Red Stag Timber Ltd v Juken New Zealand Ltd
[2021] NZHC 2662
•6 October 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-2753
[2021] NZHC 2662
BETWEEN RED STAG TIMBER LIMITED
Plaintiff
AND
JUKEN NEW ZEALAND LIMITED
Defendant
Hearing: 17 and 18 May 2021 Appearances:
N F Flanagan, C Fleming and Ms Butcher for the Plaintiff A R Galbraith QC, C L Bryant, G Luen and C Lewis for the Defendant
Judgment:
6 October 2021
JUDGMENT OF GAULT J
This judgment was delivered by me on 6 October 2021 at 5:00 pm pursuant to r 11.5 of the High Court Rules 2016.
Registrar/Deputy Registrar
……………………………………
Solicitors / Counsel:
Mr N F Flanaghan, Mr D R Green and Ms C Fleming, Meredith Connell, Auckland Mr A R Galbraith QC, Barrister, Auckland
Ms C Bryant, Ms G J Luen and Ms C Lewis (defendant’s instructing solicitors), Hesketh Henry, Auckland
RED STAG TIMBER LTD v JUKEN NEW ZEALAND LTD [2021] NZHC 2662 [6 October 2021]
[1] In this proceeding by Red Stag Timber Ltd (Red Stag) against Juken New Zealand Ltd (JNL) alleging breach of the Fair Trading Act 1986 (FTA), the following interlocutory applications require determination:
(a)JNL’s application for orders striking out Red Stag’s pleading / granting leave to apply for summary judgment / entering summary judgment for defendant;
(b)Red Stag’s applications for discovery orders and a more explicit pleading.
Factual background
[2] Red Stag and JNL compete as producers and suppliers of timber for use in the construction of buildings. Since about 2007, JNL has manufactured, promoted and supplied a product called “J-Frame” which is an engineered wood product comprising laminated veneer lumber (LVL).
[3] It is common ground that wood products must meet the performance requirements of the Building Code. Acceptance of compliance can be achieved in different ways, including by compliance with an acceptable solution (which is often based on technical standards). But the parties interpret the technical standards very differently. Also, the standards changed over time, so the interpretations apply in two main periods, before and after December 2012. It is unnecessary for the purposes of this judgment to address the detail of the various standards and of the interpretation disputes relevant to J-Frame, but I will refer to some aspects later in this judgment.
[4] Red Stag claims that JNL has since 2007 made misrepresentations about J-Frame in breach of the FTA. Red Stag says that JNL’s representations about J-Frame generally relate to its class of preservative treatment and its compliance with the building standards that set out the preservative treatment requirements for timber products according to their characteristics and uses. I will refer further to the representations later.
[5] Red Stag’s claim is that JNL’s representations allowed JNL to obtain a greater share of the framing timber market in New Zealand; if customers knew the true position about J-Frame’s treatment and compliance with standards, far fewer customers would have purchased it; and they would have purchased Red Stag’s products instead. Also, Red Stag says its sales of timber by-products were adversely affected and JNL’s presence in the market with a non-compliant product caused a drop in the price of timber framing products generally.
Procedural history
[6] Red Stag commenced this proceeding on 17 November 2017. Its claim divided JNL’s conduct into different time periods:
(a)2008 to December 2012;
(b)5 December 2012 to 18 June 2015;
(c)18 June 2015 to 9 June 2017;
(d)9 June 2017 to late August 2017; and
(e)late August 2017 to 31 August 2017.
[7] JNL filed a statement of defence in December 2017. Then, in March 2018 JNL applied to strike out the cause of action relating to the period from 2008 to December 2012 for lack of particulars.1 JNL also applied to have its limitation defence heard as a preliminary question.
[8] On 19 September 2018 Associate Judge Bell struck out the cause of action for the period from 2008 to December 2012.2 He concluded that Red Stag had given no evidence to suggest any ground to believe that between 2008 and 2012 there were treatment standards for JNL’s products, that there were any labelling requirements, that JNL did not adhere to those standards and did not label its J-Frame correctly, and
1 JNL also applied to strike out other aspects of the claim which are not in issue.
2 Red Stag Timber Ltd v Juken New Zealand Ltd [2018] NZHC 2459.
that JNL in any way misrepresented its J-Frame in trade.3 He made clear that the pleading of the cause of action failed for lack of particulars under r 5.26(b) of the High Court Rules 2016. That did not bar Red Stag from starting a fresh proceeding alleging FTA breaches between 2008 and 2012, so long as it was procedurally compliant and also met substantive requirements (including any limitation rules). Separately, Associate Judge Bell declined JNL’s application for its limitation defence to be heard as a preliminary issue.
[9] Neither party appealed. In March 2019 Red Stag filed an amended statement of claim with the first cause of action removed. But on 19 December 2019 Red Stag commenced a separate proceeding including for losses arising during the period from 2007 to December 2012. JNL applied to strike out that claim. Ultimately, in 2020 Red Stag discontinued that separate proceeding and filed amended claims in this proceeding reinstating its claim for losses prior to December 2012. The parties agreed that time would stop running on the claim for losses prior to December 2012 on 19 December 2019 (being the filing date for the 2019 proceeding).
Issues
[10]The issues to be determined are:
JNL’s applications
(a)whether JNL requires leave for its strike out application;
(b)if so, whether leave should be granted;
(c)whether JNL should be granted leave to apply for summary judgment;
(d)whether the claims are time barred under s 43A of the FTA (the substantive basis for both the strike out and summary judgment applications);
3 Red Stag Timber Ltd v Juken New Zealand Ltd [2018] NZHC 2459 at [28].
Red Stag’s applications
(e)whether a more explicit statement of defence should be ordered;
(f)whether documents falling within seven specified categories are relevant:
(g)whether there are probative grounds for believing such documents exist;
(h)whether a further affidavit of documents should be ordered;
(i)whether the Court should set aside JNL’s claims for confidentiality; and
(j)whether the Court should set aside JNL’s litigation privilege claims in respect of communications for the purpose of regulator investigations.
Whether JNL requires leave for its strike out application
[11] Red Stag says that JNL requires leave to apply to strike out pursuant to r 7.52, which provides that a party who fails on an interlocutory application may not apply again for the same or a similar order without first obtaining leave. Mr Flanagan, for Red Stag, does not rely on JNL’s earlier strike out application but on JNL’s unsuccessful application for an order that its limitation defence be determined as a preliminary question. He submitted that in the circumstances of this case, in substance, JNL is seeking a similar order, that is seeking to have its limitation defence determined before trial.
[12] For JNL, Ms Bryant submitted that r 7.52 does not apply here. JNL succeeded in striking out Red Stag’s claim for losses prior to December 2012 on procedural grounds. Its present application for a substantive strike out or summary judgment has not previously been determined. Associate Judge Bell only considered JNL’s limitation defence when considering whether to grant JNL’s application for a split trial. In electing not to appeal the Associate Judge’s exercise of his discretion not to order a split trial, JNL did not accede to Associate Judge Bell’s interpretation of section 43A.
[13] I consider that r 7.52 does not apply. As Mr Flanagan acknowledged, JNL did not fail in relation to its earlier strike out application. It succeeded on other, procedural, grounds. JNL did fail on its application under r 10.15 for an order that the limitation issue be determined as a separate preliminary question. Associate Judge Bell declined that application. JNL could not repeat that application without leave. But I consider that JNL’s strike out application is not seeking to do so. The earlier application under r 10.15 called for assessment of the factors weighing for and against proceeding by way of a split trial. The application itself did not involve substantive determination of the limitation issue. That would have followed only if a split trial had been ordered. JNL’s current strike out application addresses that substantive limitation issue on strike out grounds. It is not seeking a procedural order that JNL’s limitation defence be determined before trial. Even though the proposed strike out raises essentially the same factual and legal issues as the proposed preliminary determination would have done, and a strike out application may have the effect of determining JNL’s limitation defence before trial, in terms of r 7.52 the strike out application is not seeking the same or a similar order as the earlier application under r 10.15. Also, Associate Judge Bell made clear that a further claim by Red Stag would still be susceptible to challenge on limitation grounds.
