Cooke v Butler [2022] NZHC 2687 (18 October 2022)

Last Updated: 6 April 2023

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2021-409-152 [2022] NZHC 2687

UNDER	Part 18 of the High Court Rules 2016
IN THE MATTER	of an application for determination of a beneficiary’s claim under a constructive trust
BETWEEN	JANET MARIE COOKE, SHARON MARIE COOKE and STANLEY CHARLES BARKER as trustees of The Cooke Family Trust Plaintiffs
AND AND	PENNY LEE-ANN BUTLER First Defendant CHARLES ANDREW AXELSEN BUTLER Second Defendant continued....

Hearing:	22 September 2022
Appearances:	R A Hearn and M R Gibson for Plaintiffs S M Grieve and C Mo for Defendants
Judgment:	18 October 2022

JUDGMENT OF ASSOCIATE JUDGE LESTER

COOKE v BUTLER [2022] NZHC 2687 [18 October 2022]

BETWEEN JANET MARIE COOKE, SHARON MARIE COOKE and STANLEY CHARLES

BARKER, as trustees of The Cooke Family Trust

Plaintiffs

PENNY LEE-ANN BUTLER

First Defendant

CHARLES ANDREW EXELSEN BUTLER

Second Defendant

[1] Janet and her daughter Penny have fallen out over the nature of the assistance provided to Penny by a trust of which Janet is a trustee, the Cooke Family Trust (the Trust).

[2] In substance, this family dispute involves two broad issues. The first is whether

$100,000 provided to Penny by the Trust was a loan or not. The second issue concerns the terms of an oral agreement between the Trust and Penny and her husband, Charles, which led to them building a home on unsubdivided land owned by the Trust. The Trust accepts Penny and Charles have an interest in the land where the house is built albeit the nature of that accepted interest is not altogether clear. The disagreement is over the nature of the interest, its area and when further funds advanced by the Trust to assist with the build are repayable.

[3] The dispute concerning the $100,000 was subject to an unsuccessful summary judgment application by the Trustees.¹ Summary judgment was sought because Penny had signed a deed of acknowledgement of debt. The application was declined as there was some support in the evidence for Penny’s claim Janet told her the “loan” would only be repayable if Penny separated from her husband, Charles.

¹ Cooke v Butler [2021] NZHC 2014.

[4] As to the second issue, as I have said, the Trustees accept Penny and Charles built the house with their agreement but little else about the arrangement is agreed.

[5] Both sides seek further and better discovery. Proceeding CIV-2021-409-152 concerns the land dispute, CIV-2021-409-124 is the Trustees’ debt claim.

What must be shown to obtain further discovery

[6] The principles are not in dispute. Both counsel referred to the four stage approach from Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd.² Those requirements are:

(i) Are the documents relevant?

(ii) Are there grounds for belief that the documents exist?

(iii) Is discovery of the documents proportionate considering the time and cost of discovery against the value of the documents?

(iv) Weighing and balancing those factors, is an order appropriate?

[7] A further application is made by Penny, that is, for access to documents for which privilege has been claimed by the Trust. Access is sought on the basis of the joint interest exception to the privilege claimed by Trustees. I will deal with that issue separately.

The dispute concerning the $100,000 in more detail

[8] The following is taken from the unsuccessful application for summary judgment:³

[3] In late 2008/early 2009, Penny had separated from her then partner and needed to find a home for herself and her children. Penny says she identified 91A Memorial Avenue, Christchurch (Memorial Ave) as a suitable property and produces an Agreement for Sale and Purchase of the property dated 7 January 2009 from the vendors to her. The purchase was completed

² Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd [2015] NZHC 2760.

³ Cooke v Butler, above n 1.

by the Trust, with the then trustees taking title and their solicitor acting on the purchase. The purchase price was $306,000. A deposit of $30,000 was paid, it seems by Penny. According to the solicitor’s statement, the balance was funded by a sum of $100,000 advanced to the Trust by Janet, a further sum of

$20,000 from Penny, and bank finance. The $100,000 advance came from what had been a joint account of Clive and Janet’s. Penny took possession and lived in the home as if it were her own, making the mortgage payments and other outgoings for some years. Penny was single at the time of the purchase but subsequently married the second defendant, Charles. The couple lived at Memorial Ave until they moved out at the end of 2011, after which they let Memorial Ave.

