Een v Body Corporate 384911
[2023] NZHC 418
•7 March 2023
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2020-404-1899
[2023] NZHC 418
UNDER section 10 of the Unit Titles Act 2010 IN THE MATTER OF
an originating application by a minority for relief against resolutions of the majority
BETWEEN
WONG SUN EEN and others Plaintiffs
AND
BODY CORPORATE 384911
First Defendant
PANDEY VIADUCT QUAYS LIMITED
Second Defendant
Hearing: 27 October 2022 Counsel:
P L Rice for plaintiffs
R J Hollyman KC and W J Revell for second to sixth defendants S A Armstrong and P K J Roycroft for seventh defendant
Judgment:
7 March 2023
JUDGMENT OF ASSOCIATE JUDGE TAYLOR
[Discovery]
This judgment was delivered by me on 7 March 2023 at 3pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar Date:
Solicitors:
Haigh Lyon, Auckland for plaintiffs
Edmonds Judd, Te Awamutu for first defendant
Farry Law Limited, Auckland for second to sixth defendants Webb Henderson, Auckland for seventh defendant
EEN v BODY CORPORATE 384911 [2023] NZHC 418 [7 March 2023]
PANDEY VIADUCT SUITES LIMITED
Third Defendant
PANDEY VIADUCT SUITES TWO LIMITED
Fourth Defendant
PANDEY VIADUCT SUITES THREE LIMITED
Fifth Defendant
CUSTOM STREET HOTEL LIMITED
Sixth Defendant
AAPC PROPERTIES PTY LIMITED
Seventh Defendant
Introduction [1]
Background [3]
Application for particular discovery against second to seventh defendants [7]
Affidavit of Craig Tatley dated 5 July 2022 [9]
Second to sixth defendants’ notice of opposition [12]
Affidavit of Rula Alemdar dated 12 August 2022 [13]
Affidavit of Murray Davison dated 26 October 2022 [14]
Affidavit of Campbell McKenzie dated 9 November 2022 [21]
Seventh defendant’s notice of opposition [23]
Affidavit of Stephen Gould dated 26 August 2022 [24]
Plaintiffs’ submissions [34]
Second to sixth defendants’ submissions [37]
Seventh defendant’s submissions [45]
Legal principles [52]
Analysis [55]
Discovery against the second to sixth defendants [57]
Discovery against the seventh defendant [105]
Analysis of categories [108]
Result [129]
Orders [130]
Costs [149]
Introduction
[1] The plaintiffs seek particular discovery. They are the owners of residential units in a unit titles development at 21 Viaduct Harbour Avenue, Auckland, from which the Sofitel Hotel also operates.
[2] The second to fifth defendants are the owners of the commercial units and 89 of the residential units in the complex. They lease their units to the sixth defendant, who acts as the hotel manager. The sixth defendant has a Hotel Management Agreement (HMA) with the seventh defendant to operate a hotel in the building.
Background
[3] The plaintiffs allege that the defendants have established a new hotel within the unit title development without first obtaining a special resolution from Body Corporate 384911 (the Body Corporate) granting a licence of the common property for such purpose.
[4] The plaintiffs say that the defendants have disregarded their statutory obligations and have unilaterally undertaken a refit of the common property and commenced a new hotel in the building without the plaintiffs’ involvement, and in a manner intended to cause the plaintiffs economic loss. They seek an injunction
restraining the defendants from operating a hotel in the building without first satisfying these statutory obligations, or, in the alternative, damages.
[5] The central issue is whether the second to seventh defendants require a licence from the Body Corporate to establish and operate a hotel in the building. The second to sixth defendants say no such licence is required, and that the only interaction between the Sofitel Hotel and the common property is for people to pass over the common property from time to time, as a natural incident of the second to fifth defendants’ beneficial ownership. The seventh defendant says it has insufficient knowledge, and therefore denies, that a licence is required. It says, in any event, that responsibility for any licence is the sixth defendant’s responsibility as owner of the facilities under the HMA.
[6] The plaintiffs argue that to determine the central issue, the Court will need to examine the nature and extent of the second to seventh defendants’ use and control of the common property in establishing and operating a hotel in the complex. They say any documents disclosing the use or control of the common property by the hotel manager and operator, respectively being the sixth and seventh defendants, will be relevant.
Application for particular discovery against second to seventh defendants
[7]The plaintiffs apply for orders:1
1.1The second to seventh defendants file and serve within 20 working days a supplementary affidavit of documents listing all documents in their possession, power or control in the following categories:
(a)Documents and correspondence relating to the leasing or licensing of the second to fifth defendants’ units to the sixth defendant;
(b)Documents (including, without limitation, policy and procedure manuals and standards manuals) and correspondence passing between themselves and/or the seventh defendant (Accor) relating to the establishment and operation of a hotel in the building.
1 Plaintiffs’ application for particular discovery against second to seventh defendants dated 5 July 2022 at [1].
(c)The employment contracts of staff employed in the operation of the hotel including the General Manager’s contract;
(d)All licences and authorisations granted by any relevant authority to operate a hotel in the building;
(e)All documents and correspondence relating to the sixth defendant’s engagement of external contractors used in the operation of the hotel;
(f)All documents and correspondence relating to the building work undertaken at the premises during the period 6 July 2020 to 8 October 2020
(g)The terms of the contract made by the sixth defendant and /or Accor with hotel guests;
(h)The sixth defendant’s financial statements.
1.2That the sixth and seventh defendants provide to the plaintiff’s solicitors within five working days an unredacted copy of the Hotel Management Agreement;
1.3That the defendants pay the plaintiffs’ costs in respect of this application.
[8]The grounds on which the orders are sought are:2
2.1There are grounds to believe that the documents exist;
2.2The documents are relevant;
2.3Discovery will not be unduly burdensome;
2.4Appearing in the affidavit of Craig Phillip da Silva Tatley filed herein.
Affidavit of Craig Tatley dated 5 July 2022
[9] Mr Tatley, a solicitor employed by Haigh Lyon (solicitors for the plaintiffs in this proceeding) has made an affidavit in support of the plaintiffs’ application. He deposes that the central issue in the proceeding is whether the second to seventh defendants require a licence from the Body Corporate to operate a hotel in the building. He says resolution of that issue will require an investigation into the hotel’s use or control of the common property to determine to what extent such use goes beyond merely obtaining access to the defendants’ units.3
2 Plaintiffs’ application for particular discovery, above n 1, at [2].
3 Affidavit of Craig Phillip da Silva Tatley in support of application by plaintiffs that particular discovery be provided by second to sixth defendants dated 5 July 2022 at [26]–[28].
[10] Mr Tatley says that the following categories of documents are relevant to the inquiry:4
Category A – All documents and correspondence relating to the leasing or licensing of the second to fifth defendants’ units to Custom Street Hotel Limited. The rights granted and obligations imposed under the leases are relevant to the scope of the express or implied licence granted to the hotel manager to operate a hotel in the building including use of the common property.
Category B – All documents (including, without limitation, policy and procedure manuals and standards manuals) and correspondence passing between Custom Street Hotel Ltd and Accor relating to the establishment and operation of a hotel in the building. The policy and procedure manuals and standards manuals are referred to in the management agreement between Custom Street Hotel and Accor but have not been disclosed. They are likely to contain policies and procedures and standards for the maintenance of the entire building, including the common property.
Category C – The employment contracts of staff, including the General Manager. The roles and responsibilities of staff in relation to the building, including the use and maintenance of the common property are relevant to the central issue.
