Remediation (NZ) Limited t/a Revital Fertilisers v Enviro (NZ) Limited
[2022] NZHC 2155
•29 August 2022
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2021-404-1140
[2022] NZHC 2155
BETWEEN REMEDIATION (NZ) LIMITED
trading as REVITAL FERTILISERS Plaintiff
AND
ENVIRO (NZ) LIMITED
First Defendant
ENVIRO WASTE SERVICES LIMITED
Second Defendant
Hearing: 19 July 2022 Appearances:
J Cameron/DeAnne Brabant for the Plaintiff Garry Williams/T Lindsay for the Defendants
Judgment:
29 August 2022
JUDGMENT OF ASSOCIATE JUDGE C B TAYLOR
This judgment was delivered by me on 29 August 2022 at 3:00pm
pursuant to Rule 11.5 of the High Court Rules
…………………………. Registrar/Deputy Registrar
Solicitors:
Willis Legal (Justin Cameron), Napier, for the Plaintiff
Lindsay & Francis (Timothy Lindsay), Auckland, for the Defendants
Counsel:
DeAnne Brabant/John Maassen, Wellington, for the Plaintiff
Garry Williams, Richmond Chambers, Auckland, for the Defendants
REMEDIATION (NZ) LIMITED v ENVIRO (NZ) LIMITED [2022] NZHC 2155 [29 August 2022]
TABLE OF CONTENTS
Paragraph
Introduction [1]
Background
Background to substantive dispute [3]
Background to discovery dispute [31]
Application for discovery orders [39]
Affidavit of Joseph Buist (undated) [41]
Enviro’s notice of opposition to application for discovery orders [42]
Affidavit of Marcus Dickey dated 21 April 2022 [43]Affidavit of Brian Clark dated 21 April 2022 [44]
Reply affidavit of Andrew King dated 6 May 2022 [45]
Revital’s submissions [48]
Enviro’s submissions [54]
Legal Principles [63]
Analysis [66]
Application for standard discovery [66]Scope of tailored discovery [67]
The discovery of Enviro’s internal communications in relation to the seven categories
of documents for which tailored discovery is sought by Revital [69] The pleaded causes of action [69]
First cause of action – breach of fiduciary relationship [71] Second cause of action – misleading or deceptive conduct under s 9 FTA [81] Third cause of action [85]
Conclusion on the 7 categories of documents for which tailored
discovery is sought [88]
The discovery of Enviro’s communications with third parties in relation to the seven categories of documents for which tailored discovery is sought [89] Second cause of action – misleading or deceptive conduct [94]
Third cause of action – breach of contract [96]
Whether, after being modified by the answers to questions [67](a) and (b), the 7 categories of tailored discovery documents sought be Revital are all sufficiently relevant to the causes of action pleaded in the amended
statement of claim to be discoverable? [97]
Category 1: Pre-LOI documents [98]
Category 2: Post-LOI to tender submission [102]
Category 3: Post-tender submission [103]
Category 4: Health and safety information [104]
Category 5: Termination of the relationship [105]
Category 5: TCC communications [106]
Category 7: Site Exit [107]
Approach to eDiscovery [109]
Enviro’s discovery categories [111]
Result [113]
Costs [114]
Introduction
[1] Remediation (NZ) Ltd, trading as Revital Fertilisers (Revital) claims against Enviro (NZ) Ltd (ENZ) and Enviro Waste Services Ltd (ESL) (collectively, Enviro) for breach of fiduciary duty, misleading or deceptive conduct under the Fair Trading Act 1986 (FTA) and breach of contract. Enviro counterclaims for unpaid rent and trespass. Revital, in turn, counterclaims for bailment against Enviro’s counterclaim.
[2]The parties are in dispute over the scope of discovery.
Background
Background to substantive dispute
[3] Revital’s version of events, as set out in its amended statement of claim, is as follows.
[4] Revital produces fertilisers and aggregates. ESL provides waste collection and disposal services. ENZ is ESL’s sole shareholder, and the two companies share the same directors.
[5] In 2008, Revital purchased an organics processing operation at Te Maunga, Tauranga. It leased the site from the Tauranga City Council (TCC). That year, the parties entered into a Green Waste Disposal agreement under which ESL would provide green waste to Revital. Revital processed green waste at the Te Maunga site, turning it into BioGrow and Zespri certified compost.
[6] On 17 September 2019, Catherine Taylor of TCC and Mr Kerry O’Neill of Revital met to discuss the variation of Revital’s lease and the potential surrender of its resource consents for discharge to air and discharge to land. TCC asked for the
surrender of the consents as they created an unfair advantage in a then-upcoming Request for Proposals for organics processing and waste collection. Revital did not agree to transfer its resources consents to TCC.
[7] The following month, TCC again sought Revital’s views regarding the assignment of the resource consents should Revital not be successful in its tender. Revital and TCC then agreed that the deed of variation of lease would state that Revital would assign its consents to TCC if Revital was not the preferred supplier at the end of the tender process. The deed permitted Revital to remain on the Te Maunga site until 29 February 2021. It also provided the parties could negotiate, acting in good faith, an extension of the lease through to 28 November 2021.
[8] In October or November 2019, ENZ contacted Revital and requested a meeting regarding the waste collection, transfer and disposal/proceeding tenders. It proposed submitting a joint tender in the TCC tender process. Enviro and Revital met at Revital’s Cambridge offices on 4 November 2019. Revital says that at this meeting, Enviro advised Revital that it was considered a strategic partner in the tender process.
[9] On 16 December 2019, TCC sought tenders in respect of refuse collection contracts in the region, with a closing date of 4 March 2020. Revital and Enviro entered discussions in January 2020 to partner on the green waste and food waste aspects of the tender. On 16 January 2020, they formally agreed to party with each other and jointly tender, and to formalise the partnership in an agreement.
[10] Between 30 January 2020 and 11 February 2020, the parties negotiated and executed a letter of intent (LOI) that set out the terms of the partnership (or, as contended Revital contends, the joint venture). Revital claims the LOI provided the basis of the parties’ relationship, the mechanisms for tendering, and details of their respective roles in the tender process. It included a good faith requirement to enter into a sublease and service agreement within six months of the tender award date.
[11] Between 19 February 2020 and 4 March 2020, Revital provided its tender documents, supporting documentation, pricing, and proposals to ENZ for review and comment. ENZ in turn provided documentation relating to green waste and food waste
collection and processing to Revital. Both made adjustments to each other’s documents to ensure they reflected the LOI’s terms and the TCC requirements. One such adjustment was Revital asking ENZ to adjust its pricing schedules for the tender and seeking a reduced rent while green waste was being processed.
[12] On 4 March 2020, ENZ submitted the tender for the parties. Revital says it was not provided with a full version of the tender document, the final pricing, or the proposed rent between TCC and Revital for the Te Maunga site. In the ensuing months, Enviro acted for the parties and liaised with the company managing the tender process and TCC regarding the tender documents. The parties then jointly presented their prepared presentation in May 2020.
