Telecom New Zealand Limited v AMP NZ Property Commercial Limited HC Wellington CIV-2004-485-613

[2005] NZHC 1303

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2004-485-613

BETWEEN

TELECOM NEW ZEALAND LIMITED

Plaintiff

AND

AMP NZ PROPERTY COMMERCIAL LIMITED

First Defendant

AND

FIRE SAFETY MANAGEMENT SERVICES LIMITED

Second Defendant

AND

JONES LANG LASALLE LIMITED

Third Party

Hearing:

14 February 2005

Appearances: J.B.M. Smith and N. Silk for Plaintiff

P.M. Fee and D. Gregg for Defendants Judgment:  16 March 2005 at 12.30pm

JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL

Introduction

[1]        This is an application by the first defendant for particular discovery, requiring the plaintiff to provide discovery of:

All documents held or controlled by the plaintiff in its international division known as Telecom New Zealand International (TNZI) (including but not limited to hard copy documents and/or information stored in electronic format) relating to TNZI’s wholesale voice refile business, and the minute/margin and exchange rate data by day and country for the period from 1 January 1999 to 30 November 2004.

TELECOM NEW ZEALAND LIMITED V AMP NZ PROPERTY COMMERCIAL LIMITED And Anor HC WN CIV-2004-485-613 16 March 2005

[2]        It seems that the data sought in this application is held in a computer database system operated by the plaintiff known as INTREPID. Ms Fee for the first  defendant notes that the plaintiff has already discovered to the defendants data of the precise nature sought but relating only to the period from 1 April 2000 to 31 March 2002. The first defendant, therefore, seeks discovery of the data for the period one year before and two years after that already discovered. This is an additional period of three years.

[3]The application is opposed by the plaintiff.

Background facts

[4]        These proceedings, brought by the plaintiff, are in respect of loss and damage (both material damage and loss of profits) arising from water damage to the plaintiff’s computer system following an incident at its premises on 4 July 2001.  The Statement of Claim alleges that a Fire Systems Engineer employed by the second defendant was carrying out routine maintenance and testing of a high water riser at the premises, when water entered the computer suite located on Level 10 of the North Tower offices of the plaintiff at Jervois on the Quay, Wellington.

[5]        In this proceeding, the initial claim by the plaintiff for a loss of profits component was for the sum of $830,273.00. In September 2004 this loss of profits claim increased to $3,300,000.00 and then finally on 18 January 2005 when the plaintiff provided further particulars of its loss, this loss of profits claim escalated to the sum of $5,295,529.76.

[6]        Under the present discovery application, the first defendant seeks a spreadsheet of the data from the plaintiff’s computer database INTREPID system for the periods 1 April 1999 to 31 March 2000, and 1 April 2002 to 30 November 2004. It says this data is vital, particularly to the plaintiff’s calculations in its enhanced loss of profits claim in this proceeding.

[7]        The plaintiff’s position is that this spreadsheet does not exist, and the first defendant is therefore seeking creation of a new document for discovery. The

plaintiff says that all documents have been discovered, including the INTREPID database itself. In this respect, in a supplementary memorandum filed in this Court on 21 February 2004, counsel for the plaintiff states:

2.The INTREPID database is referred to in the plaintiff’s particulars at para 2.4 and elsewhere; in Mr Scott’s first affidavit at para 4.4 and following; in his second (supplemental) affidavit at para 36 and following; in his third affidavit at para 13; in Mr Briggs’ affidavit at para 15; and in the defendant’s submissions. It has not been listed individually in the list of documents, but it plainly has been disclosed.

3.No party, including the first defendant, has called for inspection of this document.

4.Of more importance (and relevance), the first defendant’s application does not concern whether the INTREPID database has been disclosed and nor does it seek its production for inspection.

5.Rather, the first defendant seeks, in the guise of an application for further and better discovery, that the plaintiff create (and then discover) not the INTREPID database which plainly exists and is disclosed but, instead, a special report from the INTREPID database. It is that which the plaintiff says goes beyond the limits of discovery of documents and to which the plaintiff objects.

