AFI Management Pty Ltd v Lepionka & Company Investments Ltd

[2017] NZHC 1176

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2015-404-2836 [2017] NZHC 1176

IN THE MATTER	of the Property Law Act 2007
BETWEEN	AFI MANAGEMENT PTY LIMITED Plaintiff
AND	LEPIONKA & COMPANY INVESTMENTS LIMITED Defendant

CIV-2015-404-2168

BETWEEN  GLW GROUP LIMITED First Plaintiff

GARTH BOWKETT PATERSON Second Plaintiff

ANDLEPIONKA & COMPANY INVESTMENTS LIMITED First Defendant

……………………………/continued

Hearing:

19 May 2017

Counsel:

TJ Shiels QC for plaintiffs in CIV-2015-404-2836
DW Grove for plaintiffs in CIV-2015-404-2168
MG Colson for defendants in both proceedings
D Chan for non-parties, J McHardy, Tui Tuki Ltd and

WCA Coltart

SJ Telford for non-parties, W Ladbrook/Bamboo Trust

Judgment:

31 May 2017

JUDGMENT OF FITZGERALD J [On six interlocutory applications]

This judgment was delivered by me on 31 May 2017 at 4 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar………………………………….  Date…………………………ff

AFI MANAGEMENT PTY LIMITED v LEPIONKA & COMPANY INVESTMENTS LIMITED [2017] NZHC

1176 [31 May 2017     ]

LEPIONKA & COMPANY LIMITED Second Defendant

STEFAN JOZEF JOHN LEPIONKA and NIGEL WARREN HUGHES as trustees of the SJ Lepionka Family Trust

Third Defendants

Contents

Introduction ..........................................................................................................[1] Factual background .............................................................................................[5] Issues in proceeding ...........................................................................................[19] Non-party discovery ...........................................................................................[23]

Documents concerning the offers .................................................................. [25]

Documents concerning GST on the offers ..................................................... [43]

Application against GLW – tailored discovery ................................................[52]

Communications between GLW and Westpac in the period 2009 to 2015 (categories 1 and 2) ...................................................................................[54]

The loan and loan agreement between AFI and GLW (categories 3 and 4) ....[61]
Financial standing of GLW/ability to redeem/offers to redeem (categories 5

to 12) .........................................................................................................[65] Offers in relation to the Property (category 13) ..............................................[71] Other business ventures in which Mr Paterson or one or more of companies

controlled by Mr Paterson were participants (categories 14 and 15) .......[76] Offers and actions prior to May 2015 (categories 16 and 17) ........................[81] Application for further and better discovery against GLW..............................[86] Affidavit of Elizabeth O’Neil ............................................................................[89] Enumeration and description of privileged documents ...................................[96] Production of laptop ......................................................................................[103]

GLW’s application for orders against Lepionka parties .............................. [117]

Further and better discovery ..................................................................................

Unredacted invoices and time sheets for all legal fees and other expenses

charged against the mortgage.................................................................. [119]

Copies of all accounting records/journal entries in relation to the GLW

mortgage to LCIL.....................................................................................[124]

Copies of all correspondence and agreements, and unredacted

correspondence, between the defendants and EHNP/the Edgars ............[127]

Copies of all correspondence and communications with Mr Coltart,

Tuki Tuki Ltd and Mr McHardy ...............................................................[130]

All correspondence with Nigel Hughes in relation to the preparation of the

s 179 notice and the agreement to complete ...........................................[133] All correspondence with Westpac and the defendants, but unredacted .........[136] Correspondence between the defendants and AFI/Mr David Johnson ..........[139]

Discovery application against AFI (tailored discovery) ................................[142] Application for leave to file third amended statement of claim ...................[149] Revesting “cause of action” .............................................................................[160] Result .................................................................................................................[168]

Introduction

[1]      These two proceedings are being called and are to be heard together at a trial commencing on 19 July 2017.  On Friday, 19 May 2017, I heard five interlocutory applications on the CIV-2015-404-2168 proceeding (“2168”).  There is also a sixth application, on the CIV-2015-404-2836 proceeding (“2836”), which counsel in that proceeding agreed could be dealt with on the papers.

[2]      The applications largely, though not solely, concern discovery.  There is also an application by the plaintiff in the 2168 proceeding (“GLW”) for leave to file a third amended statement of claim, which will have the effect of joining a further defendant.   The former principal of GLW, Mr Paterson, also applies for an order revesting causes of action in him (as he is currently an undischarged bankrupt), so that he will then become a second plaintiff in the 2168 proceeding.

[3]      The trial date is obviously fast approaching.  The parties’ evidence is being prepared, some of which will have been served by the time of this judgment. Accordingly, it is important that these interlocutory applications are determined with some urgency.

[4]      Before turning to each application, I first set out a brief summary of the background to the disputes.

Factual background

[5]      GLW is the registered proprietor of approximately 21.6 hectares of land in the Hawkes Bay (“Property”).  GLW purchased the Property in October 2009.  The Property is the balance of a larger parcel of approximately 25 hectares of rural property, on the banks of the Tuki Tuki River in the Hawkes Bay.

[6]      The  acquisition  of  the  Property  by  GLW  was  assisted  by  finance  from Westpac Bank (“Westpac”), which took a first mortgage over the Property by way of security.  Mr Paterson also gave a personal guarantee.  GLW’s broad intention was to develop and subdivide the Property into residential lots which were then to be sold.

[7]      At the time GLW purchased the Property, it already had one dwelling on it, which is referred to as the “Homestead”.   Having purchased the Property, GLW granted an option to Mr Andrew Coltart to purchase the Homestead lot.  One of the applications dealt with in this judgment is an application for non-party discovery against Mr Coltart (and others). A further residence (referred to as the “Lodge”) was built on the Property in approximately 2011.  Mr Paterson resided in the Lodge until

2015.

[8]      In May 2014, GLW granted a second mortgage over the Property, to an

Australian company named AFI Management Pty Limited (“AFI”).

[9]      Between the purchase of the Property and early 2015, GLW had agreed to sell lots in the Property as follows:

(a)       the Homestead (eventually Lot 2) to Mr Coltart, as above (sale and

purchase agreement (“SPA”) signed in 2009 and amended in 2012);

(b)      Lot 1 to the Edgars (SPA dated 30 September 2010);

(c)       the Lodge (Lot 4) to the third defendants (“Lepionka Family Trust”)

(SPA entered into January 2014); and

(d)      Lots 3, 5, and 8 to the second defendant (“Lepionka Company”) (SPA

entered into January 2014).

[10]     Mr Stefan Lepionka is one of the trustees of the Lepionka Family Trust.  He is also the sole director and shareholder of the Lepionka Company.  As the parties have done, I will refer to the latter two SPAs (referred to at [9](c) and (d)) as the “Lepionka Purchase Contracts” and Lepionka Family Trust and Lepionka Company, as purchasers under those contracts, as the “Lepionka Purchasers”.   Deposits of

$463,000 were paid under the Lepionka Purchase Contracts.

[11]     By early 2015, GLW was in default under its mortgage to Westpac.   The defaults were not remedied.   In March 2015, Westpac issued a notice pursuant to

s 119 of the Property Law Act (“PLA”).  I interpolate to note that GLW now disputes

the validity of that notice.

[12]     The defendants (whom I will refer to collectively as the “Lepionka parties”) allege that during this time, Mr Paterson was attempting to arrange a “back up sale” of  the  Property  and/or  an  assignment  or  transfer  of Westpac’s  mortgage  to  the plaintiff in proceeding 2836, AFI.  The Lepionka parties allege that Mr Paterson had threatened to orchestrate a restructuring to defeat the Lepionka Purchase Contracts and/or to sell the Property to a Mr Johnston (an American citizen) or to Mr Coltart.

[13]     The   first   defendant   (“LCIL”)   was   incorporated   on   25   March   2015. Mr Lepionka is also the sole director and shareholder of that company.

[14]     On  1 April  2015,  LCIL  took  an  assignment  of  Westpac’s  lending  and securities in respect of GLW (including the personal guarantee from Mr Paterson). As a result, LCIL became the mortgagee in respect of the Property.  The Lepionka parties state that LCIL took these steps intending to complete the subdivision as promised by GLW.

[15]     LCIL then took the following actions:

(a)       adopted the Lepionka Purchase Contracts under s179 of the Property

Law Act;

(b)cancelled Mr Coltart’s option, on the basis that LCIL considered it to be well under market value ($650,000 cf $2,000,000);

(c)       entered into possession as mortgagee; and

(d)entered  into  a  “Completion Agreement”,  pursuant  to  which  LCIL agreed to pay the Lepionka Purchasers a certain sum if the development was not completed.   The Completion Agreement was later cancelled.

[16]     From April 2015, there have been various attempts by GLW to redeem the mortgage over the Property. A series of offers to purchase the Property has also been put to LCIL by Messrs Coltart, McHardy and Ladbrook, or entities associated with them.

[17] At the core of both proceedings is the plaintiffs’ allegation that LCIL has breached its statutory and equitable duties as mortgagee, to exercise its power of enforcement for the purpose of preserving and realising the charged assets to discharge its debt, and to act fairly and equitably towards those with an interest in the equity of redemption. The plaintiffs say that LCIL has breached these duties given its actions, summarised at [15] above, had the primary purpose of protecting the Lepionka Purchasers’ interests, rather than LCIL’s interest in discharging the debt and obtaining the best price reasonably obtainable for the Property. The plaintiffs say that had LCIL acted in accordance with its duties as mortgagee, it would have permitted GLW to redeem the mortgage and/or accepted one of the offers made to it to purchase the Property.

[18]     LCIL’s primary position is that GLW could not, as a matter of law, redeem the Property, nor was LCIL under any legal obligation to consider the other offers made to it for the Property, given its adoption of the Lepionka Purchase Contracts. LCIL says that in any event, GLW was not in a financial position to redeem the mortgage.  In relation to the offers made to purchase the Property, LCIL says that the fact that it did not accept any of those offers did not amount to a breach of its duties, because:

(a)      The terms of Mr Coltart’s offer included a condition that required GLW’s consent, and despite LCIL requesting GLW’s consent, no such consent was forthcoming;

(b)Mr Coltart, in making his offer, was acting for an offshore purchaser, Mr Johnston, a US citizen, which gave rise to concerns under the Overseas Investment Act;

(c)      Any sale of the Property would have required LCIL to enter into agreements with other purchasers of lots within the Property, to obtain their consent to end their sale and purchase agreements.

