Transpacific All Brite Limited v MPC Traders Limited (Previously All Brite Industries Limited) HC Napier CIV-2011-441-169
[2011] NZHC 1766
•24 November 2011
IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY
CIV-2011-441-169
BETWEEN TRANSPACIFIC ALL BRITE LIMITED Plaintiff
ANDMPC TRADERS LIMITED (PREVIOUSLY ALL BRITE INDUSTRIES LIMITED) First Defendant
ANDMICHAEL FRANK THOMSON COMBS Second Defendant
ANDTIMOTHY MICHAEL BLAIR COMBS Third Defendant
ANDMICHAEL RICHARD SANKO Fourth Defendant
Hearing: 14 October 2011
Memoranda: From counsel to the plaintiff filed 27 October 2011
From counsel to the first, second and third defendants filed 28
October 2011From counsel to the plaintiff filed 1 November 2011 (Heard at Napier)
Counsel: S. Langton and A.Chadwick - Counsel for Plaintiff
M. MacFarlane - Counsel for First, Second and Third Defendants
Judgment: 24 November 2011 at 4:00 PM
JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL
This judgment of Associate Judge Gendall is delivered on 24 November 2011 at 4.00 pm under r 11.5 of the High Court Rules.
Solicitors: Langton Hudson Butcher, Barristers & Solicitors, PO Box 3690, Shortland Street, Auckland
Sainsbury Logan & Williams, Solicitors, PO Box 41, Napier
Introduction
TRANSPACIFIC ALL BRITE LIMITED V MPC TRADERS LIMITED (PREVIOUSLY ALL BRITE INDUSTRIES LIMITED) & ORS HC NAP CIV-2011-441-169 24 November 2011
[1] Before me are interlocutory applications from both the plaintiff, Transpacific All Brite Limited, and the defendants, MPC Traders Limited (until January 2007, the company was named All Brite Industries Limited), Mr Michael Frank Thomosn Coombs (Mr Michael Coombs), Mr Timothy Michael Blair Coombs (Mr Timothy Coombs) and Mr Michael Richard Sanko (Mr Sanko). MPC Traders Limited also owns another company of some relevance to the present proceeding company, Hawk Packaging Limited. More on this later.
[2] The plaintiff applies for joinder to this proceeding of a fifth defendant, NZ Pulp & Paper Limited under r 4.56 of the High Court Rules. In addition, the plaintiff seeks particular discovery and inspection orders and an order setting aside certain claims to confidentiality made by the defendants.
[3] Those applications are opposed by the defendants.
[4] The first, second and third defendants apply for orders for better discovery and inspection, to require answers to interrogatories and for further and better particulars of the plaintiff‘s claim.
[5] Those applications are opposed by the plaintiff.
[6] These applications have followed a somewhat extended process. I part heard the applications on two occasions (2 October 2011 and 14 October 2011). At the conclusion of the reconvened hearing on 14 October 2011, counsel indicated that, in light of material recently provided, they wished to have a further opportunity to provide memoranda to the Court before my decision on the applications was made. I allowed that course and memoranda have now been received by the Court, initially from counsel for the plaintiff on 27 October 2011, then from counsel for the defendants on 28 October 2011 and finally in reply from counsel for the plaintiff on
1 November 2011.
Background
[7] The plaintiff currently operates a recycling business which procures waste paper and pulp from suppliers and on-sells those products. Its present claims against
the defendants arise out of its purchase of the first defendant‘s ―All Brite‖ recycling
business in 2006.
[8] Prior to 2006, Mr Michael Coombs and Mr Timothy Combs owned and operated the first defendant company under the name All Brite Limited and its recycling business. In November 2006 the plaintiff and its parent company Transpacific Industries Limited entered into an agreement (the Agreement) with All Brite Limited, Messrs Combs and Ms Cathryn Combs. That Agreement provided first, that Transpacific Industries Limited and All Brite Limited would purchase an
80 per cent and 20 percent shareholding respectively in the plaintiff, and secondly, the plaintiff would purchase from All Brite Limited the All Brite business along with its assets. In July 2008, the Agreement was varied so that Transpacific Industries Limited also acquired All Brite Limited‘s 20 per cent shareholding.
[9] The Agreement contained five year restraint of trade clauses on the first, second and third defendants. The All Brite business had two significant contacts. These were with Webstar, a division of Blue Star Print Group (NZ) Limited, and Ludowici Packaging Limited. Webstar was a supplier of waste paper to the All Brite business and Ludowici Packaging was a purchasing customer.
[10] In November 2006, both Mr Michael Combs and Mr Timothy Combs were appointed as directors, and Export Sales Manager and Managing Director respectively, of the plaintiff. This remained until Mr Michael Combs retired and Mr Timothy Combs resigned from their respective positions in late 2008. In the meantime, Mr Sanko had been employed by the plaintiff as its Financial Controller and this continued until 22 May 2009.
[11] These proceedings arise out of those general relationships. The plaintiff‘s case is that after Messrs Combs and Mr Sanko left the plaintiff‘s employment they became involved in a competing business sourcing, procuring and selling waste paper and pulp. As part of this business it seems Hawk Packaging Limited (owned by the first defendant MPC Traders Limited) purchased Ludowici Packaging. The plaintiff also claims the first defendant then procured the termination of the plaintiff‘s contracts with Ludowici and Webstar, as once it acquired Ludowici Packaging, it purchased wastepaper directly from Webstar.
[12] In addition, the plaintiff claims that Messrs Combs personally and actively had got back into these competing businesses sourcing, procuring and trading waste paper and pulp. One such allegation made against Mr Timothy Combs, claims that, with NZ Pulp & Paper Limited‘s permission, in January 2009 he held himself out to Carter Holt Harvey Limited as being NZ Pulp & Paper‘s Managing Director in order to purchase pulp.
[13] NZ Pulp & Paper Limited operates a business which buys and sells waste paper and pulp. Its director and shareholder is Mr John Palmer (Mr Palmer), also a former employee of the plaintiff‘s. Mr Palmer resigned from his employment with the plaintiff on 30 June 2009. The first defendant MPC Traders Limited as I have noted above purchases waste paper now including from NZ Pulp & Paper Limited.
[14] In all, the plaintiff, by its first amended statement of claim, alleges six causes of action. They are:
a. Breach of sale and purchase agreement by MPC Traders Limited the first defendant;
b. Breaches of sale and purchase agreement by Mr Michael Combs;
c. Breach of sale and purchase agreement by Mr Timothy Combs;
d. Breach of fiduciary duty against Mr Sanko;
e. Against Mr Timothy Coombs alleging that he induced Mr Sanko to breach his employment contract; and
f. Conspiracy by unlawful means against Mr Timothy Combs and Mr
Sanko.
[15] As it was outlined to me, the defendants‘ case is that either there is no competition of any kind, or that there is no pulp activity or trading on their part. They have never denied that they are engaged in Hawk Packaging Limited‘s business and that it acquires paper from Webstar, but they maintain that Hawk Packaging Limited is not in competition with the plaintiff and the plaintiff has suffered no loss from its activities.
Counsels’ Submissions and My Decision
[16] It is appropriate to consider each of the applications here in turn and I now do so.
Plai n tif f ’s Joind er App lication
[17] The plaintiff seeks to join NZ Pulp & Paper Limited as fifth defendant to these proceedings. In so doing, the plaintiff intends to add a seventh cause of action, against the first defendant, Mr Timothy Combs and NZ Pulp & Paper Limited alleging conspiracy by unlawful means. The conspiracy alleged is that set out at [12] and [13] above. The unlawful means are, in effect, that the first defendant and Mr Timothy Combs breached their obligations to the plaintiff. Mr Langton, for the plaintiff, advised in his recently filed Memorandum, that those claims in his view are now strengthened by materials subsequently discovered.
[18] Mr Langton submitted that now is the logical time to consider joinder. He said that discovery and inspection have only just been completed, no trial date has been allocated and so nothing is at risk of being lost by a new defendant being joined.
[19] Mr Langton relies on r 4.56(1)(b)(ii) for joinder. That rule provides:
4.56 Striking out and adding parties
(1) A Judge may, at any stage of a proceeding, order that—
…
(b) the name of a person be added as a plaintiff or defendant because—
…
(ii) the person's presence before the court may be necessary to adjudicate on and settle all questions involved in the proceeding.
(2) An order does not require an application and may be made on terms the court considers just.
[20] Mr Langton submitted that there is a valid factual basis for the allegations made and further that because of the nature of the claim, the plaintiff is entitled to amend its statement of claim to include the proposed seventh cause of action and
claim remedies against the first defendant and Mr Timothy Combs without leave. The defendants do not appear to dispute that course here. Therefore, in effect, joining NZ Pulp & Paper will result in no new issues being put before the Court than would already be before it if the same claim was pleaded and remedies were sought only against the first and third defendants.
