JMB TRUST LIMITED AND CHINA ANIMAL HUSBANDRY GROUP BODCO LIMITED
[2024] NZHC 3833
•13 December 2024
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2023-419-123
[2024] NZHC 3833
UNDER the Companies Act 1993 IN THE MATTER
of an application for an order pursuant to s 174 of the Companies Act 1993
BETWEEN
JMB TRUST LIMITED
Plaintiff
AND
CHINA ANIMAL HUSBANDRY GROUP
First Defendant
BODCO LIMITED
Second Defendant
Hearing: 10 December 2024 Counsel:
W Hofer and R Reeves for Plaintiff
B A Keown and K Crichton for First Defendant No appearance for Second Defendant
Judgment:
13 December 2024
JUDGMENT OF LANG J
[interlocutory application for particular discovery]
This judgment was delivered by Justice Lang On 13 December 2024 at 3.00 pm
Pursuant to r 11.5 of the High Court Rules Registrar/Deputy Registrar
Date:…………………………
Solicitors/counsel: Tompkins Wake, Hamilton Bell Gully, Auckland
JMB TRUST LTD v CHINA ANIMAL HUSBANDRY GROUP [2024] NZHC 3833 [13 December 2024]
[1] This proceeding involves disputes between shareholders of BODCO Ltd (BODCO), a company incorporated in New Zealand. BODCO carries on business supplying New Zealand milk powder-based products to global markets.
[2] The disputes arose after the first defendant, China Animal Husbandry Group (CAHG), acquired shares in BODCO. CAHG is incorporated in China but operates on a global basis. It now holds 68.88 per cent of the shares in BODCO whilst the plaintiff holds 10.64 per cent.
[3] The disputes have arisen because the plaintiff contends that CAHG has used its dominant position as a majority shareholder to manipulate the operation of BODCO in a manner that is oppressive to the plaintiff as a minority shareholder. The plaintiff seeks orders granting it relief under s 174 of the Companies Act 1993.
[4] The proceeding is to be the subject of a two-week trial commencing on 24 March 2025. The plaintiff has already filed and served its evidence, albeit some of it was late. CAHG is scheduled to file and serve its evidence by 18 December 2024. It has signalled an application for an extension of time within which to do so based on the late provision of evidence by the plaintiff. Should that be granted, it seems likely that the filing and service of evidence will not be completed until February 2025.
Procedural history
[5] The discovery process has been tortuous to say the least. Associate Judge Brittain made orders for tailored discovery in Minutes issued on 12 October, 6 November and 22 November 2023. These required both parties to provide discovery no later than 1 March 2024. The parties subsequently obtained orders by consent on several occasions extending the time for providing discovery. The last of these required CAHG to provide discovery no later than 18 July 2024.
[6] Delays by CAHG in providing its discovery led O’Gorman J to issue a minute on 17 July 2024 in which she made an order that, if CAHG did not provide its discovery by 30 August 2024, its defence would be struck out. CAHG subsequently applied for a further extension of time within which to comply with its discovery
obligations. Jagose J granted the extension in a judgment delivered on 13 September 2024.1
[7] CAHG has now provided discovery in three separate tranches. However, the plaintiff does not consider this to be adequate. It contends there are material deficiencies in the discovery that has been provided. It has therefore applied for particular discovery in relation to seven categories of documents. This judgment determines that application.
The application for particular discovery
[8] Jagose J directed that any further application by the plaintiff arising out of CAHG’s discovery was to be filed and served by 7 October 2024. The plaintiff duly filed an application for particular discovery on 7 October 2024 seeking discovery of five categories of documents. On 13 November 2024, the plaintiff filed an amended application in which it sought discovery of two further categories of documents. One of these is no longer in issue but the other remains in dispute.
[9] The categories of documents for which the plaintiff now seeks particular discovery are as follows:
(a)internal documents produced by bodies within CAHG including technical committees, management teams and the board of directors;
(b)documents relating to CAHG’s engagement with nominated third parties, including the Chinese Government;
(c)documents relating to interactions with Immigration New Zealand relating to entry visas to facilitate the secondment of two CAHG employees to work for BODCO in New Zealand;
(d)documents relating to payments made by CAHG; and
1 JMB Trust Ltd v China Animal Husbandry Group [2024] NZHC 2653.
(e)WeChat messages stored on devices owned by persons employed by or associated with CAHG.
[10] In addition, CAHG has redacted information from 307 documents that it has provided in its discovery. It says it has done so to ensure it does not infringe privacy laws that apply to Chinese entities and citizens. The plaintiff seeks to obtain access to unredacted versions of these documents.
An overarching issue
[11] Taking into account the Christmas break, there are now just 10 working weeks left before the trial begins. As a result, CAHG would have very little time within which to comply with any orders for particular discovery the Court may make at this point.
[12] This factor has added importance when the breadth of the application for particular discovery is taken into account. By way of example, the plaintiff seeks discovery of the following documents under category (a) set out at [9] above.
