McCabe v McCabe
[2016] NZHC 456
•16 March 2016
IN THE HIGH COURT OF NEW ZEALAND WHANGAREI REGISTRY
CIV-2012-488-255 [2016] NZHC 456
BETWEEN BRUCE MCCABE AND IVAN
MCCABE First Plaintiffs
AND
THISTLE FARMS LIMITED Second Plaintiff
AND
ROBERT MCCABE First Defendant
AND
IRENE MISIEPO Second Defendant
AND
NEIL MCCABE Third Defendant
AND
HEATHER POMFRETT Fourth Defendant
AND
WEBB ROSS JOHNSON TRUSTEES Fifth Defendant
Hearing: 5 February 2016 Appearances:
G J Judd QC for the Plaintiffs
First and Second Defendants in person
No appearance for the Third, Fourth and Fifth DefendantsJudgment:
16 March 2016
JUDGMENT OF THOMAS J
This judgment was delivered by me on 16 March 2016 at 4.00 pm pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date:………………………….
Solicitor:
Wells & Co, Auckland for plaintiffs.
MCCABE & ORS v THISTLE FARMS LIMITED & ORS [2016] NZHC 456 [16 March 2016]
[1] The first defendant, Robert McCabe, has applied for variation of discovery orders (Orders) made by Christiansen AJ on 28 May 2015. He is supported in his application by the second and third defendants. All of them have filed submissions and Robert McCabe filed an affidavit in support.
[2] The application is opposed by the plaintiffs and affidavits in support of the opposition have been filed.
[3] The fifth defendant has been excused from attendance. The fourth defendant has taken no steps in the proceeding.
The application
[4] The first defendant applies for orders that:
(a) The directions in the Orders be more comprehensive in:
(i)discovery categories being established for the tailored discovery;
(ii)incorporating, and requiring the plaintiffs to use, the listing and exchange protocol set out in Part 2 of Schedule 9 of the High Court Rules, as is available under r 8.12(2)(a);
(iii)requiring the plaintiffs to provide an affidavit of documents as required under r 8.15, and a schedule to comply with r 8.16 and the listing protocol;
(iv)requiring the plaintiffs to provide the documents required in the r 8.32 notice served upon the plaintiffs by the defendants; and
(v) requiring Bruce McCabe to “provide formal proof (discovery)
for the standing(s) claimed in this proceeding as raised in the
defence of the defendants but not replied to by the plaintiffs as noted in the Minute of Associate Judge Doogue dated
1 October 2015.”
(b) The Court make any orders it deems necessary to ensure:
(i)that the purported BRMFT Trustees be required to provide audited financial statements since they began acting as Trustees, as well as the source documents for those statements, and copies of all meetings, documents they have signed and other documents that require specific joint authorisation; and
(ii) that Bruce McCabe is required to provide proof of standing as
raised in the Defendants’ statements of defence.
(iii)that Bruce McCabe is required to provide proof of standing for the 300 shares he purports to own.
[5] The grounds cited in the application are that:
(i)the Associate Judge did not establish the categories for tailored discovery to reflect the issues in the proceedings;
(ii) listing protocol as set out in part 2 schedule 9;
(iii) the plaintiffs have not provided an affidavit of documents; (iv) the defendants were not provided with initial disclosure; (v) the plaintiff’s claims are not clear;
(vi)there are documents missing from the discovery which has taken place and the documents provided include documents redacted, altered, erased and incomplete;
(vii)the plaintiffs have possession and control of the documents seized in 2011 as purported trustees. After that, proceedings were commenced but the plaintiffs refused to provide copies of the documents.
[6] In his submissions filed in support, the first defendant lists a large number of documents which he says should be included in any discovery order.
[7] The plaintiffs oppose the application on the grounds that:
(i)the Orders were made in chambers and as such can be challenged only by way of an interlocutory application filed within five working days. The Court, therefore, has no jurisdiction to make the orders sought.
(ii)rule 8.32 is not an alternative means of obtaining discovery but a mechanism to effect production of documents at trial.
(iii)the plaintiffs have complied with all their discovery obligations.
(iv)the issue as to standing has nothing to do with discovery but in any event the plaintiffs’ replies dated 22 September 2013 and
21 October 2015 deal with the issue.
(v)the plaintiffs have no obligation to provide audited financial statements for the trust.
