Autoterminal New Zealand Limited v IBC Japan Limited
[2020] NZHC 2692
•14 October 2020
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2018-419-294
[2020] NZHC 2692
BETWEEN AUTOTERMINAL NEW ZEALAND LIMITED
Plaintiff/counterclaim defendantAND
IBC JAPAN LIMITED
Defendant/counterclaim plaintiff
Hearing: 7 October 2020 Appearances:
M D Branch and J T Mathieson for the plaintiff/counterclaim defendant
J A MacGillivray and M K Brady for the defendant/counterclaim plaintiff
Judgment:
14 October 2020
JUDGMENT OF JAGOSE J
This judgment was delivered by me on 14 October 2020 at 12.30pm.
Pursuant to Rule 11.5 of the High Court Rules.
…………………………
Registrar/Deputy Registrar
Solicitors:
Harkness Henry, Hamilton Tompkins Wake, Hamilton
AUTOTERMINAL NEW ZEALAND LTD v IBC JAPAN LTD [2020] NZHC 2692 [14 October 2020]
[1] Under Rule 8.34 of the High Court Rules 2016, the plaintiff (“ATNZ”) required the defendant (“IBC”) to answer particular interrogatories, to which IBC objected in part as not seeking answers of relevant fact. ATNZ now seeks my order IBC answer.1
Background
[2] Under agreements between them, ATNZ imports to and distributes in New Zealand used vehicles shipped from Japan by IBC. ATNZ alleges IBC breached or repudiated the agreements by refusing to ship vehicles ordered by ATNZ. IBC denies any breach or repudiation, and counterclaims to recover amounts (exceeding JPY 5 billion, or then NZD 90 million) said to be due and payable under the agreements. ATNZ responds the amounts pleaded fail to take into account adjustments IBC agreed would be made, and denies any sum owing is due and payable.
[3] Both companies are part of a partnership between Robert Stone and Hohua Hemi. The men directly or indirectly own each company in equal shares. The relationship between the partners has broken down, resulting in a variety of disputes. Here, ATNZ alleges Mr Stone – then as IBC’s ‘representative director’, with powers under Japanese law to bind the company – committed IBC to the adjustments agreement.
[4] The precise interrogatories sought to be administered by ATNZ, together with IBC’s answers (sworn by its current representative director, Mr Hemi), are set out at the Schedule to this judgment. In broad terms, they ask:
(a)did Mr Stone have the power to make binding decisions on IBC’s behalf in relation to amounts owing by customers (including ATNZ) to IBC?
(b)if not, did he believe he had such power?
(c)does he agree all or some particular documented adjustments were intended to reduce the sums due to IBC by ATNZ?
(d)if so, to what? and
1 High Court Rules 2016, r 8.38.
(e)did he make it known to ATNZ the adjustments were made and binding on IBC?
[5] For IBC, James MacGillivray objects the first contested interrogatory seeks an answer in law rather than of fact, and the balance Mr Stone’s irrelevant “subjective state of mind”. For ATNZ, Murray Branch replies the first is a question of fact of Mr Stone’s authority; the rest are likely to determine the quantum of IBC’s counterclaim.
The law
[6] A party may require another “to answer specified interrogatories relating to any matter in question in the proceeding between the interrogating party and the party served”.2 They must be directed towards advancing one party’s case, or damaging another’s,3 by reference to an issue raised on the pleadings or a fact in dispute for determination.4 They must be “precise and unequivocal, and amenable to a direct and meaningful answer from information within the knowledge of or reasonably available to the person required to answer”.5 I may not order their answer unless I am satisfied “the order is necessary at the time when it is made”.6 That necessity in part acknowledges interrogatories are an exception to the usual means of adducing (including a defendant’s right not to call) evidence at trial.7
Discussion
[7] The interrogatories sought to be administered by ATNZ go to its affirmative defences in respect of paragraph 19 of IBC’s counterclaim dated 13 July 2020, which stated “[t]he plaintiff has failed to pay the defendant for vehicles supplied by the defendant to the plaintiff under the Agreement in a sum fully to be quantified prior to trial”. The subsequent paragraph provided “[a]s at 26 March 2020, the amount due and
