IN THE HIGH COURT OF NEW ZEALAND NELSON REGISTRY

CIV-2011-442-000122 [2013] NZHC 91

BETWEEN	COLIN HOWARD COOTE First Plaintiff

AND	KATE LARA COOTE Second Plaintiff

AND	KATCOL INVESTMENTS LIMITED Third Plaintiff

AND	JOHN NOEL MURRAY First Defendant

AND	CHRISTOPHER JOHN ROYDS Second Defendant

AND	GENE EDWARD COOPER Third Defendant

AND	DANIEL JOHN WILLIAM HUNT Fourth Defendant

AND	WEST YATES Fifth Defendant

AND	FLETCHER VAUTIER MOORE TRUSTEES LIMITED
Sixth Defendant

Hearing:	28 September 2012
Additional Submissions 4 February 2012 (from Plaintiffs and Third
Defendant)

Appearances: D Kalderimis for Plaintiffs/Respondents
K Harkess for Second and Sixth Defendants/Applicants
A R J Bowers for Third Defendant

Judgment:	7 February 2013

JUDGMENT OF ASSOCIATE JUDGE OSBORNE [as to particular discovery]

COOTE V MURRAY HC NEL CIV-2011-442-000122 [7 February 2013]

Introduction

[1]       This case is for trial on 29 April 2013.

[2]       On 13 December 2012 I gave judgment on an application by the second and sixth defendants for particular discovery.   The discovery and  inspection ordered related to documents relevant to a quantum defence pleaded by the second and sixth defendants and the first and fifth defendants respectively.

[3]       I have now received from counsel for the plaintiffs and the third defendant memoranda which indicate a disagreement as to the implications of the discovery and inspection orders which I made.

The order

[4]       The relevant part of the order made on 13 December 2012 reads:

(a)      The plaintiffs are to file and serve by 20 December 2012 a supplementary verified list of additional documents in their control belonging to the following categories:

(i)         The plaintiffs’ financial statements, income tax returns, tax summaries and tax return details for the financial years up to and including 31 March 2012 (except to the extent already discovered);

(ii)       The correspondence of the plaintiffs and/or their agents with the Inland Revenue Department regarding the plaintiffs’ income tax positions including statements of account and return acknowledgments for the financial years up to and including 31 March 2012 (except to the extent already discovered);

(iii)      Documents relating to the plaintiffs’ current and anticipated income on investments which they have owned since 2006 or currently own, including interest, salaries, wages, superannuation  schemes  or  pensions  or  other  income  to which the plaintiffs are or are likely to become entitled through such investments;

(iv)       Financial   statements   for   any   other   entities   owned   or controlled by the plaintiffs which have or are likely in the

future to create taxable income or suffer losses which can be used to off-set the plaintiffs’ income tax liability;

(b)	The plaintiffs are to make available for inspection by 24 December
2012 the documents discovered pursuant to (a) above;

(c)        Such  inspection  is  to  be  limited  to  the  legal  and  any  expert accounting advisors retained by the defendants, who shall keep confidential all copies of such documents and information in such documents, save to the extent it is reasonably required to be incorporated in a brief of evidence or referred to in cross- examination.

What has since happened

[5]       The  plaintiffs  filed  a  third  supplementary  affidavit  listing  the  plaintiffs’ additional documents on 20 December 2012.  I am informed that at the same time counsel for the plaintiffs served on counsel for the first and fifth defendants and the second and sixth defendants a copy of the affidavit.

[6]       Copies  of  the  documents  were  made  available  for  inspection  to  those defendants by CD Rom.

[7]       On 23 January 2013 (and subsequently) counsel for the third defendant wrote to plaintiffs’ counsel requesting discovery and inspection of the documents on the basis that the order of 13 December 2012 did not limit discovery and inspection to particular defendants.

[8]       On  the  face  of  the  order,  discovery  and  inspection  were  not  limited  to particular defendants.  Indeed, although the application for additional discovery had been made by the second and sixth defendants, the order was plainly intended to also benefit the first and fifth defendants who had filed statements of defence asserting the quantum defence.

[9]        I have no recollection of any submission made by counsel for the plaintiffs that the rights of discovery or inspection should be limited to particular defendants. Mr Kalderimis in his memorandum does not suggest that such a submission was made at the interlocutory hearing.

The issue now

[10]     In the absence of an express provision in the order limiting discovery and inspection to particular defendants, Mr Kalderimis’s present submission amounts to a submission that the discovery and inspection order is implicitly for the benefit of only those defendants who have already pleaded the quantum defence.   Mr Kalderimis in his submission records:

The plaintiffs consider that Your Honour’s orders were intended to restrict discovery and inspection of the documents of the legal and expert accounting advisors of the defendants that had pleaded the “quantum” defence.