(vi) “proof of standing” is a matter for trial.
(vii)the application and the first defendant’s affidavit in support is frivolous, vexatious and an abuse of the court’s proceedings, calculated to frustrate the orderly and just disposition of the plaintiffs’ proceeding.
[8] The plaintiffs seek indemnity costs from the first defendant and standard costs from the second and third defendants.
Background
[9] The first plaintiffs, Bruce and Ivan McCabe (Bruce and Ivan) and the first, second, third and fourth defendants (Robert, Irene, Neil and Heather) are all the children of Bernard and Nancy McCabe. Bernard died on 18 July 2002. Nancy died on 22 September 2011. The fifth defendant is the nominee or trustee company of the lawyers who acted for Robert, Irene, Neil and Nancy, including in this proceeding until recently. It is a trustee of trusts (Kauri Farms Trust and Gollywog Trust) which the plaintiffs say unlawfully received trust property held by the B R McCabe Family Trust (BRMFT).
[10] Bernard settled the BRMFT on 25 May 1971. Bernard also incorporated a company, Thistle Farms Limited (TFL) to hold certain farmland.
[11] TFL has 5000 shares. Bruce and Nancy had each been given 300 shares on incorporation. By 2006, the remaining shares were held by BRMFT.
[12] During 2006, Nancy, Robert and Irene, acting as trustees of BRMFT, purported to distribute shares in TFL: 600 to Nancy, 600 to Robert, 600 to Irene, and
600 to Neil. In 2011, either Nancy solely or Nancy, Robert and Irene purported to distribute 600 shares to Heather.
[13] The plaintiffs claim these dispositions were unlawful.
[14] In 2006, the then trustees also purported to advance the date of distribution to the date of Nancy’s death. The plaintiffs say the purported advance was invalid because of the absence of compliance with formal requirements.
[15] The original statement of claim is dated 26 April 2012. It was a claim by the first plaintiff against the defendants. The sole remedies sought were declarations that the ‘distributions’ were unlawful and of no effect and that the holders held those shares for the plaintiffs (as trustees of BRMFT) and they should be returned.
[16] An amended statement of claim dated 15 August 2012 added a claim against Robert for $12,000 which was paid on 10 March 2006 by the then trustees to Robert, for time allegedly spent by him doing work for BRMFT (when he was a trustee, but not a professional trustee).
[17] Heather has taken no steps in the proceeding. She has acknowledged to the first plaintiffs that BRMFT is entitled to the shares purportedly distributed to her.
[18] On 21 August 2012 Woodhouse J gave directions by consent, including:
[3] …
(b) By Wednesday, 5 September 2012, the first, second, third and fifth defendants are to provide to the plaintiffs an acknowledgement in writing, from the defendants’ solicitors, to the following effect:
(i) The transfers in 2006 of shares in Thistle Farms Ltd to Nancy
McCabe and to the first to fourth defendants were invalid.
(ii) The subsequent transfers of shares in Thistle Farms Ltd by Nancy McCabe to Kauri Farms Trust and by the second defendant to Gollywog Trust were invalid.
(iii) Any payments of purported remuneration to trustees, other than professional trustees, were and are invalid and are to be set aside.
[19] Pursuant to that direction, the solicitors then acting for Robert, Irene, Neil and the fifth defendant filed an acknowledgement dated 10 September 2012 (the
2012 acknowledgement). They purported to qualify it by commencing:
On the basis that the date of distribution of the BR McCabe Family Trust (the Trust) will be as soon as reasonably practical after the independent audit of the accounts of the Trust, the first, second, third and fifth defendants acknowledge to the plaintiffs as follows:
a. [The distributions] were invalid.
b. The payment of $12,000 to the first defendant … was invalid and is
to be set aside.
[20] The plaintiffs take the view that the qualification is ineffective because the acknowledgement was required to be in the form directed by the Court.
[21] Following the filing of the 2012 acknowledgement, the first plaintiffs applied for judgment, primarily in order to be able to appoint directors of TFL. An
agreement was reached which resulted in Robert and Irene resigning and Bruce, Ivan and Heather being appointed as directors.