[14]Accordingly, JNL does not require leave for its strike out application.
Whether leave should be granted for JNL’s strike out application
[15] It is therefore unnecessary to decide whether there are special circumstances justifying leave under r 7.52 (such as relevant facts emerging from Red Stag’s discovery). I merely note that I do not consider that seeking to bring the strike out application is an abuse of process, as Mr Flanagan submitted, given that r 7.52 has a leave element and Associate Judge Bell indicated a further claim by Red Stag would still be susceptible to challenge on limitation grounds.
Whether JNL should be granted leave to apply for summary judgment
[16] JNL sought leave to apply for summary judgment when it filed its application dated 4 December 2020. It was required to do so because it had not applied for summary judgment when its statement of defence was due back in December 2017.
Delay is a relevant factor and given the lengthy delay, explanation is certainly required. But the merit of the proposed application and efficiency will also be factors. The Court’s guiding principle is the just, speedy and inexpensive determination of the proceeding.
[17] JNL says it brought its applications for strike out and summary judgment promptly after Red Stag commenced its separate proceeding in December 2019 and then repleaded in this proceeding in 2020. JNL says its application also took account of documents provided by Red Stag on discovery in December 2019, which support a limitation defence. Despite the proceeding having been on foot since 2017, JNL says the proceeding is still at a preliminary stage. Although discovery was completed in 2019, JNL says Red Stag has not engaged with the evidence and is unable to quantify its claim. It says that summary judgment is appropriate, and no useful purpose will be served by allowing Red Stag’s claims to continue towards trial at considerable further expense to JNL and the taxpayer. Ms Bryant submitted this is one of those relatively rare cases where leave to apply for summary judgment should be granted after discovery because discovery brought to the surface Red Stag’s knowledge, and there was no subsequent delay by JNL.
[18] Mr Flanagan submitted there was delay even after Red Stag filed its third amended statement of claim on 8 July 2020 and its fourth amended statement of claim on 11 November 2020. He submitted the application is made on the basis of limitation arguments that JNL first put forward in its December 2017 statement of defence and in its application for a preliminary question in March 2018, and that Red Stag’s 2019 discovery and 2020 pleading amendments did not change the ultimate grounds. He also submitted that the application has no merit and indeed is an abuse of process given it is clear that Red Stag has an arguable cause of action since there is a relevant dispute of fact as to timing of Red Stag’s knowledge.
[19] In this summary judgment leave context as well, I do not consider that reference to abuse of process adds anything. The merit of the proposed application is a factor. Applying ordinary principles to whether leave to seek summary judgment should be granted, I take into account the following factors.
[20] Dealing first with delay, the position differs as between the two time periods in the claim. In relation to the claim for losses prior to December 2012, JNL understandably did not initially apply for summary judgment. It applied instead to strike out, albeit in March 2018 rather than when its defence was due in December 2017. Its strike out application was successful in September 2018. After the cause of action resurfaced in the separate December 2019 proceeding, JNL applied again (to strike out and for summary judgment) in that proceeding. In July 2020 Red Stag sought to discontinue that proceeding and filed its third amended statement of claim in this proceeding. JNL’s subsequent delay before filing the application was not fully explained but was relatively minor in the context of this procedurally messy dispute. Red Stag contributed to that delay.
[21] In relation to the claim for losses after December 2012, JNL applied to have its limitation defence heard as a preliminary question rather than for summary judgment (or strike out). Associate Judge Bell said JNL recognised there were disputed issues of fact.4 JNL no longer accepts there are relevant disputed issues of fact, in part due to Red Stag’s discovery in December 2019. The delay was not fully explained but, as indicated, at least from July 2020 it was relatively minor. Also, if leave were to be granted in respect of the earlier period, that may weigh in favour of leave for the latter period on efficiency grounds.
[22] As indicated, the merits are also relevant. An apparently strong case for summary judgment may justify leave even when there has been delay that is not fully explained. That may well assist in the just, speedy and inexpensive determination of the proceeding. On the other hand, leave may be declined when there is no real prospect of summary judgment. But the merits may not be immediately obvious at the leave stage. As the stark difference between the respective submissions suggests, that is the case here. This is not a case where leave should be declined on the basis that the application has no merit.
[23] Finally, in this limitation context, the difference between strike out and summary judgment may be more apparent than real, in which case the strike out
4 Red Stag Timber Ltd v Juken New Zealand Ltd [2018] NZHC 2459 at [37].
application may weigh against the need for leave to pursue the summary judgment application. On the other hand, to the extent there is any difference requiring separate determination, there is some efficiency gain in considering the two applications together.
[24] Balancing these factors, I consider that leave to apply for summary judgment should be granted. Delay is a factor, but I am required to consider the merits of the limitation issue in the context of the strike out application in any event.
[25]I now turn to the substance of JNL’s limitation argument.
Whether the claims are time barred under s 43A of the FTA
[26] JNL raises its limitation defence by way of both strike out and summary judgment. Before addressing the substantive issue, I summarise the different approaches on strike out and summary judgment applications, which are not in dispute. The difference between an application to strike out and summary judgment is that strike out is usually determined on the pleadings alone whereas summary judgment requires evidence.
Approach on strike out
[27] The approach on strike out applications under r 15.1(1) on the ground of no reasonably arguable cause of action is well established.5 The Court proceeds on the assumption that the facts pleaded in the statement of claim are true. Before the Court may strike out proceedings, the causes of action must be so clearly untenable that they cannot possibly succeed. The jurisdiction is to be exercised sparingly, and only in a clear case where the Court is satisfied it has the requisite material, but is not excluded by the need to decide difficult questions of law requiring extensive argument.
[28] A defence may give rise to a strike out. In the limitation context, the Supreme Court has said that on a strike out application, the defendant must demonstrate that the plaintiff’s case is so clearly statute-barred that the plaintiff’s claim can properly be
5 Attorney-General v Prince and Gardner [1998] 1 NZLR 262 (CA) at 267, approved in Carter Holt Harvey Ltd v Minister of Education [2016] NZSC 95, [2017] 1 NZLR 78 at [10].
regarded as frivolous, vexatious or an abuse of process.6 There must be no reasonable possibility that the case was brought within time. If there is, the matter must go to trial, with the limitation point being a defence to be assessed on the basis of all the evidence led at trial. Where the defence requires a factual foundation not evident in the statement of claim and the facts are contested, the matter will not be suitable for strike out.
[29] Partial strike out is contemplated by r 15.1(1), and available with caution where it would promote the efficient resolution of the proceeding.7
Approach on summary judgment
[30] The principles applying on a summary judgment application are also well settled. The Court may give judgment against a plaintiff if satisfied that none of its causes of action can succeed,8 that is, there is no real question to be tried.9 The onus is on the applicant. The Court must be left without any real doubt or uncertainty. It will not normally resolve material conflicts of evidence or assess the credibility of deponents.10 Applications for summary judgment will be inappropriate where there are disputed issues of material fact or where material facts need to be ascertained by the Court and cannot confidently be concluded from affidavits.11
Section 43A time bar
[31] The key issue relevant to both the strike out and summary judgment applications is whether Red Stag’s claim is time barred under s 43A of the FTA, which provides:
43A Application for order under section 43
A person may apply to a court or the Disputes Tribunal for an order under section 43 at any time within 3 years after the date on which the
6 Commerce Commission v Carter Holt Harvey Ltd [2009] NZSC 120, [2010] 1 NZLR 379 at [39], citing Murray v Morel & Co Ltd [2007] 3 NZLR 721 at [33].
