Bushetts Transport Limited v Lowes HC Wellington CIV-2011-485-131 [2011] NZHC 692 (11 July 2011)

Last Updated: 22 July 2011

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

_{CIV-2011-485-131}

BETWEEN BUSHETTS TRANSPORT LIMITED First Plaintiff

AND EASTERN EQUITIES INVESTMENTS LIMITED

Second Plaintiff

AND GRAHAM ROGER LOWES AND TONY IAN LOWES

First Defendants

AND JANIFRIE FOOT Second Defendant

AND PETER JOHN ROEBUCK Counterclaim Defendant

Hearing: 7 July 2011

Counsel: B Gustafson for Plaintiffs and Counterclaim Defendant

K Sullivan for First Defendants

P Chisnall for Second Defendant

Judgment: 11 July 2011

_{JUDGMENT OF MILLER J}

[1] This judgment responds to interlocutory applications which have been heard urgently, anticipating the trial of this proceeding on 15 August.

[2] For present purposes the background is adequately set out in my judgment of

24 February. As noted there, the claim alleges breach of fiduciary duties to Bushetts Transport Ltd (BTL) and, in the Lowes’ case, to Eastern Equities Investments (EEI), breaches of a restraint of trade affecting the Lowes, breach of directors duties and other causes of action, all arising out of a dispute between BTL shareholders over the

_{price that EEI was to pay under a shareholders agreement for the remaining 50 per}

BUSHETTS TRANSPORT LIMITED v GRAHAM ROGER LOWES AND TONY IAN LOWES HC WN CIV-

2011-485-131 11 July 2011

cent of BTL held by the Lowes. That dispute led in turn to what the plaintiffs say was an attempt to exploit BTL’s assets and information to set up a competing transport business.

[3] Interim injunctions were issued. An early trial was directed because the Lowes wish to argue that the restraint of trade, which has been provisionally enforced against them, is unreasonable.

[4] Since that judgment the plaintiffs have discontinued against the third and fourth defendants, who have made non-party discovery. Discovery and inspection on all sides appears to have been late.

[5] For their part, the defendants have brought counterclaims which substantially broaden the scope of the litigation. Peter Roebuck, who is said to control EEI, has been joined as a counterclaim defendant.

[6] The first defendants not only deny the plaintiffs’ allegations and challenge the restraint as unreasonable but also plead misrepresentations and breach of a joint venture agreement between them and EEI. It is said that EEI agreed to cause its parent, Eastern Equities Corporation Ltd, to make available its expertise and systems, including those used by a business called Farmers Transport Ltd, with which BTL was to work co-operatively, but that EEI breached all of these obligations, effectively reducing the value of BTL and hence the amount that EEI would have to pay for the remainder of the Lowes’ shares. All of this misconduct is said to render the restraint of trade determinable for breach. The Lowes also sue in injurious falsehood and defamation, alleging that the plaintiffs and Mr Roebuck have maliciously published false and defamatory statements about them.

[7] The second defendant, Ms Foot, has similarly gone beyond merely denying the allegations against her. She characterises the litigation as an abuse of process and pleads conversion of chattels and documents.

[8] The interlocutory applications are:

(a) The Lowes seek further discovery from the plaintiffs and the counterclaim defendant, Mr Roebuck;

(b) The plaintiffs and Mr Roebuck move for leave to file an amended statement of claim and seek further discovery from the defendants.

Each of these applications is opposed in part.

[9] I begin with the application brought by the first defendants, since that was brought first in time. As I have noted, their counterclaim alleges breach of a joint venture agreement.

[10] Against that background, the Lowes move for discovery of: accounting records of Farmers Transport Ltd showing transactions with BTL; any written agreements between FTL and two major customers, AFFCO and Fresh Meats; copies of all emails sent to BTL’s email addresses by Peter Roebuck, Hamish Durant and Brian Kelsey (all directors of BTL) or by Jason Roebuck (son of Peter and a BTL employee); documents between any of those men and other directors or employees of BTL regarding the pleaded breaches; director and shareholder meeting minutes for BTL, FTL, the second plaintiff and Eastern Equities Corporation Ltd relating to BTL or the breaches; and financial statements for Gisborne Livestock Finance Ltd. That company is not mentioned in the pleading, but its reference is explained to my satisfaction in an affidavit, and it presumably will have to be incorporated into an amended counterclaim.

[11] The plaintiffs and counterclaim defendant oppose, saying that the documents are not relevant, or are commercially sensitive, or are not in their possession or power. With respect to the latter, they say that Mr Roebuck is the sole director of EEI, but he is not a shareholder of Farmers Transport or its shareholder Eastern Equities Corporation. The request for emails is very broad; further, Jason Roebuck does not work for BTL and is not a respondent to the discovery application; but if the others have any, they will be discovered. Minutes will be discovered so long as costs are met on a non-party basis. There is no pleading relating to Gisborne Livestock Ltd.

