Mahasivam v Thuraisingham

[2023] NZHC 986

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2021-404-794

[2023] NZHC 986

UNDER

the Partnership Law Act 2019

BETWEEN

SHYAMA MAHASIVAM

Plaintiff

AND

KUMAR THURAISINGHAM

Defendant

Hearing:	6 March 2023
Appearances:	RO Parmenter for the Plaintiff S Khan for the Defendant
Judgment:	28 April 2023

JUDGMENT OF ASSOCIATE JUDGE SUSSOCK

This judgment was delivered by me on 28 April 2023 at 4.30pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Solicitors/Counsel:

Graham & Co, Auckland Fortune Manning, Auckland

RO Parmenter, Auckland

MAHASIVAM v THURAISINGHAM [2023] NZHC 986 [28 April 2023]

Introduction

[1]    A tailored discovery order was made in this proceeding with the parties to agree on the tailored discovery categories. Unfortunately, agreement has not been able to be reached, necessitating a hearing.

[2]    In the statement of claim, the plaintiff alleges that she was in partnership with the defendant in respect of the development of two properties on McKinstry Avenue in Auckland. The plaintiff pleads the defendant has breached the partnership agreement by using the partnership assets outside the ordinary course of business by borrowing money against the partnership’s properties and receiving rental income in respect of the properties for the defendant’s benefit. The plaintiff is seeking an order for dissolution of the partnership and for damages for the consequences of breach.

[3]    At the time the plaintiff filed the proceeding, she also filed an application for summary judgment confined to her claim for information under the partnership agreement signed by the parties and s 54 of the Partnership Law Act 2019 (Partnership Act).

[4]    Although a written partnership agreement had been entered into, the application for summary judgment was declined on the basis that the defendant had a credible defence that the arrangement between the parties was not a partnership. Associate Judge Gardiner therefore held that it was reasonably arguable that the defendant was not required to provide the information pursuant to either the written partnership agreement or the Partnership Act and dismissed the application. 1

[5]    The defendant submits that rather than a partnership, the relationship between the parties involved a simple loan agreement for a development project, the terms of which included that the plaintiff would loan $830,000 to the defendant, the defendant would pay interest on the loan, and the plaintiff would receive a $50,000 return on her investment once the project was completed.

1      Mahasivam v Thuraisingham [2021] NZHC 3221 at [55].

[6]    In her amended claim, the plaintiff has pleaded the loan agreement alleged by the defendant as an alternative claim in contract, saying that if there was such an agreement the defendant was bound to repay her the $830,000 invested plus a fixed return of $55,000 on 19 July 2021. The plaintiff therefore seeks payment on this alternative claim of $885,000 plus interest from the date payment was due through Judgment until payment is made.

Discovery categories sought

[7]    The plaintiff is seeking tailored discovery from the defendant of the following categories of documents:

(a)Full and complete financial reports and records associated with the defendant’s ownership or development of McKinstry Avenue, including details of transactions with dates, amounts, names, bank accounts and tax numbers (Category A).

(b)All documents (including emails, letters, texts and other forms of correspondence) associated with the defendant’s ownership or development of McKinstry Avenue, including but not limited to sale and purchase agreements, leases, mortgages, loan offers, mortgage terms and solicitors’ reports and statements (Category B).

(c)All documents (including emails, letters, texts and other forms of correspondence) relating to the defendant’s relationship with the plaintiff on the subject of McKinstry Avenue (Category C).

(d)All documents (including but not limited to sale and purchase agreements, leases, mortgages, loan offers, mortgage terms and solicitors’ reports and statements including emails, letters, texts and other forms of correspondence) where McKinstry Avenue has been used as a security for borrowings not connected with McKinstry Avenue (Category D).

[8]    The defendant agrees to Category C, opposes Categories A and B to the extent that they relate to ownership of McKinstry Avenue and opposes Category D in its entirety. The defendant submits that the categories proposed by the plaintiff proceed on the basis that a partnership exists, which the defendant denies.

