Wild and Mackie Law Independent Trustee Limited v Honey
[2019] NZHC 499
•20 March 2019
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-2921
[2019] NZHC 499
BETWEEN WILD AND MACKIE LAW INDEPENDENT TRUSTEE LIMITED as
trustees of The Wild Family Trust PlaintiffsAND
MARTIN RUSSELL HONEY
First Defendant
PURE REALTY LIMITED
Second Defendant
Hearing: 5 November 2018 Appearances:
Ms J C Dickson and Ms E Keall for the Plaintiffs Mr J Dymock and Ms L Pearce for the Defendants
Judgment:
20 March 2019
JUDGMENT OF ASSOCIATE JUDGE SMITH
This judgment was delivered by me on 20 March 2019 at 11.00am, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors / Counsel: Simpson Grierson, Auckland Wooton Kearney, Auckland
WILD v HONEY [2019] NZHC 499 [20 March 2019]
[1] This is a dispute between the vendors of a property and the real estate agents who acted for them in the sale. Briefly, the vendors (the plaintiffs) say that they acted on the advice of the real estate agents in agreeing to sell the property for $1.85 million, notwithstanding their own belief that the property was worth at least $2.2 million. The day after settlement, the purchaser on-sold the property for $2.55 million. The plaintiffs allege that the defendants breached certain duties owed to them in relation to the transaction. They seek damages of $700,000 and certain other relief. The defendants deny liability.
[2] On 30 April 2018 the plaintiffs served interrogatories on the defendants, requiring them to answer on oath approximately 70 questions. The defendants' answers to 18 of those interrogatories did not satisfy the plaintiffs. By amended application dated 18 July 2018 they applied for orders directing the first defendant (Mr Honey), in his personal capacity and as a director of the second defendant (Pure Realty), to attend for oral examination in relation to the defendants' responses to certain of the interrogatories. In the alternative, the plaintiffs asked for orders directing the defendants to provide sworn answers to the disputed interrogatories.
[3] In the course of the hearing, agreement was reached that the defendants would provide a further affidavit answering some of the disputed interrogatories. In the end, the Court is required to determine (i) whether Mr Honey should be required to attend for oral examination; and (ii) if not, whether the defendants should be ordered to answer the remaining 10 disputed interrogatories.
[4]I now give judgment on those two issues.
The parties
[5] The plaintiffs are the trustees of the Wild Family Trust. From 11 March 2016 until 29 July 2016 they were the registered proprietors of the property at 102 Symonds Street, Royal Oak, Auckland (the property).
[6] Pure Realty is a licensed real estate agent and a member of the Ray White Group, with offices at Royal Oak and One Tree Hill. Mr Honey is a director of, and shareholder in, Pure Realty.
Background
[7] On 5 March 2016 the first plaintiff (Ms Wild), acting on behalf of the plaintiffs, discussed with Mr Honey listing the property for sale through Pure Realty. Ms Wild had seen another property at 18 Park Avenue, Grafton, Auckland (the Grafton property) that she was interested in buying.
[8] Ms Wild said that she told Mr Honey that the property was her only substantial asset, and that she needed to get the best possible price for it. She wanted the property sold by auction, and she said she relied on Mr Honey's expertise to achieve the best possible price for the property and protect her interests in selling it.
[9] On 9 March 2016 Ms Wild entered into a conditional agreement to purchase the Grafton property for $1.8 million, with settlement on 9 June 2016. There were two special terms of the sale:
(a)The purchase was conditional upon the purchaser entering into an agreement to sell the property for $2 million, such agreement to become unconditional no later than 14 April 2016;
(b)There was a cash-out clause, which may have resulted in an earlier unconditional sale after the vendor had given three working days' notice.
[10] The plaintiffs say that further discussions took place between Ms Wild and Mr Honey with regard to the marketing and sale of the property, in the course of which Ms Wild told Ms Honey the terms of the agreement to purchase the Grafton property. They say that Mr Honey told Ms Wild that he had appraised the value of the property at $1.7 million, and that it would be unnecessary for her to obtain appraisals from other real estate agents.
[11] Ms Wild was not happy with the appraisal at $1.7 million. She told Mr Honey that she thought the property was worth $2 million.
[12] An early auction date was arranged for the sale of the property (22 March 2016), and the plaintiffs formally appointed Pure Realty as sole agent on 9 March 2016.
[13] On or about 11 or 12 March 2016, Mr Honey presented Ms Wild with a written offer to purchase the property at $1.7 million. Ms Wild believed that the named purchaser was a woman she came to know as "Louisa", who she later identified as Ms Li Yi Tang. Louisa had visited the property with Mr Honey even before the property had been listed for sale, and she inspected it again some time before 16 March 2016, this time in company with a person believed to be Mr Ron Hoy Fong of the firm "Ronovationz". Ms Wild rejected the offer, as it was well below a price the plaintiffs were prepared to accept. They say that Ms Wild told Mr Honey the she wished to proceed with the auction sale.
[14] On 13 March 2016 the agent involved in the purchase of the Grafton property told Ms Wild that there were two unconditional offers for the purchase of the Grafton property, and that she had until the following Thursday (17 March 2016) to go unconditional. Ms Wild told Mr Honey that, as she had until 9 June to settle, she would talk to the bank about bridging finance. She told Mr Honey she did not want to "undersell the property", Mr Honey replied: "Ok good plan".
