European Foods Limited v Canegallo
[2018] NZHC 1714
•11 July 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-2769
[2018] NZHC 1714
BETWEEN EUROPEAN FOODS LIMITED
Plaintiff
AND
MARCO CANEGALLO
Defendant
Hearing: 25 June 2018 Appearances:
K M McMullen and H M Cassin for the Plaintiff S L Cogan for the Defendant
Judgment:
11 July 2018
JUDGMENT OF ASSOCIATE JUDGE SMITH
This judgment was delivered by me on 11 July 2018 at 3.00pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors / Counsel:
Cavell Leitch, Christchurch Anderson Creagh Lai Ltd, Auckland S L Cogan, Auckland
EUROPEAN FOODS LTD v CANEGALLO [2018] NZHC 1714 [11 July 2018]
[1] The defendant (Mr Canegallo) asks for an order directing the plaintiff (EFL) to file and serve a more explicit statement of claim, providing further particulars as set out in Mr Canegallo's application. EFL opposes the application. It says that, while it intends to file an amended statement of claim, its amended pleading should await the completion of discovery, and in particular the resolution of a proposed application by EFL for particular discovery against Mr Canegallo and an application for non-party discovery.
Background
[2] EFL is an importer and wholesaler of Italian food. Mr Canegallo is a former director and shareholder of EFL.
[3] On or about 12 June 2015, Mr Canegallo entered into a shareholders' agreement (the shareholders' agreement) with the founding shareholders of EFL, being himself, Sandro Del Moro, Stefano La Cava, Michele Fantino, and Francesca Fantino (together, "the founding shareholders"). The shareholders' agreement included restraint of trade provisions, which provided that the founding shareholders would not, during the restraint period, and in the restraint area:
…
(1)be directly or indirectly engaged, concerned or interested in or otherwise associate with any business in competition with [EFL's] business including (for the avoidance of doubt) any developments in [EFL's] business or extensions to the product range after the commencement date (with the exception of fresh pizza dough) (clause 14.1(a));
(2)directly or indirectly induce or solicit or endeavour to induce or solicit any customer or client of [EFL] to cease doing business with [EFL] or reduce the amount of business which the customer or client would normally do with [EFL] (clause 14.1(b));
(3)employ or otherwise engage the services of any person who was an employee of, or contractor to, [EFL] in the 12 months prior to the date of termination (clause 14.1(c));
…
[4] The restraint area was anywhere within New Zealand, and the restraint period was during the term of the shareholders' agreement and for a period of 24 months after the founding shareholders ceased to hold shares in EFL.
[5] On 19 December 2015, the founding shareholders sold a total of 65,898 EFL shares to an Italian company, Granarolo International Srl (Granarolo). On or about 4 or 5 October 2016, the founding shareholders sold their remaining shares to Granarolo. At that point, the 24 month restraint period in the shareholders' agreement commenced.
[6] The second sale agreement, under which the founding shareholders sold their remaining shares to Granarolo, included provision for the restraint of trade clauses in the shareholders' agreement to continue, provided that the restraint would only relate to the business of importing and distributing Italian or other European foods, and would not relate to any other business, including the production of frozen pizza dough or pizza flour. Subject to those provisions, the shareholders' agreement was terminated.
[7] There is a minor dispute between the parties over the precise date on which the 24 month restraint period commenced. EFL says the period commenced on 7 October 2016; Mr Canegallo says the period commenced on 4 October 2016.
EFL's statement of claim
[8] EFL alleges that Mr Canegallo is in breach of the restraint provisions of the shareholders' agreement in that he:
(a)Is engaged, concerned or interested in or otherwise associated with a business involved in importing and distributing Italian or other European foods in New Zealand.
(b)Has directly or indirectly induced or solicited or endeavoured to induce or solicit customers or clients of EFL to cease doing business with EFL or reduce the amount of business which the customers or clients would normally do with EFL.
