Gillespie v Philpott
[2024] NZHC 1100
•10 May 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2022-404-782
[2024] NZHC 1100
BETWEEN BRUCE JAMES GILLESPIE, JULIET GILLESPIE
CHRISTOPHER JAMES GILLESPIE, NICHOLAS JOHN GILESPIE and JONATHAN PAUL GILLESPIE
as trustees of the GILLESPIE FAMILY TRUST
PlaintiffsAND
JOHN SYDNEY PHILPOTT
Defendant
Hearing: 11 March 2024 Appearances:
R J Hollyman KC and N G Lawrence for the Plaintiffs J W Turner and J C Waugh for the Defendant
Judgment:
10 May 2024
JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR
[Cross applications for further and better discovery; defendant’s application to strike out parts or all
of the plaintiffs’ statement of claim]
This judgment was delivered by me on 10 May 2024 at 3:00pm
pursuant to Rule 11.5 of the High Court Rules
…………………………. Registrar/Deputy Registrar
Solicitors:
Morrison Mallet (Michael Morrison), Auckland, for the Plaintiffs Devonport Law (John Waugh), Devonport, Auckland, for the Defendant
Copy for:
R J Hollyman KC, Auckland, for the Plaintiffs N G Lawrence, Auckland, for the Plaintiffs
GILLESPIE v PHILPOTT [2024] NZHC 1100 [10 May 2024]
J W Turner, Auckland, for the Defendant
TABLE OF CONTENTS
Paragraph
Introduction [1]
Background to the substantive dispute [2]
The GFT’s version of events [2]
Background to the discovery dispute [19]
The GFT’s application for discovery [22]
Mr Philpott’s opposition [24]
Mr Philpott’s application for discovery [25]
The GFT’s opposition [27]
Mr Philpott’s application to strike out [28]
The GFT’s opposition to strike out [30]
Legal principles [31]
Strike out [31]
Orders for particular discovery [33]
Analysis [36]
Preliminary Issue [36]
Issues to be determined [39]
Strike out application [40]
Paragraphs 10 to 14 of the statement of claim [46]
Paragraphs 15 to 34 [48]
Paragraphs 35 and 36 [50]
Paragraphs 37 to 41 [53]
Paragraphs 42 to 47 [56]
Paragraphs 54 to 56 [58]
Whether the GFT’s causes of action are reasonably arguable [61]
Section 9, Fair Trading Act 1986 [62]
Conclusion in respect of the first cause of action [69]
Section 13, Fair Trading Act 1986 [70]
Negligent misstatement [73]
Conclusion in respect of negligent misstatement [78]
Breach of an agreement [79]
Conclusion in respect of breach of contract [82]
Purchase of the FEIG shares [83]
Abuse of process [85]
Conclusion in respect of abuse of process [91]
The GFT’s discovery application [94]
Category 1 [94]
Conclusion in relation to Category 1 [98]
Category 2 [100]
Category 3, Category 4, and Category 5 [101]
Conclusion in relation to Categories 3, 4 and 5 [104]
Category 6 [105]
Conclusion in relation to Category 6 [108]
Category 7 [110]
Category 8 [111]
Conclusion in relation to Category 8 [115]
Category 9 [116]
Conclusion in relation to Category 9 [121]
Category 10 [122]
Conclusion in relation to Category 10 [127]
Category 11 [128]
Conclusion in relation to Category 11 [132]
Category 12 [133]
Conclusion in relation to Category 12 [137]
Category 13 [138]
Category 14 [140]
Conclusion in relation to Category 14 [143]
Category 15 [145]
Conclusion in relation to Category 15 [149]
Category 16 [151]
Conclusion in relation to Category 16 [154]
Category 17 [156]
Category 18 [157]
Conclusion in relation to Category 18 [159]
Category 19 [160]
Conclusion in relation to Category 19 [164]
Mr Philpott’s discovery application [166]
Category 4(iii) – Documents relating to advice from Colin Wilson,
the GFT’s external accountant [168]
Conclusion in relation to Category 4(iii) [173]
Category 4(v) – Communications between Mr Gillespie (and other GFT Trustees if applicable) with FEI Group and its directors, officers
and employees from 2 July 20018 to 31 December 2018 [174]
Conclusion in relation to Category 4(v) [177]
Category 4(vii) – Communications between Mr Gillespie and
Mr Wayne Sholtz in relation to the GFT claim [178]
Conclusion in relation to Category 4(vii) [179]
Category 4(viii) – Communications between Mr Gillespie and
Mr Robert Famularo in relation to the GFT claim [180]
Conclusion in relation to Category 4(viii) [183]
Category 4(ix) – Communications between Mr Gillespie and
Mr Jeff McKenzie of FEIG created after 16 April 2021 [184]
Conclusion in relation to Category 4(ix) [186]
Category 5 – Category 6: Documents relating to validity
of the Trust Deeds and [188]
Conclusion in relation to Categories 5 and 6 [192]
Category 7 – Correspondence between Mr Wilson and the
Trustees of the GFT Trust [194]
Category 8 – Correspondence between the Trustees of the GFT
themselves in relation to the FEI and FEIG matters [195]
Conclusion in relation to Category 8 [197]
Application for documents to be “undiscovered” [198]
Conclusion in relation to documents to be “undiscovered” [203]
Result [196]
Strike-out Application [196]
Paragraphs 10 to 14, 15 to 34, 35 and 36 of the statement of claim [204]
The GFT’s causes of action [205]
The GFT’s discovery application [207]
Category 1 [207]
Category 2 [208]
Categories 3, 4 and 5 [209]
Category 6 [210]
Category 7 [211]
Category 8 [212]
Category 9 [213]
Category 10 [214]
Category 11 [215]
Category 12 [216]
Category 13 [217]
Category 14 [218]
Category 15 [219]
Category 16 [220]
Category 17 [221]
Category 18 [222]
Category 19 [223]
Mr Philpott’s discovery application [224]
Category 4 (iii) [224]
Category 4 (v) [225]
Category 4 (vii) [226]
Category 4 (viii) [227]
Category 4 (ix) [228]
Categories 5 and 6 [229]
Category 8 [230]
Application for documents to be “undiscovered” [231]
Orders [232]
Strike-out application [233]
The GFT’s discovery application [234]
Mr Philpott’s discovery application [236]
Further submissions [239]
Costs [240]
Introduction
[1] The plaintiffs in this proceeding, the trustees of the Gillespie Family Trust (the GFT), apply for further and better discovery. The defendant, Mr John Sydney Philpott (Mr Philpott), cross-applies for further and better discovery. Mr Philpott also applies to strike out parts or all of the plaintiffs’ claim.
Background to the substantive dispute
The GFT’s version of events
[2] The GFT’s version of events, as set out in its amended statement of claim, is set out in the following paragraphs [3] to [17].1
[3] Mr Bruce James Gillespie (Mr Gillespie) and Mr Philpott first met in July 2004 when Mr Philpott purchased a house next door to Mr Gillespie. Over the following years, they developed a close friendship.
[4] On or around September 2017, Mr Philpott approached Mr Gillespie, inquiring if he would be interested in investing money in FE Investments Limited (FEI) which was, inter alia, a property development company with a number of developments in Auckland.
[5] Mr Philpott made various representations to Mr Gillespie, as a result of which GFT loaned money to FEI. The GFT advanced funds to FEI by establishing the trust arrangement whereby, inter alia:
(a)the GFT settled funds on FEI as trustee;
1 Amended Application for further and better discovery, dated 4 May 2023.
(b)FEI would, as trustee, advance the funds to a project subject to securities; and
(c)FEI held its interests in the securities on trust for the GFT.
Four trusts were established by trust deeds executed by FEI and the GFT:
(a)the Gillespie-Phoenix Hobson Project Trust Deed on 6 July 2018;
(b)the Gillespie-Les Ellison Hobson Project Trust Deed on 13 July 2018;
(c)the Gillespie-JMC-A29 Project Trust Deed on 13 July 2018; and
(d) the Gillespie-Crummer A29 Project Trust Deed on 13 July 2018. (together the Trust Deeds).
[7] The Gillespie-JMC-A29 Project Trust and the Gillespie-Crummer A20 Project Trust (Anzac Trusts) related to the development being undertaken at 29–31 Anzac Avenue, Auckland.
[8] A29 Holdings Limited was the company undertaking the property development at 29–31 Anzac Avenue, Auckland. The GFT made two separate
$500,000 loans, one to each of the two Anzac Trusts, and those funds were held on trust by FEI (the Anzac Loans). The $500,000 settled on the Gillespie-JMC-A29 Project Trust was in turn loaned by FEI to JMC Trustees Limited and that loan was secured by the following securities in favour of FEI, which were held on trust by FEI for the GFT:
(a)guarantees from A29 Holdings Limited and Jodie Marie Couwenberg;
(b)a registered second ranking security agreement over A29 Holdings Limited’s property; and
(c)a registered second mortgage over the property at Anzac Avenue.
[9] The $500,000 settled on the Gillespie-Crummer A29 Project Trust was in turn loaned by FEI to Crummer Trustees No.136 Limited and that loan was secured by the following securities in favour of FEI, which were held on trust by FEI for the GFT:
(a)guarantees by A29 Holdings Limited and Craig Andrew Johnson;
(b)a registered second ranking security agreement over A29 Holdings Limited’s property; and
(c)a registered second mortgage over the property at Anzac Avenue.
[10] The Gillespie-Les Ellison Hobson Project Trust and the Gillespie-Phoenix Hobson Project Trust (Hobson Trusts) related to the development being undertaken at 201 Hobson Street, Auckland.
[11] Hobson Project 201 Limited was the company undertaking the property development at 201 Hobson Street. The GFT made two separate $500,000 loans, one to each of the two Hobson Trusts (the Hobson Loans), and those funds were held on trust by FEI. The $500,000 settled on the Gillespie-Les Ellison Project Trust was in turn loaned by FEI to Leslie Ellison and that loan was secured by the following securities in favour of FEI, which were held on trust by FEI for the GFT:
(a)guarantees from Hobson Project 201 Limited and Leslie Ellison;
(b)a registered second ranking security agreement dated 13 October 2017 over Leslie Ellison’s property;
(c)a deed of priority dated 24 November 2017 between Hobson Project 201 Limited, Peninsula Golf Club Incorporated and FEI; and
(d)a registered second mortgage over the property at Hobson Street.
[12] The $500,000 settled on the Gillespie-Phoenix Hobson Project Trust was in turn loaned by FEI to Leslie Ellison and that loan was secured in the same way as the
loan from the Gillespie-Les Ellison Hobson Project Trust was secured, as set out at
[11] above.
[13] In total, the GFT settled $2,000,000 on trust for the FEI to loan to its development projects at Anzac Avenue and Hobson Street by way of the Anzac Loans and the Hobson Loans.
[14] Following the GFT’s investments in the Anzac Loans and the Hobson Loans, Mr Philpott continued to make positive representations about FEI. This resulted in the GFT making a further investment by purchasing shares in FEI’s parent company, FE Investments Group Ltd (FEIG) (an Australian company listed on the ASX), on 15 December 2018. The GFT purchased $100,000 worth of FEIG shares at 10 cents per share.
[15] Mr Philpott received payment from FEI for promoting FEI to the GFT and co-ordinating its investments in the Anzac Loans and the Hobson Loans. Between November 2016 and August 2018, Mr Philpott received approximately $498,921 in fees from FEI. Mr Philpott did not disclose to the GFT that he was receiving these fees.
[16] On 24 July 2020, FEI was put into liquidation by a special resolution of the shareholders.
[17] In December 2021, the GFT received $45,700.73 from the receivers of FEI. However, the GFT is still owed $2,054,299.27 plus interest by FEI and FEIG.
[18]Mr Philpott denies this version of events.
Background to the discovery dispute
[19] Since the beginning of the proceeding, the following discovery affidavits have been filed:
(a)Mr Philpott’s discovery affidavit sworn 19 December 2022; and
(b)Mr Gillespie’s discovery affidavit sworn 24 March 2023.
