NICON LIMITED AND TOWER INSURANCE LIMITED QUSOL (NZ) LIMITED (in liquidation) AND MAYFIELD GROUP HOLDINGS LIMITED Party
[2024] NZHC 3351
•12 November 2024
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE
CIV-2015-409-111
[2024] NZHC 3351
BETWEEN NICON LIMITED
Plaintiff
AND
TOWER INSURANCE LIMITED
First Defendant
QUSOL (NZ) LIMITED (in liquidation) Second Defendant
AND
MAYFIELD GROUP HOLDINGS LIMITED
Third Party
Hearing: 21 October 2024 Appearances:
P B McMenamin for Plaintiff No appearance for Defendants B P Molloy for Third Party
Judgment:
12 November 2024
JUDGMENT OF ASSOCIATE JUDGE PAULSEN
This judgment was delivered by me on 12 November 2024 at 4.15 pm pursuant to rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date:
NICON LIMITED v TOWER INSURANCE LIMITED [2024] NZHC 3351 [12 November 2024]
[1] Nicon Ltd was a demolition contractor operating in Canterbury following the 2010 and 2011 earthquakes. The first defendant, Tower Insurance Ltd, contracted with Stream Group NZ Pty Ltd (now known as Qusol (NZ) Ltd (in liquidation)) to provide project management services to manage earthquake claims. Stream in turn contracted with other companies to provide assessments and cost estimates for work. Nicon provided assessments for the cost to demolish earthquake damaged properties.
[2] Nicon and Stream (as agent for Tower) entered into a heads of agreement on 28 February 2011 (the HOA). Nicon is suing the defendants for breach of the HOA. It claims the defendants failed to provide it with demolition work to which it was entitled and seeks damages. It assesses its loss as the gross profit that would have been earned on the demolition of 655 properties.
[3] Nicon’s claim has been partly heard. The High Court was asked to determine four preliminary questions. The questions included the following:
(a)Does the HOA bind Tower and Stream (and, indeed, Nicon too)?
(b)If the answer to (a) is “yes”, does the HOA oblige Tower and Stream to offer all the demolition work to Nicon in respect of properties for which Nicon had provided assessments?
[4] Gendall J issued a judgment answering the preliminary questions.1 Tower and Stream appealed to the Court of Appeal. The appeal was dismissed.2 I will return to the findings made in the High Court and Court of Appeal later in this judgment.
[5] There are applications before me by both Nicon and the third party, Mayfield Group Holdings Ltd. Nicon applies for orders striking out parts of the third party’s statement of defence of 16 August 2023 on the basis:
1 Nicon Ltd v Tower Insurance Ltd [2018] NZHC 2005.
2 Tower Insurance Ltd v Nicon Ltd [2019] NZCA 332, [2020] NZCCLR 7.
(a)certain pleadings are an abuse of process, in that they raise issues already finally determined in this proceeding by the High Court and Court of Appeal judgments; and
(b)certain other pleadings do not disclose a reasonably arguable defence.
[6] The third party applies for particular discovery of documents in relation to Nicon’s waste disposal and recycling operations, particularly in respect to health and safety and other statutory compliance obligations.
[7]The third party also applies for an order that Nicon answer interrogatories.3
Nicon’s strike out application
[8] Before turning to the substance of the application, I set out the findings of the High Court and the Court of Appeal on the two preliminary questions in [3] above.
[9] In relation to the first preliminary question, Gendall J found that the HOA was a binding contract between the parties.4 The Court of Appeal agreed with that conclusion.5
[10] In relation to the second preliminary question, whether the HOA obliged Tower and Stream to offer all demolition work to Nicon in respect of properties for which Nicon had provided assessments, Gendall J held that strictly speaking the answer to that was “no”, but this was subject to qualifications as follows:
[77] These exclusions support the interpretation I have taken above. The first makes it clear that Stream is allowed to engage other contractors if, when Nicon is offered the work, it has indicated that it does not have the capacity to undertake the work in a timely manner and thus to meet the necessary time frames. But initially, where Nicon is able to do the work in a timely way, Stream is not permitted to simply engage another contractor instead for no specific reason. This, of course, is also subject to the further reservation and exclusion I outline below.
