Andrews v Lomax
[2022] NZHC 3480
•16 December 2022
IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY
I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE
CIV-2021-425-72
[2022] NZHC 3480
UNDER Section 174 of the Companies Act 1993 BETWEEN
ROBERT ANTHONY ANDREWS
First Plaintiff
KERRY ANDREWS
Second PlaintiffROBERT ANTHONY ANDREWS, KERRY ANDREWS and BERYL ANDREWS as
trustees of the Ruby Trust Third Plaintiff
AND
PAUL JOHN LOMAX
First Defendant
CHESTER HOSPITALITY LIMITED
Second DefendantNH TRUSTEES NO. 9 LIMITED, as trustee
of the Lomax Family Trust Third Defendant
ARROW HOSPITILITY LIMITED
Fourth Defendant
Hearing: 7 December 2022 Appearances:
S D Williams and B B Gresson for Plaintiffs (by VMR)
P C Murray and K M Patterson for Defendants (by VMR)
Judgment:
16 December 2022
JUDGMENT OF ASSOCIATE JUDGE LESTER
(in relation to second application for discovery)
ANDREWS v LOMAX [2022] NZHC 3480 [16 December 2022]
[1] The acrimony between the Andrews Parties and the Lomax Parties, together with the complete absence of trust between them, has resulted in a second discovery application within a little over three months.
[2] The Lomax Parties are Paul Lomax (Mr Lomax), Chester Hospitality Limited (Chester) of which Mr Lomax is a director, NH Trustees No. 9 Limited, as trustee of the Lomax Family Trust, and Arrow Hospitality Limited (Arrow). The Lomax Parties issued proceedings under s 174 of the Companies Act 1993 (the Act) against the Andrews Parties. Shortly thereafter the Andrews Parties issued separate proceedings against the Lomax Parties. The Andrews Parties are Robert Andrews (Mr Andrews), Kerry Andrews, Robert, Kerry and Beryl Andrews (as trustees of the Ruby Trust), and Arrow. The two proceedings have now been consolidated.
[3] The Andrews Parties and Lomax Parties, or their interests, are equal shareholders in Arrow which runs a hotel in Arrowtown. Mr Andrews and Mr Lomax are directors of Arrow. The issue is who should buy who out of Arrow.
[4] Mr Lomax’s company, Chester, provided management services to Arrow and in doing so maintained a Dropbox containing records in relation to Arrow’s business. Ms Miller is Chester’s administration manager and is also involved in maintaining the Dropbox. Arrow uses Xero accounting software.
[5] The last discovery hearing was in August 2022 in which the Andrews Parties sought orders enforcing existing orders for tailored discovery. The current application is the other side of the coin. The Lomax Parties say the Andrews Parties failed to meet their obligations under the discovery orders. The Lomax Parties also seek discovery of new categories of documents.
What the Lomax Parties must show to establish breach of the existing orders for discovery
[6] As the parties agreed to orders for tailored discovery, I do not need to consider whether documents within those categories are relevant. The discovery orders were made by consent. This aspect of the Lomax Parties’ application does not need to meet all the criteria set out in the Assa Abloy New Zealand Ltd v Allegion (NZ) Ltd test as it
is not an application for further and better discovery under r 8.19 of the High Court Rules 2016 (the Rules).1
[7] The first consideration under the Assa Abloy test is whether the documents are relevant. That is overtaken given the parties agreed to tailored discovery orders.
[8] I commented in the earlier discovery judgment2 that the categories of tailored discovery here were reasonably defined, that is, they did not capture a large number of documents.
[9] I also commented in that earlier judgment, with reference to the decision of Katz J in Pyne Gould Corporation Ltd v Bath Street Capital Ltd,3 that I did not see this as a case where any secondary relevance test needed to be applied before the documents in each category of tailored discovery had to be disclosed.4
[10] Here, as in the earlier hearing, I am satisfied the Lomax Parties must demonstrate there is reason to believe that the Andrews Parties have not met their obligations in respect of the existing categories of tailored discovery. In terms of the test from Assa Abloy¸ the Lomax Parties must demonstrate there is reason to believe the documents they seek exist.