Issues in proceeding

[19]     The Lepionka parties submit that the following will be the key issues at trial:

(a)       LCIL’s  motives  in  taking  an  assignment  of  Westpac’s  mortgage.

Mr Lepionka has candidly stated that it did so partly by way of a “self-help” remedy.  That is, to complete the development in what he thought was the interests of all parties.

(b)Whether,  having  adopted  the  Lepionka  Purchase  Contracts  and entered into possession, LCIL had any legal obligations to consider further offers for the Property.

(c)      Whether Westpac had consented to the Lepionka Purchase Contracts, thereby binding it and any future mortgagee to them.

(d)      The reasonableness of the costs “debited” to the mortgage (given the

quantum of those costs is challenged by GLW and AFI).

(e)      (Alternatively) the status, terms and validity of the various offers that were put to LCIL by Messrs Coltart, McHardy, Ladbrook and entities associated with them (as damages are sought by GLW in respect of LCIL’s alleged failure to accept these offers).

(f)      (Alternatively) whether GLW and/or AFI had or could procure funds to redeem the mortgage in April 2015.

(g)The nature and extent of resource consents over the Property and why changes  to  those  consents  have  been  made  by  LCIL (said  to  be relevant to the valuation of the Property and to allegations that LCIL wrongly  reduced  the  price  payable  under  the  Lepionka  Purchase

Contracts and increased the size of the land to be sold pursuant to those contracts).

(h)      (Alternatively) the value of the individual proposed lots, and the entire

Property, at key times (including 1 April 2015 and as at trial).

(i)If equitable remedies are being considered, the parties’ relative “clean hands”.

(j)The application of the Lepionka Purchase Contract deposits (there being an allegation that they have been misused).

(k)      The validity of AFI’s lending to GLW and its securities.

[20]     Through the parties’ respective written and oral submissions, it became clear that  not  all  of  the  above  matters  are  agreed  to  be  the  issues  arising  from  the pleadings.  I comment in further detail on the issues arising when considering each of the applications below.

[21]     I deal with the discovery related applications in the order they were addressed at the hearing, namely:

(a)       The applications for non-party discovery;

(b)      The Lepionka parties’ applications for discovery by GLW;

(c)       GLW’s application for discovery by the Lepionka parties; and

(d)LCIL’s application for discovery against AFI (which as noted, had been agreed to be determined on the papers).

[22]     I then address GLW’s application for leave to file a third amended statement

of claim, and Mr Paterson’s application to revest causes of action in him.

Non-party discovery

[23]     The Lepionka parties seek discovery by the non-parties of the following documents:1

(a)     all documents relating to any offer, or potential offer, made in relation to the Property, including those specific offers referred to at paragraph

38 of GLW’s second amended statement of claim;2

(b)any documents relating to advice on the GST position in relation to such offers; and

(c)     in relation to Mr Coltart only, documents relating to offers for part or all of the Property involving or relating to Mr Johnston (of the USA) from late 2014 or any other offer prior to May 2015.3

[24]     There is no doubt that documents sought by way of a non-party discovery application must be relevant to issues arising from the pleadings and that will need to be determined at trial.  In addition, in Vector Gas Contracts Ltd v Contact Energy Ltd, Kós J confirmed that it remains implicit in r 8.21 that the non-party discovery order “be necessary” (for example, because other sources of evidence are unlikely to be sufficient because they are materially incomplete or unreliable).4   His Honour also observed that the documents sought need to have the potential to make “a real difference” and are not merely marginal.

Documents concerning the offers

[25]     Paragraph 38 of GLW’s second amended statement of claim is the central

aspect of GLW’s pleading on the various offers made for the Property.  It (relevantly)

provides as follows:

1      Summarising the various categories of documents sought, which are framed in more detailed terms.

2      Being an offer by Mr Coltart on 1 May 2015; an offer by Tuki Tuki Ltd (“TTL”) (an entity

associated with Mr McHardy) in November 2015; offers by Bamboo Trust (which is asso ciated with Mr Ladbrook) in April 2016, December 2016 and January 2017. At the hearing, Mr Colson agreed that the category could be narrowed to relate only to the offers specified in paragraph 38 of the second amended statement of claim.

3      Other aspects of the application are no longer pursued.

4      Vector Gas Contracts Ltd v Contact Energy Ltd [2014] NZHC 3171, [2015] 2 NZLR 670 at [30].

38.Thereafter LCIL Lepionka Company and the Lepionka Trust at the direction  of  Mr Lepionka  undertook  a  course  of  action  to  the prejudice of the plaintiffs for the sole purpose of wrongfully benefiting the Lepionka Company and the Lepionka Trust by:

(a)      Wrongfully refused to allow GLW to redeem the mortgage in full.

Particulars

i.        The first offer to redeem the mortgage was made on

3 April  2015,  approximately  24  hours  after  GLW

became aware of LCL having the mortgage assigned to itself;

ii.        A  further  offer  to  redeem  was  made  by  GLW agreeing to the Coltart offer of 1 May 2015, that would have seen the mortgage paid out upon its settlement;

iii.      Following  LCIL’s  refusal  of  the  Coltart  offer  on

29 May 2015, GLW again made an offer to redeem on 9 June 2015.  LCIL refused that offer on 10 June

2015;

iv.       A  further  offer  to  redeem  was  made  by  GLW agreeing to an offer by Tuki Tuki Ltd to purchase all of the property “as is – where is”, for $7m in November 2015, that would have seen the mortgage paid out upon its settlement.  That offer was refused by LCIL/

v.       A further offer to redeem was made by GLW on

7 December 2015. That offer was ignored by LCIL;

vi.      A further offer to redeem was made by GLW on

18 February  2016  and  that  offer  was  refused  by

LCIL on 22 February 2016;

vii.     A further offer to redeem was made by GLW on

18 April 2016 following the Court of Appeal decision in (CA 666/2015 [2016] NZCA 102. That offer was also refused by LCIL;

viii.     A  further  offer  to  redeem  was  made  by  GLW agreeing to an offer from Bamboo Trust to purchase all of the property “as is - where is”, for $7.35m in April 2016 that would have seen the mortgage paid out upon its settlement.  That offer was rejected by LCIL;

ix.       Further  offers  to  redeem  were  made  to  LCIL by GLW through an agreement for sale and purchase to the  Bamboo Trust for the balance  of the  site  for

$4.4m.   The offers were made in December 2016, and January and February 2017.

…

(g)      Refused an offer made on 1 May 2015 to purchase the entire property for the sum of $6,930,000.00 plus GST, if any.

[26]     In response, paragraph 38 of the Lepionka parties’ second amended statement

of defence and counterclaim says as follows:

38.They deny the allegations contained in particular 38 and say further that:

(a)      as at 3 April 2015:

(i)        GLW was not in a financial position to redeem the mortgage;

(ii)       LCIL was not in a position to allow GLW to redeem the mortgage as it had already adopted the Lepionka Contracts; and

(iii)      Westpac had consented to the Lepionka Contracts in July 2014 thereby binding any assignee of its mortgage in respect of those contracts and/or the second and third defendants would have obtained an interim injunction restraining Westpac or any assignee of its mortgage from selling lot 2 (being the Balance Lot) without recognising the Lepionka Contracts.

(b)      on 1 April 2015 LCIL, as mortgagee, adopted the Lepionka

Agreements and:

(i)        was not in a position to sell lot 2 (being the Balance Lot) without the consent of the second and third defendants; and

(ii)       had no legal duty to consider any subsequent offers for lot 2 (being the Balance Lot).

…

(g)      In relation to subparagraph 38(g) say:

(i)       LCIL entered into negotiations with Mr Coltart in

April and May 2015 to sell the Property to him;

(ii)       the negotiations did not result in a concluded sale and  purchase agreement  for  a number  of reasons including:

(A)    The  relevant  terms  proposed  by  Mr Coltart included   a   condition   that   he,   GLW  and Mr Paterson     enter     into     a     settlement agreement;

(B)    LCIL repeatedly sought the consent of GLW to the terms of sale but GLW failed to confirm it would meet all those terms;

(C)    LCIL  became  aware  that  Mr Coltart  was acting  as  agent  for  an  offshore  purchaser (Mr Johnston    [sic],    a   US    citizen)    and therefore any sale may be subject to the risks and  delays  associated  with  an  application under the Overseas Investment Act and/or be unlawful under that Act because of the association   provisions   within   it   and   the overall structure of the transaction;

(D)    Any sale would have required LCIL to enter into agreements with the other purchasers of lots   within   the   Property   to   obtain   their consent to end their sale and purchase agreements.

[27]     As can be seen from the above, no issue as to the status, terms or validity of the various offers arises on the pleadings (other than that a term of Mr Coltart’s offer required other parties’ consent).

[28]     However, in conjunction with the pleadings, affidavit evidence provided in the context of a discovery application may inform the scope of documents relevant to issues to be determined at trial.5   In this case, Mr Lepionka has deposed as follows:

I  am  aware  that  Messrs McHardy,  Coltart  and  Ladbrook  have  a  close relationship and there have been mutual business dealings between or amongst them.  Mr Paterson has also been part of this at times.  I know this from emails that I have seen between them (which have been attached to other affidavits in this proceeding) and from my discussions with them.

LCIL’s primary position is that as it adopted the sale and purchase contracts with the second and third defendants (which had previously been entered into between GLW and those parties), it could no longer consider any offers.

If, however, those offers in some way become relevant then LCL wishes to test whether the offers are genuine and/or there have been any “side deals” between any of the parties set out at paragraph 3 above in relation to any of the offers.   I am concerned that one or more of these offers may not be “genuine” offers but may have been made for the purposes of promoting

5      AMP Society v Architectural Windows Ltd [1986] 2 NZLR 190 at 196.

GLW’s interests in this litigation.  Equally, I am concerned that there may be arrangements between one or more of Messrs McHardy, Coltart, Ladbrook and Mr Paterson such that the face value of any offer/the sale price would be redistributed between them after any settlement.  For example, repayment of part of the purchase price.6

And

In paragraphs 62 to 67 of his affidavit, Mr Paterson makes comment about Mr Coltart’s various offers.  My concerns with these offers has always been that  Mr Coltart  was  acting  as  a  front  man/agent  for  the  American, Mr Johnston and that the LCIL, in accepting any offers from Mr Coltart, could be complicit to a breach of the Overseas Investment Act 2005.   My concerns are based on the following documents ….7

[29]     In his affidavit in response to the evidence filed on behalf of the non-parties, Mr Lepionka says further that:8

As GLW seeks to establish its loss by relying on one or more offers made by these individuals, or entities related to them, I want to know that LCIL has available to it at trial all documents related to those offers.  I want to ensure that LCIL has the entire picture about the offers.