[13] On 7 August 2020, TCC advised Enviro that the submitted tender was successful. That same month, ESL advised Revital of the award, but not of the award date.
[14] On 13 August 2020, ENZ wrote to Revital advising it was continuing to work with TCC to finalise the head lease and service agreement required to provide the tendered services. ESL advised Revital that Revital could not deal directly with TCC as ESL and TCC remained in probity. Around this same time, the parties had some preliminary discussions about ESL purchasing Revital. However, discussions halted after the parties failed to reach agreement on the purchase price.
[15] Between September and October 2020, Revital sought updates regarding the progress of Enviro’s negotiations with TCC regarding the head lease for the site and related contracts. Enviro advised Revital it was continuing to negotiate with TCC and that lease documents would be imminent. The following month, ESL and TCC entered into a head lease for the site and an organics processing contract. The lease included pricing for rent to be paid between ESL and TCC of $75,000 per annum. Revital says this figure was higher that it had been led to believe the agreed rent was.
[16] Enviro and Revital met on 2 December 2020. There, Enviro confirmed the organics processing contract and head lease had been executed. It advised it was processing “back-to-back” contracts and these would be available to Revital before
Christmas. In the weeks to come, Revital continued to pursue the service contract and sublease, emphasising the LOI required the finalisation of those agreements within six months.
[17] On 22 January 2021, the draft sublease for Te Maunga was provided to Revital. Revital rejected it on the basis that it did not address all the matters included in the LOI and did not reflect was what discussed in the December 2020 meeting. Further negotiations were entered, and further drafts exchanged. Revital continued to be concerned that the draft versions of the proposed sublease did not address the matters agreed in the LOI.
[18] The parties remained in negotiations past 7 February 2021, being six months after the date the tender was awarded. Revital says that, both before and after that date, it continuously and unsuccessfully sought from ESL the unredacted head lease and service contract between ESL and TCC.
[19] On 23 February 2021, Revital advised ESL it would reluctantly agree to operate under the draft sublease and service agreement until such time as the sublease and contract were finalised. Two days later, Enviro sought Revital’s final position on the sublease. Then, on 26 February 2021, Revital provided a marked-up sublease and presented this as its final position.
[20] On 28 February 2021, Revital’s lease was to expire. To protect itself, it continued to pay rent to TCC. TCC initially accepted the monthly rent, but subsequently refunded three months’ rent. Around this same time, ENZ and Revital sought to resolve their negotiation hurdles. ENZ indicated there were some provisions of the LOI that it could no longer honour. Revital, in turn, said it wanted to negotiate a sensible agreement that worked for both parties and that addressed its key issues.
[21] On 1 March 2021, Mr Paul Shaw, a health and safety consultant appointed by ENZ, attended the Te Maunga site. He had not advised Revital he would do so. He conducted an audit. Revital says the audit was not fulsome or complete, with Mr Shaw failing to interview staff or to review Revital’s full health and safety systems.
[22] Two days later, ENZ wrote to Revital, supplying Mr Shaw’s report and alleging serious health and safety breaches at the site. Revital was given until 5 pm on 5 March 2021 to remedy the breaches. Revital responded the same day, advising it did not accept the position taken by ENZ or by Mr Shaw. It said it would provide a comprehensive response the next day.
[23] Between 4 March 2021 and 25 March 2021, Revital corresponded and met with ESL to discuss the alleged health and safety breaches and threatened prevention of access to the Te Maunga site. On 11 March 2021, Revital provided a further auditor’s report to ESL that concluded Revital was meeting its health and safety obligations on the site. ESL rejected the report, insisting on another audit by a third-party health and safety provider. Revital said it did not see the point of engaging a third health and safety consultant. It said the best way forward was to have a site visit to determine if the issues raised in Mr Shaw’s report were valid. ESL did not respond.
[24] ESL withdrew from further negotiations on 29 March 2021, citing Revital’s serious breaches of health and safety laws and requirements; Revital’s failure to demonstrate to ENZ’s satisfaction it had taken steps to rectify the issues identified in Mr Shaw’s report; and that the LOI had expired on 7 February 2021.
[25] ESL required Revital to immediately cease all activities at the Te Maunga site, advising it would be in contact to discuss Revital’s exit. Revital responded, rejecting the withdrawal from negotiations and repudiation of the LOI. It sought a meeting between the parties. ESL wrote back on 3 May 2021, reaffirming its position and saying it was under no obligation to meet with Revital. On 24 May 2021, ESL gave Revital 20 days’ notice to vacate the site.
[26] Between 31 March 2021 and 30 June 2021, Revital met with TCC and sought its assistance to resolve matters with ESL. TCC attempted unsuccessfully to mediate and broker meetings between the parties.
[27] On 5 July 2021, ESL filed a proceeding seeking possession of the site. In the course of that proceeding, the unredacted head lease and tender documents were
provided to Revital. They revealed, among other things, that ESL has agreed an annual rent of $75,000 for the site.
[28] On 12 November 2021, TCC advised Revital that because it was not a successful tenderer it must transfer its resource consents to TCC, pursuant to the deed of variation of lease. Revital took a different interpretation of the relevant clause and refused to transfer the consents.
[29] ESL’s proceeding for possession was successful, with the Court finding on 1 December 2021, on an interim basis, that ESL had better title to the site. Revital was required to exit the site within 14 days. Revital advised ESL it was unable to exit the site within that timeframe and sought an extension of time.
[30] Revital claims it has suffered loss of profits and other consequential losses such as the cost of relocating from the site and securing alternative premises. It estimates the loss of profits as being around $24,000,000 over a period of 20 years. It has not yet quantified its consequential losses.
Background to discovery dispute
[31] The parties have unsuccessfully sought to resolve discovery issues between them since September 2021. There have been three case management conferences to date and multiple rounds of correspondence. Trial is set down for 8 May 2023.
[32] In a minute issued after the first case management conference on 1 October 2021, Associate Judge Bell indicated that it would be “unlikely to be helpful to make a general discovery order”.1 The following month, Enviro wrote to Revital and provided a list of proposed tailored discovery categories. Those categories excluded the parties’ internal correspondence, and correspondence and documents with third parties. Enviro maintains its proposed categories are the limit of discoverable documents relevant to the issues in dispute.
1 Remediation (NZ) Ltd v Enviro (NZ) Ltd HC Auckland CIV-2021-404-1140, 1 October 2021 (Minute of Associate Judge Bell) at [5].
[33]Revital did not respond to Enviro’s discovery proposal until 22 February 2022
— the day before the second case management conference. Its response was to file a memorandum repeating the appropriateness of standard discovery but in any event attaching a schedule of its own proposed discovery categories. At the conference, I directed the parties to endeavour to agree the scope of discovery within seven days.
Failing such agreement, Revital was to apply to the Court for discovery orders.2
[34] The parties engaged in discussions over the ensuing months. They continued to disagree over the scope of discovery. On 5 April 2022, Revital filed the present discovery application; on 11 April 2022 Enviro filed its notice of opposition.
