Cogle v IAG New Zealand Limited
[2019] NZHC 793
•11 April 2019
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2018-409-258
[2019] NZHC 793
BETWEEN STEPHEN COGLE and ALEXIS COGLE
Plaintiffs
AND
IAG NEW ZEALAND LIMITED
Defendant
Hearing: 9 April 2019 Appearances:
J W Goddard and J R Parker for Plaintiffs
R W Raymond QC and V A Ma for Defendant
Judgment:
11 April 2019
JUDGMENT OF ASSOCIATE JUDGE LESTER
[1] The defendant, IAG New Zealand Ltd (“IAG”), has applied for an order under r 9.34 of the High Court Rules, requiring the plaintiffs to make available “electronic information” for inspection by IAG’s expert. The specific information that is sought to be cloned and subjected to inspection was broadly described in the application as “all information held electronically on the plaintiffs’ computer equipment”. The specific equipment in relation to which orders are sought was refined in the draft order tabled by Mr Raymond QC during the hearing.
[2] The plaintiffs’ counsel Mr Goddard understandably did not take issue with the draft order referring to specific electronic equipment as such narrowed the breadth of the application.
COGLE v IAG NEW ZEALAND LTD [2019] NZHC 793 [11 April 2019].
Context
[3] The plaintiffs are the owners of a property damaged in the Canterbury earthquakes. The defendant provided insurance cover for the property.
[4] On 24 May 2017, IAG’s solicitors declined the plaintiffs’ claim on the grounds that they had fabricated or modified documents to inflate the cost to rebuild the damaged property so as to bolster their position in the course of the negotiation of a cash settlement of their claim. The claim was declined prior to any payment being made and the plaintiffs issued proceedings in April 2018 asserting, among other things, that IAG’s declining their claim amounted to a breach of contract.
[5] The statement of defence set out what proper particulars in relation to IAG’s allegations of submission of fraudulent documents and the making of false/untrue/incomplete/misleading statements.
[6] Prior to the case management conference on 14 August 2018, IAG in its memorandum for the conference sought access to information held electronically on the plaintiffs’ computer equipment, given the suspicion that such computer equipment may have been used to amend or create the documents. While Associate Judge Osborne’s Minute after the conference contemplated that IAG’s computer expert, Mr Whale, would have access to the electronic information, His Honour did not make an express order in that regard.
[7] On 25 September 2018, counsel for IAG wrote to the plaintiffs’ counsel with a suggested proposed protocol for the cloning and searching of the electronic data. The letter concluded:
As indicated above, Mr Whale, Duncan Cotterill and IAG are willing to provide undertakings as required. If agreement cannot be reached we will be seeking from the Court orders for the hard drive and other digital information to be disclosed.
[8] “Duncan Cotterill are IAG’s solicitors and are included as the protocol suggested that Duncan Cotterill’s IT team, upon providing appropriate undertakings, would be involved in the review of the material from the cloned computer equipment.
[9] Mr Raymond, by email dated 13 February 2019, sought to progress agreement of the terms under which the computer expert nominated by IAG would be able to clone and review the information. The email suggested a modified protocol from that tabled earlier for clarification. Mr Raymond expressed the hope that the parties could work out a consent order which would meet the concerns of both parties and avoid the costs of a hearing.
[10] The plaintiffs’ solicitors did not reply to the 13 February 2019 email until 20 March 2019. The letter contained the following:
Our clients have stated that they have nothing to hide because they did not create or manipulate the Documents, but they have information to protect for reasons of privacy and legal privilege.
[11] The letter suggested the appointment of an independent expert to report to the Court.
[12] On the morning of the hearing, 9 April 2019, a further document was filed by the plaintiffs entitled “Suggested protocol for inspection” which referred back to the protocol suggested by IAG on 25 September 2018. That protocol had been overtaken, at least to some extent, by Mr Raymond’s email of 13 February 2019, and in particular the statement in the February email that the investigation to be undertaken by Mr Whale could be limited to five identified documents referred to in IAG’s supporting affidavit.
[13] With the plaintiffs’ filing of the “Suggested protocol for inspection”, I confirmed with Mr Goddard at the commencement of the hearing whether the opposition to the orders was maintained, and whether the issue was in fact one of terms of inspection. Mr Goddard maintained that the orders were opposed.
Principles
[14] I adopt Associate Judge Gendall’s (as he then was) summary of the principles from his judgment in PAE (New Zealand) Ltd v Brosnahan, Carter as follows:1
1 PAE (New Zealand) Ltd v Brosnahan, HC Wellington CIV-2005-485-843, 3 September 2007.
[11] Orders for inspection are only to be made where they are for the purpose of enabling the proper determination of any matter in question in the proceeding. Put another way, the inspection must be relevant to the issues in dispute in that proceeding …2
[12] Once the threshold jurisdiction has been established exercise of the discretion in favour of an order is likely …3
[13] Orders which follow are to be made on appropriate terms. In situations where the orders sought are as far reaching as Anton Pillar orders the Court may require the same undertakings and precautions ...4
[15] These principles continue to represent the law and were applied recently by Gordon J in Ecostore Store Company Ltd v Worth.5 It is common ground that such orders are not made where the purpose of inspection is “an impermissible fishing expedition”.6
Discussion
[16] IAG in its statement of defence pleads an affirmative defence that it was entitled to decline the plaintiffs’ claim because the plaintiffs submitted fraudulent documents in support of their claim.
