Melody v Melody [2012] NZHC 1636 (10 July 2012)

Last Updated: 30 August 2012

IN THE HIGH COURT OF NEW ZEALAND NEW PLYMOUTH REGISTRY

CIV-2012-443-200 [2012] NZHC 1636

BETWEEN GINA AMANDA MELODY Appellant

AND PETER COLIN MELODY First Respondent

AND MELODY GROUP LIMITED First Non Party Respondent

AND MELODY HOLDINGS LIMITED Second Non Party Respondent

AND MELODY HOLDINGS (NP) LIMITED Third Non Party Respondent

AND MELODY ASSETS LIMITED Fourth Non Party Respondent

AND TRUSTEES OF THE PC MELODY TRUST NO. 1

Fifth Non Party Respondent

Hearing: 4 July 2012

Appearances: P J Mooney for the appellant

No appearance for the respondent as respondent abiding

B Scott for the first to fifth non party respondents

Judgment: 10 July 2012

_{JUDGMENT OF CLIFFORD J}

Introduction

[1] This is an appeal by Mrs Melody, in the course of relationship property proceedings between her and her husband the respondent Mr Melody, against a

MELODY v MELODY HC NWP CIV-2012-443-200 [10 July 2012]

decision of Judge Courtney in the Family Court at New Plymouth declining her application for discovery against the first to fifth non parties.

Facts

[2] Mrs and Mr Melody separated in 2010 after a 19 year relationship.

[3] In 1998 Mr Melody settled the PC Melody Trust No. 1. The PC Melody Trust is a family trust: the discretionary beneficiaries are Mrs and Mr Melody and their children. The final beneficiaries are Mrs and Mr Melody’s children. As settlor, Mr Melody has a power of appointment, but not removal, of trustees. Mr Melody was himself originally a trustee, but is no longer.

[4] Shortly after its establishment the PC Melody Trust became (along with two other trusts owned by Mr Melody’s two siblings) a shareholder in Melody Group Limited. Melody Group purchased shares in Melody Holdings Ltd and Melody Holdings (NP) Ltd in February 1999 from Mr Melody’s parents and the BP Melody Family Trust, a family trust settled by Mr Melody’s father. Melody Holdings and Melody Holdings (NP) own the New World Palmerston North and the Pak ‘n Save New Plymouth supermarkets respectively. Mr and Mrs Melody were involved in working in the Pak ‘n Save New Plymouth supermarket throughout their marriage. Melody Group Ltd is also the sole shareholder of Melody Assets, which owns various titles to land associated with those supermarkets.

[5] Mr Melody issued relationship property proceedings in 2010. In his affidavit of assets and liabilities, Mr Melody described the establishment of the PC Melody Trust, and related matters, in the following terms:

The settlement of this Trust coincided with my father selling his interests in a New World supermarket in Palmerston North and a Pak ‘n Save supermarket in New Plymouth to Melody Group Limited, a company incorporated by myself and two of my brothers namely Alan Melody and Kerry Melody.

Other subsidiary companies have been incorporated in accordance with accounting advice received over the years. These were Melody Holdings Limited, Melody Holdings (NP) Limited, Melody Assets Limited. In each case the shareholder of the subsidiaries has been Melody Group Limited.

I have tried to secure information about the accounts for these companies but my requires for that information have been referred to Chapman Tripp, solicitors of Wellington who have, on instructions from the shareholders, refused to provide the information. Annexed hereto and marked “E” is a copy of a letter from Chapman Tripp dated 5 October 2009 in which it has been made clear at paragraphs 6 – 8 that the information will not be provided because it contains information that is confidential to the company and which is relevant to shareholders who are not party to these proceedings. The letter notes I am not a shareholder in my own right and therefore I do not have an entitlement to the information.

For my part, I am a discretionary beneficiary only in the PC Melody No. 1

Trust. I am one of two current trustees. I have no power to make any decision in my own right that might see myself or the Respondent benefit

from property. Any benefit either of us might receive is entirely at the

discretion of the trustees. I believe this has a significance impact on the value (if any) that may be placed on my or the Respondent’s interest in the trust as discretionary beneficiaries.