[30]     Mr Lepionka also points to certain emails that have been provided by way of discovery, which he says give rise to his concerns about the offers.  He refers to an email between Mr McHardy and Mr Johnson (a director of AFI) (at Exhibit “A” to his affidavit dated 12 May 2017), in which Mr McHardy says “…we are giving Paterson an offer of funding for the redemption for the first mortgage; as discussed that’s merely to try and keep his court case alive and keep maximum pressure on Lepionka”.  However, this does not relate to an offer to purchase the Property, but rather relates to funding GLW for the purpose of redeeming the mortgage.   Other aspects   of   that   correspondence   do,   however,   refer   to   earlier   “tenders”   by Mr McHardy, including TTL’s offer to buy the Property for $6.5 million plus GST (but say nothing further about it).  The correspondence also refers to Mr McHardy’s offer to pay AFI a $200,000 “top up” if a negotiated settlement could be achieved. This was based on LCIL accepting the $6.5 million offer, $1.8 million of that being

paid to AFI as second mortgagee, and the $200,000 “top up” to take AFI’s total

6      Affidavit of SJJ Lepionka, dated 2 March 2017, paras 5 to 7, Tab 11, page 216 of the Bundle of

Documents.

7      Affidavit of SJJ Lepionka, dated 23 September 2015, para 68, Tab 13, page 240 of the Bundle of

Documents.

8      Affidavit of SJJ Lepionka, dated 12 May 2017, para 4, Tab 23, page 345 of the Bundle of

Documents.

receipts to the $2 million amount that it appears it was looking for through a settlement.

[31]     Mr Lepionka also attaches at Exhibit “B” to his affidavit an email between Mr McHardy and Mr Johnson, in which further reference is made to Mr McHardy paying the $200,000 “top up” in the event TTL was ultimately successful in purchasing the Property.

[32]     Mr Colson for the Lepionka parties accepts that the documents sought are not relevant to  whether LCIL breached  any of its  duties as mortgagee.    Mr Colson accepts that documents not available to LCIL at that time would not be relevant to that inquiry.  However, he submits that the documents are nevertheless relevant to the question of relief, and in particular, the damages sought by GLW (which rely on some,  if  not  all,  of  these  offers).    Mr Colson  submits  that  if  there  are  emails indicating that, for example, despite an offer having been made to LCIL, the party making the offer had no intention of carrying through with it, that would be relevant to the damages calculation.  Ultimately, he submits it would be helpful or useful to have the correspondence “behind the scenes” as to the nature of the offers, to enable the viability and validity of the offers to be tested under cross-examination.

[33]     Counsel for Messrs McHardy, Coltart and TTL, Mr Chan, submits that there is nothing in the pleadings, nor in Mr Lepionka’s evidence, that makes this category of documents either relevant or necessary.  In particular, Mr Chan notes that no issue arises on the pleadings as to the “genuineness” or validity of the offers, and that Mr Lepionka’s evidence is nothing more than speculation.  He accordingly submits that the Lepionka parties are merely fishing.

[34]     Counsel  for  Mr Ladbrook/the  Bamboo  Trust,  Ms  Telford,  makes  similar points.   In addition, Ms Telford submits that the suggestion that the offers were somehow not valid or genuine is tantamount to an allegation of fraud, in respect of which no supporting evidence has been provided.

[35]     Mr   Chan   and   Ms   Telford   also   refer   to   the   affidavit   evidence   of Messrs McHardy, Coltart and Ladbrook, in which each confirms that the offers they made were genuine, intended to be carried through and were sufficiently financed.

[36]     Whether or not a discovery application amounts to “fishing” will require close  consideration  of  the  pleadings  and  the  issues  for  determination  at  trial. Mr Chan and Ms Telford referred me to a number of authorities which address discovery applications said to be “fishing”. For present purposes, it is sufficient to refer to the authoritative judgment of Chilwell J in AMP Society v Architectural Windows Ltd, in which his Honour states as follows:9

It is clear that the Court will not order discovery or allow interrogatories where the applicant is doing no more than "fishing". The meaning of the term "fishing' in  this context  has  been  discussed in a  number  of  cases. Barker J  collected  several of  them  in  Re  Securitibank  Ltd  v  Rutherford (Auckland, A 355/81, 14 August 1984 (Securitibank judgment No 31)). In my view, the description of "fishing" in the authorities cited by Barker J and in other authorities cited by counsel come to this; an applicant is fishing when he seeks to obtain information or documents by interrogatories or discovery in order to discover a cause of action different from that pleaded or in order to discover circumstances which may or may not support a baseless or speculative cause of action.

An  instance  of the first type  is found in  Petchem Ltd  v B  F  Goodrich Chemical  Ltd  [1982] VR 485. This understanding of the term "fishing" supplies support for the opinion of Gibbs J (as he then was) in Sharpe v Smail (1975) 49 ALJR 130, 133:

"An interrogatory cannot be described as fishing if it is directed to obtaining information as to a fact relevant to an issue raised by the pleadings."

That opinion was cited by Barker J in the Securitibank case where, rejecting an allegation of fishing, he said:

"In most instances, subject to any particular criticism of a particular interrogatory, the plaintiff has endeavoured to tie the question to a part of the pleadings; in general terms I do not consider that the bulk of the interrogatories come within the fishing objection."

The importance of the pleadings in determining what are the matters in question between the parties was emphasised by Kelly J in Hooker Corp Ltd v  Commonwealth  of  Australia  (1985) 80 FLR 94, 100–105. See also

13 Halsbury's Laws of England (4th ed) paras 27 and 38, Hennessy v Wright

(No 2) (1888) 24 QBD 445n and Hall v Alice Springs Veterinary Clinic Pty

Ltd (1982) 17 NTR 13.

9      AMP Society v Architectural Windows Ltd, above n 5, at 196.

The second type of fishing, ie for the baseless or speculative cause of action, is exemplified by WA Pines Pty Ltd v Bannerman (1980) 41 FLR 175, Melbourne Home of Ford Pty Ltd v Trade Practices Commission (1979)

36 FLR 450, and Lane v Gray (1873) LR 16 Eq 552.

In the present case the pleadings and the affidavit evidence define the issues with some precision. The documents sought relate to those issues to a degree which, in my opinion, saves them from an imputation of fishing. Nor can it be said that the allegation of agency is baseless or speculative. I cannot hold that the plaintiff is casting his net merely in hope of catching something worthwhile.

[37]   Having considered the pleadings, the affidavit evidence and the parties’ competing submissions, save for one aspect of the documents sought (as to which, see [41] below), I am not persuaded that discovery of all documents “sitting behind” the offers ought to be ordered.

[38]     There is no suggestion in the pleadings that the offers are not “genuine” or were not intended to be followed through by the persons or entities making them. Rather,  specific  issues  have  been  pleaded  in  relation  to  the  negotiation  of Mr Coltart’s  offers.    None  of  those  pleaded  issues  relate  to  the  genuineness  or validity of the underlying offers.

[39] Despite no issue arising on the pleadings, I might nevertheless have been persuaded to order discovery if Mr Lepionka’s evidence had provided a clear factual foundation for his concerns. However, that evidence, and the emails to which Mr Lepionka refers (as discussed at [30]–[31] above), do not in my view provide a proper foundation for the discovery sought. Ultimately, Mr Lepionka’s concerns are speculative. Speculation is not a sufficient foundation for a discovery application.10

[40]     Accordingly,  while  it  might  be  “useful”  or  “helpful”  for  LCIL to  have discovery of all documents in relation to the offers, and specifically to test the “genuineness” of them,  I do not  consider those documents  relevant  to an issue

arising on the pleading that will need to be determined at trial.

10     See, for example, Bunting v Buchanan [2013] NZHC 1921 at [33]; Chilwell J’s observations in AMP Society v Architectural Windows Ltd, above n 5; Government Life Insurance Co Ltd v Unigroup Pacific Ltd HC Auckland CL80/88, 22 June 1988 at 4–5.

[41]     The exception to this is Mr Coltart’s offer in May 2015.  Paragraph 38(g) of the second amended statement of defence and counterclaim alleges that Mr Coltart was acting as a “front man” or “agent” for Mr Johnston, a US citizen, and that LCIL had concerns about this (given the implications under the Overseas Investment Act). Mr Lepionka’s affidavit, and the underlying items of correspondence to which he refers, provide a factual foundation for that concern.   In his affidavit, Mr Coltart confirms  that  it  was  always  his  intention  to  on-sell  some  of  the  Property  to Mr Johnston.  Whether and to what extent LCIL’s concern would have materialised (in relation to the Overseas Investment Act) if the offer had been pursued is a matter that could affect damages.

[42]     There   is   no   suggestion   that   documents   concerning   Mr   Johnston’s involvement in Mr Coltart’s offer would be in the possession of Mr McHardy, TTL or Mr Ladbrook.   There is accordingly an order that Mr Coltart is to discover all documents relating to communications between him and Mr Johnston (of the USA) (or  between  entities  or  persons  acting  for  or  on  behalf  of  Mr  Coltart  and Mr Johnston) concerning an offer to purchase the Property (or any part of it).   I consider such an order against Mr Coltart, as a non-party, is necessary, given the documents are, unless forwarded on by Mr Coltart or Mr Johnston, unlikely to be in

GLW’s  possession.11      I  also  note  the  (undisputed)  issues  in  respect  of  GLW’s

discovery (discussed at [105] and [111] below), which further reinforces that the non-party discovery order is necessary.

Documents concerning GST on the offers

[43]     Category 2 of the application seeks discovery of all documents relating to advice on the GST position in relation to any offer in respect of the Property.

[44]     LCIL submits  that  it  has  put  the  non-parties’ understanding  of  the  GST position on the offers (which affects the ultimate sale price) in issue.  In this context, LCIL submits that the GST position is complicated, and points to Mr Lepionka’s

evidence that in his negotiations with Mr McHardy over the sales of Lots 2 and 6, it

11     GLW has given discovery of one email exchange in its possession relating to Mr Johnston’s offer. See Mr Paterson’s affidavit affirmed 27 April 2017, paragraph 16.

became apparent that the GST position was not appreciated by Mr McHardy which led to a renegotiation of the purchase price.

