O'Neil v Beattie

[2022] NZHC 1213

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV-2019-409-339

[2022] NZHC 1213

BETWEEN

ANDREW JAMES O’NEIL

First Plaintiff

MOBY TRUSTEES LIMITED
Second Plaintiff

AND

ANDREW ROSS BEATTIE and LOUISE PETRUS DIRKZWAGER

Defendants

Hearing:	(On the papers)
Appearances:	M J Wallace for Plaintiffs P J Shamy for Defendants
Judgment:	27 May 2022

JUDGMENT OF ASSOCIATE JUDGE LESTER

(as to costs)

O’NEIL v BEATTIE [2022] NZHC 1213 [27 May 2022]

[1]    The second application for further discovery by the plaintiffs in this proceeding came on for hearing before me on 7 December 2021. The first application was by the defendants  against  the  plaintiffs   and   resulted   in   an   interim   judgment   of   30 October 2021.1 An earlier application for discovery by the plaintiffs was withdrawn without a hearing.

[2]    As recorded in my Minute of 7 December 2021, shortly before the morning adjournment on that day, Mr Shamy, counsel for the defendants, having heard Mr Wallace’s submissions for the plaintiff/applicant, suggested resolution of the application may be possible. Terms were agreed by counsel. Mr Shamy considered Mr Wallace’s submissions provided a new explanation and further detail in support of the application for discovery leading Mr Shamy to accept the relevance of some of the material sought.

[3]    Mr Wallace submits his client was the successful party in respect of the application for further discovery and seeks an award of costs.

[4]    Mr Shamy opposes that and seeks costs on the basis that it was only with the explanation at the hearing that the plaintiffs’ application was understood and in any event the material produced by the application has turned out not to be relevant. He seeks costs on behalf of his client.

Context

[5]    The parties entered into a joint venture in late 2013 to develop bare land at Hickory Place, Christchurch, into commercial units. It is common ground the joint venture ended late 2017, the issue being whose breach led to the joint venture ceasing.

[6]    It is common ground that the joint venture commenced late 2013 and in August 2014 the first plaintiff contributed the funds required of him, which he sourced from the second plaintiff, and thereafter made the monthly payments required of him to the joint venture, such payments being sourced from the second plaintiff.

1      O’Neil v Beattie [2020] NZHC 2842.

[7]    The joint venture was initially going to be undertaken through a company called “Hickory Ltd” incorporated on 23 April 2015 with the first plaintiff and the defendants being directors and equal shareholders.

[8]    The land at Hickory Place in Christchurch was owned by Hickory Investments (2013) Ltd, a company associated with the defendants.

[9]The plaintiffs pleaded at para [9] of the statement of claim:

The parties agreed that the Hickory Development would be completed within Hickory Investments (2013) Limited which owned the land but upon completion of the development Unit numbers 3 to 10 would be transferred to a new company: Hickory Limited.

[10]   The defendants admit that pleading and say it reflected an initial agreement but that, although Hickory Ltd was incorporated, the idea of transferring the commercial units to that company was abandoned because of potential tax issues.

[11]   The defendants say the initial agreement was replaced with an agreement that the units would remain in the company, Hickory Investments (2013) Ltd, and that  the first plaintiff would instead take a one-third shareholding in that company. The defendants say that did  not occur as the plaintiff failed to provide information  in     a timely manner. In addition, they bring the counterclaim set out below. The BNZ issue

[12]   The defendants bring a counterclaim saying the first plaintiff failed to provide the sum of $524,435 which was required to be introduced by the BNZ to further facilitate the development (the BNZ sum). The pleading is those funds had to be contributed instead by the first-named defendant at a cost to him, which is sought to be recovered.

[13]It is common ground that the first plaintiff did not contribute the $524,435.

[14]   The first plaintiff accepts, as an equal joint venturer, he agreed to contribute an equal one-third share to development costs of the subdivision and the construction costs of the commercial buildings forming part of the Hickory Development.

[15]   As to the BNZ sum, the plaintiffs deny the call for that sum was initiated by the BNZ, and say the impetus for the demand was a decision by the second-named defendant choosing to transfer one of the joint venture properties out of the joint venture. Accordingly, the plaintiffs say the BNZ sum was not required for the development costs of the subdivision or the construction of the commercial buildings for the Hickory Development, but was a result of the second-named defendant altering the BNZ’s security position by transferring out of Hickory Investments (2013) Ltd one of the properties tagged for the joint venture.

[16]   The plaintiffs say the transfer of the joint venture property was a breach of the joint venture agreement and the defendants cannot rely on the consequences of their own breach (the demand for the BNZ sum) to justify excluding the first plaintiff from the joint venture.

[17]   Whether the first plaintiff was in breach in not meeting a call for the BNZ sum or whether the call was a consequence of the first-named defendant’s breach of the joint venture agreement has become one of the key issues in this proceeding.

[18]   Mr Shamy submitted that an earlier discovery judgment concerning an application for further discovery by the defendants, I said the real issue was whether the first plaintiff was obliged to make the payment required by the BNZ under the terms of the joint venture agreement.2 If he was obliged to make that payment then whether he had the ability to do so was beside the point as he did not meet the obligation.  If the first  plaintiff was not obliged to make the payment in  terms of  the joint venture agreement, then his failure to make the payment was not a breach  of an obligation he owed the defendants under the joint venture agreement, whether he had the funds or not. In short, if the first plaintiff had to pay and he did not pay, then he was in breach. If the first plaintiff did not have to pay then there was no breach and his ability to make any payment was irrelevant. The real issue was whether he had the obligation.

[19]   Mr Shamy noted that there had been an earlier application for discovery by the plaintiffs which was withdrawn before it came on for hearing. Mr Shamy did not

2      O’Neil v Beattie [2020] NZHC 2842 at [24].

suggest that a subsequent application for further discovery could not now be made by the plaintiffs, however, he makes the point that the documents now regarded as being of sufficient importance to warrant the present application can only have been overlooked in respect of the first application or considered irrelevant at that time.

[20]   Mr Shamy says the documents sought in this application are not relevant to that issue. My description of the key issue in the litigation was made in the context of the defendants’ application for discovery of the plaintiffs’ financial position at the time the BNZ payment was called for. However, why the BNZ called for further funds was identified as an important issue in the earlier judgment.

[21]   Ultimately, the defendants’ application for discovery was dealt with at the end of 2020. The costs order was that costs were to lie where they fell.3 I recorded that application was considerably refined through discussions with counsel at the hearing with Mr Wallace taking a pragmatic approach to resolving the application.

[22]   The plaintiffs’ second application that was for hearing on 7 December 2021 developed  in   a  similar  way.   Mr  Wallace  submits,   while  the  outcome  of  the 7 December 2021 hearing were not the orders the plaintiffs applied for, nonetheless the plaintiffs were successful in obtaining further discovery and costs should follow the event.

[23]   Mr Shamy relies on the clarification and further explanation of the orders sought he says took place with the plaintiffs’ submissions and how the defendants with that clarification adopted a pragmatic attitude to the discovery application.

[24]   In my view, it is appropriate that costs on the present application also lie where they fall. That is consistent with the approach that I took in respect of the defendants’ application for discovery which is, as I have said, developed in a similar way.

3      O’Neil v Beattie [2021] NZHC 17.

[25]   Accordingly, there is no order as to costs in respect of the plaintiffs’ application for further discovery that came on for hearing on 7 December 2021.

Associate Judge Lester

Solicitors:

Godfreys Law, Christchurch Landley Law, Christchurch

Copy to counsel:

M J Wallace, Barrister, Christchurch P J Shamy, Barrister, Christchurch