Monnery v Parsons

[2024] NZHC 1298

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2018-485-482

[2024] NZHC 1298

BETWEEN

PAUL MARK MONNERY

Plaintiff

PAUL MARK MONNERY and JULIE ANN MONNERY

Second Plaintiffs

AND

ANDREW GRAHAM PARSONS

First Defendant

JOHN MURRAY CREIGHTON
Second Defendant

BRUCE GORDON COPELAND

Third Defendant

KURT BRUDENBECK
Fourth Defendant

MURRAY CHARLES PARSONS
Fifth Defendant

PUSH DEVELOPMENTS LIMITED
Sixth Defendant

continued…

Hearing:	14 May 2024
Counsel:	C R Carruthers KC and R L Fletcher for Plaintiffs J D Haig for First and Sixth Defendants
Judgment:	23 May 2024

JUDGMENT OF RADICH J

[Further discovery]

MONNERY v PARSONS [2024] NZHC 1298 [23 May 2024]

… continued

SANDFIELD ASSOCIATES LIMITED
Seventh Defendant

SANDFIELD VENTURES LIMITED
Eighth Defendant

P K B INVESTMENTS LIMITED
Ninth Defendant

[1]                 A residual discovery issue remains in this proceeding, in which damages are claimed on account of allegations that the defendants denied the plaintiffs’ economic interests in a business.

[2]                 The first and sixth defendants say that, when the plaintiffs’ damages claims are considered, money earned by the plaintiffs from, and the value of their interests in, a business that the plaintiffs started subsequently should be taken into account. Accordingly, the financial records of that subsequent business – Choice Retail Ltd – are sought. So too are the financial records of the second plaintiffs, in order to show the nature and value of the second plaintiffs’ interest in Choice Retail.

[3]                 The plaintiffs say that their earnings, subsequent to the events to which the proceeding relates, have all been disclosed and that financial information of or about Choice Retail is not relevant to an issue in the proceeding.

Overview of the primary allegations and affirmative defences

[4]                 Because the application turns on an assessment of relevance, the primary issues in the proceeding, framed by the pleadings, must be considered.

[5]                 Convendium Ltd was incorporated in 2005. It developed and marketed technology for operating cashless vending machines. A related company, Eftpos

Vending Ltd was incorporated in 2013 and was involved in the overall business venture as a licensee for the cashless payment system.

[6]                 Initially, Mr Monnery was the sole director of the business and the person with day-to-day responsibility for its management. Mr and Mrs Monnery, as trustees of the Monnery Family Trust were the owners of the shares in Convendium and Eftpos Vending.

[7]                 The defendants all became involved with the business in various ways, as shareholders (directly and indirectly), directors, developers of software and investors.

[8]                 It is alleged in the proceeding that, in May 2015, some of the defendants took steps to remove Mr Monnery as a director of the business and to prevent him from having any ongoing involvement with it. Subsequently, it is said, steps were taken to cause the plaintiffs a loss of the value of their shares. Convendium was removed from the register in November 2017 and (following a brief restoration) was placed into liquidation in February 2019. Eftpos Vending was placed into liquidation in April 2018.

[9]                 It is alleged that the defendants interfered unlawfully with the plaintiffs’ economic interests through misusing the confidential information of Convendium and Eftpos Vending, in pursuing competing opportunities and in breaching equitable obligations to the plaintiffs. Tortious and equitable causes of action are pleaded for causing loss by economic means, conspiracy to injure economic interests, breach of confidence and breach of fiduciary duties. Significant damages are sought for lost income and for loss in the value of the plaintiffs’ shares in Convendium and Eftpos Vending.

[10]             Choice Retail was incorporated in 2018 to purchase Sanitarium’s existing vending machine business. It employs Mr Monnery and 80 per cent of its shares are owned by the Monnery Family Trust. The defendants say that Convendium’s confidential  information  was  used  for  the  benefit  of  Choice  Retail  and  that  Mr Monnery and the Monnery Family Trust have, in turn, benefited from an increase in the value of their shares in Choice Retail.

[11]             In their statement of defence to the plaintiffs’ second amended statement of claim, the first and sixth defendants plead that any loss suffered by the plaintiffs has been mitigated, amongst other things, by “their ongoing interests in Choice Retail Ltd and their ongoing use of Convendium’s confidential information and intellectual property”.

[12]             In a related way, in one of several affirmative defences, the first and sixth defendants plead that the plaintiffs should be disentitled to any relief “on the basis that they do not come to equity with clean hands”.  It is said under this head that, after  Mr Monnery left Convendium, he and the trustees of the Monnery Family Trust used their confidential information and customer contacts to pursue the Choice Retail business opportunity. It is said that Mr Monnery and the Monnery Family Trust have benefited from that through the payment of salary or wages to Mr Monnery and through the value of the shares held in Choice Retail.

