C & R Construction Limited v Taharoa Ironsands Limited

[2021] NZHC 1222

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE

CIV-2020-419-000087

[2021] NZHC 1222

BETWEEN

C & R CONSTRUCTION LIMITED

Plaintiff

AND

TAHAROA IRONSANDS LIMITED

First Defendant

WAYNE SIDNEY COFFEY
Second Defendant

TIMOTHY DOUGLAS ROSS and CHRISTOPHER SIMON ROSS
First Third Parties

MARSHALL MAINE

Second Third Party

Hearing:	13 May 2021
Appearances:	C P Browne and K P Woodward for Plaintiff R J Gordon for Defendants
Judgment:	28 May 2021

JUDGMENT OF ASSOCIATE JUDGE P J ANDREW

This judgment was delivered by Associate Judge Andrew dated 28 May 2021 at 12 noon

pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar

Date…………………………..

C & R CONSTRUCTION LTD v TAHAROA IRONSANDS LTD & ORS [2021] NZHC 1222 [28 May 2021]

Introduction

[1]    C & R Construction Ltd (C & R) owns earthmoving and other related machinery which it hires to Taharoa Ironsands Ltd (Taharoa). Taharoa uses the machinery for carrying out its iron sand mining operations south of Kawhia.

[2]    In the substantive proceedings, C & R seeks rectification of a written commercial contract entitled “Variation and renewal of the agreement for the hire of goods (Mobile Mining Equipment); Dry Hire)” (the Variation) entered into in 2018. At issue is whether the Variation should be rectified to enable C & R to charge “minimum hours” to Taharoa as expressly provided for in the original agreement for the hire of goods in 2015.

[3]    In an interlocutory judgment dated 21 October 2020,1 Associate Judge Smith made tailored discovery orders. They included the requirement to provide documents in “category 10”. The sealed orders of 21 October 2020 record category 10 as follows:

Category 10: Taharoa’s fourth counterclaim

–Documents in a party’s control relating to the “back-up arrangements for the hire of earthmoving equipment” and “holding costs” pleaded in paragraphs 86 – 88 of the ASoDCC, including correspondence regarding the arrangements, relevant board minutes and resolutions, order forms, delivery, receipts and payments.

[4]    In its third amended statement of defence and counterclaim dated 14 December 2020, Taharoa abandoned its fourth counterclaim. It did not provide discovery in accordance with category 10.

[5]    In the present proceeding, there are two interrelated interlocutory applications that require determination:

(a)Application by Taharoa for an order under r 8.17 of the High Court Rules 2016 varying the tailored discovery order of Associate Judge Smith so as to remove category 10;

1      C & R Construction Ltd v Taharoa Ironsands Ltd & Ors [2020] NZHC 2765.

(b)Application by C & R for discovery and inspection orders (rr 8.10 and 8.18) requiring Taharoa to provide discovery of documents falling within category 10.

[6]    The critical issue for determination is whether, despite the abandonment of Taharoa’s fourth counterclaim, documents in category 10 remain relevant to the claim for rectification and, if so, does an issue of proportionality arise?

Factual background

[7]    The factual background is comprehensively set out by Associate Judge Smith in his judgment of 21 October 2020.2 I gratefully adopt [1] – [35] of that judgment. As Associate Judge Smith records at [13], the substantial dispute between the parties concerns whether the Variation properly recorded the actual terms discussed and agreed between the parties in March and April of 2018.

[8]    C & R’s substantive case is that the parties never agreed or intended to remove the existing minimum hours provisions from the original agreement; they simply agreed to supplement those provisions so that they would apply to the additional machines. C & R contends that the Variation does not accurately record the common intention of the parties, and that it should be rectified accordingly.

[9]    Taharoa denies the rectification claim. It says that it intended the removal of the minimum hours provisions in the original agreement and that the Variation as signed correctly reflected that intention.

