Affordable Housing Limited v Body Corporate 396511
[2023] NZHC 3015
•27 October 2023
IN THE HIGH COURT OF NEW ZEALAND TAURANGA REGISTRY
I TE KŌTI MATUA O AOTEAROA TAURANGA MOANA ROHE
CIV-2019-470-135
[2023] NZHC 3015
BETWEEN AFFORDABLE HOUSING LIMITED
Plaintiff/Respondent
AND
BODY CORPORATE 396511
Defendant/Applicant
Hearing: 26 September 2023 Appearances:
B Easton and MJ Cochrane for the Plaintiff/Respondent J Heatlie for the Defendant/Applicant
Judgment:
27 October 2023
JUDGMENT OF ASSOCIATE JUDGE SUSSOCK
This judgment was delivered by me on 27 October 2023 at 4 pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Grimshaw & Co, Auckland Court One, Auckland
AFFORDABLE HOUSING LTD v BODY CORP 396511 [2023] NZHC 3015 [27 October 2023]
Introduction
[1] The defendant, Body Corporate 396511, seeks orders that two specific documents and three categories of documents are disclosed to it. The application has been brought very close to the date on which the substantive hearing is due to commence, 13 November 2023, and after the close of pleadings date. The defendant therefore requires leave.1
[2] The proceedings relate to the Cayman Apartments in Mount Maunganui, a unit title development in which the plaintiff owns a unit. The defendant and the 47 other unit owners brought proceedings in 2016 against the Tauranga City Council and others for design and construction defects within the units and common property (Complex Claim). The plaintiff, Affordable Housing Limited (Affordable), was not a party as it had already brought and settled its own proceedings against the Council and others in June 2016 (Separate Claim).
[3] The Complex Claim was settled in May 2020 for $45 million. The settlement was based on the loss in value of the 47 units and associated common property because ultimately it was uneconomic to repair the apartments. The settlement funds were divided between the 47-unit owners who participated in the Complex Claim.
[4] Affordable has brought this proceeding against the Body Corporate to recover losses it says it has suffered through breaches of fiduciary duty and the duty of care owed to it, and by the Body Corporate acting ultra vires the Unit Titles Act 2010, by not claiming for the full cost of repairing the common property including Affordable’s proportionate share and for levying Affordable for legal and expert costs relating to other units.
[5] The defendant says that the evidence and documents it now seeks are directly relevant to contested issues on the pleadings and ought to be disclosed. Furthermore, the defendant says that its position that disclosure ought to be ordered is consistent with the Court’s position on an earlier discovery application by the plaintiff (First
1 High Court Rules 2016, r 7.7.
Discovery Decision).2 The defendant says the Court ordered the disclosure of a number of privileged or otherwise confidential documents (even those confidential to third parties), with necessary protections in place, in circumstances where they have been considered relevant to issues in this proceeding, outweighing the otherwise privileged or confidential nature of the documents in issue. The defendant says that it has been ordered to disclose the following privileged and/or confidential documents:
(a)all expert reports and correspondence with the Body Corporate, including legal advice and expert advice in relation to the Complex Claim;
(b)the Conduct and Distribution Agreement between the Body Corporate and second plaintiff owners in the Complex Claim; and
(c)the settlement agreement in the Complex Claim.
[6] The defendant says there can therefore be no objection to the plaintiff now being required to disclose the documents from the plaintiff’s Separate Claim.
[7]In response, the plaintiff says it has already disclosed:
(a)the pleadings in its Separate Claim;
(b)all of the briefs of evidence served in its Separate Claim; and
(c)the settlement agreement reached in its Separate Claim.
[8] The plaintiff resists leave being granted for the disclosure of the further documents now sought given the timing of the application, submitting that the defendant’s application is brought two and a half years after all interlocutory applications were directed to be filed, more than a month after the close of pleadings and less than three months before trial. The plaintiff says there has been no adequate
2 Affordable Housing Ltd v Body Corporate 396511 [2023] NZHC 776 [First Discovery Decision].
explanation for the delay and that the merits of the application are weak and so do not support leave being granted to bring such a late application.
[9] In terms of the merits, the plaintiff submits the documents are not relevant or are privileged and the privilege has not been waived, or that the documents do not exist.
[10] Furthermore, the plaintiff does not agree that the Body Corporate was ordered to disclose privileged documents following the plaintiff’s earlier application.
[11] I set out the background briefly below and the legal principles relating to leave before considering whether the documents sought out to be disclosed.
Background
[12] As I said in my First Discovery Decision, a detailed chronology of the events leading up to this proceeding is set out by Associate Judge Gardiner in her judgment dismissing the Body Corporate’s application for strike out or summary judgment of its defence to Affordable’s claim.3 I include a brief summary here to provide context.
[13]Affordable says that its claims arise from the following circumstances:
(a)The Body Corporate and 47 other owners at the Cayman Apartments brought the Complex Claim.
(b)Affordable did not participate in the Complex Claim.
(c)Despite repeated requests from Affordable, and the Body Corporate being the owner of the common property as provided for in s 54 of the Unit Titles Act 2010, the Body Corporate refused to claim the estimated repair costs to common property which Affordable would be levied for.
(d)Despite the Body Corporate’s refusal to claim the total estimated cost of repair for the common property, the Body Corporate levied
3 Affordable Housing Ltd v Body Corporate 396511 [2021] NZHC 3149 at [14]–[67] (Summary Judgment Decision).
Affordable on the same basis as all other unit owners for the costs of the litigation and the experts’ fees. This allegedly included costs of prosecuting claims that related to unit property rather than common property and of prosecuting claims on behalf of the second plaintiff unit owners. Affordable submits that the levy in respect of the prosecution of the second plaintiff unit owners’ claim has always been ultra vires the Unit Titles Act,4 saying, by way of example, that it was levied for the legal costs of providing discovery and briefs of evidence on behalf of the second plaintiff unit owners.