[15] On 14 March 2016, the cash-out clause in the agreement for sale and purchase of the Grafton was formally activated. The same day, Ms Wild told Mr Honey that she had applied for bridging finance to buy the Grafton property. The plaintiffs say, and the defendants deny, that Ms Wild told Mr Honey that the plaintiffs had already arranged an overdraft to cover the deposit on the purchase of the Grafton property and, with the deposit and bridging finance in hand, there was no urgency in the sale of the property. They contend that Ms Wild again told Mr Honey that she wanted to have the property properly marketed and sold by auction so as to get the best possible price for it.
[16] On 14 March 2016 an email was sent to all people who had expressed an interest in purchasing the property, advising that the plaintiffs' circumstances had changed, and that all offers would need to be presented by 5.00pm on 16 March 2016.
An open home was held at the property on 15 March 2016, and Mr Honey told Ms Wild after the open home that there was only one interested person in the
$1.7 million plus price bracket. That person was expected to make an offer in the next day or so.
[17] The plaintiffs say that Mr Honey told Ms Wild that there was no point in having the auction, and that it should be cancelled. Ms Wild reluctantly accepted that advice.
[18] Bridging finance was approved for the plaintiff's purchase of the Grafton property on 16 March 2016, and Mr Honey was advised of that fact the same day.
[19] On 17 March 2016 Mr Honey presented Ms Wild with another offer for the purchase of the property. The purchaser was named as Yan Rong Ren. The plaintiffs say that Mr Honey led Ms Wild to believe that Yan Rong Ren was the same person as Louisa (who was the only person Ms Wild understood had expressed interest in purchasing the property). The defendants deny that Mr Honey told Ms Wild that Yan Rong Ren was Louisa.
[20] The offer from Yan Rong Ren was for $1.85 million, with settlement on 9 June 2016. Under a special clause in the offer, if the purchaser did not want to settle on 9 June, settlement could be extended to 29 July 2016 on payment of an extra $10,000.
[21] The plaintiffs say that Ms Wild told Mr Honey that the purchase price was below what she believed the minimum value of the property was (at least $2 million), and that she did not want to accept the offer. They contend that Ms Wild told Mr Honey that, with bridging finance for the Grafton property now arranged, there was more time to obtain a higher sale price by selling the property at auction. They also contend that Ms Wild expressed concern to Mr Honey that the property was being sold to a speculator (which she was opposed to).
[22] The plaintiffs' case is that Mr Honey told Ms Wild that the property had been marketed well, and that there was no other interest in the property. For his part,
Mr Honey accepts that he told Ms Wild that there were no other offers, and that he had been able to talk the purchaser up from $1.7 million to the $1.85 million offered.
[23] The plaintiffs allege that Mr Honey made various other statements to Ms Wild at this time, including statements that the purchaser would not go ahead with the purchase of the property unless the extended time for settlement was agreed to, and that the purchaser (Louisa) was not a speculator. They allege that Mr Honey said that the purchaser intended to retain the home, except for the attached flat, and build another dwelling on the back section. The defendants deny that Mr Honey made either of those statements.
[24] The plaintiffs say that Ms Wild accepted Mr Honey's advice and relied on his judgment. On 17 March 2016 they entered into the agreement presented by Mr Honey, without amendment or counter-offer, believing they were entering into an agreement with Louisa.
[25] The deposit was then paid, and Pure Realty deducted its commission. The solicitors for the purchaser of the property later advised that their client "Lu and Ren Family Trust", wished to extend the settlement date to 29 July, and pay the extra
$10,000.
[26] On 27 May 2016, the purchaser's solicitors gave notice that Yan Rong Ren nominated Yan Mei Li to purchase the property.
[27] The plaintiffs allege that, unbeknown to them at the time, the nominated purchaser Yan Mei Li was a friend or business associate of an employee or licensee of Pure Realty, namely Min Yu Fang (known as "Mandy"). They further allege that Louisa and Mandy were related, or close friends, residing at the same address in Normans Hill Road, Onehunga.
[28] The defendants accept that on 31 May 2016 Mandy was employed by Pure Realty as an independent contractor. Otherwise, the plaintiffs' allegations, including as to the alleged relationship between Louisa and Mandy, are denied.
[29] The plaintiffs say that in late June 2016, the property was inspected by Louisa or the nominated purchaser, Yan Mei Li, accompanied by a person believed to be Mr Eric Wu, a licensee employed by or contracted to Pure Realty.
[30] The settlement of the sale of the property duly took place on 29 July 2016, and it was transferred into the name of Yan Mei Li. The day after settlement, the property was immediately listed with Pure Realty for sale. The defendants say that the listing agreement noted Mr Eric Wu and Mrs Joey Du as the licensees.
[31] It is common ground that on 28 August 2016 the property was sold at auction for $2.55 million through the agency of Pure Realty. The property was subsequently transferred into the name of Xinda Construction & Installation Engineering Ltd (Xinda).
[32] The plaintiffs contend that, as at 17 March 2016, the fair market value of the property was $2.2 million including GST (if any). They acknowledge that there was a general increase in the market between March 2016 and August 2016, and say that, as at 28 August 2016, a fair value for the property would have been $2.4 million –
$2.5 million.