[8]        The heart of the debate between the parties here therefore relates to the extent to which the plaintiff can be required to create and produce another spreadsheet report from its INTREPID database, which report does not appear to exist at present.

[9]        The first defendant’s position broadly seems to be that the database is not itself in a readable form, and therefore must be put into this form – hence the request to create and discover the spreadsheet in question.

[10]      The plaintiff seems to accept that the database itself is a “document” for the purposes of discovery under the High Court Rules, but it says the database has already been discovered in existing lists.

[11]      The plaintiff’s further position is that if the spreadsheet in question had been created, then it would also be claiming litigation privilege with respect to inspection of this document.

Counsel’s Arguments and My Decision

[12]      This application is brought pursuant to Rule 300 High Court Rules which, together with R.295 requires that documents “relating to any matter in question in the proceedings” must be discovered, that is, to be discoverable, the documents must be relevant.

[13]      The long-established test of relevance set out in the judgment of Brett LJ in Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Co (1882) 11 QBD 54 (CA) at p63 states:

It seems to me that every document relates to the matters in question in the action, which not only would be evidence upon any issue, but also which, it is reasonable to suppose, contains information which may – not which must

– either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary. I have put in the words ‘either directly or indirectly’ because, as it seems to me, a document can properly be said to contain information which may enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary, if it is a document which may fairly lead him to a train of enquiry, which may have either of those two consequences…

(emphasis added)

[14]      This “train of enquiry approach” from the Peruvian Guano test has been the subject of some criticism by a number of Judges and commentators, and indeed the Rules Committee in 2003 unsuccessfully recommended that discovery should be confined to documents “directly relevant” to a matter in question in the proceeding. Some have suggested that the Peruvian Guano test results in a “monumentally inefficient” process, and indeed the test has been the subject of judicial criticism in New Zealand in Air New Zealand Limited v Auckland International Airport Limited (HC AK, M1634-SD00, 30 April 2001, Priestley J). In this case Priestley J noted  that the documents under scrutiny in the Peruvian Guano case were few in number and significantly fewer than were likely to be involved in the case before him.

[15]      Notwithstanding this, the Court of Appeal in M v L [1999] 1 NZLR 747, 750 have referred to and implicitly adopted this test for relevance in New Zealand as set out in Peruvian Guano, although in doing so, it was noted that it is an “expansive” test.

[16]      And, the present position is clearly that the scope of a party’s obligation to discover, remains with the traditional wide Peruvian Guano test formula.

[17]      Under R.300, to grant an order for particular discovery, the Court needs to be satisfied that:

(1)There are grounds for believing that the plaintiff has not disclosed one or more discoverable documents or a group of documents, and

(2)That it is satisfied that the order is necessary at the time the order is made.

[18]As McGechan on Procedure states at paragraph HR300.3(4):

The Court has a discretion whether to make an order under R.300. In addition, any order is subject to the requirement of subclause (2) that it be necessary at the time.

[19]      The plaintiff’s initial assertion is that, as the spreadsheet report does not presently exist, it is not “a document” for discovery purposes under Rule 295 or Rule 300, and therefore cannot or need not be discovered. The initial matter for consideration, therefore, relates to the definition of a “document” for discovery purposes.

[20]Rule 3 High Court Rules defines “document” to:

…mean a document in any form whether signed or initialled or otherwise authenticated by its maker or not; and includes –

(a)    any writing on any material

(b)    any information recorded or stored by means of any taperecorder, computer or other device;

and any material subsequently derived from information so recorded or stored…

[21]      I need to say at the outset that I am satisfied that the plaintiff’s INTREPID database itself is a discoverable document in terms of this definition contained in

Rule 3. It is clearly “information recorded or stored by means of…[a] computer or other device” in terms of R3(b).