[9]    In addition, the defendant says the plaintiff is seeking discovery of practically every document in existence concerning his involvement with McKinstry Avenue when any partnership which may have existed did not have an interest in the whole of the McKinstry Avenue site. The defendant says that the nature of the work to be undertaken at the McKinstry Avenue site is detailed in the affidavits filed for the summary judgment as follows:

(a)McKinstry Avenue was owned by a friend of the defendant who lived in a dwelling on the property.

(b)Two new dwellings in addition to the existing dwelling were to be built at the front of the site and the whole site was then to be subdivided into three separate sections each with a dwelling.

(c)Once developed and subdivided the two front sections would be purchased by the defendant (or, on the plaintiff’s version of events, by the partnership) for the favourable price of $257,000 each and the sections would then be on sold for a profit.

(d)At the end of the project the original owner would own the rear section with the original dwelling and receive $514,000 from the sale of the two front sections. The defendant (or the partnership on the plaintiff’s account) would receive the profits from the sale of the two developed front sections.

[10]   Midway through the development the defendant purchased the entire McKinstry Avenue site after the original owner allegedly ran into financial difficulty. The defendant (or the partnership on the plaintiff’s account) proceeded to complete the development of the two new dwellings and subdivide the site.

[11]   The defendant says that the key point from the above facts is that even if a partnership existed, the partnership would not have had an interest in the whole McKinstry Avenue site. Rather its purpose was limited to the development of the two front sections and the defendant’s purchase of the property did not change this.

Applicable discovery principles

[12]   Rule 8.12(1)(c) of the High Court Rules 2016 provides that a judge may make an order for tailored discovery “setting out categories (by, for example, subject headings and date periods) or another method of classification by which documents are to be identified.”

[13]   Clause 3(2) of Schedule 9 of the High Court Rules provides that where tailored discovery is appropriate:

The parties must –

(a)endeavour to agree a proposal in relation to the discovery order that should be made, with respect to the following:

(i)categories: identify the categories of documents required to be discovered by the parties, and for each category seek to limit discovery to what is reasonable and proportionate. This may be done by, for example, specifying –

(A)  subject matter:

(B)   date range:

(C)   types of documents:

(D)  key individuals (for example, those who are company directors or are at a specified management level)…

[14]   The concept of proportionality was discussed by Asher J in Commerce Commission v Cathay Pacific Airways Ltd:2

[12]The concept of proportionality is central to tailored discovery. It is relevant in determining whether tailored discovery is appropriate (r 8.9(a) and checklist cl 1). It is relevant in deciding if there is tailored discovery, whether the categories of tailored discovery are reasonable and proportionate (checklist cl 3(2)(a)(i)). And it is also a key concept in determining what is a reasonable search for documents within the scope of a discovery order (r 8.14(2)(e) and checklist cl 2(b)), and the methods and strategies for locating documents (checklist cl 3(2)(a)(ii)). At issue in this application is the definition of specific

2      Commerce Commission v Cathay Pacific Airways Ltd [2012] NZHC 726 (footnotes omitted).

discovery categories, and whether the category orders sought by the Commission are reasonable and proportionate.

[13]The starting point in such a consideration of appropriate tailored discovery orders must be an analysis of the issues. Discovery categories will reflect the issues and will only be ordered for the discovery of documents that are relevant to those issues. Except in exceptional circumstances, these issues will be discernible from a review of the pleadings. Discovery orders that are essentially of a “fishing” nature are not part of tailored discovery. Orders will not be granted where the categories do not relate to a pleaded relevant issue, but rather a non-pleaded issue which might be pleaded should discovery reveal documents that support such a pleading.