[33] The plaintiffs plead a number of causes of action against the defendants. First, they sue under the Fair Trading Act 1986 (FTA), contending that the defendants were guilty of misleading and deceptive conduct in trade, contrary to s 9 of that Act. Secondly, they plead breach of contract, relying on an alleged implied term of the agency agreement that Mr Honey and Pure Realty would exercise all reasonable care and skill when advising them on the sale of the property and in acting as real estate licensees in the sale of the property. They contend that Mr Honey and Pure Realty breached the implied term in the same respects that are alleged to have been breaches of the FTA.
[34] There are two other causes of action pleaded against Mr Honey and Pure Realty. The first is in the tort of negligence, and the other alleges breach of fiduciary duties.
[35] The plaintiffs plead numerous particulars in support of their causes of action, including particulars relating to alleged misleading advice about the value of the property, resulting in the plaintiffs accepting the offer from Yan Rong Ren at
$1.85 million. They also allege that Mr Honey and Pure Realty failed to tell Ms Wild that there was a prospective purchaser, Lola Tupou, who was very interested in the property, and would have been prepared to pay a deposit of $130,000 (depending on the sale of her own property becoming unconditional by 28 April 2016).
[36] The plaintiffs further allege that Mr Honey and Pure Realty failed to fully disclose to them that they had acted for Louisa on a previous sale or sales of the property, and/or that Louisa had had a previous involvement with them. They say that the defendants failed to disclose to them the relationship between Louisa and/or Mandy and/or Yan Mei Li and/or the defendants, including the fact that Mandy was employed by, or a licensee of, Pure Realty.
[37] The plaintiffs contend that the defendants failed to disclose to them the purchasers' intentions with regard to the property, including those of Yan Mei Li, particularly as Ms Wild had made it clear to Mr Honey that she did not want the property sold to a speculator and on-sold at a profit. They say that Pure Realty and Mr Honey were guilty of misleading or deceptive conduct in failing to warn Ms Wild about speculators in the market, such as Ronovationz and/or Ron Hoy Fong and others, who targeted vulnerable vendors and bought properties at an undervalue (then selling at a substantial gain after carrying out a "cosmetic do-up").
[38] On the breach of fiduciary obligations cause of action, the plaintiffs allege that Ms Wild was a vulnerable purchaser, being a single mother selling her home. They say the defendants knew or should have known that the plaintiffs reposed trust and confidence in them. For those reasons, Mr Honey and Pure Realty are said to have owed duties to the plaintiffs to act with the utmost good faith, and with undivided loyalty to them.
[39] The defendants are also said to have owed various other fiduciary obligations, including an obligation to keep the plaintiffs fully and properly informed of all material matters relating to the sale of the property.
[40] The plaintiffs say that, in breach of those obligations, the defendants failed to protect the interests of the plaintiffs, and instead aided and promoted the interests of Yan Rong Ren, Louisa, and Yan Mei Li, to help them acquire the property at below market value. They further contend that the defendants failed to disclose a potential conflict of interest in promoting the sale of the property to Yan Rong Ren through Louisa and subsequently to Yan Mei Li. The potential conflict is said to have arisen out of the defendants' previous dealings with those parties or entities associated with them.
[41] Put broadly, the plaintiffs say that the defendants or either of them directly or indirectly facilitated or assisted Yan Mei Li making a profit on the resale of the property. They refer to the defendants' prior connections with Louisa, to her visit to the property before it was listed for sale, and to the advice given to Ms Wild that Louisa was the only person interested in the property. Mr Honey is alleged to have pressed the plaintiffs to accept the offer from Yan Rong Ren (believed to be Louisa), and the property was eventually on-sold through Eric Wu, acting as licensee for Yan Mei Li, who was herself a business associate of one of Pure Realty's licensees (Mandy).
[42] The defendants deny all of the allegations of breach of the FTA, breach of contract, and negligence. In respect of the cause of action for breach of fiduciary obligations, they admit that they owed a fiduciary duty of loyalty, consistent with their general duties to act in the best interests of their client, to act in good faith, and to not mislead, provide false information, or withhold information that should by law or fairness be provided to a client. All of the alleged breaches of fiduciary obligations are denied.
PLAINTIFFS' APPLICATION FOR AN ORDER THAT MR HONEY BE REQUIRED TO ATTEND FOR ORAL EXAMINATION ON CERTAIN OF THE INTERROGATORIES
[43]The plaintiffs rely on r 8.42. That rule provides:
8.42Insufficient answer
If a party fails to answer an interrogatory sufficiently, a Judge may, in addition to acting under rule 7.48,—
(a)if the party has made an insufficient answer, order the party to make a further answer verified by affidavit in accordance with rule 8.38; or
(b)order the party, or any of the persons mentioned in rule 8.41(1)(b) to (d), as the case requires, to attend to be orally examined.
Submissions for the plaintiffs
[44] Ms Dickson submitted that the circumstances justify an order for cross-examination of Mr Honey under r 8.42(b). She submitted that the defendants' answers to straightforward interrogatories were insufficient, and in the case of interrogatories 3 to 6, evasive. Cross-examination will help to ensure Mr Honey understands the questions being asked, and accordingly provides complete answers to them. She asked for an order that Mr Honey be ordered to attend for oral examination on the answers to interrogatories 3, 4, 5, 6, 15(a) to 15(b) and 19(a).
