Deep v Auckland Gold Line Co-Operative Taxi Society Limited

[2018] NZHC 2362

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-001516

[2018] NZHC 2362

BETWEEN

RAMAL DEEP

First Plaintiff

SATNAM SINGH
Second Plaintiff

(Continued list of Plaintiffs next page)

AND

AUCKLAND GOLD LINE CO-

OPERATIVE TAXI SOCIETY LIMITED

Defendant

Hearing:

31 August 2018

Counsel:

L T Meys for Plaintiffs

S S Khan and M G Orange for Defendant

Judgment:

7 September 2018

JUDGMENT OF WHATA J

This judgment was delivered by me on 7 September 2018 at 4.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar Date: ………………………….

Solicitors:           Neilsons Lawyers, Onehunga

Fortune Manning, Auckland

DEEP v AUCKLAND GOLD LINE CO-OPERATIVE TAXI SOCIETY LIMITED [2018] NZHC 2362 [7

September 2018]

(Continued list of Plaintiffs)

SURINDER KUMAR

Third Plaintiff

KAHLON KULVIR SINGH

Fourth Plaintiff

VIPAN KUMAR

Fifth Plaintiff

JASVINDER PAL SINGH GILL

Sixth Plaintiff

AMARJEET SINGH

Seventh Plaintiff

ANIL KUMAR

Eighth Plaintiff

VIKAS SAHARAN

Ninth Plaintiff

KANWAL JIT SINGH

Tenth Plaintiff

PRADEEP KUMAR

Eleventh Plaintiff

MANDIP SINGH GILL

Twelfth Plaintiff

SIKANDERJEET SINGH BAJWA

Thirteenth Plaintiff

[1]I have an application for discovery before me.

Background

[2]        The background to this matter was succinctly stated by Moore J in his judgment on strike out. I cannot improve upon it and it is repeated here:1

[6]        The 13 plaintiffs are (or were) all shareholders in Gold Line, and involved in it in some capacity, either as taxi drivers (for it or its subsidiaries), company directors and/or transport operators.

[7]        Gold Line was incorporated under the Industrial and Provident Societies Act 1908 (“the Act”). In short, Gold Line was established so the plaintiffs and others, who had previously been contractors for companies operating the Auckland Airport taxi rank, could be part owners in a business which held the tender for that taxi rank. Gold Line purchased Auckland Taxi Service Ltd (“ATS”) in order to bid for the tender, which it was awarded on 11 March 2013.

[8]        The present dispute stems from the departure of a former member, Manmohan Dua, who left Gold Line in 2013 for a competitor. He attempted to repurchase shares in 2015, but was denied. However, a new board of directors was appointed at an election in October 2015. Following the election, Mr Dua was then appointed as a director in early 2016. The plaintiffs allege this occurred without a Special General Meeting (“SGM”) being called. The plaintiffs also claim Mr Dua became “effective managing director” in late February 2016, and from that point took a number of unlawful actions which targeted former directors and the plaintiffs.

…..

[10] In essence, the plaintiffs allege procedural failures which include the failure to call an Annual General Meeting (“AGM”), transferring Gold Line’s business to a subsidiary, and closing the plaintiffs out of the business. They have challenged these actions on the basis they are ultra vires, unreasonable and non-compliant with the principles of natural justice. Because the parties have resolved the strike out application, little more needs to be said about the several heads of claim at this stage.

[3]        It transpires that the strike out application was withdrawn based on an agreement about the scope of the proceedings. It is helpful to record the agreement reached as to the issues to be raised by the amended pleadings, namely:

(a)SGM and constitutional review:

1      Deep v Auckland Gold Line Co-Operative Taxi Society Limited [2018] NZHC 499.

(b)Airport tender;

(c)Appointment of directors;

(d)Resolution to suspend meetings;

(e)Refusing SGM requisitions;

(f)Removal of members; and

(g)Access to documents.

The second amended statement of claim

[4]        The plaintiffs allege eight causes of action against the defendant, claiming the defendant (in summary):

(a)Made ultra vires decisions by refusing the plaintiffs access to Society information, and choosing not to call annual AGMs;

(b)Made an ultra vires decision in appointing additional directors without a proper purpose and appointing Mr Dua, despite a resolution which prohibited his appointment;

(c)Made an ultra vires decision in declaring a prohibition on meetings and elections;

(d)Did not act in accordance with natural justice when investigating the conduct of the plaintiffs, namely, by failing to adequately disclose relevant information, pre-determining the outcome of the investigation, and failing to consider the way the Society had previously determined such issues;

(e)Did not act in accordance with natural justice when making decisions about forfeiting the plaintiffs’ shares, namely, by improperly making the decisions for political reasons and showing bias;

(f)Acted illegally by refusing a requisition for a SGM and arranging for signatories to the requisition to withdraw their support;

(g)Did not treat members equally or consider the purposes of the Society in deciding to move the Society’s business into Auckland Taxi Service; and

(h)Acted illegally by holding an SGM without notifying the plaintiffs and purporting to make changes to the Society rules at it.