[22] The plaintiffs say that various documents showed that TFL’s former directors had engaged in conduct resulting in company assets being reduced by transactions with various entities associated with Robert, Irene, Neil and the fifth defendant and Robert’s use of company funds for his own private purposes. In consequence, the first plaintiffs applied to join TFL as a plaintiff. TFL became a plaintiff and made claims now contained in the fourth amended statement of claim.
[23] The proceedings currently comprise the claims by the first plaintiffs described above (first and second causes of action), together with TFL’s claims (third, fourth, fifth, sixth and eighth causes of action) and a claim by all plaintiffs for equitable compensation to recover indemnity costs (seventh cause of action). The plaintiffs submit that, apart from seventh cause of action, the claims of the first plaintiffs have effectively been disposed of by the 2012 acknowledgment. Further, that the 2012 acknowledgement goes a long way towards establishing the seventh cause of action because the acknowledged unlawfulness was the initial and precipitating cause of everything which followed.
[24] BRMFT’s only assets are the shares in TFL, and the claims against the defendants to recover the shares allegedly wrongfully disposed of by the former trustees. Bruce funded the first plaintiffs’ claims to recover those shares. After the change of directors of TFL, TFL lent funds to BRMFT to enable BRMFT to reimburse Bruce. TFL has funded its own claims.
Submissions
[25] Robert considers that Bruce and Ivan are conducting hostile litigation against
(primarily) 50 per cent of the beneficiaries of the BRMFT.
[26] Robert says inter alia that:
·The plaintiffs have refused to provide any records of TFL since they took over as Directors; with the exception of pre-judicial financial statements to 31 March 2013 in which they claim in excess
$200,000 is owed by Robert to TFL and $10,000 by Irene. The plaintiffs have not provided the source documents that would show a clear and transparent, audit trail of what these amounts are made up of.
· Pre-judicial, financial statements to 31 March 2014 were provided;
but very little detail and no source documents were provided.
·Substantive and pre-judicial interest claims have been made against the first, second and third defendants without clear and transparent detail about how this was made up. There are also insufficient source documents underlying the legal invoices provided to provide an audit trail.
· The plaintiffs have not provided the HRCR BR McCabe Estate Files.
[27] These files contain information relevant to the first and second causes of action, says Robert.
[28] At the hearing, Robert and Irene relied on their detailed written submissions and affidavits in support of the application. However, Robert emphasised the following points:
(a) The plaintiffs had not made initial disclosure in breach of the High
Court Rules;
(b)The Associate Judge did not define the issues and the plaintiffs decided what they would provide;
(c) Despite repeated requests, the plaintiffs failed to provide an index;
(d)The plaintiffs have not complied with the Orders. Robert detailed some 35 inadequacies;
(e) In any event, the Orders should be varied.
[29] Although in his submissions Robert stated that the first plaintiffs should have made a Beddoe application, at the hearing he accepted that issue was not relevant to his application for further discovery.
[30] Robert appeared not to accept that the 2012 acknowledgement was binding on him. In his submission, the 2012 acknowledgement was conditional upon settlement occurring which has not taken place. Furthermore, he said, given further information he has received, he understands that the 2012 acknowledgment was given in error.
[31] Robert emphasised that discovery was central to the defendants’ ability to
defend the proceedings and, in his submission, what was sought was reasonable.
[32] Robert said he considered the plaintiffs had knowingly and intentionally failed to comply with the Orders. He said he did not seek to challenge the Orders but to vary them, accepting that tailored discovery was appropriate in the circumstances.
[33] Robert also opposed the plaintiffs’ application for indemnity costs, submitting that costs should be dealt with by way of a Beddoe application.
[34] Although she appeared at the hearing, Irene did not seek to be heard.
[35] The defendants (or some of them) are apparently considering instructing counsel to appear at the substantive hearing. Robert accepted that any such appointment needed to be made at an early date.
[36] The plaintiffs contended that Robert is trying to litigate everything going back to the formation of TFL and BRMFT, including the disputes which arose after Bernard’s death and which were settled by a Deed of the Family Arrangement.
[37] The plaintiffs alleged this was a frivolous and vexatious application and an abuse of the Court processes.
[38] In Mr Judd’s submission, Neil, on the one hand, says he does not want to be involved in the proceedings. On the other hand, he supports the first defendant’s application.
