C & R Construction Limited v Taharoa Ironsands Limited
[2020] NZHC 2765
•21 October 2020
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2020-419-087
[2020] NZHC 2765
BETWEEN C & R CONSTRUCTION LIMITED
Plaintiff
AND
TAHAROA IRONSANDS LIMITED
First Defendant
WAYNE SIDNEY COFFEY
Second DefendantTIMOTHY DOUGLAS ROSS and CHRISTOPHER SIMON ROSS
First Third PartiesMARSHALL MAINE
Second Third Party
Hearing: 7 October 2020 Appearances:
CP Browne and DM Kraitzick for the Plaintiff and the First Third Parties
DP MacKenzie for the Defendants
No appearance for the Second Third PartyJudgment:
21 October 2020
JUDGMENT OF ASSOCIATE JUDGE SMITH
This judgment was delivered by me on 21 October 2020 at 2.30pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors / Counsel: Wilson Harle, Hamilton
Minter Ellison, Wellington
C&R Construction Ltd v Taharoa Ironsands Ltd & Ors [2020] NZHC 2765 [21 October 2020]
[1] The plaintiff (C&R) applies for an order for tailored discovery in terms of a draft order annexed to its application. Many of the categories of documents set out in the draft order are accepted by the defendants, and I will make consent orders in respect of the agreed categories.
[2] The defendants filed a notice of opposition, to which they attached a draft consent memorandum setting out their own proposed categories for tailored discovery.
[3] Negotiations followed between counsel, and in the end there were only five categories of documents (partially or entirely) remaining in dispute. I now give judgment on the application in respect of the disputed issues, and make an order that the parties are to provide tailored discovery of the categories of documents set out in the schedule to this judgment.
Tailored discovery generally
[4] Discovery orders may direct that the parties provide standard discovery or tailored discovery.1 Standard discovery generally requires a party to disclose documents in its control on which it relies in the case, or which may adversely affect its own case or the case of another party (or support another party’s case).2
[5] Under r 8.9, there is a presumption in favour of tailored discovery in certain circumstances, unless the Judge is satisfied to the contrary. One of those circumstances is where the parties have agreed that there should be tailored discovery. That is the position in this case, and there is nothing in the circumstances of the case to suggest that justice might require standard discovery.
[6] Rule 8.10 sets out the obligation of a party ordered to make tailored discovery. The rule provides:
8.10 Obligation of party ordered to make tailored discovery
Tailored discovery requires a party against whom it is ordered to disclose the documents that are or have been in that party’s control either in categories as indicated in clause 3(2) of Part 1 of Schedule 9 or under some other method of classification that facilitates the identification of particular documents.
1 High Court Rules 2016, r 8.6.
2 Rule 8.7.
[7] Part 1 of sch 9 of the High Court Rules set out a discovery checklist. Clause 3(2) of sch 9 prt 1 provides:
3 Tailored discovery
…
(2)The parties must—
(a)endeavour to agree a proposal in relation to the discovery order that should be made, with respect to the following:
(i)categories: identify the categories of documents required to be discovered by the parties, and for each category seek to limit discovery to what is reasonable and proportionate. This may be done by, for example, specifying—
(A)subject matter:
(B)date range:
(C)types of documents:
(D)key individuals (for example, those who are company directors or are at a specified management level); and
(ii)methods and strategies for locating documents: seek agreement on what methods and strategies are appropriate to conduct a reasonable and proportionate search for the documents as identified in paragraph (a), including (but not limited to) the following:
(A)appropriate keyword searches; and
(B)other automated searches and techniques for culling documents (including concept searching, clustering technology, document prioritisation technology, email threading, and any other new tool or technique); and
(C)a method to be used to identify duplicate documents; and
(D)whether specialist assistance is required to locate documents efficiently and accurately; and
(b)discuss whether a staged approach may be appropriate in conjunction with identifying the categories and methods to be adopted by the parties. Parties may agree on—
(i)whether any different deadlines are appropriate; and
(ii)whether to look initially at select categories (for example, date ranges or key individuals).
[8] In deciding whether to order tailored discovery in respect of a particular category, the Court is required to measure the likely return of relevant documents against the cost of the exercise.3
3 Commerce Commission v Cathay Pacific Airways Ltd [2012] NZHC 726 at [18] and [21].
[9] Whether tailored discovery or standard discovery is ordered, the discovered documents must be relevant to the issues disclosed by the pleadings.4 While all discovery may be regarded as “fishing” in a sense, the discovery sought will be impermissible when it is not relevant to any pleaded cause of action but is calculated to reveal information that could be the basis of a new claim.5
[10] In a commercial dispute, if documents are sought only to prove a commercial motivation for an action, that discovery is likely to be denied.6
Background – the parties and the pleadings
The parties and the agreements
[11] Taharoa owns and operates an ironsand mine near Taharoa village, south of Kawhia harbour on the west coast of the North Island. The ironsand it mines there is exported by sea to markets in Asia. C&R owns earthmoving and other related machinery, which it hires to Taharoa for it to use as part of carrying out the mining operations.
[12] In 2015, C&R and Taharoa entered into a written contract under which C&R agreed to hire the heavy earthmoving equipment to Taharoa (the Hire Agreement). The Hire Agreement included terms relating to minimum hours, which entitled C&R to a minimum return on its equipment each month, irrespective of the actual use of the equipment by Taharoa. The Hire Agreement was due to expire on 31 March 2018.
[13] The parties negotiated an extension and variation of the Hire Agreement, for a further three years. A written document recording the agreed extension and variation was executed in April 2018 (the Variation Agreement). The substantial dispute between the parties concerns whether the Variation Agreement properly recorded the actual terms discussed and agreed between the parties in March and April of 2018.
4 Chatfield & Co Ltd v Commissioner of Inland Revenue [2016] NZCA 614, (2016) 27 NZTC 22,084 at [21].
5 Intercity Group (NZ) Ltd v Nakedbus NZ Ltd [2013] NZHC 1054 at [34].
6 At [26].
[14] The terms of the Variation Agreement were negotiated by the first third parties (Mr Tim Ross and Mr Simon Ross) for C&R, and by the second third party (Mr Maine) and Mr Robert Smith-Clare for Taharoa. At the time, Mr Maine was Taharoa’s chief operating officer.