Previous discovery orders and compliance

[13]             Discovery issues have been ongoing between the parties for over four years. It was in March 2020 when the plaintiffs filed and served their original affidavit of documents. Because of a concern on the part of the fifth and sixth defendants that the plaintiffs’ financial records had not been discovered, an application was made for discovery of all documents related to the pleaded claims for losses. In a decision of 26 October 2021, Associate Judge Johnston found the plaintiffs’ “financial circumstances over the relevant period of time” to be relevant in the case of a claim for monetary compensation.1 He ordered “that the plaintiffs provide discovery as to their financial positions” in relation to their pleaded claim for losses suffered.2

[14]             In response, Mr Monnery filed a  supplementary  affidavit of documents  on  9 March 2022. He listed six “statements of earnings” for Mr Monnery; three from Choice Retail and three from a business with which he worked before Choice Retail was established.

1      Monnery v Parsons [2021] NZHC 2854 at [45].

2      At [43] and [53].

[15]             The first and sixth defendants did not see the additional documents disclosed as having complied with Associate Judge Johnston’s orders. And so they applied again, on 6 April 2023, for the discovery of all relevant documents in the plaintiffs’ control relating to the pleaded claim for losses suffered. The application sought, in particular, financial records for the first and second plaintiffs, including the first plaintiff’s IR3 tax returns. Associate Judge Skelton made an order under r 7.48 of the High Court Rules 2016 for the filing of a supplementary affidavit of documents by the plaintiffs “containing all their relevant financial records from 2013 to the present, including but not limited to all IR3 tax returns filed for the first plaintiff”.

[16]             In a second supplementary affidavit of documents of 7 June 2023, Mr Monnery discovered his IR3 tax returns for the 2016–2022 financial years, noting that no tax returns were filed for the 2013–2015 years because the only monies he received in those years were said to be the drawings shown in the financial statements of Convendium as shareholder loans.

[17]             Financial records were not disclosed for the Monnery Family Trust. Rather, in the second supplementary affidavit, Mr Monnery said, throughout the period to which Associate Judge Skelton’s order applies, the trust earned no income and, accordingly, no IR3 tax returns for filed. Mr Monnery went on to say in the affidavit that the only assets of the trust are the family home, shares in Convendium, Eftpos Vending and Choice Retail.

The further discovery that is sought

[18]             The first and sixth defendants say that, still, the plaintiffs have not complied with the Court’s previous discovery orders in that they have not discovered relevant financial records within their control. In particular, it is said, they have to discover the financial records of Choice Retail. Moreover, their requests for the financial statements of the second plaintiffs, said to fall within the terms of the previous discovery orders, are reiterated.

Relevant principles

[19]             Under r 8.19 of the High Court Rules, an order for particular discovery may be made if there are grounds for believing that a party has not discovered documents that should have been discovered.

[20]             As was said in Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd, in considering the exercise of the Court’s broad discretion under the rule, the Court will have regard to the relevance of the documents, whether there are grounds to believe that they exist and whether their discovery is proportionate, having regard to pt 1 of the discovery checklist in the High Court Rules.3

Relevance of the financial statements of Choice Retail and of the Monnery Family Trust

[21]             As Mr Carruthers KC has said, it has always been accepted and acknowledged that Mr Monnery’s earnings from Choice Retail since the acquisition of the business in December 2018 are relevant to his claim for loss of income since that date. To show that income, he has disclosed earnings statements and IR3 returns.

[22]             As far as the income of the Monnery Family Trust is concerned, the plaintiffs make two points. First, it is said that there is no application for its financial statements and, secondly, it is said that it has not in any event throughout the relevant period earned any income. Mr Monnery has, it is said, confirmed this to be the case on oath and his affidavit evidence should not be looked behind.

[23]             However, the financial records of the Trust are within the scope of the discovery orders that  have  been  made.  Associate  Judge  Skelton  ordered  both  Mr Monnery and the Trust to disclose “all their relevant financial records from 2013 to the present”. That will include its financial statements. Not only is it relevant to understand the Trust’s income (a point that Mr Monnery has covered in his affidavit) but its general financial position is relevant to enable an understanding of the value of the plaintiffs’ interest in Choice Retail.

3      Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd [2015] NZHC 2760, [2018] NZAR 600 at [14].

[24]             The plaintiffs say that the acquisition of another asset (the shares in Choice Retail) by the Monnery Family Trust more than three and a half years after the events leading to the claim4 is simply not relevant to their claim for the loss in the value of the shares in Convendium and Eftpos Vending.

[25]             It is said that there was in any event no reasonable step that they could take in order to mitigate that loss because, between them, the defendants put Convendium into liquidation and allowed Eftpos Vending to cease trading. The acquisition of shares in Choice is described by the plaintiffs as being an entirely separate initiative. It is said that, just because of the interests of the plaintiffs in Choice Retail are pleaded, does not make them relevant for the purposes of discovery.

[26]             However, at one level it is fair to say, as the first and sixth defendants do, that the pleadings shape the issues in a proceeding. In a given case, it might clearly be able to be said that a pleaded point could stand no prospect of being established such that it could be set to one side for the purposes of defining the issues in order, in turn, to determine the scope of discovery. But I do not think that can be said of the pleadings in this case, referred to in [11] and [12] above. Whether ultimately the Court would, in assessing any damages to be awarded, take into account the plaintiffs’ ongoing interests in Choice Retail is another matter but, for the purposes of defining the scope of discovery, the allegations about offsetting the value of the plaintiffs’ interests in Choice is something that does need to be considered.

