IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV [2015] NZHC CHRISTOPHER MAURICE LYNCH First Defendant

Transcription

1 IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV [2015] NZHC 1020 BETWEEN AMANDA ADELE WHITE First Plaintiff ANNE LEOLINE EMILY FREEMAN Second Plaintiff AND CHRISTOPHER MAURICE LYNCH First Defendant STUART GORDON SPENCE Second Defendant CIV IN THE MATTER of the Insolvency Act 2006 IN THE MATTER BETWEEN of the bankruptcy of Amanda Adele White CHRISTOPHER MAURICE LYNCH Judgment Creditor AND AMANDA ADELE WHITE Judgment Debtor [Continued over] Hearing: 24 November 2014, 19 February and 20 April 2015 Counsel: Appearances: P Wright for defendants in CIV and judgment creditor in CIV and CIV AA White and ALE Freeman, plaintiffs/judgment debtors Judgment: 14 May 2015 JUDGMENT OF FAIRE J White v Lynch [2015] NZHC 1020 [14 May 2015]

2 IN THE MATTER IN THE MATTER BETWEEN AND CIV of the Insolvency Act 2006 of the bankruptcy of Anne Leoline Emily Freeman CHRISTOPHER MAURICE LYNCH Judgment Creditor ANNE LEOLINE EMILY FREEMAN Judgment Debtor

3 Contents The applications... [1] The parties... [2] The bankruptcy proceedings... [3] The strike-out application... [4] Applications to be heard together... [8] Adjournment of the hearing... [11] Background... [13] The strike-out application... [34] The statement of claim... [36] The notice of opposition... [39] The Court s approach to a strike out application... [40] The causes of action...[49] The first cause of action [52] The second cause of action [64] The seventh cause of action [66] The ninth cause of action [68] The tenth cause of action [69] Memorandum to cross-examine Mr Spence [70] Conclusion on the strike-out application [74] The application in respect of the bankruptcy notices... [75] Orders... 86]

4 The applications [1] There are two applications which require determination, namely: (a) The application by the defendants in CIV which seeks orders striking out the plaintiffs statement of claim or, in the alternative, ordering security for costs; and (b) The application by the plaintiffs in CIV , who are the judgment debtors in proceeding CIV and CIV respectively, for orders that bankruptcy proceedings issued against them be stayed. The parties [2] I shall refer to Ms White and Ms Freeman as the plaintiffs and Mr Lynch and Mr Spence as the defendants in this judgment in respect of the applications that are under consideration. The bankruptcy proceedings [3] The bankruptcy proceedings are in the form of bankruptcy notices which have been issued against both plaintiffs. The founding judgment on which the bankruptcy notices are based is a judgment of the Court of Appeal delivered on 2 July 2014 which ordered the plaintiffs pay the defendants costs in the sum of $3, The Court of Appeal judgment dealt with three interlocutory issues which arose in an appeal against a decision of Priestley J in which judgment had been entered against the plaintiffs in their capacity as third parties in favour of the defendants. 2 The substantive appeal has not yet been determined. 1 2 White v Spence [2014] NZCA 298. Spence v Lynch [2013] NZHC 1478.

5 The strike-out application [4] The strike-out application contends that the plaintiffs proceeding CIV advances three general claims, all of which are covered by a judgment given by Priestley J on 19 June 2013 between these parties. [5] The first is a claim that the judgment was obtained by fraud and is therefore a collateral attack on the judgment. The defendants allege that the plaintiffs case does not satisfy the test which must be met to allow such an attack to be made. [6] The second is that the various specific claims for remedies sought from Mr Spence in the proceeding are matters that were dealt with by Priestley J in the judgment. [7] The third is that the various allegations amounting to negligence are made against Mr Lynch and likewise, were dealt with by Priestley J in his judgment. Accordingly, the defendants claim that those claims are barred either by the principle of res judicata or issue estoppel. Applications to be heard together [8] In a conference held on 8 October 2014 Keane J recorded that the plaintiffs stay applications in respect of the bankruptcy were in reality applications to set aside the bankruptcy notices and should therefore be determined having regard to r In short, that requires a consideration of s 17 of the Insolvency Act [9] His Honour directed that the defendants strike-out applications be heard at the same time as the plaintiffs bankruptcy applications because one of the reasons advanced for the stay applications is the existence of the plaintiffs current proceedings against the defendants, which directly arise as a challenge to the judgment of Priestley J earlier referred to. [10] Clearly, the matter that requires determination first is the strike out application because it provides the substantial basis for the determination of any security for costs application and the application in respect of the bankruptcy notices.

