Golden Grand Trading Limited v Green Traders Limited
[2019] NZHC 2193
•29 August 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-002409
[2019] NZHC 2193
BETWEEN GOLDEN GRAND TRADING LIMITED
Plaintiff
AND
GREEN TRADERS LIMITED
First Defendant
AJAY CHOPRA
Second Defendant
Hearing: 29 August 2019 Appearances:
M I S Phillipps and N Dennison for Plaintiff E Telle and N K Dhaliwal for Defendants
S A Keall for Non-party Mayajaal Holdings Ltd
Judgment:
29 August 2019
ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL
Solicitors:
Vicki Ammundsen Trust Law Ltd, Auckland Neilsons Lawyers, Auckland
Rainey Law, Auckland
Copy for:
S A Keall, Barrister, Auckland
GOLDEN GRAND TRADING LIMITED v GREEN TRADERS LIMITED [2019] NZHC 2193 [29 August 2019]
[1] The defendants have applied for further discovery against the plaintiff, Golden Grand Trading Ltd, and for non-party discovery against Mayajaal Holdings Ltd. Most matters have been resolved and some orders can be given by consent. I have, however, heard argument on one matter: who should pay costs on the order for non-party discovery by Mayajaal.
[2] I deal with the consent matters first. The plaintiff is to make discovery in the terms of paragraph 1 of Mr Phillipps’ memorandum. The plaintiff is to file and serve a further affidavit of documents by Friday, 13 September 2019. The affidavit is to be sworn by the director of the company, Mr Kodoor. In that affidavit he is to confirm that he has searched all emails for all correspondence between the plaintiff and its customers and to provide a list referring to each group of emails between the plaintiff and each customer from 1 January 2013 to 31 March 2015.
[3] The parties have not agreed as to costs on the defendants’ application for discovery against the plaintiff. I direct the defendant to file and serve its submissions as to costs by 5 September 2019. The plaintiff is to file its submissions as to costs by 12 September 2019. Any reply (only if strictly required) is to be filed and served by 19 September 2019.
[4] The submissions as to costs should be no more than five pages in length but not counting copies of any correspondence attached to the memoranda. It is always helpful on costs submissions for counsel to prepare a schedule of the costs they seek. Even if one side resists costs, they should consider what costs should be ordered if they are required to pay.
[5] There is agreement that Mayajaal is to make discovery of documents. Mr Keall tendered with his submissions a schedule setting out the terms for non-party discovery orders. I make orders in terms of that schedule. The schedule requires Mayajaal to file and serve its affidavit of documents by 26 September 2019.
[6] It was also accepted that Mayajaal Holdings should have its costs on the application and its costs of complying with the order. That will allow it to recover its reasonable and actual legal costs in complying with the order for discovery.
[7] The matter on which the parties do not agree is who should pay those costs. The normal rule is that the party applying for non-party discovery pays the costs of the non-party both on the application and on complying with the order. In this case, however, the defendants contend that the plaintiff ought to pay the non-party’s costs. For this Mr Telle relies on r 8.22 of the High Court Rules 2016.
[8]Before I deal with that, I give some background to the proceeding.
[9] All the parties are in the liquor trade. Golden Grand carries on business as an importer, exporter and distributor of liquor. Mr Kodoor is the man behind the company. The second defendant, Mr Ajay Chopra, had a liquor company called Scott Trading Co Ltd. That dealt with Golden Grand. Scott Trading no longer exists and has been removed from the Companies Register. The first defendant, Green Traders Ltd, company was established in December 2012. The sole director and shareholder is Mr Sanchut Chopra, the son of Mr Ajay Chopra.
[10] There are two claims. In the second cause of action, Golden Grand sues Mr Chopra for two alleged loans: a payment of $121,314 and another of $289,006. That is a total of $410,320. The cause of action is for payments that Golden Grand made to Inland Revenue. It says that it made those payments to clear a GST liability and that Mr Ajay Chopra undertook responsibility to repay. Mr Chopra’s defence is that the payment was not a loan for which he had personal responsibility, but that Golden Grand was doing no more than paying a refund to Inland Revenue for GST payments to which it was not lawfully entitled. That cause of action is relatively insignificant for the matter I am considering today. The focus is more on the first cause of action, a claim against Green Traders for $1,200,000.
