EARL RAYMOND HAGAMAN V BARBARA JEAN FAIRBANK CA682/2010

EARL RAYMOND HAGAMAN V BARBARA JEAN FAIRBANK CA682/2010 18 November 2010IN THE COURT OF APPEAL OF NEW ZEALAND CA682/2010 [2010] NZCA 526BETWEEN EARL RAYMOND HAGAMAN Appellant AND BARBARA JEAN FAIRBANK Respondent Hearing: 20 October 2010 Court: Ellen France, Randerson and Stevens JJ Counsel: T C Weston QC for Appellant P F Whiteside and J W A Johnson for Respondent Judgment: 18 November 2010 at 11 amJUDGMENT OF THE COURT A The appeal is dismissed. B The appellant must pay the respondent costs for a standard appeal on a band A basis and usual disbursements. We certify for second counsel. REASONS OF THE COURT(Given by Ellen France J)Table of ContentsPara No.Introduction [1]Background [3]The High Court judgment [13]The statutory scheme [16]The issues [22]Jurisdiction [24]Application of s 185(3) [27]Submissions [28]Discussion [31]The effect of the request on the trustees [49]Legal privilege [52]The request for documents [55]The discretionary factors 0Disposition [60]Introduction[1] In an oral judgment delivered on 5 October 2010, Panckhurst J ordered that evidence be taken in New Zealand for use in matrimonial proceedings brought in a Californian court by Barbara Fairbank against her former husband, Earl Hagaman. 1The application for orders was made to implement a request for assistance issued by the California court and was granted under ss 184 and 185 of the Evidence Act 2006. The orders made by Panckhurst J as a result of the decision to provide assistance will enable oral evidence to be taken from a number of New Zealand residents and will require the production of documents by two of the deponents. [2] Mr Hagaman appeals against the decision to provide assistance primarily on the basis that the orders made require steps to be taken which cannot be required to be taken "by way of obtaining evidence for the purposes of civil proceedings" in the High Court and so breach s 185(3). In addition, the appellant says the application should have been declined for a number of reasons including the impact on information protected by legal privilege.Background[3] Barbara Fairbank and Earl Hagaman married in the United States of America in 1961. They separated in 1981 and their marriage was dissolved in May 1982.1 Fairbank v Hagaman HC Christchurch CIV-2010-409-2070, 5 October 2010.[4] After separation, Ms Fairbank issued proceedings in the Superior Court of California seeking, amongst other matters, orders for the division of property. The proceedings were not determined because, in 1983, the parties entered into two agreements about their relationship property (one relating to assets in the United States and one dealing with assets in New Zealand). [5] Mr Hagaman moved to New Zealand at about the time that the relationship property agreements were entered into. [6] It appears that the parties have differing views on the extent to which these agreements finally resolved matters between them and, in 2005, Ms Fairbank brought relationship property proceedings in New Zealand. These proceedings were stayed after John Hansen J concluded that the appropriate forum was California, not New Zealand. 2 Ms Fairbank then revived the proceedings in California. As part of those proceedings, the originating application to which the present appeal relates was filed in the High Court in Christchurch. The application was made to implement a 2 September 2010 request from the Los Angeles Court for assistance. [7] The request for assistance sought the examination of eight witnesses by way of taking of oral depositions and, in relation to two of the witnesses, the production by them of specified documents. The request proposed that the eight be examined and questioned by attorneys who had been retained by the parties and that the proceeding be transcribed by a California court reporter in terms of the California Code of Civil Procedure. The request records that Judge Schnider, a retired Judge of the Los Angeles County Superior Court, is to preside and act as "discovery referee" over the evidence taking and to issue rulings under California law as to any objections to questions or any issues about how the depositions are conducted. The request also states that, subject to any rulings or orders from the High Court of New Zealand, Judge Schnider is to apply Californian rules of procedure and evidence and the substantive law of California. Pankhurst J made orders generally reflecting the terms of the request.2 F v H HC Christchurch CIV-2006-409-849, 10 November 2010.[8] The eight witnesses are Mr Hagaman's present wife, two New Zealand solicitors, four men who have had dealings with Mr Hagaman and a woman who has helped him with secretarial tasks in respect of his personal affairs. [9] In terms of documents, the orders made by the High Court direct that Mr Hagaman's current wife, Lani Hagaman, is to produce:(a) All pre-marital, pre-nuptial or relationship property agreements entered into with [Mr] Hagaman; ...[10] The orders also provide that Alan MacAlister, a solicitor, is to produce:The trust account record of financial transactions of [Mr] Hagaman for the year ended 31 March 1989.