Body Corporate 366611 v Downer New Zealand Ltd
[2013] NZHC 3110
•25 November 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2012-404-006418 [2013] NZHC 3110
BETWEEN BODY CORPORATE 366611
First Plaintiff
CONFUCIUS LIMITED & ORS Second Plaintiffs
AND
DOWNER NEW ZEALAND LIMITED First Defendant
SANCTUARY DEVELOPMENTS EMPIRE LIMITED
Second Defendant
Continued over/...
Hearing: 21 November 2013 Appearances:
S Price / J Wilson for the Plaintiffs
C J Booth / D J Halliwell for the DefendantsJudgment:
25 November 2013
JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN
This judgment was delivered by me on
25.11.13 at 4:30pm, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
BODY CORPORATE 366611 & ORS v CONFUCIUS LIMITED & ORS [2013] NZHC 3110 [25 November
2013]
CLARK BROWN ARCHITECTS LIMITED
First Third Party
FLOORSTYLE LIMITED Second Third Party
KEITH MAHON PAINTERS Third Third Party
W & M NO 1 LIMITED Fourth Third Party
D ALLEN DECORATORS LIMITED Fifth Third Party
PACIFIC LINK PROPERTY INVESTMENT SERVICES LIMITED Sixth Third Party
CROATION TILERS LIMITED Seventh Third Party
FIRE SECURITY SERVICES LIMITED Eighth Third Party
[1] This hearing concerns the first defendant’s application for particular
discovery.
[2] The proceeding concerns a defective building claim. It relates to an apartment complex at Grafton, Auckland (the Empire Apartments). The first defendant (Downer) was the builder, the second defendant (Sanctuary) was the developer.
[3] The proceeding is not about leaky building claims. Rather that the Empire Apartments suffer from defects and damage as a result of alleged breaches of duty of care by the defendants and of their failure to fulfil obligations under guarantees.
[4] When this matter was first called before Associate Judge Faire he recorded that all counsel agreed that standard discovery should be given and that parties were to comply with a listing and exchange protocol set out in Part 2 of Schedule 9 of the High Court Rules.
Background
[5] The Empire Apartments were built between June 2004 and May 2006. Downer executed various guarantees in respect of works carried out by certain parties. The plaintiffs claim that the Empire Apartments contain building effects including:
(a) The choice of and the fitting of the kitchen and bathroom vinyl. (b) The adequacy of the bathroom modules.
(c) Defective stopping joints.
(d) The erection of the retaining wall.
(e) Code compliance issues with the installation of the podium common area.
(f) Defective installation of the fire system which has resulted in numerous false fire alarm activations which has resulted in false fire alarm activation callouts.
[6] The plaintiffs plead that on numerous occasions in 2006 and 2007 Downer was notified of concerns in relation to these various matters. Details were provided of subsequent notified concerns over the period April 2008 through to May 2012.
[7] The plaintiffs estimate the cost of remedial work as being about $4.22M. Further, that there are consequential losses which are estimated to amount to more than $1.04M.
[8] Causes of action include negligence and breaches of guarantees.
[9] In a second amended statement of defence Downer denied allegations of notification of defects and damage, of loss, of negligence or breaches of guarantees. For the first time Downer pleaded affirmative defences including:
(a) That the proceeding was commenced without proper authority having first been given by either the first and/or second defendants such that the proceeding is a nullity.
(b)That if it was negligent then the plaintiffs contributed to any losses incurred because:
(i)The second plaintiffs ought to have been aware of problems associated with houses constructed with monolithic cladding due to media coverage of the ‘leaky building crisis’ which emerged in late 2001 early 2002.
(ii)The second plaintiffs failed to exercise reasonable precautions before buying their apartments and should have obtained pre- purchase inspections.
(iii)If the second plaintiffs had adequately inspected the property or obtained a pre-purchase inspection report then the damage would have been exposed and the plaintiffs could have taken steps to protect their economic interests.
(iv)The second plaintiffs were aware of defects and damage in their own or in other units prior to purchase and they purchased without protecting themselves.
(c) That the plaintiffs knew of defects and damage occurring at the property since construction but have failed to carryout timely repairs and maintenance concerning those.
