No 317 Limited v Canterbury Regional Council
[2014] NZHC 1690
•18 July 2014
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2012-409-002607 [2014] NZHC 1690
BETWEEN NO 317 LIMITED
Plaintiff
AND
CANTERBURY REGIONAL COUNCIL Defendant
Hearing: 14 July 2014 Appearances:
P A Cowey for Plaintiff
K J Dobbs for DefendantJudgment:
18 July 2014
JUDGMENT (NO. 2) OF ASSOCIATE JUDGE OSBORNE
as to orders for tailored discovery
[1] By a judgment on 25 February 20141 I made orders as to tailored discovery requested by the plaintiff and other matters. In the judgment I did not deal with two aspects of the orders sought by the defendant.
[2] The issues now before me are whether I have jurisdiction to deal with those matters and, if so, what orders I should make.
Background
[3] The earlier judgment sets out in more detail the background to this litigation.
[4] The plaintiff (No 317) once ran bus services. Some of the services were run pursuant to contracts administered by the defendant (ECAN) as the Regional Council of the Canterbury region. In June 2010 No 317 entered into two additional bus
service agreements with ECAN. The services under those agreements were
1 No 317 Limited v Canterbury Regional Council [2014] NZHC 276.
NO 317 LIMITED v CANTERBURY REGIONAL COUNCIL [2014] NZHC 1690 [18 July 2014]
commenced on 1 November 2010 with the agreements expiring in June 2016. No
317 claims that ECAN unlawfully threatened in November 2010 to terminate the contracts unless No 317’s business was sold to a third party. No 317 then so sold its business to Go Bus Holdings Ltd. It sues for what it says are damages of at least $5 million.
ECAN’s discovery application
[5] In August 2013, the Court made initial discovery orders, with the parties anticipating that further tailored discovery would be required.
[6] In its application, ECAN sought additional tailored discovery set out in a detailed schedule.
[7] By the time of the hearing in February 2014 the parties had agreed on a number of the categories sought by ECAN. The Court was called upon to determine whether there should be orders in relation to the remaining categories.
[8] Within ECAN’s schedule, the category numbered 7 and entitled “Business
Options” contained the two items which are the subject of this judgment, namely:
(b) Any other documents relating to the proposed equity injections (either those above or others), including documents detailing the approach from or to prospective shareholders, CBSL’s dealings with those prospects, arrangements/agreements reached in respect of equity injections and all related correspondence.
(f) Other refinancing material – proposals discussed, offers received, approaches and related correspondence.
ECAN’s request for orders on the two remaining categories
[9] ECAN asks that the Court now determine the application in relation to the two remaining categories. As Ms Dobbs put it in her memorandum to me:
The defendant considers that Your Honour did not deal with these categories and therefore now requests a ruling on them.
[10] In the alternative, Ms Dobbs submitted that to the extent necessary, ECAN is entitled to rely on the “slip rule”, r 11.10 High Court Rules, to correct an accidental slip or omission.
[11] Mr Cowey for No 317 opposes the making of any further orders on the application.
The two remaining categories were not dealt with
[12] It is a fact that in my 25 February 2014 judgment I did not determine ECAN’s interlocutory application in relation to the two remaining categories of documents. Equally, I did not dismiss the application in relation to those two categories.
[13] In the preparation of the judgment I had inadvertently attached as Schedule 1 to the judgment a “marked-up” version of ECAN’s requested categories which counsel for ECAN had entitled “Further agreed discovery categories”. The two remaining categories appeared in that schedule and were shown crossed out. The reason that they were crossed out was because they had not been agreed. But the fact was that they remained aspects of ECAN’s application and have at no point been abandoned. It is apparent that I overlooked them in then considering my judgment on ECAN’s still requested categories.
[14] At the present hearing, Counsel addressed me from the bar on matters of background following the delivery of my judgment which are common ground between the parties.
[15] Counsel for ECAN did not in February 2014 immediately advert to the omission of the two remaining categories. A number of other issues arose between the parties and ECAN made a formal application for review of aspects of the February orders in relation to those. The parties sensibly had negotiations through counsel to explore whether remaining issues could be resolved without a hearing. ECAN also applied for non-party discovery, an application opposed by No 317 but subsequently made the subject of consent orders presented to me at the hearing on 14
July 2014.
[16] In the meantime, counsel for ECAN noted the absence of any consideration in the judgment of the two remaining categories of discovery. That matter was raised with counsel for No 317 who responded that further discovery in that regard was not agreed to.
