Westbury Thoroughbreds Limited v Webster
[2012] NZHC 333
•24 February 2012
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2011-404-5886 [2012] NZHC 333
BETWEEN WESTBURY THOROUGHBREDS LIMITED
Plaintiff
ANDMARGARET MARY-JEAN WEBSTER (AKA MARGARET WATSON) Defendant
Hearing: 24 February 2012
Appearances: P T Finnigan for Plaintiff
N Carter for Defendant
Judgment: 24 February 2012
ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL
Solicitors:
Duthie Whyte (Brian Everett), P O Box 6444 Auckland 1141, for plaintiff
Email: [email protected]
Carter & Partners, P O Box 2137 Auckland 1140
Email: [email protected]
Copy for:
P T Finnigan, DX CP24059 Auckland, for plaintiff
Email: [email protected]
WESTBURY THOROUGHBREDS LIMITED V WEBSTER (AKA WATSON) HC AK CIV-2011-404-5886 [24
February 2012]
[1] The plaintiff has applied for summary judgment against the defendant. The summary judgment application is to be heard on 5 March 2012. The plaintiff has applied for limited discovery from the defendant before the summary judgment application is heard.
[2] The plaintiff, Westbury Thoroughbreds Limited, is a thoroughbred stud operator and bloodstock breeder. It trades under the name “Westbury Stud”. It has extensive premises at Karaka in South Auckland and at Matamata. The defendant is a horse breeder. The services the plaintiff provides include servicing of thoroughbred mares by stallions, agistment, foaling, and work by farriers and vets. The defendant used the plaintiff’s services beginning from about August 2008. The defendant got behind in paying the plaintiff and the plaintiff has now sued her for the unpaid balance of account. That is for agistment charges and for servicing mares by stallions. The amount of the plaintiff’s claim is $298,654.19 plus interest.
[3] The defendant contests liability, at least in part. It is clear from the evidence that she has cash-flow difficulties, but she has attacked the merits of the plaintiff’s claims. She acknowledges liability for an amount of $160,333.78 but she says that there was an agreement that she would only have to pay accounts to the plaintiff when she sold foals. She also goes on to say that some of the plaintiff’s charges are excessive. The focus in this application is on the plaintiff’s agistment charges. She also makes other complaints:
(a) She says that the plaintiff pressured her to enter into arrangements;
(b)she denies that there was an agreement that her horses could be held as collateral for payment;
(c) she refers to tendering payment but those payments were not accepted;
(d)she gives evidence that charges from comparable stud operations are lower than what she was charged in this case; and
(e) she makes a counterclaim for not being provided with one free stud service per year for horses in which she had shares.
[4] The evidence in the plaintiff’s casebook is extensive already.
[5] The plaintiff makes its application for discovery under r 8.19 of the High Court Rules. That is the new version of the discovery rules in Part 8. That rule is in similar terms to r 8.24 of the rules in force up until the end of January 2012.
[6] It was accepted under the older discovery rules that parties might apply for discovery before the hearing of a summary judgment application. As the power to order discovery existed under the older discovery rules, and the new rule has changed its number but not its substance, I do not understand that any change of approach is required. Neither of the parties has submitted that the test under r 8.19 of the new rules is any different from the approach under r 8.24 of the old rules.
[7] The documents that the plaintiff requires the defendant to discover are set out in the application:
(a) The GST returns in which the defendant has returned as purchases and expenses or any of the invoices rendered by the plaintiff to the defendant for the defendant’s business in respect of bloodstock, until the present, including, all those contained in statements and invoices annexed to:
(i) the financial records of Russell Malcolm Warwick sworn on
20 September 2011 marked “A” and “B”; and
(ii) the fifth affidavit of Russell Malcolm Warwick sworn on
19 January 2012 marked “D”.
(b) The workings (including the invoices the plaintiff to the defendant)
supporting its GST returns sufficient to identify:
(i)the quantum of what invoices of the defendant on which the GST deductions were claimed as purchases and expenses by the defendant;
(ii)when such invoices of the plaintiff to the defendant on such GST deductions were claims as purchases and expenses by the defendant
[8] The plaintiff says that these documents are relevant to its claim for payment of the agistment charges, because the plaintiff expects that these documents will show that the defendant used its invoices when she made returns for GST purposes. That is, the plaintiff says that GST inputs will have been claimed by the defendant to assess her GST liability and in making those GST returns the plaintiff says that the defendant adopted the plaintiff’s charges. The plaintiff says that as the defendant has adopted those charges, or affirmed them, the defendant cannot blow hot and cold and then claim that she is not liable for those charges.
