Kok aka Looi v Exceed Fitness and Health Limited

[2018] NZHC 1909

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2017-404-1047

[2018] NZHC 1909

BETWEEN

LOOI HONG KOK (also known as LEWIS LOOI)

Plaintiff

AND

EXCEED FITNESS AND HEALTH LIMITED

and
RUDOLF JOHANNES HUIJSMANS

(also known as RUDI HUIJSMANS) Defendants

Hearing:	25 July 2017
Appearances:	Lewis Looi, Plaintiff in person E Grove for the Defendants
Judgment:	30 July 2018

JUDGMENT OF ASSOCIATE JUDGE R M BELL

This judgment was delivered by me on 30 July 2018 at 4:00pm pursuant to Rule 11.5 of the High Court Rules.

…………………………………

Deputy Registrar

Solicitors:

Fencible Law (Richard Galbraith), Howick, Auckland for the Defendants

Copy for:

Lewis Looi, Brisbane 4077, Queensland, Australia

Chris Patterson Barrister Ltd, Auckland, for the Defendants

LOOI HONG KOK (also known as LEWIS LOOI) v EXCEED FITNESS AND HEALTH LIMITED [2018] NZHC 1909 [30 July 2018]

[1]    This decision is about Mr Looi’s application for further and better discovery under r 8.19 of the High Court Rules. As Mr Looi now lives in Queensland, Australia, the hearing was by telephone conference, as directed in my minute of 21 June 2018.

[2]    I directed standard discovery on 7 December 2017. The defendants filed their affidavit of documents on 20 February 2018.

[3]Rule 8.19 of the High Court Rules says:

8.19Order for particular discovery against party after proceeding commenced

If at any stage of the proceeding it appears to a Judge, from evidence or from the nature or circumstances of the case or from any document filed in the proceeding, that there are grounds for believing that a party has not discovered

1 or more documents or a group of documents that should have been discovered, the Judge may order that party—

(a)to file an affidavit stating—

(i)whether the documents are or have been in the party’s control; and

(ii)if they have been but are no longer in the party’s control, the party’s best knowledge and belief as to when the documents ceased to be in the party’s control and who now has control of them; and

(b)to serve the affidavit on the other party or parties; and

(c)if the documents are in the person’s control, to make those documents available for inspection, in accordance with rule 8.27, to the other party or parties.

[4]    In Assa Abloy New Zealand Ltd v Allegion (NZ) Ltd, Asher J set out a four- stage approach:1

(i)Are the documents sought relevant, and if so how important will they be?

1      Assa Abloy (NZ) Ltd v Allegion [2015] NZHC 2760 at [14].

(ii)Are there grounds for belief that the documents sought exist? This will often be a matter of inference. How strong is that evidence?

(iii)Is discovery proportionate, assessing proportionality in accordance with Part 1 of the discovery checklist in the High Court Rules?

(iv)Weighing and balancing these matters, in the court’s discretion is applying r 8.19 more appropriate?

In this case, it is not necessary to work through all of those steps.

[5]    Exceed Fitness and Health Ltd operated a gym at 490 Ti Rakau Drive, Botany Downs, Auckland. Mr Huijsmans is the director of Exceed Fitness and Health Ltd. Under an agreement of 6 May 2016, Fit Pit Ltd, a company of which Mr Looi is a director and shareholder, bought the business for $190,000 - $180,000 for tangible assets and $10,000 for intangible assets. Mr Looi guaranteed performance by Fit Pit Ltd. The agreement includes a turnover warranty of $385,000 (excluding GST) for the 12 months ending 31 March 2016. There is a five year restraint of trade. The vendor undertook to provide assistance for 90 days following possession. There is a due diligence condition. On settlement, the purchaser paid $100,000 with the balance to be paid by three instalments of $30,000 each, payable on 30 June, 31 July and    31 August 2016. The purchaser gave a first ranking general security agreement over the business as security for the payment of $90,000.

[6]    The business failed. It defaulted in paying the balance of the purchase price. Exceed Fitness and Health Ltd appointed receivers on 18 October 2016. After the receivership, there was a shortfall of $79,182.10 which Mr Looi paid under his guarantee. He sues to recover that $79,182.10 plus damages for distress and humiliation. He alleges misleading and deceptive conduct contrary to s 9 of the Fair Trading Act. His complaint is that Exceed Fitness and Health Ltd had a licence to operate as a “Les Mills” gym, and the defendants promoted the business as having that licence but once Fit Pit Ltd took the business over, the licence was not transferred. Membership of the gym fell off and Fit Pit Ltd was unable to attract many new customers.

