Ecoworld Aquarium Limited v Port Marlborough New Zealand Limited

[2022] NZHC 535

IN THE HIGH COURT OF NEW ZEALAND BLENHEIM REGISTRY

I TE KŌTI MATUA O AOTEAROA

TE WAIHARAKEKE ROHE

CIV-2021-406-000023

[2022] NZHC 535

BETWEEN

ECOWORLD AQUARIUM LIMITED

Plaintiff

AND

PORT MARLBOROUGH NEW ZEALAND LIMITED

Defendant

CIV-2021-406-000029

BETWEEN

PORT MARLBOROUGH NEW ZEALAND LIMITED

Plaintiff

AND

ECOWORLD AQUARIUM LIMITED

First Defendant

AND

JOHN PETER REUHMAN

Second Defendant

Hearing:	22 February 2022
Appearances:	D P MacKenzie for EcoWorld Aquarium Ltd and John Reuhman D J Friar and J A Laing for Port Marlborough New Zealand Ltd
Judgment:	22 March 2022

JUDGMENT OF ASSOCIATE JUDGE PAULSEN

This judgment was delivered by me on 22 March 2022 at 11.00 am pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar Date:

ECOWORLD AQUARIUM LTD v PORT MARLBOROUGH NEW ZEALAND LTD [2022] NZHC 535

[22 March 2022]

[1]                  The application before the Court is made in related proceedings concerning whether a lease between EcoWorld Aquarium Ltd (EcoWorld) and Port Marlborough New Zealand Ltd (Port Marlborough) expired on its own terms with no entitlement for EcoWorld to require a renewal.

[2]                  EcoWorld seeks further and better discovery from Port Marlborough and also challenges Port Marlborough’s claim to privilege over certain documents.

[3]The applications are opposed by Port Marlborough.

The background

[4]                  On 17 January 2011, EcoWorld and Port Marlborough entered into a deed of lease of bare land situated at Picton Harbour. EcoWorld’s director, John Reuhman, guaranteed EcoWorld’s obligations under the lease.

[5]The lease contained terms including:

(a)The term of the lease was from 1 November 2010 ending on 22 July 2021.

(b)No renewed terms were available.

(c)In the event Port Marlborough required possession of the land to further develop the Port area, Port Marlborough was entitled to terminate the lease on giving EcoWorld not less than three months’ notice in writing.

(d)No variation of the lease was to be efficacious unless it was in writing and signed by all of the parties.

(e)At least three months before the end of the term, Port Marlborough and EcoWorld were to consult with each other to address the question of what should happen in relation to EcoWorld’s constructions or improvements at the end of the term and, if no agreement was reached,

EcoWorld was required, at its cost, to remove all of its constructions or improvements off the land and leave the land clear, clean and tidy.

[6]                  During the period 22 August 2015 to 30 April 2018, there were sporadic negotiations between Port Marlborough and EcoWorld concerning the possibility that EcoWorld would be granted a right of renewal of the lease for a further term. EcoWorld’s counsel made the submission that EcoWorld “chanced its hand” on achieving better lease terms. That view is supported by the correspondence between the parties. It is clear from the correspondence that while Port Marlborough was, at least until February 2018, prepared to entertain the possibility of granting a new or renewed lease, EcoWorld required substantial changes to the terms of its lease which Port Marlborough would not accept.

[7]                  In May 2021, Port Marlborough, along with KiwiRail Holdings Ltd, Marlborough District Council and New Zealand Transport Agency, obtained resource consents for a redevelopment of Port Picton known as the Waitohi Picton Ferry Precinct Redevelopment. This is a large infrastructure project which will take three to four years to complete. The redevelopment site excludes the land leased by EcoWorld, but EcoWorld was identified as a party potentially affected by development effects and it submitted comments to the panel considering the application.

