Kawarau Village Holdings Ltd v Chi
[2015] NZHC 2046
•28 August 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-590 [2015] NZHC 2046
BETWEEN KAWARAU VILLAGE HOLDINGS LTD
Plaintiff
AND
DAVID YUEN SING CHI Defendant
Hearing: 21 August 2015 Appearances:
T B Fitzgerald for the Plaintiff
B D Gray QC and S D Williams for the DefendantJudgment:
28 August 2015
JUDGMENT OF MUIR J
This judgment was delivered by me on Friday 28 August 2015 at 10.00 am pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date:………………………….
Counsel:
B D Gray QC, Barrister, Auckland
S D Williams, Barrister, Auckland
Solicitors:
T B Fitzgerald, Bell Gully, Auckland
J Long, Lee Salmon Long, Auckland
KAWARAU VILLAGE HOLDINGS LTD v DAVID YUEN SING CHI [2015] NZHC 2046 [28 August 2015]
[1] This is the defendant’s second application for discovery of documents arising out of the litigation involving underwrite agreements, which were entered into in the context of the Kawarau Falls Station development near Queenstown. The first application was determined by Associate Judge Bell who held that the defendant ought to particularise his allegations following which the plaintiff would provide the
relevant discovery.1
[2] The defendant now seeks orders:
(a) Confirming that the order at [46](a)(i) of the judgment of Associate Judge Bell, dated 18 June 2015, contemplates and entitles the defendant to instruct an appropriate expert witness to inspect the Kingston West and Lakeside West buildings;
(b)That the plaintiff provide immediate disclosure of the original construction contracts for Kingston West and Lakeside West (attaching and incorporating the detailed contractual specifications for those buildings) to facilitate the expert inspection; and
(c) Adjusting the timetabled inspection on account of the unavailability of the defendant’s expert other than for identified periods in mid-August and mid-September 2015.
[3] The plaintiff consents to applications (a) and (c). It opposes application (b)
and any orders as to costs.
Background
[4] The relevant factual background is fully set out in the judgment of Associate Judge Bell and I will not repeat it.2 His Honour had before him applications by the plaintiff against the defendant for particulars and by the defendant for tailored
discovery relating to 25 classes of documents.
1 Kawarau Village Holdings Limited v David Yuen Sing Chi [2015] NZHC 1379 at [46].
2 Kawarau Village, above n 1 at [3]-[8].
[5] The particulars application related to [113](b)(i) of the statement of defence which relevantly provided:
[113] Over the course of construction of Lakeside West and Kingston West PRL or MKSI made significant downgrades to the quality of materials and finish for Lakeside West and Kingston West provided for in the Draft Outlines and Specifications pleaded in paragraph 86 above.
Particulars
…
(b) Significant downgrades to the quality of materials and finish in the
Lakeside West building included:
(i) Building-wide downgrades in the quality of materials and finishes to be particularised following discovery.
…
[6] Putting paragraph 113 into context, as Associate Judge Bell did at [11] of his decision, the allegations go to the defendant’s affirmative defences that downgrades to the quality of materials and finish were in breach of an express or implied term that the developer would not act so as to prejudice the position of the underwriter in relation to its obligations (the “prejudicial acts” term) and/or an implied term that the development would be built to an extremely high quality of specification commensurate with the agreed retail prices of the relevant units and car parks (the “quality of specification” term).
[7] In relation to discovery, the defendant sought a range of documents which he said were relevant to breaches of the quality of specifications or prejudicial acts terms.
[8] In relation to the plaintiff ’s application for particulars His Honour:
(a) Allowed the defendant’s agent to inspect the Lakeside West and Kingston West buildings for discoverable downgrades in materials and finish;
(b)Required particulars of the significant downgrades in the quality of materials and finish alleged in paragraph 113(b)(i) of the statement of defence no later than 14 August 2015; and
(c) Reserved leave to apply for further directions.
[9] Relevantly, His Honour held:
[16] That is an appropriate and principled way to deal with the matter. Mr Yuen can compare the draft plans and specifications against the Kingston West and Lakeside West buildings as built. Apparently he already has access to local authority records, including applications for resource consent and building consents. Mr Yuen had a representative on site, a Mr Smith, who has already provided him with some information. For any downgrades in materials and finish to be actionable, they need to be discoverable. Mr Yuen’s defence is that the downgrades made the development less attractive to purchasers. Downgrades that could not be detected on inspection are not relevant.
