Ingram v Patcroft Properties Limited HC Auckland CIV 2006-404-4171

[2007] NZHC 2044

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2006-404-4171

BETWEEN  GRAEME JOHN INGRAM AND ELIZABETH KNEE

First Plaintiffs

ANDKIP INVESTMENTS LIMITED Second Plaintiff

ANDPATCROFT PROPERTIES LIMITED First Defendant

ANDJOHN O’DONNELL Second Defendant

Hearing:         24 August 2007

Appearances: Mr T Grove for plaintiffs

Mr S Singh for defendants

Judgment:      24 August 2007

ORAL JUDGMENT OF ASSOCIATE JUDGE DOOGUE [on application for order for further and better discovery]

Counsel:

Daniel Grove, Chancery Street Chambers, P O Box 130, Shortland Street, Auckland

Shean Singh, P O Box 10018, Mt Eden, Auckland

INGRAM  AND ORS V PATCROFT PROPERTIES LIMITED AND ANOR HC AK CIV 2006-404-4171 24

August 2007

[1]      The following categories of documents are in dispute.

Rugby tickets

[2]      Season tickets to Eden Park are one of the categories that have not been discovered.   The plaintiffs have exhibited a document from the Sponsorship and Marketing Co-ordinator of Auckland Rugby and “The Blues” dated 8 September

2005.  That document establishes, to a sufficient level of cogency, that NPC season tickets were sent to the Lorne Street  address on 15 August 2005.   That would indicate that the documents came into the possession of the defendants.   The defendants have not deposed in their affidavit of documents as to the existence of these documents.   Mr Singh accepts that these documents are relevant to an issue between the parties in the proceeding.   They should have been discovered.   They have not been discovered.  Mr Singh says that he surmises that the documents were part of 17 boxes of documents that were put in the basement of the property after the plaintiffs were put out of the building.  That does not seem to be very likely because rather than being the plaintiffs’ documents, this was mail that was apparently addressed to the Lorne Street address on 15 August when the defendants were in possession of it.   However that does not really matter, the documents ought to be discovered and there will be an order accordingly.

The documents relating to the amount demanded on 13 June 2005

[3]      The case involves a claim by the plaintiffs of wrongful re-entry by the lessor, the first defendant.   The lessor in turn justifies its actions by saying that rent and operating expenses payments were in arrears and that therefore there were breaches of the lease entitling it to re-enter.  The question of how much was owing at the date of re-entry, 13 or 14 June 2005, is a critical factor.  The plaintiffs say that they have not received proper discovery of documents generally, which lead up to the period of the re-entry.  In addition to financial documents that would bear on the question of rent, documents from third parties such as rate demands, which would bear on the question of outgoings payable have not been discovered.  It is conceivable that there will be other categories of documents, which would bear on the rights, and wrongs of

re-entry.  An example might be correspondence exchanged which might be said by one  party  to  establish  that  there  was  a  waiver  of  a  contractual  obligation  or something of that kind.  But the material available to me here to justify making an order under Rule 300 is rather patchy.   The principle is that that the affidavit of documents will be conclusive unless it can be attacked under this Rule.  There needs to be at least a prima facie indication that specified documents have not been discovered – see the authorities collected in McGechan under HR300.03.

[4]      There may be some documents that relate to the period leading up to 13/14

June 2005 which were amongst the documents which the plaintiffs say were left behind at the premises when they vacated.  Some 17 boxes of documents apparently remained in the building after the date of the eviction.  It is not possible to identify exactly what, if any document, that was relevant to the proceedings was included in those documents which stayed behind in the building.   Because those documents remained behind when the building was taken back over by the defendants there is no realistic argument available to the defendants that the documents were not within their custody, possession, control or power.  I have said that no specific document has been pinpointed as being included in those boxes but the worrying aspect about discovery  in  this  case  is  that  while  it  is  apparently  accepted  that  there  were documents of the plaintiffs left behind, the defendants have made no effort to depose to the existence of those documents even in a generalised way.  I am not going to make an order in respect of those documents at the present time.   I expect the defendants’ legal advisor to again provide advice and direction to the defendants about their obligations to discover.  The fact that the defendants may take the view that giving discovery of these documents even in a broad and generalised way is of no utility to the plaintiffs is beside the point.

