Trustees Executors Limited v Fund Managers Canterbury Limited
[2018] NZHC 954
•4 May 2018
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-Ā-TARA ROHE
CIV-2014-485-4040
[2018] NZHC 954
BETWEEN TRUSTEES EXECUTORS LIMITED
Plaintiff
AND
FUND MANAGERS CANTERBURY LIMITED
First Defendant
DELOITTE
Second DefendantDELOITTE LIMITED
Third DefendantGRAEME MAIN
Fourth DefendantALEXANDER DONALD MCBEATH, PAUL ERNEST MCEWAN,
ALAN WILLIAM PRESCOTT, GEOFFREY READ THOMAS, ANDREW HENDRA YOUNG, OLIVER RODERICK MATSON
Fifth Defendants
YOGESH MODY
First Third Party (Struck Out)AIG NEW ZEALAND LIMITED
Second Third Party
Hearing: 3 May 2018 Counsel:
A L Holloway and I Tokmadzic for Plaintiff
D J Cooper, S V A East and R D J Massey for Second and Third Defendants
No appearances for First, Fourth and Fifth Defendants
Judgment:
4 May 2018
TRUSTEES EXECUTORS LIMITED v FUND MANAGERS CANTERBURY LIMITED [2018] NZHC 954 [4 May 2018]
JUDGMENT OF CHURCHMAN J
[1] The second defendant, Deloitte, applied on 6 April 2018 for further particulars and discovery. On 30 April 2018, Deloitte filed submissions in support of its interlocutory application, not having received any notice of opposition to its application.
[2]Deloitte’s application seeks:
(a)further particulars of Trustees Executors Limited’s (“TEL”) second amended statement of claim (“2ASOC”) dated 22 December 2017 in relation to:
(i)the prayer for relief at page 49, paragraph (b); and
(ii)Appendix C of the 2ASOC as amended by letter from DLA Piper dated 9 March 2018 (“Appendix C”).
(b)Discovery of:
(i)the “BDO Loss Quantification Model” as it is referred to in the TEL’s evidence;
(ii)all underlying workings or calculations which provide the figures in Appendix C; and
(iii)any undiscovered documents comprising the loan files for the loans listed in Appendix C.
[3] On 6 April 2018, TEL served a third amended statement of claim (“3ASOC”). Deloitte maintains that the same particulars are required of the 3ASOC as of the 2ASOC, noting that the paragraph numbering between them has not changed in any way that affects Deloitte’s application.
[4] On 30 April 2018, TEL filed a notice of opposition to Deloitte’s request for further particulars. TEL opposed the making of the order requested by Deloitte in regards to the prayer for relief and, in any event, says Deloitte’s application on this point should be adjourned pending:
(a)amended briefs of evidence of David Wigmore and Christopher Seagar being served by Monday 14 May 2018; and
(b)the outcome of the parties’ mediation (starting on Monday, 18 June 2018).
Further particulars
Prayer for relief
[5] At page 49, paragraph b of the 3ASOC (“the Prayer for Relief”), TEL seeks relief against Deloitte for a:
Portion of $31,005,187 to be determined at trial, being the further loss calculated to 30 June 2018 as summarised in Appendix C, for the loss of opportunity to realise its mortgage securities in a more favourable property market.
[6] The relief sought constitutes a claim for special damages. High Court Rule 5.33 provides: “A plaintiff seeking to recover special damages must state their nature, particulars, and amount in the statement of claim.” This rule reflects the policy underlying HCR 5.32 requiring claims for recovery of sums of money to state the amount as precisely as possible.
[7] In Bendalls Importers Ltd v General Accident Fire Insurance Co of NZ Ltd, Holland J held:1
There is good reason for such a rule. A defendant is entitled to know the amount of the claim brought against it so that it can consider at an early stage in the proceedings whether the claim should be made, whether a payment into Court should be made and other factors relevant to the defence.
1 Bendalls Importers Ltd v General Accident Fire Insurance Co of NZ Ltd [1986] 1 NZLR 459 at 462.
[8] In Perestrello e Companhia Limitada v United Paint Co Ltd, the English Court of Appeal held:2
The obligation to particularise [special damages] arises not because the nature of the loss is necessarily unusual, but because a plaintiff who has the advantage of being able to base his claim on a precise calculation must give the defendant access to the facts which make such calculation possible.