(c)Has, in connection with his interest in a competing business, employed or otherwise engaged the services of any person who was an employee of, or contractor to, EFL in the 12 months prior to the date of termination of the shareholders' agreement.
[9]EFL pleads the following particulars of the alleged breaches:
Particulars
15.3.1. Prodotti D'Italia Limited (Prodotti) is a duly incorporated company, having its registered office at Level 1, 109 Carlton Gore Road, Newmarket, Auckland and was incorporated on 13 October 2016.
…
15.3.3. Prodotti is involved in importing and distributing Italian or other European foods in New Zealand;
…
15.3.6.The defendant is engaged, concerned or interested in or otherwise associated with Prodotti:
15.3.6.1 Prodotti's directors are Guiseppe Carrozzino, Ferruccio Piantini and Tomaso Piantini.
15.3.6.2.Guiseppe Carrozzino and the defendant are the directors of Pizza in a Box Limited.
15.3.6.3.Ferruccio Piantini and the defendant are the directors of Round Pizza Limited.
15.3.6.4.Round Pizza and Prodotti share the same registered office of GVW Accountants, 109 Carlton Gore Road, New Market, Auckland.
15.3.6.5.Round Pizza Limited and Prodotti have a common shareholding of Cidi International SA, a company registered in Switzerland.
15.3.6.6.Ferruccio Piantini is a director of Cidi International SA.
15.3.6.7.Ferruccio Piantini was a director of EFL from 23 August 2016 to 30 September 2016.
15.3.7 The defendant is through Prodotti engaged and associated with businesses in competition with EFL.
15.3.8.The defendant has through Prodotti directly or indirectly induced or solicited or endeavoured to induce or solicit the following suppliers of EFL to cease doing business with EFL or reduce the amount of business which would normally be done with EFL:
15.3.8.1.Europomella S.p.A;
15.3.8.2.Latteria Sociale Mantova S.c.a;
15.3.8.3.Cirillo Group S.r.l;
15.3.8.4.Salumificio Vitali S.p.a;
15.3.8.5.Pastificio Lucio Garofalo S.p.a.
15.3.9.The defendant has through Prodotti directly or indirectly solicited and employed the following employees who were employees of EFL in the 12 months prior to the date of termination of the shareholders' agreement:
15.3.9.1.Leonardo Fontana;
15.3.9.2.Rossana Guardamagna; and
15.3.9.3.Edgar Soro Martin.
15.3.10.Further the defendant has through Prodotti, directly or indirectly, solicited for employment:
15.3.10.1 Brendon Ruthledge;
15.3.10.2.Wi Hei Paora; and
15.3.10.3.Daria Garizio.
[10] EFL seeks a declaration that the restraint provisions are valid and enforceable, and an injunction restraining Mr Canegallo from being engaged, concerned or interested in, or otherwise associated with, a business involved in importing and distributing Italian or other European foods in New Zealand, until 18 October 2018 or such other period as the Court may determine. EFL also asks for an enquiry as to damages, and judgment for costs and interest.
Mr Canegallo's statement of defence
[11] Mr Canegallo admits that Prodotti is involved in importing and distributing Italian and other European foods into New Zealand. He also admits that Prodotti is in competition with EFL. However, he denies that he has ever been a director, shareholder (legal or beneficial), employee, or contractor of Prodotti, or an investor in Prodotti, or otherwise directly or indirectly engaged, concerned or interested in, or otherwise associated with or retained in any capacity by, or on behalf of, Prodotti.
[12] Mr Canegallo admits EFL's allegations relating to the identity of the directors of Prodotti, Pizza in a Box Limited and Round Pizza Limited, and he admits that Round Pizza and Prodotti have a common shareholding (Cidi International SA, a Swiss company) and that both have their registered office at the offices of GVW Accountants in Newmarket, Auckland. He also admits that Mr Piantini is a director of Cidi International, and was between 23 August 2016 and 30 September 2016 a director of EFL.
