Primero Maritime Limited v Southern Spars Limited
[2019] NZHC 469
•18 March 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2015-404-1576
[2019] NZHC 469
BETWEEN PRIMERO MARITIME LIMITED
Plaintiff
AND
SOUTHERN SPARS LIMITED
Defendant
Hearing: 11 March 2019 Appearances:
E McGill and S K Cartwright for the Plaintiff
D McLellan QC and SFW Learmonth for the Defendant
Judgment:
18 March 2019
JUDGMENT OF ASSOCIATE JUDGE P J ANDREW
This judgment was delivered by me on 18 March 2019 at 2:30 p.m. pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
……………………………………
Solicitors / Counsel:
Ms E McGill, Barrister, Auckland
Mr S K Cartwright, Hesketh Henry, Solicitors, Auckland Mr D McLellan QC, Barrister, Auckland
Ms P Davies and Mr SFW Learmonth, Fee Langstone, Solicitors, Auckland
PRIMERO MARITIME LTD v SOUTHERN SPARS LTD [2019] NZHC 469 [18 March 2019]
Introduction
[1] The plaintiff, Primero Maritime Ltd (Primero), is the owner of a super yacht, the Salperton IV. The mast of the yacht fractured whilst being sailed in January 2011. The defendant, Southern Spars Ltd, manufactured the mast and rigging. Primero sues in negligence contending that Southern Spars failed to exercise reasonable skill and care in manufacturing and supplying the rig.
[2] The cause of the dismasting and the liability of the defendant for damages are in dispute. The proceedings were brought in July 2015, following formal demand in January 2014.
[3] Southern Spars challenges Primero’s claim to privilege over a number of documents pursuant to r 8.25 of the High Court Rules 2016. Primero contends that the disputed documents are privileged under s 56 of the Evidence Act 2006 on the basis that they are communications prepared for the dominant purpose of a proceeding or an apprehended proceeding.
[4] The documents for which privilege is claimed are, in the main, reports prepared by the plaintiff or its insurer’s experts. Primero did not file an affidavit of documents until 2018. Before it did so, it provided the majority of the disputed documents to the defendant’s solicitor on a without prejudice basis and for the purposes of a mediation which ultimately did not take place.
[5] In addition to the challenge to privilege, the defendant has brought an application for particular discovery pursuant to r 8.19 of the High Court Rules 2016.
[6]The critical issues I must determine are:
(a)whether the plaintiff has discharged the burden of establishing the twin requirements of reasonable apprehension and dominant purpose under s 56 of the Evidence Act 2006 (the privilege issue); and
(b)whether the defendant has established relevance and proportionality in respect of its application for discovery (the discovery issue).
Relevant legal principles
[7] The common law test for litigation privilege was described in Guardian Royal Exchange Assurance of New Zealand Ltd v Stuart:1
… when litigation is in progress or reasonably apprehended, a report or other document obtained by a party or his legal adviser should be privileged from inspection or production in evidence if the dominant purpose of its preparation is to enable the legal adviser to conduct or advise regarding the litigation.
[8]The test is now set out in ss 56(1) and (2) of the Evidence Act 2006:
56 Privilege for preparatory materials for proceedings
(1)Subsection (2) applies to a communication or information only if the communication or information is made, received, compiled, or prepared for the dominant purpose of preparing for a proceeding or an apprehended proceeding (the “proceeding”).
(2)A person (the “party”) who is, or on reasonable grounds contemplates becoming, a party to the proceeding has a privilege in respect of—
(a)a communication between the party and any other person:
(b)a communication between the party's legal adviser and any other person:
(c)information compiled or prepared by the party or the party's legal adviser:
(d)information compiled or prepared at the request of the party, or the party's legal adviser, by any other person.
[9]The Supreme Court has noted:2
[83] The report of the Law Commission preceding the Evidence Act made it clear that the provision that is now s 56 was “intended to state the existing law as laid down by the Court of Appeal in Guardian Royal Exchange Assurance of New Zealand Ltd v Stuart”. In Guardian Royal Exchange Assurance of New Zealand Ltd v Stuart, the Court of Appeal adopted the dominant purpose test in place of an earlier more liberal, “appreciable purpose” test. It is clear that the intention of the Court of Appeal in that case was to limit the scope of litigation privilege. In his judgment, Richardson J observed that “the public interest is best served by rigidly confining within narrow limits the cases where material relevant to litigation may be lawfully withheld”.