Law on discovery
[39] The rules on discovery are governed by Part 8 of the High Court Rules. Under r 8.5 a Judge must make a discovery order for a proceeding at the first case management conference, unless the proceeding can be justly disposed of without any discovery, or there is good reason for making the order later. The types of discovery orders that can be made are standard discovery and tailored discovery.1 Rule 8.12 outlines more specifically the details as to discovery orders made at the case management conference:
8.12 Orders that may be made
(1) At the case management conference the Judge may, under rule 8.5, make—
(a) an order dispensing with discovery; or
(b) an order for standard discovery; or
(c) 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.
(2) The discovery order may—
(a) incorporate the listing and exchange protocol set out in Part 2 of
Schedule 9; or
(b) vary that protocol; or
(c) contain other obligations that are considered appropriate.
(3) The discovery order may include specific directions as to the manner of discovery.
(4) A discovery order does not require a party to discover electronically stored information that is not primary data.
…
[40] Tailored discovery must be ordered, under r 8.8, “when the interests of justice require an order involving more or less discovery than standard discovery would involve.” Rule 8.9 provides a number of situations in which tailored discovery will
be presumed, specifically where the costs of standard discovery would be
1 High Court Rules, r 8.6.
disproportionately high in comparison with the matters at issue in the proceeding, the matter is on the commercial list, there are one or more allegations of fraud or dishonesty, or the sum in issue totals $2,500,000 or in which the total value of any assets in issue exceeds $2,500,000.
[41] If tailored discovery is required or sought, Schedule 9 includes a section relating to the obligations of parties in endeavouring to reach agreement as to the categorisation of documents. In Commerce Commission v Cathay Pacific Airways Ltd, Asher J stated:2
[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.
[42] As Winkelmann J succinctly put it in Nathans Finance, “Tailored discovery
does not license discovery beyond what is relevant to the matters at issue.”3
Jurisdiction
[43] The Orders were made on 28 May 2015. The plaintiffs say that there is no jurisdiction to apply to the Court to vary those orders because s 26P of the Judicature Act 1908 exclusively sets out the means of reviewing orders of Associate Judges.
[44] Rule 2.3 of the High Court Rules sets out the requirements of an application to review under s 26P. It states:
2.3 Review of decision
(1) An application for a review, under section 26P(1) of the Act, of an order or a decision made by an Associate Judge must be by interlocutory application, which must fully state the grounds of review and what exactly is challenged by the applicant.
2 Commerce Commission v Cathay Pacific Airways Ltd [2012] NZHC 726.
3 Nathans Finance New Zealand Ltd (in rec) v AIG Insurance New Zealand Ltd [2013] NZHC
3137.
(2) Unless a Judge or an Associate Judge directs otherwise, notice of the application must be filed and served,—
(a) if it is made by a party who was present or represented when the order was made or the decision was given, within 5 working days of the order being made or the decision being given; or
(b) if it is made by a party who was not present or represented, within 5 working days after the receipt by that party of notice of the making of the order or the giving of the decision.
(3) Unless a Judge or an Associate Judge directs otherwise, the application does not operate as—
(a) a stay of the proceeding; or
(b) a step in the proceeding.
(4) If the order or decision being reviewed was made following a defended hearing and is supported by documented reasons,—
(a) the review proceeds as a rehearing; and
(b) the Judge may, if he or she thinks it is in the interests of justice, rehear the whole or part of the evidence or receive further evidence.
(5) In all other cases,—
(a) a review proceeds as a full rehearing; and
(b) the Judge may give the order or decision the weight he or she thinks appropriate.
[45] Rule 2.3 is the only procedure for reviewing the decisions of Associate
Judges made in chambers.4
[46] In relation to the time limits for applying for a review, McGechan on Procedure states “Strict compliance is required so that interlocutory matters can be disposed of promptly and the matter proceeds to substantive determination.”5
However, there is a residual discretion to allow a review application to be made out of time, as indicated by the wording of r 2.3. Given that discretion exists, the
jurisdictional challenge is not an absolute end to the proceedings.
4 Nottingham v Registered Securities Ltd (in liq) (1998) 12 PRNZ 625 (CA) at 628.
5 Andrew Beck and others McGechan on Procedure (online looseleaf edition, Westlaw) at
[HR2.303].
