IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE	
CIV-2018-409-77
[2019] NZHC 3039	

BETWEEN	PHILIP WILLIAM ROUTHAN and JULIA
VERONICA ROUTHAN as trustees for the KANIERE FAMILY TRUST
Plaintiffs	
AND	PGG WRIGHTSON REAL ESTATE LIMITED
Defendant	
AND	NELSON JOHN COOK
First Third Party	
AND	COOKS STUD FARMS LIMITED
Second Third Party	
AND	ROSS BISHOP
Third Third Party	

Hearing:	14 November 2019	
Appearances:	Mr PW Routhan (self-represented for Plaintiffs) E L Keeble for Defendant	
Judgment:	21 November 2019	

JUDGMENT OF ASSOCIATE JUDGE LESTER

This judgment was delivered by me on 21 November 2019 at 10:00am pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar 21 November 2019

ROUTHAN v PGG WRIGHTSON REAL ESTATE LIMITED [2019] NZHC 3039 [21 November 2019]

[1]	The plaintiffs have brought an application seeking further and better discovery by the defendant.

[2]	Before setting out the classes of documents sought by the plaintiffs, it is necessary to give some brief background in relation to the plaintiffs’ claim. More detail is contained in a judgment I delivered on 15 February 2019, in relation to an application for security for costs by the defendant.1

[3]	Having heard from Mr Routhan, on behalf of the plaintiffs, in respect of this application, it may be that some of the dates I gave in my earlier judgment for when particular events occurred were not entirely correct, but in any event, I will outline the key aspects of the chronology in this judgment.

[4]	The plaintiffs were interested in buying a dairy farm on the West Coast. The sale of a property they had shown interest in fell through. A property which is known by the parties as “the Cook Farm property” had previously been on the market and when the purchase of the property in which the plaintiffs had originally shown interest fell  through,  the  plaintiffs  turned  their  attention  to  the  Cook  Farm  property.  Mr Routhan approached a real estate agent, Mr Daly, who was employed by the defendant company. The Cook Farm property had previously been listed by another agency (CRT) for sale and Mr Routhan provided Mr Daly with a CRT brochure which had been produced some time before the end of the 2009/2010 dairy season. That brochure recorded that the annual production from the Cook Farm property had averaged 103,000 kg of milk solids (“kg/ms”) for the previous three seasons, being 2006/2007, 2007/2008 and 2008/2009.

[5]	Mr Routhan asked Mr Daly to see if the Cook Farm property was still on the market, but to do so without revealing that it was the plaintiffs who were interested in it.

[6]	In early August 2010, Mr Routhan says that Mr Daly called in to the plaintiffs’ property in his vehicle having just visited the vendor of the Cook Farm property and confirmed that he had ascertained that the Cook Farm property was still on the market.

1	Routhan v PGG Wrightson Real Estate Ltd [2019] NZHC 169.

Upon Mr Routhan enquiring about the state of milk production, Mr Routhan says that Mr Daly confirmed that the production for the 2009/2010 season remained steady – that is as stated in the CRT brochure.

[7]	Mr Daly had not secured a listing agreement in respect of the Cook Farm property  at  that  time.    Indeed,  the  listing  agreement  was  not  secured  until    11 October 2010.

[8]	Prior to the listing agreement being obtained, that is some time in early September 2010, Mr Routhan says that the defendant produced a document in relation to the farm called the “Kowhitiranga Proposal” which related to the Cook Farm property (“the Proposal”). The Proposal includes a document headed “West Coast” which lists various details about the property next to headings such as “price”, “location”, “fencing”, “paddocks” and “fertiliser”. One of the headings is “production” and next  to  “production”  it  is  stated:  “Average  last  3  years 103,000 kg/ms from 260 cows”. Mr Routhan notes that the document, in relation to shares, records that there are 103,000 milk company shares.

[9]	Again,  this  is  all  before   Mr Daly   obtained   a   listing   agreement   on  11 October 2010.

