Neville Holdings Limited v Chan HC Auckland CIV 2009-404-2132
[2010] NZHC 1980
•10 November 2010
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2009-404-2132
BETWEEN NEVILLE HOLDINGS LIMITED Plaintiff
ANDMICHAEL CHAN First Defendant
ANDBAYLEY'S REAL ESTATE LIMITED Second Defendant
Hearing: 2 September 2010
Counsel: P T Finnigan for Plaintiff
D Bigio and K Murphy for First Defendant
Judgment: 10 November 2010 at 1:00pm
JUDGMENT OF PETERS J. [on application for discovery]
This judgment was delivered by
The Hon. Justice Peters
On
10 November 2010 at 1:00pm
pursuant to Rule 11.5 of the High Court Rules
……………………………………………..
Registrar/Deputy Registrar
A. Application by plaintiff for order for non-party discovery pursuant to r 8.26 is granted
B. Costs reserved.
Solicitors:
Duthie Whyte (P A Craighead/N Harrison), P O Box 6444 Auckland 1141
LeeSalmonLong (D Salmon), P O Box 2026 Shortland Street, Auckland 1140
Counsel:
P T Finnigan, P O Box 2697 Shortland Street Auckland 1140
David Bigio, P O Box 4338 Shortland Street Auckland 1140Case Officer: Katrina[email protected]
NEVILLE HOLDINGS LTD V CHAN AND ANOR HC AK CIV-2009-404-2132 10 November 2010
[1] By an application dated 4 May 2010 (“application”), the Plaintiff has sought an order requiring two non-parties, namely ANZ National Bank Limited, trading as the National Bank of New Zealand Limited, and Kiwibank Limited (“NBNZ” and “Kiwibank”), to give discovery of particular documents
[2] The application is made in reliance on r 8.26 High Court Rules, which reads as follows:
(1)This rule applies if it appears to a Judge that a person who is not a party to a proceeding may be or may have been in the control of 1 or more documents or a group of documents that the person would have had to discover if the person were a party to the proceeding.
(2)The Judge may, on application, order the person— (a) to file an affidavit stating—
(i)whether the documents are or have been in the person's control; and
(ii) if they have been but are no longer in the person's control, the person's best knowledge and belief as to when the documents ceased to be in the person's control and who now has control of them; and
(b) to serve the affidavit on a party or parties specified in the order; and
(c)if the documents are in the control of the person, to make those documents available for inspection, in accordance with rule 8.33, to the party or parties specified in the order.
(3)An application for an order under subclause (2) must be made on notice to the person and to every other party who has filed an address for service.
(4)The Judge may not make an order under this rule unless satisfied that the order is necessary at the time when the order is made.
[3] A party to a proceeding is required to give discovery by making an affidavit of documents which lists the documents that are or have been in that party’s control and which relate to a matter in question in the proceeding, and which affidavit also complies with rr 8.20 and 8.21. This appears from r 8.18.
[4] A document relates to a matter in question in the proceeding if it is relevant to the matters in question. The classic formulation of “relevance” for the purposes of discovery is that set out in Compagnie Financiére et Commerciale du Pacifique v Peruvian Guano Co.[1] (1882) 11 QBD 55 (CA) at 63. A document relates to a matter in question in the proceeding not only if it would be evidence on any issue but if it may contain information either directly or indirectly enabling a party to advance his
own case or to damage the case of the party’s adversary. A document may advance a party’s case or damage the case of the party’s adversary if it is a document which may lead the party on a train of inquiry which may have either of those consequences.
[1] Compagnie Financiére et Commerciale du Pacifique v Peruvian Guano Co (1882) 11 QBD 55 at 63 (CA).
[5] Accordingly, a Judge may make an order under r 8.26 if it appears to the Judge that a non-party may have been in control of relevant documents. The Judge determining such application must also be satisfied that the order is necessary at the time it is made (see r 8.26(4)). “Necessary” in this context means “reasonably necessary” (see Clear Communications Limited v Telecom Corporation of New
Zealand Limited and Others[2]).
[2] Clear Communications Limited v Telecom Corporation of New Zealand Limited & Ors HC Wellington, M119/93, 30 March 1993, McGechan J.
[6] The Plaintiff has served the application in the manner required by r 8.26(3). Representatives of both non-parties have sworn affidavits to the effect that they have been served with the necessary documents and that they will abide the decision of the Court. If an order for discovery is made, both non-parties wish the Court to require the Plaintiff to pay such reasonable costs as they incur in complying with that order.