[4] In 2015, the Trust sold Memorial Avenue to Penny and Charles at the then government valuation of $440,000. Penny received a credit for the principal she had paid off the mortgage, which was treated as a debt owed by the Trust to her. It seems Penny thought the credit available to her was in the region of $88,000 and she and Charles arranged bank finance based on that assumption. It turned out the credit for the reduction in principal was about $35,000 less than the expected sum. The purchase price was met as follows:

Principal: $440,000.00

Less: $52,576.47 (principal reduced by Penny)

Less: $352,000.00 (bank finance)

Shortall: $35,423.53

[5] The shortfall was cleared by the Trust making a capital distribution to Penny.

[6] Penny and Charles settled their purchase of Memorial Ave on 12 June 2015. Following settlement, the Trust – upon clearing the remaining bank debt – had a surplus of $132,619.47. That sum was paid direct from the Trust’s solicitors to Penny’s nominated bank account on 12 June 2015. The documentation records $100,000 (the sum subject to this application) as an advance and the balance of $32,619.47 as a further capital distribution.

[9] I said later in the judgment:⁴

... Penny’s position is that the $100,000 that originally went into 91A Memorial Avenue was money that her parents intended her to have and the manner in which it has been documented did not reflect [her parent’s] true intention that the money was Penny’s.

[10] Penny’s position is that the loans were loans in form only “in order to safeguard the funds in the event of a relationship property claim” against her. When the Memorial Avenue property was purchased Penny had only recently separated from her former partner.

⁴ Cooke v Butler, above n 1, at [27].

[11] Ms Grieve, counsel for Penny and Charles in the summary judgment hearing, explained her clients did not assert the $100,000 was gifted to Penny in 2009. Ms Grieve submitted that the common understanding as at 2009 between Janet and Penny was that the $100,000 was to be Penny’s. Ms Grieve submitted this common understanding was important context for the deed of acknowledgement of debt signed in 2015.

Application for discovery not disclosure

[12] Before turning to the categories of documents sought by Penny, Ms Grieve sought to counter the submission of Mr Hearn, counsel for the Trustees, that many of the documents sought by Penny were not relevant, by referring to the presumption of disclosure in s 52 of the Trusts Act 2019 and Erceg v Erceg.⁵

[13] Ms Grieve submitted that Penny, as a close beneficiary, is entitled to the information sought, even if not relevant for the purposes of discovery, in order to satisfy herself as to the proper administration of the Trust. She submitted information requested by Penny to enable her to do this has not been provided.

[14] Ms Grieve submitted the issues in this case are what was agreed between Janet and Penny in respect of the payments made to Penny, the terms of repayment of the money advanced for the building of the house, and the amount of Trust land to be gifted to Penny (on Penny’s case).

[15] This proceeding is not a challenge to the Trustees’ decision to not provide disclosure – indeed such a decision has not been taken. Mr Hearn accepted the failure by the Trustees to respond to the disclosure request was an oversight. An application for discovery is primarily governed by relevance. Ms Grieve has identified the issues here relate to the agreements between Janet and Penny. Unless the documents sought are relevant to those agreements, such cannot be obtained through a discovery application, regardless of what Penny might be entitled to by way of disclosure.

⁵ Erceg v Erceg [2017] NZSC 28, [2017] 1 NZLR 320.

[16] Ms Grieve relied on McCallum v McCallum in support of the proposition that disclosure principles were also relevant in a discovery application.⁶

[17] In McCallum, Associate Judge Bell, in dealing with one of the categories of documents sought by the beneficiary of a trust, determined the documents were relevant but held whether they should be discovered turned more on proportionality and privilege. It was in considering proportionality and privilege that the Judge went on to have some regard to the principles applicable to where trustees will be required to provide Trust documents to beneficiaries by way of disclosure. Accordingly, McCallum is not authority for the proposition that in a discovery application a trustee’s disclosure obligations trump the need for a beneficiary to show relevance in an application for further and better discovery.

