Steffensen v BGW Investments Limited (formerly Broadbase Otago Limited)
[2013] NZHC 3310
•11 December 2013
IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY
CIV-2011-012-000519 [2013] NZHC 3310
BETWEEN RODNEY STEFFENSEN and ALYSON KAY STEFFENSEN
Plaintiffs
ANDBGW INVESTMENTS LIMITED (formerly Broadbase Otago Limited) First Defendant (since struck off)
ANDQBE INSURANCE (INTERNATIONAL) LIMITED
Second Defendant
Hearing: 5 December 2013 (by telephone)
Appearances: N A Till QC and N S P Laing for Applicant/Second Defendant
C S Withnall QC and J A Farrow for Respondents/Plaintiffs
Judgment: 11 December 2013
JUDGMENT OF ASSOCIATE JUDGE OSBORNE
as to application for particular discovery
[1] The second defendant (QBE) applies for orders for further discovery by the plaintiffs.
The particular documents sought
[2] The particular documents sought by QBE were as follows:
Swains
(a) All risk profile documentation (including risk questionnaires) relating
to the transfer and implementation of the plaintiffs’ investment
portfolio with Swains;
STEFFENSEN v BGW INVESTMENTS LIMITED [2013] NZHC 3310 [11 December 2013]
(b)All investment plans created by Swains and agreed to by the plaintiffs for the management of their portfolio with Swains;
(c) All quarterly reporting and other regular reporting documentation received by the plaintiffs from Swains;
(d)All correspondence between the plaintiffs and Swains containing advice about the plaintiffs’ investments, including in relation to the plaintiffs’ ongoing exposure to the equity market beyond July 2008;
Vestar and Gould Wealth Management
(e) All risk profile documentation (including risk questionnaires)
completed by Vestar and Gould Wealth Management for the plaintiffs;
(f) All investment plans created by Vestar and Gould Wealth Management and agreed to by the plaintiffs for the management of their portfolio;
(g)All quarterly reporting and other reporting documentation received by the plaintiffs from Vestar and Gould Wealth Management;
(h)All correspondence between the plaintiffs and both Vestar and Gould Wealth Management containing advice about the plaintiffs’ investments, including in relation to the plaintiffs’ ongoing exposure to the equity market;
Forsyth Barr
(i) All risk profile documentation (including risk questionnaires) relating
to the plaintiffs’ investment portfolio with Forsyth Barr from May
2009;
(j)All investment plans created by Forsyth Barr and agreed to by the plaintiffs for the management of their portfolio with Forsyth Barr;
(k)All quarterly reporting and other regular reporting documentation received by the plaintiffs from Forsyth Barr; and
(l)All correspondence between the plaintiffs and Forsyth Barr containing advice about the plaintiffs’ investments, including in relation to the plaintiffs’ ongoing exposure to the equity market beyond May 2009.
[3] Since the application was filed the plaintiffs have agreed to provide the quarterly reporting and other regular reporting documentation received by the plaintiffs from their investment advisers – an order for that category of documents is no longer necessary.
[4] Mr Till QC made an oral application at the hearing to extend the scope of the source of documents beyond Forsyth Barr to read “Forsyth Barr or any other investment adviser”.
The plaintiffs’ claim
[5] The plaintiffs in the period from 2001 to 2007 had investments in equity markets. They claim damages for losses which they suffered when certain investments referred to as the “Equity Funds” were retained and new investments not made in 2007 and 2008.
[6] The first defendant (BGW) provided financial planning and investment advice to the plaintiffs from 2001. From 2007 BGW provided the plaintiffs with a portfolio management service. The plaintiffs allege that BGW failed to act on instructions in relation to sales and purchases in 2007 and 2008.
[7] BGW has been struck off the Register of Companies so that the second defendant is now the only active defendant in this proceeding.
[8] The second defendant (QBE) was BGW’s insurer against claims of professional negligence from 1 April 2007 to 1 April 2008, the policy covering failures by BGW to implement instructions to sell securities. The policy responds to
the asserted liability of BGW. QBE is accordingly sued as a defendant pursuant to s 9 Law Reform Act 1936.
[9] Counsel agreed that the material focus for the purposes of this discovery application was upon the plaintiffs’ claim that BGW failed to sell the Equity Funds when instructed to do so around 3 December 2007. The plaintiffs learned of the BGW failure in late-January 2008. The Equity Funds were then held through 2008 while BGW remained the plaintiffs’ adviser. The plaintiffs say that the retention of the Equity Funds through this period was in mitigation of damage. The plaintiffs say that the contractual relationship between the plaintiffs and BGW ended on 15
December 2008 when BGW wrote a letter to that effect. In the same letter, BGW
denied liability for the plaintiffs’ losses.
[10] The plaintiffs say that the period in which they attempted to mitigate their loss in fact increased the loss. They quantify their loss (inclusive of general damages) at $165,604.92 plus interest.
The grounds of the second defendant’s application
[11] For the second defendant, Mr Till submits that the requested documentation is relevant to one or more of the following three issues:
(a) The appropriate date on which the Court should assess the plaintiffs’
losses (if any);
(b) The reasonableness of the plaintiffs’ attempts to mitigate;
(c) The scope, timing and consequences of the mitigation attempts.
The plaintiffs’ grounds of opposition
[12] For the plaintiffs, Mr Withnall QC submitted that the documents sought are not relevant to any issue arising from the pleadings. In particular, he asserts that the documents relate to the plaintiffs’ investment activities long after any date which is relevant in this proceeding. Mr Withnall characterises the application as fishing.
Discussion
[13] The second defendant’s application does not pursue documents in existence before May 2009. I take it that QBE is satisfied that it has discovery of all relevant documents for the period before that date.