[13] Mr Canegallo pleads that the businesses of Round Pizza and Pizza in a Box both fall outside the restraint provisions of the shareholders' agreement, and he generally denies that the various matters pleaded by EFL would be sufficient, if proved, to show that he has been engaged, concerned, interested in or otherwise associated with a business in breach of the restraint provisions.
[14] Mr Canegallo specifically denies that he has, through Prodotti or otherwise, and whether directly or indirectly, induced or solicited suppliers of EFL to cease doing business with EFL, or attempted to do so. He also denies that he has, through Prodotti or otherwise, solicited or employed the employees referred to in EFL's statement of claim.
[15] Mr Canegallo pleads affirmatively that three of the suppliers referred to in subparagraphs 15.3.8 of EFL's statement of claim (Latteria Sociale Mantova (LSM), Cirillo Group (Cirillo), and Salumificio Vitali) have continued to supply EFL, with 2017 turnover levels either approximately the same as or greater than 2016 levels. He pleads that Pastificio Lucio Garofalo (PLG) terminated its distributorship with EFL independently and without any consultation with him, because of a lack of contact and orders from EFL for over a year. Europomella is said to have terminated its distributorship with EFL due to a loss of trust and confidence in EFL for a number of reasons, including a significant decrease in orders of some products by EFL, and EFL registering in New Zealand two trademarks owned by Europomella, without Europomella's knowledge or consent. Mr Canegallo says that a further factor was that EFL's owner, Granarolo is one of Europomella's main competitors globally, and that Europomella was uncomfortable having a Granarolo subsidiary as its New Zealand distributor.
[16] Mr Canegallo accepts that Europomella decided to commence supplying Prodotti, but he says that occurred independently of and without consultation with him.
[17] Mr Canegallo pleads affirmatively that he has had no contact with Cirillo or LSM since he left EFL and before he was served with EFL's claim, and that the only contact he has had with the other suppliers has been either personal and not business related (PLG), or concerned with selling the suppliers' products outside New Zealand (ie outside the restraint area) – Europomella.
[18] In respect of the former EFL employees referred to at subparagraph 15.3.9 of EFL's statement of claim, Mr Canegallo says that each of them terminated their employment with EFL independently of and without consultation with him. Mr Fontana had resigned from EFL before Mr Piantini offered him employment with Prodotti, and Mr Martin responded to an advertisement placed by Prodotti in December 2016.
[19] In respect of the EFL employees referred to in subparagraph 15.3.10, Mr Canegallo says that he has run into Mr Paora only once since he left EFL. He says that the same is true of Mr Garizio. He has run into Mr Ruthledge on three occasions, but says he did not discuss EFL's business with him, or Mr Ruthledge leaving EFL to work for Prodotti.
Mr Canegallo's request for particulars
[20] Mr Canegallo seeks particulars of who is alleged to have done the soliciting, inducing and employing referred to in the introductory parts of subparagraphs 15.3.8,
15.3.9 and 15.4.10 (or made the endeavours to induce or solicit referred to in subparagraph 15.3.8). And in respect of each of the suppliers referred to in subparagraph 15.3.8, he asks if EFL alleges that they have in fact been induced to cease doing business with EFL (or reduce their business with EFL), and if so when.
EFL's notice of opposition
[21] In its notice of opposition, EFL says that the particulars set out in the statement of claim are reasonable in the circumstances, in that they set out the factual circumstances relied upon and indicate the nature and origin of the claim. EFL also says that certain matters of fact relevant to the particulars are within Mr Canegallo's knowledge, but not EFL's knowledge, and the issue of particulars is more appropriately dealt with following discovery.
Discovery
[22] On 7 March 2018, Associate Judge Christiansen directed the parties to provide standard discovery. Affidavits of documents were to be filed by 30 March 2018, and inspection of documents was to be completed by 20 April 2018. On 15 May 2018, I made orders extending the time for the parties to exchange affidavits of documents to 18 May 2018, with inspection to be completed by 22 June 2018.