[18] However, I make the following observation. That the Trustees are in litigation with Penny does not relieve them of their obligations to provide her with the disclosure to which she is entitled. There is a presumption that certain information will be provided when requested. Given that information has not been discovered by the Trustees, their own view is those documents are not relevant to this proceeding. It therefore is hard to see how the fact of this proceeding can have any bearing on Penny’s presumed entitlement to disclosure. The Trustees need to approach the disclosure request dispassionately and promptly given their delay in doing so to date.

[19] I will not be approaching this discovery application based on a beneficiary’s entitlement to disclosure.

Categories of documents sought by Penny

Are documents relating to Trust transactions with Penny’s brother, Andrew, relevant?

[20] Andrew, who is Penny’s brother, received $100,000 from the Trust in 2007. That payment was not recorded as a loan in the Trust’s accounts until 2017. Ms Grieve categorised this as a reclassification.

⁶ McCallum v McCallum [2019] NZHC 1925, (2019) 5 NZTR 29-018 at [42]- [43].

[21] The relevance teased out in discussion with counsel appeared to be as follows. The $100,000 payment to Andrew was, in broad terms, around the same time as the

$100,000 provided to Penny in 2009. The two payments could be seen as Janet treating her two children equally. On that assumption, the fact the payment to Andrew was not recorded as a loan could cast light on the substance of the $100,000 paid to Penny in 2009. In addition, in the accounts for 2020 and 2021, the amount owed by Andrew fluctuates. An explanation as to those changes has been provided in the form of a file note from the accountant. At least one aspect of that explanation appears unusual, that is, debts between Janet and Andrew in their personal capacity, and between Andrew and the Trust, were set-off.

[22] Documents concerning the $100,000 payment to Andrew are on the border line of relevance. However, given the family context, this is a situation where there are very few contemporary documents meaning, whatever records are available are of more value.

[23] There is merit in Mr Hearn’s submission that, if the transaction with Andrew was “reclassified” in 2017, that was well before the breakdown in the relationship with Janet and Penny in 2019 meaning that change could not have been prompted by or have anything to do with the breakdown in the relationship between Janet and Penny. However, that is not an answer to the potential line of relevance stemming from what would be a natural and understandable position of Janet providing $100,000 to each of her children within a relatively short space of time on similar terms. While there is no presumption of equal treatment, if the payment to Andrew was originally a gift that would raise the question of why a payment to Penny was not, in substance, also intended to be a gift.

[24] Accordingly, I conclude that all documents relating to the provision of the

$100,000 to Andrew in 2007 (along with all documents relating to its accounting treatment and all communications in that regard), and all documents and communications concerning variations to that amount, are relevant and are to be discovered.

[25] However, to the extent that discovery is sought in relation to other amounts provided to Andrew, such documents are not relevant. For example, there is reference to an advance made to Andrew to purchase a car – that can have nothing to do with the terms of the $100,000 transaction with Penny.

[26] In Janet’s affidavit, she says she had the Trust accountants provide a summary of the transactions with Andrew – that is not a substitute for discovery. That summary will reflect the accountants’ interpretation of events. Penny and her legal advisers are entitled to see the source documents.

[27] I have dealt with this question first as it influences the broad categories of further discovery sought by Penny.

[28] Following discussions with Ms Grieve and the provision of evidence from Janet, categories (i) and (ii) from Schedule One of Penny’s application are no longer in issue.

[29] Category (iii) is “Any other Trustee Resolutions, meeting minutes or other records of decisions made by the Trustees”. This category is discoverable only to the extent it relates to the $100,000 advance to Andrew addressed above. Of course, any such documents that concern the $100,000 provided to Penny, the arrangements in respect of the building of the house, and the advance for that purpose, I expect will have already been discovered. Such are plainly relevant.