[78] This second reservation permits Stream to enter into a competitive tendering process for any contract at any stage to ensure a market rate for
3 An application that Nicon provide further security for costs has been resolved by agreement.
4 Nicon Ltd v Tower Insurance Ltd, above n 1, at [57] and [62].
5 Tower Insurance Ltd v Nicon Ltd, above n 2, at [43].
demolition contracts is maintained under the HOA. However, in my judgment, Nicon as the “preferred contractor” is clearly meant to be part of this tendering process. Otherwise, those words, “preferred contractor” would mean nothing. I agree with Nicon’s submission that this clause does not allow Stream to sidestep offering to Nicon the chance at least to be engaged in any competitive tendering process that occurs. Whether indeed this may or may not have occurred here is another separate matter, however.
[11] The Court of Appeal agreed with Gendall J’s findings in respect to Nicon’s entitlement to be offered demolition work for which it had provided assessments. The Court of Appeal said Nicon had what was effectively a first right of refusal in respect to the work, and:
[55] In our view, the ordinary meaning of the words of the document when read as a whole is that Stream must offer Nicon all demolition work in respect of which Nicon has provided an assessment. The only circumstances in which Stream is able to offer the work to another contractor is if Nicon is unable to complete the work in the required time frame or if, following a competitive tender process, its rate is not a market rate.
[56] As to the meaning of “a competitive tender process” we agree with Gendall J that this at the very least required Nicon to be part of a tender process. It would certainly not be sufficient for Stream to compare the quote Nicon had given at the time it undertook its assessment with a more recent quote from another contractor. We also agree with Gendall J that on the evidence before him, it does not appear a competitive tender process did take place.
Relevant principles
[12] In applying to strike out parts of the third party’s statement of defence Nicon relies upon r 15.1 of the High Court Rules 2016 (the Rules), which provides:
15.1 Dismissing or staying all or part of proceeding
(1)The court may strike out all or part of a pleading if it
(a)discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or
…
(d) is otherwise an abuse of the process of the court.
[13] The general principles applicable to the exercise of the Court’s power under r 15.1 are well known.6 Pleaded facts, whether or not admitted, are deemed to be true. Normally the Court will not consider evidence inconsistent with the pleading as a strike out application proceeds on the basis that what has been pleaded may be proved.7 This does not extend to pleaded allegations which are entirely speculative and without foundation.8 The cause of action or defence must be clearly untenable before it will be struck out, so the jurisdiction is to be exercised sparingly and only in clear cases.
[14] One of the recognised categories of abuse of process is where a party attempts to re-relitigate an issue which has already been determined by the Court.9 A judicial determination of issues of fact or law, along with any matters which it was necessary for the Court to decide as the basis for its decision, are final and conclusive as between the same parties or their privies.10
[15] The findings of the Court of Appeal on the preliminary issues are beyond challenge in this proceeding. In issue is whether matters pleaded by the third party were decided in the judgment or were an essential and necessary step forming the groundwork for it. The third party’s argument is that the matters pleaded were not decided and were not legally indispensable to the Court of Appeal’s conclusions on the preliminary issues. Nicon disagrees.
Paragraph 13(a) of the statement of defence
[16] At paragraph 13 of Nicon’s fourth amended statement of claim it pleads the defendants were contractually bound to offer it the demolition work for 655 properties at the price it quoted. At paragraph 16 it pleads the defendants failed to offer it the opportunity to undertake that work and the properties were demolished by other contractors.
6 Jessica Gorman and others McGechan on Procedure (online ed, Thomson Reuters) at [HR15.1.02(1)], citing Attorney-General v Prince [1998] 1 NZLR 262 (CA) at 267 and Couch v Attorney-General [2008] NZSC 45, [2008] 3 NZLR 725 at [33].
7 Attorney-General v McVeagh [1995] 1 NZLR 558 (CA) at 566.
8 McGechan on Procedure, above n 6.
9 McGechan on Procedure, above n 6, at [HR15.1.05(2)(a)].
10 Blair v Curran (1939) 62 CLR 464, 531–533, cited in Patrick Keane Spencer Bower and Handley: Res Judicata (6th ed, LexisNexis, London, 2024) at 107–108.
[17]The third party pleads in response to paragraph 13:
...
(a)The second defendant was not obliged to offer [Nicon] the opportunity to demolish the 276 properties listed in schedule 1 to the first defendant’s Statement of Defence dated 4 July 2023 because its obligations … applied only to properties that were to be demolished by contractors appointed by the second defendant;
...
[18] Some properties for which Nicon provided assessments were demolished by contractors appointed by third parties and not the defendants. The reasons are said to include that the Canterbury Earthquake Recovery Authority took control of the demolition of properties in the Red Zone through the operation of the Canterbury Earthquake Recovery Act 2011. The third party says Nicon can have no claim in respect to such properties.
