N-Tech Limited v Abooth Limited (in rec) HC Auckland CIV 2006-404-3362
[2010] NZHC 1979
•10 November 2010
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2006-404-003362
CIV-2007-404-000990
BETWEEN N-TECH LIMITED First Plaintiff
ANDST LUCIA INVESTMENTS LIMITED Second Plaintiff
ANDABOOTH LIMITED (IN REC.) First Defendant
ANDOTHER DEFENDANTS AS SET OUT IN SCHEDULE ONE ATTACHED TO THE STATEMENT OF CLAIM
Second To One Hundred And Twenty First
Defendants
ANDR J CHAPMAN, G D C WALKER, T F MCGRATH
First Third Parties
ANDM V RICHARDSON AND T J GOLDFINCH
Second Third Parties
AND RUSSELL MCVEAGH
Third Third Party (struck Out)
ANDDENHAM MARTIN & ASSOCIATES Fourth Third Party
ANDG S C K SIDNAM Fifth Third Party
AND H C VINCENT
First Fourth Party (discontinued)
ANDJ M K BROWN AND P H CASTLE Second Fourth Parties (discontinued)
AND K A SCHWASS
Third Fourth Party (discontinued)
AND J A REID
First Counterclaim Defendant
AND H MILLOY
Second Counterclaim Defendant
N-TECH LIMITED AND ANOR V ABOOTH LIMITED (IN REC.) AND ANOR HC AK CIV-2006-404-
003362 10 November 2010
AND J WONG
Third Counterclaim Defendant
ANDCMW & COMPANY LIMITED Fourth Counterclaim Defendant
AND J D CURRIE
Fifth Counterclaim Defendant
AND P M CONNOLLY
Sixth Counterclaim Defendant
ANDASIAN GROWTH FUND LIMITED Seventh Counterclaim Defendant
ANDARMOUR FIDELITY LIMITED Eighth Counterclaim Defendant
AND KENSINGTON SWAN
Ninth Counterclaim Defendant
Hearing: 9 November 2010
Appearances: P Fee and R Butler for Applicant/Fourth and Fifth Third Parties
C T Walker and N C Z Khouri for Plaintiffs and First, Second, Third, Fourth and Sixth counterclaim Defendants (Gilbert Walker counterclaim defendants)
T P Mullins and K Simcock for Lee Salmon Long Defendants
Judgment: 10 November 2010 at 5.00 p.m.
JUDGMENT OF VENNING J
On application for further and better discovery
This judgment was delivered by me on 10 November 2010 at 5.00 pm, pursuant to Rule 11.5 of the
High Court Rules. Registrar/Deputy Registrar
Date……………
Solicitors: Gilbert Walker, PO Box 1595, Shortland Street, Auckland 1140
Grove Darlow & Partners, PO Box 2882, Shortland Street, Auckland 1140
McElroys, PO Box 835, Shortland Street, Auckland 1140
Lee Salmon Long, PO Box 2026 Shortland Street, Auckland 1140Lowndes Jordan, PO Box 5966, Wellesley Street, Auckland 1141 (K Stolberger)
Jones Fee, PO Box 1801, Shortland Street, Auckland 1140
Chapman Tripp PO Box 2206, Shortland Street, Auckland 1140 (A Ross)
Copy to: P J Dale, PO Box 130, Shortland Street, Auckland 1140
R B Stewart QC, PO Box 2302, Shortland Street, Auckland 1140
J Currie, PO Box 3683, Shortland Street, Auckland 1140F J Thorp, PO Box 3995, Shortland Street Auckland 1140
2
Introduction
[1] The fourth and fifth third parties (the Denham Martin Third Parties) seek an order for further and better discovery against the plaintiffs and the LSL defendants. The application is directed at documents relating to the negotiation of, and effecting of, any agreement concerning the liability of the LSL defendants to the first and second plaintiffs and/or the admission of liability by those defendants. The application is opposed.
The issue
[2] It is not in issue that documents of the type sought in the application exist. The correspondence annexed to Mr Refoy-Butler’s affidavit in support of the application effectively confirms that the plaintiff and the LSL defendants have negotiated an agreement pursuant to which the defendants agreed to admit the plaintiffs’ claims. The issue is whether such documents are relevant.
