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Beneficiaries, Beneficiary rights, Discovery, Relationship Property, Right to trust information, s. 182, trust

David and Goliath?

Pertinent facts:

On first blush Biggs v Biggs has the appearance of a David and Goliath style contest.   Nation J refers at [10] to the 2300 pages of documents that have had to be considered and at [11] notes that when claims are pursued “in a particular way, there can be scant recognition of the principle that questions arising under s 1N(d) PRA about relationship property should be resolved as inexpensively, simply and speedily as is consistent with justice.”

The judgment is substantial, running to 114 pages.  However, the decision warrants close consideration, especially by practitioners, as it provides direction and consideration as to how to approach the battle of information and how much is too much.

[188] I do not consider that further discovery in this regard is necessary. The potential for Ms Biggs to have benefited from either of the trusts will be apparent from the trust deeds. The way and extent to which she may have benefited from the trusts during the marriage will be apparent from the annual accounts which have already been provided for the trusts. The extent to which she might benefit from the trusts in the future should also be apparent from the trust deeds.

Salient points:

  • the information provided in relationship property proceedings should be sufficient to establish the results of activities. As noted at [13]:”… Mr Lyne required a level of documentation that indicated he wanted to know not just what the results had been of that activity, as apparent from annual accounts and tax returns, but also to be able to audit, in considerable detail, how the apparent end results had been reached.”
  • discovery must be proportionate to what is required by a party to advance its case, and regard must be had to the principles of the Relationship (Properties) Act 1976 (the PRA) [14]
  • accounting experts should engage co-operatively so as to avoid unnecessary delay and cost [17]
  • compliance with discovery should be sufficient to allow the other party to determine the scope of their claims
  • parties should not necessarily expect orders for discovery that is oppressive and disproportionate [23]
  • discovery (when not by way of non-party application) cannot be presumed simply because a party is a director or as a discretionary beneficiary of a shareholding trust [24]
  • any interim distributions should be equal ]21]
  • the manner in which parties and their advisers approach and advance relationship property negotiations can be crucial in determining whether claims are dealt with fairly and constructively
  • “… counsel obviously have a responsibility to try and ensure that such proceedings are resolved as inexpensively and efficiently as is achievable, commensurate with the just resolution of what is in dispute.” [61]
  • “In New Zealand, the ownership of assets through trusts and the building up of wealth during a marriage but within trusts has often made it more difficult for parties, usually wives, to share in the wealth that has been built up during a relationship.” [62]
  • the principles governing discovery in relationship property litigation can be expressed as follows:

(a) A robust approach should be taken to discovery consistent with the purposes and principles of the Act: the need for just division, but also inexpensive and efficient access to justice.
(b) Such discovery must not be unduly onerous.
(c) Such discovery must be reasonably necessary at the time sought.
(d) The scope of discovery should therefore be tailored to the need of the Court to dispose, justly and efficiently, of relationship property issues under the Act.
(e) More substantial discovery may well be ordered by the Court where it has reason to believe that a party has concealed information or otherwise sought to mislead either the other party or the Court as to the scope of relationship property. But even here, the scope of discovery should be no more than is required for the Court to fairly and justly determine relationship property rights. It is just that in such a situation, more is likely to be required to meet that requirement.

  • Discovery must be relevant to the issues in the proceedings [82].  Editor’s note: does this, by inference, rule out fishing expeditions?
  • Confidentiality issues are not necessarily to be equated with obstruction [139]
  • Comprehensive discovery against third party trustees cannot be presumed, only because a relationship can be identified [159].  Editor’s note – such applications would be easier to deal with where relationship partners are not the sole trustee
  • Discovery regarding distributions should not be presumed [167]
  • The use of nominee settlors is to be discouraged [Editor’s note] as this invites uncertainty regarding the role of the “de facto” settlor.  See [174]
  • The potential for a party to have benefited from one or more trusts will be apparent from the trust deeds. The way and extent to which a party may have benefited from a trust or trusts during a marriage will be apparent from the annual accounts. The extent to which a party might benefit from a trust or  trusts in the future should be apparent from the trust deeds [188]

Two words sum up Nation J’s decision: context and proportionality. The more complex the case, the greater the risk of losing sight of these key aspects and, to be clear, Biggs v Biggs is a factually complex situation. So when do documents that might be regarded as third party documents with limited direct relevance become salient to RPA claims? To what extent does it become a trustee issue to decide – which raises the question when trustees caught between warring spouses in relationship property proceedings should properly accede to demands for documentation or should quite properly resist (especially in circumstances of legitimate commercial confidentiality.)?

References:

  • Biggs v Biggs [2018] NZHC 1592

 

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