Category D – All licences and authorisations granted by any relevant authority to operate a hotel in the building. Such documents are likely to disclose the allocation of roles and responsibilities for the activities conducted within building, including activities on the common property.
Category E – All documents and correspondence relating to the engagement of independent contractors for the operation of a hotel. The terms of engagement of contractors who provide goods and services to the hotel is likely to affect the use of the common property.
Category F – All documents and correspondence in relation to any building work undertaken at the building during the period 6 July 2020 to 8 October 2020. There must be extensive correspondence and documentation relating to the refit that occurred during this period in which the defendants had exclusive occupation of the common property. By way of example only, there must be building contract/s granting possession of the site to the contractor/s during that period.
[11] Mr Tatley deposes that the second to seventh defendants have not fully complied with discovery orders made in this proceeding to date.5
4 Tatley affidavit, above n 3, at [29].
5 The particulars of the contended inadequacies in discovery are set out at [30]–[53] of Mr Tatley’s affidavit.
Second to sixth defendants’ notice of opposition
[12] The second to sixth defendants oppose the plaintiffs’ application on the following grounds:6
(a)the documents sought by the Plaintiffs at paragraph 1.1 of the application are not relevant to these proceedings;
(b)some or all of the documents sought by the Plaintiffs are commercially sensitive, and confidential;
(c)some or all of the matters of fact at which the discovery sought by the Plaintiffs is aimed, are capable of being admitted by consent in an agreed statement of facts;
(d)listing and production of the documents sought by the Plaintiffs would be unduly burdensome, and disproportionate to any probative value the documents may have (which the Second to Sixth Defendants say is none);
(e)the redacted copy of the hotel management agreement already provided in discovery, discloses any information potentially relevant to these proceedings that is contained in that document, and the information that is redacted is irrelevant to these proceedings and is commercially sensitive.
Affidavit of Rula Alemdar dated 12 August 2022
[13] Mr Alemdar, solicitor at Farry Law Ltd (solicitors for the second to sixth defendants), has made an affidavit in support of the second to sixth defendants’ opposition. She appends email correspondence between Wallace Revell of Farry Law Ltd, and counsel for the plaintiffs, Ben Molloy and Phillip Rice.7
Affidavit of Murray Davison dated 26 October 2022
[14] Mr Davison, a manager employed by the defendant group of companies, has also made an affidavit in support of the second to sixth defendants’ opposition. He deposes that the categories of documents the plaintiffs seek amount effectively to the whole of the operations of the Sofitel Hotel. He says the breadth of the categories, and the varied document types included in each category, means the task of collating the documents would be burdensome. IT consultants would need to be engaged. All
6 Notice of opposition to interlocutory application for further and better discovery dated 12 August 2022 at [3].
7 Affidavit of Rula Alemdar affirmed 12 August 2022 at [1]–[3].
documents initially identified would need to be reviewed for privacy and confidentiality reasons, and redactions made accordingly. Mr Davison says he is aware that the defendants have offered more than once to compile a list of agreed facts, which would significantly narrow the scope of discovery — but the plaintiffs would not agree to the proposal.8
[15] Mr Davison deposes that some of the sought categories of documents are commercially sensitive and contain information of a competitive nature. He says the plaintiffs operate in competition with the defendants in that they lease their units to another party that operates a hotel in the same building. The plaintiffs have a vested interest in that other party being as profitable as possible.9
[16] Mr Davison says there is no correspondence relating to the leasing or licensing of the second to fifth defendants’ units to the sixth defendant. He says they are all part of the same group and subject to the same decision maker, so there was no need for correspondence between them. He says the leases do not contain any provisions that lease or license common property to the sixth defendant.10
[17] Mr Davison deposes that all documents relating to the operation of the hotel are the intellectual property of the seventh defendant and are not in the sixth defendant’s possession. Any correspondence between the sixth defendant and the seventh defendant will entail searching the email accounts of numerous persons and manually sorting through them. This will require a lot of time and effort from people who are already occupied full time with the group’s business.11
[18] Next, Mr Davison deposes that the only personnel whose employment agreement may be relevant to the common property are the Chief Engineer and Executive Housekeeper. Both employment agreements are private and commercially sensitive. But, he says, both job descriptions are in standard forms used by the seventh
8 Affidavit of Murray Raymond Davison in support of opposition to application for further discovery dated 26 October 2022 [Davison Affidavit] at [2.1]–[2.17].
9 At [2.18]–[2.23].
10 At [3.1]–[3.5].
11 At [4.1]–[4.2].
defendant, and they are not specific to the Sofitel Hotel. And, he says, maintenance and cleaning of common property are procured and paid for by the Body Corporate.12
[19] Mr Davison says there are no specific licences required for the operation of the accommodation component of a hotel. As to engagement of independent contractors for the hotel operation, he deposes that the relevant agreements are confidential between the parties and would not, in any event, be in the second to sixth defendants’ possession.13
[20] Mr Davison deposes that the sixth defendant’s financial statements do not contain any information relating to common property in the building. The financial statements are, in any event, commercially sensitive. So too are the redacted portions of the HMA, none of which contain any provisions that give a lease or licence over common property. The contracts with hotel guests, meanwhile, are the seventh defendants’ documents, and they are in any event publicly available.14
Affidavit of Campbell McKenzie dated 9 November 2022
[21] Mr McKenzie filed an affidavit in response to Mr Tatley’s affidavit of 5 July 2022 and Mr Davison’s affidavit of 26 October 2022.15
[22] Mr McKenzie’s affidavit sets out his views and recommendations in relation to using e-Discovery processes to reduce any burdens of discovery referred to in Mr Davison’s affidavit.
Seventh defendant’s notice of opposition
[23] The seventh defendant also opposes the plaintiffs’ application, on the following grounds:16
12 Davison affidavit, above n 8, at [5.1]–[5.3].
13 At [7.1]–[7.10].
14 At [9.1]–[11.3].
15 Affidavit of Campbell Bryan McKenzie in support of application for particular discovery dated 9 November 2022 [McKenzie Affidavit].
16 Notice of opposition by seventh defendant to interlocutory application by plaintiffs for further and better discovery dated 5 July 2022 (dated 26 August 2022) at [3].
Order 1.1 (categories A to H)
(a)The material facts relied on by the plaintiffs in relation to the seventh defendant are not in dispute.
(i)The seventh defendant admits the building was designed to be used as a hotel and has been operated by the seventh defendant as a hotel.
(ii)The rights and entitlements of the seventh defendant in respect of the building are derived from its management contract with the sixth defendant, the material parts of which have been discovered and produced.
(iii)There are no pleaded allegations concerning the seventh defendant’s conduct in respect of the common property in the building.
(b)The further and better discovery categories A to H sought by the plaintiffs from the seventh defendant:
(i)are duplicative of the further discovery sought by the plaintiffs against the first to sixth defendants;
(ii)are not relevant to any allegations or particulars pleaded in respect of the actions or conduct of the seventh defendant;
(iii)seek personal information about individuals who are not party to this litigation (being employment agreements for current and former employees of the sixth defendant and the seventh defendant) in circumstances where there is no direct evidence of the relevance and/or importance of those documents to the central issue in the case; and
(iv)are unduly broad and would require a large portion of the documents routinely generated in relation to the operation of the hotel (including internal and commercially sensitive information) to be located, identified and searched to respond to the categories.