SCHEDULE A
1.The documents sought in the First Particular Discovery Order are:
(a)internal CAHG documents (including internal correspondence between CAHG employees) relating to any of the Tailored Discovery Categories;
(b)documents recording decisions made by CAHG’s technical committee(s) in relation to any of the Tailored Discovery Categories;
(c)documents recording decisions made by CAHG’s management team in relation to any of the Tailored Discovery Categories;
(d)documents recording decisions made by CAHG’s board of directors in relation to any of the Tailored Discovery Categories; and
(e)documents recording decisions made by China National Agricultural Development Group Co., Ltd in relation to any of the Tailored Discovery Categories.
[13] The wide scope of the documents sought by the plaintiff under this category is likely to create significant practical issues for CAHG in complying with any order for particular discovery prior to the commencement of the trial.
[14] The problem is particularly stark in relation to the WeChat messages sought in category (e). Under this head the plaintiff seeks discovery of all relevant WeChat messages held on the electronic devices of four named persons. For one of these persons, it seeks all relevant messages between 2015 and 2023. For the others, it seeks discovery of relevant messages for lesser periods of time.
[15] In practical terms, such orders are likely to give rise to real issues. First, it is not known whether any of the named persons remain in the employment of CAHG. Nor is it known whether they still retain devices that contain data for the periods relevant to the plaintiff’s enquiry. It also appears that there is an issue under Chinese law with such persons being required to divulge information held on their devices. Even assuming the devices are made available, they will need to be downloaded in a form that can be provided to the plaintiff. Thereafter, the plaintiff will need to have the WeChat messages translated into English. I consider there is no prospect of CAHG and the plaintiff being able to complete this process before the commencement of the trial.
[16] It goes without saying that the Court should not make procedural orders that cannot be complied with. The making of such orders in the present case would also inevitably lead to further disputes regarding the sufficiency of the efforts CAHG has made to comply with them. All of this would detract from the ability of the parties to properly prepare for trial.
[17] During the hearing, Mr Hofer candidly advised me on behalf of the plaintiff that its priority is to ensure the trial starts on the scheduled date. I consider this objective is likely to be thwarted if the Court was to make the orders the plaintiff seeks. For this reason alone, I would not have granted the application. I nevertheless propose to briefly consider it on its merits.
Relevant principles
[18] There is no dispute regarding the principles to be applied in the present context. Both parties rely on the four-stage approach referred to in Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd.2 The issues the Court is required to consider when determining an application for particular discovery under r 8.19 of the High Court Rules 2016 are as follows:
(a)Are the documents sought relevant and, if so, how important will they be?
(b)Are there grounds for belief that the documents exist?
(c)Is discovery proportionate, assessing proportionality in accordance with Part 1 of the discovery checklist from the High Court Rules?
(d)Weighing and balancing these matters, is an order appropriate?
[19] Rule 8.14 provides that a party must make a reasonable search for documents within the scope of a discovery order. In this context, Mr Keown referred me on CAHG’s behalf to the following passage from NSK Ltd v General Equipment Co Ltd.3
[24] Rule 8.14 requires a party to make a reasonable search for documents within the scope of a discovery order. There is no absolute obligation to seek out and discover every arguable document…
Categories (a) (b) and (d): Internal documents
[20] I consider these categories can conveniently be dealt with together because they raise similar issues.
[21] The steps that CAHG has taken to comply with its discovery obligations to date have been set out in an affidavit filed by Mr Siyuan (Eric) Cao. He says that CAHG conducted a search for emails sent to and received by the seven individuals within its organisation who are referred to in the pleadings. It then extracted emails
2 Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd [2015] NZHC 2760.
3 NSK Ltd v General Equipment Co Ltd [2015] NZHC 1979 at [24].
and other documents relating to these individuals from its systems dating back to 9 December 2014. The plaintiff does not challenge either the selection of the individuals identified by CAHG or the search terms it has used.
[22] Mr Cao says that CAHG focused on emails because they are the only method by which CAHG stores documents relevant to its investment in BODCO. The search covered those individuals who would reasonably be expected to receive copies of material communications relating to that investment.
[23] So far as engagement with third parties is concerned, Mr Cao says that interactions comprised emails, meetings and telephone conversations. Of these, only emails produced permanent records. He is not aware of any interactions between CAHG and the Chinese Government.
[24] Mr Cao also says that CAHG does not keep in readily accessible form any records that constitute proof of payments made by CAHG or payment instructions.
[25] Finally, Mr Cao says that CAHG instructed its New Zealand solicitors to review all documents within the client file that relates to the proceedings. This has resulted in the discovery of approximately 100 documents that CAHG’s solicitors will make available to the plaintiffs later this week.
[26] The steps that CAHG has taken resulted in the discovery of more than 5,000 documents. I consider it improbable that the orders the plaintiff now seeks will lead to the identification of further documents that fall within the terms of the tailored discovery orders. Further, I do not consider that any further documents that may be found are likely to be of real importance to the proceeding. Finally, I consider that the steps CAHG has taken to date constitutes a reasonable search in terms of r 8.14.
