Catley v Waipa Corporation Limited HC Auckland CIV 2004-463-494
[2010] NZHC 2145
•16 November 2010
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2004-463-494
BETWEEN GARY HASWELL CATLEY Plaintiff
ANDWAIPA CORPORATION LIMITED First Defendant
ANDRED STAG TIMBER LIMITED Second Defendant
ANDWAIPA MILL LAND LIMITED Third Defendant
AND WAIPA PLANT & BUILDINGS LIMITED
Fourth Defendant
ANDWAIPA PROPERTY ESTATE LIMITED Fifth Defendant
ANDPHILLIP ARTHUR VERRY Sixth Defendant
ANDMARTIN PHILIP VERRY Seventh Defendant
ANDRED STAG WOOD PRODUCTS Eighth Defendant
ANDMARTIN PHILIP VERRY, HILTON RUSSELL VERRY, LYNDSEY ELEANOR VERRY, LOUISE JANE DINMORE AND CAROL ELIZABETH HOUSTON AS EXECUTORS IN THE ESTATE OF PHILLIP ARTHUR VERRY Sixth Defendants
ANDMARTIN PHILIP VERRY Seventh Defendant
ANDWAIPA CORPORATION LIMITED First Defendant
CATLEY V WAIPA CORPORATION LIMITED AND ORS HC AK CIV-2004-463-494 16 November 2010
ANDRED STAG TIMBER LIMITED Second Defendant
ANDGARY HASWELL CATLEY Plaintiff
ANDSUZANNE LYNETTE CATLEY Counterclaim Defendant
Hearing: 23 September 2010
Counsel: M C Black for the Plaintiff
C R Carruthers QC, B H Dickey and N J Small for the Defendants
Judgment: 16 November 2010 at 10 a.m.
JUDGMENT OF POTTER J
re plaintiff’s application for inspection and further and better discovery
In accordance with r 11.5 High Court Rules
I direct the Registrar to endorse this judgment
with a delivery time of 10 a.m. on 16 November 2010.
Solicitors: Meredith Connell, P O Box 2213, Auckland 1140
Tompkins Wake, P O Box 258, Hamilton 3240
Copy to: C R Carruthers QC, P O Box 305, Wellington 6140
M C Black, P O Box 1984, Shortland Street, Auckland 1140
Introduction
[1] By application dated 7 July 2010 the plaintiff, Mr Catley, and the counterclaim defendant, Mrs Catley, seek orders for:
a) Access for themselves and their accounting and legal advisors and any experts to inspect financial information and records and other company information as referred to in a schedule annexed to the application (a copy of which is annexed to this judgment).
b)Discovery by the defendants of all other documents and information held pertaining to the financial records of the company (which I treat as a reference to the first defendant, Waipa Corporation Limited (“Waipa”)) since 2008 and involving the management and control of the defendant companies (which I treat as including the first, second, third, fourth, fifth and eighth defendants) since 2004.
c) Further directions or orders as may be necessary to implement completion of the inspection by the plaintiff and counterclaim defendant including that a supplementary discovery affidavit be filed by the defendants.
[2] The stated grounds for the application are that the defendants have provided only limited financial information and records of the company up to 2007 which comprises only the group’s financial reports for 2005, 2006 and 2007 on a counsel only basis without the right to copy any of the information; that the defendants have refused to provide further information; and that because the plaintiff remains a director and shareholder of Waipa, he is entitled to be kept informed of the operations and financial management of the trading subsidiaries. It is contended that the defendants’ continued failure to co-operate over access and further discovery of this information is prejudicing the plaintiff in his preparation of his case and his defence to the defendants’ counterclaims.
[3] The defendants oppose the application and the orders sought. They say that the financial information sought is not relevant to any issue in the plaintiff’s second amended statement of claim dated 26 November 2008; the financial information already discovered is consistent with that required to be provided to shareholders and goes further than is required; it is inappropriate to discover further non-audited information; to grant the application would in effect grant the plaintiff the substantive relief sought in the proceedings whereas that cause of action is opposed; the plaintiff has disclosed or attempted to disclose commercially sensitive information relating to the defendant companies in the past and therefore there is a substantial risk the requested information would not remain confidential; limiting inspection of confidential documents is appropriate in accordance with r 8.33(3) of the High Court Rules and because of the particular concern in this case about the risk that the information would not remain confidential; and that it would be unnecessarily inconvenient, time-consuming and disruptive to provide the additional information.
