White v James Hardie New Zealand Limited
[2021] NZHC 930
•30 April 2021
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2015-404-2981
[2021] NZHC 930
BETWEEN KAREN LOUISE WHITE AND THE PERSONS LISTED IN SCHEDULE 1
Plaintiffs
AND
JAMES HARDIE NEW ZEALAND LIMITED
First Defendant
STUDORP LIMITED
Second DefendantContinued next page
Hearing: On the papers Counsel:
S Hunter QC, S Hughes QC, A Thorn and R Havelock for Plaintiffs
J Hodder QC, J McKay and L Fraser for Defendants
Judgment:
30 April 2021
JUDGMENT (NO 9) OF WHATA J
Re: Costs on discovery
This judgment was delivered by me on 30 April 2021 at 11.30 am, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar Date: ………………………….
Solicitors: Adina Thorn Lawyers, Auckland
Chapman Tripp, Auckland
WHITE v JAMES HARDIE NEW ZEALAND LIMITED [2021] NZHC 930 [30 April 2021]
JAMES HARDIE NZ HOLDINGS LIMITED
Third Defendant
RCI HOLDINGS PTY LIMITED
Fourth Defendant
JAMES HARDIE AUSTRALIA PTY LIMITED
Fifth Defendant
JAMES HARDIE RESEARCH PTY LIMITED
Sixth Defendant
JAMES HARDIE INDUSTRIES PLC
Seventh Defendant
[1] In my Judgment (No 8) I resolved nine priority discovery issues (see Appendix A) raised by the plaintiffs largely in favour of the defendants (James Hardie).1 Both the plaintiffs and the defendants seek costs as follows.
[2] James Hardie seek costs of $105,238.13 and disbursements of $13,181.69, totalling $118,419.82, attributed to:
(a)18 December 2019 hearing (parts of plaintiffs’ application dated 29 November 2019): scale (3B) costs of $25,239.50. This includes the preparation of a bundle for the hearing.
(b)18 March 2020 hearing (part of the plaintiffs’ amended application dated 12 March 2020): scale (3B) costs of $12,708.00.
(c)6-7 August 2020 hearing (both plaintiffs’ second amended application dated 8 May 2020 and supplementary application dated 22 May 2020): scale (3B) costs of $53,832.50, together with an uplift of 25 per cent, totalling $67,290.63. This includes the costs of preparing a bundle and two sets of costs in respect of the two applications (oppositions and submissions on each).
(d)Disbursements of $13,181.69. And,
(e)Costs for preparation of the defendants’ costs memorandum, on a 2B basis, because of the particularly complex application for costs.2
[3]The plaintiffs’ corresponding position on costs is:
(a)18 December 2019 hearing: the plaintiffs accept they should pay (3B) scale costs to the defendants, except in relation to supporting affidavits (of Mr Petrie and Ms Bat-Leah). Therefore, the plaintiffs calculate total costs payable as $14,649.50.
1 White v James Hardie New Zealand (No 8) [2020] NZHC 2202 [Judgment No 8].
2 Referencing Prattley Enterprises Ltd v Vero Insurance New Zealand Ltd (2017) 23 PRNZ 484;
Body Corporate Administration Ltd v Mehta [2013] NZHC 213.
(b)18 March 2020 hearing: the plaintiffs claim 80 per cent of scale (3B) costs against the defendants of $10,166.40 (the total being $12,708.00). They also seek an uplift of 20 per cent for the defendants’ general conduct. Therefore, the total sought against the defendants, inclusive of this uplift, is $12,199.68.
(c)6-7 August 2020 hearing: the plaintiffs claim 80 per cent of scale (3B) against the defendants in respect of the 8 May and 22 May 2020 applications that were the subject of this hearing, of $31,770.00 (total being $39,712.50). They also seek a 20 per cent uplift on this amount, totalling $38,124.00.
(d)Disbursements of $440.00, for the costs of filing the four interlocutory applications dated 22 November 2019, 12 March 2020, 8 May 2020 and 22 May 2020.
[4] I have resolved that, subject to a minor reduction in one discrete respect, the defendants should have their costs on a 3B basis and corresponding disbursements in respect of the 19 December 2019 and 6-7 August hearing to be fixed by the registrar. Costs on the March 2020 hearing should lie where they fall.
[5]My reasons follow.