[9] I suggested to Mr Finnigan in argument that the GST returns might also be regarded as admissions of liability under s 34 of the Evidence Act.
[10] The leading case on discovery for summary judgment applications is NZI Bank v Philpott.[1] In that case, McGechan J was dealing with an application by a defendant for discovery. It is clear from his judgment that he considered that summary judgment applications should be made only in a limited number of cases although he did recognise in his decision that there was jurisdiction under the rules to order discovery for a summary judgment application. As far to the exercise of the
[1] NZI Bank v Philpott (1988) 1 PRNZ 560 (HC) at 566.
discretion, the essence of his judgment is in paragraphs [10] and [11]:
[10] Given that jurisdiction exists, how in a procedural sense should such applications be handled? Each, in the end, must depend on its own
circumstances and be handled in manner best calculated to serve the ends of justice, but the best general practice may well be to hold any application for an order for discovery over, dealing with it in conjunction with first hearing of the summary judgment application itself. It is not until all affidavits are in, and the arguments heard, that a Court is fully placed to judge whether discovery is “necessary” within the constraints of r 312, and is warranted as a matter of overall discretion under r 297. Adopting that approach will have the added advantage of overcoming any purely delaying tactics involved in such applications, particularly through reviews or appeals from refusals, the prime motive of which is to delay hearing of the summary judgment application itself. Last, but by no means least, such combined consideration will be the most efficient use of judicial time. I am not persuaded that holding over such applications to that point will leave matters too late for defendants. If they have a case for discovery at all, it will be as alive then as earlier. There is of course nothing to stop the opposite party, faced with such discovery application, from making the appropriate offers of informal discovery in advance of hearing, a procedure indeed to be encouraged in the overall interests of justice.
[11] In practical terms, it may well be that discovery will have only minor importance in summary judgment matters. Generally, I suggest, it will not be granted prior to first hearing of the summary judgment application itself. Even at that hearing, such orders will not be granted at all unless “necessary”. Such orders hardly will be “necessary” where a defendant, bereft of any significant defence framework, simply wishes to go fishing oceanwide to see if something can be trawled up. It will not be necessary in the converse situation where quite apart from questions of discovery the Court is not satisfied the defendant has no defence, and the summary judgment application therefore is to be dismissed on ordinary principles. Its likely significance will be in the relatively narrow band of marginal cases where an outline defence is made out, but the Court encounters genuine difficulty in determining whether or not there is no defence, and has a substantial reason to believe discovery in the proceeding will or may well assist that determination. Even in that limited range of situations, a Court encountering such difficulties might prefer to dismiss the summary judgment application under its general discretion, as a simple matter of caution and justice, rather than prolong matters through discovery, but the latter course would be open. Unjustified applications for discovery can of course be suitably dealt with by costs.
[11] In Mobil Oil NZ Ltd v Bagnall,[2] Wild J took a similar approach:
[2] Mobil Oil NZ Ltd v Bagnall (1990) 8 PRNZ 655 at 660 lines 6-32.
The summary judgment procedure is designed to enable a plaintiff quickly to obtain judgment when there really is no defence to the claim. The aim is to avoid the spectacle of a worthless defence(s) being raised and pursued for the purposes of applying undue pressure on a plaintiff through delay and additional expense, or in order to delay the inevitable. Before granting summary judgment (summary, in the sense that the defendant is denied a full hearing, including the right to question witnesses), the court must be confident that there is no bona fide defence – no reasonably arguable
defence. If the court is left with a real doubt or uncertainty as to whether there is a defence, the correct course is to refuse summary judgment. The matter then goes to trial in the ordinary way. It follows from this that, where a plaintiff seeks summary judgment, the defendant ought not to be permitted to obtain discovery unless it can demonstrate that it is are seeking discovery of a document(s) which it does not have and which may provide it with a defence, which may be relevant to a defence. This is another way of saying that discovery will only be ordered if “necessary at the time when the order is made” in terms of r 3.12. A court may find it difficult, nigh impossible, to determine the necessity for discovery until it has all the affidavit evidence before it and is apprised of the party’s opposing arguments. ... I consider that a defendant facing a summary judgment application must, before an order for discovery can properly be made in its favour, specify what the document(s) it seeks is, and demonstrate what is its relevance to the defence. At the very least, such a defendant must be able to specify the confined category of documents, and establish the relevance of it to the defence. Non- specific “trawling” cannot be permitted. ...