[17] The statement of defence identifies various documents which appear to be from a building company which had been involved in assisting the plaintiffs with planning the rebuild of their property.
[18] The first of those documents is called “Items to Add”, which contains branding and logos from the building company. Staff of the building company have provided declarations that the “Items to Add” document was not created by the building company.
[19] A second document referred to in the defence is titled “Swap List” which also contains branding and logos of the building company. Again, declarations that the document was not created by the building company are produced by IAG.
2 Re MacDonald HC Auckland M242/93, 11 April 1994.
3 Wheelans v Hayes (1986) 3 NZCLC 99,789 (HC).
4 Overseas Containers Ltd v Geo H Scales Ltd HC Wellington CP395/86, 22 September 1986.
5 Eco Store Company Limited v Worth [2017] NZHC 2943 at [23] – [26].
6 Eco Store, above n 5, at [27].
[20] In addition, there was a quote from a supplier of a shower dated 13 February 2014. In the quote the price of the shower is given as $4,772.50 including GST. The original document from the supplier records the cost of the shower as
$2,100.00, the reduction being explained by the product being “end of line”.
[21] IAG says all three amended documents were to be used by the plaintiffs to advance the cash settlement of their claim.
[22] IAG also seeks that its expert’s review of the plaintiffs’ electronic data extends to further documents discovered by the plaintiffs; the first being a document which bears the electronic signature of a Mr Goldfinch, the employee of the building company responsible for the plaintiffs rebuild. The plaintiffs list of documents describes this document as “Image”. IAG says that the allegedly fabricated “Swap List” has affixed to it the electronic signature of Mr Goldfinch as part of the forgery.
[23] Another document bears the logo of the building company and is called “Contract Quotation” but has details such as the property address omitted and a further document also from the plaintiffs’ discovery which contains what appear to be handwritten plans.
[24] The plaintiffs initially provided a response to the affirmative defence which was a bare denial but was replaced with a full response.
[25] Accordingly, there is squarely an issue whether the document preferred to in [18], [19] and [20] claimed by IAG to have been fraudulently created were in fact fraudulent.
[26] Mr Raymond for IAG submitted therefore that the application fell squarely within the first of the principles above from PAE (New Zealand) Ltd set out at [14] above.
[27] Mr Goddard for the plaintiffs did not really argue against the proposition that there was an issue as to pleadings that had to be determined. The plaintiffs have suggested that there may well be other explanations for the documents. For example,
they say that the documents may well have been prepared by another staff member of the building company but using Mr Goldfinch’s electronic signature.
[28] As already noted, the allegation that the plaintiffs fabricated documents has already been pleaded with proper particulars. Mr Goldfinch, the apparent electronic signatory of one document, denies having signed the document that being the “Swap List”. In respect of the “Items to Add” document, there is a declaration that such document does not exist within the documents relating to the plaintiffs’ property held by the building company.
[29] Mr Raymond’s point was that if a review of the electronic records discloses that the plaintiffs or either of them were responsible for the fabrication of the documents, then that may well mark an end to the claim, or at the very least may well point to the issue being one suitable for a preliminary hearing.
[30] I agree. Where the issue relates to who created documents which are central to a proceeding, the ability to search the computer equipment that may have been used to create those documents is an inspection for the purpose of enabling a proper determination of a matter in issue in the proceeding as contemplated by r 9.34.
[31] Once the threshold is passed, it is likely that an order will be made. Mr Goddard’s submissions were focused on this issue. The plaintiffs were critical of the way in which IAG had investigated the alleged fraudulent claim. There is a claim that the plaintiffs were ambushed at a meeting which had been called to discuss rebuild costings, when IAG claims the meeting had been intended to address the allegations of fraud. I do not consider that such pre-proceeding conduct, even if established, is helpful in terms of exercising the Court’s discretion.
[32] Mr Goddard, in response to my expressing the above view, sought to characterise what IAG sought as being an indulgence and therefore in his submission all IAG’s conduct could be considered.
[33] I do not accept Mr Goddard’s submission. A party seeking an order for inspection under r 9.34 is not seeking an indulgence of the Court. An applicant
seeking to rely on r 9.34 is utilising one of the tools contemplated by the Rules for a party to advance their case.