[20] Mr Gillespie states that Mr Philpott’s affidavit appears to be missing a considerable amount of relevant material which is directly relevant to the GFT’s claims that Mr Philpott had knowledge of the actual financial position of FEI and misled the GFT in relation to their investment.
[21] Mr Philpott states that the GFT’s discovery in this proceeding to date is deficient in the respects set out in his application.
The GFT’s application for discovery
[22] The GFT seeks orders for Mr Philpott to provide further and better discovery of the documents identified and described in the Schedule to the application (Further Documents) by complying with the requirements of r 8.19 (a)–(c) of the High Court Rules 2016.2
[23] Mr Philpott, in his affidavit of documents, claims he has no confidential information relevant to the dispute, has no documents which are no longer in his control, and has no documents which were never in his control but would be discoverable if they were. The GFT alleges that there are reasonable grounds for belief that Mr Philpott is in, or has been control of, the Further Documents that should have been discovered, that the documents sought are relevant to the issues in dispute in this proceeding, and that there are grounds for belief that the Further Documents exist.3
Mr Philpott’s opposition
[24]Mr Philpott opposes the application on grounds which, in summary, are:4
(a)all or most of the documents sought, as listed in the Schedule to the GFT’s application, are not referred to in the pleadings or are otherwise not relevant to the matters at issue in this proceeding
2 Amended application for further and better discovery, above n 1, at [1].
3 At [2].
4 Notice of opposition by the defendant to the plaintiffs’ application for further and better discovery, dated 19 May 2023, at [3].
or, if relevant, are of minor and peripheral importance, save where the documents sought are accepted by Mr Philpott as being discoverable;
(b)in some cases, the documents sought either do not exist or have already been discovered by Mr Philpott;
(c)in a number of cases, the discovery sought is not proportionate in terms of Part 1 of the Discovery Checklist in the High Court Rules;
(d)the GFT’s discovery requests are based to a considerable extent on the proposition that the GFT was an investor in FEI or FEIG, which was not the case in fact or in law. The GFT in fact advanced monies as co-lenders to the four project developers as the borrowers and it was those entities that were solely liable to the GFT to repay those loans. In relation to the FEIG shares, these were held by Mr Bruce Gillespie in his personal capacity and were not an asset of the GFT, so that the GFT is unable to claim any losses arising in respect of those shares;
(e)documents relating to the solvency or creditworthiness of FEI or FEIG are therefore not relevant to the matters pleaded in the statement of claim. The only way in which FEI could be said to be directly indebted to the GFT is if FEI was in breach of the four Trust Deeds executed by the GFT (which it was not) and this has not been suggested by the GFT and has not been pleaded in this proceeding;
(f)the GFT was bound to the terms of the four Trust Deeds which they had entered into in July 2018 until the termination dates of those Trust Deeds on 13 July 2020, and any documents created after 13 July 2020, save where they relate to subsequent realisations under the project securities in question, are not relevant to the matters at issue in this proceeding.
Mr Philpott’s application for discovery
[25]Mr Philpott seeks orders:5
(a)directing the GFT to provide by way of further, better, and more particular discovery, the documents referred to in Schedule 1 of his application and to list those documents in a new and amended, or supplementary, affidavit of documents;
(b)directing the GFT to remove from their existing Schedule of discoverable documents those documents listed in Schedule 2 of his application, which are documents not within the control of the GFT and which are otherwise irrelevant to this proceeding, or which are listed as duplicates, and to record that removal by providing a new and amended affidavit of documents.
[26]The grounds which the orders are sought are, in summary:6
(a)the schedule of documents in the GFT’s affidavit of documents did not include a number of the various documents listed in the schedule to his application, which are documents which are properly discoverable in this proceeding by the GFT;
(b)the schedule of documents in the GFT’s affidavit of documents included various documents listed in Schedule 2, which are documents not within the control of the GFT and which are otherwise irrelevant to the issues in this proceeding, being internal documents of the FEI group of companies which appear to have been improperly obtained by the GFT without the consent and proper authorisation of the creator of those documents and which ought to have been the subject of an application for non-party discovery;
5 Interlocutory application by the defendant in relation to further and better discovery by the plaintiffs, dated 26 April 2023, at [1].
6 At [2].
(c)the solicitors and counsel for the GFT have been requested to provide evidence that the creator of the documents listed in Schedule 2 has properly consented to them being used in this proceeding by the GFT by way of discovery and have failed to do so;
(d)the GFT’s schedule of documents also includes numerous duplications and does not comply with the document listing requirements in Schedule 9 of the High Court Rules 2016.
The GFT’s Opposition
[27]The GFT opposes the application on grounds which, in summary, are:7
(a)the documents which Mr Philpott seeks to be discovered in his application:
(i)have already been discovered by the GFT;
(ii)are not relevant to the issues in dispute;
(iii)do not exist or are otherwise not in the GFT’s control; and/or
(iv)are not required to be discovered having regard to the proportionality test, being the time and cost of delivery against their potential value.
(b)it is unclear for the majority of documents requested by Mr Philpott to be discovered:
(i)what documents he says have not been discovered; and
(ii)why he says those documents exist and are relevant to the issues in dispute in the proceeding.
7 Plaintiff’s opposition to defendant’s applications for further and better discovery and strike-out, dated 13 June 2023, at [3].
(c)overall, the classes of documents which Mr Philpott seeks to be discovered are wide-ranging and not easily comprehendible. There is very little reference to specific documents and the application requests documents by way of “classes” which are virtually limitless;
(d)the documents which Mr Philpott seeks to have removed from the GFT’s discovery:
(i)are in the GFT’s control and possession;
(ii)have been properly obtained;
(iii)are relevant to the issues in dispute in this proceeding; and
(iv)were, in some cases, discovered after Mr Philpott specifically requested them;
(e)confidential documents must still be discovered in any proceeding and so Mr Philpott’s application to have the GFT remove documents from their discovery based on confidentiality is meritless;
(f)to the extent there are duplicates in the GFT’s discovery (which is not clear as Mr Philpott has not identified any), they are not significant and do not justify the application or the GFT re-swearing its affidavit.
Mr Philpott’s application to strike out
[28]Mr Philpott seeks orders:8
(a)striking out the whole of the GFT’s statement of claim in the proceeding dated 18 May 2022; or
(b)alternatively, striking out:
8 Interlocutory application by the defendant for striking out of plaintiff’s claim, dated 26 April 2023, at [1].
(i) the alleged representations pleaded in paragraphs 10–14 inclusive of the statement of claim; and/or
(ii)paragraphs 15–34 inclusive of the statement of claim, which pleads that the GFT loaned money to FEI; and/or
(iii)the continuing representations pleaded in paragraphs 35–36 inclusive of the statement of claim; and/or
(iv)the purchase of the shares in FEIG pleaded in paragraphs 37–41 inclusive of the statement of claim; and/or
(v)fees/commission received by Mr Philpott, as pleaded in paragraphs 42–47 inclusive of the statement of claim; and/or
(vi)the GFT's claimed losses as a result of Mr Philpott’s alleged representations and continuing representations, as pleaded in paragraphs 54 to 56 of the statement of claim; and/or
(vii)the GFT’s first, second, and third causes of actions under the Fair Trading Act 1986, as pleaded in paragraphs 57–76 inclusive of the statement of claim; and/or
(viii)the legally untenable second cause of action under the Fair Trading Act 1986, as pleaded in paragraphs 65–70 inclusive of the statement of claim; and/or
(ix)the GFT’s fourth cause of action for negligent misstatement as pleaded in paragraphs 77–83 inclusive of the statement of claim;
(x)the GFT’s fifth cause of action for alleged breach of an agreement, as pleaded in paragraphs 84–91 inclusive of the statement of claim;
[29]The grounds on which the orders are sought are, in summary:9
9 At [2]
(a)The GFT has pleaded in numerous paragraphs of its statement of claim that they loaned money to and invested in FEI. The statement of claim is fundamentally flawed and is not tenable or reasonably arguable in that the GFT never loaned money to FEI and never invested in FEI but were simply parties to co-lending agreements, recorded in four Trust Deeds, in which FEI was a joint participant and pursuant to which the co-lenders advanced funds and shared in the benefit of secured loans which had already been made by FEI to the project developers in question;
(b)the defects in the GFT’s statement of claim cannot be cured by amendment, in that the cause of the GFT’s loss was not any failures or deficiencies on the part of FEI as a corporate entity, but the failure and inability of the project developers in question to repay their indebtedness to the GFT as co-lenders with FEI;
(c)the alleged continuing representations by Mr Philpott, pleaded in paragraphs 35–36 inclusive of the statement of claim, were of no causative effect in terms of financial loss to the GFT as the GFT was unable in any event to terminate its co-lending arrangements with FEI prior to the termination dates of the four Trust Deeds, which was 13 July 2020, by which time FEI had become insolvent and had been placed into receivership on 1 April 2020 and subsequently went into liquidation on 24 July 2020;
(d)the purchase of $100,000 of shares in FEIG on 15 December 2018, as pleaded in paragraphs 37–41 inclusive of the statement of claim, was made by Mr Bruce Gillespie in his own right and not by or on behalf of the GFT, so that the GFT as a separate legal entity in law is unable to claim that amount;
(e)any fees/commission received by Mr Philpott, as pleaded in paragraphs 42–47 inclusive of the statement of claim, were not paid in respect of investments by the GFT in FEI or FEIG;
(f)the GFT's claim for alleged losses as pleaded in paragraphs 54 to 83 inclusive of the statement of claim, is based upon the alleged representations and continuing representations made by Mr Philpott, which are not reasonably arguable allegations;
(g)the GFT’s fifth cause of action for alleged breach of an agreement, as pleaded in paragraphs 84–91 of the statement of claim, is not reasonably arguable in law as the allegations pleaded do not establish the existence of an enforceable contractual agreement between the GFT and Mr Philpott and, even if they were held to do so, the allegations are based on the GFT’s investing in FEI, which never actually occurred;
(h)the GFT’s claim constitutes an abuse of process as the claim is being brought and maintained in reliance on confidential internal documentation of FEI improperly supplied by Mr Jeff McKenzie to the GFT prior to his resignation as chairman of FEIG on 16 April 2021 and also after that date as recorded in Mr McKenzie's email to Mr Bruce Gillespie dated 4 May 2021.
The GFT’s opposition to strike-out
[30]The GFT opposes the strike-out application on grounds which, in summary are:
(a)the statement of claim discloses a reasonably arguable cause of action and a case appropriate to the nature of the pleading;
(b)the statement of claim does not cause prejudice or delay, nor is it frivolous or vexatious;
(c)the statement of claim is not an abuse of process of the Court;
(d)the strike out application does not meet the high threshold required to strike out applications under r 15.1.
Legal principles
Strike out
[31]Rule 15.1 of the High Court Rules 2016 provides, relevantly:
15.1 Dismissing or staying all or part of proceeding
(1)The court may strike out all or part of a pleading if it—
(a)discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading[.]
[32]There are established criteria for strike-out:10
(a)A strike out application proceeds on the assumption that the pleaded facts are true unless those pleaded facts are entirely speculative or without foundation.
(b)The cause of action or defence must be clearly untenable.
(c)The jurisdiction is to be exercised sparingly and only in clear cases.
(d)The jurisdiction is not excluded by the need to decide difficult questions of law.
(e)The Court should be slow to strike out a claim in any developing area of the law, perhaps particularly where a duty of care is alleged in a new situation.
Orders for particular discovery
[33]Rule 8.19 of the High Court Rules provides:
10 Attorney-General v Prince & Gardner [1998] 1 NZLR 262 (CA) at 267; Couch v Attorney- General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].
8.19 Order for particular discovery against party after proceeding commenced
If at any stage of the proceeding it appears to a Judge, from evidence or from the nature or circumstances of the case or from any document filed in the proceeding, that there are grounds for believing that a party has not discovered
1 or more documents or a group of documents that should have been discovered, the Judge may order that party—
(i)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
(ii)to serve the affidavit on the other party or parties; and
(iii)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.
[34] The Court will apply a four stage test in considering an application under r 8.19: 11
(a)Are the documents sought relevant, and if so how important will they be?