[35] Revital initially sought standard discovery. It subsequently abandoned that point. It now seeks tailored discovery of documents falling within seven specified categories, essentially comprising Enviro’s internal documents and correspondence and their correspondence or documents with certain third parties including TCC and Mr Shaw in relation to the health and safety audit report.
[36] Revital’s pleaded causes of action in its amended statement of claim dated 9 March 2022 are:
(a)breach of fiduciary duty in Enviro’s taking advantage of Revital’s trust and confidence;
(b)breach of s 9 of the FTA by way of misleading or deceptive conduct; and
(c)breach of contract in respect of the LOI.
[37] Enviro contends that while Revital has abandoned its substantive application for standard discovery, its tailored discovery application is of such breadth as to amount to a request for standard discovery in another guise. It says Revital’s proposed
2 Remediation (NZ) Ltd v Enviro (NZ) Ltd HC Auckland CIV-2021-404-1140, 23 February 2022 (Minute of Associate Judge Taylor) at [6].
discovery categories are not targeted and it is unclear what each category seeks in respect of the issues raised in the pleadings.
[38] Enviro says Revital’s abandonment of its application for standard discovery “at the eleventh hour” justifies an award of increased costs in its favour.
Application for discovery orders
[39] Revital’s application seeks orders for standard discovery pursuant to r 8.7 of the High Court Rules 2016. Should Enviro oppose the order, Revital seeks an order requiring Enviro to file an affidavit addressing proportionality and estimating the likely volume and cost of undertaking standard discovery. In the alternative, if the interests of justice require an order for tailored discovery, Revital seeks the order be made in respect of the following categories of documents:3
(a)Category 1: Pre LOI communications and documentation;
(b)Category 2: Post LOI to tender submission communications and documentation;
(c)Category 3: Post tender submission communications and documentation;
(d)Category 4: Health and safety documentation;
(e)Category 5: Termination of the parties’ relationship communications and documentation;
(f)Category 6: TCC communications; and
(g)Category 7: Site exit communications and documentation.
[40]The orders are sought on the following grounds:4
3 Application for discovery orders dated 5 April 2022 at [1]–[3].
4 At [4].
(a)The Plaintiff and the Defendants, despite exchanging discovery category lists and meeting with each other have not reached an agreement regarding discoverable documents;
(b)While HCR 8.9 in the first instance has a presumption towards tailored discovery, the Plaintiff submits that that presumption is displaced for the following reasons:
(i)Unless the Defendants prove otherwise, that the costs of standard discovery are not disproportionately high in comparison with the matters at issue in the proceeding; and
(ii)The total sum exceeds $2,500,000, with the damages claim being $25m based on the estimated loss of profits based on EBITDA over a period of 16–20 years that the contract was to run and loss of business at the Site.
(c)Standard discovery in this case is not onerous given the limited period of time and scope of the relationship, negotiations, and transactions that occurred between 4 September 2020 and 1 December 2021. Accordingly, standard discovery in this case would be less burdensome that tailored:
(i)The searches required under both tailored and standard discovery will be the same or similar as tailored discovery;
(ii)The recovery process for obtaining the documents under standard discovery would not differ from that of tailored discovery;
(iii)Unless, proven otherwise, the costs of undertaking standard discovery, considering the matters are limited in time, scope (which can be addressed with keyword searches), should not differ between standard or tailored discovery. Essentially, the same documents will be captured.
(d)Should tailored discovery be ordered the categories set out in paragraph [3] are appropriate for the following reasons:
(i)The categories are relevant and are closely connected with the events and transactions that occurred between the parties;
(ii)Non-objective material, including internal correspondence, is relevant when considering the common objective of a joint venture, the parties’ understanding of the common objective, and ultimately proving the existence of a joint venture;
(iii)Health and Safety documentation, including the instructions provided to the auditor, is relevant given the audit fell on the first day of ESL’s lease and in the period where the parties were still negotiating the service agreement and sublease. Health and Safety was the primary basis for requiring RNZ to exit and the Site and also the refusal to engage in further contractual negotiations. Ultimately, the audit was used to terminate the parties’ joint venture/partnership.
Affidavit of Joseph Buist (undated)
[41] Mr Joseph Buist, Chief Financial Officer of Revital, has made an undated affidavit in support of the application for discovery orders. He says the internal correspondence between ESL and ENZ is sought by way of discovery to understand which party was involved in which part of the negotiations and decision-making with Revital. He says the LOI was signed by ESL, as were the Head Lease and Contract with Tauranga City Council. He deposes that from what he understands the exercise of collecting, collating, and undertaking relevance checks would be no different if standard discovery processes were to be applied. He says he understands the cost difference between standard and tailored discovery is negligible.5
Enviro’s notice of opposition to application for discovery orders
[42]Enviro opposes the application for discovery orders on the following grounds:6
Order 1 (standard discovery)
(a) because Revital’s claim is for an estimated $24 million, tailored discovery is the presumptive approach pursuant to HCR 8.9(d);
(b) this Court has already indicated in its Minute dated 1 October 2021 that, regardless of the presumptive rule in HCR 8.9(d), it is “unlikely to be helpful to make a general discovery order”;
(c) standard discovery would require disclosure by Enviro of significantly more documents than tailored discovery;
(d) the interests of justice require an order for tailored discovery and standard discovery is otherwise inappropriate;
(e) Revital has not discharged the onus of establishing why this presumption should be displaced in this case and tailored discovery not ordered;
Order 2 (that Enviro file an affidavit on proportionality)
(f) there is no basis for requiring Enviro to file an affidavit addressing proportionality when the presumptive approach is for tailored discovery;
(g) the onus is on Revital to displace this presumption; and
(h) the affidavit evidence Revital has filed in support of its application does not displace the presumption in favour of tailored discovery.
5 Affidavit of Joseph Jeremiah Paul Buist (undated) at [9]–[11].
6 Defendants’ notice of opposition to plaintiff’s application for discovery orders dated 5 April 2022 at [3].
Order 3 (Revital’s categories of documents)
(i) Revital has not established that its proposed categories of documents are relevant to the pleaded issues in dispute;
(j) Revital’s proposed categories of tailored discovery documents:
(i)are broad and are effectively standard discovery;
(ii)seek large numbers of irrelevant documents, including (inter alia) internal communications which are irrelevant to the objective meaning of any agreement or relationship between the parties; and/or
(iii)are disproportionate to the potential significance of any document likely to be found.
(k) Revital’s proposed categories otherwise amount to a fishing expedition.