[8]                  Prior to the expiry of the lease, Port Marlborough had considered potential future uses of the land leased by EcoWorld, including whether it could be used to support its redevelopment initiatives. However, Port Marlborough decided to allow the lease to expire on its terms. This is plain from documents discovered by Port Marlborough including Port Marlborough Board Minutes.

[9]                  On 14 April 2021, Ryan Lock, the Port Manager, called EcoWorld’s lawyers to advise that EcoWorld would be notified its lease was to expire. EcoWorld denies knowledge of the call.

[10]              On 16 April 2021, Port Marlborough wrote to EcoWorld and confirmed the expiry of the lease on 22 July 2021. Strictly speaking, such notice was not required. There was, however, an obligation on both Port Marlborough and EcoWorld to consult

about what should happen to EcoWorld’s constructions or improvements at the end of the term. In its letter, Port Marlborough proposed a managed exit, whereby it would release EcoWorld from its obligations to remove and reinstate improvements, upon terms which included the making of a payment to EcoWorld of $75,000.

[11]              Also on 16 April 2021, EcoWorld’s then solicitors wrote to Port Marlborough proposing a new lease be granted to EcoWorld. As had been EcoWorld’s position since 2015, it continued to seek significantly different terms than were contained in its then existing lease.

[12]              In correspondence that then passed between the parties’ respective solicitors, Port Marlborough maintained its position that the lease would expire on 22 July 2021 and EcoWorld was obliged to comply with its expiry obligations.

[13]EcoWorld has refused to vacate the land. It filed proceedings (CIV-2021-406-

23) against Port Marlborough. In those proceedings, EcoWorld pleads two causes of action. The first cause of action asserts that by a letter dated 16 September 2015, Port Marlborough agreed the lease would be renewed for a term of 10 years. EcoWorld seeks, under s 264 Property Law Act 2007, an order that Port Marlborough renew or extend the lease on terms until at least 22 July 2031. The second cause of action seeks “equitable relief” and alleges that, by several representations, Port Marlborough created an expectation that EcoWorld would be granted a renewed lease, the representations were relied upon by EcoWorld, such reliance was to EcoWorld’s detriment, and “as a result” it would be unconscionable for Port Marlborough to resile from the expectation it created. I understand EcoWorld relies on the doctrine of equitable estoppel.

[14]              Port Marlborough commenced its own proceeding (CIV 2021-406-29) against EcoWorld and its director Mr Reuhman. Port Marlborough alleges the lease has expired and EcoWorld is in wrongful occupation of the land. In its first cause of action, Port Marlborough asserts its entitlement to immediate possession of the land and seeks an order that EcoWorld yield possession of the land and pay damages in respect of the cost to remove its improvements. The second cause of action pleads EcoWorld has breached express and implied terms of the lease in failing to yield possession and leave

the land clear, clean and tidy. Port Marlborough again seeks possession of the land and damages. The third cause of action is against Mr Reuhman under his personal guarantee and seeks judgment for the cost of removing EcoWorld’s improvements from the land.

[15]              For completeness, I should add that in their statement of defence to Port Marlborough’s statement of claim, EcoWorld and Mr Reuhman have pleaded two affirmative defences. The first is headed “equitable set-off” and alleges that to the extent EcoWorld and Mr Reuhman are liable to Port Marlborough, any damages award should be reduced to account for the conduct of Port Marlborough in contributing to its loss, including through its representations that EcoWorld would be granted a renewal of its lease. The second affirmative defence pleads estoppel based on the same alleged representations and reliance upon them by EcoWorld.

The application

[16]              EcoWorld applies for further and better discovery by Port Marlborough of two categories of documents as follows:

(a)documents relating to Port Marlborough’s lease of land (contiguous to the land occupied by EcoWorld) upon which the Edwin Fox Ship and Visitor Centre is located and related documents about its tenure; and

(b)documents relating to Port Marlborough’s decisions about, and/or consideration of, its plans for the use of the land leased by EcoWorld, including in relation to:

(i)the Waitohi Picton Precinct Redevelopment Project;

(ii)a concept plan by Athfield Architects Ltd dated 6 April 2020;

(iii)a submission by the Picton Smart + Connected Community Groups Heritage Project Group dated 13 February 2020; and

(iv)a concept plan for Marlborough District Council by Kobus Mentz of Urbanism Plus.

