Sparksman Limited v KRS (2003) Limited HC Napier CIV-2008-404-4432 [2011] NZHC 1257 (28 September 2011)

Last Updated: 1 November 2011

IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY

_{CIV-2008-404-4432}

BETWEEN SPARKSMAN LIMITED First Plaintiff

AND KEITH RAYMOND SPARKSMAN AND FLORENCE JENNIFER SPARKSMAN AS TRUSTEES OF THE SPARKSMAN FAMILY TRUST

Second Plaintiffs

AND HAWKES BAY NOMINEES LIMITED AS TRUSTEE OF THE SPARKSMAN FAMILY TRUST

Third Plaintiff

AND KRS (2003) LIMITED First Defendant

AND ADRIAN THOMAS STIELLER Second Defendant

AND JAYNE ELIZABETH STIELLER Third Defendant

Hearing: 16 September 2011 (Heard at Napier)

Counsel: S. Trafford - Counsel for Plaintiff

D.H. McLellan and A.J. Harris - Counsel for Defendant

Judgment: 28 September 2011 at 11:50 AM

_{JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL}

This judgment was delivered by Associate Judge Gendall on 28 September 2011 at

11.50 am under r 11.5 of the High Court Rules.

Solicitors: Gresson Grayson, Solicitors, PO Box 1045, Hastings

_{Gifford Devine, Solicitors, PO Box 148, Hastings}

SPARKSMAN LIMITED V KRS (2003) LIMITED HC NAP CIV-2008-404-4432 28 September 2011

Introduction

[1] This proceeding, brought by the plaintiffs, relates to allegations over the retention and use of confidential information and data said to belong to the plaintiffs and the unlawful sale of hydraulic parts from a shop owned by the first plaintiff company, Sparksman Ltd, and leased by the first defendant company, KRS (2003) Ltd (KRS). The matter is set down for a two week trial beginning 28 November

2011. The plaintiff at what is effectively now the eleventh hour applies for interlocutory inspection orders under r 9.34 of the High Court Rules.

[2] The defendants oppose the application.

Background

[3] Sparksman Limited was a full-service engineering and hydraulics business in Hawke’s Bay. It operated a precision engineering workshop (the machine shop business) and a retail hose and hydraulic parts retail shop (the retail shop business) which sold related fittings and the like as well as a mobile hydraulic hose and fittings service. The businesses were operated out of a property at 103 Henderson Road, Hastings (the property) which is owned by the Sparksman Family Trust. The trustees of this trust are the second and third plaintiffs.

[4] In early 2003, Mr and Mrs Sparksman approached Mr and Mrs Stieller, the second and third defendants respectively, with a view to selling Sparksman Limited’s full-service engineering and hydraulics business to KRS. As it seems KRS could not finance a full purchase it purchased only the machine shop part of Sparksman’s business from it. Therefore, Sparksman Limited (Sparksman) retained the retail shop business and its mobile operations. On 31 October 2003, the parties entered into a sale and purchase agreement for the machine shop business. That agreement was supplemented by a written finance agreement along with what are alleged as several oral agreements. Relevant to this proceeding, the plaintiffs contend that there were oral agreements to the effect that the defendants would refer all non-machine shop business customers to Sparksman’s retail shop operation and that KRS would purchase seals and stock items from Sparksman as required. Further, it is said there was an implied term arising out of all the agreements that the defendants would not operate a business in competition with Sparksman at the

property and that all confidential business data disclosed to the defendants would be used only for the purpose intended.

[5] KRS sought to continue to operate its newly purchased operation from the property. Accordingly, the Sparksman Family Trust as landlord and KRS as tenant entered into a lease agreement. That lease restricted what KRS could use the premises for. In particular, it provided that KRS could not, without the prior consent of the Trust as landlord, use the property for any use other than the stipulated business use. Business use was defined as ―machining and jobbing shop and manufacturing‖.

