Kelly v Lasque Construction Ltd formerly t/a Signature Homes
[2014] NZHC 1100
•22 May 2014
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2012-404-7500 [2014] NZHC 1100
BETWEEN ROBIN JOHN LEARY KELLY,
PATRICIA ANN KELLY and LINDA GLASSWELL
Plaintiff
AND
LASQUE CONSTRUCTION LTD formerly trading as SIGNATURE HOMES Defendant
AND
SIGNATURE RESIDENTIAL LIMITED Second Defendant
AND
SIGNATURE HOMES LIMITED Third Defendant
AND
S C WILSON Fourth Defendant
Hearing: 14 May 2014 Appearances:
Mr A V Shinkarenko for the plaintiff
Mrs C Meechan QC for the defendantsJudgment:
22 May 2014
JUDGMENT OF S E THOMAS J
This judgment was delivered by me on Thursday 22 May 2014 at 4.30 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date:………………………….
Solicitors:
Blackwells, Auckland
Beattie Rickman Legal Auckland
KELLY, KELLY and GLASSWELL v LASQUE CONSTRUCTION LTD formerly trading as SIGNATURE HOMES [2014] NZHC 1100 [22 May 2014]
[1] The plaintiff has applied for particular and better discovery against the defendants and non-party discovery. The application recorded some 15 different categories of documents sought. At the hearing Mr Shinkarenko, counsel for the plaintiffs, abandoned categories vii, xiii, xiv and xv.
[2] The application is opposed on the grounds that there is no basis on which the Court can conclude that the documents sought should have been discovered in light of the issues in dispute as raised by the proceedings.
Background to the claim
[3] The plaintiffs entered into a building contract with Lasque Construction Limited, the first defendant, (Lasque) on 27 July 2001 for construction of a dwelling house at English Oaks Drive, Auckland. Practical completion occurred in early March 2002. On 17 September 2010 the plaintiffs discovered that there was no code compliance certificate for the house. The local Territorial Authority now requires certain work to be undertaken to the house prior to the issue of a code compliance certificate.
[4] A representative of Lasque accepted that Lasque was responsible for the failure to obtain a code compliance certificate. The plaintiffs did not commence proceedings against Lasque prior to 6 March 2012. Any proceedings issued after that date would have been met by limitation defences.
[5] The plaintiffs rely on meetings held with the fourth defendant, Mr Wilson, in October 2011 and February 2012. They allege that Mr Wilson on behalf of the first, second and third defendants pledged to undertake any necessary remedial works and do whatever was required to obtain the code compliance certificate.
[6] The plaintiffs say that their dealings with Mr Wilson were in his capacity as a director (either formally appointed or under the wider definition of director in section 126 Companies Act 19930) and/or employee of the second and third defendant.
[7] The plaintiffs say that the defendants have failed to undertake the work and obtain a code compliance certificate and claim loss.
Procedural history
[8] The first statement of claim was dated 14 December 2012. It alleged that the second defendant, Signature Residential Limited (SRL), had assumed the rights and obligations of Lasque on incorporation of SRL, in May 2011. It alleged Mr Wilson made commitments in October 2011 and February 2012 on behalf of all defendants.
[9] By its statement of defence 20 February 2013 the defendants denied that SRL had assumed the rights and obligations of Lasque. It asserted that Mr Wilson was acting at all times in his capacity as managing director of Lasque only and it denied any commitments were made by any party other than Lasque.
[10] The defendants sought particulars of the allegation that SRL had assumed the obligations of Lasque.
[11] By a joint memorandum counsel for the parties sought targeted discovery. The plaintiffs sought targeted discovery of:
a. Documentation that related to the issue of whether or not SRL
assumed the right and obligations of Lasque;
b. Relevant franchise agreements;
c. Year end accounts for the defendants for the last three years;
d.Any file notes made by any of the defendants in relation to their dealings with the plaintiffs.
[12] All four defendants provided answers to interrogatories in July 2013. Specifically there were responses by Mr Wilson on oath as to the dates when he was a director and employee of Lasque and SRL. He confirmed he had never been a
director, shareholder, employee or contractor of the third defendant, Signature
Homes Limited.
[13] There was then the first amended statement of claim dated 30 July 2013. The claim that SRL had assumed the rights and obligations of Lasque was deleted. The statement of claim alleged Mr Wilson made certain commitments on behalf of the defendants, the consideration being forbearance by the plaintiffs to sue Lasque. It alleged that Mr Wilson had acted in his capacity as a director/employee of SRL.
[14] That was followed in September 2013 by a notice requiring further and better particulars of the first amended statement of claim.
[15] There was then a second amended statement of claim dated 17 October 2013. Relevantly that contained the following allegations:
(1)That on 21 October 2011 Mr Wilson on behalf of SRL and Signature Homes specifically committed them to meet the obligations owed by Lasque to the plaintiffs.
(2) That at that time Mr Wilson was a director of SRL and Signature Homes under the extended definition of director in section 126 in the Companies Act 1993 and as an actual director of SRL from 1
December 2011.
(3)That Mr Wilson made similar commitments on 20 February 2012 on behalf of all defendants.