[10] In relation to the defendant’s discovery application, His Honour held that the plaintiff was required to disclose documents in Categories 15(a) – (d) of the defendant’s application (the detail of which I will refer to subsequently) but only in so far as they were relevant to particulars already provided by the defendant. His Honour reserved leave generally to apply for further directions in relation to discovery.3
The respective arguments
Submission on procedure and jurisdiction
[11] The defendant now seeks immediate disclosure of what the plaintiff describes as being simply a subset of the documents sought in its earlier and substantive discovery application.
[12] In correspondence which has passed between the parties and which is annexed to Ms Yallop’s affidavit in support of the application, the defendant claims that, subsequent to the decision of Associate Judge Bell, it has come to his attention
that the plaintiff will have in his possession or control construction contracts for both
3 Kawarau Village, above n 1 at [46](b) and [46](d).
the Lakeside West and Kingston West buildings. That position is repeated in the memorandum of counsel filed with the application in which it is stated:
12.It has become apparent in the course of instructing the expert that KVHL has in its possession or control highly detailed specifications for Kingston West and Lakeside West, which form part of the construction contracts for those buildings. Disclosure is sought of these two documents to facilitate the expert inspection.
[13] Counsel further suggests that where the plaintiff resisted the defendant’s discovery application on the grounds it would be over burdensome, the defendant could reasonably have expected the plaintiff to have drawn the Court’s attention to the existence of the construction contracts and specifications as major or significant documents which could easily be provided to facilitate an expert inspection.
[14] For its part, the plaintiff says it has never denied the existence of written construction contracts for the buildings and that given the size of the development it is almost inconceivable that there would not have been such contracts. In its submission, the fact that the plaintiff’s expert has confirmed that he would expect such a document to exist does not justify a renewed request for discovery in advance of particulars.
[15] It says that, in reality, the application is one under r 8.17 for a variation of the existing discovery order and that in terms of r 8.17(2) this is neither a case where:
(a) Compliance or attempted compliance with the terms of the order has revealed a need for a variation; nor
(b)Where there has been a change of circumstance that justifies reconsideration.
Submissions on the substantive application
[16] The defendant says that the detailed contractual specification(s) attached to the construction contract(s) are the best evidence of the quality of the finish contracted for by the developer and from which it is alleged the downgrades were made. It says the contractual specification(s) will supplement (or complete) the
“Draft Outline Plans and Specifications” referred to in the underwrite agreements and the subsequent agreements for sale and purchase of the units. As such it says the documents are relevant to the defendant’s prejudicial acts defence whereby it says that various acts (including the downward grade in specification) materially and detrimentally affected the value of each of the Lakeside West and Kingston West units and/or the ability of the substitute purchasers to settle their purchases.
[17] In addition it says that the contracts are directly relevant to the quality of specification implied term pleaded at paragraphs 77, 94, and 97 of the statement of defence. In that respect Mr Grey says that the actual evidence will be that the defendant was told the standard would be “better than the Westin”, a reference to a five star hotel and residences in Lighter Quay Auckland.
[18] For the plaintiff, Mr Fitzgerald submits that the prejudicial acts pleaded in the statement of defence are said to have resulted in third party purchasers (actual purchasers not hypothetical ones) declining to settle their purchases. He says that, by definition, if deviations from plans and specifications were to have this effect, they had to be apparent to purchasers. He says that the purchasers did not have access to the construction contract(s) and original specification(s) and that, if the construction contract(s) are needed to identify a deviation from plans, then the deviation is irrelevant to the claim. He cites the passage from Associate Judge Bell’s judgment previously referred to at [9] and submits that the same reasoning applies to the documents now sought by the defendant. All that is necessary, in his submission, to particularise the allegation made by the defendant are the marketing and underwriting agreements, the agreements for sale and purchase and the associated Outline Plans and Specifications. He says these are the only relevant reference points against which the inspection need proceed.
[19] The plaintiff also submits that identification of the specific documents sought may not be as easy as suggested and will inevitably involve the plaintiff in a two stage discovery process whereby relevant documents (said to occupy approximately
100 lever-arch files) will need to be reviewed firstly to identify construction contracts and then again to search for documents relevant to pleaded particulars.
