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High Court of New Zealand Decisions |
Last Updated: 1 October 2011
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2009-425-000284
BETWEEN WENDY JOY PERRIAM Plaintiff
AND LAWRENCE ERNEST WILKES First Defendant
AND STEPHEN JOHN BRADSHAW Second Defendant
AND ALEXANDER MCLENNAN WILSON Third Defendant
AND LESLEY MARGARET INSTONE Fourth Defendant
AND JUDITH ELEANOR FLETT Fifth Defendant
AND QBE INSURANCE (INTERNATIONAL) LIMITED
Third Party
Hearing: 5 August 2011
Appearances: S J Callanan for Plaintiff
No appearance for Defendants or Third Party
D Chisholm for Non-Parties F Perriam and trustees of the Colorado
Trust
Judgment: 11 August 2011 at 10:00 AM
JUDGMENT OF VENNING J
(a) Application in relation to preservation order
(b) Application for non-party discovery – F T Perriam (c) Application for non-party discovery – Colorado Trust (d) Application for joinder of additional defendant
This judgment was delivered by me on 11 August 2011 at 10 am, pursuant to Rule 11.5 of the High
Court Rules. Registrar/Deputy Registrar
Date...............
PERRIAM V WILKES HC AK CIV-2009-425-000284 11 August 2011
Solicitors: Lewis Callanan, Auckland
Hornabrook Macdonald, Auckland
Copy to: D J Chisholm, Auckland
Introduction
[1] Although these are not property relationship proceedings they have their origin in the plaintiff ’s claim to relationship property. The plaintiff alleges the defendants (and others) have acted to frustrate her entitlement to a share of relationship property held by her former husband.
[2] At relevant times the defendants were partners in a firm of solicitors in Invercargill. The first defendant was the plaintiff’s brother-in-law. The non-party from whom discovery is sought and whom the plaintiff now seeks to join to the proceeding is the plaintiff’s former father-in-law, Frank Perriam.
The matters for determination
[3] In a minute issued on 31 May 2011 Faire J directed the allocation of a one day fixture for the following applications:
(a) in relation to the preservation order;
(b) for particular discovery against the defendants; (c) for non-party discovery (Frank Perriam);
(d) for non-party discovery – (trustees of the Colorado Trust).
[4] The defendants and plaintiff have resolved the application for particular discovery against the defendants. No orders are sought in relation to that. That application is dismissed with no order as to costs.
[5] The three remaining applications require determination. In addition, the plaintiff recently, (on 18 July 2011), filed an application for joinder of Frank Perriam as an additional defendant.
[6] The applications referred to in [3] are to be dealt with in the context of the relevant pleading. That is the third amended statement of claim filed on 5 July 2011.
In that claim the plaintiff alleges against the defendant solicitors:
various breaches of fiduciary duty in relation to a
number of trusts;
various breaches of duty as constructive
trustee;
equitable fraud;
fraudulent dealing.
[7] In addition the plaintiff seeks orders under s 44(2) of the Property (Relationships) Act 1976, although the pleading in relation to that particular cause of action seems to be more directed at the actions of Frank Perriam rather than actions of the defendants. Frank Perriam is not a party to the third amended statement of claim.
[8] The plaintiff’s claim has already been the subject of an application to strike- out by the defendants. The application was adjourned pending discovery and further particularisation of the claim. It seems inevitable the application to strike-out will be renewed.
The application for non-party discovery – Frank Perriam
[9] As noted, Frank Perriam is the plaintiff’s former father-in-law. He is 91 years old. He is not presently a party to the proceedings and is not a defendant to the third amended statement of claim. He is, however, subject to the application for joinder.
[10] The application for non-party discovery was filed on 12 May 2010. The application sought inter alia: “(vii) details of any other trusts [Frank Thomas Perriam] is associated with”.
[11] Faire J made a number of orders on 17 March 2011 on the application including an order in terms of clause (vii):
Other trusts
1. Details of other trusts Frank Perriam is associated with, if any, on the basis that this includes materials such as deeds, loan documents, minutes, bank statements and resolutions (if any).
Ms Callanan submits that, (by implication) the order required Mr Frank Perriam to discover a copy of his Will. Mr Frank Perriam has refused to do so. The plaintiff seeks an order requiring him to discover it.