Background
[6] To make sense of the outcome it is necessary first to retell the background, including as it relates to the Waitakere proceedings (which were at that time dealt with together with these proceedings) as set out in my Judgment (No 8) as follows:
[2] The central claim in both the White and Waitakere proceedings is that the defendants (collectively, James Hardie), manufactured, supplied or promoted defective exterior cladding products, sold under the brand names “Harditex”, “Monotek” or “Titan” (the James Hardie products). Approximately 1,246 properties are claimed to be clad with defective James Hardie products. Of those properties, 1,236 are residential homes, five are commercial buildings and five are retirement villages. The five retirement villages are the plaintiffs in the Waitakere proceedings. The primary issues raised by the plaintiffs in their proceedings are set out in Schedule 1.
[3] The hearing of this matter has been split into two stages with the following issues to be addressed at stage one:3
(a)who is responsible for the design/manufacture/sale of the James Hardie products and related product information;
(b)whether the James Hardie products are defective;
(c)whether the defendants knew/ought to have known about any defects, and
(d)whether the defendants breached any common law or statutory duties in respect of the James Hardie products or James Hardie product information.
[4] The trial date for stage one was set down to commence on 3 May 2021. Tailored discovery orders were subsequently made in two bites, with the result being that James Hardie was required to discover the following classes of document:4
A.Product Development
B.Testing
C.Promotional Material
D.Customer Complaints
E.Harditex Improvement Project
F.Decision to withdraw Old Product and Introduce New Product;
G.Industry Study Tour of USA and Canada
H.Technical Literature;
I.Documents Identifying Risks or Defects or liability relating to James Hardie Products;
J.Insurance documents
K.Training Documents
L.Site Visits
M.Customer advice
N.Correspondence with Industry and Regulatory Bodies
P.Licensing arrangements
3 White v James Hardie New Zealand [2018] NZHC 1627.
4 White v James Hardie New Zealand (No 2) [2018] NZHC 2812; and White v James Hardie New Zealand (No 4) [2019] NZHC 1543.
Q.Sales Figures
U. Agency, representation, joint venture or similar arrangements
[5] A large set of search terms were also sought by the plaintiffs and later adopted by James Hardie. Directions were also made for tranches of discovery by specified defendants to be provided, with a final tranche of discovery to be provided by all defendants by 13 September 2019.5
[6] Discovery did not go smoothly. Deadlines for making discovery were not met and the plaintiffs’ demands for further and better discovery continued to evolve. Illustrative of this, the plaintiffs have – since my first discovery orders – filed a further six applications.6 Three of them are described, together with the supporting evidence, in my judgment issued on 3 April 2020 (Judgment No 7).7 Some of what the Waitakere plaintiffs called “priority discovery” issues were resolved by that judgment, with other issues deferred for later consideration.
[7] My Minutes 31 – 37 then followed, all dealing with discovery. In my Minute 31,8 I set down a timetable for the resolution of the remaining discovery issues. The White plaintiffs were to file a second amended interlocutory application in relation to discovery by 8 May 2020, and the Waitakere plaintiffs were to file an updating memorandum that same day. Any notice of opposition and memorandum in reply were to be filed by 22 May 2020. James Hardie were to provide an updated discovery list (in accordance with the amended schedule of document types agreed with the Waitakere plaintiffs) by 1 June 2020. A hearing was to be fixed after 5 June 2020, including in respect of James Hardie’s further application for security for costs. That timetable was optimistic.
The remaining applications
[8] In their memoranda of 8 May 2020, the Waitakere plaintiffs identified the remaining discovery issues and proposed timetabling orders. They also foreshadowed a problem with the generic listing of “James Hardie” in the “Author/Receipt Fields” and the lack of job titles for the custodian of documents.
The White plaintiffs’ second amended and supplementary applications
[9] The White plaintiffs, in their 8 May 2020 application, sought additional orders that:
(a)the defendants file further affidavits as to the methodology employed by the defendants, why and how custodians were identified, confirmation as to whether certain archives have been searched and relevant documents discovered and, if not, why not;
5 Minute (No 19), dated 13 May 2019.
6 On 29 November 2019, 6 December 2019, 8 May 2020, 22 May 2020, 15 June 2020, 21 July 2020.
7 White v James Hardie New Zealand (No 7) [2020] NZHC 685.
8 Dated 1 May 2020.
(b)the defendants shall treat an additional 50 persons as custodians;
(c)the defendants provide a further affidavit in relation to categories of documents listed in Schedule 3 to the application;
(d)the defendants search for and discover relevant non- privileged documents using additional search terms listed in Schedule 4 to the application;
(e)the defendants produce copies of the documents listed in Schedule 5 to the application (privileged documents) for inspection by the Court for the purpose of deciding the validity of the privilege claimed; and
(f)the defendants produce copies of the documents listed in Schedule 6 to the application (masked documents) for inspection by the Court.