Affidavit of Marcus Dickey dated 21 April 2022
[43] Mr Marcus Dickey, associate at Lindsay & Francis (lawyers for Enviro), has made an affidavit in support of Enviro’s notice of opposition. He deposes Enviro has sought to resolve discovery issues with Revital since September 2021, but the parties have as yet been unable to agree. He highlights that in a minute issued after this proceeding’s first case management conference, Associate Judge Bell indicated it would be unhelpful to make a general discovery order. He deposes Enviro’s view is Revital’s proposed discovery categories are either too broad or of unclear relevance. They include discovery of Enviro’s internal documents and documents between Enviro and TCC — documents that are not relevant to establishing a common objective between Enviro and Revital.7
Affidavit of Brian Clark dated 21 April 2022
[44] Mr Brian Clark, IT Manager for Enviro, has also made an affidavit in support of Enviro’s notice of opposition. He deposes he will be responsible for organising and collating Enviro’s electronic discovery. He says he does not accept Mr Buist’s evidence that standard discovery and tailored discovery are not qualitatively different (and that the cost difference would be negligible). He says the tailored discovery categories Revital seeks are extremely broad, and that his initial representative
7 Affidavit of Marcus Dickey in support of notice of opposition dated 11 April 2022 to plaintiff’s application for discovery orders dated 5 April 2022 (dated 21 April 2022) at [1]–[14].
searches based on those categories have returned around 376,000 documents. He says this figure is the approximate pool of documents that will need to be reviewed by Enviro’s lawyers. Mr Clark says it is more time and cost efficient for targeted searches to be made because there will be a significant amount of otherwise irrelevant material that will need to be located and reviewed if standard discovery is ordered.8
Reply affidavit of Andrew King dated 6 May 2022
[45] Mr Andrew King, founder and director of Legal Innovate, has made an affidavit in reply to Enviro’s notice of opposition. He deposes he has over 20 years’ experience in coordinating discovery exercises. He says that since 2011 he has provided regular training sessions on how to apply the High Court Discovery Rules and eDiscovery best practices, and that he has written more than 250 articles on the latter subject.9
[46] Mr King says Mr Clark’s initial data set of approximately 376,000 documents would not be considered large by today’s standards — if anything that is a conservative figure. He deposes that document volumes have increased considerably with the proliferation of electronic information. He says manual review of all the documents is unnecessary. Discovery best practices would involve continuous refinement of search parameters to isolate relevant material, with the aid of sophisticated software tools. He says Mr Clark has not substantiated his concerns as to time and cost of discovery.10
[47] Mr King says tailored and standard discovery have the same starting point as far as the practical steps taken to identify, review and produce the discoverable documents. He says the amount of key discoverable documents may be considerably less than the “approximately 376,000 documents” that Enviro has identified. He proposes a potential search approach to help meet the tailored discovery categories Revital has identified and says the more the parties work together the greater the efficiencies that can be achieved. He deposes the appropriate use of eDiscovery tools
8 Affidavit of Brian Clark in support of notice of opposition dated 11 April 2022 to plaintiff’s application for discovery orders dated 5 April 2022 (dated 21 April 2022) at [1]–[9].
9 Affidavit of Andrew James King in reply to defendants’ notice of opposition to discovery orders affirmed 6 May 2022 at [1]–[8].
10 At [13]–[24].
will give the parties assurance they have complied with their discovery obligations and met the requirements of the High Court Rules 2016.11
Revital’s submissions
[48] Ms DeAnne Brabant, for Revital, submits that the areas of dispute are the appropriate approach to eDiscovery; the discovery of internal correspondence; and Enviro’s communications with TCC. As to the first issue, Ms Brabant says electronic processes and available technology can be applied to locating and assessing the relevance of documents. She says that if the principles of eDiscovery are engaged with, there is no requirement for every document discovered to be manually reviewed by Enviro’s legal team. The use of appropriate eDiscovery tools can effectively manage the issue of costs and proportionality.12
[49] As to the second issue, Ms Brabant submits Revital is entitled to internal correspondence for each category of documents sought, on the basis the correspondence is relevant and relates to matters at issue in the pleadings. She says internal correspondence will be relevant to proving the existence of the contended joint venture, evidence of the mutual meeting of the minds, the definition of the common objective, the parties’ understanding of the common objective and the progress being made towards the common objective. She says exclusion of the internal correspondence would prejudice Revital’s claim.13
[50] On the third issue, Ms Brabant says the communications between Enviro and TCC are relevant because Revital pleads a joint venture with Enviro. Central to that joint venture was the tendering for the green waste and food waste processing at the Te Maunga site. She submits one or both of ENZ and ESL assumed responsibility as a fiduciary or as an agent for entering into obligations with the TCC on behalf of Revital. She submits Revital is entitled to documents relating to the negotiation of the relevant contracts, and surrounding communications.14
11 At [25]–[39].
12 Synopsis of submissions for the plaintiff in relation to discovery dated 14 July 2022 at [11]–[21].
13 At [22]–[33].
14 At [34]–[40].
[51] Ms Brabant turns to address the individual categories of documents. She says Category 1 is limited in scope and date, seeks documents that are relevant to the pleadings, and that it is appropriate to disclose the documents in this category. She submits these are documents that are relevant to the allegation of a pre-contractual joint venture entered into before the LOI was signed (with fiduciary duties arising from that time).15
[52] As to Category 2, Ms Brabant reiterates internal documents produced regarding the tender preparation are relevant to the second cause of action for misleading and deceptive conduct, and to the breach of fiduciary duty claim. On Category 3, she says relevant date range was when Enviro was exclusively negotiating with TCC on behalf of Revital. Category 4, relating to health and safety information, is relevant to establishing the cause of action for breach of contract and in terms of the termination of the joint venture. Category 5 is relevant to the claim Enviro breached its fiduciary obligations in terminating the joint venture unreasonably. Category 6 is relevant to the joint venture issue. And Category 7, relating to the site exit, is relevant to all causes of action.16
[53] Concluding, Ms Brabant submits Enviro’s objections to Revital’s proposed discovery categories are unsustainable. She says Enviro has not considered the relevance of the requested information and has not accounted for eDiscovery best practices. She says it is appropriate to make an order in terms of the categories of documents proposed at [3] of Revital’s discovery application, such order incorporating Mr King’s proposed search terms. She says Revital seeks 2B costs.17
Enviro’s submissions
[54] Mr Garry Williams, for Enviro, submits that Enviro does not accept Revital’s criticism of Mr Clark’s proposed approach to eDiscovery. He says the key point from Mr Clark’s evidence is that a significant number of documents will be caught by Revital’s proposed discovery categories. A much smaller number will be caught by Enviro’s proposed discovery categories. He says that even if some duplicative,
15 At [41]–[45].
16 At [46]–[55].
17 At [56]–[59].
irrelevant, privileged or confidential documents are removed from the review process, there will remain a significant number of materials to be reviewed by Enviro’s legal team. He says Mr King’s evidence that the pool of potentially discoverable documents “would not be considered large by today’s typical documents” misses the point — the relevant question is whether the discovery exercise is proportionate and appropriate for the proceeding and issues in dispute.18
[55] Mr Williams says relevance is fundamental to determining appropriate discovery categories. The key issue, then, is whether Enviro’s internal correspondence is relevant to Revital’s three pleaded causes of action. On the first cause of action, Mr Williams submits there is a significant dispute as to whether there was a fiduciary relationship between Enviro and Revital, under which Enviro owed Revital duties and obligations. Enviro says there was no joint venture, only a commercial contracting relationship. Mr Williams submits Enviro’s internal correspondence and communications with third parties will, at best, only evidence its subjective understanding of the relationship between the parties and is therefore irrelevant to determining objectively whether the relationship was fiduciary in nature. There is therefore no basis for the disclosure of those documents in relation to the first cause of action.19
[56] On the second cause of action, Mr Williams submits an objective test is applied to determine whether a party has engaged in misleading or deceptive conduct for the purposes of s 9 of the FTA. To that extent, the subjective views of the parties are irrelevant. Enviro’s internal correspondence is irrelevant to whether there has objectively been a breach — it will only be evidence of subjective intention or belief. He says the same principles apply to correspondence between Enviro and third parties.20
[57] On the third cause of action, Mr Williams submits the well-established principles of contract interpretation are relevant to determining the scope of tailored
18 Defendants’ submissions in opposition to application for orders relating to discovery dated 18 July 2022 at [29]–[33].