Submissions for the defendants
[45] Mr Dymock referred to Stephenson v Jones, where Koś J noted that, although there is provision for ordering oral examination ahead of trial in an appropriate case, it is a rare practice.1 Mr Dymock noted only one case in which such an order had been made, and it involved a litigant in person who was not answering the questions.2 He submitted that an order under r 8.42(b) is not warranted in this case. The defendants have not ignored the notice, or failed to take the matter seriously. They have answered most of the interrogatories, and have raised genuine objections to a select number of them.
Discussion and conclusions
[46] I accept Mr Dymock's submissions on this issue. An order under r 8.42(b) is rarely ordered, and I am not satisfied that this is case where such an order would be justified.
1 Stephenson v Jones [2015] NZHC 1455 at [59].
2 Hawkins v Ayers (1995) 9 PRNZ 138 (HC).
[47] The defendants have responded to approximately 70 interrogatories, and in the end the disputed interrogatories number only 10 or 11. The defendants' contentions relating to the meaning of the expression "dealings" (affecting interrogatories 3 to 6) was not in my view beyond reasonable argument, and the present case is distant from a case such as Hawkins v Ayers, where a litigant in person was simply not answering the questions.
[48] In Hawkins v Ayers, the Master said that Mr Ayers had been given every opportunity to put his house in order and to seek out the information that is required, but he elected not to give the Court any further answers, or satisfy the Court that he would or could seek further information. It appears that the Court in Hawkins v Ayers was dealing with an uncooperative litigant in person, rather than a litigant represented by competent counsel running a point that was not beyond reasonable argument.
[49] In this case, there is no reason to believe that the defendants, to the extent they have been ordered to do so, will not file full and complete answers to the disputed interrogatories they have been ordered to answer. The application for an order under r 8.42(b) is accordingly dismissed.
PLAINTIFFS' APPLICATION FOR AN ORDER THAT THE DEFENDANTS ANSWER INTERROGATORIES
The relevant rules
[50]Rules 8.38 and 8.39 of the High Court Rules 2016 provide:
8.38Order 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 8.39 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.
8.39Contents of statement
(1)A statement in answer to interrogatories must, unless a Judge otherwise orders, comply with this rule.
(2)A statement in answer to interrogatories must deal with each interrogatory specifically, either—
(a)by answering the substance of the interrogatory without evasion; or
(b)by objecting to answer the interrogatory on 1 or more of the grounds mentioned in rule 8.40(1) and briefly stating the facts on which the objection is based.
(3)The statement must set out above or opposite to each answer or objection the interrogatory to which it relates.
[51] A party served with interrogatories has a limited entitlement to object to providing answers. Rule 8.40 of the High Court Rules materially provides:
8.40Objection to answer
(1)A party may object to answer an interrogatory on the following grounds only:
(a)that the interrogatory does not relate to a matter in question between the parties involved in the interrogatories:
(b)that the interrogatory is vexatious or oppressive:
(c)that the information sought is privileged:
(d)that the sole object of the interrogatory is to ascertain the names of witnesses.
(2)It is not a sufficient objection that the answer to an interrogatory will determine a substantial issue in the proceeding.
…
(4)If the Judge determines that the objection is not sufficient, the application is not entitled to object to answer the interrogatory.
Interrogatories 3 to 6
The interrogatories and the defendants' answers
Question
3As at March 2016, had the defendants previously had dealings with Yan Rong Ren, the person named as the purchaser of the property in
the agreement for sale and purchase of the property dated 17 March 2016?
Answer
It is not clear what the plaintiffs mean by "dealings", but on the assumption that they mean having entered into an agency agreement, then the answer is no.
Question
4If the answer to the previous interrogatory is yes, what were the dealings that the defendants had had with Yan Rong Ren?
Answer
N/A
Question
5As at March 2016, had the defendants previously had dealings with Li Yi Tang, otherwise known as Louisa, in connection with the sale and purchase of property or any other dealings whatsoever with her?
Answer
It is not clear what the plaintiffs means by "dealings", but on the assumption that they mean having entered into an agency agreement, then the answer is yes.
Question
6If the answer to the previous interrogatory is yes, what were the dealings that the defendants had with Louisa, and on what date or dates were such dealings?
Answer
Agency agreements were entered into in respect of the following properties: 25 Brookfield Avenue, Onehunga – October 2006.
25A Brookfield Avenue, Onehunga – May 2007.
The plaintiffs' submissions on interrogatories 3 to 6
[52] Mr Honey has admitted that he knew Louisa prior to the first sale of the property, and that he knew that Mandy worked for Pure Realty. He has also acknowledged (in answer to an interrogatory) that he was aware that Mandy and Louisa knew each other. In those circumstances a key issue in the proceeding will be
whether the defendants made full disclosure to the plaintiffs of the defendants' previous relationships with Louisa and the purchasers of the property.
[53] Ms Dickson submitted that these interrogatories are each relevant to that key issue. The interrogatories are plainly stated, clear, and unambiguous. The defendants have interpreted "dealings" as the entering into of agency agreements, but that limited answer is insufficient and evasive. By limiting their answer to whether or not Louisa or Yan Rong Ren had entered into an agency agreement with the defendants, the defendants have essentially reformulated the question before answering it, something they are not entitled to do. The result is that the response provides little or no information about the extent of the relationship between the defendants and Louisa/Yan Rong Ren.