[14]Affordable is now suing the Body Corporate for:
(a)failing to claim Affordable’s share of common property losses in the Complex Claim;
(b)levying Affordable for investigation and litigation costs which include attendances relating to unit property and claims made for the second plaintiffs; and
(c)Affordable’s proportionate share of the settlement monies derived from the Complex Claim that relates to common property and Affordable’s contribution to legal and expert costs relating to other units at the Cayman Apartments comprised of levies raised against its unit.
Principles for granting leave
[15] No interlocutory application (or amended pleading) may be made after the close of pleadings date without leave.5
[16] The principles applying to the granting of leave are well settled and require the applicant to surmount the “three formidable hurdles” identified by the Court of Appeal in Elders Pastoral Ltd v Marr:6
4 Body Corporate 85403 v Magill (2008) 9 NZCPR 399 (HC).
5 High Court Rules, r 7.7.
6 Elders Pastoral Ltd v Marr (1987) 2 PRNZ 383 (CA) at 385.
(a)the order sought will be in the interests of justice;
(b)it will not significantly prejudice the other party; and
(c)it will not cause significant delay.
[17] The further away or closer the application is made to trial, the less or more formidable those hurdles are.7
[18] As noted by Osborne J in Body Corporate 355492 v Queenstown Lakes District Council most applications for leave pursuant to r 7.7 relate to amendments to the pleadings.8 Where the application relates to the bringing of an interlocutory application, as it does here and it did in that case, it is necessary to consider whether if the application is successful it may serve to reduce (rather than extend) the legal and factual issues for trial. His Honour acknowledged however that both applications to amend pleadings and interlocutory applications “may nevertheless share the potential to cause prejudice and/or cause expense to the other party in their preparation for trial”.9
[19] The defendant is seeking the production of copies of two specific documents and three categories of documents. Whether the order sought will be in the interests of justice, the first of the Marr "hurdles”, requires the consideration of each of the five “categories” of document individually. I consider each of these below referring to the relevant paragraph number in the amended discovery application dated 12 September 2023.
[20] I then consider the second two “hurdles” from Marr in respect of all of the documents sought together.
7 Lyttelton Port Co Ltd v Aon New Zealand [2019] NZHC 726 at [22].
8 Body Corporate 355492 v Queenstown Lakes District Council [2022] NZHC 1494 at [47].
9 At [48].
Will the order sought be in the interests of justice?
Document 1(b)(i) — Prendos Report
[21] The first document the defendant seeks is a report by Prendos New Zealand Limited. The defendant says the plaintiff obtained the report in its Separate Claim and that it is listed as a confidential document in this proceeding by Affordable as AFF.08.00028 (Prendos Report).
[22] The Prendos Report is dated 23 July 2014 and there does not appear to be any dispute that the report was obtained for the purpose of the Separate Claim brought by Affordable against the Tauranga City Council and others. An affidavit has been filed in support of the plaintiff’s opposition by Mackenzie Cochrane, a solicitor at Grimshaw & Co, the plaintiff’s solicitors, which confirms that Affordable filed its Separate Claim in the Tauranga District Court in May 2014.
[23] The plaintiff resists production of a copy of the Prendos Report on the basis that it is privileged under s 56 of the Evidence Act 2006. Affordable says that it is appropriately listed in part 2 of the schedule to the plaintiff’s affidavit of documents as being privileged and not confidential as the Body Corporate submits.
[24] The affidavit filed in support of the defendant’s application by Rose Michele Allison, a law clerk at the defendant’s solicitors, attaches correspondence between solicitors for the parties including an email from Ms Heatlie to Mr Easton on 1 August 2023 seeking a copy of the Prendos Report together with a number of other documents. No challenge to the privilege claimed by Affordable in respect of the Prendos Report is made in the email, the email simply recording that “it appears that [the Body Corporate] has not been provided with [those documents]”.
[25] Mr Easton replied on 2 August 2023 confirming that the Prendos Report attracts privilege. Ms Heatlie replied on 3 August 2023 saying “your client curiously maintains privilege … not withstanding that your client has requested, and received, all evidence in the Complex Claim which would are [sic] privileged documents.” Ms Heatlie continues:
This applies to the Prendos and Yeoman documents. These documents plainly deal with the same issue (being the distinction between unit and common property) that Affordable relied upon to obtain the evidence in the complex claim. The only distinction is that the documents do not actually make such distinction and are unhelpful. Be that as it may, Affordable separate claim was premised on that distinction. According to Affordable it was claiming only repairs to its unit property. It is plainly relevant to Affordable’s claim against the body corporate which is in effect the “other side of the same coin” that the Court is able to assess the extent to which Affordable has already been compensated. In simple terms, it was in Affordable’s interest in its separate claim for the unit property to be as extensive as possible, while in its current claim the reverse i[s] true.
[26] Although the above might explain why the Body Corporate considers the Prendos Report to be relevant, the Body Corporate does not expressly challenge the claim to privilege. Nor has it identified any conduct which would amount to an express waiver of privilege in the Prendos Report.
[27] The Body Corporate submits, as it does for all documents that are the subject of the application, that Affordable has impliedly waived privilege “under ss 65(1) and
(3) of the Evidence Act by placing the documents in issue in this proceeding.”