[15] The Variation Agreement contains a sentence that has the effect of removing the scheduled minimum hours provisions in the Hire Agreement, and replacing them with a scheduled minimum hours provision for one additional machine only. C&R’s case is that the parties never agreed or intended to remove the existing minimum hours provisions from the Hire Agreement; they simply agreed to supplement those provisions so that they would apply to the additional machine. C&R contends that the variation does not accurately record the common intention of the parties, and that it should be rectified accordingly.
[16] Taharoa denies the rectification claim. It says that it intended the removal of the minimum hours provisions in the Hire Agreement, and that the Variation Agreement as signed correctly reflected that intention.
[17] Following the execution of the Variation Agreement, C&R continued to render invoices on a “minimum hours” basis, notwithstanding that charging on that basis was limited by the Variation Agreement to only the additional machine. Taharoa’s senior management, including the second defendant Mr Coffey, realised this in or about April 2019. They complained to C&R.
[18] C&R (having presumably gone back and reviewed the Variation Agreement) accepted Taharoa’s position on the overcharging. It acknowledged that Taharoa had overpaid it for its services during the 11 months ended February 2019, “due to the inadvertent errors of both parties”. Over five months in 2019, C&R refunded to Taharoa the full amount Taharoa believed it had overpaid. The amount repaid by C&R was approximately $750,000.
[19] On 19 July 2019, the parties executed a written settlement agreement which was said to be in full and final settlement of all outstanding issues between the parties.
[20] Later in 2019, C&R changed its stance. On 1 October 2019 its solicitors wrote to Taharoa contending that the continued charging on the minimum hours basis after the Variation Agreement was signed reflected the parties’ real intention when they signed the Variation Agreement.7 The present proceeding, seeking rectification of the Variation Agreement, was issued in April 2020.
C&R’s statement of claim
[21] In addition to its claim for rectification of the Variation Agreement, C&R pleads two additional causes of action. In its second cause of action, it alleges that Taharoa and Mr Coffey made misleading or deceptive statements about their intentions during the negotiations and when executing the Variation Agreement, contrary to s 9 of the Fair Trading Act 1986 (the FTA). In its third cause of action, C&R alleges in the alternative that Taharoa has acted in breach of contract by deducting amounts for legal fees and executive time from the sums that were otherwise payable under the Variation Agreement.
Taharoa’s defence and counterclaims
[22] Taharoa denies liability on all of C&R’s causes of action. It then makes four counterclaims against C&R. In its first counterclaim cause of action, Taharoa seeks a declaration (in response to C&R’s third cause of action) that it was entitled to deduct the amounts for legal fees and executive time from the payments it made under the Variation Agreement.
[23] In its second counterclaim cause of action, Taharoa claims in the alternative a declaration to the same effect, on the basis of equitable set-off.
[24] Taharoa’s third counterclaim cause of action alleges breach of s 9 of the FTA relating to the rectification claim.
7 It appears that C&R reached that view after its solicitors interviewed Mr Maine, who had left his employment with Taharoa in May 2020.
[25] Taharoa’s fourth counterclaim against C&R is for breach of contract, or repudiation of contract, arising out of a comment allegedly made by a C&R employee to a Taharoa employee on or about 23 December 2019. In this cause of action, Taharoa says that the C&R employee threatened to remove the earthmoving machinery C&R had hired to Taharoa, in circumstances where C&R knew that such removal would effectively force Taharoa to stop operating. The threat by the C&R employee is alleged to have been a deliberate attempt to obtain leverage over Taharoa, to assist C&R achieve its desired outcome on the rectification argument. Taharoa alleges that C&R adopted a course of action from 1 October 2019 (which included but was not limited to the 23 December 2019 threat), which was designed to place pressure on Taharoa.
[26] Taharoa says it was compelled by C&R’s pressure and threats to put in place back-up arrangements for the hire of earthmoving equipment, as “insurance” against breach or repudiation by C&R. Taharoa counterclaims “full holding costs” (unspecified) for C&R’s breach or repudiation of contract, and/or for misleading or deceptive conduct by C&R under the FTA.
Taharoa’s third party claims
[27] Taharoa has issued third party claims against Mr Tim Ross and Mr Simon Ross of C&R, and also against its former chief operating officer, Mr Maine.
[28] The claims against Mr Tim Ross and Mr Simon Ross allege breach of s 9 of the FTA. Taharoa alleges that Mr Tim Ross and Mr Simon Ross knew at all material times after the Variation Agreement was signed that C&R had no entitlement to invoice Taharoa for the “minimum hours” charges. It alleges that Mr Tim Ross and Mr Simon Ross were parties to a determination by C&R to concoct the allegations of rectification, when all parties knew full well at the time of executing the Variation Agreement that neither C&R nor Taharoa intended to continue on the basis of the “minimum hours” charging regime that had previously applied. It says that Mr Tim Ross and Mr Simon Ross were parties to C&R’s conduct in sending a “fabricated” invoice to Taharoa on 1 October 2019, seeking payment of the “minimum hours” payments that C&R had earlier agreed to refund to Taharoa.
[29] In addition, Taharoa says that Mr Tim Ross and Mr Simon Ross were actively involved in C&R inducing Mr Maine (for reward) to breach his duty of confidence to Taharoa, and that they were directly or indirectly knowingly concerned in C&R’s alleged breaches which are the subject of Taharoa’s fourth counterclaim cause of action. Mr Tim Ross and Mr Simon Ross are said to have aided, abetted, counselled or procured C&R’s contravention of s 9 of the FTA.
[30] In its third party claim against Mr Maine, Taharoa pleads three causes of action. First, it alleges that Mr Maine breached certain duties of confidentiality owed to it. Secondly, it says that Mr Maine was guilty of the tort of deceit. Thirdly, it says that Mr Maine was an accessory to misleading and deceptive conduct by C&R, and is liable as such under s 9 of the FTA.
