Perpetual Trust Limited v Mainzeal Property and Construction Limited
[2013] NZHC 1260
•31 May 2013
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2010-404-7597 [2013] NZHC 1260
BETWEEN PERPETUAL TRUST LIMITED First Plaintiff
AMP CAPITAL PROPERTY PORTFOLIO LIMITED Second Plaintiff
AND
MAINZEAL PROPERTY AND CONSTRUCTION LIMITED First Defendant
NUPLEX INDUSTRIES LIMITED Second Defendant
PROJECT ROOFING LIMITED Third Defendant
Hearing: 13 May 2013 Appearances:
J Stewart and A Cornelius for Plaintiff
W Smith and M Beight for 14th and 17th Defendants
Judgment:
31 May 2013
JUDGMENT OF ASSOCIATE JUDGE J P DOOGUE
This judgment was delivered by me on
31.05.13 at 4 pm, pursuant to
Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date……………
PERPETUAL TRUST LIMITED & ANOR v MAINZEAL PROPERTY AND CONSTRUCTION LIMITED [2013] NZHC 1260 [31 May 2013]
Background
[1] The substantive proceeding involves a claim for alleged leaks in the Botany Town Centre shopping complex which was issued on 16 November 2010. James Hardie was joined on 16 March 2011.
[2] The fourteenth defendant (Studorp Limited) and seventeenth defendant (James Hardie New Zealand), collectively “James Hardie”, apply for particular discovery.
[3] The plaintiffs’ first affidavit of documents was provided in June 2011. James Hardie considers that the plaintiffs have not discovered particular documents and classes of documents relevant to the matters in issue between the parties. James Hardie’s solicitors corresponded with the plaintiffs’ solicitors about this matter. The plaintiffs did not consider the requested documents to be relevant on the pleadings. On 29 November 2012, James Hardie provided the plaintiffs with an amended statement of defence. The plaintiffs reviewed their discovery with reference to the amended defence and on 5 February 2013 served a sixth supplemental affidavit of documents. James Hardie considers that the plaintiffs have not provided the further documents requested or any explanation as to why they are unable to do so. James Hardie requested further documents on 15 and 21 February. This is the basis of James Hardie’s application for particular discovery, filed and served on 22 February
2013.
[4] James Hardie requested 18 documents or categories of documents. The plaintiffs have agreed to make enquiries to clarify the existence of and/or obtain the documents in requests one, two, three, seven, eleven, thirteen, sixteen and eighteen. The plaintiffs challenge James Hardie’s remaining requests on the bases that: the plaintiffs have provided substantial discovery relevant to the issues raised by James Hardie’s current pleading; James Hardie has failed to properly articulate the relevance of the discovery being sought; James Hardie’s assertions of relevance are unsupported by the current pleadings, and the costs to the plaintiffs in providing further discovery are disproportionately high in comparison with the matters at issue.
[5] In order to determine the applications which the defendants have brought the Court has to firstly determine what the applicable discovery test was that related to the discovery which the plaintiffs were required to undertake. Having decided that point, the Court will then review the material to ascertain whether it is likely that the plaintiffs have not disclosed documents which were discoverable as a result of application of the appropriate test.
[6] While there does not seem to have been any explicit direction as to which discovery test was applicable, whether the “adverse documents” test or the Peruvian Guano test,1 it would appear that the original discovery was carried out on the basis of the latter. It follows that the enquiry into whether there have been deficiencies in the discovery ought to be judged according to the same test.
[7] I was referred to the decision of Managh v Britton2 in which Gendall AJ
observed:
[24] If proceedings are filed and discovery orders are in place before 1
February 2012, when the new rules took effect, discovery continues in accordance with the existing discovery order. However, if one of the parties wishes to amend an existing order, the court can determine the application in accordance with the new discovery rules.
[8] The Judge went on to conclude that the case before him involved an amendment to the existing discovery orders. While I respectfully agree with the decision in Managh it is not applicable in the present circumstances where there is not in any sense a revisiting of the original discovery order but rather an application based upon grounds that the original order has not been properly complied with.
[9] I therefore consider that the correct approach is to enquire whether a basis has been established for showing that the plaintiffs may not have discovered all documents which were of direct or indirect relevance, including those which could lead to a line of enquiry that might assist the defendants’ case or be adverse to the
plaintiffs’ claim.
