Patel v Dunbar

[2021] NZHC 2634

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE

CIV-2020-485-20

[2021] NZHC 2634

BETWEEN

JIGNESH PATEL and SOHINI PATEL

First plaintiff/first counterclaim defendants

INDIAGO LIMITED
Second plaintiff/second counterclaim defendants

AND

SALLY-ANNE DUNBAR

First defendant/first counterclaim plaintiff

IMMIGRATION CENTRE LIMITED

Second defendant/second counterclaim plaintiff

Hearing:	7 September 2021
Appearances:	E Watt and D Livingston for plaintiffs/counterclaim defendants J D Haig for defendants/counterclaim plaintiffs
Judgment:	5 October 2021

JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1]    The background to this litigation was described in my judgment of 7 July 2021.1 There, I was dealing with interlocutory applications by both parties — the Patel interests (the first and second plaintiffs and first and second counterclaim defendants) and the Dunbar interests (the first and second defendants and first and second counterclaim plaintiffs) — for discovery and related orders. For the purposes of this judgment, the most efficient way of recording the background is to quote from my earlier judgment:

1      Patel v Dunbar [2021] NZHC 1687.

PATEL v DUNBAR [2021] NZHC 2634 [5 October 2021]

[1]        On 28 April 2019 Indiago Ltd, then called Immigration Centre Ltd, and Jignesh and Sohini Patel, on the one hand, and Sally-Anne Dunbar (in two capacities — as both purchaser and guarantor), on the other hand, entered into an agreement whereby Indiago Ltd and Mr and Mrs Patel agreed to sell, and Ms Dunbar agreed that she or her nominee would purchase the company’s immigration consultancy business, and that she would guarantee the obligations of any nominated purchaser. The original Immigration Centre Ltd subsequently changed its name to Indiago Ltd, and Ms Dunbar incorporated a new company known as Immigration Centre Ltd and nominated that company as the purchaser of the business.

[2]        The agreement for sale and purchase followed a marketing campaign by the Patel interests and a due diligence exercise by the Dunbar interests during the second half of 2018 and the first half of 2019, both parties being assisted by professional advisers throughout. After the execution of the original agreement, aspects of the same were renegotiated.

[3]Some important terms of the final agreement were as follows:

(a)The sale and purchase price was $1.5 m. The business had very little in the way of fixed assets so that the $1.5 m price was virtually entirely made up of good will, based on a warranted turnover for the FYE 31 March 2018 of

$1,332,758.   The   price   was   payable   in   three  tranches;

$150,000 by way of a deposit on execution of the agreement;

$850,000 on settlement; and $500,000 on 16 December 2019;

(b)To support the value placed on the goodwill of the business, the Patels agree to restraints of trade to operate worldwide for a period of three years;

(c)Mr and Mrs Patel both agreed to continue working in the business during a “period of assistance” of 20 working days to ensure a smooth transition, and Mr Patel also agreed to accept employment or engagement from the conclusion of the transition period as National Sales Manager, either as employee or contractor.

[4]        On execution and settlement of the agreement the deposit and second tranche of the sale and purchase price were paid.

[5]Following settlement things did not go well.

[6]        In their affidavit evidence Mr Patel and Ms Dunbar describe how they say matters unfolded.

[7]        It is unnecessary to attempt a comprehensive summary of all of this, but here are some key points:

(a)The relationship between Mr Patel and Ms Dunbar was not an especially productive one. Mr Patel did not approve of the direction in which Ms Dunbar wished to take the business and did not enjoy the transition period or relish the notion of remaining involved after the conclusion of that period.