(c)The order and categories as framed are oppressive. The nature and scale of the search and discovery exercise the plaintiffs seek to impose on the seventh defendant is unduly burdensome and wholly disproportionate to the probative value the documents may have in relation to factual allegations pleaded against it.
(d)When the matters raised in paragraphs (a) to (c) above are weighed and balanced, it is not appropriate, or in the interests of justice, for the Court to exercise its discretion to order further and better discovery by the seventh defendant.
Order 1.2 (Hotel Management Agreement)
(e)The Hotel Management Agreement is confidential to the parties and contains commercially sensitive information (including pricing information).
(f)The seventh defendant opposes inspection of all pricing information redacted in the HMA. Such information has not previously been requested by the plaintiffs and is irrelevant to the central issue in dispute.
Order 1.3 (costs)
(g)The seventh defendant seeks costs against the plaintiffs in respect of the Application.
Affidavit of Stephen Gould dated 26 August 2022
[24] Mr Gould, general manager of the Sofitel Auckland Viaduct Harbour and employee of the seventh defendant, has made an affidavit in support of the seventh defendant’s opposition. As to the sought category A documents, he says the seventh defendant does not possess any documents comprising correspondence relating to the licensing of the second to fifth defendants’ units to the sixth defendant.17
[25] As to the category B documents, Mr Gould says the sixth defendant has appointed two representatives and that he has regular contact with the sixth defendant and the representatives. He estimates he and the representatives exchange emails around twice per month on a wide range of matters. He says included in category B would be various documents and communications between the seventh and sixth defendants relating to agreements for the use of hotel areas, and that there would be no less than 50 enquiries of this kind each month. Also included in category B would be communications between him and all hotel staff employed by the sixth defendant in relation to operating the Sofitel Hotel — an estimated 150 emails per day on average. Mr Gould says the majority of documents and correspondence passing between the seventh and sixth defendants are commercially sensitive and confidential.18
17 Affidavit of Stephen John Gould affirmed 26 August 2022 [Gould Affidavit] at [1]–[5].
18 At [6]–[12].
[26] On the category C documents, Mr Gould says he is the only staff member employed by the seventh defendant with respect to the Sofitel Hotel. He says he engages with the sixth defendant in relation to hiring personnel, but the decision whether to hire a particular person for a role is made by the sixth defendant. He says employment contracts are held by the human resources manager, who is an employee of the sixth defendant, and that these contracts contain personal information belonging to those staff members that is protected under the Privacy Act 2020. He says he regards the term of his own employment contract as confidential to him and the seventh defendant but confirms that his key performance measures are not linked to the use or maintenance of the common property.19
[27] As to the category D documents, Mr Gould deposes that licences and authorisations granted by relevant authorities to operate the Sofitel Hotel are obtained in the name of, and held by, the sixth defendant.20
[28] On category E, Mr Gould says independent contractors for the Sofitel Hotel are either engaged as part of a national procurement or supplier selection, or through the sixth defendant. Where independent contractors are engaged through a national procurement process, the seventh defendant enters into the contract with the contractor and particular hotels are named in the contract as required. Contractors engaged specifically for the Sofitel Hotel are engaged by the sixth defendant, which enters into these contracts itself or with the seventh defendant acting as its agent. Mr Gould says these contracts are commercially sensitive and confidential, and that in a given month there would be 20 to 30 contractors used as part of hotel operations.21
[29] Turning to category F, Mr Gould deposes that building work completed in the period from 6 July 2020 to 8 October 2020 was undertaken by the sixth defendant. The seventh defendant supported the improvement works. Mr Gould attended project management meetings where the seventh defendant provided advice about the works and matters relating to the works being undertaken. The seventh defendant was not
19 Gould affidavit, above n 17, at [13]–[16].
20 At [17].
21 At [18]–[21].
party to the HMA with the sixth defendant over part of that period. Mr Gould again says documents in this category would be commercially sensitive and confidential.22
[30] On category G, Mr Gould deposes that individual guests are required to sign a registration form that includes reference and agreement to the seventh defendant’s standard terms and conditions. He says that, to the best of his knowledge, the form does not make any reference to the common property. He deposes further that group bookings are prepared based on a standard form base template contract, which is amended as required. Mr Gould deposes that, to the best of his knowledge, none of these contracts refer to the common property. He says group booking contracts are commercially sensitive and confidential.23
[31] Finally, on category H, Mr Gould says the seventh defendant has access to the audited accounts for the Sofitel Hotel and is involved in preparing the accounts. He says the seventh defendant does not have access to or involvement in the preparation of the sixth defendant’s financial statements. He deposes that the audited accounts in respect of the Sofitel Hotel are commercially sensitive and confidential, and that they do not refer to the common property or its use.24
[32] Mr Gould says that while most of the documents in the discovery categories are documents in possession of the sixth defendant, he has access to those documents in his capacity as general manager of the Sofitel Hotel. He has knowledge of what would be involved in searching for and compiling the sought documents. He says the discovery categories are broad and encompass most aspects of the Sofitel Hotel’s operation. He estimates that searches of email inboxes of at least 50 current and past employees of the sixth defendant would be needed, and that the seventh defendant would need to engage an information technology specialist to obtain copies of the relevant inboxes and archives.25
[33] Mr Gould deposes that a review exercise of the proposed nature and scale would be beyond his capacity. Further, he reiterates that a large number of documents
22 Gould affidavit, above n 17, at [22]–[24].
23 At [25] and [26].
24 At [27] and [28].
25 At [29]–[34].
called for by the discovery categories concern internal operation matters and pricing details that are commercially sensitive and confidential. If this material was required to be discovered, extensive review and redaction would be needed.26
Plaintiffs’ submissions
[34] Mr Rice, for the plaintiffs, submits that the second to sixth defendants’ affidavit of documents lists only a small number of mostly irrelevant documents. He says that while the second to sixth defendants have provided a redacted copy of the HMA, it was missing several pages. He submits there is no evidential foundation for the second to sixth defendants’ claim that the redactions are needed for confidentiality reasons. He says that, despite the plaintiffs’ request, the second to sixth defendants have not provided a supplementary affidavit listing the missing documents or an unredacted copy of the HMA.27
[35] Mr Rice says the seventh defendant’s affidavit of documents omits any documentation or correspondence between the seventh defendant and the other defendants in relation to the establishment of the new hotel and the renovation work. He again submits that, despite the plaintiffs’ request, the seventh defendant has not provided a supplementary affidavit or an unredacted copy of the HMA. He says these missing categories of documents are likely to exist, are relevant to the central issue and their discovery is proportionate.28
[36] Mr Rice says that if the sought documents exist, then there can be no real doubt that they are likely to adversely affect or support the plaintiffs’ case that the defendants are, or have been, exercising control over the common property in establishing and operating a new hotel. He says there are good grounds to believe the sought documents exist — there has been no suggestion by the defendants that they do not. And, Mr Rice submits, discovery of the documents would not be unduly burdensome. The costs involved in carrying out the discovery exercise would be proportionate to