[11] As we understand it, the procedure for deposing the witnesses will involve the American lawyers questioning the witnesses here in New Zealand with Judge Schnider present via Skype link-up. [12] At the time we heard the matter, the exigencies of the Californian court's timetabling were such that the oral depositions were to be concluded by 5 November 2010 with the hearing in California commencing on 10 November 2010. Since the hearing, we have been advised that both dates have been extended by the Californian court to 29 November 2010. Release of our judgment has been delayed by delays in finalising the sealed orders of the High Court.The High Court judgment[13] Panckhurst J concluded that the request satisfied the terms of ss 184 and 185. In particular, he concluded that there was no breach of s 185(3), which prohibits orders requiring the taking of steps which cannot be required for civil proceedings in New Zealand, or of s 185(5), which deals with the scope of requests for the production of documents. [14] Further, the Judge said that objections based on matters of legal privilege could be dealt with by retired Judge Schnider or could be referred to the High Court.Mr Hagaman had also objected to the request on the basis that some of the information was held by persons in their capacity as trustees. Panckhurst J expressed the tentative view that the trustees could be asked questions and may be compelled to answer. He noted the power under s 69 of the Evidence Act to direct that confidential information not be disclosed in appropriate circumstances. [15] On the discretionary factors, while delay was a factor, Panckhurst J deferred to the view of the Californian court that this was not significant. Finally, the Judge rejected the submission that the request was oppressive.The statutory scheme[16] Section 184 of the Evidence Act provides that a High Court Judge may exercise the powers conferred by s 185(1) if the Judge is satisfied of the matters referred to in s 184. Those matters include the requirement that the application for the taking of evidence is made to implement a request issued by a foreign court. [17] Section 185(1) provides that if the section applies the Judge may make orders for the taking of evidence. Those orders may include provision for the examination of witnesses orally or in writing, and for the production of documents. 3[18] Section 185(3) states:An order under subsection (1) may not require any particular steps to be taken unless they are steps which can be required to be taken by way of obtaining evidence for the purposes of civil proceedings 4 in the High Court (whether or not proceedings of the same description as those to which the application for the order relates).[19] In terms of s 185(5), an order under s 185(1) may not require a person:(a) to state what documents relevant to the proceedings to which the application for the order relates are or have been in the person's possession, custody, or power:3 Section 185(2).4 "Civil proceeding" is defined in s 182 as meaning any proceeding other than a criminal proceeding.(b) to produce any documents other than particular documents specified in the order as being documents appearing to the court making the order to be, or to be likely to be, in the person's possession, custody, or power and relevant to the proceedings.[20] Section 185(6) states that persons required to attend are entitled to payment for expenses and loss of time. [21] Finally, s 186 deals with the privileges of witnesses. Section 186(1) makes it clear that a person may not be compelled by an order under s 185(1) to give any evidence he or she could not be compelled to give:(a) in civil proceedings in New Zealand; or (b) in civil proceedings in the country in ... which the requesting court exercises jurisdiction.The issues[22] The substantive appeal can be dealt with using the parties' list of agreed issues which requires consideration of the following: (a) The application of s 185(3) of the Evidence Act; (b) The effect of the request on the prospective deponents who are trustees; (c) The effect of the request on the prospective deponents whose evidence may be the subject of legal privilege; (d) The effect of s 185(5) on the document request; and (e) Various matters going to the Court's discretion. [23] Before dealing with these matters, we address briefly the Court's jurisdiction to hear the appeal.Jurisdiction[24] We raised the question of jurisdiction with counsel at the hearing. The parties took the position that s 66 of the Judicature Act 1908 applied. That section provides that there is a right to appeal any judgment, decree or order of the High Court. [25] However, not every decision made by the High Court before delivery of the substantive judgment is amenable to appeal under s 66. This Court in Association of Dispensing Opticians of New Zealand Inc v Opticians Board said: 5[R]ulings made either in the course of the hearing of the proceeding (using that term in a broad sense, including for example an adjournment application), or as part of the trial conduct or management process would not ordinarily be susceptible to interlocutory appeal. On the other hand rulings which have some substantive effect on rights and liabilities in issue would be.[26] As a matter of form, the application for the relevant orders was brought before the High Court by way of originating application with the permission of the Court under r 19.5 of the High Court Rules. On one view of it, the decision made in this case is procedural in kind and relates to a matter of trial conduct. However, the orders made will enable the deponents to be compelled to give evidence and there will not necessarily be any further New Zealand proceeding. Because of these two factors we take the view, although without the benefit of full argument on the point, that the orders do have some substantive effects on rights. On this analysis, we proceed on the basis that there is jurisdiction to appeal under s 66.Application of s 185(3)[27] We turn then to consider the application of s 185(3) which was the focus of much of the argument on the appeal.5 Association of Dispensing Opticians of New