Thode v Turners and Growers Horticulture Limited
[2018] NZHC 2234
•28 August 2018
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2015-404-1300 [2018] NZHC 2234
BETWEEN ROBERT WILLIAM THODE and OLESEN
TRUSTEES (2011) LIMITED as trustees of the ROBERT THODE FAMILY TRUST Plaintiffs
AND
TURNERS AND GROWERS HORTICULTURE LIMITED First Defendant
ENZAFRUIT NEW ZEALAND INTERNATIONAL LIMITED Second Defendant
T&G GLOBAL LIMITED Third Defendant
Hearing: 8 August 2018 Appearances:
N F Flanagan and K Muirhead for the Plaintiff
S P Pope and W M Irving for the DefendantsJudgment:
28 August 2018
JUDGMENT OF ASSOCIATE JUDGE SMITH
This judgment was delivered by me on 28 August 2018 at 3.00pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors / Counsel: Meredith Connell, Auckland M N Dunning QC, Auckland Russell McVeagh, Auckland
THODE v TURNERS AND GROWERS HORTICULTURE LTD [2018] NZHC 2234 [28 August 2018]
[1] The plaintiffs apply for particular discovery against the defendants.
[2] The plaintiffs are the trustees of a family trust that operated two kiwifruit orchards near Te Puke. The defendants are all members of the T&G Global Limited group, which runs a well-established and vertically-integrated horticulture business.
[3] The case concerns a kiwifruit variety known as Red Sun 1, also known as "RS1", which the defendants marketed under the name ENZA Red. In their submissions, counsel for the plaintiffs described ENZA Red as "a selection of a Chinese red kiwifruit variety known Hongyang". They said that ENZA Red was to be the defendants' flagship kiwifruit variety, and the defendants marketed it to kiwifruit growers on the basis that it was a premium product that was ready for commercial cultivation.
[4] The defendants supplied what the plaintiffs believed was ENZA Red graft wood to the plaintiffs. The graft wood was grafted into kiwifruit vines on the plaintiffs' orchards.
[5] The plaintiffs contend that the graft wood was defective. They say that some grafted vines and their fruit did not develop the characteristics expected of ENZA Red, and that such fruit was larger and heavier than ENZA Red fruit. The fruit was said to be round or dumpy-looking, and did not store well. They say that it also had a poor taste, and was not commercially saleable.
[6] The plaintiffs say that those issues did not become apparent until the vines came to maturity in the plaintiffs' orchards several years later, causing substantial losses.
The plaintiffs' claims
[7] The plaintiffs claim against the defendants in breach of contract, negligence, and for alleged misleading representations under the Fair Trading Act 1986 (the FTA).
[8] In their breach of contract cause of action, the plaintiffs say that they have a statutory right to damages from the first defendant (or alternatively from the second
and third defendants) under ss 32(3) and 52 of the Sale of Goods Act 1908, as the plaintiffs were delivered goods mixed in with others, meeting a different description not included in the contract.
[9] In the plaintiffs' first alternative cause of action, the plaintiffs say that the first defendant (or alternatively the second and third defendants) breached conditions of sale implied by the Sale of Goods Act 1908, in that the kiwifruit graft wood supplied did not comply with its description, was not fit for purpose, and was not of merchantable quality.
[10] Secondly in the alternative, the plaintiffs say that the defendants were negligent in failing to exercise reasonable care and skill to test, or adequately test, the kiwifruit graft wood supplied to them, to ensure that it was true to type.
[11] The last of the plaintiffs' causes of action pleads breach of the FTA. The plaintiffs say that, by their conduct and representations and those made on their behalf, the defendants represented to the plaintiffs and to the public that the ENZA Red graft wood supplied by the first defendant was ready for commercial planting. The plaintiffs say that the representations were contrary to ss 10 and 13(a) of the FTA.
[12] The defendants deny liability. They say (inter alia):
(1)the graft wood supplied was true to type, and did comply with any description given for it;
(2) the plaintiffs cultivated their own variation of ENZA Red (the "Thode
Variation");
(3)the first-named plaintiff, Mr Thode, and therefore the plaintiff trustees, knew of the risk that plants may mutate;
(4)ENZA Red was at a research and development stage. Any loss suffered by the plaintiffs was a direct result of the plaintiffs' decision to plant a new variety of kiwifruit when it was at the research and development stage; and
(5)the plaintiffs would not have made a profit from growing ENZA Red at its orchards because of its susceptibility to the bacterial kiwifruit vine disease Psa.
The defendants' discovery
[13] On 10 March 2016, Associate Judge Sargisson made an order that the parties were to provide standard discovery pursuant to r 8.7 of the High Court Rules.
[14] In early 2016, the parties agreed on certain categories of documents they considered should be included in each party's standard discovery. The categories were agreed simply to inform the parties' respective searches for documents. They were not intended to be categories for tailored discovery under the rules.
[15] The first defendant provided its first verified list of documents on 3 August
2016. It was sworn by Mr Douglas Bygrave, a director of the first defendant and the company secretary of the third defendant (the first defendant's parent company).
Mr Bygrave is also a director of the second defendant.
[16] At the time Mr Bygrave swore the first discovery affidavit, the second and third defendants had not been joined as defendants in the proceeding. An order was made by Associate Judge Sargisson on 27 April 2017 adding them as defendants.
[17] In his affidavit sworn in opposition to this application, Mr Bygrave said that the joinder of the second and third defendants did not affect the scope of the parties' obligations under the discovery order because the first defendant and the plaintiff had agreed (in a memorandum of counsel dated 26 April 2017) that no discovery was to be sought from the second and third defendants pending completion of discovery by the plaintiff and the first defendant.
[18] Mr Bygrave said that at all relevant times personnel of each of the defendants have in any event used shared computer systems and electronic document storage locations. Any relevant electronic documents that are within the control of the second or third defendants are also in the first defendant's control.
[19] After the first defendant filed its first sworn list of documents in early August
2016, there was quite extensive correspondence between the solicitors over the scope of the first defendant's discovery. More documents were located by the defendants, and on 23 June 2017 Mr Bygrave swore a supplementary affidavit of documents, updating his first affidavit of documents. In this second discovery affidavit, he outlined additional steps taken on behalf of the first defendant to fulfil its discovery obligations following the correspondence between the solicitors.
[20] The parties have continued to disclose documents not previously disclosed, with further documents provided as recently as Friday 3 August 2018 (the defendants) and Monday 6 August 2018 (the plaintiffs).
[21] Generally, Mr Bygrave said the discovery has been a large and complex exercise for the defendants, with an initial pool of some 54,000 documents to be classified (using appropriate search terms), and a subset of approximately 15,000 documents manually reviewed for relevance and privilege by the defendants' solicitors. In his affidavit of 6 April 2018 he said that the defendants' solicitors have expended hundreds of hours searching for documents, liaising with the defendants' employees, and liaising with third parties, in order to respond to requests for documents from the plaintiffs. At times, the defendants have decided to discover documents that they did not consider relevant in an effort to avoid the additional expense of an interlocutory application. Mr Bygrave said that the defendants have been billed more than $225,000 plus GST on the original discovery exercise, and a further sum (in excess of that figure) on attendances relating to discovery and inspection since the date of the first list. They have also spent more than $20,000 fees accounts rendered by their document management consultants.
The plaintiffs' application for particular discovery
[22] In its initial application, dated 21 March 2018, the plaintiffs sought particular discovery of a total of 18 separate categories of documents. As a result of the production of some further documents and Mr Bygrave's affidavit in opposition, the list of disputed categories was reduced to nine by the time of the hearing.
[23] In the course of the hearing, Mr Flanagan told me that the plaintiffs were not pursuing a further category, identified in the particular discovery application as category "D2".
[24] The plaintiffs maintain their application for particular discovery in respect of the following eight categories of documents:
(1)Documents concerning any testing (including, without limitation, communications, mapping records, photographs and notes of visual or other inspections), whether genetic or otherwise, of RS1/ENZA Red/Hongyang kiwifruit plant material (collectively Red, that term including plant material believed to be Red or a variant of Red) from any source whatsoever carried out by or on behalf of any of the defendants.
(2)Documents relating to Red displaying unusual, unintended or undesirable characteristics.
(3)Documents relating to there being potential variations, sports, or mutations of Red.
(4)Documents relating to the commercialisation of ENZA Red, including business cases and reports prepared to or by the Board, as well as any Board meeting agendas or minutes regarding such documents.
(5)All correspondence with Alejandro Navarro relating to Red subsequent to 6 November 2015.
(6) All correspondence with Heriberto Jara relating to Red subsequent to
6 November 2015.
(7) All documents relating then INIA La Platina laboratory report dated
23 June 2015 confirming non-uniformity in Red samples tested and the defendants' response to it, including its correspondence with the Chilean authorities regarding the irregularities with Red in Chile (referred to in [documents] RM.014.000040 and RM.022.00027).
(8)All documents relating to the decision by the Chilean authorities to revoke the plant variety right or equivalent in respect of Red in or about November 2016, and the defendants' consideration of and response to that (referred to [in document] RM.022.00027).