Principles
[3] The application is made in reliance upon r 8.24 of the High Court Rules. As noted in ANZ National Bank Limited v Tower Insurance Limited r 8.24 does not incorporate the requirement of former r 300 that the particular discovery is “necessary” but the Court may still exercise its discretion in a conservative way.[1]
[1] ANZ National Bank Limited v Tower Insurance Limited HC Auckland CIV-2008-404-7271, 1 September 2009.
[4] Where, as here, the Court is satisfied the documents exist, the focus will be on the relevance of the documents. The test of relevance for discovery purposes was confirmed by the Court of Appeal in ANZ National Bank v Commissioner of Inland Revenue as:[2]
[2] ANZ National Bank v Commissioner of Inland Revenue [2009] NZCA 150
... relevance for discovery purposes is not necessarily the same as relevance in terms of s 7 of the Evidence Act 2006 (BNZ Investments (CA) at para [41]). In particular, it is sufficient in the former case that a document
may lead a party to a train of inquiry which enables that party to advance its own case or damage its adversary’s case.
[5] The matters in question, upon which relevance is to be determined, are informed by the pleadings: New Zealand Rail v Port Marlborough NZ Ltd.[3]
Application to this case
[3] New Zealand Rail v Port Marlborough NZ Ltd [1993] 2 NZLR 641 at 644.
[6] The plaintiffs’ claim against the defendants (including the LSL defendants) for the unpaid balance due under the defendants’ agreements to purchase shares in the plaintiffs (or loss on resale). The principal response of the defendants (other than the LSL defendants) is that they cancelled the agreements on the basis of breach of contract and misrepresentation. The defendants assert affirmative defences to that end.
[7] The defendants, including the LSL defendants, also claim against the third parties. As against the Denham Martin third parties they primarily allege negligence in the provision of opinions. The Denham Martin third parties deny the existence of a duty to the LSL defendants, and put the LSL defendants to proof of loss. They also raise a limitation defence.
[8] The LSL defendants have not filed a defence to the consolidated statement of claim recently filed by the plaintiffs. In fact the LSL defendants filed admissions of claim dated 1 November 2010. From the LSL defendants’ point of view the focus of the proceeding will be on their claim against the third parties, including the Denham Martin third parties.
[9] Despite the admissions filed by the LSL defendants to the plaintiffs’ claim, the issue of the liability of those defendants to the plaintiffs remains at large for the purposes of the LSL defendants’ claim against the Denham Martin third parties. To succeed against the Denham Martin third parties the LSL defendants will have to establish loss as a consequence of the Denham Martin third parties’ negligence:
Fletcher v National Mutual Life;[4] Stott v West Yorkshire Road Car Co Ltd;[5] Baylis v
Waugh;[6] Crichton v Harteveld & Ors.[7] It will be open to the Denham Martin third parties to argue that the LSL defendants had no liability to the plaintiffs and should not have admitted the plaintiffs’ claim.
[4] Fletcher v National Mutual Life [1990] 3 NZLR 641, at 682 – 683.
[5] Stott v West Yorkshire Road Car Co Ltd [1971] QB 651.
[6] Baylis v Waugh [1962] NZLR 44.
[7] Crichton v Harteveld & Ors HC Christchurch CP178/99, 13 June 2001.
[10] Mrs Fee argued that the documents should be discovered as they could enable the Denham Martin third parties to consider:
•the benefits obtained by the LSL defendants in entering the agreement;
• the motivation behind entering the agreement;
•the extent to which the admissions genuinely reflected belief as to liability;
•the extent to which admissions were in conflict with previous positions;
•the extent to which the admissions of claim were constructed in order to advance the claim against the Denham Martin third parties.
[11] Mr Walker submitted that the admissions of the plaintiffs’ claim by the LSL defendants, and any agreement behind the admissions were irrelevant as a matter of law to the LSL defendant’s claim against the Denham Martin third parties as the Denham Martin third parties are able to put in issue the LSL’s liability to the plaintiffs despite the admission. He submitted the position might be different if the agreement contained material relevant to the LSL defendants’ liability to the plaintiffs but the plaintiffs would have discovered the document if that was the case.