1 Guardian Royal Exchange Assurance of New Zealand Ltd v Stuart [ 1985] 1 NZLR 596 (CA) at 602.
2 Beckham v R [2015] NZSC 98 (footnotes omitted).
[84] We think it is consistent with the intention of the legislature to adopt the law set out in Guardian Royal Exchange Assurance of New Zealand Ltd v Stuart to apply the dominant purpose test with some rigour. We do not think that the approach suggested by Mr Mount is sustainable, essentially because it undermines the dominant purpose test and renders it meaningless.
[10]In E Sport Yachting Ventures Ltd v Southern Spars this Court held:3
(a)Questions of whether litigation was reasonably apprehended at the time the statements were prepared and as to whether they were prepared for the dominant purpose of such litigation have to be determined on the basis of evidence, with both limbs of the test having to be satisfied before litigation privilege attaches.4
(b)Whether or not litigation is reasonably apprehended is a question of fact, with the requirement for “reasonable” apprehension importing an objective element; the question is whether a reasonable person in the position of the party in question, and possessed of the same information at that time, would have regarded the future commencement of litigation as probable.5
(c)A vague apprehension of litigation is insufficient.6
(d)If the person who caused the documents to be prepared had at that time a bona fide belief that litigation would probably ensue, the documents will likely be privileged.7
(e)Where the party claiming the privilege is a corporate entity, the subjective intention of an employee of, or investigator for, that party may not be determinative, but where an individual with influence in that party’s decision to litigate has formed a view as to the likelihood
3 E Sport Yachting Ventures Ltd v Southern Spars HC Auckland CIV-2008-404-1120, 29 July 2011.
4 At [20].
5 At [21] and [22].
6 At [21].
7 At [21].
of litigation, that will be a critical fact from which an objective observed would almost certainly infer that litigation was probable.8
(f)The “dominant purpose” element of the test reflects a balancing of the ready access to relevant information, against the ability to obtain legal advice on existing or contemplated litigation.9
(g)Whether documents were prepared for the dominant purpose of enabling a legal adviser to conduct or advise regarding litigation is a matter of fact. The fact that the documents would be made available to lawyers in the context of possible litigation does not of itself establish that this was the dominant purpose for which they were prepared.10
(h)It is the intention of the party who obtains the doc that matters, not the intention of the person who creates the document (applying Laurenson v Wellington City Corporation11).12
Factual background
[11]For the purposes of this judgment, a brief chronology will suffice.
Date: Events: 27 March 2007:
The plaintiff entered into a contract with Fitzroy Yachts Ltd for the construction of the vessel, Salperton IV.
4 February 2008:
Fitzroy Yachts sub-contracted to the defendant the design, manufacture and supply of the vessel’s mast and rigging.
8 At [21].
9 At [22].
10 At [22].
11 Laurenson v Wellington City Corporation [1927] NZLR 510 (SC).
12 E Sport Yachting Ventures Ltd v Southern Spars HC Auckland CIV-2008-404-1120, 29 July 2011 at [21].
April 2009: The mast was installed in the vessel, which was shortly
afterwards handed over to the plaintiff by Fitzroy Yachts.
April 2010:
The vessel was involved with a crash gybe event which badly damaged the boom. Significant repair work was undertaken by the defendant.
May 2010:
The vessel’s rig was fully inspected and found to be in good condition. The defendant arranged for ultrasonic testing of the mast.
November 2010:
The rig was again fully inspected and given a 12 month intermediate service.
22 January 2011:
The vessel dismasted while off the coast of Guadeloupe. Later the same day the crew prepared statements summarising what they had recalled had happened during the incident.
23 January 2011:
A number of interested parties, including the defendant, were notified of the incident and invited to attend a joint inspection of the damage.
April to December 2011:
Investigative testing was carried out on the yacht’s mast stub and the salvaged PBO rigging in order to determine the cause of the failure.