7 Body Corporate 360683 v Auckland Council [2017] NZHC 1785 at [31]-[37]; and Auckland City Council v Effuzi (International) Ltd HC Auckland CIV-2009-404-6044, 19 October 2011 at [103].
8 High Court Rules 2016, r 12.2.
9 Pemberton v Chappell [1987] 1 NZLR 1 (CA) at 3.
10 Krukziener v Hanover Finance Ltd [2008] NZCA 187, (2008) 19 PRNZ 162 at [26].
11 Westpac Banking Corp v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA) at [62].
loss or damage, or the likelihood of loss or damage, was discovered or ought reasonably to have been discovered.
[32] Thus, on an application for an order under s 43, the three year time limit starts to run after the date on which the loss or damage, or the likelihood of loss or damage, was discovered or ought reasonably to have been discovered.
[33] Ms Bryant submitted that time starts running when the plaintiff has actual or constructive knowledge:
(a)of the facts and circumstances which give rise to a tenable cause of action for contravention of the FTA;12 and
(b)that it is more probable than not that the possible contravention has caused, or will in future cause, more than minimal loss.13
[34] Ms Bryant submitted that knowledge of the legal position is not required. By reference to Commerce Commission v Carter Holt Harvey Ltd,14 she also submitted that ongoing conduct does not prevent time running.
[35] Mr Flanagan submitted that the Supreme Court’s test in Commerce Commission v Carter Holt Harvey requires actual or constructive knowledge that it is more probable than not that there has been or will be loss occasioned by the contravention (that is, false or misleading representations in breach of the FTA), which includes knowledge of the contravention.
[36] It can be seen that the difference between the parties primarily relates to the need for knowledge of the likelihood of “contravention”. That involves a dispute as to knowledge of the proper legal interpretation of the building standards (bearing in mind that disputed interpretation underlies the entire dispute).
12 Citing Commerce Commission v Carter Holt Harvey Ltd [2009] NZSC 120, [2010] 1 NZLR 379 at [33]; and Houghton v Saunders [2014] NZHC 2229, [2015] 2 NZLR 74 at [658]-[660].
13 Citing Commerce Commission v Carter Holt Harvey at [22]-[27].
14 Commerce Commission v Carter Holt Harvey [2009] NZSC 120, [2010] 1 NZLR 379.
[37] Commerce Commission v Carter Holt Harvey concerned an earlier limitation provision contained in s 43(5) of the FTA, but s 43A is materially the same. Before turning to the facts of the case, the Supreme Court majority judgment given by Tipping J addressed three points arising on the interpretation of the limitation provision, two of which are relevant here: the proper compass of the expression “likelihood of loss or damage”; and what it means to “discover” loss or damage: what degree of awareness of the loss or damage does one need before being found to have discovered it, and how likely must the suffering of loss or damage be before it can be said to have been discovered.
[38] In relation to “likelihood of loss or damage”, Tipping J confirmed that the phrase encompassed knowledge of losses that were likely to arise in the future.15 Time starts running when the applicant discovers or ought to have discovered that loss or damage has already occurred, or is likely to occur in the future.16
[39] In relation to what it means to “discover”, Tipping J first referred to the degree of awareness and said that an applicant either is or is not aware of the loss or damage.17 If there is doubt, the inquiry moves to whether the applicant ought reasonably to have been aware of it. As to how likely the occurrence of loss should be before it can be said to have been discovered or that it ought to have been discovered, Tipping J considered likelihood means that loss is more probable than not, in the context of both past and future loss.18
[40]Tipping J added that:19
As loss is not relevant for present purposes unless it was occasioned by a contravention of the Act, the words “as a result of a contravention of the Act” are necessarily implicit in this question. The same concept of probability should apply, for present purposes, to the applicant’s awareness that loss has been occasioned by a contravention.
15 Commerce Commission v Carter Holt Harvey Ltd [2009] NZSC 120, [2010] 1 NZLR 379 at [22]-[27].
16 At [27].
17 At [29].
18 At [30].
19 At [31].
[41] Finally, Tipping J said that the use of the definite article in the phrase “the loss or damage” in the limitation provision did not require the applicant to have become aware of the actual loss or damage as ultimately established.20 The expression means some more than minimal loss or damage, without the need for any greater specificity as to the nature or amount of that loss or damage.21
[42] Accordingly, in terms of the applicable test, Tipping J concluded that Carter Holt Harvey Ltd (CHH) must show that the Commerce Commission knew or ought reasonably to have known, on or before 26 October 2003, that some person or persons were likely to have suffered loss or damage as a result of a probable contravention by CHH. That test reflected the facts of the case which involved a claim against CHH by the Commission as regulator rather than by a person claiming to have suffered loss. Hence, the focus on awareness of existing or future loss. Also, the key alleged representation by CHH was that timber met a particular grade (MGP10). The essential issue was whether the timber did meet its represented grade. In that case, whether there had been a contravention depended on consideration of the average of an appropriately delineated population of timber sold. Tipping J concluded that CHH’s argument that the Commission was aware of the contravention was based on a small sample from which it could not be said that the average would probably contravene the standards. Hence, the strike out failed on final appeal.
[43] Tipping J’s reference to knowledge of “probable contravention” should be understood in that context, that is referring to knowledge that the timber on average did not meet its represented grade. That the timber did not in fact meet its represented grade on average was the relevant element of the cause of action (FTA contravention). That is consistent with the general approach to limitation, where knowledge of the (factual) elements of the cause of action is required. I do not consider Tipping J was referring to knowledge of the legal result. Although not explicit in the judgment, the conclusion is consistent with Ms Bryant’s submission that the plaintiff need not know that the facts and circumstances contravene the FTA (which will not be determined until judgment).
20 Commerce Commission v Carter Holt Harvey Ltd [2009] NZSC 120, [2010] 1 NZLR 379 at [32].
21 At [34].
[44] In Houghton v Saunders,22 the limitation issue also depended on awareness of an alleged contravention of the FTA. Like this case, it did not involve a third party regulator claim with the resulting focus on awareness of existing or future loss. Nevertheless, Dobson J considered that the approach in Commerce Commission v Carter Holt Harvey applied. Relevantly, Dobson J also said:
[659] The ascertainment of loss suffered by a potential claimant is an issue of fact, the identification of which will generally be under the control of the potential claimant. Ascertaining the elements of a cause of action under the FTA will likely require the application of the law to the facts, and in that sense could be seen as different from determining the existence of a qualifying loss. In many cases, once loss has crystallised, its existence is a certainty. In contrast, a claimant will never know if a cause of action is successful until judgment has been obtained. It is common for limitation provisions to have time running from the point at which a claimant knew, or ought reasonably to have been aware, of the existence of all the elements of the cause of action. In the present context, Tipping J’s requirement that the applicant be aware that loss “has been occasioned by a contravention of the Act” cannot be taken literally to require knowledge that the claim must necessarily succeed. Rather, that all elements for a tenable claim exist.
[660] Accordingly, where the existence of loss or damage is not an issue, but reasonable discoverability of the elements to be made out in establishing a contravention of the FTA are, then time will run from the point where those elements were discovered, or ought reasonably to have been.