[45]     Again, however, no issue concerning GST on the offers (or the non-parties’ understanding in that regard) arises on the pleadings.  And Mr Lepionka’s evidence relates to his opinion of Mr McHardy’s understanding of the GST position on a later sale of two lots to TTL (and not to any of the offers referred to at paragraph 38 of the second amended statement of claim).  Further, Mr McHardy gives evidence that he did not misunderstand the GST position.   I also accept Mr Chan’s submission that the offers made were for specified sums plus GST if any, such that if any offer had been accepted, the incidence and amount of GST would have been a matter of law.

[46]     I accordingly consider this aspect of the application to be, at best, speculative. I decline to grant the application in this respect.

[47]     The final aspect of the non-party discovery application is category 5,  in which the Lepionka parties seek discovery by Mr Coltart of, first, all documents relating to “any offer involving or related to Mr Johnston of the USA from late

2014”.  I have already dealt with this aspect of the discovery application at [41]–[42]

above.

[48]     The  second  part  of  category  5  seeks  discovery  from  Mr  Coltart  of  all

documents relating to “any other offer [in respect of the Property] prior to May

2015”. Mr Colson submits that these documents are relevant to the Lepionka parties’ pleading that, if LCIL were to be found to have breached any of its duties, the Lepionka Purchase Contracts ought not to be set aside on.  This is on the basis that, inter alia, GLW was taking steps in early 2015 to defeat the Lepionka Purchase Contracts  by  selling  the  Property  to  Mr  Coltart  or  to  Mr  Johnston.    As  such, Mr Colson submits that the documents are relevant to a “clean hands” defence.

[49]     Mr Colson refers to Mr Lepionka’s evidence that when LCIL took possession of  the  Lodge,  it  found  three  (unsigned)  sale  and  purchase  agreements  between Mr Coltart and GLW.  Those agreements were dated 2015 and related to the lots that

were to be purchased under the Lepionka Purchase Contracts.  A condition of the

agreements was the removal of the Lepionka Purchasers’ Caveats on the title.

[50]     Mr Coltart does not address these matters in his affidavit.  Mr Paterson/GLW appear to accept that documents concerning offers to sell the Property to Mr Coltart prior to May 2015 are relevant, having provided discovery of documents relating to such offers over the period June 2014 to May 2015.12

[51]     Given the content of the pleadings, I am satisfied that this aspect of category

5 seeks documents that are relevant to an issue arising on the pleadings.   Further, given the issues with GLW’s own discovery, I consider it is necessary to make a non- party discovery application.   There is accordingly an order against Mr Coltart in terms of category 5(b) of the non-party discovery application.

Application against GLW – tailored discovery

[52]     The Lepionka parties seek discovery orders in respect of certain categories of documents that the parties were unable to agree for the purposes of the tailored discovery orders. The primary dispute is one of relevance.

[53]     Mr Colson attached to his written submissions a helpful schedule addressing each  category of the  documents  sought  and  why the documents  are said  to  be relevant.

Communications between GLW and Westpac in the period 2009 to 2015 (categories

1 and 2)

[54]   These categories effectively seek discovery of all documents containing communications between GLW and Westpac in the period 2009 to 2015, and all documents relating to GLW’s accounts/financial arrangements with Westpac.

[55]     The Lepionka parties say that these documents are relevant for a number of reasons:

12 Mr Paterson’s affidavit affirmed 27 April 2017, at [17].

(a)      Paragraph 35 of GLW’s second amended statement of claim pleads that correspondence from solicitors acting for the Lepionka parties sent  to  Westpac  on  30 September  2014  “created  discomfort  for Westpac and  caused Westpac to  transfer  [GLW’s]  accounts  to  the Loans Management Unit and led to Westpac refusing to roll over one of GLW’s term loan facilities.”  Mr Colson submits that, on the basis of expert evidence filed in support of the application, a full view of Westpac’s relationship with GLW over the period 2009 to 2015 is necessary to test this allegation.

(b)The documents are also relevant to GLW’s allegation that it would have redeemed the mortgage in early 2015, given LCIL’s allegation that GLW was not in a financial position to do so.

(c)      Communications between GLW and Westpac are also likely have included documents setting out the costs, cash flows and/or expected profit for development  of the Property.13     Mr Colson submits that these documents are relevant to GLW’s allegation the costs incurred by LCIL in relation to the subdivision are excessive.14

(d)The  documents  are  also  said  to  be  relevant  to  whether  Westpac consented to the Edgars’ right to roam over the common area of the Property.15    Whether or not Westpac consented is in turn relevant to the ability of the Lepionka Purchasers to settle on the Lepionka Purchase Contracts.

(e)      The final aspect in which it is said that the categories are relevant is that they are relevant to Westpac’s consent to the Lepionka Purchase Contracts (which is in issue on the pleadings).

[56]     In opposition, Mr Grove submits the following:

13     This is based on expert evidence filed in support of the application.

14     See paragraphs 59(c) and 77(e) of the second amended statement of claim.

15     Paragraph 21 of the second amended statement of claim pleads that Westpac gave that consent.

LCIL has denied that Westpac gave consent.

(a)      Paragraph  35  of  the  second  amended  statement  of  defence  is somewhat of a red herring, given it does not go to any of the issues to be determined at trial.  Mr Grove submits that it is merely part of the background or narrative, and is not relevant to the issue concerning LCIL’s motive for the purchase of the Westpac security or its subsequent actions as mortgagee (and in particular, whether it has breached any of its statutory or common law duties attaching to that role).

(b)GLW does not suggest that the funding for GLW’s attempts to redeem the mortgage in early 2015 was going to come from Westpac.  Rather, GLW has confirmed that the sole source of funding was to be AFI (which  in  turn  was  going  to  source  the  funds  from  a  Mr Arthur Johnson, a relative of Mr David Johnson of AFI).  Mr Grove submits that all documentation relevant to that funding has been provided and accordingly nothing further can be provided.

(c)       Mr Grove  submits  that  there  is  clear  evidence  that  Westpac  did

consent to the Edgars’ right to roam.

[57]     I do not consider these categories of documents, at least in the very broad manner in which they are presently framed, to be relevant or proportionate.  First, I accept Mr Grove’s submission that paragraph 35, although strictly denied by the Lepionka parties, does not give rise to an issue which will need to be determined at trial.   It is not in dispute that GLW was in default under its mortgage and that its accounts had been transferred to the Loans Management Unit.  What are in dispute are steps taken after that point in time, and in particular, LCIL’s acquisition of the mortgage and its actions as mortgagee.

[58]     Further, it is not in dispute that GLW itself did not have the funds to redeem the mortgage in early 2015.  Mr Grove has confirmed that it will not be suggested by GLW that Westpac was a proposed source of funding for this purpose.

[59]     However, I accept that any documents provided to Westpac that set out the costs, cash flows and/or expected profit for development of the Property are relevant. That is also the case in respect of any documents evidencing Westpac’s consent to the Edgars’ right to roam and its consent to or knowledge of the Lepionka Purchase Contracts.

[60]     I accordingly decline to order discovery in terms of categories 1 and 2 of schedule 1 to the application.  There is, however, an order that GLW discover any documents containing communications between GLW and Westpac and which:

(a)       evidence the costs, cash flows or expected profit for development of the Property;

(b)      evidence Westpac’s consent to the Edgars’ right to roam; and

(c)       evidence Westpac’s  consent  to  and/or  knowledge  of  the  Lepionka

Purchase Contracts.

The loan and loan agreement between AFI and GLW (categories 3 and 4)

[61]     Two categories of documents fall within this head, namely categories 3 and 4 of the schedule to the application.

[62]     As  noted  above,  Mr Grove  has  confirmed  that  funding  for  GLW’s  own attempts to redeem the mortgage was to be sourced from AFI (and not any other third party).

[63]     Mr Grove, in his written submissions, does not dispute the relevance of these two categories of documents.   On that basis, it is not altogether clear to me why these categories of documents were not agreed categories for the purposes of the parties’ joint memorandum dated 13 December 2016.  I also note that categories in broadly similar terms have been agreed as between AFI and LCIL in proceeding

2836.    Nevertheless,  Mr Grove  confirms  (and  Mr Paterson  gives  evidence)  that Mr Paterson/GLW has  already discovered  all  documentation  that  can  be located regarding these categories.  In his affidavit affirmed on 27 April 2015, Mr Paterson

says that any further documents are likely to be on the hard drive, which was left at the Lodge in April 2015 when LCIL took possession.  Mr Grove also submits that discovery has already been provided by AFI, such that any relevant documents will already be in the defendants’ possession in any event.

[64]     Given GLW’s acceptance that the documents sought in categories 3 and 4 are relevant,  there  are  orders  that  GLW  is  to  give  discovery  of  those  documents described in categories 3 and 4 of the schedule to the application.  As such, to the extent any further documents are located in due course, and consistent with GLW’s continuing discovery obligations, they are to be discovered. This may also become relevant in the context of any further documents which might be retrieved as a result of forensic review of Mr Paterson’s laptop (as to which see [103]–[116] below).

Financial standing of GLW/ability to redeem/offers to redeem (categories 5 to 12)

[65]     These categories seek documents largely based on Mr Thompson’s expert evidence, as to the type of documentation a potential lender would wish to see before making a decision on whether or not to advance funds to GLW.

[66]     Mr Grove submits that it is not in dispute that GLW itself did not have the requisite financial standing to fund the redemption.  He submits that every offer to redeem has been particularised and all relevant documents in GLW’s possession or control have already been provided.   Mr Grove further submits that while, on the basis of Mr Thompson’s evidence, the very broad range of material sought might be the type of documentation required by a party such as Westpac or other significant lender in order to inform its lending decisions, that is not necessarily the case in respect of AFI itself.   Mr Grove also points to the fact that affidavit evidence has been produced confirming that AFI was willing and in a position to provide funding to  GLW,  through  financing  it  proposed  to  source  from  Mr   Johnson’s  relative (Mr Arthur Johnson).

[67]     While I accept Mr Grove’s submission that the affidavit evidence confirms AFI’s  intent  to  provide  funding to  GLW to  redeem,  GLW’s  financial  ability to redeem will be a key issue in this proceeding.  As such, a key issue will also be the willingness and ability of AFI to provide that funding to GLW.

[68]     I am not prepared to order the broad ranging discovery sought at categories

5 to 12 of the schedule to the application.  In my view, and particularly in light of confirmation that AFI was the only potential source of funding, and that in turn, Mr Arthur Johnson was the only source of funding for AFI, such a broad range of materials is neither relevant nor proportionate.   Rather, there will be an order that GLW give discovery of any documents relating to AFI’s ability and/or willingness to provide funding to GLW for the purpose of GLW redeeming the mortgage in respect of the Property.