[5]      This is a matter which needs to be followed up and is to be included in the agenda at the next case management conference.

[6]      There is a category of documents which demonstrably ought to have been discovered by the defendants but has not.  These are documents that are contained in the plaintiffs’ affidavit of documents, which was sworn 15 March 2007.  That is to say, the evidence and circumstances disclose that there are documents which are

likely to have been in the possession of the defendants that have not been discovered because they appear in the opposing parties’ affidavit of documents.   Those documents are the ones numbered 485, 487, 490, 492, 494, 495 and 496 in the plaintiffs’ affidavit of documents.   I direct the defendants to provide further and better discovery concerning those items.

Beyond that Mr Grove in his submission said that there was “surprisingly, very little documentation …” that has been discovered from the critical period as he called it – from 31 March up until 13/14 June 2005.  He further said, “ there must be further documentation”.    Submissions  of  that  kind  do  not  assist  the  Court  in  deciding whether  or  not  there  is  at  least  a  prima  facie  indication  that  there  are  such documents.   Mr Grove referred me to a facsimile dated 8 June 2005 that Mr O’Donnell, the second defendant, sent to the plaintiffs' solicitors.  That document has not been discovered and ought to have been and I order accordingly. But it is not possible to extrapolate from the fact that that document was sent to the conclusion that there must be therefore other documents of a like kind.

Facsimile confirmation reports

[7]      Mr Grove said there was a further category of documents that have not been discovered which were copies of outgoing facsimiles reports which would have been generated by the defendants’ facsimile machine.  However after further discussion with opposing counsel Mr Grove told me he does not seek orders at this time in respect of such documents.

Computer Records

[8]      The application which the plaintiff filed 7 March 2007 specifically required the defendant to provide further and better discovery of:

(i)  All  of  the  records  relating  to  the  plaintiffs’  businesses whether in hard copy or computer record;

[9]      The second defendant swore an affidavit 13 April 2007.  In his affidavit he said:

2.4As a result of the first plaintiff not assisting me with the computer we had, I was not able to extract any data.   This computer was repaired and any document that may have existed was lost or destroyed.

[10]     He does not say in his affidavit when this loss of data occurred.

[11]     At the hearing before me today I was told that the second defendant now says that in addition to the above difficulties, the computer has now been disposed of as part of the sale of the property.  Mr Grove said that in the light of the fact that an application had been made for further and better discovery relating to the computer this development is a serious one.

[12]     Mr  Singh  says  that  he  is  prepared  to  have  his  client  make  enquires  to ascertain the whereabouts of the computer and to facilitate a computer expert to be retained by the plaintiffs if that is their wish, accessing the computer.   The idea would be that a copy would be made of such data as remains on the computer disk drive.  Given that development I will not make orders at this stage.  If this aspect of the application cannot be resolved I will expect that there will be a close examination of the circumstances of the loss of the computer data and it may be necessary for one or more individuals to be examined on oath concerning that issue.   It is probably wise that I say no more about that aspect of the matter at this point.  This issue, too, is to be raised at the next case management conference.