[19] Nicon argues the pleading is an abuse of process because the essence of the judgments is that by commissioning and receiving an assessment from Nicon the defendants became contractually bound to award the demolition work that eventuated on that property to Nicon in all but two circumstances. It argues the third party’s pleading is a challenge to the comprehensive nature of the findings of the High Court and Court of Appeal, and is an impermissible attempt to impose an additional limitation on its entitlement to perform demolition work that is not to be found in the judgments.
[20] I do not consider the position is as clear as Nicon contends. Neither judgment expressly deals with the circumstance where demolition work was undertaken by contractors appointed by a third party. The judgments proceed on the basis the primary obligation owed by the defendants under the HOA was to prioritise Nicon when allocating the demolition work they undertook.11 As Gendall J noted:
[73] I consider that in this context the ordinary and plain meaning of the term is that in a general sense Stream will prioritise or tend to choose Nicon when allocating its demolition work. This creates an approach whereby work will be first offered to Nicon as Tower’s preferred contractor and then only
11 Nicon Ltd v Tower Insurance Ltd, above n 1.
offered to other contractors if Nicon either declines, or cannot meet the time frames required, or its pricing is not generally competitive with market rates at the time. ...
(emphasis added)
[21] The Court of Appeal did not purport to differ from Gendall J’s conclusion. The position is also reflected in the Court of Appeal’s view that Nicon effectively had a first right of refusal, where the Court said:12
[55] … The only circumstances in which Stream is able to offer the work to another contractor is if Nicon is unable to complete the work in the required time frame or if, following a competitive tender process, its rate is not a market rate.
(emphasis added)
[22]It follows that I do not strike out this pleading.
Paragraph 13(c) of the statement of defence
[23] Again in response to Nicon’s pleading the defendants were obligated to offer it the demolition work for the 655 properties, the third party pleads:
(c)The second defendant was not obliged to offer [Nicon] the opportunity to demolish the 35 properties listed in schedule 3 to the first defendant’s Statement of Defence dated 4 July 2023 because these demolitions were allocated by it to other contractors in order to:
(i)Ensure a market rate for demolitions was maintained; and
(ii)Facilitate the timely remediation of the complete claim volume.
[24] The first of the exceptions to Nicon’s entitlement to be allocated demolition work applied “if, following a competitive tender process, [Nicon’s] rate is not a market rate”.13 Nicon says the judgments are clear that obtaining an alternative quote from another contractor would not of itself qualify as a competitive tender.14
12 Tower Insurance Ltd v Nicon Ltd, above n 2.
13 Tower Insurance Ltd v Nicon Ltd, above n 2, at [55].
14 Nicon Ltd v Tower Insurance Ltd, above n 1, at [78]; and Tower Insurance Ltd v Nicon, above n 2, at [56].
[25] In respect to the second exception, the Court of Appeal said, “[t]he only circumstances in which Stream is able to offer the work to another contractor is if Nicon is unable to complete the work in the required time frame …”.15
[26] Nicon again submits that the precise parameters of the exceptions to its entitlement to demolition work were carefully considered and defined in the judgments and these pleadings are incompatible with them.
[27] Nicon is correct in my view to challenge this pleading. Neither Gendall J nor the Court of Appeal held that the defendants had an unqualified right to allocate work to other contractors to ensure market rates were maintained or to facilitate the timely remediation of claims. The exceptions required the defendants to first offer Nicon all demolitions for which it had provided assessments, and to then offer that work to another contractor only if Nicon was unable to complete the work within “the required time frame” or following a “competitive tender process”. As it stands, this pleading is incompatible with those findings.
[28] I have not overlooked the third party’s position that neither judgment decided what would satisfy the requirement for a competitive tender process. However, what is clear is that a competitive tender process was to be followed if work was to be allocated to other contractors on the basis of price. There is no pleading that the defendants followed a competitive tender process or what they say it consisted of.
[29] It follows, in my view, that the third party’s pleadings should be struck out with leave to amend to reflect the true scope of the exceptions. To the extent the third party says the exceptions apply, Nicon is entitled to particulars of any alleged refusals by Nicon to undertake the work at all or within required time frames, and the details of any competitive tender process upon which the defendants relied when allocating the work to other contractors on the basis of price.
15 Tower Insurance Ltd v Nicon Ltd, above n 2, at [55].
Paragraph 18(e)of the statement of defence
[30] Paragraph 18 of Nicon’s fourth amended statement of claim is concerned with the loss it says it suffered as a result of the defendants’ breach of the HOA. The third party denies Nicon’s pleading that the loss amounted to $2,207,456 and pleads:
...