[4] Thus both the nature and extent of the financial information to be disclosed and the manner of disclosure (inspection) are in issue.
The current position
[5] The issue of the disclosure of financial information requested by the plaintiff has been the subject of several references in minutes of case management conferences and has been discussed by counsel for the parties. By letter of 15 June
2010 Mr Dickey, counsel for the defendants, advised counsel for the plaintiff that financial statements for the group for the financial years 2005-2008 inclusive were available and that access to this information would be made available to an independent expert accountant and to the plaintiff by providing the information to counsel for the plaintiff, Mr Black, for the plaintiff to view in the presence of counsel. He said this limitation was to ensure that Mr Black could make certain that copies of the financial information were not taken. The defendants also required acknowledgment by the plaintiff of the implied undertaking in r 8.36 (a reference to the limitation that a party who obtains a copy of such a document may use that copy
only for the purposes of the proceeding and except for the purposes of the proceeding, must not make it available to any other person).
[6] The letter pointed out that additional information had been provided in the affidavits filed in proceedings CIV-2008-404-7975. These proceedings concerned an application by the plaintiff under s 165 of the Companies Act 1993 for leave to bring proceedings in the name of the company, Waipa Corporation Limited, against Mr Martin Verry and others (Mr Phillip Verry being deceased). The application was
declined by Duffy J on 22 February 20101 (“the s 165 claim”).
[7] The offer was subsequently expanded by the defendants to include the group financial reports for 2009. The provision of any further financial information was denied as being unnecessary for resolution of the issues in the case and in effect granting the relief sought from the Court by the plaintiff.
[8] Counsel for the defendants advised the Court that no request has been made by the plaintiff for his counsel or accountant, or the plaintiff in the presence of counsel, to review the audited financial reports. Mr Black advised that he had attended on his own to inspect the financial information but was not accompanied by either the plaintiff or his accountant and did not take copies.
[9] The plaintiff’s proposal is that Mr Catley should provide an undertaking not to provide the financial information to third parties unconnected with the litigation unless by agreement of the parties or direction of the Court. This proposal was set out in a memorandum filed by counsel for the plaintiff dated 4 May 2010 at paragraph 6. This proposal is not acceptable to the defendants who clearly do not trust Mr Catley to maintain confidentiality in information they consider is highly commercially sensitive.
Background
[10] In December 2003 the plaintiff and Mr Phillip Verry (previously the sixth defendant but now deceased) acquired the Waipa Mill from the receivers of Citic New Zealand Limited. The plaintiff and Mr Phillip Verry became equal shareholders in Waipa, which was formed to acquire the shares in the operating companies that owned the Waipa Mill business. Early in 2004 differences arose between Mr Catley and the Verrys. Matters came to a head in July 2004 when the Verrys removed Mr Catley as a director of the subsidiary companies of Waipa. Mr Catley remains as a director of Waipa and continues to hold fifty per cent of the shares in the company although that shareholding is the subject of dispute. Mr Catley issued these proceedings in July 2004. He sought a mandatory injunction order from the Court to restore him as a director of the company but that application
was dismissed by Rodney Hansen J.2
Pleadings
[11] In the second amended statement of claim dated 26 November 2008 the plaintiff alleges that the affairs of Waipa have been and are being conducted in a manner that is oppressive, unfairly discriminatory and unfairly prejudicial to him. He seeks such orders as would be just and equitable under s 174(2) of the Companies Act 1993. He also claims breach of fiduciary duties by Mr Phillip Verry and Mr Martin Verry in relation to the joint venture between Mr Catley and Mr Phillip Verry for the purchase of the Waipa Mill and seeks financial relief under various headings arising from the alleged breaches of fiduciary duties.