[30] I need not deal in detail with category (iv), save to the extent it seeks to include documents relating to Penny’s new husband, Mr Butler. The category sought is “All documents relating to loans between the Trust and Penny/Charles Butler and between the Trust and Andrew ...”. These documents are discoverable in relation to Andrew only to the extent they concern the $100,000 received by him. For the avoidance of doubt in relation to that advance, the disclosure should include any documents recording demand, repayment or set-off and any correspondence between the Trustees and their accountants about that amount.

[31] Category (v) concerns “All records relating to drawings or distributions made to beneficiaries, including correspondence between the Trustees and their accountants”. Documents that relate to what have been called “drawings” by Penny in the accounts are relevant because they relate to amounts that are subject to this proceeding. In relation to Andrew, as I have said, only documents concerning the original $100,000 advance need to be discovered. This category is to be discovered only to the above extent.

[32] Categories (vi), (vii), (viii) and (ix) are not relevant; they being sought by way of beneficiary disclosure. The applications relating to those categories are dismissed.

[33] In relation to category (x), this is a catchall category concerning the other Trustees, Mr Barker and Ms Sharon Cooke. Documents held by Mr Barker and Ms Cooke that are relevant to the issues concerning Penny and Charles already identified, and to Andrew’s $100,000 advance, are to be discovered.

[34] As drawn, category (x) sought all correspondence, whether relevant or not, and was a continuation of the beneficiary disclosure request. However, I expect relevant documents held by all Trustees have already been disclosed. If not, Mr Barker and Ms Cooke should check their records for the further categories of documents covered by this judgment and the accepted areas of relevance.

Plaintiffs’ application for discovery

Categories of documents sought by the trustees

[35] The following documents are sought:

(i) Bank statements showing payments made towards the construction of the defendants’ home on the Trust property.

(ii) Bank statements showing receipt by Penny of the $100,000 loan from the Trust in 2015, and how it was applied.

(iii) Documents relating to the sale of Charles’ property.

(iv) Copy of the build contract(s) between Penny and Charles and entities that undertook construction work on their home, including but not limited to Orange Homes.

[36] Of the above categories, category (iii) was provided following the filing of this application, as was the Orange Homes build contract under category (iv). The remaining relevant categories are therefore (i) and (ii).

Category (i): bank statements showing payments made towards the construction of the defendants’ home on the Trust property

[37] Mr Hearn’s explanation of relevance is as follows. The Trustees do not contest that Penny and Charles have an interest in the Trust land as a result of estoppel based on them constructing a house in reliance on the verbal agreement with Janet. The terms of that agreement are in dispute. The parties’ discussions progressed over time and there were varying discussions about the size of the section that Penny was to obtain. One of the elements of estoppel is a change in position by the person claiming the interest.

[38] Mr Hearn submits that even if there was an oral agreement as to terms asserted by Penny, if that agreement came, for example, after the build had been completed or after Penny and Charles were contractually committed to complete the build, then there was arguably no or insufficient change of position by Penny and Charles to render departure from the oral agreement unconscionable.

[39] Penny and Charles plead they changed their position through incurring expenditure on the build of the house. Mr Hearne submits Penny and Charles provide no particulars about what costs were incurred or when. Mr Hearn’s submission is:

The precise dates(s) on which the defendants changed their position by incurring various build costs will be a relevant consideration in determining whether there was any change in position. The amounts of the costs expended will be relevant in determining whether any such change in position means it is now unconscionable for the trustees to now resile from the verbal agreement.

[40] Mr Hearn submits the bank statements will be relevant to that assessment.

Penny’s pleading as to the timing of the land agreement

[41] The build contract with Orange Homes is dated 21 April 2016. Penny’s pleading under the heading “Particulars of agreement as to Penny’s area” refers to there being specific discussions between Penny and her mother in 2014 prompted by a developer approaching the Trustees about a potential purchase of part of the Trust’s land. Penny says discussions progressed in relation to her construction plans including the land area and that by early 2015 an oral agreement had been reached following which surveyors and planners were engaged in May 2015.