[10] Further issues arose out of the defendants’ provision of further documents on 8 May 2020, culminating in the White plaintiffs’ supplementary application of 22 May 2020 in which they seek orders:
(a)for production of documents relating generally to management reports and related documents (as identified in Schedule 1 to the application);
(b)for the defendants to produce copies of documents in Schedule 2 to the application (specified documents identified by the defendants as privileged documents) for inspection by the Court;
(c)for the unmasking of specified documents; and
(d)specifying a final date for discovery.
[11] As a result of the various memoranda, a hearing date for one to two days to hear all remaining matters was set down for 6 July 2020.9 10 priority issues which remained to be resolved were identified. Given this, expert caucusing and the appointment of independent counsel to assist on reporting on the outstanding discovery issues was mooted. It was envisaged that members from each of the discovery teams should be able to caucus and reach agreement in relation to seven of the remaining issues and that independent counsel should be able to report on the balance of matters.
[12] Minute (No 34) recorded the agreement of the parties to the appointment of independent counsel and conferral between the discovery teams, and a timetable for conferral was fixed. The independent counsel process had to be deferred, given issues relating to identification and an appropriate person to assist.
9 Minute (No 33), dated 25 May 2020.
[13] In Minute (No 35),10 the role of independent counsel was revisited. A direction was made that independent counsel should address all remaining issues and report to the Court on the proper management of those issues. The issue of independent counsel was revisited in Minutes (No 37) and (No 38).11 A fixture was also allocated and a timetable set down for that purpose.
[14] Minute (No 39) refers to and attaches a copy of instructions to independent counsel.12 The instructions noted the primary task was to assist the parties and the Court in the resolution of the remaining discovery issues.
Amended interlocutory application by Waitakere plaintiffs
[15] On 15 June 2020, the Waitakere plaintiffs filed an amended application. It has been overtaken by a second amended application of 21 July 2020. As that application requires leave, it remains necessary to describe the 15 June application. In summary that application seeks four orders. First, an order for compliant discovery in relation to Class J and Class I categories on the grounds that the defendants have discovered incomplete documents in both these categories. Second, an order that the defendants search for documents in the control of six persons (Messrs Gustafson, Gries, Salter, Baker, Fisher, Loduwick) on the grounds that James Hardie holds mailboxes for them and no proper basis for excluding searches of them has been provided. Third, that leave be reserved to the plaintiffs to apply for such further orders as may be necessary in relation to above. Fourth, that the costs of the application, and incidental costs, should be awarded to the plaintiffs.
Caucusing and independent counsel process
[16] T he independent counsel process below is addressed below. Caucusing of the discovery teams took place on one occasion, on 15 June 2020. No report on that process was produced. That is regrettable because the Court has no clear understanding as to the outcomes of that process. Unhelpfully, correspondence between the parties concerning the matters discussed at the conferral is included in the bundles provided by the parties. It is not the function of this Court to wade through volumes of correspondence to ascertain material outcomes of the caucusing process or other discussions between the parties. I simply understand that it facilitated resolution of some issues but also triggered new issues and/or the refinement of issues. It seems that second amended application by the Waitakere plaintiffs refers to some of these new and/or refined issues.
Second amended application by Waitakere plaintiffs
[17] As mentioned above, on 21 July 2020 the Waitakere plaintiffs filed a second amended interlocutory application for orders that:
(a)In respect of Class J documents (insurance documents), the defendants:
(i)discover specified documents (e.g. proposal or renewal forms, notifications, insurance policies, or
10 Dated 9 June 2020.
11 Dated 12 June 2020 and 16 June 2020 respectively.
12 Dated 23 June 2020.
other specified documents referred to in discovered documents) or otherwise confirm that they do not exist;
(ii)confirm they have correctly applied the test for relevance in relation to specified documents; and
(iii)provide copies of their document retention/destruction policies for the period 1980 to 2006.