2 High Court Rules 2016, r 8.34(1).
3 Todd Pohokura Ltd v Shell Exploration NZ Ltd [2009] NZCA 561 at [14].
4 High Court Rules 2016, r 8.38(2).
5 Todd Pohokura Ltd v Shell Exploration NZ Ltd, above n 3, at [15].
6 Rule 8.38(4).
7 Todd Pohokura Ltd v Shell Exploration NZ Ltd, above n 3, at [16].
owing by the plaintiff to the defendant under the Agreement in respect of the supply of vehicles to it was [JPY] 5,268,514,823.45”.8
[8] ATNZ denies paragraph 19 “and puts the [d]efendant to proof, and in particular it says that it has failed to take into account adjustments (credits) made by the [d]efendant, to the [p]laintiff’s account”. It then asserts Mr Stone was IBC’s representative director during the relevant period, with authority to represent it, and to enter into binding contractual commitments and make operational decisions, on IBC’s behalf. In that role, ATNZ alleges Mr Stone agreed to make adjustments to its account to reduce its debt to IBC by that amount; alternatively, IBC is estopped from denying Mr Stone’s representations to those ends; and in any event his representations waived IBC’s entitlement to the adjustments’ payment.9
—interrogatory (b): Mr Stone’s “power”
[9] So far as the first contested interrogatory is concerned, it is too broadly worded to avoid the long-standing prohibition on questions of law or mixed fact and law.10 That effectively is conceded by ATNZ, whose submission sought to recast the question as “a question of fact whether IBC accepts that Mr Stone had the requisite authority to act for IBC during the relevant period”. But IBC’s acceptance is not determinative either.
[10] The matter in issue is if Mr Stone’s alleged conduct is binding on IBC. It is a question of law. I will not require this interrogatory (b) to be answered.
—interrogatories (c)—(j): Mr Stone’s ‘belief’, ‘agreement’ and ‘making known’
[11] I apprehend the balance of contested interrogatories may be intended formulated in the alternative to a determination Mr Stone’s alleged conduct is binding on IBC. That is express in relation to the interrogatory (c).
8 The interrogatories were sought by notice dated 20 July 2020. The counterclaim was amended by pleading dated 28 July 2020. Nothing appears to turn on that amendment, but the amendment’s omission of the former paragraph 14 means the relevant paragraph now is paragraph 18.
9 ATNZ’s affirmative defence of waiver was added in an amended defence dated 9 September 2020 to IBC’s amended counterclaim.
10 Attorney-General v Wang NZ Ltd [1990] 3 NZLR 148 (CA) at 151–152.
[12] But Mr Stone’s belief he had power to bind IBC in relation to amounts owing by customers (including ATNZ) to IBC is not relevant to ATNZ’s pleading IBC agreed or represented adjustments (or waived their payment) in reduction of ATNZ’s account with IBC. Mr Branch argued Mr Stone’s intention was material to ATNZ’s allegations of formation of contract with,11 estoppel of, and waiver by IBC.12 That can only be so if Mr Stone’s alleged conduct is binding on IBC, against whom those affirmative defences are pleaded.
[13] Thus the other interrogatories resolve to the same point as I have refused to allow to be interrogated. They are questions based on disputed assumptions of facts,13 not as to facts in issue, but additionally impermissibly as to evidence of facts in issue.14 The fact in issue is if IBC agreed or represented adjustments (or waived their payment) in reduction of ATNZ’s account with IBC. The questions seek evidence of those facts in issue – ie, if Mr Stone so agreed, represented or waived – on the disputed assumption his alleged conduct is binding on IBC. I will not allow them either.
—discretion
[14] Had any of the interrogatories prima facie been answerable by IBC, I nonetheless would have exercised my discretion against requiring their answer as unnecessary in the present circumstances:
(a)they should be as to information “within the knowledge of or reasonably available” to IBC.15 But Mr Stone is said to be co-operating with ATNZ and not IBC. IBC’s information requests of him are said to have gone unacknowledged and unmet. I am given no reason to think IBC can answer the latter interrogatories without Mr Stone’s input; indeed, that precisely is what ATNZ seeks;
11 Electricity Corporation of New Zealand v Fletcher Challenge Energy Ltd [2002] 2 NZLR 433 (CA) at [55].
12 Bell v BDO Spicers Manawatu Ltd [2012] NZHC 1598 at [47].
13 Westpac Banking Corp v Hart (1987) 1 PRNZ 719 (HC) at 726.
14 Evans v Harris (1991) 6 PRNZ 329 (HC) at 332, citing Marriott v Chamberlain (1886) 17 QBD 154 at 63.
15 See [6] above at n 5, citing Todd Pohokura Ltd v Shell Exploration NZ Ltd, above n 2, at [15].
(b)although in somewhat circular fashion, commentaries and authorities hold themselves against providing answers “which could be readily proved by a witness to be called at the trial”,16 as lacking the requisite necessity. Trial is scheduled for March 2021, with evidence due at the end of November 2020. I am given no reason to think Mr Stone is not a competent and compellable witness; and
(c)I am sufficiently uncomfortable about the partners’ potential strategic motives in their broken-down relationship to consider the application risks an abuse of this Court’s process and accordingly is disqualifyingly vexatious.
Result
[15]ATNZ’s application is dismissed.
Costs
[16] In my preliminary view, as the successful party, IBC is entitled to 2B costs and disbursements on steps taken in the application. That is because, so far as I can tell, no step on this averagely complex application required other than a normal amount of time. My apprehension the application risks being vexatious is an insufficient ground on which to claim increased or indemnity costs.