[9] Deloitte submitted that TEL’s prayer for relief does not adequately inform it of the alleged loss and the pleading does not meet the standard of particularisation required by HCR 5.33. The prayer for relief does not inform Deloitte:
(a)which loans in Appendix C are loans on which TEL is said to have lost the opportunity to realise its mortgage securities in a more favourable property market;
(b)when those opportunities would have arisen and when TEL would have realised the relevant properties;
(c)the values that it is claimed would have been achieved had the relevant properties been realised in the more favourable market that TEL refers to; and
(d)when each of the relevant properties were in fact realised and for how much (so as to compare the alleged missed opportunity with what transpired in fact).
[10] Deloitte submitted that it is not possible for it to assess these key elements of TEL’s claim without being informed of how and when that opportunity is alleged to have been lost. TEL’s failure to plead these matters impedes Deloitte’s preparation for trial, in particular the preparation of evidence.
[11] Deloitte further submitted that TEL’s evidence does not assist in respect of these particulars and it is therefore unclear how this matter will be “determined at trial” as pleaded by TEL in the Prayer for Relief.
2 Perestrello e Companhia Limitada v United Paint Co Ltd [1969] 3 All ER 479 at 579.
[12] In Moodie v Ellis, the plaintiff made a similar pleading seeking “special damages for loss of business and profits in an amount to be determined before trial”.3 The Court noted:4
Even if the extent of the damage, and a calculation of loss, can still only be an estimate at this point, or will have to be updated for trial, the defendants are entitled to know now what loss has been suffered.
[13]TEL opposes making the order on the following grounds:
(a)further particulars are not required in relation to the loss of opportunity because the pleadings (including the Prayer for Relief) make clear the basis of the lost opportunity and the amount of damages sought;
(b)amended briefs of evidence by Mr Wigmore and Mr Seagar, providing more particular quantification of the matters sought, will be served on Monday 14 May 2018;
(c)Mr Wigmore’s and Mr Seagar’s amended briefs will address and provide a valuation range in respect of the probable losses for the loan security properties already addressed by them, which loans represent nearly two thirds of the loss of opportunity claimed against Deloitte; and
(d)any further particulars as sought should be deferred pending these amended briefs as well as the parties’ mediation which is scheduled to start on 18 June 2018.
[14] A defendant is entitled to know the case at it is required to answer. Fairness requires that a defendant is not taken by surprise.
[15] I have considered whether it is appropriate to accede to the plaintiff’s request that this application be adjourned until after further briefs of evidence by Mr Wigmore
3 Moodie v Ellis HC Wellington CIV-2007-485-2212, 19 March 2009.
4 At [55].
and Mr Seagar are filed. The basis for this suggestion is that they will provide a more particular quantification of the matters sought.
[16] There is a difference between pleadings and evidence. Pleadings are required to set out the nature and extent of the claim and the evidence is what establishes those claims. Irrespective of the level of detail to be found in the proposed new briefs of evidence from Mr Wigmore and Mr Seagar, the defendants are entitled to a greater level of detail than that presently set out in paragraph (b) on page 49 of the 3ASOC.
[17] In order to be able to draft the proposed new briefs of evidence of Mr Wigmore and Mr Seagar, the plaintiff must ready have the details which will form the basis of that new evidence.
[18] It is therefore appropriate that the plaintiff be required to provide the further particulars sought by the second and third defendants. The defendants should not have to wait until after the proposed mediation to get that level of detail. It is information that may well be relevant to the position that they adopt at any mediation.
[19]I therefore direct that the plaintiff provides the information sought within
10 working days from the date of this judgment.
Further discovery
[20] At the hearing on 3 May 2018, the parties made substantial progress in agreeing what documentation covered by the second and third defendants’ application of 6 April 2018 would be provided.
[21] While the parties clearly agreed that information relating to “Total Expenses” in Appendix C to the 3ASOC would be provided, it is not clear to me whether their agreement extended as far as addressing the loan files and the Loss Model and underlaying calculations. On the assumption that the parties’ agreement did not extend to these matters, I now set out my determination.
Loan files
[22] The loan files are a set of documents maintained by the managers of the Canterbury Mortgage Trust (“CMT”). Each loan file relates to a specific secured property and contains information such as property valuations, contracts, deeds, and information about any sale of that property.