26 Gould affidavit, above n 17, at [34] and [35].
27 Plaintiffs’ submissions in support of application for particular discovery dated 13 October 2022 at [41]–[47].
28 At [48]–[56].
their high degree of relevance. Discovery of the documents ought therefore to be ordered.29
Second to sixth defendants’ submissions
[37] Mr Hollyman KC, for the second to sixth defendants, submits that the documents the plaintiffs seek are not relevant, the sought discovery would be disproportionate and the redacted documents are commercially sensitive. He says the trial court will be dealing with issues of statutory interpretation and whether the Sofitel Hotel uses the common property for anything more than passing over it. References to common property that may exist in the documents will not address these issues. Further, he says there is no correspondence relating to the leasing or licensing of units to the sixth defendant and the leases are not relevant to any question to be proved or disproved at trial.30
[38] Mr Hollyman submits it would be disproportionate to order discovery of documents and correspondence between the defendants regarding the establishment and operation of the Sofitel Hotel. He says the category is broad and ill-defined, and it is unclear how many documents would actually be relevant to the trial issues. And discovery of the documents would be onerous.31
[39] As to the sought discovery of staff employment contracts, Mr Hollyman says they are private, commercially competitive and confidential. They do not have content that relates to the leasing or licensing of common property. Even if they did, he submits, these contracts would not evidence what has actually taken place. The contracts are therefore not relevant to the pleaded issues. Even if they were only marginally relevant, it would be disproportionate to order their discovery given the privacy, competition and confidentiality concerns.32
[40] Mr Hollyman says operation of the accommodation component of the hotel does not require any licence or authorisation. Liquor licences extend to the whole of
29 Plaintiffs’ submissions, above n 27, at [61]–[67].
30 Synopsis of submissions for the second to [sixth] defendants in opposition to application for further discovery dated 26 October 2022 at [1.1]–[1.5] and [3.1.1]–[3.2.8].
31 At [3.3.1]–[3.3.11].
32 At [3.4.1]–[3.4.7].
the building and regulatory requirements for the building are procured by the Body Corporate. Sought documents in this category, therefore, either do not exist or do not go to the issue for which the plaintiffs seek them. Further, the sought documents relating to the engagement of independent contractors are confidential because they are inherently competitive. They address the scope of goods and services supplied, and the pricing for them. And, in any event, they are irrelevant or of only marginal relevance. Their discovery would be disproportionate.33
[41] Mr Hollyman submits that building work to the complex’s common areas was procured and paid for by the Body Corporate. There were no contracts as existing staff were engaged for the works. Documents in this category would be of marginal relevance at best. And, he submits, the sixth defendant’s financial statements are simply not relevant to the pleaded issues at all.34
[42] In Mr Hollyman’s submission, the unredacted HMA should not be disclosed. He says none of the redacted portions contain provisions that lease or license common property. The redacted portions are generally confidential and include provisions that are matters of competition. Mr Hollyman submits that the redacted portions are therefore irrelevant and confidential, and that their discovery would be disproportionate.35
[43] Mr Hollyman reiterates that the core issue in the proceeding is one of statutory interpretation, being the extent of an owner’s interest in common property under s 54 of the Unit Titles Act 2010, and the scope of s 56. He says the sought documents do not go to that issue, and they will be of only marginal relevance to the factual question of what actual uses of the common property occur. With the plaintiffs being direct competitors to the defendants, he says, it is reasonable to infer that the plaintiffs’ real purpose in this discovery application is to gain access to documents relating to defendants’ competitive position, from which the plaintiffs could obtain a commercial advantage. Mr Hollyman says the plaintiffs therefore have an improper purpose in seeking the documents.36
33 Second to sixth defendants’ submissions, above n 30, at [3.5.1]–[3.6.7].
34 At [3.7.1]–[3.8.7].
35 At [3.9.1]–[3.9.7].
36 At [3.11.1]–[3.11.9].
[44] Concluding, Mr Hollyman submits that the Court should decline to order discovery of any of the documents sought by the plaintiffs.37
Seventh defendant’s submissions
[45] Ms Armstrong, for the seventh defendant, submits that there is no disputed issue of fact between the seventh defendant and the plaintiffs. The seventh defendant admits it operates a hotel business in the building and it self-evidently uses the common property for that reason. She says the plaintiffs cannot rely on a pleading by the second to sixth defendants to establish a discovery obligation by the seventh defendant. Such discovery obligations that do arise properly fall only on the second to sixth defendants. Ms Armstrong submits, double discovery in this case would be unnecessary, unjust and unduly onerous. And, she says, there are procedural irregularities with Mr Tatley’s affidavit in that it primarily contains inadmissible evidence in the nature of submissions. That evidence should not be accepted for the purpose of the plaintiffs’ application.38
[46] Ms Armstrong turns to analyse each of the sought discovery categories. As to category A, she says the seventh defendant does not have the sought documents in its possession, power or control. As to category B, she submits that the seventh defendant is only an agent for the sixth defendant insofar as the seventh defendant operates the hotel business. It is the sixth defendant that enters into contracts with third parties relating to the hotel’s establishment. Any documents and correspondence relating to the operation of the hotel that are within the seventh defendant’s possession are irrelevant to the plaintiffs’ case and, in most cases, are commercially sensitive and confidential. Ms Armstrong submits that the category B documents are in any event duplicative of the further discovery the plaintiffs seek against the second to sixth defendants.39
[47] On category C, Ms Armstrong submits that the seventh defendant employs only one staff member with respect to the Sofitel Hotel: Mr Gould. She says all other
37 Second to sixth defendants’ submissions, above n 30, at [4.1]–[4.3].
38 Synopsis of submissions of counsel for the seventh defendant in opposition to plaintiffs’ interlocutory application for further and better discovery dated 20 October 2022 at [7]–[11].
39 At [19]–[24].
staff are employed by the sixth defendant, which possesses the relevant contracts and other information. She says the matters contained in Mr Gould’s employment contract are irrelevant to the central issue and there is no basis for the document to be discovered. The category D documents, meanwhile, are held by the sixth defendant and are not in the seventh defendant’s possession or control.40
[48] Ms Armstrong submits that the category E documents are mostly documents that are necessarily in the sixth defendant’s possession or control. In any case, she says, given the number of contractors used as part of hotel operations the volume of documents falling within the scope of this category is so large as to require specialist IT support. Most of the contracts bear little or no relevance to the pleaded allegations, and the discovery sought is otherwise duplicative of that sought from the sixth defendant. She submits that the category F documents are similarly held by the sixth defendant and that the seventh defendant is not the appropriate party from which discovery should be sought.41
[49] On the category G documents, Ms Armstrong submits that the terms and conditions are irrelevant to the plaintiffs’ case, and that none of the sought contracts refer to the common property. Each contract is commercially sensitive and confidential. And, as to the category H documents, Ms Armstrong submits the seventh defendant does not have access to, or involvement in, the preparation of the sixth defendant’s financial statements. The audited accounts for the Sofitel Hotel, of which the seventh defendant does have possession, are commercially sensitive and do not refer to the common property.42
[50] Ms Armstrong submits that the plaintiffs’ application is a blanket attempt to seek wholesale further discovery from all defendants. She says it is indiscriminate and duplicative in its scope, and that it does not sufficiently explain how certain categories of sought documents are relevant to the central issue. She submits the time and cost that would be required to give effect to an order for particular discovery is disproportionate and oppressive.43
40 Seventh defendant’s submissions, above n 38, at [25]–[30].
41 At [31]–[37].
42 At [38]–[44].
43 At [45]–[47].
[51] Finally, Ms Armstrong says that the seventh defendant seeks costs against the plaintiffs in respect of the application. She invites the Court to dismiss the application against the seventh defendant in its entirety.44
Legal principles
[52]Rule 8.19 of the High Court Rules 2016 provides:
8.19Order 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
(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.
[53] The Court will apply a four stage test in considering an application under r 8.19:45
(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?