(b)In respect of Class I documents (documents identifying risks, defects or liability relating to James Hardie Products), the defendants:
(i)discover (or otherwise confirm that they do not exist), all relevant board materials, documents related to Team management, Group Business Results that discuss or identify risks, defects and/or liability, product development monthly reports, and product development meeting minutes;
(ii)produce documents incorrectly listed as privileged; and
(iii)confirm that they have searched all repositories/locations where the relevant materials are likely to be stored.
(c)The defendants provide their document retention/destruction policies and information as to why certain documents are not recoverable.
(d)The defendants treat six persons (Messrs Gustafson, Gries, Salter, Baker, Fisher, Loduwick) as custodians and discover all relevant documents obtained from them.
(e)The Court set aside or modifies the defendants’ claim to privilege over specified documents (which also appear to include insurance-related documents).
[18] Given the lateness of this amended application, leave to file the application was required. This aspect is dealt with below.
[7] Judgment (No 8) also sets out in detail the background to the discovery process undertaken by James Hardie. It is not necessary to repeat it here. I simply note the following:
(a)the discovery undertaken was vast, comprising a discovery universe of 1,710,428 documents, a review set of 233,811 documents and a
disclosure set of 28,495 documents, which, in the end, was thorough and beyond serious criticism;
(b)however, reflecting the sheer scale of the exercise, the discovery process was iterative and the rationale behind it was not always clear;
(c)various timetabled deadlines for discovery were also missed;
(d)the plaintiffs, bewildered by the scale, nature and form of the discovery and concerned about delay, pressed hard for clarity as to the scope and timing of the discovery. This manifested itself in multiple evolving applications, corresponding affidavits and culminated in hearings in December 2019, March 2020 and August 2020;
(e)in order to bring some definitive clarity to the discovery process and outputs, the parties (eventually) agreed to expert caucusing and an independent counsel process;
(f)the caucusing process proved largely futile, but the independent counsel process succeeded in bringing the requisite clarity. As I noted in Judgment No 8:
[121] … Ms O’Gorman’s report was thorough, careful and balanced. She had undertaken the type of fine-grained review I had envisaged. It was of considerable assistance to me. Her substantive analysis was not seriously criticised by any counsel. The primary complaints of the plaintiffs were that Ms O’Gorman was said to have trespassed outside her brief into an adjudicative role, failed to take into account all the post-caucusing proposals and did not accurately record the White plaintiffs’ position. I do not accept these complaints. As noted, Ms O’Gorman was tasked with assisting the parties and then the Court with the resolution of the remaining issues and she has done exactly that. In short, she has assessed whether and to what extent, if at all, the issues raised by the plaintiffs require further action by the defendants. She has made recommendations that correspond to that assessment. Any purported failure to take into account post-caucusing proposals or the position of the parties does not materially derogate from the substance of her recommendations.
(g)The plaintiffs pressed on with their remaining issues which, as I have noted, the defendants largely showed to be inconsequential.
Thresholds
[8] The party who succeeds is usually entitled to their costs according to scale.13 That scale is usually 2B, but in complex cases the scale might properly be adjusted in whole or in part to 3B.14 Costs, however, may be increased or decreased depending on, among other things, the conduct of the parties in the litigation.15 In some cases, costs may be shared where success is shared,16 but success on more limited terms is still success.17
Argument
Success
[9]Both parties claim success.
[10] The plaintiffs submit they were successful in their 8 May and 22 May 2020 applications (together, the May 2020 Applications) dealt with at the hearing on 6-7 August 2020. They claim success in the resolution of the “most significant” discovery issues prior to the hearing of the applications, and during the independent counsel process. They refer to the Microsoft Teams-related search issues (issue 8) and additional search terms (issue 9). In particular, the plaintiffs highlight the 322 documents discovered in respect of issues 8 and 9, “many” of which they say are “highly significant”. The plaintiffs also submit they were reasonable in abandoning and narrowing certain issues (namely issues 1, 3 and 8), but maintain the defendants’ explanations were required before they could do so. But for their pursuit of those applications, the plaintiffs say the defendants would not have agreed to resolve those six issues.
13 High Court Rules 2016, r 14.2.
14 High Court Rules, rr 14.3 and 14.5.
15 High Court Rules, rr 14.6 and 14.7.
16 See, for example, the Court of Appeal’s decision in Packing In Ltd (In Liq) v Chilcott (2003) 16 PRNZ 869 (CA) at [5] per Tipping J.