[12] I am unable to accept that the order made by the Judge required Frank Perriam to discover a copy of his Will. There is a significant difference between trusts and their associated documentation and a will. A trust is a legal relationship created by the trust deed. It has an entity of its own. It may hold assets and even trade. A will is, however, simply a legal record of the testator’s direction for the distribution of his assets upon his death. It can be changed at any time prior to death. At most it is probative of the testator’s intention at a particular point in time.
[13] Ms Callanan next submitted the Will was discoverable because it was referred to by the first defendant in his affidavit of 2 December 2010 in response to the plaintiff’s application for particular discovery. In that affidavit Mr Wilkes said:
I attach as Exhibit “B”, a copy of the Trust Deed for the MF Perriam Trust. To the best of my knowledge, that trust has never traded and does not have any assets. I also understand that this trust was formed to be a beneficiary of Frank Perriam’s will.
[14] Ms Callanan submitted that because the Will was referred to in that way it was discoverable in accordance with r 8.23. Rule 8.23 provides a process by which a party may request to inspect a document referred to in a pleading or affidavit. But the rule cannot be used to obtain discovery from a non-party in this way. Further, the Will was only referred to in passing by Mr Wilkes in the context of his reference to the trust deed. The content of the Will was not disclosed or relied on. Mr Wilkes had no power to obtain a copy of Mr Frank Perriam’s Will, a personal document, for inspection. Finally, I note that r 8.23(3) preserves claims to privilege and
confidentiality in any event. Mr Wilkes could not be obliged to produce Mr Frank
Perriam’s Will under r 8.23.
[15] On the basis of the existing pleadings Mr Perriam’s Will has no relevance to the claim against the defendant solicitors.
[16] The application for an order requiring Frank Perriam to discover a copy of his
Will is dismissed.
The application for non-party discovery against Colorado Property Trust
[17] This application was also made some time ago, on 20 May 2011. It seeks, inter alia, copies of the bank statements relating to the Colorado Property Trust.
[18] The Colorado Property Trust was established by trust deed dated 20 August
1999. Up until to the collapse of the Perriam companies in 2007/2008 it recorded significant assets in its accounts. The balance sheet recorded assets of $2.744 million primarily made up of a loan of $2.737 owing by Perriam Developments Limited. Unfortunately Perriam Developments Limited went into liquidation on 19
February 2009.
[19] The trustees of the Colorado Property Trust are Mark Perriam and his business partner Cameron Marsh. Both Mr Perriam and Mr Marsh were adjudicated bankrupt on 28 June 2010. The trustees’ position is that the trust has no funds.
[20] The trustees of the Colorado Property Trust accept that its bank statements are discoverable and have no objection to copies of those documents being provided to the plaintiff. The sole issue on this application is who should bear the costs of providing the relevant bank statements to the plaintiff.
[21] The trustees say that the bank statements, together with a number of other documents relating to the trust, are held in storage. Mark Perriam says he does not have the resources to inspect and extract the bank statements himself. The trust itself is without funds. By letter of 7 July to the plaintiff’s solicitors the trustees confirmed
that they would agree to provide an authority, addressed to the relevant bank, to enable the plaintiff to obtain copies of the bank statements on the basis the plaintiff would meet the bank’s costs.
[22] The plaintiff does not accept the Colorado Property Trust bank statements from April 2004 would not be readily available. In closing Ms Callanan submitted that the plaintiff would be willing to go through the stored documentation (under supervision if necessary) to extract the documents. However, given the background to these proceedings that is not a suggestion the trustees would agree to.
[23] Although the plaintiff’s claim arises out of her relationship with Mark Perriam, he is not a party to the current proceedings and nor is the other trustee, Mr Marsh. The trust has a separate legal entity, and is not a party to the proceedings. There is no reason to depart from the general rule that an applicant seeking third party discovery ought to pay the actual and reasonable costs of discovery by a non-
party: New Zealand Apple & Pear Marketing Board v Devondale Orchards Ltd;1
Clear Communications Ltd v Telecom Corp of NZ Ltd.2
[24] In this case the costs can be limited to the bank’s direct costs. I direct that the non-party Colorado Property Trust is to discover its bank statements from 4 April
2004 to the present to the plaintiff by the trustees providing all necessary authorities to the bank to enable the plaintiff to obtain copies of the bank statements on payment by her of the bank’s costs.