19 At [34]–[48], principally citing Paper Reclaim Ltd v Aotearoa International Ltd [2007] 3 NZLR 169 (SC) at [31].
20 At [49]–[51], principally citing Red Eagle Corporation Ltd v Ellis [2010] 2 NZLR 492 (SC) at [28]; and Juken New Zealand Ltd v Red Stag Timber Ltd [2022] NZCA 184.
discovery. He submits these principles mandate the exclusion of Enviro’s internal correspondence and communications are irrelevant to the objective meaning of the LOI. Again, they will only evidence Enviro’s subjective belief or intent. And, again, the same applies to correspondence with third parties. The documents Revital seeks will not prove anything relevant to the objective interpretation of the LOI.21
[58] Mr Williams submits that because the documents Revital seeks are irrelevant to the issues raised by its three pleaded causes of action, they are inadmissible under ss 7(2) and 8 of the Evidence Act 2006. Their probative value is outweighed by the risk their admission will needlessly prolong the proceeding. He says similar considerations apply at the discovery stage — the documents are inadmissible and Enviro therefore should not be compelled to discover them.22
[59] Next, Mr Williams submits that Revital’s proposed categories are too broad and risk capturing virtually every document Enviro holds that mentions the Te Maunga site. Such discovery would be unduly burdensome for Enviro and would require it to search for and review many irrelevant materials. This in turn would result in delay and wasted cost. As well, Mr Williams says, Revital’s proposed discovery categories essentially only require discovery by Enviro. The one-sided nature of the proposals must be relevant to the proportionality balancing exercise.23
[60] Mr Williams submits Revital’s proposed discovery categories represent an impermissible fishing expedition. Enviro’s internal correspondence and communications with third parties do not go to the disputed issues. He submits compliance with the proposed categories will provide very little, if any, material benefit to the parties or the Court. Even using appropriate eDiscovery methods, reviewing documents could be very time consuming. Given the relative proximity to the May 2023 hearing, there would be a risk of delay to evidence-related deadlines if discovery is not completed promptly. Mr Williams says such delay could potentially be fatal to the fixture date.24
21 At [52]–[59], principally citing Bathurst Resources Ltd v L&M Coal Holdings Ltd [2021] NZSC 85, [2021] 1 NZLR 696 at [46], [68] and [75].
22 At [60]–[62].
23 At [63]–[67].
24 At [68]–[72].
[61] In Mr Williams’ submission, the only discovery required is that proposed by Enviro. Enviro’s proposed categories have been framed by reference to the pleadings and issues in dispute; are far more proportionate than Revital’s proposed categories; and permit discovery of relevant documents from both parties.25
[62] Should Revital’s application be dismissed, Mr Williams says, Enviro seeks 2B costs with a 50 per cent increase under r 14.6(3)(b) of the High Court Rules. He submits increased costs are justified because the discovery issues have been going for more than 10 months; Revital continued for months to insist on standard discovery notwithstanding the presumption for tailored discovery and Associate Judge Bell’s indicate standard discovery would not be appropriate; and Revital only belatedly conceded that tailored discovery was the appropriate way forward. In these ways, Revital pursued unnecessary steps that lacked merit and, without reasonable justification, failed to accept a legal argument.26
Legal principles
[63]Rule 8.8 of the High Court Rules provides:
8.8 Tailored discovery
Tailored discovery must be ordered when the interests of justice require an order involving more or less discovery than standard discovery would involve.
[64] The starting point in considering a tailored discovery order is the issues raised in the pleadings; “fishing” for irrelevant material is generally impermissible.27 The Court is afforded a broad discretion as to the appropriate directions,28 but relevance and proportionality remain key principles.29 Discovery will only be made of documents relevant to the pleaded issues.30
25 At [73]–[75].
26 At [76]–[80].
27 Commerce Commission v Cathay Pacific Airways Ltd [2012] NZHC 726 at [13] and [26]; and Nathans Finance New Zealand Ltd (in rec) v AIG Insurance New Zealand Ltd [2013] NZHC 3137 at [34].
28 James Hardie New Zealand Ltd v White [2020] NZCA 142 at [54].
29 Farrelly v Wellington City Council [2019] NZHC 1875 at [16] and [20]; and Commerce Commission v Cathay Pacific Airways Ltd, above n 27, at [12].
30 Farrelly v Wellington City Council, above n 29, at [21].
[65] The proportionality assessment involves a balancing exercise, under which it is necessary to consider the chances of finding relevant documents against the cost of carrying out the discovery process. The amount at issue, the parties’ resources and any delay to the proceedings may also be relevant considerations.31
Analysis
Application for standard discovery
[66] Revital, in its submissions, abandoned the pursuit of an order for standard discovery. Consequently, I do not deal with the section of Revital’s application relating to standard discovery in this judgment.
Scope of tailored discovery
[67]The issues to be determined in this proceeding are:
(a)the discovery of Enviro’s internal communications in relation to the seven categories of documents for which tailored discovery is sought by Revital;
(b)the discovery of Enviro’s communications with third parties in relation to the seven categories of documents for which tailored discovery is sought by Revital;
(c)whether, after being modified by the answers to the questions at [67](a) and (b), the seven categories of tailored discovery documents sought by Revital are all sufficiently relevant to the causes of action pleaded in the amended statement of claim to be discoverable; and
(d)the appropriate approach to eDiscovery.
[68]I will deal with each of these in turn.
31 Commission v Cathay Pacific Airways Ltd, above n 27, at [18].
The discovery of Enviro’s internal communications in relation to the seven categories of documents for which tailored discovery is sought by Revital
The pleaded causes of action
[69] The scope of discovery is to be determined by reference to the issues as defined in the pleadings. Revital’s three pleaded causes of action are:
(a)Breach of fiduciary duty. Revital alleges that Enviro “acted in bad faith” and “unconscientiously took advantage” of Revital’s trust and confidence in circumstances where Enviro knew or ought to have known that Revital was in a weak position and unable to adequately look after its own interests.