[45] I agree that the approach in Commerce Commission v Carter Holt Harvey applies where the issue is discovery or reasonable discoverability of an element of the claim other than existing or future loss by a third party (being the issue in that regulator claim context). As Tipping J said, the same concept of probability applies to the applicant’s awareness that loss “has been occasioned by a contravention”.23 Tipping J must have been referring to awareness of a contravention as well as that it caused loss. That is reinforced by the references later in his judgment to “probable contravention”.24 It would be inconsistent to apply the concept of probability to the awareness of causation but not to awareness of the contravention itself (at least in the sense arising in that case, as described).
[46] I also agree with Dobson J that Tipping J in Commerce Commission v Carter Holt Harvey was not saying the claimant must be aware that the claim would succeed,
22 Houghton v Saunders [2014] NZHC 2229, [2015] 2 NZLR 74.
23 Commerce Commission v Carter Holt Harvey Ltd [2009] NZSC 120, [2010] 1 NZLR 379 at [31].
24 At [39] and [54].
but rather was saying the claimant must be aware of the elements of a claim, including contravention of the FTA (in the sense relevant in that case), causation and loss. Dobson J’s reference to knowledge “that all elements for a tenable claim exist” acknowledges that ascertaining the elements of a cause of action under the FTA will likely require the application of the law to the facts. That is particularly so here where the nature of the claim is complicated by the fact that whether each representation of compliance was in fact false depends on the proper interpretation of the standards (a question of law).
[47] Ordinarily, knowledge of the elements of the claim would not require knowledge of the legal strength of the claim – whether “tenable”, “possible” or “probable”. However, in this FTA context, one element of the claim is that the conduct was misleading, that is the representations of compliance with standards were false, on the basis that the standards required specified preservative treatment. In this context, the claimant’s knowledge of that particular element necessarily requires some appreciation of the preservative treatment requirements and therefore the proper interpretation of the standards.
[48] As to the necessary level of that appreciation, the Supreme Court’s decision in Commerce Commission v Carter Holt Harvey provides that knowledge of “probable contravention” is required at least in respect of the factual elements of the claim. On one view, that same level of knowledge is required as to whether the representations are false even though the proper interpretation of the standards is integral to whether the representations are false. The question is whether that feature of this case is sufficiently different from the issue in Commerce Commission v Carter Holt Harvey outlined above to require a different approach to knowledge of the proper interpretation of the standards; that is, Dobson J’s lower threshold of knowledge that the elements for a “tenable” claim exist.
[49] As indicated, the nature of the factual issue in Commerce Commission v Carter Holt Harvey did not call for consideration of the issue raised here. I consider the significance of the proper interpretation of the standards to whether the representations are false (the contravention) is a material distinction in this case. Here, the correct interpretation of the standards is unknown until determined by the Court. In the civil
context, more probable than not is the substantive standard of proof. Thus, if knowledge of the probable contravention extends to knowledge of the probable meaning of the standards as well as of the factual elements, it is effectively knowledge that the claim will succeed. That would be a very difficult threshold to meet, which seems inconsistent with the purpose of a limitation provision (avoiding the unfair prejudice of preparing a defence to a stale claim). I accept that, if there is doubt, the inquiry moves to whether the claimant ought reasonably to have known, but even that would be a difficult threshold in the context of the probable interpretation of the standards. Claimants may or may not have taken legal advice on the proper interpretation. Another complication in this case is that alternative claims are advanced based on different interpretations of the standards. The alternative claims have different factual elements. In such a case, would the threshold be that the claimant knew or ought to have known that the particular claim will probably succeed or only that one of the alternative claims will probably succeed?
[50] For these reasons, I consider that Commerce Commission v Carter Holt Harvey is distinguishable insofar as knowledge of the proper legal meaning of the standards is concerned. I consider that knowledge of the probable contravention does not extend to knowledge of the probable interpretation of the standards. Accordingly, the actual or constructive knowledge of the claimant that the defendant must show is knowledge of the factual elements of the false representation claim to the more probable than not standard but only knowledge that the claimant’s alleged interpretation is tenable or arguable.
[51] I turn to the application of the test to the facts of this case. JNL’s argument differentiates between the periods before and after December 2012. It is convenient to deal with the later period first since the claim for the earlier period was initially struck out and reinstated more recently.
Period after December 2012
[52] JNL’s argument is that Red Stag’s claim relating to conduct after December 2012 is based on Red Stag’s interpretation that the 2012 editions of NZS 3640, AS/NZS 1604.4 and B2/AS1 require LVL used in hazard class H1.2 conditions to be
treated with Zelam’s glueline treatment. For limitation purposes, JNL says Red Stag needed to know that:
(a)J-Frame was treated with boron, not Zelam’s glueline treatment;
(b)J-Frame was branded H1.2;
(c)it was arguable J-Frame did not comply with NZS 3640 and/or B2/AS1;
(d)J-Frame’s presence in the market had caused, or would likely cause, Red Stag loss.
[53] JNL says Red Stag had all of this information more than three years prior to the issue of this proceeding on 17 November 2017, that is before 17 November 2014. JNL says that the material Red Stag had before that date, including documentation from CHH, shows that Red Stag was aware of the possible contravention, which Ms Bryant submitted is all that is required. She submitted Red Stag then had three years to bring its case but chose to pursue a regulatory pathway, and by the time it issued this proceeding it was too late.
[54] Red Stag disputes that it was familiar with treatment standards for LVL. The treatment standards for Red Stag’s products required boron treatment and it had no reason to question the fact that J-Frame also had boron treatment. It disputes the knowledge it is said to have acquired at a September 2014 conference. It says it only knew of CHH’s concerns informally around the time of CHH’s 6 November 2014 letter – not receiving the letter until later – and knew that JNL rejected those concerns. Before that, Red Stag had no reason to investigate J-Frame. Red Stag’s testing in early November 2014 was inconclusive.
[55] Thus, Mr Flanagan submitted that Red Stag did not know of any more than a mere possibility (if that) that JNL might have made false or misleading representations about J-Frame’s treatment or compliance with relevant standards. He submitted that as soon as Red Stag made its own enquiries and discovered it was likely that JNL had
contravened the FTA – in December 2014 – it notified two clients and a representative of the Timber Quality Scheme of its concerns.
[56] In essence, Mr Flanagan submitted that in the face of sworn evidence from Mr Verry of Red Stag as to his knowledge, I could not say in a strike out or summary judgment context that Red Stag knew or ought to have known that JNL’s representations were false or misleading in breach of the FTA.
[57] The evidence of Mr Verry of Red Stag focuses on saying that Red Stag did not know that JNL’s representations about J-Frame were false or misleading until around 24 November 2014 at the earliest. As indicated, I consider that is not the correct question. The correct question is whether Red Stag knew of the other factual elements of the claim (to the more probable than not standard) and that the claimed interpretation was tenable.
[58] Dealing first with the other factual elements, knowledge of some of the acts relevant to the claimed FTA contravention of misrepresenting compliance are not in dispute – knowledge that JNL represented J-Frame’s compliance for hazard class H1.2 and knowledge that the representations have caused loss. In the context of a claim that J-Frame had to be treated with Zelam’s glueline treatment to comply, the remaining factual question is whether Red Stag knew or ought reasonably to have known before 17 November 2014 that J-Frame was treated with boron, not Zelam’s treatment. That seems a narrow factual question (which ought to be capable of straightforward resolution by interlocutory processes, with potential cost consequences if it is not).
[59] Mr Verry’s evidence does not explicitly address when he knew that J-Frame was treated with boron, not Zelam’s treatment. It is necessary to infer from his evidence Red Stag’s knowledge of the underlying facts. It seems from his evidence that Red Stag knew that J-Frame was treated with boron, but the timing of this is not clear, and there is no reference in his evidence to Zelam’s treatment.