[12] The allegations of oppressive, discriminatory and prejudicial conduct under s 174(1) of the Companies Act are made under several headings:
a) Removal of Mr Catley as a director of all the companies in the Group except Waipa itself, on 12 July 2004;
b)Self dealing by the Verrys – that in or about November 2006 they sold two parcels of land owned by Red Stag Wood Products Limited to companies which were wholly-owned subsidiaries of Eros Capital Limited, a company owned and controlled by the Verrys.
c) Payment of $1.4m to Phillip Verry by Red Stag Timber Limited in August/September 2005 for pre-purchase contributions he claimed in relation to the acquisition of the Waipa Mill.
d)Borrowing from Eros Capital Limited of funds borrowed by Eros from ANZ Bank ($4m) together with a further $1m making a total of
$5m, which were on-lent to Red Stag Timber Limited on a basis claimed to be beneficial to Eros Capital Limited and the Verrys and detrimental to Red Stag Timber Limited.
e) Failure to provide financial information and documents, namely management reports, board reports and financial statements concerning the Waipa group for the period commencing 1 July 2005 to date, thereby effectively excluding the plaintiff from the business of the group.
f) Treating payments in March 2004 of $620,000 to Mr Phillip Verry and $50,000 to Mr Martin Verry as compensation payments for services rendered prior to acquisition of the mill business rather than repayable advances.
[13] The second cause of action alleges the matters referred to above as having been procured by Mr Phillip Verry and Mr Martin Verry in breach of fiduciary duties claimed by Mr Catley to be owed to him.
[14] In their statement of defence dated 13 March 2009 the defendants deny the plaintiff’s allegations of wrongful or improper conduct. They allege breaches by Mr Catley of fiduciary duties and of his duties as a director prior to his removal as a director.
[15] In the defendants’ statement of counterclaim dated 19 May 2009, which names Mrs Catley as a counterclaim defendant, breaches of fiduciary duties by the plaintiff to Mr Phillip Verry and Mr Martin Verry are alleged. It is pleaded that these arise from false representations allegedly made by the plaintiff in relation to a joint venture bid by the plaintiff with Mr John Zwiers for the purchase of the Waipa mill and an agreement the plaintiff signed with Mr Zwiers on 3 April 2003. Also from alleged non-disclosure by the plaintiff to the joint venture partners in relation to the failure of the Multiplex cinema complex in Rotorua in which the plaintiff was the developer, and previous dealings by the plaintiff with Ferrier Hodgson (receivers of Citic). A breach of fiduciary duty is also alleged by the plaintiff’s refusal to acknowledge the ten per cent shareholding of Mr Martin Verry in the joint venture.
[16] The relief claimed for the alleged breaches of fiduciary duties are orders that the plaintiff’s shareholding in Waipa is held on constructive trust for the Verrys or for transfer of the plaintiff’s shares to the Verrys, and equitable damages or compensation as set out in the counterclaim.
[17] The Verrys also claim against the plaintiff as alternative causes of action, breach of s 9 of the Fair Trading Act 1986, deceit and breach of contract relating to actions of the plaintiff in 2003, 2004 and 2005 in respect of the joint venture.
[18] There are also claims for breach of fiduciary duties and breach of directors’ and Companies Act duties to Waipa and Red Stag Timber Limited relating to alleged actions and omissions of the plaintiff in 2004, 2005 and 2006 in aspects of the Waipa Mill business.
[19] The cause of action against the counterclaim defendant is in deceit based on alleged false representations to the Verrys in relation to Mr Zwiers and his joint venture with the plaintiff.
The law
[20] Documents in the control of one party to proceedings are discoverable if they are relevant to the matters in the proceeding. The formulation of the test for
relevance is contained in Compagnie Financiere et Commerciale du Pacifique v
Peruvian Guano Co:3
It seems to me that every document relates to matters in question in the action which not only would be evidence upon any issue, but also which, it is reasonable to suppose, contains information which may – not which must
– either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary. I have put in
the words ‘either directly or indirectly’ because, as it seems to me, a
document can properly be said to contain information which may enable the party requiring the affidavit either to advance his own case or to damage the
case of his adversary if it is a document which may fairly lead him to a train
of inquiry which may have either of those two consequences.
[21] But as was observed in Prime Commercial Ltd v NZ Wool Board,4 discovery of irrelevant documents is not helpful to anyone.
