Thode v Turners and Growers Horticulture Limited

[2018] NZHC 890

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2015-404-1300

[2018] NZHC 890

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

ENZA FRUIT NEW ZEALAND INTERNATIONAL LIMITED
Second Defendant

T&G GLOBAL LIMITED

Third Defendant

Hearing:	13 April 2018
Appearances:	M N Dunning QC and R M Dixon for the Plaintiffs W M Irving and A J McLeod for the Defendants
Judgment:	1 May 2018

JUDGMENT OF ASSOCIATE JUDGE R M BELL

This judgment was delivered by me on 1 May 2018 at 3:30 pm

pursuant to Rule 11.5 of the High Court Rules.

…………………………………

Deputy Registrar

Solicitors:

Meredith Connell, Auckland, for the Plaintiffs Russell McVeagh, Auckland, for the Defendants Counsel:

M N Dunning QC, Auckland, for the Plaintiffs

THODE and v TURNERS AND GROWERS HORTICULTURE LIMITED [2018] NZHC 890 [1 May 2018]

[1]    The plaintiffs’ application under r 8.19 of the High Court Rules 2016 for further discovery is to be heard on 5 June 2018. Ahead of that hearing, they have applied for an order under r 9.75:

9.75     Person refusing to make affidavit

(1)        If a person having information relevant to a proceeding or an interlocutory application refuses to make an affidavit as to that information, a party may apply for an order directing the person to appear and be examined on oath before the court, or any person the court appoints, as to that information.

(2)The court may—

(a)make any orders the court thinks just for the attendance of that person before the court, or before the person named in the order, for the purpose of being examined, and for the production of any documents specified in the order; and

(b)impose any terms the court thinks just, as to the examination and the costs of and incidental to the application and examination.

[2]They seek these orders:

(a)a declaration that Murray Robert Malone make an affidavit giving the court all relevant information in his possession;

(b)that the plaintiff may liaise with Mr Malone for that purpose;

(c)any confidential information disclosed by Mr Malone as a result be held on the same terms as the existing undertakings as to confidentiality given by the plaintiffs, and the plaintiffs’ intended witnesses, to the defendants in February and March 2018;

(d)Mr Malone’s affidavit be provided to the defendants 14 working days before it is filed for them to assess whether any issue as to admissibility arises (whether a to privilege, confidentiality, relevance or otherwise); or

(e)in the alternative to the orders sought above, that Mr Malone appear and be examined on oath before the court at the hearing of the interlocutory application on notice by the plaintiffs for particular discovery set down for 5 June.

[3]    The plaintiffs are kiwifruit orchardists in the Bay of Plenty. The first and second defendants are subsidiaries of T & G Global Ltd. Turners & Growers Horticulture Ltd and ENZA Fruit New Zealand International Ltd are licensed to market and sell kiwifruit. ENZA is the exclusive licensee of a number of kiwifruit varieties. Turners & Growers Horticulture Ltd has a nursery that grows and propagates plants, and on-sells plants and materials to kiwifruit growers. It also researches and grows new varieties of kiwifruit as well as packing, storing and exporting kiwifruit. ENZA Fruit New Zealand International Ltd obtained an exclusive licence in China for a plant variety right for a red kiwifruit variety known variously as “Hongyang”, “Red Sun 1”, “RSY 1”, and “ENZA Red”. It obtained a plant variety right for New Zealand and imported cuttings to develop a commercially viable variety.

[4]    In 2011, ENZA gave the plaintiffs the right to acquire and grow ENZA Red under an agreement of July 2011 for one orchard, and under an agreement of November 2011 for a second orchard. It supplied them with graft wood. In 2014, it was found that some vines at both orchards produced kiwifruit with characteristics which deviated from the ENZA Red variety. These “off type” kiwifruit were not commercially viable. The plaintiffs cleared their orchards of all vines grown from the graft wood supplied by the defendants. They suffered losses. They sue the defendants for breach of contract, negligence and breach of the Fair Trading Act 1986.

[5]    The parties agreed that there should be standard discovery. They prepared a schedule setting out classes of documents which each side expected the other side to disclose. This was not intended to limit the requirement to make standard discovery, or to limit either side’s ability to challenge the adequacy of discovery by the other. Among others, the classes of documents related to the commercialisation of ENZA Red, research and development in New Zealand, mutation and orchard practice. The defendants filed a substantial affidavit of documents in August 2016. Notwithstanding that, the plaintiffs say that discovery has been an ordeal, with the defendants supplying

documents only in response to specific queries when they ought to have been disclosed much earlier. The defendants do not accept these complaints. The plaintiffs urge that information as to what went wrong with ENZA Red and why is critical to their case, and that the defendants must hold documents with that information.