44 Seventh defendant’s submissions, above n 38, at [53] and [54].
45 Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd [2015] NZHC 2760, [2018] NZAR 600 at [14].
(d)Weighing and balancing these matters, in the Court’s discretion applying r 8.19, is an order appropriate?
[54] As to the first limb, documents will be discoverable only if they are relevant to the pleaded issues.46 As to the second limb, the party seeking discovery must show some credible objective evidence that the existing affidavit of documents is incomplete. It need not prove the sought documents actually exist.47 As to the third limb, the possibility of discovering relevant documents needs to be balanced against the cost of the discovery exercise. Highly relevant documents may justify greater expense.48 The final limb of the test entails a holistic assessment whether the Court, having regard to the factors considered under the first three limbs, should exercise its discretion to order further discovery.
Analysis
[55] The four stage test set out at [53] is to be applied to each of the categories A to H of documents for which discovery is sought by the plaintiffs. I deal with each of those categories in turn.
[56] I deal with discovery against the second to sixth defendants first and then discovery against the seventh defendant.
Discovery against the second to sixth defendants
[57] Mr Rice, for the plaintiff, submits that the central issue in these proceedings is whether the second to seventh defendants require a licence from the Body Corporate to establish and operate a hotel in the building (the central issue). Mr Rice submits that in order to determine the central issue the Court will need to examine the nature and extent of the defendants’ use and control of the common property in establishing and operating a hotel in the unit title complex. He submits any documents disclosing
46 High Court Rules 2016, r 8.7; and Intercity Group (NZ) Ltd v Nakedbus NZ Ltd [2013] NZHC 1054 at [15].
47 Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd, above n 45, at [10] and [12]; Lighter Quay Residents’ Society Inc v Waterfront Properties (2009) Ltd [2017] NZHC 818 at [16]; McCullagh v Robt Jones Holdings Ltd [2015] NZHC 1462 at [7]; and Robert v Foxton Equities [2014] NZHC 726, [2015] NZAR 1351 at [8].
48 Commerce Commission v Cathay Pacific Airways Ltd [2012] NZHC 726 at [18] and [21].
the use and/or control of the common property by the hotel manager and operator, the sixth and seventh defendants, will be relevant in determining this issue.
[58] Mr Rice presented his analysis of each of categories A to H for which discovery is sought.
Category A
[59] This category relates to all documents and correspondence relating to the leasing or licensing of the second to fifth defendants’ units to Customs Street Hotel Limited, the sixth defendant. Mr Rice submits that the rights granted under the defendants’ leases of their units are relevant to the scope of the express or implied licence granted to the hotel manager to operate a hotel in the building, including the use of the common property.
[60] Mr Rice submits that Mr Davison, in his affidavit, has admitted the existence of the leases from each of the second to fifth defendants to the sixth defendant which contain provisions granting to the sixth defendant the non-exclusive right to use the common areas in the building and therefore are relevant to the central issue and should be discovered.49
[61] Mr Hollyman submits that there is no correspondence in this category as the fifth defendants’ and the sixth defendant are all part of the same group and are subject to the same decision-maker and hence correspondence relating to the lease or licensing of the units was unnecessary. He relies on the affidavit evidence of Mr Davison.50
Conclusion in relation to category A
[62] In my view, the plaintiffs have a reasonable argument that the scope of any rights expressed or implied in the leases or licences relating to the uses of common property as between the second to fifth defendants and the sixth defendant will shed light on the use of the common property for the purposes of the hotel operation and therefore are relevant to the central issue.
49 Davison affidavit, above n 8, at [3.5.1].
50 Davison affidavit, above n 8, at [3.1]–[3.5].
[63] As to correspondence relating to the leases or licences, Mr Hollyman’s submission is that there isn’t any such correspondence as the second to sixth defendants are all part of the same group. I accept this may be the case and if there is nothing to discover in this regard then that will be the response by the second to sixth defendants. However, if there is any correspondence between the second to sixth defendants concerning the use of the common property relating to putting in place the leases and licences, this should be discovered. Using the appropriate search tools, as proposed in Mr McKenzie’s affidavit,51 should assist in restricting the search sufficiently to eliminate any irrelevant correspondence.
[64] I acknowledge the issue raised by the second to sixth defendants that the leases or licences may contain commercially sensitive information. The leases and licences and any correspondence to be disclosed can be redacted to the extent of any commercially sensitive information, such as pricing, contained therein.
Category B
[65] This category relates to all documents (including, without limitation, policy and procedure manuals and standards manuals) and correspondence between the second to sixth defendants and the seventh defendant relating to the establishment and operation of the hotel in the building.
[66] Mr Rice submits that the policy and procedure manuals and standards manuals are referred to in the HMA between the sixth and seventh defendants but have not been disclosed. He submits they are likely to contain policies and procedures and standards for the maintenance of the entire building, including the common property.
[67]Mr Rice submits that such documents and correspondence are likely to show:
(a)the nature and extent of the seventh defendant’s activities or services in operating the hotel and its necessary use of/control over the common property to conduct such activities or services;
51 McKenzie affidavit, above n 15.
(b)the defendants’ position with regard to obtaining the plaintiffs’ consent to a new hotel.
[68] Mr Hollyman on the other hand, submits that this category is ill-defined and appears to be a catch-all for any piece of information that might touch on the hotel and accordingly, casts an extremely wide net. He submits the policy, procedure and standards manuals belong to the seventh defendant, that the second to sixth defendants do not possess them and relies on the affidavit evidence of Mr Davison.52
[69] Mr Hollyman also submits that these documents would have to be read in the context of the HMA, which is expressly subject to the sixth defendant’s leasehold interest which is, in turn, explicitly subject to the Unit Titles Act and the Body Corporate rules. However, in my view this submission begs the question as to the correct interpretation of the Unit Titles Act which is a central issue in this proceeding.
[70] I have also noted Mr Davison’s evidence to the effect that locating correspondence relevant to these documents will entail searching email accounts of numerous persons, up to 50, and manually sorting through them for relevance to the proceeding and that such discovery will require a lot of time and effort from people already occupied full time in the business of the group.
Conclusion in relation to category B
[71]My views in relation to category B are as follows:
(a)Mr Hollyman in his submissions, and Mr Davison in his affidavit, say that the sixth defendant does not have access to the standards and policy manuals and procedures manuals, but I find this surprising given cl 6 of the HMA, pursuant to which the sixth defendant commits to the hotel being operated in accordance with the “standards” and procedures. The definition of “standards” in the HMA indicates that the sixth defendant has access to these documents if it wishes to obtain them.
52 Davison affidavit, above n 8, at [4.1]–[4.2].
(b)The standards and policy manuals and procedures manuals are relevant to how the hotel is operated and, in my view, there is a reasonable argument on behalf of the plaintiffs that they will contain information as to how the common property is used for the purposes of the hotel and are therefore relevant to the central issue.
(c)I note Mr Davison’s evidence as to how onerous discovery of correspondence relating to these standards and policy manuals and procedures manuals is likely to be. However, I am of the view that use of electronic searching with key words and filters should allow the correspondence to be searched and the searches refined.
(d)Accordingly, the standards and policy manuals and procedures manuals should be discovered and also correspondence between the second to the sixth defendants and the seventh defendant relating thereto, subject to limiting the scope of discovery of such correspondence by using suitable key words and filters.
(e)The documents and correspondence can be redacted to the extent of any commercially sensitive information, such as pricing, contained therein.
Category C
[72] This category relates to employment contracts of staff, including the general manager of the hotel.