[21] Mr Langton also contended that in any event the plaintiff could issue separate proceedings against the first defendant, Mr Timothy Combs and NZ Pulp & Paper Limited in terms of the pleaded seventh cause of action but that this would merely duplicate the present proceedings. That approach he said would be a waste of resources. Finally, Mr Langton suggested that any finding reached by the Court in the substantive proceedings may have adverse consequences for NZ Pulp & Paper
Limited, and therefore it should be joined here.1
[22] For the defendants, Mr Macfarlane suggested that joinder here would lead to delay and add additional complexity and cost to the proceedings. In particular, Mr Macfarlane pointed to additional discovery which would likely be undertaken with respect to the additional defendant. He maintained that in this case discovery has been far from a smooth process up to now and any additional discovery is likely to follow the same course. Therefore, it is likely that the addition of a further defendant would set back any likely trial date to late 2012 at the earliest. The defendants‘ position is that this application could have been brought as long ago as June 2011 when the significance of the email which evidences the claim recorded at [12] above
was first noticed by the plaintiff.2 Mr Macfarlane also brought my attention to
existing proceedings between some of the parties to the present proceeding which are extant in the Employment Court. Those proceedings, I am told, have been stayed pending the resolution of the present proceeding before this Court. Mr Macfarlane submitted, therefore, that any further delay in matters before this Court would also
have downstream effects on matters before the Employment Court.
1 Mainzeal Corp Limited v Contractors Bonding Limited (1989) PRNZ 47 (HC) at 50.
2 23 September 2011 affidavit of Ms Franks at paragraph 41.
[23] As to the plaintiff‘s claim that failure to allow joinder would lead to an unnecessary waste of resources, the defendants‘ general response seems to be a ―wait and see‖ one. Mr Macfarlane suggested that if the plaintiff is unsuccessful against the present defendants, then it is unlikely that it would have any case against NZ Pulp & Paper Limited.
[24] It is clear that the current approach to joinder in New Zealand is a liberal one. The object of the rules is to provide for the inclusion of necessary parties. The authors of McGechan on Procedure at HR4.56.09 summarised the effect of r
4.56(1)(b)(ii) in this way:
The question is: will the proposed defendant‘s rights against or liabilities to any party to the action in respect of the subject-matter of the proceeding be directly affected by any order which may be made in the action?: Mainzeal Corp Limited v Contractors Bonding Limited (1989) 2 PRNZ 47, adopting Pegang Mining Co Limited v Choong San 1/7/69, Privy Council A5/68; Arklow Investments Limited v Ngai Terangi Iwi Inc Soc CA42/94, 1 June 1994 at 20.
[25] In order to reach that jurisdictional threshold, an applicant must show a tenable cause of action and to that end the Court is ordinarily to accept that applicant‘s factual assertions.3
[26] In the present case, I am satisfied that the plaintiff has reached that jurisdictional threshold. It would be an unattractive prospect for the plaintiff‘s claim against NZ Pulp & Paper Limited to be contingent on the plaintiff‘s success in an analogous claim against the present defendants where similar evidence will be produced in circumstances where NZ Pulp & Paper Limited have no opportunity to respond. Further, it would be wrong here in my view to make that assessment on the prospect that the plaintiff would not succeed and so one should wait until after the plaintiff has established liability here to determine NZ Pulp & Paper Limited‘s interest in the proceeding.
[27] Notwithstanding that jurisdictional threshold, r 4.56 retains some discretion in the Court to allow joinder. As I have noted above, New Zealand courts take a
3 Brideway Projects Limited v Webb HC Auckland CIV-2003-404-1965, 7 July 2003 at [10].
liberal approach and exercise discretion in favour of joinder.4 Nevertheless, likely delay is relevant.5 However, I agree with Mr Langton that in the present case little prejudice will result by allowing this application. Of course, some delay is inevitable. I consider however that the plaintiff did not delay for an inordinate time
in bringing this application which it did on 14 September 2011, some three months after becoming aware of the email which aroused its suspicions with regard to NZ Pulp & Paper Limited‘s involvement. In those circumstances, I allow the plaintiff‘s application for joinder.
[28] Orders are now made:
(a) Joining NZ Pulp & Paper Limited as a fifth defendant to this proceeding; and
(b)Directing that the plaintiff‘s intended second amended statement of claim and notice of proceeding are to be filed and served within 10 working days of today.
Plai n tif f ’s Ap pli cation for Particular Discovery
[29] It is well established that an applicant for an order for particular discovery must establish three jurisdictional requirements set out in r 8.24, which are:6
(a) Grounds for belief that the party is in or has been in possession of
(b) A document or class of document that
(c) Relates to any matter in question in the proceeding.
[30] On the first two of these requirements, an applicant is required to demonstrate grounds for a belief that a particular document exists and that it may be, or may have
been, in the control of the person from whom discovery is sought. Grounds for such
4 Mainzeal Corp Limited v Contractors Bonding Limited (1989) 2 PRNZ 47 (HC); Chan v Seyip
Association of New Zealand Inc [2008] NZAR 37 (HC) at [12].
5 Isolare Investments Limited v Fetherston HC Auckland CIV-2002-404-1791, 21 April 2005.
6 Andrew Beck and others McGechan on Procedure (online looseleaf ed, Brookers) at [HR8.24.03].
belief, may be established from direct or indirect evidence or from the nature or circumstances of the case or from any document filed in the proceeding. And, the documents in question are to be described with some specificity.7
[31] Rule 8.18 of the High Court Rules provides that an affidavit of documents must list documents that are or have been in that party‘s control and that are relevant in the sense they relate to a matter in question in the proceeding. The general rule remains that an affidavit verifying a list of documents is conclusive, but r 8.24 allows the court to go behind the affidavit providing there is clear evidence that the list is not conclusive.8
[32] There should be at least a prima facie indication that the documents concerned are, or have been, in the party‘s control.9 But there is no requirement that the applicant must prove, on the balance of probabilities, that there are further documents that have not been discovered.10
[33] On the third requirement, the legal test remains11 that set out in Compagnie
Financière et Commerciale du Pacifique v Peruvian Guano Co:12
It seems to me that every document relates to matters in question in the action which not only would be evidence upon any issue, but also which, it is reasonable to suppose, contains information which may — not which must — either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary. I have put in the words ‗either directly or indirectly‘ because, as it seems to me, a document can properly be said to contain information which may enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary if it is a document which may
7 AMP Society v Architectural Windows Limited [1986] 2 NZLR 191 (HC) at 199.
8 Equiticorp Industries Group Limited v Hawkins [1994] 2 NZLR 738 (HC) at 740.
9 Beecham Group Limited v Bristol- Myers Co [1979] VR 273 at 279; Astra-National Productions
Limited v Neo-Art Productions Limited [1928] WN 218.
10 Southbourne Investments Limited v Greenmount Manufacturing Limited HC Auckland CIV-2005-
404-6675, 12 June 2008 at [42].
11 See M v L [1999] 1 NZLR 747 (CA).
12 (1882) 11 QBD 55 (CA) at 63.
fairly lead him to a train of inquiry which may have either of those two consequences.
[34] The concept of relevance is an expansive one,13 and is potentially broader than the definition in s 7 of the Evidence Act 2006.14 The matters which are in question are to be identified by reference to the pleadings.15
[35] Once the jurisdictional requirements are made out, it is for the court to consider whether its discretion should be exercised. The court will scrutinise carefully the reasons advanced by parties affirmatively resisting production of documents where the jurisdictional requirements are otherwise made out.16
[36] While an applicant need not necessarily show that an order for discovery is necessary at the time, and therefore a conservative approach to discovery is no longer stipulated,17 it will be rare that the court‘s discretion will be exercised and an
order made for particular discovery if such an order is not necessary.18
[37] It is also important to be alive to the consideration that applications should not be used as a ―fishing expedition‖. And, an application for discovery may also be opposed where requiring discovery would be oppressive.19 A balance must be struck
between the potential cost, time and difficulty involved in the additional discovery
13 M v L [1999] 1 NZLR 747 (CA) at 750.
14 ANZ National Bank Limited v Commissioner of Inland Revenue [2009] NZCA 150, [2009] 3 NZLR
123 at [5] and [24]
15 New Zealand Rail v Port Marlborough New Zealand Limited [1993] 2 NZLR 641 (CA) at 644.
16 See Clear Communications Limited v Telecom Corporation New Zealand Limited HC Auckland CL
51/96, 22 July 1998 at 3.
17 The Oaks Law Centre Solicitors Nominee Company Limited v Quotable Value Limited HC Wellington CIV-2008-485-1691, 16 June 2009 at [23].