The application for joinder
[25] As noted, the plaintiff seeks to join Frank Perriam to the proceedings. Mr Chisholm submitted that the Court should decline the application for joinder. He noted that the application to join Frank Perriam followed his refusal to comply with a demand by the plaintiff for discovery. He referred to the plaintiff’s solicitor’s letter
of 5 July in which it was said:
2 Clear Communications Ltd v Telecom Corp of NZ Ltd (1994) 8 PRNZ 200.
8. Unless we have Mr Frank Perriam’s agreement to provide his Will and the 16 statements referred to above, by the close of business on Thursday, 7th July 2011 we have instructions to join Mr Frank Perriam to these proceedings and these will be filed on Friday, 8th July 2011.
[26] Mr Chisholm submitted it was an abuse of process to threaten to join a non- party unless they complied with demands regarding non-party discovery.
[27] The Court will not allow its processes to be abused. However, if a party has a valid claim against a non-party it would be an extreme step to decline an order for joinder as a sanction. The Court can express its displeasure in other ways. It could not be suggested that, even if Mr Perriam had complied with the demand for discovery, the plaintiff could not have then applied to join him in any event.
[28] Mr Chisholm also submitted that the proposed causes of action in the draft fourth amended statement of claim against Mr Perriam were defective and the proposed 13th cause of action in particular was nonsensical.
[29] The proposed causes of action pleaded against Frank Perriam make serious allegations against him. Counsel has a responsibility to be satisfied reasonable grounds exist for making such allegations.3 I also agree there is force in Mr Chisholm’s submission that the 13th cause of action is not sustainable in its present form. Generally the plaintiff’s pleading suffers from an inability to identify the
source of the money which is said to be relationship property and to underlie the claims the plaintiff seeks to pursue.
[30] However, notwithstanding the potential difficulties with the claim, I accept Ms Callanan’s submission that the appropriate course of action is for joinder to be granted leaving it to Mr Perriam to apply to strike-out. The claim is only in draft form at present. The plaintiff may be able to improve it. Further, a non-party is
generally not heard on an application for joinder.4 Such an approach is consistent
with the comments of Richardson J in Auckland Regional Services Trust v Lark:5
3 Rule 13.8 Lawyers & Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008.
4 See the Commentary to McGechan at 4.56.02.
5 Auckland Regional Services Trust v Lark [1994] 2 ERNZ (CA) at 5.
The purpose of joinder rules is to secure the determination of all disputes relating to the same subject matter without the delay and expense of separate proceedings. The general test is whether the proposed party will be directly affected by any order which may be made in the proceedings and the general rule is that it is for the plaintiff to decide who he or she will sue and for any person named as defendant to take striking out proceedings if it is considered by them that there is no arguable cause of action.
[31] The plaintiff’s application for joinder of Frank Thomas Perriam as a defendant is granted. The plaintiff should not, however, take this as any sanction for the proposed pleading in the draft form attached to the application for joinder. The pleading is defective and needs to be amended. The amended statement of claim is to be filed and served by 24 August 2011.
The application in relation to the preservation order
[32] The plaintiff applied ex parte for an order that the sums of $225,762.70 and
$219,885.82 held by Frank Perriam in two bank accounts be paid into Court to preserve the fund until the substantive proceedings were determined. The application was made in reliance on rr 7.46, 7.53, 7.54 and 7.55.
[33] On 2 May 2010 Woolford J made an order in terms of the application. Frank
Perriam seeks to review the order.
[34] Ms Callanan submitted that the Court should not hear the application as there was no jurisdiction to revisit the preservation order made on an ex parte basis by Woolford J on 2 May 2011. First she noted that Frank Perriam had not applied to rescind the order in terms of r 7.49. However, an application was unnecessary because the terms of the orders made by Woolford J contemplated the order would be reviewed following the filing of notices of opposition to it. His minute records:
1. Interim order made in terms of No. 1(a) in Without Notice Application for Interlocutory Injunction/Preservation Order against Non-Party dated 28/4/11.
2. Application and associated documents to be served on all defendants and third party by 5pm on 4/5/11.
3. Notice of opposition and any affidavits in opposition to continuation of interim order to be filed and served by 5pm on 11/5/11.
[35] Frank Perriam filed and served a notice of opposition and affidavit in support by 11 May as directed. The Court has jurisdiction to consider the review contemplated by the Judge when he made the initial order.