[31] Taharoa says that Mr Maine had the day-to-day carriage of the negotiations with C&R for the Variation Agreement. It contends that it instructed Mr Maine that the “minimum hours” provisions in the Hire Agreement were already commercially onerous for Taharoa, and that it would be uneconomic for Taharoa to agree to extend the Hire Agreement on the basis of that charging regime. It says that Mr Maine was told that the Variation Agreement was not to include the “minimum hours” provisions.
[32] Taharoa pleads that Mr Maine then took legal advice for Taharoa on the terms of the Variation Agreement, in the form in which it was subsequently executed by the parties. After taking the legal advice, Mr Maine told Mr Coffey that the “minimum hours” obligations would no longer form part of the contract. He is also alleged to have told Mr Coffey that C&R had taken its own legal advice on the draft Variation Agreement before it executed the document.
[33] After Mr Maine left his employment as chief operating officer with Taharoa in May 2020, Taharoa contends that he remained subject to a strict duty of confidence not to disclose or otherwise use any confidential information belonging to it. It alleges that, in breach of that duty of confidence, Mr Maine disclosed to C&R confidential and commercially sensitive information. That information is said to have led to C&R making its unfounded claim for rectification of the Variation Agreement.
[34] Taharoa also alleges that Mr Maine has failed to take steps to mitigate his breach of duty, by refusing to disclose to Taharoa the extent to which he has disclosed its confidential and commercially sensitive information to C&R. Mr Maine is alleged to have continued to breach the duty of confidence by making further disclosures of confidential information to C&R. Taharoa says that, either directly or indirectly, Mr Maine has been rewarded by C&R for disclosing confidential and commercially sensitive information to it.
[35] In its alternative claim in deceit, Taharoa alleges that the disclosures made by Mr Maine to C&R were, to Mr Maine’s knowledge, erroneous in material ways. It says that Mr Maine’s false representation of existing facts to C&R has caused loss to Taharoa. In the alternative, Taharoa alleges that Mr Maine is liable to it as an accessory, on C&R’s breaches of s 9 of the FTA.
The five categories of documents not agreed by the parties
[36] I will deal with the disputed issues in each category separately, setting out the matter in issue, summarising the parties’ submissions, and setting out my conclusions.
Category 2 – documents prior to 1 October 2018 relating to the Variation Agreement, and;
Category 6 – documents relating to C&R’s communications with Mr Maine
[37] It will be convenient to deal with the disputed matters in these two categories together.
[38] Category 2 is defined as comprising documents prior to 1 October 2018, relating to the negotiation, preparation, consideration, review, approval and execution of [the Variation Agreement]. The category includes eight sub-categories (a) to (h).
[39] Nearly all of the Category 2 documents are agreed. The only disagreement relates to sub-categories (e) and (f). Those sub-categories read:
(e)[documents] relating to the drafting of the [Variation Agreement], including all instructions, drafts and advice given in the course of drafting the [Variation Agreement] including letters, emails, file notes,
time records, invoices and memoranda to, from, or held by [the defendants’ solicitors];
(f)[documents] relating to any legal advice which either contracting party sought or obtained prior to execution of [the Variation Agreement], including letters, emails, files notes, time records, invoices and memoranda.
[emphasis added]
[40] Category 6 is concerned with documents relating to Mr Maine, and sub- category 6(a), added by the defendants, would require disclosure of the following:
(a)Documents (including those held by legal advisers) relating to the circumstances in which Mr Maine disclosed information to C&R concerning [the Variation Agreement], including documents of any interview of him and any documents Mr Maine provided to C&R or its agents.
The issues, and counsel’s submissions
[41] The points in issue are whether lawyers’ time records should be disclosed in these three sub-categories, and whether all documents in the three sub-categories should be individually identified in the parties’ discovery lists.
[42] In fact, both parties would be content to disclose the time records in sub- categories 2(e) and (f), but the defendants say that if the time records are disclosed in sub-categories 2(e) and (f) they should also be disclosed in sub-category 6(a). They say that the time records should either be “all in” or “all out” in all three sub-categories.
[43] Mr Browne does not accept that proposition. In his view, documents in sub- category 6(a) are fundamentally different, as they are (or may be) concerned with C&R’s preparation of its case in this proceeding. The communications between C&R, its solicitors and Mr Maine are therefore likely to be protected by litigation privilege, and the defendants should not have access to records showing matters such as exactly when Mr Maine may have been interviewed and how long the interview(s) lasted.
[44] The result of the parties’ positions as just set forth is that decisions are needed on whether lawyers’ time sheets should be discovered in any of the three categories, and if so which ones.
[45] Mr Browne submitted that the lawyers’ time records do not of themselves attract any blanket privilege,8 and that the time records around the time of the negotiations for the Variation Agreement will reveal the patterns of activity in the drafting of the Variation Agreement and the seeking and receipt of legal advice by either party prior to execution. The time sheets will show exactly when the relevant activity occurred, and the amount of time spent. Of course the time sheets will not disclose the substance of any advice, but the parties will obtain information not otherwise recorded in documents such as invoices.
[46] Mr Browne said that the Variation Agreement was drafted by the defendants’ solicitors in late March 2018, but it is not known which lawyer drafted it or how much time was spent on the drafting exercise. As C&R’s case is that the Variation Agreement contains an advertent error, it is relevant to know who drafted the document, and the pattern of activity, including the timing of communications, and time spent. He submitted that time spent on the drafting work (sub-category 2(e)), and on providing legal advice (sub-category 2(f)), is highly relevant.
[47] In his oral submissions, Mr Browne acknowledged that it was difficult to say how the time sheets will assist either party until counsel have seen them. He noted, however, that in respect of the sub-category 2(e) and (f) documents (relating to the drafting and advice on the Variation Agreement) C&R’s case is likely to be assisted more if the records show less time spent by the lawyers than if they had spent more time.
[48] On the issue of the individual listing of documents in the three sub-categories, Mr Browne advised that the parties accept that a number of documents in sub- categories 2(e) and (f) are likely to be privileged (legal advice privilege). While the usual position is that privileged documents may be group-listed,9 counsel had agreed in the course of their negotiations prior to the hearing that documents in Category 2, which are contemporaneous with the negotiation, drafting and execution of the
8 Referring to Quinn v Toon [2020] NZHC 816, at [75] and Meaker v Newdick CIV-2006-404-3428 HC Auckland, 23 October 2007, at [29].