[60] Mr Verry acknowledges that Red Stag knew earlier in November 2014 that CHH was concerned that J-Frame did not comply. But this does not necessarily mean
Red Stag knew or ought reasonably to have known the underlying factual basis for CHH’s concern, in particular that J-Frame was treated with boron, not Zelam’s treatment. Nor does Red Stag’s testing in early November 2014, except that a 5 November 2014 email with photographs of samples indicates that Red Stag knew it was doing “Boron Penetration test of LVL Frame”. This document does not refer to Zelam’s treatment. Nor does it show Red Stag knew or ought reasonably to have known the standards arguably required that J-Frame be treated with Zelam’s glueline treatment. The requisite knowledge may be inferred from reading together all the relevant documents, including this email and official information released to Red Stag’s lawyers earlier in 2014. Alternatively, it may be inferred that Red Stag ought reasonably to have known. But, having regard to the high thresholds referred to for strike out and summary judgment, I consider such inferences should not be drawn on the current applications. Such inferences might well be appropriate at trial but, in the circumstances of a strike out or summary judgment, I consider that JNL falls short of showing that Red Stag knew (or ought reasonably to have known) before 17 November 2014 that J-Frame was not treated with Zelam’s treatment and that the standards arguably required that. In relation to the period after December 2012, I cannot say there is no reasonable possibility that the case was brought within time. In strike out terms, JNL has not shown that Red Stag’s claim is so clearly statute- barred that it can properly be regarded as frivolous, vexatious or an abuse of process. In summary judgment terms, I cannot say there is no real question to be tried or no real doubt or uncertainty.
[61] Given my conclusion, it is unnecessary to decide whether ongoing conduct prevents time running in the circumstances of this case.
Period prior to December 2012
[62] As mentioned, Red Stag’s original claim for the period prior to December 2012 was struck out in 2018. Its reinstated claim was filed on 19 December 2019. JNL says the effect of s 43A must be assessed by reference to the date three years before the reinstated claim; that is, before 19 December 2016.
[63] JNL’s argument is that Red Stag’s claim for the period prior to December 2012 is based on its interpretation of earlier editions of NZS 3640, AS/NZS 1604.4 and B2/AS1, as well as NZS 3602 and NZS 3604, to the effect that they:
(a)did not recognise a boron treatment for LVL hazard class H1.2; and/or
(b)required boron treated LVL to comply with the penetration requirement for solid timber in NZS 3640.
[64] JNL says the first proposition is based on an analysis of publicly available documents and the claim is out of time for the same reasons as the later period. JNL says the second proposition requires Red Stag to know that J-Frame was not treated to comply with the penetration requirement in NZS 3640. JNL and its certifier had confirmed this to CHH in August and November 2014. Again, JNL says that CHH notified Red Stag of its concerns prior to 17 November 2014. Red Stag knew CHH had obtained independent testing which showed that complete sapwood penetration was not achieved or always achieved. Red Stag’s own testing in early November 2014 was consistent with this finding.
[65] Again, I consider the focus should be on when Red Stag knew or ought reasonably to have known the factual elements of the claim (to the more probable than not standard) and that the claimed interpretation was arguable. The relevant acts for the period prior to December 2012 are that J-Frame was treated with boron and that complete sapwood penetration was not achieved or always achieved.
[66] Red Stag does not dispute that it was aware of these facts before 19 December 2016; that is, three years before the claim for the earlier period was reinstated on 19 December 2019. Instead, it says that its reinstated claim is not a new cause of action as it is essentially the same as its claim for the later period (and 17 November 2014 remains the relevant date). I turn to address this issue.
Whether Red Stag’s amended pleading in relation to losses to December 2012 raises a new cause of action for limitation purposes
[67] What constitutes a fresh cause of action in this context is well established. In ISP Consulting Engineers Ltd v Body Corporate 89408, the Court of Appeal said:25
The relevant principles set out in Ophthalmological Society of New Zealand Inc v Commerce Commission26 were summarised in Transpower New Zealand Ltd v Todd Energy Ltd:27
(a)A cause of action is a factual situation the existence of which entitles one person to obtain a legal remedy against another (Letang v Cooper [1965] 1 QB 232 at 242-243 (CA) per Diplock LJ);
(b)Only material facts are taken into account and the selection of those facts “is made at the highest level of abstraction” (Paragon Finance plc v D B Thakerar & Co (a firm) [1999] 1 All ER 400 at 405 (CA) per Millett LJ);
(c)The test of whether an amended pleading is “fresh” is whether it is something “essentially different” (Chilcott v Goss [1995] 1 NZLR 263 at 273 (CA) citing Smith v Wilkins & Davies Construction Co Ltd [1958] NZLR 958 at 961 (SC) per McCarthy J). Whether there is such a change is a question of degree. The change in character could be brought about by alterations in matters of law, or of fact, or both; and
(d)A plaintiff will not be permitted, after the period of limitations has run, to set up a new case “varying so substantially” from the previous pleadings that it would involve investigation of factual or legal matters, or both, “different from what have already been raised and of which no fair warning has been given” (Chilcott at 273 noting that this test from Harris v Raggatt [1965] VR 779 at 785 (SC) per Sholl J was adopted in Gabites v Australasian T & G Mutual Life Assurance Society Ltd [1968] NZLR 1145 at 1151 (CA)).
[68] Ms Bryant submitted that Red Stag’s original causes of action were based on J-Frame’s alleged failure to comply with the 2012 editions of the relevant standards, and the essential argument is that Zelam’s glueline treatment is the only permitted treatment for LVL in hazard class H1.2. As JNL did not use this treatment, J-Frame did not comply, and representations that it did were a breach of the FTA. The alleged misrepresentations regarding compliance with the 2012 editions or the acceptable solution were necessarily made, and losses were necessarily caused, thereafter.
25 ISP Consulting Engineers Ltd v Body Corporate 89408 [2017] NZCA 160, (2017) 24 PRNZ 81 at [21].
26 The Ophthalmological Society of New Zealand Inc v Commerce Commission CA168/01, 26 September 2001 at [22]-[24].
27 Transpower New Zealand Ltd v Todd Energy Ltd [2007] NZCA 302 at [61].
Similarly, alleged misrepresentations made prior to December 2012 related to whether J-Frame complied with earlier editions, and loss can only have been caused by JNL’s conduct in the earlier period. The essential nature of the claim for the period prior to December 2012 is not the same as the claim for the period after December 2012. Every change in standard requires a separate cause of action.
[69] Mr Flanagan submitted that Red Stag did not put forward any new legal basis for its claim in 2019 – its claim remained breach of ss 9, 10 and 13 of the FTA by making false and/or misleading representations about J-Frame’s compliance with applicable treatment standards, including by omitting to label J-Frame as having an envelope treatment pattern. The basic claim is that JNL represented J-Frame complied with standards for hazard class H1.2 when it did not comply – consumers would have understood that meant full penetration when J-Frame did not have full penetration. By adding NZS 3604 and NZS 3602 to its claim, Red Stag simply clarified it. The applicable standards are all intrinsically linked and cannot be assessed in isolation. The relevant acceptable solution B2/AS1 reinforces that link by referring to each of the standards either directly or indirectly. The claim’s particulars did not change its essential character. The only change in December 2012 was the introduction of a glueline treatment requirement under NZS 3640 (which JNL says did not apply to J-Frame in any event).
[70] Finally, Mr Flanagan submitted that JNL cannot say it had no fair warning of Red Stag’s claim given the original proceedings filed on 17 November 2017 and Associate Judge Bell’s signal when striking out that a claim for conduct in the earlier period might be reintroduced.
[71] Dealing with the last point first, I do not accept that the original 2017 cause of action for the period prior to December 2012 amounts to fair warning in this context. It was struck out for lack of particulars. Associate Judge Bell made clear that any reintroduction was subject to limitation rules.