6 Adjournment of the hearing [11] A hearing scheduled for 24 November 2014 had to be adjourned because the plaintiffs/judgment debtors had not filed any formal opposition to the defendants strike-out application. What they wished to do instead was to produce a series of documents. The aim, as explained to the court, was an attempt to show that the judgment of Priestley J which they seek to attack was based and had been obtained by inaccurate and/or misleading and/or false evidence, allegedly given by Mr Spence. The plaintiffs say the contention can be proved by Mr Spence s bank account statements, which had been denied to the plaintiffs. Because the issue had not been signalled in the documents so far filed and needed to be formalised by affidavit evidence from both sides of this dispute, I adjourned the hearing part-heard and gave specific directions for the filing of a notice of opposition and affidavits in opposition. I also ordered that any reply affidavits be filed by a set date. Other machinery directions to ensure that the matters would be properly ready for a resumed hearing were made. [12] Although numerous documents have been filed by the plaintiffs there has, in fact, been no thorough analysis by way of comparison with the evidence that was given to Priestley J by Mr Spence and new evidence which Ms White and Ms Freeman now seek to introduce. That will be discussed in greater detail in this judgment. Background [13] In July 2002, Mr Spence, the second defendant, and the first plaintiff, Ms White, began a de facto relationship. They separated in December [14] Each had previously had been in a failed relationship. On 14 August 2002 they entered into an agreement under s 21 of the Property (Relationships) Act 1976 for the purpose of contracting out of the Act. Ms White was advised by a lawyer, Mr Simpson, and Mr Spence was advised by the first defendant, Mr Lynch.

7 [15] Ms White established a trust on 25 February 2003 (the DCT Trust). The trustees from commencement were herself, her mother (the other plaintiff), and until his retirement in October 2007, Mr Lynch. [16] Mr Spence alleged that he had advanced $224,480 to the DCT Trust that Ms White had established. The advances, which are recorded in the judgment of Priestley J as being made in four tranches, were made between February 2005 and October Mr Spence said the purpose of the advance was to contribute to the building of a family home on a property at Whangapouri Road to be owned by the DCT Trust. [17] In 2008, Ms White sold the Whangapouri Road property. She had agreed to buy another property at Glenbrook in October 2007 and she also purchased a property at Greenmeadows in May Both properties were bought through the DCT Trust. [18] After the parties separated, disputes arose about the way in which Ms White had dealt with property of the DCT Trust. Mr Spence issued the original proceeding against Mr Lynch in November 2011 to recover the debt which arose from his advances to the DCT Trust. Mr Spence claimed $224, for advances to the DCT Trust between February 2005 and October Mr Lynch was a trustee of the trust until he retired on 9 October [19] Before that matter proceeded to trial, Mr Lynch and Mr Spence reached agreement whereby Mr Lynch paid $155,000 to Mr Spence in settlement of the claim against him. As part of the settlement, Mr Spence assigned his claim against the trustees of the DCT Trust to Mr Lynch. Mr Lynch joined his former co-trustees, the plaintiffs, to seek contribution from them. Mr Spence, as part of the settlement, was required to give evidence to support Mr Lynch s claim. [20] That proceeding came to trial before Priestley J on 20 May In his Honour s judgment, delivered on 19 June 2013 he said: 3 At [31].

8 [3] The relationship of [Mr Spence and Ms White] lasts for six years and five months. Despite the initial orthodox and sensible arrangements evinced by the trust and s 21 agreement, carelessness, confusion, and chaos rode in behind the couple. Their family lived in properties owned by the trust. [Mr Spence and Ms Freeman] advanced substantial sums to the trust. Startlingly no one took any steps to prepare annual accounts and balance sheets for the trust. The s 21 agreement was never reconsidered or updated. The [T]rust s bank accounts were used constantly and extensively by [Ms White] to pay domestic accounts. [Mr Spence], because he respected [Ms White s] financial acumen, gave her internet banking authority for his bank accounts. The solicitor, advised [Mr Spence and Ms White] about a possible property sharing agreement, but one was never concluded. When the couple separated [Mr Spence] lodged a notice of claim pursuant to s 42 of the Act. [Ms White], despite the domestic loss of [Mr Spence s] income, continued to use the [T]rust as a vehicle to acquire further realty. [4] Four and a half years after [Mr Spence and Ms White] separated, the High Court is asked, through this proceeding, to sort out an unholy and totally unnecessary mess. [Mr Spence] wants the money which found its way to the [T]rust returned to him. [Ms White and Ms Freeman], who remain trustees, are exposed to the consequences of forthcoming mortgagee sales and could well be insolvent. They blame [Mr Spence] and the solicitor for their unfortunate predicament. [21] Priestley J recorded that the plaintiffs, who were the third parties in the proceedings before him, had broadly cast pleadings, the essence of which had been recorded in a minute made by Ellis J in a face-to-face conference before trial. Her Honour recorded the essence of Ms White s and Ms Freeman s defence as: that monies paid by Mr Spence were not loans to the DCT Trust but were paid pursuant to a profit sharing agreement between Mr Spence and the trust. Additionally it was claimed that the funds advanced by Mr Spence are subject to a right of set-off. His Honour later recorded the issue as: [46] The advances made by Mr Spence to the DCT Trust cannot properly be treated as loans if in fact there was a concluded agreement between relevant parties whereby the trust was sharing its assets in some agreed proportion with Mr Spence or another entity. [22] His Honour s conclusion is recorded as follows: [61] I accept the evidence of Mr Spence and Mr Lynch on this issue. No property sharing agreement was ever concluded. Although there was a broad measure of agreement between the parties that the shares might be 76 per cent/24 per cent, obviously no precise proportions