(e)[Nicon] did not have the capacity to complete the demolition of all of the properties listed in the schedule to the statement of claim in a timely manner;
…
[31] Nicon again argues that this pleading is an attempt to introduce a further exception into the HOA. It contends the defendants had an “absolute obligation to allocate the work to Nicon”, and that unless it can be established the exceptions apply the extent of Nicon’s resources to undertake the work is irrelevant.
[32] This pleading does not concern the interpretation of the HOA (which is what the judgments of Gendall J and Court of Appeal were primarily concerned with) or whether the defendants breached the HOA by failing to offer work to Nicon. Instead, it relates to the separate question of Nicon’s loss that flowed from any breaches of the HOA.
[33] Nicon’s case is that it has suffered loss of profits on the work it did not have the opportunity to undertake. Its capacity to undertake the work and earn the profit has been put in issue. That evidence of Nicon’s capacity to do work was called at the preliminary questions hearing does not prevent that issue being raised at trial in the assessment of its loss. There are no findings in the judgments concerning Nicon’s capacity to do work had it been awarded, and the evidence given in respect to that was not fundamental to the resolution of the preliminary questions.
[34]It follows that I do not strike out this pleading.
Paragraph 18(f) of the statement of defence
[35]The third party pleads:
...
(g)[Nicon’s] claimed loss is only a loss of a chance that was unlikely to materialise;
…
[36] The third party argues the effect of the judgments on the preliminary issues is that the defendants were obliged only to involve Nicon in its decision making for the allocation of demolition work but there was no guarantee of work. It says Nicon’s losses must be assessed on the basis Nicon lost a chance to match or beat a competitor’s price and thereby get the demolition work.
[37] The third party’s analysis is, to my mind, incorrect and incompatible with the judgments on the preliminary issues. This is not a case where the parties contracted for a chance or anticipated that chance would have a part to play in realising the benefits of their contract.16 Further, whether Nicon was entitled to be allocated all, some or none of the 655 demolition jobs is not unknowable. It is susceptible of proof on the balance of probabilities.17
[38] If Nicon’s quote was above the market following a competitive tender process or it could not meet a required time frame, the work could be offered to another contractor. In such a case no breach of the HOA would have occurred and Nicon would not have suffered compensable loss. However, where Nicon establishes demolition work was offered to another contactor in breach of the HOA it will be entitled to damages assessed on ordinary contract principles. In neither case will the Court be required to choose between an all or nothing or lost chance approach to the assessment of damages.
[39] This pleading is also objectionable because it opens the door for the third party to introduce irrelevant evidence if, for instance, the third party invited the Court to
16 See the discussion in Strack v Grey [2019] NZCA 432, (2019) 20 NZCPR 408.
17 At [51], citing Gregg v Scott [2005] UKHL 2, [2005] 2 AC 176 at [82].
undertake a loss of a chance analysis in relation to 655 demolitions, greatly extending the trial and increasing the parties’ costs.
[40]For those reasons I consider this pleading should be struck out.
Paragraph 21 of the statement of defence
[41]I deal with these together. The third party pleads:
21.[Nicon] has failed to mitigate its losses by:
Particulars
(a)refusing to provide updated quotes to reflect the market rates offered by other demolition contractors in Christchurch;
(b)advising the second defendant it was unwilling to meet the market rates of demolition work;
(c)failing to make reasonable inquiries or take steps to find alternative drilling or demolition works;
...
[42] Nicon says these pleadings should be struck out as paragraphs 21(a) and (b) challenge the judgments on the preliminary issues. In relation to paragraph 21(c), Nicon says it had no obligation to mitigate its loss arising from the breach of the HOA.
[43] The so-called obligation to mitigate encompasses principles that a party suing for breach of contract cannot recover loss that could have been avoided by taking reasonable steps, nor can that party recover potential loss that was in fact avoided by the taking of such steps. The onus of proof to show that Nicon could have mitigated its loss consequent upon a breach of the HOA rests on the defendants and third party.18
[44] The steps the third party pleads Nicon should have taken at paragraph 21(a) and (b) are not concerned with mitigation of loss. They might potentially be relevant to whether the defendants breached the HOA by awarding work to another contractor if, for instance, it is alleged that Nicon refused to provide updated quotes as part of a
18 See the discussion in Donald Harris, David Campbell and Roger Halson Remedies in Contract and Tort (2nd ed, Cambridge University Press, Cambridge, 2005) at 109–114.
competitive tender process or told the defendants it was exiting the demolition market altogether. I therefore do not strike out the pleadings.