[73] Mr Rice submits that the roles and responsibilities of the staff in relation to the building, including the use and maintenance of the common property, are relevant to the central issue.
[74] Mr Rice submits that Mr Davison accepts that the employment agreement of the Chief Engineer and the Executive Housekeeper may have some relevance to the common areas,53 and accordingly these should be discovered. Mr Rice also submits
53 Davison affidavit, above n 8, at [5.1].
there is no compelling reason why the remaining employment contracts should not be provided as well, as inferences may be drawn from the employees roles and responsibilities as to their use of the common property. He accepts the names and salaries of the staff may be redacted if desired.
[75] Mr Hollyman submits that the employment agreements are private, commercially competitive and confidential and do not have content that would show lease/licensing of the common property. He submits that if the Court considers that they are relevant, they are only marginally so and if only marginally relevant it would be disproportionate to discover them given the privacy, competitive and confidentiality issues.
[76] I note Mr Davison’s evidence that the job descriptions are standard documents of the seventh defendant rather than being specific to the hotel operated in the building and that both maintenance and cleaning of the common property are procured and paid for by the Body Corporate.
Conclusion in relation to category C
[77] My view in relation to the documents sought in category C is that they are likely to only be marginally relevant to the use of the common property for the purposes of the operation of the hotel and to the central issue. Accordingly, discovery should be restricted to the employment contracts for the Chief Engineer and the Executive Housekeeper. The commercially sensitive information relating to the names of the relevant employees and salaries or benefits may be redacted in the version of the documents discovered.
Category D
[78] This category relates to all licences and authorisations granted by relevant authorities to operate a hotel in the building. Mr Rice submits that such documents should be disclosed as they are relevant to the allocation of roles and responsibilities for activities conducted in the building, including activities on the common property.
[79] Mr Rice submits that Mr Davison admits to liquor licences, food premises licences and a licence to operate the spa, and that these licences extend to the whole building and accordingly are relevant to the use of the common property.
[80] Mr Hollyman submits that operation of the accommodation component of the hotel does not require any licences or authorisation by any authority. He submits that the liquor licences extend to the whole building as a matter of standard practice by Auckland Council and the regulatory requirements for the building are procured by the Body Corporate. He submits, in short, that the documents either do not exist or do not impact on the central issue.
Conclusion in relation to category D
[81] In my view the category D documents are likely to be of limited relevance to the use of the common property for the purposes of the hotel operation and therefore to the central issue. However, as discovery of these documents is straightforward and not onerous to the second to sixth defendants, they should be discovered. Any commercially sensitive information as to suppliers’ names and details or pricing can be redacted.
Category E
[82] This category relates to all documents and correspondence regarding the engagement of independent contractors for the operation of the hotel. Mr Rice submits that terms of engagement of contractors who provide goods and services to the hotel is likely to impact on the use of the common property.
[83] Mr Rice submits that Mr Davison admits to the sixth defendant entering into a significant number of individual contracts with a large range of food and beverage suppliers.54 Mr Rice submits that Mr Davison omits to mention contracts which must exist with waste removal contractors, plant upkeep and various trades people who must necessarily enter onto the common property. He submits that contracts with the
54 Davison affidavit, above n 8, at [7.5].
sixth defendant should be disclosed to show the extent of trade-persons who enter on the common property.
[84] Mr Rice also submits that Mr Davison admits to contractor equipment located in service ducts and cabinets.55 Mr Rice submits the agreements with such contractors should be discovered, including the licences permitting them to store their equipment on the common property.
[85] Mr Hollyman submits that the contracts and independent contractors in relation to the hotel are confidential. They are inherently competitive as they address the scope of goods and services supplied and the pricing for them.
[86] Mr Hollyman notes that the second to sixth defendants acknowledge they have television and internet fixtures, supplied by contractors and installed in cabinets and ducting that are designed to accommodate such items to be installed, available to all owners for use for their intended purpose, and are common property. He submits that even if the contracts did contain a provision capable of being read as leasing/licensing common property, it would be ineffective against s 56 of the Unit Titles Act. However, this latter submission again begs the question as to the correct interpretation of s 56 of the Unit Titles Act.
Conclusion in relation to category E
[87] In my view, category E documents, to the extent those independent contractors have access to the common property, the documents and relevant correspondence should be disclosed as the plaintiffs have a reasonable argument that they will shed light on the use of the common property for the purposes of the hotel operation and therefore are relevant to the central issue. Independent contracts, and correspondence related thereto, which do not involve any use of, or access to the common property by the independent contractor do not need to be disclosed. Any commercially sensitive information relating to names of contractors and details of independent contractors and pricing can be redacted.
55 Davison affidavit, above n 8, at [7.7].
[88] As to correspondence, I acknowledge the second to sixth defendants’ concern as to the width of that category in respect of correspondence. In that regard, my view is only correspondence directly relevant to the independent contracts pertaining to the use of common property be disclosed. As noted previously, use of key word searches and appropriate filters should make this search manageable.
Category F
[89] This category relates to all documents in correspondence in relation to any building work undertaken at the building during the period 6 July 2020 to 8 October 2020. Mr Rice submits there must be extensive correspondence and documentation regarding the refit that occurred during this period in which the defendants had exclusive occupation of the common property. He submits that, for example, there must be building contracts granting possession of the site to the contractors during that period.
[90] Mr Hollyman submits that work on the common areas was procured and paid for by the first defendant, not the second to sixth defendants. He submits that due to the urgency of the work, existing staff were engaged and there were no contracts. He submits that whatever access personnel carrying out the respective renovations had, they were there on behalf of the second defendant as to the commercial units, and the Body Corporate as to the common property.
[91] I note Mr Davison’s evidence is that the scope of works was largely decorative or maintenance related and that all trades, supplies, joinery and furniture and other inputs into the works were based on a quotation from a supplier and invoiced accordingly.
Conclusion in relation to category F
[92] In my view, to the extent there are in existence any material contracts and related correspondence relating to the refurbishment work, these should be discovered as the plaintiffs have a reasonable argument that they will shed light on the use of the common property for the purposes of establishing the hotel operation, and are therefore relevant to the central issue. In addition, the building consent application
should be discovered as, although it may be of marginal relevance, discovery of it should be straightforward. Quotations, invoicing and related correspondence for individual supply which do not involve access to the building or use of the common property do not need to be disclosed.
[93] Any documents which are disclosed under this category can be redacted for names and details of suppliers and pricing to the extent such information is commercially sensitive.
Category G
[94] This category relates to terms of the contract made by the sixth and/or seventh defendants with hotel guests. Mr Rice submits these terms are likely to disclose the rights and obligations of the guests/hotel operator in relation to use of the hotel premises, including the common property.
[95] The evidence is that contracts entered into with hotel guests are a matter of public record and do not impact on use of the common property.
Conclusion in relation to category G
[96] In my view, given these documents are straightforward and easy to disclose, they should be disclosed, albeit they may be only of marginal relevance. Any commercially sensitive information, such as pricing, contained in such documents can be redacted.
Category H
[97] This category relates to the financial statements of the sixth and seventh defendants for the hotel operation and the documents showing room occupancy and profitability since the commencement of the new Sofitel hotel. Mr Rice submits that these documents will be relevant to the plaintiffs’ alternative claim for damages in lieu of an injunction.
