Angland v Mower HC Christchurch CIV-2008-409-001990
[2011] NZHC 832
•3 August 2011
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2008-409-001990
BETWEEN JOHN SHEARER ANGLAND First Plaintiff
AND TREVOR JOHN BURT Second Plaintiff
AND MICHAEL TONG CHEE CHIN Third Plaintiff
AND THOMAS ELWIN MOWER Defendant
AND PHILLIP BOYD WILSON First Counterclaim Defendant
AND RONALD W ANGLAND & SON (SUED AS A FIRM)
Second Counterclaim Defendant
Hearing: 6 July 2011
Counsel: H D P van Schreven for First, Second and Third Plaintiffs
J A Frampton for Defendant
C A Hannagan for First Counterclaim Defendant
Judgment: 3 August 2011
JUDGMENT OF ASSOCIATE JUDGE MATTHEWS
[1] There are two applications for orders directing further discovery:
1.By the first, second and third plaintiffs against the defendant and the first counterclaim defendant.
2.By the defendant against the plaintiffs and the first counterclaim defendant.
JOHN SHEARER ANGLAND V THOMAS ELWIN MOWER HC CHCH CIV-2008-409-001990 3 August 2011
A. The plaintiffs’ application against the defendant
[2] Since the application was filed in September 2010 some further discovery has been given by the defendant. There are now two categories of documents sought by the plaintiff.
[3] First, two documents which have been discovered make reference to other documents which have not. A direction is sought that these other documents be discovered.
[4] In a letter dated 27 December 2007 from the defendant to the first counterclaim defendant there is a passage thus:
I appreciate your letter of December 22nd.
It is this letter which has not been discovered. Mr van Schreven accepted that this document may in fact be irrelevant but given that it has been identified in a relevant and discovered document, he submitted that any suggestion of irrelevance would need to be accompanied by an explanation. Likewise, Mr van Schreven accepted that there may be a claim for privilege and/or confidentiality which might ultimately require determination, perhaps by inspection by the Court. However, any such claim cannot be considered unless and until it is made.
[5] In an email from one Julie Blaney, a personal assistant at relevant times to the defendant, dated 13 April 2010 to the first-named plaintiff, Mr Angland, Ms Blaney made reference to four dates which appear to also be references to documents bearing those dates. Her email says:
06/22/07
Tom is excited about the Hossack purchase.
06/30/07
Tom talks of submitting an 010 application. Building a house there. Moving graves, etc.
07/06/07
Tom talks about Phil’s having a party that will buy Tom out for $3M. Says it
would be great to get rid of Hossack.
07/20/07
Tom tells Phil that Rich Hill is coming to prison to discuss suing John.
(The description of this date contains a good deal of further information, but it need not be summarised here).
[6] Ms Frampton for the defendant confirmed that the defendant will discover documents she holds which are believed to be those referred to, and she also confirmed that there would be no claim to privilege in relation to these documents as far as the defendant was concerned. Ms Frampton said the only reason the four documents have not been discovered is that she is waiting to see whether the first counterclaim defendant wishes to raise issues of privilege, and he has not yet seen the documents and decided on his position. Evidently that has been held up until now and a further 15 working days is sought for the first counterclaim defendant’s position to be advised. I accept that as a reasonable period.
[7] In my view all documents I have described should be discovered, and I so direct. Detailed orders follow at the end of this judgment.
[8] The second outstanding discovery issue between the plaintiffs and the defendant is the provision by the latter of landline and cellphone numbers, and accounts for those numbers. The order sought is in the following terms:
All landline and/or cellphone numbers for telephones and/or cellphones in the possession or use of the defendant for the period from 2004 to date together with copies of all landline and/or cellphone accounts for those numbers for the period from 2004 to date.
[9] Mr van Schreven submitted these documents are relevant as evidence in support of the plaintiffs’ claim against the first counterclaim defendant that he, in conjunction with the defendant, interfered with the contractual relationship that existed between the plaintiffs and the defendant, and that the first counterclaim defendant acted in breach of the shareholders’ agreement between the plaintiffs and the first counterclaim defendant, who were all shareholders and, at relevant times, directors of Hossack Station Limited. Mr van Schreven submitted that documents
which have been discovered to date show a number of communications between the defendant and the first counterclaim defendant, and noted that the defendant does not deny that they were in communication at relevant times. However, Mr van Schreven said that the frequency, timing and duration of conversations by telephone are relevant to assist in establishing the degree or level to which the y were in fact in communication, and it is material to the establishment of interference with contract to show who instigated contact by telephone.