(b)Are there grounds for belief that the documents sought exist? This will often be a matter of inference. How strong is that evidence?
(c)Is discovery proportionate, assessing proportionality in accordance with Part 1 of the Discovery Checklist in the High Court Rules?
(d)Weighing and balancing these matters, in the Court’s discretion, applying r 8.19, is an order appropriate?
[35] As to the first limb, documents will be discoverable only if they are relevant to the pleaded issues.12 As to the second limb, the party seeking discovery must show some credible objective evidence that the existing affidavit of documents is
11 Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd [2015] NZHC 2760; [2018] NZAR 600 at [14].
12 High Court Rules 2016, r 8.7; Intercity Group (NZ) Ltd v Naked Bus NZ Ltd [2013] NZHC 1054 at [15].
incomplete. It need not prove the sought documents actually exist.13 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.14 The final limb of the test entails a holistic assessment of whether the Court, having regard to the factors considered under the first three limbs, should exercise its discretion to order further discovery.
Analysis
Preliminary issue
[36] Following the hearing, Mr Hollyman submitted a memorandum dated 13 March 2024 attaching two reports of the receivers of FEI referring:
(a)in the seventh receiver’s report to a reference to the fact that the receivers have submitted reports to the FMA and the Registrar of Companies regarding what they consider to be breaches of directors’ duties, or statutory or regulatory obligations;
(b)in the second receiver’s report to a reference to the value of FEI’s property loans being “materially overstated”.
[37] Mr Turner filed a memorandum objecting to these reports being admitted into evidence on the grounds that:
(a)they have been in existence since August 2023 but allegations arising from them have not been pleaded;
(b)the references to loans being overstated do not identify the loans as including the Anzac Loans and the Hobson Loans, and in any event references to the value of the loans being “materially overstated” refers
13 Above, n 11, 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].
14 Commerce Commission v Cathay Pacific Airways Ltd [2012] NZHC 726 at [18] and [21].
to the recoverable value of the loans not the value at inception in July 2018.
[38] I am of the view that the reports should not be admitted into evidence and I accept Mr Turner’s submissions on this issue.
Issues to be determined
[39]The issues to be determined in this judgment are:
(a)in relation to Mr Philpott’s strike-out application, whether the Court is satisfied that the statement of claim overall does not disclose a reasonable cause of action or, in respect of the specific paragraphs which Mr Philpott seeks to strike out, the allegations therein are untenable; and
(b)in relation to the discovery application, whether orders for discovery should be made in relation to the documents sought by the GFT from Mr Philpott and vice versa, by applying the four tests set out at [34].
Strike out application
[40] Mr Turner, for Mr Philpott, in his submissions as to strike out of the GFT’s statement of claim in its entirety, and as to strike out of various sections of the statement of claim, relies to a large extent on a fundamental submission. The way the claim is pleaded, the GFT claims it is owed money by FEI and FEIG. Mr Turner submits that FEI in fact owes nothing to the GFT unless FEI can be shown to be liable to the GFT for a breach of trust, which is not pleaded.
[41] In relation to the parent company FEIG, Mr Turner submits that it owes nothing to its shareholders unless a distribution of its capital to shareholders is available on a winding-up after payment of unsecured creditors and all other liabilities, which is not applicable in this case. He submits therefore that FEIG does not owe anything to the GFT in respect of the shares purchased, assuming that they have been purchased by the GFT and not Mr Gillespie in his own name.
[42] Mr Turner supports this argument by analysing the four Trust Deeds which the GFT entered into. Mr Turner submits that the legal effect of the Trust Deeds is that the GFT loaned money as a co-investor to developers, and that FEI was the trustee holding those loans and the security for the GFT as beneficiary. He submits that the borrower under each of the Trust Deeds is the project development company, not FEI, and that FEI has no obligation to make repayments to the GFT of any of the Anzac Loans or the Hobson Loans.
[43] In response to this argument, Mr Hollyman for the GFT submits that that application is based on a wrong legal premise, namely that the GFT’s claim is against FEI. He submits that the claim is against Mr Philpott and that Mr Philpott is proceeding on the flawed premise that FEI is in effect the defendant, that no allegations of breach of trust by FEI have been made, and that, therefore, no claim against FEI can be made out.
[44] The principal claim the GFT has against Mr Philpott is a Fair Trading Act 1986 (FTA) claim. I accept that, in the statement of claim, the language is used to the effect that FEI and/or FEIG is responsible for repayments of the Anzac Loans and the Hobson Loans to the GFT, and that this is inaccurate in terms of the legal structure of the Trust Deeds. However, it is not, in my view, a ground to strike out many of the paragraphs which Mr Philpott seeks to strike out. The defendant in the proceedings is Mr Philpott, not FEI or FEIG, and, as is discussed below in relation to the striking out of specific paragraphs of the statement of claim, there is a reasonably arguable basis for a FTA claim against Mr Philpott.
[45] I now turn to the specific paragraphs which Mr Philpott seeks to strike out from the statement of claim.
Paragraphs 10 to 14
[46] While it is not completely clear from Mr Turner’s submission as to the grounds for striking these paragraphs out, it appears to be that they are based on the premise that the Anzac Loans and the Hobson Loans were lent by the GFT to FEI, rather than being co-investments with FEI as trustee, to the project developers. As I have noted
at [41], this is not a ground for striking out representations on which the FTA claim against Mr Philpott is based. Whether the representations were made by Mr Philpott and whether they amounted to a breach of the FTA, is an issue for trial. However, in my view, the representations referred to at paragraphs [13](a)–(k) and paragraphs [14](a)–(j) (together the representations) of the statement of claim are a reasonably arguable basis for a claim against Mr Philpott under the FTA.
[47]Accordingly, these paragraphs should not be struck out.
Paragraphs 15 to 34
[48] The basis for striking out these paragraphs is similar to the basis for striking out paragraphs 10–14, namely that they are pleaded on the basis that the Anzac Loans and the Hobson Loans were loaned by the GFT to FEI as opposed to being co-investments with FEI as trustee, with the funds being loaned to the project developers who were the parties liable for repayment. Mr Turner does note in his submissions that paragraph [16] of the statement of claim correctly pleads the legal effect of the Trust Deeds.
[49] For the reasons given at [41], these paragraphs should not be struck out. It is noted that, in any event, they are largely descriptive of the factual details relating to the Anzac Loans and the Hobson Loans made by the GFT under the Trust Deeds.
Paragraphs 35 and 36
[50] Paragraph 35 pleads a number of representations, as set out at paragraphs 35(a)–(o) of the statement of claim (the continuing representations), which the GFT allege Mr Philpott made to it after the GFT’s investments in July 2018. Mr Turner submits that these paragraphs should be struck out for, in summary, the following reasons:
(a)they plead matters which are irrelevant to the GFT’s claim for loss in respect of the Anzac Loans and the Hobson Loans. He submits the other investment opportunities referred to in these paragraphs (such as
the Guardian Angel opportunity, the Lateral Profiles opportunity, a further investment in the Hobson Street development project, and other unspecified opportunities) were not taken up by the GFT and the GFT does not claim any loss in respect of these opportunities;
(b)once the GFT had entered into the Trust Deeds, it was bound by those transactions until the termination date of the Trust Deeds on 13 July 2020. The pleaded allegations in these paragraphs concern matters occurring after July 2018 (being the date the Trust Deeds were entered into) are irrelevant to the liability of Mr Philpott and were not causative for any of the loss to the GFT as the future loss to the GFT was cemented in place when the four Trust Deeds were signed and the GFT advanced its monies as co-lender.
(c)As far as the claim in respect of the value of the FEIG shares, the allegations in paragraphs 35 and 36 relate to FEI, not its parent company FEIG, and they are not directly relevant to the value of the FEIG shares.
(d)Although paragraph 36 states that the representations in paragraph 35 were relevant to the FEIG share purchase as well, this is not shown to be the case as there are no pleaded allegations concerning the structure of the FEI group, the number of wholly-owned subsidiaries of FEIG, or the effect of FEI’s financial performance on the profitability of FEIG as the parent company and the consequent forecast value of the FEIG shares.
(e)The specifically pleaded allegations in paragraphs 35(h)(v) and (vi) are based on an email from Mr Philpott dated 21 February 2019, sent well after the FEIG shares were purchased by Mr Gillespie/GFT and therefore cannot amount on the facts to any kind of representations about FEIG’s future prospects made by Mr Philpott to Mr Gillespie prior to the purchase of the FEIG shares on 15 December 2018.
[51] Mr Hollyman did not directly respond to Mr Turner’s submissions on the various paragraphs but submitted that the continuing representations by Mr Philpott were relevant, as they were arguably causative of the GFT keeping its money invested in the Anzac Loans and Hobson Loans whereas, without the continuing representations, the GFT may have taken other actions prior to the expiry of the term of the Trust Deeds. Not a lot of detail was given by Mr Hollyman as to what these other actions could be, but for the purposes of considering the strike-out position, in my view, it is reasonably arguable that these continuing representations are relevant to the FTA claim and the potential loss to the GFT as a result of Mr Philpott’s representations.
[52]Accordingly, I am of the view that these paragraphs should not be struck out.
Paragraphs 37 to 41
[53] These paragraphs plead the loss claimed by the GFT from the purchase of the FEIG shares. The GFT alleges that it invested in the FEIG shares as a result of the representations and continuing representations made by Mr Philpott.
[54] Mr Turner submits that these paragraphs should be struck out as FEIG does not owe anything to the GFT for the reasons I have already discussed at [41] and on the grounds that the representations and continuing representations are not tenable as a basis for the GFT’s claims.
[55] In my view, these paragraphs should not be struck out as there is a reasonably arguable basis for the FTA claim that the representations and the continuing representations by Mr Philpott induced the GFT to purchase the FEIG shares and it suffered loss as a result. It is correct that FEIG does not owe the GFT any money as submitted by Mr Turner, but the FTA claim is not framed that way and is a claim against Mr Philpott, not FEIG.
Paragraphs 42 to 47
[56] These paragraphs plead that Mr Philpott was receiving commissions and fees from FEI for promoting FEI’s investment projects and these fees and commissions were not disclosed by Mr Philpott.
[57] It is not completely clear on what basis Mr Turner submits these paragraphs should be struck out but in my view, as it is alleged the fees and commissions were not disclosed to the GFT, they are clearly part of the basis for the FTA claim against Mr Philpott. They should not be struck out.
Paragraphs 54 to 56
[58]These paragraphs plead the losses claimed by the GFT under the FTA claim.
[59] Mr Turner submits these paragraphs should be struck out as the losses claimed are not claimable against FEI or FEIG. This is the same point as in his fundamental submission on the statement of claim as discussed at [40] to [44] and these paragraphs should not be struck out for the reasons discussed in those paragraphs.
[60]Accordingly, I am of the view that these paragraphs should not be struck out.
Whether the GFT’s causes of action are reasonably arguable
[61] The statement of claim pleads five causes of action, the second of which has been withdrawn, with the remaining four causes of action being:
(a)breach of s 9 of the FTA;
(b)breach of s 13 of the FTA;
(c)negligent misstatement; and
(d)breach of agreement.