[6]    In their application for further discovery, the plaintiffs ask for discovery of  18 classes of documents. Examples include the following:

(a)documents relating to Red displaying unusual, unintended or undesirable characteristics;

(b)documents relating to there being potential variations—spots, or mutations of Red; and

(c)documents relating to the commercialisation of ENZA Red, including business cases and reports prepared for or by the Board, as well as any Board meeting agendas or minute regarding such documents.

[7]    Mr Murray Malone worked for the Turners & Growers group of companies between 1989 and 2012. His roles included development manager and director of Turners & Growers Horticulture Ltd. He was involved in the development and commercialisation of new varieties of fruit, including kiwifruit. He managed the development and commercialisation in New Zealand and overseas of the ENZA Red variety. He now lives in Nelson and no longer has any association with the Turners and Growers group.

[8]    The plaintiffs’ lawyers contacted Mr Malone about the existence and whereabouts of documents in the control of the defendants which were the subject of the application for further discovery. On 20 March 2018, he swore an affidavit for the plaintiffs, stating that he had confidentiality obligations to the defendants, although he was uncertain of their scope. He was not prepared to give evidence by affidavit or to assist the plaintiffs by discussing the case because of those confidentiality obligations, but would do so if ordered by the court or permitted to do so by the defendants.

[9]    The defendants then contacted Mr Malone. In an affidavit of 23 March 2018 prepared by their lawyers, he states his understanding of the issues in the case, explains that, because he no longer works for the defendants, he no longer has access to any of the documents relating to his work for them, and that to the best of his recollection documents relating to ENZA Red and the kiwifruit programme more generally were stored:

(a)in a shared electronic network drive;

(b)in email accounts of himself and two other named employees;

(c)in a limited number of hard copy files; and

(d)there were also board reports which included kiwifruit project status reports.

He does not recall documents relating to any potential concerns about the commercial viability of ENZA Red because there were no such concerns when he left the defendants, barring any concerns about PsA.1

[10]   The plaintiffs refer to Mr Malone’s affidavit of 20 March 2018 to show that he is unwilling to make an affidavit. They acknowledge that there is no express rule by which the court can order a person to make an affidavit, but they point to a practice that has developed under applications under r 9.75, where the courts have made declarations in terms of their application, instead of requiring a person to appear and be examined on oath in court. In Auckland City Council v Auckland Electric Power Board, Barker ACJ said:2

The examination procedure is unsatisfactory in that the party seeking the evidence does not necessarily know what the witness is going to say and is unable to mould the evidence into an appropriate sequence of time and topic. Also, such an examination could require the attendance of counsel for all parties with some cost to them; if an affidavit is prepared it is at the first instance the cost of the party seeking to file it.

1      PsA stands for “Pseudomonas syringae Actinidiae”, bacteria that had serious effects on kiwifruit vines, particularly in the Bay of Plenty.

2      Auckland City Council v Auckland Electric Power Board (1993) 7 PRNZ 74 at 76.

He drew on a similar ruling made by Holland J in Re Cross, a family protection proceeding.3 Hugh Williams J followed those decisions in Haylock v Southern Petroleum NL.4 The plaintiffs accordingly propose a declaration with an order for  Mr Malone to attend  in  person  only  as  a  second-string  option.  They  say  that Mr Malone is likely to have crucial information for the proceeding, that the defendants’ approach to discovery has been unsatisfactory, and that information that Mr Malone may give could assist the court in resolving their application for further discovery. As there is no property in a witness, they are entitled to speak to him. At the substantive hearing, he may be subpoenaed to give evidence. Any concerns by the defendants as to confidentiality can be accommodated. There are current undertakings as to confidentiality and any affidavit by Mr Malone can be provided to the defendants’ lawyers to assess any admissibility issues, before it is filed in court.

[11]   The plaintiffs discount Mr Malone’s further affidavit of 23 March 2018 because it does not contain the information they are after. His affidavit goes to where information is kept, not what that information was. They stress “that information” in r 9.75(1).

[12]In opposition, the defendants say:

(a)Because Mr Malone has already given his affidavit of 23 March, there is no basis for making an order under r 9.75.

(b)Mr Malone is unlikely to be able to contribute any useful information to the discovery questions to be decided on 5 June.

(c)The plaintiffs have made only generalised assertions as to inadequacy of discovery by the defendants.

(d)The defendants are entitled to hold Mr Malone to his confidentiality obligations to them.