[72] I accept that whether the amended pleading is essentially different is a question of degree. Here, the claim for the earlier period involves the same legal basis; that is, false or misleading representations in breach of the FTA. I also accept that, although
the pleading of new facts is in theory capable of creating a fresh cause of action, it will be rare that factual matters are so vital as to affect the essence of the case brought.28 At a level of generality, the claims for the two periods involve the same alleged representations; that is, compliance with applicable preservative treatment standards. It is necessary, however, to view the representations in context; that is, by reference to the prevailing standards. In that sense, the effect of the alleged representations varies over time and raises different factual interpretation issues. In particular, whereas the claim for the later period focuses on not using Zelam’s glueline treatment, the claim for the earlier period involves the separate factual elements that J-Frame was not treated to comply with the penetration requirement and complete sapwood penetration was not achieved or always achieved (in the alternative to the claim that the standards did not recognise boron treatment).
[73] Even so, I consider on balance that the claim for the period prior to December 2012 is not essentially different to the claim for the later period. Over both periods, the primary claim is that JNL used boron treatment, which was not compliant, even though the argument for the later period is that the standards required Zelam’s glueline treatment (for LVL in hazard class H1.2). It is the alternative claims that raise additional factual allegations regarding penetration. The alternative claims are somewhat different, but I consider that applying the essential difference test they should not be characterised as new causes of action. Also, while assessment of whether the representations were false depends on the prevailing standards, I do not consider that every change in standard requires a separate cause of action.
[74] Accordingly, 17 November 2014 remains the knowledge date applicable to the claim for the period prior to December 2012. In the context of the claim for the period after December 2012, I have already concluded that JNL has not shown that Red Stag knew (or ought reasonably to have known) before 17 November 2014 that J-Frame was not treated with Zelam’s treatment and that the standards arguably required that. Zelam’s treatment is irrelevant to the claim for the period prior to December 2012. But in this strike out and summary judgment setting, even if I could infer that Red Stag knew (or ought reasonably to have known) before 17 November 2014 that J-Frame
28 Commerce Commission v Visy Board Pty Ltd [2012] NZCA 383 at [145]-[146].
was treated with boron and that the standards arguably did not recognise a boron treatment for LVL hazard class H1.2, I consider that JNL falls short of showing that Red Stag knew (or ought reasonably to have known) that J-Frame was not treated to comply with the penetration requirement, that complete sapwood penetration was not achieved or always achieved and that the standards arguably required boron treated LVL to comply with the penetration requirement for solid timber in NZS 3640. There is also an alternative referring to omitting a label for envelope treatment. Accordingly, I cannot say in relation to the period prior to December 2012 that there is no reasonable possibility that the case was brought within time.
Damages
[75] JNL also says that if Red Stag’s claim for conduct before December 2012 is struck out, its entire claim for damages must be struck out because the counterfactual that underpins its damages claim relies on representations made by JNL in, or around, 2007. That counterfactual includes that J-Frame would not have entered into the market.
[76] I have concluded that the claim for conduct before December 2012 should not be struck out. I accept that if it were, Red Stag would need to replead its damages claim. But I could not say that any repleaded damages claim is untenable. It is not appropriate to engage on an assessment of the competing factual contentions on a strike out or summary judgment application. As Ms Bryant acknowledged, Red Stag should have an opportunity to replead.
Conclusion
[77] For these reasons, JNL’s strike out and summary judgment applications do not succeed.
Whether a more explicit statement of defence should be ordered
[78] Turning to the first of Red Stag’s applications, it seeks an order that JNL file and serve a more explicit pleading.
[79] Mr Flanagan submitted that, among other things, the amended statement of defence fails to state clearly what is admitted and what is denied. In response, JNL was critical of Red Stag’s pleading. Irrespective of fault, the difficulties are highlighted by the different approaches taken to the relevance of certain categories of documents in the context of the discovery application, referred to in the next section of this judgment.
[80] The current pleadings are complex. As the claim (that JNL’s representations of compliance were false) depends on the proper interpretation of the standards, Red Stag has pleaded its various interpretations. While the proper interpretation of the standards is a question of law, I accept given the nature of the claim that Red Stag pleaded its various interpretations in an attempt to be helpful. It did so in the form of a schedule. Each column of the schedule was referred to in the body of the fourth amended statement of claim. However, in part, these references were included in particulars. JNL pleaded to the allegations in the body of the fourth amended statement of claim, including as to its competing interpretation of the standards, but not to the schedule. The result is that the detail of the competing interpretations masks the extent to which underlying facts are in dispute.
[81] In any event, while the pleadings are less than ideal, having resolved the differences as to relevance of certain categories of documents during the hearing, I see no utility in ordering either party to replead now.
Particular discovery
[82] Following standard discovery, Red Stag seeks an order under r 8.19 for particular discovery by JNL of seven categories of documents, summarised as follows:
(a)internal correspondence regarding interpretation of building standards and requirements;
(b)internal correspondence and documents about the treatment of J-Frame;
(c)internal correspondence and documents about the testing, auditing and/or certification of J-Frame;
(d)internal documents regarding JNL’s marketing of J-Frame;
(e)customer documents and communications;
(f)regulator documents and communications; and
(g)all relevant documents pre-dating 2012;
[83]It is common ground that the Court adopts the four stage approach set out in
Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd:29
(a)Are the documents sought relevant, and if so how important will they be?
(b)Are there grounds for belief that the documents sought exist? This will often be a matter of inference. How strong is that evidence?
(c)Is discovery proportionate, assessing proportionality in accordance with Part 1 of the Discovery Checklist in the High Court Rules?
(d)Weighing and balancing these matters, in the Court’s discretion applying r 8.19, is an order appropriate?
Relevance
[84] It is also common ground that with standard discovery under r 8.7 the test for relevance is the adverse documents test; that is:
(a)documents on which the party relies; or
(b)documents that adversely affect that party’s own case; or
(c)documents that adversely affect another party’s case; or
29 Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd [2015] NZHC 2760, [2018] NZAR 600 at [14].
(d)documents that support another party’s case.
[85] As Mr Galbraith QC for JNL emphasised, this requires “actual and direct” relevance on the pleadings,30 unlike the former Peruvian Guano test.31
[86] Before turning to the seven categories of documents in dispute, some further brief background is necessary.
[87] In 2014, Red Stag raised complaints regarding JNL’s treatment of J-Frame with the Timber Quality Scheme and with MBIE. Subsequently, Red Stag made further complaints to the Commerce Commission, various industry bodies and others. The Commission issued a compliance advice letter in June 2017.
[88] Meanwhile, in June 2015 JNL obtained a CodeMark and amended its branding and marketing to remove reference to the acceptable solution and NZS 3640.
[89] Also, in 2016 Red Stag made a new complaint of criminal conduct, claiming JNL provided so-called golden samples to Scion for use in durability trials, and made public allegations of golden sampling in 2017. The Commerce Commission conducted a second investigation into this complaint. MBIE also undertook a separate investigation into this complaint. MBIE confirmed the outcome of this investigation in July 2017, recording that the samples used were representative. This golden sampling complaint is not raised in this proceeding.
[90] One consequence of the messy history of this proceeding is that JNL gave discovery in 2019, based on a pleading that has been superseded.
[91] Another difficulty is that, although it is common ground that relevance is determined by reference to the issues on the pleadings, there is considerable disagreement as to what underlying facts are in issue, particularly in relation to
30 Pyne Gould Corporation Ltd v Bath Street Capital Ltd [2020] NZHC 1247 at [13]; and Sellman v Slater [2018] NZHC 3057 at [46], citing Chatfield & Co Ltd v Commissioner of Inland Revenue [2016] NZCA 614, (2016) 27 NZTC 22-084.