17 Weaver v Auckland Council (2017) 24 PRNZ 379 (CA) at [26].
[11] The plaintiffs characterise the issues for determination in Judgment (No 8) as “residual” and “relatively minor”. While Ms Thorn notes the Court made ten directions in favour of the plaintiffs, she concedes the Court declined to grant the further orders they sought. However, Ms Thorn submits this should be read “… in context: the discovery matters before the Court represented only a minor proportion of the totality of discovery issues between the parties”.
[12] The defendants respond the plaintiffs are not entitled to costs on the May 2020 Applications. They claim costs should be awarded against the plaintiffs because, save for five discrete issues,18 the Court declined to grant orders sought by the plaintiffs. In any case, the defendants say they had already offered to provide the documents or fulfil the requests at the heart of those issues, or in the case of producing documents for inspection by the Court, Bell AJ found them irrelevant. The defendants say these offers—“such as a search string run to resolve additional search term and additional custodian issues”—were reasonable and “over and above what the Court would have ordered.” The defendants refer to the Court’s findings on the remaining orders sought by the plaintiffs, which the defendants say were all in their favour. In addition, the defendants claim this list does not include issues they say the plaintiffs pursued following the independent counsel report, but abandoned prior to the hearing.
[13] The defendants also say the plaintiffs have put forward an incomplete picture of relevant correspondence in their submissions, and the plaintiffs’ claim the defendants produced “highly significant” documents only as a result of their applications is untrue. In response to this claim, the defendants submit the most relevant documents were in fact produced as a result of their ongoing discovery obligations. Only a small number (36), out of tens of thousands, of documents searched were discovered as a result of the May 2020 Applications. Accordingly, the defendants’ position is that the plaintiffs’ exercise ultimately yielded “no results” in reality, and is demonstrative of the their “unrelenting” and “futile” pursuit of increasingly expansive discovery.
18 Concerning the Teams searches; confirming deeds related to defects; board papers; discovery of additional documents James Hardie had agreed to discover; and the production of two documents for review by Bell AJ.
Assessment
[14] James Hardie was ultimately the successful party, as reflected in the body of Judgment (No 8) and in the final orders made. With respect to Ms Thorn’s submissions otherwise, the plaintiffs pursued multiple substantive discovery issues at the last hearing and capitulated or lost on all of them, except in relatively minor respects. There may have been ‘wins’ on the way through, but (subject to what I have to say in respect of the March hearing) they do not individually or cumulatively undermine the success enjoyed by James Hardie when it counted most: at the substantive hearing of the May 2020 Applications in August 2020. The approach taken to discovery may also have contributed to the need for the applications and the hearings, but that goes to question of increased or reduced costs (which I return to below), not the issue of success in the result.
[15] As to the March 2020 hearing, I am however satisfied success should be treated as evenly shared. In my Judgment (No 7)19 I expressed the following view:
[56] The defendants did not have an adequate opportunity to respond to the latest amended application or the further round of evidence from the White plaintiffs. Therefore, I cannot fairly resolve the fresh issues raised by the White plaintiffs. In this regard, I propose to convene a telephone conference for timetabling purposes. This will also need to address timetabling in relation to items (d) and (e).
[57] I nevertheless want to indicate where I am currently sitting on the White plaintiffs’ application:
(a)Based on the evidence of Mr McKenzie, the defendants have not adequately explained whether specified document types (see [34]) have been discovered and if not, why not – this needs to be addressed.
(b)A proper explanation is also needed as to how the custodians were identified, and why certain others have not been identified as custodians. Unless an adequate explanation is forthcoming, my current view is that all previous and current directors should be identified as custodians.
(c)The additional search terms “GMT” and “RMT” would appear to be justified having regard to the role apparently played by the GMT and RMTs in relation to leaky building issues.
19 Above n 7.
(d)Save in respect of the request for searches of the terms “GMT” and “RMT”, it is not clear to me why the existing search terms are insufficient, and in particular:
(i)Why and how existing search terms have failed to identify relevant documents;
(ii)why and how the new search terms will identify additional relevant documents not already discovered; and
(iii)why the new search terms are needed in respect of all categories of discovery.
[16] I also referred to the possibility of expert caucusing and independent counsel, which was subsequently utilised, I think, to the ultimate benefit of all parties in terms of securing a clear and transparent discovery process. It seems to me therefore that while there were no final orders either way, the March 2020 hearing and related applications served an important purpose for all parties and were thus justified. The proper outcome is therefore that costs in respect of this hearing and associated preparation should lie where they fall.