[17]Port Marlborough opposes the application for further and better discovery.

[18]              In addition, EcoWorld challenges claims to privilege over certain documents disclosed by Port Marlborough. By the time of the hearing, there were only two such documents that remained in issue.

Legal principles

[19]              On 23 August 2021, Grice J ordered the parties to provide standard discovery. Port Marlborough filed its affidavit of documents dated 18 November 2021. Standard discovery only requires disclosure of documents of actual and direct relevance.1 Relevance is assessed having regard to the pleadings. As such, the pleadings set the outer limits of what must be disclosed. In determining relevance, it is the case of the party seeking discovery that is to be assumed to be true.2 Documents that do not relate to an issue arising on the pleadings, that are no more than background, or that relate to a non-substantive aspect of the case are not relevant and therefore not discoverable.3

[20]              As EcoWorld seeks further and better discovery, r 8.19 of the High Court Rules is engaged. It provides:

8.19     Order    for    particular    discovery    against    party    after proceeding commenced

If at any stage of the proceeding it appears to a Judge, 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 1 or more documents or a group of documents that should have been discovered, the Judge may order that party

(a)To file an affidavit stating

(i)whether the documents are or have been in the party’s control; and

1      Pyne Gould Corp Ltd v Bath Street Capital Ltd [2020] NZHC 1247 at [13].

2      Kawarau Village Holdings Ltd v Yuen [2015] NZHC 1379 at [38].

3      RHH Ltd v Anderson [2018] NZHC 2032 at [12]; Bei v Wang [2019] NZHC 2860 at [9].

(ii)if they have been but are no longer in the party’s control, the party’s best knowledge and belief as to when the documents ceased to be in the party’s control and who now has control of them; and

(b)to serve the affidavit on the other party or parties; and

(c)if the documents are in the person’s control, to make those documents available for inspection, in accordance with rule 8.27, to the other party or parties.

[21]              The key issue in applications under r 8.19 is whether there are grounds for believing a party has not discovered documents that should have been discovered. The Court generally adopts the four-stage approach as outlined in Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd:4

(a)Are the documents sought relevant, and if so how important will they be?

(b)Are there grounds for belief that the documents sought exist? This will often be a matter of inference. How strong is that evidence?

(c)Is discovery proportionate, assessing proportionality in accordance with Part 1 of the Discovery Checklist in the High Court Rules?

(d)Weighing and balancing these matters, in the Court’s discretion applying r 8.19, is an order appropriate?

EcoWorld’s submissions

[22]              In respect of the Edwin Fox lease, the Marlborough Heritage Trust leases land from Port Marlborough to house and display the ship Edwin Fox. EcoWorld contends it took some comfort from this because its presence nullified Port Marlborough’s future development right under the lease insofar that Port Marlborough could “hardly invoke that clause but leave the Edwin Fox untouched”. It seeks discovery of the Edwin Fox lease to test Port Marlborough’s pleading that EcoWorld could not have relied upon any representations because it knew the lease could be terminated on three months’ notice.

4      Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd [2015] NZHC 2760, [2018] NZAR 600 at [14].

[23]              As to the other documents sought, EcoWorld contends documents relating to whether or not the land leased by it is being used for the ferry redevelopment project are “highly relevant”. Specifically, the documents are said to be relevant to the issue of whether it is unconscionable for Port Marlborough not to satisfy EcoWorld’s expectation that it would be granted a renewal of its lease.