Ms Dunbar for her part says that she received no cooperation from Mr Patel during the transition period;

(b)In any event, the relationship between the new business and Mr Patel came to an end on 22 August 2019;

(c)From the date of settlement the business turnover plummeted, and never reached the turnover level at which it was operating prior to the sale, or anything like it. Mr Patel and Ms Dunbar have diametrically opposed views as to why this  was  so.  Mr Patel attributes it to  Ms  Dunbar’s  management  and  Ms Dunbar puts it down to Mr Patel’s lack of cooperation with the handover of the business;

(d)On 14 November 2019 the Dunbar interests purported to cancel the sale and purchase agreement for breach. The alleged breaches of contract are many and varied, but the central one was the alleged failure — effectively by Mr Patel

— to hand over everything that comprised the goodwill of the business;

(e)Unsurprisingly, 16 December 2019 came and went, and the third tranche of the sale and purchase price was not paid;

(f)On 22 January 2020 the Patel interests commenced this proceeding. Their claim was and is for the payment of the third tranche of the sale and purchase price. On 28 February 2020 the Dunbar interest entered a statement of defence and counterclaim. In their counterclaim they claim damages for breach of contract — essentially the sale and purchase price together with interest and costs;

(g)Between the first case management conference in August 2020 and November 2020 the parties provided standard discovery. Neither party accepts that the other has provided adequate discovery.

[8]        Before the Court for determination are interlocutory applications by both the Patel interests and the Dunbar interests.

[2]    In the end, it was not necessary to deal with the Patel interest’s application because the Dunbar interests did not oppose the same, and these were made in paragraph [23] of my judgment.

[3]    For the reasons set out in my judgment I concluded that the Dunbar interests were entitled to an order requiring the Patel interests to provide further information and discovery. I was concerned to ensure that any orders were made in appropriate terms. For that reason, I outlined the orders I proposed to make, but reserved leave to both parties to come back to the Court by memorandum in connection with these.

[4]The orders I proposed were:

[24]      In relation to the application by the defendant/counterclaim plaintiff parties:

(a)The application concerning the discovery of the bank account records of Mr and Mrs Patel’s minor children is dismissed;

(b)within 20 working days of the date of this judgment the Patel interests are to file and serve a supplementary affidavit identifying comprehensively all email accounts or addresses and all mobile telephone numbers used by the business formerly owned, governed and managed by Mr and Mrs Patel and the company now known as Indiago Ltd in the course of its business from 1 January 2019;

(c)pursuant to r 9.34 of the High Court Rules, I order that the Patel interests permit and facilitate a forensic computer specialist nominated by the Dunbar interests to inspect those email accounts or addresses and mobile phone numbers for electronic documentation relevant to the issues between the parties to this proceeding;

(d)following that exercise, the Dunbar interests are to file and serve affidavit evidence including a comprehensive list of all material extracted from those email accounts or addresses and mobile telephone numbers;

(e)pending further order of the Court, all such information is to be treated as confidential and, so far as the Dunbar interests are concerned, to be viewed only by the Dunbar interests’ solicitors and counsel engaged in this proceeding and expert witnesses that the Dunbar interests’ solicitors anticipate calling to give evidence in this proceeding.

[5]    Seemingly, neither party regarded those orders as satisfactory. Despite my having reserved leave to the parties as already said, the Patel interests filed and served an interlocutory application for an order recalling my judgment or alternatively leave to appeal. The Dunbar interests responded by filing and serving an application for leave to cross appeal.

[6]    In a minute dated 7 September 2021 I indicated that I would deal with these applications on the papers unless one or either of the parties sought an oral hearing. The Registrar subsequently informed me that counsel had sought an oral hearing. That of course is their entitlement.

[7]    It turns out that counsel were wise to do so because it became clear during the course of the oral hearing that there was a significant measure of agreement between the parties as to what orders should be made, and that even in relation to the one important area of difference between them, it is not at all impossible to imagine an outcome satisfactory to both. As I said at the conclusion of the oral hearing, I am grateful to counsel for the responsible approach that they have adopted to dealing with this matter, and I am hopeful that this judgment will assist the parties to get the remaining issues resolved without incurring unnecessary additional costs.

