Body Corporate 422631 v Queenstown Lakes District Council
[2022] NZHC 543
•23 March 2022
IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY
I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE
CIV-2021-425-16
[2022] NZHC 543
BETWEEN BODY CORPORATE 422631
First Plaintiff
AND
KAWARAU VILLAGE HOLDINGS LIMITED
Second Plaintiff
AND
QUEENSTOWN LAKES DISTRICT COUNCIL
Defendant
AND
DE GEEST CONSTRUCTION LIMITED
First Third Party
AND
DE GEEST BATHROOMS LIMITED
Second Third Party
Hearing: 15 March 2022 Appearances:
E J Walton and G S Burcher for Applicant (via VMR) T J Rainey for Respondent (via VMR)
Judgment:
23 March 2022
JUDGMENT OF ASSOCIATE JUDGE LESTER
BODY CORPORATE 422631 v QUEENSTOWN LAKES DISTRICT COUNCIL [2022] NZHC 543
[23 March 2022]
[1] The defendant, Queenstown Lakes District Council (QLDC), seeks by way of two applications, to compel the plaintiffs to comply with discovery orders made in 2021. Alongside those applications, QLDC applies for non-party discovery if some or all of the documents sought are not within the plaintiffs’ power and control. By the time of the hearing, the plaintiffs accepted the documents were in their control because of developments I describe below. Therefore, orders can be made essentially on a consent basis.
The claim and the parties
[2] It is sufficient to briefly summarise the plaintiffs’ claim as being that QLDC was negligent in how it carried out (or failed to carry out) inspections during the construction of the Hilton Hotel in Queenstown (the Hotel).
[3] The Hotel was developed by a company called Melview (Kawarau Falls Station) Investments Limited (MIL). The original owner of the Hotel was a related company called Melview (Kawarau Falls Station) Development Limited (MDL).
[4] MIL and MDL were placed into receivership in mid-2009. Messrs Gibson and Graham of Korda Mentha were appointed receivers (the original receivers). Korda Mentha is now Calibre Partners Limited (Calibre).
[5] The units in the Hotel operate under the “Hilton” name. The original receivers incorporated the second plaintiff, Kawarau Village Holdings Limited (KVHL) to hold the units issued by the first plaintiff, Body Corporate 422631. The original receivers were the original directors of KVHL. MIL was, and remains, the sole shareholder of KVHL. The law firm acting for the original receivers is MinterEllison and is the object of the non-party discovery application.
[6] The original receivers were replaced in 2012 by Messrs Bethell and Mayo-Smith of BDO Auckland (BDO) (the current receivers). Mr Bethell and another BDO partner, Mr McKay, are now the directors of KVHL. As noted, MIL remains the shareholder of KVHL which is now under the control of the current receivers.
[7]The present application arises because Mr McKay deposed as follows:1
Documents prior to our appointment
14.BDO did not obtain copies of documents held by the prior receivers of Melview when Mr Bethell and Mr Mayo-Smith were appointed. The former receivers retained those documents.
15.Nor did BDO obtain access to the files of the solicitors who acted for the former receivers (MinterEllison) following our appointment.
[8] The plaintiffs issued these proceedings in March 2021. Two orders requiring the plaintiffs to give standard discovery have been made; the first required discovery to be given by the plaintiffs by 30 July 2021 alongside an agreed order that informal discovery of some documents be provided by 11 June 2021. The standard discovery order was not complied with. The plaintiffs said they had difficulties in accessing documents from the original receivers and their solicitors. A new timetable was ordered. The plaintiffs were to provide by 12 October 2021, the documents they could as requested by the defendant’s solicitor’s letter dated 8 September 2021. General discovery was to be provided by 12 November 2021. Some informal discovery was provided, but no more.
The current applications
[9] The defendant applies for an order that the plaintiffs provide an affidavit in relation to identified documents which are, or have been, in their control. If the documents are in the plaintiffs’ control they are to be included in a further affidavit of documents and made available for inspection. If they are not in the plaintiffs’ control, the plaintiffs are to state when those documents ceased to be in their control.
[10] The second order seeks an unless order in relation to the existing discovery orders.
[11] The third application is in relation to non-party discovery. The non-party is MinterEllison.
1 Affidavit of Andrew John McKay sworn 21 February 2022.
[12] QLDC notes only 243 documents have been disclosed by the plaintiffs in relation to the two year construction of the 98 room hotel. The plaintiffs accept other documents exist but say they are beyond their power and control as they are held by the original receivers or MinterEllison.
[13]Mr McKay says the plaintiffs have sought access to the documents but:
17.As Mr Bethell explained in the affidavit of documents, Calibre Partners and MinterEllison have declined access to the documents unless MinterEllison reviews each document for confidentiality or privilege. Any access which we would have to those documents is dependent upon the advice from MinterEllison to Calibre Partners.