9 could be calculated until such time as Mr Spence s separate property contributions to Whangapouri Road could be assessed as a fraction of the purchase price and building costs of that property. More importantly, the parties to a property sharing agreement (Mr Spence personally or a trust) were never agreed.19 No property sharing agreement was ever prepared or executed. Nor was the important feature of extending a period of grace to Ms White, during which the DCT Trust would be able to buy out the joint owner s share should the relationship with Mr Spence come to an end, ever agreed. [62] In the absence of a concluded property sharing agreement Ms White s perceptions are rejected. The monies advanced by Mr Spence to the DCT Trust are not repayable pursuant to the terms of any arrangement between the parties relating to profits or respective contributions, quite simply because no such agreement was ever concluded. The same findings and state of affairs applies equally to the Glenbrook property into which the sale proceeds of Whangapouri Road passed. [23] The plaintiffs acted for themselves in that trial. Priestley J entered judgment in favour of Mr Lynch based on his assignment of the cause of action which Mr Spence had against the trustee in respect of moneys owed by Ms White s DCT Trust in the sum of $130,158. Costs were subsequently fixed in the sum of $66,466 plus disbursements and witnesses expenses. [24] Before trial Ms White was anxious to access bank records. She believed that such statements would discredit evidence to be given by Mr Spence about the flow of money into and out of the DCT Trust. She said that the BNZ gave her incorrect advice that bank statements for her various accounts were available online. She says that because the relevant accounts had been closed, the bank statements were no longer available online. During the trial before Priestley J, the BNZ acknowledged that statements for certain accounts which had been closed may no longer be available online. The Bank advised Ms White, in an dated 5 June 2013, that all outstanding statements were available to collect from BNZ reception at 80 Queen St, Auckland. The position then is that, after Ms White had closed her evidence before Priestley J, the documents were available. Judgment, at that stage, had not been given. No application was made to the Judge to alert him to the existence of the further bank documents.

10 [25] Prior to trial before Priestley J application was made for non-party discovery. The application was determined by Katz J in a judgment delivered on 14 May Her Honour recorded the three categories of documents concerned as: (a) (b) (c) documents relating to any Account Operating Authority signed by the plaintiff, Stuart Spence ( Request A ); any Account Operating Authority enabling Mr Spence to have internet access to the Spence Personal Accounts linked to the DCT Trust ( Request B ); and all bank statements in relation to the DCT Trust Account from the date the Account Operating Authority enabling Mr Spence to have access to the DCT Trust Account was signed (allegedly late 2005) to the date the Authority was cancelled ( Request C ). [26] Her Honour made orders in relation to request (a) by consent. In relation to request (b), her Honour noted that counsel for Mr Spence advised that he was prepared to consent to the disclosure of the documents sought in that category. On that basis, the Bank withdrew its opposition to the disclosure and it was ordered. Her Honour further recorded that at the hearing Ms White and Ms Freeman elected not to pursue request (c) because: (a) Any documents in that category that predated April 2006 no longer existed, as the Bank does not keep records for longer than 7 years; (b) Documents that post-dated April 2006 were available to Ms White via her online banking facility at no charge, or on request at a cost of $5 per statement if hard copies were required; (c) The Bank had already supplied bank statements for the DCT Trust account up to April 2009 to Ms White, at no charge; and (d) The only further documents that could be provided were hard copies of bank statements from April 2009 onwards, which could be obtained either through Ms White s internet banking facility or by provision of hard copies at a cost of $5 per statement. 4 Spence v Lynch [2013] NZHC 1081.

11 [27] On 30 March 2015, Ms White and Ms Freeman applied to rescind the judgment of 14 May That application was refused in a judgment delivered by her Honour on 30 March A further application was made to recall that judgment, which was declined in a judgment delivered on 17 April [28] Ms White has subsequently analysed the Bank records and has prepared schedules. The object of that exercise is designed to show that some of the evidence given by Mr Spence about payments that he made to the DCT Trust was wrong. [29] Ms White and Ms Freeman lodged an appeal against Priestley J s judgment. 7 Application had to be made to the Court of Appeal to extend time to apply for a fixture and file the case on appeal because time had expired. In addition, Ms White and Ms Freeman wished to appeal against Priestley J s subsequent costs decision. 8 Also, a formal application was made seeking permission to adduce further evidence on the appeal. That evidence consisted of the bank records obtained by Ms White and also her analysis of them. [30] A hearing on the preliminary issues took place at the Court of Appeal on 23 June Ms White and Ms Freeman were represented on this occasion by counsel. The Court of Appeal extended time to apply for a fixture and to file a case on appeal. The Court also extended time to file an appeal against the costs decision. The Court of Appeal declined the application to adduce further evidence. [31] The evidence which the plaintiffs sought to introduce was described by the Court of Appeal as follows: 9 [13] The further evidence Ms White and Ms Freeman wish to adduce consists largely of various bank statements covering the period of the relationship between Ms White and Mr Spence (July 2002 to December 2008), as well as an account reconciliation by Ms White and commentary on all the material. In total, there are approximately 1000 pages of additional material Spence v Lynch [2015] NZHC 609. Spence v Lynch [2015] NZHC 735. White v Spence, above, n 1. Spence v White [2013] NZHC White v Spence, above, n 1.