Section 9, Fair Trading Act 1986
[62] Mr Turner submits this cause of action is untenable for, in summary, the following reasons:
(a)the allegation of breach of the FTA relies on the representations and the continuing representations. He submits that, for the reasons set out at [47](b), the paragraphs of the statement of claim relating to the continuing representations should be struck out;
(b)to the extent that any of the representations relate to future events or statements of opinion, such as those in paragraph [14] of the statement of claim, such as predictions or forecasts, they do not constitute actionable representations under the FTA if there was a reasonable basis for the opinion or opinions in question. Mr Turner submits that, in this case, Mr Philpott had a reasonable basis for the opinion or opinions as the various development projects he had invested in as co-lender with FEI had been profitable. Mr Turner refers to the decision of Global Sportsman Pty Ltd v Mirror Newspapers Ltd15 and the decision in R v Sunair Holidays Ltd16 as support for this submission;
(c)the GFT undertook its own extensive due diligence into the viability of the Anzac Avenue and Hobson Street developments, and voluntarily entered into the Trust Deeds, which clearly spelt-out the GFT’s rights and obligations under the co-lending arrangements. As to due diligence, he points to the following, carried out by the GFT:
(i)obtaining what was in effect a clean bill of health for the arrangements from the GFT’s external accountant, Mr Colin Wilson;
15 Global Sportsman Pty Ltd v Mirror Newspapers Ltd [1984] 2 FCR 82 at 88.
16 R v Sunair Holidays Ltd [1973] 2 All ER 1233.
(ii)analysis of the development projects, their costings, and their viability by Mr Gillespie personally, who had considerable personal property development expertise and professional design construction engineering experience in the area, and was a high wealth eligible investor in terms of the FMA investment criteria;
(iii)supporting analysis from Mr Chris Trounsdell, a senior quantity surveyor;
(iv)detailed discussions on the proposed co-lending arrangements between Mr Gillespie and the two directions of FEI, being Mr T K Shim and Mr Stewart;
(v)arranging for the external the GFT accountant, Mr Wilson, to execute the Trust Deeds on behalf of some of the trustees under the power of attorney which, by inference, Mr Wilson would not have done if he had entertained reservations about the transactions.
(d)if there were any representations by Mr Philpott, even if they were otherwise actionable, they were clearly not causative of any loss to the GFT.
[63] In relation to paragraph [62] of the statement of claim, Mr Turner submits that the GFT could not call in its co-lending arrangements with the developers prior to the termination date of the Trust Deeds on 13 July 2020 and, consequently, any representations after 13 July 2018 were not relevant to the GFT’s loss. He submits that the GFT did not at any stage seek to challenge the competence of FEI’s administration of the Trust Deeds, and such an allegation is not pleaded.
[64] In response to these arguments, Mr Hollyman refers to the principles applicable to an FTA claim as set out by the Supreme Court in the decision of Red Eagle
Corporation v Ellis.17 He summarises the principles extracted from the Court’s judgment as follows:
(a)“It enables the Court to provide a remedy for any existing or future consequence of the breach [of s 9 or some other provision] where someone has suffered or is likely to suffer loss or damage”;
(b)there is no prescriptive methodology to be applied — the circumstances are too variable (reflecting the intently factual nature of such a claim);
(c)section 9 would be breached where a reasonable person in the claimant’s situation would be likely to have been misled or deceived. Importantly, there is no requirement to prove a dishonest intention;
(d)section 43 looks to whether it has been proved that the claimant has suffered loss or damage “by” the conduct of the defendant. It is a “common law practical or common-sense concept of causation”. The impugned conduct does not have to be the sole cause, but it must be a cause and not immaterial. Contribution/carelessness by a claimant will not disqualify a claim.
[65] Mr Hollyman submits that, in the light of these principles, in the present case the statement of claim pleads that:
(a)there were representations and continuing representations by Mr Philpott;
(b)Mr Philpott was in trade for the purposes of the FTA;
(c)the representations and continuing representations were likely to mislead or deceive because, at the time they were made (amongst other matters):
17 Red Eagle Corporation Ltd v Ellis [2010] NZSC 20.
(i)Mr Philpott knew the investments were not prudent financial investments;
(ii)Mr Philpott knew that significant financial risk attached to the investments;
(iii)Mr Philpott had failed to do proper due diligence on FEI’s financial position that he held out to the GFT that he had done;
(iv)Mr Philpott knew that debt from previous FEI projects was being carried over into developments that the GFT was investing in;
(v)Mr Philpott knew that FEI’s directors were extracting significant sums from FEI and that they were personally gaining from the GFT’s investments; and
(vi)Mr Philpott was deliberately concealing from the GFT that he had a direct pecuniary interest in the GFT investing amounts in FEI.
(d)the representations and continuing representations were false;
(e)in making the investments it did, the GFT relied on Mr Philpott’s conduct (the representations and the continuing representations) and did not later call in the loans or exercise its rights;
(f)reliance was reasonable and the GFT suffered a loss as a result of placing money with FEI.
[66] Mr Hollyman submits that the pleadings allege Mr Philpott held himself out as having expert and intimate knowledge of FEI, was an expert in finance and had done due diligence on FEI himself to satisfy himself and the GFT that investing with FEI was sound. He submits that the GFT was entirely reliant on Mr Philpott and the information he provided.
[67] Mr Hollyman submits that Mr Philpott’s position fundamentally mischaracterises the above because:
(a)no allegation of breach of trust by FEI is needed or ought to be made;
(b)the GFT do not need to show FEI is liable for breach of trust;
(c)the interpretation and the contractual terms of the investment vehicle that FEI set up are not determinative. It is the representations made, whether a breach of s 9 occurred, and what relief may be ordered under s 43, that are relevant.
[68]In answer to issues raised by Mr Philpott, Mr Hollyman submits that:
(a)the pleading of the GFT’s loss (the funds which they have been unable to recover from FEI or FEIG) is taken out of context and, relevantly, the GFT pleads the misrepresentations by Mr Philpott caused them the loss which, as with Red Eagle,18 reflects the unrecovered amount;
(b)the allegations as to the continuing representations by Mr Philpott do not need to reflect investments made by the GFT. The GFT relies on the positive representations Mr Philpott made about FEI, his involvement and his close association with FEI;
(c)Mr Philpott wrongly makes the assertion that there can be no action or misrepresentation because “in this case the excellent and uncontradicted performance up to that time, in relation to the co- lending arrangements, of the FEI group and of FEIG provided such a reasonable basis” [for Mr Philpott to make such statements of opinion or predictions of future events]. Mr Hollyman submits this is a matter for the trial judge and untested evidence cannot found a strike-out application;
18 Above, n 17.
(d)similarly, despite the approach to causation and loss set out by the Supreme Court in Red Eagle, Mr Philpott persists in the assertion that there is no causation, which plainly ignores the pleaded role of Mr Philpott in the documents and affidavit evidence in support, and the entirety of the context that the Court will take into account in the final determination.
Conclusion in respect of the first cause of action
[69] I am of the view that in the first cause of action of the GFT, being an allegation that Mr Philpott is in breach of s 9 of the FTA, is not untenable and is reasonably arguable on the pleadings and the evidence before the Court. While, as I have already noted at [41], there are inaccuracies in some of the language in the statement of claim, it nevertheless establishes a reasonably arguable basis for the elements of an FTA claim as set out in the Red Eagle decision.19
Section 13, Fair Trading Act 1986
[70] Section 13 of the FTA provides that no person shall, in connection with the supply of goods or services or in the promotion of the supply of goods or services, make false or misleading representations as to the matters set out in s 13(a) to (j), a subset of which is set out at paragraphs [71(a)–(g)] of the statement of claim. The pleading relies on:
(a)the fact that Mr Philpott was acting in trade for the purposes of the FTA;
(b)the allegation that the representations and continuing representations of Mr Philpott were misleading; and
(c)that the representations and continuing representations were made in respect of a service, being the loaning of money by the GFT and the purchase by the GFT of shares in FEIG.
19 Above, n 17.
Mr Turner submits that this cause of action should be struck out for the same reasons as the cause of action under s 9 of the FTA, namely that the representations and the continuing representations on which the claim under s 13 depends, should be struck out.
[71] In my view, the same considerations as have been advanced by Mr Hollyman in relation to s 9 apply to s 13. The representations and continuing representations of Mr Philpott relating to FEI and the related investments create a reasonably arguable basis for a claim under s 13 of the FTA.
[72] Accordingly, this cause of action should not be struck out from the statement of claim.
Negligent misstatement
[73] This cause of action is based on a claim for negligent misstatement against Mr Philpott. As has been noted by both Mr Turner and Mr Hollyman, the Court of Appeal in the decision of Carter Holt Harvey Ltd v Minister of Education, set out the elements of negligent misstatement:20
(a)a false or misleading statement;
(b)made in circumstances where a duty of care is owed to the plaintiff;
(c)reasonable reliance on the statement by the plaintiff; and
(d)resulting loss to the plaintiff.
[74] Mr Turner submits, based on the Supreme Court’s Carter Holt Harvey decision that the elements required for reliance on a statement are:21
20 Carter Holt Harvey Ltd v Minister of Education [2015] NZCA 321 at [112].
21 Carter Holt Harvey Ltd v Minister of Education [2016] NZSC 95, [2017] 1 NZLR 78 at [80]; citing North Shore City Council v Attorney-General [2012] NZSC 49, [2012] 3 NZLR 725 at [189].
(a)the advice is required for a purpose that is made known (at least inferentially) to the adviser;
(b)the adviser knows (at least inferentially) that the advice will be communicated to the advisee specifically or as a member of an ascertainable class;
(c)the adviser knows (at least inferentially) the advice is likely to be acted on without independent inquiry; and
(d)the advisee does act on the advice to its detriment.
[75] Mr Turner submits that the cause of action must fail as the requirement that Mr Philpott knew that the advice was likely to be acted on without independent inquiry is not met. He submits that Mr Philpott’s involvement was simply to facilitate Mr Gillespie meeting the directors of FEI to see what opportunities those directors had to offer, and it was those directors who introduced Mr Gillespie, and through him, the GFT to the development projects in which the GFT invested. He submits that any advice given by Mr Philpott was therefore tendered on the basis that Mr Gillespie would undertake his own due diligence and make independent inquiries with the directors of FEI as in fact occurred, and accordingly there are no actionable representations made by Mr Philpott.
[76] Mr Hollyman in response submits that Mr Turner’s argument is effectively that Mr Philpott owed no duty of care to the GFT and that following evidence in a full trial, the Court could not find he owed such a duty. Mr Hollyman submits that a duty of care by an agent or financial or other adviser to the party being advised will readily be made out and that commentary notes:22
A “special relationship” will be held to exist where it is plain that the party seeking information or advice is relying upon the other to exercise reasonable care in the giving of that advice, where it is reasonable to so rely, and where the person giving the information or advice knows or ought to know that it is being relied upon. The duty is said to arise when the person giving the information or advice can reasonably be held to have voluntarily assumed responsibility to others who may rely on it for its accuracy. This will usually
22 C Withnall (ed) The Laws of New Zealand (online ed, Lexis Advance) at [66].
be the case if the defendant is, or purports to be, carrying on a business or profession which involves the giving of advice or information in the relevant area. The fact that the defendant has a financial interest in the plaintiff acting in reliance on the statements supports the imposition of a duty of care.
(footnotes omitted)
[77] Mr Hollyman submits that the pleadings and the affidavit evidence create a reasonably arguable basis that reliance by Mr Gillespie and the GFT on Mr Philpott’s statement was reasonable and that a duty of care exists.
Conclusion in respect of negligent misstatement
[78] I am of the view that it is reasonably arguable that the relevant duty of care exists and was voluntarily assumed by Mr Philpott and it was reasonable for Mr Gillespie and the GFT to rely on Mr Philpott’s statements. In particular, the representations made by Mr Philpott as set out at paragraph [14(f)–(j)] of the statement of claim, if established at trial, indicate that Mr Philpott had detailed knowledge of FEI and the investments it was promoting. These representations, coupled with the allegation Mr Philpott had the financial interest in the GFT investing in the investments being promoted, is a reasonably arguable basis for Mr Philpott having assumed a duty of care to the GFT and it was reasonable for the GFT to rely on those representations.
Breach of an agreement
[79] Mr Turner submits that the breach of an agreement by Mr Philpott pleaded at paragraphs [84] to [91] of the statement of claim is not properly pleaded and not properly supported by the facts pleaded by the GFT, and the cause of action is not reasonably arguable. He submits that essential elements of a contract, being offer, acceptance and consideration, should have been pleaded, and the terms of the agreement should have also been specified in the pleadings. He submits the terms of the alleged agreement lack certainty.
[80]Mr Turner submits:
(a)The alleged agreement was said to have been made in April 2018 which was several months before the GFT conducted its own due diligence and entered into the Trust Deeds in July 2018, and therefore on the face of the pleading there is a complete absence of consideration to support the alleged agreement.
