NZ Iron Sands Holdings Ltd v Toward Industries Ltd
[2019] NZHC 2516
•3 October 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-001975
[2019] NZHC 2516
BETWEEN NZ IRON SANDS HOLDINGS LIMITED
Plaintiff
AND
TOWARD INDUSTRIES LTD
First Defendant
TAHAROA IRONSANDS LIMITED
(formerly known as NEW ZEALAND STEEL MINING LIMITEDSecond Defendant
Hearing: 3 October 2019 (by teleconference) Counsel:
M D O’Brien QC, M Colson and A Ho for Plaintiff
J Hodder QC, J A McKay, R Irvine-Shanks and J Kerkin for First Defendant
M Corlett and R Gordon for Second Defendant
Judgment:
3 October 2019
Reasons:
3 October 2019
REASONS JUDGMENT OF VENNING J
This judgment was delivered by me on 3 October 2019 at 4.45 pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
Solicitors: Gilbert Walker, Auckland
Chapman Tripp, Auckland
Minter Ellison Rudd Watts, Wellington
Counsel:M O’Brien QC, Auckland/M Colson, Wellington J E Hodder QC, Auckland
NZ IRON SANDS HOLDINGS LIMITED v TOWARD INDUSTRIES LTD [2019] NZHC 2516 [3 October 2019]
Background
[1] NZ Iron Sands Holdings Ltd (NZIS) commenced these proceedings against the defendants Toward Industries Limited (TIL) and Taharoa Ironsands Limited (NZ Steel) on 25 August 2017.
[2] NZIS is a special purpose vehicle which was established for the purpose of acquiring the shares in NZ Steel. On 14 November 2016 NZIS, TIL and NZ Steel entered a share sale agreement pursuant to which NZIS agreed to purchase from TIL all of the shares in NZ Steel for a purchase price of $1. In addition NZIS agreed to make future royalty payments of up to $131,700,000 to TIL and to inject a minimum of $30,000,000 into NZ Steel to fund expansion of the iron sand mine.
[3] The share sale agreement was subject to a number of conditions precedent. TIL cancelled the first share sale agreement on the basis the conditions were not satisfied.
[4] In late 2016/early 2017 TIL, another entity and NZ Steel entered a second share sale agreement whereby the other entity agreed to purchase the shares in NZ Steel. NZ Steel has owned and operated the iron sand mine since May 2017 when the agreement was settled.
[5]NZIS raises five causes of action. In summary it alleges:
(a)TIL and NZ Steel breached the contract as they failed to use all reasonable endeavours to fulfil the conditions precedent;
(b)TIL and NZ Steel misrepresented and/or engaged in misleading or deceptive conduct regarding the likelihood of a Japanese shipping line agreeing to reduce its charter rates;
(c)TIL breached the Financial Markets Conduct Act 2013 and the Fair Trading Act 1986 by the way in which it dealt with NZIS in relation to the conditions precedent;
(d)TIL through its agent misrepresented NZIS’s prospects of success if it participated in the second sales process.
[6] In its amended claim NZIS claims it lost the opportunity to acquire the shares in NZ Steel for $1 when the market value of the shares at the time was $506,000,800. It claims damages in this sum on each of the five causes of action.
[7] The proceeding has been allocated to the Commercial Panel and is managed by Wylie J.
[8]The case has been allocated a five week (23 days) fixture to commence at
9.00 am on 22 October 2019.
Application for adjournment
[9] NZIS applied to vacate the fixture. The application was advanced on the grounds that:
(a)six weeks will now be required for the trial;
(b)the plaintiff’s expert witness in geology and metallurgy is unavailable; and
(c)the interests of justice generally support vacation of the existing fixture.
[10] The application for adjournment was supported by an affidavit of Selva Nithan Thirunavukarasu (known as Nithan Thiru). It was opposed by TIL and NZ Steel.
[11] In the absence of the assigned Judge on leave I convened a telephone conference and heard from counsel. At the conclusion of the conference I declined the application for adjournment and advised counsel I proposed to make the alternative orders suggested by TIL’s counsel to ensure that the currently allocated fixture remains on track. This judgment sets out my brief reasons.
Principles
[12]The application for adjournment is made under r 10.2. That rule provides:
10.2 Adjournment of trial
The court may, before or at the trial, if it is in the interests of justice, postpone or adjourn the trial for any time, to any place, and upon any terms it thinks just.
[13] The interests of justice are the overriding consideration. Those interests are not limited to doing justice to the party seeking the adjournment. The Court must also do justice to the parties who wish to retain the benefit of the fixture and must also consider the interests of litigants in other cases before the Court as well as the general interest in maintaining public confidence in the ability of the Court to manage and hear cases within a reasonable timeframe.1
[14] As French CJ said in Aon Risk Services Australia Ltd v Australian National University:2
the time of the court is a publicly funded resource. Inefficiencies in the use of that resource, arising from the vacation or adjournment of trials, are to be taken into account. So too is the need to maintain public confidence in the judicial system.