What the Lomax Parties must demonstrate to obtain discovery of new categories of documents
[11] In respect of this aspect of the Lomax Parties’ application, they must satisfy the test from Assa Abloy. The well-known four stage test is as follows:
(1)Are the documents relevant; and if so how important will they be?
(2)Are there grounds for belief that the documents sought exist? This will often be a matter of inference. How strong is that evidence?
1 Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd [2015] NZHC 2760; [2018] NZAR 600 at [14].
2 Andrews v Lomax [2022] NZHC 2244 at [7].
3 Pyne Gould Corporation Ltd v Bath Street Capital Ltd [2020] NZHC 1247.
4 Andrews v Lomax, above n 2, at [9].
(3)Is discovery proportionate, assessing proportionality in accordance with pt 1 of the discovery checklist in the Rules?
(4)Weighing and balancing these factors, in the Court’s discretion, is an order appropriate?
[12]It is common ground that relevance is determined by the pleadings.
[13] Mr Murray, counsel for the Lomax Parties, also draws the Court’s attention to r 8.18(2) of the Rules. The rule provides when a party in the course of complying with an order for tailored discovery becomes aware of a document not within a category of tailored discovery but, which adversely affects their own case, adversely affects the other party’s case, or supports the other party’s case, such must be disclosed.
The fundamental problem for the Lomax Parties’ application
[14] Mr Murray submits the Andrews Parties have failed to provide all relevant documents within the existing categories of discovery subject to this application. The Andrews Parties’ evidence is that they have disclosed all documents sought or that they believe all such material is already within the control of the Lomax Parties. Mr Murray refers to material he says provides reason to believe there should be more documents held by the Andrews Parties.
[15] An order requiring the Andrews Parties to give discovery as sought by the Lomax Parties would be pointless given they have already said on oath they do not have any more material to disclose (subject to what I discuss below as to how far the Andrews Parties can rely on their belief the material sought by the Lomax Parties is already within their control).
[16] The circuit breaker on this issue is what a Mr Townsend may be able to directly provide.
Non-party discovery from Mr Townsend
[17] Running through Mr Murray’s submissions is reference to correspondence between the Andrews Parties and their accountant, Mr Townsend, or documents, work papers et cetera assumed to be held by Mr Townsend. Again, the Andrews Parties say they have discovered all relevant material in their control. Mr Townsend’s own work papers and his personal file will not be within the Andrews Parties’ power and control.
[18] At the hearing on 7 December 2022, I told Mr Murray I saw no point in ordering the discovery he sought as it would simply produce, as I have said above, an affidavit from the Andrews Parties confirming they have no further documents. What was needed to test the Andrews Parties’ position was non-party discovery from Mr Townsend and I invited Mr Murray to make an oral application for non-party discovery. Mr Murray made that application and Ms Williams, counsel for the Andrews Parties, did not oppose the application being made orally or the application itself.
[19] Under r 8.21(3), an application for non-party discovery must be on notice to the party from whom the documents are sought. Accordingly, Ms Williams is to provide a copy of this judgment to Mr Townsend and he is requested to advise either through Ms Williams or his own solicitor whether he has any objection to providing the discovery sought in Mr Murray’s submissions as detailed below.
[20] At the conclusion of the hearing, I also asked Ms Williams to give Mr Townsend advance notice of this development and to emphasise that my suggestion of non-party discovery did not represent any implied criticism of him. The intention of the non-party discovery application is to address the distrust between the parties I have already noted above.
[21] Both counsel see real value in their respective valuers conferring with a view to agreeing the value of the shares in Arrow or at least to identify and hopefully narrow any areas of dispute. As I commented in my Minute of 5 August 2022 (which I also request Ms Williams provide to Mr Townsend), that process will only work if the parties are confident their valuers have all relevant material. Where a party harbours doubts they have seen all relevant material, there will remain mistrust and potentially
a lack of confidence in the valuation process. I suggested Mr Townsend confirm the documents he holds to cut through that distrust.
[22] The discovery that Mr Townsend will be asked to make is set out in Mr Murray’s submissions at paragraphs [19] to [44]. Ms Williams is to provide those paragraphs to Mr Townsend.
