Domenico Trustee Ltd v Tower Insurance Ltd
[2014] NZHC 2657
•29 October 2014
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2013-409-000839 [2014] NZHC 2657
BETWEEN DOMENICO TRUSTEE LIMITED
Plaintiff/Respondent
AND
TOWER INSURANCE LIMITED Defendant/Applicant
Hearing: 13 October 2014 Appearances:
M C Harris for Tower Insurance Ltd, Applicant
GDR Shand for Domenico Trustee Ltd, RespondentD M Lester for Staples Can Ltd, 8D Project Management Ltd and Stephen Peter Betts
Judgment:
29 October 2014
JUDGMENT OF ASSOCIATE JUDGE MATTHEWS
[1] In this proceeding, the plaintiff (Domenico) sues Tower Insurance Limited (Tower) under an insurance policy over a property in Christchurch which was damaged beyond economic repair in the sequence of earthquakes in the Canterbury region in 2010 and 2011.
[2] The case has been managed under the case management protocol introduced for earthquake-related cases in the Christchurch Registry of the High Court.
[3] The close of pleadings date set by the Court was 22 August 2014. On
2 September 2014 Tower filed an interlocutory application for orders for particular discovery and for non-party discovery, and for an order directing Domenico to answer interrogatories.
[4] For the applications to be considered, Tower requires leave given that the close of pleadings date had passed by the time the application was filed. Domenico,
DOMENICO TRUSTEE LTD v TOWER INSURANCE LTD [2014] NZHC 2657 [29 October 2014]
and the non-parties against whom discovery orders are sought, oppose the granting of leave and oppose the substantive applications.
Relevant facts
[5] The property is a residence with an area of 100m2. Tower insured it for its full replacement value. After the damage was incurred Mr Da Col, the director of Domenico, lodged claims with Tower and EQC. Early in April 2013 Domenico settled with EQC. On 8 April 2013 Tower offered to pay Domenico $236,413 less EQC payments, and other necessary deductions. It was a term of the offer that Tower would also pay for additional costs actually and reasonably incurred when rebuilding took place. This offer was based upon assessments made on behalf of Tower of the expected costs of rebuilding.
[6] In response Mr Da Col advised Tower that his “research” indicated that the figure was “a bit low”. He asked Tower a number of questions. Tower considered the position and on 18 April 2013 raised its offer to $254,501, with EQC payments to be deducted as with the first offer. Again, this offer included a term that further costs actually incurred would also be met.
[7] Twelve days later Domenico issued this proceeding claiming that the cost of rebuilding would be $842,392, this sum being extracted from a document1 said to be a quantity surveyor’s report,2 which is annexed to the statement of claim.
[8] Up to this point Tower had been dealing directly with Mr Da Col. It transpired, however, that without Tower being informed Mr Da Col had engaged the services of one or more companies in a group of companies owned in whole or in part by Staples Can Limited. The only company owned in part is 8D Project Management Limited in which Staples Can Limited owned 70 per cent of the shares,
and Mr Stephen Betts and his son, Anson Betts owned 30 per cent of the shares.
1 The document is titled ‘Sales Summary by Cost Centres’ and ‘Sales Bill of Materials’, bears a logo ‘QS4 Less’, and a copyright notation in favour of iComply Ltd. Its author is not disclosed.
2 Submissions of counsel for the plaintiff dated 10 October 2014 paragraph 5.
[9] Another company in the ownership of Staples Can Limited, Claims Resolution Service Limited, holds itself out as assisting in the resolution of insurance claims resulting from the Canterbury earthquakes. Staples Can Limited is owned by Mr Bryan Staples, his wife, and a trust. Bryan Staples is a director of all the companies and until August 2014, Stephen Betts was a director of 8D Project Management Limited.
[10] In December 2012 Mr Da Col emailed an employee of the Staples Can
Limited group saying:
I’m hoping for around $240,000 excluding demolition and excluding
driveways, fences, paths in order to cover all costs.
The employee replied:
We will try, Stream were talking around $1800m2 so that’s $180k, generally
with properties like this we have been coming close to between $2400 and
$2900 but including driveways.
[11] Tower settled the claim in relation to hard landscaping for $31,199. The area of the house is 100m2. Adjusting for the accepted settlement for hard landscaping the indication from the Staples’ employee adjusts to a square metre rate for the house between $2,100 and $2,600, so Mr Da Col’s aspiration for a settlement around
$2,400 per square metre was within the band suggested by the employee.
[12] The sum claimed in the statement of claim equates to $8,423 per square metre.
[13] Tower then commissioned a geotechnical engineer’s report and provided it to Domenico. As a result Domenico reduced its claim to $655,401, which I take to reflect a reduction in the estimated cost of foundation work. This assessment of costs was prepared by Mr Stephen Betts.
[14] In June 2014 Tower obtained a rebuilding cost estimate of $347,990. On
14 August 2014 Mr Betts revised his estimate of rebuilding cost to $581,787 and on
25 August Domenico filed an amended statement of claim seeking judgment for that sum less EQC payments.
[15] Four days later Domenico served its briefs of evidence for trial. The brief of Mr Stephen Betts supported his estimate of $581,787 and a further brief was provided from Mr Stewart Harrison, another quantity surveyor, but unrelated in any way to the Staples Can Limited group, who estimated the cost of rebuilding at
$445,882.
[16] According to Tower, it has some experience of the work of member companies of the Staples Can Limited group, and Mr Stephen Betts. It raised these concerns in July 2014, in another case Pearce v Tower Insurance Ltd.3 The concerns related to the relationship between Mr Betts and other companies within the Staples Can Limited group given that Mr Staples was being relied upon by the group as an expert witness in cases where it was engaged to assist plaintiffs, as in the present case.