[98] Mr Hollyman submits that the sixth defendant’s financial statements are not relevant to the central issue. He submits that any revenue or profit which may be
disclosed by the financial statements for the sixth defendant cannot be considered reflective of what the plaintiffs could have reasonably expected from the units “but for” the alleged defaults by the various defendants — in other words their losses caused by the alleged defaults. Mr Hollyman submits that financial statements of the sixth defendant are for both the Sofitel Auckland Hotel and the Sofitel SO on Customs Street, therefore do not contain information that pertains to the common property and contain information that has nothing to do with the building.
[99] Mr Hollyman further submits that the financial statements of the sixth defendant, even if isolated for the Sofitel Auckland Hotel, are not relevant to the plaintiffs claim for damages, given they relate to the hotel’s operation as it is structured by the sixth defendant. He elaborates on these reasons at [3.8.7] of his submissions.
Conclusion in relation to category H
[100] In my view, Mr Hollyman is correct that the financial statements of the sixth defendant are not relevant to the central issue. I also accept his submission that the relevance of the financial statements to the plaintiffs’ alternative claim for damages in lieu of an injunction is highly speculative and does not justify discovery of those documents.
Hotel Management Agreement
[101] Mr Rice submits that the second to sixth defendants provided a redacted version of the HMA missing several pages. He submits that while confidentiality was cited as the reason for redactions, there was no evidential foundation for such a claim and no explanation of how the defendants would suffer harm if the unredacted HMA was disclosed in full.
[102] Mr Hollyman submits that the redacted portions of the HMA do not contain provisions that lease/license common property. He submits that in addition to being generally confidential, the redacted portions include provisions that contain competitive information, including pricing and figures.
[103] In my review of the HMA, while some of the redactions relate to fees and pricing and it is reasonable that these sections be redacted, other redactions are less explainable. For example, redactions to cl 34 relating to warranties by the owner and redaction of sch 5 relating to a non-disturbance deed. In addition, it is noted that the lease areas set out in sch 6 have also been removed from the disclosed copy.
Conclusion in relation to the HMA
[104] In my view, an unredacted version of the HMA should be provided to the plaintiffs by way of discovery, except for redaction of the pricing, fees, or other figures related to financial arrangements between the parties.
Discovery against the seventh defendant
[105] Ms Armstrong, for the seventh defendant, opposes the orders sought by the plaintiffs on the following grounds:
(a)There are no pleaded allegations concerning the seventh defendant’s conduct in respect of the common property in the building, and the seventh defendant’s rights and entitlements are derived from the HMA. She submits that the seventh defendant is merely an agent for, and on behalf of, the sixth defendant.
(b)The further discovery categories A to H sought by the plaintiffs from the seventh defendant:
(i)are duplicates of further discovery sought by the plaintiffs from the other defendants;
(ii)are in many cases irrelevant to the allegations of particulars pleaded in respect of the actions or conduct of the seventh defendant;
(iii)for the most part are not in the seventh defendant’s possession;
(iv)seek personal information concerning individuals who are not party to this litigation and there is no convincing evidence of the relevance or important of such documents to the issues in this case; and
(v)are unduly broad and would require a large portion of the documents routinely generated in relation to the day-to-day operation of the hotel (including internal and commercially sensitive information) to be located, identified, searched and in many cases redacted.
(c)The categories as framed are oppressive and disproportionate to the probative value the documents/correspondence may have in relation to the pleaded allegations.
(d)After weighing the balance in the above matters, it is neither appropriate nor in the interests of justice for the Court to exercise its discretion to order further and better discovery against the seventh defendant.
[106]Ms Armstrong makes the following general submissions:
(a)The plaintiffs’ claim does not plead or give particulars concerning the seventh defendant’s conduct in respect of the common property in the building. She submits at most, [27] to [30] of the amended statement of claim simply states that the seventh defendant operates a hotel in the building and, implicitly, suggests that the seventh defendant must use the common property for that purpose. The seventh defendant admits the building was designed to be used as a hotel, and has been operated by the seventh defendant as a hotel (and the seventh defendant self-evidently uses the common property for that purpose), and therefore there are no disputed issues of fact between the seventh defendant and the plaintiffs.
(b)To the extent the plaintiffs rely on a pleading by the second to sixth defendants to establish a discovery obligation by the seventh defendant, that is not sufficient. Discovery obligations that arise in respect of that pleading, if there are any, properly fall on the second to sixth defendants.
(c)Double discovery is unnecessary and:56
… in practical terms, this would be a nonsense. Discovery obligations are onerous enough without doubling up and having two parties discovering exactly the same documents.
[107] Ms Armstrong submits the injustice of double discovery is further highlighted in this case by the fact that the discovery categories sought by the plaintiffs are unduly broad and encompass most aspects of operating the hotel.
Analysis of categories
[108] Ms Armstrong then proceeded to present her analysis in relation to each of the categories.
Category A
[109] Ms Armstrong asserts that the seventh defendant does not have in its possession, power or control any documents in this category. Mr Rice in his supplementary submissions at [14] concedes that defendant does not have possession or control of the documents in category A.
[110] Given the acknowledgement that these documents are not in the possession or control of the seventh defendant, discovery against the seventh defendant in respect of category A should not be ordered.
Category B
[111] Ms Armstrong submits that the seventh defendant does not enter into contracts or other arrangements relating to the establishment of the hotel and it is merely an
56 Elders Pastoral Holdings Ltd v Raptorial Holdings Ltd (in rec) (2001) 16 PRNZ 202 (HC) at [20].
agent for the sixth defendant operating the hotel business. It is the sixth defendant that enters into contracts with third parties. Consequently, Ms Armstrong submits orders for discovery of documents relating to the establishment of the hotel should be sought from the sixth defendant.
[112] As to documents and correspondence relating to the operation of the hotel, Ms Armstrong submits that:
(a)The seventh defendant’s hotel management policies are internal documents that are irrelevant to the plaintiffs’ pleaded case, covering such issues as reinstatements, and health and safety standards. She submits there are no hotel policies, procedure manuals or standards manuals that concern maintenance of the common property in the building and relies on the evidence of Mr Gould.57
(b)The seventh defendant’s emails with the sixth defendant’s manager concern issues such as the physical state of the property, staffing service quality and the hotel’s financial performance, and are consequently irrelevant.
(c)The class of documents generally includes a large volume of communications between the hotel’s general manager and hotel staff relating to day-to-day operational matters. She submits the sheer volume of documents sought would require disproportionately large amounts of the seventh defendant’s time and resources to retrieve when compared with their relevance and overall value.
(d)The majority of documents and correspondence between the sixth defendant and the seventh defendant are commercially sensitive and confidential, and if production of the documents was required, would require extensive review and redaction to ensure that such information is identified and redacted.
57 Gould affidavit, above n 17, at [9].
(e)The documents are duplicative of the further discovery by the plaintiffs sought against the other defendants.
[113] In my view, discovery of documents in category B should not be ordered against the seventh defendant as it is duplicative of discovery against the second to sixth defendants in the same category.
Category C
[114] Ms Armstrong submits that only one staff member is employed by the seventh defendant with respect to the hotel. All other staff employed in the operation of the hotel are employed by the sixth defendant. Employment contracts and other information in respect of those staff are for the most part in the possession of the sixth defendant, not the seventh defendant.
[115] Ms Armstrong further submits that the plaintiff has not shown how a personal employment contract for the only seventh defendant employee has any relevance to the proceeding and that the contract contains nothing concerning the use or maintenance of the common property in the hotel building and is personal and confidential to the general manager.