[23] In the event, there has been some further delay. Counsel told me at the hearing that exchanges relating to discovery were still taking place between counsel as late as Friday 22 June 2018. Ms McMullen advised that, while EFL has disclosed hundreds of documents, Mr Canegallo has disclosed only 14 documents. She advised that EFL's intention is to make an application for particular discovery against Mr Canegallo, on the basis that there are further relevant documents in his power which have not been disclosed. EFL is also considering an application for non-party discovery.
Further particulars applications – legal principles
[24] Rule 5.26(b) of the High Court Rules requires that a statement of claim must give sufficient particulars of time, place, amounts, names of persons, nature and dates of instruments, and other circumstances, to inform the Court and the party or parties against who relief is sought of the plaintiff's cause of action.
[25] In PriceWaterhouse v Fortex,1 the Court of Appeal noted that pleadings are intended to ensure proper pre-definition of issues, and avoid surprise. Pleadings which
1 PriceWaterhouse v Fortex CA 179/98 30 November 1998 (CA) at 9.
are properly drawn and particularised are an essential roadmap for the Court and the parties.2 They are the documents against which the scope of relevance for the purposes of discovery is assessed, and briefs of evidence are prepared. As such, the pleadings establish the parameters of the case.
[26] On the obligation in the Rules to "state" the "claim", so that the Court knows what it has to rule upon and the defendant knows the case it must meet, the Court of Appeal said in Fortex:3
What we are saying is that both the Court and opposite parties are entitled to be advised of the essential basis of a claim or defence, and all necessary ingredients of it, so that subsequent processes and the trial itself can be conducted against recognisable boundaries. Neither the Court nor opposite parties should be placed in the position of having to deal with a proposition of whose substance adequate notice has not been given in the pleadings.
[27] What is required is a sufficient outline of the plaintiff's case to enable a reasonable degree of pre-trial briefing and preparation. Ultimately, a common-sense and balanced judgment is required,4 taking into account what is reasonable in the circumstances of the case.
[28] The statement of claim should not stray into setting out evidence,5 and further pleading is not an area for mechanical approaches or pedantry.6
[29] Ms McMullen referred to Hickson v Scales,7 and Body Corporate 74246 v QBE Insurance (International) Limited,8 in support of the proposition that, where the defendant knows the facts and the plaintiff does not, the defendant should give discovery before the plaintiff is required to give particulars.
[30] The Court has a discretion as to whether further particulars should be ordered, and that discretion will be exercised in accordance with the facts of each case. In Body Corporate 74246 v QBE Insurance (International) Limited, the Court considered three
2 At 17.
3 At 18.
4 At 19.
5 Commissioner of Inland Revenue v Chesterfields Preschools Limited [2013] 2 NZLR 679 at [84].
6 PriceWaterhouse v Fortex, above n 1, 19.
7 Hickson v Scales (1900) 19 NZLR 202.
8 Body Corporate 74246 v QBE Insurance (International) Limited [2015] NZHC 1360.
questions in assessing whether a pleading was consistent with the objectives of the Rules:9
(a)Has sufficient information been provided to inform the other party of the case they have to meet and to enable them to take steps to respond?
(b)Is there are a real risk that the other party may face a trial by ambush if further particulars are not provided?
(c)Is the request oppressive or an unreasonable burden upon the party concerned?
[31] The Court also noted, in considering whether a party is likely to be taken by surprise, that the Court may have regard to the fact that any particulars sought are within the knowledge or control of the requesting party.
[32] In PriceWaterhouse v Fortex the Court of Appeal stated that any view that exchange of briefs of evidence before trial might be seen as curing any lack of particularity in the proceedings is misguided, and that pleadings, properly particularised, are the documents which establish parameters of the case. Both the Court and parties are therefore entitled to be advised of the essential basis of a claim or defence, and all necessary ingredients of it.10
The request for particulars of subparagraph 15.3.8
[33] For convenience, I reproduce below the introductory part of subpara 15.3.8 from EFL's statement of claim:
The defendant has through Prodotti directly or indirectly induced or solicited or endeavoured to induce or solicit the following suppliers of EFL to cease doing business with EFL or reduce the amount of business which would normally be done with EFL:
…
9 At [18](h).
10 Above, n 1, at 17-18.
[34]Mr Canegallo seeks the following further particulars of this subparagraph:
(a)Who is alleged to have directly or indirectly induced or solicited, or endeavoured to induce or solicit, each of the suppliers pleaded at paragraph 15.3.8 of the statement of claim?