[22] Commercial sensitivity of information is not a ground for opposing discovery if the documents are relevant. However, r 8.20(2)(e) recognises that there may be the need for constraints to be imposed on inspection where confidentiality concerns warrant it. Rule 8.33(3) provides that the party making discovery may limit inspection of confidential documents. This the defendants have sought to do in relation to the range of financial information relating to Waipa and its subsidiary companies which they are prepared to provide. Directions restricting the normal use of discovered material are relatively common in New Zealand to meet genuine
concerns.5 Each case will depend on its own facts as to the minimum extent to
which discoverable documents should be disclosed in order for discovery to be effective for the purpose for which it is legitimately required.6
3 Compagnie Financiere et commercial du Pacifique v Peruvian Guano Co (1882) 11 QBD 55 (CA), at p 63, per Brett LJ.
4 Prime Commercial Ltd v NZ Wool Board HC Wellington CP92/01, 14 March 2002.
5 T D Haulage Limited v NZ Railways Corp (1986) 1 PRNZ 668.
6 British Markitex v Johnston (1987) 2 PRNZ 535 at 543.
[23] In this case the above principles are brought sharply into focus. Mr and Mrs Catley claim they require access to the financial information described in the schedule to their application for the purposes of this proceeding. Mr Catley further claims he is entitled to the financial information as a shareholder and director of Waipa. The defendants contend that significant financial information has already been disclosed, that the further financial information sought is not relevant to any of the causes of action pleaded in the plaintiff’s second amended statement of claim, that the financial information is highly commercially sensitive in relation to the business of the Waipa group, and that on the basis of past experience, the plaintiff cannot be trusted not to disclose confidential information to other parties.
Further financial information
[24] A distinction needs to be made between the information that has been discovered and is available for inspection by Mr and Mrs Catley, subject to constraints as to the manner in which the group financial accounts may be inspected, and the further financial information of which discovery is sought (being the information listed in the schedule to the application for further and better discovery).
[25] The defendants do not dispute that the plaintiff should have access to the group financial reports from 2005-2009. The constraints they seek are to protect confidentiality of the financial information. Further, the defendants accept the relevance of the historical financial information made available as listed at paragraph
3 of the affidavit of Mr Martin Verry dated 2 August 2010. He refers to documentation discovered by the defendants by affidavit dated 2 October 2009 which included:
a) Board reports for the period July 2004-January 2005;
b) Financial reports for the year 2004;
c) Reports to directors and shareholders dated July 2004;
d) Board papers dated July and August 2004;
e) Company cashflow budgets, memoranda and letters;
f) All of the financial information disclosed in the affidavits filed in CIV-2008-404-7975 (the s 165 claim) including information in the affidavits of Theodorus Petrus Rigter sworn 27 March 2009 (at paragraphs 6 and 7 and reproduced in the attached Schedule of Excerpts); affidavit of David Bruce Sandford sworn 31 March 2009 (at paragraphs 83-97 and reproduced in the attached Schedule of Excerpts); affidavit of Martin Philip Verry sworn 1 April 2009 (at paragraphs 173-174 and reproduced in the attached Schedule of Excerpts).
[26] The defendants note that all the issues pleaded in the second amended statement of claim (refer [12] above) relate to matters occurring primarily in 2003-
2005, that the counterclaim brought by the defendants relates to matters occurring mainly in the same period and that extensive documentation including financial information and management and directors reports for the relevant period has been already discovered.
[27] The defendants say that the information already disclosed together with the group financial reports for the years 2005-2009 inclusive, provide all material relevant to the plaintiff’s claims in the second amended statement of claim and to the defendants’ statement of defence and claims in the statement of counterclaim (refer [14]-[19] above).
[28] They say that none of the substantive issues in the pleadings requires access to confidential company information beyond that which has already been discovered and made available for inspection (subject to the inspection qualification advised). They contend that in fact the information provided outside the relevant time period covered by the pleadings, is more than the defendants are obliged to disclose, referring, by way of example, to the forecast information provided in the affidavit of Theodorus Petrus Rigter sworn 27 March 2009 and filed in the s 165 claim.
[29] Mr Black’s position on behalf of the plaintiff and the counterclaim defendant is that without the benefit of discovery of the further financial information they cannot properly assess the plaintiff’s case under s 174 of the Companies Act. He noted that with the benefit of further discovery, amendment to the pleadings may become necessary.