(b)The alleged agreement is partly based on the email correspondence of April 2018, relating to due diligence being carried out by Mr Philpott on FEI and its related entities, and he contends the email does have the meaning asserted by the GFT and could not form the basis of an agreement.
[81] Mr Hollyman, in response, submits that the “global” or “holistic” approach to establishing contractual agreements and understandings is established in New Zealand law and accordingly there is no need to identify formal moments of offer and acceptance.
Conclusion in respect of breach an agreement
[82] On the face of the email correspondence relied on by the GFT in the pleadings, I do not find that it is reasonably arguable that there is an agreement between the GFT and Mr Philpott to the effect that Mr Philpott would carry out due diligence on behalf of the GFT in relation to FEI and its related entities. However, the pleading is on the basis that the alleged agreement also depends on oral representations made by Mr Philpott and in my view, whether these are oral representations were made, and whether they create an agreement, needs to be dealt with at trial. Accordingly, this cause of action should not be struck out and it will be up to the GFT to establish this agreement by evidence at trial.
Purchase of the FEIG shares
[83] Mr Philpott in his statement of defence has pleaded as an affirmative defence that the FEIG shares were purchased by Mr Gillespie personally and not on behalf of
the GFT. Accordingly, Mr Turner submits that the allegation relating to the FEIG shares and the losses claimed by the GFT of $100,000 should be struck out.
[84] My view on this is that it is a matter to be left to trial and for the trial judge to determine on the evidence whether the FEIG shares were in fact purchased on behalf of the GFT or by Mr Gillespie personally. Accordingly, the allegation relating to the purchase of the FEIG shares should not be struck out.
Abuse of process
[85] Mr Turner submits that an abuse of process arises as the GFT have obtained and misused confidential documents relating to FEI. He submits these documents were obtained from Mr McKenzie, the former chairman of FEIG, and were provided by Mr McKenzie without the apparent consent of any of the officers of FEI. He says this is a misuse of confidential information by the GFT.
[86] Mr Turner submits that a reasonable inference can be drawn from available evidence that Mr McKenzie’s objective in providing assistance to Mr Gillespie/the GFT and other current investors was to assist them in investigating any adverse corporate conduct of FEI, presumably with the objective of seeking remedies against FEI and/or its officers. He submits the GFT’s claim, by inference, also seeks to further this collateral purpose through seeking wide-ranging discovery from Mr Philpott and this is an objective that runs contrary to the GFT’s purpose in the present claim and therefore constitutes an abuse of process contrary to r 15.1(1)(d). Mr Turner relies on the authority of Hanrahan v Ainsworth.23
[87] Mr Turner submits that the claim should be struck out in its entirety or stayed as a result of the abuse of process by use of the confidential information and the collateral purpose underlying the claims which he submits can be inferred from the GFT’s and Mr McKenzie’s actions.
[88] Mr Hollyman acknowledges that Mr Gillespie confirms that he received some documents from Mr McKenzie. Mr Hollyman submits that there is no confidentiality
23 Hanrahan v Ainsworth (1990) 22 NSWLR 73 (NSWCA).
against the Court and there was no reason why Mr Gillespie could not use or discover the documents obtained from Mr McKenzie. He submits that Mr Philpott seeks to strike out based on the assertion that an unidentified but small portion of the documents that the GFT provided in discovery were confidential and Mr Philpott has not identified or suggested how or to what extent the documents underlie the GFT’s claim, let alone how Mr Gillespie’s possession of these documents could render the entire claim an abuse of process.
[89] Mr Hollyman submits that the onus is on Mr Philpott to establish the documents are in fact confidential or that Mr McKenzie had no authority to provide them to Mr Gillespie and there is no evidence before the Court in respect of those matters.
[90] Mr Hollyman also submits that the Hanrahan case is not applicable in the present case and there is no evidence to support the allegation that a collateral objective of the GFT bringing its claim is investigating the possibility of remedies by co-investors against FEI or its directors.
Conclusion in respect of abuse of process
[91] I am of the view that the argument of abuse of process put forward by Mr Turner for striking out or staying the GFT’s claim does not succeed. There is no evidence before the Court that the documents Mr McKenzie provided are confidential or whether or not Mr McKenzie had authority to provide them to Mr Gillespie. In any event, it has not been established that there is any reason why the GFT/Mr Gillespie could not discover and use those documents.
[92] As to the Hanrahan case, I am of the view that it has not been established that there is a collateral purpose by the GFT in bringing its claim, namely the purpose which Mr Turner submitted could be inferred from Mr McKenzie’s actions of facilitating the co-investors to seek remedies against FEI or its directors.
[93] Accordingly, the statement of claim should not be struck out on the basis of an abuse of process pursuant to r 15.1(1)(d) and the relevant documents do not need to be excluded from the GFT’s discovery.
The GFT’s discovery application
[94] The GFT has applied for discovery of documents from Mr Philpott in 19 categories. I review each of these categories below. The category references refer to the categories described in the Schedule of the GFT’s amended application for further and better discovery dated 4 May 2023.
Category 1
[95] This category relates to correspondence to/from FEI, Federal Securities Ltd (formerly First Eastern Securities Ltd, Mr Shim and Mr Stewart’s company through which they provided services to FEI)(FES) or related companies, and to or from Mr Philpott, Mr Shim, Mr Stewart and co-investors in the Maritime Apartments project since and/or before Mr Philpott invested in that development in 2016, including evidence of any fees he received by introducing others to invest.
[96] Mr Hollyman submits that the documents sought are relevant because, in summary:
(a)It appears that the Maritime Apartments project was restructured at some point and re-emerged as the Anzac Ave Hotel development in which the GFT then invested.
(b)The allegations that Mr Philpott held a special relationship with FEI, was privy to commercial information and goings-on at FEI which the GFT were not, and that Mr Philpott used this information to convince the GFT and others to invest with FEI.
(c)The documents would establish the extent of knowledge Mr Philpott had about FEI’s financial position/past performance in projects, and the
accuracy with which he passed this information on to those who he was encouraging and advising to invest.
[97] Mr Turner submits, in opposition to discovery of these documents, in summary, that:
(a)the Maritime Apartments project is not referred to anywhere in the pleaded allegations, statement of claim or in the GFT’s reply;
(b)paragraph [59(e)] of the statement of claim is vague and unparticularised, and Mr Philpott denies any knowledge of previous debt being carried over into the new projects;
(c)the GFT did not participate in the Maritime Apartments project as co- lender and that project does not form part of the basis for the GFT’s pleaded claim in the proceeding. There is no specific allegation of breach of trust levelled against FEI in its capacity as trustee for the co- lenders, or any allegation Mr Philpott facilitated or knowingly assisted in any such alleged breach of trust;
(d)Mr Philpott has stated he has at least 1,000 pages of documents on the Maritime Apartments project and discovery would not be proportionate in terms of the time required and the inconvenience; and
(e)Mr Philpott’s evidence directly contradicts Mr Gillespie’s evidence that Mr Philpott was closely involved in the internal management and business activities of FEI.
Conclusion in relation to Category 1
[98] In my view documents sought by the GFT in category 1 should be discovered by Mr Philpott. Much of the GFT claim relating to the misleading representations allegedly made by Mr Philpott centre around Mr Philpott’s knowledge of the internal affairs of FEI and of its previous investments with which he may have been involved.
[99] These documents bear on whether these representations were true or not. Consequently, the documents relating to the Maritime Apartments project are relevant and while there is an objection by Mr Philpott as to the proportionality due to the volume of the documents, the financial value of the claim, availability of bulk discovery or informal listing, and the ability to limit the volume of documents by agreed search terms, means, in my view, discovery would not be disproportionate. As will be noted from the orders at the end of this judgment, search terms are to be agreed between counsel to assist in narrowing the search of these documents.
Category 2
[100] These documents relate to the feasibility numbers and what are described as “CMP offer” in relation to the Maritime Apartments project. It is noted at [27] of Mr Hollyman’s submissions that the feasibility study of the Maritime Apartments project has now been disclosed. As category 2 is not addressed in Mr Hollyman’s submissions, I have assumed that the disclosure which has been made is sufficient. If not, then as noted at the end of this judgment, counsel are invited to make a further submission in relation to this category.
Category 3, Category 4 and Category 5
[101] These documents relate to evidence of all FEI property investments Mr Philpott made prior to the Maritime Apartments project and/or developments he has been involved in, including all statements of investment amounts and fee invoices (category 3); copies of all correspondence to/from FEI, FES, or related companies and to or from Mr Philpott, Mr Shim, Mr Stewart and co-investors in relation to previous FEI property projects which Mr Philpott has been involved in including any records of invoices and/or fees he received by introducing others to invest (category 4); and copies of all correspondence (and text messages, emails and letters) from and to Mr Russell Maloney.
[102] Mr Hollyman submits that, as with category 1, these documents will inform of Mr Philpott’s knowledge of and role/involvement with FEI and its financial position/past performance. Mr Hollyman points to correspondence from Mr Philpott
offering to show “a couple of” his own investments in the FEI, and also to reference in Mr Philpott’s email to rates and invoices he was charging to FEI as well as various other charges and negotiations he was having with others. Mr Hollyman submits these documents are relevant to the question of the secret commissions, and Mr Philpott’s relationship with FEI, and will inform how intertwined Mr Philpott was with FEI.
[103] In relation to correspondence with Mr Russell Maloney, Mr Hollyman submits that Mr Gillespie believes that Mr Maloney was another investor in FEI who was also helping Mr Philpott raise funds, and that correspondence with Mr Maloney will be relevant to the GFT’s claim as the correspondence will likely show how Mr Philpott leveraged relationships to procure investors in FEI and got paid by FEI for doing so. Mr Hollyman submits it is likely to show a similar pattern of conduct compared to Mr Philpott’s relationship with Mr Gillespie, in terms of the accuracy of disclosure of FEI’s financial information, which is relevant to the GFT’s claims and Mr Philpott’s defence. Mr Turner submits that the allegations in relation to the documents sought have not been specifically pleaded and are not relevant to the GFT’s claim which is based on two specific development projects in Anzac Avenue and Hobson Street and the purchase of $100,000 worth of shares in FEIG. He points out that there is no mention of Mr Maloney in the statement of claim or the two other projects referred to by Mr Gillespie in his affidavit in support (being St Martins and Taylors Road) which did not involve the GFT as a co-lending participant and in any event, were successful and profitable investments.
Conclusion in relation to Categories 3, 4 and 5
[104] In my view these documents should be discovered as sought by the GFT. As with Category 1, they are relevant to demonstrating the degree of involvement Mr Philpott had in FEI and his involvement to past investments and amounts of money he may have received from such involvements, and are, as above, relevant to the representations allegedly made regarding the FEI-related investments in which the GFT invested.
Category 6
[105] This category relates to documents in respect of the ZOA Trust, including details of its property investment, records and fees Mr Philpott received and invoices he issued to FEI, FES, FEIG for the ZOA Trust and all other documents pertaining to the ZOA Trust investments.
[106] Mr Hollyman submit that these documents are relevant as the ZOA Trust was a family trust of Mr Philpott’s which apparently entered into one investment related to FEI. He submits that Mr Philpott used the apparent fact of his own investments in FEI to help persuade the GFT to invest and no documentation relating to the ZOA Trust’s involvement has been provided.
[107] Mr Turner submits that Mr Philpott opposes the discovery of these documents on the basis that neither the ZOA Trust nor Mr Bailey are referred to in the statement of claim. He submits the ZOA Trust (which was wound up on 10 March 2020) was a co-lender in relation to a previous co-lending transaction involving Taylor 129 Limited concerning a successful development project in Taylors Road, Morningside, Auckland, in which the GFT was not involved. He submits therefore that documents relating to the ZOA Trust are therefore irrelevant to the GFT’s claim.
Conclusion in relation to category 6
[108] In my view, the documents in relation to the ZOA Trust should be discovered. As has been noted, part of the allegations made by the GFT is that Mr Philpott alluded to previous investments with FEI-related entities in relation to the representations encouraging the GFT to invest in the Anzac loans and the Hobson loans. Consequently, it is relevant to these representations as to the investments in which Mr Philpott was involved with FEI-related entities.