(d)That if the plaintiffs are awarded damages then they will be placed in a better position than they would have been but for their own conduct.
Application for particular discovery
[10] The application for particular discovery was filed on 17 September 2013.
[11] In a Schedule Downer has identified the documents it requires discovery of. They include from:
(a) Body Corporate documents.
Management contracts entered into by the Body Corporate with
third parties.
Body corporate communication with present or past owners
relevant to the issues in the proceeding.
Documents including reports and the scopes of work for such reports reflecting investigations by the Body Corporate of the alleged defects the subject of the proceeding.
Records of the Body Corporate relating to the maintenance and repairs of Empire Apartments including accounting information
on the funding of such works.
Any documents referring to the costs of remedial works carried
out to date.
(b) The Body Corporate:
Communications with present and/or past owners and the Body
Corporate.
The ‘Empire Rules and Regulations Resident’s Handbook’.
Documents (including reports and the scope of work for such reports) reflecting investigations of the alleged defects the
subject of the proceeding.
Records relating to the maintenance of the Empire Apartments.
Documents reflecting the management of the alleged defects and warranties the subject of the proceeding.
Any documents referring to the cost of remedial works carried
out to date.
All records relating to insurance claims made by or on behalf of
the Body Corporate in respect of alleged damage.
(c) Communications between Body Corporate experts and:
The present and/or past owners.
The Body Corporate.
The Body Corporate’s agents.
Any other parties whether or not they are a party in the proceeding relating to the alleged defects the subject of the
proceeding.
(d) Documents evidencing the investigation by the expert as to the defects
in the building including:
Photographs
Videos
Moisture meter readings
Test results
Reports including drawings and plans.
(e) Unit owners’ documents:
Documents evidencing each unit owners’ authority to the
plaintiffs to act on their behalf.
(f) Any documents that are relevant to the issue of the proceedings
including but not limited to:
Documents relating to the purchase of the unit the subject of the proceedings including, where the unit owner is the original purchaser, pre contractual communications and promotional
material.
Documents reflecting communications between the unit owner and any other party, including parties to the proceeding, relating to the defects the subject of the proceeding.
Documents reflecting the existence of any lease arrangement in respect of each unit.
Documents reflecting the existence of any property management
arrangement in respect of each unit.
Documents reflecting the existence of any tenancy, licence to occupy, or other occupancy arrangement between the unit owner
and the individual occupier’s of each unit.
Documents reflecting any communications between the unit owner and any property manager, lessor, tenant or other form of
occupier relating to any of the issues relevant to the proceeding.
In the case of each unit, documents relevant to any claim (if any) for loss of rent including:
(i) The occupancy rate of each unit since construction of the
Empire Apartments was complete.
(ii) The rent or other income received for each unit since construction was completed.
(iii) The Body Corporate levies and any other operating or maintenance costs paid in respect of each unit since
construction was completed.
(g) Unit owner’s solicitors files:
(i)Any documents that are relevant to the issues in the proceeding including, but not limited to, documents relating to the purchase of the unit the subject of the proceeding.
[12] An affidavit sworn in support of the application for particular discovery noted that a request for specific discovery in terms indicated by the present application had
previously been sent. The affidavit deposes it has not received a copy of any management contract nor of any communications between the first plaintiff and present or past owners. Complaint is made of the fact that a limited number of documents provided reflected investigations by the first plaintiff into the alleged defects. Nor, it is claimed, have any documents at all been discovered which refer to the costs of remedial works already carried out.
[13] In a second affidavit sworn in support of the particular discovery application there has been attached copies of the minutes of an extraordinary general meeting of the first plaintiff dated 10 December 2009, the minutes of an annual general meeting of the first plaintiff dated 20 May 2011, and a letter from the first plaintiffs committee to apartment owners dated 26 January 2012.
Reasons given for further discovery
[14] In response to a direction by Associate Judge Faire, Downer ’s solicitors by letter dated 15 October 2013 wrote to the plaintiffs’ solicitors for the purpose of setting out in greater detail the reasons why the additional documents were sought. The letter indicated Downer’s reasons for requesting the documents sought including inter alia:
(a) Body Corporate documents including a management contract should show the manager maintained its responsibilities for the maintenance and upkeep of the Empire Apartments.