[10] The first counterclaim defendant has produced telephone records which have not yet been inspected as they are currently unavailable, being located in the first counterclaim defendant’s solicitor’s office which is within the red zone in Christchurch City. It expected that they will be recovered in due course but it is difficult to place a date on when this will occur. Once Mr van Schreven has those for inspection he wishes to check those records against the defendant’s records, and to establish, for example, whether there were further conversations initiated by the defendant which would not show as calls made by the first counterclaim defendant, and also to establish the duration.
[11] Issues relating to discovery were raised before Associate Judge Doherty in December. At that time, I was informed, it was agreed by counsel that at least the telephone numbers would be made available without the need for orders. This is recorded in paragraph [12] in the judgment of the Court dated 16 December 2010. This has not occurred and accordingly an order is now sought in the terms quoted above.
[12] In an affidavit sworn on 2 May 2011 the defendant has deposed that for the period from 2004 until 31 December 2006, “my phone records are held by Neways International”. He states that he sold this company in 2006 so these records are no longer in his possession or control. In the same affidavit he says, secondly, that he was incarcerated in a federal prison camp from January 2007 until August 2008 and records of any phone calls made during this period are not within his possession or control as they are in the control of the prison camp.
[13] In response to this evidence Mr van Schreven submitted that as far as the period of imprisonment was concerned, the affidavit was silent on whether he held a personal cellphone which he used during that time. Secondly he said that during that period Julie Blaney was working for him (some three years up to December 2008). Thus it was submitted that discovery should be given of the number and telephone call records of any cellphone he had whilst in prison, and any telephone held by Julie Blaney which he might have used during the time in question. Mr van Schreven submitted that the requirement to discover documents within a party’s possession or power was not just a requirement to discover those documents physically held, it includes an obligation to include those under the party’s control or direction or within the party’s use.
[14] So far as the documents said to be held by Neways International are concerned Mr van Schreven submitted that the defendant has the ability to request these documents from the company or to obtain them by making a non -party discovery application in the United States, as the United States is not subject to the provisions of the Reciprocal Enforcement of Judgments Act and a corporation would not necessarily respond to an order for a non-party discovery made in this country. Mr van Schreven said it is simply not sufficient to say that the documents are held by a company which the defendant has sold. He pointed out that the company was sold on 8 November 2006 so even if the documents cannot be obtained for any period after that they must be held for the entire relevant period prior to that. T he plaintiffs maintain telephone records from November 2006 onwards continue to be relevant because, I was informed, the plaintiffs believe that it was around that time that the defendant had what Mr van Schreven described as a change of heart about the purchase of shares which is in issue in this proceeding. Therefore Mr van Schreven submitted that I should make an order in the terms sought and if issues arise later in relation to the defendant’s compliance with that order he and his clients would then make a call on whether to seek discovery of documents that might be held by Neways International by other means.
[15] Ms Frampton for the defendant submitted that the records are not relevant to the proceeding. She pointed out that the defendant has already admitted to being in
regular contact with the first counterclaim defendant from 2004 until the present time, stating in paragraph 12 of his affidavit dated 16 October 2010:
I have discovered a number of documents which show that I have been in communication with the first counterclaim defendant, Phil Wilson, between
2004 and the current date. I do not dispute that I have been in
communication with Phil Wilson during this time.
[16] Ms Frampton said, in relation to the documents said to be in the possession of Neways International, that there are disputes between the defendant and that company, which have given rise to litigation, so it is unlikely that they would cooperate with the defendant to release the records sought.
[17] So far as telephone records for any calls made during the defendant’s period of incarceration are concerned Ms Frampton submitted that the affidavit he has sworn stating that records from any phone calls made during this period are not within his possession or control as they are within the possession or control of the prison is conclusive of this issue.