[17] Immediately after these concerns were raised the following occurred: (a) Mr Staples retired as a director of 8DPM on 6 August.
(b) Mr Staples was reappointed as a director of 8DPM on 12 August.
(c) Mr Stephen Betts resigned as a director and ceased to be a shareholder of 8DPM on 13 August.
(d) Mr Anson Betts ceased to be a shareholder of 8DPM on 13 August.
(e) Mr Stephen Betts was appointed as a director of another company, Urban Structural Services Limited (USS) on 13 August.
(f) Shares in USS were issued to Mr Stephen Betts on 19 August.
(g)Mr Anson Best was appointed as a director of USS and new shares were issued to him on 19 August.
(h)Mr Pavol Csiba, whom Tower describes as “another Staples Can expert” resigned as a director of USS and shares previously held by him
were transferred to Mr Stephen Betts on 21 August.
3 Pearce v Tower Insurance Ltd HC Christchurch CIV-2013-409-1732, 22 July 2014.
[18] All the documentation to give effect to these transactions was registered with the Companies Office by Mr Staples.
[19] USS had been incorporated on 30 June 2014 by Mr Staples.
[20] Mr Betts and Mr Staples are both shareholders in another company, Bright
Star Construction Limited, which was incorporated by Mr Staples on 31 March
2014. Mr Stephen Betts is the director and he and Mr Staples are both shareholders, with Mr Staples owning 70 per cent of the shares.
[21] Finally, in Rout v Southern Response Earthquake Services Ltd,4 Mr Stephen Betts gave evidence. The following passage appears in the record of cross- examination of Mr Betts:
Q. You’ve presently got an insurance claim with Southern Response haven’t you?
A. Yes.
Q. And it’s disputed isn’t it?
A. Well I haven’t seen any offers yet so I don’t think I’ve got anything to
dispute.
[22] However, prior to that Mr Betts in his personal capacity had commenced proceedings against Southern Response in relation to damage to a property of his. In the statement of claim he pleads:
The defendant has refused to meet its obligations under the policy because it has offered to pay only $237,107 less EQC payments of $115,000 to buy another house (when rebuild costs are about $1079,008.90) when the plaintiffs have suffered the total loss of the house.
Tower’s position in relation to Mr Betts
[23] Tower says that Mr Betts is not an independent expert entitled to give evidence in that capacity in the High Court. It says that he is financially involved in the Staples Can Limited group and another company which he co-owns with
Mr Staples, and one of the companies in the Staples Can Limited group, Claims
4 Rout v Southern Response Earthquake Services Ltd [2013] NZHC 3262.
Resolution Service Limited, is advising Domenico in this proceeding in return for a fee assessed as a percentage of the sum recovered. It says that recent changes of ownership of shares in 8DPM and USS affect only the form but not the substance of that involvement. Further it says that on the face of the record in Rout v Southern Response Earthquake Services Ltd Mr Betts misled the Court and when asked for an explanation he has failed to give one, and that he failed to disclose his relationship with the Staples Can Limited group or the fact that he was himself a plaintiff against Southern Response when he presented his expert evidence in that case.
[24] Tower intends to challenge the admissibility of any evidence from Mr Betts in this case. In doing so it will rely on the facts I have set out. To support its challenge it seeks answers to interrogatories and it seeks discovery of documents on a formal basis.
Should leave be granted for these applications to be brought?
[25] In support of his application for leave Mr Harris relies on the filing of an amended statement of claim by Domenico after the close of pleadings date and the re-arrangement of the corporate affairs of the Staples Can Limited Group between
6 and 21 August 2014, almost immediately before the close of pleadings date.
[26] Mr Shand says the proceeding was commenced in April 2013 and has been through numerous conferences and interlocutory processes. There are no reasons why the present applications could not have been made earlier. He notes they were not raised at the case management conference on 14 August 2014. He says the trial will take place shortly, witness statements with relevant documents attached have been exchanged without issue being taken in respect of them, the questions covered by the interrogatories can be asked of witnesses at trial and all relevant documents appear to have been produced.
[27] I am satisfied that leave should be granted in this case for the following reasons:
(a) There are real issues which will come before the Court in relation to the admissibility of evidence from Mr Stephen Betts. The applications relate directly to his involvement in the case on behalf of Domenico.
(b)At least until the reorganisation of the corporate affairs of the Staples group in August Mr Betts had a financial interest in a company within that group, and the rearrangement took place immediately before the close of pleadings date. Domenico could not reasonably be expected to have known of the rearrangements or, even if it did know, to have properly considered them and taken active steps in relation to how it might respond to those changes prior to the close of pleadings date.
(c) There is no trial date set, though a two day trial is anticipated in the relatively near future.
(d)The evidence provided to Tower from Mr Betts is highly material to Domenico’s claim. As well, were it to be accepted, it is highly material to the fee which would be received by Claims Resolution Service Limited, a member of the Staples group. Although on the face of the material before me it is not apparent that Mr Stephen Betts will personally benefit from any increase in income that acceptance of his evidence might bring that company, examination of the interrelationship of the companies in the Staples group at trial may paint a different picture, given the direct personal involvement of Mr Staples, the sole director of Claims Resolution Service Limited, in the steps taken to divest Mr Betts of his shares in 8D Project Management Limited, and install him in another company previously directed and owned by an employee of one of Mr Staples’ companies. There is force in the argument that the Court will look to the substance of Mr Betts’ involvement in the Staples group rather than the form.