[109] The documents relating to Mr Bailey do not need to be discovered, as from Mr Turner’s submission they appear to be irrelevant to the GFT’s claim.
Category 7
[110]This category is no longer pursued by the GFT.
Category 8
[111] This category relates to copies of all of Mr Philpott’s and Jaypee & Associates’ financial records from 2010 onwards including tax returns.
[112] Mr Hollyman submits that Mr Philpott has discovered an invoice that his trading entity, Jaypee & Associates, that was supplied to FES in December 2017 for “refinancing” services and “co-investor agreements” related to the Hobson Street development and the Wainui Golf Club. Mr Hollyman submits the invoice appears to show Mr Philpott received fees from FES and this suggests Mr Philpott was rendering services and being paid for procuring investments in FEI’s project, which was never disclosed to the GFT when it invested in FEI-related investments. Mr Hollyman submits it is unclear how much money Mr Philpott and/or his related entities received through providing these services and his financial records or invoices and related tax returns are required to show the amount of money Mr Philpott was earning for procurement services for FEI. Mr Hollyman submits they also directly inform the financial incentive that Mr Philpott had, and would explain why the investment was not accurately represented to the GFT.
[113] Mr Turner submits that Mr Philpott opposes making these documents available as the documents relate to a co-lending transaction involving a mortgage which was taken out by the Wainui Golf Club which is not referred to in the statement of claim and did not involve FEI as trustee for any co-lenders. He submits the transaction has no relevance to the GFT’s claim in this proceeding.
[114] Mr Turner submits that Mr Philpott has discovered his FEI commission invoices relating to the GFT co-lending transactions and the other documents sought by the GFT, including his tax returns, and are of no relevance to the GFT’s claim.
Conclusion in relation to category 8
[115] My view is that any invoices issued by Mr Philpott or Jaypee & Associates related to the investments in FEI’s related entities should be discovered. However, if the investment is completely unrelated to any of FEI’s related entities then they are not sufficiently relevant to justify an order for discovery. In my view, disclosure of the tax returns, which may include information regarding other unrelated income received by Mr Philpott or Jaypee & Associates, is too broad for the purposes of the GFT’s claim and these do not need to be discovered.
Category 9
[116] This category relates to copies of “Shimhan Investment Asia queries on DD for Wayne Scholtz”.
[117] Mr Hollyman submits the documents are relevant as Mr Philpott disclosed an email trail between himself, Mr Shim and Mr Stewart in April 2018 where Mr Philpott discusses funds he is owed by FEI and meeting various potential investors, including the GFT. Mr Hollyman submits that the emails indicate Mr Philpott appears to be concerned about FEI’s financial position and a recent Standard & Poore ratings downgrade, but continued to raise funds for FEI including convincing new investors to take over his old debt at Maritime Apartments project (which he considers risky) so he can invest in FEI’s new venture at Hobson Street.
[118] As to the email trail from Mr Lionel Neave of Odyssey, Mr Hollyman points to a reference by Mr Philpott to an attached document which relates to due diligence questions from an entity called Shinhan Financial, which appear to relate to a potential investment in FEI. Mr Hollyman submits the due diligence questions and their answers will help establish what Mr Philpott knew about FEI and its financial position at the time, as this was just months prior to the GFT investing in the Anzac Loans and Hobson Loans.
[119] Mr Turner submits that Mr Philpott opposes providing the documents as sought, as Mr Philpott states he had no direct contact with the entity and the documents
form part of New Zealand Focussed Fund Ltd’s (NZFF) due diligence, and that the document he has already discovered is the only relevant document in Mr Philpott’s possession.
[120] As to the Standard & Poore’s report, Mr Turner submits that the solvency issues are not relevant as the investment by the GFT was with the project developers and not FEI as spelled out in the Trust Deeds.
Conclusion in relation to category 9
[121] In my view, if the Shinhan Financial investment and due diligence conducted related to any investment related to FEI, it is relevant to the issue of Mr Philpott’s knowledge of FEI’s financial position and accordingly to the truth of the representations which were allegedly made to the GFT and should be discovered. If the investment was unrelated to any FEI-related entity then it would not be relevant for the purpose of discovery. As noted in the orders at the end of this judgment, if this is still an issue between the parties, then the parties are entitled to make further submissions on this category.
Category 10
[122] This category relates to copies of the share certificates held by Mr Philpott in FEIG. Mr Hollyman submits that Mr Philpott disclosed in April 2018 an email between himself, Mr Shim and Mr Stewart, about a meeting relating to Mr Philpott’s share allocation in FEIG. Mr Hollyman submits that this email suggests Mr Philpott had a controlling and influential hand in how FEI was being run, or at least as to how it was raising funds, and he was directing what needs to be done and who needs to do it. His email suggests that he knew that FEI did not have the funds to repay its investors.
[123] As to the share certificates in FEIG, Mr Hollyman submits that as a benefit to Mr Philpott for working for Mr Shim, Mr Stewart and FEI, by raising funds from investors, he was being allocated share options and discovery of the share certificates is necessary to confirm from what date Mr Philpott, or any of his related entities, was
a shareholder in FEIG and the number of shares he held. Mr Hollyman submits this would be influential in assessing Mr Philpott’s relationship with FEI, and financial incentive he might have received, which is central to the GFT’s claims.
[124] Mr Turner submits that Mr Philpott opposes the discovery of these documents and submits that the email relating to his affairs, referred to at paragraph [50] of Mr Gillespie’s affidavit, in fact supports the contention that Mr Philpott did not have any detailed knowledge of the day-to-day running and financial aspects of FEI.
[125] As to the shares Mr Philpott owned in FEIG, Mr Turner submits that FEIG was a listed public company in Australia and a separate legal entity from its shareholders. He submits that Mr Philpott was never a director, officer or employee of that company and the mere fact of being a shareholder in a listed company like FEIG did not give him any detailed knowledge of the internal affairs of FEIG or its subsidiary companies, including FEI. Accordingly, the defendant’s shareholding in FEIG was of no relevance to the GFT’s claim.
[126] In addition, Mr Turner repeats his earlier submission that the shares in FEIG were owned by Mr Gillespie personally rather than by the GFT, and consequently could not form part of the GFT’s claim.
Conclusion in relation to category 10
[127] In my view share options in FEIG which may have been granted to Mr Philpott which may have resulted in shares being issued to him in FEIG, are relevant to whether the options or shares comprise part of any financial incentive Mr Philpott received in relation to procuring investment funds for FEI. It is true that FEIG and its subsidiaries, including FEI, are separate legal entities, but in a commercial sense it is clearly relevant if Mr Philpott was being rewarded for his investment funds procurement services by being issued options or shares in the parent company, and they are properly discoverable as sought by the GFT.
Category 11
[128] This category relates to copies of materials and records obtained and/or created by Mr Philpott during his due diligence exercise on FEI investments.
[129] Mr Hollyman submits that in an email chain in April 2018 from Mr Philpott to Mr Gillespie regarding potential FEI investment opportunities, Mr Philpott refers to “due diligence” he had just completed on an investment opportunity he had previously sent to Mr Gillespie, which was likely to be the Hobson Loans. Mr Hollyman submits that no due diligence documents have been disclosed, nor has Mr Philpott referred to documents that were in his possession or to confidential due diligence documents that cannot be disclosed. Mr Hollyman submits it is not credible that all the documents have been accounted for and provided for in discovery.
[130] Mr Turner submits that Mr Philpott opposes this discovery on the basis that he has provided the relevant due diligence documents to Mr Gillespie and that there possibly is one other document, being an FEI project update issued in April 2018, which might be regarded as relevant to the due diligence, and he will discover that document as well.
[131] Mr Turner submits that Mr Gillespie met with Mr Shim and Mr Stewart in July 2018 and the GFT did its own due diligence on the Anzac Avenue and Hobson Street development projects.
Conclusion in relation to Category 11
[132] I am of the view that if any further due diligence documents exist in relation to the due diligence carried out by Mr Philpott on the Hobson Street development, these should be discovered. They are relevant to the representations made by Mr Philpott as to that due diligence and are relevant as to whether the representations allegedly made by Mr Philpott are true.
Category 12
[133]This category relates to copies of all newsletters drafted by Mr Philpott for FEI.
[134] Mr Hollyman submits that Mr Philpott disclosed an email from Mr Shim, where Mr Shim sent Mr Philpott a newsletter he had drafted and asked Mr Philpott to scrutinise and recraft it. Mr Hollyman submits that Mr Philpott has not discovered the attached newsletter from Mr Shim, nor the version that he scrutinised and sent back, and both those documents are relevant as they will show the level of input that Mr Philpott had and his knowledge of what was going on at FEI.
[135] Mr Turner submits that Mr Philpott objects to this discovery order and submits that the relevant email did not attach a draft newsletter but only a draft of the email which Mr Shim sent to Mr Robert Famularo, a co-lender, relating to a co-lending transaction not involving the GFT and that Mr Philpott has agreed to discover the proposed draft email letter to Mr Famularo.
[136] In objecting to the discovery of these documents, Mr Turner also points to Mr Philpott’s evidence that he played a minor role in editing some FEI newsletters and was not involved in commenting on figures or projections in those newsletters.
Conclusion in relation to category 12
[137] In my view the GFT have not established sufficient relevance of the documents sought in this category and the order sought is declined.
Category 13
[138] This category relates to copies of all correspondence (including text messages, emails and letters) between Mr Stewart and Mr Philpott.
[139] Mr Philpott has agreed to provide these documents. The applicable date ranges from 20 May 2018 to 11 June 2018. An agreement to do so is noted and an order by consent is made at the end of this judgment.
Category 14
[140] This category relates to copies of service agreements between Mr Philpott and/or his entities and Les Ellison & Phoenix Properties Limited, and Crummer
Trustees No.136 Limited and JMC Trustees Limited. Mr Hollyman submits that Mr Philpott has disclosed tax invoices from himself to Crummer Trustees No.136 Limited, JMC Trustees Limited, and Les Ellison & Phoenix Properties Limited for “financial services” rendered by Mr Philpott. Mr Hollyman submits the amounts are significant but Mr Philpott denies there were any formal service agreements between him and these companies.
[141] Mr Hollyman submits that these invoices are only two of a number of invoices rendered by Mr Philpott or his related entities to FEI and/or entities related to FEI, Mr Shim and Mr Stewart, and other documents Mr Philpott has discovered include discussions about fee arrangements with FEI. Mr Hollyman submits that given the large sums of money being exchanged, it would be expected there would be some sort of agreement or even discussion about what fees Mr Philpott would receive for introducing investors to FEI and that these documents would help the Court to understand Mr Philpott’s role and the extent of his involvement in decision-making and financial and fundraising efforts in relation to FEI.
[142] Mr Turner submits that Mr Philpott objects to this discovery request and he has stated that no service agreements were in place between Mr Philpott and the developers of the projects involved in the four Trust Deeds.
Conclusion in relation to category 14
[143] In my view any fee arrangements, whether documented in service agreements or not, between Mr Philpott and the developer companies involved in the Anzac Loans and the Hobson Loans should be discovered. They are clearly relevant to any financial incentives that Mr Philpott was receiving to procure co-investors in relation to these developments and the allegations by the GFT that these fees were hidden by Mr Philpott from Mr Gillespie/the GFT.
[144] Accordingly, I make an order below for discovery of documents in this category.
Category 15
[145]This category relates to all due diligence Mr Philpott did on FEIG.
[146] Mr Hollyman submits that in November 2018, in an email to Mr Gillespie, Mr Philpott refers to due diligence that he has done which has shown the deal he is offering would be good value and specifically refers to the low offer price for taking up the investment opportunity and the high returns it will bring. Mr Hollyman submits that Mr Philpott has not discovered any documents relating to this due diligence and his affidavit appears to suggest he conducted due diligence without documents, which does not seem plausible. Mr Hollyman submits this is relevant as Mr Philpott was previously a company accountant and the GFT believed him when he said he had done due diligence, and the content of that due diligence will show whether Mr Philpott was being honest about what he knew or not, as well as the level of knowledge he had about FEI’s financial affairs.