[23] Appendix C specifies the “loss date” for each loan. Deloitte submits that in some instances, that loss date postdates the date on which TEL discovered the relevant loan file. For example:
(a)the loan file for loan number 1720 to Lichfield Ventures Ltd was discovered on 26 August 2014 but losses are alleged to have been incurred in January 2018; and
(b)the loan file for loan numbers 1097 and 1791 to Central Otago Pinot Noir Ltd was discovered on 26 August 2014 but losses were alleged to have been incurred in June 2017.
[24] Deloitte submitted that this suggests there must be loan file documents that have been generated since TEL provided discovery, for example covering the recent property sales.
[25] On 23 February 2018, Deloitte’s solicitors wrote to TEL’s solicitors requesting discovery of specific loan files where the “loss Date” post-dated discovery.
[26] On 23 March 2018, TEL’s solicitors and Deloitte’s solicitors discussed the discovery of loan documents. TEL’s solicitors indicated that the undiscovered documents collated in respect of the files referred to in Deloitte’s letter of 23 February 2018 were voluminous. Deloitte then sought confirmation that there were no additional undiscovered materials relating to other loans listed in Appendix C. TEL did not respond to this request and Deloitte wrote to TEL again on 26 March 2018 requesting this confirmation. TEL has still not provided that confirmation.
[27] On 23 April 2018, TEL provided informal discovery of 999 further loan file documents in relation to the following loans: WE Whiley & Co Ltd (loan number 928): P Jarman (1476); Eco Construction Ltd (1834); Gillies Residential Investments Ltd (1808); Thyme Fields Ltd (1452); and Anthem Holdings Ltd (1410).
[28] This set of documents did not include further loan file documents for Central Otago Pinot Noir Ltd (loan number 1791), despite Deloitte requesting discovery of this loan file in its letter of 23 February 2018. TEL’s discovery on 23 April 2018 was not accompanied by the requested confirmation that there were no other undiscovered loan file documents for the 47 loans listed in Appendix C.
[29] On Friday, 27 April 2018, TEL discovered 2,147 documents described simply as “further discovery documents”. TEL did not provide any further description and did not confirm that there were no other undiscovered loan file documents for the 47 loans listed in Appendix C.
[30] The outstanding loan files (to the extent there are outstanding loan files) are relevant because they contain information about the loans in relation to which TEL claims loss against Deloitte, including (as discussed) detail of the sales of the secured properties. Deloitte submitted that it needs that information to respond to the claim that there was a loss on these loans, as alleged in Appendix C.
[31] Deloitte further said that TEL was required to discover any remaining undiscovered loan files because they fell within the agreed categories of tailored discovery as approved by Dobson J on 9 December 2015 (“the Discovery Categories”). The loan files contain documents captured by the following Discovery Categories:
(a)2.10 – “Documents evidencing, recording or relating to TEL’s role in winding up the Fund from the suspension date (4 June 2008) to the present”; and
(b)2.13 – “Documents evidencing, recording or relating to the calculation of loss in Appendix C, including each component of that loss calculation.”
[32] Deloitte submitted that the undiscovered documents fit into both those categories because:
(a)they cover the process of realising the secured properties which is relevant to TEL’s role in winding up the Fund (TEL was required to be involved with this as trustee of CMT); and
(b)they relate to the calculation of loss in Appendix C being information about how and when securities were realised.
[33] High Court Rule 8.18 places a continuing obligation on TEL to give discovery and HCR 8.19 empowers the Court, where there are grounds for believing that a document has not been discovered that should have been, to make certain orders including ordering a party to make documents available for inspection.
[34] The approach to HCR 8.19 was usefully set out in Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd, where Asher J laid out the following four-stage test:5
(a)Are the documents sought relevant, and if so how important will they be?
(b)Are there grounds for belief that the documents sought exist? This will often be a matter of inference. How strong is that evidence?
(c)Is discovery proportionate, assessing proportionality in accordance with Part 1 of the Discovery Checklist in the High Court Rules?
(d)Weighing and balancing these matters, in the Court’s discretion applying r 8.19, is an order appropriate?
[35] Deloitte submitted that each of those elements was met in the present case. With respect to each:
5 Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd [2015] NZHC 2760 at [14].