Discussion
[20] I consider the application is appropriately brought under Associate Judge
Bell’s general reservation of a right to apply.4
[21] I accept Mr Gray’s submission that the argument before the Associate Judge in relation to whether particulars were appropriately provided in advance of discovery was one based on the proportionality of that exercise. That was in turn informed by the scope of the discovery application which was directed specifically to documents disclosing modification to the relevant plans and specifications or quality of materials and finish. This is confirmed by [15] of his Honour’s judgment in the following terms:
[15] Kawarau Village Holdings Ltd says that if it were required to make discovery ahead of Mr Yuen providing particulars, it would need to go through masses of documents relating to the plans and specifications to see whether any of them departed from the draft outline plans and specifications on which Mr Yuen relies. Instead it has offered Mr Yuen, or any agent appointed by him, access to the entire development to inspect and identify all potential downgrades in material and finish
[22] What is now sought, says Mr Gray, are not the documents which disclose the modifications, but those which establish the effective starting point – a much narrower focus than contemplated in the previous discovery application. He says such documents are necessary to facilitate the orders of Associate Judge Bell in so far as they require particularisation of defects following an inspection of the premises. That, he says, is a matter clearly within the Associate Judge’s reservation of leave.
[23] Alternatively, he says that there is a change of circumstances within the terms of r 8.17 in that, whereas previously the discovery application was focused on documents identifying the changes to the specification, there is, as a function of the Associate Judge’s orders, now a requirement to focus on the starting point.
[24] Both counsel accept that in the argument before the Associate Judge the discoverability, prior to particulars, of the original construction contract(s) and
4 Kawarau Village, above n 1 at 46(d).
attached specification(s) was not specifically addressed and that the focus was instead on the size of the exercise necessary to distil changes through the construction period. Although Associate Judge Bell could not have intended by his general reservation of leave to provide an opportunity to re-litigate issues already addressed and decided, and although Mr Fitzgerald may well be correct in saying that compliance with the defendant’s original discovery requirements would, in their literal terms, have necessitated disclosure of the original contract(s) and specification(s), I consider that the specific issue raised in the present application is sufficiently discrete from the proportionality issue which underpinned the Associate
Judge’s earlier decision, that exercise of the reservation of leave is appropriate.5 I do
not therefore need to decide the r 8.17 point.
[25] On that basis I therefore address the application in terms of:
(a) Whether the documents sought are relevant on the pleadings; and
(b)Whether the case is one where discovery is appropriately ordered in advance of particulars.
[26] In my view the first question is undoubtedly answered in the affirmative. Mr Fitzgerald focuses on the alleged express or implied term that the developer would not act to prejudice the position of the underwriter and emphasises the submission recorded at [18]. Although there is force in his observation that, from the perspective of potential purchasers, the only downgrades which can be relevant are those measured against the Draft Outline Plans and Specifications to which the purchasers were privy, para 127 of the statement of defence also pleads that the alleged “prejudicial acts … materially and detrimentally affected the value of each of the Lakeside West and Kingston West Units”. As such, there is an overlap with the alleged quality of specification implied term and one which invokes a comparison between the value of the units, if constructed to the “extremely high quality” which
the defendant says was originally intended and the units as delivered.
5 I note that ordinarily the application would have been heard by Associate Judge Bell but His Honour’s current leave arrangements preclude that occurring within the time frame the parties seek.
[27] Significantly, however, the quality of specification implied term stands as a discrete pleading, the alleged breach of which is said to itself justify a right of cancellation.
[28] I accept Mr Gray’s submission that the original construction contract(s) and specification(s) must be relevant to this context. It may indeed be, as he suggests, the best evidence of the “extremely high quality of specification” which was originally intended.
[29] That neither the defendant nor the purchasers of the units sighted the documents does not, in my view, detract from this aspect of the defence. In so far as the quality of specification implied term is concerned, it must at least be arguable that the content of the term is informed by the specification(s) to which it was simultaneously contemplated the development would be built, even if not specifically reviewed by the defendant (or purchasers).
[30] In discussions with the Bench Mr Fitzgerald responsibly acknowledged the potential relevance of the documents in this context although maintaining that the application still fell outside the reservation of leave recorded in the Associate Judge’s decision. On that basis, discovery of the relevant contract(s) and specification(s) becomes an issue of timing and not ultimate provision. Although not underestimating what work may be involved in identifying the relevant documents, I am left with the impression that at least one of the reasons the application is resisted at this stage is to secure a tactical advantage by requiring the defendant to specify downgrades from the alleged “extremely high quality of specification” in something of an information vacuum.