18.The position take by Calibre Partners and MinterEllison is that those documents which they possess do not “belong” to KVHL. They are documents which belong to Calibre Partners as the former receivers of Melview. Calibre Partners will not consent to disclosure of any of those documents unless:
(a)It consents to the disclosure having been satisfied on advice from MinterEllison, that any confidentiality or privilege attaching to any document identified for disclosure is protected; or
(b)A non-party discovery order is made by the court with Calibre Partners having full notice of any such application and an opportunity to be heard.
[14] In short, the plaintiffs were, up until the hearing, saying they would do no more and had met their discovery obligations.
The documents sought in more detail
[15]From the non-party, the following documents are sought:
1. Any documents in relation to the original construction of the Property.
2. Any documents in relation to the transfer of the Property to Kawarau Village Holdings Limited (the second plaintiff).
[16] As to the plaintiffs, the defendant seeks they give discovery of the documents captured by the standard discovery order already made and in particular the documents it requested in its solicitor’s letter of 8 September 2021 being:
6.Further, we had expected to be provided with a number of other documents including but not limited to:
(a)Documents from the construction period, including:
(i)consent documents including plans, specifications, RFIs and responses;
(ii)site inspection reports and/or site meeting minutes;
(iii)project control group meeting minutes;
(iv)communications with contractors, subcontractors and consultants;
(v)head contractor and subcontractor contracts;
(vi)producer statements;
(vii)any other construction documents;
(viii)Code of Compliance documents;
(ix)construction insurance information; and
(x)photographs relating to the pleaded defects.
(b)Any expert reports;
(c)Documents relating to any post construction works including the work to the bathroom of unit 223;
(d)Maintenance documents including any and all long-term maintenance plans, reviews of those plans and any agreements with Hilton and related documents;
(e)Hotel Management’s Duty Manager reports; and
(f)Any other relevant Body Corporate documents.
[17] At the hearing, the above request was qualified by adding “insofar as they refer or relate to the pleaded defects”.
[18]Paragraph 7 of Wynn Williams’ letter of 8 September 2021 states:
7.KVHL is a wholly owned subsidiary of the developer Melview (Kawarau Falls Station) Investments Limited, the receivers of which
are the directors of KVHL. Therefore, all of the original construction and development documents are within the control of KVHL and need to be discovered. Mr Rainey [counsel for the plaintiffs] has confirmed this and that he has obtained consent from the receivers to discover all relevant documents within their/Melview’s control.
Plaintiffs’ discovery obligations
[19] It is not in dispute that the plaintiffs must include in the discovery they have been ordered to give, all relevant documents within their power and control.
[20] Rule 1.3 of the High Court Rules 2016 (the Rules) provides that control in relation to a document, means:
(a)possession of the document; or
(b)a right to possess the document; or
(c)a right, otherwise under these rules, to inspect or copy the document.
[21]McGechan on Procedure says:2
A document is in the control of the party, even if in the possession of another, if the party has an enforceable right to access the document: Biggs v Biggs [2018] NZHC 1582, [2018] NZFLR 580 at [228] citing
Dotcom v Attorney-General [2014] NZHC 1343.
[22] In Dotcom v Attorney-General, Winkelmann J concluded, in relation to one category of documents subject to the application, Mr Dotcom was entitled to that information as he had an entitlement pursuant to the principles of the Privacy Act. While that entitlement was not one that could be enforced through the Court, it was an entitlement “for which procedural pathways exist for enforcement.”3
The plaintiffs’ pathway for enforcing access
[23] QLDC says the current receivers have the ability to require the original receivers to produce the documents by virtue of ss 11A(2) and 11A(3) of the Receiverships Act 1993 (the Act). Those sections provide:
2 Andrew Beck and others McGechan on Procedure: High Court Rules 2016, (online ed, Thomson Reuters) at [HR8.7.02],
3 Dotcom v Attorney-General [2014] NZHC 1343 at [87].
11A Provision of information and assistance to replacement receiver
(2)The previous receiver must, where practicable, provide to the replacement receiver the information that the previous receiver has in their possession or under their control and that the replacement receiver reasonably requires to carry out the functions and duties of receiver, including any accounting records and other documents relating to the property in receivership.
(3)The previous receiver must, where practicable, provide to the replacement receiver any assistance that the replacement receiver reasonably requires to carry out the functions and duties of receiver.
[24]In addition, s 14 of the Act provides:
14 Powers of receivers
(1)A receiver has the powers and authorities expressly or impliedly conferred by the deed or agreement or the order of the court by or under which the appointment was made.
(2)Subject to the deed or agreement or the order of the court by or under which the appointment was made, a receiver may—
(a)demand and recover, by action or otherwise, income of the property in receivership:
(b)issue receipts for income recovered:
(c)manage the property in receivership:
(d)insure the property in receivership:
(e)repair and maintain the property in receivership:
(f)inspect at any reasonable time books or documents that relate to the property in receivership and that are in the possession or under the control of the grantor:
(g)exercise, on behalf of the grantor, a right to inspect books or documents that relate to the property in receivership and that are in the possession or under the control of a person other than the grantor:
(h)in a case where the receiver is appointed in respect of all or substantially all of the assets and undertaking of a grantor that is a body corporate, change the registered office or address for service of the body corporate.