(a)The documents were relevant to the proceeding. The documents fell within the Discovery Categories as well as HCR 8.28 and 8.9, and related to at least one key issue in this proceeding being the alleged quantum of loss set out in Appendix C.
(b)There was good reason to believe the documents exist. TEL had indicated that the number of documents was voluminous and had not confirmed whether or not it had discovered all loan file documents for loans in Appendix C. If TEL had discovered all such documents, this confirmation could have been readily given.
(c)Discovery was proportionate as this was a confined set of specified documents in the context of a complex proceeding involving a substantial claim.
(d)Discovery was appropriate as Deloitte required the documents in order to meet the case before it. It was not just that in preparing its case, TEL should have access to these key documents whilst Deloitte did not.
[36] Deloitte therefore sought an order that TEL file, pursuant to its ongoing discovery obligations under HCR 8.18, an affidavit:
(a)describing the documents discovered on 23 and 27 April 2018 in the form and to the level of detail required to Part 2 of Schedule 9 of the High Court Rules; and
(b)confirming whether or not there were any other undiscovered loan file documents for the loans listed in Appendix C.
[37] I accept Deloitte’s submissions that the documents sought are relevant; there is good reason to believe the documents exist and that discovery is proportionate and appropriate in respect of these documents.
Loss model and underlaying calculations
[38] Appendix C did not disclose the calculations or workings that produced the figures in that appendix.
[39] However, TEL had referred to the existence of a “BDO Loss Quantification Model” in the brief of evidence of Roger Taylor dated 16 March 2018. Mr Taylor’s evidence was that he calculated TEL’s loss by incorporating data into the BDO Loss Model and making a series of adjustments and further calculations. According to Mr Taylor, the resulting figures were set out in TEL’s 2ASOC (now 3ASOC).
[40] Deloitte submitted that the BDO Loss Model and underlying calculations were relevant documents and fell within paragraph 2.13 of the Discovery Categories being “[d]ocuments evidencing, recording or relating to the calculation of loss in Appendix C, including each component of that loss calculation.”
[41] On 24 April 2018, Deloitte filed an affidavit from Alan Garrett of Korda Mentha in which he explained that his firm had been engaged by Deloitte to provide expert financial evidence on loss and that, to properly analyse the numbers in Appendix C, the calculations that sat behind that Appendix, i.e. the BDO Loss Model and any other underlying workings or calculations, were required.
[42] Later that day, TEL’s solicitors sent Deloitte’s solicitors an email advising that they’d “uploaded two further discovery documents (being loss quantification models) to our FTP site”. The email contained a link to two Excel documents but provided no further information about the documents.
[43] The two Excel workbooks provided on 24 April 2018 did not appear to be the updated BDO Loss Model referred to by Mr Taylor. In particular:
(a)the loss figures in the appendix to Mr Taylor’s evidence and Appendix C (which appear to be the same), did not match the figures in the two Excel workbooks provided; and
(b)the two Excel workbooks appeared to incorporate data up to August 2013 but not beyond. This did no reconcile with Mr Taylor’s evidence that he had updated the BDO Loss Model “to [the] June 2018 quarter”, and did not reconcile with the fact that Appendix C referred to loss figures allegedly incurred as recently as January this year.
[44] In light of the information provided since the Deloitte’s application, Deloitte sought directions that:
(a)TEL confirm whether the two “loss quantification models” provided on
24 April 2018 were the “updated” version of the BDO Loss Quantification Model that Mr Taylor referred to at [15] of his evidence; and
(b)if the answer to the above question was no, TEL discovers the updated version of the BDO Loss Quantification Model referred to by Mr Taylor.
Conclusion
[45]I make the following orders:
(a)that within 10 working days TEL file an affidavit:
(i)describing the documents discovered on 23 and 27 April 2018 in the form and to the level of detail required to Part 2 of Schedule 9 of the High Court Rules; and
(ii)confirming whether or not there were any other undiscovered loan file documents for the loans listed in Appendix C.
(b)that TEL confirm whether the two “loss quantification models” provided on 24 April 2018 were the “updated” version of the BDO Loss Quantification Model that Mr Taylor referred to at [15] of his evidence
and, if the answer is no, TEL discovers the updated version of the BDO Loss Quantification Model referred to by Mr Taylor.
Churchman J
Solicitors:
DLA Piper for Plaintiff
Bell Gully for Second and Third Defendants
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