[6] By its third amended statement of claim, the plaintiffs have outlined seven causes of action:

a) Breach of the implied terms of the sale and purchase agreement that KRS would not “take” the customer base of Sparksman or not operate a business in competition with Sparksman at the property;

b) Breach of the terms of the lease that KRS’s use of the property would

be limited to the stated business use;

c) Repudiation of the sale and purchase agreement and the non-compete agreement;

d) Misrepresentation under the Contractual Remedies Act 1979 that Mr and Mrs Stieller would first, use their best endeavours to purchase, as soon as practicable, the remainder of Sparksman’s business being the retail shop business, secondly, that KRS would refer all non-workshop customers to Sparksman, thirdly, that KRS would not compete with Sparksman, and fourthly, that the defendants would not misuse data obtained from Sparksman’s computer records;

e) Breach of the Fair Trading Act 1986 in so far as the defendants have engaged in conduct that is misleading or deceptive in trade in that they misled the public that they were entitled to operate as a retail shop, that they purchased the business in order to access the plaintiffs’

confidential business data and further, that they misrepresented that

KRS’s business is connected with Sparksman;

f) Passing off KRS’s products and services as those of Sparksman’s to

obtain the goodwill of Sparksman; and g) Misuse of confidential information.

[7] Since proceedings were commenced, the plaintiffs suggest that the defendants have hampered reasonable attempts at discovery. In order to assist discovery of its electronic information, the defendants engaged a company, Helm Business Information Systems Ltd. Mr Tiffen, a director of Helm, deposes that Helm:

11.1. Created a back up of the Aurora accounting system on KRS’ computer. That would essentially create a copy (without modifying the data in any way) of the Aurora accounting system as at the date on which the back up was created;

11.2 Copied (without modifying the data in any way) the back up of the Aurora accounting system as at May 2006 which we had found on [WHK (NZ) Limited’s, a company at which Mr Tiffen worked before establishing Helm,] computers;

11.3 Copied (without modifying the data in any way) from KRS’ computer the emails which the defendants had selected and identified (by segregating the emails into a particular folder in Outlook) as being relevant and discoverable;

11.4 Provided the data described in paragraphs 11.1 to 11.3 above to KRS’s solicitors, Gifford Devine, on an electronic storage device, together with the Aurora installation disk, the relevant user name and passwords, and the registration details which may be required to access the data on the back ups of the Aurora accounting system; and

11.5 Set the data up and tested it on a computer at Gifford Devine.

[8] Mrs Sparksman swore two affidavits in support of this application. The following is apparent from her affidavits:

(a) Discovery in this proceeding began in early to mid 2010

(b) The defendants provided voluminous amounts of hard copy files on discovery extending to 51 cartons of documents. The plaintiffs were also given access to the defendants Auroa accounting software, which appears to have contained all the defendants’ financial records, by way of a flash drive. It seems there were many duplicate copies of

documents between the hard copies and the flash drive. Access to all of the files was limited to viewing with one of the plaintiffs’ solicitors present, as the defendants claimed confidentiality over all of them. Access to the flash drive was required to be at the defendants’ solicitor’s office. Further, the defendants’ discovery list it is alleged provided vague and generalised descriptions of the documents. Access to the flash drive it seems was not entirely straight forward. Not all required passwords were provided. The plaintiffs therefore had to pay for the defendants’ technician’s assistance. Also, some information on the flash drive appears to have been misnamed. A CD was also required of the Aurora software in order to access the files on the flash drive. Issues arose it seems installing that software on computers in order to access the files on the flash drive.

(c) The plaintiffs could not generate sales analysis reports which they generally could do in the Aurora software. That suggests some issue with either the Aurora software provided or the data provided on the flash drive. Therefore, it is said that all the raw data had to be trawled through.

(d) It is alleged that most of the information contained on the flash drive is likely to be the plaintiffs’ and so confidentiality could not be claimed over it. Further, much of the data was over four years old and so was no longer current.

(e) The Aurora software is accounting software. So the data which it generates is limited to that. The plaintiffs were not provided with any separate quotations book and the general ledger, budget forecasts had data missing.

(f) Sparksman’s stock codes it is alleged were used by KRS.

(g) She alleges KRS was actively selling seals but attempted to hide that fact by manipulating data.

