Sainsbury Logan & Williams v Bell [2013] NZHC 1311 (5 June 2013)

Last Updated: 8 July 2013

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV 2009-091-197 [2013] NZHC 1311

BETWEEN SAINSBURY LOGAN & WILLIAMS Plaintiff

AND ROBERT ARTHUR BELL Defendant

Hearing: 19 April 2013

Counsel B R Cuff for the Plaintiff

R A Bell (in person) Judgment: 5 June 2013

_{JUDGMENT OF MALLON J}

Introduction

[1] Mr Bell applies for review of Associate Judge Gendall’s decision awarding costs on an interlocutory application in favour of Sainsbury Logan & Williams (SLW).1 The quantum of costs is not yet calculated but is anticipated to be around

$5,000.

[2] The substantive claim began in April 2009 as a simple claim for $3,900 for unpaid legal fees.2 The fees arose from relationship property proceedings in which

_{SLW had represented Mr Bell.}3 _{Mr Bell responded with a counterclaim against SLW}

1 _{Sainsbury Logan & Williams v Bell [2013] NZHC 185.}

2 The statement of claim was served on Mr Bell by substituted service and judgment was initially obtained against Mr Bell by default. That judgment was set aside by the District Court on the grounds that it was irregularly obtained: Sainsbury Logan & Williams v Bell DC Porirua CIV-2009-091-197, 20 May 2010.

3 Mr Bell and his ex-partner settled relationship property matters on terms set out in a Family

Court consent order dated 22 August 2006. Issues arose as to the interpretation of this consent order which led to the filing of more Family Court proceedings. Mr Bell instructed SLW to act for him in those proceedings. Those proceedings were eventually settled on terms set out in a consent order of the Family Court of Napier dated 15 September 2008. SLW did not receive payment for their legal services performed from 16 September to 14 October 2008.

SAINSBURY LOGAN & WILLIAMS v BELL [2013] NZHC 1311 [5 June 2013]

alleging (amongst other things) negligence and seeking damages of $800,000.4 The proceedings were transferred to the High Court. Since then the litigation has been delayed by discovery disputes. The costs award at issue here was awarded in respect of an “unless order” which SLW had sought in relation to Mr Bell’s discovery obligations.

[3] Mr Bell’s principal submission is that, in awarding costs to SLW, the Associate Judge simply compared the last list of documents filed by Mr Bell with the earlier lists he had filed and from that concluded that the application for an unless order was properly brought. Mr Bell says that this was wrong because it failed to take into account Mr Bell’s position that the last list was filed for pragmatic reasons (i.e. to avoid further disputes about discovery) rather than because it was necessary. He also contends that the Associate Judge erred in referring to the addition of privileged documents in the last list of documents. He says that these documents relate to the period after the earlier lists were filed and so could not have been discovered earlier.

[4] SLW contend that the Associate Judge was correct to award costs. They say that it was not until the last list was filed that they obtained a compliant list of documents.

Background

[5] The proceeding between SLW and Mr Bell was transferred to the High Court as a result of Mr Bell’s counterclaim in 2011. On 30 September 2011 the Associate Judge directed that discovery was to be completed by 28 October 2011, with inspection to take place by 18 November 2011. At that time the old discovery rules

_applied.5

4. The present counterclaim has 14 causes of action. The amended counterclaim has so many causes of action it is impossible to generally describe.

5 Under the previous High Court Rules the approach set out in Compagnie Financiére et

Commerciale du Pacifique v Peruvian Guano Co (1882) 11 QBD 55 (CA) (the Peruvian Guano approach) applied pursuant to which a document was discoverable if it might be relevant to any matter in question in the proceeding, or it might fairly lead to a train of enquiry of relevance. These rules were replaced from 1 February 2012 pursuant to which the “direct relevance” and “adverse documents” approach applies to standard discovery. However where discovery orders were in place prior to 1 February 2012 the old discovery rules continue to apply.

[6] For their part, SLW filed an affidavit of documents on 28 October 2011. Mr Bell also filed a document, which was described as “defendant statement re discovery.” As is perhaps understandable from a lay person’s perspective, Mr Bell approached discovery with the view that he should not have to discover anything that SLW already had in their possession. He also took a narrow view of relevance. This approach meant that he discovered only one document. His “statement re discovery” was in those terms:

May it please the Court.