18 ANZ National Bank Limited v Tower Insurance Limited (2009) 15 ANZ Insurance Cases 61-816 (HC) at [22]; Cynotech Securities Limited v People Limited HC Auckland CIV-2008-404-1669, 12
February 2009 at [16].
19 Mao-Che v Armstrong Murray (1992) 6 PRNZ 371 (HC).
against the potential value that the discovery will add to the proceedings.20 Allan J
commented in Simunovich Fisheries Limited v Television New Zealand Limited (No
6):21
In the present instance the first plaintiff‘s fishing records lie at the heart of the litigation and in particular are central to the calculation of the plaintiffs‘ claims for damages. That claim is extraordinarily large and is in some respects unconventional. The plaintiffs are well resourced. I do not think it is an answer to the defendants‘ claim for the discovery of paper documents to say that they are stored at several different locations and/or that they are not well ordered. It may well be that the plaintiffs will be obliged to retain a team of people to undertake the task of locating and assembling relevant documents but there is no suggestion that the whereabouts of those documents is not known; nor is it claimed that the task of assembling the documents would be impossible. The plaintiffs merely say that it would be
―logistically impractical‖.
In my view, given the magnitude of this claim, the manner in which it has been calculated and the financial resources available to the plaintiffs, it will not be oppressive if the plaintiffs are required to make discovery of at least some of the documents which underlie the electronic database maintained by the first plaintiff.
[38] Here, the plaintiff seeks discovery of three categories of document. First, the plaintiff seeks from each of the first defendant, Mr Michael Combs and Mr Timothy Combs all landline and mobile phone records which relate to the following issues in the proceeding:
i. MPC Traders‘ negotiation for and entry into the supply agreement with
Webstar in June 2009;
ii.The procurement by any of MPC Traders or Messrs Combs of any waste paper and/or pulp from suppliers from 1 July 2008;
iii.The sale by any of MPC Traders or Messrs Combs of any waste paper and/or pulp to purchasers (including prospective purchasers) from 1
July 2008;
iv.Communications by any of MPC Traders or Messrs Combs with any brokers or agents for pulp from 1 July 2008 onwards; and
20 Houston v Attorney-General HC Wellington CIV-2008-485-2689, 17 December 2009 at [23];
Worldwide NZ LLC v QPAM Limited HC Auckland CIV-2006-404-1827, 15 May 2009 at [78]-[80].
21 HC Auckland CIV-2004-404-3903, 3 August 2007 at [41]-[42].
v. Communications between Timothy Combs and Mr Sanko between 1
January 2009 and 22 May 2009.
[39] It is common ground that the phone records exist and that they have not been discovered. I also accept that these records are in the defendants‘ control in that if necessary they are able simply to make a request for them from their telephone service provider.22 The parties dispute however whether the records are relevant.
[40] The plaintiff argues that the records are relevant in seven respects in that they may relate directly to:
i.The extent to which the defendants breached their restraint of trade agreements by negotiating a supply agreement with Webstar;
ii. The losses suffered by the plaintiff as a result of the first defendant‘s
entry into that agreement;
iii.The timing and extent of discussions between the parties to that agreement;
iv. The extent to which Mr Michael Combs has been trading in pulp; v. The extent to which Mr Timothy Combs has been trading in pulp; vi. Mr Timothy Combs‘ recruitment of Mr Sanko; and
vii. Mr Timothy Combs and Mr Sanko‘s discussions surrounding the first defendant and Mr Timothy Combs‘ plans to acquire Ludowici Packaging.
[41] The plaintiff says further that Timothy Combs has already discovered a
number of phone records in the first and third defendants‘ lists of documents dated
11 and 14 July 2011. Those records included two calls made in 2009. Mr Langton submitted that if the defendants were able to isolate those phone records, they ought
to be able to do the same in relation to the other issues identified above.
22 Swanston v Lishman (1881) 45 LT 360.
[42] Mr Langton noted also in his Memorandum filed in this Court that various
2009/2010 diaries of the defendants are relevant and those diaries evidence a number of phone numbers for the defendants to call. Mr Langton submitted that the phone records must be relevant to enable linking with those diary entries.
[43] Mr Timothy Combs, in his 21 September 2011 affidavit, deposed to the fact that an agreement between the first defendant and Webstar was signed. Further, documents which evidence that the first, second and third defendants were trading in pulp appear to have been listed. Mr Timothy Combs went on to depose that the only sales of waste paper by the defendants were to NZ Pulp & Paper Limited. The relevant documents relating to that seem to be listed. He also deposed to having a personal relationship with Mr Sanko and it was suggested therefore that any phone records evidencing communications between the two of them could not distinguish personal ―chat‖ from business. Accordingly, before me Mr Macfarlane submitted that the phone records cannot assist, in any meaningful way, to any of the ends asserted by the plaintiffs as noted above.
[44] I accept that the extent of the defendants‘ communications with Webstar may have some tangential relevance to determining when loss began to accrue, in that Webstar began to trade with the defendants prior to signing a formal agreement, but it does seem to me that telephone records cannot evidence that. Further, I accept that at trial some inferences may be drawn generally from the magnitude of calls to or from particular defendants. However, what is required, in my view, in the present case is some clear documentation. Therefore, I accept the defendants‘ submission that the records are unlikely to be directly relevant to the issues in this proceeding. While those records may provide a broad lead to the existence of documentation, that is the epitome of a ―fishing expedition‖. Further, even if relevance could be established, I would have reservations ordering discovery of all these records in the present case. This is not a case, such as that in Simunovich where there is a very well resourced party which could easily absorb the cost of discovery. Therefore, imposing an obligation on the defendants to retrieve and search what is likely to be hundreds of pages of phone records, over the course of multiple years, would place a significant burden on them. Given the context here that I am of the view those records would be of very limited assistance to the plaintiff‘s case, I would also be
inclined to find such an order oppressive. There is to be no order for discovery of the telephone records.
[45] The next category of documents sought by the plaintiff here is all of the documents held by Markhams Accountants for any of the first defendant‘s or Messrs Combs which are relevant to any issues in this proceeding. Markhams were the chartered accountants who assisted with the first defendant‘s due diligence exercise before it purchased Ludowici Packaging. It appears that in response to the plaintiff‘s discovery request, Mr Timothy Combs did contact Markhams. He was advised it seems that Markhams had not retained any documents relating to the due diligence. The plaintiff‘s position is that this is remarkable, and Markhams‘ response may be explained by Mr Combs‘ limited request which as I understand it was for soft copies of documents which relate to the due diligence process which had been deleted or retained by Markhams. The plaintiff‘s position now is that it seeks all ―relevant documents‖ not just those limited in that request.
[46] The defendants say, however, that they have discovered all due diligence documents which they hold. Indeed, I was advised by Mr Macfarlane that the defendants‘ solicitors have since enquired again and were referred to a different person at Markhams. That led to some further documents being located which have now been discovered but he says that is now an end of this matter. Accordingly, I accept that the defendants have taken all reasonable steps to locate documents related to the plaintiff‘s request. No more can be done. The plaintiff has not satisfied me here that there is any indication that documents of the kind requested are in the control of any of the defendants. No order is to be made as to the Markham documents.
[47] The plaintiff‘s next category of documents sought is schedule G to the Ludowici Packaging sale and purchase agreement. The plaintiff‘s application in this respect is that each of the items listed in schedule G to that agreement should be provided.
[48] Mr Timothy Combes‘ affidavit records that the documents listed in Schedule G were provided in response to requests from the plaintiff and are included in the defendants‘ list of documents.
[49] In response, Mr Langton seeks a sufficient description in accordance with r
8.21 in order for the plaintiff to determine the basis for any privilege claimed in relation to those documents and that any claim of privilege be set aside.
[50] I was advised by Mr Macfarlane that 11 documents have now been provided to the plaintiff‘s counsel pending my decision on the confidentiality issue. Mr Macfarlane further accepted that subject to the confidentiality point, some (those which do not contain legal advice) of the documents do require relisting in order to meet the defendants‘ obligations under r 8.21 of the High Court Rules.
[51] For the interests of completeness, I turn to the confidentiality issue now with respect to the ―Ludowici documents‖. There are two categories of document which concern the Ludowici Packaging business:
(a) The Agreement for Sale and Purchase dated 30 June 2009; and
(b) The other documents concerning the Ludowici Packaging business.