(e) The overall justice of the case requires that an opportunity be given to
Tower for judicial consideration of its applications.
[28] I accordingly grant leave for these applications to be brought.
Interrogatories
[29] Tower issued a notice to Domenico on 21 August 2014 requiring it to answer nine interrogatories. Of these, it no longer pursues the first six. It asks for an order that the following interrogatories be answered:
(a) Mr Da Col advised Tower on or around 18 April 2013 that he had carried out research into the costs of rebuilding the plaintiff’s house. What research or inquiry has been carried out by or on behalf of the plaintiff at any time since the September 2010 earthquake as to the costs of rebuilding the house, and what were the findings of that research and inquiry?
(b)Has the plaintiff obtained any estimates of, or advice or opinions as to, the costs of rebuilding the house at any time since the September 2010 earthquake that it has not already disclosed to Tower?
(c) If the answer to (b) is yes, what were those estimates, advice or opinions?
[30] Rule 8.3 empowers the Court at any stage of any proceeding to order any party to file and serve on any other party a statement in answer to interrogatories specified or referred to in the order. The interrogatories must relate to matters in question in the proceeding, but an order must not be made unless the Court is satisfied that it is necessary at the time when it is made.
[31] In Commerce Commission v Air New Zealand Ltd (No 6), Asher J said:5
It is therefore a legitimate purpose of interrogatories such as these that they are designed to obtain admissions of facts which will support the case of the interrogating party, the Commerce Commission, or damage the case of the parties interrogated, the airlines. “Necessary” does not mean as is suggested in some of the submissions for the defendant airlines, that the questions relate to facts crucial to the interrogating party proving its case. The threshold is not that high. Rather, necessary questions can include questions that may indirectly prove the key facts relied on. They may establish or form a step in establishing the allegations made.
5 Commerce Commission v Air New Zealand Ltd (No 6) [2012] NZHC 2113 at [18]; citing Shore v
Thomas [1949] NZLR (SC) at 695.
[32] Mr Shand says that the three interrogatories now in issue are not necessary. He says that Domenico is not seeking to recover compensation based on its estimates as at April 2013, but on professional assessments of cost now before the Court.
[33] Mr Harris says that all three questions concern the central matter in issue in this case, the cost of rebuilding the house. He notes that it was as recently as
15 September 2014 that Domenico disclosed five documents, one of which revealed Mr Da Col’s expectation that $240,000 would be adequate to cover all costs. He says that Domenico has not explained its failure to disclose these documents during the discovery phase of interlocutories, managed by the Court, and that given the information in the email in question Domenico must have obtained estimates of or advice or opinions in relation to the costs of rebuilding in order to have formed the views expressed in the email.
[34] In my opinion it is necessary that the three interrogatories be answered. First, they are questions which, in terms of Commerce Commission v Air New Zealand Ltd, may indirectly establish or form a step in establishing the correct outcome on the plaintiff’s claim. The view expressed by Mr Da Col, personally, in an email in April
2013 is manifestly at odds with the claim made by his company in its pleading just a matter of days later. It is also manifestly at odds with the claim as it is now framed, yet broadly it aligns with the views of another advisor Mr Da Col had at the time, a Mr Cattermole who, Tower says, has not featured any further during the progress of this litigation.
[35] Secondly, whilst Mr Shand’s argument that the final outcome of the case will now be guided by the evidence of current estimates of cost has a persuasive quality, the estimates of that cost in this case are exceedingly wide-ranging, and those initially referred to by Mr Da Col might support the assessments now made on behalf of Tower, even though they differ by several hundred thousand dollars from the estimates put forward now by Mr Da Col, and in particular the estimates given by Mr Betts on his behalf. I accept that there has been significant inflation in building costs since April 2013 and that there is now a more clear picture of the requirements for the foundations of the building than appears to have been in sight at that time. Nonetheless, the defendant and the Court are entitled to such assistance as
may be relevant to the determination that lies ahead and in my view that includes assessment of the information Mr Da Col had in the period up to the filing of this proceeding.
[36] In Mr Da Col’s brief of evidence there is reference to information he received from EQC in relation to required repairs to the property and an independent damage assessment completed by Earthquake Services. It is not clear whether this is the information referred to by Mr Da Col in his email exchange in April, or information that he relied on informing his view on the amount it would cost to rebuild the house.
[37] Mr Shand says that Mr Da Col’s affidavit in opposition to this application
also answers the interrogatories given. At paragraph 8 of his affidavit of
15 September 2014, below a subheading “Research”, Mr Da Col specifically refers to Tower having asked him about research regarding building costs which are referred to in his email of 10 April. He then says:
On 10 April 2013 my research into the costs of rebuilding my house consisted of a consultation with CRS and engagement of a quantity surveyor in November 2012.
[38] There is no mention of the engagement of a quantity surveyor in November
2012, in Mr Da Col’s brief of evidence, unless this is the document he describes as an independent damage assessment report completed by Earthquake Services, which he says was completed on 4 December 2012. However, this is not described as a report from a quantity surveyor, and in any event it was obtained in December not November. Neither the affidavit nor the brief, nor both read together, satisfactorily answer the questions in the interrogatories.
[39] Mr Shand suggests that the interrogatories are seeking evidence, not facts, but I disagree. The questions are phrased so as to elicit specific facts. For completeness I record that I do not consider the interrogatories to be oppressive.