[9] In response to Mrs Sparksman’s affidavit, Mrs Stieller provided an affidavit, from which she claims it is apparent that:

(a) Discovery in fact began in early November 2009.

(b) Confidentiality was not claimed over all of the documents. The plaintiffs’ claims are broadly worded and so it was difficult for the defendants to narrow the compass of what was relevant. Requests for further particulars by the defendant were met with a response that

―further particulars will be supplied after discovery‖.

(c) The orders for inspection sought are very invasive and provide access to information which is, clearly, irrelevant such as payroll information.

(d) The difficulties in operating the Aurora software can be explained by the software no longer being supported, as the company which created it no longer exists.

(e) Even though a voluminous amount of material was discovered, the plaintiffs completed their inspection about a year ago.

(f) As for the plaintiffs’ allegation that not all relevant material was disclosed, the material which the defendants complain was not disclosed does not exist. Those facts were communicated to the plaintiffs.

Principles Relevant to this Application

[10] The present application is made in reliance on r 9.34 of the High Court Rules. That rule provides:

9.34 Order for inspection, etc

(1) The court may, for the purpose of enabling the proper determination of any matter in question in a proceeding, make orders, on terms, for—

(a) the inspection of any property:

(b) the taking of samples of any property:

(c) the observation of any property:

(d) the measuring, weighing, or photographing of any property: (e) the conduct of an experiment on or with any property:

(f) the observation of a process.

(2) An order may authorise a person to enter any land or do anything else for the purpose of getting access to the property.

(3) In this rule, property includes any land and any document or other chattel, whether in the control of a party or not.

[11] As a threshold requirement, an order for inspection will only be made where it is for the purpose of enabling the proper determination of any matter in question in the proceeding. The inspection must be relevant to the issues in dispute in the proceeding.[1] That question is a matter for the Court to decide on an objective assessment of the available material.[2] In determining the approach to be applied as to whether a matter is relevant, I note the comment of the authors of Sim’s Court Practice at HCR9.34.5:[3]

It would appear, however, that the threshold of necessity under r 8.36 in relation to discovery does not necessarily apply in respect of r 9.34. See Rand v Livesound Manufacturing Ltd (1993) 7 PRNZ 164, where the High Court ordered an inspection on the grounds that a determination by the expert would be an “important consideration” in disposing of an appeal from the District Court.

[12] Nevertheless, a helpful starting point is the approach still applying at present to determining relevance in discovery applications, Compagnie Financière et Commerciale du Pacifique v Peruvian Guano Co:[4]

every document relates to matters in question in the action which not only would be evidence upon any issue, but also which, it is reasonable to suppose, contains information which may – not which must – either directly or indirectly enable the party requiring the affidavit either to advance his own case or to damage the case of his adversary.

[13] Once the threshold jurisdiction has been established, exercise of the discretion in favour of an order is likely.[5] Any orders however must be made on appropriate terms in light of the intrusive nature of an inspection order. Where orders may be as far reaching as a search order under Part 33 of the High Court Rules, the Court may require a similar undertaking.[6]

Counsels‟ Submissions and My Decision

[14] The plaintiffs’ present application before the Court seeks the following

orders:

A. That within 14 days, the defendants assemble all property of the kinds specified in Schedule 1 and defined herein as the Computers and Data within their power, possession or control into a single location and make such property available, at a time agreed between the parties, so that it may be copied by Elementary Solutions Limited (and/or their agents) (the “Computer Expert”).

B. That the Computer Expert be permitted to take into their custody any copies so made of the Computers and Data (but not the original items) for the purpose of carrying out an inspection, examination and search of the copies.

C. That within 14 days the defendants are to deliver into the custody of this Court any backup tapes or other backup media that may contain

_{data copied from their computer systems.}

[15] Schedule 1 of the application provides:

SCHEDULE 1

The kinds of property to be made available by the defendants for copying comprise:

1. Computers – including (without limitation) desktop computers, laptops, servers;
   
2. Electronic storage media – including (without limitation) hard disks, CD-Roms, DVDs, memory sticks, flash drives, floppy disks;
   

3. Data stored by or on behalf of the defendants at any location on the

Internet;

in the possession, power or control or the defendants on which any information relating to this litigation is, or has previously, been stored, dealt with or accessed by (the ―Computers and Data‖).