(b)It seems inconceivable that there have been communications between the Body Corporate and present and/or past owners since the apartments were completed, and that those communications would bear on the defects and damages pleaded by the plaintiffs.
(c) There are very little by way of reports into the alleged defects and damage covered by the notifications the plaintiffs pleaded were made to Downers.
(d)Because the documents discovered relating to maintenance and repairs were extremely sparse.
(e) That a Rules and Regulations Residence handbook should contain rules and guidelines governing the use and occupation of the apartments.
(f) Records relating to maintenance of the apartments would indicate whether the plaintiffs carried out timely repairs and maintenance.
(g)All documents having any bearing on the way in which the alleged defects were managed should be discovered.
(h)Insurance documents were required because they were likely to include contemporary statements by plaintiffs or unit occupants of observed defects and damage, and of investigations undertake inclusions reached by the insurers.
(i)Documents discovered by plaintiffs in relation to experts were extremely sparse and full discovery of all of those could provide an assurance discovery obligations have been met.
(j)Documents relating to the purchase of the units whether by the initial or a subsequent purchaser would indicate whether the apartments were utilised as was intended when they were marketed.
(k)Documents from unit holders regarding the nature of an occupational arrangement should be provided to support claims for rental loss.
(l)Individual owners’ solicitors files should be discovered because such were likely to indicate the extent to which, if any, proper enquiry was made as to the state of the unit before it was purchased.
Considerations
[15] Rule 8.19 provides that if there are grounds for believing that a party has not discovered documents that should have been discovered then the Judge may order that party to file an affidavit stating:
(a) Whether the documents are or have been in the parties’ control.
(b)If they have been but are no longer in the parties’ control, the parties best knowledge and belief as to when the documents ceased to be in the parties control and who now has control of them.
(c) If the documents are in the persons control, to make them available for inspection.
[16] Downer’s position is that the documents sought to be discovered are those which the plaintiffs should have discovered in terms of Rule 8.19.
[17] The new discovery regime significantly alters discovery obligations. Whilst the Peruvian Guano approach may still be appropriate in normal course compliance Rule 8.19 requires discovery according to the new ‘adverse documents’ test, or any other test that may be imposed by way of tailored discovery. Therefore whether a document should have been discovered in terms of Rule 8.19 means, as McGechan notes, discovery according to the new ‘adverse documents’ test or any stricter test imposed by way of tailored discovery.
[18] As Associate Judge Osborne noted in Karam v Fairfax New Zealand
Limited:1
The discovery rules which came into effect on 1 February 2012 were designated to reduce disproportionate cost and delays caused by discovery and to reduce the tactical use of discovery. They do that in a number of ways. Particularly relevant to this case are the duties to:
1 [2012] NZHC 887.
(a) cooperate to ensure that the processes of discovery and inspection are proportionate and facilitated by agreement on practical arrangements (s 8.2) (i); and
(b) to consider options to reduce the scope and burden of discovery (s
8.2) (ii), such as by standard discovery under r 8.7 (involving an adverse documents regime) or by tailored discovery under 8.8 (tailoring discovery to meet the interests of justice).
[19] Quite clearly now the Peruvian Guano approach is the exception and not the rule; considerations of applications for particular discovery under Rule 8.19 are to be focussed upon documents tailored to the requirements of the case. Rule 8.19 applicants must be able to describe the documents they seek. As Mr Price submits, an appropriate level of specificity is required.
[20] Before Downer brought this application for particular discovery it had not pleaded any affirmative defences. In doubt were issues relating to the relevance of the discovery sought. Clear evidence of direct relevance was required. The amended statement of defence appears to try and address this purpose but regretfully it does not achieve this purpose. In the Court’s view the amended statement of defence inadequately provides particulars to support the allegations in support of its affirmative defences. To be frank the claims raised by the affirmative defences involve little more than indulgence of speculation. There is a lack of detail regarding the documents expected to be provided. It is not clearly indicated what relevance those documents may have to the issues in this proceeding. There is a potential for oppression if any order of the kind sought was to be made. The discovery application seeks documents “reflecting”, “relating to”, and “referring to” various matters. That kind of request is unhelpful and without more should be ignored.