[25] The plaintiffs ask for an order that the defendants' file and serve a supplementary affidavit of documents listing all documents in these categories that are within their possession, power or control. They also ask that the affidavit to be filed on behalf of the defendants list in detail the steps taken to fulfil the defendants' discovery obligations in relation to the categories of documents sought.
[26] The plaintiffs contend that the further documents sought are relevant to matters that will be in dispute at the trial. They say that the documents may adversely affect the defendants' case and support the plaintiffs' case, because they go to the heart of whether the kiwifruit plant material supplied by or on behalf of the defendants to the plaintiffs:
(a)was mixed with a material proportion of plant material that did not meet the description of ENZA Red;
(b) corresponded with its description;
(c) was fit for purpose;
(d) was of merchantable quality;
(e) was tested or adequately tested; and
(f) was ready for commercial planting.
[27] Specifically in respect of category 4 (documents relating to the commercialisation of ENZA Red, including business cases and reports prepared to or by the Board, as well as any Board meeting agendas or minutes regarding such documents), the plaintiffs say that the documents may further support or adversely affect the plaintiffs' claim for breach of the implied conditions, because they relate to the prices achievable for ENZA Red kiwifruit and therefore the quantum of loss suffered by the plaintiffs, and the commercialisation of ENZA Red.
[28] The plaintiffs' contend that correspondence between counsel and the documents already provided by way of discovery provide prima facie evidence that the documents sought may exist and are in the first defendant's power or control. They say that the first defendant has failed to provide assurances as to the steps taken to locate the particular categories of documents sought. They also allege that the defendants have failed to cooperate in providing the documents, in breach of r 8.2 of the High Court Rules.
[29] The plaintiffs say it is proportionate and appropriate for the Court to exercise its discretion to make the orders sought.
The defendants' notice of opposition
[30] The orders sought are opposed. The defendants say that, over a two year period, they have diligently conducted multiple searches for documents to discharge their standard discovery obligations, at considerable cost. Secondly, they say that the orders seek documents that have already been searched for and discovered by them.
[31] The defendants say that there are insufficient grounds for believing that further relevant and material documents exist in the categories sought, and a general lack of evidential foundation for the orders.
[32] They say that the additional discovery sought would not be proportionate in light of the discovery exercise already undertaken by the defendants, and that it would not be in the interests of justice to make the orders sought.
[33] In response to the application for an order that they provide a further affidavit of documents, they say that the order sought is unnecessary, as any order for further particulars will require them to provide a further affidavit in accordance with r 8.15.
The Board paper
[34] Mr Flanagan relied on a Turners & Growers Board paper dated 23 April 2015 (the Board paper), which was disclosed by the defendants only as recently as 3 July
2018. The Executive Summary in the Board paper noted that ENZA Red formed an important part of the defendants' kiwifruit strategy, both in New Zealand and internationally. While the cultivar was said to have had its licensing and agronomic challenges and risks, results from the defendants' research projects over the past year were said to have shown there was potential to mitigate the risks, and grow a commercially viable crop of ENZA Red. A section of the Board paper headed "New Zealand Development" noted that the defendants were then funding their own internal research and development programmes for ENZA Red. Steady progress was said to have been made in the last year on solving agronomic issues typically
associated with new variety development, to a point where the defendants had a high degree of confidence in the commercial viability of growing these cultivars provided certain conditions were met.
[35] A section of the Board paper dealt specifically with ENZA Red. Apart from its "agronomic challenges", the variety was said to have been shown to be "moderate to highly susceptible to [the bacterial plant disease] Psa". The Board paper noted that ENZA Red had been slow to establish growth in New Zealand, and possible mutations found in budwood could have been supplied to third party growers in New Zealand. Orchard returns based on traditional growing methods had not yet delivered a premium to the orchards. The Board paper went on to note that the defendants' own ENZA Red uncovered orchards had been infected with Psa.
[36] In spite of those challenges, the Board paper reported that the end product had been well received by consumers in the market. Successful market trials in Australia and China suggested that there was a real market opportunity for a sweet, red-centred kiwifruit cultivar.
[37] The Board paper referred to the defendants having conducted a number of research trials on ENZA Red for the 2014/15 year. The results of the trials were said to have been very encouraging, with no new or progression of Psa infection occurring where the trial area had been covered with a protective plastic canopy. Based on the test results, it was expected that fruit of a marketable size could be achieved at yields at an acceptable commercial level.
[38] The Board paper noted that while ENZA Red made up only a small proportion of ENZA kiwifruit plantings in New Zealand and internationally, its uniqueness attracted attention from customers and potential licensees in New Zealand and abroad. The paper went on to note that, more recently, the defendants had been "careful not to overstate benefits of ENZA Red to potential growers until it has developed the necessary research to demonstrate the methods of how to grow the cultivar to get a satisfactory return on investment. [The defendants] now [have] an increasing confidence that if certain growing conditions are met, then a satisfactory commercial return can be achieved."
[39] The Board paper contained a section headed "Financial Implications", where the capital expenditure required for each of a number of projects was listed. Project 2 was described as "ENZA Red Conversion and Covered Canopy". Each of the projects was allocated a net present value (NPV), and the NPV for ENZA Red was said to be "$438,000" with a "pay back of 6.3 years". Details of the NPV calculations for ENZA Red covers were set out in a document referred to as Appendix 5.
[40] A document which appears to be Appendix 5 (although it is not marked as such) has been disclosed by the defendants. It is headed "Project 2 – ENZA Red Conversion and Covered Canopy". The (one page) document set out projected cash flow figures from 2015 through to 2024, based on a 4.3 hectare orchard. The document also set out projected capital expenditure figures for the same period, before arriving at a (2015) NPV of $438,349. A number of assumptions were set out in the document, including a total capital expenditure over the period of $1.1 million. The assumptions included figures for volume at full production, number of trays, and return per tray.
The Chile connection – correspondence with Mr Navarro and Mr Jara
[41] Mr Alejandro Navarro was a grower of kiwifruit in Chile, who contacted
Mr Thode by email in April 2015 about problems he had encountered growing ENZA Red (sourced from the defendants) in his orchard in Chile. According to Mr Thode,
Mr Navarro told him that he had been given Mr Thode's contact details by Mr Murray Malone, a former employee of the third defendant. Mr Navarro told Mr Thode that he had detected two types of fruit in his ENZA Red orchard. He had been advised that the problem was confined to Chile, but Mr Malone had told him that Mr Thode had the same problem in New Zealand. There was an exchange of emails between
Mr Navarro and Mr Thode in April 2015, in which Mr Navarro sought details of
Mr Thode's problems with the ENZA Red orchard in New Zealand. Mr Navarro referred to a comment said to have been made to him by the defendants that
Mr Navarro "mixed this variety in Chile". Mr Navarro said that he never mixed the variety in Chile, and did not have any variety like this in his facilities. Mr Thode responded to Mr Navarro by email on 11 April 2015, providing certain information about his own ENZA Red orchards and asking Mr Navarro what orchard gate return
he was getting on his ENZA Red. Mr Thode did not receive any further information from Mr Navarro.
[42] Some emails between the defendants and Mr Navarro have been discovered. They begin with an email from Mr Damien Gibson (the third defendant's general manager for diversified horticulture) to Mr Navarro dated 5 November 2015. The
5 November email indicated that the defendants had received a communication from the Chilean authorities about "the non-uniformity of ENZA Red plants in the PVR 1 trial". It advised that the Chilean authorities had set a deadline of November 6 for an explanation. Mr Gibson said that the defendants had already explained that the likely cause of non-uniformity was mutation in the micro propagation process, and that while the plants genetically are the same, the mutations from the process caused the non-uniformity. Mr Gibson went on to say that the defendants needed to provide a proposal as to how to correct the situation to avoid a possible rejection. He sought
Mr Navarro's input on that, including an explanation from Mr Navarro on why the plants and fruit were not uniform. He asked Mr Navarro if he had ENZA Red plants in his "mother block" which had fruited, and which he could positively identify as being the correct fruit type. He also asked if there were other plants in the mother block which were showing symptoms of mutation.
[43] Mr Navarro replied on 6 November 2015. He did not agree with Mr Gibson's suggestion that there had been some "in vitro mutation". He suggested that the material may have come to the defendants from China already mixed. Mr Navarro said that the mother plant he had in his nursery did not show fruit, and was used only to "introduce in the vitro lab". He was not sure if it was the real ENZA Red or not.
[44] In a reply email dated 9 November 2015, Mr Gibson asked Mr Navarro if it was possible to fruit the mother plant held in Mr Navarro's nursery, and evaluate the results. No reply to this email had been disclosed by the time the plaintiffs made their particular discovery application.