[16] A detailed list of suggested conditions upon which the inspection and copying of the data could be undertaken by the plaintiffs was set out at Schedule 2 of the application.

[17] Ms Stafford, for the plaintiffs, submitted three grounds on which the orders sought in the application are necessary for the proper determination of the issues in this proceeding:

(a) The defendants’ computers are likely to contain information highly

relevant to the issues in dispute;

(b) There is evidence to suggest that the defendants have not made full disclosure of relevant documents; and

(c) There is evidence to suggest that the defendants have actively altered relevant documents to obfuscate the discovery process.

[18] As to the first, Ms Stafford contended that the defendants’ computers are

likely to hold information relevant to determining how the plaintiffs’ confidential

information was used by the defendants, the extent to which the defendants were selling seals and other retail goods, and the extent to which the defendants obtained stock from suppliers other than Sparksman Limited. She further submitted that this information is likely to be on the computers due to irregularities in the data she says has been received by the plaintiffs in discovery. Therefore, it appears that any information which exists is likely to be limited to the plaintiffs’ breach of confidence and non-competition claims. For example, it seems there were two Aurora software systems established and it is said that enabled the defendants to retain the plaintiffs’ historical information. Further, it is alleged that only a detailed forensic investigation can potentially uncover what is claimed to be deleted computer data. I also note the comment by the expert engaged by the plaintiffs to undertake the forensic examination of the defendants’ computers, Daniel Francis Ayers (Mr Ayers) at paragraph 47 of his second affidavit that Mr Tiffin’s statement that he understood data which was not in the Aurora accounting system to be irrelevant is not accurate. Mr Ayers said further:

...I consider there is a strong possibility that electronic data on the Defendants’ computers outside of the Aurora One computer system will be relevant to matters at issue in this proceeding.

[19] In response, Mr McLellan, for the defendants, argues that the plaintiffs’ evidential foundation for there being relevant information is weak. He submitted that Mr Ayers’ allegations are based only on a theoretical explanation of what is possible when examining hard drives. Mr McLellan further contended that the relevance of any potential data must be analysed through the lens of the plaintiffs’ claims. Any data obtained, in Mr McLellan’s submission, is likely to be relevant only (as claimed by the plaintiffs) to disclose the fact that the defendants were operating a competing business to the plaintiffs. However, it appears that the only specific provision in the nature of a non-competition provision in the relationship between the parties was in the lease between the trust and KRS. The trust he says cannot show any loss from any competition and the plaintiffs’ argument that the lease agreement was in some way a component of the sale and purchase agreement is implausible. In relation to the use of confidential information the defendants’ position is that they were expressly given the use of the plaintiffs’ computer system and no limitations were placed around this. So, of course, according to Mr

McLellan, the plaintiffs’ data will be found on the defendants’ computers but that

does not mean that they misused confidential information.

[20] As to the second, Ms Stafford submitted that there is also evidence supporting the fact that the defendants have not fully disclosed that relevant information. That is evident she says from the difficulties that the plaintiffs encountered in accessing the defendants’ disclosed data. Those obstacles are detailed in the summary of Mrs Sparksman’s affidavit outlined above. Ms Stafford referred me to an email which was produced by Mrs Sparksman. That email was not disclosed in discovery, but instead it seems was discovered by Mr Sparksman when emptying a rubbish bin in 2005. The email was sent by a salesman working for a company called Sealhouse. The email appears to be soliciting a rotary storage unit for seals. Ms Stafford contended that this evidences, at least, a preliminary attempt by the defendants to operate their own competing business, notwithstanding Mrs Stieller’s dismissal of that email as being an unsolicited approach by a salesman. That further shows it is said that the defendants have not discovered all relevant emails. Mr Ayers deposes to the fact that any emails which were deleted may well be recoverable. It is also suggested that deleted emails may turn out to be significant and probative here. In that regard, it is claimed the present case is similar to that in Tyco where an application for inspection of computers was initiated as two emails deleted from a computer by a defendant were recovered by the plaintiff. In that case, the emails showed that the defendant was in some way connected to a business in competition with the plaintiff, in circumstances where he was under a restraint of trade obligation, and further it was suggested that because two non-disclosed emails were in existence, there could be more.