Discovery
[40] Tower seeks discovery of six classes of documents which it says ought to have been discovered by Domenico. It says they are or have been in the control of
one or more of Domenico, Staples Can Limited, 8D Project Management Limited and Stephen Betts, are relevant to assessing the admissibility and/or the weight that may be given to the costings on which Domenico relies and has relied in this proceeding, and to assessing costs in this proceeding.
[41] The first specified class of documents is all documents which would be discoverable by Domenico under an order to make standard discovery.
[42] The remaining classes of documents are those which evidence the relationship of Domenico to Claims Resolution Service Limited or any other member of the Staples Can group, those which evidence the relationship of Mr Betts with 8D Project Management Limited or any other member of the Staples Can group, documents relating to various aspects of the transactions which I have described in paragraphs [17] to [19], above, and documents evidencing the basis on which Mr Stephen Betts received or has received, or may in the future receive, any direct or indirect financial benefit in connection with this proceeding or his
association with any member of the Staples Can group.6
[43] It is convenient to consider the application by reference to two separate groups of documents, first those said to be discoverable by Domenico under an order made for standard discovery.
[44] In relation to these documents, Mr Shand says that informal discovery has been given, no order for standard discovery has been made (in accordance with the usual practice in the earthquake list) and Tower has never asked for standard discovery at any court conference, even the most recent on 14 August 2014. He says it is difficult to see that there are any other documents that meet the adverse documents test by reference to the issues requiring determination at trial, beyond those which have already been produced. He says an order for standard discovery at this stage of the proceeding is not necessary in order to do justice between the
parties.7 Mr Shand says there are only two issues for the Court to determine, the cost
6 The orders sought are set out with particularity in Schedule 1 of the Notice of Application dated
2 September 2014, which includes a detailed diagram of the ownership structure of the Staples
Can group after the registration of documentation on 13 August.
7 Air National Corporate Ltd v Aiveo Holdings Ltd [2012] NZHC 2258.
to rebuild the current house on its current site, and whether Tower is liable to pay the rebuild cost less EQC payments, in cash. When discovery is considered in relation to these issues, the orders sought are not necessary.
[45] Mr Harris says that Domenico has never made full informal disclosure as directed by the Court. A request that it do so after the last conference was met with a response from Domenico that it would attach relevant documents to its briefs of evidence. This does not satisfy Tower.
[46] Mr Shand notes that in its notice of opposition to this application Domenico says it has apparently provided all documents required under a standard discovery order, but Mr Harris takes issue with the word “apparently”. Domenico served an affidavit from Mr Da Col a week after the opposition. Before that Domenico disclosed five more documents, one of which was the document which revealed Mr Da Col’s expectation early in 2013 that $240,000 would be adequate to “cover all costs”. Another was a document relating to a proposal that instead of building in Christchurch, a house be built in Wellington, and the estimated building cost for a house 20 per cent bigger than the subject house was $342,000. Mr Harris says the late discovery of these documents shows that Mr Da Col has not turned his mind to his obligations under a standard discovery order. No explanation has been given by him on why he failed to disclose these two documents earlier.
[47] Further, although Mr Da Col said in his affidavit that he had disclosed the agreement between Domenico and Claims Resolution Service Limited, the papers in fact provided do not run or fit together, judging by their numbering and the sequences of clauses within them.8
[48] Mr Harris notes that Tower’s records show that over 110 email exchanges with Mr Da Col took place but Mr Da Col has discovered only a small selection of emails. Those which have been provided show that he is, as Mr Harris puts it,
careful and thorough. He takes notes of discussions, and those notes show not only
8 Another copy of a document which is said to be an agreement of this kind has now been provided. I note that it still suffers from one of the shortcomings identified by Mr Harris, namely that the front page is described as page 1 of 3, but the second page is described as page 2 of 2. I did not receive any more submissions on this document.
the date but the precise time of those discussions. Mr Harris says that a careful and thorough person like Mr Da Col would have more documents to discover.
[49] As an instance, Mr Harris notes reference by Mr Da Col, in a conversation with Tower, to his seeking assistance from “my Christchurch builder, with insurance claims”. Mr Harris says it would be surprising if he had not discussed with that person the costs of rebuilding, and it would be surprising as well if he did not keep email notes or any other records of any such discussions.
[50] I am satisfied that a formal order for standard discovery is appropriate notwithstanding that evidence has already been exchanged. My reasons for this are:
(a) The documentation provided informally is indeed sparse. I accept the evidence that Mr Da Col is thorough in his note-taking and I note the extent of the exchange of emails with Tower. It is highly likely there are other relevant documents which should be discovered.
(b)Some of the documents disclosed so far strongly suggest that other documents are in existence.
(c) Tower is entitled to see, and has not seen, all relevant emails, reports and assessments in relation to the work required to rebuild the house and the cost of it, and these should be provided formally from the time of damage to the house to date. This includes notes of discussions Mr Da Col had with any other parties, for instance (but without limitation) the builder he has described, and his advisor, Mr Cattermole.
(d)There are grounds for the Court to be particularly concerned that formal standard discovery is given in this case, instead of informal.
(i) The huge disparity between the sum claimed in the first statement of claim and the sum which almost contemporaneously with that was Mr Da Col’s own expectation of the outcome of his insurance claim.
(ii) Domenico seeks to rely on evidence from Mr Stephen Betts who, on the face of the record in another case, appears to have been untruthful in evidence given to this Court.
(iii) Further relevant documents were provided by Domenico after it had filed its notice of opposition in which it said that all relevant documents had apparently been disclosed.
(e) Although there will be some cost to Domenico in giving formal discovery I am satisfied that cost is not disproportionate to the extent of this claim, which is for a sum around $600,000.