[69]     In his written submissions, Mr Grove submits that all documentation relating to funding the initial redemption request (in May 2015) has been discovered.  It is not clear to me pursuant to which agreed category of tailored discovery those documents will have been provided.  Accordingly, for the avoidance of doubt, the order made in the preceding paragraph will encompass the documents “relating to that funding”.

[70]     Mr Grove also submits that from October 2015 to April 2016, funding was also available from Tessera Finance.   Mr Grove states that it is accordingly only during that period that documents would be relevant, and that “the funding documents” have been discovered. Again, it is not clear in response to which agreed category of documents those documents will have been provided (other than perhaps agreed category 8). Accordingly and on the basis that is not suggested that any other source of funding was available to GLW over the period October 2015 to April 2016, there is an order that GLW give discovery of all documents relating to Tessera Finance’s ability and willingness to provide finance to GLW over the period October

2015 to April 2016 (inclusive) for the purpose of GLW redeeming the mortgage in relation to the Property.

Offers in relation to the Property (category 13)

[71]     The Lepionka parties seek discovery from GLW of all documents “sitting behind” the various offers made to purchase the Property and particularised at paragraph 38 of the second amended statement of claim.

[72]     For the reasons I have already given in relation to the application for the same documents through the non-party discovery application, I decline to make a discovery order in terms of category 13.  I do, however, make an order for discovery by GLW of any documents in its possession or control falling within those categories of documents ordered to be discovered by Mr Coltart and set out at [42] and [51] above.

[73]     Mr Colson also pointed to Mr Ladbrook’s evidence, namely that the Bamboo Trust made a number of offers in 2016 and 2017 for all or part of the Property, both to GLW and to Mr Lepionka.  Mr Ladbrook says that the offers made to GLW were initially  made  through  GLW’s  previous  legal  counsel,  Mr Lawson  of  Lawson Robinson, who was to draft an agreement in May 2016.

[74]     Mr Colson submits that the offers made directly to GLW are not pleaded in paragraph 38 of the second amended statement of claim.   Mr Colson submits that there is therefore a concern that GLW may have “cherry-picked” from a series of Ladbrook offers.   He accordingly submits it would be “helpful” to see documents relating to these other offers.

[75]     I do not consider these additional matters mean documents in relation to offers which may have been made directly to GLW are relevant to issues for determination at trial.   As already noted, they cannot be relevant to the primary question of LCIL’s compliance or otherwise with its statutory and common law duties,  not  being  materials  available  to  LCIL at  the  relevant  time.    Nor  am  I persuaded that the documents are relevant to the question of damages.  The damages inquiry will no doubt turn on an assessment of whether any of the specific offers pleaded at paragraph 38 of the second amended statement of claim ought to have been accepted by LCIL, and if it had been, the financial consequences that would have followed.  Offers not relied on by GLW for the purposes of its damages claim are not relevant.

Other  business  ventures  in  which  Mr Paterson  or  one  or  more  of  companies controlled by Mr Paterson were participants (categories 14 and 15)

[76]     Category  14  is  a  further  very  broad  category  seeking,  in  essence,  all documents  relating  to  any  communications  between  GLW  and  any  third  party relating to the assertion that GLW wished and was in a financial position to redeem the Westpac mortgage.  This is stated to include (but not be limited to) documents concerning  six  Australian-based   business   ventures   in   which   it   is   said   that Mr Paterson (or entities associated with him) participated.

[77]     Again, the basis for this request is said to be AFI’s willingness to fund GLW to redeem the mortgage.  Mr Colson submits that if AFI “took a bath” on its lending in Australia to entities associated with Mr Paterson, then it would be less likely to fund GLW to redeem the mortgage.

[78] I am not persuaded that a discovery category of this nature and breadth is relevant or proportionate. GLW is the plaintiff to this proceeding, rather than any other entity that might be owned or controlled by Mr Paterson and which might have participated in property developments in Australia. While I accept that AFI’s willingness to advance funds to GLW is relevant to issues to be determined in the proceeding, documents relevant to that issue can appropriately be discovered pursuant to the narrower category set out at [68] above.

[79]     I  accordingly decline  to  order  discovery in  terms  of  category 14  of  the schedule attached to the application.

[80]     This also deals with category 15, which seeks discovery of any financial statement or bank statements of any entity described in category 14.

Offers and actions prior to May 2015 (categories 16 and 17)

[81]     Category 16 is an overlap with similar categories in the non-party discovery application.   That the documents sought by these categories are relevant does not appear to be in dispute.   In his submissions, Mr Grove simply notes that further discovery has now been given by GWL in relation to these categories.  Similarly, by

his  affidavit  affirmed  on  27 April  2017,  Mr Paterson  gives  discovery  of  further documents relating to these categories.

[82]     Nevertheless, these categories do not presently form a part of the agreed

categories for tailored discovery and set out in the parties’ joint memorandum dated

13 December 2017.  I make an order for discovery in terms of category 16.

[83]     Category 17 seeks, in broad terms, documents relating to GLW’s involvement in or consideration of a sale or assignment of the Westpac mortgage in the period from  August  2014  to  May  2015,  and  liquidating  GLW  in  the  same  period. Mr Colson refers to paragraph 75(c) of the second amended statement of defence, namely that if the Court were to find that LCIL had breached any of its duties, then that Lepionka Purchase Contracts ought not to be set aside for a number of reasons. One of those reasons is said to be that:

GLW was taking steps in early 2015 to:

(i)       Bring about an assignment of Westpac’s mortgage to a third party;

and/or

(ii)      Have that third party sell the balance lot and thereby attempt to defeat Lepionka Contracts; and/or

(iii)     Attempt to cancel the Lepionka Contracts to allow a sale of the balance lot to Mr Andrew Coltart and/or Mr Johnston (a US citizen).

[84]     Accordingly, the pleadings do raise an issue in relation to these matters.  It is therefore not correct, as Mr Grove submits, that what happened before LCIL took the assignment of the Westpac debt and security is irrelevant as far the pleadings are concerned.   However, the pleading itself only refers to these actions being contemplated by GLW/Mr Paterson from early 2015.   The underlying evidence in support of this category of documents (Mr Lepionka’s affidavit sworn 23 September

2015) also only refers to the position in early 2015.

[85]     Accordingly,  there  will  be  an  order  for  discovery  by  GLW  in  terms  of category 17, but limited to the time period 1 January 2015 to May 2015 (inclusive).

Application for further and better discovery against GLW

[86]     This application, dated 4 May 2017, seeks further and better discovery from GLW in relation to categories of documents that had been agreed by the parties to be relevant. Attached to Mr Colson’s submissions is “Schedule 2”, which sets out those agreed categories and the particular grounds for the Lepionka parties’ belief that not all documents relating to those categories have been discovered by GLW.

[87]     Mr Grove informed me at the hearing that the simple point is that, as matters currently stand, GLW does not have any further documents to produce in response to these categories.  This is largely due to issues GLW has experienced in respect of its discovery (which I discuss further below, at [93]–[94]).  Mr Colson quite properly recognised   that   it   is   slightly   artificial   to   pursue   the   application   in   those circumstances.

[88] In light of this, I do not propose to make any orders on this application at this time. However, there is no doubt that these categories of documents are relevant, having been agreed as such for the purposes of tailored discovery. Accordingly, the production of any further documents responsive to these categories may need to be revisited in light of the orders I am prepared to make in respect of Mr Paterson’s laptop, which I address at [103]–[116] below.

Affidavit of Elizabeth O’Neil

[89]     The Lepionka parties also seek an order that Ms O’Neil, who has been the director of GLW since April 2015, swear an affidavit setting out the steps she has personally taken to ensure that GLW has complied with its discovery obligations (by reference to r 8.15(2)(a) to (d)).

[90]     Mr Grove submits that this is simply unnecessary, in that Ms O’Neil has had

Mr Paterson deal with discovery on behalf of GLW.

[91]     Mr Paterson’s affidavit of documents states that:

(a)       he is authorised by the director of GLW to make the affidavit on behalf of GLW;

(b)      he is aware of his discovery obligations; and

(c)       he  has  “diligently  searched  for  all  documents  required  to  be discovered”.

[92]     Rule  8.15(2)(c)  of  the  High  Court  Rules  requires  that  any  affidavit  of documents “give particulars of the steps taken to fulfil [the party’s discovery] obligations”. Mr Paterson’s affidavit does not do so.

[93]     Given  the  uncontested  issues  with  GLW’s  discovery,16   I  consider  it  is appropriate that both Mr Paterson and Ms O’Neil swear a further affidavit giving particulars of the steps  they have each  taken  to  comply with  GLW’s  discovery obligations.  I appreciate that Ms O’Neil’s affidavit may simply refer to the fact that she has effectively delegated the task to Mr Paterson. But the Lepionka parties are entitled to know the position in relation to that, on affidavit.

[94]     In addition, and because of Mr Paterson’s own acceptance of the deficiencies in GLW’s discovery,17 I consider it is appropriate for Mr Paterson to swear a further affidavit expanding on the particular steps he has taken to search for documents required to be produced in response to the agreed discovery categories.

[95]     I  accordingly  order  that  each  of  Ms O’Neil  and  Mr Paterson  provide  an affidavit giving particulars of the steps that each of them have taken to fulfil GLW’s

discovery obligations.

16     At the hearing, Mr Grove acknowledged that the position in respect of GLW’s documentation was unsatisfactory, but pointed to the missing hard drive(s), on which further documents could have been backed up.

17     Mr Paterson refers to the missing hard drive that contained historical materials, as well as a second hard drive said to remain at the Property and which contains further documents.  See Mr Paterson’s affidavit, sworn 27 April 2017, at [3]–[6].  Mr Riley, who currently occupies the Lodge, provided an affidavit stating that he has searched for but cannot locate any hard drives remaining at the Lodge.

Enumeration and description of privileged documents

[96]     Rule 8.16(2) provides that:

Subject to Part 2 of Schedule 9, documents of the same nature falling within subclause (1)(b), (d) or (e) may be described as a group or groups.

[97]     Subclause  (1)(b)  relates  to  documents  in  respect  of  which  privilege  is claimed.

[98]     Further, r 8.16(3) provides that:

The description of documents for which privilege is claimed under subclause (1)(b) must be sufficient to inform the other parties of the basis on which each document is included in a group under subclause (2).