Increased or reduced costs
The plaintiffs’ position
[17] The plaintiffs claim an uplift of 20 percent against the defendants for the applications heard on 18 March 2020 and 6-7 August 2020 respectively for contributing unnecessarily to the time and expense of the proceeding, or a step in it, in the meaning of rr 14.6(a)-(c) of the High Court Rules by:20
(a)failing to comply with discovery orders;
(b)failing to accept an offer of settlement without reasonable justification; and
(c)“other” reasons justifying increased costs.
20 And in reference to Bradbury v Westpac Banking Corporation [2009] 3 NZLR 400 (CA).
[18] While framed as a claim to uplift, given where I have got to, these matters more properly go to the issue of whether any costs award against the plaintiffs should be reduced.
[19] The plaintiffs submit a “broad rather than granular” approach should be taken to the question of reasonableness here, given the scale and complexity of proceedings. Extensive and detailed submissions are provided on these arguments.
[20] First, the plaintiffs identify instances in which they say James Hardie did not comply with discovery orders, for want of (among other things) specificity, completeness, compliance with the High Court Rules, or employing unorthodox approaches to providing discovery materials (for example the “collective” approach to discovery which the Court of Appeal endorsed). Appendix B includes a schedule of the alleged failings. My concerns in Judgment (No 7),21 already mentioned above, were also noted.
[21] Secondly, the plaintiffs say an adjusted award of costs is warranted because the White plaintiffs made two Calderbank offers to the defendants in an attempt to resolve discovery issues outstanding, on 25 February 2020 and 16 April 2020, which they unreasonably refused. In respect of the first (concerning attempts to resolve four issues outlined in the 25 February 2020 letter) the plaintiffs contend the defendants accepted the offer only to a very limited extent. In respect of the second, it is contended they did not even respond to the offer but later agreed to some of those matters during the independent counsel process.
[22] Finally, under r 14.6(c), “other reasons” justifying an award of increased costs, the plaintiffs submit:
(a)The defendants drip-fed discovery and missed deadlines, “[i]n many cases…timed to ambush key events”, disrupting the resolution of discovery issues and causing unnecessary costs to the plaintiffs.
21 Above n 7.
(b)The defendants failed “to engage in discovery issues and to make constructive proposals”. The plaintiffs refer to the first general proposal to resolve matters on 3 June 2020, which was superseded by the independent counsel process and by a schedule provided on 18 June 2020. Many of the proposals were promptly accepted by the plaintiffs. But the defendants then refused to take certain steps, or undertook various steps that ultimately left matters unresolved. This included defendants changing their position, failing to specify dates, or refusing to carry out the substance of orders sought by the plaintiffs, instead proposing unworkable alternatives (merging separate requests, including from the separate Waitakere proceedings). The plaintiffs say issues regarding custodians and additional document searches could have been resolved earlier but for this approach by the defendants.
(c)The defendants’ “Statement of Position” document, which they provided to independent counsel, was unduly lengthy and contravened the Court’s direction that process was not to be adjudicative. This caused the plaintiffs time and cost to review.
(d)“[F]ailure to follow through on proposals accepted by White plaintiffs”: in respect of issue 1 (cloud-based storage); issue 5 (roles of additional custodians); and issue 8 (Board documents); the plaintiffs say the defendants either provided out of time, or had not provided prior to the hearing steps they said they would take.
(e)The defendants’ approach to privileged and irrelevant documents was unsatisfactory. Generally, the plaintiffs complain the defendants provided insufficient descriptions of documents and inappropriately and heavy-handedly masked for irrelevance and privilege, including failing to differentiate whether masking was under the grounds of irrelevance or privilege. The plaintiffs point to a specific instance of this on the day before documents were due with independent counsel, although they concede independent counsel ultimately found they were largely irrelevant or privileged. Despite this, the plaintiffs submit the
defendants’ approach described above left them “no choice but to make the challenge”. They also note the defendants were delayed in providing headings they agreed on to clarify their position in respect of the documents, resulting in a Court order in Judgment (No 8) at [220](h).
