Blackley v Blackley [2018] NZHC 2011 (8 August 2018)

Last Updated: 31 August 2018

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-002166 [2018] NZHC 2011

BETWEEN	AMANDA JUDITH BLACKLEY Applicant/Respondent
AND	DAVID CHARLES BLACKLEY Respondent/Appellant

Hearing:	21 June 2018
Appearances:	M Sandelin and J Spring for the Applicant, Mrs Blackley D Chambers QC for the Respondent, Mr Blackley
Judgment:	8 August 2018

JUDGMENT OF HINTON J

[re application for further discovery]

This judgment was delivered by me on 8 August 2018 at 1.00 pm pursuant to Rule 11.5 of the High Court Rules

.............................................................................. Registrar/Deputy Registrar

Counsel/Solicitors:

Minter Ellison Rudd Watts, Auckland

Deborah Chambers Ltd, Queens Counsel, Auckland

AMANDA JUDITH BLACKLEY v DAVID CHARLES BLACKLEY [2018] NZHC 2011 [8 August 2018]

[1] This judgment deals with an application for further discovery against Mr Blackley.

[2] Mr and Mrs Blackley separated in 2011 after 23 years together.

[3] Almost all of the known assets are now held in a trust called the Blackley Children’s Trust (BCT). Before that, they passed through a number of different entities.

[4] Mrs Blackley says the equity of the BCT so far as presently known is about
$4 million. Mr Blackley says it is materially less.

[5] Mrs Blackley’s claims against the BCT and otherwise, are apparently strongly disputed by Mr Blackley. As is inevitable where the assets acquired during the relationship are held in trust, the issues are extensive, including applications under s 44C of the Property (Relationships) Act 1976 (PRA) and s 182 of the Family Proceedings Act 1980.

[6] The parties agree that the case is complex. It has been wending its way through the Family Court for five years and was transferred to this Court earlier this year. A number of orders have already been made for discovery.

[7] Counsel for Mrs Blackley, Mr Sandelin, helpfully provided a Schedule “B”, being a redacted form of the original application, which excluded documents that were by the time of the hearing accepted as not necessary. A copy of that Schedule is annexed to this judgment. The left-hand column lists the documents sought. The right-hand column sets out why documents are believed to exist. The Schedule was further materially reduced in the course of argument.

[8] The documents of which Mrs Blackley seeks further discovery largely relate to three transactions, two of which were back in 2007/2008. These transactions are:

(a) The Port transaction whereby another trust called Toll Investment Trust made about $5.8 million in 2007.
(b) The High Street transaction whereby a property at High Street, Whangarei was sold in the 2007 financial year for a capital gain of approximately $3.35 million. In respect of this transaction it seems, on the basis of an email from Mr Blackley’s then accountant, Mr Verwey, to Mr Blackley, that Mr Verwey was instructed by Mr Blackley in January 2011 to “take the $3.7 million off the company’s balance sheet and let it fall by the wayside”. This was a reference to the High Street transaction, albeit a different amount. It seems that Mr Blackley had transferred $3.7 million from funds held by solicitors for a Blackley company to ABN Ambro “for purposes other than those relating to [the company]”. (In the same email, Mr Verwey also refers to the issue of the “disappearing” sheep, referring to 1,275 sheep missing from the accounting, a number which was, as Mr Verwey put it, “obviously too high!”)

(c) The Hennessey transaction whereby the former family home at Tahunatapu Road was transferred to Ms Hennessey, a friend of Mr Blackley in 2010/2011 for no consideration. Ms Hennessey’s evidence is that she was asked to hold the property “to help Mr Blackley with his family affairs”. Mr Blackley then admits to forging Mrs Blackley’s signature, transferring the property to Mrs Blackley in September 2011.

[9] There are significant sums involved in the first two transactions, especially when contrasted with the final equity of the BCT, whatever it may ultimately be.

[10] A forensic accountant instructed by Mrs Blackley’s solicitors, Mr Hussey, has sworn an affidavit identifying the first two transactions, setting out the further documents that are sought, and explaining why they are required. He questions the accounting that has been received for these transactions, pointing to inter-entity balances not agreeing, seemingly inappropriate accounting around the proceeds from the sale of the High Street property and seeming use of hindsight to decide on the classification of assets and transactions. Mr Sandelin submits that the documents are needed inter alia to assess where funds from those transactions have ended up, whether
they have all been accounted for, for classification purposes, and to track the path of those funds for purposes of s 44C claims and otherwise.