[45] Mr Heriberto Jara was an employee of Delica Limited (which trades as the third defendant), based in Chile. On 6 November 2015 he sent an email to the
1 Plant Variety Right.
defendants asking for instructions about how he should deal with potential off-type ENZA Red in his orchards. These "off type" ENZA Red fruit had previously been identified as having a greater average weight than ENZA Red, a spherical appearance, and a poorly developed internal red colour. The defendants' discovery contained no further emails with Mr Jara after 6 November 2015. According to Mr Bygrave's affidavit of 6 April 2018, the matter was followed up by Mr Gibson, and Mr Gibson reported that he was not aware of any relevant correspondence with either Mr Navarro or Mr Jara after 6 November 2015.
[46] In the course of the hearing on 8 August counsel agreed that a further affidavit the defendants had agreed to provide in respect of category (4) documents would also address the steps taken by the defendants to fulfil their discovery obligations in respect of any post–6 November 2015 correspondence with Mr Navarro and Mr Jara. That affidavit was filed on 17 August 2018. I refer to it below in my judgment on the application for discovery of further documents in categories (5) and (6).
Documents held by Mr Baker and Mr Dunn
[47] Mr Dunn and Mr Baker were independent contractors who worked for the defendants and had some involvement with ENZA Red. Neither now works for the defendants, and it is likely that both will be witnesses for the plaintiffs at trial.
[48] The plaintiffs contended that relevant documents held by Messrs Baker and Dunn were in the defendants' control, but the defendants failed to approach them to obtain and disclose their documents.
[49] In fact it appears that there was a misunderstanding between the parties' solicitors over who would approach Mr Baker and Mr Dunn and obtain any relevant documents from them. Ms Pope referred to a letter from the plaintiffs' solicitors dated
4 May 2017, in which the plaintiffs' solicitors advised that the plaintiffs had sought (in some cases additional) documents from certain third parties, including Messrs Dunn and Baker. The letter advised that the plaintiffs had received and were in the process of receiving documents from these third parties. Relevant documents would be discovered by the plaintiffs by way of supplementary affidavit. In those circumstances, Ms Pope said that the defendants understood that discovery of any
relevant documents held by Mr Dunn and Mr Baker was being attended to by the plaintiffs.
[50] Following the hearing counsel filed a joint memorandum, in which they advised that the defendants have confirmed to the plaintiffs that they do not take issue (including on the basis of confidentiality) with Mr Baker or Mr Dunn providing any documents they may hold in their capacity as contractors of the defendants to the plaintiffs, for the purposes of discovery. The joint memorandum recorded that the plaintiffs would accordingly seek such documents from Mr Baker and Mr Dunn, and would discover any further relevant documents as soon as might be reasonably practicable.
[51] Counsel confirmed that there remained no issue or difficulty over the discrete issue of obtaining relevant documents from Mr Baker or Mr Dunn.
Orders made at the hearing on 8 August 2018
[52] At the hearing, counsel indicated that further supplementary discovery lists would be filed in respect of the documents disclosed informally by the defendants on
3 August 2018 and by the plaintiffs on 6 August 2018. I directed that the further supplementary lists were to be filed and served by 17 August 2018.
[53] Ms Pope advised that the defendants would also provide a further affidavit directed to discovery category (4) in paragraph [23] of this judgment. The proposed further affidavit would include "a description of the steps taken to fulfil the defendants' discovery obligations in relation to business cases and reports prepared to or by the Board relating to the commercialisation of ENZA Red, as well as any Board meetings agendas or minutes regarding such documents".
[54] I noted in a minute issued during the hearing that that proposal did not fully satisfy the plaintiffs, but it appeared at the very least that it would be a step toward providing any further discovery the defendants should properly provide. I directed the defendants to file and serve this further affidavit by 17 August 2018.
Applications for particular discovery – legal principles
[55] The relevant rule in the High Court Rules is r 8.19. It provides:
8.19 Order for particular discovery against party after proceeding commenced
If at any stage of the proceeding it appears to a Judge, from evidence or from the nature or circumstances of the case or from any document filed in the proceeding, that there are grounds for believing that a party has not discovered 1 or more documents or a group of documents that should have been discovered, the Judge may order that party—
(a) to file an affidavit stating—
(i)whether the documents are or have been in the party’s control; and
(ii)if they have been but are no longer in the party’s control, the party’s best knowledge and belief as to when the documents ceased to be in the party’s control and who now has control of them; and
(b) to serve the affidavit on the other party or parties; and
(c)if the documents are in the person’s control, to make those documents available for inspection, in accordance with rule
8.27, to the other party or parties.
[56] There was no dispute between counsel as to the approach the Court should take to the application. Counsel generally agreed that the four stage approach adopted by Asher J in Assa Abloy New Zealand Limited v Allegion (New Zealand) Limited should be adopted.2
[57] The four-stage approach was regarded as convenient by Katz J in Lighter Quay Residents' Society Incorporated & Ors v Waterfront Properties (2009) Limited & Anor, where Her Honour said:3
[16] Rule 8.19 of the High Court Rules allows an order for particular discovery to be made if it appears to a Judge, from evidence or from the nature or circumstances of the case or from any document filed in the proceeding, that there are grounds for believing that a party has not discovered one or more documents or a group of documents that should have been discovered. The relevant principles are:
2 Assa Abloy New Zealand Limited v Allegion (New Zealand) Limited [2015] NZHC 2760 at [14].
3 Lighter Quay Residents' Society Incorporated & Ors v Waterfront Properties (2009) Limited & Anor [2017] NZHC 818.
(a)Existence of the document does not have to be established on the balance of probabilities on a "more likely than not" basis. A lower threshold is required, which may vary given the relevance of the documents and issues of proportionality.
(b)While there is a presumption that affidavits of documents filed are conclusive, an application under r 8.19 is a proper way to circumvent the conclusiveness rule. The party seeking further discovery has to establish that the existing affidavit of documents is incomplete.
(c)Whether a document "should have been discovered" should be determined by reference to the "adverse documents" test in r 8.7, or any stricter test imposed under tailored discovery pursuant to r 8.8.
(d) A four-stage approach is convenient:
(i)Are the documents relevant, and if so how important will they be?
(ii)What are the grounds, and what is the probative value of those grounds, for the belief that the documents sought exist?
(iii) Is discovery proportionate?
(iv) Weighing and balancing these matters, is an order appropriate?
[17] The applicants bear the burden of establishing that the relevant
grounds exist. …
[58] Rules 8.2, 8.14 and 8.15 of the High Court Rules are also relevant to the plaintiffs' application. Those rules materially provide:
8.2 Co-operation
(1)The parties must co-operate to ensure that the processes of discovery and inspection are—
(a) proportionate to the subject matter of the proceeding; and
(b) facilitated by agreement on practical arrangements. (2) The parties must, when appropriate,—
(a) consider options to reduce the scope and burden of discovery;
and
(b)achieve reciprocity in the electronic format and processes of discovery and inspection; and
(c) ensure technology is used efficiently and effectively; and
(d)employ a format compatible with the subsequent preparation of an electronic bundle of documents for use at trial.
8.14 Extent of search
(1)A party must make a reasonable search for documents within the scope of the discovery order.
(2)What amounts to a reasonable search depends on the circumstances, including the following factors:
(a) the nature and complexity of the proceeding; and
(b) the number of documents involved; and
(c) the ease and cost of retrieving a document; and
(d) the significance of any document likely to be found; and
(e)the need for discovery to be proportionate to the subject matter of the proceeding.
8.15 Affidavit of documents
(1)Each party must file and serve an affidavit of documents that complies with this rule, subject to any modifications or directions contained in a discovery order.
(2) In the affidavit of documents, the party must—
(a) refer to the discovery order under which the affidavit is made;
and
…
(c) give particulars of the steps taken to fulfil those obligations;
and
(d)state the categories or classes of documents that have not been searched, and the reason or reasons for not searching them; and
(e)list or otherwise identify the documents required to be discovered under the order in a schedule that complies with rule 8.16 and Part 2 of Schedule 9; and
…
Discussion and conclusions
[59] I will consider the eight categories of documents sought by the plaintiffs in the order in which they were referred to by counsel, and then address the plaintiffs' request for an order directing the defendants to file an affidavit setting out the steps they have taken to fulfil their obligations in respect of each of the categories of documents in respect of which particular discovery is sought.
Categories (1), (2) and (3)
[60] Mr Flanagan dealt with the first three categories together. He summarised them in the following terms:
Documents relating to RS1/ENZA Red/Hongyang kiwifruit plant material (collectively "Red") displaying unusual, unintended, or undesirable characteristics; potential variations, sports or mutations of Red, and any testing of Red.
[61] The plaintiffs say that in April 2014 the defendants conducted an evaluation of the plaintiffs' orchards, and confirmed the existence of kiwifruit displaying the characteristics described in paragraph [5] of this judgment, on both orchards. They say that the defendants have not discovered any documents relating to any contemporaneous testing or analysis of this kiwifruit, or of similar kiwifruit discovered on the defendants' own orchards (notwithstanding that an employee of the defendants observed shortly before the evaluation was released on 6 April 2014 that "we had some plants like his [ie Mr Thode]").