[47] In relation to whether the discretion should be exercised, Associate Judge
Bell has recently stated:6
[9] In applying for an extension of time, the first defendant is asking the court for an indulgence. In seeking an indulgence it cannot say that it is entitled to seek a review as of right. In these situations where the court is being asked to consider whether to extend the time for a decision to be reviewed, the merits of the proposed challenge are not the only consideration. The court is required to weigh what may be competing considerations. On the one hand there are questions of justice, that is, the concern to see that decisions are made correctly according to law. But against that there is also the need for finality, and in the case of interlocutory decisions the need to see that the proceeding as a whole is allowed to proceed expeditiously. It can happen that the requirements of finality and the need for prompt disposal of proceedings may prevail over the requirement to see that decisions are made correctly according to law.
[48] Rule 2.3 is therefore not an absolute jurisdictional barrier to this application continuing. I still need to look to the merits of the claim and weigh that against the other considerations mentioned.
Application to vary
[49] The application purports to be an application for variation of the Orders under r 8.17. Rule 8.17 provides:
8.17 Variation of discovery order
(1) Subject to rule 7.18, a party may apply for an order varying the terms of a discovery order.
(2) The variation may be granted by a Judge on the ground that—
(a) compliance or attempted compliance with the terms of the order has revealed a need for a variation; or
(b) there has been a change of circumstances that justifies reconsideration.
[50] The reference to r 7.18 is redundant, as that section has now been repealed.
[51] It is clear that the rule can be used by an Associate Judge where review is sought of his or her own orders.7 There is no time limit for such applications, likely
6 Mu v Body Corporate 31241 [2012] NZHC 22.
7 Commissioner of Inland Revenue v Kamal [2015] NZHC 3095.
due to the requirement within the rule that there be a change in circumstance before the application is made. In Kawarau Village Holdings Ltd v Chi, the appellants sought to exercise a residual leave to appeal, allowed by Bell AJ in his discovery judgment, and in the alternative applied under r 8.17 for variation.8 Muir J considered the application, and ultimately found it came within the reservation of leave to appeal. However, no party (nor the Judge) took issue with the view that r
8.17 could apply, independent of an application to review the Associate Judge’s orders. Muir J did note that typically such an application would be made in front of the original Associate Judge.
[52] In an appeal against a District Court Judge’s decision on discovery, Rodney Hansen J held that there was a power to vary orders where compliance with those orders was too onerous.9 In Southland Building Society v Barlow, Associate Judge Osborne considered that there was jurisdiction for him to consider an application under r 8.17 on the basis that there had been an evolution of the defendant's pleadings and case, which brought into relevance an arguably wider or different
range of documents, which amounted “in my judgment to a ‘change of circumstances that justifies reconsideration’ (in terms of r 8.17(2)(b)) of the existing discovery order”.10
[53] As an application to vary, this may more appropriately have been brought before the Associate Judge who initially heard the application. However, if it can be seen as an application to vary, the application is subject to the test under r 8.17.
Analysis
Is the application effectively a challenge to the Orders?
[54] The plaintiffs rely on the terms of the Orders and the affidavits in support of the notice of opposition, which gives the background to the making of the Orders
and compliance with them.
8 Kawarau Village Holdings Ltd v Chi [2015] NZHC 2046.
9 Santa Rosa Orchards Ltd v Freshmax NZ Ltd [2013] NZHC 1406.
10 Southland Building Society v Barlow Justice Ltd [2013] NZHC 1125.
[55] In Mr Judd’s submission, the application is in fact a challenge to the Orders rather than an application to vary them. In support of that proposition, he referred to the wide range of matters canvassed in Robert’s submissions. He noted that all these issues were addressed in the memoranda filed by him and Bruce in advance of the pre-trial conference when the Orders were made. In Mr Judd’s submission, a reading of the Minute confirms that the Associate Judge was well aware of the issues and made the Orders having considered those submissions.
[56] Mr Judd pointed out that Robert, Irene and Neil all attended the telephone conference. The Minute records that extensive memoranda had been filed. The issues in Robert’s memorandum were the same as those advanced in support of the application, said Mr Judd.
