Air National Corporate Ltd v Aiveo Holdings Ltd
[2012] NZHC 2258
•4 September 2012
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2011-404-001187 [2012] NZHC 2258
BETWEEN AIR NATIONAL CORPORATE LIMITED Plaintiff
ANDAIVEO HOLDINGS LIMITED First Defendant
ANDBONNER WILLIAM BYLSMA Second Defendant
Hearing: 23 August 2012
Counsel: SS Cook and JA O'Connell for Plaintiff
B Henry and P Knapp for Defendants
Judgment: 4 September 2012
JUDGMENT OF ASHER J
This judgment was delivered by me on Monday, 4 September 2012 at 3pm pursuant to r 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Solicitors/Counsel:
Buddle Findlay, DX CP 24024, Auckland. Email: [email protected]
B Henry, PO Box 4070, Shortland Street, Auckland 1140. Email: [email protected]
AIR NATIONAL CORPORATE LTD V AIVEO HOLDINGS LTD HC AK CIV-2011-404-001187 [4 September
2012]
Introduction
[1] This is an application to review part of a decision of Associate Judge Abbott of 3 April 2012 where he granted limited further discovery.
[2] It is common ground that in respect of an application to review under s 26P(1) of the Judicature Act 1908 the approach is essentially appellate. The Court applies the approach in Austin, Nichols & Co Inc v Stichting Lodestar1 and makes its own assessment in determining whether the original decision is wrong, while recognising that there is an onus on the applicant.
[3] It is necessary to refer briefly to the relevant facts. These are set out in more detail in the Associate Judge’s judgment.2 The second defendant Bonner Bylsma is a pilot and the sole director and shareholder with his wife of the first defendant Aiveo Holdings Ltd (“Aiveo”). Air National Corporate Ltd (“Air National”) provides aircraft under charter and the provision of flight services to other commercial operators.
[4] On 22 January 2010 the parties entered into an agreement under which Aiveo agreed to provide Captain Bylsma’s services as a captain in relation to certain aircraft for a period of five years. Captain Bylsma took on that role as a pilot together with additional roles as a manager of flight operations and a manager of check training and assessment. His roles were approved by the Civil Aviation Authority (“CAA”).
[5] By mid-2010 Captain Bylsma was expressing concerns about aspects of Air National’s operations. On 8 September 2010 he wrote to the CAA setting out safety concerns about Air National’s maintenance department and flight operations. He advised the CAA that in light of those concerns he could not continue to be the manager of flight operations. Two days later on 10 September 2010 he wrote again reiterating his safety concerns and advising that he had resigned as the manager of
flight operations. At the same time, he had written to Air National informing them
1 Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141.
2 Air National Corporate Ltd v Aiveo Holdings Ltd HC Auckland CIV-2011-404-1187, 3 April
2012 at [5]–[22].
that he no longer wished to carry out his role as manager of flight operations and setting out a statement of his concerns.
[6] On 26 January 2011 the CAA commenced an audit of Air National. On
28 January 2011 it gave notice to Air National that it was suspending Air National’s operations for an initial period of 10 days, and that suspension continued for a period. On 31 January 2011 Air National applied to the High Court to review that decision seeking an interim reversal of it.3 Interim relief was granted, but that decision was overturned by the Court of Appeal on 4 February 20114 and the
suspension was re-instituted.
[7] The statement of claim alleges that the defendants breached the agreement that they had with Air National in that they failed or refused to perform their services from 10 September 2010 and breached the agreement. They claim a significant sum for the losses arising from Captain Bylsma’s discontinuance of his roles from
10 September 2010 to 7 December 2010.
[8] In the statement of defence the defendants assert that the contract was terminated lawfully on 10 September 2010, and that the safety concerns were such that all flight actions should have been suspended as at 10 September 2010.
The decision
[9] In the High Court, the defendants sought two categories of documents:
(a) Documents created after Captain Bylsma’s departure from Air National (in September 2010) which relate directly to the reasons for his departure and, specifically, documents relating to the CAA’s investigation into Air National’s health and safety practices in late
2010 (whether in the form of correspondence, official orders or audit
reports).
3 Air National Corporate Ltd v Director of Civil Aviation HC Wellington CIV-2011-485-135,
2 February 2011.
4 Director of Civil Aviation v Air National Corporate Ltd [2011] NZCA 3, [2011] NZAR 152.
(b)Documents in or relating to Air National’s proceedings against the CAA, referring to the health and safety concerns raised in Captain Bylsma’s complaint and leading to his decision to resign from his role.