12 [14] Ms White says the reason she wishes to adduce this further evidence is to shed a more accurate light on the financial interactions between Mr Spence and the Trust than was provided to the High Court. In particular she wants to show the extent of the benefits Mr Spence took from the DCT Trust by way of financial remuneration or benefits that were only informally recorded. She submits that if this additional material had been placed before Priestley J, it would have had a material influence on the outcome. Indeed it is submitted that it would have resulted in Mr Spence being held to owe $33,000 to the trustees. [32] In analysing the application to adduce further evidence Court of Appeal said: [15] The constraints on the admission of further evidence are very strict. The evidence must be fresh, credible and cogent. It will not be regarded as fresh if it could with reasonable diligence have been adduced at trial. Evidence that is not fresh will only be admitted in exceptional and compelling circumstances. [16] We accept that bank statements are business records and hence inherently reliable. Not so the analysis by Ms White, some of which is, as Mr Pidgeon conceded, inadmissible opinion evidence. [17] More importantly, the evidence is not fresh. The financial records were all in existence and were discoverable at the time of the trial. Mr Spence's bank statements had been discovered in the Family Court for the purposes of relationship property litigation between Ms White and Mr Spence. As for the Trust's bank statements, these were in the control of Ms White and Ms Freeman. [18] Ms White attempts to justify the failure to obtain the statements by blaming the bank and the fact that she was not legally represented. The record does not, however, suggest that the bank was to blame. In any event, even if the bank were at fault, there were steps that Ms White and Ms Freeman could have taken. The fact they were selfrepresented in our view does not excuse the failure to take those steps. [19] All litigants, whether self-represented or not, are under an obligation to put their best case at trial and must live with the litigation strategy they choose to adopt. On appeal, parties are not entitled to recast their case by adducing new evidence, which is what the appellants in this proceeding are effectively attempting to do. [20] We have come to a very clear view that it is not in the interests of justice to allow the further evidence to be adduced. There are no compelling or exceptional circumstances. [21] The application is accordingly dismissed. (Citations omitted) [33] As earlier recorded, the hearing of the appeal has not yet taken place. I was advised that the reason for this is that security for costs have not been finalised. That

13 issue, in terms of r 37.2 of the Court of Appeal Rules, prevents this case from being allocated a hearing date. At this stage, no application has been made to strike out the appeal for non-payment of security for costs in terms of r 37(1) of the Court of Appeal Rules. The appeal appears to be languishing with nothing happening on it. The strike-out application [34] The defendants apply, pursuant to r 15.1 of the High Court Rules, to strike out the statement of claim. The relevant parts of r 15.1 that are relied upon are the following: 15.1 Dismissing or staying all or part of proceeding (1) The court may strike out all or part of a pleading if it (c) (d) is frivolous or vexatious; or is otherwise an abuse of the process of the court. [35] It is submitted on the defendants behalf that this proceeding is an abuse of process because the causes of action either: (a) Consist of collateral challenges on a previous final judgment of the Court, alleging without proper foundation that the prior judgment was obtained by fraud; (b) Attempt to relitigate matters that were in issue and finally determined by the prior proceeding; and (c) Attempt to raise matters that could and should have been raised in the prior proceeding for determination. The statement of claim [36] The plaintiffs statement of claim pleads fifteen causes of action. They are numbered one to 16. There is no eighth cause of action. Each claim is pleaded so that each allegation is carried forward to the next cause of action.

14 [37] The pleading recites the history of the relationship between Ms White and Mr Spence, how Ms White established the DCT Trust, how she and Mr Spence discussed entering into a profit-sharing agreement and how Mr Spence deposited the proceeds from the sale of his property into the DCT Trust s account, and how he represented to Ms White that the profit-sharing agreement was in place. Additionally, the plaintiffs say: (a) that Ms White and Ms Freeman, as trustees, were unaware that the deposits from the property sales were made as a loan by Mr Spence to the DCT Trust; (b) that Mr Lynch did not prepare a profit-sharing agreement or loan documents; and (c) that Mr Spence obtained substantial and ongoing credits from the DCT Trust and promised to repay them. [38] Mr Wright correctly summarised the five areas covered in the plaintiffs statement of claim. In summary they are: (a) An allegation that the judgment of Priestley J was obtained as a result of Mr Spence knowingly giving false or misleading evidence concerning the transactions between Mr Spence and the DCT Trust, being those matters covered by the first, second, seventh, ninth and tenth causes of action; (b) An allegation that Mr Spence is estopped from denying the existence of a property sharing agreement, which Priestley J held did not exist and which is contained in the third cause of action; (c) A claim for an accommodation debt which the plaintiffs allege Mr Spence owes the DCT Trust and which is the fourth cause of action;