9 High Court Rules 2016, r 8.16(2), and sch 9 cl 9(2).
Variation Agreement, should be individually listed (even if they are the subject of claims to legal advice privilege).
[49] Mr Browne submitted that there should be no individual listing of documents in sub-category 6(a), notwithstanding counsel’s agreement to individually list privileged documents in sub-categories 2(e) and (f). There is lack of mutuality between the documents in sub-categories 2(e) and (f) and in sub-category 6(a) (which are documents relating to communications between a potential witness and C&R’s lawyers only), and the purpose of litigation privilege would be undermined if C&R’s lawyers’ time sheets for the sub-category 6(a) documents had to be disclosed. Sub- category 6(a) documents will disclose how C&R has put its case together, and it should not have to disclose that.
[50] On the subject of individually listing documents in sub-category 6(a), Mr MacKenzie submitted that the answer should be the same as that applicable to sub- categories 2(e) and (f). He also advised that, although C&R is seemingly intent on claiming litigation privilege in respect of the sub-category 6(a) documents, any such claim will inevitably be challenged by Taharoa.10 At that point individual listing will be necessary. Better to do it now.
My conclusions
[51] The Court has a broad discretion on the appropriate directions to make in relation to tailored discovery, and the discovery rules are to be interpreted in light of the overall objective of the Rules, namely to secure the just, speedy and inexpensive determination of any proceeding or interlocutory application.11 That broad discretion includes the ability in an appropriate case to include in a discovery order obligations apart from those identified in Part 8 or Schedule 9 of the Rules that are designed to ensure that the discovery process is conducted in a manner consistent with the objectives of the Rules, and in accordance with the dual purposes of:12
10 The defendants will argue that any litigation privilege has been waived by C&R. That is said to be the result of the letter sent by C&R’s lawyers to the defendants’ lawyers on 1 October 2019, in which C&R’s lawyers said that Mr Maine had been interviewed, and that he had confirmed to them that the removal of the minimum hours requirement was simply an unintended mistake.
11 James Hardie New Zealand Ltd v White [2020] NZCA 142 at [54] and [56].
12 At [88].
(a)facilitating production of relevant documents in the control of a party that are not privileged; and
(b)disclosure of the existence of other potentially discoverable documents that are not in the control of the party giving discovery.
[52] In this case, I accept that documents showing whether, and if so, when the parties took legal advice on the drafting and/or review of the Variation Agreement are relevant and should be discovered. The defendants allege at [23(b)] of their amended statement of defence and counterclaim that Mr Maine assured Mr Coffey that C&R had taken legal advice on the terms of the Variation Agreement before it executed the document, and that allegation is denied in C&R’s reply and defence to counterclaim. It seems implicit in the pleading and the denial that there will be a live issue at trial as to whether C&R did or did not take legal advice before the Variation Agreement was executed.
[53] I accept also that where a central issue in the case is whether the parties were labouring under a relevant common mistake when they signed the Variation Agreement, the fact that legal advice may have been sought or received on one or both sides prior to the signing of the document may be relevant to the likelihood or otherwise that either or both of the parties were mistaken as C&R alleges. The time records will show the dates of the lawyers’ attendances on the matters with which sub- categories 2(e) and (f) are concerned, and I accept Mr Browne’s submission that it may be important in a case like this to establish a precise timeline of when particular events occurred, including when a party may have taken legal advice. Of course the time records may contain privileged legal advice, particularly any narrations setting out relevant attendances. There might also be room for argument on whether the amount of time spent by the lawyers on each occasion is privileged (arguably, it might go to the extent or quality of legal advice communicated). But I am not presently concerned with issues of privilege. The present question is whether the lawyers’ time sheets relevant to these two sub-categories should be the subject of the tailored discovery order, and for the reasons just set out, I think they should be. There will be an order accordingly that the tailored discovery of the documents in sub-categories 2(e) and (f) is to include “time records” as proposed by C&R.
[54] Turning to the question of whether lawyers’ time records should also be included within the sub-category 6(a) discovery, I am satisfied that they should be disclosed here too. Taharoa alleges13 that C&R induced Mr Maine to breach his strict duty of confidence to Taharoa, and the principal basis for that contention appears to be that Mr Maine wrongly disclosed confidential information to C&R and/or its solicitors relating to the parties’ intentions in entering into the Variation Agreement. Taharoa’s pleadings on this issue are generally denied by C&R in its Reply, and by the first third parties in their statement of defence to Taharoa’s claims against them.
[55] There is nothing privileged or confidential about the fact that C&R’s solicitors met with Mr Maine and discussed with him the parties’ intentions in entering into the Variation Agreement – that is clear from the letter from C&R’s solicitors dated 1 October 2019. And the parties are agreed that the sub-category 6(a) discovery is to disclose the “circumstances” in which Mr Maine disclosed particular information to C&R concerning the Variation Agreement. It seems to me that the dates of any meetings Mr Maine may have had with C&R’s solicitors must form part of those “circumstances”, and that those dates are likely to be recorded in the solicitors’ time records.
[56] Mr Browne submits that the meeting or meetings between C&R’s lawyers and Mr Maine must be the subject of litigation privilege, and that the broad purpose of litigation privilege would be undermined if C&R’s lawyers’ time sheets for the sub- category 6(a) documents had to be disclosed. He says that the defendants should not be permitted access to the manner in which C&R has put its case together for this proceeding. The first difficulty with that submission is that the discovery issue under sub-category 6(a) is not simply a discovery issue on C&R’s claim for an order rectifying the Variation Agreement; it is also an issue arising on Taharoa’s “inducing breach of confidence” claim. And I am not here concerned with issues of privilege – they will be for argument on another day if necessary.
13 At [74] of its amended statement of defence and counterclaim, and at [4] of its statement of claim against the third parties.
[57] I conclude that lawyers’ time records are to be included in sub-category 6(a). Any questions of privilege that might be raised by the parties in respect of the discovery of the time records in this category can be raised in the appropriate parts of the parties’ lists of documents.