(b)If not [Mr Canegallo], who and in what capacity?
(c)In respect of each of the suppliers pleaded at paragraph 15.3.8 of the statement of claim:
(i)whether it is alleged that they were in fact induced to cease or reduce doing business with [EFL]; and
(ii)if so, when.
EFL's post-hearing memorandum
[35] In a memorandum filed (at the Court's request) after the hearing, Ms McMullen identified EFL's specific response to the request for particulars in respect of this subparagraph, if it were required to respond now, as follows:
(a)[Mr Canegallo]; and/or
(b)any person that [Mr Canegallo] may have communicated with to bring about the breach alleged, or person approached to act on the instruction of or agency of [Mr Canegallo], including but not limited to:
(i)Edgar Soro Martin; and/or
(ii)any person affiliated with Prodotti; and/or
(c)Prodotti.
[36] In respect of the particulars request directed to which suppliers have ceased carrying on business with EFL, Ms McMullen's post-hearing memorandum identified the companies Europomella S.p.A and Pastificio Lucio Garofalo SpA. The cessations respectively occurred on or around March 2017 and August 2017. The reduction and/or termination of other suppliers' business was said to be an ongoing matter, which
would be particularised at the end of the restraint period, and on completion of the proposed further discovery steps (EFL is presently unable to say when or on what dates the alleged solicitation occurred; that is believed to be within Mr Canegallo's knowledge). The only particulars that can be firmly included at this point are the dates two suppliers gave notice of termination of their business relationships with EFL. (The dates known are the dates of termination, not the precise dates of solicitation/inducement.) However, Mr Canegallo by his own pleading has knowledge of those dates, and there is no suggestion he does not understand the case he has to meet on this point.
Submissions for Mr Canegallo
[37] Mr Cogan submits that EFL was required to plead the circumstances that it says bring the alleged conduct within the scope of the restraint of trade (eg the essential element of solicitation), but it has not done so. He referred in support to Drew New Zealand Limited v Hodgson & Ors, a 1995 decision of the Employment Court where the defendant allegedly solicited business from the plaintiff's customers in breach of a restraint of trade provision,11 and also to the decision of Asher J in Financial Markets Authority v Warminger.12 In the latter case, the plaintiff alleged that certain trades by the defendant "had, or were likely to have, the effect of creating, or causing the creation of, a false or misleading appearance" in terms of the Financial Markets Conduct Act 2013. However, the plaintiff did not plead how that was so. Mr Cogan referred to the following passages from the judgment of Asher J:
That is left for the reader to infer; it is to be assumed that the preceding facts show that Mr Warminger has created a misleading effect.
[13] While it may be that this could be assumed from the previous paragraphs, pleading is not about inferential assertions. Such assertions fall short of the certainty and clarity offered by an express allegation. In my view, the way in which the trades had the effect of creating or causing the creation of a false or misleading appearance needed to be spelt out. It is too important to be left to inference. The statement of claim should tell the defendant the allegations that must be answered, so the defendant is not left to guess, and can affirm or deny with confidence. If the defendant is left to infer how the conduct constituted manipulation, even though the inference in the end may be reasonably plain, that is not enough.
11 Drew New Zealand Limited v Hodgson & Ors EC Auckland AEC 90A/95 24 November 1995.
12 Financial Markets Authority v Warminger [2016] NZHC 1193 (footnotes omitted).
…
[16] In essence then, the pleading currently is unduly conclusory, and there is no bridge between the facts given, and the conclusion of a misleading appearance. It needs to be explained. The effect of this being specifically pleaded will be that the defendant knows precisely the allegation to be answered, which is what is required of a statement of claim in all cases.