[24]              EcoWorld does not accept Port Marlborough’s stated position that the land it occupies is not required for the redevelopment project. It contends the Court will be interested to know whether or not the land is in fact being used for the redevelopment project. EcoWorld submits it was only following a suggestion in January 2021 about using the land for the redevelopment project that set in chain events that led to Port Marlborough issuing the expiry notice. EcoWorld also submits that, while Port Marlborough has disclosed “considerable documentation” about evicting EcoWorld so that it can use the land for the redevelopment project, there is no like documentation “rowing back from that decision”.

[25]              EcoWorld submits all the documents it seeks plainly exist, that any concerns about proportionality can be accommodated by appropriate keyword searches and, given their high level of relevance, the Court should exercise its discretion to order further disclosure.

My assessment

[26]              All of the further discovery sought is said to relate to EcoWorld’s pleading that Port Marlborough is estopped from resiling from an expectation it created in EcoWorld that its lease would be renewed. It is generally accepted a party asserting equitable estoppel must show:5

(a)a belief or expectation created or encouraged by the party against whom the estoppel is alleged;

(b)the belief or expectation has been reasonably relied upon;

5      Andrew Butler and others Equity and Trusts in New Zealand (Thomson Reuters 2nd ed, 2009, Wellington) at [19.2].

(c)detriment will be suffered if the belief or expectation is departed from; and

(d)it would be unconscionable for the party against whom the estoppel was alleged to depart from the belief or expectation.

The Edwin Fox lease

[27]              The relevance of the Edwin Fox lease is said to be that it gave Mr Reuhman comfort Port Marlborough would not exercise its rights under the redevelopment clause. Mr Reuhman says, “I always had some comfort around PMNZ’s use of the Future Development clause because of the presence of the Edwin Fox ship …” and “The terms of [Port Marlborough’s] lease with the Edwin Fox … no doubt had a part to play in [its] decision making on using the Future Development clause”.

[28]              As Mr Reuhman did not know the terms of the Edwin Fox lease, his evidence is difficult to comprehend. Given EcoWorld’s lack of knowledge of the terms of the Edwin Fox lease, those terms cannot have influenced EcoWorld’s understanding as to whether Port Marlborough might rely on the redevelopment clause. In any event, Port Marlborough did not exercise its rights under the redevelopment clause and EcoWorld’s lease expired according to its terms. There is no suggestion the Edwin Fox lease might be relevant on some other basis. For instance, it is not suggested Port Marlborough made any representations concerning the Edwin Fox lease or that its rights under its lease to EcoWorld were restricted by terms of the Edwin Fox lease. It follows the Edwin Fox lease has no connection at all to any pleaded allegation and need not be disclosed.

The Waitohi Redevelopment Project

[29]              As to the balance of the documents sought, EcoWorld asserts they are relevant to the issue of whether it is unconscionable for Port Marlborough to not satisfy EcoWorld’s expectation of a new or renewed lease.

[30]              There is no pleading that such unconscionability arises because of the manner in which Port Marlborough intends to use its land. To the contrary, the pleading is that unconscionability arises as a result of EcoWorld’s reliance upon Port Marlborough’s representations. Nothing more is pleaded.

[31]              Underlying the request for these documents appears to be a belief on the part of EcoWorld that the land is to be used as part of the redevelopment project and that it has, in some manner, been deceived by Port Marlborough. Mr MacKenzie put the position matter of factly in his submission:

“If [Port Marlborough] was not being upfront with EcoWorld about the potential for alternate uses of its land from July 2021 - and thereby leading EcoWorld on in the context of an existing right of renewal – it is submitted that the Court will be very much interested in that conduct”

[32]              Not only is there no such pleading, but there is no evidence to support the submission. I do not see that on the state of the pleadings the Court will, at trial, have any interest in how Port Marlborough intends to use the land. I do not see, either, how any uses to which it may put the land in the future can have any bearing on whether its decision not to grant a renewal of the lease was unconscionable.