[22]      Before me, Mr Smith for the plaintiff argued that the database itself had already been discovered by the plaintiff by inclusion in its lists provided to date. There can be no question, therefore, that the plaintiff’s database is a “document” for discovery purposes here.

[23]      The issue for determination, however, is whether, because the particular information sought by the first defendant is not currently in a spreadsheet report form, therefore it does not exist and is not discoverable.

[24]      Given that the starting point must be that the information contained in INTREPID is discoverable under Rule 300, the issue remains whether the plaintiff is obliged to take the necessary steps to extract the relevant information into a readable form by creating the spreadsheet report.

[25]      Before me, counsel for the plaintiff acknowledged that the data exists in bit stream format in INTREPID. Interestingly, the plaintiff has already provided what is essentially a summary of the information sought for the two year period from 1 April 2000 to 31 March 2002. This was provided by way of daily totals for the two year discovery period in spreadsheet form.

[26]      In essence, the argument from the first defendant is that the portion of the database, although part of a discoverable “document” in terms of Rule 3, is not itself in a readable form, and additional work must be undertaken by the plaintiff to put it into readable form.

[27]      Ms Fee for the first defendant contended that the plaintiff must have an obligation to provide its computer system information in a readable form, and it is up to the plaintiff how that is achieved.

[28]      Here, Ms Fee notes that the plaintiff is making a substantial loss of profits claim against the defendants predicated on five years information. As such, it is

incumbent upon the plaintiff to make that information available in a proper way- hence this discovery application.

[29]      It is clear that the High Court Rules contemplate that in certain instances the obligation to discover and provide documents for inspection will require some human intervention to put the discoverable information into a readable form.

[30]Rule 309 relating to inspection states:

(1) As soon as a person who is required to make discovery is served an affidavit or documents, the person must make the documents listed in the affidavit available for inspection by the parties to the proceeding.

[31]      “Availability” for inspection is obviously crucial. In addition, Rule 310 provides for orders to be made facilitating inspection. It reads:

(1)The Court may, on application, make any order it thinks appropriate to facilitate the efficient inspection of documents.

(2)An order under subclause (1) may, for example, require the person who is to produce the documents for inspection to do either or both of the following:

(a)    arrange the documents in a stated manner or order;

(b)    assist the party inspecting the documents to locate and identify particular documents or group of documents.

[32]As to Rule 310, McGechan on Procedure at paragraph HR310.01 provides:

HR310.01 Obligation to facilitate inspection

The prospect of orders under the rule creates implicit obligations on a party providing documents for inspection. The implicit obligations require  sensible ordering and identification of documents so that efficient inspection is not frustrated by an inability to go to specific documents by reference to the schedule of discovered documents or to follow the chronological sequence. The rule should prevent tactical obstruction by parties wishing to make inspection unduly time-consuming or confused.

[33]      The emphasis must always be upon the facilitation of an “efficient inspection”. Here I am satisfied that the Court has power to order the plaintiff to put the data in question into a spreadsheet report format so that efficient inspection can be achieved.

[34]      I have already noted that the parties accept that the information in question is available in raw bitstream data which can be extracted from the INTREPID database. Although, as I understand it, extracting the information would necessitate “queries” being made of INTREPID to assemble the material from its storage as bitstream data, nevertheless, I am satisfied that this does not impose an unreasonable additional step that the plaintiff should be obliged to undertake here.

[35]      In his opposition to the orders sought, Mr Smith for the plaintiff said that this case was similar to that of Bayer AG v Harris Pharmaceuticals Ltd, High Court of Justice, Chancery Division, 13 December 1990, Hoffman J, which established that there is no obligation upon a party giving discovery of a document in a foreign language to provide a translation of that document. Mr Smith argued that the situation here was similar in many respects and that, therefore, discovery of the INTREPID database is all that could be required on the part of the plaintiff.