[30] Mr Black referred to the broad entitlement to information for shareholders under s 178 of the Companies Act. Section 178 provides that a shareholder may at any time make a written request to a company for information held by the company. The company in response may either provide the information, agree to provide it or refuse to provide the information specifying the reasons for the refusal.
[31] Subsection (4) provides that a company may refuse to provide information if the disclosure of the information (inter alia) would or would be likely to prejudice the commercial position of the company. Under subsection (7) the Court may make an order requiring the company to supply the information if it is satisfied that the company does not have a sufficient reason to refuse to supply the information or those reasons are outweighed by other reasons. If the Court makes an order under subsection (7) it may specify the use that may be made of the information and the persons to whom it may be disclosed.
[32] The plaintiff’s application for further discovery of financial information by Waipa and its subsidiaries is made in the context of this proceeding rather than under s 178. But in either case, the Court would be required to assess a claim to confidentiality by reason of commercial sensitivity for refusing to supply the information sought or posing restraints on inspection, as the case may be. The Court needs to be satisfied that the reasons for refusing disclosure or for restricting the use of the material disclosed are necessary to meet a genuine concern. It must be apparent that disclosure would be likely to prejudice the party making discovery in
some significant way.7 When discovery is sought in litigation, relevance will always
be a touchstone.
7 Port Nelson Limited v CC [1994] 3 NZLR 435.
[33] The plaintiff placed considerable reliance on the observations of Rodney Hansen J in his judgment on the plaintiff’s application for an interim mandatory injunction to restore him as a director of the subsidiary companies and for other orders.8 In dismissing the application Rodney Hansen J observed9 that Mr Catley remained a director and a shareholder of Waipa and that in those capacities he was entitled to call meetings and to be kept informed of the operations and financial
management of the trading subsidiaries. He said there was some suggestion that Mr Catley had not received all the information he had sought or was entitled to but that had not been thoroughly explored because it had no relevance to the complaints in respect of which Mr Catley sought interim relief.
[34] Those were observations made in a judgment on an interlocutory application in 2004 which was not concerned with an application under s 178 of the Companies Act or with discovery. It was concerned with whether Mr Catley had a seriously arguable case that his removal as a director of the subsidiaries of Waipa was invalid. The Court held he did not and that the relief he sought would constitute:
... an unacceptable intrusion into the rights of shareholders to conduct the affairs of the companies as they see fit in accordance with the Act and the constitutions.10
[35] His Honour continued that even if he had been persuaded that there was a serious question to be tried on the issue of Mr Catley’s removal as a director the balance of convenience would have weighed against granting the interim relief sought because it would have meant that the Verrys, if successful at trial of this proceeding, would have suffered the damage of having the governance of Waipa changed against their will.
[36] It is pertinent to note that since 2004 Mr Catley has not sought to call a meeting of directors and has apparently not attended the meetings of the Waipa board which have been convened. He has not sought financial or other information
8 Catley v Waipa Corporation Limited & Ors HC Rotorua CIV-2004-463-494, 11 October 2004 (Reasons 12 October 2004).
9 At [28].
10 At [27].
except in the context of this proceeding. While the observations of Hansen J were relevant and appropriate in the context of the 2004 interlocutory injunction application, I do not consider they assist in determining the issues now before the Court.
[37] I agree with the defendants’ submission that the further financial information listed in the schedule to the application for further discovery is not relevant to any of the heads of claim in the second amended statement of claim. There are no claims of mismanagement of the company or wrongful conduct except the matters of historic complaint pleaded in the second amended statement of claim. The affidavits filed by Waipa management attest to the successful operation of the Waipa group and that they are well managed. Information to verify (or for that matter contradict) those claims should be readily available from the annual group accounts for the period
2005 to date which the defendants have disclosed (subject to inspection constraints).
[38] At the heart of this proceeding is the issue of Mr Catley’s entitlement to his fifty per cent shareholding (or forty five per cent taking into account the ten per cent shareholding entitlement claimed by Martin Verry) which the defendants allege is the outcome of breaches by the plaintiff of fiduciary duties to the Verrys. They claim, therefore, that he is not entitled to his shareholding, or the rights of shareholder or director. On the other hand, one of the heads under which the plaintiff alleges oppressive, unfairly discriminatory and unfairly prejudicial conduct is the refusal of the defendants to provide to the plaintiff financial statements, management reports and board reports of the Waipa group for the period from 1 July
2005. But the defendants contend that to provide the financial information sought under the guise of discovery would pre-empt part of the plaintiff’s claim under s 174, which the defendants deny.