[7]    For the discovery application, Mr Looi says that there are other matters he wants to claim against Exceed Fitness and Health Ltd and Mr Huijsmans but at this stage those matters are not in his pleadings. That affects discovery obligations. Pleadings determine relevance. The case of the party seeking discovery is assumed to be true, that is, the case set out in the pleadings. The court generally does not try the merits of the case before deciding what discovery to order. Under standard discovery, a document is relevant if the document or its contents could be used in evidence at the trial. For that, the relevance test under s 7(3) of the Evidence Act 2006 must be satisfied: there must be a tendency to prove or disprove anything that is of consequence to the determination of the proceeding. While these matters are well established, I have set them out because Mr Looi did not understand them. He is not a lawyer and does not have any relevant legal training. That has led to difficulties with his discovery application, because he was not aware of the relevance requirements.

[8]    I can only give discovery directions in the light of the current pleadings.        I intend however to give Mr Looi the opportunity to amend his pleadings. If he does so, I encourage him to obtain legal advice to ensure that he runs his case according to the practice and rules of court.

[9]Now for the categories of documents he seeks.

Full records and correspondence of Exceed website

[10]   Mr Looi says that the website is relevant to show what Exceed Fitness and Health Ltd offered its customers, including the number of Les Mills classes and other group fitness classes, the types of gym membership offered, and the fitness equipment in the gym.

[11]   In response, the defendants deny that the website is relevant, but they go on to point out that the website was shut down after the sale in June 2016. They point out that the website and its web pages are publicly available for free online at the online internet archive: They say that archived versions of the website go back to 2011.

[12]   Mr Looi acknowledges that he could access documents on that site. Given that these documents are publicly available and Mr Looi may access them, it is not necessary to require the defendants to make an affidavit of documents about them.

Full records and correspondence of the Exceed Facebook account

[13]   Mr Looi says that copies of the Facebook account will prove the establishment of the gym, including photos, videos of gym classes, communications of the defendants with gym staff, Les Mills instructors and members. He also says that on 18 October 2016, when Fit Pit Ltd was put into liquidation, Mr Huijsmans made a personal comment on a Facebook page which defamed Mr Looi.

[14]   In opposition, the defendants say that the Facebook account was closed in July 2016. They concede that it may be possible to restore the Facebook account but they say that that is not necessary for this case. They say that they operated a gym which ran Les Mills classes and there has already been adequate disclosure of documents relating to the Les Mills classes. They refer, in particular, to a pre-purchase information bundle which includes a section on contracts and agreements and refers to a Les Mills licence agreement.

[15]   In my judgment, it would be disproportionate to require the defendants to restore a closed-down Facebook page. Under discovery a party is required to disclose a document in their control, but they cannot be required to create documents or to restore them.

[16]   As to the message published by Mr Huijsmans on 18 October 2016, there is no relevant pleading. The statement was made after the company was put into receivership. It appears that any damage for which Mr Looi is suing had already occurred when the company was put into receivership. It is not apparent that any statements made by Mr Huijsmans upon the receivership added to any damage. If  Mr Looi considers that Mr Huijsmans’ statement of 18 October 2016 has caused him damage on top of whatever damage he may have suffered from earlier misleading or deceptive conduct by the defendants, he will need to add a new cause of action. If he

wants to take that matter further, he should take legal advice to ensure that any cause of action is soundly based.

Full records and correspondence of Trade Me account

[17]   Mr Looi says that that the Trade Me account would show communications with other potential purchasers and will show what was included in the sale of the gym.

[18]   In response, the defendants say that there was a Trade Me account but it was deactivated in 2016. The Trade Me advertisement has already been discovered. While the Trade Me account was the initial point of contact for some prospective purchasers, later communications were via email or in person. Purchasers were given information packs and those have already been disclosed.

[19]   The defendants accept that they operated under a licence given by Les Mills and they therefore do not contest that part of Mr Looi’s case. Given that, I do not regard it as necessary to require further discovery under this head. The discovery made already seems appropriate. There will be obvious practical difficulties in requiring discovery for a Trade Me account that has been deactivated.

Full financial statements of Exceed Fitness, including proof of the income and expenditure for the last five years.

[20]   Mr Looi explained that turnover fell markedly after he took over the business and he therefore wishes to probe the gym’s turnover in earlier years. He says that the Exceed Fitness and Health Ltd warranted a turnover of $442,750 for the 12 months ending 31 March 2016.

[21]   The defendants point out that the warranty was for $385,000 (excluding GST) and there was no warranty as to future turnover. It only warranted what it had earned.

