest free loans granted to the defendant’s family, and accordingly a proper basis for alleging that the plaintiffs have been deprived of a fair share of Mrs Winton’s estate in breach of the Settlement Agreement.

(c)That other breaches of the Settlement Agreement have occurred, in particular a failure to make Mrs Winton’s estate a beneficiary of the Riviera Trust.

(d)Calculations which are particularised in the fifth amended statement of claim identify an unexplained hole in the value of Mrs Winton’s estate in the amount of $576,404.08, and accordingly a basis to conclude that there have been dispositions to the plaintiffs’ disadvantage.

[32]   The first three factors  may  not  have  much  significance  in  themselves.  Mr Chapman argued, and I did not understand Mr Haig to disagree, that the interest free loans were known about, and accordingly do not evidence the allegation of hidden dispositions. The failure to make the estate a beneficiary of the Riviera Trust was apparently an oversight — Mrs Winton herself was made a beneficiary, and an offer was made to remedy this by also making the estate a beneficiary. In any event, it is not suggested that anything actually happened as a consequence of this. The factor referred to in [31(a)] in relation to the original dispute by itself does not provide a basis

for such further steps actually being taken, although it may explain why the plaintiffs are suspicious.

[33]   It seems to me that the key factor which would clearly demonstrate the basis of the claim is the apparent hole in the value of Mrs Winton’s estate.

[34]   Mr Chapman produced a schedule in his reply submission that went through the various key assets of Mrs Winton’s estate. Using the plaintiffs’ pleadings about the value of the assets in the fifth amended statement of claim he contended that the full amount of the value of the estate was properly accounted for, and there was no hole. One of the important considerations was that the relevant monies needed to be converted into Australian dollars, which is where the defendant and Mrs Winton resided. The relevant assets were:

(a)The loan to Alex Surace, representing approximately AUD$632,000.

(b)The NZ$1,070,000 loan to the defendant (representing AUD$832,793).

(c)The net proceeds of the sale from Lane Cove representing AUD$1,275,000.

(d)The total of the above assets (AUD$2,739,793) is close to the AUD$2,769,445.92, the proper value of the estate as alleged by the plaintiffs.

[35]On the face of it, Mr Chapman demonstrates that there is no hole.

[36]   Mr Haig’s response was to suggest that Mr Chapman’s exercise utilised what he described as an arbitrary exchange rate.  Or at least that was his answer before  Mr Chapman’s more detailed breakdown in his reply submission setting out a calculation to demonstrate that there was no hole.

[37]   For the moment it seems to me that Mr Chapman’s point is a powerful one which has not been answered by Mr Haig. The basis for the plaintiffs’ allegations

appear, at least, thin. Nevertheless I have decided there is a sufficient basis for the plaintiffs to be able continue with the allegations. In particular:

(a)Mr Chapman’s analysis was based upon what is pleaded by the plaintiffs, rather than actual evidence. The true position may turn out to be more complicated that his analysis suggests, including because of the actual exchange rates used. So I hesitate before making a categorical decision on the basis of this analysis alone.

(b)Whilst there will be work required for the defendant to respond to the discovery orders, and to answer the interrogatories, where there is a history of distrust it is better for the actual information to be provided. The dispute between the family must be brought to a close at some point, and if it is to be determined by the Court, it is best determined by consideration of the allegations on their merits with the relevant evidence available.

(c)If the discovery and answers to interrogatories confirm the analysis put forward by Mr Chapman, the plaintiffs would be at significant risk if the allegations are continued with, including in relation to costs. The pursuit of allegations that prove not to have substance could lead to an increase in a costs award.

(d)I see some support, although not substantial support, from the other three factors referred to by Mr Haig. That includes the fact that loans were provided interest free, which would have financially advantaged the borrowers.

(e)I also take into account that the first  plaintiff  is  a  beneficiary  of Mrs Winton’s estate. I accept Mr Haig’s point that this is relevant to the allegation that he is fishing, even though there is no allegation that the executor has failed in her duties in relation to the estate itself. It is information by which it could be said he has some legitimate interest.

Conclusion

[38]   For the above reasons I have determined that I should make the orders for discovery, and direct the answer for interrogatories, and that these two steps should precede an obligation for the plaintiffs to provide better particulars of their claim.

[39]Accordingly I make orders that there be particular discovery of:

(a)Bank statements for all bank accounts held by, for or on behalf of (whether personally or as beneficiary or beneficial owner):

(i)Rachel Winton; and

(ii)the Riviera Trust;

between 26 March 2012 and 31 August 2016.

(b)Any cash book(s), cheque stubs, notes, diary entries or other documents that refer to or record financial transactions between Rachel Winton, Virginia Winton, Ben Surace, Alexandre Surace or Joseph Surace between 26 March 2012 and 17 August 2016.

(c)All documents and records that relate to the Riviera Trust’s asset of

$530,000 including its original composition and any proceeds derived from that asset (as referred to at clause 5 of the Settlement Agreement between the parties dated 26 March 2012).

[40]   I further order the defendant to provide answers to question (a) – (v) in the plaintiffs’ notice to answer interrogatories dated 13 July 2018.

[41]   The further discovery and answers to the discovery referred to in [39] and [40] are to be provided within 20 working days of the release of this judgment.

[42]   Following receipt of the discovery and answers to interrogatories the plaintiffs are to advise whether they are continuing with their allegations in paragraphs [79] and

[81(f)] of the fifth amended statement of claim. If they are the plaintiff is to provide the following particulars of paragraph [79] and [81(f)] of the fifth amended statement of claim as set out in the notice requiring particulars dated 25 February 2019:

(a)of “Mrs Winton disposed of the proceeds of the nominated assets in the approximate sum of $576,404.08 to other family members” (paragraph

79) specify:

(i)the amount of each disposition of proceeds;

(ii)the name of the family member to whom each disposition was made;

(iii)the date of each disposition; and

(iv)precisely the action of Mrs Winton that disposed of each amount particularised.

(b)of “reducing the net value of the defendant’s (sic) estate” (paragraph 81(f)) specify how each disposal reduced the net value of the estate and by how much.

[43]   Such particulars are to be provided within 20 working days of provision of the discovery and answers to interrogatories.

[44]   There is then to be a case management conference to set the matter down for trial. The parties are to contact the Registry to seek such a conference when they are ready to do so. In my view the parties ought to avoid further interlocutory argument. I record that Mr Haig said that he thought that would be a three day trial, and        Mr Chapman thought it would be a five day trial.

[45]   In relation to costs, normally the plaintiffs would be entitled to them as they have succeeded on the argument before me. My preliminary view is that the circumstances I should not make a costs award in the plaintiffs’ favour on this application at this stage. I propose to reserve the question of costs so that they are to

be treated as costs in the cause. If the plaintiffs demonstrate that the disputed allegation has substance, they should be entitled to costs. But if it transpires that the allegation has no basis, then it seems to me that the cost of the present argument should be borne by the plaintiffs. If the plaintiffs nevertheless seek a costs award they should file a memorandum within five working days (10 page maximum) with any reply five working days after (10 page maximum).

Cooke J

Solicitors:

Nowland Gordon & Associates, Wellington for Plaintiffs Brandons, Wellington for Defendant