(b)Breach of s 9 of the FTA. Revital claims that Enviro engaged in conduct that is misleading or deceptive, or likely to mislead or deceive, in breach of s 9 of the FTA.
(c)Breach of contract. Revital alleges that Enviro breached the essential terms of the LOI.
[70] The discoverability of Enviro’s internal communications in relation to the seven categories of documents for which tailored discovery is sought by Revital can be tested against each of the causes of action.
First cause of action — breach of fiduciary relationship
[71] Ms Brabant submits that the first cause of action pleads the parties entered into a joint venture that gave rise to fiduciary duties. She submits this joint venture was formalised in the LOI and fiduciary duties established under the pre-contractual joint venture remained intact following the formation of the joint venture and the LOI. Accordingly, she submits the internal correspondence of Enviro is relevant to proving the existence of a joint venture, and the breach of fiduciary duties.
[72] Ms Brabant submits that action taken by Enviro in respect of negotiating the terms of the head lease and service contracts with TCC and decision-making regarding
terms that Revital was bound by in those documents are equally relevant. The decisions and steps taken to terminate the relationship between Enviro and Revital, in particular to cease to negotiate the sublease and service head of agreement between the parties, also supports disclosure of internal correspondence.
[73] Ms Brabant seeks to distinguish the Diagnostic Medlab decision.32 She submits that that case is not relevant as it is a judicial review proceeding and is limited in its scope and application. She submits that the Court’s finding about internal correspondence in that specific situation does not provide any assistance in the present case. Ms Brabant instead relies on Commercial Factors Ltd v Scenic Hotel Group Ltd.33 In that case the plaintiff, CFL, was a financier that entered into an arrangement with the defendant, Scenic Hotel Group, a substantial New Zealand hotel operator. It acquired the hotel complex and the parties entered into an interim arrangement while they discussed the terms of a joint venture arrangement. A company was established for that purpose with equal shareholdings. The relationship broke down and litigation followed. CFL sought, among other things, a declaration that Scenic Hotel Group and CFL were joint venture partners in respect of the hotel, and a declaration that the joint venture had been validly terminated. The Court found that the contractual joint venture had come into existence no later than June 2011, at which time Scenic Hotel Group was successful in its tender for the hotel.
[74] Ms Brabant submits that Osborne J, in his conclusion, considered a “plethora of evidence” including emails and handwritten notes of telephone calls. She submits that the decision highlights that internal correspondence is relevant and appropriate within the scope of an application for discovery orders in circumstances where the issues require determination of the existence of a joint venture, and fiduciary duties that arise and continue until all the steps necessary to bring the affairs of the joint venture to a conclusion fairly have been taken. She submits that unlike a claim for breach of contract, establishing whether the nature of the relationship was one of a joint venture (or partnership) requires an understanding of the subjective intention and understanding of the parties.34
32 Diagnostic Medlab Ltd v Auckland District Health Board HC Auckland CIV-2006-404-4724, 30 October 2006.
33 Commercial Factors Ltd v Scenic Hotel Group Ltd [2020] NZHC 2370.
34 At [230]–[237].
[75] Mr Williams submits that it is disputed whether any fiduciary relationship existed.35 However, these submissions are more appropriate to trial issues than present discovery issues.
[76] Mr Williams refers to Raph Engle Concepts Ltd v SCL Holdings Ltd36 and to Firm PI 1 Ltd v Zurich Australian Insurance Ltd.37 In the Raph Engle decision the issue was whether the relationship between the parties was one of dependence by one contracting party on another to perform a contract on its terms, or whether it gave rise to a fiduciary relationship. He submits that in that decision the High Court held it needed to consider the conduct of the parties in the wider context around the time of formation of the contract said to give rise to a fiduciary relationship to ascertain the
objective meaning intended by the parties.38 As to the “wider context”, the Court referred to the objective approach adopted by the Supreme Court in Firm PI 1 Ltd, in which the relevant background was held to be “all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract”.39
[77] Mr Williams submits the Court in Raph Engle adopted an objective approach to determining the existence of a fiduciary relationship. He submits that at best Enviro’s internal correspondence and communications with third parties will only be evidence of Enviro’s subjective belief. This is irrelevant to an objective determination as to whether a fiduciary relationship existed between the parties. Accordingly, there is no basis for ordering disclosure of Enviro’s internal communications in relation to the first cause of action.
[78] Mr Williams’ further submissions at [43]–[46] relate to trial issues rather than the discovery issues at hand.
35 Defendants’ submissions in opposition to application for orders relating to discovery, above n 18, at [38]–[40].
36 Raph Engle Concepts Ltd v SCL Holdings Ltd [2015] NZHC 1415.
37 Firm PI 1 Ltd v Zurich Australian Insurance Ltd [2014] NZSC 147, [2015] 1 NZLR 432.
38 Raph Engle Concepts Ltd v SCL Holdings Ltd, above n 36, at [50].
39 At [41], citing Firm PI 1 Ltd v Zurich Australian Insurance Ltd, above n 37, at [60] (emphasis added).
[79] Mr Williams submits that Ms Brabant’s reliance on the Scenic Hotel Group decision as highlighting the relevance of internal correspondence in proving the existence of a joint venture is misplaced for the following reasons:
(a)it was common ground in that case that a pre-contractual joint venture existed between the parties,40 unlike the present case where the existence of a joint venture or other fiduciary relationship is contested;
(b)the overwhelming majority — if not all — of the correspondence referred to by Osborne J is between the parties rather than internal correspondence privy to only one party as alleged by Revital; and
(c)Revital cites the decision as authority for the proposition that establishing the nature of the relationship between the parties requires an understanding of the subjective intention and understanding of the parties — relying on [230]–[237] of the judgment. Mr Williams submits that these paragraphs do not address this issue at all, and in any event, that proposition is inconsistent with the Raph Engle decision.
[80] My conclusion on this issue is that Mr Williams’ submissions are correct, and internal communications of Enviro are not within the test propounded in Firm PI 1 Ltd as being reasonably available to the parties in the situation they were in at the time of the contract. I also accept Mr Williams’ submissions noted at [79](c) above that the Scenic Hotel Group decision is not authority for the proposition that establishing the nature of the relationship between the parties requires an understanding of the subjective intention and understanding of the parties. Consequently, there is no justification for disclosure of these in respect of the first cause of action.
Second cause of action — misleading or deceptive conduct under s 9 FTA
[81] In relation to internal communications of Enviro in respect of the second cause of action, Ms Brabant submits that the internal communications are relevant to Enviro’s deliberate withholding of information during the negotiation of the sublease
40 Commercial Factors Ltd v Scenic Hotel Group Ltd, above n 33, at [243].
and service agreement with TCC, that Enviro knew that the redacted terms of the head lease would be detrimental to Revital, as were other terms which bound Revital that were not in keeping with the agreed basis for those contracts in the LOI. She also submits that the communications are relevant to Enviro’s failure to consult Revital during the negotiations.