[14] The May 2009 date is some six months after December 2008 when the adviser relationship between BGW and the plaintiffs was terminated by BGW with a denial of liability to put right the plaintiffs’ losses.
[15] Mr Till and Mr Withnall presented differing submissions as to the date at which a trial Judge will assess damages in relation to a breach of a direction to sell equities. Both recognised the general rule that damages are to be assessed at the date of the breach.1 Mr Withnall submitted, and Mr Till appeared to accept, that in this case that date would have to be deferred in the interests of justice to, at the earliest,
30 January 2008 when the plaintiffs became aware that their instructions had not been followed. Such a shifting of the date recognises the principle enunciated by Richardson J in Stirling v Poulgrain, namely that the general rule yields to the Court’s power in the interests of justice to fix such other date as may be appropriate
in all the circumstances.2
[16] The thrust of Mr Withnall’s submission was that the trial Judge will on the facts of this case be required to fix a still later date for the assessment of damages, being 15 December 2008 when BGW communicated to the plaintiffs that the relationship was at an end and that BGW did not accept it was liable to the plaintiffs for any damages. Mr Withnall draws a parallel with observations in Turner v
Superannuation and Mutual Savings Ltd.3 In Turner, Smellie J observed in relation
to the Court’s ability to fix a later date:4
The consequence is that while damages may be assessed at a later date or at date of trial in order to fully compensate an innocent party they may not be so assessed to the benefit of the defaulting party …
1 Stirling v Poulgrain [1980] 2 NZLR 402 (CA) per Richardson J at 424.
2 At 424.
3 Turner v Superannuation and Mutual Savings Ltd [1987] 1 NZLR 218 (HC).
4 At 231.
[17] On the facts in Turner, Smellie J observed the innocent party was:5
… genuinely uncertain as to how it would proceed, particularly in view of the fact that the plaintiff [defaulting party] might still come up with an acceptable offer which the defendant [innocent party] would feel obliged to accept.
Smellie J found that that uncertainty for the innocent party had the effect not of deferring the date for assessment of damages (because the defaulting party should not get the benefit of the later assessment). Rather the uncertainty created for the innocent party was relevant to the assessment as to whether that party’s steps (or omissions) in mitigation should be found to be reasonable – which Smellie J found in Turner they were.
[18] There is nothing in the authorities to which Mr Till referred me to suggest that the Court should in this case fix a date for the assessment of damages later than January 2008 when the plaintiffs learned that their directions had been disobeyed.
[19] There is common ground, at least for the purposes of this discovery application, that the Court may have to take into account steps (or omissions) to sell which the plaintiffs assert were in mitigation up to at least December 2008. The real issue in this discovery application (in determining what documents may be relevant), is whether the period after December 2008 may be arguably relevant to mitigation. That was essentially the way Mr Till put the argument by identifying the second and
third issues6 as relating to the reasonableness of the plaintiffs’ attempts to mitigate
and the scope, timing and consequences of the mitigation attempts.
[20] As I have said, I am not concerned in this application with the additional six months of documents from December 2008 to May 2009. QBE already has access to the documents relating to that six month period. From the time of abandonment of any further attempts at mitigation the plaintiffs took upon themselves the risks
associated with ownership or sale of the equities.
5 At 231.
6 Above at [11](b) and (c).
[21] Mr Till’s submissions effectively invite me to anticipate that a trial Judge may conclude, notwithstanding the plaintiffs’ case as to mitigation, that the plaintiffs were in fact undertaking mitigation more than six months after they draw a line across the period of mitigation by reference to the date at which BGW effectively sacked them as clients.
[22] I remind myself that BGW’s failure (in breach of contract) to sell the equity funds occurred around 3 December 2007, a failure which became known to the plaintiffs in late January 2008. With shares being a fungible property, the usually appropriate time for assessing loss is, as the Privy Council recognised in Jamal v
Moolla Dawood,7 the date of breach. That approach recognises, with the close
relationship between the principles of mitigation and remoteness of damage, the connection between the breach and the damage. The decision of Smellie J in Turner recognises that there may be periods in which an innocent party is justified in remaining uncertain as to how to proceed. The plaintiffs clearly have a sustainable argument in that regard on the facts of this case where negotiations of some form continued up to December 2008 before BGW finally denied liability and terminated the contractual relationship. It is not sustainable for QBE to argue for a form of continuing steps of mitigation or duty to mitigate, after December 2008 let alone after May 2009. Any connection between losses (or indeed gains) incurred or achieved that far after the date of breach has simply disappeared. The plaintiffs at that point, if still retaining the equities, are to be treated as the Privy Council referred to in the Jamaal case as quite simply taking the risk of falls and rises themselves.
Outcome
[23] I am not satisfied that documents for the four-year period after May 2009 are relevant to the assessment of the plaintiffs’ damages incurred through BGW’s failure to sell the equity funds in December 2007.
[24] The application for further discovery must be dismissed.
[25] The appropriate course is that costs follow the event.
7 Jamal v Moolla Dawood [1916] 1 AC 175 (PC).
[26] Other matters of case management relating to this proceeding will be dealt with in a separate Minute to be issued today.
Orders
[27] I order:
(a) I dismiss the second defendant’s application for particular discovery;
(b)The second defendant is to pay the plaintiffs’ costs in relation to the application on a 2B basis together with disbursements to be fixed by the Registrar.
Associate Judge Osborne
Solicitors:
Duncan Cotterill, Wellington for Applicant/Second Defendant
N A Till QC, Barrister, Christchurch
Webb Farry, Dunedin for Respondents/Plaintiffs
C S Withnall QC, Barrister, Dunedin
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