[39] These submissions identify the tension in the parties’ positions relating to discovery and inspection of the financial information relating to Waipa and its subsidiaries.
[40] I conclude on the application for further discovery that the defendants’ obligation to discover financial information relevant to this proceeding will be adequately and properly met by disclosure of the audited group financial statements for the years 2005 to date, including financial statements for the 2010 financial year when these have been completed and audited, if these proceedings are still current at that time. The basis for inspection, I consider later in this judgment.
Inspection of documents – confidentiality
[41] As set out in Mr Dickey’s letter of 15 June 2010 (refer [5] above), the defendants wish to impose limitations on the access of the plaintiff and the counterclaim defendant to the group financial accounts which they are prepared to disclose , and I have accepted should be disclosed.
[42] The reason given is that there is significant risk the plaintiff will disclose Waipa’s confidential and highly sensitive information to others as he has done or attempted to do with confidential information relating to Waipa in the past. These instances are referred to in the affidavit of Martin Verry dated 2 August 2010 at paragraphs 31-35:
(a)In August 2005, the plaintiff (and John Zwiers) approached Tur Borrin and then Hugh Green of Taranaki Pine, a competitor company, with confidential company information. The plaintiff claims at paragraph 6 of his affidavit dated 7 July 2010 that the defendants claim that he has disclosed confidential information to a third party is unsubstantiated. The defendants’ claim is fully detailed at paragraph 598 of Phillip Verry’s affidavit which states:
In August 2005, I learned that Mr Zwiers and Mr Catley approached Mr Hugh Green, of Taranaki Sawmills, with a copy of the Red Stag Timber Limited financial reports that Mr Catley had provided him. This as a competitor of Waipa Mills. Mr Tur Borrin, an owner of Taranaki Sawmills, notified me by telephone of this approach, apparently against Mr Catley’s wishes. Mr Catley had received financial reporting on Red Stag as a Waipa Corporation director in 2004 and up to June
2005 and had obviously passed that commercially sensitive confidential information on to Mr Zwiers, and the two of them had then claimed to be legitimate shareholders in the company in an attempt to sell those shares to a direct competitor of the company. ... This
was a breach of Mr Catley’s duty to the company and a breach of the company’s policy on Confidentaility of Information ... which I had distributed to Martin, Mr Sandford and Mr Catley in April 2004.
(b)On 23 September 2008 the plaintiff shared financial information with business broker Business Link. ... In fact the information purports to list 50% of the shares in the business for sale. The business broker, Elaine Ford, told me that the plaintiff had provided the information.
(c)On a regular basis, I believe Company information has been shared by the plaintiff with Mr John Zwiers who in separate proceedings CIV-2003-404-7359 (and reissued proceedings CIV-2009-419-
825/CIV-2009-404-8252) sued the companies. On 6 May 2010 in a note to Counsel I recorded an extract of a telephone conversation I
had with Mr Zwiers, in it he said to me: “... It is a very profitable company on the basis of the information I get”. ...
32.The plaintiff in fact funded Mr Zwiers’ claim against the Company, providing $250-300,000 to Mr Zwiers. He recently admitted this funding in his answers to interrogatories asked by the defendants. The claim was struck out by Harrison J on 14 August 2008 (and the reissued proceedings were struck out by minute of Associate Judge Faire on 13 May 2010). The proceedings cost the companies over
$750,000 in legal and related fees, and significantly more in time (in both opportunity costs and management focus).
33.Having Red Stag’s cost structure, profitability, strategy and other company documentation in the plaintiff’s hands is extremely risky to the group, and valuable to a competitor. The Companies are private companies, one of their competitive advantages is the confidentiality of their commercial information and their financial reports. Our competitors do not know, nor can they reasonably estimate the respective balance sheet, profit and loss or liquidity position of Red Stag. This permits the company to devise and execute strategy without our competitors knowing of our ability to do so and hinders our competitors’ ability to respond with counter.