[54] Ms Dickson further submitted that these interrogatories are not oppressive or vexatious. The work required to answer them will be proportionate to the value of the facts sought. If Pure Realty considers that it may have had dealings with Louisa and Yan Rong Ren through any of its agents (past or present), then its obligation was to make reasonable enquiries of the agents it considers may have had those dealings. There is no indication in the evidence that Pure Realty has made those enquiries, even of current agents and staff.
The defendants' submissions on interrogatories 3 to 6
[55] Mr Dymock submitted that these interrogatories are deficient in a number of respects. First, the interrogatories are ambiguous, as it is not clear what is meant by "dealings". Alternatively, the interrogatories have been properly answered. Further in the alternative, the interrogatories are oppressive and unduly burdensome.
[56] As for the word "dealings", it is not clear whether it means anyone the defendants interacted with, or only the people they contracted with.
[57] In support of the submission that the interrogatories have been properly answered, Mr Dymock submitted that a real estate agent's business dealing is with a vendor, and the defendants have answered the questions in relation to "dealings" based
upon listing arrangements. They have therefore provided a substantial answer to these interrogatories.
[58] On the oppressive/unduly burdensome point, Mr Dymock said that Pure Realty has been actively trading for nearly 15 years, and Mr Honey has been working in the area for over 20 years. Mr Honey is unable to recall all the people he has dealt with over the past year, let alone everyone over the past 20 years. Pure Realty sells a large number of properties throughout Onehunga, Hillsborough, One Tree Hill, and Royal Oak each year, and each listing generally includes two to four open homes. In addition, many people will contact Pure Realty via text, email and telephone. Properties are commonly sold at auction, which many more people will attend. All told, Pure Realty will come across thousands of people every year in the course of their business, and many of their interactions with these people will be fleeting and unmemorable. The plaintiffs have not provided any limitations in terms of time, place or circumstances on these interrogatories.
[59] The plaintiffs' expectation appears to be for the defendants to review every open home register, email, text message and auction attendance sheet that has been created. In the case of Pure Realty, that would represent at least seven years of records; for Mr Honey, it would be over 20 years of interactions to be recalled. The defendants do not have the administrative capacity to undertake a task of that magnitude without significant disturbance to their business.
Discussion and conclusions on interrogatories 3 to 6
[60]The issue is over the meaning of "dealings".
[61] Dealing first with interrogatories 3 and 4, I accept Ms Dickson's submission that the word, used in its present context, cannot be limited to situations where Yan Rong Ren entered into an agency agreement with Pure Realty or Mr Honey under which they agreed to act as his agent in the sale or purchase of real property. In my view the word "dealings" must include any property or commercial agreements the defendants or either of them may have entered into with Yan Rong Ren (so that, for example, a joint venture between Pure Realty and Yan Rong Ren for the development
of a property, or other business dealing entered into for joint benefit, would be caught by interrogatories 3 and 4).
[62] I think that asking the defendants to answer on the basis that "dealings" includes every interaction that may have occurred between Yan Rong Ren and Pure Realty or Mr Honey, falling short of an actual agreement, would be oppressive.
[63] I direct that, within 20 working days of the date of this judgment, the defendants are to provide answers, verified by affidavit, to interrogatories 3 and 4 on the basis that the expression "dealings" is to be construed as including any commercial or property agreements entered into by Yan Rong Ren with the defendants or either of them.
[64] The same considerations arise in respect of interrogatories 5 and 6 (although it is even more clear from interrogatory 5 that the plaintiffs' intention was to capture dealings going wider than mere listing agreements). The result must be the same — the defendants were not entitled to limit their answers to those interrogatories as they have. I direct that, within 20 working days of the date of this judgment, the defendants are to provide answers, verified by affidavit, to interrogatories 5 and 6, on the basis that the expression "dealings" is to be construed as including any commercial or property agreements entered into by Li Yi Tang (otherwise known as Louisa) with the defendants or either of them.
Interrogatory 9(b)
The interrogatory and the defendants' answer
Question
9Document PRL.00068 of the defendants' discoverable documents includes an email sent by Lola Tupou to the first defendant dated 14 March 2016 at 16:21:
a)Was the information in this email conveyed to the plaintiffs or either of them?
b)If the answer is yes, please say how and when it was conveyed to the plaintiffs?
Answer
a)Ms Tupou's initial interest in the property was relayed to Ms Wild.
b)Verbally.
[65] In the course of the hearing Mr Dymock advised that Mr Honey has provided his answer to interrogatory 9(b) as to the "how" part of the question, but he omitted to say when the answer was conveyed to the plaintiffs. Mr Dymock advised at the hearing that the answer to the "when" aspect of interrogatory was provided by letter to the plaintiffs solicitors dated 4 July 2018. At the hearing, I directed that the answer on the "when" part of the question should be provided by sworn affidavit. I made a direction accordingly.