[36]      For the first defendant Ms Fee contended that this situation is entirely different from that prevailing in Bayer. She argued that the other party in Bayer was always equally capable of obtaining a translation of the discovered document, whereas here the first defendant does not have access to the information in question, and so there is no possible translation issue. I accept these contentions.

[37]      Having considered all these matters, on balance I am satisfied that the INTREPID database, accepted as a discoverable document by both parties, needs to be in readable form when discovery is provided.

[38]      To suggest otherwise would, in my view, be nonsensical. The first defendant would receive a document which, without considerable technical assistance, it would be quite unable to read. This cannot be the position.

[39]      I turn now to consider the second aspect. This is the question whether the order for particular discovery is necessary at present.

[40]In my view, this matter is quickly dealt with.

[41]      The plaintiff’s loss of profits claim in this proceeding has jumped from an initial figure of about $890,000.00 to over $5.2m. The data sought relates to a five year period to support and justify the loss of profits claimed over this time.

[42]      Counsel for the first defendant suggests that this refusal to hand over the data in question smacks of obfuscation, particularly when one considers that the plaintiff’s own loss of profits claim has as its foundation the very information which the first defendant is now seeking.

[43]      In my view, there is substance in the first defendant’s argument as to this aspect.

[44]      The plaintiff has already disclosed to the first defendant the spreadsheet data for a portion of the five year period in question, that is from 1 April 2000 to 31 March 2002. It is the additional three year period in question which is now sought.

[45]      Ms Fee for the first defendant argued that disclosure of the underlying data to support the loss of profits claim is essential if the first defendant is to have an opportunity to evaluate and analyse the alleged loss. This argument is constructed in the following way:

a)The plaintiff claims $5.2m loss of profits calculated on the basis of a period of loss from 16 July 2001 to 21 December 2001, where according to the plaintiff, actual minutes traded fell below a long term trend line calculated on five years of the plaintiff’s trading records.

b)The plaintiff has already disclosed its aggregate assessment of daily minutes traded in a document noted as “data 1999 to 2004.xls”.

c)To assess the merits of this quantum claim, consideration must be given to the actual trends of the plaintiff’s revenue data which make up the aggregate data. In particular, the first defendant needs to be able to check if there are any anomalous contracts over this period similar to that of contracts with Nigeria and Syria which the plaintiff

has chosen to exclude from its calculations, and which might affect these trends.

d)Consideration needs to be given to the historical margin data to check whether the margin calculation set out in the plaintiff’s claim is a true estimation of the margin on minutes not traded during the plaintiff’s nominated period of loss.

[46]      Given these factors and the size of the plaintiff’s loss of profits claim, I accept the thrust of this argument put forward by the first defendant. As I understand the position, the information in question will need to be assembled, in any event, to support the plaintiff’s total loss of profits claim, so I fail to see any disadvantage to the plaintiff in being required to assemble and disclose this material now.

[47]      An argument put forward by the plaintiff in opposing this application is that due to the difficulty of accessing the bit-stream data in a comprehensible format, it would be difficult and oppressive for the plaintiff to easily satisfy any order made here.

[48]      As to this, Mr Smith for the plaintiff contended that it would take two person- weeks of work to assemble the material from the INTREPID database to provide the spreadsheet report sought.

[49]      In the context of this claim, and given what seems to me to be the unanswerable point that the plaintiff’s own loss of profits claim is based upon the entire five years data in question, which it seems, in any event, would need to be put into spreadsheet form, I reject any suggestion that an order for particular discovery here would be oppressive or unreasonably difficult for the plaintiff to comply with.

[50]      As to this, the first defendant notes that Telecom is one of New Zealand’s largest corporations, with over 5,000 employees, and many dedicated computer staff who have the skills to extract the information in question.

[51]      The plaintiff has already chosen to produce part of this information sought, that is two years worth, and did not claim that that was in any way oppressive, although it was acknowledged to be time-consuming.

[52]      The plaintiff’s final argument in opposing the discovery application is that the spreadsheet information sought would necessarily attract litigation privilege, because it was and would be brought into existence for the purpose of these proceedings, and privilege would not be waived.