1 Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Co (1882) 11 QBD 55 (QBD).
2 Managh v Britton [2012] NZHC 2949.
[10] In framing the question of relevance, the parties were agreed that regard has to be had to the way the issues are stated in the current statement of claim and responding statement of defence.
[11] For the defendants, Mr Smith summarised the relevant parts of the statement of defence in the following terms:
In its Amended Statement of Defence dated 26 November 2012 ... James
Hardie has made the following affirmative pleadings:
(a) It has denied that either of the plaintiffs has suffered any loss. In respect of the first plaintiff, James Hardie has specifically denied that the first plaintiff sold the land for less than what would otherwise have been its market value at the time of sale because of the existence of the alleged Defects or Leaks. It has also denied that the first plaintiff has any legal responsibility for the repair costs which are claimed in the proceeding (Defence, para 71.1). At para
71.4 of the Defence, James Hardie pleads that when the second plaintiff acquired the Botany Town Centre in 2008, the consideration
it provided took into account the anticipated costs of repairing the
alleged Defects and Leaks.
(b) James Hardie pleads that the plaintiffs have failed to carry out adequately or at all, regular maintenance on James Hardie products used at the Botany Town Centre, and have either been guilty of contributory negligence on that account or have failed to mitigate the claimed Losses (Defence, paras 72 and 73).
(c) James Hardie has expressly pleaded the six year time limit under the
Limitation Act, contending that any claimed Losses occurred before
16 March 2005, or (if it be the relevant test) that the first plaintiff ought reasonably to have discovered the loss or damage before 16
March 2005 (and that in the circumstances of this case, any “deemed
knowledge” of the first plaintiff or associated entities must be attributed to the second plaintiff as the first plaintiff’s “nominee” (Defence, para 74). In their Reply, the plaintiffs have pleaded that their negligence and Fair Trading Act causes of action did not accrue until after 14 March 2005 and 14 March 2008 respectively.”
[12] For the plaintiffs, Ms Stewart submitted:
The applicant must prove relevance
A party seeking particular discovery bears the onus of showing that the
documents sought are relevant to an issue in the proceeding.3 In Powerco
3 Gibson v Curtis HC Wellington CIV-2007-485-000907, 4 July 2008 at [16]. See also Managh v
Hasselman HC Napier CIV-2011-441-000824, 1 June 2012 at [9].
threshold which the applicant must meet is a high one – the applicant must
show the respondent’s view as to relevance is “plainly wrong”.
(footnotes in original)
[13] Before considering the individual categories of documents it is necessary to say something to make further reference to the background.
[14] The first plaintiff acquired the title to the property on which the shopping centre was constructed in 1999. Construction of the Botany Town Centre took place over the next two years with the final practical completion certificate being issued 30
June 2001.
[15] Once the complex had been completed it was transferred to an AMP company, AMP NZ Property Retail Limited (“Retail”). This company is a wholly owned subsidiary of the first plaintiff. It is not necessary to trace the full history of the various changes of ownership that occurred over the succeeding years but it is important to note that at least one other AMP company, AMP Capital Investors (New Zealand) Limited (“Investors”) acquired part of the property in 2002, but transferred its interest to what seems to have been a third party company, Trust Company Limited (“Trust”) in 2003. At that point both Retail and Trust were the owners of the complex and the complex was managed pursuant to an ownership deed between those parties from 2003 to 2008. In 2008 Trust transferred its interest in the property to Retail so that once again Retail was the sole owner of the complex. Then later that year both titles comprising the property were transferred to the second plaintiff who has been the legal owner of the property ever since.
[16] Ms Stewart submitted that the documents that were sought were of tangential significance, if any. She described the request for the documents as being “unfocussed” and not supported by any proper basis. She points out that the defendants now “baldly” assert that the plaintiffs have no “present legal
responsibility” in respect of the repairs without pleading the basis on which they
4 Powerco Limited v The Commerce Commission HC Wellington CIV-2005-485-1066, 10 March 2006.
expeditions.