Discovery sought
[7] In its application, and incorporating an amendment notified to the Court after the hearing, the Plaintiff seeks an order that the non-parties give discovery of:
“All documents including
(a) all correspondence and emails
(b) memoranda, reports, banker’s diary notes, notes (whether handwritten or typed), records of telephone conversations
(c) applications for finance (d) budgets and cash flows (e) valuations
(f) offers, agreements for sale and purchase and leases with purchase terms in respect of 3 Cortina Place Pakuranga [“the property”]
(g) sent to and or received by the [non party] by the first defendant or any entity on behalf of the first defendant
(h) and or held by or produced by the [non party]
(i) for the period from 1 June 2008 and 31 March 2009
(j) relating to the seeking of finance by the first defendant to fund the purchase of the property and the provision of such finance.”
[8] The First Defendant opposes the application. He takes issue with the Plaintiff as to the relevance of the documents. The First Defendant also takes issue with the Plaintiff as to whether an order is “necessary” in relation to particular classes of documents. In response to the amendment to the order which the Plaintiff proposed after hearing, and without departing from its objections at all, counsel for the First Defendant advised that if an order were to be made, the First Defendant would wish the following amendments to be made: exclude the word “all” in subparagraph (a) above; carve out of subparagraph (c) above any statement of assets and liabilities relating to the First Defendant; exclude from the order any valuations of the property, i.e. delete subparagraph (e) above; amend subparagraph (g) above so that instead of saying “by the first defendant”, say “from the first defendant”; delete sub- paragraph (h) above; and amend the commencement date from 1 June 2008 to 7
August 2008.
Bayley’s Real Estate Limited
[9] For the sake of completeness I note that initially the Plaintiff also sought relief against the Second Defendant, Bayley’s Real Estate Limited (“Bayley’s”). The Plaintiff has discontinued its claim against Bayley’s. Accordingly, references below to “the Defendant” are references to Mr Chan.
Background
[10] By agreement for sale and purchase dated 11 August 2008 (“agreement”), the
Plaintiff agreed to sell to the Defendant, or his nominee, a property situated at
3 Cortina Place, Pakuranga, Auckland (“property”). The agreement provides for a purchase price of $3,725,000, including GST.
[11] Shortly after the agreement was executed, an issue arose between the parties as to whether the purchase price recorded in the agreement was to exclude GST, or was to include it, as is recorded on the face of the document. The agreement was prepared on the ADLS/REINZ Inc eighth edition form. On the face of the form, next to where the purchase price is recorded, the form includes the words “Plus GST (if any) OR inclusive of GST (if any). If neither is deleted the purchase price includes GST (if any).”
[12] The parties did not delete either the “Plus” or “inclusive” option, meaning that by default the purchase price included GST.
[13] When the issue arose, the Plaintiff’s position was that the agreement should have recorded the purchase price was “Plus GST”. The Defendant’s position was that the agreement was correct in recording the price on a GST inclusive basis.
[14] On 20 March 2009, the parties settled the sale and purchase on a GST
inclusive basis, without prejudice to the Plaintiff’s position in this proceeding.
Causes of Action
[15] In its statement of claim the Plaintiff seeks rectification of the agreement, alternatively relief pursuant to the Contractual Mistakes Act 1977 (“Act”), in both cases to provide for a sale price of $3,725,000 plus GST.
[16] At present the Plaintiff’s “mistake” claim is pleaded on the basis of s 6 (1)(a)(i) of the Act, i.e. unilateral mistake known to the Defendant. However, the Plaintiff has signalled that it proposes to amend its pleading so as to include a claim for relief under s 6 (1)(a)(ii) of the Act, i.e. that in entering into the agreement both parties were influenced by the same mistake as to GST.
[17] The Plaintiff also seeks orders against the Defendant for specific performance of the contract, post-rectification or variation under the Act, so as to require the Defendant to pay the GST amount and interest to the Plaintiff.
[18] The Defendant denies that the Plaintiff is entitled to any relief.
Matters in dispute
[19] The main issue between the parties at the hearing of the application was whether any documents held by non-parties, and dated prior to 7 August 2008, could be relevant to any matter in issue in the proceedings.
[20] In support of its application that documents pre-7 August 2008 are relevant and that the appropriate starting point for non-party discovery is 1 June 2008, the Plaintiff relies on evidence sworn on its behalf in support of the application.
[21] Mr McMillan, a director of the Plaintiff, has given evidence that the parties were in negotiations in respect of the property in two distinct periods.
[22] The first period was in June 2008. At that time, the parties were considering a lease of the property from the Plaintiff to the Defendant or his nominee. Mr Harrison, the Plaintiff’s solicitor, has put in evidence an email from Bayley’s to the Defendant dated 10 June 2008. Bayley’s attached a draft agreement to lease to that email and that draft included a provision giving the Defendant a right to require the Plaintiff to sell the property to him at $4,000,000 plus GST.
[23] The second period of negotiations occurred in August 2008. The earliest email in evidence during this period is an email from Bayley’s to the Defendant dated 1 August 2008. Bayley’s sent the Defendant a draft agreement for sale and purchase in respect of the property. Thereafter the parties exchanged several offers and the agreement was then executed on 11 August 2008.