[147] Mr Hollyman reiterates that the FEIG shares were bought in the name of the GFT and Mr Gillespie purchased these shares in his name as trustee of the GFT.
[148] Mr Turner submits that Mr Philpott objects to this request for discovery on the basis that the information as set out in his email of 27 November 2018 was derived from the statements made by the directors at the 2018 AGM of FEIG. He also reiterates that the FEIG shares were purchased by Mr Gillespie in his own name and not on behalf of the GFT and therefore should not form part of the GFT’s claim.
Conclusion in relation to Category 15
[149] I am of the view that any documents relating to whatever due diligence Mr Philpott carried out on FEIG should be discovered. They are clearly relevant to the state of knowledge as to FEIG’s financial position and to whether representations by Mr Philpott as to the investment in FEIG’s shares which the GFT made may be misleading or not.
[150]Accordingly, I make an order that these documents should be discovered.
Category 16
[151] This category relates to Mr Philpott’s notes of meetings with Mr Wayne Scholtz.
[152] Mr Hollyman submits that Mr Philpott disclosed an email from himself to Mr Shim and Mr Stewart where he requests payment of his invoices and gave updates on discussions he was having with potential investors. Mr Hollyman notes that at point 6 of that email, Mr Philpott refers to a meeting with Mr Wayne Scholtz who was coming to discuss further investment, but that no notes of that meeting have been discovered.
[153] Mr Turner submits that Mr Philpott opposes this request on the basis that the forthcoming meeting with Mr Scholtz of NZFF was after the GFT had entered into the Trust Deeds, after FEIG shares had been purchased on 15 December 2018 and therefore cannot be relevant to the causes of action pleaded by the GFT in its statement of claim. He submits that this meeting was not relevant as it did not concern any matters pertaining to FEI’s co-lending investments but related to a proposed merger between NZFF and a mortgagee lender called Squirrel, with a possible future business involvement by FEI.
Conclusion in relation to Category 16
[154] I am of the view that the GFT have not established sufficient relevance of these documents to the claims made by the GFT to justify an order for discovery. The GFT have not demonstrated any notes of meetings with Mr Scholtz are relevant to whether or not the representations allegedly made by Mr Philpott are misleading or false, and there is really only speculation as to what involvement FEI or any of FEI’s related entities might have in respect of the transaction to which these discussions purportedly related.
[155]Accordingly, an order for discovery is declined.
Category 17
[156] This category is no longer being pursued by the GFT. Documents have been provided.
Category 18
[157] This category related to all underwrite agreements entered into by Mr Philpott including evidence of whether any of them were honoured or not.
[158] Mr Hollyman submits Mr Philpott has disclosed a series of emails from Mr Philpott to Mr Shim and Mr Stewart after FEI was put into receivership, and in those emails Mr Philpott refers to underwrite agreements which he entered into. Mr Hollyman notes that Mr Philpott has disclosed two of these indemnities but has not sworn they are the only indemnities, and he submits they are relevant to the GFT’s assessment of Mr Philpott’s financial incentives to pursue investments in FEI-related entities.
Conclusion in relation to category 18
[159] I make an order at the end of this judgment that Mr Philpott either confirms by affidavit that there are no other underwrite agreements or discovers any further underwrite agreements related to any FEI-related investments.
Category 19
[160] This category relates to a “catch all” request for correspondence (including text messages, emails and letters) to/from Mr Philpott and Mr Shim, Mr Stewart, Mr Jeff McKenzie, Mr Marcus Ritchie, Mr Andrew Pike, and other FEI/FEIG personnel, Mr Marty Kells, Mr Andrew Montgomerie and any others at FEI or FES associated with companies related to the FEI property projects Mr Philpott has been involved in.
[161] In relation to this “catch-all” category, Mr Hollyman submits that Mr Philpott was heavily involved in raising funds for FEI and the financial needs of the company and was regularly in contact with its directors and was paid significant sums by them.
Mr Hollyman submits it could be expected that there would be more correspondence between them than has been discovered. He then refers to the following specific categories:
(a)correspondence with Mr Stewart;
(b)correspondence with Mr Jeff McKenzie, a director of FEIG;
(c)correspondence with Mr Marcus Ritchie, a director of FEI from 2014 to 2020 and also the CEO and managing director of FEIG when Mr Shim retired from that role in April 2019;
(d)correspondence with Mr Andrew Pike, another director of FEI whom Mr Philpott would have dealt with;
(e)correspondence with Mr Marty Kells, a project manager for the Maritime Apartments project development on Anzac Avenue which FEI funded and Mr Philpott was invested and involved in; and
(f)correspondence with Mr Andrew Montgomerie, the developer of the Anzac Ave Hotel in Hobson Street, a development which Mr Philpott was invested in.
[162] Mr Hollyman submits that very little correspondence has been disclosed with these parties.
[163] Mr Turner submits that Mr Philpott objects to this request as the request goes well beyond the pleaded allegations against Mr Philpott, and is disproportionate by reason of being unduly burdensome. He notes that, as is conceded in the request, it is in the nature of a “catch-all” rather than a specific request for relevant documents.
Conclusion in relation to category 19
[164] I am of the view that no order should be made for discovery in respect of the “catch-all” request. In my view this request is unduly wide, relating to correspondence
with persons over a considerable period of time, there being no request for specific documents or basis established as to their relevance to the GFT’s claims. As this request includes all texts, emails and letters, and this could be unduly burdensome to Mr Philpott given the number of persons and the period of time over which the documents may need to be discovered.
[165]Accordingly, this request is declined.
Mr Philpott’s discovery application
[166] Mr Philpott’s discovery application sought discovery of documents from the GFT in nine categories, as set out in the Schedule annexed to Mr Turner’s submissions in respect of this application. The parties have reached agreement for discovery of certain categories of documents, being those set out at 1, 2, 3, 4(i), 4(ii), 4(iv), 4(vi) and 9 of the Schedule. An order by consent is made at the end of the judgment providing that these documents will be provided as agreed.
[167] With respect to the remaining categories of documents, discovery of which is sought by Mr Philpott, these are now considered.
Category 4(iii) — documents relating to advice from Colin Wilson, the GFT’s external accountant
[168] This category seeks discovery of all correspondence, emails and documentation passing between Mr Gillespie and the other GFT trustees on the one hand, and Mr Colin Wilson, the GFT’s external accountant, on the other hand.
[169] While Mr Turner acknowledges that some of these documents have been discovered, he submits that given Mr Wilson signed the Trust Deeds there must be communications, probably by email, forwarding these documents to Mr Wilson for his signature and giving him instructions as to signing them and as to the nature of the transactions. He also submits that Mr Wilson is likely to have returned the documents to the GFT by email and that it is likely that he may have made some accompanying comments on the documents.
[170] Mr Turner submits discovery of the emails is not likely to be an onerous task, and that the communications will be directly relevant to the pleaded defence of voluntary assumption of risk by the GFT, as pleaded at paragraph [92(f)–(k)] of the statement of defence.
[171] Mr Turner submits that while Mr Gillespie has stated in paragraph [33] of his affidavit sworn on 13 June 2023 that he has discovered all correspondence with Mr Wilson, but it appears likely that there are further communications which have not been discovered.
[172] Mr Hollyman submits that Mr Gillespie has deposed that all relevant correspondence between Mr Wilson and himself has already been discovered and that entry into the Trust Deeds is not an issue, so the relevance of the documents sought is not established. He submits the Trust Deeds have been provided, as have the relevant trustee resolutions, and discovery has included the GFT bank account statements showing the use of funds, and the GFT trust deed, and the GFT tax returns.
Conclusion in relation to Category 4(iii)
[173] I am of the view that if there are any further documents in this category which have not been discovered by the GFT, these documents should be discovered. They are relevant to Mr Philpott’s defence that the GFT voluntarily assumed risk in respect of the Anzac Loans and the Hobson Loans, and to the extent that communications from Mr Gillespie to Mr Wilson as an independent trustee, and vice versa, as to due diligence or other aspects of the transaction being acceptable to the GFT, would be relevant if contained in such emails.
Category 4(v) — communications between Mr Gillespie (and other GFT trustees if applicable) with FEI Group and its directors, officers and employees from 2 July 2018 to 31 December 2018
[174] Mr Turner submits there are likely to be further communications and emails between the FEI directors to Mr Gillespie between 2 July 2018 and 31 December 2018. He refers to an email from Mr Wayne Sholtz to Mr Gillespie, dated 28 May 2022. Mr Hollyman has submitted that privilege is claimed for the Sholtz email
(the Sholtz email) and it was disclosed in error. I deal with this issue in relation to Category 4(vii) below.
[175] Mr Turner submits that dealings between Mr Gillespie and the FEI directors have been pleaded in defence by Mr Philpott at paragraphs [92(m) to (r)] of the statement of defence and are therefore relevant.
[176] Mr Hollyman submits that Mr Gillespie has already confirmed that the GFT has provided all financial information that the GFT has in relation to FEI. The remainder of his submission relates to the privileged nature of the Scholtz email.
Conclusion in relation to Category 4(v)
[177] In my view, putting aside the Scholtz email which is in contention, as Mr Philpott has pleaded as part of his defence that the discussions which led to the GFT investing in the Anzac Loans and the Hobson Loans occurred between Mr Gillespie sand the FEI directors, Mr Shim and Mr Stewart, any further communications Mr Gillespie (and any of the other trustees, if relevant) had with Mr Shim and Mr Kim are relevant and should be discovered.
Category 4(vii) — communications between Mr Gillespie and Mr Wayne Sholtz in relation to the claim
[178] This request for discovery is based on the Scholtz email. Mr Hollyman submits that this email was disclosed inadvertently and privilege has not been waived in respect of it. At [26] to [30] of his submissions, Mr Turner disputes whether or not the Sholtz email is in fact privileged.
Conclusion in relation to Category 4(vii)
[179] My view on this is that the dispute between the parties as to whether this email attracts privilege or not cannot be resolved in the context of the application for discovery and accordingly the discovery request cannot be dealt with. I make an order at the end of this judgment that either the parties come to an agreement as to the
privileged status or otherwise of the Scholtz email or, if not, then the GFT will need to make an application for privilege.
Category 4(viii) — communications between Mr Gillespie and Mr Robert Famularo in relation to the GFT claim
[180] Mr Turner refers to email communications between Mr Gillespie, Mr McKenzie and Mr Famularo dated 15 February 2021, which he states have not been provided in full and therefore this email should be discovered.
[181] Mr Turner submits there are likely to be other communications between Mr Gillespie and Mr Famularo which have not been discovered.
[182] Mr Hollyman submits that the communications are not relevant and Mr Gillespie has already deposed that all correspondence between himself and Mr Famularo has already been discovered. He also notes that the suggestion that the email of 15 February 2021 has not been fully disclosed is incorrect and has in fact been fully disclosed.
Conclusion in relation to Category 4(viii)
[183] In my view the communications between Mr Gillespie and Mr Famularo in respect of the GFT’s claim are relevant and, to the extent they have not been already discovered, should be discovered.
Category 4(ix) — communications between Mr Gillespie and Mr Jeff McKenzie of FEIG created after 16 April 2021
[184] Mr Turner refers to an email from Mr McKenzie to Mr Gillespie on 4 May 2021 which, in Mr Turner’s submissions, suggests that Mr McKenzie has a lot of information from FEI documents and was trying to locate more. He notes that no reply from Mr Gillespie to Mr McKenzie to that email has been discovered. Mr Turner submits it is likely that there were subsequent emails between Mr McKenzie and Mr Gillespie relevant to the GFT’s claim.
[185] Mr Hollyman submits that these documents have already been discovered by the GFT and no evidential foundation has been laid that there are further documents that ought to be discovered in that respect.
Conclusion in relation to Category 4(ix)
[186] As I have concluded at [93] of this judgment, I have determined that documents provided by Mr McKenzie to Mr Gillespie do not need to be excluded from the GFT’s discovery. I am of the view that to the extent any further communications between Mr Gillespie and Mr McKenzie relating to the GFT’s claim they are relevant and they should be discovered.