[31] In terms of whether discovery of the contract(s) and specification(s) should predate the provision of particulars [13] and [14] of the Associate Judge’s decision summarises the law in the following terms which I adopt:
[13] There is a line of cases that recognises that parties may not be required to give particulars before discovery where the party seeking
particulars is the only one with the information on which the other party could rely. In Sachs v Speilman, North J said:6
… it is suggested by the notice of motion that the Defendants are embarrassed by the form in which this pleading is framed. But how can it be said that the Defendants are embarrassed by not knowing these details? The Plaintiff has told them in his statement of claim that he has not the means of giving these details. They, on the other hand, are the persons who carried through the transactions, and have in their possession the books containing the full accounts; therefore they have full knowledge and means of knowledge, and can shew precisely what the cases are, if any, in which they did do what the statement of claim alleges they did. I do not see how they can possibly be embarrassed by not obtaining from the Plaintiff the information they have in their own possession. Of course I can see well enough why they press for these particulars. If the Plaintiff were obliged to condescend upon particulars, and to specify the instances in which the Defendants have done what he charges them with, the result might be that from his imperfect knowledge he would not be able to point out in the particulars some cases in which they had actually done what he says they have done; and inasmuch as, after particulars were given, their defence would be addressed only to those points, the ignorance of the Plaintiff might relieve the Defendants from being held responsible as to certain matters with respect to which they are open to the charge contained in the statement of claim.
[14] Edwards J followed that reasoning in Hickson v Scales.7 In Truck
Master Ltd v Mastagard Waste Ltd, Associate Judge Osborne said:8
In some circumstances, particulars can neither be reasonably expected nor appropriately sought by order from a plaintiff. The cases recognise that the usual expectation as to detailed particulars of a claim will give way in cases where the party which would be entitled to particulars has knowledge concerning those particulars which the other party does not have. This is an approach to the requirements of pleading recognised in both England and in New Zealand. The Courts recognise as adequate a pleading which pleads all material particulars other than those which can be derived only from information within the particular knowledge or control of the defendant.
[32] In my view the present case is one where the detail of the “extremely high quality of specification” which is alleged to apply (and which may in part be encapsulated in the original contract(s) and specification(s)), is knowledge in the
possession of the plaintiff (or its predecessor’s in title), and not reasonably in the
6 Sachs v Speilman (1887) 37 Ch D 295 (Ch) at 303.
7 Hickson v Scales (1901) 19 NZLR 202 (SC).
8 Truck Master v Mastagard Waste Ltd [2014] NZHC 1676 at [15] (footnotes omitted).
knowledge of the defendant. That provides a proper basis in my view for the orders sought.
[33] Nor do I regard the application in the pejorative “fishing” terms which the plaintiff employs. In an affidavit filed in relation to the application before the Associate Judge, there was evidence of concern on the part of Queenstown Lakes District Council with “continuous eros[ion]” of the amenity values provided by the original “characteristics of design and materials” and the application is targeted to various specific documents which the plaintiff acknowledges exist.
Result
[34] I order that the plaintiff provide disclosure of the original construction contract(s) for the Kingston West and Lakeside West developments (attaching and incorporating the detailed contractual specification(s) for those buildings) to facilitate the expert inspection contemplated in [46](a)(i) of the judgment of Associate Judge Bell.
[35] I make orders by consent in terms of para (1)(a) of the defendant’s
application.
[36] In terms of a timetable for provision of the documents, inspection by the defendant’s expert and subsequent steps (para 1(c) of the application), counsel have indicated a desire to confer following delivery of my judgment. In the unlikely event that the matter cannot be dealt with on a consent basis, I invite memoranda on the following timetable:
(a) Defendant’s to be filed and served by 3 September 2015; (b) Plaintiff’s to be filed and served by 7 September 2015; and (c) Reply to be filed by 8 September 2015.
Costs
[37] Costs in relation to the application before Associate Judge Bell remain outstanding. Because this matter came before me in an exercise of reservation of leave to apply for further directions under His Honour’s judgment, I consider that they are best addressed in that context.
[38] Mr Fitzgerald says that, in relation to the consented applications, the Court’s
involvement was not required. I tend to agree, but I do not consider those issues to have materially added to the costs face by the plaintiff in defending the application.
Muir J
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