[34] Mr Goddard also referred to the imbalance of power between the parties, the plaintiffs as individuals, and IAG as insurer. Such is not relevant in the present circumstances. IAG through counsel sought to agree the terms of inspection so as to avoid costs. There is no suggestion of anything improper in IAG’s application. IAG foreshadowed that it wished to have access to the plaintiffs’ computer equipment from the outset.
[35] Mr Goddard also referred to the plaintiffs’ limited means and that they would be unable to instruct their own computer expert. The suggestion was that this would put them at a disadvantage if IAG’s computer expert had access to the computer records when the plaintiffs did not have the means to do so themselves. I do not understand the submission when Mr Goddard’s clients’ position is that:
…they have nothing to hide because they did not create or manipulate the documents …
[36] On this basis the plaintiffs’ position must be that IAG’s experts can find nothing that shows the plaintiffs created the documents.
[37] I am satisfied that it is appropriate that there be an order for inspection given such may well directly shed light on what are key allegations in the proceeding.
Terms of inspection
[38]Mr Raymond tabled a draft order and a signed undertaking from Mr Whale.
[39] Having indicated to Mr Goddard that I had reached the point where I considered orders should be made, Mr Goddard’s co-counsel Mr Parker briefly addressed the terms of the draft order, subject to the additions that I set out below. Mr Parker did not dispute the appropriateness of the draft order.
[40] Accordingly, the following orders are made, which are in the form of the draft order with additions after the first sentence to order (9).
(1)IAG New Zealand Ltd’s appointed expert, Brent Peter Whale, will provide a confidentiality undertaking in the form annexed to the draft order to Mr and Mrs Cogles’ solicitors.
(2)Within 48 hours of receipt of Mr Whale’s undertaking referred to in (1) above, Mr and Mrs Cogle will make available to Mr Whale at their residential address in Christchurch on a date and at a time within that 48 hours to be agreed between the parties’ solicitors, the following items of electronic equipment which were previously seized by the New Zealand Police and returned to the Cogles, namely:
(2.1) Toshiba laptop;
(2.2) HP laptop;
(2.3) Seagate hard drive; (2.4) Imation pen drive; (2.5) Apple iPad;
(2.6) Samsung tablet;
(2.7) Morrison Kent pen drive; and (2.8) WD hard drive.
(3)Mr Whale will, within 48 hours of receipt of the electronic equipment identified above, take a clone of each item of electronic equipment.
(4)Within 48 hours of taking the clones, Mr Whale will return to the Cogles the electronic equipment referred to above.
(5)Mr Whale will not allow any other person access to the electronic equipment or the clones.
(6)At the time Mr Whale uplifts the electronic equipment identified above from Mr and Mrs Cogle, they shall also provide to Mr Whale in writing any passwords, credentials and assistance required to access and/or download the electronic information.
(7)Mr Whale will focus on his investigation on the documents identified as Exhibits “A” to “E” of the affidavit of Caroline Pua Emile dated 6 December 2018.
(8)Mr Whale will be acting in accordance with the Code of Conduct for Expert Witnesses and will issue a confidential and privileged report to IAG’s solicitors and counsel concerning the outcome of his examination, subject to the terms of his confidentiality undertaking.
(9)No privileged, personal or irrelevant information will be provided by Mr Whale to IAG, its solicitors or counsel. In the event that Mr Whale has any doubt about whether a document is confidential or privileged, he is to refer that document to the Court (Associate Judge Lester) for determination. The referral will be through IAG’s senior counsel, but without Mr Whale disclosing such information to counsel.
(10)Once the Court process is complete, or upon further direction by the Court, the data on the clones taken by Mr Whale will be forensically wiped. Mr Whale will provide an affidavit confirming that it has been wiped, if required by the Court.
(11)The costs of the cloning and the report to IAG will be met by IAG.
(12)The parties have leave to apply to the Court on 72 hours’ notice.
[41] Mr Whale is to confirm that in carrying out the inspection he has read and will comply with the Code of Conduct for Expert Witnesses.
[42] A further practical issue was raised on behalf of the plaintiffs that is what would happen to the clone should anything befall Mr Whale who is a sole practitioner. I do not consider that requires any orders at this time. Should the issue arise then counsel are free to bring the matter back to me.
[43] I record that Mr Whale intends to travel to Christchurch prior to 17 April 2019 to complete the cloning. The plaintiffs confirmed they were available up to that date.
I also record that the plaintiffs may nominate a solicitor or corporate expert to be present while the cloning is completed if they wish.
Costs
[44] IAG is to file submissions on costs not more than five pages within five working days of this judgment (that is by Thursday 18 April 2019). Mr and Mrs Cogle are to reply within a further five working days (that is by Tuesday 30 April 2019) again not more than five pages. If IAG wishes to reply, it is to do so within three working days (that is by Monday 6 May 2019), not more than three pages.
Associate Judge Lester
Solicitors:
WCM Legal, Wellington Duncan Cotterill, Christchurch
Copy to counsel: R W Raymond QC, Christchurch
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