[8]    The first matter to deal with is the status of the existing judgment. As already said, the Patel interests have sought an order recalling my judgment under r 11.9 of the High Court Rules 2016 so as to enable the terms of the orders to be reconsidered. The opportunity to do that is exactly what I was attempting to facilitate in reserving leave to the parties to come back as to the terms of the orders, and it is not obvious to me why the Patel interests did not elect to take advantage of that reservation of leave. However, the parties having approached matters in the way that they have, I turn to the principles governing recall.

[9]    The leading authority as to the circumstances in which a court will recall a judgment is the judgment of Wild J in Horowhenua County v Nash (No. 2) and in particular the following passage:2

Generally speaking, a judgment once delivered must stand for better or worse subject, of course, to appeal. Were it otherwise there would be great inconvenience and uncertainty. There are, I think, three categories of cases in which a judgment not perfected may be recalled — first, where since the hearing there has been an amendment to a relevant statute or regulation or a new judicial decision of relevance and high authority; secondly, where counsel have failed to direct the Court’s attention to a legislative provision or authoritative decision of plain relevance; and thirdly, where for some other very special reason justice requires that the judgment be recalled.

[10]   The underlying analysis was revisited by Heath J in Munro v Gladvale Farms Ltd where his Honour said:3

In my view, a recall application must raise a material issue on which it would be unjust for the parties to be put to the cost and trouble of appeal, when the

2      Horowhenua County v Nash (No. 2) [1968] NZLR 632 (SC) at 633.

3      Munro v Gladvale Farms Ltd [2017] NZHC 2692 at [14].

issue is one more appropriately addressed by the first-instance Judge. Such a situation will arise in cases in which a Judge acknowledges that he or she overlooked a material factor in reaching a particular decision. Recall, in that situation, avoids the risk that an appeal might be allowed and remitted to the trial Judge for reconsideration of the point in issue, at unnecessary further cost to the parties. Such circumstances, in my judgment, constitute a “very special reason” for exercising the recall jurisdiction, to adopt the language employed by Wild CJ in Horowhenua County.

(Footnotes omitted.)

[11]   Whilst I do not see these judgments as being in conflict, it does seem to me that the circumstances in which the Court may consider recall have been expanded by Munro v Gladvale Farms Ltd. I respectfully agree with Heath J’s conclusion that where it is clear that the court has misunderstood an important aspect of one of the parties’ cases or overlooked an aspect of the evidence or argument, the parties should be able to invite the court to recall its judgment and reconsider the case in light of the alleged misunderstanding or factors that were overlooked.

[12]   Of course, that is not to say that applications for recall ought to become commonplace and effectively alternatives or precursors to appeal. As Wild CJ said in Horowhenua County v Nash (No. 2), judgments ought generally to stand for better or worse.4

[13]Nevertheless, in a case such as this where:

(a)the Court foresaw issues relating to the terms of the orders to be made and reserved leave in that regard;

(b)it is the terms of the orders sought which are subject to the dispute between the parties; and

(c)both parties have raised concerns about the terms of the proposed orders;

I see no obvious difficulty with recalling the judgment in order to address those concerns.

4      Horowhenua County v Nash (No. 2), above n 2, at 633.

[14]   I make an order recalling the judgment expressly for the purpose of resolving the terms of the orders to be made.

[15]I will reissue my judgment in due course.

[16]   In the meantime, the important issue is the terms of the orders that should be made.