[28]Section 65 of the Evidence Act provides as follows:
65 Waiver
(1)A person who has a privilege conferred by any of sections 54 to 60 and 64 may waive that privilege either expressly or impliedly.
(2)A person who has a privilege waives the privilege if that person, or anyone with the authority of that person, voluntarily produces or discloses, or consents to the production or disclosure of, any significant part of the privileged communication, information, opinion, or document in circumstances that are inconsistent with a claim of confidentiality.
(3)A person who has a privilege waives the privilege if the person—
(a)acts so as to put the privileged communication, information, opinion, or document in issue in a proceeding; or
(b)institutes a civil proceeding against a person who is in possession of the privileged communication, information, opinion, or document the effect of which is to put the privileged matter in issue in the proceeding.
(4)A person who has a privilege in respect of a communication, information, opinion, or document that has been disclosed to another person does not waive the privilege if the disclosure occurred
involuntarily or mistakenly or otherwise without the consent of the person who has the privilege.
(5)A privilege conferred by section 57 (which relates to settlement negotiations or mediation) may be waived only by all the persons who have that privilege.
[29] Section 65(3)(b) has no application as the Body Corporate is not “in possession of the privileged communications, information, opinion or document”.
[30] Turning to s 65(3)(a), the question is whether Affordable has acted so as to put the Prendos Report in issue in the proceeding.
Legal principles — implied waiver
[31] In AstraZeneca Ltd v Commerce Commission Panckhurst J held in relation to s 65(3)(a):10
The mere relevance of a privileged communication to an issue in the case provides no basis for waiver. Even a party’s asserted reliance upon a privileged communication is generally insufficient. Waiver [under s 65(3)(a)] occurs where a party both asserts reliance upon the privileged communication and also seeks to inject the substance of the communication in evidence. At that point an abuse of the privilege exists. The claimant cannot have the benefit of reliance upon the substance of the advice and still seek to shield that advice from disclosure to the other side. To permit this would give rise to unfairness in the required sense, in that the party’s conduct would be offensive to the trial process.
[32] The Body Corporate does not point to any reference to the Prendos Report in the evidence filed. It is difficult to understand therefore how Affordable can be said to be trying to obtain a benefit from the advice while still seeking to shield the advice from disclosure to the other side.
[33] Although decided before the introduction of the Evidence Act, the Court of Appeal’s discussion in Ophthalmological Society of New Zealand Inc v Commerce Commission is still routinely referred to and is useful here as an analogy can be drawn between market definition and the line between unit and common property.11 In that case, an employee of the plaintiff had sworn an affidavit referring to advice given to
10 AstraZeneca Ltd v Commerce Commission (2008) 12 TCLR 116 (HC) at [39].
11 Ophthalmological Society of New Zealand Inc v Commerce Commission [2003] 2 NZLR 145 (CA).
the plaintiff by an economist in support of an application to file and serve an amended statement of claim. The defendant said the advice was both relevant and significant to the resolution of issues raised by the litigation and ought to be disclosed. The affidavit of Mr Thorn from the plaintiff, the Commerce Commission, said that the Commission had further investigated and reflected on the issue of market definition, with the critical passage then reading as follows:12
The Commission also took the step of briefing another economist, Alex Sundakov, Director of the New Zealand Institute of Economic Research, to give the Commission a second opinion on market definition. His conclusion is that the relevant geographical market is Southland – not New Zealand, which was the original opinion of Professor Stephen King who has been assisting the Commission to date. Subject to further timetabling, a brief of evidence by Mr Sundakov will be provided in due course.
[34] The Court was required to decide whether, for reasons of fairness, the advice underpinning the statements made in the affidavits should be disclosed to the defendant. In the High Court, Master Gendall (as his Honour then was) concluded that the reference to the economist’s advice went beyond a bare reference but only by a fine margin.13 His Honour decided that the case did not call for the Court to impute a waiver of privilege. Master Gendall’s decision was upheld by France J.14
[35]The Court of Appeal dismissed the further appeal, observing:15
Loss of privilege by imputed waiver
[20] It is well established that a party may lose the benefit of legal professional privilege, including litigation privilege, by its conduct in the course of litigation in relation to the privileged material. As it is of the essence of privilege that the material to which it attaches is confidential, where a party’s use of the material destroys that confidentiality, even if unintentionally, or is inconsistent with the party legitimately continuing to assert it, the privilege is treated as waived. The principle underlying this concept of unintentional implicit or imputed waiver is stated in a frequently cited passage in Wigmore on Evidence:
“In deciding it, regard must be had to the double elements that are predicated in every waiver, ie, not only the element of implied
12 Ophthalmological Society of New Zealand Inc v Commerce Commission, above n 11, at [8].
13 Ophthalmological Society of New Zealand Inc v Commerce Commission HC Wellington CP354/97, 23 August 2002.
14 Ophthalmological Society of New Zealand Inc v Commerce Commission HC Wellington CP354/97, 26 September 2002.
15 Opthalmological Society of New Zealand Inc v Commerce Commission, above n 11 (citations omitted).
intention, but also the element of fairness and consistency. A privileged person would seldom be found to waive, if his intention not to abandon could alone control the situation. There is always also the objective consideration that when his conduct touches a certain point of disclosure, fairness requires that his privilege shall cease whether he intended that result or not. He cannot be allowed, after disclosing as much as he pleases, to withhold the remainder. He may elect to withhold or to disclose, but after a certain point his election must remain final.”