(f) As this case is awaiting allocation of a fixture on a backup basis there is a possibility of there being some delay to a trial but I find that any disadvantage in that is outweighed by the need for Domenico to give a formal response to its discovery obligations.
[51] The balance of Tower’s application for discovery of documents raises different issues. The documents sought are said by Mr Harris to be relevant to the admissibility of Mr Stephen Betts’ evidence and the weight, if any, that should be attached to it. Mr Harris squarely puts in issue whether Mr Betts should be allowed to present opinion evidence to the Court on the basis of being an expert.
[52] Mr Harris presented a detailed argument in support of his contention that Mr Betts’ evidence could not be so admitted. He relies principally on two propositions: first, that this is a case where the position of the proposed expert is so lacking in independence that it is obvious that his expression of opinion will not be able to be substantially helpful,9 and secondly, that a witness who has a financial interest in the outcome of a case, because his fee will be derived on a contingency
basis, would only very rarely be accepted by the Court.10
9 Commissioner of Inland Revenue v BNZ Investments Ltd [2009] NZCA 47, (2009) 19 PRNZ 553.
10 R (Factortame Ltd) v Secretary of State for Transport [2002] 4 All ER 97 (CA) at [73]; Donovan
Drainage & Earthmoving Ltd v Halls Earthworks Ltd HC Auckland CIV-2010-404-29,
10 November 2010 at [55].
[53] As well Mr Harris says Mr Betts could not properly give expert evidence against Tower given that he is separately suing Tower in respect of his own alleged losses.
[54] In light of those principles Mr Harris gives nine reasons why Mr Betts’ evidence is not admissible. I need not record them in this judgment because they will be fully aired if Domenico seeks to call Mr Betts at trial. Mr Harris says, however, that the documents within the categories he seeks must be disclosed to enable Tower to argue, and then the Court to determine, whether Mr Betts’ evidence should be admitted. He notes that Mr Betts has not himself sworn an affidavit in opposition to this application and he describes the evidence put in by Mr Da Col and Mr Staples as amounting to a carefully worded, unsubstantiated explanation. He says that in Commissioner of Inland Revenue v BNZ Investments Ltd the Court of Appeal said that where the position of a proposed expert is so lacking in independence as to make it obvious that his opinion will not be substantially helpful, it may be appropriate to rule out the evidence before the trial. Mr Harris says that Tower should have access now to the documents which it requires in order to substantiate its objection to Mr Staples’ evidence, so that it can consider whether to make a pre-trial application that the evidence not be admitted or, in the alternative, to mount a comprehensive challenge at trial. This could jeopardise the trial fixture as relevant documents would be sought in cross-examination.
[55] Mr Harris draws a distinction between a challenge to admissibility, and a challenge to credibility. He accepts that discovery is not generally available for the latter. He says that challenges to admissibility are rare and he accepts that documents could not be sought unless there were a proper ground for an inquiry by the Court on admissibility.
[56] Mr Shand says that it is an established principle that discovery of documents cannot be ordered where their only relevance is to the credibility of a witness. He relies on Thorpe v Chief Constable of Greater Manchester Police,11 Favor Easy
Management Ltd & Anor v Wu & Ors,12 and George Ballantine & Son Ltd v FER
11 Thorpe v Chief Constable of Greater Manchester Police [1989] 1 WLR 665.
12 Favor Easy Management Ltd & Anor v Wu & Ors [2011] 1 WLR 1803.
Dixon & Son Ltd.13 He says that the documents sought have no relevance to the issues which will be determined by the Court at trial.
[57] Mr Lester, representing the non-parties against whom discovery is sought, notes that s 25 of the Evidence Act 2006 provides that the opinion of an expert is admissible if the Court is likely to obtain substantial help from the opinion in understanding other evidence in the proceeding, or in ascertaining any fact that is of consequence to the determination of the proceeding. Mr Lester says that the test of substantial helpfulness conflates the former common law tests of reliability and
probative value.14
[58] Mr Lester says that discovery cannot be ordered in order to challenge reliability, so could only be ordered if the documents would assist in assessing the probative value of the evidence. They would not. Further, he says that the documents sought are intended to be used to show bias on the part of Mr Betts on the basis that he has a financial interest in the outcome of the case, but the evidence before the Court at present is that Mr Betts will receive nothing but a professional fee for his services as a quantity surveyor. He says there is no evidence of any financial interest but there is evidence to the contrary. Therefore, this application amounts to seeking discovery on the basis of a suspicion.
[59] In Thorpe v Chief Constable of Greater Manchester Police the Court of Appeal set out certain limitations on the generally accepted principles of discovery of documents, as they then stood in England. Dillon LJ said:15
The first is that the court should not order discovery, or interrogatories which are a form of discovery, on matters which would go solely to cross- examination as to credit. I think that Walton J was right, in George Ballantine & Son Ltd. v. F.E.R. Dixon & Son Ltd [1974] 1 WLR 1125 to deduce that limitation from the judgment of A L Smith LJ in particular in Kennedy v Dodson [1895] 1 Ch 334, although the actual decision in George Ballantine & Son Ltd. v. F.E.R. Dixon & Son Ltd. is better put on the different ground that the discovery sought was in itself oppressive. It would indeed be an impossible situation in my view if discovery had to be given of every document, not relevant to the actual issues in the action, which might
13 George Ballantine & Son Ltd v FER Dixon & Son Ltd [1974] 1 WLR 1125.
14 Citing Richard Mahoney and others The Evidence Act 2006: Act and Analysis (3rd ed, Thomson
Reuters,Wellington, 2014).