[11] I summarise some of the statement of claim but note that the defendants do not accept the allegations against Green Traders. According to the statement of claim, Scott Trading began dealing with Golden Grand in 2009. Later that year, Golden Grand took a lease of commercial premises in Stoddard Road, Mount Roskill. The arrangements were that Golden Grand would stock that warehouse. Scott Trading would purchase and warehouse the stock and would in turn distribute liquor to wholesalers. Scott Trading would take possession on delivery and account for and
manage the stock. Golden Grand was not responsible for any loss or theft. Scott Trading was to notify Golden Grand if stock was delivered in a damaged or unsaleable condition, and the plaintiff was to provide a credit. That trading continued until the end of the financial year, in 31 March 2013. Mr Ajay Chopra says that by that stage he wanted to get out of the business. He was not finding it profitable and he found lifting heavy boxes of liquor hard work as he got older.
[12] Green Traders Ltd was incorporated in December 2012. An arrangement was made under which Green Traders took over from Scott Trading. The pleading suggests a novation: the plaintiff would cease trading with Scott Trading and instead begin trading with Green Traders on the same terms as it had traded with Scott Trading, except that there would be different arrangements for invoicing and payment. Green Traders would assume liability to Golden Grand for any outstanding amounts that Scott Trading owed the plaintiff. Scott Trading would transfer all the stock held by it to Green Traders on the basis that Green Traders would pay Golden Grand for stock as and when it was sold. Golden Grand and Green Traders would each maintain a written book of all stock purchased from Golden Grand and distributed and sold by Green Traders. Those books would replace any need for formal invoicing.
[13] At the outset, Green Traders took over the warehouse in Stoddard Road. Later it established its own retail premises in Dominion Road. The statement of claim pleads that once the Dominion Road operation started there was a meeting where it was agreed that the stock held for Green Traders would be identified and paid for, but all remaining stock would be sent to Mayajaal, the non-party to the discovery application. Apart from what was sent to Mayajaal, Green Traders would have to pay for all outstanding stock which it had sold. The Scott Trading debt was also to be cleared.
[14] The statement of claim says that by late 2013 some payments had been made by Green Traders. Some stock had been delivered to Mayajaal and there was still a sum owing, an amount in the order of $1.6 million. There were further payments after that. The statement of claim pleads that there was a meeting in February 2014 between Mr Kodoor and Mr Ajay Chopra. It was agreed that the debt would be fixed at
$1,200,000. Golden Grand claims that it made demand, but no payments were made, and it sues for that $1,200,000.
[15] A difficulty for the case is that the arrangements that Golden Grand relies on for its novation agreement made in the period 2012/2013 were not recorded in any form of written agreement and the accounting arrangements between the parties were casual at best. There does not seem to have been a proper system of invoicing. Instead, the plaintiff has relied on handwritten notes in a school exercise book.
[16] One issue will be how the alleged novation is to be characterised. While the plaintiff says there was a three-way agreement, the defendants’ case is that Scott Trading agreed to return the stock to Golden Grand; it invoiced Golden Grand for that stock; and Golden Grand in turn issued a credit note for the value of any stock,
$2,262,516. The arrangements for Green Traders to deal with the plaintiff were independent of the termination of Scott Trading’s agreement with Golden Grand.
[17] Because of these difficulties, the defendants have pursued discovery fully in the hope that accounting records of the plaintiff would cast more light on the issues. That is, an analysis of the plaintiff’s accounting records may show how the stock was treated at the end of the March 2013 financial year and the start of the following financial year. The defendants have therefore requisitioned the plaintiff extensively for full accounting records. They have not had as ample disclosure as they would wish. For its side, the plaintiff contends that it has provided fulsome discovery and has met its obligations.
[18] While the parties disagree on the adequacy of the discovery, I record that the defendants accept that pursuing discovery against the plaintiff is unlikely to yield anything more useful than the correspondence which has been ordered in terms of the memorandum submitted by Mr Phillipps today.
[19] The defendants have instead turned to Mayajaal for discovery. Mayajaal was also a customer of Golden Grand and apparently dealt with it extensively. The defendants have obtained accounting advice. Their discovery application has been brought in reliance on advice from the accountant as to the materials he wishes to examine to cast light on the crucial issue in the first cause of action.