…
[30] The fairness factor has, however, rightly been treated as of particular importance in cases where partial disclosure of legal advice raises questions over whether natural justice requires disclosure of the whole advice. In the end, however, as Mann v Carnell makes it plain, it is the Court’s objective judgment as to the consistency of the conduct with maintaining the privilege which must be assessed in all the circumstances. That requires close analysis of the particular context: what is the issue in relation to the privilege; how does the evidence relate to that issue; and is there inconsistency that could lead to injustice if the privilege is upheld. The weight to be given to fairness in the Court’s exercise of judgment will differ according to the circumstances including the character of the privilege it is said has been waived which, as in this case it is litigation privilege.
[36] Here the Body Corporate appears to assert in the correspondence that Affordable is seeking to rely on a narrower view of what unit property is for the purposes of its claim against the Body Corporate as compared to its claim against the Tauranga City Council. In considering how the privileged material relates to that issue, there is no suggestion that either of the briefs served by the plaintiff in this proceeding, by Mr Naismith or Mr Bretherton, refer to the Prendos Report. Instead, the submission appears to be that the evidence ought to have referred to the Prendos Report to fairly represent the position.
[37] In Ophthalmological Society, however, even where the privileged material had clearly been referred to the Court held that there had been no waiver of privilege in that material.
[38] Counsel for the Body Corporate submits that there ought to be a lesser standard where the document is withheld on the ground of litigation rather than legal professional privilege. The Court of Appeal discussed litigation privilege in Ophthalmological Society, observing:16
16 Opthalmological Society of New Zealand Inc v Commerce Commission, above n 11.
[31] Litigation privilege is a branch of legal professional privilege which is distinct from the lawyer-client privilege. Although sharing the general purpose of legal professional privilege of promoting the sound administration of justice, litigation privilege is justified by a distinct public policy consideration. It is that the effective conduct of litigation in an adversary system requires that parties and their lawyers be free to conduct their preparations for litigation in the confidence that they will not have to disclose material they gather, including that from third parties, to their opponents. Litigation privilege is not directly concerned with promoting the lawyer-client relationship as such. As the Law Commission has put it litigation privilege “does not protect private secrets but only the process of collecting evidence.” Although the introduction of case management to the adversary process of litigation has impacted on the premise on which the privilege is based, litigation privilege clearly remains part of our law. The leading case defining the scope and affirming the continuing place of the privilege in New Zealand is Guardian Royal Exchange Co Ltd v Stuart. It was, furthermore, the Law Commission’s considered view in its final report that it should continue to do so substantially in its present form.
[39] The Court of Appeal made it clear in discussing litigation privilege that a party is entitled to gather opinions in preparing its case and for those opinions to be protected by privilege. There is no requirement to disclose the various advice received on the grounds of fairness. It is only where a party seeks to rely on that advice in part but not disclose the whole of it that implied waiver will be found.17
[40] In addition, counsel suggested that it was not fair for litigation privilege to continue after the litigation to which it related is determined or resolved. Mahoney on Evidence discusses the question of whether litigation privilege terminates with the passage of time or because of a change in the circumstances giving rise to the privilege and concludes that the rule of “once privileged, always privileged” ought to be of universal application under the Act. This is because of what Mahoney refers to as legitimate policy concerns, including in relation to how to define an exception for related litigation.18 The claim that Affordable brings now against the Body Corporate is litigation that is related to its Separate Claim. The same policy reasons for protecting advice collected by a party for the purposes of litigation would appear to protect that advice in related litigation.
17 Opthalmological Society of New Zealand Inc v Commerce Commission, above n 5, at [40]–[44] (citations omitted).
18 Elisabeth McDonald and Scott Optican (eds) Mahoney on Evidence Act and Analysis (4th ed, Thomson Reuters, Wellington, 2018) at [EV67.07].
[41] Affordable has already discovered its pleadings in the Separate Claim, its briefs of evidence served, and the Settlement Agreement. Those were the materials on which Affordable settled its claim. There is no suggestion any of those materials refer to the Prendos Report. Nor do the briefs served by the plaintiffs in this proceeding. In my view there is not therefore any inconsistency in Affordable’s position in respect of the Prendos Report that could lead to injustice if the privilege is upheld. The interests of justice would not therefore appear to support disclosure of this report.
Document 1(b)(ii) — Yeomans’ Letter
[42] The second specific document sought is a letter from Yeomans Survey Solutions dated 8 October 2015 obtained by the Tauranga City Council in Affordable’s Separate Claim, listed as AFF.08.00026 (Yeomans’ Letter). The Body Corporate again says the document is listed as a confidential document but Affordable in fact lists it in part 2 of its schedule, claiming privilege under s 57 of the Evidence Act.
[43] Section 57 provides for “without prejudice” privilege. Mr Cochrane’s evidence for Affordable is that the Yeomans’ Letter was provided to Affordable by the solicitors who acted for the Tauranga City Council in Affordable’s Separate Claim on a without prejudice basis on 2 February 2016. The plaintiff’s position is that the letter is therefore privileged.
[44] The Body Corporate alleges that Affordable has waived privilege in relation to the Yeomans’ Letter because it provided the Body Corporate with a copy of an initial report completed by an expert witness for the plaintiff, Tom Bretherton, of Envivo (Bretherton Initial Report) on a without prejudice basis and in the Bretherton Initial Report he says that he was provided with a copy of Yeomans’ Letter prior to his inspection of the building.