[38] Mr Cogan submitted that the same could be said of EFL's pleading in this case. How the restraint of trade provisions are said to have been breached is too important a matter to leave to inference, and should have been spelled out in EFL's pleading. As the pleading is presently drafted, there is no discernible "bridge" between the allegations that suppliers have left, and the conclusory statement that the restraint of trade has been breached. The Court and Mr Canegallo are left to infer how the suppliers were induced or solicited to leave, including whether EFL is alleging primary or secondary liability (ie whether the alleged inducing or soliciting was by Mr Canegallo or Prodotti).
[39] On EFL's contentions that the requested particulars are within Mr Canegallo's knowledge, and/or better dealt with after discovery, Mr Cogan submitted that EFL's theory of its own case is clearly not within Mr Canegallo's knowledge. Nor will further discovery assist EFL in supplying the requested particulars. He submitted that the documents already provided show that Mr Canegallo did not approach the pleaded suppliers, and in any event, why a given supplier would choose to leave EFL is not something on which Mr Canegallo's discovery could shed any light. Furthermore, it is the pleadings that determine the scope of discovery, not vice versa.
[40] Mr Cogan submitted that EFL has made serious allegations against Mr Canegallo, without pleading any proper basis for the allegations. And its response to Mr Canegallo's particulars request exposes its proposed further discovery application as no more than a fishing expedition.
Submissions for EFL
[41] In her submissions, Ms McMullen submitted that now is not the time for specifying the particulars sought. EFL has given notice to Mr Canegallo that it intends to apply for particular discovery against him, and also to apply for non-party discovery.
She advised that an amended statement of claim would be filed after those steps had been taken.
[42] Ms McMullen submitted that a claim that pleads all the material particulars other than those that can only be derived from information within the peculiar knowledge or control of the defendant, is regarded as adequate.13 If the claim in its current state adequately informs Mr Canegallo of the case he has to meet, or it is reasonable to leave the pleading as it is, then the Court can and should decline to order a more explicit pleading.
[43] Ms McMullen acknowledged that the subject matter of this claim relies heavily on discovery from the party (Mr Canegallo) who is alleged to be acting in breach of the restraint provisions. She submitted that EFL does not know every possible breach Mr Canegallo may have committed, and that further particulars should not be ordered where EFL's imperfect knowledge of Mr Canegallo's conduct might then "relieve [Mr Canegallo] from being held responsible" for particular breaches.14 It would prejudice EFL if a particulars order had the effect of limiting it to claiming for individual breaches which are presently known to it. Restricting the scope of the claim would in turn limit discovery to documents relevant to the particular breaches identified.
Discussions and conclusions
[44] I think there is no question that Mr Canegallo is entitled to the further particulars sought in respect of subparagraph 15.3.8. He is entitled to be fairly informed of the case he has to meet, and how he is alleged to have induced or solicited the companies referred to in subparagraph 15.3.8. The allegations of inducing or soliciting or of attempts to induce or solicit, are at the heart of EFL's claim against him, and I accept Mr Cogan's submission based on the Warminger case that Mr Canegallo is entitled to know what is said to constitute the "bridge" between the various associations he has with people or companies who have a relationship with Prodotti, and any "inducing" or "soliciting" of the suppliers. (Or if he is alleged to
13 Referring to Poros v Bax [2015] NZHC 1579 at [16], and Truck Master Limited v Mastagard Waste Limited [2014] NZHC 1676.
14 Sachs v Spellman (1887) 37 Ch D 295.
have done or attempted the soliciting or inducing personally, he is entitled to know when, where and how he is alleged to have done that.) As in Warminger, those details are too important to leave Mr Canegallo guessing what the case against him is on this issue. That is particularly so when the allegations are that he did or may have acted "through Prodotti", and/or "indirectly".
[45] The real issue is not whether particulars should be ordered, but whether a particulars order should be deferred until EFL has completed the further discovery steps it wishes to take.