…

[18] To determine the proportionality arguments in relation to tailored discovery of particular categories, it is necessary to consider the chances of finding relevant documents in the discovery exercise and their degree of relevance. This should then be balanced against the cost of carrying out that discovery process. Broader considerations such as the amount at issue, the resources of the parties, and delay to the proceedings may also be relevant. …

[15]   Where tailored discovery is ordered, r 8.18(2) of the High Court Rules 2016 provides that a party must discover a document if in the course of complying with an order for tailored discovery, the party becomes aware of a document that is not required to be discovered under the order, but that:

(a)adversely affects that party’s own case; or

(b)adversely affects another party’s case; or

(c)supports another party’s case.

[16]   The key issues are therefore whether the categories of documents sought by the plaintiff are relevant to the issues and proportionate.

Are the categories of documents sought relevant to the issues?

[17]   The plaintiff submits that there is no question that the documents falling within the categories sought are relevant to the issues and that without the documents sought the plaintiff:

(a)would be hindered in establishing the existence of the partnership;

(b)could not advance specific submissions as to the application of the partnership assets;

(c)could not establish that there was a misuse of the partnership’s assets; and

(d)could not call evidence to establish the effect of any misuse of partnership assets or to calculate loss as a result of alleged misuse.

[18]As set out above the defendant does not object to providing Category C.

[19]   For the remaining three categories the defendant submits they ought to be narrowed as “[t]hey are all premised on the existence of a partnership, which is hotly contested, and it would be premature to order disclosure of such documents before a partnership has been proven.”

[20]   As the plaintiff submits, the defendant appears by this submission to be suggesting that there ought to be two trials. That cannot be required and would lead to considerable inefficiencies.

[21]   If the defendant denies a partnership exists that does not mean that the documents are not relevant. Otherwise a party could always resist discovery where they deny another party’s claim. The categories of documents that r 8.7 provides must be discovered under a standard discovery order support this as they include documents that adversely affect the party’s own case. The same applies to tailored discovery by r 8.18. Part 1 of Schedule 9 of the High Court Rules confirms that proportionality is to be assessed by reference to the categories of documents that would be required under a standard discovery order. Relevance is clearly therefore not to be determined by reference to only one party’s theory of the case, all of the pleadings must be considered.

[22]   The defendant further submits that, by the discovery orders sought, the plaintiff is seeking to circumvent the judgment of Associate Judge Gardiner. I do not accept that this is the case as Associate Judge Gardiner’s decision considered, on a summary basis, the question of whether information could be ordered to be provided in

accordance with the written partnership agreement or the Partnership Act. Her Honour held that the defendant had a credible defence that the written agreement may not reflect the agreement between the parties and so there may not be a partnership as pleaded by the plaintiff. The information could not therefore be ordered to be provided pursuant to the written partnership agreement or the Partnership Act in the context of the summary judgment application. The decision did not consider the question of the relevance of the documents sought to the issues in the substantive proceeding which is the question before the Court in this application.

[23]   Finally, the defendant submits that even if a partnership did exist it only exists for the purpose of developing, subdividing, and selling the two front dwellings. This point highlights why the documents sought are relevant and important because if the partnership does exist and the parties are to share in the proceeds (as the plaintiff alleges) then the documents sought in relation to ownership of the property are relevant to determining what those proceeds are. Additionally, the documents will be relevant to whether the partnership assets have been used in breach of the agreement.

[24]   If a party considers that another party is simply including a pleading essentially to allow a “fishing” exercise for information, a strike out application can always be brought to ensure there is a proper basis for a claim. The defendant is not suggesting that this is the case here nor could they in circumstances where the claim is based on a signed partnership agreement, even one the defendant disputes.

[25]   In my view there is no question that the documents sought are relevant to the issues.

Is discovery of the proposed categories proportionate?

[26]    The defendant submits that the discovery sought is not proportionate as it would potentially see the defendant having to discover vast amounts of loan, security and other documentation relating to the structure of his finances that is unrelated to the development work at McKinstry Avenue. The defendant submits that it is usual for property developers like the defendant to have cross-security arrangements in place and all documents relating to those securities would fall within the proposed categories.