A. Sainsbury Logan and Williams as my Lawyer in this matter have all relevant papers.

B. They also have the files of my pervious lawyers Grant Allan and

Richard Lewis.

C. The only relevant document they do not have is my copy of the draft settlement agreement prepared by Anne Hinton, together with my proposed amendments and changes. These were incorporated into Mr MacFarlane’s own copy in his own words. He then took his copy back to his office to be typed.

[7] SLW objected to Mr Bell’s approach to discovery. As a result the issue of discovery came back before the Associate Judge on 30 November 2011. The Associate Judge directed Mr Bell to file and serve a compliant affidavit of documents by 14 December 2011. On that day Mr Bell filed an affidavit of documents (compliant with the High Court Rules in form) which listed the following:

Schedule

Part 1

Documents that are in my control and for which I claim neither privilege nor confidentiality

Draft settlement agreement prepared by Ann Hinton which contains my proposed amendments and changes

(All other relevant documents relating to this proceeding are already in the possession of the Plaintiff including all documents passed to them from my previous lawyers Grant Allen and Richard Lewis and therefore need not be disclosed).

Part 2

Documents that are in my control and for which I claim privilege

Nil

Documents that are no longer in my control

Nil

Part 5

Documents that have never been in my control

Nil

...

[8] Mr Bell sought to inspect SLW’s documents so that he could see what documents they had. He thought that this would help him determine what else he might have to discover. SLW objected to this. Their position was that Mr Bell’s

14 December 2011 affidavit was inadequate and that Mr Bell could not inspect their documents until he had filed a satisfactory affidavit of documents. This led to an application by SLW for further and better discovery.

[9] SLW’s application for further and better discovery was heard by the High

Court (Clifford J) on 7 June 2012. The Judge ruled as follows:6

In exchanges with Mr Bell it became apparent, however, that he does have a documentary record relating to this proceeding which I am satisfied is discoverable and liable to be inspected by Sainsbury Logan & Williams. Whilst Mr Bell may not consider the contents of it relevant, it is not his assessment of relevance that is determinative. Moreover, the fact that he is prepared to take the risk he may not be able to rely on undiscovered documents does not answer Sainsbury Logan & Williams’ concerns: undiscovered documents may be adverse to Mr Bell.

In terms of r 8.19, I therefore made an order that Mr Bell was to prepare and file an affidavit of further and better discovery listing, by reference to a description of type and subject matter, but not by individual document, the documents he now has in his possession relating to the matters at issue between himself and Sainsbury Logan & Williams and, particularly:

(a) any notes prepared by him for the purposes of meetings with

Sainsbury Logan & Williams; and

(b) any accounting and tax records and information relating to the lost benefit of Resident Withholding Tax and interest deductibility as

6 Sainsbury Logan & Williams v Bell HC Wellington CIV-2009-091-197, 8 June 2012 (Minute and

Order) at [11]-[14].

would be relevant to establish a claim that he could otherwise have benefitted from those matters if they had been provided to him as he said was required.

Mr Bell may be guided by Sainsbury Logan & Williams’ affidavit of documents as to a reasonable basis for describing the documentary records he has in his possession. The provision of that affidavit to Sainsbury Logan

& Williams will therefore provide the basis upon which Mr Bell may inspect the documents discovered by Sainsbury Logan & Williams, and Sainsbury

Logan & Williams may inspect the documents discovered by him.

As I said to Mr Bell, it seemed highly unlikely (to put it mildly) that given the nature of his counterclaim against Sainsbury Logan & Williams, he would not be in possession of discoverable documents liable to inspection. At the same time, for Sainsbury Logan & Williams Mr Leman acknowledged that a schedule of documents contained in an affidavit of documents need not include “correspondence that may reasonably be assumed to be in the possession of all parties”. Thus Mr Bell need not disclose correspondence between him and Sainsbury Logan & Williams, except to the extent that such correspondence contains annotations or comments made by him and not subject to privilege.

[10] The Judge directed that the affidavit was to be filed by 29 June 2012. He reserved costs.

[11] On 29 June 2012 Mr Bell filed an affidavit which stated as follows:

Schedule

Part 1

Documents that are in my control and for which I claim neither privilege nor confidentiality

(a) Draft settlement agreement prepared by Ann Hinton which contains my proposed amendments and changes

(b) Box undated notes prepared by me for the purposes of meeting with the Plaintiff.