[20] One must be careful with shopping lists of documents provided by accountants on which discovery applications are mounted. What an accountant sets out as required is by no means determinative. The Court of Appeal made comments to that effect in Biggs v Biggs.1 All the same, Mayajaal has generally agreed to discovery, although on more limited terms than were initially sought.
[21] The issue here is whether, in those circumstances where the defendants say that the plaintiff’s discovery is inadequate, I should order the plaintiff to pay the costs of non-party discovery instead of the defendant. Rule 8.22 says:
8.22 Costs of discovery
(1) If it is manifestly unjust for a party to have to meet the costs of complying with an order made under this subpart, a Judge may order that another party meet those costs, either in whole or in part, in advance or after the party has complied.
(2) Despite subclause (1), the court may subsequently discharge or vary an order made under that subclause if satisfied that a different allocation of those costs would be just.
(3) If an order is made under rule 8.20(2) or 8.21(2), the Judge may, if the Judge thinks it just, order the applicant to pay to the person from whom discovery is sought the whole or part of that person’s expenses (including solicitor and client costs) incurred in relation to the application and in complying with any order made on the application.
[22] Sub-rule (3) provides authority for the Court to order the party seeking non- party discovery to pay the costs of the non-party in carrying out discovery. While not invariable, it is standard practice that non-parties are entitled to have their costs because carrying out discovery is a real imposition. I understand that the man behind Mayajaal is a sole trader with no other staff. To ensure that he meets his obligations to carry out discovery, he ought to have legal assistance. Having been required to disclose financial records, it is appropriate that he have the protection of legal advice to ensure that he complies with the Court’s order. No-one questions his entitlement to be paid for the costs of discovery.
[23] There is a good reason for requiring applicants to pay those costs. That acts as a restraining influence on any enthusiasm to go after third parties for disclosure of
1 Biggs v Biggs [2018] NZCA 546 at [35].
documents. It ensures that proposals for discovery by non-parties are dealt with in a moderate fashion.
[24] On the face of it, r 8.22 does not seem to contemplate what the defendants are seeking here. That is, that another party, who has not sought non-party discovery, should pay the costs of the non-party on the application and in complying with the order. Cost-shifting orders can be made under r 8.22(1). That allows for cost-shifting if it is manifestly unjust for a party to have to meet the costs of an order made under this sub-part of the Rules. The “order” contemplated under sub-rule (1) is clearly an order for discovery, not an order for costs. Notwithstanding that, it is at least arguable for the defendants that the Court has jurisdiction to order someone other than the applicant to pay costs of the non-party when non-party discovery is ordered. After all, in Commerce Commission v Telecom Corporation the Court of Appeal accepted that the Court had powers to make cost-shifting orders, even before r 8.22 was included.2
[25] But I do not consider this is an appropriate case to require the plaintiff to pay the costs of the non-party making discovery. The test is the same as that under r 8.22(1): whether it is manifestly unjust for the defendants to have to meet the costs of the non-party in complying with the discovery order. The thrust of the defendants’ complaint is that the plaintiff has not been as fulsome with discovery as they would have wished. They complain that the plaintiff failed to keep accounting records that ought properly to be retained under the Tax Administration Act and the Companies Act.3 Notwithstanding that, Mr Phillipps makes a fair point that the case has to be taken on the basis that the parties did business in a certain way. If documents cannot be obtained from a party, it may be legitimate for the other party to look elsewhere for documents. But even if there has been inadequacy in keeping records, that does not amount to a manifest injustice for the defendant to carry the costs when it applies for non-party discovery.
[26] This decision not to shift costs has been made when I have ordered non-party discovery. The matter may be reviewed later after the case has gone to trial. By that stage the trial Judge will be able to assess the costs of the proceeding in its entirety.
2 Commerce Commission v Telecom Corporation CA198/05, 13 September 2006.
3 Tax Administration Act 1994, ss 15B(d) and 22; Companies Act 1993, s 194.
In light of the final decision, he or she may be able to review where the costs for non- party discovery ought ultimately to fall. I do not regard the plaintiff’s conduct in this case as so egregious that it should be ordered to pay costs for non-party discovery at this stage. Accordingly, that part of the application is dismissed. The defendants are to pay Mayajaal’s costs on discovery.
Associate Judge R M Bell
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