[82] In relation to this cause of action, Mr Williams submits that it is well established the test for whether conduct is misleading or deceptive is an objective one, and he relies on the decision in Red Eagle Corporation Ltd v Ellis.41 He also refers to the recent decision of Juken New Zealand Ltd v Red Stag Timber Ltd.42 That case concerned an unsuccessful appeal against a refusal to grant discovery of internal documentation in an FTA case. The Court of Appeal held that the internal documentation was irrelevant to the objective test under s 9 of the FTA:43
The critical issue on liability is whether the representations were misleading or deceptive or likely to mislead or deceive. The question of whether Juken’s conduct was misleading or deceptive in breach of the FTA must be determined objectively. The subjective views held from time to time (one way or the other) by Juken personnel are not relevant to this assessment.
[83] Mr Williams submits this approach is applicable in the present case and internal communications of Enviro will only be evidence of its subjective intention or belief.
[84] My conclusion on this issue is that Mr Williams’ submissions are correct and Enviro’s internal communications are not relevant to the issue of whether Enviro’s conduct has been misleading or deceptive for the purposes of the FTA. Accordingly, they are not discoverable.
Third cause of action — breach of contract
[85] In relation to the third cause of action, being breach of the LOI, Mr Williams submits that the general admissibility of internal and third party documentation of the
41 Red Eagle Corporation Ltd v Ellis, above n 20, at [28].
42 Juken New Zealand Ltd v Red Stag Timber Ltd, above n 20.
43 At [14].
type Revital is seeking to discover was addressed in the Supreme Court in Bathurst Resources Ltd v L&M Coal Holdings Ltd.44 He relies on the following description:45
… evidence of what a party subjectively understood or intended as to the meaning of the contract will not be admissible if that was not communicated to the other party prior to contract formation. An undeclared understanding or intention as to the meaning of a contract is not evidence that would have been available to the notional reasonable person having all of the information reasonably available to the parties at the time. It is not therefore relevant to the task of contractual interpretation.
[86] Mr Williams submits that internal correspondence between Enviro employees is irrelevant to the objective meaning of the LOI because it will only be evidence of Enviro’s subjective belief or intent.
[87] My conclusion on this point is that Mr Williams is again correct and Enviro’s internal communications are not relevant to interpretation of the LOI and whether Enviro has breached the LOI.
Conclusion on the seven categories of documents for which tailored discovery is sought
[88] As will be apparent from the conclusions I have reached at [80], [84] and [87], Enviro’s internal communications are not sufficiently relevant to the three causes of action pleaded to justify their discovery.
The discovery of Enviro’s communications with third parties in relation to the seven categories of documents for which tailored discovery is sought.
[89] Ms Brabant submits that Revital pleads a joint venture with Enviro and that central to that joint venture was the tendering for the green waste and food waste processing at the Te Maunga site, over which Revital held the lease. Ms Brabant submits that after the award of the tender in August 2020, Enviro commenced negotiations with TCC regarding the head lease and service contract tendered for in the request for proposals. Terms regarding the provision of services by Revital were also included in those negotiations with TCC as ESL was under probity with TCC. She submits the head lease and service contracts negotiated and agreed between ESL
44 Bathurst Resources Ltd v L&M Coal Holdings Ltd, above n 21.
45 At [68].
and TCC contained provisions which expressly bound Revital or dictated how the company would operate. The LOI stated the matters that were required to be included in the lease and the service contracts, and the attendant subcontract and sublease.
[90] Ms Brabant submits Enviro bound Revital to the head lease and service contract to terms relating to price, sublease terms, and requirements to abide by a development contract. She submits those terms severely impacted Revital’s ability to negotiate appropriate terms in the subcontract and sublease, which resulted in no agreement being reached between the parties before ESL commenced its lease with TCC. Ms Brabant submits Revital is therefore entitled to the documents relating to the negotiation of the contracts, particularly as to the terms agreed to by TCC and ESL which severely limited the company’s ability to negotiate favourable terms for itself within the six month period as specified in the LOI.
[91] Mr Williams submits that Enviro’s communications with TCC are no different to internal communications of Enviro in relation to the first cause of action and will only be evidence of Enviro’s subjective intention or belief. Accordingly, they should not be discoverable as the test for breach of the FTA is objective.46
[92] In my view, there is a distinction between Enviro’s communications with third parties, and in particular TCC, and Enviro’s internal communications in relation to relevance to the first cause of action. The communications with third parties are not relevant to establishing whether a joint venture existed and a fiduciary relationship existed, and in that sense are the same as Enviro’s internal communications. But in relation to breach of fiduciary duty by Enviro, in my view, these communications are relevant. In relation to breach, they do not suffer from the same problem as internal communications in that they do not have to be reasonably available to both parties at the time of entering into the LOI which allegedly created the fiduciary relationship (the Firm PI 1 test). The communications, particularly in relation to the negotiation of the head lease and service contract between TCC and ESL, will shed light on issues relating to the alleged breach and accordingly are discoverable.
46 Defendants’ submissions in opposition to application for orders relating to discovery, above n 18, at [51].
[93] In conclusion on this issue, my view is that communications with third parties are relevant to the first cause of action, being a breach of the fiduciary duty by Enviro.
Second cause of action — misleading or deceptive conduct
[94] As has been noted at [82] above, whether Enviro’s conduct was misleading or deceptive under s 9 of the FTA must be judged objectively. I consider the same points made above, relating to communications with third parties in respect of the first cause of action, apply to the second cause of action. Communications between Enviro and TCC and other third parties will shed light on its conduct and dealings with those parties versus conduct and dealings with Revital. While Enviro’s communications with third parties would not have been available to Revital, and to that extent only represent Enviro’s position, they can nevertheless be relevant to an objective assessment of Enviro’s conduct under s 9 of the FTA.
[95] I am of the view that communications with third parties are relevant to the second cause of action and accordingly are discoverable.
Third cause of action — breach of contract
[96] While, as noted at [85] above, internal communications are not relevant to the objective interpretation of a contract, communications with third parties after the LOI was entered into are relevant to an allegation of breach of contract. In particular, Revital alleged that Enviro breached the LOI in not negotiating the terms the LOI required it to negotiate with TCC in respect of the head lease and the service contract. The communications with TCC and other third parties after the date the LOI was entered into are relevant to this allegation and in my view are therefore discoverable in relation to the third cause of action.
Whether, after being modified by the answers to questions [67](a) and (b), the seven categories of tailored discovery documents sought by Revital are all sufficiently relevant to the causes of action pleaded in the amended statement of claim to be discoverable?
[97]I deal with each of these categories in turn.
Category 1: Pre-LOI documents
[98] It is unclear whether Revital has pleaded that a pre-contractual joint venture existed. Mr Williams pointed to [27] and [93] of the amended statement of claim which, he submitted, show that the basis of any joint venture that existed was the LOI. However, in my view this language is not completely unequivocal in that it refers to formalising the joint venture agreement between the parties, implying at least that there is an argument, which Revital is making, that the joint venture existed before the LOI.