[24] After the agreement was executed, documents attached to the affidavits show that the Defendant was in correspondence with the non-parties regarding finance for part of the purchase price of the property. The earliest document in this respect is 15
August 2008 and the latest is 13 February 2009. As stated, settlement took place on
20 March 2009.
[25] Because of the 10 June email and the terms of the draft lease, the Plaintiff contends the discovery period should run from 1 June 2008. In fact, in its original application, the Plaintiff sought discovery from the non-parties commencing on
1 March 2008. The Plaintiff submits that the fact the Defendant has produced documents as to his communications with non-parties after 11 August does not mean the non-parties do not hold relevant documents created prior to 1 August 2008.
[26] Counsel for the Defendant submitted that, at trial, the issue for the Court on the Plaintiff’s claim for rectification will be whether the Plaintiff can prove the matters set out in Westland Savings Bank v Hancock.[3]In that case, Tipping J said as follows:[4]
[3] Westland Savings Bank v Hancock [1987] 2 NZLR 21.
[4] At 29-30.
... I am of the view that some outward expression of accord is not necessary but that before rectification can be ordered the Court must be satisfied that the following points are established:
(1) That, whether there is in antecedent agreement or not, the parties formed and continued to hold a single corresponding intention on the point in question.
(2)That such intention continued to exist in the minds of both or all parties right up to the moment of execution of the formal instrument of which rectification is sought.
(3)That while there need be no formal communication of the common intention by each party to the other or outward expression of accord, it must be objectively apparent from the words or actions of each party that each party held and continued to hold an intention on the point in question corresponding with the same intention held by each other party.
(4)That the document sought to be rectified does not reflect that matching intention but would do so if rectified in the manner requested.
[27] As for the claim for relief or mistake, amongst other things, the Plaintiff will need to prove at trial that it was influenced in its decision to enter the agreement by a mistake that was material to it, and the existence of the mistake was known to the Defendant or it will need to prove that both parties were influenced by the same mistake.
[28] Counsel for the Defendant, however, submitted that the parties only arrived at the price of $3,725,000 on or shortly before 11 August 2008. Given that, and given that the Plaintiff’s case is either that the agreement did not record the parties’ common intention as to price or that there was a unilateral or mutual mistake, documents prior in time to the parties agreeing on $3,725,000 could not be relevant.
[29] That said, counsel for the Defendant also advised that the Defendant proposed to refer at trial to a letter from the Plaintiff to a third party dated 7 August
2008 and so the Defendant would accept a commencement date of 7 August 2008. As I understood it, the Defendant would also accept, most reluctantly, a starting date of 1 August 2008, given the email and draft agreement referred to above. However, the Plaintiff would not accept that any documents prior to that date could be relevant to the issues on the existing and proposed causes of action.
[30] In my view, the Defendant’s submission takes too narrow a view of what the issues before the Court are likely to be at trial. As I understand it, the issue is whether the price recorded on the face of the agreement is correct in including or excluding GST. The emphasis is not on the $3,725,000 but the parties’ failure (on the Plaintiff’s case) to delete the words “OR inclusive of GST (if any)”.
[31] On a claim for rectification, evidence as to a party’s intention prior to the execution of the instrument to be rectified may be relevant to the issues before the Court. This is clear, for instance, from the Court of Appeal’s decision in Fletcher Challenge Energy Limited v ECNZ Limited.[5] Counsel for the Defendant drew attention to the evidence to which the Court had regard in the Westland case. Counsel’s submission was that the Court had regard only to the memorandum of
mortgage of which the Plaintiff sought rectification. However, counsel for the Plaintiff submitted, correctly in my view, that the Court in Westland did have regard to evidence as to antecedent matters between the parties, namely a loan agreement between the parties which preceded the memorandum of mortgage in issue.
[5] Fletcher Challenge Energy Limited v ECNZ Limited [2002] 2 NZLR 433 (CA) at 444-445 paras [55]-[56].
[32] Accordingly, in my view, documents prior to 1 August 2008 may be relevant to the issues before the Court. Given the email of 10 June 2008 and the provision in the draft lease as to a possible right on the part of the Defendant to purchase the property at $4,000,000 plus GST.
[33] I also consider that discovery of these documents by the non-parties is necessary, in terms of r 8.26(4). The Defendant swore an affidavit in respect of the Plaintiff’s application. In his affidavit, the Defendant stated that he had checked his records and could not find any documents to suggest that he contacted either NBNZ or Kiwibank prior to executing the agreement. Accordingly, as counsel for the Plaintiff submitted, the Defendant has not ruled out the existence of such documents. Accordingly if the documents exist, they will only be in the control of the non- parties.