[10]   Taharoa filed and served a second amended statement of defence and counterclaim dated 13 November 2020 (i.e. subsequent to the tailored discovery orders of Associate Judge Smith). That pleading retained the fourth counterclaim to which category 10 relates.

[11]   The third amended statement of defence and counterclaim, which abandoned the fourth counterclaim, was filed and served on 14 December 2020.

2      C & R Construction Ltd v Taharoa Ironsands Ltd & Ors, above n 1.

[12]   Taharoa served its affidavit of documents (i.e. tailored discovery) on 14 December 2020, in the same email serving its third amended statement of defence and counterclaim. As noted, it did not and has not provided discovery of documents in category 10.

Relevant legal principles

[13]Rule 8.17 of the High Court Rules reads:

Variation of discovery order

(1)        Subject to rule 7.7, a party may apply for an order varying the terms of a discovery order.

(2)The variation may be granted by a Judge on the ground that –

(a)compliance or attempted compliance with the terms of the order has revealed a need for a variation; or

(b)there has been a change of circumstances that justifies reconsideration.

[14]   As noted by the learned authors of McGechan on Procedure, changes to the scope of what must be discovered may be sought under r 8.17 by any party.3 One of the grounds in sub-clause (2) must be satisfied.

[15]   In Lyttleton Port Company v Aon New Zealand,4 Associate Judge Osborne held that the four-stage test for further and better discovery, as set out in Assa Abloy NZ Ltd v Allegion (NZ) Ltd,5 was the correct approach to take to a variation case under r 8.17. The four factors are as follows:

(a)Are the documents sought relevant, and if so, how important will they be?

(b)Are there grounds for belief that the documents sought exist? This will often be a matter of inference. How strong is that evidence?

3      Andrew Beck and others McGechan on Procedure (online ed, Thomson Reuters) at [HR8.17.01].

4      Lyttleton Port Company Ltd v Aon New Zealand [2016] NZHC 2996, at [7].

5      Assa Abloy NZ Ltd v Allegion (NZ) Ltd [2015] NZHC 2760, at [14].

(c)Is discovery proportionate, assessing proportionality in accordance with Part 1 of the discovery checklist in the High Court Rules?

(d)Weighing and balancing these matters, in the Court’s discretion applying the rule, is an order appropriate?

Analysis and decision

[16]   As Mr Gordon submitted, the issue is identical in both applications – and stands or falls on whether category 10 should now be varied.

[17]   It is clear that category 10 is integrally linked to Taharoa’s counterclaim. That is apparent from both the heading and the description itself. Express reference is made to paragraphs 86 – 88 of the amended statement of defence and counterclaim. In the circumstances, it is entirely understandable that Taharoa did not provide discovery of documents in category 10 once it had abandoned its fourth counterclaim.6

[18]   I also note that none of the other categories of the tailored discovery order made by Associate Judge Smith encompass the category of documents that C & R now says are relevant to its principal claim of rectification. That includes category 7 which deals specifically with rectification.

[19]   Mr Browne, for C & R, essentially acknowledged that there needs to be an amendment to category 10. He proposed the following:

Category 10: Taharoa’s arrangements for alternative equipment

Documents in the parties’ control relating to any arrangements made by Taharoa to obtain access to alternative earthmoving equipment, which it could use instead of equipment hired from C & R during the period of the Variation, including correspondence regarding the arrangements, relevant board minutes and resolutions, order forms, delivery, receipts and payments.

6      Taharoa says that it abandons its fourth counterclaim for pragmatic and cost-related reasons. It says that it does not wish to divert the focus of the proceedings away from the principal claim of rectification. I have no reason to doubt that explanation.

[20]   In determining whether I should amend category 10 in the manner now contended for by Mr Browne, the critical issues are the conventional ones of relevance and proportionality.