[45]Counsel for the Body Corporate says any privilege has been waived:
(a)through impliedly waiving any privilege by placing the document in issue in this proceeding (as for all documents sought);
(b)through collateral waiver by Affordable of correspondence and advice in relation to Affordable's Separate Claim under s 65(3), referring to Mr Naismith’s evidence where he sets out the two bases on which Affordable’s solicitors had calculated its total claim thereby putting otherwise privileged communications, information, opinions, or documents in issue in a proceeding by referring to it in evidence for trial; and
(c)specifically in relation to the Yeomans’ Letter, Affordable has on the one hand claimed privilege as a document provided to it by the Tauranga City Council for mediation but on the other hand provided it to their expert in this proceeding, Mr Bretherton, when he did his investigations.
[46] In respect of the last of these reasons, the Body Corporate says further that if mediation privilege did apply to that report, it should not have been provided to Mr Bretherton. Having provided it to Mr Bretherton, privilege over that document has now been expressly waived. Furthermore, the Body Corporate says the report is a cadastral survey and the Body Corporate will not be as well-armed as Affordable if it is not provided with it.
[47] Affordable says as the Yeomans’ Letter was provided to Affordable on a without prejudice basis by the Tauranga City Council, the privilege in the letter is a joint privilege in favour of it and the Tauranga City Council. Affordable relies on s 65(5) of the Evidence Act which provides:
(5) A privilege conferred by section 57 (which relates to settlement negotiations or mediation) may be waived only by all the persons who have that privilege.
[48] Affordable says it has not and cannot unilaterally agree to waive privilege in the Yeomans’ Letter as clearly provided for in s 65(5).
[49] Affordable says further that it provided the Bretherton Initial Report to the Body Corporate on a without prejudice basis and the Body Corporate is breaching that without prejudice privilege by relying on the Bretherton Initial Report in this
application. Affordable says therefore that references to the contents of the report in the Body Corporate’s application and Ms Allison’s affidavit ought to be disregarded.
[50] In any event, Affordable says privilege is not waived in the Yeomans’ Letter as Mr Bretherton does not refer to the letter in his brief of evidence that has now been served (as the Body Corporate correctly recognises). Affordable submits Mr Bretherton’s brief in no way puts the letter in issue and no implied waiver therefore arises.
[51] In addition, Affordable submits there is no unfairness as the Body Corporate’s own cadastral surveyor can establish the delineation between common and unit property and does not need the Yeomans’ Letter to do so.
[52] Section 57 of the Evidence Act includes a power for the Court to override without prejudice privilege as follows:
(3) This section does not apply to –
…
(d) the use in a proceeding of a communication or document made or prepared in connection with any settlement negotiations or mediation if the court considers that, in the interests of justice, the need for the communication or document to be disclosed in the proceeding outweighs the need for the privilege, taking into account the particular nature and benefit of the settlement negotiations or mediation.
[53] There is no question that the Bretherton Initial Report was provided to the Body Corporate by Affordable on a without prejudice basis. I agree with Affordable’s submission that the Body Corporate is therefore prima facie prevented from relying on its contents for the purposes of supporting this application.
[54] It is not clear from the evidence the basis upon which the Yeomans’ Letter was provided to Mr Bretherton and whether confidentiality was sought to be maintained in the document or whether the consent of the Tauranga City Council was obtained prior to its provision to Mr Bretherton. However, because of the clear terms of s 65(5), Affordable cannot unilaterally waive privilege in the letter.
[55] Standing back and considering the interests of justice, the Yeomans’ Letter is simply a letter of a further expert. Both parties have had an opportunity to file their own evidence from cadastral surveyors. There is therefore no prejudice to the Body Corporate in the Yeomans’ Letter remaining privileged in circumstances where Mr Bretherton does not rely on the letter or even refer to the letter in his brief of evidence, and nor does Mr Naismith. As a result, it is not in the interests of justice for the Yeomans’ Letter to be disclosed.
Category 1(b)(iii) — all evidence provided by the Tauranga City Council and other defendants in Affordable’s Separate Claim
[56] Counsel for Affordable submit that the request for this category is correctly described as an application for further discovery, despite the Body Corporate not referring to r 8.19 of the High Court Rules in its second amended application.
[57] This category of documents is not included in Affordable’s affidavit of documents and so I agree that the application in respect of this category ought to be considered an application for further discovery.
[58]As outlined in my First Discovery Decision, a four-stage process is set out in
McGechan on Procedure for further discovery applications under r 8.19:19
(a)Are the documents sought relevant, and if so, how important will they be (a criterion described as materiality in Robert Jones Holdings Ltd v McCullagh)?20
(b)Are there grounds for the belief that the documents sought exist?
(c)Is discovery proportionate (balancing the time and costs of discovery against the potential value of discovery)?21
19 Jessica Gorman and others McGechan on Procedure (online ed, Thomson Reuters) at [HR8.19.03]; referring to Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd [2015] NZHC 2760, [2018] NZAR 600 at [14]. See also Lighter Quay Residents’ Society Inc v Waterfront Properties (2009) Ltd [2017] NZHC 818 at [16].
20 Robert Jones Holdings Ltd v McCullagh [2016] NZHC 2529.
21 Southland Building Society v Barlow Justice Ltd [2013] NZHC 1125 at [17].
(d)Weighing and balancing these matters, and the Court’s discretion applying r 8.19, is an order appropriate?
[59] Affordable’s opposition to disclosure of these documents relies on the second stage, submitting that there are no grounds for the belief that the documents sought exist. Affordable says that prior to this application the documents had never been requested and had the Body Corporate requested them, it would have been advised that they do not exist.
[60] Mr Cochrane’s evidence records that the Separate Claim was settled on 27 June 2016, prior to the date by which the defendants’ briefs of evidence were to be served of 11 July 2016. In addition Mr Cochrane says that he has reviewed the documents that Grimshaw & Co holds in relation to Affordable’s Separate Claim and does not believe that any of the defendants served briefs of evidence.