[52] The defendants directed my attention to clause 26.1 of the Agreement for Sale and Purchase. Clause 26.1 provides, inter alia, that the parties will keep that agreement, and its terms, and any other confidential information about the parties to the agreement obtained during negotiations, confidential. Mr Langton submitted that Ludowici Packaging provided confidential documents to the first defendant as part of the due diligence process, subject to confidentiality obligations at clause 26.1. The documents were also, however, Ludowici Packaging‘s business records. Under clause 7.4 of the Agreement, all business records were to be delivered to the first defendant upon completion under the Agreement. Therefore, Mr Langton submitted, the documents are not encumbered by the restrictions relied upon by the defendants as the documents would have been transferred to the first defendant regardless of whether they were disclosed during due diligence.
[53] The defendants‘ position is that they are not opposed to disclosing the documents. They are merely reluctant to provide the documents unencumbered, given clause 26.1 of that agreement. The total shareholding in Ludowici Packaging is now held by Ludowici Plastics Limited. That company‘s address is provided as
C/- the Auckland solicitors, Bell Gully. No view on these issues has been provided by that firm of solicitors or by Ludowici Plastics Limited.
[54] I accept the plaintiff‘s submission that these documents are now held as
―business records‖, although I have not been provided with a definition of ―business records‖ as contained in the agreement. Clause 7.4 of that agreement would entitle the purchaser, the first defendant, to those documents even if they were not disclosed during negotiations. As the confidentiality clause 26.1 is limited to information obtained during the course of negotiations, I consider that this clause does not cover information which was obtained in another way, in this case through disclosure after the agreement was completed. Accordingly, I consider that clause 26.1 does not apply to Ludowici Packaging‘s business records.
[55] That being the case, I need not deal with the plaintiff‘s application for setting aside the defendants‘ claim to privilege. Even if I was to consider the plaintiff‘s application in that regard, it is premature here. There is an insufficient basis at this time in my view to assess privilege with regard to those documents. I say this particularly bearing in mind that the defendants did not join issue here on the privilege point.
[56] I note that the plaintiff sought discovery of a further category of document, those held by Mr Sanko. That issue however has since been resolved between the parties.
Plai n tif f ’s Ap pli cation for Inspection orders
[57] Inspection orders are sought by the plaintiff here under r 9.34 of the High
Court Rules which provides:
9.34 Order for inspection, etc
(1) The court may, for the purpose of enabling the proper determination of any matter in question in a proceeding, make orders, on terms, for—
(a) the inspection of any property:
(b) the taking of samples of any property: (c) the observation of any property:
(d) the measuring, weighing, or photographing of any property:
(e) the conduct of an experiment on or with any property: (f) the observation of a process.
(2) An order may authorise a person to enter any land or do anything else for the purpose of getting access to the property.
(3) In this rule, property includes any land and any document or other chattel, whether in the control of a party or not.
[58] The plaintiff seeks various orders, in effect, to determine whether there are any documents held on the defendants‘ computer systems, either current or deleted previously which are relevant to these proceedings.
[59] Under r 9.34 an order may only be made for the purpose of ―enabling the proper determination‖ of any matter.23 Mr Langton submitted that there was a proper evidential basis for supposing that there were relevant documents on the defendants‘ computer systems. The documents said to exist appear to be confined to emails. The belief that some still exist arises from the defendants initial failure to discover relevant documents regarding the first defendant‘s negotiation of, and entry
into the Agreement with Webstar. Those documents were subsequently provided once further discovery was requested. Further, the plaintiff says it has uncovered relevant emails sent from the defendants which the defendants have not discovered.
[60] The defendants‘ response is simply that they have no further relevant documents on their computer systems. Indeed, the defendants, notwithstanding the protests of the plaintiff, engaged a computer network engineer, Mr Akers, to undertake a search of their computer systems to recover any deleted files which could be recovered. Mr Akers has since undertaken that search and, on 13 October
2011, provided an affidavit to this Court outlining details of the search.
[61] Mr Akers acknowledges that he is not a computer forensic expert, but he deposes that he has both the software and the experience to recover deleted files.
The plaintiff however has engaged a computer forensic expert, Mr Whale. He
23 Andrew Beck and others McGechan on Procedure (online looseleaf ed, Brookers) at [HR9.34.01].
deposes, in his 23 September 2011 affidavit, that if care is not taken in data recovery that data can be altered or lost.
[62] Mr Akers deposes specifically that he had read and agreed to comply with the code of conduct for expert witnesses in the High Court Rules and he suggests that it is not only computer forensic experts who are able to recover deleted documents. He deposes that he has inspected the Combs‘ respective home computers along with the work computers at the first defendant. In each case, Mr Akers deposes to having installed a computer program on each computer which program recovers deleted emails. He says, however, that the defendants used a web-based email service and so little was actually on the defendants‘ computers. He, therefore, apparently checked the web data stored on the computers for signs of emails. However, Mr Akers deposes, no relevant emails could be located except for those on the computer of Hawk Packaging. That data it seems has subsequently been provided to the defendants‘ solicitor.
[63] Mr Langton‘s response is that there are still non-email based documents which have not been discovered. Those documents are generally in the form of incomplete attachments to emails which emails themselves have been discovered. Mr Macfarlane advised that those incomplete attachments are exactly how the defendants received them and so nothing more can be provided. Further, Mr Langton complains that the defendants have not undertaken any steps to retrieve documents from their PDAs which are computer systems. Mr Langton also refers to Mr Whale‘s evidence that he believes he may be able to retrieve electronic documents from computer systems operating web-based email systems.
[64] I accept that Mr Akers may properly be called an expert. The High Court Rules define an expert at r 1.3 as a person who has specialised knowledge or skill based on training, study, or experience. That definition is the same as that in s 4 of the Evidence Act 2006, and the definition merely codifies the common law.24 That
expertise may arise out of experience. No formal training is necessary.25 I also
24 Law Commission Evidence Code and Commentary (NZLC R55, 1999) at [C15].
25 R v Tipene (2001) 19 CRNZ 93 (CA) at [93].
accept that if any emails, including incomplete attachments to some of the emails already discovered, are located they might be relevant to matters in issue here. However, the question remains: is it likely that such documents will be retrieved given one computer expert‘s unsuccessful attempt at their retrieval?
[65] On the one hand, the defendants have engaged a computer expert who is not a forensic expert who has come up with little. On the other hand, the plaintiff‘s forensic expert, Mr Wale, it seems contends that he might be able to retrieve certain electronic documents even though they have been deleted. This is a rather unsatisfactory state of affairs. Notwithstanding this, the plaintiff contends it has a valid basis for its belief that relevant documents exist on the defendants‘ computer systems which have not been discovered because first, the defendants had earlier failed to discover relevant documents of this type which were later provided and secondly, the plaintiff itself contends that it has discovered further relevant documents sent from the defendants‘ computer systems which the defendants have not already discovered.
[66] Under all these circumstances and noting that similar orders have been made in cases such as Tyco Flow Pacific Pty Limited v Grant, HC, Auckland, 18 March
2005, CIV-2003-404-4121, Sargisson AJ and PAE (New Zealand) Limited v Broshnahan, HC, Wellington, 3 September 2007, CIV-2005-485-843, Gendall AJ. I am of the view that the plaintiff should be given the opportunity through its forensic expert and with the safeguards noted in the conditions to follow to carry out the computer inspection sought in terms of paras 4, 5 and 6 of its application dated 23
September 2011.
[67] The application for inspection orders therefore succeeds. The following orders are now made:
(a) That each of the first, second and third defendants within fifteen working days of this judgment are to provide an affidavit verifying:
(i)which email addresses (including all work and personal email addresses); and
(ii)which computer systems (including all work and personal or home computer systems);
have been used by the first, second and third defendants from 1 July
2008 onwards;
(b)That an order for inspection of property is now made allowing the plaintiff to inspect any email addresses and/or computer systems verified by the first, second and third defendants as having been used by the second and third defendants from 1 July 2008 onwards (the
―property‖);
(c) That the order for inspection be made on the following terms:
(i)The plaintiff will provide each of the first, second and third defendants with an undertaking as to damages in relation to the inspection process.
(ii)Each of the first, second and third defendants will make the property available to a computer forensic expert, approved by the Court, for cloning and/or inspection.
(iii)The computer forensic expert will consult with the plaintiff‘s and the first, second and third defendants‘ solicitors in regard to what emails or other documents may be considered relevant and on the property.
(iv)In the first instance, and subject to paragraphs (v) to (vii) below, neither the computer forensic expert nor the plaintiff‘s solicitors will discuss or disclose to the plaintiff any emails or documents found during the inspection process.
(v)The first, second and third defendants‘ solicitors will, with the computer forensic expert‘s technical assistance, prepare a supplemental affidavit of relevant documents arising out of the inspection.
(vi)The plaintiff will inspect any documents that are relevant and over which the first, second and third defendants claim neither privilege nor confidentiality.