15 (d) Claims for interest on amounts awarded to Ms White in the judgment of Priestley J and being covered by the fifth and sixth causes of action; (e) Allegations that the first defendant, Mr Lynch, variously breached fiduciary duties, duties of care, acted negligently and acted while under a conflict of interest in his capacity as a trustee of the DCT Trust and as a solicitor for the plaintiffs, and being those matters contained in the eleventh to sixteenth causes of action. The notice of opposition [39] The grounds upon which the plaintiffs oppose the defendants strike-out application are: (a) That Mr Spence gave false evidence in a trial before Priestley J heard on May and 4, 5 and 7 June 2013; (b) Mr Spence breached his discovery obligations under r 8.7 and did not produce relevant bank statements in the High Court proceedings before Priestley J. The implication is that Mr Lynch obtained a judgment which he was not entitled to obtain; (c) Mr Spence gave false evidence about his purported compliance with his discovery obligations with the result that the judgment was obtained either fraudulently or improperly; (d) Mr Lynch prevented Ms White from complying with her Family Court disclosure obligations from 2009 to 2011 in circumstances that her non-compliance was used to discredit her before Priestley J.

16 The Court s approach to a strike out application [40] The general principles to be applied in a strike-out application are well known. They were confirmed in Attorney-General v Prince & Gardner where the Court of Appeal said: 10 A striking-out application proceeds on the assumption that the facts pleaded in the statement of claim are true. That is so even although they are not or may not be admitted. It is well settled that before the Court may strike out proceedings the causes of action must be so clearly untenable that they cannot possibly succeed (R Lucas & Son (Nelson Mail) Ltd v O Brien [1978] 2 NZLR 289 at pp ; Takaro Properties Ltd (in receivership) v Rowling [1978] 2 NZLR 314 at pp ); the jurisdiction is one to be exercised sparingly, and only in a clear case where the Court is satisfied it has the requisite material (Gartside v Sheffield, Young & Ellis [1983] NZLR 37 at p 45; Electricity Corporation Ltd v Geotherm Energy Ltd [1992] 2 NZLR 641); but the fact that applications to strike out raise difficult questions of law, and require extensive argument does not exclude jurisdiction (Gartside v Sheffield, Young & Ellis). [41] The principles referred to above were endorsed by the Supreme Court in Couch v Attorney-General. 11 [42] Special principles apply to applications to strike-out proceedings where a judgment on the issue has been obtained. The Supreme Court recently reviewed the position in Commissioner of Inland Revenue v Redcliffe Forestry Venture Ltd: 12 [28] The principle of finality in litigation gives rise to a rule of law that makes conclusive final determinations reached in the judicial process: Unless a judgment of a Court is set aside on further appeal or otherwise set aside or amended according to law, it is conclusive as to the legal consequences it decides. The rule reflects both the public interest in there being an end to litigation and the private interest of parties to court processes in not being subjected by their opponents to vexatious relitigation. The rule recognises, however, that a policy of absolute finality is unsafe. It accommodates exceptional situations by allowing final determinations to be revisited but within prescribed limits. For example, where there is no abuse of process involved, an application for recall of the judgment of a court can be made on grounds, which include where counsel have failed to direct the Attorney-General v Prince & Gardner [1998] 1 NZLR 262 (CA) at 267. Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725. Commissioner of Inland Revenue v Redcliffe Forestry Venture Ltd [2012] NZSC 94, [2013] 1 NZLR 804.

17 Court s attention to a legislative provision or authoritative decision of plain relevance. Limitations on the exceptions ensure that they do not subsume the general rule of finality and conclusiveness of judgments. The need for this was recognised by Lord Wilberforce in the leading case on the availability of the particular exception which Redcliffe relies on in this case: For a policy of closure to be compatible with justice, it must be attended with safeguards: so the law allows appeals: so the law, exceptionally, allows appeals out of time: so the law still more exceptionally allows judgments to be attacked on the ground of fraud: so limitation periods may, exceptionally, be extended. But these are exceptions to a general rule of high public importance, and as all the cases show, they are reserved for rare and limited cases, where the facts justifying them can be strictly proved. [29] In cases brought under the fraud exception, only fraud in the strict legal sense will suffice: equitable fraud or lack of frankness does not qualify. In Lord Wilberforce s words: There must be conscious and deliberate dishonesty, and the declaration must be obtained by it. And as Lord Simon said in The Ampthill Peerage, citing a passage in the leading text on res judicata: Where the allegation, or the evidence, of the suggested fraud is inconclusive, or wanting in precision, or such as to give rise to no more than surmise, suspicion, or conjecture, the affirmative answer fails, and the estoppel is not displaced. [30] In New Zealand, the Court of Appeal has confirmed that claims based on suspicion are not allowed and has said that the fraud alleged must go to the heart of the judgment. To ensure these requirements are all met in any fresh proceeding challenging the finality of a judgment on this ground, the law sets strict requirements as to pleading in a case brought under the fraud exception. [31] It is also established that the appropriate procedural course, where a party against whom a judgment has been entered, alleges that it has been obtained by fraud, is to commence a separate proceeding seeking to have the judgment set aside. This is because cases invoking the fraud exception allege there has been dishonesty, usually involving perjury, in the evidence given at trial which has deceived the trial court into making erroneous determinations of fact. It is because the challenge is directed at the integrity of the determinations of fact in the litigation that the party alleging fraud brings a fresh proceeding in the trial court, even where the impugned judgment has already been subject of appeal. In such a case the plaintiff does not seek a review of the legal principles that were applied, being rather concerned with the consequence of their application to tainted evidence. [32] The rationale for allowing a fraud exception to finality is that it is right that a party who can show that his or her ability to mount an effective case was compromised by the fraudulent conduct of the