[45] Nicon’s position in relation to paragraph 21(c), that it had no obligation to take reasonable steps to avoid loss, is founded upon what I consider is an erroneous view that providing an estimate/quote for demolition work was the consideration for the performance of the work and it could not therefore mitigate its loss. In my view, the primary consideration for payment of the quoted price was performance of the work itself. I therefore accept that the third party is entitled to raise in defence of Nicon’s damages claim any benefits that Nicon did or should reasonably have received through the deployment of its resources for alternative works. On that basis, paragraph 21(c) should not be struck out either.
[46] As a further argument, Mr McMenamin submits that the obligation to mitigate could not arise until Nicon was aware of the defendants’ breach and Nicon was never notified when work was allocated to other contractors. That may well be a valid argument, but it requires findings of fact which cannot be made on this application.
[47]The orders made on this application are at [84].
Particular discovery
[48] Since September 2023 there has been much correspondence between solicitors concerning the third party’s requests for further discovery, including in relation to Nicon’s recycling and disposal operations.
[49] The third party filed its application for particular discovery on 14 May 2024 and an amended application on 16 August 2024. The categories of documents in respect to which the third party sought particular discovery were wide ranging, but at the hearing Mr Molloy advised that the focus of the third party’s request is Nicon’s recycling and disposal operations (as opposed to its demolition operations).
[50] Responding to the criticism as to breadth of the further discovery sought (and because Nicon has responded to some requests and others have been abandoned),
Mr Molloy advised that the third party would be satisfied if particular discovery was ordered in the following categories:
(a)any site-specific safety plans relating to each recycling site;
(b)any documents relating to applications for and compliance with any resource or building consents or other local government statutory requirements for each recycling site;
(c)any documents relevant to the costs incurred by Nicon for the disposal of waste from the recycling sites;
(d)financial accounts of Nicon for the 2009 to 2011 financial years; and
(e)the general ledger of Nicon for the period 2009 to 2014.
[51] As a result of this modification in the third party’s position some of the objections raised by Nicon, such as that the categories of documents sought are not sufficiently described or are impossible to identify, lose their initial force.
The law
[52] Rule 8.19 allows a party to seek further discovery where it appears another party has not discovered documents that ought to have been discovered. As the authors of McGechan on Procedure note, it is “one of the ways of circumventing the conclusiveness rule applicable to discovery affidavits”.19
[53]Rule 8.19 provides:
8.19Order for particular discovery against party after proceeding commenced
If at any stage of the proceeding it appears to a Judge, from evidence or from the nature or circumstances of the case or from any document filed in the proceeding, that there are grounds for believing that a party has not discovered 1 or more documents or a group of documents that should have been discovered, the Judge may order that party—
19 McGechan on Procedure, above n 6, at [HR8.19.01].
(a)to file an affidavit stating—
(i)whether the documents are or have been in the party’s control; and
(ii)if they have been but are no longer in the party’s control, the party’s best knowledge and belief as to when the documents ceased to be in the party’s control and who now has control of them; and
(b)to serve the affidavit on the other party or parties; and
(c)if the documents are in the person’s control, to make those documents available for inspection, in accordance with rule 8.27, to the other party or parties.
[54] Whether a document “should have been discovered” will be determined by reference to the “adverse documents” test for standard discovery in r 8.7, or any stricter test imposed under tailored discovery pursuant to r 8.8.20 Here the parties were ordered to provide standard discovery.
[55] The main issue on such applications tends to be whether there are grounds for believing a party has not discovered documents that should have been discovered. In deciding whether to order further discovery the Court generally adopts the following four-stage approach to such applications as outlined in Assa Abloy New Zealand Ltd v Allegion (NZ) Ltd:21
(a)Are the documents sought relevant, and if so how important will they be?
(b)Are there grounds for belief that the documents sought exist? This will often be a matter of inference. How strong is that evidence?
(c)Is discovery proportionate, assessing proportionality in accordance with Part 1 of the Discovery Checklist in the High Court Rules?
(d)Weighing and balancing these matters, in the Court’s discretion applying r 8.19, is an order appropriate?
[56]I will deal with this application applying the Assa Abloy criteria.
20 Lighter Quay Residents’ Society Incorporated v Waterfront Properties (2009) Ltd [2017] NZHC 818 at [16(c)].
21 Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd [2015] NZHC 2760, [2018] NZAR 600 at [14].
Are the documents sought relevant?