[21] In response, Mc McLellan argued that the plaintiffs have only pointed to a handful of material here which might possibly to some extent support their claims. Such scarcity of discovered, relevant material he says does not in this case justify the major endeavours which the plaintiffs propose in light of the extensive discovery process already undertaken.

[22] Ms Stafford endeavoured to respond to this by suggesting that the delay here has been in part due to the fact that the plaintiffs did not become aware of how limited the electronic information provided might be until they began briefing Mr

Ayers in May 2011. The plaintiffs it seems requested access to the defendants’ computers on 29 July 2011 in order to perform a forensic examination. They claim this request was made within ample time of the allocated trial date here which was November 2011. The plaintiffs claim that a time line highlights that the delay is not entirely one sided. That time line shows that the defendants did not respond to the plaintiffs’ July 2011 request for forensic examination until 5 August 2011. Therefore, according to the plaintiffs’, filing the interlocutory on 12 August 2011 was not unreasonable in a timing sense.

[23] Ms Stafford further submitted that the briefing of Mr Ayers was delayed until May 2011 after a series of without prejudice communications between the parties which discussed a possible judicial settlement conference throughout late 2010. That time line discloses that the prospect of a judicial settlement conference was only abandoned in April 2011. Ms Stafford explained that Mr Ayers was not engaged to conduct the inspection of the electronic documents during the earlier discovery and inspection process as the plaintiffs sought to keep costs down only inspecting the defendants’ data by way of software with which they were familiar, Aurora. Further, the plaintiffs argue that their acceptance that they had all of the relevant material was simply a result of the defendants’ communications with them. They contend it was the defendants who said that they had received access to all of the files which were relevant and who confirmed that they had access to the defendants’ entire hard drive.

[24] In response, Mr McLellan argued that the plaintiffs knew exactly what they had been given access to as that had been explained to them as early as March 2010. On this, Mr McLellan referred me to an email at the time between counsel for the plaintiffs and the defendants’ solicitor in which the plaintiffs sought clarification as to whether the flash drive was a complete back up of the defendants’ “Aurora computer system” or whether it only contained certain data. The defendants’ response was that it was a copy of all of the data in the defendants’ Aurora computer system. Mr McLellan noted that with the trial date fast approaching, the plaintiffs’ witness statements were due to be served on 22 September 2011 and the defendants’ on 13 October 2011. In circumstances where the information relevant to this application has been available for more than a year, he maintained such a late

application as the present one is simply not justifiable. Those circumstances, in Mr McLellan’s submission, distinguish this case from that in PAE (New Zealand) Ltd v Brosnahan where an order for inspection was made, notwithstanding a late application, as a previously unknown laptop which was in the possession of an employee had just been discovered.

[25] As to the terms of the orders sought here, Ms Stafford submitted that the orders sought by the plaintiff are not oppressive. They are for Mr Ayers their expert to generate a report, and once that report is provided, the parties’ solicitors are to have seven days to review it and consider issues of privilege prior to the parties viewing it. Further, Mr Ayers will himself sign a confidentiality undertaking. Finally, any allegations of excess expense in facilitating the process it is said can be dealt with by an award of costs.

[26] In response to that submission, Mr McLellan contended that the particular orders sought are deficient on multiple grounds. In particular he suggested that they do not adequately specify the person who is to extract the electronic data or provide any indemnity in the event that data is lost. Further, given that the proposed orders are akin to search orders, he says that independent supervision is a necessity, the costs of which should be borne by the plaintiffs.