18 other party, should not be bound by a judgment which was thereby obtained. [33] While this rationale exceptionally warrants permitting an unsuccessful litigant to bring a proceeding seeking to reopen a judgment in concluded litigation on the ground it was procured by fraud, it also provides for pre-trial scrutiny of such claims to protect against abuse of that process. So where a defendant in a proceeding involving the fraud exception applies to strike it out, the plaintiff is required to discharge the onus of showing it has a case with an evidential foundation amounting to a prima facie case of fraud. The plaintiff s claim of fraud must be one that is fully and precisely pleaded and particularised and of sufficient apparent cogency that it should go to trial. Where the claim alleging fraud is based on allegations concerning facts discovered since the judgment concluding the litigation, it must be shown they were not discoverable with reasonable diligence at the time of the previous proceeding. The same requirements of freshness, materiality and cogency that are imposed for admissibility of new evidence on appeal must be met. Evidence that was available at the time of trial, and could reasonably then have been adduced, will only be considered in special circumstances. As well, if the defendant applies to dismiss the proceeding on the ground that the threshold for a claim under the fraud exception is not met, the plaintiff must also respond by promptly submitting probative affidavit evidence which verifies the critical pleaded facts relied on in the proceeding. It has the onus of establishing that the new evidence is such as to justify a new trial. [43] The Court of Appeal in Shannon v Shannon emphasised that where the challenge to the prior judgment is based on an allegation of perjury, the evidence of perjury must be so strong that it would reasonably be expected to be decisive at the rehearing. 13 The Court confirmed that there must be: (a) Evidence newly discovered since trial; (b) Evidence that with reasonable diligence could not have been found by the time of the trial; (c) Evidence so material that its production would properly have affected the outcome of the trial; and (d) Where perjury is alleged, evidence so strong that it would reasonably be expected to be decisive at the rehearing. 13 Shannon v Shannon (2005) 17 PRNZ 587 (CA) at [104] and [119].

19 [44] A pleading may also be struck out where it is barred by issue estoppel. The Court of Appeal in Shiels v Blakely 14 held that where a final judicial decision has been pronounced by a New Zealand judicial tribunal of competent jurisdiction over the parties to and the subject matter of the litigation, any party or privy to such litigation as against any other party or privy is estopped in any subsequent litigation from disputing or questioning the decision on the merits. 15 Issue estoppel applies where the matter has been put directly at issue in the first proceeding. The particular issue must be fundamental to the earlier decision. 16 [45] However, a pleading may also be stopped if it could have been put forward before the trial Judge but was not due to the strategy the party chose to adopt. The Court of Appeal in Bhanabhai v Commissioner of Inland Revenue 17 has recently reviewed the relevant authorities that discuss the re-litigation of issues that were addressed in a previous judgment or ought to have been brought to the court s attention in the previous proceeding. [46] The first such relevant authority is the judgment of Sir James Wigram V-C in Henderson v Henderson: 18 In trying this question, I believe I state the rule of the Court correctly, when I say, that where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time. [47] The pleading will be an abuse of process if it raises an issue that could and Shiels v Blakely [1986] 2 NZLR 262 (CA). At 268 and 269. Talyancich v Index Developments Ltd [1992] 3 NZLR 28 (CA). Bhanabhai v Commissioner of Inland Revenue [2007] 2 NZLR 478 (CA). Henderson v Henderson [1843] 3 Hare 100, [ ] All ER Rep 378.

20 should have been raised in the previous proceeding. 19 In Bhanabhai the Court of Appeal also considered the observations of Bingham LJ in Johnson v Gore Wood & Co (a firm): 20 Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceeding involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in early proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. [48] In respect of the causes of action that allege the judgment was obtained by fraud, the onus is on the plaintiffs to show that they have a prima facie case of fraud supported by evidence that is fresh, material and cogent, or that if the evidence was available at the time of trial, that special circumstances exist that warrant consideration of that evidence. In respect of the remaining causes of action, the court must consider whether they raise issues which were, or should have been, argued before Priestley J. If this question is answered in the affirmative, those causes of action are estopped and should be struck out Neylon v Dickens [1987] 1 NZLR 402 (CA) at 409; New Zealand Social Credit Political League Inc v O Brien [1984] 1 NZLR 84 (CA); Henderson v Henderson; Greenhalgh v Mallard [1947] 2 All ER 255 (CA); Hunter v Chief Constable of West Midlands Police [1982] AC 529 (HL). Johnson v Gore Wood & Co (a firm) [2001] 1 All ER 481 (HL) at