[62] Mr Flanagan then referred to an internal email dated 15 April 2014 from
Ms Vonda Windley, the defendants' research and technical manager. The email attached some notes, which included the following in respect of ENZA Red:
… there are questions around the genetic homogeneity of the mother plant material supplied from China from which all bud wood and subsequent orchard plantings have been generated. One off type variant has been identified in our commercial plantings which we are in the process of removing. In the spring the four mother plants will undergo genetic testing to identify and remove any variations that may be present.
…
PSA Susceptibility
Present finding from KVH/Plant and Food side by side. PSA trial suggest that ENZA Red's relative susceptibility to PSA is higher than that of the other two ENZA varieties (Enza Gold and Summerkiwi).
[63] Mr Flanagan said that the defendants have not discovered any documents expressly addressing the existence of questions over the genetic homogeneity of the mother plant material sourced from China, notwithstanding that the plaintiffs have previously requested documents falling into this category.
[64] Mr Flanagan submitted that these documents are relevant to the plaintiffs' claim that there was something wrong with the plant material supplied by the defendants, and to the defendants' pleading that Mr Thode cultivated a new variation of Red kiwifruit. He invited the Court to draw an inference that there must be contemporaneous documents recording the testing or analysis of the kiwifruit found on the plaintiffs' orchards in March or early April 2014 that the plaintiffs now say were "off type". Similarly, there must be contemporaneous testing or analysis documents referring to the one off-type variant discovered by the defendants in their own commercial plantings. Mr Flanagan submitted that it is hard to conceive that such a serious issue was not investigated and documents created as a result. Given the narrow scope of the documents sought in these categories, he submitted that it would be proportionate and appropriate to require the defendants to file an affidavit of documents in relation to these issues.
[65] Mr Flanagan also relied on a report on a trip to Chile (the Chile report) made by some of the defendants' representatives in early April 2016, and on the Board paper. As I understand it, the Chile report was one of the further documents disclosed by the defendants in July or early August 2018.
[66] The Chile report made it clear that there were plantings of ENZA Red in Chile. Under a heading "General Kiwifruit", the report noted:
• Viewed the ENZA Red PVR block where some mutations were evident.
Need to contact [the Chilean authority] SAG to determine the next steps. Also a cover may need to be put over the two rows to increase protection from Psa.
…
• … All commercial plantings of ENZA Red have been removed due to
PSA.
[67] Mr Flanagan submitted that while the Board paper expressed a concluded view on the tolerance of ENZA Red to Psa, no test results or other materials have been discovered underpinning the conclusion "that ENZA Red was "moderate to highly susceptible to Psa".
[68] The other documents relied upon by Mr Flanagan as showing that some further undiscovered documents in these categories must exist, were the email exchanges in November 2015 between Mr Damien Gibson and Mr Navarro (described at paragraphs [41] to [44] of this judgment).
[69] Mr Flanagan submitted that it is improbable that there would not have been a response to Mr Gibson's 9 November 2015 email, particularly as representatives from the defendants travelled to Chile and produced a report on the situation only a few months later.
[70] Finally, Mr Flanagan noted that Mr Baker travelled to China on four occasions, but only one report has been disclosed by the defendants.
[71] Ms Pope submitted that the defendants have complied with their obligations under the standard discovery order, and they have cooperated (and are continuing to cooperate) with the plaintiffs in making any further documents available as they are located.
[72] Ms Pope said that the appendices to the Board paper have been discovered, and that the defendants' undertaking to file a further supplementary affidavit should be sufficient to meet any remaining obligations the defendants may have to provide discovery.
[73] Ms Pope also submitted that to order the particular discovery sought on the category (1) documents would be to require the defendants to retrace their discovery exercise. She referred in that regard to the judgment of Edwards J in Carolan v NZ Real Estate Credit Limited.4 In that case, the learned Judge found that there was evidence that a file of the plaintiff held by the BNZ might contain relevant documents over which the plaintiff had control, but there was no evidence which would elevate "this mere possibility to grounds of belief that such documents exist and have not been discovered by the plaintiff". Her Honour went on to note that, even if documents in
the BNZ file did exist, they were unlikely to be of central importance to determination of the issues in dispute.5
[74] Ms Pope submitted that the defendants have already discovered any documents within their control relating to any contemporaneous testing or analysis of the "off type" ENZA Red discovered on the plaintiffs' orchards, and have also discovered any documents expressly addressing the existence of questions around the genetic homogeneity of the mother plant material sourced from China. She referred to
Mr Bygrave's affidavit sworn on 6 April 2018 in opposition to the particular discovery application, where Mr Bygrave set out in detail the steps taken by the defendant to locate documents falling within category (1) in the plaintiffs' application.
[75] Mr Bygrave referred in that affidavit to the various enquiries made by the defendants' solicitors, and reviews of the defendants' discovery documents conducted by them. Multiple enquiries were made of Ms Windley and of Ms Willetts (the first defendant's current post-harvest manager) to determine whether they held any further documents relating to the testing of ENZA Red (genetic or otherwise). Those employees then conducted further searches of their files on several occasions, and provided some further documents relating to the testing of ENZA Red which post-dated the inspection set of documents that had been given to the defendants' solicitors for review. Additional documents disclosed by these searches were subsequently provided to the plaintiffs' solicitors.
[76] Mr Bygrave detailed further enquiries made by the defendants' solicitors of Kensington Swan, who had formerly acted for the defendants in relation to an unrelated matter involving ENZA Red. Some further documents (which were privileged) were provided to the defendants' solicitors as a result of that enquiry.
[77] Mr Bygrave also described enquiries carried out by the defendants' solicitors of Dr Bruce Christie, who carried out testing on ENZA Red while it was held at a quarantine facility near Whakatane in 2009. Dr Christie confirmed that he had retained no documents relating to the testing of ENZA Red plant material, and the plaintiffs' solicitors were advised accordingly. An enquiry was also made of Dr John
Stephen, a former employee of the Australian Genome Research Facility Ltd (AGRF), who carried out DNA profiling on ENZA Red for the defendants in 2010. At the time of the enquiry, Dr Stephen had recently left AGRF, but he confirmed that he had not retained any documents relating to the testing of ENZA Red. The defendants' solicitors also contacted AGRF, and that organisation confirmed that it did not hold any documents relating to the testing of ENZA Red other than those already in the defendants' possession. Again, that information was relayed to the plaintiffs' solicitors.
[78] Mr Bygrave said that the defendants have previously discovered a number of documents in categories (2) and (3). He identified certain documents falling into these categories which were listed in his first and second discovery affidavits, by reference to the document discovery numbers. Some additional documents in these categories were discovered following enquiries made of Kensington Swan. Mr Bygrave said that he understood all relevant documents provided by Kensington Swan that fell into categories (2) or (3) were privileged.
[79] Mr Bygrave said that, following receipt of letters from the plaintiffs' solicitors dated 21 August 2017 and 9 March 2018, the defendants' solicitors made further enquiries of Mr Gibson about the existence of documents relating to ENZA Red off-shore, including, but not limited to, documents relating to issues with any physical characteristics of ENZA Red grown in overseas jurisdictions. Mr Gibson made enquiries of various employees of overseas companies that had grown ENZA Red and that have or had a commercial relationship with the defendants. Those companies are located in Chile, France, Italy, Egypt, South Africa and Australia. As a result of those enquiries Mr Gibson obtained some additional documents in categories (2) and (3), and those documents have been provided to the plaintiffs.
[80] In response to Mr Flanagan's submission that it is hard to conceive that such a serious issue was not investigated and documents created as a result, Ms Pope submitted that the defendants' discovery demonstrates that the issue was investigated, and the documents created as a result have been discovered. She relied on
Mr Bygrave's affidavit of 6 April 2018, in which he set out the steps the defendants have taken to search for relevant documents. She submitted that it would not be
proportionate or appropriate to require the defendants to file another affidavit of documents in relation to these documents.
Discussion and conclusion on categories (1) to (3)
[81] I do not understand there to be any issue over the relevance of the documents sought in these categories. It is clear too that documents concerned with any variations or mutations in ENZA Red fruit, and any testing of ENZA red graftwood or fruit which the defendants may have undertaken (whether for "mixing", genetic mutations or susceptibility to Psa) will or may be important in this case. The first of the four steps in Assa Abloy is therefore satisfied.
[82] The issues on these categories are over the second and third steps in the Assa Abloy analysis. Have the plaintiffs provided some credible evidence which, assessed objectively, indicates that the documents sought exist?6 If so, would it be proportionate to order the particular discovery sought?
[83] I am satisfied on the balance of probabilities that there probably are test records or reports on tests, that the defendants have not discovered.
[84] First, the notes attached to Ms Windley's email of 15 April 2014 indicated that the four mother plants obtained from China would undergo genetic testing in the spring, "to identify and remove any variations that may be present". Mr Bygrave did not specifically address this statement in his 6 April 2018 affidavit, although he did say that enquiries had been made of Ms Windley (and Ms Willetts) to determine whether they held any further documents relating to the testing of NZA Red (genetic or otherwise) at the defendants' "Kerifresh" orchards in Kerikeri. Ms Windley and
Ms Willetts were said to have searched their files and provided some further documents relating to the testing of ENZA Red to the defendants' solicitors.