[21] Nor does the matter appear to be clarified by the submissions filed in support of the application. In short there is a lack of specificity relating to the broad categories of documents sought.
[22] Downer seeks evidence of the authority of the plaintiffs’ solicitors to act on the plaintiffs’ behalf in this proceeding. The Court agrees with Mr Price’s comment that there is an element of absurdity in this submission/proposition. It assumes that
because not all owners have been named as plaintiffs’ therefore there may be an absence of appropriate authority to represent the plaintiffs at all.
[23] As Mr Price submits, and as a matter of law by filing a proceeding on behalf of 225 plaintiffs, counsel implicitly warrants that it has the authority to do so.
[24] If Downer wishes to challenge the solicitor’s authority then it must have a reasonable basis for doing so. Clearly none has been identified by submissions or in any evidence available to the Court.
[25] Downer is aware than an authority agreement was distributed to unit owners seeking authority to pursue a claim on their behalf; that although not all apartment owners have brought this proceeding, there is a reasonable inference that those who gave such authorisation have been joined in this proceeding.
[26] Other aspects of Downer’s affirmative defences require review.
[27] A defence has been raised suggesting contributory negligence due to a lack of diligence on the part of the plaintiffs when they purchased their apartments. No particulars are provided in support of that proposition which appears to forget that the claim in this proceeding does not involve a leaky building matter. The claim is about builder’s liability. Considerations of contributory negligence whilst theoretically available are misguided. There is no general obligation upon a purchaser of an apartment to obtain a pre-purchase inspection report. The evidence suggests in this case that most owners purchased at or immediately after construction was completed. Downer’s pleading in defence does not appear seriously to maintain an allegation of contributory negligence in those circumstances.
[28] Also it is not clear on what basis Downer can plead an alleged failure to mitigate by purchasers of their units. The Court accepts that a proper basis for pleading a failure to mitigate would require at the very least proper particularisation as to the specific defects and damage said to have been caused to or exacerbated by some lack of repair or maintenance, coupled with details as to what repairs or
maintenance ought reasonably to have been done. Insufficient particulars have been provided in support of any justification for this defence.
[29] Downer’s application lacks particularity regarding the documents it seeks; it fails to provide sufficient particulars to support its alleged affirmative defences; and it does not adequately indicate the relevance of the documents it seeks.
[30] Mr Price submits and the Court accepts that by Downer ’s application it has exhibited an approach to particular discovery which is the epitome of what the new discovery rules ought to prevent. Counsels reference to the decision of Osborne AJ in Karam v Fairfax (supra) is appropriate:
For the reason I have previously stated in this judgment, parties are not entitled to look to the Court to make sweeping discovery orders as if the new rules had not come into force, particularly when the parties themselves have not put any evidence before the Court as to endeavours to reduce the scope and burden of discovery. The potential discovery of all material relevant to the Schedule A propositions was a matter which cried out for such co- operation.
[31] Mr Price submits and the Court agrees that the first defendant’s particulars application illustrates the very reason why discovery rules have recently changed. The emphasis is on cost effectiveness and to prevent discovery being employed as a tactic to create delays and unnecessary expense.
[32] The Peruvian Guano approach to discovery is no longer the cornerstone of discovery practice. Although it may be relevant it is not discoverable unless it meets the adverse documents test. Alternatively tailored discovery should be engaged if a little more discovery is considered desirable.
[33] Rule 8.18 obliges parties to provide continuing discovery as it becomes available. In this case Downer’s application wrongly seeks details of repair costs for it appears clear from the proceeding that those are not yet being claimed. If they are then appropriate discovery will be required at that time.
[34] Downer’s application for further discovery fails because it is too generalised and not specific enough regarding the purpose for which it is required. The discovery request is a classic example of ‘fishing’ for information.
[35] The Court considers it fails so significantly that the Court is not prepared to waste its time trying to find parts of the discovery request that might provide an acceptable reason for directing further discovery to be made. Rather, the Court’s view is that the first defendant should be put to the task of providing a sensible request if further discovery is required.
Judgment
[36] The particular discovery application is declined.
[37] Whilst the plaintiffs seek costs on an increased basis the Court is of the view that 2B costs should be awarded. Whilst the application was misconceived, it
arguably was not mischievous.
Associate Judge Christiansen
3