[23] In the first instance, the costs of Mr Townsend in complying with the order (assuming he does not object) are to be borne by the Lomax Parties. This is because the Lomax Parties are in essence asserting the Andrews Parties have incorrectly claimed they have no further discoverable documents relating to Mr Townsend.
[24] In the event Mr Townsend’s non-party discovery shows the Andrews Parties were incorrect and they did have within their power and control further discoverable documents, then the issue of who should bear Mr Townsend’s costs will be revisited. I again note Ms Williams’ point that the revisiting of costs would not be triggered through Mr Townsend discovering material not within the Andrews Parties’ power and control such as Mr Townsend’s own work papers, diary, et cetera.
Balance of Lomax Parties’ application
[25] If non-party discovery is completed it will overtake a number of the categories of discovery pursued by the Lomax Parties in this application. The application for further discovery relating to the existing categories of tailored discovery, save for existing Category G, is adjourned.
[26] That leaves categories which will not be addressed by documents that may be produced by Mr Townsend. Those categories were addressed at the hearing and I now deal with those categories. One relates to a current category of agreed tailored discovery, the other four relate to new categories of tailored discovery.
Existing Category G: documents relating to the employment of Natalia Seabra
[27] Ms Williams’ short response to this category is that all documents relevant to the employment of Ms Seabra are already in control of the Lomax Parties and are
therefore not required to be disclosed pursuant to r 8.16(5) of the Rules. The documents are within the Dropbox information system operated by Chester. The Lomax Parties have access to the Dropbox.
[28] Ms Williams submitted, and Mr Murray did not dispute, that if anything the Lomax Parties had greater access to the Dropbox than the Andrews Parties. Mr Murray made it clear that the Lomax Parties’ application only seeks disclosure of material not in the Dropbox.
[29]Rule 8.16(5) provides:
The schedule need not include—
(a)documents filed in court; or
(b)correspondence that may reasonably be assumed to be in the possession of all parties.
[30] The application of r 8.16(5) came up in my earlier judgment between the parties. I referred there to the following passage from McGechan:5
It is not necessary to list documents filed in court or correspondence that may reasonably be assumed to be in the possession of all parties: r 8.16(5). Interpreted literally, documents other than correspondence need to be listed even if in the possession of all parties. However, even if such a literal interpretation is correct, proportionality and the duty to co-operate under r 8.2 should operate to relax the requirement to stick rigidly to the rules: Dold v Murphy [2018] NZHC 994 at [28].
[31] Rule 8.2 in relation to the need for co-operation between parties in the discovery exercise provides:
8.2 Co-operation
(1)The parties must co-operate to ensure that the processes of discovery and inspection are—
(a)proportionate to the subject matter of the proceeding; and
(b)facilitated by agreement on practical arrangements.
(2)The parties must, when appropriate,—
5 Andrews v Lomax, above n 2, at [20], citing Robert Osborne (ed) McGechan on Procedure (online ed, Thomson Reuters) at [HR8.16.07].
(a)consider options to reduce the scope and burden of discovery; and
(b)achieve reciprocity in the electronic format and processes of discovery and inspection; and
(c)ensure technology is used efficiently and effectively; and
(d)employ a format compatible with the subsequent preparation of an electronic bundle of documents for use at trial.
[32] There is limited authority on the scope of r 8.16(5). As the passage from McGechan notes, Associate Judge Bell in the Dold decision said, while the exception is limited to correspondence, requiring a pedantic insistence on disclosure of documents by one side to which both sides have equal access should be avoided. He said that approach would create an obvious inefficiency in both sides preparing schedules identifying documents individually which both sides have access to. The Judge however preferred to have that difficulty left in the hands of responsible counsel to resolve co-operatively under r 8.2. The Judge said: “[i]n many cases proportionality will relax any requirement to stick rigidly to the [Rules]”.
[33] In Robert v Foxton Equities Ltd, Kós J noted that a party did not discover a contract because the other party already had a copy.6 His Honour referred to r 8.16(5)(b) without any critical comment.
[34] Again, as observed by Kós J in the Robert case, context is everything.7 It was a safe assumption in that case that both parties to the contract had a copy.
[35] If both parties here have unfettered access to all parts of the Dropbox record, then it is just as much in one party’s power and control as the other. If one party wants to locate certain information within the Dropbox they are free to do so.