Marketing and sale of the property

[13]     Mr Grove referred me to a deposition in his client’s affidavit sworn 5 March

2007 at paragraph 32.   In that passage the plaintiff, Mr Ingram, said that the defendants had been marketing the businesses for sale.  I take that to be a reference to the backpacker business and the bar business carried on in the same building as the backpacker business.  Annexed to Mr Ingram’s affidavit were documents which appear to have been produced as part of a marketing campaign for the businesses which are referred to compendiously as “Central City Backpackers”.  Then with each of the documents in this set of annexures Mr Grove submitted these were all documents that were discoverable.   First as to relevance Mr Grove said that the plaintiffs have brought a claim for what they lost when they were deprived, allegedly

without justification, of their business.   That is, the defendants caused loss to the plaintiffs, it is alleged, when the defendants re-entered and seized the business.  Mr Grove says that anything that casts light on the value of the business will be discoverable.   I accept that submission.   I also accept that the documents may be relevant to an issue in the proceeding, even if they do not qualify as proof, which would be admissible at the trial.   I consider that the documents relating to the marketing of the business are relevant because they represent what might be the defendants’ assessment of how much the business might realise on the then market. If nothing else the documents could lead to the defendants being contradicted at trial if they contended for a much lower value with the business.   Why, it might rhetorically be asked, would they list the businesses at an unrealistically high level if that were simply going to result in the marketing being an exercise in futility?

[14]     Some at least of the documents are therefore relevant for the reasons that Mr Grove advanced.   I went through each of the documents with Mr Singh to next decide whether they were documents that the defendants had in their possession and power etc.   Mr Singh told me that he had no difficulty in accepting that if the documents were relevant for the reasons I have just outlined, that the document at page  130  of  the  bundle  was  discoverable  and  likewise  131.    He  said  that  the document extending from 132 to 135 might not be.  He told me that parts of those documents may have originated from the defendant.  That is not necessarily the point as I see it because if the documents originated from the plaintiff they could still have come into the possession and power of the defendant and have been used by the defendant.   The fact that the documents were annexed to the marketing proposal would indicate that the point at which they originated must have been the possession of the defendants.  No one else is likely to have supplied the real estate agent with marketing documents.

[15]     In any event the text in at least part of the document running from page 132 to 135 suggests that it was the defendant that brought this document into existence. That is because the document speaks of a new ten year lease that “will be entered into”.  The person who authorised that statement to be made clearly had control of the freehold of the building which would seem to exclude the plaintiffs.

[16]     Then Mr Singh referred me to the accounts at page 136.  These are undated. They set out the turnover, gross profit and the net profit.  A hand-written disclaimer is written onto page 136 which Mr Singh accepted, is apparently in the hand of Mr O’Donnell.   That document therefore must be discoverable quite apart from the consideration that it seems to have been included in the suite of documents which the real estate agent circulated as part of the marketing attempts for the property.  Page

137 appears to be the final page of the document which included reference to the ten year lease that I mentioned before, and for that reason probably originated with the defendant, but certainly has been in the power and possession of the defendant at some stage while making its way to the real estate agent.  The same may be said of

138 to 139.   These are documents which describe themselves as being from “Ulysees.com Limited” but again the defendant must have had control of them at some stage to give them to the real estate agent.  The same can be said of page 140 and 141 of the bundle.  The next document at 142 is Mr Hooker’s summary of gross sales.  This document is undated but would seem to me to be discoverable because it is part of the agent’s package and any way it was addressed to Mr O’Donnell and inferentially was brought into existence at his request.   143 is beyond argument a document of the defendants.

[17]     It might be said that directing discovery of these documents has no utility because the plaintiffs already have them but there can be real advantages in not just the possession of documents but also approving that at one stage they were in the possession or power of the other party and that is why the defendant should have discovered these documents and must do so now.

[18]     Beyond that the documents do establish that the defendants may not have considered carefully enough the extent of their obligations concerning marketing and sale of the property.  Now that it has been explained to counsel how these documents qualify as being relevant within the Peruvian Guano test I would hope that a careful review is made to ensure that there are no other discoverable documents that ought to be disclosed.

Costs

[19]     The plaintiffs seek costs against the defendants on the application to strike out which did not proceed today and the application for orders requiring further discovery under Rule 300.  The plaintiffs claim that they should have above scale costs in respect of the application for orders under Rule 300.