[6] In his affidavit of assets and liabilities Mr Melody stated that:

(a) he had no interest in any business, partnership, stock in trade or venture of any kind;

(b) he had current account debts owing to him, which he acknowledged to be relationship property, by Melody Group ($9,230); Melody Holdings (NP) ($544,163) and Melody Holdings ($108,477);

(c) as income, he was in receipt of salary and drawings from “the supermarket business owned in part by the PC Melody No. 1 Trust” in respect of which he and Mrs Melody were discretionary beneficiaries, and he referred to spousal maintenance proceedings to disclose the amount of that income; and

(d) as regards interests in trusts, he referred to his interest in the Tarisbrook Trust (which owns the family home and which is not relevant for this appeal) and the PC Melody Trust.

[7] Against that background, Mrs Melody applied for discovery against the first to fifth non party respondents. She did so first in August 2011 as regards the PC Melody Trust. In February this year she made a similar application as regards

the first to fourth non party respondents. Those applications were directed at the annual accounts of each of the non party respondents for the financial years 2008 to

2011. Mrs Melody had also sought details of arrangements between the PC Melody Trust and Mr Melody’s parents relating to the purchase of the New Plymouth Pak ’n Save supermarket business. On 11 April 2012 in the Family Court at New Plymouth Judge Courtney declined those applications. At the same time, the Judge directed that Mr Thompson, a trustee of the PC Melody Trust and the accountant for the Melody group of companies and their subsidiary companies, file an affidavit relating to the current accounts Mr Melody held with each of the non party respondents. At least as I read Mr Melody’s affidavit of assets and liabilities, he only referred to current accounts with Melody Group, Melody Holdings and Melody Holdings (NP). I therefore infer that that direction was based on information put before the Judge during the hearing.

[8] In appealing the Judge’s decision, Mrs Melody limits her application to the annual accounts of each of the non party respondents for the last three financial years.

The Judge’s decision

[9] As I understood Mr Mooney, Mrs Melody seeks to advance an argument that the supermarket businesses owned in part, through Melody Holdings, by the PC Melody Trust, and in particular the New Plymouth Pak ‘n Save business with which she and her husband have been directly involved, comprise assets that in some way, but for or in the absence of the Trust and other arrangements already described, would have been property of her and Mr Melody’s relationship. She seeks to advance that claim by reference to either or both of ss 44 and 44C of the Property (Relationships) Act 1976, the “bundle of rights” doctrine as it applies in relationship property proceedings to interests under trusts, and s 182 of the Family Proceedings Act 1980. It is fair to say that, at the present time, those arguments are not well developed.

[10] The bundle of rights argument would be addressed as a claim to property properly recognised as relationship property. The claims under ss 44 and 44C of the

Property (Relationships) Act would, as I understand matters, be addressed at property that – pursuant to those provisions – could properly be made the subject of orders under the Property (Relationships) Act even though it did not necessarily constitute relationship property. A claim under s 182 of the Family Proceedings Act may be brought in connection with the dissolution of a marriage. Section 182 provides for the Court to make orders with respect to settled property as it thinks fit in certain circumstances for the benefit of the children of the marriage or the parties to the marriage.

[11] The Judge concluded that none of these claims currently had sufficient strength to establish that the requested documents properly came within the scope of discovery under r 143 of the Family Court Rules 2002. As regards s 44C, it was difficult to identify relationship property which had been disposed of to the PC Melody Trust by Mr Melody. The Judge did not think that the original settlement of the PC Melody Trust, for $10, would be likely to give rise to such a claim. The Judge had a similar difficulty with the prospect of a claim under s 44. The Judge acknowledged the possible claim under the bundle of rights theory, and did not reach a final view on that. On the question of s 182, Mrs Melody had not yet filed an application for dissolution, but she could address that by doing so promptly. In those circumstances, the Judge indicated a preliminary view that such a claim might be difficult, but he was careful to express no final view.

[12] The Judge therefore concluded that Mrs Melody had not made out a basis for non party discovery of the documents sought, subject to one matter. The Judge referred to the disclosure Mr Melody had made of the various current accounts he held, which Mr Melody acknowledged were relationship property, and which would therefore need to come into consideration in the determination of the proceedings.

The Judge made the following direction:1

I therefore direct by consent that Mr John Thompson, who is now a trustee of the PC Melody Trust Number 1, and accountant for the Melody group of complanies and their subsidiary companies, is to file and serve within 28 days an affidavit detailing the current accounts, if any, that Mr Melody held at the date of separation with either the PC Melody Trust Number 1, Melody Group Limited, Melody Holdings Limited, Melody Holdings (New

Plymouth) Limited, or Melody Assets Limited. That affidavit is to also include a transactional history showing the transactions taking place in those various current accounts over the period of the relationship between Mr and Mrs Melody up until separation. If there have been any other funds provided by Mr Melody to the trust or any of the four companies I have referred to, which are not reflected for some reason in his current accounts, the affidavit is to also give full details of such advances.