[36] Applying r 8.16(5)(b) liberally, that is, not limited to correspondence, might be thought understandable where it is certain each side has equal and unfettered access to the material in question. But, in my view, it is preferable that result is reached through treating an application that one party list such material as being disproportionate.
6 Robert v Foxton Equities Ltd [2014] NZHC 726, [2015] NZAR 1351, at [9].
7 At [54].
[37] Here, the real issue is whether the Lomax Parties have demonstrated there is reason to believe there is material relating to Ms Seabra outside the Dropbox.
[38] Mr Lomax, in his affidavit, refers to two emails, one between Kerry Andrews and Ms Miller of Chester dated 5 March 2022, referring to Ms Seabra as a new employee and the second between Ms Andrews and Ms Miller dated 10 June 2020, also referring to Ms Seabra.
[39] Mr Lomax, in his affidavit, says it can be concluded that the two emails mean the Andrews Parties hold documents relevant to the employment of Ms Seabra.
[40] Mr Murray submitted this material is relevant because there is a dispute whether Ms Andrews knew and agreed to an arrangement whereby an employee, Ms Pinheiros, who worked in the hotel as cleaning staff, was contracted by Arrow in exchange for Ms Seabra, but was contracted to Newmarket ADT Ltd, another Lomax hospitality venue.
[41] Mr Andrews, in his affidavits, notes that based on documents disclosed by the Lomax Parties, Ms Seabra was employed by Newmarket ADT Ltd. Mr Andrews says Ms Seabra carried out work under that employment in the New Orleans Hotel as a cleaner from June to August 2020. Mr Andrews says therefore all documents relevant to her employment are held either by Chester or by any other company which administers employee matters for Mr Lomax’s other companies. He says those documents are therefore already in the control of the Lomax Parties. In a further affidavit filed shortly before the hearing on 7 December 2022, Mr Andrews reiterates that in his view all documents relevant to the employment of Ms Seabra are already in the possession of the Lomax Parties.
[42] What Mr Andrews does not say is that he does not have documents relevant to Ms Seabra’s employment. His response to this category of discovery is to assert that any documents that exist must already be held by the Lomax Parties.
[43] I cannot be sure whether Mr Andrews’ affidavit was, in this sense, carefully drafted or whether Mr Andrews intended to convey he does not hold any documents
outside of the Dropbox relating to Ms Seabra. In other affidavits in opposition to this application dealing with other categories, Mr Andrews was express that he had carried out a further search and had not located any further documents.
[44] To this extent, I am left in doubt as to the situation. I direct Mr Andrews is to clarify by affidavit if he holds any documents relating to the employment of Ms Seabra outside of the Dropbox. If he does, he is to discover them because he cannot assume that the Lomax Parties have exactly the same material as he holds (if indeed he does hold further material) not in the Dropbox. The assumption underpinning Ms Williams’ implicit reliance on r 8.16(5) in respect of this category is that the material held by each party is identical. Of that I cannot be sure, hence the above direction.
[45] Accordingly, in my view r 8.16(5) should be limited to correspondence which because of its nature a party will know it is held by other parties.
[46] If counsel considers there are other documents in the power and control of all parties then, pursuant to the obligation to co-operate, counsel should seek confirmation of that understanding from other counsel.
[47] Where counsel considers all parties have full and unfettered access to materials such as Dropbox or relevant manuals et cetera, counsel should seek confirmation of that from other parties before assuming such material need not be disclosed. Counsel need to be alert to the guidance contained in the listing and exchange protocol in pt 2 of Sch 9 of the Rules. Clause 8, which deals with the treatment of duplicate documents, includes the need to discover apparent duplicates which contain a material modification, an obliteration or other marking.
New categories
Documents relevant to the closure of the venue
[48] Mr Murray submitted there has been a change in circumstances warranting this new category of discovery being that since 19 November 2021, the venue has been closed on days it was scheduled to be open and otherwise changed its operating times. Mr Lomax says he was not consulted about these changes. Mr Lomax estimated in
May 2022 that Arrow had suffered a loss of revenue of nearly $200,000 as a result. The venue closure and changes to operating hours occurred after the discovery orders were made.