[27]   There was no evidence before the Court estimating the number of documents that might be included. Counsel for the defendant confirmed the defendant’s concern that the discovery would be oppressive was not based so much on the numbers of documents but because of the financial information the documents would reveal.

[28]   At the hearing the potential for confidentiality orders in respect of any particularly sensitive documents was discussed. Counsel for the plaintiff made it clear that the plaintiff would oppose any such orders and submitted that the defendant would be protected by r 8.30 of the High Court Rules, limiting the use of documents discovered to this proceeding. I agree that it appears that the r 8.30 protection is likely to be sufficient.

[29]   In these circumstances, I do not consider that requiring discovery of the categories of documents sought would be disproportionate. The plaintiff pleads that the defendant has borrowed moneys against the partnership’s properties at McKinstry Avenue for the purpose of carrying out other developments and has received rent from those properties for the benefit of the defendant to the exclusion of the plaintiff. The categories of documents sought are confined appropriately to matters relevant to the pleadings, limiting the documents sought to either documents relating to the ownership or development of McKinstry Avenue or where McKinstry Avenue has been used as security. I therefore make the orders for tailored discovery as sought but with slight adjustment to ensure they apply to both parties.

[30]   A two-day substantive hearing has now been set for 24 October 2023 and so I include directions for the filing and service of affidavits of documents in four weeks and set dates for the pre-trial steps in accordance with the directions made by Associate Judge Taylor on 6 July 2022.

Result

[31]I order:

(a)The parties are to complete tailored discovery of the following categories of documents:

(i)full and complete financial reports and records associated with ownership or development of McKinstry Avenue, including details of transactions with dates, amounts, names, bank accounts and tax numbers (Category A).

(ii)all documents (including emails, letters, texts and other forms of correspondence) associated with ownership or development of McKinstry Avenue, including but not limited to sale and purchase agreements, leases, mortgages, loan offers, mortgage terms and solicitors’ reports and statements (Category B).

(iii)all correspondence and documents (including emails, letters, texts and other forms of correspondence) between the parties relating to McKinstry Avenue (Category C).

(iv)all documents (including but not limited to sale and purchase agreements, leases, mortgages, loan offers, mortgage terms and solicitors’ reports and statements including emails, letters, texts and other forms of correspondence) where McKinstry Avenue has been used as a security for borrowings not connected with McKinstry Avenue (Category D).

(b)The parties are to file and serve affidavits of documents complying with Part 2 of Schedule 9 of the High Court Rules 2016 (unless otherwise agreed) and with contemporaneous exchange of open documents by 26 May 2023.

(c)The close of pleadings date is 19 June 2023.

(d)The plaintiff’s written statements of proposed evidence-in-chief and the list of documents the plaintiff wants included in the common bundle are to be served by 31 July 2023.

(e)The defendant’s written statements of proposed evidence-in-chief and a list of documents the defendant wants included in the common bundle are to be served by 28 August 2023.

(f)The plaintiff is to file and serve the common bundle of documents by 9 October 2023.

(g)The plaintiff’s synopsis of opening submissions and chronology of facts is to be filed and served by 16 October 2023.

(h)The defendant’s response to the plaintiff’s chronology of facts is to be filed and served by 19 October 2023.

(i)As previously allocated, a two-day substantive hearing will commence on Tuesday, 24 October 2023.

(j)Leave is reserved to apply by memoranda (preferably joint) on five working days’ notice for further directions.

Costs

[32]   The plaintiff has succeeded and so in the ordinary course would be entitled to costs. The parties however asked to be heard on costs following my decision. I ask that counsel confer in the first instance and only if costs are unable to be agreed to file memoranda of no more than five pages (excluding schedules), on behalf of the plaintiff within 20 working days and the defendant a further 10 working days.

Associate Judge Sussock