[57] Mr Judd noted his submission to the Associate Judge that the appropriate way forward would be for the plaintiffs to provide all the documents which would be required for the purposes of the hearing. That is, those on which the plaintiffs would rely to prove their case. The documents were to be provided on a DVD which would contain a directory describing the relevant documents, their date and other particulars and the directory would effectively be an index. As Mr Judd noted, the plaintiffs had filed an affidavit by Alan Rowe dated 25 May 2015 setting out the evidential foundation for Mr Judd’s proposed way of dealing with discovery. Mr Judd then referred to Mr Rowe’s affidavit for the purpose of this application which gave extensive detail of the steps taken by the plaintiffs to comply with the Orders.
[58] This file has quite some history to it and it is necessary to traverse the background in order to put this application in context.
[59] At the first case management conference on 21 August 2012, counsel then acting for all the defendants, other than the fourth defendant, gave the acknowledgment which resulted in the direction referred to at [18] and the 2012 acknowledgment. Discovery was also discussed. The Judge recorded the defendants’ acknowledgment that they were bound to provide discovery to the plaintiffs and directed by consent:
By Wednesday, 5 September 2012, the defendants are to make discovery of all documents in their possession or power relating to the [BRMFT] including, but without limitation, the accounts and other records of Thistle Farms Ltd, and all documents relating to Kauri Farms Trust and Gollowog Trust. A sworn list of documents is to be provided together with copies of all the documents.
[60] By a Minute dated 24 February 2015, the Court requested the plaintiffs to file and serve a memorandum setting out the plaintiffs’ expectations on the provision of tailored discovery. The defendants were invited to provide details of the discovery they expected and Robert took the opportunity to do so.
[61] The affidavit of Alan Rowe, solicitor on record for the plaintiffs, dated
25 May 2015 was provided for the purpose of that case management conference. He reveals that, as well as irregularities in the affidavit of documents purportedly on behalf of the defendants, the plaintiffs had received a CD of documents which contained the bulk of documents referred to in the affidavit in PDF format. Boxes of documents were then delivered to the plaintiffs’ solicitors. Mr Rowe then said:
I am instructed and believe to be true that the plaintiffs have virtually no documents relating to Thistle Farms Ltd, Kauri Family Trust and Gollywog Trust apart from the documents received from the defendants. That being the case the plaintiffs’ position is that the plaintiffs should not now be required to schedule and itemise the documents (as the first, second and third defendants are demanding in their latest memorandum dated 20 May 2015) when the Court directed the defendants to do that very task but which they have only done in part.
…
The plaintiffs made initial disclosure at the time the first statement of claim was served on the defendants (April – May 2012). That disclosure contained the important documents that the first plaintiffs had at the time.
I am instructed and believe to be true that at the time the proceeding was initiated the plaintiffs had very few documents pertaining to either the [BRMFT] or TFL and, other than the documents referred to in the initial disclosure and those that they did have were obtained either from public records or from the first and second defendants or their solicitor.
…
From my position as the plaintiffs’ solicitor from 2011 and from my involvement in the events since then, I believe the first and second defendants had possession of and access to most, if not all, relevant documentation that the plaintiffs had about the BRMFT and TFL at the time the proceeding was commenced as they were the trustees and directors of those entities until roughly that time. Therefore the plaintiffs consider that
the defendants will probably already be aware of all important documents that will be relied on by the plaintiffs at the trial and when they receive the
19 Bundle they certainly will be aware of all documents that the plaintiffs will rely on at trial and therefore expending significant resources on
discovery at this stage of the proceeding is simply not proportionate.
[62] That was the background to the plaintiffs’ proposal to the Court as to discovery. The proposal was put on the basis it would eliminate the need for further steps in relation to discovery and inspection which were not considered necessary because the vast bulk of the documents in the plaintiffs’ possession were obtained from the defendants.
[63] The plaintiffs also provided a detailed response to the list of documents sought by Robert.
[64] It is against that backdrop that the Orders were made.
[65] There is no doubt, therefore, that there was a full analysis of what discovery was appropriate to the case before the Associate Judge made the Orders. The documents sought by the defendants in this application are, by and large, the same as those sought by them prior to the making of the Orders.