[10] The Associate Judge did not order the discovery of documents in the first category as the category was too open ended and some of the document were already available to the plaintiff. He did order discovery of the second category,5 and it is that order which the plaintiff challenges. He stated in ordering discovery of the second category:
As against that, I take into account the comments made first by the High Court and then by the Court of Appeal on the evidence in Air National's proceedings against the CAA. Although I accept that the trigger for the suspension in late January 2011 were matters occurring after Captain Bylsma's resignation (the absence of a proper competency check on Air National's training manager in November 2010 and falsification of training records for two pilots on Air National's Westwind II aircraft in December
2010), both judgments made reference to concerns held and views formed by
CAA regarding organisational failings and a negative safety culture. That evidence may well be material to the Court in this proceeding when assessing the context in which Captain Bylsma decided to resign in September 2010. Air National's responses to that evidence could also be material. The affidavits may not go far beyond what is referred to in the judgments, but nevertheless I consider that they are material and should be discovered as having the potential to support Captain Bylsma's concerns, or to have an adverse affect on Air National's rejection of those concerns.
(emphasis added)
Approach to particular discovery
[11] The application was not stated to be under any particular rule, but it must be determined under r 8.19(a) of the High Court Rules, which provides:
8.19 Order for particular discovery against party after proceeding commenced
If at any stage of the proceeding it appears to a Judge, from evidence or from the nature or circumstances of the case or from any document filed in the proceeding, that there are grounds for believing that a party has not discovered 1 or more documents or a group of documents that should have been discovered, the Judge may order that party—
5 At [61].
(a) to file an affidavit stating—
(i) whether the documents are or have been in the party's control; and
(ii) if they have been but are no longer in the party's control, the party's best knowledge and belief as to when the documents ceased to be in the party's control and who now has control of them; and
...
[12] Under r 8.19 a Judge may order a party to discover particular documents not listed in the affidavit of documents. An applicant must establish grounds for a belief that a party has in its possession documents or classes of documents that should have been discovered. This rule was largely unchanged from its predecessor, r 8.24, when the new discovery regime in the High Court Rules came into force on 1 February
2012. As the Associate Judge recognised, the new regime applied when he delivered his decision.
[13] Under r 8.19 a party seeking particular discovery must show grounds for believing:
(a) the documents that should have been discovered have not been discovered; and
(b) those documents are in the other party’s control.
[14] Rule 8.24 replaced the previous r 300 on 1 February 2009. Under r 300(2) the order had to be “necessary” at the time it was made. This was interpreted as mandating a conservative approach to discovery orders.6 I agree with the observation of Clifford J in The Oaks Law Centre Solicitors Nominee Co Ltd v Quotable Value Ltd7 that the conservative approach mandated by the wording of r 300 no longer applies. It suffices if an applicant demonstrates that grounds exist
for believing that the respondent has not discovered documents that should have
6 Commissioner of Inland Revenue v BNZ Investments Ltd [2008] NZCA 141, (2008) 23 NZTC
21,992 at [32].
7 The Oaks Law Centre Solicitors Nominee Co Ltd v Quotable Value Ltd HC Wellington CIV-
2008-485-1691, 16 June 2009 at [21]–[23].
been discovered.8
[15] It has been observed that it would be rare that an order would be made for particular discovery if such an order is not necessary to do justice between the parties.9 I agree with the observation of Wylie J in ANZ National Bank Ltd v Tower Insurance Ltd10 that this reservation does not go to the basis on which the discretion falls to be exercised. In my respectful view now that the requirement for necessity
has been removed it is best to put the concept of necessity to one side. An application for particular discovery can be approached as an assessment of discoverability under the rules, akin to an assessment of a tailored discovery application.
[16] It is implicit in r 8.19, as before 1 February 2012, that documents will only be directed to be discovered if they can be shown to be discoverable under the general rules relating to discovery. Under those rules there are two kinds of discovery, standard and tailored discovery. Under r 8.7 the test for standard discovery particularises the traditional concept of relevance. It requires each party to disclose:
(a) documents on which the party relies; or
(b) documents that adversely affect that party’s own case; or (c) documents that adversely affect another party’s case; or (d) documents that support another party’s case.
Under r 8.8 it is provided:
8.8 Tailored discovery
Tailored discovery must be ordered when the interests of justice require an order involving more or less discovery than standard discovery would involve.
(emphasis added)
8 Ibid; see also ANZ National Bank Ltd v Tower Insurance Ltd (2009) 15 ANZ Ins Cas 61-816 at [24].
9 Cynotech Securities Ltd and Budget Loans Ltd v People Ltd HC Auckland CIV-2008-404-1559,
12 February 2009 at [16].
10 At [23].
The duty to co-operate applies to all the processes of discovery and inspection, which implicitly includes particular discovery.11
[17] A decision as to whether there should be particular discovery under r 8.19 is by definition a decision as to the discovery of a specific document or documents, and therefore tailored to the particular requirements of the case. The starting point is still the relevance of the document, as with the standard discovery test, but particular discovery under r 8.19 can be refused for documents that would otherwise be relevant and therefore discoverable under standard discovery, if that discovery would be contrary to the interests of justice. Particular discovery will not, for instance, be allowed if the costs of further discovery are disproportionately high in comparison
with the matters at issue.12 On the other hand, particular discovery on a “train of
enquiry” basis could be ordered in certain circumstances such as a fraud claim,13 if that was in the interests of justice.