21 January 2014:
Formal demand sent to defendant by solicitors for the plaintiff and its subrogated hull insurers.
9 July 2015:
Proceedings issued.
Analysis and decision
Challenge to privilege
[12] There is a paucity of evidence from the plaintiff to discharge the burden it carries under s 56 of establishing the twin requirements of reasonable apprehension
and dominant purpose. Beyond the affidavit of documents itself, the only affidavit evidence filed by the plaintiff in opposition to the defendant’s application was sworn by a solicitor employed by Kennedys solicitors. However, that affidavit merely annexes a letter from the plaintiff’s solicitor’s letter and does not set out any evidence of fact which could be used to assess whether the requirements of s 56 have in fact been met.13
[13] The plaintiff submits that the dismasting in January 2011 was an unusual accident. The vessel is said to be a high value super yacht with specialised sailing equipment that was well maintained and regularly serviced (including, it is alleged, by the defendant). The incident is said to have occurred in good weather conditions. The dismasting also caused damage to the vessel. The plaintiff submits that it was immediately apparent that costs of repair/replacement would be significant. It is thus argued that it is entirely reasonable to conclude that a person in the position of the owner (a high net worth individual) and insurer of the vessel would have immediately regarded future litigation as highly likely. The fact that photographs and crew statements were taken immediately supports the prospect of litigation being at the forefront of the plaintiff’s mind.
[14] However, I reject that submission. A number of those contentions are, as Mr McLellan QC submitted, evidence from the bar and there is no basis to draw an inference from the undisputed facts that either the reasonable apprehension or dominant purpose tests have been met. In the circumstances where the plaintiff carries the burden and the tests in s 56 are to be applied with some rigour, it was incumbent on the plaintiff to provide the necessary evidential foundation. It has not done so. In my view, what the plaintiff was required to do was to adduce evidence to establish at which point in time litigation became reasonably apprehended and the purpose of commissioning the report. The plaintiff’s evidence should also have addressed whether the plaintiff had any control over the issuing of proceedings and whether it ever instructed legal advisers.
13 I accept that Hesketh Henry, solicitors and counsel, have only very recently been instructed (namely, a week before the hearing). However, that does not of course displace the burden which the plaintiff carries.
[15] The documents at issue were created in the period 25 January 2011 until 17 March 2013. They were thus prepared long before any formal demand was made or litigation commenced. If there is any reasonable inference to be drawn, it is that the purpose of commissioning the reports was either for the purpose of assessing the insurance claim or for investigating cause and liability. That does not of course assist the plaintiff because as the jurisprudence makes clear, a mixed purpose is not enough; the dominant purpose of engaging someone to prepare a report must be to prepare for proceedings or apprehended proceedings.
[16] In support of its position, the plaintiff relies upon the decision of this Court in E Sport.14 It says that the facts of that case are very similar to the present one. In E Sport a yacht dismasted on 26 December 2006 during the Sydney to Hobart yacht race. A director of one of the companies that owned the yacht was onboard the vessel at the time. He arranged for crew statements to be taken in January 2007 following the vessel’s return to port. The director was a lawyer and the key decision-maker for the plaintiff. He gave evidence that he anticipated the need for court proceedings and so arranged for the statements to be prepared for the purpose of briefing solicitors and for the litigation. Lawyers were instructed and were given the statements in February 2007. Proceedings were commenced in February 2008.
[17] However, I accept the submissions of Mr McLellan that E Sport does not assist the plaintiff and can be distinguished. Associate Judge Abbott concluded that E Sport was a case of “rather unique circumstances” and there was clear evidence from the director, a lawyer, to establish both limbs of the test of privilege. There had also been an earlier dismasting in the E Sport case and the director/solicitor had been closely involved in the negotiations over, and implementation of, the repair work following that first dismasting.
[18]In Guardian Royal Exchange Assurance, Richardson J held:15
… there is all the difference in the world between confidential communications between a client and his solicitor designed to encourage a candid flow of information and advice between them and the preparation by
14 E Sport Yachting Ventures Ltd v Southern Spars HC Auckland CIV-2008-404-1120, 29 July 2011.
15 Guardian Royal Exchange Assurance of New Zealand Ltd v Stuart [1985] 1 NZLR 596 (CA) at 604; see also Beckham v R [2015] NZSC 98 at [84].
third parties of material for multiple purposes, one only of which is for consideration by the solicitor for apprehended litigation.