Interrogatory 10
[66] Mr Dymock noted that interrogatory 10(a) has been sufficiently answered, and that is not disputed by the plaintiffs. Interrogatory 10(b) was the subject of agreement at the hearing, recorded in my Minute dated 5 November 2018. No further order or direction is necessary in respect of interrogatory 10.
Interrogatory 13(b)
[67] At the hearing, Ms Dickson advised that the defendants have now provided a complete answer to interrogatory 13(b) (in Mr Honey's affidavit sworn in opposition on 1 August 2018). Accordingly, no orders are required on interrogatory 13(b).
Interrogatories 15(a) and (b)
The interrogatories and the defendants' answers
Question
15 Document PRL.00145 of the defendants' discoverable documents is a document dated 5 July 2016 whereby Yan Mei Li appoints Louisa her Power of Attorney:
a)On what date was the said Power of Attorney provided to the defendants?
b)Who provided the Power of Attorney to the defendants?
Answer
a)This information is not in the defendants' possession, but it is presumed that it was provided on or around 30 July 2016.
b)This information is not in the defendants' possession, but it is presumed that it was Yan Mei Li.
Submissions for the plaintiffs on interrogatories 15(a) and (b)
[68] The defendants say that the information is not in their possession. They then state what they presume the answer to be. Ms Dickson submitted that those answers are insufficient.
[69] Parties answering interrogatories have a responsibility to make enquiries of past and present employees and agents, although the answering party may be excused where the employee left the answering party's employment many years ago, or the former employee's whereabouts are no longer known. In this case, there is no evidence that the defendants have attempted to make relevant enquiries of former agents or employees. Ms Dickson noted that the document in question is a 2016 document, and would not call for extensive enquiries to be made of former employees. She submitted that the answers to these interrogatories are evasive, and the objection to providing more complete answers is without foundation.
Submissions for the defendants on interrogatories 15(a) and (b)
[70] Mr Dymock accepted that a party answering interrogatories is required to make enquiries of former employees or agents. In this case, Mr Honey has set out in his affidavit in opposition the enquiries he made in order to answer the interrogatories. He made enquiries with all employees and agents of Pure Realty who might reasonably be expected to have knowledge relevant to the interrogatories.
[71] The power of attorney relates to the on-sale conducted by Mr Wu and Mrs Du. Mr Honey has reviewed the power of attorney document and talked to current staff. Based on those investigations he has given substantial and specific answers, and those answers were sufficient. While they were qualified, Mr Honey would also have placed a similar qualification on any information he received from a third party.
[72] Mr Dymock noted that the plaintiffs' concerns appear to relate to whether enquiries were made of Eric Wu and Joey Du. They both left Pure Realty in the early part of 2017, and are now working for another agency. Neither of them was an employee — they were independent contractors. Mr Dymock submitted that an independent contractor is in a different position from a former employee. Pure Realty did not control how Mr Wu and Mrs Du performed their services, and there was no duty of loyalty such as an employee has to his or her employer. Mr Dymock submitted that in those circumstances the defendants' duty to make further enquiry did not extend to Mr Wu and Mrs Du.
[73] In the alternative, the defendants object to answering these interrogatories on the basis that their sole purpose is to seek the names of witnesses.3
Discussion and conclusions on interrogatories 15(a) and (b)
[74] The power of attorney document under which Yan Mei Li appointed Louisa as her attorney was dated 5 July 2016, and the agency agreement under which Yan Mei Li appointed Pure Realty (Eric Wu and Joey Du as licensees) to sell the property shows that the agency commenced with effect from 30 July 2016. The agency agreement was signed by Louisa "as POA for Yan Mei Li", and it is to be inferred that she did so using the 5 July 2016 power of attorney she held.
[75] Mr Honey explained in his affidavit in opposition that Ms Lyn Beere, Pure Realty's branch manager who signed the agreement, is no longer with the company, and he has not made enquiries of Eric Wu or Joey Du, Pure Realty's contracted licensees who acted on the on-sale of the property.
[76] The probability must be that Pure Realty received a copy of the power of attorney at some time between 5 July 2016 and 30 July 2016 when it was used by Louisa, and the issue raised by the plaintiffs appears to be whether the defendants knew about the relationship between Louisa and Yan Mei Li, the existence of which
3 High Court Rules, r 8.40, and Knapp v Harvey [1911] 2 KB 725 (CA) at 735. However, if the by-product of an otherwise admissible interrogatory will result in the disclosure of a name then it may be allowed: BNZ v Gardner (1990) 2 PRNZ 278 (HC) at 284.
was confirmed by the 5 July 2016 power of attorney, before the plaintiffs settled the sale of the property on 29 July 2016.
[77] Even if they were not employees of Pure Realty, it seems to me that Mr Wu and Ms Du acted as its agents in carrying out the marketing work on the on-sale of the property, and that Mr Honey's enquiries should have extended to making reasonable enquiries of them for relevant information necessary to answer the interrogatories. They were obviously persons to whom enquiry needed to be made, and it is not unreasonable to have expected the defendants to have done so.4 I direct that, in the affidavits the defendants are to provide within 20 working days, they are to provide a further answer to interrogatory 15(a) after obtaining such further information on it as they may be able to obtain from Mr Wu and Ms Du.
[78] Turning to interrogatory 15(b), this does seem to me to be an interrogatory directed to obtaining the name of a witness,5 and the relevance of the question is not clear. I decline to make any order in respect of this interrogatory.