3      Re Cross [1981] 2 NZLR 673 at 680.

4      Haylock v Southern Petroleum NL HC Auckland CL50/99, 29 June 2001 at [13]–[16].

[13]   I note a reservation about the orders proposed by the plaintiffs. There is a jurisdiction question as to the declaration that Mr Malone should make an affidavit. While an Associate Judge’s court jurisdiction under s 20 of the Senior Courts Act 2016 includes the power to order an injunction on a summary judgment application or by consent, Associate Judges have no power to make an injunction on an interlocutory application.5 An injunction is coercive. A person bound by it must comply with it and failure to do so will be subject to the court’s powers to enforce compliance with its orders. Generally speaking, a declaration that a person should or should not do something is not coercive in the same sense as an injunction, but it may be perceived to be. To illustrate, the court does not issue injunctions against the Crown.6 Instead it makes declarations as to what the Crown ought to do. As a matter of course, the Crown does what the court says it ought to do. There will be a similar expectation if the court declares what a person should do. A person who is subject to such a declaration may consider themselves bound to do so. If Associate Judges were to begin making declarations what people should do, they would risk going outside their jurisdiction by making injunctions in all but name. The difficulty can be avoided by the court making an order under r 9.75 requiring the unwilling deponent to attend court to be examined, but also giving them the option of making an affidavit instead on the basis that the affidavit will be treated as compliance with the court’s order. Under that course, the order is within r 9.75 and does not involve an Associate Judge making an injunction or an equivalent order.

[14]   I accept the defendants’ submission that once Mr Malone swore his affidavit of 23 March 2018, the court no longer had grounds to make an order under r 9.75(1). I do not accept the plaintiffs’ argument that Mr Malone’s affidavit is not about the information they seek. Mr Malone’s affidavit is not detailed. He states his recollection of the location of documents relevant to the issues in the proceeding. His affidavit cross-links to Mr Bygrave’s affidavit in opposition to the application for further discovery, which explains that documents in locations identified by Mr Malone have been disclosed. In addition he refers to the contents of the documents, admittedly very briefly.

5      Senior Courts Act 2016, s 22(4)(g).

6      Crown Proceedings Act 1950, s 17.

[15]    Even if the plaintiff had shown that Mr Malone had refused to make an affidavit as to relevant information under r 9.75, as a matter of discretion I would not make an order. It is not required for this case. The discovery application is a standard one and has no unusual features. The plaintiffs are concerned the defendants have not made proper discovery. They will contend that there are grounds for believing that the defendants have not discovered documents that should have been discovered. The defendants, on the other hand, make the usual submission as to having made a reasonable search for documents under r 8.14. At the hearing, the judge will likely apply the four-step approach set by Asher J in Assa Abloy New Zealand Ltd v Allegion (NZ) Ltd.7 Typically, the court has regard to affidavit evidence, pleadings and the circumstances of the case to establish whether there are grounds to believe that a party has not discovered documents that should have been disclosed. In those run-of-the- mill cases, deponents are not required for cross-examination. The court would only order that a deponent attend for cross-examination under r 7.28 if special circumstances were established. I am aware of only one case where a deponent has been required to attend court for cross-examination on an application for further discovery.8 There are no circumstances here to suggest that Mr Malone should be cross-examined on his affidavit. That counts against making an equivalent order under r 9.75.

[16]   Mr Bygrave, the company secretary of T & G Global Ltd, also a director of the first and second defendants, has sworn an affidavit of documents and has also sworn an affidavit in opposition to the application under r 8.19. There is no suggestion that he should be cross-examined on his affidavit; yet his evidence as to the defendants’ discovery is more important. Apparently, the plaintiffs hope to discredit his evidence by obtaining evidence from Mr Malone. But he has had no association with the defendants for the last six years. The requirements of proportionality apply.9 The parties agreed on standard discovery. That requires a party to produce documents under the adverse documents test. A party required to make discovery must make a reasonable search for discoverable documents. There is no absolute obligation to seek

7      Assa Abloy New Zealand Ltd v Allegion (NZ) Ltd [2015] NZHC 2760 at [14].

8      Sleeman v ANZ Banking Group (New Zealand) Ltd (1994) 7 PRNZ 508.

9      High Court Rules 2016, r 8.2(1)(a).

out and discover every available document.10 The process entails that trust is placed on each party to come clean with all documents that may be found under a reasonable search.

[17]   In the absence of any red flags indicating that something is amiss, warranting a more intensive approach, it is disproportionate for the plaintiffs to look to a former employee and director—who has not been connected with the business for six years— to give information about documents held by the companies with which he has had no recent connection. The case does not call for that over-the-top treatment.

[18]   For these reasons I dismiss the application for an order under r 9.75. The defendants are entitled to costs on the application. I allow for one counsel only. I expect counsel to agree as to costs but, if they cannot, memoranda may be filed.

……………………………….

Associate Judge R M Bell

10     NSK Ltd v General Equipment Co Ltd [2015] NZHC 1979 at [24].