[58] The question of whether a party should be required to individually identify privileged documents was considered by Van Bohemen J in Redwood Group Ltd v Queenstown Gateway (5M) Ltd.14 His Honour recorded the defendants’ acceptance that it has been well-established in New Zealand that group listing of documents subject to litigation privilege is permitted, and that their application to have the plaintiff’s privileged documents individually identified and listed should be limited to those documents which were said to be subject to solicitor/client privilege. In reply, counsel for the plaintiff submitted that the rules allow for group listing of both categories of privileged documents, and there is no basis for making any differentiation between the two categories.15
[59] Van Bohemen J agreed with the plaintiff that there is nothing in the rules to suggest a difference in the listing requirements for documents subject to solicitor/client privilege and documents subject to litigation privilege. However His Honour accepted there may be occasions when a particularised listing of correspondence between solicitor and client is required.16
[60] In this case, I think there is a case for individual listing of the sub-category 2(e) and (f) documents (both open and “privileged”), for essentially the same reasons that I consider lawyers’ time records should be discovered in these sub-categories. The nature of the rectification argument is such that it may be important at trial whether legal advice was obtained before a communication was sent or a document signed, and I do not consider that a group listing of documents said to be subject to legal advice privilege within a particular date range would best meet the particular requirements of this case. The result in respect of the individual listing of documents in sub-categories 2(e) and (f) is accordingly that the documents should be individually listed (with
14 Redwood Group Ltd v Queenstown Gateway (5M) Ltd [2018] NZHC 3439.
15 At [69] and [70].
16 At [88].
relevant details for each document provided in accordance with cls 6 to 8 of the Listing and Exchange Protocol in prt 2 sch 9 of the High Court Rules as appropriate).
[61] Turning to the documents in sub-category 6(a), I think individual identification and listing of the documents is appropriate for all non-privileged documents, and also for documents sent, received, or created prior to 1 October 2019 that are the subject of privilege claims. In respect of documents sent, received or created after 1 October 2019 for which privilege is claimed, group-listing will be allowed in accordance with r 8.16(2) and sch 9 cl 9(2) of the High Court Rules.
[62] It is clear that by 1 October 2019 this litigation was apprehended by C&R, and the probability is that most of the documents in sub-category 6(a) after that date will be the subject of litigation privilege claims. In accordance with sch 9 cl 9(2), the starting point is that such documents may be group-listed, and I see no reason to depart from that approach in the case of documents sent, received or created after 1 October 2019 for which privilege may be claimed.
[63] I do not think Taharoa’s “inducing breach of confidence” claim affects those views. There is presently no clear pleading of what Mr Maine is said to have wrongly divulged to C&R, or when he divulged it, and I think the only sensible inference I can draw from the pleadings and counsel’s submissions is that the allegation is that he wrongfully disclosed information about Taharoa’s intentions when it signed the Variation Agreement. On the evidence, that must have occurred before 1 October 2019, when C&R’s solicitors sent their letter of that date. There is nothing presently pleaded to suggest that there were additional (allegedly) wrongful disclosures made by Mr Maine after 1 October 2019, and accordingly there is nothing to displace the starting point presumption that C&R should be entitled to group-list privileged documents sent, received or created after that date.
[64] I think the position is different in respect of documents in sub-category 6(a) that were sent, received or created before 1 October 2019. First, there may be a question (depending on how early Mr Maine met with C&R or its representatives) as to whether the relevant communications were only at an early exploratory stage, before it could reasonably be said that they were for the dominant purpose of preparing for
this litigation. In such a case, there would be no litigation privilege protection for the communications. Secondly, it appears that Taharoa needs to know the dates of relevant communications between Mr Maine and C&R prior to 1 October 2019, so that it can provide appropriate further particulars of its “inducing breach of confidence” allegations.
[65] The circumstances accordingly call for individual listing of all documents in sub-category 6(a), in accordance with the requirements of cls 6 to 8 of the Listing and Exchange Protocol, sent, received or created in the period up to 1 October 2019. Documents in the sub-category are after that date may be group-listed in accordance with r 8.16(2) and sch 9 cl 9(2) of the High Court Rules.
Category 7 – documents relating to a diesel spill at the mine site in September 2019
[66] Category 7 is generally concerned with documents relating to C&R’s claim to be entitled to rectification of the Variation Agreement. There are three sub-categories, which are generally agreed.
The issues, and counsel’s submissions
[67] The dispute arises over the following sub-paragraph the defendants seek to add:
(a)All Board papers and records of either party relating to the diesel spill incident on or about 6 September 2019.
[68] It is common ground that there was a diesel spill at the mine site on or about 6 September 2019. On 11 September 2019, Taharoa’s solicitors wrote to C&R expressing concern at alleged failings of C&R that Taharoa considered were the cause of the spill. Taharoa reserved its rights to seek significant compensation.
[69] On 1 October 2019, before any resolution of the compensation claim had occurred, C&R advanced its claimed entitlement to have the Variation Agreement rectified.
[70] On Taharoa’s theory of the case, by at least September 2019 C&R knew it could not charge “minimum hours” under the Variation Agreement. So it attempted to “strong arm” Taharoa into re-writing the terms of the agreed bargain (ie the terms in the Variation Agreement), to achieve a more favourable commercial outcome for it. In its pleading, Taharoa expressly pleads that C&R knew it did not have a valid claim to rectification, and the diesel spill incident goes directly to the underlying “strong arm” premise. The documents sought are relevant to the pleading that Taharoa knew that it did not have a good claim for rectification.
[71] Mr MacKenzie did not accept that the Intercity case referred to by Mr Browne17 sets out a blanket rule that a party’s commercial motivation will never be a good reason justifying discovery in a commercial dispute. In Intercity, the commercial motivation was an accepted fact, but in this case C&R has not accepted the commercial motivation alleged against it. And the same considerations do not necessarily apply to a claim for rectification. C&R’s conduct after the Variation Agreement was signed, including its decision to refund the “overpayments” made by Taharoa, supports Taharoa’s theory that in entering the Variation Agreement C&R never had the intention for which it now contends.