[27] As to whether the inspection sought in the present application might disclose information relevant to the issues in dispute, I am satisfied that this is a possibility but only that. I accept for present purposes the submission for the plaintiffs that there is some possible likelihood that there would be information which is recovered from the defendants’ computers which might not yet have been discovered in this proceeding. It cannot be said, however, on the material presently before the Court, that a “smoking gun” exists. To conclude that the email uncovered by the plaintiffs disclosing a conversation between the defendants and a seal storage unit salesman provides evidence of a “smoking gun” in my view is to draw too long a bow. However, while Mr Tiffen deposes that he did not consider any other information on the defendants’ computers to be relevant, it does appear that it is possible this may not be the case. While payroll information may not be relevant, I accept the evidence of Mr Ayers that there may be other items of information, such as emails, which are. It follows from that, therefore, that not all information may have been

disclosed at discovery. I will turn to consider the reasons and responsibility for this below.

[28] Nevertheless, in my view I need to take notice here of the generally applied warning with regard to fishing expeditions. As occurred in Tyco, I also adopt the analysis of Chilwell J in AMP Society v Architectural Windows Ltd at 196:[7]

It is clear that the Court will not order discovery or allow interrogatories where the applicant is doing no more than "fishing". The meaning of the term "fishing" in this context has been discussed in a number of cases. Barker J collected several of them in Securitibank Ltd v Rutherford (Auckland, A 355/81, 14 August 1984 (Securitibank judgment No 31)). In my view, the description of "fishing" in the authorities cited by Barker J and in other authorities cited by counsel come to this: an applicant is fishing when he seeks to obtain information or documents by interrogatories or discovery in order to discover a cause of action different from that pleaded or in order to discover circumstances which may or may not support a baseless or speculative cause of action.

[29] In the present case, the plaintiffs have seven broadly worded causes of action. I accept the defendants’ allegations that these may not be fully particularised. One could be forgiven therefore for concluding that the plaintiffs’ current application is just that, a fishing expedition. Nevertheless, I do not consider that the causes of action in the present case can be seen as entirely baseless or speculative. The plaintiffs appear to have some evidence, particularly that arising out of their, already completed, discovery process. Therefore, this is not fishing. But it is, nevertheless, close.

[30] Accordingly, for all the reasons outlined above, I accept but only by a rather fine margin, that the plaintiffs have managed to cross the jurisdictional threshold in the present case. That is, however, not the end of the matter. While I record above that the authorities establish that an order is likely to be granted where the threshold is met, the Court retains a discretion as to whether to make the order.

[31] As to the processes suggested here, Mr Ayers, the expert engaged by the

plaintiffs to undertake the forensic examination of the plaintiffs’ computers, deposed

_{as to his proposed methodology. He stated:}

22. The first step ... would be to make forensic clones ... of any computers and electronic media that were to be examined. The copies would then be returned to my office in Queen St, Auckland, for examination.

23. The examination would be largely automated using a set of computer systems and forensic software located at my office. The examination would be carried out 24 hours a day, likely over several weeks.

24. The examination involves searching for forensic artefacts and relevant items within the computer data.

25. The examination cannot be restricted by date as not all items examined have dates associated with them.

26. The examination does not consist solely of keyword searches, so it cannot be scoped or restricted in terms of an agreed list of keywords.

[32] Mr Ayers commented further, at paragraph 70 of his affidavit in reply:

Certainly if the Defendants had retained and used a large quantity of the Plaintiffs’ information relating to the retained part of the business, then the examination could result in a large report. But in that case the report would be of very high probative value and I would have thought of great interest to the Court.

[33] While I cannot be certain, taking a realistic and pragmatic approach, and given the fact that 51 cartons of documents have been discovered by the defendants initially, it is clear that any report furnished by Mr Ayers following his detailed database investigations would be weeks in the making.

[34] Turning to consider the timetabling arrangements in this case, the plaintiffs’

briefs were due by 23 September 2011 and the defendants’ briefs are due by 14

October 2011. A trial date has been set down for 28 November 2011. The plaintiffs have had access to the defendants’ flash drive since May 2010. Given Mr Ayers’ outline of the likely process, it does appear inherently unlikely that if I was to grant the orders sought, the trial would proceed on 28 November 2011. Clearly, delaying the trial fixture is not an ideal outcome. I acknowledge Ms Stafford’s submissions that the delays here were in part caused by settlement attempts and not entirely therefore through the fault of the plaintiffs. That efforts were undertaken to attempt settlement either out of court or through a judicial settlement conference process must be seen as laudable. Those efforts should not be unduly hampered in such a way that future litigants are dissuaded from engaging those processes. Nevertheless, while I have not seen the correspondence between the parties, time was also taken here to file a further amended statement of claim. Some prospect must have been recognised in November 2010, therefore, that a trial was likely. Further, while the