[17] She referred to the fact that the defendants have pleaded the six year time limit under the Limitation Act 2010, contending that any claimed losses occurred before 16 March 2004. She further noted that the defendant said that the plaintiff ought reasonably to have discovered the loss or damage before 16 March 2005 and that in the circumstances of the case any “deemed knowledge” of the first plaintiff or associated entities must be attributed to the second plaintiff as the first plaintiff’s “nominee”. Ms Stewart said that the plaintiffs were being obliged to read between the lines to determine the proper basis for James Hardie’s purported limitation defence. She said that in any event there were sufficient particulars provided.
[18] Before the hearing of the application commenced, the parties reached agreement that a number of the document categories which were included in the application for particular discovery would no longer be required. The applicant no longer sought orders in respect of items one, three, four, 11, 13, 14, 16 and 18. Pursuant to supplementary submissions filed on the morning of the hearing, the applicant also abandoned request nine to the extent that Mr Penn for the plaintiffs had deposed that such documents did not exist or, to the extent that they did exist, had been discovered. Requests eight and 17 were also no longer required. I will now consider the applications in respect of the documents that are still in contention.
[19] I also assume that the applicant does not seek an order in respect of category two because argument was not addressed to the Court on this category of documents.
Request five
[20] This document is described as an “information memorandum of 23
November 2007”. The document apparently relates to a restructuring that occurred to the AMP New Zealand Property Fund. This is said to be relevant to the question of how that fund is controlled and the nature of the ownership of the Botany Town Centre land. That in turn is said to be relevant to the respective plaintiff’s ability to
sue for the cost of repairs, the attribution of knowledge of any leaks and whether each plaintiff (or either) has suffered loss. The plaintiffs resist disclosure.
[21] The relevance of the document is alleged to arise in the following way. There have been a number of transfers of the BTC property over the years since it was constructed. It may be that neither of the entities that are parties to the present litigation suffered any loss when transferring the property, even if the property could be described as being of reduced value as a result of having been stigmatised as a leaky building. The loss could have arisen from other sources as well, including the cost of repairs. So assuming that it is likely that there has been a loss in value in the properties, it is not clear whether that loss has accrued to one of the present plaintiffs or to some other party who was part of the property transaction chain.
[22] Another possibility is that there have been transactions which were not truly arms length transactions that reflect market value. This possibility reflects the further contingency that the second plaintiff may have had the property transferred to itself to hold as a nominee or something akin to a trustee for another party, probably the first plaintiff.
[23] I agree that in principle the issue of who suffered any loss as a result of weather tightness problems is a relevant issue and therefore one in respect of which discovery obligations arise. Any documents that bear upon the value at which the property was transferred which have relevance to that issue in the Peruvian Guano sense should therefore have been discovered.
[24] However, I do not consider that it has been demonstrated that there has been a failure to give proper discovery for the reason that the inherent nature of the document in question does not give rise to an inference that it is concerned with the types of matters that have a bearing on whether the present plaintiff suffered any loss. That document, which relates to the restructuring of an investment fund, may not have anything to do with the ownership of individual properties which the fund proprietor owns.
[25] Another issue which the defendants put forward is that of attribution of knowledge. The argument as I understand it is this. If the correct starting point for the limitation period is the point when the person who suffered loss ought reasonably to have understood that the building was defective because of weathertightness problems, then the state of mind of the various responsible officers of the party which suffered the loss will be relevant. However, because the parties involved in the chain of ownership (other than Trust) were related parties, this means that there is likely to be some commonality of knowledge between various parties in the Perpetual/AMP company group who will have had knowledge of the commencement of the problem. Thus it is said that it is important for the defendants to understand the relationship between the various companies because that might enable the defendants to establish that the knowledge of one particular individual/s can be attributed to a claimant company and if that knowledge was acquired at a time which results in the limitation period having commenced running, then it could help the defendant establish a limitation defence – a defence which is explicitly pleaded.
[26] The Court is unable to conclude that the document which is sought in category five ought to have been discovered. There is no information which would persuade the Court that this document has the required characteristics of being relevant to an issue which is in contention in the proceeding and nor are there grounds for supposing that it might lead to a chain of enquiry that would advance the defendants’ case or be adverse to the plaintiffs’ claim.
[27] Before leaving this category, it is appropriate to make reference to a wider issue that impacts upon all of the categories of documents. It would seem that the plaintiffs have approached their discovery obligations on the basis that the Peruvian Guano test is not the appropriate test and that the adverse documents test contained in HCR 8.7 applies. For the reasons that I have earlier outlined I do not agree with that position. The expectation of the Court would be that the plaintiffs review the discovery given in the light of these remarks.