[99]     Part 2 to the Schedule attached to Mr Paterson’s affidavit of documents states the following (in relation to documents that are in GLW’s control and for which GLW claims privilege):

Communications between solicitor, counsel, clients and potential witnesses.

[100]   Mr Grove quite properly accepted during the course of the hearing that this aspect of the Schedule to Mr Paterson’s affidavit does need to be recast.   Self- evidently, for example, communications between solicitor and client, client and any other parties, or solicitor and potential witnesses are not of the same nature and therefore cannot be grouped together as per the existing text of the Schedule to Mr Paterson’s affidavit.   Nor is it clear over which categories of documents the different forms of privilege are claimed.

[101]   Given  that  documents,  including  those  in  respect  of  which  privilege  is claimed, may be listed by group, I am not prepared to order (at this stage) that each of the communications be individually listed.  However, Part 2 of the Schedule to Mr Paterson’s affidavit needs to be reproduced in a form which complies with the Rules.  In particular, if group listing of privileged documents is to be adopted, the listing needs to accurately inform the Lepionka parties of the nature of the individual documents in that group, the date range for them and the basis for privilege claimed.

That will need to be the case in respect of legal advice privilege and litigation privilege (and any other privileges claimed).18

[102]   Accordingly, there is an order that Part 2 of the Schedule to Mr Paterson’s

affidavit of documents be resworn in a form which complies with the Rules.

Production of laptop

[103]   LCIL also seeks an order pursuant to r 9.34 that Mr Paterson make his laptop available to be inspected by an independent forensic expert, to determine the ability to  access  historic  emails  and  documents.    During  the  course  of  the  hearing, Mr Colson expanded the scope of this application to include any laptop or other computers used by Mr Paterson.   Mr Colson submits that an order for inspection under  r 9.34  is  particularly  necessary in  light  of  the  accepted  issues  in  GLW’s documentation, and the current unknown whereabouts of hard drives that would otherwise back up GLW’s documents.

[104]   Mr Colson accepts that if the order is made, the costs of the inspection ought to  be borne by the  Lepionka parties (at  least  in  the first  instance,  pending the outcome of the trial itself).

[105]   Mr Grove objects to an order for the provision of Mr Paterson’s laptop (or other computers), submitting it is a “fishing expedition”.   He submits that documentation  that  can  be  discovered  has  been  discovered.    Mr Grove  further submits that there can be no suggestion that there is any category of documents which has not been discovered and which is crucial to the proceedings, and that rather than dealing with matters such as this, GLW’s focus should be on completing its evidence for trial, given it does not have the unlimited resource that the Lepionka parties do.  Mr Grove accepts, however, that Mr Paterson is in possession of a laptop that has been used by him over the period to which these proceedings relate.  He also confirms that Mr Paterson does not use the Cloud for backing up materials, and that the issue lies in the inability to locate the hard drives on which further documents

would likely be located.   I further note that Mr Paterson confirms in his affidavit

18     See similar observations of Dunningham J in Tierney v Earthquake Commission [2014] NZHC

2941 at [26].

(affirmed  on  27 April  2017)  that  historical  materials  have  always  been  kept  on

“various computers or hard drives”.

[106]   In  appropriate circumstances,  orders  will  be  made pursuant  to  r 9.34  for inspection of computers, laptops and other electronic devices for the purposes of discovery.  Mr Colson refers to a number of decisions in which there was evidence of deficiencies in the discovery provided by a party and an order for inspection of a computer was therefore made pursuant to r 9.34.

[107]   The principles of the application of r 9.34 were helpfully summarised by

Associate Judge Bell in Gillespie v Guest:19

More recently the courts have made orders under this rule to allow the inspection of computer systems to search for documents. Examples are Tyco Flow Pacific Pty Ltd v Grant, PAE (New Zealand) Ltd v Brosnahan and Transpacific All Brite Ltd v MPC Traders Ltd.   These orders go beyond inspection of the computer systems to ascertain their inherent states or properties, to enable the party seeking inspection to obtain discovery of documents. They are really extended discovery orders.   As discovery of documents ought to be achieved by the rules under Part 8 of the High Court Rules, the party seeking inspection of another party’s computer systems to obtain documents needs to satisfy the court that there is good reason for this additional form of discovery.  In each of the three cases above the court did inquire and was satisfied that there was good reason.  Generally the party seeking the inspection order persuaded the court that the other side’s discovery was arguably inadequate and there was reason to believe that further documents would be found on a computer system.  Accordingly for this application inspection should only be required if there is good reason to believe that other discovery by Mr Guest has been inadequate and that documents may be found on his computer systems.

[Emphasis added, citations omitted]

[108]   In  Gillespie  v  Guest,  the  applicant  pointed  to  a  gap  in  emails  between

1 January 2007 and 26 August 2007.  Associate Judge Bell accepted the submission that it was implausible that there were no emails during that period, and made an order for inspection under r 9.34 as a result.

[109]   The issue was considered more recently by Associate Judge Doogue in Craig v Slater.20   Points of note in relation to that decision are that:

19     Gillespie v Guest [2013] NZHC 668 at [65].

20     Craig v Slater [2017] NZHC 740.

(a)      Mr Slater, against whom the order was sought, had already received advice from a computer consultant that the deleted documents could not be retrieved; and

(b)The application was made on the eve of the substantive proceedings commencing (an interlocutory hearing being held on 10 April 2017 with the trial due to commence on 8 May 2017).

[110]   Associate Judge Doogue was nevertheless satisfied that there was a good reason for making such an order and that it was in the interests of justice to do so. The order was framed in terms to ensure confidentiality of the documents searched was maintained.

[111]   I am satisfied that, first, there is good reason to believe that GLW’s discovery has been inadequate (given those issues addressed by Mr Paterson in his 27 April affidavit)  and  second,  that  relevant  historical  documents  may  be  found  on Mr Paterson’s laptop or other computer systems.  The first point cannot seriously be challenged.     Mr Grove  accepts  as  much  in  his  written  submissions,  as  does Mr Paterson.   Moreover, Schedule 2 to Mr Colson’s submissions makes a credible case that relevant documents that ought to have been in GLW’s possession have not been discovered.  The second point is also not in dispute.  As noted, Mr Paterson is in possession of a laptop which he has used over the time period relating to these proceedings.   Further, Mr Paterson confirms that historical materials have always been kept on various hard drives or computers.

[112]   At  the hearing,  Mr Colson  clarified that  the order sought  at  this  time is limited to a forensic expert examining Mr Paterson’s laptop, and any other relevant computers, to ascertain whether historical documents can be retrieved from that laptop or computer.

[113]   I accordingly make the following orders:

(a)      Within three business days of the date of this judgment, Mr Paterson is  to  provide  an  affidavit  confirming  those  laptops  and/or  other

computers which remain within his or GLW’s possession or control, and which have been used in respect of emails and other documents/correspondence concerning the Property (since the time of GLW’s purchase of the Property).

(b)Within the same time period, the parties are to seek to agree on an independent expert to whom the laptop and computers identified in Mr Paterson’s affidavit are to be provided for inspection.  I interpolate to note that Mr Colson confirmed at the hearing that he had made inquiries of the larger accountancy firms, such as PriceWaterhouseCoopers and/or Deloitte, who confirm they would be able to carry out such an inspection.  I would hope that the parties can readily agree on a suitable independent expert, but if they not able to within the time period specified, the matter may be referred to me (by way of memoranda) and I will determine the expert.

(c)      Within 48  hours of the expert  being appointed,  Mr Paterson  is  to provide the laptop and/or computers referred to in his affidavit to the expert for inspection.

(d)Pending  any  further  order  of  the  Court,  the  independent  expert’s review and inspection of the laptop and/or computers produced is to be confined to assessing whether or not the expert is able to access historic emails and documents.   The inspection is not to extend to recovery or inspection of any historic emails or documents that can be accessed.

(e)      The expert is to report on these matters to the Court.  The report is also to be produced to Mr Colson (though he is not to disclose it to his clients)  and  Mr Grove  (who  may disclose  and  discuss  it  with  his instructing solicitors, Mr Paterson and GLW).   The reason for the restriction on Mr Colson disclosing the contents of the report at this stage is that it is not known precisely what the content of the report will be (despite the restrictions on the extent of the inspection referred

to  above).    This  is  to  reflect  the  reality  that  the  laptop  and/or computers will contain materials that are irrelevant to these proceedings and/or which are confidential to Mr Paterson and/or other third parties.

(f)      Once  the  independent  expert  has  carried  out  his  or  her  initial inspection, the laptop and any other computers produced are to be immediately returned to Mr Paterson/GLW.

[114]   I do not propose making any further orders in relation to the inspection at this stage.   Any further orders will largely depend on the contents of the report, and whether any (and if so, to what extent) historic materials can indeed be retrieved from the individual laptop and/or computers produced.

[115]   I also order that the costs of the independent expert are to be met in the first instance by the Lepionka parties.

[116]   There may need to be additional conditions/orders to those I have set out above.  If any party considers there should be further or amended orders in respect of the inspection, leave is reserved to bring those matters to my attention, via memoranda, so that any further orders required can be made expeditiously.

GLW’s application for orders against Lepionka parties

[117]   This application has four aspects:

(a)       First, an application for further and better discovery of documents

referred to in Schedule “A” to the application.

(b)Second, an application for leave to file a third amended statement of claim, the only objection to which is that the third amended statement of claim would see an additional party, namely Mr Lepionka in his personal capacity, joined as a further defendant to these proceedings.

(c)       Third, the allocation of a conference to consider trial matters and the time estimate for the trial.

(d)Finally, an order revesting the “cause of action” with Mr Paterson in his personal capacity.

[118]   I deal with the orders sought at (b) and (d) above at the end of this judgment.

Further and better discovery

Unredacted invoices and time sheets for all legal fees and other expenses charged against the mortgage

[119]   GLW  alleges  that  excessive  costs  have  been  charged  by  LCIL  to  the mortgage, including significant legal fees.  Mr Colson’s submissions set out that one of the “key issues” in the proceeding will be the “reasonableness of the costs debited to the mortgage”.

[120]    Mr Grove points to the fact that, at present, the legal invoices provided by way of discovery are either heavily redacted or are not accompanied by the letter setting out the tasks attended to in relation to each invoice.  Mr Grove also notes that one of the invoices (for $37,000) appears to relate to the Coltart appeal, and submits that this should not be charged to the mortgage at all (and even if so, the amount appears  excessive).     Mr Grove  submits  that,  in  the  absence  of  information concerning the tasks that have been completed in relation to each invoice, it is not possible to assess whether the costs are properly charged to the mortgage, and if so, the reasonableness of those costs.