The fixture length
[15] Mr O’Brien QC noted that briefs have been served from 25 witnesses. The plaintiff anticipates additional reply witnesses. There will likely be 27 to 28 witnesses at trial. Given the pages of briefs, the extent of the common bundle, he estimates that the trial will take six full weeks.
[16] The case had originally been allocated a four week trial. On 5 September 2019 counsel filed a joint memorandum recording that they had understood an additional hearing week was available to allow the trial to be extended to 23 days. In the memorandum counsel agreed that, with careful management and co-operation,
1 O’Malley v Southern Lakes Helicopters Ltd HC Christchurch CP 513-89, 4 December 1990; Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; SM v LFDB [2014] 3 NZLR 494; and Te Ara Rangatū O Te Iwi O Ngāti Te Ata Waiōhua Incorporated v Attorney General [2019] NZHC 1205.
2 Aon Risk Services Australia Ltd v Australian National University (2009) 258 ALR 14 at [5].
including limiting cross-examination, it should be possible for opening submissions and all evidence to be heard within 23 days.
[17] As a result of the issues counsel raised regarding the length of the trial Wylie J convened a telephone conference on 16 September. The Judge issued a minute following that conference noting that counsel had advised there were 27 witnesses and that ideally the matter required six weeks. The Judge allocated an additional week for the fixture.
[18] With Labour Weekend and the trial starting on Tuesday, 22 October 2019, 23 days were allocated. The Judge also directed the trial would start at 9.00 am each day, adding an additional hour a day to the sitting time. That would effectively provide another four and a half hearing days in total over the period of the fixture.
[19] There is nothing fresh in the matters raised by the plaintiff in support of the application for adjournment insofar as it is pursued on the basis that there will be inadequate time for the trial to be completed within the current time allocated.
[20] The trial length has already been reviewed by Wylie J, the Judge who has managed the case throughout and who has the best knowledge of it. The number of witnesses were known to the Judge. Discipline will be required and counsel may have to prepare and adhere to a trial diary to ensure completion within the time allocated but with responsible and senior counsel that should be achievable.
The unavailability of the plaintiff’s witness
[21] A new development is the unavailability of one of the witnesses the plaintiff intends to call. The evidence in issue is evidence as to the extent of the resource and impacts directly on the quantum of the plaintiff’s claim and the basis for the calculation of the quantum. Mr O’Brien referred to the case of Hamilton v Papakura District Council where a fixture was vacated because the plaintiff’s witness was unavailable.3 But of course, each case must turn on its own facts.
3 Hamilton v Papakura District Council (1997) 11 PRNZ 43 (HC).
[22] The witness is Dr Feenan of IHC Robbins. His evidence currently covers the work his firm IHC Robbins undertook in preparing and verifying the mine expansion plan provided to TIL in late 2016. At present Dr Feenan is essentially a witness of fact.
[23] When the defendants’ briefs of evidence were served they included briefs from two technical mining experts, Mr Benjamin (Geology) and Mr Gilman (Metallurgy). Mr Thiru has been advised that if the adjustments suggested and discussed by those witnesses in their evidence were applied to the model it would have a significant effect on the value of the mine and thus the claim for damages. Mr Thiru says it would have a profound impact on BDO’s valuations.
[24] NZIS apparently intended that Dr Feenan would prepare a reply brief qualifying himself as an expert witness and then reply to the evidence of Messrs Gilman and Benjamin. However, on the evening of Thursday 19 September, Dr Feenan advised NZIS that he was not in a position to give independent expert evidence on those issues. Mr Thiru understands that IHC Robbins’ Dutch parent company (Royal IHC) instructed Dr Feenan he was not to qualify himself and appear as an expert witness in the proceeding and was not to provide evidence in reply to Messrs Gilman and Benjamin.
[25] During the course of the telephone conference Mr Colson, counsel for the plaintiff, confirmed he understood Dr Feenan would still be available to give the evidence contained in his brief as exchanged but would not be available to be briefed as an expert.
[26] NZIS has sought to engage other experts. Mr Thiru’s evidence is that one of the firms approached indicated it could not assist. Mr Thiru then deposed that the other firm advised NZIS on 26 September 2019 that:
… they were having trouble finalising availabilities for the key experts that have the skills for the job, and that it was a busy time for them at the moment. NZIS is yet to receive a formal engagement proposal from the firm. I am hopeful that we will be able to use this firm but the timing of their reply evidence is now uncertain. It will not be received before the trial commences on 22 October.
The reply evidence from a consultancy firm will then to be provided to NZIS’s valuation expert, BDO, to input into their model. I understand from BDO that this will take a further week, at least, to prepare.