Interrogatory 19(a)
The interrogatory and the defendants' answer on interrogatory 19(a)
Question
19Document PRL.00178 is a Transaction Report for the sale of the property to Xiao Yi Peng on 28 August 2016 at a sale price of
$2,550,000. At paragraph 20 the source of the listing is referred to as a "past client":
a)Who was the client referred to?
4 A party's duty in answering interrogatories extends to making enquiries of those who have acted as its agent — see Stansfield Properties Ltd v National Westminster Bank PLC [1983] 1 WLR 568 ChD, at 571:
If the answers do not at least state in general terms that the person swearing to them has made diligent enquiries of all officers, servants and agents of the company who might reasonably be expected to have some knowledge relevant to the questions, the party administering the interrogatories may justifiably question whether the company has discharged its obligations in answering the questions. In particular, if any person is an obvious source of knowledge, he must be questioned. If he is not, the company should say why.
5 Rule 8.40(1)(d).
Answer
This information is not in the defendants' possession, but the defendants presume that the past client was Yan Mei Li.
Submissions for the plaintiffs on interrogatory 19(a)
[79] Ms Dickson submitted that the defendants have again apparently made no enquiries with former employees or agents that were involved in the matters to which the interrogatory relates. The document dates back only to August 2016, so the enquiries would not have been burdensome. She submitted that the defendants' answer, in which they say that they do not have the information in their possession, but presume that the past client was Yan Mei Li, is evasive and insufficient.
Submissions for the defendants on interrogatory 19(a)
[80] Mr Dymock submitted that the defendants have taken steps to answer the questions, and based on their investigations have given substantial and specific answers. He repeated his submissions to the effect that the object of the present application is to require the defendants to obtain further information from Mr Wu and Mrs Du, contractors whose relationships with Pure Realty ceased in the early part of 2017.
Discussion and conclusions on interrogatory 19(a)
[81] My answer on interrogatory 15(a) provides the answer on this interrogatory. Mr Wu and Ms Du were obvious parties from whom the defendants could and should have made enquiries, they having acted as agents for Pure Realty in bringing about the on-sale of the property. It would not have been burdensome or unreasonable for the defendants to have made those enquiries.
[82] I direct that, in the affidavit the defendants are to provide within 20 working days, they are to provide a further answer to interrogatory 19(a) after obtaining such further information on it as they may be able to obtain from Mr Wu and Ms Du.
Interrogatories 20 and 21
The interrogatories and the defendants' answers
Question
20Did the defendants know in March 2016 whether Louisa visited the property with a person believed to be Ron Hoy Fong of Ronovationz prior to 16 March 2016?
Answer
The defendants object to answering this interrogatory on the basis that it is oppressive and vexatious as it is a fishing interrogatory that proceeds upon speculation and disputed assumptions of fact.
Question
21If the answer to the previous interrogatory is yes:
a)What date did Louisa visit and inspect the property with Ron Hoy Fong?
b)Who knew of the said visit?
c)On what date did they become aware of such visit?
Answer
a)The defendants object to answering this interrogatory for the same reasons explained above.
b)The defendants object to answering this interrogatory for the same reasons explained above.
c)The defendants object to answering this interrogatory for the same reasons explained above.
Submissions for the plaintiff on interrogatories 20 and 21
[83] Ms Dickson submitted that the rule against "fishing" interrogatories applies as soon as it appears that the questions are asked in order to enable the party to see if they can find a case, either of complaint or defence, of which at present the party knows nothing, and which will be a different case from that which the party now makes.6 She submitted that these interrogatories are directly relevant to the pleadings in the statement of claim that the defendants have breached fiduciary duties owed to the plaintiffs, and that the defendants have breached s 9 of the FTA. The specific pleading
6 Re Securitibank Ltd (No 31) 1 PRNZ 514 at 519.
relied upon in the plaintiffs' breach of fiduciary obligations cause of action is that the defendants failed:
(h)… to warn Ms Wild about investors and speculators in the market such as Ronovationz and/or Ron Hoy Fong and others who bought properties at an undervalue and after carrying out a cosmetic do-up, resold at a substantial capital gain. Rather, the defendants worked in concert with such investors and speculators to achieve outcomes favourable to them at the expense of vendors such as the plaintiffs.
[84] The FTA pleading (at paragraph 46(i) of the statement of claim) alleges breach of the FTA by the defendants in respect of the same alleged failure to warn.
[85] Ms Dickson also relied on Ms Wild's evidence (in a reply affidavit) of links between the property and Mr Wu on the one hand, and Ronovationz/Ron Hoy Fong on the other. Ms Wild referred in her evidence to a potential witness informing her that a person believed to be Mr Fong visited the property prior to 16 March 2016.
[86] On those bases, Ms Dickson submitted that these interrogatories are not fishing interrogatories.
[87] Ms Dickson acknowledged that Mr Honey stated in answer to interrogatory 22 (not in issue on this application) that he did not know Mr Ron Hoy Fong. However, she submitted that that answer did not absolve the defendants from their duty to answer interrogatories 20 and 21.
Submissions for the defendants on interrogatories 20 and 21
[88]Mr Dymock submitted that these are fishing interrogatories.