[11]     Mr Kalderimis makes the point that where a quantum defence is not pleaded by a defendant the documents have no relevance and need not be discovered or provided for inspection.  Discovery, he submits, should be limited to the advisers for whom the documents are relevant as defined by the respective parties’ pleadings.  By that means he suggests that the continued maintenance of confidentiality and the interests of justice will be achieved.

Discussion

[12]     To focus, in the context of discovery and inspection, on the relevance of documents for particular parties may be unhelpful and distracting.  The obligation of the discovering party is to discover documents in whatever categories are agreed or directed, including in this case by reference to relevance.   Once a document is relevant to one party it is relevant in the proceeding.

[13]     Concerns which arise from the confidentiality of accounting records as in this case can be met, as the order did, by limiting inspection to relevant (e.g. legal and accounting) advisers.

[14]     There is a history of informal inspection in this proceeding whereby informal inspection obtained on behalf of some defendants led to the incorporation by those defendants in the pleadings of those defendants of the quantum defence.  The third

defendant did not obtain documents through the informal discovery process.   His statement of defence stands without a pleading of the quantum defence.

[15]     Through  his  memorandum,  Mr  Kalderimis  would  seek  to  characterise  a situation whereby the third defendant’s legal advisers now obtained inspection of the additional documents as no more than a very late “fishing expedition”.  On the other hand, an order which entitles all defendants to the benefit of inspection (subject to confidentiality restrictions) may be seen as treating all defendants even-handedly. Depending on developments relating to pleadings and the conduct of the trial, the treatment of the discovery and inspection order as applying now to all defendants may avoid difficulties at trial in the event that the third defendant is permitted to make a late amendment and Mr Bowers wishes then to develop cross-examination or submissions in support of the third defendant’s amended pleading.

[16]     I do not overlook the fact that the setting down date (now more informatively referred to as “the close of pleadings date”) passed on 1 September 2012.  Leave will therefore be required to amend pleadings.   But it is not out of the question that the third defendant may yet obtain such leave particularly having regard to the fact that precisely the same quantum defence is already pleaded by four defendants against the plaintiff and the plaintiff is having to meet that defence in any event.   Mr Kalderimis refers to the passing of the date for the filing of the defendants’ expert evidence.   The plaintiffs are in the process of preparing their response.   Those circumstances alone cannot weigh heavily in my assessment.  It may well be that the third defendant will be content to rely on the expert evidence called on behalf of other defendants.   If, perchance, Mr Bowers seeks leave to file late evidence, any such application will be dealt with on its merits at the time.  As it stands, the third defendant may see no need to contemplate further evidence.

[17]     Rule 8.19 High Court Rules, providing for orders for particular discovery, contemplates the service of the verifying list on the other party or parties.  Orders are standardly made on the basis that a “party must file and serve” its list by a certain date without reference to service upon a particular party.   The order contemplates that the service will be on all parties who have filed an address for service as they are the parties entitled to receive copies of all documents filed.

[18]     Rule 8.27 High Court Rules provides a general right of inspection to all parties on whom the verified list is served (subject to the express terms of the order)
– see McGechan on Procedure at HR 8.27.02.

[19]     In the present case I was not invited to limit the obligation of service of the list to service upon particular defendants nor was I invited to expressly limit the right of inspection to particular defendants.  I did not do so.  The relevant aspect of the order in relation to inspection (paragraph (c)) limited the right of inspection to the “legal and any expert accounting advisers retained by the defendants”.   The legal adviser for the third defendant comes within that category as much as the legal advisers for the first, second, fifth and sixth defendants.

Outcome

[20]     I  therefore  decline  the  request  by  the  plaintiffs  for  a  direction  or  order limiting the rights in relation to discovery and inspection of the documents relevant to the “quantum defence” to the legal and expert accounting advisers of the first, second, fifth and sixth defendants.   The verified lists of documents served on the named defendants on 20 December 2012 ought to have been served on counsel for the other defendants at the same time. To the extent that that was now done, I extend the time for service of that document upon parties who have not been served for two working days from the date of this judgment.

[21]     To the extent that any party’s solicitor has not received the CD Rom by way of inspection, I extend the time for the plaintiffs to make available that CD Rom to any requesting solicitor by two working days from the date of this judgment.

[22]     No formal application has been made in relation to this issue and it has been resolved  appropriately  and  sensibly  by  counsel  by  an  exchange  of  memoranda

requesting the Court to resolve the issue.  In the circumstances there will be no costs in relation to these directions.

Associate Judge Osborne

Solicitors:

Chapman Tripp, PO Box 993, Wellington 6140
Duncan Cotterill, PO Box 827, Nelson 7040
McElroys, PO 835, Auckland 1140
ARJ Bowers, PO Box 1380, Nelson 7010
D Gardiner, P O Box 147488, Ponsonby, Auckland

COOTE V MURRAY HC NEL CIV-2011-442-000122 [7 February 2013]