[20]     Dealing  first  with  the  application  to  strike  out.    The  argument  that  the plaintiffs advanced was that the counter-claim which the defendants filed reflected a mistaken view of the law as it related to whether or not there had been a merger of a sub-lease with a lease.  The plaintiffs say they pointed this out.  The defendants say that upon being told of this they filed an amended statement of counter-claim that removed the point from contention.  Mr Singh said it would not be appropriate to direct costs.

[21]     In my view the applicant/plaintiffs should be regarded as successful on the point even although it did not go to a defended hearing.  They should have costs but costs confined to the preparation of the notice of application.   There can be no entitlement to further costs of preparation for hearing on that application.

[22]     The next point concerns costs on the discovery application.  Mr Grove says that the application became necessary after the plaintiffs had warned the defendants of inadequate discovery.   He said that factor coupled with the scope of the deficiencies in discovery would justify an order exceeding scale.

[23]     In my view there should be an order for costs made in favour of the plaintiffs. They have been successful on this application.   I do not regard the failures of the defendants to discover as being wholly egregious as there has been a considerable attempt made to discover.  The matters that were in issue before me today partially at least support a view of matters that the defendants had legitimate doubts about whether or not  they should  discover.    I say “partially”  because  in  at  least  one category of documents, the computer disk, they did not discover the contents at all.  I do not overlook that Mr Singh conveyed an offer to the plaintiffs to make the disk drive  available.    Nonetheless  there  are  two  distinct  stages  to  be  observed  in

discovery.  The first is discovery itself and the second inspection.  In the first stage the opposing party hopes to tie down the discovering party on oath as to what material there is available to be inspected.  The two phases can not be elided.  It is therefore no answer to a failure to provide a comprehensive affidavit of documents to  say  that  it  didn’t  matter  because  we  informally  offered  to  give  inspection. However as I say I don’t think this is a case where above scale orders are called for. The applicants/plaintiffs will have costs on a 2B basis.

Other Matters

[24]     There are a number of issues  that  will  need  to  be re-visited  at  a future conference.     Those  issues  might  throw  up  contested  applications  for  further discovery so I will be circumspect in what I say about them.   Without giving any indication of whether further orders might be made in the future I observe that I have some grounds for concern about the seriousness with which the defendants take their obligations to discover.  They would be very well advised to ensure that a thorough review is undertaken to make sure that there are no documents as yet undiscovered.

[25]     I also note Mr Singh’s submission, that while the defendants may have been in breach of their discovery obligations, he considers the plaintiffs were as well. That is not a matter that I have had to rule on today because there is no application in proper form before me.  However if such an application were received it would be approached with the same rigour as I hope I have brought to bear on the application brought by the plaintiffs.

[26]     The Registrar is to allocate a further conference within the next two months, or failing that should arrange for the proceeding to be listed for mention in my Chambers List or that of Associate Judge Abbott in my absence on leave, so that a final review can be carried out of the interlocutory failings of this case.

[27]     It seems to me that the time has arrived when this matter should be allocated a trial date.  The Registrar is to allocate a four-day hearing.  He should first consult with counsel in the usual way as to suitable dates.  I will not give any directions as to a setting down date at this point or as to pre-trial timetable orders.  They can be dealt

with subsequently.   I would encourage counsel to confer on this aspect of matters and try and agree on appropriate arrangements.   Likewise I would hope that there will  be  a  co-operative  approach  from  this  point  forward  on  matters  such  as discovery.  Applications of the kind that I have had to deal with today should largely be unnecessary.  There may be one or two isolated issues of discovery which raise complicated issues of principle that require a Judge to rule on them but it is not the function of the Judge to do counsel’s work for them.

[28]     The orders that I have made require a supplementary affidavit of documents to be filed by the defendants.  This is to be attended to within 21 days.

J.P. Doogue

Associate Judge