[12] At the hearing I declined the application in relation to paragraphs [1.1.3] to [1.1.5], on the ground that Mr Gustafson assured me that discovery would be made, with the relevant material redacted. Orders were made in terms of [1.1.1], [1.1.2], and [1.1.6].

[13] To the extent necessary, these orders are made in the form of non-party orders. By expressing myself in that way, I am not to be taken as accepting that the material is not within the possession or power of Mr Roebuck. It may be. On the pleadings, the non-parties appear to be controlled by Mr Roebuck and further have benefitted from his alleged breach of obligations owed to the Lowes. I decline to order that the costs of discovery be borne in the first instance by the first defendants, as would normally be the case for non-party discovery. That issue will have to be resolved by the trial Judge.

[14] Mr Gustafson’s principal ground for opposing the application was that the first and second defendants would likely misuse the information, which is commercially sensitive. As to that, he pointed to the terms of my first judgment. I record, as I did at the hearing, that it should not have been necessary to trouble the Court with this matter. The past behaviour of the defendants – assuming it is made out at trial – cannot excuse non-discovery. Commercial sensitivity cannot excuse non-discovery, and the terms of inspection were easily capable of agreement among counsel. The terms I have ordered are that the documents in respect of which commercial sensitivity is claimed may be inspected by counsel, by expert witnesses who have given the usual undertakings to the Court, and by the Lowes and Ms Foot. However, the latter are to inspect the documents only in the presence of counsel, who will remind them of their obligation not to misuse the information, and they may not take copies. In short, the only purpose for which they may see the documents is for the necessary purpose of briefing their counsel.

[15] I turn to the plaintiffs’ application. The first part of the application pertains to a file held by UDC Finance. The file contains, I accept, relevant material; there is evidence that Ms Foot sought to raise finance for her new venture by relying on BTL’s financial statements and customer information. Ms Foot has filed an affidavit saying that everything in her possession or power has been discovered, and I see no

reason at present to go behind that. Some other material, albeit of a limited nature, has been discovered by Central Hawke’s Bay Transport, whose UDC file it was. UDC Finance will hold a file of its own, which prima facie is not in the possession or power of Ms Foot.

[16] However, I accept Mr Gustafson’s submission that there may be information on the file to which Ms Foot is entitled under the Privacy Act. To that extent, the information is within her possession or power, and she must seek it forthwith.[1]

There will be an order accordingly.

[17] The second dimension of the plaintiff’s application concern personal bank statements of the Lowes and Ms Foot and corporate credit cards used by those and Ms Foot in relation to BTL (1994) Limited. That is a separate company from BTL, of which Graham Lowes and Ms Foot remain directors. Its assets, with the exception of a depot, were to be transferred to BTL under the shareholders agreement, but the plaintiffs say that it continued in operation and money from BTL was diverted to it and thereafter used for personal purposes by the Lowes and Ms Foot.

[18] I accept that the discovery sought is relevant. I did not make an order in relation to the corporate credit cards, however, because an agreement was reached. The plaintiffs, who have BTL’s computer hard drive, will forthwith advise the defendants which particular credit cards statements are not already held, and Ms Foot and Mr Lowes will thereafter immediately request copies of the missing statements from the relevant bank.

[19] I declined to order discovery of the personal bank accounts of Ms Foot and the Lowes. Such discovery should not be necessary for the plaintiffs to demonstrate that BTL money was paid to them, as Mr Gustafson recognised.

[20] Finally, the plaintiffs sought leave to update the statement of claim. That was not opposed, and leave was granted. The amended statement of claim will be filed

_{within seven days. There will be leave to file amended statements of defence within}

a further seven days. Mr Sullivan signalled that it may be necessary to amend the Lowes’ counterclaim. As I have already flagged in this judgment, I accept that may be so. But a separate application must be made. The matter can be dealt with by a joint memorandum of counsel.

[21] The Registrar is to arrange a pre-trial conference before the trial Judge. Having regard to the many issues raised by the pleadings, careful attention will need to be paid to ensuring that the trial time is well used to address the main issues. As counsel suggested, some aspects of the case may warrant an inquiry into damages. That will be a matter for the trial Judge.

[22] The costs of the present applications and hearing are reserved.

Miller J

Solicitors:

Morrison Daly, Wellington for Plaintiffs and Counterclaim Defendant

Davidson Armstrong Campbell, Waipukurau for First Defendants

MacAlister Mazengarb, Wellington for Second Defendant

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[1] Johansen v American International Underwriters (NZ) Ltd (1997) 11 PRNZ 22 (HC).