[22]   There is no relevant pleading as to turnover. Accordingly, the documents sought by Mr Looi are not relevant. If Mr Looi wishes to allege that the defendants misrepresented turnover, he will need to change his pleadings. Again, before doing so, he should take legal advice. Discovery is not ordered under this head.

The Ezypay membership account for the last five years.

[23]   Mr  Looi  says  that  the  defendants  warranted  a  membership  of  over    500 members.  He says that after the sale, membership dropped by between  15 to  20 per cent. He contends that there was a breach of the sale and purchase agreement.

[24]   The agreement for sale and purchase does not have any warranty as to future membership numbers nor as to existing membership numbers. Mr Looi has not pleaded any misrepresentation as to membership numbers. Accordingly, discovery is not required under this head. That may change if he were to amend his pleadings, but again he should take legal advice before doing so

All records and correspondence with Les Mills

[25]   Mr Looi says that documents relating to Les Mills are relevant to his claim, especially the transfer of the gym business to Fit Pit Ltd.

[26]   In response, the defendants say that they have disclosed all relevant documents. In particular, they have disclosed the Les Mills licence agreement and the correspondence relating to the later attempts to transfer the licence to Fit Pit Ltd.

[27]   Mr Looi has not shown reason to believe that there are additional relevant documents which should have been disclosed but have not been.

All records and correspondence with Alistair Russell, sales manager of Technogym, and Scott Rough, service manager of Technogym

[28]   Technogym supplied gym equipment. Mr Looi says that there should be records relating to breakdowns, repairs and servicing. He says that some of the equipment was not in good working condition and he had to buy more equipment to replace what Fit Pit Ltd took on purchase.

[29]   Mr Looi has not included this allegation in his statement of claim. It is accordingly not relevant to discovery under the current pleading. Again, if he wishes

to allege a cause of action in respect of gym equipment, he will need to amend his pleadings and again he should take legal advice before doing so.

All records and correspondence with Chris Blong

[30]   Mr Blong is the landlord of the gym premises. Mr Looi says that there was a problem with a leaky roof and that had an adverse effect on the gym business.

[31]   That is not a pleaded issue in this proceeding. In the absence of any pleading against the defendants in respect of defects in premises, there is no basis for ordering discovery under this head. Again, if Mr Looi wishes to add allegations as to defects in the premises, he should take legal advice first.

All records and correspondence with the defendants’ solicitors and barristers

[32]   Mr Looi does not understand that any communications between the defendants and their lawyers for the conduct of the proceeding are privileged and immune from inspection. He has shown no reason for not upholding the privilege in those communications. No orders are required under this head.

All records and correspondence with the receivers

[33]   While Mr Looi is disappointed with the outcome of the receivership, he has not pleaded any claim against the defendants in respect of the conduct of the receivership. It would be difficult to do so. By and large, receivers are agents of the company, not agents of the secured creditor. In the absence of any relevant pleading, discovery under this head is not required.

All records and correspondence with Shannon Gallagher

[34]   Mr Looi says that Shannon Gallagher was the gym manager who had been employed by the defendants. She continued working in the gym under Fit Pit Ltd’s ownership. Mr Looi says that he dismissed her for discriminating against another employee on account of race.

[35]   There is no pleading about this. It is not clear what cause of action Mr Looi could have against the defendants in respect of Shannon Gallagher. If Mr Looi wishes to make some claim against the defendants under this head, he will need to amend his pleadings to show a new cause of action. Again, he should take legal advice first.

All records and correspondence with Exceed staff – Colin Treacy, Caron Kaveney,
Andrew Lenton

[36]   These were gym staff employed by the defendants. There is no relevant pleading about them. I see no basis for ordering discovery in respect of them under the current statement of claim. Again, if Mr Looi does consider that he has some claim in respect of them, he will need to amend his statement of claim and again he should take legal advice first.

All records and correspondence with Les Mills’ instructors

[37]   Mr Looi has not shown any basis for believing that there are undisclosed documents under this head, which are relevant to the current pleadings.

[38]   Overall, Mr Looi has not shown any basis for ordering for further discovery in the light of his case, as it is now pleaded. The application is accordingly dismissed.

[39]   The defendants are entitled to costs on the application. The defendants are to file their memorandum as to costs within 10 working days of this decision. Mr Looi is to file and serve his response within a further 10 working days. I will then decide costs on the papers.

[40]   Mr Looi should advise whether he intends to amend his statement of claim. If he does not give that advice before the end of August 2018, I direct the Registrar to refer the file to me so that I can make an order transferring this proceeding to the District Court.

……………………………….

Associate Judge R M Bell