[66] Furthermore, as articulated by the Associate Judge in his Minute, he considered the defendants’ requirements for a bundle index and noted the plaintiffs’ position that there would be no need for such as the file names of the electronic documents would comprise a sufficient list.
[67] It is clear from the context in which the Orders were made that the defendants’ application is indeed, as the plaintiffs contend, in essence a challenge to the Orders, albeit that the application is framed as an application for variation of the Orders.
[68] That being the case, the defendants are seeking an indulgence in requesting a review of the Orders. I next consider the merits of the claim and whether, in any event, the defendants’ application can in any way properly be considered as an application to vary the Orders.
The issues
[69] Discovery should be directed to the issues in the plaintiffs’ substantive
claims.
[70] In Mr Judd’s submission, the preponderance of the allegations is not in dispute. He conducted an analysis of the causes of action and issues. No such analysis was carried out by Robert, Irene or Neil in their submissions and neither Robert nor Irene identified any dispute at the hearing with Mr Judd’s analysis. In Mr Judd’s submission, the first two causes of action can be disposed of given the
2012 acknowledgment.
[71] In respect of third cause of action, the plaintiffs allege that in 2006-2008, Robert contracted with TFL; property was bought and sold; he made a profit; and TFL made separate loss. The issues concern the legal consequences of a director making a profit at the expense of his company and causing the company to make a loss. Robert’s statement of defence shows he appears to accept the facts.
[72] In respect of the fourth cause of action, the plaintiffs allege that in 2008-
2010, a property was purchased by the Kauri Farms Trust from a third party with money provided by TFL. It was then purchased by TFL from the Kauri Farms Trust and sold at a loss. Robert’s statement of defence appears to accept the facts but claims justification.
[73] In respect of the fifth cause action, the plaintiffs allege that advances were made by TFL to Nancy and the Kauri Farms Trust which have not been repaid. This appears to be a simple debt dispute.
[74] In respect of the sixth cause of action, TFL alleges Robert spent company money on his own account and the company seeks to recover it.
[75] In respect of the seventh cause of action, the plaintiffs claim equitable compensation for the costs they have incurred as a result of the defendants’ breaches of trust and fiduciary duty.
[76] In respect of the eighth cause of action, TFL seeks to recover a payment to Robert during the financial year ended 31 March 2013. This was made after the first plaintiffs were appointed trustees but just before they became TFL’s directors. It was characterised as a director’s fee. TFL alleges it was not properly payable.
[77] All these causes of action concern the actions of the first and second defendants and Nancy, before she died, whilst they were in control as trustees/company directors.
[78] Documents do not have to be discovered unless they in some way relate to facts in issue. I accept the plaintiffs’ submission that, if Robert had genuine concern to obtain documents needed to enable the defendants to defend the disputed claims, then he should have addressed the causes of action where there are disputes and explained what documents not already provided he needs to defend claims in those causes of action, and why. Instead, many of the documents requested by him appear to have little bearing on the current case. For example, Robert’s request for “the PWC report on the employment status of Robert McCabe with TF Ltd … [also including] all correspondence concerning the plant and machinery (fixed assets of TF Ltd)” relates solely to his contemporaneous employment action against TFL.
[79] As Mr Judd was at pains to point out at the hearing, it is a matter for the plaintiffs to prove their claims on the balance of probabilities. The documents provided will be relied upon by the plaintiffs in that regard. If they are insufficient, the claim will fail.
Other matters
[80] Robert also relies on r 8.32. However, r 8.32 exists to facilitate the production of evidence – “for the purpose of evidence at the hearing”. It is not another method of obtaining discovery.
[81] I accept the plaintiff ’s submission that they have no obligation to provide
audited financial statements for BRMFT.
[82] Robert also makes a number of points about inadequacies relating to the DVD on which the relevant documents were discovered. He claims that the DVD is “unclear, erratically compiled, empty folders, missing folders, missing documents, incomplete documents, redacted; and altered documents.” I accept the plaintiffs’ submission and evidence that the DVD format was used due to the size of the information provided. There appears to be no basis for the assertions about missing information in the DVDs, and the plaintiffs have clearly offered to address any concerns about altered or erased documents if those documents were identified by Robert. None have been.