[72] For C&R, Mr Browne submitted that there is no mention of the diesel spill in the defendants’ pleadings. He also drew attention to a letter from C&R’s solicitors to Taharoa dated 13 September 2019, in which the solicitors said:
Contrary to the concerns expressed by your client at paragraph 4 of [a letter from the defendants’ solicitors dated 11 September 2019], our client is treating the incident very seriously. We are instructed that the C&R employee concerned has been stood down pending an independent investigation into the incident. Insurers have been notified, and an independent investigator was appointed on Monday, 9 September. The investigator will attend the site on Tuesday, 17 September 2019 to carry out the investigation. Your client was notified of this yesterday.
[73] Mr Browne submitted that there is nothing to indicate that C&R brought the claim for rectification because of the diesel spill. The diesel spill was a purely operational matter, that was appropriately dealt with. An independent incident and investigation report classified the incident as “low”, with losses in the vicinity of
17 Intercity Group (NZ) Ltd v Nakedbus NZ Ltd, above n 5.
$12,500, and contemporaneous documents produced in a reply affidavit filed for C&R do not support any linkage between the diesel spill incident and C&R’s decision to bring the rectification claim. On the contrary, the reason C&R advanced the rectification claim in its solicitors’ letter of 1 October 2019 is expressly stated in that letter – C&R’s commercial solicitors had spoken with Mr Maine, and Mr Maine had “confirmed … that the removal of the minimum hours requirement was simply an unintended mistake”.
My conclusions
[74] I do not consider there is any proper basis for ordering discovery of the additional documents sought by the defendants in Category 7.
[75] The fundamental issue on the rectification claim is whether the parties had a continuing common intention of the kind for which C&R contends, when they signed the Variation Agreement in April 2018. It seems improbable that a diesel spill at the mine site in September of 2019 could inform that issue, and I am not persuaded that it does or might.
[76] Nor does the diesel spill appear to have any apparent relevance to C&R’s counterclaims. The first and second counterclaims are primarily concerned with alleged breaches by C&R in knowingly asserting an argument on the rectification issue that it knew to be false, and the sending of “fabricated” invoices based on its false claims. The third counterclaim again appears to be concerned with the knowingly false assertion of the rectification claim and the sending of “fabricated” invoices, this time in the context of an alleged breach of the FTA. No issue of “pressure”, or “strong arm” tactics, appears to be suggested by these counterclaims.
[77] The fourth cause of action does allege the improper exercise of perceived leverage by C&R (in order to bring about an outcome whereby it would no longer be bound by the Variation Agreement), but there is no mention of the diesel spill in this counterclaim, nor any pleading of how it allegedly formed part of any “pressure”, or “strong arm” tactics adopted by C&R. There is no pleading that the diesel spill was the result of a deliberate act by C&R, and if the diesel spill occurred accidentally, which seems to be the most likely explanation given the independent investigation
apparently initiated by C&R, it is hard to imagine how it could possibly have formed part of any “pressure”, or “strong arm”, tactics being employed by C&R. Furthermore, the fourth counterclaim does not appear to allege that there was any campaign of improper leverage, or pressure being waged by C&R, at the time of the diesel spill – the course of conduct alleged against C&R is not said to have commenced until 1 October 2019.
[78] The remaining possibility is I think the one Mr McKenzie was primarily relying on, namely that C&R was allegedly motivated to make its (allegedly dishonest) claims for rectification on 1 October 2019 as an effective defensive ploy, arising from its concern that it might be facing a substantial claim arising out of the diesel spill. But that is purely speculative, and I do not think it can form the basis of a tailored discovery order catching all of C&R’s records relating to the diesel spill, as a “stand-alone” sub- category. If C&R holds records showing that its reasons for asserting the rectification claim in early October 2019, and for re-invoicing Taharoa in October 2019 on the “minimum hours” basis, were somehow connected to the diesel spill, those records will be caught by one or both of the first or third of the agreed sub-categories in Category 7. There is no need for the addition of a separate “diesel spill” sub-category.
[79] For those reasons, the defendants’ request to add the sub-category at [67] of this judgment is refused.
Category 10 – documents relating to Taharoa’s fourth counterclaim
[80]C&R seeks the following documents in this category:
Documents (including those held by third parties affiliated with Taharoa or Mr Coffey) relating to the “back-up arrangements for the hire of earthmoving equipment” and “holding costs” pleaded in paragraphs 86 to 88 of [Taharoa’s amended statement of defence and counterclaim], including correspondence regarding the arrangements, relevant Board minutes and resolutions, order forms, delivery, receipts and payments.
The issues, and counsel’s submissions
[81] Mr MacKenzie confirmed that the defendants will discover relevant documents within their control, as required by the rules, but Taharoa objects to the words in parenthesis at the beginning of the category “including those held by third parties
affiliated with Taharoa or Mr Coffey”. Taharoa submits that those words give the appearance of a claim for non-party discovery, when no such application is before the Court.
[82] In his oral submissions, Mr Browne submitted that the addition of the disputed words was aimed at reducing the likely need for post-discovery applications.
My conclusions
[83] I can deal with this issue quite shortly. The parties are required to make discovery of relevant documents that are in their control,18 and there can be no open- ended tailored discovery order requiring a party to discover documents “held by third parties”. Either a document held by a third party will be in the control of Taharoa or Mr Coffey or it will not. It is for them, assisted by their solicitors, to make any necessary judgment on that issue. To the extent the documents sought are not in the control of Taharoa or Mr Coffey, C&R will have to make a non-party discovery application if it wishes to pursue such documents.
[84] The category 10 tailored discovery order can be made as sought, but with the words “(including those held by third parties affiliated with Taharoa or Mr Coffey)” deleted and replaced with the words “in a party’s control”.
Category 11 documents – relating to Taharoa’s fourth counterclaim and its claim against the first third parties
[85]The category, as originally accepted by C&R and the first third parties, reads:
Documents relating to any threat by a staff member of C&R, on or about 23 December 2019, that C&R would remove its earthmoving machinery from the mine site (including any documents recording involvement or knowledge of C&R’s directors).