language used may not have been as precise as it might have been in referring to the defendants’ computer systems, I accept the submission for the defendants that the plaintiffs knew exactly what they were getting - a copy of the Aurora software data. That is all. I was not directed by counsel to anywhere in the evidence where the defendants misrepresented that this was all of the data on the defendants’ computers. Further, while I accept that in so far as the plaintiffs may have asked whether they had access to the entire Aurora system, (see [27] above), they may have actually meant access to the entire computer rather than just the accounting data, I accept that the defendants’ responses were reasonable.

[35] Accordingly, in my view the plaintiffs ought to have known that they might not have been seeing the whole picture. If they believed that they did not have the defendants’ entire hard drive when that is what they desired the question must remain, why did they not seek to engage a forensic expert at that time. Further, Ms Stafford’s submission that the plaintiffs in 2010 simply did not engage an expert in order to keep costs down, and her later submission that costs surrounding a forensic analysis are seemingly irrelevant, do not sit well. I consider that the plaintiffs are now attempting to have, what might be seen as two bites at the cherry. They attempted to undertake discovery on a budget. While I accept that they may have been hampered by a cumbersome process in that masses of material were discovered, the claims brought by the plaintiffs, with respect to what are two relatively small businesses and companies, were equally broad.

[36] Once the plaintiffs prepared for trial it seems now they suspected that some more information might be in existence. However, by that time, matters in this proceeding had progressed a long way. The present application for these inspection orders was not made until 12 August 2011. The plaintiffs ought to have known that this opposed application would take time to find a date to be heard. That has led us to mid September 2011. Given that course of conduct, I decline to exercise my discretion in the plaintiffs favour. Their contribution to the delay ought not to avail them of further delays and the necessary abandonment of a long-fixed trial date.

[37] As to the possibility of prejudice being caused to the plaintiffs here, given the plaintiffs have already had very extensive discovery, albeit interrupted with some difficulties, I am satisfied that any prejudice to them in refusing this further

inspection application is minimal and outweighed by the other considerations noted above. While, the discovery process may have been more cumbersome and costly than the plaintiffs expected, in my view in the end they have had ample opportunity over a long period of time to peruse all of the discovered data. Further, parties must be on notice that with a trial date rapidly approaching, processes such as this must be undertaken promptly and in good time.

[38] Given the conclusion I have come to on the merits of the application, I need not consider whether the orders sought are unduly oppressive.

Conclusion

[39] For the reasons outlined above, while the plaintiffs may have met (but only just) the threshold for making the inspection orders sought in the present case, I decline to exercise my discretion to make the orders requested. The plaintiff’s application accordingly is declined.

[40] The defendants being successful in opposing this application, they are entitled to costs, which are awarded on a Category 2B basis together with disbursements as fixed by the Registrar.

„Associate Judge D.I. Gendall‟

---

[1] MacDonald v Hoggard HC Auckland M242/93, 11 April 1994.
[2] Tyco Flow Pacific Pty Ltd v Grant HC Auckland CIV-2003-404-4121, 18 March 2005 at [33].
[3] Matthew Casey and others Sim’s Court Practice (online looseleaf ed, LexisNexis) at HCR9.34.5.
[4] (1882) 11 QBD 55 at 63 (CA).
[5] Wheelans v Hayes (No 2) (1986) 3 NZCLC 99,789 at 99,789; Andrew Beck and others McGechan on Procedure (online looseleaf ed, Brookers) at [HR9.34.04]; Tyco Flow Pacific Pty Ltd v Grant HC Auckland CIV-2003-404-4121, 18 March 2005 at [42].

[6] Overseas Containers Ltd v Geo H Scales Ltd HC Wellington CP395/86, 22 September 1986 at 7.

[7] [1986] 2 NZLR 191 (HC) emphasis added.