[17] On 28 May 2014 counsel for No 317 arranged to have the Registrar seal the formal order made through the 25 February 2014 judgment. The sealing was arranged without consultation with counsel for ECAN. The sealed order faithfully reflects what was actually contained in the February judgment.
Jurisdiction – discussion
[18] I have jurisdiction to determine the application for the two remaining categories of discovery precisely because I have not previously determined them. In the judgment of 25 February 2014 I did not dismiss the application in relation to those remaining categories.
[19] Mr Cowey invited me to conclude that the Court was functus officio in relation to the application for the two remaining categories. I adopt the description of this term given by Bryan A Garner in A Dictionary of Modern Legal Usage:2
Functus officio is a LATINISM that literally means “having performed his or her office.” In practice, the phrase denotes the idea that the specific duties and functions that an officer was legally empowered and charged to perform have now been wholly accomplished, and thus that the officer has no further authority or legal competence based on the original commission.
[20] In this case the Court is not functus officio precisely because the Court did not wholly accomplish the duty of determination which it had in relation to ECAN’s application.
[21] For this reason it is strictly unnecessary that I consider whether the slip rule was applicable to the present circumstances. Had it been necessary to do so, it is likely that I would have applied the slip rule. But that is unnecessary for the reason that the Court is not functus officio on the application so far as it relates to the two
remaining categories.
2 B Garner A Dictionary of Modern Legal Usage (2nd ed, Oxford University Press, 1995) at 377.
The grounds of ECAN’s discovery application
[22] In its December 2013 application for further orders by way of tailored discovery, ECAN had identified the two remaining categories (and others) as being relevant to the “Business Options” part of No 317’s pleadings. In particular, the application referred to paragraphs 15 and 16 of the amended statement of claims in which No 317 pleads:
The plaintiff’s business options
15.From at least early 2010, but actively from September 2010 onwards, the plaintiff was pursuing various options open to it which included:
15.1Equity injection by from the owners of two passenger transport operators, South Coast Bus Service (Pty) Limited and Brazier Motors;
15.2 Merger with Go Bus Holdings Limited;
15.3 Sale to Swan Transport of Australia.
16.From at least September 2010 onwards the plaintiff was engaged in discussions with its financier, Face Finance, in order to pursue the various options open to it and as part of those discussions Face Finance agreed to the plaintiff paying the deposit for the buses pleaded in paragraph 8 above.
[23] In its statement of defence, ECAN has in relation to most of the allegations in paragraphs 15 and 16 stated that it has insufficient knowledge and therefore denies the pleadings.
[24] No 317’s repeated reference in paragraphs 15 and 16 to “various options” is self-evidentially included to provide the platform upon which No 317 may pursue its at present unquantified damages (stated to be “no less than $5m”). The “various options” referred to must be taken to be the material allegations in relation to the asserted likelihood that No 317, but for unlawful conduct on the part of ECAN, would have found a viable commercial alternative other than the sale of its business to Go Bus Holdings Ltd on unfavourable terms.
[25] Against this background, Ms Dobbs submitted that the two remaining categories of discovery sought are relevant on the pleadings in terms of understanding:
(a) No 317’s business options, including those beyond the three pleaded; (b) Other sources of finance open to No 317 (relevant to trading on); and
(c) Whether there were other players in the market interested in purchasing or investing in No 317’s business (and, if so, the nature of their interest and any offers tabled).
[26] Mr Cowey provided a written synopsis. After opposing any further orders by reason of the functus officio principle, he alternatively opposed the requested orders for reasons set out under a heading “Proportionality”. Mr Cowey made five points:
(a) The time period sought is 1 January to 30 November 2010;
(b)This covers a period gearing up for new contracts in July 2010 and then the 1 November 2010 contracts;
(c) No 317 was in an expansionary phase. Its workforce and fleet were expanded to some 320 staff and some 106 buses. That required significant capital. To require discovery of all discussions and refinancing options considered by the company for this period would be onerous.
(d)It is accepted that the discussions regarding the equity injections that were made was relevant. So too are the arrangements to finance the purchase of the new buses. Those documents have all been discovered.
(e) Documents involving a range of other discussions about possibilities that did not eventuate would simply be an oppressive exercise.
Discussion – paragraph 15 documents
[27] ECAN’s first request relates to documents as to proposed equity injections
from 1 January 2010 to 30 November 2010.