(4)That in consideration of the agreement that Signature Homes were to undertake the work the plaintiffs did not issue proceedings.
(5)That at all times from October 2011 the plaintiffs’ dealings with Mr Wilson were in his capacity as a director (either formally or under definition in section 126) and/or employee of the second and third defendants.
[16] The statement of defence to the second amended statement of claim is dated
20 November 2013. The defence is that Mr Wilson’s activities had always been in his capacity of managing director of Lasque only and no commitments were given by or on behalf any other party. The de facto director allegation was denied.
[17] There has been significant correspondence between the parties in relation to discovery and interrogatories. The plaintiffs’ position is that the defendants were less than forthcoming in the fulfilment of their obligations as evidenced by the fact that initial discovery consisted of four documents in respect of Lasque, none in respect of SRL, none in respect of Signature Homes and two in respect of Mr Wilson. The plaintiffs’ position is that it is “incredible” that that is the true extent of the properly discoverable material.
[18] A five day fixture was due to commence on 10 March 2014. Just prior to that the plaintiffs made the application the subject of this decision. The fixture was vacated. In his minute, Keane J recorded the plaintiffs’ indication that the documents sought were not only relevant to the case as pleaded but may require a re-pleading of the statement of claim to vary the existing cause of action, to add a further cause of action and to require the addition of a further defendant.
[19] No such amended statement of claim has been filed.
[20] It appears that the application arose after disclosure of eight sections of board reports which were made available to the plaintiffs at the time the defendants’ briefs of evidence were filed. The defence does not accept that the board reports reasonably generated the extent of discovery now sought.
[21] Against the back drop of the plaintiffs’ lack of confidence that the defendants have fully complied with their discovery obligations, the plaintiffs submit they are entitled to the extensive discovery sought.
[22] While Mr Shinkarenko spent quite some time traversing the history complaints about discovery, it must be remembered that the parties agreed to tailored discovery pursuant to r 8.8 of the High Court Rules.
[23] I now turn to consider the categories under which the further discovery orders are sought.
i. Full unabridged monthly reports for Lasque (starting September/October
2010) when the plaintiff’s first raised the issue with Signature Homes.
[24] The plaintiffs have received redacted monthly reports starting in January
2011. As the plaintiffs first raised the issue with Lasque in September/October 2010, the plaintiffs maintain that similar reports prior to January 2011 must exist.
[25] The plaintiffs do not accept the redacted reports, submitting that they are entitled to inspect the full reports without redactions to ascertain for themselves relevance.
[26] The defence says that the report dated January 2011 was the first time when the plaintiffs’ case was mentioned. Counsel has inspected all the reports and has satisfied herself that the redactions are appropriate.
Decision
[27] The defendants cannot discover something which does not exist. I accept the defence assurance that the first time the plaintiffs’ claim is mentioned is in the report dated January 2011.
[28] I was handed a sample report without redaction. There was nothing in that relevant to the plaintiffs which had not been disclosed.
[29] Furthermore a party is entitled to produce for inspection copies of documents with irrelevant parts redacted.1
ii. Full unabridged monthly reports for SRL from the date of incorporation of the company on or about 18 May 2011.
Decision
[30] For the same reason as applies to i above no further order is required.
1 N – Tech Limited v Abooth Ltd (in Rec) HC Auckland CIV-2006-404-3362, 25 February 2011.
Evidence of who constitutes and/or represents the Board of Directors of
Lasque and/or SRL for whose benefit the “monthly reports” are made
[31] Mr Shinkarenko did not seem prepared to agree that the plaintiffs could rely on the information filed with the Companies Office. He said that he was not satisfied with the information disclosed regarding the constitution of various boards and wanted to know to whom Mr Wilson reported so that he could request emails.
[32] The defence refers to the information held at the Companies Office and notes that information concerning directorships and Mr Wilson’s employment details were answered in interrogatories.
Decision
[33] I decline to make an order under this heading. The relevant information is held with the Companies Office. They plaintiffs have already received information by way of interrogatories. Further issues can be explored during the evidence.
Evidence of oral or written communications, reports and advices received from the Board to Lasque and/or SRL in relation to Kelly’s property file.
[34] I am not sure what the plaintiffs seek under the heading of “oral communications”. Board reports have already been provided and are referred to under categories i and ii.
[35] Mrs Meechan QC confirms that the reports that exist, the file notes created at the time the absence of the code compliance certificate was discovered and the plans prepared in relation to the targeted repair have all been disclosed.
[36] The plaintiffs’ application must be considered in light of its claim.
[37] However, given the defendants’ late disclosure of the reports and that these arguably came within category d of the originally agreed tailored discovery, I agree that the plaintiffs are entitled properly to be satisfied that all matters under this head have been disclosed. The defendants are therefore to discover documentation
relating to the plaintiffs’ claim under this head which would appear to be relatively narrow in any event.
All management and/or employment contracts between Lasque and Mr
Steward Wilson and Mr Gavin Hunt.
[38] I am satisfied that the relevant information has already been provided to the
plaintiffs in relation to Mr Wilson’s status.