[61] Counsel for the Body Corporate submits that Mr Cochrane’s evidence is carefully worded as it only refers to there being no briefs of evidence and not evidence including reports, documents and so forth. Mr Easton confirmed at the hearing that Mr Naismith, the sole director and shareholder of the plaintiff, would have no difficulty in providing an affidavit confirming that there were no briefs of evidence provided by the Council or other defendants but said that it may be more difficult to confirm the position in respect of the broader category of “evidence” apparently now sought, as it appeared discovered documents themselves may even fall within the category sought. Counsel for Affordable could foresee difficulties with the breadth of this category, and therefore proportionality, particularly at this late stage. Furthermore, if any reports had been provided, counsel suggested they may be protected by without prejudice privilege pursuant to s 57 in the same way that the Yeomans’ Letter is.
[62] Mr Easton emphasises that the onus for demonstrating that the documents sought exist rests with the applicant and that there is no evidence that there are any such reports and therefore no order ought to be made.
[63] Given the Separate Claim settled before briefs were due to be served by the defendants, it appears unlikely that any briefs would have been served as they were not yet due.
[64] The four-stage assessment set out above requires at least some evidence as to the existence of such material, which has not yet even been alleged. Without some evidence, the materiality of the evidence and proportionality would not be able to be assessed so the final weighing step four would result in an order for discovery not being appropriate.
[65] Furthermore, the category sought by the Body Corporate refers to “evidence”, which I consider the plaintiff reasonably interpreted as briefs of evidence. The plaintiff’s notice of opposition said the defendants in Affordable’s Separate Claim did not serve evidence, as supported by Mr Cochrane’s affidavit. The Body Corporate amended its application to include an application for leave but did not at the same time amend this category to specifically refer to reports or other documents provided by the defendants to Affordable in the Separate Claim. Instead, counsel for the Body Corporate questions Mr Cochrane’s evidence for not saying “whether such evidence was provided informally in any other form”. In these circumstances I do not consider that the interests of justice favour leave being granted. I note that I reach this conclusion before considering the practical implications of any order for discovery of this category, as discussed below in relation to the second and third Marr hurdles.
Category 1(b)(iv) — all correspondence between Affordable Housing and Grimshaw & Co relating to Affordable’s Separate Claim, including advice on the claim and/or settlement thereof
[66] Affordable submits that the documents in this category are privileged under both ss 54 and 56 of the Evidence Act with these documents again being listed in Part 2 of the schedule attached to Affordable’s affidavit of documents.
[67] The Body Corporate does not appear to challenge that the documents would attract privilege but submits instead that the privilege has been waived or that it would be in the interests of justice that the documents be disclosed anyway.
[68] The Body Corporate does not rely on any express waiver but says that Affordable has impliedly waived privilege by referring to legal advice in [19] of Mr Naismith’s brief of evidence. This paragraph reads:
Prior to the mediation, my solicitors had calculated Affordable’s total claim on two bases as set out below.
Item Repair Loss in value Cost to repair $327,781.00 Loss in value $436,000.00 Consequential losses $8,793.10 $8,793.10 2B scale costs $55,933.00 $55,933.00 Disbursements $1,129.38 $1,129.38 Expert costs $40,736.23 $40,736.23 $434,372.71 $542,591.71
[69] The repair costs, loss in value and consequential losses are each referred to in Mr Naismith’s brief of evidence prepared for Affordable’s Separate Claim, a copy of which has already been provided to the Body Corporate along with copies of the briefs of evidence served in the Separate Claim.
[70] Affordable submits that the figures for loss in value and cost to repair are derived from expert evidence, not legal advice from the plaintiff’s solicitors and that the line items for disbursements and expert costs are matters of arithmetic representing the total of invoices paid for Court fees and to experts. Again, Affordable submits these figures are not legal advice.
[71] The table includes a calculation of scale costs on a category 2 band B basis per the High Court Rule but Affordable submits that this falls a long way short of constituting a significant disclosure or reliance on expert advice such that privilege in all legal advice is waived as the Body Corporate contends. Affordable says that Mr Naismith’s brief responds to the Body Corporate’s allegation that Affordable settled its proceedings based on diminution in value, referring to the Body Corporate’s amended statement of defence, dated 7 July 2023, at [5]. In doing so Affordable does not rely on legal advice or put that legal advice in issue to the extent necessary to constitute waiver.
[72] Affordable relies on the following extracts from Cross on Evidence in relation to implied waiver:22
Waiver will only occur if the party is placing some reliance on the substance of that [legal] advice as having justified its actions, so as to make the accuracy of that advice part of the case, and still seeks to withhold from the other party the actual advice received. Mention of the advice short of this sort of reliance does not put the advice itself in issue in any meaningful sense. The fact that the privileged advice would contain information relevant to the parties’ dispute is not a consideration in the assessment of the question whether or not privilege has been waived.
[73] In the earlier paragraphs of Mr Naismith’s brief of evidence, he records that he understands that the Body Corporate suggests that the settlement represented the loss in value of unit 5B4, rather than the estimated cost to repair it. Mr Naismith says it appears that the Body Corporate makes this assumption because the settlement sum is close to the estimated difference in the value of the unit according to the valuer who had prepared evidence on behalf of Affordable. Mr Naismith explains that the valuer, Mr Hill, estimated the unaffected market value of the unit at $1,516,000 and the affected market value at $1,064,000. Affordable says that a copy of this valuation is in evidence in the proceeding. As Affordable purchased the unit for $1.5 million, the estimated loss in value is therefore $436,000.