Zealand Inc v Opticians Board [2000] 1 NZLR 158 (CA) at [36]; see also Andrew Beck and others McGechan on Procedure (online looseleaf ed, Brookers) at [J66.04(1)] and Andrew Beck "Litigation" [2008] NZLJ 449 at 452.Submissions[28] The principal submission for the appellant is that the orders which have been granted authorise an investigatory exercise, not an evidence-gathering exercise. Mr Weston QC for the appellant submits that the investigatory nature of the undertaking is apparent from the fact the inquiry will start with Mr Hagaman's current assets and work backwards from that information to any links with relationship property. [29] Mr Weston argues that New Zealand courts are prohibited from assisting in an investigatory exercise by s 185(3). He also says the relevance of the proposed line of questioning is very low. The appellant relies on evidence from the prospective deponents about the distance in terms of timing between their dealings with Mr Hagaman and events in California. In addition, Mr Weston points to the observation made by John Hansen J in the 2005 proceedings that, on the evidence as it then stood, the Judge was not satisfied there were "substantial" properties in New Zealand that were not identified in 1983.6[30] Mr Whiteside for the respondent acknowledges the inquiry is wide-ranging but says that reflects the context. Ms Fairbank claims that not all relationship property was divided between the parties and some property which was in New Zealand at the time of separation or which later came to New Zealand was relationship property. If successful in establishing that, she will seek to undertake a tracing exercise of the proceeds. Ms Fairbank's case is that this property has been used to build up a substantial asset base in New Zealand. Mr Whiteside submits that once the Californian court determined the deponents may be able to give relevant evidence, that was the end of the matter. Finally, Mr Whiteside says the Californian deposition taking procedure which is to be used can be seen as a hybrid of the New Zealand procedures of interrogatories and issuing a subpoena and so the test in s 185(3) is met.6 At [23].Discussion[31] In assessing the application of s 185(3), and indeed all of the matters raised by the appeal, it is important to be clear about the basis on which the respondent's case is brought. In written submissions, counsel put it this way:38. Third, the evidence will be used at trial in relation to both issues to be considered by the Californian Court, namely what New Zealand assets were held by the Appellant at the time of separation and what has happened to those assets. The evidence will be used to establish the extent of undivided community property at the time of separation, whether and when that property ended up in New Zealand and whether that property can be traced. Again, it is correct to state that is an "investigatory procedure".[32] In oral argument, Mr Whiteside said he would delete the description that the assets in issue are "New Zealand" assets. The submissions reflect the way the application was expressed to Judge Shaller in California and so, presumably, reflect the request. Mr Bachmayer, one of the counsel for Ms Fairbank, told Judge Shaller that:To the extent that those acquisitions in New Zealand can be traced to community property, [equating to what is known in New Zealand as relationship property], then clearly the argument would go that those acquisitions are either community in character or impressed with a community interest.[33] As to the approach applicable to ss 184 and 185 of the Evidence Act, the legislative history indicates that these sections are based on the Evidence (Proceedings in Other Jurisdictions) Act 1975 (UK) and were intended to be consistent with the Hague Convention on the Taking of Evidence Abroad in Civil or Commercial Matters. 7 New Zealand is not a party to the Convention. The general principles applicable to the issues raised by the present request are helpfully discussed by the United Kingdom Court of Appeal in considering the United Kingdom legislation in First American Corp v Zayed. 87 Evidence Bill 2005 (256-1) (explanatory note) at 36; see also Ministry of Justice Departmental Report for the Justice and Electoral Committee, Evidence Bill Pt 4 – Evidence from Overseas or to be used Overseas (May 2006). The report notes that most Australian states have followed the United Kingdom model, at 3.8 First American Corp v Zayed [1999] 1 WLR 1154 (CA). The United Kingdom has entered a reservation to Art 23 of the Convention, namely, that the United Kingdom will not execute any Letter of Request which requires a person:[34] That case dealt with a request from an American court for the oral examination of accountants employed by an international accountancy firm. The firm had been involved in providing audit services for a group of companies. The First American Corp alleged that this group had been involved in fraudulent conduct in an attempt to mount a takeover of the First American Corp. [35] In discussing the approaches taken in the earlier decision of In re State of Norway, 9 Sir Richard Scott VC said that case was authority for the proposition that: 10[A]s a matter of discretion, a request for oral testimony should not be acceded to if the intention were to obtain information rather than to obtain evidence for use at trial.[36] Applying the decision of the House of Lords in In re Asbestos Insurance Coverage Cases, 11 Sir Richard Scott said that the Court receiving the request: 12... must look at the issue of the relevance of the requested testimony, if it is raised, in broad terms, leaving to the foreign court, in all but the clearest cases, the decision as to whether particular answers, or answers on particular topics, would constitute relevant admissible evidence.