[116] In my view, discovery of the employment contract of the seventh defendant’s employee, the general manager, is not justified and discovery should be limited to the two employment contracts to be discovered by the second to sixth defendants. Accordingly, discovery should not be ordered against the seventh defendant in respect of category C documents.
Category D
[117] Ms Armstrong submits that all licences or authorisations granted by the relevant authorities to operate the hotel are obtained in the name of, and held by, the sixth defendant. She refers to cl 21 of the HMA which confirms this and submits that the seventh defendant does not have possession or control of these documents.
[118] I am of the view that discovery of the documents in category D should not be ordered against the seventh defendant. It is duplicative of the discovery against the second to sixth defendants who, from the evidence, have primary custody of these documents.
Category E
[119] Ms Armstrong submits that most of the documents in this category are in the possession or control of the sixth defendant, not the seventh defendant. She further submits that any contracts for the operation of the hotel are either engaged by the seventh defendant as part of a national procurement or supply process or, in the majority of cases, engaged through the sixth defendant. In particular, she submits:
(a)Where independent contractors are engaged through a national procurement process the seventh defendant enters into a contract with the contractor and particular hotels are named in the contract as required. She submits that having regard to Mr Gould’s evidence, such contracts would not shed light on the issues in dispute in this proceeding. In addition, these contracts are commercially sensitive and confidential.
(b)Where independent contractors are engaged specifically for the operation of the hotel by the sixth defendant, the sixth defendant enters into these contracts itself with the seventh defendant acting as an agent. Accordingly, Ms Armstrong submits these contracts should be discovered from the sixth defendant and in any event, they are commercially sensitive and confidential.
[120] Ms Armstrong also submits that any given month around twenty to thirty independent contractors are used as part of the hotel operation and various emails may be exchanged across the departments and between the operational staff. The volume of documents falling within this category is so large it would require specialist IT support. She submits that the majority of these contracts would be of little relevance and discovery would be disproportionate and duplicative.
[121] In my view, discovery of the documents in category E should not be ordered against the seventh defendant. It is duplicative of discovery ordered against the second to sixth defendants to the extent that these contracts are relevant to the issues in the pleading, namely the issue of the common property.
Category F
[122] Ms Armstrong submits that this category relates to building work undertaken in respect of the hotel premises during the period from 6 July 2020 to 8 October 2020, and this building work was undertaken by the sixth defendant not the seventh defendant. Accordingly, the seventh defendant is not the appropriate party from which discovery should be sought for these documents and was not a party to the HMA with the sixth defendant during this period.
[123] In my view, discovery should not be ordered against the seventh defendant in relation to these documents. It is duplicative of discovery against the second to sixth defendants who were the primary parties engaged in procuring this work.
Category G
[124] Ms Armstrong submits that the guests sign a registration form which includes reference to the seventh defendant’s standard terms and conditions. She submits these terms and conditions are for the most part irrelevant to the plaintiffs’ pleaded case and are publicly available to prospective guests.
[125] She further submits that group bookings are based on a standard form template contract amended on a case-by-case basis, but none of these contracts refer to the common property and each contract for group bookings is commercially sensitive and confidential.
[126] In my view, discovery of these documents should not be ordered against the seventh defendant. It is duplicative of discovery ordered against the second to sixth defendants.
Category H
[127] Ms Armstrong submits that the seventh defendant has access to the audited accounts of the hotel and is involved in their preparation but does not have access to involvement in the preparation of the sixth defendant’s financial statements. The seventh defendant therefore does not have possession or control over this category of the documents and the proper defendant for which discovery should be sought is the sixth defendant.
[128] I am of the view that disclosure of these documents should not be ordered against the seventh defendant. I accept Ms Armstrong’s submission that it would be duplicative and that the party with primary custody of these documents is the sixth defendant.
Result
[129] Because of the conclusions I have reached at [62] to [64], [71], [77], [81], [87] and [88], [92] and [93], [96], [100], [104] in respect of discovery against the second to sixth defendants and at [110], [113], [116], [118], [121], [123], [126] and [128] in respect of discovery against the seventh defendant, I make the orders set out at [130] to [149].
Orders
[130]I make the following orders.
Category A
[131] The second to sixth defendants are to disclose the documents in category A, including any correspondence concerning the use of the common property related to putting in place the leases and licences. Discovery of correspondence should be limited by e-Discovery procedures to restrict the scope of discovery.
[132] The documents and any correspondence disclosed can be redacted to the extent of any commercially sensitive information, such as pricing, contained therein.
[133] The application for discovery of documents in category A against the seventh defendant is declined.
Category B
[134] The second to sixth defendants are to discover the documents and correspondence in category B. Discovery of correspondence should be limited by e-Discovery procedures to restrict the scope of discovery. The documents and correspondence can be redacted to the extent of any commercially sensitive information, such as pricing, contained therein.
[135] The application for discovery of the documents in category B against the seventh defendant is declined.
Category C
[136] The second to sixth defendants are to discover the two employment contracts in this category relating to the Chief Engineer and the Executive Housekeeper. Any commercially sensitive information relating to the names of the relevant employees and salaries or benefits may be redacted.
[137] The application for discovery of the documents in category C against the seventh defendant is declined.
Category D
[138] The second to sixth defendants are to discover the documents in category D. Any commercially sensitive information as to suppliers’ names or details of pricing can be redacted.
[139] The application for discovery of the documents in category D against the seventh defendant is declined.
Category E
[140] The second to sixth defendants are to disclose the documents in category E and correspondence related thereto to the extent those independent contractors have access to the common property. Independent contracts which do not involve any use of, or access to, the common property by the independent contractors do not need to be disclosed. Discovery of correspondence should be limited by e-Discovery procedures to restrict the scope of discovery. Any commercially sensitive information relating to the names of contractors and details of independent contractors and pricing can be redacted.
[141] The application for disclosure of the documents in category E against the seventh defendant is declined.
Category F
[142] The second to sixth defendants are to disclose any material contracts relating to the refurbishment work and correspondence related thereto. In addition, the building consent application relating to the refurbishment work is to be disclosed. Quotations and invoicing for individual supply which do not involve access to the building or use of the common property do not need to be disclosed. Discovery of correspondence should be limited by e-Discovery procedures to restrict the scope of discovery. The documents disclosed can be redacted for the names and details of suppliers and pricing to the extent such information is commercially sensitive.
[143] The application for discovery of documents in category F against the seventh defendant is declined.
Category G
[144] The second to sixth defendants are to disclose the documents in this category. Any commercially sensitive information, such as pricing, contained in such documents can be redacted.
[145] The application for discovery of documents in category G against the seventh defendant is declined.
Category H
[146] The application for discovery of documents in category H against the second to sixth defendants is declined.
[147] The application for discovery of documents in category H against the seventh defendant is declined.
Hotel Management Agreement
[148] The second to sixth defendants are to disclose an unredacted version of the Hotel Management Agreement except for the redaction of pricing, fees or other figures related to the financial arrangements between the parties.
Costs
[149] Costs are reserved. Counsel are directed to endeavour to agree costs in respect of the plaintiffs’ application. If costs cannot be agreed within 20 working days of the date of this judgment, counsel for the plaintiffs shall file a memorandum as to costs (not exceeding five pages) within five working days of expiry of the 20 working day period, and counsel for the second to sixth defendants and for the seventh defendant shall each file a reply memorandum (each not exceeding five pages) within five working days of receipt of the memorandum of counsel for the plaintiffs.
Associate Judge Taylor
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