[12] Mr Walker also submitted that the obligation to discover was not an obligation to discover documents to enable a party to review them to determine whether they contained anything of relevance.
[13] Mr Mullins supported Mr Walker’s submissions, noting that it was entirely up to the LSL defendants whether they contested liability to the plaintiffs and the fact they had chosen not to could not affect the Denham Martin third parties’ defence to the LSL defendants’ claim against them.
[14] While the argument advanced on behalf of the plaintiffs and the LSL defendants has an initial superficial attraction, on reflection I am satisfied that the plaintiffs and the LSL defendants should discover any agreement between them supporting or leading to the admissions filed with the Court.
[15] I accept Mr Walker’s argument the admissions do not of themselves prove anything in relation to the defendants’ claim against the third parties, but the admissions do quantify an aspect of the loss claimed by the defendants and the agreement pursuant to which the admissions were filed may be relevant to the quantification of that loss.
[16] To establish their claim against the Denham Martin third parties the LSL defendants will have to prove a duty, breach and loss. The agreement leading to the admissions cannot have any relevance to the existence of a duty or its breach. However, it is relevant to the issue of loss, which is an essential element of the cause of action pleaded by the LSL defendants against the Denham Martin third parties. An obvious way to prove loss will be to establish the LSL defendants’ liability to the plaintiffs under the share purchase agreements. The agreement which preceded the admissions will record the acceptance of such liability and is likely to provide the basis for its quantification.
[17] Put another way, to support their claim against the Denham Martin third parties the LSL defendants will inevitably rely on their liability to the plaintiffs under the share purchase agreements. The agreement concluded between the plaintiffs and the LSL defendants is the prime document that provides the basis for that admitted liability. At the very least, discovery of that document may lead the Denham Martin third parties on a train of inquiry which may enable them to advance their defence. It may provide a basis to challenge the defendants’ claim, at least as to quantum. For that reason the settlement agreement leading to the admissions from the LSL defendants, is discoverable.
[18] I am not, however, able to accept Mrs Fee’s submission that the discovery should extend to all documents relating to the negotiation of and giving effect to the agreement. It is accepted that there has been a concluded agreement reached between the LSL defendants and the plaintiffs. That agreement will record the terms upon which the parties settled the matters in issue between them. The negotiations that proceeded it have been effectively subsumed in the final agreement. It is not, in the circumstances, necessary to go behind that final agreement, particularly bearing in mind that the Court’s discretion to order particular discovery should be exercised in a conservative way.
Result
[19] For those reasons the application is successful in part. [20] I make the following orders:
a) The first and second plaintiffs and the LSL defendants are to discover the document or documents which record any agreement concerning the liability of the LSL defendants to the first and second plaintiffs or any admission of liability by the LSL defendants to the first and second plaintiffs (apart from the formal admissions filed with the Court).
b)Subject to c) below, discovery is to be made by the first and second plaintiffs and the LSL defendants filing and serving on the parties to the proceeding an affidavit in the standard form identifying the relevant document(s).
c) If an affidavit on behalf of the first and second plaintiffs is filed confirming the existence of the document(s) one affidavit may be sworn on behalf of the LSL defendants to confirm that the documents discovered by the plaintiffs are the relevant documents. There is no need for a duplication of lists by the LSL defendants.
Privilege
[21] I record that Mr Walker indicated that common interest privilege would be claimed in relation to the agreement if discovery was ordered. If, on reflection, that claim is maintained, the Denham Martin defendants will no doubt wish to challenge the claim to privilege. On receipt of any such application, the Registrar is to refer it to me. I will issue a minute with directions to convene a one hour hearing before me at 9.00 a.m. prior to the end of the year.
Costs
[22] The applicants have succeeded in part. The first and second plaintiffs and the LSL defendants are to pay one award of costs to the Denham Martin third parties for an interlocutory application on a 3B basis. The plaintiffs and the LSL defendants are
to be jointly and severally liable for the award.
Venning J
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