[121]   I agree with Mr Grove’s submission that further information is required to enable GLW to properly assess the reasonableness of the costs charged to the mortgage.  Mr Colson responsibly accepted at the hearing that a further review will be carried out in respect of the invoices, to remove as many redactions as possible. He indicated that his preliminary view was that there will be few remaining redactions, though some may be required to maintain privilege.  For the avoidance of doubt, I confirm that the provision of invoice narrations in an unredacted form would

not be viewed by the Court as a waiver of privilege in the underlying advice or communications themselves.

[122]   Mr Grove was content to proceed on this basis.   I do not consider that the provision of the underlying time record sheets is required (at least at this stage).  If, despite  the  provision  of  further  invoice  information,  GLW  wishes  to  pursue discovery of the underlying time records, that may be brought back before me on short notice.

[123]   I accordingly do not make any formal orders on this aspect of the application.

Copies of all accounting records/journal entries in relation to the GLW mortgage to

LCIL

[124]   The nature and quantum of the amounts to be charged by LCIL in respect of the mortgage are plainly relevant to the proceedings.  Mr Grove submits that on the materials available to date, those amounts appear excessive.  Mr Grove submits that in order to properly review and test the costs which LCIL proposes to charge to the mortgage, further detail needs to be provided of precisely what costs are being charged.   He submits that a report in the form of a debit and credit “accounting record” is required.

[125]   Again, Mr Colson responsibly acknowledged at the hearing that steps will be taken to provide a more detailed and updated schedule to GLW.  Mr Colson indicated that an update for April 2017 could be provided in the next few days, with a further update to follow thereafter.

[126]   In light of the progress on this matter made at the hearing, I do not propose to make formal orders at this stage.  However, it is appropriate to record that sufficient information will need to be provided to GLW to enable it to properly understand the nature and quantum of the various cost items that LCIL has charged to the mortgage. This information should also be readily available to LCIL, to have enabled it to calculate the sums charged to date to the mortgage.

Copies of all correspondence and agreements, and unredacted correspondence, between the defendants and EHNP/the Edgars

[127]   Despite the terms of this category, the only point raised in Mr Grove’s written submissions is that some of the correspondence has been redacted.   In his oral submissions, Mr Grove submitted that the redactions (including some as far back as February 2015) “just look suspicious”.

[128]   In respect of the example given in support of the application,21 there is a large redaction made in the top half of the relevant page.  It strikes me that this may well be an email forwarding the email chain below to solicitors, perhaps with comments in relation to the forwarded material.  Be that as it may, I do not consider there is, without more, anything inherently “suspicious” in relation to the redaction that justifies any orders of the Court.  Mr Colson has confirmed that the redactions have properly been  made  on  the  basis  of  privilege.   Absent  any  reason  to  conclude otherwise, the Court will proceed on the basis that counsel have complied with their obligations  as  to  privilege  and  discovery  under  r 13.9  of  the  Lawyers  and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008.

[129]   The redactions being the only matter raised on this aspect of the application, I decline to make any orders.   For completeness, I note that there is a reference in Mr Paterson’s affirmation in support of the application that he is aware of a further agreement between EHNP and the Lepionka parties, but no further details are given. In the absence of any further details, it is not possible for either the Lepionka parties or the Court to determine what material might be referred to and whether or not it is relevant.  If GLW wishes to pursue this aspect of the application, more detail would need to be given as to what is sought and why it is said to be relevant.

Copies of all correspondence and communications with Mr Coltart, Tuki Tuki Ltd and Mr McHardy

[130]   In  his  written  submissions,  Mr Grove  submits  that  there  is  a  document, understood  to  be  a  settlement  agreement  between  the  Lepionka  parties  and

Mr Coltart, arising out of the caveat proceedings.  Mr Grove says that LCIL has not

21     Bundle 2, Tab 32, page 443.

provided a copy of the agreement by way of discovery, apparently on the basis that it is confidential and/or privileged.

[131]   Mr Colson acknowledges that there is a settlement agreement, but that large parts of it are irrelevant.  The settlement agreement is also, not surprisingly, subject to a confidentiality clause.  Mr Colson agreed that a further review of the settlement agreement would be undertaken to establish whether any aspects of it are relevant.  I accordingly make an order that the settlement agreement between Mr Coltart and any one or more of the Lepionka parties is to be provided by way of discovery.  To the extent that some parts of the settlement agreement are irrelevant, and properly and fairly severable from those parts which are relevant, only those relevant parts need to be disclosed.

[132]   Nothing in Mr Grove’s written submissions or Mr Paterson’s affidavit sets out why an order should be made “in respect of all correspondence and communications with Mr Coltart, Tuki Tuki Ltd and Mr McHardy”.  If GLW wishes anything broader than the settlement agreement, there would need to be a more detailed explanation of what documents are sought and why they are said to be relevant.

All correspondence with Nigel Hughes in relation to the preparation of the s 179 notice and the agreement to complete

[133]   Mr Colson  has  confirmed that  Mr Hughes  was  not  involved in the s 179 notice, which was given by LCIL and not the Lepionka Trust.  There are therefore no documents responding to this category.  In light of Mr Colson’s confirmation, I do not make any orders on this aspect of the application.

[134]   In relation to correspondence with Mr Hughes concerning the agreement to complete, Mr Colson confirmed that one email has already been discovered, but that the  position  will  be  rechecked  to  ensure  there  are  no  further  materials  to  be disclosed.  If any further such materials are located, it is accepted by the Lepionka parties that they are relevant and will need to be discovered.

[135]   Again, given the acknowledgements made at the hearing, I do not make any formal orders in relation to this aspect of the application.

All correspondence with Westpac and the defendants, but unredacted

[136]   Mr Grove   again   points   to   various   redactions   having   been   made   in correspondence between Westpac and the Lepionka parties.   He refers, by way of example, to a redaction on page 446 of the bundle.

[137]   Mr Colson  submits  that  the  redactions  have  been  properly  made  for solicitor/client privilege.

[138]   As with the redactions made to the Edgar documents, absent anything further to cast doubt on the redactions, there is no basis to make an order in respect of this aspect of the application.

Correspondence between the defendants and AFI/Mr David Johnson

[139]   This was not one of the agreed categories of tailored discovery set out in Schedule 2 to the parties’ joint memorandum dated 13 December 2016.  Nor was it one of the disputed categories.

[140]   Mr Grove nevertheless points to correspondence at page 384 of the exhibit to Mr Paterson’s  affidavit  sworn  11 September  2015,  concerning  LCIL’s  potential purchase of AFI’s second mortgage.  Mr Grove submits that any actions taken in its role as mortgagee are relevant to a key issue in the proceeding, namely whether LCIL has fulfilled its statutory and common law duties as mortgagee.

[141]   At  the  hearing,  Mr Colson  accepted  that  documents  relating  to  LCIL’s potential  purchase of  GLW’s AFI debt  and  security are  relevant.    He  therefore confirmed that a further review would be undertaken to ensure that all such relevant documents have been discovered.  Accordingly, there is an order that the Lepionka parties are to give discovery of all documents comprising a communication between the Lepionka parties, or any one of them, and AFI relating to any offer by either one

or  more  of  the  Lepionka  parties  to  purchase  GLW’s  debt  to  AFI  and  the

accompanying security (i.e. the second mortgage).

Discovery application against AFI (tailored discovery)

[142]   The Lepionka parties seek orders that AFI give discovery of four further categories of documents, namely (in summary):

(a)       AFI’s financial statements from the year ended 2010 to date; (b)       AFI’s tax returns over the same period;

(c)      All documents relating to any communication between AFI and GLW in respect of matters pleaded at paragraph 60 of the statement of claim, and in particular, Mr Paterson’s assertion that GLW wished to and was in a financial position to redeem the Westpac mortgage (including a broad range of documents in respect of certain property developments in Australia); and

(d)Documents  relating  to AFI’s  decision  to  advance  funds  to  GLW, continued financial support of GLW in the period August 2014 to May 2015,  together  with  any  “strategy  or  plan  to  recover  sums secured by the loan agreement between GLW and AFI”.

[143]   In his written submissions, Mr Colson submits that the four categories of documents relate to paragraphs 60 and 73 of AFI’s amended statement of claim. Paragraph 60 of the amended statement of claim alleges that on 3 April 2015, GLW gave notice to LCIL that GLW wished to redeem the Westpac mortgage.   LCIL admits this allegation, but says that GLW was not in a financial position to redeem the mortgage.  Paragraph 73 of the amended statement of claim pleads that LCIL is liable to account to AFI “as if” GLW had paid to LCIL on 9 April 2015 all amounts secured by the Westpac mortgage. That is denied by LCIL.

[144]   As  will  be  appreciated,  there  is  considerable  overlap  between  these documents sought from AFI, and similar categories of documents sought from GLW.

Further, and as noted earlier, the matter has narrowed somewhat, as a result of AFI’s notice of opposition and the affidavit evidence in support of the opposition, which confirm that it is not suggested that either GLW or AFI had sufficient funds to redeem the Westpac mortgage.   Rather, AFI’s case is that a Mr Arthur Johnson, a relation of Mr Alan Johnson of AFI, was prepared to and had the means to advance moneys to AFI in early April 2015 to enable GLW to redeem the mortgage.

[145]   In light of the above, Mr Shiels submits that the issues identified at paragraph

3.4 of Mr Colson’s submissions do not arise, at least as between AFI and LCIL.

[146]   I disagree.  On the pleadings, there is a live issue as to whether GLW was in a financial position to fund redemption of the mortgage in April 2015.   There is no dispute that GLW itself did not have the funds, and its only source of funds was AFI. The pleading that GLW was not in a position to fund the redemption accordingly calls into question AFI’s willingness and ability to put GLW into a financial position to do so.

[147]   Given AFI’s confirmation of the only source of available funds, I am not persuaded  that  the  broad  range  of  documents  sought  in  LCIL’s  application  are relevant or proportionate.  For the reasons given at [65] to [68] above in respect of similar documents sought from GLW, a narrower category of documents is relevant and proportionate, namely an amended form of category 4(a) of the application. I accordingly make a discovery order against AFI on the following terms:

All documents, including correspondence, emails, file notes, memoranda, working papers and the like relating to AFI’s decision to advance funds to GLW  for  the  purposes  of  Mr Paterson/GLW  redeeming  the  Westpac mortgage, as pleaded at paragraph 60 of the amended statement of claim.