[18] Turning to relevance, Ms Frampton submitted that whilst records of calls might establish the frequency, timing and duration of communications between her clients and the first counterclaim defendant, that is insufficient to establish relevance in terms of the pleadings between the parties. There is no dispute in relation to the fact that Mr Mower and Mr Wilson were in contact, correspondence has been produced, and the defendant has admitted it in his affidavit (as noted above). Ms Frampton submitted the records could take the point no further: the allegation is that the first counterclaim defendant induced the defendant not to proceed with his contract with the plaintiffs and submitted that the duration, frequency and timing of any calls could not assist the plaintiffs in establishing their proposition: none of these elements would have established what the parties were talking about.
[19] Ms Frampton’s final point is plainly correct. The most the documents could establish is a record of the calls which occurred. However, I am satisfied that the phone records sought are relevant to the issues between the plaintiffs and the defendant and the first counterclaim defendant because they will assist in establishing a pattern of communication and the extent of it. Even though it is
admitted that communication occurred, in my view, on the pleadings, the extent of that communication and who instigated it are relevant facts to be established in evidence. I also accept Mr van Schreven’s submission that the orders should be made as sought notwithstanding possible issues in relation to compliance, which can be considered if and when they arise.
[20] The next issue on this point is the period for which the plaintiffs seek t hese records. As noted, they are sought up to the present time. However, in submissions Mr van Schreven accepted that the records could only be relevant up to the date of the filing of the proceeding. In my view, that is correct.
[21] The terms of an order follow at the end of this judgment.
B. Application by the plaintiffs against the first counterclaim defendant
[22] The plaintiffs’ application seeks discovery by the first counterclaim defendant of documents within six categories. Counsel for the first counterclaim defendant has informed counsel for the plaintiffs, and confirmed to the Court, that the documents sought are in her office, and ready to be discovered and made available for inspection. When last seen, prior to the office being temporarily vacated as a result of the earthquakes earlier this year, they were compiled ready to be placed in folders for these purposes. Ms Hannagan informed me that there is no question over whether she will regain access to her office, it is a matter of when.
[23] The first counterclaim defendant also agrees to swear a further affidavit of discovery documents received from Julie Blaney. Those documents are to be made available to the first counterclaim defendant’s counsel so that affidavit can be prepared and sworn. That affidavit may raise issues related to confidentiality and/or privilege but, if so, those issues will be dealt with then.
[24] The first counterclaim defendant has also agreed to attempt to reconstruct his email log by obtaining information from two persons, Amanda Napier and Geoff Dunham who were involved in the defendant’s attempt to buy the Glenhope Station. It is hoped that those persons will make available to the first counterclaim defendant
the information he requires but if not, his counsel informed me in her written submissions that he will apply for third party discovery orders. Both Ms Frampton and Mr van Schreven indicated that they would consent to those orders being made, if required. However, as parties outside this litigation are involved, counsel sought
10 weeks to provide the reconstructed email log or to apply for third party discovery orders if required.
[25] On all these matters orders are set out at the end of this judgment.
C. Application by the defendant against the plaintiffs
[26] The defendant seeks orders that the plaintiffs, and also the first counterclaim defendant, provide discovery of the following documents:
(a) Hossack Station Limited’s files or documents in relation to the purchase
of Hossack Station in 2003.
(b)Documents held by Hossack Station Limited in relation to the proposed sale of shares to the defendant in September 2004.
(c) Documents held in relation to Hossack Station Limited’s purchase of
Mount Paul land.
(d)Any valuations undertaken or in the possession of any of them and/or Hossack Station Limited in relation to the land and/or business at any time, including the valuation completed by John Ryan of Hossack Station in April 2008.
[27] Hossack Station is owned by Hossack Station Limited. The plaintiffs and the first counterclaim defendant are the shareholders, and the plaintiffs are the directors. The first counterclaim defendant was a director, also, at material times. Ms Frampton for the defendant submitted there are two main issues, the relevance of the documents, and whether they are in the possession and control of the plaintiffs and the first counterclaim defendant.
[28] Ms Frampton said that the plaintiffs have filed a further affidavit of documents dated 29 June 2011, since the application was made, which, as she put it, “purports to provide the documents sought in the application” but as they appear to be adopting a position contrary to that contained in their notice of opposition, she still sought orders.