The issues, and counsel’s submissions
[86] The issue relates to the defendants’ request to add the following words at the end of the category:
18 High Court Rules 2016, r 8.10.
… and the forwarding to the media, of an email that C&R had received from the Ministry of Business, Innovation and Employment on 7 April 2020 (including any and all documents recording involvement and/or knowledge of C&R’s directors in this).
[87] The letter in question is said to have been received by a senior C&R employee, Mr Graeme Haswell, from the Ministry of Business, Innovation and Employment (MBIE). The defendants contend that it was maliciously forwarded to the media. A redacted form of the letter from MBIE dated 7 April 2020 was produced, and it appears to have confirmed that Taharoa was entitled to operate to provide certain essential services at the mine during the Covid-19 lockdown period. The copy of the MBIE letter was accompanied by a copy of an email sent from an anonymous email address, to a journalist, Mr Matt Freeman. The email alleged that, in the previous week, Taharoa had not only mined, but had also processed ironsand, and that it had done so in breach of the lockdown rules. The letter suggested that “incidents such as this could dam the industry”, and it advised that Taharoa had “signalled to startup again tonight on full production”.
[88] Mr MacKenzie submitted that the disclosure to Mr Freeman was another instance of C&R adopting “strong arm” tactics to attempt to obtain its desired commercial outcome. The letter from MBIE, said to have been shared by Mr Haswell only with C&R’s directors, was forwarded on to the media from a “fake” email address (seemingly created solely for the purpose), and it falsely stated that Taharoa was operating outside of the restrictions imposed under the Covid-19 lockdown. Mr MacKenzie noted that C&R and Mr Haswell both claim that they have no idea how the confidential email came to be forwarded to the media with the covering email, but C&R has declined to have Mr Haswell swear to that on oath. He submitted that the additional material sought by the defendants in this category will be highly relevant to Taharoa’s counterclaim.
[89] Mr MacKenzie further submitted that, as C&R has accepted that documents relating to the December 2019 threat to withdraw machinery from Taharoa’s mine site are relevant, it cannot reasonably oppose discovery relating to the malicious forwarding of the email relating to the MBIE communication. He said that before 10
August 2020, C&R had been agreeable to giving discovery of the additional documents, and there is no basis for it now to “walk back” that earlier agreement.
[90] For C&R, Mr Browne submitted that similar considerations apply to the proposed addition to the category 11 documents as applied to the proposed category 7 addition. There is no pleading that would support the discovery request. Taharoa filed its amended statement of defence and counterclaim on 6 July 2020, three months after the early April 2020 correspondence involving MBIE and Mr Freeman, but that document made no reference to the MBIE documents. The defendants’ request for the additional documents in category 11 amounts to fishing for a new claim, and that is impermissible.
My conclusions
[91] I accept Mr Browne’s submissions on this issue. There is no specific pleading relating to the MBIE correspondence, nor anything clearly linking it to broader allegations in the defendants’ pleadings (in particular, to Taharoa’s fourth counterclaim). There is no pleaded linkage with the threat to remove earthmoving machinery from the mine site in December 2019, nor any clear pleading as to how the email sent to Mr Freeman (if it was sent by C&R) could have caused or contributed to the costs of the “back-up arrangements” that were apparently already in place, or the “holding costs” that Taharoa was presumably already incurring.
[92] In the absence of a specific pleading referring to the MBIE correspondence and the email to Mr Freeman, I am not satisfied that the additional documents sought by the defendants in Category 11 are relevant. Their request for tailored discovery of the additional documents is refused accordingly.
Result
[93]I make the following orders:
(1)By consent, the parties are to provide tailored discovery of the categories of documents set out in the Schedule to this judgment.
(2)The parties are to provide tailored discovery of the following documents sought in Category 10 in the Categories list appended to the interlocutory application:
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 to 88 of [Taharoa’s amended statement of defence and counterclaim], including correspondence regarding the arrangements, relevant Board minutes and resolutions, order forms, delivery, receipts and payments.
(3)The defendants’ request for an order for tailored discovery of the following additional documents in Category 7 in the Categories list appended to the interlocutory application:
All Board papers and records of either party relating to the diesel spill incident on or about 6 September 2019.
is refused.
(4)The defendants’ request for an order for tailored discovery of the following additional documents in Category 11 in the Categories list appended to the interlocutory application:
… and the forwarding to the media, of an email that C&R had received from the Ministry of Business, Innovation and Employment on 7 April 2020 (including any and all documents recording involvement and/or knowledge of C&R’s directors in this).
is refused.
(5)In respect of the documents in sub-categories 2(e), 2 (f) and 6(a) in the Categories list appended to the interlocutory application:
(i)the parties are to include in their verified lists of documents the following documents, in addition to the documents in sub- categories (a), (b), (c), (d), (g) and (h) of Category 2:
(e)[documents] relating to the drafting of the Variation Agreement, including all instructions, drafts and advice given in the course of drafting the Variation Agreement including letters, emails, notes, time
records, invoices and memoranda to, from or held by Minter Ellison Rudd Watts;
(f)[documents] referring to any legal advice which either contracting party sought or obtained prior to execution of the Variation Agreement, including letters, emails, file notes, time records, invoices and memoranda.
(ii)the parties are to include in their verified lists of documents the following documents, in addition to the documents in sub- categories (b) and (c) of Category 6:
(a)documents (including those held by legal advisers, and including the legal advisers’ time records) relating to the circumstances in which Mr Maine disclosed information to C&R concerning the Variation Agreement, including documents of any interview of him and any documents Mr Maine provided to C&R or its agents.
(iii)the documents in sub-categories 2(e) and (f) described at Order 5(i) above are to be individually identified and listed in accordance with clauses 6 to 8 of the Listing and Exchange Protocol at sch 9 prt 2 of the High Court Rules.
(iv)The documents in sub-category 6(a) described at Order 5(ii) above that were sent, received or created before 1 October 2019 are to be identified and listed individually in accordance with clauses 6 to 8 of the Listing and Exchange Protocol. Documents in this sub-category that were sent, received or created after 1 October 2019 may be listed on a group basis, in accordance with r 8.16(2) of the High Court Rules and cl 9(2) of the Listing and Exchange Protocol.