[89] He noted that Mr Fong is a "property coach" based in Mt Roskill, who made headlines in 2017 by suggesting that his students target "divorcees, dummies and deceased estates", to obtain a bargain. Those comments attracted negative attention in the New Zealand Herald about the time the present claim was filed.
[90] Mr Dymock submitted that fishing interrogatories are inadmissible, as they do not seek information on matters in question between the parties, but attempt to discover a cause of action or defence other than that pleaded. In this case, the
allegation is no more than that an unnamed, unknown person told Ms Wild that a Chinese man (who might have been Mr Fong) visited the property on an unknown date. No further details have been provided.
[91] Ms Wild did say in her affidavit that she has a photograph showing Mr Fong and Mr Honey together. The photograph was taken at a public auction, and uploaded onto Pure Realty's Facebook page. But the person "identified" as Mr Honey is in fact one of his business partners, and it is not possible to tell who the other person is (apart from the fact that he appears to be of Chinese ethnicity).
[92] For those reasons, Mr Dymock submitted that these interrogatories are entirely speculative. Furthermore, interrogatory 20 is framed in terms of an unknown third party's belief, which is something that the defendants are unable to answer.
[93] In the alternative, and if the Court concludes that the interrogatories are not fishing interrogatories, the defendants say that the interrogatories have been properly answered. A party is entitled to refer to the whole of the affidavit in answer to show that the answers are sufficient, and in this case the defendants statement in answer to interrogatory 24 (that they do not know Mr Fong, and do not know whether he or one of his employees was provided with marketing or listing material) sufficiently supports their "don't know" answer to interrogatory 20.
Discussion and conclusions on interrogatories 20 and 21
[94] I do not consider interrogatory 20 is speculative, or in the "fishing" category. The plaintiffs have alleged that the defendants were working in concert with investors and speculators such as Ronovationz and/or Mr Ron Hoy Fong to achieve outcomes favourable to them at the expense of people like the plaintiffs, and if to the knowledge of the defendants Mr Ron Hoy Fong attended the property on 16 March 2016 in company with Louisa (known to be associated with the person later nominated as purchaser of the property, and apparently actively involved (as attorney) in the on-sale of the property), the question does appear to be relevant to part of the plaintiffs' case. I note further the express pleading in the statement of claim (para 9) that on 16 March 2016 Louisa did visit the property with a person believed to be Mr Ron Hoy Fong.
[95] I am not here concerned with the merits of the plaintiffs' case on this "failure to warn" issue, but merely whether there is a sufficient basis in the pleadings to justify the interrogatory. Answering this interrogatory, which is fairly narrowly confined, will not in my view be onerous or oppressive for the defendants, and I accept Ms Dickson's submission that it is not a sufficient answer for the defendants to say that Mr Honey does not know Ron Hoy Fong or Ronovationz. The question is not whether Mr Honey knew them, but whether he was aware in March 2016 of the site visit allegedly made by Louisa and Ron Hoy Fong on that day. There will need to be enquiries made of staff and any other agents who may have been involved at the time, but the question does seem to admit of a fairly simple yes or no answer.
[96] Interrogatory 21(a) also does no more than require reasonable enquiries of those who may have been involved at the time, and the defendants will presumably either state the date or approximate date if they can, or say that, despite their enquiries, they are unable to do so (if that is the position).
[97] However, I think the questions posed by Interrogatories 21(b) and (c) are far too broad, to the point of being oppressive.
[98] I direct that, in the affidavit the defendants are to provide within 20 working days, they are to provide further answers to interrogatories 20 and 21(a), after having made enquiries of Pure Realty staff and agents who might reasonably be expected to have any knowledge of the subject matter of those interrogatories. I decline to order the defendants to answer interrogatories 21(b) and (c).
Result
[99]I make the following orders:
(1)The application for an order that Mr Honey attend for oral examination is dismissed.
(2)The defendants are ordered to file and serve, within 20 working days after the date of delivery of this judgment, further answers (verified by affidavit) to the following interrogatories served by the plaintiffs:
(2.1) interrogatories 3–6 inclusive, on the basis that the expression "dealings" in those interrogatories is to be construed as including any commercial or property agreements entered into by the defendants or either of them with (a) Yan Rong Ren (interrogatories 3 and 4), or (b) Li Yi Tang (otherwise known as Louisa) (interrogatories 5 and 6);
(2.2)interrogatory 15(a), after obtaining such further information on it as they may be able to obtain from Mr Eric Wu and Ms Joey Du;
(2.3)interrogatory 19(a) , after obtaining such further information on it as they may be able to obtain from Mr Eric Wu and Ms Joey Du;
(2.4) interrogatories 20 and 21(a), after having made enquiries of Pure Realty staff and agents who might reasonably be expected to have any knowledge of the subject matter of those interrogatories.
(3)Subject to order (2) above, the plaintiffs' application for orders directing the defendants to answer interrogatories is refused.
(4)The plaintiffs have been successful on most of the interrogatories that were argued, and others were resolved after the plaintiffs' application was filed. Against that, the plaintiffs' application for an order that Mr Honey attend for examination was not successful. In those circumstances, I think the justice of the case will be met by awarding the plaintiffs costs on a 2B basis, reduced by 50 per cent, with disbursements as fixed by the Registrar. I make orders accordingly.
Associate Judge Smith
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