The discovery application

[5]The plaintiffs seek discovery and production of the following documents:

(a)The defendant’s shareholder register and share transfer book relating to the period since 1 October 2015 to date;

(b)All Board of Director Resolutions and Minutes since 1 October 2015 to date;

(c)The defendant’s annual financial accounts relating to the financial years ending March 2016 and March 2017; and

(d)The defendant’s bank statements from 1 October 2015 to date.

[6]        The applications are supported by an affidavit of Mr Jasvinder Gill. The affidavit is short, but attaches various documents, including correspondence and affidavits filed in the District Court. The probative value of much of this material is unclear. In any event, Mr Gill usefully summarises the basis for the discovery as follows:

3.Issues in the proceeding to which the documents sought in the application are relevant include:

3.1The plaintiffs allege that:

(a)Directors in the Society were invalidly appointed and shareholders have also been added at various times without asking existing shareholders;

(b)The Society misrepresented the terms of and then wrongfully altered the documents referred to as the

purported share surrenders and which the Society coerced the first to third plaintiffs to sign;

(c)It cannot be a coincidence that none of the plaintiffs received notice of the defendant’s Special General Meeting (SGM) 19 July 2017 and the Society must have deliberately refused to post notices of that SGM to the plaintiffs;

(d)The Society has deliberately tried to remove shareholders from the Society and replace them with non-shareholder drivers who have no rights but the plaintiffs do not know who is still listed as a shareholder in the Society;

3.2.The Society has made allegations against the plaintiffs (which are denied) and decisions to forfeit their shares and/or stop them from voting based on:

(a)Non-payment of levies against the plaintiffs based on an incorrect understanding of how many shares they each own and denial that Society levies are not required to be paid during periods when a shareholder’s vehicle cannot be operated for any reason outside that shareholder’s control;

(b)Misconduct relating to previous management but without allowing them access to the shareholder register and share transfer book to fairly defend themselves and despite having promised to do so.

4.I believe that the documents sought in the application (the relevant documents) are at the heart of this proceeding because they will help to prove the above issues and in particular whether the Society has:

4.1Treated all shareholders equally and in preference to non- shareholders;

4.2Acted honestly and fairly in creating the purported share surrender documents;

4.3Wrongfully ignored the previous bylaws and informal management of the Society when making politically motivated decisions to try remove shareholders.

5.In addition I believe that the underlying motives of the Society in refusing to disclose the relevant documents is that they will show that:

5.1The Society has tried to and/or succeeded in removing a large proportion of shareholders since Mr Dua became involved from about March 2016 and especially around June/July 2016 when the Society moved its business into Auckland Taxi Service Ltd (to avoid the District Court’s order over the other subsidiary Gold Line Taxi Limited). The removal of shareholders means that their bond money which the Society

holds will therefore be divided amongst fewer and fewer people;

5.2The Society’s directors have been paying themselves a significant amount of money and do not want to lose their position as directors therefore they have prohibited elections.

Plaintiffs’ case

Shareholder register/transfer book

[7]        The plaintiffs say that this class of document is relevant to the proceedings because:

(a)The transfer book and minutes will show that the Society often delegated decisions without formal resolution;

(b)The shareholder register and transfer book will show that until Mr Dua took power, the Society allowed share transfers with oral permission from the Board which bears on the claim by the seventh plaintiff, Amarjeet Singh, that the directors were wrong to hold that he had only one share because they do not have a formal written share transfer application;

(c)The shareholder register and transfer book will show that prior to the current directors the Society did not require levies to be paid by members during periods when their taxis were unable to operate, as well as showing that when this arises now, the new directors of the Society are selectively demanding levies from political opponents but not those members who are in their own faction; and

(d)The shareholder register will show that many shareholders have received permission from the Society to operate for other organisations at various times, which goes to the legitimacy of the directors’ claim that the plaintiffs breached their duties to the Society by driving for other companies;

Financial statements and bank statements

[8]The plaintiffs say that these documents are relevant because they provide:

(a)A granular level of information about levies paid by drivers, which is relevant to the plaintiffs’ claim that Mr Dua has allowed other shareholders to vote whilst not paying levies;

(b)Information about the sums the directors are now paying themselves.

