PriceWaterhouseCoopers v Zag Limited

[2019] NZHC 3272

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

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

CIV 2018-485-892

[2019] NZHC 3272

BETWEEN

PRICEWATERHOUSECOOPERS

Plaintiff/Counterclaim defendant

AND

ZAG LIMITED

Defendant/Counterclaim plaintiff

Hearing:

11 December 2019

Counsel:

A E Simkiss and Y Lee for Plaintiff/Counterclaim defendant

J Smith QC and O Jaques for Defendant/Counterclaim plaintiff

Judgment:

12 December 2019

REASONS FOR JUDGMENT OF ASSOCIATE JUDGE JOHNSTON

[1]    This is an application by the plaintiff, PricewaterhouseCoopers, for an order pursuant to r 5.21 of the High Court Rules 2016 that the defendant, Zag Limited, provide further and better particulars of aspects of its first amended statement of defence and counterclaim dated 26 November 2019. The application was heard on  11 December 2019. Following the hearing, I gave judgment, dismissing the application and refusing any costs order. I indicated that I would give my reasons in writing. I now do so.

[2]    The proceeding itself is relatively complex. It has been identified as such for case management purposes. However, for present purposes, it is unnecessary to outline the background and identify the issues other than in the most general way.

[3]    In late 2014 the New Zealand Police engaged PwC as the lead entity in a consortium that included Zag (then known as Soltius Limited) to build and implement a computer-based human resource management system. There were two tiers of

PRICEWATERHOUSECOOPERS v ZAG LIMITED [2019] NZHC 3272 [12 December 2019]

contractual arrangements; the first between the Police and PwC and the second between PwC and Zag. The PwC consortium’s proposal involved the use of two proprietary software systems supplied by organisations known as SAP and Kronos. The project encountered significant difficulties. In this proceeding, PwC seeks to recover damages against Zag for alleged breaches of the contractual arrangements between those parties.

[4]    The core  pleadings  are  extensive.  PwC’s  claim  runs  to  59 pages  and  170 paragraphs. Zag’s original defence  and  counterclaim  ran  to  70 pages  and  257 paragraphs. Its first amended defence and counterclaim is longer.

[5]    PwC says that aspects of Zag’s pleadings are inadequate and, as I have already said, seeks an order that Zag provide further and better particulars.

[6]    Mercifully, since PwC originally sought particularisation of aspects of Zag’s pleadings, the parties’ solicitors and counsel have narrowed the scope of the dispute considerably.

[7]    By the time the matter was argued before me, PwC’s application focussed on one paragraph of Zag’s defence (paragraph 5.5) and five paragraphs of its counterclaim (paragraphs 196, 202, 214, 219 and 220).

[8]    Counsel helpfully summarised the general principles relating to the requirements of pleadings and referred me to the leading cases.

[9]    There was no discernible difference between the way in which Ms Simkiss for PwC and Mr Smith for Zag analysed these. For myself, I do not think it necessary to say any more than this. Part 5 of the High Court Rules effectively requires that a party, in pleading its case, whether that be a claim, a defence, a counterclaim or anything else, articulate the basis of the same with sufficient clarity and in sufficient detail to ensure that the other party or parties can understand the claim or defence they have to meet and respond meaningfully. The rationale for this scarcely needs to be stated. Without adequate pleadings setting out clearly each parties’ position the litigation cannot be conducted fairly.

[10]   That much said, the courts have been clear that in complex commercial cases especially there is a danger in “over-pleading”. As Miller J said in BNZ Investments Ltd v Commissioner of Inland Revenue (No 5) (2008) 23 NZTC 21, 821 at [45], there is a law of diminishing returns in terms of the detail which parties should be expected to provide in their pleadings and an “over-pleaded” case can be as confusing as an “under-pleaded” case.

[11]   Against that background, I turn to the two limbs of PwC’s application in this case.