[19] His Honour further held that the public interest is best served by rigidly confining with the narrow limits the cases where material relevant to litigation may be lawfully withheld.16
[20] It is not enough to assert that the facts here are in essence the same as those in E Sport; the plaintiff needed to provide a proper evidential foundation and especially when the circumstances of E Sport were described as “rather unique”. (I agree that they were.)
[21] I also find that, as Mr McLellan submitted, there is some inconsistency in the plaintiff’s treatment of its documents and that this casts some doubt on the credibility of the plaintiff’s assertion of privilege. The plaintiff has not claimed privilege in respect of two reports dated 31 May 2012 but has asserted privilege in respect of the parent report of the same day. I accept that this does give rise to some undesirable suggestion that the plaintiff is seeking to disclose documents that it regards as innocuous but to withhold those which might cause it some prejudice. Inferences of that kind are to be avoided and this, again, reinforces the need for a full explanation from the plaintiff.
[22] Ms McGill, for the plaintiff, argued that the defendant’s own assertion of litigation privilege was inconsistent with its challenge to the claim of privilege by the plaintiff. In the defendant’s list of documents it claims litigation privilege in respect of reports created at a similar time to those at issue. The defendant was, of course, put on notice about the dismasting on 23 January 2011, the day following the dismasting. Ms McGill thus argued that the defendant’s reasonable apprehension of litigation at that time supported the plaintiff’s contention for the same apprehension. There is some force in that submission, but that does not ultimately assist the plaintiff in discharging the burden it carries. The defendant now accepts that it should make disclosure of the
16 Guardian Royal Exchange Assurance of New Zealand Ltd v Stuart [1985] 1 NZLR 596 (CA) at 605.
documents recorded at paragraph 2.1 of its affidavit of documents dated 20 August 2018.17
[23] In the circumstances, I thus conclude that the application to set aside privilege should be granted.
Defendant’s application for discovery
[24] The plaintiff has agreed to provide an informal discovery of some of the further documents sought by the defendant. However, the plaintiff opposes the application for discovery of the insurer’s file and the expert file. It is contended that the defendant has failed to establish grounds for believing that the plaintiff has not discovered a relevant category of documents that it is required to discover.
[25] In considering an application under r 8.19 it is conventional to adopt the four- step approach of Justice Asher in Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd.18
(a)Are the documents sought relevant, and if so how important and material will they be?
(b)Are there grounds for belief that the documents sought exist?
(c)Is discovery proportionate (balancing the time and cost of discovery against the potential value of discovery)?
(d)Weighing and balancing these matters, in the Court’s discretion applying r 8.19, is an order appropriate?
[26] I find that the defendant has established the four grounds of the Assa Abloy test and that an order for particular discovery should be granted. In particular, I find the
17 The document identification numbers to which paragraph 2.1 relates are SSL.01.3620- SSL.07.4184 and described as consisting of correspondence between the defendant and its legal advisers intended to be confidential and made in the course, and for the purpose of, the defendant requesting legal services.
18 Assa Abloy Ltd New Zealand v Allegion (New Zealand) Ltd [2016] NZHC 2760 at [14].
defendant has established that there are grounds for belief that a relevant category of documents exists. The plaintiff has, in essence, accepted that the discovery to date has been incomplete and given the matters at issue in the proceedings, the categories of documents sought are prima facie relevant.19 In the circumstances there is credible evidence that the documents sought (which do exist) are relevant.
[27] I also reject the plaintiff’s submission that an order requiring it to file a fresh affidavit of documents in these two disputed categories would not be proportionate. The sum in dispute in the proceeding is substantial, namely nearly €5 million, and the cause of the dismasting, likely to be an intensely factual dispute, is clearly a major issue. Furthermore, the plaintiff’s complaint that the defendant has not provided discovery of the same category of documents is irrelevant (the defendant’s own list does not include its experts’ files).