[49] The extent to which these documents may need to be discovered will be in part related to the valuation date issue that I address at the conclusion of this judgment.
[50] Mr Murray submits the documents are relevant for two reasons. The first is the claim that Mr Lomax has been excluded from the management of Arrow’s business. The closure of the venue is a matter of record and discovery will not disclose an absence of consultation. If this had been the sole basis for relevance then this category may well not have been directed.
[51] However, the second basis for relevance is that information relating to the closure of the venue and the resulting loss of revenue is relevant to the value of Arrow’s shares. As noted below, the parties have previously used a valuation date of 31 March 2022 so the closure would be at least partly relevant to that valuation date. I expect the valuers would want to know if there has been a drop in turnover, whether that was explainable by COVID related circumstances. If the drop in revenue was due to a one-off factor the valuers might discount its significance. The Lomax Parties are entitled to discovery in respect of that issue given the reduction in turnover and that the reasons for it may have an impact on value.
[52] Ms Williams submits there is no pleaded allegation in relation to the venue closure but, in my view, that submission does not address the argument closure is relevant to turnover and therefore to value.
[53] The Andrews Parties submit the venue closure was due to staffing issues, some of which arose as a result of COVID disruptions. Responsibility for other staffing issues is laid at the feet of Mr Lomax by the Andrew Parties including that Chester refused to process employment documentation or approve pay increases in a timely fashion.
[54] Ms Williams submits the evidence shows the Andrews Parties do not hold any documents in this category that are not also in the control of Chester. Mr Andrews’ evidence is that he has not undertaken any financial analysis of lost revenue.
[55] This is another category where I have the impression that the Andrews Parties have leaned too heavily on their approach to r 8.16(5). Mr Andrews’ evidence is he considers the Andrews Parties do not hold any documents not also in the control of Chester. For the same reasons as discussed in the previous category, the Andrews Parties in their affidavit are to confirm they have searched for all relevant material outside of the Dropbox. Mr Murray again said that he does not want discovery of the Dropbox material. The Andrews Parties are to again have regard to the guidance contained in the listing protocol referred to above at [47].
All documents relating to unbanked cash
[56] For reasons I need not fully explain here, the Andrews Parties started retaining the cash receipts for the hotel including cash from gaming machines and TAB transactions. In due course, cash of nearly $350,000 was accumulated. The Andrews Parties say they needed to retain the cash in order to be able to pay debts as they fell due, to keep operating.
[57] Mr Murray referred to a spreadsheet which records cash actually deposited into Arrow’s bank account and a cash summary prepared by Chester of the costs it expected to be banked.
[58] Chester’s cash summary records it was expecting cash of $344,008.75. Cash banked was $298,498.80 together with a further banking bag not banked of $23,244. Then there is a further $22,360.90 being a TAB credit resulting in total actual cash of
$344,103.70, slightly higher than the amount expected by Chester.
[59] Chester has access to the gaming machine and TAB data which is apparently produced automatically. The Andrews Parties have provided detailed explanations in respect of this issue.
[60] I am not convinced that further discovery on this point is relevant. Mr Murray submitted this issue went to the probity of the Andrews Parties. The fact is there is no missing money. The Andrews Parties completed their own reconciliation which is incomplete but that, in my view, is of no moment. Whether their calculations are correct or not is beside the point. The cash retention is perhaps symptomatic of the dysfunctional relationship between the parties. That the unbanked cash reconciles with what Chester was expecting is an answer to any suggestion of impropriety in respect of the cash.
[61] Mr Murray submitted the Andrews Parties should disclose all documents they used to prepare their own reconciliation, given those numbers do not reconcile with the Chester cash summary. Just why that is relevant to matters in issue in this case, I do not know.
[62] To the extent Mr Murray’s submissions assumed there was a cash shortfall, such is not supported by the records. The Andrews Partners remain ready, willing and able to answer any further questions the Lomax Parties may have in respect of the TAB refund and that is the most proportionate and efficient way of dealing with that issue.
[63] I am unable to see how the Trial Judge would be assisted in determining any of the matters in issue by having the Andrews Parties workings in respect of their banking reconciliation. This category of discovery is declined.