[12]   In paragraph 5.5 of its original defence Zag said that there were “material gaps” between the SAP and Kronos software that required Zag to customise the systems and associated application programming interfaces. In its amended claim the terminology has changed to “material differences”, though I do not perceive that change to be of any real significance.

[13]   Given that Zag’s defence (and its counterclaim) are to an extent based on an allegation that PwC required it to carry out work arising from difficulties encountered as a result of these software components, it is not surprising that PwC seeks particulars in terms that would require Zag to identify these alleged gaps or differences.

[14]   However, as the argument developed and I was referred, by counsel for both parties, to the relevant components of the pleadings, two aspects of the case became increasingly apparent.

[15]   First, paragraph 5 of the defence in its entirety — and paragraph 5.5 in particular — is descriptive and introductory. It raises the question of the differences between, and the incompatibility of, the software products merely to contextualise the issues that arose later in the project. These issues are canvassed with more precision later in the pleading.

[16]   Second, PwC’s own pleadings suggest that it was aware from the outset – as Zag was also no doubt aware – of these differences and the prospect of incompatibilities between the systems.

[17]   In those circumstances, the conclusion I reached was that even if an order were to be made requiring Zag to describe the differences to which it refers in paragraph 5.5, this would be nothing but a general description of the nature of the systems involved and their differences which would not take matters far or shed any particular light on the subsequent, more detailed, pleadings, and would not inform PwC of anything it is not already aware of.

[18]For those reasons I declined to make the order sought.

[19]   Turning to the second limb of the application, this relates to a series of allegations in Zag’s counterclaim which on their face assert post-contractual variations agreed with PwC whereby PwC instructed Zag to carry out additional work above and beyond what was required by the original contractual arrangements, and Zag agreed to carry out such work on the basis of, and in reliance on, PwC’s agreement that it would be paid.

[20]   I deliberately refer to those pleadings (the relevant paragraph references for which are provided above) as appearing to allege that because when Mr Smith responded to the submissions made on PwC’s behalf, he helpfully indicated that, despite the terms of the pleading, Zag would not be able to maintain at trial that there were a series of discrete variations. He described the situation in much more general terms. The flavour of his description (in my words rather than his) was that there came a point when it was obvious to all concerned (the Police; PwC; Zag) that the project was not proceeding as anticipated and that, if it was to be saved at all, that would require both PwC and Zag to commit significant additional resources, most likely “on their own nickel”, as he put it.

[21]   In other words, whilst the pleadings may suggest a series of discrete variations proposed and agreed between the parties, the reality is that Zag’s case is that PwC and Zag agreed that they would have to do what they had to do to try and save the project.

[22]   In those circumstances, Mr Smith frankly accepted that Zag could not provide the particulars being sought, that is to say it could not identify the nature and terms of

particular arrangements made by the parties as to the extra work to be carried out by Zag.

[23]   Had the position been otherwise, and as suggested by the terms of Zag’s counterclaim, I would have been inclined to order Zag to provide the particulars sought. It is elementary that a party pleading the existence of a contractual arrangement must provide sufficient details of the way in which that arrangement came about, so as to enable the other party to test that out with potential witnesses. However, given Mr Smith’s description of the situation, the view I reached was that no useful purpose would be served by the Court ordering Zag to provide particulars that it says it is not in a position to provide.

[24]   I have deliberately recorded the argument advanced on Zag’s behalf in case it becomes an issue at any later stage in the proceeding.

[25]   On that basis I declined to make the order sought by PwC in relation to those paragraphs of Zag’s claim.

[26]PwC’s application is therefore dismissed.

[27]   As to costs, although Zag might normally expect to secure a costs award given that PwC’s application has been dismissed, to the extent that the second limb of PwC’s application appears to have been justified by somewhat misleading pleadings, the conclusion I came to was that substantial justice would be done if I refrained from making any costs order in relation to this interlocutory proceeding, leaving costs to lie where they have fallen.

Associate Judge Johnston

Solicitors:

MinterEllisonRuddWatts, Auckland for plaintiff Hudson Gavin Martin, Auckland for defendant