[11] There is no forensic evidence put forward by Mr Blackley to refute that of Mr Hussey.

[12] Mr Sandelin says that Mrs Blackley does not trust Mr Blackley. In addition to the striking evidence noted above, he points inter alia to the following:

(a) Mr Blackley has previously told some of his advisers by email dated 19 June 2010 to ensure that information is withheld from Mrs Blackley. He said:

Mandie has once again left the family and said she is getting a divorce. I am taking this seriously this time.

Please therefore be advised, that there is to ZERO release of information and ZERO discussions with Mandie (or anyone acting for her), with regards ANY business or personal interests associated with myself or any member of the Blackley family. This is ABSOLUTE.

If you are placed in a ‘spot’ then advise Mandie that you are acting on my instructions and then advise me IMMEDIATELY.

(b) Mr Blackley has admitted that he has forged Mrs Blackley’s signature without her knowledge, on documents other than for the Hennessey transaction.

(c) Mrs Blackley also claims that Mr Blackley may have forged the signature of a Mr John Hill as supposed director of Toll Holdings Ltd (relating to the Port transaction) and that Mr Hill may have no knowledge of Toll Holdings or the Port transaction.

(d) I note also that the BCT itself, which was settled in October 1997, had as its beneficiaries Mr Blackley and children, but excluded Mrs Blackley.¹ That remained the case until much later in the relationship.

¹ This may give rise to issues under s 44 of the PRA.

[13] Mr Blackley’s lawyer, Ms Chambers QC, says that the discovery application should be declined because:

(a) The documents are not relevant or reasonably necessary (to identification and valuation of relationship property).

(b) In any event, they have either been provided, or an explanation given as to why they cannot be made available.

(c) To provide any further documents would be unduly onerous.

[14] Ms Chambers says there can be no basis to distrust Mr Blackley in terms of the Port and High Street transactions, given that they occurred in 2007, at a time when the separation was not even contemplated. In response, Mr Sandelin observes that the accounts relating to these transactions were not drawn up until after separation. Further, given Ms Chambers’ submission that the marriage had held together despite what Mr Blackley considered to be years of aggravation, the separation could not be classified as sudden or uncontemplated on Mr Blackley’s part.

[15] There is clear evidence of concerning conduct on Mr Blackley’s part, going back to the early stages of the relationship with the formation and terms of the BCT.

Analysis

[16] Discovery is a matter of what is relevant and reasonably necessary.

[17] There is no question but that documents in relation to the Hennessey transaction are relevant. Ms Chambers says they are not relevant because Mr Blackley and Ms Hennessey have volunteered that the transaction was not genuine. Any dealings, at or around the time of separation, with an asset in respect of which there is a claim, or a potential claim, are relevant. Without question, Mrs Blackley is entitled to see these documents.

[18] Documents in categories outside the three transactions, also all seem to be clearly relevant. Ultimately there were not many of these.
[19] Some of the documents required in respect of the Port and High Street transactions are source documents for financial statements (bank statements, working papers, and similar) rather than more direct accounting material such as financial statements themselves or even ledgers.

[20] With regard to these transactions, in a straightforward property case, with no apparent reason for further enquiry, it might be either of very limited relevance, or oppressive, to go beyond the key financial records and to delve in depth into transactions that occurred four years before separation. In this regard, I agree entirely with Nation J in Biggs v Biggs that a spouse should not be assumed to be dishonest, and the subject of an audit, simply because of a separation.² However, in a complex case, with clear evidence and legal basis to show reason for further enquiry, it will in my view generally be appropriate to order the provision of such further records, and for the Court to take a robust approach to such an order. This is consistent with the comments of Kós J in Dixon v Kingsley³ and also with the Court of Appeal decision in M v B where Robertson J said the law relating to relationship property disputes requires total disclosure and co-operation.⁴

[21] I consider this case to be a stark example of where further discovery should be provided.

[22] The documents sought are relevant, or may be relevant, in determining the value of property (including trust property); in determining the proper classification of assets (for example, there may have been a distribution in effect to Mr Blackley in the movement of funds); and in tracing the movement of funds for purposes of s 44C of the Act. The field of relevance would be materially reduced if Mr Blackley were to accept equal division of trust assets, but where Mrs Blackley has to rely inter alia on s 44C of the Act, discovery becomes much broader.

² Biggs v Biggs [2018] NZHC 1592 at [290].

³ Dixon v Kingsley [2015] NZHC 2044 at [20].

⁴ M v B [2006] NZCA 535; [2006] 3 NZLR 660 at [49].