(vii)The plaintiff and the first, second and third defendant will discuss any restrictions to be proposed over the inspection of documents that are relevant and confidential.
(viii)Any clones of any computers or devices obtained by the computer forensic expert will be kept in safe custody by the computer forensic expert until the discovery and inspection process is complete, after which the clones of the computers and devices will be returned to the first, second and third defendants.
(ix) The costs of the computer forensic expert will be met by the plaintiff in the first instance.
Plai n tif f ’s Remaining Application for Confidentiality Orders
[68] As recorded above, I have already dealt with the plaintiff‘s final group of documents under this application. As for the remaining group, those numbered 283-
419 of the first defendant‘s and Mr Timothy Combs‘ list of documents, counsel advised that what has been redacted were the names of suppliers. Mr Langton claimed that the documents contain:
(a) The names of suppliers of waste paper from whom the first defendant and/or Hawk Packaging Limited purchased waste paper, except that names have been redacted from the confidential documents;
(b)If NZ Pulp & Paper Limited purchased the waste paper for the first defendant or Hawk Packaging Limited, the names of the suppliers who it purchased it from, except the names have been redacted from the confidential documents;
(c) Evidence of the on-sale of the waste paper to Hawk Packaging Limited;
(d)The dates, prices and volumes of waste paper purchased and sold by the first defendant and NZ Pulp & Paper on its behalf; and
(e) The location from where the waste paper was sourced and to where it was transported, except that these have been redacted from the confidential documents.
[69] All of the documents over which confidentiality is claimed have been produced for inspection by counsel, in-house solicitors and experts only. Therefore, the application in respect of documents 283-419 concerns provision of an unredacted version to the plaintiff‘s staff only.
[70] There is a trend towards more openness in litigation. As the Court of Appeal noted in General Accident Fire & Life Assurance Corporation Limited v Elite Apparel Limited:26
Any perceived movements in the law on discovery and inspection of documents are towards the freeing up of the rules with the object that the parties and the Court will have access to as much information as will best ensure the doing of justice consistent with the maintenance of secrecy for what is the other party's brief.
[71] Further, Woolford J recently commented in Oceanic Holdings (International) Limited v Air Transport World Freight Limited that:27
confidentiality on the grounds of commercial sensitivity is not a ground for opposing discovery. The sole test is relevance. Rule 8.20(2)(e) does, however, recognise the prospect of restrictions which can [be] imposed by a Court on the use of confidential documents.
[72] In determining an application under r 8.31 the Court must consider the documents on an individual basis and undertake the following balancing exercise:28
on the one hand the interests of justice in ensuring that the [party requesting disclosure] is able to prepare and present its case, and on the other the interests of
26 [1987] 1 NZLR 129 at 131 (CA).
27 HC Auckland CIV-2008-404-751, 21 February 2011 at [21]; see also Gibson v Curtis HC Wellington CIV-2007-485-907, 28 April 2009 at [24].
28 Port Nelson Limited v Commerce Commission (1994) 7 PRNZ 344 (CA) at 384.
[the party resisting disclosure] in safeguarding its confidential information in a competitive market.
[73] That statement of principles is now echoed in s 69(2) of the Evidence Act
2006. The fact that the party seeking disclosure is a trade competitor is a relevant consideration.29 In M v L the Court of Appeal described the Court‘s discretion to order disclosure of confidential documents as follows:30
In parallel with the position at common law, there can be no doubt that for the purposes of inspection following discovery, R 307 [now r 8.31] invests the Court with a discretion. Discoverable documents which are not privileged in the strict sense, must ordinarily be produced for inspection by opposite parties, but if to do so would serve little forensic purpose and would be in breach of some social or ethical value of sufficient importance to predominate, the Court is entitled to refuse an order for production.
[74] Mr Langton submitted that the information contained in the documents in question is highly relevant to whether the first defendant directly or indirectly sources, procures and sells wastepaper in breach of the restraint of trade clauses.
[75] The defendants‘ fear however it seems is that the plaintiff will use the suppliers‘ names for its own purpose and if the plaintiff were to contact them that would interfere with Hawk Packaging Limited‘s wastepaper supply chain. Mr Macfarlane notes that the plaintiff has been given the names of the suppliers by its counsel and their experts have them as well. He contends that this is surely enough. Indeed, Mr Forman, an employee of the plaintiff, deposes to knowing who the suppliers are, given the small nature of the market. Nevertheless, he deposes that the information assists in the following way:
The names of the suppliers, combined with the location and grade of the paper, will inform me of the extent to which the first, second and third defendants are participating in the market for the sourcing, procurement and sale of waste paper; specifically whether they are directly and/or indirectly similar and/or competitive businesses.
[76] I accept that the information will be of assistance to the plaintiff‘s case.
Further, given that it is the expertise of the plaintiff‘s employees which needs to be
29 Mobil Oil New Zealand Limited v Ellison (1999) 13 PRNZ 177 (HC).
30 [1999] 1 NZLR 747 (CA) at 762.
relied on in order for this material to be of any use, disclosure merely to the
plaintiff‘s experts and solicitors does not meet the potential needs of the parties.
[77] I also acknowledge that the defendants‘ claim they are fearful as to misuse of the information. However, the defendants have not pointed to any real evidential basis for this fear. Therefore, I do not regard interference in the nature which the defendants have alleged as likely. In addition, the market in this area as I understand it is a relatively small one and the plaintiff already knows who all the suppliers are. The defendants arguments here also evaporate to some extent as I see it in the sense that as part of their defence, they claim they are not competing with the plaintiff for this supply. The harm here, or to put it in the terms of s 69 of the Evidence Act the public interest in preventing harm to the defendant, is low and is outweighed in my view by the interest in disclosure to the plaintiff.
[78] The plaintiff‘s application in this regard succeeds. An order is now made setting aside the defendants‘ claims of confidentiality over the redacted documents
283-419. These documents are to be produced to the plaintiff for inspection without restriction.
Conclu sion on th e Plai ntif f ’s A pplications
[79] In summary, I consider that the plaintiff‘s applications as to joinder, inspection and to set aside claims of confidentiality are allowed. Orders on these applications as noted at paras [28], [67] and [78] above are made. The plaintiff‘s applications as to discovery of the phone records and the Markham accountants documents are declined.
Counsels’ Submissions and My Decision on the First, Second and Third
Defendants’ Applications
[80] The defendants filed this application on 9 September 2011. That application was amended by the defendants‘ Memorandum dated 28 September 2011. This added an additional discovery order sought with respect to any document which shows the supply of wastepaper by the plaintiff to manufacturers within New Zealand such as Full Circle and Huhtamaki. However, before me agreement was
reached between counsel on that application and it was not pursued further before me.
Def en d an ts’ Inspection Application
[81] The defendants have applied for inspection of the Schedule Part 3 documents listed in the plaintiff‘s affidavit of documents dated 8 July 2011 without the restriction ―limited to counsel only‖ imposed by paragraph 8 of that affidavit. Counsel advise that now all but 20 of the subject documents have been released from that restriction. Those documents have been provided for my inspection
[82] I remind myself of the principles relevant to an inquiry of a claim of confidentiality outlined above.
[83] The plaintiff categorised the documents thus:
(a) Documents LHB1.0299; LHB1.033; LHB1.0567; LHB1.0568; LHB1.0569; LHB1.0570; LHB1.0571 and LHB1.0726 contain the plaintiff‘s financials projections and business strategy. Those documents would be competitively beneficial to the defendants, but they are not central to the proceeding.
(b)Document LHB1.0709 contains the plaintiff‘s lists of its major customers and suppliers. This document is most confidential in the context of this litigation, and the defendants‘ conduct. It is not highly relevant to the issues in the case.
(c) Documents LHB1.0163; LHB1.0166; LHB1.0368; LHB1.0497; LHB1.0565; LHB1.0566; LHB1.0773; LHB1.0775; LHB1.0776 and LHB1.0777 are historical documents, which contain information concerning the plaintiff‘s business strategy. They would refresh the defendants‘ memories and be competitively beneficial to them. They are not highly relevant to the issues in the proceeding.
[84] The plaintiff‘s main asserted prejudice here is that the defendants may use the commercially sensitive information in trade against the plaintiff as the parties are broadly in competition. The plaintiff asserted competition in the sense that both
parties obtain waste paper and on sell it (the first defendant obtains from Webstar and sells to Hawk Packaging) and NZ Pulp & Paper Limited acts as the first defendant‘s agent and so obtains pulp on its behalf. The plaintiff further noted that the restraint of trade clauses expire in November 2011 and so after that point the defendants will be free to use information against the plaintiff.