[29] In his counterclaim dated 3 December 2010 the defendant itemises 10 ways in which he alleges that the first plaintiff has fallen short of his responsibilities, and then pleads these respectively as breach of his solicitor/client contract, negligence, breach of fiduciary duty, and breach of the implied guarantee in s 28 of the Consumer Guarantees Act. He then pleads in the seventh cause of action against the second and the third plaintiffs and the first counterclaim defendant, dishonest assistance on their part with the first plaintiff’s breach of his fiduciary duties to the defendant. He also pleads dishonest conduct on the part of the second and third plaintiffs and the first counterclaim defendant based on certain specified factual allegations, one of which is the price at which he alleges the first plaintiff was promoting the sale of shares to the defendant, that price being significantly in excess of the market value of the shares.
[30] The price obtained for the shares in the agreement in issue in this proceeding is challenged in all these causes of action, either directly or indirectly, as being significantly in excess of the then current market value of the shares, this being one of the elements of the allegations in all the causes of action to which I have referred.
[31] On that basis Ms Frampton submitted that it is important for the defendant to establish the value of the property owned by Hossack Station Limited at the time at which the alleged conduct of the first, second and third plaintiffs, and the first counterclaim defendant, is alleged to have taken place. All documents relating to the value of the shares, including the underlying asset, the farm itself, are said to be relevant documents which must be discovered. Evidently all relevant accounting records for Hossack Station Limited have been discovered so it seems that the remaining class of documents required for this exercise are documents concerning asset valuation assessments.
[32] The first breaches upon which these causes of action are based are alleged to have occurred in April 2005, but the documents are sought in broader terms: documents held by the plaintiffs and the first counterclaim defendant “at any time”. When questioned about whether this could possibly extend beyond the point at which Mr Angland ceased to be the solicitor for the defendant (on the assumption that he was in fact acting at any point in that capacity, which he denies) Ms Frampton submitted that his breaches of duty continue to the present time because in this proceeding he seeks specific performance of the contract and by so doing, she submitted, he is still acting in breach of his fiduciary duty.
[33] No authority was produced to me in support of the defendant’s proposition. I am not satisfied on the argument presented that Mr Angland’s fiduciary duties to the defendant, if he acted as the defendant’s solicitor, could have extended beyond the date of termination of his engagement in the manner Ms Frampton alleged. Ms Frampton advised that relevant files were uplifted from Mr Angland pursuant to an authority dated 1 December 2006 so it would seem that he ceased acting at that date, if indeed he acted at all.
[34] One document in particular is contentious, a valuation prepared by Mr John Ryan, a valuer, of Hossack Station in 2008. The defendant specifically sought discovery of this document. It was prepared for the purpose of a mediation, and Mr van Schreven submitted that it is therefore a confidential document of which production cannot, as a matter of policy, be ordered. He also submitted that it is too remote from the date of the contract, that being the time at which the impugned actions of the plaintiffs and the first counterclaim defendant are said to have occurred.
[35] In my view the Ryan valuation is not discoverable. First, I agree that it is confidential, having been prepared for the sole purpose of a mediation. Secondly, it significantly post-dates the entry of the contract for the sale of shares and the date at which all files were uplifted from Mr Angland, which in my view was the date upon which any engagement he may have had as solicitor for the defendant terminated.
[36] The plaintiffs opposed discovering documents within this category on the ground they are properly owned by Hossack Station Limited, and are not documents which they themselves might have in their possession or control. The defendant’s response is that documents in the possession or control of Hossack Station Limited are in fact under the control of its directors, the plaintiffs. So far as the first counterclaim defendant is concerned, Ms Frampton submitted that as he was formerly a director and is still a shareholder, he too may still have some documents which came into his possession whilst he held office. In any event, Ms Frampton submitted, even if the documents are held by Hossack Station Limited and not the plaintiffs or the first counterclaim defendant, they could all disclose their existence as documents they know to exist but do not hold. She pointed out that the plaintiffs had already discovered a number of documents, for example bank statements, which would normally have been considered the property of the company but which the plaintiffs accepted were in their possession. Therefore, she submitted, it appears that there is no issue as between the directors and the company.