[74] Mr Naismith then explains that prior to the mediation his solicitors had calculated Affordable’s total claim on two bases, as set out in the table above. His evidence is that the settlement amount of $440,000 is actually closer to the losses in the left column based on the estimated cost to repair, consequential losses and legal and expert costs. Mr Naismith goes on to say however that it is incorrect in any event to say that the settlement was based on either the repair costs or the loss in value as it was an overall settlement and there was no agreement that it represented one measure or the other.
[75] The Body Corporate relied on the concept of collateral waiver as described by Katz J in Capital + Merchant Finance Ltd v Perpetual Trust Limited:23
This principle, sometimes known as the “cherry-picking rule”, aims to prevent a party from presenting the court with a selective view of the relevant
22 Paul Michalik (ed) Cross on Evidence (online ed, LexisNexis) at [EVA65.4].
23 Capital + Merchant Finance Ltd v Perpetual Trust Limited [2015] NZHC 1233 at [29].
evidence. This will occur if a party is able to waive privilege in relation to helpful portions of evidence, while hiding behind privilege in order to avoid disclosing other parts of evidence that are potentially unhelpful. In such circumstances, privilege is waived in relation to all the material relevant to the issue in question, as there would otherwise be a risk of injustice as to the real weight or meaning of the document or evidence that has been disclosed. Where collateral waiver applies, a party will be required to disclose any further privileged material that is relevant to the same issue for which the privileged material was deployed.
(citations omitted)
[76] In PricewaterhouseCoopers v Zag Ltd, a further case relied upon by the Body Corporate, the documents in issue were “Settlement Documents”, described as documents exchanged between PricewaterhouseCoopers (PWC) and the Police leading up to their mediation and settlement agreement, including position papers. PWC had disclosed some documents but not all, submitting that it did not waive privilege in the others and that in any event it was a joint privilege with the Police which PWC could not unilaterally waive. McQueen J referred to the fact that the Police had agreed to waive without prejudice privilege in the documents PWC provided to Zag Ltd and that in doing so had waived privilege in the Settlement Documents.24 The Court held there had been collateral waiver and ordered the documents to be disclosed.25
[77] In that case, PWC was suing Zag Ltd on an indemnity in respect of claims made by the Police. PWC had a duty to mitigate its loss and so the reasonableness of the settlement between PWC and the Police was squarely at issue in the proceeding.
[78] The claim made in this proceeding is very different. It is not for an indemnity in respect of the Separate Claim. Instead, as set out above, it is for the failure to claim for the cost of repairs to Affordable’s share of the common property and for levying Affordable for the cost of the Complex Claim.
[79] The advice Mr Naismith refers to in his brief of evidence is simply the arithmetical calculation of the two different bases on which Affordable could claim. Mr Naismith is not asserting that his lawyer’s advice was to settle on a certain basis,
24 Capital + Merchant Finance Ltd v Perpetual Trust Limited, above n 23, at [53].
25 PricewaterhouseCoopers v Zag Ltd [2023] NZHC 1470 at [49]–[55].
for example, which may then have put that advice in issue. Even if that were the case, which I do not consider it appears to be, Affordable would only potentially waive privilege in advice on that issue and not in all of Grimshaw & Co’s advice. I do not accept the Body Corporate’s submission therefore that privilege in all advice has been waived.
[80] As referred to above, Affordable has disclosed a copy of the settlement agreement in its Separate Claim to the Body Corporate. A copy of the settlement agreement was not however annexed to the affidavit filed in support of the Body Corporate’s application and nor did counsel for the Body Corporate refer to anything in the settlement agreement which suggested that there were further background documents that would assist in interpreting the settlement agreement, as was the case in PricewaterhouseCoopers v Zag Ltd.
[81] Furthermore, any legal advice that Affordable should settle on the basis of diminution in value rather than cost to repair would have been privileged to Affordable and therefore not relevant to an objective approach to ascertaining the meaning of the settlement agreement, as it would not have been information that would have been available to the parties to the contract in the situation they were in at the time of the contract.26
[82] On the basis of the principles as articulated by Panckhurst J in AstraZeneca Ltd v Commerce Commission, I do not consider that Affordable appears to be “[asserting] reliance upon the privileged communication and also [seeking] to inject the substance of the communication in evidence.”27 There does not appear to be any basis in my view for finding there is implied or collateral waiver of any advice provided by Grimshaw & Co. In these circumstances the interests of justice again do not favour granting leave in respect of this category.
26 See contractual interpretation principles as set out in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 (HL) at 912 per Lord Hoffmann; cited in Firm PI 1 Ltd v Zurich Australian Insurance Ltd t/a Zurich New Zealand [2014] NZSC 147, [2015] 1 NZLR 432 at [60]; and endorsed in Bathurst Resources Ltd v L & M Coal Holdings Ltd [2021] NZSC 85, [2021] 1 NZLR 696 at [43].
27 AstraZeneca Ltd v Commerce Commission, above n 10, at [39].
Category 1(b)(v) — any advice, including file notes of telephone discussions, provided by Grimshaw & Co in relation to joining the Complex Claim
[83] The Body Corporate accepts that this advice is privileged but again says that the privilege has been waived pursuant to s 65(1) and (3) of the Evidence Act by placing the documents in issue in this proceeding.