[85] I express no view on the ultimate issue as to whether the first defendant is a competitor of the plaintiff‘s. However, there are clear similarities between the operations of the first defendant and that of the plaintiff. Both procure and sell waste paper. The first defendant it seems operates in a more limited market, procuring only from Webstar and selling only to Hawk Packaging, but that would appear to be a similar trading operation to that of the plaintiff‘s.
[86] The defendants‘ claimed relevance in these documents is that they can be used to interpret financial information and explain whether the plaintiff might truly have suffered any loss. Also, they say they may identify issues of failure to mitigate any loss suffered. Again, given the defendants‘ expertise in the plaintiff‘s business, I accept that it is the value that the defendants can add to the interpretation of those documents which is important in this case. Accordingly, the defendants submit, it is not sufficient for their access to be limited to counsel and experts only. Mr Macfarlane offered a half-way solution whereby restrictions could be placed prohibiting the documents from being copied and their only being inspected at the premises of the plaintiff or the plaintiff‘s solicitor.
[87] The general reason for requiring full discovery is to ensure arrival at the truth, to encourage settlement, and to narrow the issues. I note the comments of Fisher J in Walker Data Vision Limited v Radiola Corporation Limited that where the competing parties in litigation are trade competitors ―with the best will in the world they will find it difficult later to blot from their minds information provided solely for the purpose of the proceedings‖.31 However, I note also the observations of Master Thomson in Mobil Oil New Zealand Limited v Ellison, in circumstances where the parties at issue were not direct competitors, ―information would only
become available to a trade competitor if the [parties] breached a confidentiality order of the Court which they are willing to have imposed on them‖.32
[88] Here, while the question is certainly in dispute, I approach this matter on the basis that the parties are in competition with one another. Further, it is relevant that in this instance it is the defendants who are seeking information from the plaintiff. As Williams J commented in Cedco Publishing Company v Hodder Moa Beckett Publishers Limited:33
it is nonetheless the case that they are officers of a company which has chosen to sue the defendants in New Zealand and accordingly must be taken to have accepted that Cedco will subject itself to the inevitable process of discovery, an intrinsic aspect of which is that it enables inspection, often by competitors, of what would otherwise be private documents and to which those persons would ordinarily have no access.
[89] Williams J was clearly influenced by the fact that this was an application by a defendant seeking to mount a proper defence to a claim against it. I consider that in the present case disclosure of the documents in (a) and (c) above at [83] should be made to the defendant. As to document (b), I do not consider that it is relevant to matters in dispute. It is merely a list of customers and suppliers outlining the procurement costs with respect to each. It cannot be said to assist in determining any loss suffered by the plaintiff here.
[90] However, I do appreciate that given the highly sensitive nature of the information contained therein, processes must be put in place to mitigate any prejudice to the plaintiff. I, therefore, consider Mr Macfarlane‘s suggestion at [86] above to be sensible. I further order inspection of the documents in question here at [83] (a) and (c) (but not (b)) without the restriction ―limited to counsel only‖ subject to appropriate undertakings to be made by the defendants (along the lines outlined at [86] above) the wording of which may be the subject of further submissions to this Court if counsel cannot agree.
Defendants’ Further and Better Discovery Application
[91] In this aspect of their application the defendants complain as to the format of the plaintiff‘s most recent affidavit of documents, that produced by Marion Franks dated 23 September 2011. The application arises out of the layout of the list and in particular the lack of headings and the fact that the documents are not ordered chronologically. The defendants say that, as the documents have been listed in this way, determining the relevance of documents is very difficult and requires the defendants to re-word the entire list in order to get the files in that order. Accordingly, the defendants request that the Court order that the list be done again and that appropriate directions be given. On this, Mr Macfarlane referred to rr
8.18(1) and 8.22 of the High Court Rules and the commentary provided by the authors of McGechan on Procedure at [HR8.21.02].
[92] The plaintiff‘s response is that r 8.21 does not require the documents to be listed chronologically and that the documents have merely been listed in the manner in which they were retrieved. Further, the plaintiff argues that r 8.21 does not require a description of documents by title. Mr Langton relied on the decision of Associate Judge Osborne in Vanda Investments Limited v Logan.34 Further, the plaintiff submitted that here the plaintiff has provided the defendants with inspection copies of all the discovered documents on a disk, described by their discovery number. That allowed the defendants to cross reference the document number in the list with the document on the disk.
[93] While not specified in this way, I understand the defendants‘ dispute to arise in relation to Parts 1 and 3 of the plaintiff‘s affidavit. Parts 2, 4 and 5 of the plaintiff‘s affidavit of documents have a greater level of specificity and contain fewer documents. The plaintiff‘s list under Parts 1 and 3 follow the following
format:
Doc ID Doc Date C/O Doc Type Description/ Subject
Author Author CO Recipient Recipient
CO
LHB1.0004 24/08/2009 C LTR Restraint and Magnus SLW Gerard BP
claim Macfarlane Brown
[94] Rule 8.21 of the High Court Rules provides:
8.21 Schedule appended to affidavit of documents
(1) The schedule referred to in rule 8.20(2)(d) must identify or list documents—
(a) in the control of the party giving discovery and for which the party does not claim privilege or confidentiality, identifying them by number:
(b) in the control of the party giving discovery for which privilege is claimed, stating the nature of the privilege claimed:
(c) in the control of the party giving discovery for which confidentiality is claimed, stating the nature and extent of the confidentiality:
(d) that have been, but are no longer, in the control of the party giving discovery, stating when the documents ceased to be in that control and the person who now has control of them:
(e) that have not been in the control of the party giving discovery but are known by that party to relate to a matter in question in the proceeding, stating who has control of them.
(2) Documents of the same nature in category (b), (c), (d), or (e) may be described as a group or groups.
(3) The schedule need not include—
(a) copies of documents filed in court; or
(b) correspondence that may reasonably be assumed to be in the possession of all parties.
[95] Paragraphs (a) to (e) are, in this case, delineated as Parts 1 to 5 in the plaintiffs‘ affidavit of documents. Associate Judge Osborne, in Vanda Investments Limited, concluded that the effect of r 8.21(2) is that documents listed in Part 1 need not be grouped. In other words, the rule is permissive.35 Associate Judge Osborne went on to summarise the effect of r 8.21 as follows:36
I identify these requirements in the rules:
35 At [96](g).
(a) The party discovering must ―identify or list‖ the documents to be discovered –
this applies to all documents: r 8.21(1).
(b) The open documents must be identified by number: r 8.21(1)(a).
(c) Documents of the same nature in categories (b),(c),(d) and (e) of r 8.21(1) may be described as a group or groups. A question arises as to whether by implication documents of the same nature in category (a) (i.e. open documents in the control of the party giving discovery) may therefore not be described as a group or groups: r 8.21(2)).
(d) These are the standard requirements in terms of a discovery order: r 8.18.
(e) A discovery order may modify standard discovery, i.e. by specifying the method of discovery of the documents: r 8.16(4)(b). That indicates that there was to be a generally applicable requirement for discovery which was subject to adaptation to meet the requirements of a particular case – such as where necessary to counter oppression: see McGechan on Procedure HR 8.16.6.
[96] Rule 8.21(1)(a) requires that the document must be enumerated. That is done here. In relation to the requirement in r 8.21(1)(c), that the nature and extent of the confidentiality is set out, part 3 contains the reasons for a claim of confidentiality.
[97] As to the purpose of discovery, Associate Judge Osborne said at [48] this was:
(a) To ensure (to the reasonable satisfaction of the Court and other parties) that all disclosure has been given.
(b) In relation to open documents:
i. To enable the opposite party to identify the documents; and
ii To enable the opposite party to request particular documents for inspection or copying; and
iii. To enable the Court to order production and to ensure that such an order is enforced.
(c) In relation to privileged documents –
i. To enable the opposite party to become aware of the documents claimed to be privileged.
ii. To enable that party to meaningfully consider a challenge to the claim of privilege.
(d) In relation to documents no longer in the possession of the discovering party, to enable the opposite party to decide whether to seek discovery against a third party or to issue a subpoena to that person.
(e) To enable the opposite parties and the Court to meaningfully apply the provisions of r 8.37 as to the effect of failure to include a document in an affidavit of documents.
(f) To enable the Court to enforce the provisions of r 8.38 as to the admissions as to documents being originals or true copies.
[98] His Honour then considered that once that context was understood, the rules could be seen in the following way:37
(a) While r 8.21 (and before it, the amended r 298) no longer expresses a
requirement of ―describing‖ documents, the rule requires that the schedule
―identify or list the documents‖. That is consistent (without using the word
―describe‖) with the long-standing requirement that listing of documents be sufficient to enable the party requiring discovery to identify a document or group.