[83] In relation to concerns about the lack of indexing provided for the discovered documents, I note the plaintiffs’ affidavit evidence that a description of each document is given in the identification of the PDF formatted document. This is what the Court clearly envisaged when it made the Orders. The Associate Judge was aware of the defendants’ request for an index. If, indeed, the defendants are finding it difficult to trace the documents which have been discovered, they need to raise this with the plaintiffs. In this regard, I cannot locate the plaintiffs’ affidavit of documents pursuant to r 8.15 and would ask the plaintiffs to address this within 10 working days of this decision.
[84] Mr Judd dealt with Robert’s allegations regarding standing under three headings:
(i)Whether the first plaintiffs should have made a Beddoe application. I agree with Mr Judd that issue is irrelevant to the current application and to the question of standing. Robert conceded that at the hearing.
(ii)Whether Bruce had the power to appoint himself and Ivan as trustees of the BRMFT following the death of Nancy McCabe. That, in Mr Judd’s submission, is a legal question. Whether Bruce indeed had that power is to be ascertained by interpreting the trust deed and the documentation used to effect the appointment. In Mr Judd’s submission, Bruce, as the
surviving executor of Bernard, was entitled to appoint trustees. Disclosure of all relevant documents comprising the trust deed, Bernard McCabe’s will, and the relevant documentation surrounding appointment of the trustees has been made.
A sub-set of this issue is the allegation that the first plaintiffs are not suing in their capacity as trustees. That is dealt with specifically in the statement of claim and relates to the first and second causes of action.
(iii)The defendants appear concerned as to Bruce’s entitlement to hold 300 shares in TFL. I cannot see how this is relevant to the issues.
[85] Finally, having read the comprehensive affidavits on behalf of the plaintiffs, I
am not persuaded they are in breach of the Orders.
Result
[86] As a result, I conclude:
(1)Any application to review the Orders should have been made within five working days of their being issued.
(2)There is nothing in the circumstances of this case which persuades me to exercise my residual discretion to allow a review application to be made out of time. I say that, in particular, because of the detail before the Associate Judge prior to the Orders being made.
(3) To the extent that any of the discovery orders sought by the defendants could be considered an application to vary, I am not satisfied that either of the grounds set out in r 8.17(2) apply. That is, there is no need to vary the Orders and no change of circumstances which justifies reconsideration.
[87] The application is dismissed.
Costs
[88] In Mr Judd’s submission, Robert has acted vexatiously, frivolously, improperly or unnecessarily in making and continuing with the application and the plaintiffs seek indemnity or increased costs against Robert. Irene and Neil supported Robert’s application. It is submitted that they should pay costs on the standard basis, with the intent that Robert, Irene and Neil should be jointly and severally liable for costs in that quantum. Although the general principle is that the liability of each party ordered to pay costs should be joint and several, the court retains the discretion
to order otherwise where it is appropriate.11
[89] The plaintiffs request leave to file material concerning the quantum.
[90] The plaintiffs are entitled to costs. I accept that the application was misguided, and voluminous material was filed, particularly on behalf of Robert, requiring the plaintiffs to expend considerable time and expenses in dealing with the application.
[91] Rule 14.6 allows the court to order a party to pay increased costs if the party opposing costs has contributed unnecessarily to the time or expense of the proceeding or step in it by taking or pursuing an unnecessary step or an argument that lacks merit or failing, without reasonable justification, to admit facts, evidence, documents, or accept a legal argument, or if some other reason exists which justifies the court making an order for increased costs (amongst other bases for increasing costs).
[92] Before finally deciding on the question of costs the plaintiffs are to file within
21 days material concerning the quantum. At the same time they are to address the
question of the plaintiffs’ affidavit of documents referred to at [83].
11 High Court Rules, r 14.14.
Conduct of the case
[93] I note the plaintiffs’ concern that the defendants might appoint counsel close in time to the trial date which would likely result in an application for adjournment of the trial. The plaintiffs believe that the defendants have been saying for some time that they intend to instruct counsel but have not done so. Robert assured me that he did not intend to delay matters and planned to meet with proposed counsel within the next fortnight. I record that the defendants are on notice that, in the circumstances of this case, it is highly unlikely that any adjournment will be granted
simply because counsel is appointed close in time to the trial date.
Thomas J
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