Additional documents were then provided to the plaintiffs' solicitors.
6 Assa Abloy New Zealand Limited v Allegion (New Zealand) Limited, above n 2, at [12] – "…all that is necessary is to show that there is some credible evidence which assessed objectively indicates that the documents that are sought exist".
[85] In his written submissions, Mr Flanagan expressly relied on the notes attached to Ms Windley's email of 15 April 2014, and advised that the defendants had "not discovered any documents expressly addressing the existence of questions surrounding the genetic homogeneity of the mother plant material sourced from China". I infer from that advice that the defendants have not disclosed any documents relating to the genetic testing that was planned for the spring of 2014.
[86] In those circumstances the questions appear to be whether these tests were or were not conducted, and if they were, whether records were kept of the test methodology and results. In the absence of any evidence to the contrary, and given the apparent importance the issue of genetic homogeneity must have had for the defendants at the time, I consider the plaintiffs have sufficiently shown that the defendants probably hold or held further documents relating to these proposed tests (either recording a decision that the tests would not be conducted after all, or if they were conducted, recording the test methodology and results). Such documents are relevant and (subject to any proportionality issue) should be discovered.
[87] The same notes attached to Ms Windley's 15 April 2014 email referred to findings on a Psa trial, which suggested that ENZA Red's susceptibility to Psa was higher than two other kiwifruit varieties. The Board paper also expressed that opinion. Again, it is reasonable to infer that the results of this trial were recorded in writing, and the results are relevant and discoverable. Subject only to the question of proportionality (and assuming the trial results have not already been located and disclosed), they should be discovered by the defendants.
[88] The Board paper referred to the defendants having conducted a number of research trials on ENZA Red for the 2014/15 year. To the extent those "research trials", have not already been disclosed, then, subject to any question of proportionality, I am of the view that they too should be located and discovered.
[89] Having regard to the apparent importance of the issue, and the relatively narrow area of enquiry, I do not consider it would be disproportionate to direct the defendants to file a further affidavit disclosing any documents tending to show whether the genetic testing referred to in the notes attached to Ms Windley's email
dated 15 April 2014 did or did not take place, and if the testing did take place, recording details of the methodology and the results.
[90] Similarly, I do not think it would be disproportionate to direct the defendants to make a further effort to locate and disclose the details and results of the Psa trial(s) referred to in Ms Windley's notes, and the trials on ENZA Red for the 2014/15 year referred to in the Board paper. In the ordinary course someone would have made notes or records of these trials, and (to the extent they have not already been discovered) it would not be disproportionate to require the defendants to make a further effort to locate records of the trials and their results, and provide a further discovery affidavit in respect of them. All of these documents appear to be potentially important to the
case.
[91] Mr Flanagan also relied on the Chile report, and the correspondence in November 2015 between Mr Gibson and Mr Navarro, as a basis on which the Court should infer that there are further documents in categories (1)-(3) that the defendants have failed to discover. I will address the correspondence between Mr Gibson and
Mr Navarro when I deal with the request for documents in category (5). The Chile report does refer to an inspection of the "Enza Red PVR block", where some mutations were evident. I accept that one might have expected photographs to be taken, or notes made, in the course of any inspection where mutations were evident, and I accept
Mr Flanagan's submission that evidence of any mutations in ENZA Red plants grown in Chile could be important on the argument over the "Thode variation".7
[92] The Chile report is six pages long, and it contains detailed descriptions of a number of local orchards/growers visited by the four "attendees" (Mr Gibson,
Ms Willetts, Mr Jara and Mr Felipe Rodriguez), with some photographs. The visit appears to have extended to three days. It seems more likely than not that some notes would have been made (either in writing or dictated) for the author to have produced
the report, and I think it should be a relatively simple matter for the defendants to
7 The defendants are contending that the plaintiffs themselves introduced a variant to the graftwood supplied by the defendants to the plaintiffs. The plaintiffs deny this, and say they never supplied any kiwifruit plants to growers in Chile. They argue that if similar off-type plants to those which are the subject of their claim in New Zealand are also to be found in Chile, that will be a powerful argument against the so-called "Thode variation".
identify the author of the report, and ascertain whether any contemporaneous notes or photographs were made or taken to provide a basis for the author's subsequent report, insofar as it relates to the inspection of the "Enza Red PVR block". To the extent any such notes or photographs have not already been discovered, I do not consider it would be disproportionate to require the defendants to provide a further discovery affidavit addressing that issue. There will be an order accordingly.
[93] Beyond the tests or trials that I have referred to (being those referred to in the notes attached to Ms Windley's 15 April 2014 email and in the Board paper), and the visit to the ENZA Red PVR block in Chile, I am not satisfied that the plaintiffs have shown that there exist further relevant documents in these categories which are in the defendants' power and which have not been discovered.
Category (4)
(4)Documents relating to the commercialisation of ENZA Red, including business cases and reports prepared to or by the Board, as well as any Board meeting agendas or minutes regarding such documents.
[94] Mr Flanagan noted that this was one of the categories of documents expressly agreed between the parties before the discovery process began. He said that the defendants repeatedly denied that there was any defect in their discovery, but in July
2018 they disclosed the Board paper for the first time. Until then, they had not disclosed any documents relating to the impact of Psa on the defendants' ability to continue to commercialise ENZA Red in New Zealand (that was said to be relevant to the defendants' pleading that the plaintiffs would not have made any profit from ENZA Red due to the impact of Psa), or the defendants' decision to sell their New Zealand kiwifruit operations, including ENZA Red orchards, to Seeka Limited in 2018 (that was said to be relevant to the plaintiffs' cause of action under the FTA insofar as it might reveal whether ENZA Red was or is ready for commercial cultivation, as well as contain information relating to the quantum of the plaintiffs' claim).
[95] Mr Flanagan submitted that the Board paper is critical to the plaintiffs' case, in that it comprehensively contradicts core allegations in the defendants' statement of defence, where it says that:
(a)possible mutations found in budwood could have been supplied to third party growers in New Zealand;
(b) Psa infection could be halted by protecting vines with a plastic cover;
and
(c) the commercial prospects of ENZA Red were strong.
[96] Mr Flanagan said the defendants have not explained why this document was discovered so late in the proceeding, and they appear to have implicitly accepted that no Board minutes had been reviewed or discovered previously. They also failed to disclose apparently relevant appendices to the Board paper (namely "the Psa Observational Report", and "the ENZA Red Development Proposal").
[97] Mr Flanagan submitted that it is surprising that no other Board papers have been discovered. For example, one might have expected a Board paper or papers referring to the success or otherwise of the proposed expansion of the ENZA Red plantings, as outlined in the Board paper, or to Psa covers. He also described as surprising that no Board materials had been discovered where the problem with the "off type" ENZA Red fruit in New Zealand and overseas had been considered, and that no Board documents relating to the defendants' decision to sell their New Zealand kiwifruit operations to Seeka Ltd have been disclosed.
[98] Mr Flanagan submitted that the Board paper could not have stood alone – it could only have been built on other, internal documents. But there is little trace of those in the defendants' discovery. Given the apparent gaps in the defendants' discovery relating to highly relevant Board materials, and the fact that Board documents for large corporates like the defendants are likely to be relatively well-organised and therefore not difficult to search, Mr Flanagan submitted that it was appropriate for the Court to make an order in respect of category (4).
[99] At the hearing, I asked Mr Flanagan which documents the plaintiffs rely upon in support of the contention that further documents in this category exist but have not been disclosed. Mr Flanagan referred to the Board paper, including in particular the
NPV calculations, and the revenue and production calculations. He also relied on those parts of the Board paper which referred to ENZA Red's resistance to Psa. He
submitted that there must be some underlying documents on those issues.
[100] Ms Pope submitted that the plaintiffs' complaint appears to be that, while a number of documents relating to the commercialisation of ENZA Red have been discovered, 8 few Board papers have been discovered. She noted that the sole basis on which the plaintiffs appear to say that further documents must exist is that the defendants have recently discovered the Board paper. In her submission, the existence and discovery of one relevant Board document does not provide a basis to think that undiscovered relevant Board documents exist.
[101] In respect of the NPV referred to in the Board paper, and in particular the working papers underpinning the figures referred to in the Board paper, Ms Pope submitted that there was no basis for ordering discovery of working papers underlying the calculations. The first question is whether such documents exist, and if they do, there would then be a question as to whether they would or might be adverse to one of
the parties. The only area where a comparison of the plaintiffs' loss calculation and the defendants' NPV calculation must be relevant would be over the discount rate applied in calculating the NPV, and the figures relied upon in calculating the NPV of
$438,349 already provide a sufficient basis for the plaintiffs to assess the discount rate which must have been used.