[34] At the hearing, the Defendant’s counsel emphasised that the Defendant is concerned that the Plaintiff is on a fishing expedition and, in addition, that discovery of the nature sought may well lead to a “blow out” in the length of the trial. I consider that unlikely because the ambit of the order will be relatively confined.
[35] Accordingly, I propose to make an order requiring the non-parties to give discovery of particular documents (as to which, see below) from 1 June 2008.
[36] Insofar as concerns the documents of which discovery is to be given, I accept the Defendant’s submission that any statement of assets and liabilities of the Defendant’s, and valuations of the property, if any, could not be relevant to any of the Plaintiff’s existing or proposed causes of action. At the hearing, counsel for the Plaintiff submitted that a valuation or valuations of the property might reveal that the property was of sufficient value to secure borrowings of $3,725,000 plus GST. Even if that were so, it could not be relevant to the matters in issue in the proceeding. The amendment the Defendant has proposed to [7](g) above is also helpful to clarify matters.
Costs
[37] Costs are reserved. This is the order the Plaintiff originally sought as to costs when it made its application. Shortly after the trial the Plaintiff sought to alter its position and asked for an order for costs. In my view, it was too late for the Plaintiff to do so. Also, the Plaintiff itself amended its application significantly, so that the commencement date ran from 1 June 2008 rather than the 1 March 2008 date the Plaintiff originally sought. The Defendant has had success on other points also.
[38] The Plaintiff’s application proposed a form of discovery and inspection by the non-parties which is more informal than that permitted by r 8.26. The parties will see from the form of the Orders below that they are framed in terms of r 8.26. However, if by agreement the parties and non-parties prefer to proceed in a different way, and the Plaintiff were to advise the non-parties that, in fact, it no longer requires them to file and serve an affidavit of documents, then that is a matter for them.
[39] In addition, originally in its application the Plaintiff proposed that the non- parties would have a 14 day period in which to file and serve affidavits as to the documents of which discovery is to be ordered. After the hearing, the Plaintiff advised that a 21 day period would be preferable. Accordingly, I make the following orders.
[40] ANZ National Bank Limited (“NBNZ”) is ordered:
a) To file an affidavit stating:
i)whether the documents (“documents”) listed below are or have been in its control; and
ii)if the documents have been but are no longer in its control, its best knowledge and belief as to when the documents ceased to be in its control and who now has control of them; and
b) To serve the affidavit on the Plaintiff and the First Defendant; and
c)If the documents are in NBNZ’s control, to make the documents available for inspection, in accordance with r 8.33 High Court Rules, to the Plaintiff and the First Defendant.
d)To attend to such filing and service within 21 days after service on it of this order.
Documents
All documents including
(a) correspondence and emails
(b)memoranda, reports, banker’s diary notes, notes (whether handwritten or typed), records of telephone conversations
(c)applications for finance (but not any statements of assets and liabilities)
(d) budgets and cash flows
(e)offers, agreements for sale and purchase and leases with purchase terms in respect of 3 Cortina Place Pakuranga (“the property”) sent to and or received by ANZ National Bank Limited from the First Defendant or any entity on behalf of the First Defendant
(f) between 1 June 2008 and 31 March 2009 and
(g)relating to the seeking of finance by the First Defendant to fund the purchase of the property and the provision of such finance.
[41] Kiwibank Limited (“Kiwibank”) is ordered:
a) To file an affidavit stating:
i)whether the documents (“documents”) listed below are or have been in its control; and
ii)if the documents have been but are no longer in its control, its best knowledge and belief as to when the documents ceased to be in its control and who now has control of them; and
b) To serve the affidavit on the Plaintiff and the First Defendant; and
c)If the documents are in Kiwibank’s control, to make the documents available for inspection, in accordance with r 8.33 High Court Rules, to the Plaintiff and the First Defendant.
d)To attend to such filing and service within 21 days after service on it of this order.
Documents
All documents which are or have been in the control of Kiwibank Limited including
(a) correspondence and emails
(b)memoranda, reports, banker’s diary notes, notes (whether handwritten or typed), records of telephone conversations
(c)applications for finance (but not any statements of assets and liabilities)
(d) budgets and cash flows
(e)offers, agreements for sale and purchase and leases with purchase terms in respect of 3 Cortina Place Pakuranga (“the
property”) sent to and or received by Kiwibank Limited from the First Defendant or any entity on behalf of the First Defendant
(f) between 1 June 2008 and 31 March 2009 and
(g)relating to the seeking of finance by the First Defendant to fund the purchase of the property and the provision of such finance.
[42] The Plaintiff is to pay the reasonable costs of ANZ National Bank Limited and of Kiwibank Limited in carrying out the terms of this order.
[43] The costs of this application as between the Plaintiff and the First Defendant are reserved.
.................................................................
PETERS J
0
0
1