[10]	The claim, as it was originally understood by me and the defendant, was that Mr Daly through his oral statement and/or through including the reference to 103,000 kg/ms production in the document headed “West Coast” had breached the Fair Trading Act 1986 (“the Act”) (along with other causes of action) because the farm had not for the 2009/2010 season achieved that level of production. Again, the claim was for an average, but the average of the three seasons prior to and including 2009/2010 was below the (mis)represented figure. The assumption was that the production figures in the Proposal had been copied from the CRT brochure. The CRT brochure referred to the three seasons prior to the season 2009/2010. The Proposal was created after the end of the 2009/2010 season so that season was the first of the “last three years” referred to in the Proposal. On this assumption, the Proposal contained an error.

[11]	Mr Routhan has now obtained what is said to be a statement from Mr Daly, or at least  a  record  of  a  conversation  between  Mr Routhan  and  Mr Daly  which  Mr Routhan says has been approved by Mr Daly. It is before the Court in an informal way but constructively counsel for the defendant did not object.

[12]	What comes out of Mr Daly’s statement is that he has told Mr Routhan, and Mr Routhan apparently accepts what Mr Daly says, that the figures in the Proposal document and the oral confirmation were based on what the vendor of the Cook Farm property had told Mr Daly was the production in the 2009/2010 season. So, the assumption that the Proposal was wrong, as it copied the CRT figures, is rejected by Mr Daly.

[13]	That then raised the issue that Mr Daly may have been acting as a conduit for the information and, in terms of Goldsbro v Walker, would not be liable for simply passing on information that he had been given by the vendor.2

[14]	It was during the hearing on 14 November 2019 that, through discussions with Mr Routhan, the nature of the plaintiffs’ claim was developed.

[15]	The timing of the statements by Mr Daly is important – both the claimed oral statement and the provisions of the Proposal.

[16]	Mr Routhan refers to the Rural Agency Agreement between the defendant and the vendor of the Cook Farm property entered into on 11 October 2010, a month after the Proposal was produced and approximately two months after the claimed oral statement.

[17]	At the bottom of the first page of the Rural Agency Agreement it says: “Rural Information Sheet completed” and there is a box ticked “Yes”. The Rural Information Sheet is referred to in a few paragraphs of the agreement. In cl 17(e) of the contract, which is the interpretation clause, the following appears:

‘Rural Information Sheet’ means the agent’s Rural Information Sheet prepared by the agent and signed by the owner containing further information about the

2	Goldsbro v Walker [1993] 1 NZLR 394, (1993) 4 NZBLC 102,926 (CA).

property and improvements on the property and any substitute Rural Information Sheet entered into by the parties in the future.

(emphasis added)

[18]	The document intended to be the Rural Information Sheet is the same document headed “West Coast” which was included in the Proposal document referred to earlier.

[19]	Mr Routhan’s point is that the Rural Information Sheet, that is the West Coast document, has not been signed despite the box on the front page being ticked to say that it had been signed. On the plaintiffs’ case, this is more than a mere oversight.

[20]	What Mr Daly has apparently advised Mr Routhan is that the vendor when presented with the “West Coast” document “… hesitated about the production and said to Greg that he would just check it”. Mr Daly (based on the record of conversation produced by Mr Routhan) did not follow up with the vendor to confirm the figures the vendor said he wanted to check and nor did Mr Daly obtain sign off of the document containing the production figures.

[21]	The plaintiffs went on  to  sign  the  agreement  for  sale  and  purchase  on  19 October 2010 and settled on 20 December 2010 without the Rural Information Sheet having been signed and without Mr Daly having advised the plaintiffs that the vendor had baulked when asked to sign the Rural Information Sheet.

[22]	The way in which the plaintiffs have approached the defendant’s actions can be seen from the categories of documents they seek in this application which are as follows:

(a)	Documents outlining the defendant’s earlier process for verification of production levels, meaning the process in place prior to the process operating at the time they purchased the farm (manuals, memos, check lists and so on).

(b)	Documents outlining the defendant’s process for verification of production levels at the time they purchased the farm and how the

process was to be implemented (manuals, memos, check lists and so on).

(c)	Communications in relation to the defendant’s process for verification of production levels at the time they purchased the farm, generally and in relation to the farm (emails, letters, memos and so on).