[102] Ms Pope said that, in light of the plaintiffs' correspondence, further enquiries were undertaken to check whether there were any further relevant Board documents. That included reviewing Board documents dating back to 2008.9
[103] Ms Pope submitted that the plaintiffs have wrongly alleged that the defendants have failed to disclose apparently relevant appendices to the Board paper. She referred
8 Ms Pope referred to 10 documents listed (with their respective discovery numbers) by Mr Bygrave in his affidavit of 6 April 2018.
9 In their letter of 3 July 2018, the defendants' solicitors advised the plaintiffs' solicitors that the defendants had reviewed Board documents dating back to 2008. One undiscovered Board paper
(the Board paper) and an associated set of Board minutes had been identified. Copies of those documents, with some redactions relating to confidential or irrelevant information, were enclosed
with the letter.
to specific discovery numbers for the Psa Observational Report and the ENZA Red Development Proposal, and submitted that the fact that those appendices had been discovered supports the position that no further documents exist, and that the defendants have discharged their discovery obligations. There was an oversight (failure to disclose the Board paper earlier), but that oversight related only to one document, in the context of searches involving many thousands of documents. That oversight has now been rectified, and it does not justify the inferences or orders sought by the plaintiffs. It is not enough for the plaintiffs' counsel to simply express surprise that there are no further documents for discovery.
[104] In addition to those submissions, Ms Pope noted the defendants' offer to file and serve a supplementary affidavit relating to the steps taken by the defendants to fulfil their discovery obligations in respect of this category.10
[105] In his reply submissions, Mr Flanagan acknowledged that the late production of one document would not be enough on its own to justify the broader orders sought by the plaintiffs (including an order that the defendants file an affidavit explaining why previous affidavits of documents have not listed all relevant documents, and explaining why the plaintiffs should now have confidence that all relevant documents in the defendants' power have been disclosed). However, Mr Flanagan submitted that the documents have been sought over a very long period of time, and have only been disclosed "in dribs and drabs" over that period. In response to a question from the Court, Mr Flanagan said that the plaintiffs wanted the Court to order that the defendants disclose what they have done to fulfil their discovery obligations, in respect of all of the limited categories of documents now sought by the plaintiffs.
Discussion and conclusions on category (4)
[106] Again, I do not apprehend there to be any question over the relevance of the documents sought. The issues are whether the plaintiffs have sufficiently shown that the defendants have further documents in this category in their power that have not
10 Now an order of the Court – at the hearing, the defendants were ordered to file and serve that affidavit by 17 August 2018.
been discovered, and if so whether it would be disproportionate to require them to discover the further documents.
[107] I note first that there does not appear to be any basis to require further discovery of documents that are said to form part of the Board paper. Mr Flanagan identified two Appendices which were said to be missing, but Ms Pope was able to identify them in the discovery already provided by the defendants.
[108] Nor do I consider that any further discovery is required in respect of the "Project 2" figures in the Board paper, that are detailed in Appendix 5. The figures related to the defendants' projections for its ENZA Red fruit, whereas the relevant issue at trial will presumably be what profits the plaintiffs would have made (if they can prove that the ENZA Red plants supplied to them were not true to type).
Mr Flanagan submitted there is a need for discovery of the working documents underpinning the Appendix 5 figures, but I think it would be disproportionate to require that in circumstances where the working papers would not be concerned with the plaintiffs' business, and would likely be of marginal or no relevance. Mr Flanagan was only able to point to the (presently unknown) discount rate used in assessing the NPV figure of approximately $438,000 as a "common denominator", but the appropriate discount rate is likely to be the subject of independent expert evidence at trial, and the rate used by the defendants in the Board paper is unlikely to be decisive. I expect in any event that those giving the expert valuation evidence at trial may well be able to "reverse engineer" the discount rate the defendants must have used from the detailed figures in Appendix 5.
[109] Mr Flanagan also referred to the Psa susceptibility of ENZA Red as reported in the Board paper, and I agree that records of any tests or trials that were undertaken and formed the basis of the relevant statement in the Board paper should be disclosed: I have addressed that above in my judgment on categories (1)-(3).
[110] Mr Flanagan submitted that it is surprising that no further board papers or minutes were disclosed by the defendants. But I do not think that surprise alone could be a basis for an order for further discovery, particularly where the defendants are represented by a reputable firm of solicitors, the subject matter of the request (board
minutes and board papers) would presumably not have been difficult to locate, and the solicitors have advised that board papers have been reviewed going back as far as
2008. At some point the Court is entitled to rely on parties giving discovery having complied with their obligations under the rules, and I think a particular discovery order based on no more than the opposing party's surprise that no relevant documents of a particular kind have been discovered would go beyond that point.
[111] I accept Ms Pope's submission that the late discovery of the Board paper cannot, without more, provide a basis for the Court to infer that there exist more documents in this category that the defendants have not disclosed.
[112] Finally under this head, the defendants have now filed an affidavit responding to the order made at the hearing that they file a further affidavit, including a description of the steps they have taken to fulfil their discovery obligations in relation to business cases and reports prepared to or by the Board relating to the commercialisation of ENZA Red, as well as any Board meetings, agendas or minutes regarding such documents.
[113] Mr Bygrave's further affidavit, sworn on 17 August 2018, referred to steps taken by the defendants as detailed in his first and third affidavits. He then said that, following receipt of a letter dated 14 June 2018 from the plaintiffs' solicitors,11 he conducted a specific search for Board papers or minutes referring to ENZA Red, on a central shared drive on Turners & Growers' computer system. He confirmed that the search encompassed Board papers or minutes dating back to 2008.
[114] The defendants also instructed their solicitors to search for relevant Board papers or minutes that might be in their possession.
[115] The further searches carried out after 14 June 2018 turned up three relevant documents, and copies of these were sent to the plaintiffs' solicitors on 3 July 2018.
11 In which the plaintiffs' solicitors questioned the absence of any Board papers or minutes from the defendants' discovery, and in particular the absence of any record of a decision taken by the defendants to halt the commercialisation of ENZA Red due to Psa concerns.
[116] Mr Bygrave said that he was not aware of any documents in this category that have not now been discovered.
[117] Mr Bygrave referred in his 17 August 2018 affidavit to the recent sale of the defendants' kiwifruit business to Seeka Ltd. The agreement for sale was entered into in April 2018. Prior to the sale, the defendants had uploaded documents relating to the business to a "dataroom", to enable prospective purchasers to undertake due diligence.
[118] The plaintiffs' solicitors sought further discovery relating to the sale, on
30 April 2018. The defendants then conducted a search of the dataroom for potentially relevant documents. Six relevant documents were recovered, and copies were made available to the plaintiffs on 15 June 2018.
[119] Having regard to all of those considerations I am not satisfied that the plaintiffs have sufficiently shown that the defendants have in their control further documents in category (4) in respect of which a particular discovery order should be made.
Categories (5) and (6) – correspondence with Mr Navarro and Mr Jara
[120] Mr Flanagan dealt with these categories together. They relate to the correspondence between the defendants and Mr Navarro and Mr Jara described at paragraphs [41] to [46] of this judgment.
[121] In 2010 and 2011, the defendants supplied ENZA Red to Chilean orchards. The plaintiffs contend that in 2015, unusually-shaped fruit bearing a striking resemblance to the "off type" ENZA Red in the plaintiffs' New Zealand orchards were found in Chilean orchards. Mr Flanagan submitted that that state of affairs is plainly relevant to the defendants' suggestion that the "aberrant" fruit were a result of some error by the plaintiffs which produced the "Thode Variation", and not inherent flaws in the graftwood supplied by the defendants. Also, overseas markets for ENZA Red were expressly put at issue in the discovery categories agreed by the parties in advance.
[122] Mr Flanagan submitted that it would be unusual if there was nothing further after 6 November 2015 to or from Mr Navarro, given that his last email (to Mr Gibson
and Ms Willetts) advised that Mr Navarro was unsure whether his mother plant was true to type, and believed that the ENZA Red plant material supplied from China to the defendants may have been mixed. Mr Flanagan submitted that it would not be difficult for further searches to be carried out for the documents sought. For example, enquiries could be made of Ms Willetts (Mr Bygrave's affidavit did not detail any specific enquiries made of Ms Willetts). Nor did Mr Bygrave depose to any enquiries made of Ms Vonda Windley.
[123] Mr Flanagan noted that Mr Navarro did not respond to Mr Thode's recent efforts to contact him for assistance. As Mr Navarro resides in Chile, the only practical means of obtaining discovery of any relevant correspondence with him is an order for particular discovery against the defendants (to the extent that any such documents are within their control).
[124] With respect to Mr Jara, Mr Flanagan submitted that it would be unusual if there were no further relevant correspondence after 6 November 2015. Mr Jara's last email to the defendants of that date sought instructions about how to deal with potential off-type ENZA Red growing in his orchards.
[125] Mr Flanagan submitted that it is unclear from Mr Bygrave's affidavit whether
Mr Gibson made any enquiries of Mr Jara. As Mr Jara appears to be employed by a company that trades as the third defendant, he submitted that it would not have been difficult for Mr Gibson to make those enquiries.