[33]              The focus of the modern approach to estoppel is the detriment suffered by the person asserting estoppel, not any benefit obtained by the other party. That is how EcoWorld’s case is pleaded. While there have been cases which have held if the party making a representation gains some benefit as a result of the representation, that will tend to make the recusal from the representation unconscionable, that is, in my view, because in those cases the benefit was unfairly obtained.6 This is not such a case.

[34]              Mr MacKenzie made the further curious submission that the Court will be very much interested about whether or not the land is being used for the redevelopment project as, if it is not, “Surely [Port Marlborough] should simply uphold the promise that it made to EcoWorld … and renew the lease. Equity will demand as much.” I could understand that submission if Port Marlborough were arguing that, because it

6      Andrew Butler and others Equity and Trusts in New Zealand, above n 5, at [19.2.4]; Burbery Mortgage Finance & Savings Ltd (in rec) v Hindsbank Holdings Ltd [1989] 1 NZLR 356 (CA) at 365.

needs the land for the redevelopment project, it is not unconscionable for it to resile from any representations it may have made to EcoWorld. Port Marlborough does not advance such an argument.

[35]              I therefore find that documents sought concerning the redevelopment project are also not relevant to the matters put in issue by the pleadings and need not be disclosed. However, there are further reasons I would not order further discovery.

[36]              Port Marlborough has discovered documents concerning its plans for the land following the expiry of the lease, including documents in relation to the extent to which the land would be involved in the redevelopment project. This has included board papers, management papers, concept plans, and emails. The affidavit of documents sworn on Port Marlborough’s behalf by the Port Manager, Mr Lock, sets out the steps that were taken to search for relevant documents which I consider to be entirely reasonable. There is, in my view, no gap in the decision-making process as to whether the land will be used as part of the redevelopment project as EcoWorld asserts. The position is perfectly clear from the documents discovered.

[37]              Further, Mr MacKenzie submits it is proportionate to require further discovery because all that would be involved is running appropriate search terms across keywords in the documents. But it is clear that appropriate keyword searches have already been undertaken over documents that might disclose the potential future use of the land leased by EcoWorld because of its proximity to the redevelopment project. It appears from Mr Lock’s evidence that, due to the size of the redevelopment project, to undertake the further discovery exercise EcoWorld appears to be suggesting would require searches of tens of thousands of documents. Such an undertaking would not be proportionate when one considers the time and expense of the exercise and what I consider must be a very small prospect that it will reveal any documents of significance.

[38]              For completeness, as far as the Athfield Architects Ltd concept plan, the submission of the Picton Smart + Connected Community Groups Heritage Project Group and the Urbanism Plus concept plan are concerned, it has not been shown that there is reason to believe Port Marlborough is in possession of documents concerning

them that have not been disclosed or are not already in EcoWorld’s possession. They are, in addition, not relevant for the reason already given. I am satisfied no further disclosure is required.

The privilege claims

[39]              Under r 8.25, EcoWorld challenges the claims to privilege made in respect of several documents in Port Marlborough’s affidavit of documents. However, at the hearing only two documents were in issue. These were identified as PM. 010.1074 and PM.009.0098 in Port Marlborough’s affidavit of documents. Following discussion with counsel, those documents were provided to me for inspection on the basis that privilege was not waived. I have considered the documents and accept that privilege has been correctly claimed in respect of them for the reasons set out in the affidavit of Mr Lock and Mr Friar’s submissions.

Result

[40]EcoWorld’s application is dismissed in its entirety.

[41]              Port Marlborough has been successful and is entitled to its costs on a 2B basis plus reasonable disbursements as fixed by the Registrar.

[42]      There shall also be a direction that the ex parte memorandum of counsel for Port Marlborough dated 1 March 2022, and the attachments to it, should be sealed and access to those documents shall not be granted to any person except by order of a High Court Justice or Associate Judge.

O G Paulsen Associate Judge

Solicitors:

Macalister Mazengarb (D Greenslade), Wellington Bell Gully, Wellington