31 The Compagnie Financiere et Commerciale Du Pacifique v The Peruvian Guano Co (1882) 11 QBD 55 (CA) at 63. Under the Peruvian Guano test, the obligation was to disclose documents that were or might be relevant to issues in the proceeding, or may lead to a train of inquiry.
Red Stag’s alternative interpretation claims. That is at least in part due to the complex form of the current pleadings, already mentioned.32 But it is clear JNL admits that J-Frame:
(a)was treated with boron, not Zelam’s glueline treatment; and
(b)was not treated to comply with the complete sapwood penetration (penetration to the central ninth) requirement in NZS 3640 for solid wood.
[92]I turn to the seven categories of documents.
Internal correspondence regarding interpretation of building standards and requirements
[93] Mr Flanagan submitted that JNL’s internal correspondence regarding the interpretation of the pleaded building standards and requirements is relevant. He acknowledged the different test for admissibility of internal correspondence in the context of disputed interpretation of building standards, but submitted that does not affect relevance for discovery, citing Westgate Town Centre Ltd v Auckland Council, which in turn cited Attorney-General v Institution of Professional Engineers NZ Inc.33
[94] Mr Galbraith accepted that a document did not have to be admissible to be relevant, but he submitted that relevant has a recognised legal meaning, that is logically capable of being probative, and that documents in this interpretation category could not be relevant here.
[95] In Attorney-General v Institution of Professional Engineers NZ Inc, documents containing legal advice were held to be relevant not because such advice would tend to prove anything of consequence in the proceeding, but because it will be relevant in a wider common usage sense; if that were not the case, there would be no point in the concept of legal advice privilege.34 Mr Galbraith took issue with this. I consider the
32 At [80]-[80] above.
33 Westgate Town Centre Ltd v Auckland Council [2021] NZHC 858 at [33]; and Attorney-General v Institution of Professional Engineers NZ Inc [2018] NZHC 74, [2018] NZAR 275 at [28].
34 Attorney-General v Institution of Professional Engineers NZ Inc at [28]-[30].
explanation for documents containing (or seeking) legal advice often being relevant is rather because they record instructions or other underlying facts that are relevant. In any event, in the context of this FTA misrepresentation case where the relevance of the proper interpretation of the pleaded building standards and requirements is whether the representation was false, I do not consider that internal correspondence regarding JNL’s view of the proper interpretation is of actual and direct relevance.
[96] Mr Flanagan also submitted there is a specific FTA allegation in relation to how the standards are understood irrespective of strict compliance; that is, even if the standards can be interpreted such that J-Frame complied, consumers and the industry understood the standards to require complete sapwood penetration and therefore JNL’s representations gave that false impression. On this narrow basis, I accept that internal correspondence containing consumer or industry views of the proper interpretation of the pleaded building standards and requirements may be relevant.
Internal correspondence and documents about the treatment of J-Frame
[97] Mr Flanagan submitted that the relevance of this category turns on the scope of JNL’s admissions to Red Stag’s allegation, in the alternative to its primary claim, that AS/NZS 1604.4 requires penetration in the sapwood of treated veneers. He submitted this category of documents would be relevant if JNL denies that its sapwood was not treated. He also submitted there is an issue about the extent to which JNL’s boron treatment “migrates” into the inner veneers of J-Frame when wet, and documents relevant to that are discoverable.
[98] As indicated, JNL admits that J-Frame was not treated to comply with a complete sapwood penetration requirement. Its compliance case is based on its interpretation that the standards do not require complete sapwood penetration for J-Frame. JNL admits that if there is a complete sapwood penetration requirement, it did not comply.
[99] JNL says, however, that prior to 1 September 2017 J-Frame was treated to comply with the penetration requirement for hazard class H1 in AS/NZS 1604.4. JNL says this means test samples must show evidence of penetration of boron in the
sapwood of each veneer. JNL says its testing for compliance with the penetration requirements of AS/NZS 1604.4 is not in issue.
[100] I accept that the Court may adopt one of a number of possible interpretations of the standards, but it does not follow that all treatment documents are relevant. That depends on whether there is a factual issue. Whether there is a factual issue here is not clear. If, as JNL understands, Red Stag’s alternative claim is that even AS/NZS 1604.4 requires penetration in the central ninth part of the framing, JNL admits J-Frame does not have such penetration. But if Red Stag’s alternative claim alleges that J-Frame’s test samples do not show evidence of penetration of boron in the sapwood of each veneer, there is a factual issue and documents relating to JNL’s test samples in that respect would be relevant. Red Stag should clarify if this is alleged.
[101] Mr Flanagan also submitted there is an allegation that JNL did not test the durability of J-Frame until at least 2015, and so documents in this category are at least relevant for that period. JNL’s response to this allegation is unclear but I read it as an admission that it did not test the durability of J-Frame until February 2015. The relevance of Red Stag’s allegation to treatment is also unclear. But I accept there is an issue as to whether JNL tested the durability of J-Frame in the remainder of 2015.35 Documents relating to the durability testing of J-Frame in that period in 2015 are therefore relevant.
Internal correspondence and documents about the testing, auditing and/or certification of J-Frame
[102] Mr Flanagan submitted that JNL has put its testing, auditing and certification regime in issue and must disclose all documents relevant to testing. I accept that insofar as JNL has put its testing, auditing and certification regime in issue, such documents are relevant. But, as indicated in relation to the treatment category, insofar as Red Stag’s case is that J-Frame is non-compliant because it does not meet the complete sapwood penetration (penetration to the central ninth) requirement for solid timber, JNL admits that J-Frame does not have complete sapwood penetration. It also admits that it has never tested for complete sapwood penetration. For these reasons,
35 In context, I do not read “at least” as meaning that Red Stag alleges JNL did not test after 2015.
I do not consider that documents about the testing, auditing or certification of J-Frame are relevant, unless Red Stag alleges that J-Frame’s test samples do not show evidence of penetration of boron in the sapwood of each veneer, as indicated.36
[103] There is also the exception for documents relating to the durability testing of J-Frame from February to December 2015, already mentioned.37
Internal documents regarding JNL’s marketing of J-Frame
[104] Red Stag seeks all internal documents about JNL’s marketing insofar as they relate to J-Frame’s treatment, labelling and/or compliance with the pleaded standards, the Building Code and Acceptable Solution B2/AS1. Mr Flanagan submitted they might be evidence of consumer’s perceptions or understandings or useful in cross-examination of JNL’s witnesses to test their evidence. They may also be relevant to JNL’s denial that customers would not have purchased J-Frame if they knew it did not comply. I accept that documents evidencing consumer’s perceptions or understandings in relation to J-Frame’s treatment, labelling or compliance are relevant. JNL says they have been discovered, but counsel would review whether there are any additional documents in this category.
Customer documents and communications
[105] JNL does not dispute the relevance of this category. The issue is whether all documents have been disclosed. Mr Galbraith referred to JNL’s affidavit of documents indicating that such documents that exist have been disclosed. He submitted that the small number of documents disclosed in this category did not indicate there were more. J-Frame was mainly sold to a few customers.
[106] Mr Flanagan also submitted that JNL’s affidavit of documents does not say whether the necessary searches have been done to capture correspondence via JNL’s info email address and website. Mr Galbraith agreed to follow up this aspect. Assessing the adequacy of discovery of documents in this category also overlaps with the application to set aside confidentiality, addressed below.