15 Thorpe v Chief Constable of Greater Manchester Police, above n 11, at 669.
open up a line of inquiry for cross-examination of the litigant solely as to credit.
[60] In West Harbour Holdings Ltd (in liq) v Tamiheri,16 Associate Judge Bell said by reference to Thorpe:17
... it is still important to recognise the principle that was established in that case. The English Court of Appeal gave that decision when the Peruvian Guano test for relevance still held sway in England. To the extent that there is a more restrictive approach to discovery in both England and New Zealand now, the policy against discovery of documents going only to credit applies even more strongly now than it did then.
[61] The fundamental rationale for declining discovery of documents sought only for impeachment of credibility, is that discovery:18
… would become gravely oppressive and time-consuming if there were an obligation on a party to disclose any document which might provide material for cross-examination as to his credit-worthiness as a witness. The present practice is a salutary one which helps to keep discovery within reasonable and sensible bounds.
[62] There is no doubt that discovery of documents sought only to challenge credibility are not the subject of standard discovery obligations.
[63] The English Court of Appeal addressed this issue again in Favor Easy
Management Ltd v Wu. The Court referred to two rules relating to discovery, CPR
31.6 and CPR 31.12. The former sets out the requirements of standard disclosure which broadly mirror r 8.7 of the High Court Rules, which defines standard discovery.
[64] CPR 31.12 provides for the Court to make an order for specific disclosure of documents or classes of documents specified in the order, or to take other related
steps.
16 West Harbour Holdings Ltd (in liq) v Tamiheri & Ors [2014] NZHC 716.
17 At [29].
18 Thorpe v Chief Constable of Greater Manchester Police, above n 11, at 673 per Neill LJ.
[65] The Court said:19
Mr Trace made the point that the Civil Procedure Rules are intended to be a flexible regime. There is some force in that. It may very well be, although it would be inappropriate for us to decide in this case, that CPR 31.12, which is concerned with specific disclosure, can be invoked in an appropriate case by a party seeking disclosure of documents to impugn the credit of another party. CPR 31.12 is not expressly limited to CPR 31.6, and does not refer to standard disclosure, and I note that CPR 31.6 is linked to CPR 31.5, which again is concerned with standard disclosure. I can, therefore, see a real argument for saying that CPR 31.12 would, in an appropriate case, enable the court to order disclosure of documents falling within the exception laid down in Thorpe. However, it would be inappropriate and unnecessary to decide that point here.
[66] The High Court Rules do not contain a rule which is in the same or similar terms to CPR 31.12. The Court may, however, order discovery under r 8.19 after a proceeding is commenced if at any stage of the proceeding it appears to a judge either from evidence or from the nature or circumstances of the case or from any document filed in the proceeding that there are grounds for believing that a party has not discovered one or more documents or a group of documents that should have been discovered. In this event the Judge may order that party to give discovery of those documents.
[67] This rule was discussed in Air National Corporate Ltd v Aiveo Holdings Ltd. Asher J said:20
It is implicit in r 8.19, as before 1 February 2012, that documents will only be directed to be discovered if they can be shown to be discoverable under the general rules relating to discovery. Under those rules there are two kinds of discovery, standard and tailored discovery. Under r 8.7 the test for standard discovery particularises the traditional concept of relevance. It requires each party to disclose:
“(a) documents on which the party relies; or
(b) documents that adversely affect that party’s own case; or (c) documents that adversely affect another party’s case; or (d) documents that support another party’s case.”
Under r 8.8 it is provided:
19 Favor Easy Management Ltd & Anor v Wu & Ors, above n 12, at [20].
20 Air National Corporate Ltd v Aiveo Holdings Ltd, above n 7, at [16]-[18].
“8.8 Tailored Discovery
Tailored discovery must be ordered when the interests of justice require an order involving more or less discovery than standard discovery would involve.”
(emphasis added)
The duty to co-operate applies to all the processes of discovery and inspection, which implicitly includes particular discovery.
A decision as to whether there should be particular discovery under r 8.19 is by definition a decision as to the discovery of a specific document or documents, and therefore tailored to the particular requirements of the case. The starting point is still the relevance of the document, as with the standard discovery test, but particular discovery under r 8.19 can be refused for documents that would otherwise be relevant and therefore discoverable under standard discovery, if that discovery would be contrary to the interests of justice. Particular discovery will not, for instance, be allowed if the costs of further discovery are disproportionately high in comparison with the matters at issue. On the other hand, particular discovery on a “train of enquiry” basis could be ordered in certain circumstances such as a fraud claim, if that was in the interests of justice.
The starting point remains as it was before the 2012 amendments, an assessment of the relevance of the documents. But more explicitly than before the Court must also consider whether it is in the interests of justice to order the particular discovery, and the Court in this regard will consider the matters at issue and in particular the proportionality of the cost of particular discovery in comparison with those issues.
(footnotes omitted)
[68] I respectfully adopt this approach to r 8.19.
[69] By an order of tailored discovery the Court may order more discovery than would be required under standard discovery when the interests of justice so require. Such an order is specific to the circumstances of each case. The giving of tailored discovery is a measured response to those circumstances. Thus, it is not a form of discovery which would necessarily be disproportionately burdensome, and, in particular, it is a form of discovery which in itself keeps discovery within
“reasonable and sensible bounds”.21 It follows that the rationale which supports the
general prohibition of discovery of documents sought only to impugn credibility is built into tailored discovery. This being the case I see no need for that general rule to prevent the Court ordering tailored discovery of such documents when the interests
of justice require.
