Snorkel Elevating Work Platforms Limited v Thompson HC Palmerston North Civ-2005-454-847
[2007] NZHC 1679
•27 February 2007
IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY
CIV-2005-454-847
BETWEEN SNORKEL ELEVATING WORK PLATFORMS LIMITED
Plaintiff
ANDHAROLD STEWART THOMPSON First Defendant
ANDROSS HOGAN Second Defendant
ANDANTRIN HOLDINGS LIMITED Third Defendant
Hearing: 26 February 2007
Appearances: L. Turner for Plaintiff
P. Chisnall for Defendants
Judgment: 27 February 2007
In accordance with r540(4) I direct the Registrar to endorse this judgment with a delivery time of 4.00pm on the 27th day of February 2007.
JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL
Introduction
[1] Before the Court is an application by the defendants against the plaintiff for further and better discovery and for confidentiality orders.
[2] So far as the order for further and better discovery sought by the defendants is concerned, Mr Turner, counsel for the plaintiff, indicated that this order was not
opposed. He said, however, that although some documents which the defendants
SNORKEL ELEVATING WORK PLATFORMS LIMITED V THOMPSON AND ORS HC PMN CIV-2005-
454-847 27 February 2007
were seeking may not be in the possession or control of the plaintiff, a further discovery affidavit would be filed.
[3] That said, an order is now made that within 10 working days of service on the plaintiff of this order, the plaintiff will complete, file and serve an affidavit containing a verified list of documents sworn by a person who meets the requirements of r517 with regard to the following documents:
A.All relevant documentation held in the United States of America by the plaintiff or its parent company including, but not limited to:
(i)due diligence documentation relating to the sale of the parent company from Omniquip Textron Inc to Snorkel International Inc and other relevant corporate documentation held by the parent company relating to the plaintiff’s interests in the property at Levin (the “property”);
(ii) all documentation acquired by the owners of the parent company when it purchased the share in the parent company from Omniquip Textron Inc relating to the transfer of the interest in the property from Figgie International Real Estate Inc to Scott Technologies Inc in early 1999;
(iii)all documentation acquired by the owners of the parent company when they purchased the shares in the parent company from Omniquip Textron Inc, relating to the remediation of the property and their option to purchase the property from Scott Technologies Inc and Tyco International Limited. In particular, correspondence or documents from Scott Technologies Inc and Tyco International Limited to Ron Layfield, Rick Sassu or other officers of Omniquip Textron Inc.
(iv)All documentation acquired by the owners of the parent company when it purchased the shares in the parent company from Omniquip Textron Inc relating to the transfer of the interest in the property from Scott Technologies Inc to Antrin Holdings Limited.
(v)All documentation relating to the corporate governance of the plaintiff, including any directions or instructions given by officers and directors of the plaintiff’s parent company and/or directions from the officers and directors of the owners and shareholders of the plaintiff’s parent company, directors meetings and directions resolutions.
(vi)All documentation that was held in the Minute Book at the plaintiff’s office on the property in Levin regarding changes to the company and its officers.
(vii)All e-mails or other correspondence between Ron Layfield and
Ross Hogan relating to the purchase of the Levin property.
[4] The second order sought by the defendant in their discovery application was in the following terms:
An order that within seven days of service on the plaintiff of the order sought, the plaintiff will return any physical copies and permanently delete any electronic copies of the following documents in the plaintiff’s verified list of documents:
(a) R.M.01.282 (b) R.M.01.283 (c) R.M.01.284 (d) R.M.01.285 (e) R.M.01.286 (f) R.M.01.287 (g) R.M.01.288
(h) R.M.01.291 (i) R.M.01.292 (j) R.M.01.293
[5] Before me Mr Turner for the plaintiff acknowledged that this order sought by the defendants could be made by consent with respect to the documents noted as R.M.01.285, R.M.01.287, R.M.01.288, R.M.01.291, R.M.01.292 and R.M.01.293, which the plaintiff accepted were privileged. An order to this effect will follow.
[6] The only matter in dispute, therefore, relates to the order sought by the defendants for return and deletion of the documents in the plaintiff’s verified list of documents noted as R.M.01.282, R.M.01.283, R.M.01.284 and R.M.01.286. I now turn to consider these documents.