[25] The power under s 14 of the Act is subject to any express deed or agreement but the plaintiffs do not suggest that there is any deed, agreement or order by which the current receivers’ power to obtain the documents was cut back or removed.
[26] In short, QLDC’s position is that the current receivers agreed to discover documents within their control as receivers of MIL’s control and have not done enough to obtain the documents held by the original receivers and their solicitors.
Do sections 11 and 14 of the Act apply?
[27] Mr Rainey, counsel for QLDC, submits s 11A of the Act was inserted by the Insolvency Practitioners Regulations Act 2019 and only became effective on 1 September 2020.4 Accordingly, Mr Rainey submits s 11A does not apply to receiverships prior to 1 September 2020.5
[28] I accept Mr Rainey’s submission. The transitional provisions in the Act, in my view, make it clear that s 11A does not apply to receiverships that commenced prior to 1 September 2020.6
[29] As to s 14 of the Act, Mr Rainey submits the power of the current receivers to inspect documents that relate to the property and receivership is limited to material in the possession and control of the grantor. He submits the material held by the original receivers or their solicitors are not documents in the possession or control of the grantor (MIL). Again, that submission must be correct.
[30]In Mr Rainey’s submissions then said:
The position taken by Calibre Partners as the former receivers of Melview is that the documents are documents which belong to Calibre Partners. They are documents prepared by the receivers and their agents for themselves or for the debenture holder and are not documents belonging to the company: Gomba Holdings UK Ltd and Others v Minories Finance Ltd and Others.
[31] That statement is correct as far as it goes. The Court in Gomba confirmed that all documents created pursuant to the receiver’s duty to manage the company’s affairs
4 Insolvency Practitioners Regulation (Amendments) Act 2019, s 66.
5 Insolvency Practitioners Regulation (Amendments) Act, s 66 Receiverships Act 1993, Sch 1AA cl 3.
6 See Receiverships Act, Sch 1AA C13, cl 1: Definition of Conveyancing and s 11A.
were property of the company.7 Accordingly, here the original receivers would have to make such documents available to the subsequent receivers.8
[32] Thorpe J, in Watson v Russell, confirmed documents such as cheque books, receipt books, bank statements, records, invoices, contracts and correspondence affecting contracts made for or on behalf of the company are correctly classified as documents or records created or received by the receiver as agent for the company and in the course of its agency and are accordingly documents “belonging to” the company.9
[33] While it seems there has been co-operation from the original receivers in respect of the release of construction documents, the Court was told there was reluctance to release documents relating to the transfer of the Hotel to KVHL.
[34] Inevitably, the process by which the Hotel was transferred to KVHL will have seen the origina receivers create documents for the purpose of advising and informing their secured party, along with working papers and the like which will not be company documents. However, contracts and documents relating to KVHL’s purchase of the assets will be documents of that company.
[35] There is the further factor here that the original receivers were also directors of KVHL. Documents that came into their possession as directors will include company documents.
[36] In my view, the original receivers were under an obligation to make company documents available to the current receivers. If that required the original receivers to spend time reviewing their files to sort out company records that was a matter for them.
[37] Potentially, the current receivers could (perhaps should) have pushed the original receivers harder in respect of that obligation, but it is acknowledged by
7 Gomba Holdings (UK) Ltd v Minories Finance Ltd (1989) 1 All ER 261.
8 This analysis assumes that the receivers are agents of the company which, in New Zealand, is almost invariably the case.
9 Watson v Russell (1988) 3 BCR 54 at 62 and see Private Receivers of Companies in New Zealand, Peter Blanchard & Michael Gedye (Lexis Nexis, 2008) at 52.
Mr Rainey that the present application has brought that matter to a head and the original receivers will now make the documents available to Mr Rainey for him to review, subject to arrangements concerning confidentiality. However, the reality is it required the plaintiffs to bring this application for that to occur which is relevant to costs.
[38] Accordingly, there is an order in terms of paras 1(a) to 1(d) of the plaintiffs’ application dated 17 December 2021, save that the reference to the 8 September 2021 letter is qualified, as set out at para [17] above.
[39]The plaintiffs are entitled to costs on a 2B basis in respect of this application.
[40] Discovery is to be given by the first and second plaintiffs within two months of the date of this order, that is by 23 May 2022.
[41] The plaintiffs also sought unless orders in respect of the existing discovery orders. The reality is the above order overtakes those earlier discovery orders. While I have suggested the plaintiffs might have pushed the original receivers harder in respect of their obligation, the fact is had they done so and met resistance, delays would have occurred in any event.
[42] I am not satisfied this is a case for an unless order, but in order to check that Mr Rainey’s confidence that the affidavit can be completed within the two month period is not misplaced, there will be a telephone conference at 10.30am on Tuesday 24 May 2022.
[43] The application for non-party discovery is adjourned for review at the telephone conference on 24 May 2022.
Associate Judge Lester
Solicitors:
Hornabrook Macdonald, Auckland Wynn Williams, Auckland
Copy to counsel:
T Rainey, Barrister, Auckland
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