[17] If that is not accepted by the parties, or they cannot otherwise agree, I reserve costs for determination on short memoranda of no more than five pages – annexing a single-page table setting out any contended allowable steps, time allocation, and daily recovery rate – to be filed and served by IBC within ten working days of the date of this judgment, with any response and reply to be filed within five working day intervals after service.
—Jagose J
16 Robert Osborne (ed) McGechan on Procedure (online looseleaf ed, Thomson Reuters) at HR8.38.03, citing Lang v Australian Coastal Shipping Commission [1974] 2 NSWLR 70 (SC) at 73 and Dodds v Smith (1991) 4 PRNZ 117 (HC) at 119 (the latter citing the McGechan on Procedure commentary to the former r 282).
SCHEDULE
ATNZ’s interrogatories
(a) Who was the Representative Director of the Defendant from its incorporation up until
IBC’s answers, by Hohua Hemi
(a) Robert Stone.
31 May 2018?
(b) Did the Representative Director … have the power to make binding decisions on behalf of the Defendant in relation to amounts owing by customers (including ATNZ) to IBC during his tenure?
(b) This question is objectionable as it relates to a matter of Japanese law. I note that while the Representative Director has power to make binding decisions, that
power is subject to the need to comply with fiduciary duties and to obtain board
approval of certain matters. I consider that it would be a breach of fiduciary duty to forgive debt without any consideration for doing so.
(c) If the answer to question (b) is No, did the Representative Director … believe that he had the power to make binding decisions on behalf of IBC in relation to amounts owing by customers (including ATNZ) to IBC during his tenure? (c) I object to answer on the basis that the subjective belief of Mr Stone is not relevant to any fact in dispute in this proceeding.
What is relevant is what documentary and system records the representative director made in IBC during his tenure.
(d) Does the Representative Director … agree that the adjustments shown in sales and money man modules … were intended to reduce the sums due to IBC by ATNZ? (d) I object to answer the question as framed on the basis that Mr Stone’s state of mind is not relevant to any material fact in dispute.
On behalf of IBC I do say that as a matter of fact the “adjustments shown in sales and money man modules …” did not represent actual transactions between IBC and ATNZ
and were not entered into ATNZ’s customer account in Trakker (being the only part of Trakker accessible by ATNZ as a customer) and therefore did not reduce the accounts receivable shown as owing by ATNZ to IBC in Trakker. IBC can find no
documentary records or other evidence of any agreement with ATNZ on any of the
disputed adjustments. Money man is IBC’s internal module in Trakker which is not
accessible to any customers and does not record adjustments that reduce the sums due to IBC by any customers.
(e) If the answer to question (d) is No, then does the Representative Director … agree
that some of the adjustments shown in sales and money man modules … were intended to reduce the sums due to IBC by ATNZ?
(e) I object to answer the question as framed on the basis that Mr Stone’s state of mind is not relevant to any material fact in dispute.
On behalf of IBC I do say that as a matter of fact none of the “adjustments shown in sales and money man modules … ” represented actual transactions between IBC and ATNZ and were not entered into ATNZ’s customer account in Trakker
(being the only part of Trakker accessible
by ATNZ as a customer) and therefore did not reduce the accounts receivable shown
as owing by ATNZ to IBC in Trakker. IBC
can find no documentary records or other evidence of any agreement with ATNZ on any of the disputed adjustments. Money man is IBC’s internal module in Trakker which is not accessible to any customers
and does not record adjustments that reduce the sums due to IBC by any customers.
(f) If the answer to question (e) is Yes, then what were those adjustments which it is
accepted were intended to reduce the sums due to IBC by ATNZ?
(f) N/A and I repeat my answer to (e) (g) If the answer to question (d) is Yes, then does the Representative Director … agree that the adjustments shown in sales and money man modules … did reduce the sums due to IBC by ATNZ? (g) N/A and I repeat my answer to (d). (h) If the answer to question (f) is Yes, then does the Representative Director … agree that the adjustments did reduce the sums due to IBC by ATNZ by the amount of the
adjustments provided in answer to question (f)?
(h) N/A and I repeat my answer to (d) and (e). (i) If the answer to question (d) is Yes, did the Representative Director … make known, in any way, to ATNZ that the adjustments referred to in the answer had been, or were intended to be, made and be binding on IBC? (i) This question is not applicable as it only calls for an answer if the answer to question (d) is yes, however, I do say that IBC can find no documentary records or
other evidence to suggest that Mr Stone or anyone else at IBC “make known, in any way, to ATNZ that the [disputed
adjustments] had been, or were intended to be, made and be binding on IBC”.
(j) If the answer to question (e) is Yes, did the Representative Director … make known, in any way, to ATNZ that the adjustments referred to in the answer had been, or were intended to be, made and be binding on IBC? (j) This question is not applicable as it only calls for an answer if the answer to question (e) is yes, however I do say that IBC can find no documentary records or
other evidence to suggest that Mr Stone or anyone else at IBC “make known, in any way, to ATNZ that the [disputed
adjustments] had been, or were intended to be, made and be binding on IBC”.
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