[27]             The plaintiff says that, in any event, to say in the affirmative defence referred to in [12] that the plaintiffs should be disentitled to relief on the basis that they do not come to equity with clean hands, is to demonstrate a level of confusion because an equitable defence cannot be used to a common law claim. I do not see the affirmative defence as being clearly untenable. The claims in the second amended statement of claim span both equity and tort. That is apparent from the causes of action themselves

– for example, for breach of confidence5 and breach of fiduciary duty – and from some

4      A meeting on  16 March  2015  during  which,  allegedly,  a  decision  was  made  to  remove  Mr Monnery from management or control of Convendium and Eftpos Vending.

5      A cause of action for breach of confidence in circumstances such as these can be regarded as at least partially equitable in nature: see AB Consolidated Ltd v Europe Strength Food Co Pty Ltd [1978] 2 NZLR 515 (CA); Aquaculture Corp v New Zealand Green Mussel Co Ltd [1990] 3 NZLR 299 (CA); Skids Programme Management Ltd v McNeill [2012] NZCA 314, [2013] 1 NZLR 1 at

of the relief sought in the amended claim being account of profits and some being expressed as “equitable compensation”.

[28]             At another level, it could be said that it is not so much a pleaded duty to mitigate that is in question here but a matter of having relevant financial information available to enable, if this point is reached, the plaintiffs’ loss to be calculated. The first and sixth defendants say that the acquisition by the Trust of the shares in the business of a competitor of Eftpos Vending that uses Convendium’s payment systems was only possible because of Mr Monnery’s dissociation with Eftpos Vending and Convendium. If that is the case – and the point is very much at large – a net loss position will need to be considered and, to do that, Choice’s financial records will need to be considered.

[29]             Accordingly, I see documents sought as being relevant and within the plaintiffs’ control. In terms of the further Assa Abloy considerations (referred to in

[20] above), they are documents that exist and, given that they will be few, discovery will be proportionate.

[30]The scope of the discovery will encompass:

(a)the financial statements of Choice Retail Ltd; and

(b)the financial statements of the Monnery Family Trust which do in any event fall within the scope of the orders of Associate Judge Skelton.

The terms of discovery

[31]      It may well be the case that confidentiality is claimed over all or parts of documents that fall within the scope of the discovery that is ordered. Mr Carruthers indicated that, in the event that the discovery application was to be granted, he would wish to be heard on the terms of disclosure. A possible mechanism, it was suggested, would be for the Court to inspect documents falling within the scope of the discovery

[87]; and, for recent authority from the United Kingdom, see Vidal-Hall v Google Inc [2015] EWCA Civ 311, [2016] QB 1003; see also John Katz (ed) Laws of New Zealand – Intellectual Property: Confidential Information (online looseleaf ed, Lexis Nexis) at [167].

orders to determine whether or not there is a basis for disclosure of particular documents.

[32]      A confidentiality mechanism within the relevant affidavit of documents may well suffice. Documents over which confidentiality is claimed can be listed in a separate part of the schedule to an affidavit of documents. The affidavit itself can provide that the documents in that part are subject to a claim of confidentiality and can be inspected and held only by the solicitors or counsel for the parties and they are not to be released or provided to any of the parties personally. A mechanism may be included to enable counsel to confer with clients over all or parts only of the documents. Written confirmation of the terms can be required from solicitors and counsel prior to the documents being disclosed.

[33]      Counsel should discuss the terms of disclosure in the first instance. If issues remain, then a VMR conference may be convened.

Result

[34]I make the following orders:

(a)The plaintiffs are to provide particular discovery, in accordance with the terms of r 8.19 of the High Court Rules, of the following documents:

(i)The financial statements and annual accounts of Choice Retail Ltd from the date of its incorporation; and

(ii)The financial statements of the Monnery Family Trust, insofar as they relate to the value of shares held in Convendium Ltd, Eftpos Vending Ltd and Choice Retail Ltd since 2013.

(b)The parties are to liaise over the scope of disclosure and over arrangements for the disclosure of any confidential information. If issues remain, arrangements should be made with the Registry for the allocation of hearing time through a one-hour VMR conference.

(c)Costs on this application should be paid by the plaintiffs on a 2B basis. However, if any issue arises between the parties, memoranda may be filed in accordance with [3] of my minute of 14 May 2024 except the date in [3(a)] will for the purposes of this application be 7 June 2024, the date in [3(b)] will be 21 June and the date in [3(c)] will be 28 June.

Radich J

Solicitors:

Woods Fletcher Associates, Wellington for Plaintiffs

Macalister Mazengarb, Wellington for First and Sixth Defendants K3 Legal, Auckland for Second Defendant

Claymore Partners, Auckland for Third, Seventh and Eighth Defendants George Bogiatto, Auckland for Fourth, Fifth and Ninth Defendants