[84] The Body Corporate submits that this advice is relevant to the merits of the claim that Affordable says the Body Corporate ought to have advanced on its behalf and is directly relevant to the issues of duty and causation in this proceeding, because:
(a)if the claim is considered in Grimshaw’s legal advice to have been impugned, the nature and extent of any duty that may be established will inevitably be affected; and
(b)if the claim is considered to have been impugned, the Body Corporate’s acts or omissions could not have caused Affordable any loss.
[85] Affordable’s primary submission in response to this category is that any such advice is not relevant to any issue in the proceeding. Affordable says that it is the Body Corporate’s contention that Affordable’s loss (if any) can be attributed to its decision not to be a second plaintiff in the Complex Claim. If that is so (which Affordable denies) Affordable submits it does not follow that the reasons for Affordable’s decision not to participate are relevant. Affordable relies on the following passage in relation to the relevance of legal advice from Cross on Evidence:28
It is also important to remember that only relevant evidence is discoverable/admissible. In many cases legal advice given to a party will not cross this threshold of relevance. Legal advice will normally amount to no more than a third party’s opinion about matters that will be the subject of submission, rather than evidence. Bearing this in mind, many references to a party having taken legal advice that might be thought to waive privilege in all the advice taken on the issue, will still not lead to the advice mentioned and other advice on the same issue being discoverable, simply because what advice was given about the issues in a case will not normally be relevant evidence for the determination of any of the issues actually arising.
28 Michalik, above n 22, at [EVA65.5].
[86] Even if the legal advice were relevant, Affordable says the advice clearly attracts solicitor client privilege pursuant to s 54 of the Evidence Act.
[87] The sole ground on which the Body Corporate appears to rely for disclosure of this advice is implied waiver. The defendant expressly excludes this category from its submissions in respect of collateral waiver. The defendant does not however identify how the plaintiff has put the advice in issue so as to give rise to an implied waiver. Affordable therefore submits there is nothing for it to respond to other than to deny waiver.
[88] At the hearing, counsel for the Body Corporate suggested that the advice itself could be redacted and that the Body Corporate is only seeking disclosure of the facts on which the advice relied.
[89] I agree that Grimshaw and Co’s advice to Affordable as to whether Affordable’s claim had merit is not relevant to the proceeding as it is simply a third party’s opinion about matters that will be the focus of submission at the hearing.
[90] Furthermore, the factual matrix on which the legal advice is based ought to be available from primary evidence rather than through disclosure of the summary of the factual matrix in legal advice that is then redacted. This would only appear to be relevant where the legal advice was in issue, but it is not in this proceeding — the question is whether Affordable would have succeeded if it had been a second plaintiff or whether there was some difficulty with its claim. Grimshaw & Co’s advice on this question is clearly privileged and the Body Corporate has not advanced any grounds on which that privilege has been expressly, impliedly or collaterally waived. Again, the interests of justice do not support leave being granted in respect of this category.
Will leave significantly prejudice the other party?
[91] Four out of five of the categories of documents sought by the Body Corporate are privileged and there is no evidence that the fifth category of documents exists. Contrary to the Body Corporate’s submission, the orders made in the First Discovery Decision did not require disclosure of otherwise privileged documents. One category of documents sought, Category 3, was accepted by the parties as being privileged. The
only order made in respect of that category was that the documents were required to be recorded in part 2 of Affordable’s list of documents.29
[92] Disclosure of the remaining categories was resisted by the Body Corporate on the basis of relevance, confidentiality or proportionality, not privilege. I held that the documents sought were relevant and, other than a slight amendment to one of the categories, that discovery was proportionate with orders made to address confidentiality concerns. It is not therefore correct to say that the disclosure sought by the Body Corporate in this application is equivalent to the disclosure sought by Affordable in the first discovery application.
[93] Granting leave to bring this application would significantly prejudice Affordable from a practical perspective in having to respond to the application at this very late stage in the proceeding. If orders were made to disclose the documents there is the possibility of significant prejudice from a substantive perspective but from the consideration above of whether it is in the interests of justice for leave to be granted in respect of each of the categories, that outcome appears unlikely. Having to direct resources to resisting an application for which the merits appear weak however would still cause significant prejudice to Affordable.
Will leave cause significant delay?
[94] If leave were granted and orders made then there would be very little prospect that the substantive hearing could proceed on 13 November 2023. Collecting together the documents sought, particularly the third, fourth and fifth categories, and listing and perhaps redacting some of the documents would distract the plaintiff unfairly from trial preparation. Time would then have to be allowed for the Body Corporate to consider the documents disclosed. It would be very unlikely that the trial would therefore be able to go ahead.
[95] If the trial was not able to proceed in November, a two-week trial is unlikely to be able to be reallocated for some time. There is no question therefore that leave would cause significant delay.
29 First Discovery Decision, above n 2, at [5] and [73(a)(iii)].
Conclusion on leave
[96] This proceeding was first filed in 2019. The interests of justice would have to favour leave being granted to warrant the significant further delay that would be likely to result. That is clearly not the case here. Leave ought not to be granted in these circumstances.
Substantive Application
[97] Even if I had granted leave, I would not have ordered disclosure of any of the categories of documents either because the documents are privileged and that privilege has not been expressly, impliedly or collaterally waived for the reasons discussed above when discussing the interests of justice, or because there is not sufficient evidence that the documents exist (category 1(b)(iii)).
Result
[98]The defendant’s application for disclosure is dismissed.
Costs
[99] The plaintiff has succeeded and so is entitled to costs. The plaintiff asked to be heard on costs if the parties could not agree them. I ask the parties to confer and, only if costs cannot be agreed, to file memoranda, on behalf of the plaintiff within 30 working days of this judgment and the defendant a further 10 working days.
Associate Judge Sussock
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