[39] I am at a loss as to how the defendants justify the request concerning Mr
Gavin Hunt. He is not referred to in the claim.
All management and/or employment contracts between SRL and Mr Stewart
Wilson and Mr Gavin Hunt.
[40] The same comment applies
vii. Insurance Policy Covers for both Mr Stewart Wilson and Mr Gavin Hunt as directors of Lasque and SRL.
[41] No longer pursued.
viii. Financial information relating to payments made by Lasque to Signature Homes Guarantee Limited a company currently know as Residential Indemnity Limited (“SHGL/RIL”), which holds a fund for all franchisees of Signature Homes group specifically set up to cover failures and defaults by franchisees (“Signature Guarantee Scheme”), including schedules of payments, bank account statements, annual profit and loss account statements, annual balance sheets.
[42] The plaintiff’s house was constructed in 2002 and was subject to the guarantee regime set up through Master Build Services Limited. The issue has been put in relation to a “guarantee” given by Lasque to the plaintiffs dated 11 November
2010. It is expressed to be a weather tight guarantee for 10 years from practical
completion, March 2002, and was given by Lasque as a Signature Homes franchise builder.
[43] A company currently known as Residential Indemnity Limited (RIL) which holds a fund to cover any failures by franchisees was established in June 2008.
[44] The plaintiffs appear to suggest that the 2010 guarantee is subject to this scheme. There is no reference to the scheme or RIL in the 2010 guarantee. The affidavit of Mr Hunt deposes that the plaintiffs’ house was not part of that scheme because its construction was completed six years before the scheme came into existence. Applications for cover under the scheme have to be submitted and approved prior to commencement of construction. Mr Hunt’s affidavit makes it clear that the plaintiffs did not apply for and have not been given a guarantee by RIL.
[45] In any event there is no pleading in relation to the guarantee dated 11
November 2010. The claim is based on oral representations. The issues for determination as set out in Mr Shinkarenko’s submissions at paragraph 18 do not include this as an issue. The information sought is not relevant to liability.
[46] For those reasons I am not satisfied that the documents sought under this heading are properly discoverable.
ix. Any documentation, analysis, notes of meetings, minutes, email correspondence discussing or relating to Lasque entering the Signature Guarantees Scheme and other incidental documents.
[47] The same reasoning applies. The documents are not properly discoverable.
x. Deed of Participation in Signature Guarantee Scheme between Lasque and/or SHGL/RIL and/or Signature Homes or any other formal documentation evidencing the contractual arrangement and participation of Lasque in the Scheme.
[48] The same reasoning applies. The documents are not properly discoverable.
xi. Franchise Agreement between Lasque and Signature Homes (not disclosed to date)
[49] The Franchise Agreement between Signature Homes and SRL was discovered under tailored discovery. The plaintiff now seeks the Franchise Agreement between Lasque and Signature Homes.
[50] The defendants resist the application on the basis that the current pleadings do not show that the terms of the Franchise Agreement are in dispute and there is no allegation based on the terms of that agreement.
[51] I accept the plaintiffs’ submission on this point. The statement of defence at paragraph 2 recites that Lasque was at all material time a franchisee of Signature Homes. At paragraph 25 the statement of defence records that Lasque presented itself as a franchisee of Signature Homes. The Franchise Agreement therefore is relevant and should be disclosed.
[52] I am not however satisfied that the operational franchise manuals referred to in item xii are properly discoverable. I cannot see on the basis of the pleadings how franchise manuals could be relevant.
Categories xii – xv
[53] This is not pursued.
Categories of Documents requested from non-party, Residential Indemnity
Limited, numbered i – iv
[54] Rule 8.21 of the High Court Rules provide:
(1) This rule applies if it appears to a Judge that a person who is not a party to a proceeding may be or may have been in the control of 1 or more documents or a group of documents that the person would have had to discover if the person were a party to the proceeding.
(2) The Judge may, on application, order the person—
(a) to file an affidavit stating—
i. whether the documents are or have been in the person's control; and
ii. if the documents have been but are no longer in the person's control, the person's best knowledge and belief as to when the documents ceased to be in the person's control and who now has control of them; and
(b) to serve the affidavit on a party or parties specified in the order;
and
(c) if the documents are in the control of the person, to make those documents available for inspection, in accordance with rule
8.27, to the party or parties specified in the order.
(3) An application for an order under subclause (2) must be made on notice to the person and to every other party who has filed an address for service.
[55] There is nothing in the current pleadings which would require discovery relating to a guarantee regime begun in 2008 by Residential Indemnity Limited. The comments under item viii are relevant to this issue.
[56] The guarantee referred to by the plaintiffs is a weather tightness guarantee for
10 years from practical completion. It does not refer to Residential Indemnity Limited. As such any information relating to that Scheme is irrelevant to any claim the plaintiff may have under the document dated 11 November 2010.
Decision
[57] For the reason given the plaintiff’s application is granted in respect of items iv and xi but in all other aspects it is declined.
[58] If the parties are unable to agree on the costs on the application memoranda should be submitted to the Court within 28 days of the date of this decision.
Thomas J
0
0
1