James Hardie’s position
[23] The defendants submit costs against the plaintiffs should be uplifted by 25 per cent.22 They contend the plaintiffs acted unreasonably, and increased the time and expense of the proceeding, in the meaning of r 14.6 of the High Court Rules23 by pursuing nine “meritless” arguments to the August hearing following the independent counsel report and the defendants’ reasonable offers, which would have resolved issues and disposed of the need for the hearing. For example, the defendants refer to offers they made to resolve the additional custodian and search term issues on 3 June 2020 and 3 July 2020. The plaintiffs did not accept these offers, which the defendants say were more beneficial to the plaintiffs than what would have been ordered had the issues not been resolve during the hearing. The defendants also point to an offer they made during the hearing agreeing to confirm inquiries relating to insurance documents. They submit the Court was not prepared to make order to that effect, therefore the defendants’ offer was more generous than any outcome the plaintiffs would have received from the Court.
[24] The defendants also claim 50 per cent of the fees of independent counsel as a disbursement. The defendants submit the plaintiffs “attempted to impede” the process and, at times, “failed to meaningfully engage”. Several examples are provided, including seeking recusal of counsel, refusal to engagement with a joint report on caucusing, subverting the Court’s directions regarding any issues with cost, unduly narrowing the scope of the counsel’s report and criticising counsel’s draft report.
[25] The parties initially agreed each party would pay one-third of independent counsel’s fee. The defendants now say, given their “overwhelming success”, the
22 Relying on Jarden v Lumley General (NZ) Ltd [2016] NZHC 2820.
23 Referencing Bradbury v Westpac Banking Corporation, above n 20.
plaintiffs’ “attempts to stymy the process” and the plaintiffs’ decision to proceed to the August 2020 hearing despite the independent counsel’s reports, the defendants should recover $11,883.33, as half of their payment of Ms O’Gorman’s fee (being 50 per cent of $23,766.67, which is one third of the total fee) from the plaintiffs by way of disbursements. They also seek to recover half of their share of Ms Armstrong’s fee ($651.67) on the basis the plaintiffs’ request to recuse counsel incurred unnecessary cost, and the defendants “ultimately enjoyed total success in the independent counsel process”.
Assessment
[26] Save in one respect noted below at [28], I am satisfied that there should be no uplift or reduction in costs. Both parties have reason to be dissatisfied with the discovery process including for some of the reasons just mentioned by them. Overall, the discovery process was like a long rolling maul, with infringements by both sides. It ultimately collapsed, and James Hardie ended up with better field position. But I cannot assess where fault overall starts or finishes. Rather, I can simply observe that neither the plaintiffs nor the defendants can claim the high moral ground or that one party was more or less reasonable than the other. To illustrate, I accept, for example, that the criticisms recorded above at [20] and [22] relating to the timing and form of the discovery have some justification.24 As I have said, it left the plaintiffs bewildered at times. Conversely, the independent counsel process should have brought matters to a close. It should have been clear to the plaintiffs that the majority of their concerns were not substantiated. I, nevertheless, reject the suggestion that the plaintiffs should pay an additional sum beyond that agreed in respect of independent counsel’s costs. I can see no basis for that. And, it would be unfair to do so—the costs-sharing arrangement was agreed.
[27] For completeness, the offers made are not “Calderbank” offers. The 25 February 2020 letter contained proposals which may have resolved the immediate issues discussed therein, but it is not at all clear to me that even if accepted it would have resolved all discovery matters. I make a similar observation in respect of the
24 For completeness, I do not consider that the defendants’ Statement of Position was disproportionate– the objective of the exercise was to resolve the discovery issues in their entirety.
April offer, noting also that it contained a reservation of rights on the part of the plaintiffs to seek further discovery and pursue other challenges.
[28] I consider the defendants’ costs for the preparation of the affidavits of Ms Bat- Leah and Mr Petrie to be a partial exception. Part of the information provided in them should have been provided as part of the discovery process—indeed the use of TAR should have been a matter of prior discussion—rather than in the context of a contested proceeding. I therefore reduce the costs claimable in respect of those affidavits by 25 per cent.
[29] Overall, this was a hard-fought, complex discovery process involving many steps, some of which could and should have been avoided. But, save in one discrete respect, the “fault” for this is in my view evenly shared.