All documents relevant to the payments of life insurance made by Arrow on behalf of Mr and Mrs Andrews
[64] Arrow had an advance from the Bank of New Zealand (BNZ) and the circumstances in which it was repaid by the Andrews Parties was a catalyst for the breakdown in the parties’ relationship. BNZ had required the Andrews Parties to have life insurance as a condition of the advance. With the advance being repaid, the Lomax Parties ask on what basis the company should be treating payment of the life insurance as an expense when the Lomax Parties say this cost should be an Andrews Parties’ drawing. It may be that material from the accountant, Mr Townsend, if there
is non-party discovery, will cast light on this. It may be there are no further documents in respect of this issue.
[65] This is a category of discovery where the Andrews Parties say Mr Lomax can check with the BNZ its current requirements as to life insurance. That was not an answer to the Andrews Parties’ discovery obligations. This appears to be another category where the Andrews Parties have stretched r 8.16(5). Rule 8.16(5) is concerned with documents in the possession of a party – not documents within that party’s control, which as defined in r 1.3 is a much wider concept. The Andrews Parties should discover documents they have relating to the classification of this cost. They are to cover this issue in the affidavit I have already referred to.
Documents provided to or obtained by the Andrews Parties’ valuers
[66] I do not order this category as I have already made clear in my Minute of 5 August 2022, the Court’s expectations as to how the experts will undertake their conferral. In that Minute I recorded that the Lomax Parties at that stage considered their expert had not had disclosure of information in the hands of the Andrews Parties’ valuers. I said:
What that means is the expert engaged by Mr Murray’s clients needs to identify the documents they [consider] they require and why those documents are relevant. I would expect all such documents to be provided, regardless of which expert requests them. In that way the parties’ experts can, if necessary through a series of meetings, drill down into the matters of concern. Where each parties’ expert has requested documents and they have not been provided, the party refusing to provide those documents will, in all likelihood, struggle to argue the material is not relevant.
[67]I leave the issue of disclosure of documents between experts on that basis.
[68] Again, I expect and require the parties’ experts to conduct their conferral on an open book basis. Should there be any concerns in respect of compliance, leave is reserved to request a telephone conference on this point.
[69] I note here that the parties should not assume all documents are within the power and control of the other. If non-privileged material has been made available to their valuer they should assume the other valuer will want to see it. The expert
conferral will be made easier if the parties do not assume all documents are readily available to the other side, particularly when such may have to be requested from third parties. For example, here there was correspondence from a Mr Collins of Asahi Beverages dated 23 June 2022 which the Andrews Parties provided to their valuers. It is not enough for Mr Andrews to say that Mr Lomax could access that information at any time. If Mr Andrews or his expert considered it relevant to the valuation then it should have been provided. Again, it is no answer to say Mr Lomax could request the same information, as rhetorically how was he to know that it had been requested in the first place or, that the information was considered relevant by the Andrews’ valuer? It may have been something that the Lomax Parties’ valuer had not been aware of. Ultimately, this comes back to the obligations of co-operation in respect of discovery and also that the parties must co-operate in the joint valuation exercise.
Is the Andrews Parties’ affidavits of documents non-compliant?
[70] Mr Murray submits that the Andrews Parties’ affidavits of documents lack particulars of the steps they took to fulfil their obligations under the discovery order including what searches they undertook.
[71] I have directed a further affidavit be completed by the Andrews Parties. Given the reason for that is in part the need for the Andrews Parties to confirm they have had regard to the guidance in the listing and exchange protocol, this issue can be addressed in that affidavit. I decline to make a ruling on this issue as Ms Williams points out it was not raised in the application. Ms Williams submitted it was raised for the first time in submissions. It is reasonable that the Andrews Parties have an opportunity to address that before there are any rulings against them.
Joint expert conferral
[72] I have already noted that counsel continue to see value in a joint expert conferral. As set out in my Minute of 5 August 2022, the first meeting between the parties’ experts misfired. Mr Murray advised his clients have instructed a new valuer who knows the valuer retained by the Andrews Parties.
[73] I direct the Andrews Parties’ and the Lomax Parties’ experts are to confer no later than the end of February 2023. For the avoidance of doubt, the conferral is to take place in the absence of counsel. I recommended during the hearing that the parties appoint a facilitator for that conferral. The experts are to prepare, by the end of March 2023, a joint expert report recording the areas of agreement and, where they disagree, a summary of their reasons for disagreement. Counsel can then consider whether briefs of evidence will be necessary in respect of those areas of disagreement.