[46] I accept Mr Cogan's submission that the starting point is that particulars should normally precede discovery. Broadly speaking, that is because the relevance of documents for discovery purposes is assessed by reference to the issues disclosed in the pleadings, and the particulars may be necessary to make those issues clear.
[47] But this is not a fraud case, where the allegations against the defendant must be pleaded with particularity before the plaintiff has obtained discovery, and it might perhaps be said that particulars requests (a) and (b) are within the category of cases discussed in Hickson v Scales, where discovery should precede the supply of the further particulars. That will often be the case where there would be a risk of prejudice to a plaintiff who could not provide the particulars sought: if its case had to be limited to the particulars it could provide without the benefit of discovery from the defendant, there would be a risk of injustice, in that its full case might not proceed to a hearing on the merits. The cases make it clear that where the particulars sought by a party are within that party's own knowledge, and the Court considers that the requesting party is not genuinely embarrassed by the lack of particulars, orders may be made that the particulars need not be provided, or that they may be deferred until after the requesting party has provided discovery.15
[48] One of the difficulties in this case is that Mr Canegallo has already provided discovery. Should EFL be permitted to hold back providing the particulars until it has pursued to a conclusion its proposed applications for particular discovery and/or
15 See Body Corporate 74246 v QBE Insurance (International) Ltd, above n 8 at [18](i); and Prime v Hardie HC Auckland CP 248/01, 15 March 2002 at [12].
non-party discovery? Normally I would answer that question in the negative, but in this case both Mr Cogan and Ms McMullen acknowledge that their clients will probably have to provide some supplementary discovery.
[49] The standard discovery ordered by the Court on 7 March 2018 was ordered by consent, that is, Mr Canegallo accepted that he should provide discovery before he would have to hand any particulars of EFL's claim that he may have wanted. And it now appears that Mr Canegallo's discovery may be incomplete.
[50] In those circumstances, I think the justice of the case will be met by deferring any order for particulars of subparagraph 15.3.8 until any particular discovery and/or non-party discovery applications have been filed by EFL. By then, EFL will have had any further discovery Mr Canegallo may provide voluntarily, and it will be obliged to provide affidavit evidence, or at least point to some other basis, on which the Court may conclude that there are grounds for believing that Mr Canegallo has not discovered all of the documents he should have discovered.16 To the extent EFL may seek non-party discovery, it will need to provide evidence, or at least put forward some basis, to persuade the Court that the non-party has in its control documents that, if it were a party, it would have had to discover.17 If those applications do not disclose on their face that documents do or may exist that would or might tend to support the allegations of soliciting or inducing (or attempts to do so), I think that may well be the end of the road for EFL as far as resistance to the present particulars request is concerned. But that will be better assessed when EFL has filed any discovery applications it may elect to file.
[51] For those reasons, the applications for the particulars of subparagraph 15.3.8 requested at subparagraphs (a) and (b) of Mr Canegallo's application will be adjourned for further consideration when the discovery applications EFL has indicated it proposes to file are called.
[52] While it may seem that there may be no good subparagraph 15.3.8 claims in respect of LSM, Cirillo and Salumificio Vitali (all of these companies appear to be
16 See r 8.19, relating to particular discovery by a party.
17 Rule 8.21, High Court Rules, relating to discovery by a non-party.
still supplying EFL, and EFL has pleaded no particulars of reduced supplies from them), I doubt that much would be achieved by ordering EFL to provide the particulars sought in Mr Canegallo's request (c) at this stage, in advance of his particulars requests
(a) and (b). Request (c) will also be adjourned for further consideration when EFL's proposed further and/or non-party discovery applications are called.
The request for particulars of subparagraph 15.3.9
[53]The introductory part of subparagraph 15.3.9 reads:
15.3.9 The defendant has through Prodotti directly or indirectly solicited and employed the following employees who were employees of EFL in the 12 months prior to the date of termination of the shareholders' agreement:
…
[54]Mr Canegallo seeks the following further particulars of this subparagraph:
(d)Who is alleged to have:
(i)directly or indirectly solicited; and
(ii)employed;
each of the employees pleaded at paragraph 15.3.9 of the statement of claim?