[27] The defendants acknowledge that generally the plaintiff should have the ability to reply to their experts’ briefs, but maintain their opposition to the adjournment of the fixture noting that the need for expert evidence of the kind NZIS now seeks to locate should have been known and appreciated by NZIS for some time. NZIS has created the situation it now seeks to rely on to adjourn the fixture.
[28] On 28 May 2018 TIL filed an amended list of issues in which it stated that a material issue at trial would be:
56.3When calculating anticipated trading profit, what are the appropriate inputs to that calculation, having regards to what assumptions or inputs are appropriate for each year in the relevant trading period, including for:
(a)the volume of iron sand which is available to be mined;
(b)the grade/quality of that ironsand;
(c)iron ore prices (including the appropriate value in use discount) …
[29] Further, TIL sought security for costs in respect of the cost of its two technical mining experts in respect of which there was extensive correspondence between the parties prior to the plaintiff serving its evidence. In particular, in support of the application for security for costs Alice Morrison deposed:
38.2Two technical mining experts that have been required to assist the valuation expert to understand (amongst other things):
(a)the extent and nature of the resource to be mined;
(b)the operation of the mine and the method of mining, both historically and in respect of changes to the method of mining that a buyer would need to implement in order to extract the remaining resource;
(c)the proposed expansion plan for the mine that was central to projected cash flows for the business; and
(d)the risks and potential rewards associated with the proposed expansion plan.
[30] For whatever reason the plaintiff chose not to obtain technical mining expert evidence to support the assumptions which its valuer relied on when exchanging its evidence-in-chief.
[31] Mr O’Brien emphasised that the unavailability of Dr Feenan has arisen through no fault of the plaintiff. But it has arisen at a very late stage because of the delays in the exchange of evidence which the plaintiff must accept some responsibility for, (an extension having been agreed for the service of its initial briefs) and the failure of the plaintiff to lead such evidence in its original witness briefs despite the knowledge it should have had of the defendants’ case. There is also the rather curious statement by Mr Thiru in his affidavit when referring to Dr Feenan’s unavailability:
It now also appears that there may have been communication or expectation mismatch issues on the scope of the role and costs …
[32] As the evidence stands the Court is not satisfied that it is necessary or in the interests of justice overall to vacate the fixture to address the problem created by the current lack of an expert witness for the plaintiff. The Court is not satisfied that the plaintiff has taken all steps necessary to obtain an alternative expert witness.
[33] There are two possibilities which would see the case proceed without the need for an adjournment.
[34] The first is that the plaintiff take all steps it can to engage other experts. The evidence of the defendants’ experts is limited in scope. The second is that, although undesirable, there is a possibility of the trial proceeding on liability initially with quantum to be determined at a later date. I would prefer to leave that option to the trial Judge.
[35] In relation to the first issue, counsel for the first defendant have suggested alternative orders which would see the matter proceed on the following basis:
(a)expert evidence at trial to be heard by way of expert panels after completion of all fact evidence;
(b)the plaintiff’s reply evidence to be filed by 4 October 2019, save for any evidence in reply to the expert evidence of Mr Benjamin and Mr Gilman and the valuation experts;
(c)the plaintiff’s reply evidence in respect of the expert evidence of Mr Benjamin and Mr Gilman and the valuation experts to be provided no later than 21 October 2019; and
(d)expert conferences to be convened as soon as possible on the following basis:
(i)expert conferences in respect of shipping and hedging issues to be held in accordance with Wylie J’s original orders, with joint papers to be provided by the expert witnesses by 16 October; and
(ii)expert conferences for the technical mining experts and valuation experts to occur as soon as possible after the reply evidence is served by the plaintiff, with joint statements to be prepared prior to the expert panels being called at trial.
[36]Those proposals seem a reasonable compromise to address the current position.
Interests of justice
[37] A number of issues come into play when considering the interests of justice generally. As noted, not only the interests of NZIS are to be considered but also the interests of the other parties to this litigation, and other parties to litigation before the Court as well as the credibility of the Court’s processes.
[38] The claim is a substantial claim which has been hanging over the defendants for more than two years. They are entitled to finality. That is particularly so when NZ Steel has been operating subject to the threat of this claim and NZIS’s very public media statements about its claim against the defendants.
[39] Another factor is the difficulty of arranging a further six week fixture for the matter as suggested by NZIS. All parties are represented by senior counsel. If the fixture was adjourned counsel for the first defendants, in particular, but also second defendant, have other commitments during 2020 and at present it would be difficult, if not impossible, to co-ordinate a six week fixture. It is likely the trial Judge would have to be reassigned. The reality is the most likely outcome would be a fixture in the early part of 2021. Given the nature of the claim and that it is a Commercial Panel case that would not be acceptable.
Result
[40]For those reasons the application for adjournment was declined.
[41]Directions are made in accordance with [35] above.
[42] Costs should follow the event on a 2B basis in favour of both defendants. Order accordingly.
Venning J
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