21 The causes of action [49] I first consider the causes of action that do not allege fraud. These are the third to sixth, and eleventh to sixteenth causes of action, inclusive. They all raise matters that were either dealt with by Priestley J in his judgment or should have been raised by the parties for consideration at that time. On their face, they are caught by the principles of finality in respect of civil proceedings under the established doctrine of res judicata and under the inherent powers to prevent abuse of process. Accordingly, they must be struck out. [50] The first, second, seventh, ninth, and tenth causes of action all allege fraud of one kind or another. Accordingly, these causes of action and the evidence adduced in support need to be considered to determine whether the fraud exception to the finality of judgments applies in this case so that it would not be appropriate to strike out these causes of action as an abuse of process. The issue involves a consideration of bank statements that had been made available and also a commentary, or analysis, on them which has been completed by Ms White. At the end of the day, what is required is an assessment as to whether the analysis of the bank statements given by Ms White, considered against the testimony given by Mr Spence before Priestley J, discloses a sufficiently material difference and would leave to a different result, so that the new proceedings should be allowed to continue. [51] I now consider these causes of action separately. The first cause of action [52] The first cause of action alleges that Mr Spence assisted Mr Lynch to obtain a judgment by giving inaccurate, misleading or false evidence about the financial transaction between himself and the DCT Trust. Specifically, the plaintiffs allege that the following allegations made by Mr Spence before Priestly J were false: (a) that he regularly deposited monies into the DCT Trust s bank account (because such transactions were irregular and minor according to the plaintiffs);

22 (b) that he contributed his salary to support the de facto relationship; and (c) that he complied with all disclosure requests by the plaintiffs to supply bank statements for all of his accounts. [53] The plaintiffs also say that Mr Spence did not reveal to Priestley J that he received ongoing and substantial credits from the DCT Trust from 2005 to late 2008, and that as a result, Priestley J assumed these credits did not exist. [54] Mr Wright accurately summarises the plaintiffs argument as follows: Ms White now in effect argues that: (a) (b) (c) (d) She did not have all the BNZ bank statements and/or Mr Spence s bank statements; She therefore could not provide an analysis of the net position as between Mr Spence and the DCT Trust; If she had had all the statements, she would have known that Mr Spence owed the DCT Trust money and would have won the case or would have been likely to win the case; The reasons she did not have all the bank statements were: (i) (ii) Mr Spence did not disclose his statements contrary to his disclosure obligations; The bank statements were not available contrary to the BNZ s explanations to the Court; (e) (f) Mr Spence lied about his disclosure; Therefore Mr Lynch got judgment by fraud or improperly. [55] The plaintiffs allege that an analysis of the bank account statements provides a factual basis for these allegations. [56] The issue, then, is whether the bank statements and Ms White s analysis of them establish a prima facie case that the conclusions reached by Priestley J would have been different had they been available. There is also the added issue, which is that the information was available before judgment and not brought to his Honour s attention.

23 [57] Ms White has prepared a number of charts in which she compared the figures Mr Spence said (in evidence before Priestley J) he transferred to the DCT Trust and the corresponding figures that are shown in Mr Spence s bank statements. In some instances, the amount stated by Mr Spence in evidence differs significantly from the amount shown in the bank statement. The outcome is that the total amount paid by Mr Spence to the DCT Trust is considerably less than he alleged in evidence before Priestley J. There are also other charts that compare the amounts paid by the DCT Trust to Mr Spence, which allege that these amounts were not acknowledged as having been received by Mr Spence in his evidence before Priestley J. [58] The issue with these statements however is that they do not contradict Priestley J s finding that Ms White was in control of both the DCT Trust s and Mr Spence s accounts and was the partner responsible for the family s finances throughout the relationship. I also keep in mind that these charts were not prepared by an expert and the analysis Ms White derives from them is only of limited assistance. [59] If the bank statements and the analysis are nevertheless taken as being true and correct, they still only reveal inaccuracies in Mr Spence s evidence and hence do not provide a sufficiently strong evidential foundation with which the plaintiffs can show they have a prima facie case of fraud. This is so for the following reasons: (a) Any alleged dishonesty or inaccuracy in Mr Spence s evidence has not been shown to amount to conscious and deliberate dishonesty. (b) As far as perjury is alleged, the evidence relied upon by the plaintiffs falls far short of raising an expectation that it would be decisive at the rehearing. (c) If the bank statements and their analysis were presented before Priestley J, it is unlikely he would have concluded that a profitsharing agreement was in place or that the settlement between Mr Lynch and Mr Spence was obtained by fraud.