[37] The approach to be taken was summarised as follows:13... ask first whether the intended witnesses can reasonably be expected to have relevant evidence to give on the topics mentioned in the amended schedule of requested testimony, and second whether the intention underlying the formulation of those topics is an intention to obtain evidence for use at the trial or is some other investigatory, and therefore impermissible intention.[38] Sir Richard Scott said the other relevant considerations were first, the importance of comity, and secondly, the need to protect witnesses from an oppressive request. 14a. to state what documents relevant to the proceedings to which the Letter of Request relates are, or have been, in his possession, custody or power; or b. to produce any documents other than particular documents specified in the Letter of Request as being documents appearing to the requested court to be, or to be likely to be, in his possession, custody or power.9 In re the State of Norway (Nos 1 and 2) [1989] ECC 468 (HL).10 At 1164.11 In re Asbestos Insurance Coverage Cases [1985] 1 WLR 331 (HL).12 At 1165.13 At 1165.14 At 1165.[39] In considering a provision of the United States Federal Rules of Civil Procedure which appears to be in similar terms to the provision in issue in the case before us, Sir Richard Scott continued: 15It is clear, therefore, that, under the United States rules, the questioning of the intended witnesses can cover both the eliciting of admissible evidence and an investigatory search for information leading to a train of inquiry. The latter type of questioning would not be permitted in this country, save in aNorwich Pharmacal type of action (see Norwich Pharmacal Co v Customs and Excise Commissioners [1974] AC 133). Section 2(2) of the Act of 1975 would, in my judgment, bar that type of questioning in an examination pursuant to a letter of request. In the present case, however, notwithstanding the width of some of the paragraphs of the schedule of requested testimony, I do not see any reason to doubt that questions put to the witness on the specified topics would, in general, be questions intended to elicit evidence for use at trial.[40] We agree with Mr Weston that the reference to s 2(2) must be a reference to s 2(3), which is the United Kingdom equivalent to s 185(3). [41] As indicated in First American and in the High Court in this case, questions of comity are important in relation to letters of request. 16 With that in mind, we turn to consider the key question for us, namely, whether the Californian court is requesting assistance in eliciting evidence for trial or in an investigatory inquiry. If the former, then the respondent is correct that there are analogous procedures in New Zealand in the form of interrogatories, the subpoena process and, we would add, the ability to take evidence prior to trial where circumstances require that. [42] The California Code of Civil Procedure §2025.620 provides:At the trial or any other hearing in the action, any part or all of a deposition may be used against any party who was present or represented at the taking of the deposition, or who had due notice of the deposition and did not serve a valid objection under Section 2025.410, so far as admissible under the rules of evidence applied as though the deponent were then present and testifying as a witness, in accordance with the following provisions: ...15 At 1166 – 1167.16 The same point is made in the context of a similar argument about consistency between English and American procedures in J Barber & Sons v Lloyd's Underwriters [1987] 1 QB 103 (QB) at 105.(c) Any party may use for any purpose the deposition of any person or organization, including that of any party to the action, if the court finds any of the following: (1) The deponent resides more than 150 miles from the place of the trial or other hearing. ...[43] Panckhurst J had evidence on the effect of the relevant provisions of the Code from William Glucksman, a lawyer giving evidence on behalf of Mr Hagaman and from Brian Brandmeyer, a lawyer giving evidence on behalf of Ms Fairbank. As Panckhurst J said, there was a difference in emphasis between the two, with Mr Brandmeyer placing more weight on the likely use of the evidence obtained at trial. It is, however, common ground that the answers from the deponents may be used at trial and, indeed, that if the respondent wants to obtain evidence from the deponents that this is the way to do it. These factors support the conclusion that the intended use is for evidence in the trial. Certainly, the request refers to use at trial. [44] Two other aspects are important. The first is that the trial will proceed on a two-part basis. The initial step is that the Californian court will deal with the issue of whether there was any undivided relationship property and what that property is. Mr Brandmeyer says the Court will make an interim decision on that. Mr Brandmeyer continues:If [Ms Fairbank] is successful then the trial moves to consider the tracing of the undivided property straight away. There will be no delay to allow for the gathering of further evidence.[45] The timing is the second factor we see as assuming some importance. There will be no gap in terms of time after the taking of the depositions to allow for further evidence gathering, nor, as Mr Brandmeyer says, for any further evidence to be collected after the first stage of the court's hearing is completed. [46] Accordingly, we consider the purpose of the exercise is to obtain evidence for use at trial. There is no breach of s 185(3).