[36] Next Ms Callanan submitted, in reliance on the wording of r 7.49, that the non-party, Frank Perriam was not a party affected by the order so there was no jurisdiction for him to review it. She submitted that Mr Frank Perriam was not affected because he had accepted he had no interest in the moneys. She referred to the following passage in his affidavit:
When I received the funds from Macalisters back in 2008, I understood the funds had been forwarded at the direction of Mark, apart from knowing the funds had been paid on his direction, I didn’t know what they were for or why the payments had been made. I put them on term deposit in 2008, and awaited a direction from Mark about what I might do with them. I did not ever discuss with either Macalisters or Mark, at the time of receiving the payments or after, whether the funds were “relationship property” or how the plaintiff’s “rights” could be defeated, and I vehemently deny that any of us were somehow colluding or defrauding the plaintiff. Until I learnt of the preservation order, I had no idea that the plaintiff was asserting any interest in these funds.
[37] To clarify, that passage refers to the balance of $243,684 Mr Perriam accepts he holds for his son as he explained in his affidavit. The amounts of money subject to the preservation order are different to that sum.
[38] There is a short answer to the submission that Mr Frank Perriam was not affected. This is not an application to vary or set aside under r 7.49 so the rule relied on by Ms Callanan does not apply in any event.
[39] But more fundamentally, as a party who has been directed by the Court to pay money from his bank accounts into Court Frank Perriam has been affected by the order.
[40] I turn to consider the preservation order in this case. The jurisdiction for the order is to be found in r 7.55 of the High Court Rules:
7.55 Preservation of property
(1) A Judge may at any stage in a proceeding make orders, subject to any conditions specified by the Judge, for the detention, custody, or preservation of any property.
(2) An order may authorise a person to enter any land or to do any other thing for the purpose of giving effect to the order.
(3) The Judge may order that a fund be paid into court or otherwise secured if the proceeding concerns the right of a party to the fund.
(4) The Judge may treat an application under this rule as an application for directions under rule 7.9 and give directions accordingly.
[41] Ms Callanan confirmed that the plaintiff relied on r 7.55(3). She submitted that the proceeding concerned the right of the plaintiff to moneys held by Mr Frank Perriam in his bank account. She submitted the money in his bank account was the fund in issue. The plaintiff claims to be entitled to that fund pursuant to s 44 of the Relationships Property Act so that r 7.55(3) applies.
[42] The wording of r 7.55(1) and (3) is substantially the same as the wording of the former rules 331(1) and (3). The authorities that have considered those rules are still applicable to r 7.55.
[43] Ms Callanan was correct to accept the plaintiff could not rely on r 7.55(1). Rule 7.55(1) is directly largely, if not exclusively, to tangible property or choses in possession: Rapid Metal Developments (NZ) Ltd v Rusher.6
[44] On the other hand, r 7.55(3) is directed largely, if not exclusively, to an intangible fund or choses in action. As noted, the plaintiff’s case is that the money in Frank Perriam’s bank account is a fund for the purposes of r 7.55(3). Money in a bank account may generally, or in colloquial terms, be referred to as “funds” but that is not the meaning ascribed to “fund” as that term is used in 7.55(3). The distinction was considered in some detail by McGechan J in the Rapid Metal case. After considering the dictionary definition, the traditional interpretation of a fund, (an aggregation of money or an accounting device directing money to a particular
purpose so that the money is held for that purpose) and the liberal interpretation of
6 Rapid Metal Developments (NZ) Ltd v Rusher [1987] NZHC 94; (1987) 2 PRNZ 85.
fund (which might extend to and include any existing and identifiable aggregation of money), McGechan J concluded that the word “fund” in both common usage and in general legal usage has a purposive overtone denoting an existing sum of money or item in an account devoted to and not yet spent for that purpose. As McGechan J
said:7
In the end, I do not believe that “fund” should be interpreted in the colloquial sense “funds”.
And later:8
An interpretation of r 331(3) so as to extend preservation orders to identifiable aggregations of money paid over by purchasers, or for that matter by lenders or the like, would amount to a significant additional jurisdiction in an area previously regarded as regulated along with all others by r 567 as to charging orders before judgment and by Mareva injunctions. While of course the object of preservation orders differs from the other remedies, that observation is somewhat idle as the effects are the same. It is possible, but it is not at all likely, that the Legislature intended indirectly through r 331(3) to supplant those carefully limited remedies. I am not however prepared to make that assumption.