21 See Thorpe v Chief Constable of Greater Manchester Police, above n 11, at [62].
[70] Therefore I consider that r 8.19 permits the Court to order disclosure of documents required to impugn the credibility of a witness just as CPR 31.12 may be seen to give that power in England. The order would be for tailored discovery, and the reason for making such an order would be that the interests of justice require it. Similarly, an order could be made under r 8.8 earlier in a proceeding, though it is less likely, as the basis for so doing is not as likely to be apparent at that point.
[71] For these reasons, although the principle recognised in Thorpe and applied subsequently in New Zealand is undoubtedly of general application and applies to standard discovery, I do not consider that the door is closed on an application for tailored discovery of documents that may impugn the credibility of another party or witness. The question will be, in terms of r 8.8, whether the interests of justice require that an order be made. For that finding to be made an applicant will need to satisfy the Court that is the case, and that proportionality favours the making of an
order. Proportionality is enshrined in the High Court Rules.22
[72] Given this decision, it is unnecessary to canvass the arguments presented on whether there is a distinction, for the purposes of discovery, between a challenge to credibility and a challenge to admissibility.
[73] Tower seeks discovery of documents in five classes. I am satisfied that a sufficient evidentiary foundation has been laid for an order for tailored discovery. I need not analyse the evidence again in this context. It is sufficient to note that there is evidence of Mr Betts having a financial involvement in the group, having disposed of that interest and obtained an interest in another company from another party associated with Mr Staples, and the group having a direct financial interest in the outcome of this proceeding.
[74] First, Tower seeks:
(b) all documents evidencing the relationship of the plaintiff to Claims Resolution Service Limited or any other member of the Staples Can group.
22 High Court Rules, r 8.2.
[75] Mr Shand says there are only two documents in this category, a contract between Mr Da Col and EQ Fast Solutions Limited and a contract between Mr Da Col and Claims Resolution Service Limited. He says both have been supplied. Given that discovery is to be ordered, the affidavit should include reference to all documents in this category, for the sake of completeness. Copies provided so far are criticised by Mr Harris as I have recorded at paragraph [48]. A further set of copies was supplied by memorandum after the hearing closed but the copies received by the Court do not appear to be complete either. If necessary, the originals will need to be made available for physical inspection.
[76] Secondly, Tower seeks:
(c) all documents evidencing the relationship of Mr Stephen Betts to 8D Project Management Limited and any other member of the Staples Can group … including:
(i) any documents evidencing any direct or indirect financial interest that he had in any member of that group at any time during the course of this proceeding;
(ii) all communications between Mr Betts and Mr Bryan Staples on or after 10 July 2014 concerning his relationship with 8D Project Management Limited and any other member of the Staples Can group;
(iii) all documents relating to Mr Betts ceasing to be a director and shareholder of 8D Project Management Limited on 13 August
2014 and the reasons therefor;
[77] Documents in this general category all bear on the critical issue of Mr Betts’ independence and are thus relevant to the assessment that the Court must make on whether his evidence should be admitted, and if so, the weight which should be given to it. It must be remembered that the challenge to Mr Betts is wider than an allegation that he derives a financial advantage from giving evidence for companies assisted in their claims by member companies of the Staples Can group. There is also evidence that he may be under the control of Mr Staples to some degree, as Mr Staples orchestrated the transactions set out in paragraph [17].
[78] The documents described in sub-paragraph (i) relate to financial interest. There is evidence that Mr Betts was only paid a normal professional fee for his services as a quantity surveyor. There are other elements, however, to a financial
involvement with a group of companies apart from the derivation of income. An example is given by the ownership and then divestment of shares in a member company of that group.
[79] The documents described in (ii) and (iii) all relate to the transactions described in [17]. Again, they are relevant to financial interest, and the degree of control Mr Staples had over Mr Betts’ activities.
[80] Thirdly, Tower seeks:
(d) all documents relating to the incorporation of Urban Structural Services Limited, the appointment of Mr Betts as a director and issuance of shares to him on 19 August 2014, the transfer of shares from Mr Csiba to Mr Betts on 25 August, and the reasons therefor;
[81] Mr Harris accepts that documents of which there are copies registered at the Companies Office should be excepted from any discovery order. Plainly that is appropriate. Most documents in this category would appear to be documents which can be sourced at the Companies Office, but documents relating to reasons for the transactions, and any financial aspects of them, are relevant for the reasons I have given.
[82] Fourthly, Tower seeks:
(e) all documents relating to Mr Bryan Staples ceasing to be a director of
8D Project Management Limited on 6 August 2014 and his reappointment as a director on 12 August 2014, and the reasons therefor;
[83] The documents sought in relation to Mr Staples and his directorship of 8D Project Management Limited are not in my opinion relevant to the admissibility of the evidence of Mr Betts.
[84] The final category of documents sought is:
documents evidencing the basis on which Mr Betts receives (or has received or may in the future receive) any direct or indirect financial benefit in connection with this proceeding or his association with any member of the Staples Can group (with disclosure of commercially sensitive financial terms being subject to appropriate confidentiality arrangements).
[85] Documents in this category bear on the critical issue of Mr Betts’ financial involvement with members of the Staples Can group and, in particular, his derivation of any direct or indirect financial benefit in connection with this proceeding. I have considered whether the extension of the request to Mr Betts’ association with any member of the Staples Can group should be the subject of discovery. In the context of the discovery of documents for the purpose of assessing the admissibility of Mr Betts’ evidence as an expert I find documents in this category to be relevant, even though it appears that documents may be included within this phrase which are outside the ambit of this proceeding. This is because in my judgment, should Mr Betts be in receipt of any direct or indirect financial benefit as a result of his association with any member of the Staples Can group, that is relevant to the decision the Court will be required to make in relation to the admissibility of his evidence.