(6)The time for the parties to file and serve their verified lists of documents is extended to 14 December 2020. Inspection of documents is to be completed by 22 January 2021, and any further interlocutory applications concerning discovery or inspection are to be filed and served by 29 January 2021.
(7)The Registrar is to allocate a telephone conference on the first practicable date after 5 February 2021, for the purpose of giving directions for the directions for the disposal of any outstanding discovery applications, setting a close of pleadings date, giving directions for the filing of briefs of evidence and the preparation of a common bundle, and the allocation of a trial date. Counsel should also be prepared to address at that conference any remaining sch 5 matters that may not yet have been addressed.
(8)I do not consider it appropriate to award costs on the application at this stage. Finalising a list of categories for tailored discovery is intended to be a co-operative exercise between the parties, and counsel have done their best to reach agreement. Only a handful of matters remained unresolved, and each side has had a measure of success on the issues that were in dispute. Costs are reserved.
Associate Judge Smith
Schedule
Agreed categories of documents for tailored discovery
Category 1: Activities commencing pre-variation:
Documents confirming that cost-cutting or cost-saving programmes, plans or measures were in place with Taharoa, as pleaded in paragraphs 15(a), 18 and 20 of the amended statement of defence and counterclaim dated 6 July 2020 (the ASoDCC), and all documents relating to such programmes, plans or measures potentially affecting C&R.
Category 2: The variation:
Documents, prior to 1 October 2018, (including those held by legal advisers) relating to the negotiation, preparation, consideration, review, approval and execution of the Variation Agreement. This includes any/all documents:
a. relating to the exchanges preceding and leading up to the execution of the Variation Agreement, by both contracting parties;
b. comprising, recording or referring to Mr Coffey’s instructions to Mr Maine as pleaded in paragraphs 18 to 20 of the ASoDCC;
c. comprising, recording or referring to the date upon which Mr Ross and Mr Coffey respectively executed the Variation Agreement;
d. comprising, recording or referring to Mr Maine’s assurances to Mr Coffey as pleaded in paragraph 23 of the ASoDCC;
…
(g) board documents, including reports and minutes, relating to the renewal or variation of the Hire Agreement and the entry into the Variation Agreement and its approval; and
(h) comprising copy documents, drafts, communications and notes relating to the Hire Agreement and the Variation Agreement made or compiled by Mr Maine, placed in lever arch folders and left in his former office at Taharoa.
Category 3: C&R charging post-variation:
Documents relating to the sums charged by C&R to Taharoa for hireage of earthmoving equipment in the period from April 2018 to March 2019, including all documents relating to the preparation, review, approval and/or rejection of C&R’s claim spreadsheets and the payment of C&R’s invoices in the period.
Category 4: Taharoa complaints of overcharging / C&R refunds / the Settlement Agreement:
Documents relating to the complaints made by Taharoa to C&R in around April 2019 about overcharging (including, but not limited to, the inclusion by C&R of minimum hours charges after April 2018 (the Complaints)), C&R’s responses to the complaints, and the refund or credit of amounts to Taharoa. This includes all documents:
(a) comprising or recording communications to, from or between the boards of C&R or Taharoa, relating to the complaints, including documents relating to the investigation conducted by Taharoa’s accountant, managing director and chairman of the Board as pleaded in paragraph 30(e) of the ASoDCC; and
(b) relating to the settlement of the complaints, as pleaded in the affirmative defence (paragraphs 53 to 62 of the ASoDCC), including correspondence and documents comprising or recording communications to, from or between the boards of C&R or Taharoa, communications between legal advisers and documents relating to the decision of C&R to credit or refund charges to Taharoa.
Category 5: C&R charging after credits or refunds:
Documents relating to the sums charged by C&R to Taharoa for hireage of earthmoving equipment in the period following the complaints and up to October 2019. This includes all documents relating to the preparation, review, approval or rejection of C&R’s claim, spreadsheets and the payment of C&R’s invoices.
Category 6: Marshall Maine:
Documents relating specifically to Mr Maine namely:
…
(b) documents relating to the allegation pleaded in paragraph 74 of the ASoDCC, including documents comprising or recording any reward, direct or indirect, paid to or for Mr Maine by C&R and any indemnity given by C&R to Mr Maine, including in relation to payment of his legal expenses; and
(c) documents relating to Mr Maine’s authority as Chief Operating Officer of Taharoa, both generally and specifically to the negotiation and documentation of the Variation Agreement, and, to the extent relevant to the matters in issue, documents relating to the termination of his employment with Taharoa.
Category 7: Retification:
Documents (including those held by legal advisers) relating to C&R’s claim to be entitled to rectification of the Variation Agreement including:
(a) documents relating to C&R’s re-invoicing Taharoa in October 2019 for the charges that C&R had earlier (in around April 2019) credited or refunded to Taharoa;
(b) financial records concerning C&R’s accounting treatment of its invoice #1 dated 30 September 2019, as well as any GST paid on this invoice; and
(c) all board papers and records of either party relating to C&R’s resumption of charging on the basis of increased “minimum hours” from October 2019 onwards.
Category 8: Complaint or claim by parties against their lawyers:
Documents concerning any complaint or claim by either party (whether contemplated, threatened or actual) against any lawyer who advised it on the terms of the Variation Agreement.
Category 9: C&R’s charges and Taharoa’s payments from September 2019:
Documents relating to the sums charged by C&R to Taharoa for hireage of earthmoving equipment from September 2019, including all documents relating to the preparation, review, approval and/or rejection of C&R’s claim spreadsheets and the payment of C&R’s invoices. This category includes all:
(a) internal Taharoa documents (including board reports and minutes) relating to the decision and practice (including calculations) of making deductions for “C&R transport, routine maintenance and repairs responsibility”, “management costs” and “legal costs”;
(b) documents (including calculations) relating to the claimed costs, losses or damages that Taharoa deducted, or intends to deduct, from sums payable to C&R, including invoices and time records relating to the deductions; and
(c) communications between the parties or their lawyers regarding the deductions.
Category 12: Other:
All other documents not within any of the categories above intended to be and/or which will be relied upon by any of the parties at trial.
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