36 At [100] above.
37 At [101] above.
Regulator documents and communications
[107] Mr Flanagan submitted that JNL’s blanket rejection of the relevance of documents in this category is insufficient, and they need to be assessed for relevance. As Mr Galbraith submitted, the golden sampling allegations, which were the subject of the second round of regulatory investigations, are outside the scope of this proceeding. He accepted that documents from the earlier labelling investigations may be relevant, but believed they had been dealt with.
All relevant documents pre-dating 2012
[108] Mr Flanagan submitted that JNL is wrong to dispute the relevance of documents pre-dating December 2012 on the basis that Associate Judge Bell struck out that part of the claim.
[109] JNL says that it did not limit its searches to the period after December 2012 but Red Stag’s amended claim (when discovery was conducted) was for representations made, and losses suffered, after December 2012 and therefore there were very few relevant documents from the earlier period.
[110] Given Red Stag has reinstated that part of the claim pre-dating December 2012, this issue overlaps with the strike out and summary judgment applications. JNL accepted that if its application were unsuccessful, it would need to give further discovery of documents relevant to new matters raised in the more recent statement of claim.
Whether there are probative grounds for believing such documents exist
[111] When the categories of irrelevant documents are put to one side, the grounds for believing further documents exist are considerably reduced. There are grounds for believing that some further documents exist but, as indicated, during the hearing counsel for JNL agreed to follow up some categories. Also, JNL acknowledged that it would need to carry out further discovery based on the more recent pleadings if its strike out application did not succeed.
Whether a further affidavit of documents should be ordered
[112] But for the need to carry out further discovery to address the more recent pleadings since the strike out application has not succeeded, I would decline to order a further affidavit of documents. Given that need, however, a further affidavit of documents is appropriate.
Whether the Court should set aside JNL’s claims for confidentiality
[113] JNL placed confidentiality restrictions on a large number of documents in its affidavit of documents. Those restrictions limited inspection to agreed counsel and on terms to be agreed. Subsequently, inspection has been extended to an independent expert. Red Stag seeks to set aside those confidentiality restrictions on the following categories of documents:
(a)documents containing information available to the public;
(b)documents containing common knowledge of the industry;
(c)documents containing information of which Red Stag has general knowledge; and
(d)documents created by JNL more than two years ago.
[114] Mr Flanagan relied on Payment Express Ltd v Paymark Ltd,38 where I considered a similar issue. In that case, I noted that the party claiming confidentiality bears an initial onus to make out the requirements for its confidentiality claims. Once that is done, there is a balancing exercise in relation to prejudice. Mr Flanagan submitted that in this case JNL has not discharged the initial onus, and that its confidentiality claims are overly broad.
[115] Mr Flanagan indicated that Red Stag particularly wanted JNL’s customer complaints. He submitted that Red Stag was restricted in its preparation because the
38 Payment Express Ltd v Paymark Ltd [2019] NZHC 2027.
documents show the effect of JNL’s representations and that statements were made due to resistance in the market.
[116] A document by document review was not sought, and the categories of documents where confidentiality is sought to be set aside are inapt insofar as documents may contain confidential and non-confidential information. With such documents, redacting confidential information may be feasible. I also do not consider that a brightline rule for documents created more than two years ago is appropriate. Documents more than two years old may still be confidential and more recent documents may not be. But I accept that JNL’s confidentiality claims appear broad. Documents that contain only information available to the public, common knowledge in the industry or known to Red Stag would not have the necessary quality of confidence.39 Mr Galbraith agreed they should look at what is sought.
[117] In terms of the balancing exercise in relation to prejudice, it would not be appropriate to determine the balance in the abstract. But I make some general observations in the expectation that experienced counsel can resolve outstanding issues, with leave reserved to apply to modify a specific confidentiality claim if counsel are unable to reach agreement on a particular document or more specific category of documents.
[118] First, some documents will be more confidential than others. I accept that disclosure of JNL’s highly confidential information, such as trade secrets, would create a real risk of prejudice to JNL. That is particularly so since, at least in the application, Red Stag seeks to set aside JNL’s confidentiality claims without accepting any restrictions beyond those inherent with documents disclosed on discovery. Mr Flanagan’s submissions seemed to accept that inspection would be on the basis of appropriate undertakings from the representatives of Red Stag given access including at least its CEO, Mr Verry. JNL’s concern about misuse of its confidential documents is heightened by its experience of Mr Verry’s public statements about J-Frame and approaches to JNL’s customers. I expect that risk could be managed where other factors favour disclosure.
39 Payment Express Ltd v Paymark Ltd [2019] NZHC 2027 at [24], citing A B Consolidated Ltd v Europe Strength Food Co Pty Ltd [1978] 2 NZLR 515 (CA) at 521.
[119] Secondly, in the context of the issues in this case and on the basis of a general contention that disclosure of confidential documents is necessary to enable Red Stag to prepare adequately for trial, I consider there is relatively little risk of prejudice to Red Stag in its preparation and conduct of the proceeding. Access by a representative of Red Stag to less highly confidential documents, such as historic financial documents, may be appropriate on terms so as to maximise its visibility of the conduct of the proceeding. But, as Mr Galbraith submitted, JNL’s confidentiality claims do not prevent Red Stag’s counsel from discussing the general position with Red Stag and providing advice. Counsel should be able to obtain proper instructions. This FTA case is unlike Warner-Lambert Co v Glaxo Laboratories Ltd, where the circumstances called for disclosure of technical information to an authorised officer able to make major decisions on its behalf such as whether to continue or abandon a patent infringement action.40 Also, this is not a case where Mr Verry’s role as a witness about market acceptance or otherwise would appear to be compromised.
[120] For these reasons, I am not prepared to set aside JNL’s confidentiality claims, but will reserve leave as indicated.
Whether the Court should set aside JNL’s litigation privilege claims in respect of communications for the purpose of regulator investigations
[121] Red Stag seeks to set aside JNL’s privilege claims over communications and information relating to investigations into J-Frame by MBIE and the Commerce Commission.
[122] In relation to the regulatory investigation documents, the dispute was more about relevance, which I have already addressed. The position is also complicated where an industry expert had one role in the investigation context and has another role in the proceeding. Insofar as there are relevant regulatory investigation documents, I accept that litigation privilege only applies if the document was created for the dominant purpose of the anticipated proceeding. Documents created for two equally important purposes do not satisfy the dominant purpose test. Also, insofar as experts
40 Warner-Lambert Co v Glaxo Laboratories Ltd [1975] RPC 354 (CA) at 360-361.
have changed roles, litigation privilege only applies if the document was created by or for the party claiming privilege.
[123] On this basis, once the relevance of any documents in this category is confirmed in JNL’s further affidavit, I expect counsel can resolve any residual litigation privilege disputes. In these circumstances, I am not prepared to set aside JNL’s privilege claims but will reserve leave.
Result
[124]I make the following orders:
(a)I grant leave for JNL to apply for summary judgment.
(b)JNL’s strike out and summary judgment applications are dismissed.
(c)Red Stag’s application for an order that JNL file and serve a more explicit pleading is dismissed.
(d)JNL is to file and serve a further affidavit of documents within eight weeks, with leave reserved to file a joint memorandum seeking varied timetable orders if necessary.
(e)Red Stag’s application to set aside JNL’s confidentiality claims is dismissed, with leave reserved to apply to modify a specific confidentiality claim if counsel are unable to reach agreement on a particular document or more specific category of documents.
(f)Red Stag’s application to set aside JNL’s privilege claims is dismissed, with leave reserved.
(g)I will convene a case management conference on the first available date after 1 December 2021 to consider timetable directions towards trial. The parties are to file memoranda (ideally a joint memorandum) at least one clear day before the conference.
[125] Each party has had some success. If costs cannot be agreed, I will receive memoranda not exceeding four pages within 21 days and determine costs on the papers.
Gault J
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