[148] For the avoidance of doubt, the above order is intended to include communications between AFI and Mr Arthur Johnson, in relation to the provision of funds by Mr Johnson to AFI for the purposes of advancing those funds to GLW to redeem the Westpac mortgage.

Application for leave to file third amended statement of claim

[149]   GLW seeks leave to file a third amended statement of claim.  A number of amendments and further causes of action have been added.   To that extent, the Lepionka parties do not oppose leave being granted.  However, leave is opposed in respect of the proposed addition of a ninth cause of action, against Mr Lepionka only, namely conspiracy to injure by unlawful means.   The addition of the ninth cause of action will therefore require the joinder of Mr Lepionka in his personal capacity, as fourth defendant.

[150]   The Lepionka parties object to any such joinder on the following grounds:

(a)      The lateness of the application, given the proceeding has been on foot since September 2015.

(b)      The draft pleading in respect of the proposed ninth cause is bare.

(c)      For the tort of conspiracy (in the form of a conspiracy to injure), there is  nothing  to  suggest  that  any  of  Mr Lepionka’s  actions  (in  his personal capacity) were made with the sole intention of injuring GLW.

(d)For the tort of conspiracy (in its form of a conspiracy to use unlawful means), any actions by Mr Lepionka were as a director or trustee, and no agreement between two or more parties has been pleaded.

(e)      Joinder  is  likely  to  delay  the  trial,  as  it  may  be  necessary  for Mr Lepionka to seek separate legal advice (given the nature of the claim), and he may apply to strike out or for a defendant’s summary judgment on this cause of action, if it were added.

[151]   Mr Grove submits that as a matter of principle, a person can, in their personal capacity, conspire with a company of which they are the controlling mind.  Mr Grove

refers to Barclay Pharmaceutical Ltd v Waypharm LP in support of the proposition.22

22     Barclay Pharmaceuticals Ltd v Waypharm LP [2012] EWHC 306 (QB) at [221] and [227]–

[229].

It is correct that in that case, having reviewed the available authorities, Gloster J concluded that both an individual and a company which is controlled by that individual can be parties to a conspiracy to injure.

[152]   Mr Grove further submits that there would be no prejudice to the existing defendants in joining Mr Lepionka, and that it will not give rise to further requests for discovery or alter the evidence required.

[153]   As the authors of The Law of Torts in New Zealand note, the cause of action may be brought against one alleged conspirator only, it not being necessary that the other alleged co-conspirators be sued or named.23

[154]   Further, the Court will not ordinarily embark on an assessment of disputed facts  on  an  application  for  joinder.24      Whether  and  to  what  extent  if  any  of Mr Lepionka’s actions in respect of the Property were actions by him in his personal capacity are matters for trial.   So too are those matters raised by Mr Colson and summarised at [150](c) and (d) above.

[155]   In terms of the lateness of the application and the consequences if joinder is permitted, these matters go to the residual discretion inherent within r 4.56.  I am not satisfied that these factors, in and of themselves, mean an order for joinder ought not to be made.   In particular, Mr Colson for the Lepionka parties responsibly accepts that joinder of Mr Lepionka in his personal capacity will not alter the disclosure or evidence  required.     Mr Grove  has  also  confirmed  that  joinder  would  not  be accompanied by any further discovery applications by GLW against Mr Lepionka personally.

[156]   I accept that Mr Lepionka may wish to take separate legal advice, in his personal capacity.   However, there remain several weeks prior to trial, and his interests nevertheless appear closely aligned with the existing defendants.  In those

circumstances, it is anticipated that counsel for the existing Lepionka parties will be

23     Stephen Todd (ed) The Law of Torts in New Zealand (7th ed, Thomson Reuters, Wellington,

2016) at [13.4.02].

24     Simunovich Fisheries Ltd v York New Zealand Ltd HC Auckland CIV-2001-404-2415, 24 March

2004 at [41].

in a position to provide considerable assistance and information to any separate counsel Mr Lepionka may wish to retain, to “bring them up to speed” in a relatively quick timeframe.

[157]   Finally,  I am conscious of Mr Colson’s indication that if Mr Lepionka is joined, there may well be an application to strike out this cause of action or an application for a defendant’s summary judgment.  He submits that this may delay the trial.  I am not persuaded that would be so.  Any such application and its outcome would be quite separate from the remaining causes of action.  Moreover, given the proximity of trial, it may well be more efficient for the claim simply to be dealt with on its merits at trial.  If the claim is indeed amenable to striking out, then that will be a matter able to be dealt with at trial, on the basis of the factual evidence adduced at that time.   Any additional legal issues arising from the proposed cause of action appear discrete, and as acknowledged, the addition will not alter the disclosure and evidence required.

[158]   Despite  the  above,  however,  I accept  Mr Colson’s  submission  that  in  its present form, the proposed amended pleading is inadequate.   It is bare and broad brush.  For example, the agreement alleged to form a part of the conspiracy would need to be pleaded and particularised.   So too would the alleged unlawful means. The conduct referred to at paragraph 112 of the draft third amended statement of claim would also need to be properly pleaded and particularised.

[159]   Accordingly, leave is granted to file the third amended statement of claim (and for the joinder of Mr Lepionka), but on the basis that the proposed ninth cause of  action  is  fully and  properly pleaded  and  particularised.   Any third  amended statement of claim in which it is proposed to include the present ninth cause of action is to be filed and served within five working days of the date of this judgment.

Revesting “cause of action”

[160]   Finally, Mr Paterson seeks an order revesting “the cause of action” on behalf

of Mr Paterson and the Official Assignee to Mr Paterson.

[161]   There is no dispute that the Official Assignee has disclaimed the causes of action in these proceedings.  The Lepionka parties also accept that LCIL’s duties as a mortgagee  extend to  Mr Paterson,  as  guarantor  of GLW’s  debt  to Westpac.    In addition, the Court of Appeal has held that there is an arguable case that LCIL breached its duties as mortgagee.

[162]   Revesting of a cause of action in a bankrupt is governed by s 119 of the

Insolvency Act 2006. This provides as follows:

119     Position of person who suffers loss as result of disclaimer

(1)      A person suffering loss or damage as a result of disclaimer by the

Assignee may—

(a)       claim as a creditor in the bankruptcy for the amount of the loss or damage, taking account of the effect of an order made by the court under paragraph (b):

(b)       apply to the court for an order that the disclaimed property be delivered to, or vested in, that person.

(2)       The  bankrupt  may  also  apply  for  an  order  that  the  disclaimed property be delivered to, or vested in, the bankrupt.

(3)       The court may make an order under subsection (1)(b) or (2) if it is satisfied that it is fair that the property should be delivered to, or vested in, the applicant

[163]   There is no requirement under s 119(2) that the bankrupt has suffered loss.25

Accordingly, an order may simply be made if the Court is satisfied that it is “fair”

that the property should be delivered to or vested in the applicant.

[164]   As Mr Colson submits, the authorities do not provide significant guidance on this test, given the circumstances which mean revesting is fair will, of course, be very factually dependent.  What is clear, however, is that the merits of the underlying claim are relevant to whether a vesting order should be made (see, for example,

Robinson v IAG New Zealand Ltd and Hodder v The Official Assignee).26

25     Robinson v IAG New Zealand Ltd [2016] NZHC 3149 at [62].

26     Robinson v IAG New Zealand Ltd, above n 25, at [65]; Hodder v The Official Assignee [2016] NZHC 981, at [11].

[165]   In his affirmation in support of the order, Mr Paterson deposes that his view is that he was wrongfully bankrupted (as a result of the Lepionka parties’ actions). However,  Mr Paterson  has  already  applied  to  annul  his  bankruptcy,  which  was declined by Associate Judge Osborne in a judgment given June 2016.27    I do not consider that revesting unspecified causes of action (in respect of which Mr Paterson has suffered no loss) on the basis that Mr Paterson was wrongly bankrupted, when

that  issue  has  been  fully  and  comprehensively  ruled  upon  by Associate  Judge

Osborne, is required in order to be “fair”.

[166]   Further, this proceeding is already being pursued by GLW, being the party that is alleged to have suffered loss as a result of LCIL’s actions.   This case is therefore  far  removed  from  instances  where  revesting  has  been  ordered,  where absent such revesting, a meritorious claim would not be pursued at all.  Mr Grove submits that any steps to seek to remove Mr Paterson from bankruptcy would be strengthened by him personally being a party to this proceeding.  I am not persuaded that is so; as noted, the identical facts and circumstances which would be alleged in relation to any claim by Mr Paterson are already being pursued by GLW in any event.   If GLW is successful in its claim against the Lepionka parties, then those facts will be available to Mr Paterson in any attempt to exit bankruptcy.

[167]   Accordingly, in all of the circumstances outlined above, I am not satisfied that it is fair to revest the cause of action (whatever it might be).  The application is declined.

Result

[168]   There are accordingly orders as follows:

(a)       Orders for discovery by Mr Coltart as set out at [42] and [51] above; (b)       Orders for discovery by GLW as set out at [60], [64], [68], [70], [72],

[82] and [85] above;

27     Paterson v Lepionka & Company Investments Ltd [2016] NZHC 1331.

(c)      Orders relating to further discovery affidavits and production of laptops/computers for inspection, as set out at [95], [102] [113] and [115] above;

(d)      Orders for discovery by the Lepionka parties as set out at [131] and

[141] above;

(e) An order for discovery by AFI as set out at [147] above; and

(f) Leave is granted to GLW to file a third amended statement of claim, subject to those observations made at [159] above.

[169]   In terms of the time for compliance with the above discovery orders, I direct that discovery be given within 15 working days of the date of this judgment, i.e. on or before 21 June 2017.  I am aware of those matters raised for AFI in Ms Hubbard’s affidavit sworn 27 March 2017.   However, with the narrower scope of further discovery ordered against AFI, and taking into account the timeframes addressed in that affidavit for broader discovery (if it had been ordered), it appears that this timeframe will be sufficient.

[170]   For the avoidance of doubt, none of the above orders alter the existing trial directions that are in place and continue to apply.

[171]   In terms of costs, if the parties are unable to agree, memoranda are to be filed within 10 working days of this judgment.  Absent any request for a hearing, I will

then determine costs on the papers.

Fitzgerald J

Solicitors:           Downie Stewart, Dunedin (P Hubbard) Foy Halse, Auckland, (G Halse)

Gibson Sheat, Wellington (E Cox) Carlile Dowling, Napier (D Chan)

Morgan Coakle, Auckland