[45] In the Rapid Metal case the plaintiff claimed, inter alia, fraudulent misrepresentation in relation to the sale of shares. It sought to preserve the balance of the purchase money paid over by it for the shares. The Judge accepted that the purchase money could be traced and identified into the bank accounts and deposits in issue. However, he was not prepared to accept that the money (even though it represented funds paid over by the plaintiff) could be said to be a fund in terms of r 331(3). There was no jurisdiction to make a preservation order under that provision. McGechan J’s reasoning was approved by Tipping J in Lewis v Poultry
Processors (Holdings) Ltd.9
[46] A similar situation applies in the present case. The fact the plaintiff is able to identify payments made by her former husband, and/or entities associated with him into the defendant solicitors’ trust account and from that trust account into bank accounts operated by Frank Perriam does not in some way establish the money in
Frank Perriam’s bank account as a fund for the purposes of r 7.55(3).
7 At 95.
8 At 95.
9 Lewis v Poultry Processors (Holdings) Ltd [1988] NZHC 243; (1988) 3 PRNZ 167 (HC).
[47] The plaintiff’s proceedings are not under the Property (Relationships) Act for a share of relationship property. She claims against the defendant solicitors for breach of fiduciary duty, breach of constructive trust, equitable fraud and fraudulent dealing. If successful in those claims she will receive an award of damages.
[48] While the plaintiff makes an additional claim based on dispositions under s 44 of the Property (Relationships) Act, if that claim is successful, the relief sought is “An Order under s 44(1A) and 44(2)(c) of the Property (Relationships) Act 1976” and alternatively “A Preservation Order preserving the funds”. But the plaintiff cannot achieve, by way of final relief, a preservation order. Further, s 44(1A) confirms the jurisdiction to make orders under s 44 in proceedings other than under the Property (Relationships) Act but does not itself prescribe the form of relief. Section 44(2)(c) provides for the transfer of an interest in property or payment of a sum representing the value of the interest. In the present case the only “property” in issue is money. For the reasons given by McGechan J, money in a bank account is not tangible property or a chose in possession. The relationship property itself no longer exists. The plaintiff’s claim is really a claim for money to represent the value of her interest in relationship property. If she succeeds and obtains an order under s
44(2) she will receive judgment for a sum of money. She may be entitled to judgment against the defendant solicitors or, once Frank Perriam is joined, perhaps him as well. But that does not support a claim by her to any particular sums of money in Frank Perriam’s bank account.
[49] This case is similar to the recent case of Cuthbert v Humphries10 where Courtney J rejected a plaintiff’s claim to an interest in sale proceeds. Courtney J rejected the application on the basis there was no jurisdiction for it, finding:11
It is apparent from both the pleadings and the way the claim was explained to me in submission, that Ms Cuthbert cannot have an interest in the actual monies paid to EML pursuant to the sale of the Big Sky assets. Her complaint is that those monies were obtained by EML and Portland Trust through the use of her share of relationship property. This assertion gives rise to a claim against Mr Humphries personally or a claim by way of a constructive trust against Portland Trust in respect of the assets it may have acquired at her expense but it cannot realistically be asserted as claim in respect of the money itself. The application must fail for that reason.
10 Cuthbert v Humphries HC Auckland CIV-2003-404-007071, 31 May 2007.
11 At [8].
[50] In the present case the plaintiff’s claim is even less direct than that. There is no jurisdiction for an order under s 7.55(3). The money standing to the credit of Frank Perriam in his bank account is not a fund for the purposes of r 7.55(3). The ex parte order must be revoked.
Conclusion/results
[51] The application for non-party discovery against Mr Frank Perriam in relation to the Will is declined. I reserve the issue of costs to be dealt with by way of memorandum but note that there was a delay by Frank Perriam in the provision of the bank accounts relating to Jamieson Strategies Ltd, despite the order of Faire J dated 17 March 2011. The appropriate order on that application may be for costs to lie where they fall.
[52] The application for non-party discovery against Colorado Property Trust is granted but on the basis suggested by the Colorado Property Trust. The trustees of the trust are to provide an authority to the bank in sufficient terms to entitle the plaintiff to obtain at her cost copies of the bank statements for the trust for the relevant period. Costs are reserved. Counsel can exchange memoranda.
[53] The application for joinder of Frank Thomas Perriam is granted. I record there are difficulties for the plaintiff with the proposed draft pleading against Mr Perriam. However, I accept that it may be possible for the plaintiff to formulate a claim against him. I make no order for costs on that application.
[54] The preservation order made on an ex parte basis on 2 May 2011 is revoked. The Registrar is to return the moneys held by him to the solicitors for Frank Perriam, Messrs Hornabrook MacDonald. Mr Perriam is entitled to costs on that application.
Counsel can exchange memoranda.
Venning J
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