(b) If it were correct that r 298(1) did not implicitly contain a requirement of description of documents, then r 298(2) would have been unnecessary. Rule
298(2) was the provision which allowed documents other than open documents in the control of the discovering party, where they were of the same nature, to be described as a group or groups. In other words, as Rodney Hansen J indicated in Ferrier Hodgson v Siemer, the current rules preserve the approach taken in Hunyady but in the specific context of unprivileged documents within
the control of the party giving discovery.
(c) Rule 8.16 (permitting an alteration of the default discovery order by providing for a discovery order specifying the method of discovering documents) is clearly an intended means of guarding against situations where a default rule requiring description of documents might become oppressive (this was the very mischief intended to be met by the Law Commission when promoting the predecessor of the current r 8.16 (r 295).
(d) Rule 8.38 – providing deemed admissions as to the authenticity of discovered documents – assumes a degree of description beyond the mere listing of documents. In the case of original documents the deemed admission arises if the document has been described in the affidavit of documents as an original document. In the case of a copied document the admission arises if the document is described in the affidavit of documents as a copy. If r 8.21 is construed so as to allow a list to identify documents by number only, without a description identifying whether the document is an original or a copy, a party would be able to entirely undermine r 8.38. I note that the abbreviations adopted by the plaintiff in Part 2 of its affidavit provide for all the obvious types of documents including ―O‖ for original, ―C‖ for copy and ―D‖ for draft.
(e) As the Law Commission identified in its General Discovery report (paragraphs
11 and 12), what is now r 8.37 – precluding a party relying on a document not included in its affidavit of documents - works effectively if there is adequate identification and description of documents in the affidavit of documents. The Law Commission recognised that proposals such as simply numbering documents sequentially without describing them might lead to time consuming arguments at trial as to whether a particular document had or had not been discovered. Simple numbering may lead to ambiguity or even mischief. Numbering combined with adequate description is likely to remove any ambiguity or mischief.
(f) In the broader context – beyond the rules themselves – all the reasons which led to the creation of discovery rules and the case law with regard to discovery continue to have force today[.] Criticism of a requirement to describe documents has not generally been on the basis that the underlying reasons for requiring description were misconceived. Rather, criticism appears to have arisen out of a concern that the benefits obtained by having someone describe documents were outweighed by the onerous consequences in relation to particular cases. Those consequences can properly be met by the Court‘s power (under r 8.16) to depart from default orders (under rr 8.20 and 8.21).
(g) The question then remains as to whether within Part 1 of the list, the plaintiff is entitled to group documents and, if so, in what format. It might be suggested that, because r 8.21(2) expressly provides that ―documents of the same nature in category (b), (c), (d), or (e) may be described as a group or groups‖, group identification is excluded for documents in Part 1. I do not read r 8.21(2) as being intended to bar group identification for Part 1 documents. Rather, I read it as a permissive provision, confirming so that there is no doubt that privileged and other documents may be described as a group or groups. The Hunyady decision, which is often taken as the New Zealand starting point for grouping of documents, was focussed on documents which have to be produced for inspection (i.e. open documents in Part 1 of an affidavit). Identification by bundle or file was envisaged as an appropriate means of achieving that. What r 8.21(2) makes clear is that that approach is acceptable for privileged and other categories of documents. I do not regard r 8.21(2) as being intended to abrogate the application of the Hunyady approach to group documents.
[99] Against that background, I do not consider the plaintiff here to have erred in its obligations for discovery. It has numbered the documents and provided a sufficient description to enable the defendants to assess whether inspection of that particular document is warranted. Any ordering in a chronological fashion is likely to be vulnerable to attack on the basis that documents are no longer ordered in another way, such as by type. It should be for the plaintiff to determine the most expedient means of disclosure, within the confines of the requirements under r 8.21 expressed above.
[100] The defendants discovery application here is dismissed.
Def endant s’ Applications for Answers to Interrogatories
[101] On 19 August 2011, the first, second and third defendants issued a notice to answer some 50 interrogatories to the plaintiff. Many of those interrogatories were either satisfactorily answered by the plaintiff or, the defendants say, have been answered by the plaintiff‘s proposed second amended statement of claim which the plaintiff has undertaken to file.
[102] Mr Langton attached to his submissions a table outlining those interrogatories to which there was still dispute between the parties. I did not take Mr Macfarlane to object to Mr Langton‘s characterisation. Therefore, by my count, there are eight interrogatories which require my consideration under r 8.5 of the High Court Rules. That rule provides:
8.5 Order to answer
(1) A Judge may, at any stage of any proceeding, order any party to file and serve on any other party (whether the interrogating party or not) a statement prepared in accordance with rule 8.6 in answer to interrogatories specified or referred to in the order.
(2) The interrogatories must relate to matters in question in the proceeding. (3) The order may require the statement to be verified by affidavit.
(4) The Judge must not make an order under subclause (1) unless satisfied that the order is necessary at the time when it is made.
[103] Those interrogatories are:
(a) 5.6(iv) (b) 5.6(i) (c) 5.6(ii) (d) 5.6(v) (e) 5.7(i) (f) 5.12 (g) 5.16 (h) 5.18
[104] I record that the defendants do not pursue interrogatories 5.11(v) and 5.11(vi) due to assumptions that there is no information to be had but that if their assumptions are mistaken the defendants reserve the right to re-issue a notice for interrogatories in those respects.
[105] The authors of McGechan on Procedure note at [HR8.1.01] that an interrogatory:
must be directed towards advancing one side‘s case or damaging the other‘s case. It must accordingly be relevant to an issue raised on the pleadings or a fact in dispute for determination: Todd Pohokura Limited v Shell Exploration NZ Limited [2009] NZCA
561. It is not permissible to interrogate on matters of law or mixed fact and law (A-G
v Wang NZ Limited [1990] 3 NZLR 148, (1989) 2 PRNZ 238 (CA)), nor to ask the names of witnesses or what is in their evidence of the facts in issue: Marriott v Chamberlain (1886) 17 QBD 154 (CA); Wilson v Broadcasting Corporation of New Zealand (1987) 1 PRNZ 368.
[106] There are four objects of interrogatories:38
To obtain admissions as to facts which will support the case of the interrogating party;
To obtain admissions which will destroy or damage the case of the party interrogated;
Interrogatories which are in the nature of a request for further and better particulars; and
Interrogatories which seek to obtain accounts from a party occupying a fiduciary position.
[107] With regard to the third, the courts have expressed a growing reluctance to that practice as there is an available remedy of requesting further particulars under r
5.21 of the High Court Rules. Further, interrogatories must be answered on oath, a requirement which a pleading does not have.39
[108] These purposes have been supplemented in the New Zealand context in light of what has been seen as the ―interventionist‖ nature of our High Court Rules. Thus, in Bank of New Zealand v Gardner Master Hansen commented:
It seems to me that within the context of the New Zealand rules there must be added to the four objects of interrogatories, listed by Lockhart J in W A Pines v Bannerman (supra), the aim and object of the rules generally and especially relating to interrogatories mentioned by Barker J at p 4 of [Sunde v Meredith Connell & Co HC Auckland A1479/85, 19 September 1986], ie:
(1) The aim of the rules is to arrive at the truth.
(2) The rules are designed to assist the parties in coming to a recognition of the proper issues.
(3) Through that recognition to a settlement of disputes.
38 Fay v Chirnside (2002) 16 PRNZ 87 (HC) at 89.
39 Re Securitibank (No 32) (1984) 1 PRNZ 523 (HC) at 525.
Certainly, even if the third object mentioned above is not met, if interrogatories answer objects one and two above, it seems to me they must be deemed necessary. The early crystallisation of issues if it does not lead to the promotion of settlement will certainly lead to a meeting of the aims of r 4, ie the just, speedy, and inexpensive determination of the proceeding.
[109] It is important, however, to distinguish particulars ordered under r 5.21 from interrogatories obtainable under r 8.1. The authors of McGechan on Procedure at [HR
5.21.04] describes this difference as follows:
Particulars are matters of pleading, designed to make plain to the opposite party the case to be raised. Interrogatories are sworn statements of fact, procured by the opposite party to assist that party in proving his or her case. The one is pleading; and the other proof.
[110] Interrogatory 5.6 relates to paragraph 19 of the plaintiff‘s amended Statement of Claim. That paragraph pleads the loss which the plaintiff has suffered due to the first defendant‘s breach of the sale and purchase agreement. Paragraphs (i), (ii), (iv) and (v) ask the following questions:
(i)In which of its financial years does the plaintiff say it has suffered loss in respect of the Webstar and Ludowici contracts?
(ii)What was the value to the plaintiff of each of those contracts in each of those years?
(iv)What other losses does the plaintiff say it has suffered and continues to suffer?