[187]Accordingly, an order for discovery of those documents should be made.
Category 5 and Category 6 — documents relating to validity of the Trust Deeds
[188] Mr Turner has acknowledged that Category 6 is subsumed into Category 5, and the same submissions apply.
[189] At [39] and [40] of his submissions, Mr Turner sets out the issues that are perceived with the method of execution of the Trust Deeds on behalf of the GFT. These submissions seek to raise doubts as to the validity of the execution of the Trust Deeds.
[190] Mr Hollyman submits that the validity of the Trust Deeds is not an issue in these proceedings. He submits that the statement of claim pleads at paragraphs [15] to [17] the documents by which the investment was made, and Mr Philpott’s defence does not deny the documents were entered into.
[191] Mr Hollyman submits the same applies to the powers of attorney which are sought and that the documents are not relevant. In any event, he submits the GFT would be bound by the Trust Deeds even if there was any deficiency in the power of attorney on the basis of the principals being bound by their agent.
Conclusion in relation to Categories 5 and 6
[192] I am of the view that no order for discovery of these documents should be made. They are not relevant to the pleadings and the validity of the execution of the Trust Deeds is not an issue in the pleadings.
[193]Accordingly, no order is made for discovery of these documents.
Category 7 — correspondence between Mr Wilson and the trustees of the GFT Trust
[194] Mr Turner has acknowledges that this category is subsumed into Category 4(iii) as dealt with above.
Category 8 — correspondence between the Trustees of the GFT themselves in relation to the FEI and FEIG matters
[195] Mr Turner submits that instructions must have inevitably been provided to Mr Wilson to exercise his powers of attorney in signing the Trust Deed and therefore it is likely there will be email, texts or messages in correspondence between the trustees themselves as to the investments in the Anzac Loans and the Hobson Loans confirming that they were all content to proceed with the Anzac Loans and the Hobson Loans and the reasons for this.
[196] Mr Hollyman submits that Mr Gillespie has already provided an explanation in his affidavit as to how the GFT came to make the investment, as set out in paragraphs [21], [32] and [65] of Mr Gillespie’s affidavit of 13 June 2023.
Conclusion in relation to Category 8
[197] I am of the view that this request for discovery is effectively dealt with under Category 4(iii) as Mr Wilson executed the Trust Deeds on behalf of the three Gillespie sons under powers of attorney and any communications would be between Mr Gillespie and Mr Wilson under this category. Therefore no order for discovery in this category is necessary.
Application for documents to be “undiscovered”
[198] Mr Turner makes a submission that the documents which Mr Gillespie obtained from Mr McKenzie of FEIG should be excluded from GFT’s discovery. Mr Turner’s submission is that “possession” of a document and the definition of “control” in r 1.3 of the High Court Rules should be construed as meaning a legitimate right to possession of the document that cannot be challenged by the true owner of the documents. He submits that there is no evidence presented by the GFT that Mr McKenzie was entitled or authorised to the supply confidential internal documents in relation to FEI and those documents ought to have been discovered by the GFT by way of an application for non-party discovery against FEI.
[199] In support of this submission, Mr Turner refers to the decisions of Life Plan Australian Friendly Society v Woff24and Lonrho Ltd v Shell Petroleum Co Ltd.25 Mr Turner also refers to the decision of Schlumberger Holdings Ltd v Electromagnetic Geoservices AS.26
[200] Finally on this point, Mr Turner submits that even if the Court considers that the documents supplied by Mr McKenzie are within the definition of “control” by the GFT on its proper construction, the Court still has jurisdiction to remove the documents from the GFT’s discovery or to order that the use of those documents by the GFT amounts to an abuse of process.
[201] Mr Hollyman submits that no claim has been made by FEI or FEIG for confidentiality of the relevant documents and the proposition that a party may be required to “undiscover” documents is unsupported by authority:
(a)a party is required to list documents in its “control” (r 8.7) which includes “possession” (r 1.3); and
24 Life Plan Australian Friendly Society v Woff [2016] FCA 248 at 351-352
25 Lonrho Ltd v Shell Petroleum Co Ltd [1980] 1 WLR 627 (HL) at 635–636.
26 Schlumberger Holdings Ltd v Electromagnetic Geoservices AS [2008] EWHC 56 (Pat).
(b)inspection is governed by r 8.27 — privileged documents are not required to be discovered and limits may be initially placed on confidential documents, but they are still required to be disclosed.
He submits documents in respect of FEI came into Mr Gillespie’s possession over time and the records may have become mixed as to the source of various documents.
[202] Mr Hollyman refers to his submissions in relation to this issue in the strike-out application (discussed at [88] to [90] of this judgment).
Conclusion in respect of documents to be “undiscovered”
[203] I have already expressed the view at [93] that I do not consider that these documents should be excluded from the GFT’s discovery.
Result
Strike-out application
Paragraphs 10 to 14, 15 to 34, 35 and 36, 37 to 41, 42 to 47, 54 to 56 of the statement of claim
[204] As a result of the conclusions I have reached at [46], [49], [51], [55], [57] and [59], these paragraphs should not be struck out from the statement of claim.
The GFT’s causes of action
[205] The second cause of action in the statement of claim (s 12A of the FTA) has been withdrawn by the GFT.
[206]As a result of the conclusions I have reached at [69] (s 9 of the FTA), [71] and
[72] (s 13 of the FTA), [78] (negligent misstatement), [82] (breach of an agreement),
[84] (purchase of FEIG shares), [91] to [93] (abuse of process), none of these causes of action should be struck out. It follows that the statement of claim should not be struck out in its entirety.
The GFT’s discovery application
Category 1
[207] As a result of the conclusions I have reached at [98] and [99], the documents sought by the GFT in category 1 should be discovered.
Category 2
[208] As noted at [100], I have assumed the discovery made by Mr Philpott in respect of this category is sufficient. If not, counsel for the parties are invited to make further submissions on this category.
Categories 3, 4 and 5
[209] As a result of the conclusions I have reached at [104], the documents sought by the GFT in these categories should be discovered.
Category 6
[210] As a result of the conclusions I have reached at [108] and [109], the documents sought by the GFT in this category should be discovered with the exception of any documents relating to Mr Bailey.
Category 7
[211]This category is no longer pursued by the GFT.
Category 8
[212] As a result the conclusions I have reached at [115] the invoices sought by the GFT in this category should be discovered to the extent the invoices relate to the investments in FEI’s related entities, but not unrelated invoices. The tax returns sought do not need to be discovered.
Category 9
[213] As a result the conclusions I have reached at [121], to the extent the documents sought by the GFT in this category relate to any investment related to FEI, they should be discovered. It is unclear whether Mr Philpott has made sufficient disclosure in relation to this category already but, if not, counsel for the parties are invited to make further submissions on this category.
Category 10
[214] As a result of the conclusions I have reached at [127], the documents sought by the GFT in this category should be discovered.
Category 11
[215] As a result the conclusions I have reached at [132], the documents sought by the GFT in this category should be discovered.
Category 12
[216] As a result of the conclusions I have reached at [137] , the documents sought by the GFT in this category do not need to be discovered.
Category 13
[217] Mr Philpott has agreed to provide the documents in this category, and a consent order is made below.
Category 14
[218] As a result of the conclusions I have reached at [143], the documents sought by the GFT in this category should be discovered.
Category 15
[219] As a result of the conclusions I have reached at [149], the documents sought by the GFT in this category should be discovered.
Category 16
[220] As a result of the conclusions I have reached at [154], the documents sought by the GFT in this category do not need to be discovered.
Category 17
[221] This category is no longer being pursued by the GFT as the documents have been provided.
Category 18
[222] As noted at [159], either Mr Philpott confirms by affidavit that there are no further underwrite agreements or discovers any further such agreements
Category 19
[223] As a result of the conclusions I have reached at [164], the documents sought by the GFT in this category do not need to be discovered.
Mr Philpott’s discovery application
Category 4(iii)
[224] As a result the conclusions I have reached at [173], the documents sought by Mr Philpott in this category should be discovered.
Category 4(v)
[225] As a result of the conclusions I have reached at [177], the documents sought by Mr Philpott in this category should be discovered.
Category 4(vii)
[226] This category relates to documents in respect of which the parties are in dispute as to privilege. I make orders dealing with this at the end of this judgment.
Category 4(viii)
[227] As a result the conclusions I have reached at [183], the documents sought by Mr Philpott in this category should be discovered.
Category 4(ix)
[228] As a result of the conclusions I have reached at [186], the documents sought by Mr Philpott in this category should be discovered.
Categories 5 and 6
[229] As a result of the conclusions I have reached at [192], the documents sought by Mr Philpott in this category do not need to be discovered.
Category 8
[230]As I have noted at [197], this category is effectively subsumed into
Category 4(iii) and accordingly no order for discovery is necessary.
Application for documents to be “undiscovered”
[231] As a result of the conclusions I have reached at [93] and [186], these documents do not need to be excluded from the GFT’s discovery.
Orders
[232]I make the following orders set out in the following paragraphs.
Strike out application
[233]Mr Philpott’s application:
(a)to strike out the statement of claim in its entirety is dismissed;
(b)in the alternative, to strike out paragraphs 10 to 14, 15 to 34, 35 and 26, 37 to 41, 42 to 47 and 54 to 56 of the statement of claim is dismissed;
(c)to strike out the second cause of action pleaded at paragraphs 65 to 70 of the statement of claim is granted (acknowledging it has been withdrawn by the GFT);
(d)to strike out the first, and third to fifth, causes of action is dismissed;
(e)to strike out the claim in respect of the purchase of the FEIG shares by the GFT is dismissed;
(f)to strike out the entire claim on the grounds of abuse of process is dismissed.
The GFT’s discovery application
[234]The GFT’s discovery application in respect of the documents sought in:
(a)categories 1, 3, 4, 5, 10, 11, 14 and 15 is granted;
(b)categories 12, 16 and 19 is dismissed;
(c)category 6 is granted with exception of any documents relating to Mr Bailey;
(d)category 8 is granted to the extent that any of the invoices sought by the GFT relate to investments in any of FEI’s related entities, but is
declined in respect of invoices unrelated to FEI’s investments and is declined in respect of the tax returns sought.
(e)category 9 is granted to the extent the documents relate to any investments related to FEI. If the GFT considered Mr Philpott has not already made sufficient discovery in respect of this category, counsel are granted leave to make further submissions as set out at [239].
(f)category 13, is granted by consent
[235] In respect of category 18, either Mr Philpott is to swear a further affidavit that all underwrite agreements have been discovered, or he is to discover any underwrite agreements he has not already discovered, in each case relating to any investments related to FEI.
Mr Philpott’s discovery application
[236]Mr Philpott’s discovery application in respect of the documents sought in:
(a)categories 4(iii), 4(v), 4(viii) and 4(ix) is granted;
(b)categories 5 and 6 is declined.
[237] In respect of category 4(vii), counsel are directed to endeavour to resolve the dispute between the parties in respect of whether the Sholtz email is privileged or not and, if such dispute cannot be resolved within 15 working days of the date of this judgment, the GFT may, if it wishes to do so, make an application to have the privilege issue determined.
[238] Mr Philpott’s application to exclude the documents obtained by Mr Gillespie/the GFT from Mr McKenzie from the documents discovered by the GFT is declined.
Further submissions
[239] Where counsel have been invited to make submissions in respect of categories 2 and 9 of the GFT’s discovery application, Mr Hollyman shall file and serve any submissions within 10 working days of the date of this judgment, and Mr Turner will file any submissions in response within 10 working days of receipt of Mr Hollyman’s submissions. The issue will then be resolved on the papers.
Costs
[240] Each party has had a measure of success in the applications. Counsel are directed to endeavour to agree costs and failing agreement being reached within the 20 working days from the date of this judgment, each party will file a memorandum as to costs (not to exceed five pages) within 10 working days of expiry of the 20 working day period. A decision on costs will then be made on the papers.
…………………………….. Associate Judge Taylor
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