[74] The valuers are to exchange their valuations at least two weeks before the conferral. The valuations are to list every document referred to by the valuer in reaching their conclusion, whether that document is referred to in their report or not. If either valuer requests any document listed by the other, that is to be provided by the valuer forthwith.
[75] Counsel may seek a deferral of the above timetable for the valuers’ report, if the valuers consider the timetable unrealistic or that a further conferral is needed.
Valuation date
[76] I was told that the valuers instructed by the parties for their previous unsuccessful conferral valued the shares in Arrow as at 31 March 2022. Neither party pleads a valuation date. I direct that the parties are to confer and agree an appropriate valuation date. Mr Murray suggested that the valuer previously instructed on behalf of the Lomax Parties did not have authority to agree a valuation date.
[77] The fact is, the valuation exercise cannot be a rolling exercise as it would mean the valuers can never pinpoint a fixed date to work to and circumstances affecting the valuation will constantly change, leading to further requests for discovery. That state of affairs has led to some of the ongoing discovery disputes.
[78] As I noted during the hearing, it is not unusual for parties in a shareholder prejudice case to select a valuation date that predates the matters of which they complain so that the valuation is not tainted by the alleged prejudicial conduct. That approach would not prevent counsel, if they thought it necessary, to lead evidence of subsequent prejudicial conduct given I was told this is a situation where both parties
want to buy the shares in Arrow. If counsel consider the Trial Judge may find in favour of their clients’ desire to purchase because of the conduct of the other, counsel are free to prove and refer to that conduct but such need not complicate the valuation exercise.
[79] Given I was told there is at least a working relationship between the newly appointed Lomax Parties’ valuer and the Andrews Parties’ valuer, it is hoped the expert conferral process can start afresh.
Orders
[80] There is an order that the Andrews Parties are to provide affidavits covering the requirements referred to at [44], [55], [65] and [71] above.
[81] There is a conditional order that Mr Townsend provide non-party discovery of the documents sought by the Lomax Parties in paragraphs [19] to [44] of Mr Murray’s submissions. Mr Townsend may also have material relevant to the closure of the venue. The order shall not take effect unless and until Mr Townsend confirms in writing that he consents to providing discovery. Mr Townsend’s reasonable costs (including any legal costs) in complying with the order shall be paid by the Lomax Parties in the first instance. Leave is reserved to the Lomax Parties to apply for those costs to shift to the Andrews Parties if they consider the circumstances justify that.
[82] If Mr Townsend wishes to be heard on the orders then he is to advise the Court and a telephone conference will be arranged. If Mr Townsend opposes the order, I anticipate at that point the Lomax Parties will need to make a formal application for non-party discovery. Mr Townsend is to advise his position to the Court and to the parties by the end of January 2023.
[83] If Mr Townsend is content to provide disclosure, I suggest he provide his discovery by the end of February 2023. Obviously, if Mr Townsend considers he can complete discovery earlier, well and good, but given the time of year and the need for Mr Townsend to take advice and to collate the relevant material, a reasonable amount of time is required. Leave is reserved to Mr Townsend to seek further time for compliance should that be required and, of course, should he agree to the provision of the documents.
[84] If Mr Townsend agrees to give discovery and if counsel want that material before the expert conferral, leave is reserved to amend the timetable for the expert conferral.
Costs
[85] Counsel are free to file submissions on costs. The application has met with mixed success. In part, I have the impression Andrews Parties have relied too heavily on the assumption that relevant material is available to the Lomax Parties. If no costs submissions are filed within five working days of the date of this Judgment, then the order of the Court is that there should be no order as to costs.
[86] If costs submissions are filed then, given the time of year, any reply is to be filed by the end of January 2023.
Associate Judge Lester
Solicitors:
Todd & Walker Law, Queenstown (for Andrews Parties) Fortune Manning, Auckland (for Lomax Parties)
Copy to counsel:
S D Williams, Barrister, Auckland (for Andrews Parties) P Murray, Barrister, Auckland (for Lomax Parties)
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