34.Red Stag has been the best performer in the milled structural timber sector since we removed the plaintiff ... Its financials, investments in technology, strategy and plans are intellectual property that cannot be trusted with the plaintiff and/or Mr Zwiers.
35.Further, the plaintiff has previously attempted to undermine the relationship with its then bank Westpac and threatened to do so with its main log supplier, and I am concerned that by providing him with any detailed information on the business he will do so again with other counterparties.
[43] In his affidavit dated 30 August 2010 Mr Catley refers to these concerns about breach of confidentiality stated by Mr Martin Verry and says “I do not accept that criticism ...”. He does not appear to deny the matters detailed by Mr Verry.
[44] I consider there is evidence which strongly supports the defendants’ requirement that restrictions be placed on the plaintiff’s access to the financial information disclosed. Mr Verry says that he will comply with any undertakings, directions or other requirements that the information is not to be disclosed to any third parties except his legal, accounting or other expert advisors. However, I accept on the basis of past performance and experience that the defendants have justifiable concerns that any such undertakings will not be adhered to and that there is a real and substantial risk that Waipa’s business could be prejudiced.
[45] Mr Catley maintains that he is entitled to consider and evaluate the information and he will be prejudiced in preparation of the case for trial if he cannot have access to copies of the financial information. I do not accept those contentions. The basis upon which the defendants have offered inspection will permit copies of the group financial accounts being taken by legal counsel, the plaintiff’s accountants and any experts he may instruct. The plaintiff can consider and evaluate the accounts at his leisure provided he does so under the supervision of Mr Black, to ensure the plaintiff does not take copies. It should not be beyond the wit of Mr Black to make arrangements for Mr Catley to have access to the accounts at a suitable time or times and in a situation where Mr Black can ensure that the plaintiff is not able to copy the documents. The limitations permit sufficient flexibility to avoid their being unduly onerous.
Result
[46] The application of the plaintiff and the counterclaim defendant for inspection and further and better discovery dated 7 July 2010 is declined except to the following extent:
a) Discovery of the audited financial reports for the Waipa group for the financial years ended 2005-2009 (including for the financial year ending 2010 when those reports are completed and audited) are to be discovered by the defendants providing copies to counsel for the plaintiff and the counterclaim defendant and/or an independent expert accountant instructed by them.
b)The plaintiff and the counterclaim defendant may inspect the documents with counsel, Mr Michael Black, in circumstances where Mr Black can ensure that copies are not taken, it being the intent of this order that copies of the financial reports should not be made available to the plaintiff or the counterclaim defendant.
c) Prior to inspection the plaintiff and the counterclaim defendant are to provide to counsel for the defendants in relation to the copies provided to counsel, a written acknowledgment in terms of r 8.36(4)(a) and (b).
[47] I reserve leave for the parties to apply if the detail of the above order does not reflect the protection it is intended to provide or its intended implementation.
Other matters
[48] I do not preclude that examination by the plaintiff of the group financial accounts to be disclosed (on the qualified basis) could lead to a request for discovery of a further specific document/s or item/s of information relevant to these proceedings. I would expect counsel to be able to agree the basis for inspection in accordance with this judgment. If not, the plaintiff would need to file promptly, a further application.
Next event
[49] There will be a case management conference at 9 a.m. on Wednesday 23
February 2011 to review all aspects of this proceeding. Counsel should file memoranda by 4 p.m. on Monday 21 February 2011.
Costs
[50] The defendants are entitled to costs on the application which I award on a 2B
basis to be paid forthwith.
SCHEDULE
1.The operations of the company and its trading subsidiaries including internal memoranda, addendas and company minutes (or records of meetings and resolutions) involving the same including from early 2004 to the present time.
2.The information sought to be discovered should include what management rights and fees have or are being paid between the company, its subsidiaries and the management personnel involved.
3.Ongoing financial information concerning the company’s operations and management from 2007 up to the present time and until the hearing of this proceeding. The financial information sought should also discover:
(a) Arrangements or agreements have occurred between the various corporate entities and relating to the company’s turnover and business operations.
(b) The profits that are being generated and from which source.
(c)This information should also discover what monies have been spent on infrastructure, capital costs and other expenditure by and between the Defendants and their subsidiaries.
4. Any other financial, management and operational information concerning the
Defendants and their subsidiaries.
0
0
0