[57] The third party’s amended statement of defence of 16 August 2024 pleads that it was an implied term of the HOA that Nicon would meet health and safety requirements for demolition work including its recycling operations (paragraph 5(d)), that Nicon did not lawfully undertake demolition, disposal and recycling operations in compliance with its health and safety obligations and the required resource consents (paragraph 5(e)), and that Nicon’s profit calculation is inflated due to its failure to recognise the true cost of demolition and disposal had it been undertaking its operations in compliance with those obligations (paragraph 18(f)). Mr Molloy argues the particular discovery sought is relevant to those pleadings.
[58] Nicon argues the documents are not relevant. It submits in assessing its loss the only relevant question is how profitable the business was overall, in respect to which it has provided its relevant financial statements. Nicon contends that the manner in which the business operated and whether it complied with or breached resource consents, health and safety or other compliance requirements is not relevant to that assessment.
[59] The evidence is that there are strict compliance requirements in undertaking recycling operations, involving significant costs. Nicon has raised the fact it undertook its own recycling and its methods of doing so as factors to support its gross profit margin, which the third party contends is inflated. Documents relevant to Nicon’s compliance processes and the costs associated with them are in issue on the pleadings and will clearly be an issue at trial. In my view, documents in the categories sought are relevant and may be important in the assessment of Nicon’s loss.
[60] However, I note Nicon carried out work for the defendants from February 2011 until the end of 2012. The third party seeks financial statements for the years 2009 to 2011 and a general ledger for the period 2009 to 2014. I understand from counsel’s correspondence that Nicon’s financial statements for the 2012 to 2014 years have been disclosed but not a general ledger. In my view the financial accounts and general ledger for the years 2010 to 2014 are relevant to the issues and should be disclosed.
This covers periods both before and after Nicon undertook work sufficient to assess Nicon’s historical profitability and any issues concerning mitigation.
Are there grounds for belief that the documents sought exist?
[61] Mr McMenamin says the affidavits filed in support of the application do little more than attach correspondence between lawyers and do not touch on the existence of documents relating to the issue of compliance with health and safety risks and hazards, nor is there any evidence of a general company ledger or other financial records. I do not agree.
[62] The evidence of Mr Giltrap speaks to health and safety and other compliance matters and the existence of documents relating to such matters, some of which have already been discovered. Mr Giltrap says Nicon’s health and safety practises were meticulous.
[63] There is also no doubt that Nicon has financial accounts and base documents supporting those accounts. It is to be expected that Nicon would have a general ledger and there is no denial of this; rather Nicon’s position is that it is irrelevant to the issues.
Is discovery proportionate, assessing proportionality in accordance with pt 1 of the Discovery Checklist in the Rules?
[64] Nicon has raised proportionality concerns. In respect to scope of the discovery sought in the application as filed, Mr Giltrap gave evidence:
13… extracting, categorising and reproducing for inspection all the documents which make up [Nicon’s] health and safety portfolios across 186 properties would be a huge task. …
14Further, even if this were done, it is not clear that this would satisfy the demands in the application. Health and safety touches upon almost every aspect of the demolition operation and the open open- ended nature of the questions provides no limit as to what is sought. This could seemingly encompass day-to-day practices including such matters as vehicle maintenance, licensing and warrants of fitness, driver hours and other every day activities.
[65] These comments are pertinent to the request for any documents relevant to Nicon’s compliance with statutory obligations in recycling operations. That category
of documents is so widely defined it could encompass most aspects of Nicon’s business. I consider it would be disproportionate to order discovery on this basis, particularly in circumstances where the allegations that Nicon either did not have or did not comply with health and safety plans and resource or other consents are expressed in the broadest of terms. In this particular respect, I consider further discovery should be limited and Nicon must disclose only its site-specific plans and resource or other local body consents relevant to the operation of its recycling and disposal operations.
[66] In relation to the costs incurred in disposal of waste, this has been addressed by Mr Giltrap in his affidavit where he says the only documents relating to waste disposal would be monthly accounts from the Burwood Resource Recovery Centre for tip fees but these documents cannot be located. He says the tip fees are incorporated in Nicon’s financial accounts. However, Mr Molloy points out that in Mr Giltrap’s affidavit he also produced an invoice for dumping asbestos, which did not form part of Nicon’s discovery and appears contrary to Mr Giltrap’s evidence that such documents do not exist or cannot be found. For this reason, a further search for documents relevant to dumping should be undertaken.
Weighing and balancing these matters, in the Court’s discretion applying r 8.19, is an order appropriate?