Result
[30] James Hardie were successful. They are entitled to costs and disbursements as follows:
(a)in respect of the 18 December 2019 hearing (disposing of parts of plaintiffs’ application dated 29 November 2019), the plaintiffs are to pay the defendants’ costs on a 3B basis, with a partial reduction, in the sum of $22,591.50; and
(b)in respect of the 6-7 August 2020 hearing (disposing of both the plaintiffs’ applications dated 8 May and 22 May 2020), the plaintiffs are to pay the defendants’ costs on a 3B basis, with no uplift or reduction, in the sum of $53,832.50; and
(c)associated disbursements, to be fixed by the registrar.
[31] Costs in respect of the 18 March 2020 hearing (concerning part of the plaintiffs’ amended application dated 12 March 2020) are to lie where they fall.
APPENDIX A
The nine outstanding discovery issues requiring resolution at the hearing on 6-7 August 2020 was summarised in my Judgment (No 8) as follows:25
(a)Issue 2 – whether the defendants must file and serve a sworn affidavit of documents explaining how and why the additional custodians were selected.
(b)Issue 4 – whether the defendants should make additional enquires of identified persons.
(c)Issue 6 – whether the defendants should provide a sworn affidavit confirming whether they have in their control any of the types of insurance documents listed in Schedule Three, item 1 to the application, and if the documents are no longer in James Hardie’s control, identify who currently holds such documents.
(d)Issue 7 – whether the defendants should discover additional types of insurance documents.
(e)(In part) Issue 8 – whether the search and/or discovery of specified types of documents was adequate, namely: James Hardie “teams” documents; deeds of access, insurance and indemnity; board documents; specific document requests; and the insurance policy referred to in 2019 accounts.
(f)Issues 10, 11 and 12 – privileged, masked and irrelevant documents – whether the defendants have provided sufficient information in order to enable the plaintiffs to be able to assess their claims to privilege and whether the defendants’ approach to irrelevance is too extensive.
(g)Issue 13 – final discovery date. This relates to the plaintiffs’ request that a final date of discovery be allocated.
25 Above n 1, at [147]-[148].
APPENDIX B
(a)Each specified group of defendants did not provide tranches of discovery according to the stages in the Court’s Minute (No 19),26 which provided:
(i)by 17 May 2019, the first, second and third defendant shall provide a further substantial tranche of documents;
(ii)by 24 May 2019, the defendants will provide discovery of any documents relating to testing by other parties in other cases;
(iii)by 17 June 2019, the fourth, fifth and sixth defendants will provide the first substantial tranche of discovery;
(iv)by 17 August 2019, the fourth, fifth and sixth defendants will provide the second tranche of discovery. The seventh defendant will provide all discovery (subject to any residual discovery, which it may need until 13 September 2019 to provide); and
(v)by 13 September [2019], if necessary, a final tranche of discovery for all the defendants will be provided.
(b)Instead, the defendants collectively provided nine tranches of discovery on an informal basis between 7 December 2018 and 17 October 2019, informing the plaintiffs that a “final” sworn affidavit of documents would follow upon completion of discovery.
(c)The “final” sworn affidavit was served almost two months late (on 11 November 2019). Its content raised numerous questions as to the defendants’ compliance with the High Court Rules and as to the completeness of discovery (see below).
26 White v James Hardie New Zealand dated 13 May 2019.
(d)The defendants also provided discovery on a “collective” basis, which became a significant issue in itself. It is acknowledged that the Court of Appeal ultimately concluded that this was permissible. Nevertheless this manner of discovery was unorthodox and it was reasonable for the plaintiff to challenge it.
(e)The content of the sworn affidavit raised numerous questions as to the defendants’ compliance with the High Court Rules and as to the completeness of discovery:
(i)Failing to specify an author and/or recipient of each document—as the Court subsequently ordered under Judgment (No 7) dated 3 April 2020.
(ii)Disclosure to the plaintiffs for the first time of the defendants’ unilateral use of Technology Assisted Review, contrary to the High Court Rules requiring the parties to agree.27 This meant the plaintiffs had to engage an e-discovery expert to assess the adequacy of the defendants’ use of TAR.
(iii)Limited inquiries of New Zealand and Australian custodians, to the exclusion of others, despite the defendants operating in three countries, over a period of almost 40 years.
(iv)Limited searching of sources, to the exclusion of others (including any emails prior to 2006 and data on employer-issued computers/laptops/devices). As a result the plaintiffs needed to obtain their own expert evidence from forensic technology discovery expert.
(v)Limited discovery of certain document types, including board papers and insurance documents.
27 Sch 1, pt 9, item (3) at (2)(a)(ii).
1
8
1