24 [60] Moreover, the bank statements relied upon by the plaintiffs are the same bank statements the Court of Appeal refused to adduce as new evidence on appeal on the basis that they were reasonably available to the plaintiffs at the time, and were neither material, nor credible nor cogent. To use this evidence as a basis for alleging fraud is an attempt to circumvent the decision of the Court of Appeal and to have a second bite at the cherry. [61] In respect of the plaintiffs allegation that Mr Spence did not reveal to Priestley J that he had received substantial credits from the DCT Trust, this point was addressed by Priestley J at [103] to [105] of his judgment: [103] Throughout her cross-examination of Mr Spence, Ms White asked questions designed to show that Mr Spence had over the years received extensive monetary benefits from the DCT Trust. There was mention of this factor too in Ms White's closing submissions. It is doubtful whether this issue has been properly pleaded. Nonetheless I can deal with it succinctly. [104] Ms White essentially submitted that an analysis of Mr Spence's credit card statements and personal bank accounts revealed inflows of money from the DCT Trust. Her estimate of the figure is $184,000. There has, however, been no itemisation or evidence of this. Similarly there appears to have been modest funding of the DCT Trust on a reasonably regular basis from Mr Spence's bank account. [105] I find as a fact, that payments made, on Mr Spence's behalf, by the DCT Trust, were the product of Ms White's internet banking access to his accounts. More importantly this pattern is, in my judgment, a product of the use to which Ms White chose to put the trust's funds. Certainly Mr Spence was not a beneficiary of the trust. A perusal of such items as can be gleaned from the disclosed bank accounts of the trust and Mr Spence points to high levels of domestic expenditure. As I have already commented[31] Ms White's clear conduct, as the dominant DCT Trust trustee, was to fund the bulk, if not all, of the domestic, personal, and family expenditure of the couple from the trust's bank account. [62] I also accept the defendants submission that the findings made by Priestley J in respect of the existence of a profit-sharing agreement and the financial transactions between Mr Spence and the DCT Trust were made on the basis of contemporaneous documents and not on credibility of either Mr Spence or Ms White.

25 [63] It follows that the plaintiffs allegation that Mr Spence gave inaccurate, misleading or false evidence is not supported by sufficiently strong evidence that would lead to the conclusion that the judgment of Priestley J was obtained by fraud. Accordingly, the first cause of action should be struck out. The second cause of action [64] The second cause of action repeats all of the allegations pleaded in the first cause of action. In this cause of action the plaintiffs claim that Mr Spence caused loss by deception when he gave misleading or false evidence concerning his financial transactions with the DCT Trust. [65] As no separate particulars or allegations are pleaded, the second cause of action should be struck out for the same reasons as the first. The seventh cause of action [66] The seventh cause of action repeats all previous pleadings. It pleads that Mr Spence committed equitable or constructive fraud when he gave inaccurate, misleading or false evidence about the amount of credits he received from the DCT Trust. The plaintiffs say that as a result of this fraud, Mr Spence was able to free himself from repaying the credits to the DCT Trust and was able to retain the settlement amount paid to him by Mr Lynch. The plaintiffs argue that the settlement was only achieved because Mr Spence did not make Mr Lynch aware of the credits he received from the DCT Trust. [67] This pleading is essentially the same as those for the first and second causes of action. The factual inquiry is also the same, as well as the findings by Priestley J referred to above. The plaintiffs do not particularise the amount of credits Mr Spence is said to have obtained by fraud. The plaintiffs have not, on the evidence, made out a prima facie case of fraud, as it is used in its strict legal sense. The seventh cause of action should also be struck out.

26 The ninth cause of action [68] The ninth cause of action pleads that Mr Spence obtained a pecuniary advantage by deception. The pleading is effectively that of fraud, albeit worded differently. It similarly repeats all previous allegations, and causes of action without adding anything more to them. It contains no further particulars of the alleged deception or the amount gained by that alleged deception. The ninth cause of action should also be struck out. The tenth cause of action [69] The tenth cause of action is similar to the others in that it effectively pleads fraud but is headed unconscionable dealings. It repeats all the previous causes of action and should be struck out for the same reasons. Memorandum to cross-examine Mr Spence [70] On 13 February I issued a minute following a telephone conference with the parties in which I declined leave to cross-examine Mr Spence but reserved the possibility for relooking at the matter following the presentation of submissions at the hearing. Following the hearing the plaintiffs filed an urgent memorandum requesting leave to cross-examine Mr Spence. [71] The plaintiffs contend that Mr Spence was being untruthful when, in his affidavit of 14 July 2010 filed in the Family Court, he stated that he did not have a copy of his and Ms White s s 21 agreement at the time he filed the affidavit. The plaintiffs rely on a letter from their solicitor on 12 May 2010 which states that Mr Spence told him that he had located a copy of the s 21 agreement. The plaintiffs say that this evidence undermines Mr Spence s credibility and that by implication, it undermines Priestley J s credibility finding in relation to Mr Spence. Accordingly, they say Mr Spence should be cross-examined and new credibility findings made. [72] I do not think this step is necessary. The argument adds nothing to what has already been put before the Court and is a repetition of previous submissions. In light of the plaintiffs inability to produce evidence to support their contention that the