[67] Mr McMenamin argues that the third party’s pleadings concerning Nicon’s recycling and disposal operations have been made in response to Nicon’s challenge that there was no relevant pleading putting those matters in issue. He submits that the request for particular discovery is a fishing exercise and the allegations made to justify the further discovery are baseless.22 I do not accept this submission.
[68] In the third party’s statement of defence of 28 September 2022 the third party pleaded that it was an essential term of the HOA that Nicon meet health and safety requirements for demolition work, and on occasions had not met those requirements. While I accept the third party’s latest pleading has a new focus on the recycling and
22 Australian Mutual Provident Society v Architectural Windows Ltd [1986] 2 NZLR 190, (1986) 2 PRNZ 510; and Securitibank Ltd v Rutherford (No 31) HC Auckland A355/81, 14 August 1984, citing Lockhart J in W A Pines Pty Ltd v Bannerman (1980) 41 FLR 175, 190.
disposal operations, health and safety compliance has been in issue for some time. Also, Nicon’s compliance with health and safety and other requirements is raised as an aspect of a broader challenge to Nicon’s loss assessment which has always been in issue.
[69]The orders made on this application are at [85].
Interrogatories
[70] The third party’s application for an order that Nicon answer interrogatories is made under r 8.38 of the Rules. The interrogatories concern Nicon’s recycling operations. As with the application for further discovery, the third party’s position was modified at the hearing. It no longer seeks answers to some interrogatories and seeks to amend others. The interrogatories are few in number and are as follows:
(i)What steps did [Nicon] take to systematically identify any health and safety risks and hazards in its demolition, recycling and disposal operation?
(ii)Were site-specific safety plans prepared for the demolition, recycling and disposal operation undertaken by [Nicon]?
...
(v)What were the exact locations at which the recycling operations of [Nicon] were undertaken?
(vi)Were any resource consents obtained to allow for the recycling operations to have been lawfully undertaken at those locations?
(vii)Please advise the quantity of waste that was required to be disposed of by [Nicon]?
The law
[71]Rule 8.38 of the Rules provides as follows:
8.38 Order to answer
(1)A Judge may, at any stage of any proceeding, order any party to file and serve on any other party (whether the interrogating party or not) a statement prepared in accordance with rule 8.39 in answer to interrogatories specified or referred to in the order.
(2)The interrogatories must relate to matters in question in the proceeding.
(3)The order may require the statement to be verified by affidavit.
(4)The Judge must not make an order under subclause (1) unless satisfied that the order is necessary at the time when it is made.
[72] Rule 8.40 sets out grounds upon which a party may object to answering an interrogatory, although it has been held that objections are not limited to the specified grounds. Rule 8.40 relevantly provides:
8.40 Objection to answer
(1)A party may object to answer an interrogatory on the following grounds only:
(a)that the interrogatory does not relate to a matter in question between the parties involved in the interrogatories:
(b)that the interrogatory is vexatious or oppressive:
(c)that the information sought is privileged:
(d)that the sole object of the interrogatory is to ascertain the names of witnesses.
…
[73] A useful summary of the relevant law is to be found in Todd Pohokura Ltd v Shell Exploration Ltd as follows:23
[14] It is appropriate to summarise briefly the nature, purpose and permissible scope of interrogatories. An interrogatory is a question asked before trial for the purpose of eliciting an answer on oath or affirmation which is admissible in evidence at trial. Like all questions, it must be directed towards advancing one side’s case or damaging the other’s case. It must accordingly be relevant to an issue raised on the pleadings or a fact in dispute for determination.
[15] An interrogatory must also, like a question in cross-examination, be precise and unequivocal, and amenable to a direct and meaningful answer from information within the knowledge of or reasonably available to the person required to answer. It must not place unnecessary or burdensome obligations on the interrogated party, or be prolix. And its purpose must not be to search or probe on the speculative basis that an answer may prove relevant (colloquially known as fishing). A question which offends these elements will fall within the general category of oppressiveness.
[16] An interrogatory is an exception to the settled manner of adducing evidence and in particular to a defendant’s right not to call evidence at trial. Accordingly the Court must be satisfied that the interrogatory is necessary
23 Todd Pohokura Ltd v Shell Exploration NZ Ltd [2009] NZCA 561.
where an application to issue interrogatories is opposed: r 8.5 High Court Rules. A material consideration is whether briefs of evidence will be given by the party to be interrogated. Moreover, an interrogatory is not to be confused with a request for further particulars.