[28] I likewise find that it would not be disproportionate to require the plaintiff to include the non-disputed items in any further affidavit of documents to be sworn and filed.
[29] For all these reasons I grant, in its entirety, the defendant’s application for particular discovery.
Result
[30]I make the following orders:
(a)The plaintiff’s claim to privilege in respect of the documents listed in schedule A is set aside and the plaintiff is required to make the documents available for inspection by the defendant (to the extent that they have not already done so).
(b)The plaintiff is to file and serve an affidavit by 12 April 2019 stating:
19 This is apparent from its recent concession to grant informal discovery in relation to some of the documents in the defendant’s application and the acknowledgement (responsibly made) by Ms McGill at the hearing that the assertions of solicitor/client privilege in relation to a number of documents in dispute was incorrect.
(i)Whether the following documents or classes of documents are or have been in the plaintiff’s control:
1. the sailing/deck logs for the vessel Salperton IV for the period between its first launching and the dismasting;
2. the load cell data from the gauges attached to the vessel’s rig and the associated datalogger;
3. the B & G display records from the time of the dismasting;
4. the files of the vessel’s insurer relating to:
·the incident that gave rise to this proceeding; and
·any prior incidents notified to the insurer which related to the vessel’s mast or rigging;
5. the files of the following persons relating to the dismasting incident:
·Norton Rose, solicitors, United Kingdom;
·Miami Yacht Surveyors;
·Wolfson Unit; and
·Minton Treharne and Davies;
6. Communications since the dismasting between the plaintiff or the vessel’s insurer or any of their solicitors (of the one part) and Future Fibres relating to the dismasting or the mast or rigging.
(ii)If they have been but are no longer in the plaintiff’s control, the plaintiff’s best knowledge and belief as to when the documents ceased to be in the plaintiff’s control and who now has control of them.
(c)If the documents are in the plaintiff’s control, the plaintiff is to make those documents available for inspection, in accordance with r 8.25, to the defendant.
[31] The defendant has, of course, succeeded in respect of both applications. The plaintiff is ordered to pay costs and disbursements to the defendant in respect of both applications and on a 2B basis. Disbursements are to be fixed by the Registrar.
Associate Judge P J Andrew
SCHEDULE A20
Document Document type Date Author Recipient Privilege category PRI.07.0001 Photographs 22/1/11 Plaintiff Nil P221 PRI.07.0002 Witness statements 22/1/11-
23/1/11
Plaintiff Nil P1/P2 PRI.07.0005 Crew list with handwritten notes 24/1/11 Plaintiff Nil P1/P2 PRI.07.0007 File note 25/1/11 Plaintiff Nil P1/P2 PRI.07.0009 Report 30/1/11 Miami Yacht Surveyors Nil P1/P2 PRI.07.0010 Report 1/2/11 Wolfson Unit (WU) Nil P1/P2 PRI.07.0015 Report 18/4/11 Milton Treharne & Davies (MTD) Nil P1/P2 PRI.07.0016 File note 3/6/11 WU Nil P1/P2 PRI.07.0017 Annex to report 8/6/11 MTD Nil P1/P2 PRI.07.0018 Report 16/9/11 MTD Norton Rose P1/P2 PRI.07.0019 Report 26/10/11 MTD Norton Rose P1/P2 PRI.07.0020 MTD protocol 11/11/11 Norton Rose P1/P2 PRI.07.0021 Report 2361 00/1/12 WU P P1/P2 PRI.07.0022 MTD report 12/4/12 Norton Rose P1/P2 PRI.07.0023 MTD interim report 31/5/12 Norton Rose P1/P2 PRI.07.0024 Wolfson Unit report 2389_3 17/3/13 Nil P1/P2 PRI.07.0025 MTD report 11/12/12 Norton Rose P1/P2 PRI.07.0026 MTD and Wolfson Unit memoranda 17/3/13 Norton Rose P1/P2
20 This schedule is taken from the plaintiff’s affidavit of documents (the affidavit of John Tomlinson Gray on behalf of the plaintiff dated 15 August 2018 at part 2).
21 The plaintiff’s categories P1 and P2 cover respectively legal professional privilege and litigation privilege.
1
2
1