(d)	Documents and communications relating to any changes in the defendant’s processes for verification of production levels since they purchased our farm (manuals, memos, check lists, emails, letters and so on).

[23]	It will be seen from these paragraphs that the plaintiffs start from the position that the defendant as real estate agent was required to verify information provided to it by a vendor.

[24]	It seemed to me what the plaintiffs were asserting in relation to Mr Daly’s silence was that the defendant owed them a duty to advise that the production figures the defendant had presented in an unqualified way were apparently not unconditionally accepted by the vendor when it was presented with the West Coast document/Rural Information Sheet. Indeed, the vendor was not prepared to sign the Rural Information Sheet until further checks were made. The plaintiffs say that through not being given that advice they lost the opportunity to undertake further checks which they say they did not undertake, having relied on the unequivocal statements about production in the Proposal and the oral statement by Mr Daly referred to at [6] above.

[25]	This basis of claim as I have stated it is not pleaded. There are references in the statement of claim to the contents of the Rural Information Sheet having not been confirmed by the vendor. However, it is the defendant’s silence in that regard which is the wrong complained of by the plaintiffs; on the plaintiffs’ case the defendant presented the production figures as firm but did not correct that impression when it knew the vendor wanted to check the figures and when it knew the figures had not been signed off as required by the defendant’s own systems.

[26]	The plaintiffs must establish a duly on the defendant to speak in order for the defendant’s silence to be misleading conduct for the purpose of s 9 of the Fair Trading Act 1986 for the tort of negligent mis-statement.

[27]	Accordingly, some careful thought in relation to the repleading of the claim is required. The “conduit defence”, that is the Goldsbro v Walker defence referred to at
[13] above, will only be available to the defendant if Mr Daly’s account of what he was told by the vendor is correct. Even then whether the defence can be maintained when Mr Daly knew the vendor had not or would not confirm the production figures may need to be addressed.

[28]	The vendor is joined to this proceeding. If Mr Daly’s account of his instructions from the vendor is not correct, that may mean that Mr Daly did not merely pass on information he received and the original causes of action will remain to be considered.

[29]	However, the discovery sought by the plaintiffs as set out at [22] is not relevant to those issues. Nor does a pleading that the defendant owed a duty to verify the milk production figures of itself entitle the plaintiffs to disclosure of the defendant’s internal documents. That agents can rely on the “conduit defence” is of itself confirmation that agents do not have to verify what they are told by their vendors. Agents are not guarantors of the accuracy of their vendors’ instructions. If an agent makes a statement negligently it may attract liability in negligent mis-statement.

[30]	The defendant’s internal documents in relation to training, guidance for agents, or operations manuals or the like are not relevant to the basic issue underlying the original causes of action which are:

(a)	Did Mr Daly orally confirm to Mr Routhan that the milk solid production at the Cook Farm property for the 2009/2010 season remained steady at 103,000 kg/ms?

(b)	Are the statements in the Proposal document set out at para [8] above, accurate or not?

[31]	Accordingly, on the statement of claim as it is pleaded, I do not consider the documents sought by the plaintiffs in their application to be relevant. The plaintiffs’ application for discovery as framed is dismissed.

[32]	However, in respect of an amended claim to come out of Mr Daly’s failure to advise Mr Routhan that the vendor was equivocating over the milk production figure, certain internal information of the defendant may be relevant to determining whether a duty of care to speak existed. The defendant’s internal documents relating to the significance of the Rural Information Sheet may be relevant to whether the plaintiffs can establish that the defendant was under a duty of care to advise the plaintiffs that the Rural Information Sheet had not been signed. For example, the defendant’s internal documents including its “Company Office Policy Manual” may have required staff not to advance a transaction until the document had been signed. Such documents may cast light on the foreseeability of harm to purchasers.

[33]	The plaintiffs have recently filed a second amended statement of claim to which the defendant was about to plead, indeed it has drafted its amended statement of defence. Given Mr Routhan now wishes to file a third amended statement of claim to address the new alternative claim, the time spent by the defendant in preparing its statement of defence to the second amended statement of claim is to a large extent wasted.