[27] I therefore consider it would be disproportionate, and a wasteful use of resources, to require CAHG to undertake any further searches. The only documents it has identified that have not already been searched are hard copy archives. As Mr Cao has explained, these contain tens of thousands of documents relating to the entire CAHG organisation. A further search would require manual review of all these
documents, which are organised by reference to year. I accept CAHG’s submission that there can be no guarantee that any relevant document would be found if these were to be searched at this stage. Such a search at this late stage would be disproportionate both in terms of likely cost and ultimate value.
Category (c): Documents provided to Immigration New Zealand
[28] Mr Cao says that CAHG extracted the immigration applications and supporting information provided to Immigration New Zealand when it sought entry visas for the two CAHG employees who were seconded to work for BODCO in New Zealand.
[29] I am satisfied CAHG should not be required to provide any further discovery of documents provided by it to Immigration New Zealand in relation to the two individuals seconded to work for BODCO in New Zealand. When Associate Judge Brittain made orders for tailored discovery on 6 November 2023, he directed that CAHG was only required to discover the original applications for entry visas together with supporting documentation. He was not prepared to direct any wider discovery at that stage and the plaintiff has not shown why the breadth of the discovery process in this area should now be widened.
Category (c): WeChat messages
[30] I have already outlined the practical issues that any order relating to the WeChat messages would raise. In addition, CAHG opposes any order being made under this head because it says the application for discovery of these was not made in accordance with the directions given by Jagose J in his judgment delivered on 13 September 2024.
[31] As I have already noted, Jagose J required the plaintiff to file and serve any application arising out of CAHG’s discovery no later than 7 October 2024. The original application for particular discovery that the plaintiff filed on 7 October 2024 did not seek discovery of the WeChat messages. Discovery of these was sought for the first time when the plaintiff filed its amended application on 13 November 2024. The plaintiff did not seek an extension of time within which to file this application.
[32] Mr Hofer submitted that Whata J effectively granted the plaintiff leave to file the amended application when he issued a Minute on 5 November 2024 making directions by consent as sought in a joint memorandum counsel had filed the previous day. The memorandum noted that the plaintiff anticipated filing an amended application for particular discovery that would include an application for discovery of the WeChat messages. However, the memorandum also noted that counsel for CAHG was still taking instructions on the potential amendments, “including whether they are out of time”. I therefore do not consider Whata J gave the plaintiff leave to file the amended application outside the time limit directed by Jagose J.
[33] To deal with this issue Mr Hofer advanced an oral application during the hearing before me seeking an extension of time within which to seek discovery of the WeChat messages. I decline the application because the plaintiff has not provided any explanation as to why it did not include the WeChat messages in its original application. It must have been aware by 7 October 2024 that WeChat messages may exist. I cannot discern any reason why they could not have been included in the original application.
Access to redacted documents
[34] As I have already noted, the plaintiff seeks access to unredacted copies of 307 documents. CAGH contends it has made the redactions to comply with privacy laws imposed by the Chinese Government.
[35] Mr Cao says the redactions relate to personal details of individuals such as email addresses, cellphone numbers and dates of birth. He confirms the substantive content of the documents has not been redacted.
[36] The plaintiff has not sought to challenge Mr Cao’s evidence on this issue even though it must be obvious from the documents in question that information of the type described by Mr Cao has been redacted. I accept the submission for CAHG that it would be disproportionate to direct this information to be discovered when to do so would breach Chinese privacy laws. As matters currently stand it is not evident in any event that the redacted information is relevant to the proceeding.
Result
[37] The application for particular discovery and for access to redacted documents is dismissed.
Costs
[38] As the successful party CAHG would ordinarily be entitled to an award of costs in its favour.4 However, in his judgment delivered on 13 September 2024 Jagose J directed that CAHG was to pay the actual costs and disbursements reasonably incurred by the plaintiff on “any interlocutory applications made by [the plaintiff] in respect of CAHG’s discovery (regardless of their outcome)”.5 I view myself as being bound by this direction until such time as it may be rescinded by the Judge or reversed on appeal.
[39] It follows that, despite its lack of success, the plaintiff is entitled to its actual and reasonable costs on the present application. However, these are not to include any costs associated with preparing and filing the amended application that was filed outside the time limit imposed by Jagose J. CAHG is also to be credited with the filing fee that it paid when it filed documents in opposition to the amended application.
[40] In addition, the plaintiff is not entitled to be reimbursed for the costs associated with the assembly of the bundles of documents and authorities for the hearing before me. They do not fall within the category of costs reasonably incurred in preparing for the hearing because they were plainly excessive given the issues that the application raised.
Lang J
4 High Court Rules 2016, r 14.2(1)(a).
5 JMB Trust Ltd v China Animal Husbandry Group, above n 1, at [10(d)].
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