[23] I return to Ms Chambers’ submission that some of these documents have either been provided, or are not available, which she says has been explained at length in Mr Blackley’s affidavits.

[24] In the course of argument, there were a number of documents in Schedule B which Mr Sandelin conceded had been provided, and other document categories which he deleted or refined. Beyond that, I asked Ms Chambers several times if she would indicate clearly which documents on Mr Sandelin’s list had been provided. Although Ms Chambers took me through Mr Blackley’s narrative affidavits at length, I was left unclear as to the answer.

[25] In any event, if some documents have been provided before, it will be a small enough task to provide them again.

[26] In terms of whether the documents exist, I am satisfied there are credible grounds for belief that they exist. For example:

(a) Regarding the Port transaction, there would clearly have been conveyancing and accounting files, and trust account ledgers showing the flow of moneys. The trust account ledgers should still be available and it would be surprising if the files, (or part of them) and the other documents sought, were not still held by one adviser or another. It seems enquiries have been made, but these enquiries are not sufficiently exhaustive, as set out in Schedule B. Mr Blackley contends that he has not had any contact with Findlays⁵ since 2011. Such a statement is hardly sufficient to satisfy the Court that those accountants do not hold any relevant documents.
(b) Regarding the High Street transaction, again it would be surprising if files, and the other documents sought, were not still held by one of the advisers. Again, enquiries have been made, but they are not sufficiently comprehensive for the reasons set out in Schedule B. Moreover, Mr Sandelin says a large number of further documents relevant to the High Street transaction have been discovered in a related proceeding

⁵ The accountancy firm that took over Mr Verwey’s practice following his death.

which involves the same issues, yet have not been discovered in this proceeding. These documents could not be used in this proceeding without consent, which at the time of the hearing had not been given, to my knowledge. Mr Blackley says the documents have been provided to one or multiple of Mrs Blackley’s previous counsel, but does not exhibit any relevant correspondence.
(c) Regarding the Hennessey transaction, a Quotable Value document records that Urlich McNab (a firm of solicitors) acted on the transaction. Again, for the reasons set out in the Schedule, there should be more documents relevant to this transaction.

[27] Again, I asked Ms Chambers to clearly demonstrate, with specific regard to each of the document categories in Schedule B, those documents which had been shown to be unavailable. The position remained unclear to me. I accept that real efforts have been made, but my impression is that the enquiries made have either not been specific enough, or not been broad enough. Also, Mr Blackley has a habit of swearing lengthy affidavits repeating that all documents have been provided. It would be preferable to have had a solicitor’s letter responding directly to Schedule B, or to the earlier application.

[28] If documents are not available, then Mr Blackley will need to clearly explain what has happened to the documents, with specific reference to the document category in Schedule B and with supporting documents by way of correspondence to and from his advisers and any other third parties whose hands they have been through in the interim. Mr Blackley’s solicitors will need to ensure full compliance in this regard, in accordance with their obligations under the High Court Rules.⁶

[29] I do not consider the application in its reduced form to be oppressive or unduly onerous.⁷ It does not involve a large number of documents and it is directed substantially at the three transactions. Also, cost does not appear to be an issue in this case. It would have been cheaper to comply with Mrs Blackley’s application than to defend it.

⁶ High Court Rules 2016, r 8.13.

⁷ Some of the categories were previously, for example, generic requests for correspondence.

Conclusion

[30] As noted above, in the course of the hearing, Mr Sandelin made a significant number of deletions and reductions to Schedule “B”.⁸ I consider the consequent schedule to be the appropriate subject of an order for discovery. Rather than redrafting it, I direct that the applicant file the amended version and, subject to my being satisfied that it is consistent with the changes made at the hearing, I will order accordingly.

[31] I urge both parties and their counsel to co-operate fully over these residual discovery issues. Mr Blackley, via his advisers, should comply fully with document requests, including providing clear third-party proof where documents are said to have existed, but now said to not exist anywhere, and to instruct his/the parties’ advisers to engage in direct discussion, rather than spend more time on lengthy narrative affidavits.

[32] It goes without saying that, once discovery is finalised, or at the same time, Mrs Blackley needs to sensibly address the realistic value of the asset pool, and Mr Blackley to take a realistic approach to its division.











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Hinton J

8. For example, Mr Sandelin deleted (i)(cc) and (hh); (ii)(dd); (iii)(aa); (iv); (vii); (viii); (ix)(dd) and (ee); (x) and (xi)(aa).