[34]	I explained that I wanted to avoid a situation where the plaintiffs filed an amended statement of claim without the benefit of the defendant’s internal documents, then obtain those documents on discovery and perhaps have to amend their pleading again. Ms Keeble for the defendant saw the merit in that two-stage approach being avoided.

[35]	Again, the defendant’s approach to this application has been based on the statement of claim as it stands. With the possibility of an alternative cause of action being pleaded as a result of discussions at the hearing, Ms Keeble advised that her client would be prepared to disclose internal information relating to the Rural Information Sheet, including that in the Company’s Policy Manual.  I consider that   a pragmatic and constructive approach for the defendant to take. Ms Keeble, on a best

endeavours basis, said such documents should be available “within the next two weeks”.

[36]	Accordingly, the following directions were arrived at following discussions with counsel:

(a)	It is not necessary for the defendant to file a statement of defence in relation to the second amended statement of claim. There shall be an award of costs to the defendant in respect of its defence to the second amended statement of claim on a 2B basis, but such are to be costs in the cause. That means that the defendant has the benefit now of a costs award in respect of the second amended statement of defence, but that costs award will only be brought into consideration once the proceeding is concluded. I take this step now as given that document was not filed, I want to avoid an argument in the future as to whether scale costs could be claimed in respect of that document when it was not filed.

(b)	The plaintiffs shall  file an  amended  statement  of  claim  by Friday 6 December 2019 addressing the proposition that the defendant had    a duty to advise the plaintiffs that the vendor had not confirmed the Rural Information Sheet.

(c)	The defendant is to provide the discovery referred to above within two weeks (that is by Thursday 28 November 2019) on a best endeavours basis.

(d)	In the event that the defendant is unable to provide discovery within two weeks, leave is reserved for the above timetable to be amended to reflect when the documents will become available.

(e)	Assuming the amended statement of claim is filed as per order [36](b) above, the statement of defence is to be filed Friday 31 January 2020.

(f)	The plaintiffs’ response to affirmative defences in the amended statement   of   claim   is   to   be   filed   and   served   by   Friday    14 February 2020.

(g)	There  is  to  be  a  telephone  conference  at  10  am  on  Wednesday  4 March 2020.

Costs of this application

[37]	As already noted, the costs related to the redundant statement of defence will be taken into account when costs are ultimately determined in this proceeding. The defendant seeks that costs in respect of this application be awarded now.

[38]	The plaintiffs’ application as framed has been dismissed. Rule 14.8 of the High Court Rules 2016 provides that:

(1)	Costs on an opposed interlocutory application, unless there are special reasons to the contrary, --

(a)	must be fixed in accordance with these rules when the application is determined; and

(b)	become payable when they are fixed.

…

[39]	As the commentary in McGechan notes, the rule reflects the fact that the merits of a particular application and those of the substantive proceeding are different matters.3

[40]	In respect of costs, Mr Routhan said that the application had had some success in relation to the defendant’s internal material concerning the Rural Information Sheet. However, that disclosure only came out of my exchange with Mr Routhan aimed at trying to clarify the true nature of the plaintiffs’ complaint. Once that had been clarified, Ms Keeble for the defendant advised there was no objection to the production of material concerning the Rural Information Sheet. The defendant’s agreement to produce that material before the further amended statement of claim was

3	McGechan on Procedure (online ed, Thomson Reuters) at [HR14.8.04].

a pragmatic and constructive approach to the issue, but it does not represent the plaintiffs succeeding in the application which was brought against the defendant’s opposition.

[41]	I find that the plaintiffs’ application as framed was unsuccessful. The normal rule is that costs follow the event.

[42]	Accordingly, there is an order that the plaintiffs are to pay the defendant’s costs on a 2B basis and disbursements as fixed by the Registrar in relation to the plaintiffs’ unsuccessful application for discovery. For the avoidance of doubt, once those costs are quantified they are payable straight away.

Associate Judge Lester

Solicitors:
Parker Cowan Lawyers, Queenstown P W and J V Routhan