Northlake Investments Limited v Wanaka Medical Centre Limited

[2019] NZHC 2721

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

I TE KŌTI MATUA O AOTEAROA WAIHŌPAI ROHE

CIV-2018-059-88

[2019] NZHC 2721

BETWEEN

NORTHLAKE INVESTMENTS LIMITED

Plaintiff

AND

WANAKA MEDICAL CENTRE LIMITED

Defendant

Hearing:

23 October 2019

(By telephone conference)

Counsel:

G D Simms and A G Needham for Plaintiff M H L Morrison and J A Zwi for Defendant

Judgment:

25 October 2019

JUDGMENT OF ASSOCIATE JUDGE LESTER

(in respect of application by defendant for particular discovery)

This judgment was delivered by me on 25 October 2019 at 11.00am pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar 25 October 2019

NORTHLAKE INVESTMENTS LIMITED v WANAKA MEDICAL CENTRE LIMITED [2019] NZHC 2721

[25 October 2019]

Background

[1]                 Osborne J in his Minute of 16 September 2019, reserved leave for there to be an application by way of memorandum if the parties were unable to resolve an outstanding request for discovery. Counsel for the defendant has taken up that invitation and by memorandum dated 18 October 2019 sought an order that the plaintiff produce one document.

Context

[2]                 I refer briefly to the context as set out in the defendant’s memorandum. Plaintiff’s counsel did not take issue with the accuracy of that summary of the background.

[3]                 On 29 September 2016, the plaintiff as potential landlord, entered into a Heads of Agreement (“HOA”) with the defendant. The HOA concerned the defendant leasing a commercial building to be built by the plaintiff as part of a commercial and residential subdivision being developed in Wanaka.

[4]                 The defendant says it was approximately a year later that the plaintiff offered the defendant lease terms – the HOA not recording matters such as rental, term, renewals et cetera.

[5]                 The defendant says that commercial terms could not be agreed, and it did not take the leasing of premises from the plaintiff any further.

[6]                 The plaintiff brings two causes of action arising from the HOA itself. A further claim in promissory estoppel and a claim in quantum meruit which concerns design and development costs incurred by the plaintiff.

[7]                 The defendant says that the plaintiff entered into heads of agreement with other parties on the same or similar terms to those that are the subject of this proceeding, with those third party agreements dated between October 2016 and April 2017.

[8]                 Referred to in a document in the plaintiff’s discovery is a further a heads of agreement with Progressive Enterprises Ltd (“PHOA”).

[9]                 I have had the advantage of the PHOA being produced to me. The document is dated 24 October 2017 (the date of the last signature), about a year after the HOA which is the subject of these proceedings and before the defendant took the stance that it was not going to take up a tenancy from the plaintiff.

[10]              Of necessity, the defendant has had to make assumptions about the document in framing its request for its discovery.

[11]              Having reviewed the document, I consider it is discoverable. The cause of action in estoppel is based on an objective assessment of the circumstances. What would a reasonable commercial landlord/developer have understood/believed the defendant had  committed  to  in  the  circumstances.  The  estoppel  claim  assumes a starting point that there is no contract; was it reasonable in the circumstances for the plaintiff to have proceeded as if there was a contract? How entrenched a position or understanding is in an industry may be relevant to whether it was reasonable for a party to believe another had departed from that position.

[12]              Included in the conduct relied on, the PHOA appears to have been drafted by Progressive Enterprises Ltd. To the extent that the application for production assumed it had been drafted by the plaintiff, those submissions were overtaken. That the PHOA was drafted by a potential tenant may say something about how common the terms referred to in the next paragraphs are.

[13]              The concluding paragraphs of the PHOA’s terms provide that it does not create a legally binding agreement and that neither party shall be bound to the other in any fashion until such time as a formal agreement to lease is entered.

[14]              The PHOA may indicate that terms such as in [13] above are normal practice in the context of the development of commercial buildings for potential tenants. If that is the case, the PHOA may be relevant to whether it was reasonable for the plaintiff to have proceeded on the basis that that starting position had been overtaken.

[15]              The only issue in relation to the application for discovery is relevance. Given that there is only one document in issue, issues of proportionality do not arise.

[16]              I recognise that the PHOA was entered into on 24 October 2017, which date being before the defendant advised on 17 December 2017 that it would not be taking up its tenancy. However, in terms of what may be standard or normal in the industry that the PHOA was created about a year after the HOA in issue in this case does not mean the PHOA will have no relevance in the absence of any significant industry change in the intervening period.

[17]              I am also conscious that this is not the context to decide the ultimate relevance of the document, however to me it is not obvious that the document will have no useful purpose, hence concluding it is relevant. Once I can see a basis upon which the document may be relevant then it should be produced. If I am wrong in that regard then in practical terms no harm is done given it is one document and the protections that can be placed around confidentiality.

Commercial redactions

[18]              The plaintiff has sought that if I direct production of the document, that parts of the document be redacted for reasons of commercial sensitivity. Having reviewed the redactions which concern issues of rental, rent reviews et cetera, I am satisfied that the dollar amounts disclosed are not relevant. However, I have amended the redactions as the fact that there are terms in relation to rental and reviews may be relevant to the type of commercial terms that had to be finalised between the parties as contemplated by the HOA. I immediately recognise that a lease of a full service supermarket as described in the PHOA is a very different creature from a lease of a medical centre, but I consider the deletion of the financial detail sufficient to protect commercially sensitive information.

[19]              Finally, the plaintiff seeks orders to prevent the onward or public disclosure of the document even if it is used at trial. Prior to trial, the redacted document is subject to the implied undertaking that documents provided under discovery may only be used for the purposes of the proceeding  in  question  –  see  McGechan  on  Procedure HR pt SUB pt 1.08. I simply remind the defendant of that. As to whether further

orders will be made preventing disclosure of the document, assuming it was used at trial that will be a matter for the trial Judge, Osborne J.

[20]              The document with the redactions made by me will be circulated to counsel by Minute which will not be searchable without leave of a High Court Judge.

Associate Judge Lester

Solicitors:

Wynn Williams, Auckland Morrison Mallet, Auckland