[28] The “various options” for equity injections were explored by No 317, according to its paragraph 15 pleading from “at least early 2010 … ” The options are accordingly made relevant by No 317 through its own pleading. Mr Cowey suggested in his submissions that discovery in relation to any entities other than the companies expressly named in paragraph 15 would be unnecessary and, I inferred him to suggest, disproportionate.
[29] I reject Mr Cowey’s suggestion for two reasons. First, No 317 has not adduced any evidence to indicate how many other entities (beyond the four expressly named in paragraph 15) were involved in the 11 month period and with what degree of documentation. Secondly, ECAN faces a claim for damages of over $5 million. In the context of proportionality, the Court must have regard to ECAN’s right to access No 317’s discussions as to all potential equity involvement in the critical 2010 period as casting light on how viable (or not) the “various options” may have been.
[30] I indicated this conclusion tentatively to Mr Cowey in the course of his submissions. Partly to meet it, Mr Cowey indicated that No 317 would be prepared to reconsider amending paragraph 15 of the claim to delete the words “various options open to it which included” so that the expressly identified four companies would be the sole particulars of potential injection, merger or sale identified and to be relied on by the plaintiff at trial. In the course of the hearing Mr Cowey had discussed with me the possibility of giving an undertaking as to the amendment of the pleading.
[31] I initially decided in preparing the judgment that the appropriate course was that there be an order for tailored discovery in relation to the equity injection documents upon the basis of No 317’s pleadings as they stand, leaving Mr Cowey in discussion with his client to file an amended pleading if No 317 so chooses. I intended to build into the order I would make, a condition and a time frame which meant that the order for discovery would lapse in the event of the discussed
amendment of No 317’s pleading. Ms Dobbs accepted that such an amendment would obviate the need for documentary evidence relating to entities other than the four expressly named in paragraph 15.
[32] On the day following the hearing Mr Cowey, upon discussion with Ms Dobbs, filed a Memorandum recording No 317’s undertaking that paragraph 15 of the Amended Statement of Claim will be amended by deleting the words “various options open to it which included” and paragraph 16 will be amended by deleting the words “in order to pursue the various options open to it and”.
[33] With such amendments to No 317’s claim I am satisfied that it is not appropriate to give further discovery in relation to the paragraph 15 pleading. But for the amendments I would have granted ECAN’s application in this regard albeit with some restrictions.
Discussion – paragraph 16 documents
[34] The second category of documentation arises through No 317’s pleading in paragraph 16 in relation to discussions with its financier.
[35] No 317’s pleading of its financing discussions at paragraph 16 of the claim are in a different category from those at paragraph 15. No 317 has only identified as relevant the financing discussion it had with Face Finance. As Mr Cowey noted in his submissions, No 317 accepts that those discussions are relevant. Mr Cowey says that all documents relevant to those discussions have been discovered.
[36] In her submissions, Ms Dobbs submitted that there ought to be tailored discovery of “other sources of finance open to No 317” on the basis that that is relevant to No 317’s ability to trade on.
[37] I do not view the pleading at paragraph 16 as appropriately opening up for appropriate discovery any discussions which No 317 may have had with other financiers. The only financing discussions which No 317 relies upon as creating or enhancing business options are those with Face Finance. At trial it can be established whether or not Face Finance would have assisted. In the absence of a
pleading that any other financier would have assisted, No 317 will not be entitled to call evidence to suggest that another financier would have assisted. No 317 will therefore not be entitled to establish a probability in relation to other financing. Any communications had with other financiers in the 2010 year will not assist in the litigation.
[38] The order sought in relation to the refinancing material will be refused.
Costs
[39] This is an application on which ECAN would have partly succeeded but for No 317’s pleading amendment (which rendered the additional discovery no longer justifiable). That was a development which originated on the day of the hearing. No 317 has partly succeeded in its opposition, specifically in relation to the discovery said to flow from the paragraph 16 pleading.
[40] Counsel anticipated that the outcome of the hearing may not lend itself to a straightforward application of costs principles. That is how it has transpired. My tentative conclusion is that costs in relation to the discovery issues should lie where they fall by reason of the different outcomes referred to at [39] above. Failing agreement between the parties, they will have leave to make submissions on costs through memoranda.
Orders
[41] I order:
(a) The application for the two remaining categories of further discovery is dismissed;
(b)The costs and disbursements of the hearing as to the two remaining categories of discovery and of this order are reserved, with leave to
counsel to file memoranda (limit three pages) if there is disagreement between the parties as to the appropriate outcome.
Associate Judge Osborne
Solicitors:
Parry Field, Christchurch
Bell Gully, Wellington
0
1
0