[7] By way of background, documents R.M.01.282, R.M.01.283, R.M.01.284 and R.M.01.286 are e-mail exchanges between 12 June 2005 and 14 June 2005 between Mr Nigel Moody (“Mr Moody”), a partner in Gibson Sheat, solicitors, Wellington, who are solicitors and counsel for the defendants, and a Mr Stephen Light, a former director of the plaintiff company. The defendants contend that these e-mails are privileged communications on the grounds of litigation privilege. This is opposed by the plaintiff.
Background Facts
[8] Some brief factual background to this matter is useful.
[9] The first and second defendants were former directors of the plaintiff company. The first defendant was also formerly the General Manager of the plaintiff.
[10] The plaintiff is a wholly-owned subsidiary of an American company Snorkel International Inc. Over the years there have been several changes of ownership of the parent company of the plaintiff.
[11] In this proceeding the plaintiff sues the first and second defendants for alleged breach of their duties as directors owed to the plaintiff. In addition, the plaintiff alleges that the first and second defendants dishonestly assisted the third defendant to purchase the property at Levin, and thereby realise an opportunity that belonged to the plaintiff.
[12] The third defendant is sued as the purchaser of the Levin property on the basis that it knowingly received and used that opportunity which again rightfully belonged to the plaintiff.
[13] So far as the Levin property was concerned, at one point this was a “contaminated site”. It was leased to the plaintiff and pursuant to that lease, the plaintiff had an opportunity to purchase the property for $US1,000, but this option was to expire at the earlier of the tenth anniversary of the lease, or 90 days after remediation of the property to clear its contaminated site designation.
[14] As I understand it, decontamination of the site was undertaken. Arguments have arisen between the parties, however, over whether the plaintiff and its officers then gave notice that it did not intend to exercise the option to purchase, which then resulted in the sale of the property by the first and second defendants to the third defendant.
[15] The e-mails in question in the present application, documents R.M.01.282, R.M.01.283, R.M.01.284 and R.M.01.286 relate generally to a series of questions which Mr Moody put to Mr Light relating first to the acquisition by the third defendant of the Levin property and secondly, general governance matters of the plaintiff, given that Mr Light was previously a director of the plaintiff between approximately November 2001 and February 2003.
Counsel’s Arguments and My Decision
[16] This application relates to a claim of litigation privilege. To attract privilege under the litigation privilege head, McGechan on Procedure at para HR307.07 notes that two tests must be satisfied:
a) There must be a definite prospect of litigation – litigation must be “reasonably apprehended” – General Accident, Fire and Life Assurance Corp Ltd v Elite Apparel Limited [1987] 1 NZLR 129;
and
b)The document in question must have been prepared for the dominant purpose of assisting in the preparation of contemplated or existing litigation.
[17] As to these matters, in Guardian Royal Exchange Assurance of New Zealand Limited v Stuart [1985] 1 NZLR 596 (CA) reports produced by an insurance assessor two days after the insured’s house was destroyed by fire were held (in the circumstances of proceedings being issued by the insured six months after the fire and where it was only in the Statement of Defence to the claim that the insurer committed itself to repudiating the insured’s claim on the basis of alleged arson) not to have been produced with the dominant purpose of assisting in litigation, but rather for the primary purpose of enabling the insured to decide whether to reject the insured’s claim. A contrary conclusion to that reached in the Stuart case on this dominant purpose aspect was arrived at by the Court of Appeal in the Elite Apparel Limited case. There the Court of Appeal discerned in the duality of purposes (to decide whether a claim would be accepted and to defend the insurer’s position on repudiation) that the dominant purpose for a majority of the insurance assessor’s reports was to assist with the conduct of or advice from solicitors regarding litigation which was reasonably apprehended at the time. In applying the dominant purpose test set out in the Stuart case, the Court of Appeal in Elite Apparel Limited reached the contrary conclusion on the facts of that case.