[86] I am satisfied that the giving of discovery in the terms I will set out will not be disproportionate to the sum at stake in this case.
[87] Finally, an alternative to ordering discovery now is to leave it to Mr Harris to cross-examine Mr Betts when he presents his evidence and seek from him documentation at that time. Given the apparent complexity of the arrangements in respect of which I am ordering discovery, I think it unsatisfactory from the point of view of Tower and the Court that an investigation into these issues takes place without prior consideration of relevant documentation. There is a real prospect that counsel would ask questions of Mr Betts on the very topics on which Tower seeks discovery. Having the documents in advance will focus any questioning that takes place, and avoid the possibility of the trial having to be delayed while documentation is searched and produced in order to answer questions or challenge or substantiate answers that may be given to them.
[88] That is not to encourage Tower to bring an application for a ruling in advance of trial on the admissibility of the evidence of Mr Betts. It is for Tower to make its own decision on how to deal with that issue.
[89] Some of the documents which are to be discovered are held by the non- parties. They are to give discovery of documents they hold in the required categories.
Orders
[90] I make the following orders:
Leave
[91] Leave is granted for Tower to bring the interlocutory application dated 2
September 2014 for orders requiring answers to interrogatories and discovery.
Interrogatories
[92] The plaintiff will file and serve on Tower a statement prepared in accordance with r 8.39 in answer to the following interrogatories:
(a) Mr Da Col advised Tower on or around 18 April 2013 that he had carried out research into the costs of rebuilding the plaintiff’s house. What research or enquiry has been carried out by or on behalf of the plaintiff at any time since the September 2010 earthquake as to the costs of rebuilding the house, and what were the findings of that research and enquiry?
(b)Has the plaintiff obtained any estimates of, or advice or opinions as to, the costs of rebuilding the house at any time since the September 2010 earthquake that it has not already disclosed to Tower?
(c) If the answer to (b) is yes, what were those estimates, advice or opinions?
(d)The statement in answer to these interrogatories will be verified by affidavit.
Discovery
[93] Domenico will give standard discovery to Tower in accordance with the provisions of the High Court Rules. As well, by way of tailored discovery, each of
Domenico, Staples Can Limited, 8D Project Management Limited and Stephen Peter Betts will file and serve an affidavit stating whether the documents listed below are or have been in their control and if any such documents have been but are no longer in their control, their best knowledge and belief as to when the documents ceased to be in their control and who now has control of them.
The documents are:
(a) All documents evidencing the relationship of Domenico to Claims Resolution Service Limited or any other member of the Staples Can group.
(b)All documents evidencing the relationship of Mr Stephen Betts to 8D Project Management Limited and any other member of the Staples Can group including:
(i) any documents evidencing any direct or indirect financial interest that he had in any member of that group, at any time during the course of this proceeding;
(ii) all communications between Mr Betts and Mr Bryan Staples on or after 10 July 2014 concerning his relationship with 8D Project Management Limited and any other member of the Staples Can group;
(iii) all documents relating to Mr Betts ceasing to be a director and shareholder of 8D Project Management Limited on 13 August
2014 and the reasons therefor;
(iv) all documents relating to the incorporation of Urban Structural Services Limited, the appointment of Mr Betts as a director and issuance of shares to him on 19 August 2014, the transfer of shares from Mr Csiba to Mr Betts on 25 August, and the reasons therefor;
(v) documents evidencing the basis on which Mr Betts receives (or has received or may in the future receive) any direct or indirect financial benefit in connection with this proceeding or his
association with any member of the Staples Can group (with disclosure of commercially sensitive financial terms being subject to appropriate confidentiality arrangements).
[94] Timing and form:
(a) The affidavit sworn in answer to the interrogatories is to be filed and served within 15 working days.
(b) Each affidavit discovering documents is to be filed and served within
15 working days.
(c) The documents discovered will be made available for inspection in accordance with r 8.27. The listing and exchange protocol in Part 2 of Schedule 9 will apply unless otherwise agreed by Domenico and Tower.
Costs
[95] Domenico will pay costs to Tower on a 2B basis plus disbursements fixed by the Registrar.
Further memorandum
[96] After I reserved my judgment at the conclusion of argument, and at a point when the judgment had been prepared and its release awaited only my completion of another hearing, I received a memorandum from Mr Harris drawing my attention to R v Sullivan (No 7),23 a judgment dated 6 May 2014 but suppressed by the Court until recently. Mr Harris invited me to ask for further submissions as a result of this judgment.
[97] It concerns disclosure in a criminal prosecution and although it refers to independence of expert witnesses, I do not find it of assistance in the present case. My decision concerns orders by the Court for tailored discovery of documents,
pursuant to the High Court Rules, and I do not think that the Court’s analysis of
23 R v Sullivan (No 7) [2014] NZHC 925.
specific provisions of the Criminal Disclosure Act 2008 would have assisted me in reaching my decision on these applications.
[98] I have not, therefore, sought further submissions, nor taken this case into account.
J G Matthews
Associate Judge
Solicitors:
Gilbert Walker, Auckland for Tower Insurance Limited.
Grant Shand, Barrister & Solicitor, Christchurch for Domenico Trustee Limited.
Ngaire Smith, Lawyer, Christchurch for Staples Can Limited, 8D Project Management Limited and Stephen Peter Betts. (Counsel – D M Lester).
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