[99] As has been noted earlier, in the Raph Engle decision, in relation to determining whether or not a fiduciary relationship existed or not, the Court adopted the objective test of contract interpretation from Firm PI 1, namely that the documents have to be reasonably available to the parties at the time the joint venture giving rise to the fiduciary relationship was formed. Consequently, documents discoverable pre- LOI should exclude Enviro’s internal communications and Enviro’s communications with third parties in relation to the first cause of action, as neither of these were reasonably available to Revital at the time of formation of the joint venture (whether it was formed by the LOI or pre-LOI)
[100] As to the second cause of action, pre-LOI documents (excluding Enviro’s internal communications) are relevant to breach of s 9 FTA (Enviro’s conduct with third parties such as TCC versus its conduct with Revital).
[101] As to the third cause of action, breach of the LOI, Enviro’s internal communications and communications with third parties are not relevant to the objective interpretation of the LOI under the Bathurst Resources Ltd test.
Category 2: Post-LOI to tender submission
[102] As a result of my conclusions at [93], [95] and [96] above, these documents (excluding Enviro’s internal communications) are relevant to breach of fiduciary duty under the first cause of action, to misleading or deceptive conduct by Enviro under the second cause of action, and to the alleged breach of the LOI.
Category 3: Post-tender submission
[103] I consider these documents (excluding Enviro’s internal communications) are relevant to all three causes of action. During the period Enviro was negotiating the head lease and service contact with TCC, these documents could shed light on the issues of breach of fiduciary duty, misleading and deceptive conduct (by disclosing Enviro’s engagement with TCC versus its engagement with Revital), and breach of contract in disclosing what negotiations Enviro undertook with TCC regarding the critical elements of the LOI which it was to negotiate under the LOI and which affected Revital.
Category 4: Health and safety information
[104] Given health and safety concerns identified by Mr Shaw, and Revital’s alleged failure to remedy these defects, which Revital alleges was Enviro’s basis for terminating the joint venture negotiations, in my view these documents (excluding Enviro’s internal communications) are relevant to the first cause of action, breach of fiduciary duty, the second cause of action, breach of the FTA (being potentially misleading and deceptive if health and safety issues were not a genuine concern), and to the third cause of action, breach of contract in wrongly terminating the LOI.
Category 5: Termination of the relationship
[105] Ms Brabant submits that these documents are relevant to Revital’s claim for breach of fiduciary obligation as the fiduciary obligations will affect the manner in which the fiduciary relationship is terminated. I accept this submission and accordingly I am of the view those documents (excluding Enviro’s internal communications) are relevant.
Category 6: TCC communications
[106] This category is really subsumed into the earlier categories, as I have determined that correspondence with TCC and other third parties is discoverable under these categories. It is not necessary to retain this as a separate category.
Category 7: Site Exit
[107] Ms Brabant submits that these documents are relevant to Enviro’s causes of action relating to site exit, being unpaid rent and trespass alleged by Enviro. Revital’s counterclaim contains a breach of bailment cause of action. She submits that these documents are relevant to these three causes of action and fall into the timeframe where Revital was exiting the Te Maunga site.
[108] I am of the view these documents (excluding Enviro’s internal communications) are relevant to these causes of action and accordingly should be discoverable.
Approach to eDiscovery
[109] There is conflicting evidence as to the correct approach to eDiscovery and the volume of documents that a searching will produce. Mr Clark’s affidavit evidence suggests that searching under the categories proposed by Revital will produce an unmanageable number of documents. In Mr King’s affidavit he advocates the approach of using electronic search parameters which are iteratively refined to isolate the documents sought. He maintains that this process will lead to accurate sourcing of the relevant documents.
[110] In this regard, I do not make any orders beyond those that apply to the parties under cl 3 of pt 1 of sch 9 to the High Court Rules.
Enviro’s discovery categories
[111] Mr Williams submitted that Enviro’s proposed categories of tailored discovery have been agreed between the parties and therefore discovery orders should include those categories.47
[112] There will be considerable overlap between discovery in the categories suggested by Enviro at sch 2 to Mr Williams’ submissions and the categories sought
47 Defendants’ submissions in opposition to application for orders relating to discovery, above n 18, at [12], citing Memorandum of counsel for the plaintiff dated 4 April 2022 at [9].
by Revital (as modified by the terms of this judgment). It is suggested that a staged process of discovery could be undertaken whereby the categories listed in sch 2 of Enviro’s counsel’s submissions are discovered first, and then to the extent the additional (now six) categories of documents allowed under Revital’s categories (as modified by this judgment) are discovered as a secondary exercise.
Result
[113]I make the following orders:
(a)the parties shall, as a first stage, undertake tailored discovery of the documents set out in sch 2 of the submissions of counsel for Enviro;
(b)to the extent that such documents have not already been discovered under [113](a), the parties undertake tailored discovery of the six categories of documents specified in Revital’s application for discovery, modified as follows:
(i)Category 1 — Pre-LOI documents — excluding all of Enviro’s internal communications and documentation and excluding all Enviro’s communications with third parties, except to the extent any of Enviro’s communications with third parties are sought by Revital in relation to breach of s 9 of the FTA during the pre- LOI period.
(ii)Category 2 — Post-LOI tender submission — excluding all Enviro’s internal communications and documentation but including Enviro’s relevant communications with third parties.
(iii)Category 3 — Post-tender submission — excluding all of Enviro’s internal communications and documentation, but including Enviro’s relevant communications with third parties.
(iv)Category 4 — Health and safety documents — excluding all of Enviro’s internal communications and documentation, but including Enviro’s relevant communications with third parties.
(v)Category 5 — Termination of the relationship between the parties, excluding all of Enviro’s internal communications and documentation, but including Enviro’s relevant communications with third parties.
(vi)Category 6 — This category is no longer needed, as set out at
[106] above.
(vii)Category 7 — Site exit, excluding all Enviro’s internal communications and documentation, but including Enviro’s relevant communications with third parties.
(c)the parties shall comply with cl 3 of pt 1 of sch 9 to the High Court Rules, including in particular cl 3(2) of pt 1, to:
(i)refine the search criteria in respect of Enviro’s categories as precisely as possible; and
(ii)refine the search criteria in respect of Revital’s categories as precisely as possible having regard to the date ranges, subject matter and individuals set in the search parameters.
Costs
[114] Enviro has sought increased costs against Revital with an uplift of 50 per cent. In particular, Mr Williams submits increased costs should be awarded against Revital in relation to its late abandonment of its application for standard discovery.
[115]My preliminary view is that:
(a)Enviro should be awarded costs on a 2B basis but not increased costs against Revital in respect of Revital’s application for standard discovery, which was only abandoned in its submissions; and
(b)in relation to the outcome of the discovery orders, each party has been partially successful, so costs should lie where they fall.
[116]If the parties are unable to agree costs:
(a)counsel for Revital shall file a memorandum as to costs within 10 working days of delivery of this judgment; and
(b)counsel for Enviro shall file a memorandum as to costs within 5 working days of Revital’s memorandum.
…………………………….. Associate Judge Taylor
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