[12] For this application, I accept that the plaintiff has appropriately narrowed the scope of its discovery to a defined class of documents.
[13] In its written submissions it has referred to the Peruvian Guano test of relevance. However, I doubt that for a plaintiff’s application for discovery in a summary judgment application that the Peruvian Guano test is of much help. The Peruvian Guano test requires a document to be discovered if it might be relevant to a line of enquiry. As I understand the decision of McGechan J in the Philpott case, there is only a very narrow range of cases where the court will consider that discovery is necessary. Discovery will only be required once a necessity test has been satisfied.
[14] In the two cases I have referred to, defendants applied in response to plaintiffs’ applications for summary judgment. The necessity test there was whether the documents were reasonably required to allow a defendant to show that it had an arguable defence. However, in a plaintiff’s application for discovery where the plaintiff is the applicant for summary judgment, the enquiry is whether the documents are reasonably required to establish that the defendant does not have a defence to the plaintiff’s causes of action in its statement of claim. Looked at that way, documents that simply go to establishing a line of enquiry do not really assist in deciding whether discovery should be ordered in the context of a summary judgment application, that is, in deciding whether the defendant does not have an arguable defence.
[15] In the Philpott decision, McGechan J indicated that there was narrow band where discovery would be ordered on a defendant’s application. In many cases it would be fruitless to order discovery because the plaintiff would have a straightforward case where discovery would not be required to establish any kind of arguable defence. And there would also be cases where an arguable defence could be shown without the need the discovery. That left only a narrow band of cases where discovery would be required. Plaintiffs’ applications can be considered in a similar way.
[16] In many cases, a plaintiff will already have a straightforward case where a defendant does not really have anything to assist it. In those cases requiring discovery is simply unnecessary. In other cases there may be such a dispute that requiring documents to be provided is not going to assist one way or the other in establishing whether there is or is not an arguable defence.
[17] In a plaintiff ’s application, the documents that a plaintiff might want discovered have to be documents that would establish a “king hit” against the defendant. In this case, that “king hit” is only on the issues of the reasonableness of the agistment charges and the plaintiff’s acceptance of those agistment charges.
[18] The plaintiff ’s case is that it regularly invoiced the defendant for agistment charges from August 2008. The defendant accepted the charges for a long period without demur. The plaintiff therefore has a respectable argument based on the course of dealing that the defendant accepted the charges. It seems to me that while the defendant has queried the charges, the plaintiff already has a respectable argument in support of its claim. In asking for discovery of the defendant’s GST records it is really going for the “icing on the cake”.
[19] I also take into account just how much weight can be placed on the GST records of the defendant. The GST records are communications between the defendant and the Inland Revenue Department. It is still the case, I think, that as communications between the defendant and the Inland Revenue they can be treated as admissions of liability. But they are not communications with the plaintiff and there is not any kind of estoppel binding the defendant in her dealings with the
plaintiff. Even though there is nothing like an estoppel here, there may be admissions. But, as admissions, they are somewhat unusual admissions. They may go towards establishing an acceptance of liability. But there is room for argument as to the weight to be put on them as admissions. They are not necessarily unequivocal admission of liability, given that it is always open to amend GST returns and to ask the Inland Revenue to look at matters afresh.
[20] Looking at the matter overall, I am concerned that summary judgment applications are intended to be summary. They are meant to be a limited enquiry whether a defendant has an arguable defence - and no more than that. Discovery is discouraged simply because indulging in discovery operates against the speedy disposal of summary judgment applications. It tends to turn what has simply been an enquiry whether a defendant has an arguable defence into a kind of “mini trial”.
[21] For these reasons, in my discretion, this is not an appropriate case to order discovery. I think the case is capable of argument as matters presently stand, without requiring the defendant to make further discovery. Accordingly, I dismiss the application.
Costs
[22] The summary judgment application is going to be heard on its merits on
5 March 2012. It may be better for the Judge who hears the application to deal with costs in the light of the outcome of that application
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R M Bell
Associate Judge
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