[18] And in Dinsdale v Commissioner of Inland Revenue (1997) 11 PRNZ 325 (CA), the Court of Appeal confirmed that gathering evidence to defend a prosecution threatened by the Inland Revenue Department was at best an equal, and not the dominant, purpose for the notes made at interviews undertaken to prepare a report by accountants on the adequacy of disclosure of documents by a bank to the Inland
Revenue Department. This was so, even though the bank, its solicitors and the accountants believed that litigation privilege would attach to the work undertaken.
[19] Turning to the present case, the first question is whether litigation was a definite prospect at the time the e-mails in question were prepared.
[20] Harrison v Attorney-General (HC WN, 11 October 1989, CP244/88) Master Williams QC noted, whether litigation is “reasonably apprehended” is a question of fact.
[21] In Opthamological Society of New Zealand Inc v Commerce Commission
(2003) 16 PRNZ 569 (CA) McGrath J noted that litigation privilege:
attaches to preparations for litigation and covers communications between a party or its legal advisers and third parties made for the purposes of litigation. Such material, is of a confidential nature, and obtained by or for submission to legal advisers in anticipation of or for the purposes of litigation, is privileged from inspection by opposing parties.
[22] That said, I am satisfied in the present case that when the e-mails in question were exchanged in June 2005, the present litigation which was commenced on 3
November 2005 was very much in prospect. Mr Moody said as much in his 12 June
2005 e-mail when he noted “A dispute has arisen…”. As I see it, this is a case of a legal adviser, Mr Moody, making enquiries of Mr Light as a potential witness for the defendants. This aspect of the test is satisfied.
[23] I turn now to consider the second question. This is whether the dominant purpose in preparing the e-mail documents in question was to assist in preparation of this contemplated litigation.
[24] In considering this, it is useful to note the words of McGrath J in Opthamological Society of New Zealand Inc at paragraph 31 where he notes that litigation privilege is justified by distinct public policy considerations and states:
It is that the effective conduct of litigation in an adversary system requires the parties and their lawyers to be free to conduct their preparations for litigation in the confidence that they will not have to disclose material they gather, including that from third parties, to their opponents.
[25] Having considered the documents in question R.M.01.282, R.M.01.283, R.M.01.284 and R.M.01.286, there can be no doubt that these are e-mail communications between the defendants’ legal adviser Mr Moody and the third party Mr Light. They relate to direct questions and answers over the property purchase at issue in this proceeding, and matters of corporate governance involving the plaintiff company. These matters all impact upon the present action brought against the first and second defendants as its former directors and the third defendant as purchaser of the property.
[26] I am satisfied that these communications related to the defendants’ preparation for this anticipated litigation which was then in direct prospect. As I see it, the dominant purpose for the preparation of the questioning e-mails and their responses was to enable Mr Moody as legal adviser to provide advice regarding the anticipated litigation – see Guardian Royal Exchange Assurance of New Zealand v Stuart. As McGrath J noted, the effective conduct of litigation in our adversary system requires that the defendants here and their lawyers must be free to “conduct their preparations for litigation in the confidence that they will not have to disclose material they gather, including that from third parties, to their opponents”.
[27] I conclude, therefore, that the e-mails R.M.01.282, R.M.01.283, R.M.01.284 and R.M.01.286 are subject to litigation privilege and the order sought by the defendants for the return of those e-mails and for the permanent deletion of any electronic copies should be made.
[28] The defendants’ application for return and destruction of all the documents noted in paragraph [4] above therefore succeeds.
[29] An order is made that within five working days of service on the plaintiff of this order, the plaintiff will return any physical copies and permanently delete any electronic copies of the following documents in the plaintiff’s verified list of documents:
a) R.M.01.282
b) R.M.01.283 c) R.M.01.284 d) R.M.01.285 e) R.M.01.286 f) R.M.01.287 g) R.M.01.288 h) R.M.01.291 i) R.M.01.292 j) R.M.01.293
[30] As to costs, the defendants have effectively succeeded in all aspects of their discovery application before the Court. I see no reason why costs should not follow the event in the normal way.
[31] Costs are therefore awarded to the defendants against the plaintiff on a category 2B basis, together with disbursements, if any, approved by the Registrar.
Associate Judge D.I. Gendall
Solicitors:
Russell McVeagh, Auckland for Plaintiff
Gibson Sheat, Wellington for Defendants
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