(v)Of SOC 19a (The consideration paid by the plaintiff pursuant to the Sale and Purchase Agreement for the All Brite Assets is loss suffered) what part of the consideration was the price paid for the Webstar and the Ludowici contracts (separately or altogether)?
[111] With respect to 5.6(i), (ii) and (iv) Mr Langton submitted that this interrogatory is directed at particulars, not at any primary facts. The plaintiff said that it has pleaded the dates from when the Ludowici Supply Arrangements ended and has claimed ongoing loss. Further, the plaintiff said that it has not yet quantified loss nor has it yet elected between expectation or reliance damages. Mr Langton submitted that the questions are evidential matters and may include general damages for loss of future profits, which it is under no obligation to specify.
[112] The defendants‘ main issue, in particular with 5.6(iv), is with the plaintiff‘s use of the word ―including‖ when particularising damage.
[113] The authors of McGechan on Procedure comment at [HR8.1.11(5)] that interrogatories on quantum of damages are rarely allowed unless on particulars of special damage.
[114] I accept the plaintiff‘s submission that to require it to answer an interrogatory in this respect would be oppressive. The plaintiff has said that it has sought an enquiry into damages but that it is not yet in a position to particularise its loss further. I accept that is the case. A trial date has not yet been set and discovery has only just been completed. In those circumstances, it would be also inappropriate to require the plaintiff to plead further particulars at this stage. That does not, however, affect the defendants‘ rights to request the plaintiff to particularise that loss at a later, and more appropriate, stage of this proceeding.
[115] Interrogatory 5.7(i), requested in relation to paragraph 21(a)(i) of the
plaintiff‘s amended Statement of Claim, asks:
(i) What are the services alleged to have been provided to NZ Pulp & Paper
Limited and on what date(s) were they provided.
[116] Paragraph 21(a)(i) pleads a particular with respect to how Mr Michael Combs breached his duties owed to the plaintiff by providing services to NZ Pulp & Paper Limited.
[117] Interrogatory 5.12 requested in relation to paragraph 24(a)(i) materially the same information but in respect of Mr Timothy Combs.
[118] The defendants argued that without an answer to that interrogatory, they do not know the case to be met, or the enquiries that should be made for the purposes of meeting the plaintiff‘s claim.
[119] Mr Langton submitted that this interrogatory is a request for particulars of allegations, and evidence, not primary facts. Mr Langton further submitted that as the request is for what the defendant did it would be impossible for the plaintiff to do any more than repeat its allegation and it would be doing so on oath.
[120] Here, I do not consider that the defendants are requesting evidence. Nor is this question more apt as a request for particulars. The defendants seek knowledge of the instances of which the plaintiff is aware which give rise to the plaintiff‘s belief that Messrs Combs breached their duties to the plaintiff. That is an appropriate question to ask in cross examination, so it is not a pleading point, and the instances are primary facts.40 Further, I am satisfied that the answers are necessary to enable the case against them to be properly understood.
[121] Interrogatory 5.16, requested in relation to paragraph 32(i) of the amended
Statement of Claim, asks:
What was the confidential information contained in the list (identified by reference to name and number)?
[122] Paragraph 32(i) provides a particular as to the way in which Mr Sanko breached his duties to the plaintiff as induced by Mr Timothy Combs. It provides:
On or about 3 February 2009, and without the plaintiff‘s consent, the fourth defendant emailed to the second defendant the plaintiff‘s contacts‘ list, which list contained and comprised the plaintiff‘s confidential information.
[123] The defendants seek to know whether the whole list is confidential or, if not, which parts are. Mr Langton‘s response is that what is confidential is a question of law and he further argues that the allegation is sufficiently particularised not to require an answer.
[124] I accept the plaintiff‘s argument that the answer to that question is a question of law, ie whether the whole list is confidential or not. Further, in my view, the allegation is sufficiently particularised in the pleading.
[125] Interrogatory 5.18, requested in relation to paragraph 33 of the amended
Statement of Claim, asks:
What damage and loss was suffered as a result of the alleged inducement?
[126] Paragraph 33 pleads, in relation to Mr Timothy Comb‘s inducement of Mr
Sanko to breach his duties to the plaintiff:
40 Fay v Chirnside (2002) 16 PRNZ 87 (HC) at [39]-[41].
The plaintiff has suffered and will suffer loss as a result of the third defendant‘s
inducement of the fourth defendant‘s breaches of his duties as pleaded at paragraph
32 of the Statement of Claim.
[127] Under paragraph 35 of the plaintiff‘s second amended Statement of Claim, the damage claimed includes that particularised in paragraph 21, ie that damage claimed in respect of the first cause of action.
[128] For the reasons I have outlined above at [114] I consider that the order sought here would be oppressive.
Defendants’ Applications for Better Particulars
[129] As is the case with the application for answers to interrogatories, many of the requests for further particulars have either been answered or dealt with in the plaintiff‘s second amended Statement of Claim. Accordingly, only three requests are still at issue. Those are:
21ai What are the services and on what date/s have they been provided? 24ai What are the services and upon what dates were they provided?
32iWhat was the confidential information contained in the list (identify by reference to name and number where applicable)?
[130] The Application for Further and Better Particulars is brought in reliance upon rules 5.21 and 5.26 High Court Rules. The degree of particularity required will necessarily vary depending on the facts of each individual case.41 However, regard must be had to the purpose of pleadings, which is ―to define the issues and thereby inform the parties in advance of the case they have to meet and so enable them to take steps to deal with it‖.42
[131] The relevant legal principles regarding the purpose, and particularisation, of
pleadings are uncontroversial. The object of a statement of claim is to ―state‖ the
41 Commerce Commission v Qantas Airways Limited (1992) 5 PRNZ 227 (HC) at 230.
42 Farrell v Secretary of State [1980] 1 All ER 166 (HL) at 173.
―claim‖ in each case, so that the Court has sufficient clarity and detail to understand the issues it has to rule on, and the defendant knows the case which is to be met and is able to prepare for trial.43
[132] Rule 5.26(b) specifically requires that a statement of claim shall give sufficient particulars ―of time, place, amounts, names of persons, nature and dates of instruments, and other circumstances to inform the court and the party or parties against whom relief is sought of the plaintiff‘s cause of action‖. In particular, r 5.26 requires that a statement of claim must set out the factual circumstances relied upon giving rise to each cause of action alleged and the relief claimed as a consequence.44
[133] Factors which the Courts have viewed as relevant when considering whether further particulars are necessary include:
(a) Has sufficient information been provided to inform the other party of the case they have to meet and to enable them to take steps to respond?45
(b) Is there a real risk that the other party may face a trial by ambush if the further particulars are not provided?46
(c) Is the request an unreasonable burden or oppressive for the party concerned?47
(d) And finally and importantly, a request for further particulars can be resisted if the request goes beyond the scope of particulars, and is
probing for evidence.48
43 Price Waterhouse v Fortex Group Limited CA179/98 30 November 1998 at 18.
44 Andrew Beck and others McGechan on Procedure (online looseleaf ed, Brookers) at [HR5.26.03].
45 Price Waterhouse v Fortex Group Limited CA179/98 30 November 1998.
46 Price Waterhouse v Fortex Group Limited CA179/98 30 November 1998.
47 Commerce Commission v Telecom Corporation of New Zealand Limited HC Auckland CIV-2004-
404-1333, 21 December 2004.
[134] Requests under 21ai and 24ai are the corollaries to interrogatories 5.7(i) and
5.12. For the reasons discussed above, I need not consider this request.
[135] With regard to the final request under 32i, it is the corollary to interrogatory
5.16. The plaintiff says that it has answered that issue in its second amended Statement of Claim. I reiterate my comments above that this claim is sufficiently particularised. Therefore, I do not consider that any further order is justified.
Conclusion on the Defendants’ Applications
[136] In summary, I allow the defendants‘ applications for inspection orders on documents listed in (a) and (c) above at [83], subject to the conditions noted at [86] and [90] above. An order is made as to this at [90] above.
[137] I grant the defendants‘ application requiring orders for answers within fifteen working days hereafter as to the interrogatories noted at [103] (e) and (f) above (Interrogatories 5.7(i) and 5.12) only. Orders are made accordingly. Otherwise, that application is dismissed.
[138] And, the defendants‘ further and better discovery application (the format
complaint) noted at [91] above is dismissed as specified at [100] above.
Costs
[139] No submissions on costs were made to me at the hearing of this matter. As to costs on the applications before me, if counsel are unable to agree on the issue, they may file memoranda sequentially which are to be referred to me and in the absence of either party indicating they wish to be heard on the matter I will decide the question of costs based on the material then before the Court.
‘Associate Judge D.I. Gendall’
48 Andrew Beck and others McGechan on Procedure (online looseleaf ed, Brookers) at [HR5.26.04].
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