[42] Penny then says in her claim that the exact land area to be gifted evolved in various iterations of plans prepared by the surveyors and planners in consultation with Penny and Janet. Penny’s claim alleges the land area was increased to include both Lots 3 and 5 as shown in the final plan prepared by the surveyors in August 2015. In subsequent plans the Lots labelled ‘Lot 3” and “Lot 5” became Lots 791 and 792. Lot 792 (Lot 5) is the section on which Penny and Charles’ home has been built.

[43] Penny does not allege a further agreement after August 2015 and Ms Grieve confirmed this at the hearing. It seems Penny’s case is that her entitlement to Lots 3 and 5 had crystallised by August 2015 and that subsequent variations to the size of those Lots are not relevant.

[44] On the basis of this pleading, given the contract is dated April 2016 and the build took place between January 2017 and November 2017, the documents sought by Mr Hearn are not relevant as the agreement relied on was already in place. Thus, the idea of piecemeal amendments to the agreement needing to be supported by corresponding piecemeal alterations of position does not arise. This aspect of the plaintiffs’ application is dismissed

Category (ii): bank statements showing application of the $100,000 in 2015

[45] Mr Hearn frankly acknowledges that these documents are sought for the purposes of challenging Penny’s credibility.

[46] Mr Hearn refers to the documents filed in support of the summary judgment application concerning the $100,000. Mr Hearn recounts that Janet’s evidence was the loan was sought by Penny to assist in a commercial transaction of some kind; this was denied by Penny.

[47] Justice Downs, in Robert Jones Holding Ltd v McCullagh, notes there is a clear line of authority that discovery directed exclusively at witness’ credibility is impermissible.⁷

[48] Mr Hearn referred to Domenico Trustee Ltd v Tower Insurance Ltd, in support of such discovery being available.⁸ Downs J referred to Domenico noting the case has been described as involving “highly unusual and rare facts”.⁹

[49] Here the point of credibility relied on by Mr Hearn is not a question the Trial Judge will have to determine. As noted by Downs J in Robert Jones, s 37 of the Evidence Act 2006 means veracity evidence must be substantially helpful in order to be admissible.¹⁰

[50] I decline this category of discovery. The credibility issue identified is not a core issue in this case. I was told Penny’s bank statements showing receipt of the

$100,000 in 2015 have already been provided. The $100,000 remained in her account for the three months covered by those statements. To open up this credibility issue would be to take the parties and the Court down a rabbit hole of what plans Penny had for the money at the time she received the funds, when and if those plans changed, and the character of the eventual use of the money. It would also require Janet to be cross-examined as to what she asserts Penny told her. This issue is a diversion and not likely to result in a conclusion that will be substantially helpful to determining Penny’s credibility.

⁷ Robert Jones Holding Ltd v McCullagh [2016] NZHC 2529 at [55](a).

⁸ At [556](6) referring to Domenico Trustee Ltd v Tower Insurance Ltd [2014] NZHC 2657.

9. In C & S Kelly Properties Ltd v Earthquake Commission [2014] NZHC 3111, (2014) 22 PRNZ at 539 at [19].

¹⁰ Robert Jones Holdings Ltd v McCullagh, above n 7 at [55](c)

Can the Trustees maintain privilege against Penny – the joint interest exception

The joint interest exception

[51] Trustees can only claim privilege as against beneficiaries of a trust if the joint interest exception does not apply. The “joint interest” exception to privilege applies to both litigation privilege and legal advice privilege.¹¹

[52] If there is a joint interest, privilege cannot be asserted against those who hold the joint interest. Once it has been established that privilege generally exists, the relevant question in determining privilege as against beneficiaries of a trust is if and when the joint interest exception came to an end.¹²

[53] The joint interest privilege exception applies to legal advice obtained by the trustees in respect of general administration of the trust.¹³ For non-administrative advice, the starting point, even where litigation is contemplated, is that the trustees will, when taking advice (in accordance with their obligations and the interests of the trust as a whole), be seeking “guidance as to the right cause of action”, rather than seeking advice on how to resist litigation. It is expected that trustees will not seek advice on how to resist litigation without first having sought advice as to what stance they should take. The joint interest exception will apply to the latter advice, but not to the former.¹⁴