[17]   Having had the opportunity to hear from counsel in relation to this, my understanding of the position is as follows:

(a)There is no issue relating to the orders covered in paragraph [23] of my 7 July 2021 judgment;

(b)There is no issue relating to the order covered in paragraph [24] (a);

(c)Insofar as paragraph [24] (b) is concerned, that was intended to ensure that the Dunbar interests were fully and fairly informed as to all methods of communication (to use the most general terminology I can think of) with past, present or prospective customers of the business formerly run by them and sold to the Dunbar interests over the period during which they owned and ran the business and subsequently. As I understand it there is no real dispute in connection with this. The Dunbar interests wish to know what devices were used by Mr Patel and others associated with the former company and the Patel interests do not object to providing this information. Indeed, they say that they have already done so, though not in one document. In my judgment the Dunbar interests are entitled to an order requiring the Patel interests to list, so far as they are able, all hardware and all email addresses, telephone numbers and the like that were used for business purposes. Let me be as clear as I can in relation to this. It is not my expectation that the Patel interests will be required to list every electronic device or every means of communication that they used over the relevant time.

It is only those which were used to any material extent in connection with and for the purposes of the business that need to be disclosed.

[18]   That brings me to the order which is effectively captured in para [24] (c), and which, during the course of the argument, appeared to narrow to Mr Patel’s mobile telephone(s).

[19]There are two competing interests in relation to this aspect of the order.

[20]   On the one hand, the Dunbar interests are in my judgment entitled to discovery of any electronic exchange which the Patel interests had with past, present or prospective customers of the business before or after settlement of a commercial nature. On behalf of the Patel interests Ms Watt contends that there was no evidential basis for my conclusion that the discovery already provided by the Patel interests did not include all such documentation. At very least, she would add, if there is, it was not fully articulated in my judgment. In my view, there was evidence which suggested that discovery may not have been comprehensive. As Mr Haig for the Dunbar interests submitted, both at the original and the more recent hearing, the fact that the business’ turnover plummeted so very dramatically from settlement, the difficult relationship which appears to have existed between the parties post settlement and the fact that the disclosure of Mr Patel’s primary mobile telephone details included something like 500 outgoing calls and no incoming calls when information as to the incoming calls would be available either from Vodafone or on a forensic examination of the device is, in my view, strong evidence that disclosure has not been complete.

[21]   As against what I regard as the Dunbar interest’s genuine entitlement to such discovery, an equally compelling argument is advanced on behalf of the Patel interests that it was too much of an invasion of their personal privacy to allow access to electronic equipment such as mobile phones which are used for both personal and business purposes.

[22]   The question that counsel ultimately focused on during the course of the hearing is how best to balance these interests.

[23]In an attempt to assist I have considered what such an order might provide.

[24]   It is the Dunbar interests that are seeking this additional disclosure and it is they who must bear — initially at least — the cost of the exercise.

[25]   The examination of Mr Patel’s mobile telephone for incoming calls and the like will only be possible with the assistance of a technical specialist. As to this, the Dunbar interests have proposed a Mr Hansen. The Patel interests do not appear to have any particular objection to Mr Hansen.

[26]   Mr Hansen will need Mr Patel’s mobile telephone in order to clone it. An assessment will then need to be made as to whether any material on the telephone is relevant to the issues between the parties. In my view, Mr Hansen is not the right person to make this assessment. It needs to be made by a legal practitioner with an understanding of the law and the case. One option discussed was the appointment of independent counsel for that purpose. Whilst that may solve one problem, it will add significantly to costs. Another option is for counsel for both parties jointly to review the information. However, I see no reason why, with the protection of a clone of the telephone being available, the order cannot reflect general practice whereby the initial assessment of this material is made by the Patel interest’s solicitors who would be obliged to identify every item and categorise them into irrelevant personal and relevant business items. The Dunbar interests could then challenge that categorisation should they so wish, and if necessary a judge could review a selection of items to assess the issue of their relevance.

[27]   In light of the above, I invite counsel to confer (as is of course their obligation pursuant to r 8.2 in relation to discovery) and formulate replacement orders for those in paragraphs [24] (b)–(e). I would expect a joint memorandum as to this within 10 working days.

Associate Judge Johnston

Solicitors:

Livingston & Livingston, Wellington for plaintiffs/counterclaim defendants Mcalister Mazengarb, Wellington for defendants/counterclaim plaintiffs