[37] In my opinion the plaintiffs should discover documents in the terms to be ordered, whether held by themselves personally or whether technically owned by the company. The plaintiffs are fully in control of the company and therefore of its documents. The first counterclaim defendant was in that position, and must discover documents he has as a consequence. The inevitable consequence of accepting the distinction Mr van Schreven invited me to draw is that an application for non-party discovery will be brought against the company. I cannot see anything would be gained by that; inevitably one or other of the first-named plaintiffs would be obliged to swear the affidavit discovering the company’s documents. I can see no injustice to the plaintiffs or the first counterclaim defendant in discovery being given in the manner I will direct.
[38] The application by the defendant sought documents in categories considerably broader than merely those documents relating to valuation of the shares in Hossack Station Limited or its underlying assets. In her submissions Ms Frampton said that the defendant would accept discovery on a more limited basis than sought in her application, acknowledging Mr van Schreven’s submission that many documents of a purely mechanical nature but technically within the classes of
document sought, would be irrelevant. Ms Frampton indicated that the documents the defendant seeks are those relating to the value of the shares in Hossack Station Limited and those relating to the knowledge of the plaintiffs and the first counterclaim defendant of valuation issues, including not only the shares but also the underlying assets, and such other financial information as may be relevant to an assessment of the value of the shares. An order is made in terms more limited than set out in the application, and follows at the end of this judgment.
D. Application by the defendant against the first counterclaim defendant
[39] As noted the same orders were sought by the defendant against the first counterclaim defendant. He has not filed any opposition to the application. Ms Hannagan informed me, however, that the most recent earthquakes have caused a significant degree of liquefaction at his property where any remaining documents in his possession were held and all his remaining paperwork has been destroyed. Ms Hannagan responsibly accepted that her client has an obligation to give full discovery and did not oppose discovering documents in the classes sought by the defendant. In my opinion, the first counterclaim defendant is still obliged to give discovery of documents of which he no longer has possession, due to their having been destroyed, listing them as documents which he knew to exist but has no longer in his possession or control. Again, an order follows.
Orders
1.(a) Within 15 working days the defendant shall give discovery of: (i) all documents referred to in:
•a letter dated 27 December 2007 from the defendant to the first counterclaim defendant;
• an email from Julie Blaney to the first-named plaintiff dated
13 April 2010;
(ii) all landline and/or cellphone numbers for telephones and/or cellphones in the possession of, or used by, the defendant for the
period from 1 January 2004 to 27 August 2008 and copies of all accounts showing call records for those numbers within that period.
(b) Within 15 working days of receipt of advice from the first counterclaim defendant in paragraph 2(a) concerning the issue of privilege, the defendant will disclose to the plaintiff all documents in the category described as the “Julie Blaney documents” which the first counterclaim defendant does not claim to be confidential.
2. Except in relation to a reconstruction of his email log, within 15 working days the first counterclaim defendant shall give discovery of:
(a) Emails and correspondence between the first counterclaim defendant and the defendant and others conveyed through Julie Blaney of Utah, USA, Personal Assistant to the defendant from
2005 to August 2008 and, in particular, communications received and transmitted through her personal Hotmail account including electronic copies of letters between the defendant and the first counterclaim defendant. The first counterclaim defendant shall at the same time advise the defendant whether he does or does not assert a claim to confidentiality in relation to any of the documents described in this sub-paragraph or paragraph 1 hereof. Any documents to which he asserts a claim of confidentiality will be filed in court by the first counterclaim defendant with an accompanying memorandum explaining the basis of the claim, for the Court to rule on that issue.
(b)Any documents, emails or correspondence held by the first counterclaim defendant relating to the purchase of White Elk Ranch in the USA by the defendant and/or a related party.
3.1 The first counterclaim defendant will make available for inspection by all other parties within 10 working days of the date on which he or his advisers are able to gain access to them, the documents set forth in the following sub-paragraphs:
(a) copies of communications, telephone calls (via telephone accounts) and correspondence between the first counterclaim defendant and the defendant’s US attorneys in respect of communications directed by the defendant relating to the defendant’s purchase of an interest in Hossack Station Limited and the Glenhope and Glenwye Station attempted purchases;
(b) the first counterclaim defendant’s US cell phone records for cell phone number 9168133006 or such other cell phone number as the first counterclaim defendant has used from 2004 to August 2008, and New Zealand phone accounts for the periods dated September
2004 (for calls made during August 2004), June 2005 (for calls made during May 2005), accounts between December 2005 and March 2006 (for calls between November 2005 and February
2006);
(c) the files held by William Brown, Solicitor and/or Saunders Robinson Brown on the first counterclaim defendant’s behalf relating to:
•files and documents relevant to this proceeding including without limitation files in respect to:
- the formation of entities including companies/trusts for the defendant and/or first counterclaim defendant;
- the purchase of Glenhope and/or Glenwye Stations by the defendant or related parties;
- the application or applications to the Overseas Investment Office relating to Glenhope and/or Glenwye Stations by the defendant or related parties.