[54] The joint interest exception is predicated on the assumption legal advice acquired by a trust is for the benefit of the beneficiaries rather than the trustees.¹⁵ Where that assumption is displaced, that joint interest exception comes to an end and privilege will be determined in accordance with the ordinary principles relating to privilege.¹⁶

¹¹ Lambie Trustee Ltd v Addleman [2021] NZSC 54, [2021] 1 NZLR 307.

¹² Lambie Trustee Ltd v Addleman, above n 11, at [75].

¹³ Lambie Trustee Ltd v Addleman, above n 11, at [62] and [74].

¹⁴ Lambie Trustee Ltd v Addleman, above n 11, at [92].

¹⁵ Lambie Trustee Ltd v Addleman, above n 11, at [74].

¹⁶ Lambie Trustee Ltd v Addleman, above n 11, at [75].

[55] Lambie was an application for disclosure by a beneficiary, not an application for discovery. At the heart of whether the Court will order disclosure opposed to discovery, is whether disclosure is necessary to ensure trustee accountability.¹⁷

[56] The documents sought by Penny pursuant to the joint interest exception are relevant documents – so much is confirmed by the Trustees having discovered them. Should the documents sought extend beyond those already discovered, relevance will have to be established alongside showing the joint interest exception applied when those documents were created.

[57] Given the litigation between Penny and the Trustees, the joint interest exception clearly came to an end on the issue of the respective sets of proceedings – the debt proceeding being issued on 31 March 2021 and the proceedings relating to the subdivision of the land being issued on 9 April 2021. Prior to the issuing of those proceedings, the point would have been reached at which it was clear that hostile litigation was inevitable.

[58] Ms Grieve submitted different principles should apply to the application of the joint interest exception where a trustee sued a beneficiary rather than a proceeding being brought by the beneficiary against a trustee. Ms Grieve went so far as to submit a trustee who sues a beneficiary cannot claim legal advice or litigation privilege against a beneficiary. I do not accept that novel submission which was not supported by any authority.

[59] Mr Hearn submitted a beneficiary cannot rely on the joint interest exception to gain access to documents subject to without prejudice privilege. I do not accept such a limitation exists.

[60] If a joint interest exists then the parties with the joint interest “... obtain no confidence against each other ...”.¹⁸ There is likely to be an overlap in legal

¹⁷ Lambie Trustee Ltd v Addleman, above n 11, at [44].

¹⁸ Bonkim Thanki (ed) (3^rd ed, Oxford University, Oxford, 2018) at 608 and 604. The Law of Privilege says that the effect of a joint interest is; “...neither party can assert privilege as against the other in respect of communications coming into existence at the time the joint privilege subsisted; hence each party to the relationship can obtain disclosure of the others (otherwise privileged) documents so far as they concern the joint purpose of interest”. Whether this applies

advice/without prejudice privilege in many cases. Whether the joint interest exception applies should not depend on how a party wanting to maintain privilege describes the privilege asserted. Nor does it seem logical that legal advice about a dispute while the joint interest subsists has to be disclosed, but a document created at the same time concerning an attempt to settle the same dispute is not. Both may allow the trustees’ views or advice on the merits of the dispute to be discerned albeit more expressly in the former than the latter.

The categories of documents sought

[61] The following documents are sought:

• (1) All communications, advice or documents between the plaintiff Trustees (or Bob Lineham) and their solicitors, and/or file notes, memoranda and handwritten notes or marked-up plans created by the Trustees’ lawyers, after June 2019 and up until shortly after commencement of these proceedings, for which legal professional privilege has been claimed in the plaintiffs’ supplementary affidavit of documents.

• (2) All other communications, advice or documents between the plaintiff Trustees and their solicitors in relation to administration of the Trust, property of the Trust and dealings with third parties or beneficiaries and which are not contained in the plaintiffs’ supplementary list of documents.