[47] Mr Weston did not press the issue of relevance but we make some brief comments on that aspect. As Panckhurst J said, comity is important here. 17 But it is still necessary to be satisfied the New Zealand statutory tests for admissibility of evidence are met. Section 7 of the Evidence Act, dealing with the need for evidence to be relevant, comes into that equation. Understandably, given the passage of time since the parties' separation, Panckhurst J expressed some concerns about whether there would be evidence relevant to the proceeding but concluded that, given evidence may prove or disprove something, the threshold was met. We agree. It may be, given the lapse of time, that the only evidence in fact assists Mr Hagaman. On the other hand, the reverse may be true: it depends what the deponents may say. [48] We add that the transcript of the argument before Judge Shaller shows the various concerns about relevance were raised on behalf of Mr Hagaman and considered by Judge Shaller.The effect of the request on the trustees[49] Four of the prospective deponents explain in their affidavits that their link with Mr Hagaman has involved their acting in a trustee capacity for various trusts. The evidence before the High Court was that Ms Fairbank is not a beneficiary of any of the trusts, all of which are New Zealand based. [50] In the High Court, the appellant's objection to the request as it related to information held by the trustees was that the court will not compel a trustee to give information to a non-beneficiary if there is no cause of action alleged against the trustee. Before us, the argument was put as another way of stating the first issue ie the Californian court is asking this Court to support an investigatory process. Essentially, Mr Weston submits, a New Zealand trustee should not be made to participate in a broad-ranging investigation undertaken by a non-beneficiary in another jurisdiction.17 See on this point Asbestos Insurance at 339 per Lord Fraser of Tullybelton about the inappropriateness of an English court to "determine in advance the matters relevant to the issues before the Californian courts on which each of these witnesses is in a position to give evidence".[51] For the reasons we have given, we do not see this ground as a reason for declining the request. The trustees can be questioned and if there are matters of privilege arising, they can be dealt with by retired Judge Schnider or the High Court.Legal privilege[52] Two of the deponents maintain that answering questions will involve disclosure of material that is legally privileged. Both of these witnesses have acted for Mr Hagaman as a solicitor. [53] Mr Weston's argument is that the Judge could have relied on s 186(1)(a) to refuse the request in relation to these two witnesses and should have done so. [54] We agree with the approach taken by Panckhurst J to this issue, namely, that issues of privilege can be dealt with as part of the oral depositions process. The orders of the Court set out the process to be followed where an objection is made as to the compellability under New Zealand law of any evidence requested in the depositions. That process envisages that a deponent will not be compelled to give the evidence objected to, pending resolution of any objection. In addition, it seems to us that there may well be matters raised with these witnesses which do not raise issues of privilege, for example, as to the details of particular transactions.The request for documents[55] The appellant is critical of the width of the document requests and suggests they are in the nature of a fishing expedition. [56] We agree that the request was framed fairly broadly. However, the orders made by the Judge require production of a significantly more limited range of documents. In any event we have concluded the request did not breach s 185(5).The discretionary factors[57] The appellant emphasises two factors he says mean the Judge should have exercised his discretion against granting the request, namely, delay and oppression. [58] Delay was a matter of concern to Panckhurst J. However, correctly in our view, the Judge deferred to the view of the Californian court that the delays were not such as to warrant declining the request. The reality is that, because of the passage of time, the deponents may have difficulty in recalling details but that does not necessarily mean it is oppressive to ask the questions. [59] The sorts of matters which have been seen as potentially oppressive include the costs and expenses incurred by potential witnesses, 18 a possible ulterior motive uch as where the witnesses were potential defendants in criminal proceedings, 19 and an unduly wide request. In this case, the deponents will have their expenses in terms of s 185(6). Any suggestion at this stage that the deponents are prospective defendants is speculative. Finally, keeping in mind the basis of the request, the orders as framed provide sufficient protection against an unduly broad exercise, especially with the added protection of s 186(1).Disposition[60] For these reasons, the appeal is dismissed. The respondent, having succeeded, is entitled to costs for a standard appeal on a band A basis. We certify for second counsel. The appeal was brought on as a matter of urgency and involved some novel issues.Solicitors: Meares Williams, Christchurch for Appellant Wynn Williams & Co, Christchurch for Respondent18 Perry v Molteno (1999) 13 PRNZ 546 (HC) at 552, a case dealing with the predecessor to ss 184 and 185, namely, s 48A of the Evidence Act 1908.19 As was the case in First American.