(e)If not [Mr Canegallo], who and in what capacity?
EFL's post-hearing memorandum
[55] In her post-hearing memorandum Ms McMullen identified EFL's response to the request for particulars in respect of this subparagraph, if it were required to respond now, as follows:
(a)[Mr Canegallo]; and/or
(b)any person that [Mr Canegallo] may have approached, influenced, instructed (including in an agency capacity) to assist with the breach alleged including but not limited to:
(i)Edgar Soro Martin;
(ii)any person associated with Prodotti; and
(c)Prodotti.
Discussions and conclusions
[56] For the reasons given on my consideration of the request for particulars of subparagraph 15.3.8, Mr Canegallo is clearly entitled to the particulars sought. To properly prepare his case, he is entitled to know whether it is his own actions which are in issue, or the actions of someone else acting on behalf of Prodotti. In the latter case, he is entitled to know the identity of that other person, and how the actions of that other person are said to implicate him in the alleged breaches of the shareholders' agreement (ie the "capacity" in which that other person is alleged to have acted, and how that capacity is said to implicate Mr Canegallo in the alleged breaches).
[57] EFL's response in Ms McMullen's post-hearing memorandum does nothing to inform Mr Canegallo on those matters, and I did not understand Ms McMullen to suggest that it would. Her primary position was that the particulars application was premature before EFL had completed its proposed further discovery steps.
[58] As with subparagraph 15.3.8, the only issue is whether the particulars should be ordered before Mr Canegallo has provided the further discovery he may provide voluntarily, and/or before EFL has filed its proposed applications for particular discovery and/or non-party discovery.
[59] On that issue, I think the same considerations apply in respect of subparagraph 15.3.9 as apply in respect of subparagraph 15.3.8. The result must be the same. The application for particulars of subparagraph 15.3.9 (requested at
subparagraphs (d) and (e) of Mr Canegallo's application) is accordingly adjourned for further consideration when EFL's discovery applications are called.
The request for particulars of subparagraph 15.3.10
[60]The introductory part of subparagraph 15.3.10 reads:
15.3.10. Further the defendant has through Prodotti, directly or indirectly, solicited for employment:
…
[61]Mr Canegallo seeks the following further particulars of this subparagraph:
(f)Who is alleged to have directly or indirectly solicited each of the employees at paragraphs 15.3.10 of the statement of claim?
(g)If not [Mr Canegallo], who and in what capacity?
EFL's post-hearing memorandum
[62] In her post-hearing memorandum Ms McMullen identified EFL's response to the request for particulars of this subparagraph, if it were required to respond now, as follows:
(a) Any person that [Mr Canegallo] may have approached, influenced, instructed (including in an agency capacity) to assist with the breach alleged including but not limited to Edgar Soro Martin.
Discussions and conclusions
[63] The same considerations apply to these particulars requests. Mr Canegallo is entitled to know who he is alleged to have "approached, influenced or instructed" to assist with the breach, and when he is alleged to have done that. The allegation is central and he should not be left to guess how he is alleged to be personally implicated in the alleged soliciting.
[64] On the issue of when the particulars should be provided, the position is the same as it was for the requests in respect of subparagraphs 15.3.8 and 15.3.9. The application for particulars of subparagraph 15.3.10 will also be adjourned for further consideration when EFL's discovery applications are called.
Orders
[65] Any applications EFL may wish to make for particular discovery or non-party discovery, are to be filed and served by 27 July 2018.
[66]Notices of opposition to any such applications are to be filed and served by
3 August 2018.
[67] Any such applications, and Mr Canegallo's adjourned further particulars application, are to be listed for mention before me in Chambers on the first practicable date (to be allocated by the registrar) after 6 August 2018.
[68]Costs to date on the particulars application are reserved.
Associate Judge Smith
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