[53]      As I see it, the plaintiff cannot, and does not claim that the database itself is a privileged document, as it was not brought into existence for the purposes of this litigation.

[54]      The spreadsheet sought by the first defendant is a document that merely brings out and assembles certain information from the database itself and puts it into a particular order and form. The data contained in the database is broadly the same  as the information contained in the spreadsheet.

[55]      Therefore, I find it hard to see how the data or the spreadsheet could be seen as a communication brought into existence for the purpose of the litigation or for the purpose of submission to the plaintiff’s lawyer.

[56]      Here, as I see it, a simple exercise would be undertaken of changing the medium in which the information in question is held from that of a computer database to the hard copy spreadsheet. In my view, the spreadsheet would not attract privilege.

[57]      In any event, if I am wrong as to this aspect, in my view, the plaintiff has waived privilege to this information. To date the plaintiff has supplied part of the data sought in spreadsheet form, and presumably if privilege was claimed at that point, that privilege was waived.

[58]      As I have noted above, the data concerned underpins the plaintiff’s loss of profits claim based upon the five year period analysis, and the plaintiff’s present

refusal to supply all the data which provides the basis for this loss of profits claim cannot, in my view, be justified upon the basis of a privilege claim.

[59]      McGechan on Procedure at paragraph HR307.13(2) notes that privilege may have been impliedly waived, without the opposing side seeing the document in issue, where there has been reliance by the party claiming privilege on the contents of it. See Chandris Lines Ltd v Wilson & Horton Ltd [1981] 2NZLR 600 at 610. Here, the plaintiff is relying on this information for the whole five year period in formulating its claim, although so far it has only supplied to the defendants information relating to two years of this period. As I see it, if the plaintiff is to rely on the information for the five year period to its advantage, it cannot claim the document setting out that information is privileged. In my view, this would constitute an abuse of privilege – see Opthomological Society of New Zealand Inc. v Commerce Commission [2003] 2 NZLR 145. Here the plaintiff would be endeavouring to withhold the underlying data which underpins its damages claim from examination by the defendants. As I see it, that cannot be appropriate.

Conclusion

[60]      It will be apparent from the above that the first defendant’s application for particular discovery is successful.

[61]      An order is now made that the plaintiff within 30 working days of the date of this order is to provide particular discovery of the documents set out in paragraph

[62]   below, and in particular within that 30 working day period the plaintiff shall:

a)File an affidavit stating-

i)Whether the documents are or have been in the plaintiff’s control; and

ii)If they have been, but are no longer, in the plaintiff’s control, the  plaintiff’s  best  knowledge  and  belief  as  to  when  the

documents ceased to be in the plaintiff’s control and the person who now has control of them; and

(b)Serve the affidavit on all other parties; and

(c)For those documents referred to in the affidavit which are held by the plaintiff in electronic format (and in particular the data sought for the periods 1 January 1999 to 31 March 2000 and 1 April 2002 to 30 November 2004) make these available to the first defendant for inspection and copying in hard copy spreadsheet report form.

[62]The specific documents for which the first defendant seeks discovery are:

All documents held or controlled by the plaintiff in its international division known as Telecom New Zealand International (“TNZI”) (including but not limited to hard copy documents and/or information stored in electronic format) relating to TNZI’s wholesale voice refile business and the minute/margin and exchange rate data by day and country for the period from 1 January 1999 to 30 November 2004.

[63]      The first defendant has been successful in this application and is entitled to costs, which are awarded on a category 2B basis, together with disbursements, as fixed by the Registrar.

Associate Judge D.I. Gendall

Delivered at 12.30pm on 16 March 2005.

Solicitors:

Russell McVeagh, Wellington for Plaintiff Jones Fee, Auckland for First Defendant

Young Hunter, Christchurch for Second Defendant Duncan Cotterill, Nelson for Third Party