[126] Mr Flanagan submitted that there is a "strong inference" that documents in these categories "may well exist", and the defendants have failed to specifically address the plaintiffs' queries relating to them in Mr Bygrave's affidavit. The staff, including Mr Jara, should be readily available to search for and provide any further relevant correspondence. In those circumstances, he submitted it is proportionate and
appropriate to make the orders sought in categories (5) and (6).
[127] For the defendants, Ms Pope did not dispute the relevance of the documents in these categories – the defendants' position was simply that there were no grounds to believe that they held any further documents for discovery. Notwithstanding that
belief, Ms Pope advised that the defendants did re-check whether they held any relevant correspondence with Mr Navarro or Mr Jara after 6 November 2015. Those searches turned up six further relevant documents (relating in substance to one email and two trip reports), and those documents were part of the bundle of further documents disclosed by the defendants on 3 August 2018. As noted at paragraph [46] of this judgment, the defendants also agreed to provide an affidavit addressing the steps taken by them to address their discovery obligations in respect of any post-6 November 2015 documents in these categories.
[128] Ms Pope submitted that, in the light of the further discovery provided by the defendants, there are no grounds for particular discovery orders in respect of categories (5) and (6).
Discussion and conclusions on categories (5) and (6)
[129] In his affidavit sworn on 17 August 2018, Mr Bygrave referred to the steps taken by the defendants, described in his first (discovery) affidavit and in his affidavit sworn on 6 April 2018, to locate documents in these categories. He then confirmed that Mr Gibson and the defendants' solicitors located a further six relevant documents, copies of which were made available to the plaintiffs on 3 August 2018.
[130] Mr Bygrave said that, since the hearing on 8 August, Ms Willetts has located a small number of additional documents. The documents provided to the plaintiffs on
3 August 2018, and the further documents located by Ms Willetts after the hearing, were listed in a schedule to the affidavit of Mr Bygrave sworn on 17 August 2018.
[131] Mr Bygrave's affidavit of 17 August 2018 does not appear to list any email correspondence to or from Mr Navarro after 9 November 2015. There is a listing for a report, or plan, prepared by Mr Jara in January 2016, and Mr Jara appears to have been one of a number of recipients of emails sent by Mr Hector Pantano, who appears to have been a member of the defendants' executive team, on 22 and 23 November
2015.
[132] It appears likely from Mr Bygrave's 17 August 2018 affidavit that any further documents involving Mr Jara after 6 November 2015 have now been disclosed. The
further enquiries referred to by Mr Flanagan have now been made, and there is no evidence that the defendants have in their control further relevant documents involving
Mr Jara that have not been discovered. In those circumstances, there is no basis for a particular discovery order in respect of the category (6) documents.
[133] I do not consider there is sufficient evidence that the defendants have further relevant (post-6 November 2015) documents within their control relating to
Mr Navarro. The fact that no response to Mr Gibson's email of 9 November 2015 has been disclosed does not mean that there was a response, particularly in circumstances where arguably Mr Navarro's interests were opposed to those of the defendants. I can understand the plaintiffs' frustration at new documents being produced by the defendants so close to trial,12 but I do not think the defendants past failures to produce relevant documents can provide the basis for an inference that further documents exist.
[134] I note also that Mr Navarro did not respond to an email Mr Thode sent him on
11 April 2015. It seems entirely possible that the same occurred with Mr Gibson's email of 9 November 2015.
[135] In those circumstances I do not consider the plaintiffs have made out a case for particular discovery of documents in category (5).
Categories (7) and (8)
(7)All documents relating to the INIA La Platina laboratory report dated 23 June 2015 confirming non-uniformity in Red samples tested and the defendants' response to it, including its correspondence with the Chilean authorities regarding the irregularities with Red in Chile (referred to in [documents] RM.014.000040 and RM.022.00027).
(8)All documents relating to the decision by the Chilean authorities to revoke the plant variety right or equivalent in respect of Red in or about November 2016, and the defendants' consideration of and response to that (referred to [in document] RM.022.00027).
12 The case is scheduled for trial on 12 November 2018.
[136] Document RM.014.000040 is an email dated 29 October 2015 from Mr Gibson to Mr Navarro, concerning ENZA Red and "the communication we have had from the Chilean authorities about the non-uniformity of the ENZA Red plants "in the PVR trial"". Mr Gibson noted in the email that the Chilean authority (SAG) had set a deadline of 6 November 2015 for the defendants to respond. He sought Mr Navarro's input into a proposal the defendants would put to SAG to "correct the situation and avoid a possible rejection".
[137] Document RM.022.00027 is a letter in the Spanish language from SAG, apparently advising of the cancellation of the Hongyang PVR as of 9 November 2015.
[138] The plaintiffs say that following the discovery of apparently off-type red kiwifruit in Chile, the defendants (through Mr Jara) arranged for samples of the red kiwifruit plant material to undergo genetic testing. They say that test results released in June 2015 confirmed that while nine of the 10 samples had the same genotype at the particular genetic markers examined, one sample did not. They say that in November 2016 SAG determined to cancel or declare the expiry of a Chilean PVR, or registration, for the Hongyang graftwood (including ENZA Red). That step was said to have been taken after SAG had inspected fruit samples, which it classified as "bad", with great variation from fruit to fruit. The plaintiffs say that SAG found that within
10 samples at least four different forms of fruit were identified. Additional testing confirmed non-uniform plants and fruits which did not match their descriptions.
[139] Mr Flanagan said the defendants have not discovered any documents revealing their consideration of or response to this issue, including any steps taken to confirm the Chilean test results, or to check the genetic uniformity of the ENZA Red mother plants in New Zealand (from which all ENZA Red plant material has been derived). That includes any emails or Board papers or minutes addressing the non-uniformity of the red kiwifruit grown in Chile. Mr Flanagan submitted that that is highly unusual given the potential commercial consequences for the defendants, not only in Chile but also in other territories where the defendants have distributed ENZA Red plant material.
[140] Mr Bygrave's evidence was that Mr Gibson made enquiries relating to these issues with ENZA Red growers overseas, including Chile, and that additional documents were discovered as a result. However Mr Flanagan noted that Mr Bygrave did not explain whether there are any additional documents that are or have been in the defendants' control in categories (7) or (8), or any steps that were taken in order to specifically address those categories. Mr Flanagan submitted that if the defendants have already expressly addressed these categories, it will not be disproportionate for them to file and serve an affidavit simply confirming the steps they have taken.
[141] Mr Flanagan acknowledged that the plaintiffs carry the burden of producing some credible evidence that the documents sought exist. He relied on the defendants' alleged failure to directly address the plaintiffs' queries, combined with the relevance of the documents sought and the strong inference that more documents should exist. He submitted that those considerations make it appropriate for the Court to make the orders sought in respect of the category (7) and (8) documents.
[142] Ms Pope noted that there is considerable overlap between categories (7) and (8) on the one hand, and categories (1) to (3) (to the extent that they relate to testing) and category (4) (to the extent that the category relates to Board documents) on the other. She relied on her submissions made above in respect of those other categories.
[143] To the extent that categories (7) and (8) may extend further, Ms Pope submitted that the emails in categories (5) and (6), and the additional documents discovered on
3 August 2018, reveal the defendants' response to the INIA La Platina laboratory report of 23 June 2015.
[144] Ms Pope referred to Mr Bygrave's affidavit of 6 April 2018, in which he traversed both the general search terms relevant to all of the documents sought by the plaintiffs, and the specific terms relative to categories (7) and (8). Mr Bygrave listed a number of documents (by reference to their discovery numbers) which he had referred to in the defendants' first and or second discovery affidavits, or in his affidavit of 6 April 2018. He then described enquiries the defendants' solicitors made of
Mr Gibson in relation to the existence of relevant documents relating to ENZA Red in
Chile (as well as in other off-shore markets).
[145] Ms Pope submitted that it would not be proportionate or appropriate to require the defendants to file a further affidavit of documents in relation to categories (7) or (8). The application does not satisfy the four-stage test set out in Assa Abloy, and
confirmed by Katz J in Lighter Quay Residents' Society Incorporated v Waterfront
Properties (2009) Limited.13
Discussion and conclusion on categories (7) and (8)
[146] To the extent the plaintiffs' concerns under category (7) are with the non-disclosure of any tests the defendants may themselves have undertaken on the apparently off-type ENZA Red fruit or plants in Chile, I would accept there can be no question over relevance or importance. Any such test results would be relevant, and there would be no issue over proportionality – there would be a very limited number of documents, and they might well be very important. The issue is whether the plaintiffs have provided sufficient credible evidence that documents in these categories exist and are in the defendants' control.
[147] I am not satisfied that the plaintiffs have produced such evidence in respect of category (7). As for category (8), the defendants have searched through Board minutes and papers going back to 2008, and Mr Bygrave has stated on oath that no further relevant documents have been located (apart from any that may have been copied to the plaintiffs in July and August of 2018 and listed in Mr Bygrave's affidavit sworn on 17 August 2018).