[13] The Judge then observed:2

Given the preliminary determinations I have made I am of the view that the proceedings as a whole should be set down for hearing so that all issues can be determined at the same time. If it transpires that there are any findings that require further assessment or valuations they can then follow that event. However, I believe that the issue of relationship property entitlements and adjustments in a general sense should be determined in one hearing rather than by way of separate hearings.

Issues raised on appeal

[14] Mrs Melody appeals against the Family Court Judge’s decision on the basis that it is wrong in fact and law. More specifically, the material she sought was relevant to the claims she has made and wishes to pursue. In response, the non party respondents say that the Family Court Judge’s decision is not appealable under either s 39 of the Property (Relationships) Act or s 72 of the District Courts Act 1947. But if it is so appealable, and whether the decision is considered as a discretionary one or not, it is one made by an experienced Family Court Judge and shows no error of fact or law. It should not, therefore, be interfered with.

Analysis

[15] Before me, Mr Mooney submitted that the information sought in discovery (namely the annual accounts for the three years) could be helpful to the claims Mrs Melody wished to advance. That information would enable the Court to understand the value of the entities in question and therefore, as I took it, what might be the significance for the case if such a claim were to succeed. Mr Mooney accepted, however, that that information was not necessary, at least at this stage, for Mrs Melody to advance those claims: her arguments would not depend on the

current value of the entities in question, but rather on other transactions that may or may not have occurred involving Mr Melody. By reference to that concession, which I think is correct and properly made, I do not see how it can be argued that the Family Court Judge’s decision was wrong, whether as a matter of fact or law, and whether or not his decision is considered as one involving the exercise of a

discretion or otherwise.3 By my assessment, what the Judge decided was that, as

matters currently stood, he could not see a basis for making the orders sought. However, alive to the possible significance of the current accounts, he ordered further disclosure as regards those matters.

[16] Mr Thompson, the company accountant, has now provided the information directed. That shows significant interactions (to use a neutral term) between Mr Melody, the PC Melody Trust and each of Melody Group, Melody Holdings, Melody Holdings (NP) and Melody Assets. By my assessment, the information so disclosed may well require further information to be provided to Mrs Melody for its significance to be properly understood. As discussed during the hearing of this appeal, it may be appropriate for interrogatories to be issued to Mr Thompson. Once that information has been considered, Mrs Melody may consider it of further significance as regards the claims that she has indicated she wishes to bring. It may also be that, at the end of the day, that information cannot be understood without having greater access to the accounts and records of the PC Melody Trust, and the companies in question.

[17] But all those are matters for another day. They do not, in my view, mean that the Judge’s decision is one which this Court should now interfere with on appeal. As Mr Scott for the Trust and the Companies submitted, the Judge is an experienced Family Court Judge and will be well alive to the significance or otherwise of the information which has now been provided by Mr Thompson and the further information that Mrs Melody may seek.

[18] I do not think, therefore, there is any reason to interfere with the decision which is the subject of this appeal.

[19] In those circumstances, it is not necessary for me to consider the jurisdictional issues that were raised. Clearly there are issues in reconciling s 39 of the Property (Relationships) Act and s 72 of the District Courts Act in the way that John Hansen J did in E & H H Limited v E.4 In that regard, I agree with the views expressed by MacKenzie J in Dunsford v Shenley & Another, but here take that issue no further.5 Even if s 72 of the District Courts Act does provide a right of appeal, there must also be questions, given the essentially interim nature of the orders Judge Courtney made, as to whether his decision is appealable under that Act. But again, I need not take that issue further.

[20] The question of costs was not referred to me. At the end of the day, I see no reason why costs on this appeal should not follow the event when issues of costs come finally to be resolved.

“Clifford J”

Solicitors:

Mooney & Webb, New Plymouth for the appellant

Reeves Middleton Young, New Plymouth for the respondent

Chapman Tripp, Wellington for the non party respondents

4 _{E & H H Limited v E [2005] 3 NZFLR 806 (HC).}

5 Dunsford v Shanley & Another [2012] NZHC 257.