(d) the files held by Helmore Ayers, Lawyers, Christchurch for and on behalf of the first counterclaim defendant relating to any issue surrounding Hossack Station Limited and/or the defendant.
3.2 For the avoidance of doubt these documents include those numbered
928, 929, 930 and 931 in the Supplementary Affidavit of Documents sworn by the First Counterclaim Defendant on 18 February 2011.
3.3 In the event the First Counterclaim Defendant maintains a claim of confidentiality in all or any of the four documents numbered in sub- paragraph 3.2, he will within 10 working days of the documents being made available for inspection, file those documents in court with an accompanying memorandum explaining the basis of the claim and seeking a ruling on that issue.
3.4 To the extent necessary the first counterclaim defendant shall reconstruct his email log as described in paragraph [24] of this judgment and within the time stated therein.
4. In relation to the documents described in paragraph 2(b) the First Counterclaim Defendant will deliver interrogatories within 15 working days of the date of this judgment.
5. Within 15 working days each of the plaintiffs shall give discovery of all documents in their possession or under their control, whether as directors of Hossack Station Limited or otherwise, in relation to the purchase by Hossack Station Limited of Hossack Station in 2003, the sale of shares in Hossack Station Limited to the defendant in September 2004, the purchase by Hossack Station Limited of Mount Paul land, but limited however to:
(a) all valuations of assets held or to be held by Hossack Station Limited, with the exception of a valuation prepared by Mr John Ryan, valuer, of Hossack Station in 2008;
(b) all valuations of the shares in Hossack Station Limited;
(c) all documents relevant to the assessment of the value of the shares in Hossack Station Limited including accounting records, instructions to, working papers of and written communications to
and from valuers, accountants or others engaged in valuing the shares in Hossack Station Limited or its assets.
6. Within 15 working days the first counterclaim defendant shall give discovery of all documents in his possession or under his control, whether as a former director of Hossack Station Limited or otherwise, in relation to the purchase by Hossack Station Limited of Hossack Station in 2003, the sale of shares in Hossack Station Limited to the defendant in September 2004, the purchase by Hossack Station Limited of Mount Paul land, but limited however to:
(a) all valuations of assets held or to be held by Hossack Station Limited, with the exception of a valuation prepared by Mr John Ryan, valuer, of Hossack Station in 2008;
(b) all valuations of the shares in Hossack Station Limited;
(c) all documents relevant to the assessment of the value of the shares in Hossack Station Limited including accounting records, instructions to, working papers of and written communications to and from valuers, accountants or others engaged in valuing the shares in Hossack Station Limited or its assets.
7. The following additional order is made by consent:
(a) Within 20 working days of the date of this judgment the First Plaintiff on his own behalf and on behalf of the Second Counterclaim Defendant will file and serve an affidavit disclosing the income the First Plaintiff and/or the Second Counterclaim Defendant have received in each financial year since 2002 from overseas clients;
(b)upon request of the Defendant each of these parties will produce to the Court for inspection any firm invoices supporting the statements in the affidavit required by sub-paragraph (a).
8. Leave is reserved to any party to apply for further orders under the current applications if necessary, within 30 working days of this judgment.
9. Costs are resesrved.
J G Matthews
Associate Judge
_
Solicitors:
Clark Boyce, PO Box 79122, Christchurch 8446 Fax (03) 379 9439 for Plaintiffs
White Fox & Jones, PO Box 1353, Christchurch Fax (03) 353 0652 (Hugh Matthews) for Defendant Cherry Kannangara Thomson, PO Box 13964, Christchurch 8141 for 1st Counterclaim Defendant Ronald W Angland & Son, 80 High Street, Leeston, Canterbury (John Angland)
0
0
0