[148] Any testing of the genetic uniformity of the ENZA Red mother plants in New Zealand would obviously be discoverable and relevant, but the methodologies and results of any such tests or trials will be caught by the order I will make in respect of category (1) documents.
[149] Mr Flanagan submits that it would have been highly unusual for the defendants not to have responded to the INIA La Plantina lab report and the subsequent steps taken by SAG to cancel or revoke the relevant PVR in Chile, but even if that were so I do not think it could be elevated to the status of "credible evidence" that the
13 Lighter Quay Residents' Society Incorporated v Waterfront Properties (2009) Limited, above n 3.
defendants have in their control further documents constituting a response to the cancellation of the PVR in Chile. The correspondence between Mr Gibson and
Mr Navarro in late October and early November 2015 suggests that the defendants were still then trying to come up with a strategy to deal with the situation which had developed in Chile over the PVR, and of course Psa appears to have hit the ENZA Red stock in Chile at about the same time. It seems at least possible that the defendants may have simply elected to "let the issue go" in Chile.
[150] The one area where it seems to me that the application for discovery of documents in these two categories may be warranted, is the area of communications between the defendants or their agents and SAG. In his email to Mr Navarro dated
9 November 2015 Mr Gibson said: "We have made a statement to the Chilean authorities and I will let you know the outcome of that". That "statement" is clearly within these categories, and I think it and any other communications between the defendants and their agents and SAG relating to ENZA Red or the PVR in Chile, whether in English or in Spanish, should be discovered.14
Plaintiffs' application for an order that the list of documents to be filed on behalf of the defendants list in detail the steps taken to fulfil their discovery obligations in relation to the documents
[151] Mr Flanagan said that the discovery undertaken to date has been marked by extensive correspondence querying what had been provided, followed by the provision of further information as a consequence. The defendants may have made extensive searches, but there are apparent gaps in what has been provided and certain materials were only provided when their likely existence was identified by the plaintiff. For example, the plaintiffs received a number of documents relating to the presence of off-type ENZA Red in Chile having been supplied by the defendants, only after the plaintiffs identified that such materials might exist and specifically asked for them. The plaintiffs also identified from public sources plainly discoverable materials that
had not been provided, included AGM presentations, and videos making
14 It may be that the "statement" referred to by Mr Gibson in his 9 November 2015 email to Mr Navarro is the same document as that referred to in Mr Gibson's 29 October 2015 email to Mr Navarro, in which Mr Gibson said (having referred to the Chilean authorities' "deadline for an explanation"): "We have already explained that the likely cause of non-uniformity is caused by mutation in the micro propagation process …".
representations about the readiness of ENZA Red for commercial cultivation in New Zealand. The defendants have also provided certain materials without concession as to relevance (when they were plainly relevant), and/or provided documents at a very late stage in the proceeding, without any explanation as to why they had not been provided sooner.
[152] Mr Flanagan said that the plaintiffs' core concern is that they cannot know what they do not know. They see a real risk that the defendants are withholding certain discoverable materials, and they will not know that those materials are missing.
[153] Mr Flanagan expressed particular concern over the Board paper. The defendants have not explained why this document was discovered so late in the proceeding, after the plaintiffs had spent well over a year raising what appeared to them to be obvious gaps in the defendants' discovery. Proper explanations have not been provided where discovery has been provided belatedly.
[154] In those circumstances, Mr Flanagan submitted that the defendants should be required to explain in detail in a further affidavit of documents the steps they have taken to discover documents of the types identified in each of the eight categories. That should include an explanation for the failures to date. Once that is done, the plaintiffs should be given an opportunity to assess the explanations, and if issues remain, the application should be brought back before the Court.
[155] In response, Ms Pope submitted that the defendants have consistently and diligently complied with their discovery obligations. The ongoing provision of relevant documents, and the consequent reduction in the scope of the plaintiffs' discovery application, is testament to that, and not evidence of a lack of transparency. The fact that the defendants failed to locate all relevant documents on the first attempt simply reflects the complexity of the discovery exercise in an "information-heavy" age.
[156] Ms Pope also submitted that the proposed order that the defendants explain in a further affidavit how or why late-discovered documents were not discovered earlier, has not been sought in the application. And there is no need for any order that the
defendants set out the steps they have taken to locate relevant documents. That is a matter already covered by the rules.
[157] In response to a question from the Court as to the extent to which the Court might draw inferences about the existence of further documents from the defendants' previous failures to make full discovery, Ms Pope submitted that there would first need to be a careful analysis of the facts. The Court has not been referred to all the relevant correspondence between the parties, and the reality is that there were repeated questions asked about discovery on both sides. Indeed, as recently as Monday
6 August 2018 the defendants were provided with some 80 additional documents by the plaintiffs, without explanation.
Discussion and conclusion on the application for order detailing steps taken by the defendants
[158] First, it seems to me that the orders sought under this head by the plaintiffs are unnecessary, in that the plaintiffs' various affidavits of documents filed to date have set out the steps they have taken to search for relevant documents. Most recently,
Mr Bygrave's affidavit of 17 August 2018 has set out in detail the further steps taken by the defendants to locate the further documents which have been disclosed in categories (4)-(8), and some other documents that have been disclosed since he swore his 6 April 2018 affidavit.
[159] At the hearing Mr Flanagan invited me to go further, and order the defendants to file an affidavit explaining why documents disclosed recently (including in July and August 2018) were not disclosed earlier. I am not sure that I have jurisdiction to make such an order, but even if I did I do not consider such an order would be appropriate. In the first place, the application for particular discovery did not ask for such an order, and there was no application made at the hearing to amend it. Secondly, I am not aware of any principle which would support the making of such an order on the basis that it is necessary to give the other party (in this case the plaintiffs) confidence that full discovery has in fact been made.
[160] Thirdly, the issue of why a party has failed to make full disclosure (and the other party has in consequence been obliged to apply for an order for particular
discovery) seems to me to be a matter going to the question of costs on the particular discovery application, rather than providing a basis for some separate remedial order that the defaulting party go on oath to explain its defaults.
[161] In respect of the further documents in respect of which particular discovery orders are made in this judgment, I accept Ms Pope's submission that the order as sought at paragraph 1(b) of the plaintiffs' amended interlocutory application is not necessary. Rules 8.14 and 8.15 will apply to the required further affidavit, and that will include the r 8.15(2)(c) requirement that the defendants include in the further affidavit "particulars of the steps taken to fulfil [the further discovery] obligations".
[162] For those reasons, I decline to make any order on paragraph 1(b) of the plaintiffs' amended interlocutory application for particular discovery.
Result
[163] I make the following orders:
(1) Under r 8.19, ordering the defendants to file and serve, by not later than
12 September 2018, an affidavit stating whether the following documents (being documents that have not so far been discovered by the defendants) are or have been in the control of any of the defendants:
(a)documents tending to show (i) whether genetic testing of the four mother plants15 did or did not take place (whether in the
spring of 2014 or at any other time after 15 April 2014) and; (ii)
if it did, the methodology and/or results of the genetic testing;
(b)documents showing the methodology and/or results of trials carried out by or for the defendants (or any of them) relating to ENZA Red in 2014 or 2015, showing the susceptibility of ENZA Red to Psa (whether alone or relative to other kiwifruit varieties);
15 Being the proposed genetic testing of the mother plants referred to in paragraph [84] of this judgment.
(c)photographs or notes taken or made during or promptly following the visit to the "Enza Red PVR block" referred to in the Chile report, recording what the taker of the photographs or maker of the notes observed in the course of their inspection of the "Enza Red PVR block";
(d)(i) the "statement" made by the defendants or any of them, or by their agent or agents, to "the Chilean authorities", referred to by Mr Gibson in his email to Mr Navarro dated 9 November 2015; and
(ii) any other written communications between the defendants or any of them or their agent or agents, and SAG in the period 2014-2016, relating to the cancellation or expiry of the Chilean PVR relating to ENZA Red.
(2)If any such documents have been but are no longer in the control of the defendants (or any of them), the defendants are to state in the affidavit their best knowledge and belief as to when the document or documents ceased to be in their control and who now has control of them.
(3) Otherwise dismissing the plaintiffs' application.
(4)Leave is reserved to the plaintiffs to apply by memorandum for any further order or direction that may be considered necessary or appropriate arising out of the production of further documents by the defendant after 3 August 2018 (or out of Mr Bygrave's further affidavit sworn on 17 August 2018).
(5)The application having been partly successful and partly unsuccessful, my preliminary view is that costs (which would be on a 2B basis) should be reserved. I bear in mind also that the trial is now only a little over two months away. However, if either counsel considers that costs
should be awarded now, and counsel cannot agree on costs, memoranda may be filed. Any memorandum seeking an award of costs should be filed and served within 10 working days of the date of this judgment. Memoranda in reply may be filed within 10 working days after service of any memorandum in which an award of costs is sought. If no memorandum seeking an award of costs is filed within 10 working days, costs will be deemed to have been reserved.
Associate Judge Smith
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