[28] For all of those reasons I decline to make the order sought in respect of document request number five.
Request six
[29] This request is concerned with an explanatory note which is referred to in the background section to document five.
[30] For much the same reasons as I set out under the previous category I decline to make an order with respect to request number six.
Request seven
[31] This application is for documents which would explain the basis (including whether as legal or beneficial owners) on which first AMP NZ Property Retail Limited, and then the second plaintiff, became registered proprietors of the land in the two relevant titles.
[32] I record that since the defendants filed their application the plaintiffs have agreed to make the appropriate enquiries to obtain the sale and transfer agreements for the transfers of title to Retail and to the second plaintiff.
[33] I accept that it is arguably relevant to the issue of whether either of the current plaintiffs suffered loss to know in what capacity they hold the property. I can understand a submission that there may at least be some uncertainty about whether a party to whom the property was transferred to hold as a “nominee” or trustee might not be a party which has a claim to recover damages or loss caused by way of water ingress to the BTC. The problem that the defendants have is that there is no reason to suppose that discoverable documents exist which actually contain the type of information which might make them relevant in the Peruvian Guano sense. The plaintiffs also oppose the application on the ground that it would be an expensive and time consuming operation for them to trawl through numerous files that are now in the archive. Further, the plaintiffs say that there is no guarantee that any documents retrieved will reveal anything different than the documents already disclosed relating to leaks and defects.
[34] As well, the jurisdiction to make orders for discovery is a discretionary one. Having regard to the evidence of Mr Penn in opposition to the application with
regard to request seven, and specifically his deposition about the cost and time in money to the plaintiffs if an order is made in terms of request seven, and also having regard to the offer to meet at least part of the terms of what the defendant is seeking, I conclude that it would be an appropriate exercise of the discretion to decline to make an order on request seven.
Request 10
[35] The document described in request ten is the “Closing Memorandum”
referred to in clause 8.9 of the Properties Transfer Agreement dated 11 March 2008.
[36] The defendants’ position is that this document is relevant to how AMP New Zealand Property Fund is controlled and to the nature of the ownership of the BTC Land. The document was said to be relevant to the respective plaintiff’s ability to sue for the cost of repairs, the attribution of knowledge of any leaks, and whether each plaintiff (or either) has suffered a loss. The point taken by the plaintiffs is that the attribution of knowledge of officers of one member of the Perpetual/AMP Group to another has not been foreshadowed in the statement of defence. I do not agree that such a matter needs to be pleaded. It is essentially a question of how the defendant would set about proving matters that would possibly give rise to a defence to the effect that the plaintiffs ought reasonably to have discovered the defects at an early enough time to result in claims being statute barred.
[37] In my view an order ought not to be made because I cannot see how it can be inferred that providing a document of the description of that which is the subject of request ten would arguably be relevant for the purposes of discovery. The application is declined.
Request 12
[38] In this part of the application the defendants seek discovery of the Co- ownership Deed dated 20 August 2002 (referred to in the Agreement for Sale and Purchase: Trust Company Limited to AMP NZ Property Retail Limited).
[39] Retail and Trust were co-operators of BTC between 2003 and 2008. Knowing which of the parties had responsibility for surveillance and inspections of the building that might have been expected to disclose water ingress could conceivably assist the defendants on the issue of when the damage complained of was reasonably discoverable. It may be that under the adverse documents test such a document would fall short of being discoverable but under the Peruvian Guano formulation it could well lead to a further line of enquiry and be the foundation for cross-examination of witnesses on this issue. In my view it ought to be provided and I order accordingly.
Request 15
[40] Request 15 is for the Asset Management Agreement relating to BTC entered into pursuant to the Co-Ownership Deed referred to in the agreement for sale and purchase of one-half share of BTC. This document raises similar considerations to those that I discussed under request 12 and, consistent with the conclusions that I reached concerning request 12, I also order discovery in regard to this document.
Costs
[41] The parties have each had some degree of success on the applications which have been brought. For those reasons I consider that the just order as to costs is that
they lie where they fall and I order accordingly.
J.P. Doogue
Associate Judge
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