Submissions
[74] The third party argues that the interrogatories are relevant to the pleadings concerning Nicon’s recycling and disposal operations and its statutory compliance (paragraphs 5(e), 13(d) and (e), and 18(f) of the statement of defence), and that an order Nicon provide answers to the interrogatories is necessary as it has “steadfastly” refused to answer questions concerning compliance issues relating to the recycling operations.
[75] Nicon argues that the interrogatories do not have any bearing on the “real issues” that arise in the proceeding and are a fishing exercise. It also submits the interrogatories are objectionable as concerning “peripheral evidence”. Mr McMenamin submits it is axiomatic that interrogatories may be administered to elicit primary facts but not evidence of those facts.24 Nicon also complains that the interrogatories are in some respects not sufficiently precise.
Analysis
[76]The first interrogatory in issue reads as follows:
What steps did [Nicon] take to systematically identify any health and safety risks and hazards in its demolition, recycling and disposal operation?
[77] I agree with Mr McMenamin that this question appears to be intended to disclose breaches by Nicon of health and safety requirements. Whether such breaches occurred is not a material fact in issue, rather it is evidence which might go to whether Nicon’s historical gross profit was inflated.25
[78] I also consider the interrogatory is objectionable because it is not sufficiently precise and unequivocal, amenable to a direct and meaningful answer. The question
24 Wilson v Broadcasting Corporation of New Zealand (1987) 1 PRNZ 368 (HC).
25 See for instance Tourplan Pacific Ltd v Australian Tours Management Pty Ltd [2017] NZHC 2210; and Johnson v Johnson [2021] NZHC 840.
relates to any and all steps taken, without limitation as to time or circumstances to identify health and safety hazards. Nicon does not have to answer this interrogatory.
[79]The second, fifth and sixth interrogatories read:
Were site-specific safety plans prepared for the demolition, recycling and disposal operation undertaken by [Nicon]?
What were the exact locations at which the recycling operations of [Nicon] were undertaken?
Were any resource consent/s obtained to allow for the recycling operations to have been lawfully undertaken at those locations?
[80] I consider Nicon should answer these interrogatories. The existence of site-specific health and safety plans and appropriate resource consents at the locations where Nicon undertook recycling operations are put in issue in the third party’s pleadings and the questions are precise and amenable to a direct and specific answer.
[81]The seventh interrogatory reads:
Please advise the quantity of waste that was required to be disposed of by the plaintiff?
[82] I do not consider that Nicon is required to answer this interrogatory as it is not sufficiently relevant to a matter in issue. While it is to be inferred that the question concerns the 186 houses that Nicon demolished for the defendants, it is not clear what is meant by the terms “waste” or “disposed of” and, regardless of what measure is used, the quantity of material resulting from the demolitions is not in issue in the proceeding. What the third party is concerned with is the cost of dumping such materials.
[83]The orders I make on this application are at [86].
Result
[84] In relation to Nicon’s application to strike out parts of the third party’s statement of defence, I order as follows:
(a)paragraph 13(c) of the statement of defence is struck out with leave reserved to amend as per [29];
(b)paragraph 18(f) of the statement of claim is struck out; and
(c)otherwise the application is dismissed.
[85] In relation to the third party’s application for particular discovery, I order that Nicon must file and serve within 20 working days of the date of this judgment an affidavit stating:
(a)whether it has (or has had) in its control documents in the following categories:
(i)any site-specific safety plans relating to each recycling site;
(ii)any documents relevant to the costs incurred by Nicon for the disposal of waste from its recycling sites;
(iii)financial accounts of Nicon for the 2010 and 2011 financial years; and
(iv)any general ledger of Nicon for 2010 to 2014 financial years.
(b)If those documents, or any of them, have been but are no longer in Nicon’s control, Nicon’s affidavit is to state to its best knowledge and belief as to when the documents ceased to be in its control and who now has control of them.
[86] In relation to the third party’s application that Nicon answer interrogatories, I order that Nicon is to answer the following questions:
(ii)Were site-specific safety plans prepared for the demolition, recycling and disposal operation undertaken by [Nicon]?
...
(v)What were the exact locations at which the recycling operations of [Nicon] were undertaken?
(vi)Were any resource consents obtained to allow for the recycling operations to have been lawfully undertaken at those locations?
[87] I reserve costs. Both parties have had some measure of success, but if any party seeks costs counsel may file submissions within 21 days of the date of this judgment (no longer than six pages) and I will deal with the matter on the papers.
O G Paulsen Associate Judge
Solicitors:
K J McMenamin & Sons, Christchurch Gilbert Walker, Auckland
Haigh Lyon Lawyers Ltd, Auckland
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