[21]   I find that the documents sought in the amended category are relevant and that they may well be important to C & R’s claim for rectification. Post-contract conduct (i.e. after variation) could be relevant to the mutual intention of the parties at the time of the contract.7 The issue of mutual intention is at the heart of C & R’s rectification claim. It is clearly arguable that consideration Taharoa gave to alternative earthmoving equipment might provide evidence or an indication of its view as to whether there was a binding agreement for minimum hours in relation to C & R’s equipment. There may well be, as Mr Browne submitted, commercial considerations that Taharoa took into account arising from its assessment as to whether it had an ongoing and binding minimum hours contract.

[22]   I accept that there was no exclusivity in either the original 2015 agreement or in the Variation of 2018. Taharoa could therefore always get additional machines to work alongside those of C & R. However, that is not a complete answer to whether the consideration of alternative machines is relevant. Taharoa’s decision regarding alternative earthmoving equipment might have been informed by an assessment of its understanding of its minimum hours obligations even if it had always been free to engage additional non-C & R machines.

[23]   In concluding that there is a sufficient connection between alternative earthmoving equipment considerations and the issue of Taharoa’s view of whether there was an ongoing minimum hours obligation, it is somewhat surprising that documents in this category were not expressly dealt with in category 7 (or elsewhere). That may have been a reflection of the particular negotiations between the parties over the various categories; I am in no position to make any particular findings about that omission.

7      It is long-established post-contract conduct is admissible in the assessment of whether the Court will exercise its equitable jurisdiction to order rectification. See Westland Savings Bank Ltd v Hancock [1987] 2 NZLR 21 (HC); Jeremy Finn, Stephen Todd and Matthew Barber Burrows, Finn and Todd on the Law of Contract in New Zealand (6th  ed, LexisNexis, Wellington, 2018) at

10.6.1 and Kaimai Properties Ltd v Queen Elizabeth the Second National Trust [2021] NZCA 10.

[24]   Having found that the documents in the amended category are relevant, I further find that the legitimate issues of proportionality Mr Gordon raises (i.e. expense and time) can be addressed by deleting the words “order forms, delivery, receipts and payments” from Mr Browne’s amended category 10. That means the documents can be confined to correspondence regarding the arrangements, relevant board minutes and resolutions.

[25]   In all the circumstances, I find the appropriate course is to grant the r 8.17 variation application albeit on different terms from that sought by Taharoa. The criteria in Assa Abloy NZ Ltd v Allegion NZ Ltd8 are made out.

[26]   Instead of removing category 10, as Taharoa seeks, there will be an order requiring Taharoa to provide discovery in the amended category 10 as set out below. In terms of r 8.17(2), there has been a change of circumstances (i.e. the abandonment of the fourth counterclaim) and as a matter of discretion the variation that C & R now seeks should be made.

Result

[27]   In accordance with r 8.17, I order that category 10: Taharoa’s fourth counterclaim be removed from tailored discovery order dated 12 October 2020, and replaced by the following:

Category 10: Taharoa’s arrangements for alternative equipment:

Documents in a parties’ control relating to any arrangements made by Taharoa to obtain access to alternative earthmoving equipment, which it could use instead of equipment hired from C & R during the period of the Variation,9 including correspondence regarding the arrangements, relevant board minutes and resolutions.

[28]   Taharoa is to provide discovery of the amended category 10 by way of a further affidavit of documents to be filed and served within 15 working days.

8      Assa Abloy NZ Ltd v Allegion NZ Ltd, above n 5.

9      From 1 April 2018 to 31 March 2021.

[29]   I note counsel’s indication that if the documents in the amended category 10 are commercially sensitive then they will seek to agree on ways to accommodate that. Leave is reserved to apply for further directions should that be necessary.

[30]   C & R’s application for discovery and inspection orders under rr 8.10 and 8.18 is dismissed. It is dealt with by the r 8.7 order I make.

[31]   As to costs, I find that both parties have had a measure of success and there should be no order as to costs.

Associate Judge P J Andrew