• (3) All communications between the Trustees after June 2019, or between the Trustees and third parties (including Bob Lineham), or between the Trustees’ solicitors, in respect of issues relevant to the proceedings.

in this situation was not addressed by counsel and I do not make any directions in terms of what the finding of a joint interest may mean for whether the trustees can rely on this passage to obtain disclosure from Penny.

• (4) Any file notes, memoranda and draft letters or documents created by the Trustees (or Bob Lineham) after June 2019 in respect of issues relevant to the proceedings.

Documents relating to the $100,000 advance

[62] Notwithstanding the breakdown in the relationship between Penny and Janet did not occur until 2019, the Trustees did not call up the $100,000 advance in reliance on the acknowledgment of debt until February 2021. Penny says until that time the

$100,000 had not been mentioned.

[63] Accordingly, there can be no question of the Trustees having contemplated hostile litigation with Penny in respect of the $100,000 advance prior to February 2021. Until Penny refused to pay the demanded amount and the Trustees had taken advice in respect of her declining to pay and whether they should issue proceedings, litigation cannot have been inevitable. The debt proceedings were filed on 31 March 2021.

[64] Advice taken about calling up the debt and the communications between the Trustees relating to the decision to do so is to be discovered.

Documents relating to the dispute over the subdivision and the house loans

[65] The Trustees claim litigation privilege or without prejudice privilege in relation to documents concerning this issue from July 2019. I do not accept the joint interest privilege ended as early as this date. Lambie is clear. Until the point of hostile litigation the beneficiaries enjoy joint interest privilege in advice received by the Trustees. That the joint interest privilege exists, even to the point where the Trustees take advice in respect of proceedings they have received from a beneficiary, emphasises the joint interest privilege is not easily lost.

[66] Given the proceedings in relation to the subdivision dispute where not issued until 9 April 2021, hostile litigation cannot have been contemplated in July 2019. The prolonged period of negotiation that occurred is consistent with that.

[67] Janet notes that Penny lodged a caveat in September 2019. I do not see the lodging of a caveat of itself indicating an end to the joint interest. A caveat is simply a protective measure.

[68] Janet says that on 3 October 2019, the Trustees approached their solicitors for advice on how to deal with the caveat and Penny’s Constructive Trust claim. It was not until May 2020 that Janet’s solicitors, in correspondence with Penny’s solicitors, referred to the file being transferred to the Trustees’ litigation team but such may have been no more than an indication of the type of advice being sought. The Trustees’ instructions to issue proceedings came late in 2020. Janet says the precise date is unclear but on 10 December 2020 the Trustees’ solicitors advised Penny’s solicitors that they had been instructed to draft proceedings.

[69] Accordingly, it would seem that litigation became inevitable on 10 December 2020 or at least no later than that. I am unable to pinpoint when the joint interest exception came to an end. What I can say is:

(i) the joint interest exception rule applies to documents for which the without prejudice privilege is claimed;

(ii) the joint interest in relation to the subdivision subsisted until sometime in late 2020 – leave is reserved for that issue to be re-addressed, if necessary with further evidence and/or the opportunity for the Court to inspect relevant documents;

(iii) the documents sought by Penny pursuant to the joint interest exception at [61] categories (1) and (2), are subject to a relevance requirement – the remaining categories already incorporate a relevance requirement. In each case the discovery that will be required will only be up until the joint interest came to an end.

[70] Counsel sought that this judgment provide a high level determination in relation to the issues in Penny’s joint interest exception application so they could

consider my determination on those issues to see if they could then resolve any remaining issues. Leave is reserved to apply further in respect of that application.

[71] Costs are reserved.

[72] There will be a telephone conference on Wednesday 9 November 2022 at 2.30pm to address whether any further directions will be required and for counsel to consider what application they wish to make in relation to costs.

Associate Judge Lester

Solicitors:

Corcoran French, Christchurch Saunders & Co, Christchurch

Copy to counsel:

S M Grieve, Barrister, Christchurch