[18] The starting point remains as it was before the 2012 amendments, an assessment of the relevance of the documents. But more explicitly than before the Court must also consider whether it is in the interests of justice to order the particular discovery, and the Court in this regard will consider the matters at issue, and in particular the proportionality of the cost of particular discovery in comparison with those issues.
Relevance in this application
[19] It was on the issue of relevance that counsel focussed their argument. Captain Bylsma put forward as one of his reasons for cancellation poor safety practices on the part of Air National. He referred specifically to those poor safety practices in his summary of areas of concern. There was reference to issues that increased flight safety risks and reference to serious safety and performance issues
within Air National’s engineering department, and the safety culture within the
11 High Court Rules, r 8.2.
12 See r 8.9(a).
13 See r 8.9(c).
company. He alleged that the overriding priority of Air National was to save costs and that this was at the expense of safety.
[20] Mr Cook submitted that the documents sought were not relevant. He submitted that the issue in the proceeding was the defendants’ state of mind and knowledge of Air National’s flight operations when they terminated the agreement. The affidavits filed in the CAA proceedings were not relevant to the defendants’ state of mind and knowledge at the time of the resignation. He submitted that the Judge erred when he held, in relation to the affidavits, that documents not known to Captain Bylsma or relied on by him in coming to his decision could be relevant to
support his view.14
[21] However, the core issue in the proceeding is not Captain Bylsma’s personal knowledge or belief when he terminated. The test to be applied in assessing whether there has been a valid cancellation of a contract is not subjective. Rather it is objective. The Court looks at what the parties did and said and the background circumstances to make an objective assessment of whether there has been a
sufficiently serious breach by one party to warrant cancellation by the other.15
[22] It will advance the case of the defendants if they can show that there were indeed real safety issues at Air National on or about 10 September 2010. This will help the defendants show that the cancellation was valid. This will not turn on Captain Bylsma’s subjective assessment of whether there were such issues, but rather an objective assessment of whether they in fact existed and constituted a breach of Captain Bylsma’s contract warranting cancellation.
[23] The CAA affidavits were discussed in the Court of Appeal decision.16
Reference was made to material in the affidavits that related specifically to safety
issues and an “elevated risk profile” of Air National over recent years. There was a
quote of a reference in the affidavits to “recurring organisational failings”.
14 At [56].
15 Contractual Remedies Act 1979, s 7(4)(b); MacIndoe v Mainzeal Group Ltd [1991] 3 NZLR 273 (CA) at 284–285.
16 Director of Civil Aviation v Air National Corporate Ltd, above n 4, at [13]–[18].
[24] Thus, while the affidavits may be in narrative or summary form, they undoubtedly contain information critical of Air National’s safety practices. On their face they are supportive of Captain Bylsma’s claim that the defendants were entitled to cancel because of such safety failings, which were a breach of contract by Air National.
[25] It was faintly suggested that the defendants would have all this material in any event. That does not appear to be the case. The CAA would have had much greater ability to explore and assess safety issues, and it can be expected that the affidavits contain reference to matters that go beyond the defendants’ knowledge.
[26] I therefore conclude that the Associate Judge was correct in his decision that the documents were relevant.
Interests of justice
[27] The affidavits can be discovered without undue cost or delay. Their listing and provision for discovery will not give rise to any particular cost or inconvenience.
[28] There are issues of confidentiality, but these can be dealt with by appropriate conditions added to the Associate Judge’s order for discovery. The condition will be that the documents are to be disclosed initially to the defendants’ counsel Mr Henry and Ms Knapp, and the aviation experts briefed by the defendant. They are not to be disclosed to the defendant or any other persons without further order of the Court, or written consent by the plaintiff.
Result
[29] The application to review is dismissed. A confidentiality condition is added
to the Associate Judge’s order for discovery.17
[30] Costs must follow the event and are to be paid by the plaintiff to the defendants, assessed on a 2B basis.
17 See [28].
[31] The parties confirmed to me that a judicial settlement conference should be directed by consent. I order that there be a judicial settlement conference.
[32] At this stage I am informed there are no further outstanding interlocutory issues. Accordingly, I direct that a fixture be allocated for this proceeding.
……………………………..
Asher J
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