Board of directors’ resolutions and minutes

[9]        The plaintiffs say that these documents are relevant because they show that when making the challenged decisions the directors and/or Mr Dua:

(a)Acted without authority from a board resolution and/or a vote at a general meeting;

(b)Acted with actual or apparent bias towards the plaintiffs, in particular because they will show if the directors ever made a formal board or SGM decision against the plaintiffs; and

(c)Failed to take into account relevant considerations including the Society’s rules, the purpose of the Society, the Society directors’ representations, and the Society’s direct control of subsidiaries.

Assessment

[10]      I decline to make the orders as sought. The central issue for discovery is relevance. The pleadings are prolix. Multiple allegations of misconduct are made in respect of the managing director, Mr Dua. But this is a judicial review proceeding about the lawfulness of specific decisions made by the defendant. Only documents that are relevant to the legality and or fairness (in an administrative law sense) of those decisions are relevant. General broad-brush claims of improper bias will not justify the type of open ended discovery now sought by the plaintiffs. Mr Khan’s contention

for the defendant, that the discovery sought is tantamount to a fishing expedition to bolster a generic claim of bias, is well made.

[11]      To illustrate, Mr Meys sought discovery of all the defendant’s Board minutes since 2015 because this might show inconsistent treatment by the Board of the plaintiffs as compared to other shareholders. Similarly, Mr Meys sought the financial statements of the defendant since October 2015 because it might show improper dealings by the directors. I am not prepared to make discovery orders on that wide- reaching basis for a judicial review claim about specified decisions. Discovery is not an opportunity to gather information in the hope of finding evidence that might corroborate serious claims tantamount to misfeasance. Such claims should not be made without prima facie evidence to support them.2 Mere speculation based on the impugned decisions made is not enough. Rather, the scope of the discovery sought must be properly tethered to the causes of action.

[12]      I have a further concern. The discovery application in respect of the share register and transfer book if granted, effectively renders the first cause of action moot. In that cause, the plaintiffs seek a declaration that the decision of the defendant to refuse to provide that information was unlawful. To my mind, it is patently an abuse of process to achieve by discovery what they might not achieve in the result.

[13]      Finally, as Mr Khan notes, the discovery is premature. The defendant has not yet filed complete affidavits in response to the pleaded claims. That affidavit evidence must respond to the claims and will need to include relevant supporting documentary evidence in respect of the decisions being challenged. Claims of bias will need a response to the extent they are relevant to the pleaded claims. Any affirmative response to the plaintiffs’ claims, for example about disparate treatment of shareholders based on non-payment of the levies, will need to be supported by financial records available to the defendant. Mr Khan will be familiar with his and the defendant’s obligations to the Court in terms of transparency. It may be that much of the documentary material sought will be provided as part of that process. To the extent that there is no documentary material directly on point, the evidence will need to state

2      Commissioner of Inland Revenue v Redcliffe Forestry Venture Ltd [2012] NZSC 94, [2013] 1 NZLR 804 at [33]

as much. If having reviewed this evidence, the plaintiffs are not satisfied with the discovery information, they may apply for specific further discovery.

[14]      I am prepared, however, to grant discovery on a tailored basis having regard to the decisions under review and each cause of action. Having discussed the claims with Mr Meys, I make the following orders:

(a)In respect of the share register and share transfer book, the defendant must discover all share register and share transfer book entries relating to the matters pleaded at [40] (including any records of dealings with Nardeep Singh’s share) and [84.1] (relating only to levies owed by Mr Gill and Mr Singh) of the Second Amended Statement of Claim (SASOC).

(b)In respect of the Board of Director Resolutions and Minutes, the defendant must discover all resolutions and minutes relating to the actions or decisions of the Board pleaded at [28], [29], [33], [34], [56], [76], [84], [91], [92], [93], [94] and [96.1] of the SASOC.

(c)In respect of the financial accounts and bank statements, the defendant must discover all financial accounts and bank statements relating to the levies referred to at [84.1] (relating only to the levies owed by Mr Gill and Mr Singh) of the SASOC.

(d)I grant leave to the parties to seek clarification as to the scope of discovery within 5 working days. For avoidance of doubt, none of these orders are intended to require the defendant to discover generally information held in respect of decisions or actions of the Board in relation to other shareholders. Rather, I anticipate the defendant will file affidavits responding to the general claims of bias with supporting information.

(e)I grant leave to the plaintiffs to seek further and better discovery within 10 working days of receipt of the defendant’s evidence.

[15]      No orders were made in respect of filing of evidence. The parties are to file a joint memorandum proposing a timetable for completion of the discovery process and exchange of evidence.

[16]      The defendant is entitled to its costs, on a 2B basis, on this application, less 10 per cent to reflect the plaintiffs’ partial success. Quantum will be fixed by the Registrar.