(c) Accounting or Tax records in respect to Resident Withholding

(RWT) tax in respect to the disputed relationship property:- (i) My RWT tax certificate for $38,304;

(ii) I do not have any document relevant to my ex-partners RWT

tax of $34,236. (See Part 5)

(d) Other Documents

(i) Copies of correspondence between the plaintiff and myself as discovered by the plaintiff;

(ii) Copies of correspondence between plaintiff and third parties as discovered by the plaintiff;

Documents that are in my control and for which I claim confidentiality

Nil

Part 4

Documents that are no longer in my control

Personal Notes given to the Plaintiff

I have not retained many of the notes made by me for the purposes of meetings with the Plaintiff. They have either been lost or discarded subsequent to the meetings.

Part 5

Documents that have never been in my control

My ex-partners RWT and tax records.

[12] SLW maintained that this affidavit remained non-compliant. On 27 August

2012 SLW filed an application seeking further discovery and an “unless order”. The

application was on the following grounds:

A The defendant’s affidavit of documents dated 29 June 2012 fails to

comply with the discovery order made by His Honour Clifford J on

8 June 2012 (Minute 8 June 2012, [12]).

B In particular, the defendant’s affidavit:

(i) fails to identify the documents he has in respect of the communications with the plaintiff as solicitors in respect of the subject matter of his various counterclaim causes of action.

(ii) the defendant’s counterclaim in his sixth and seventh causes of action put in issue certain tax claims both of which will have involved events and documents (including in particular the defendant’s tax returns, assessments and dealings with third parties including his accountants, other lawyers, the IRD, and the Banks). The defendant has failed to disclose any such documents.

C The defendant has been given numerous and ample opportunities to file a compliant affidavit of documents and yet he continues to fail to do so.

[13] That application was scheduled for hearing on 12 November 2012. By that date Mr Bell had just instructed a solicitor, Mr Cox, to act for him in the proceedings. Mr Cox advised the Court that he had only been instructed five days earlier. Mr Cox sought an adjournment so that he could arrange for Mr Bell to complete a compliant affidavit of documents in that time.

[14] SLW opposed the adjournment. They wanted the “unless order” to apply in the event that there was any further failure in compliance by Mr Bell. The Associate Judge declined to make the order because it would deny Mr Cox the opportunity of making submissions on the necessity of the order. The adjournment was therefore granted. Costs were awarded against Mr Bell on a category 2B basis together with disbursements for the hearing, to be calculated on the basis of one quarter of a day.

[15] The adjourned date for the hearing of the “unless order” was 30 January

2013. On 25 January 2013 Mr Cox, on Mr Bell’s behalf, filed a memorandum annexing a draft affidavit of documents which counsel contended, once sworn and filed, would satisfy Mr Bell’s discovery obligations. In light of that memorandum, the Associate Judge dismissed the “unless order” application and reserved costs.7

[16] The affidavit of documents was duly sworn and filed on 31 January 2013. The schedule to that affidavit ran to nine pages and listed all Part 1 documents item by item. Parts 3, 4 and 4 bulk listed some documents but provided a description as to what they related to. The affidavit itself (i.e. not including the schedule) ran to eight pages. It included the following:

I have sworn two previous affidavits of documents (14 December 2011 and

29 June 2012). I believe those affidavits comply with the High Court Rules. However, I make this further, new, affidavit to comply with the Court’s direction and to be pragmatic. There are many documents listed in the schedule to this affidavit that I believe do not necessarily have to be discovered for differing reasons, such as not being directly relevant or already being in the possession of the plaintiff, but on the advice of my counsel I have included them to try and avoid further disputes about discovery. In doing so, I am not making any concession about my previous affidavits but simply trying to get through this process.

7 Sainsbury Logan & Williams v Bell [2013] NZHC 38.

[17] The affidavit then set out the steps Mr Bell had taken to fulfil his discovery obligations up to this point. It gave reasons why, in relation to each category of documents that SLW were seeking discovery of, the documents were not relevant in Mr Bell’s view.

The costs judgment

[18] The Associate Judge gave his decision on costs on 13 February 2013. The Associate Judge noted that the latest affidavit of documents filed by Mr Bell included a substantial number of documents and was entirely different from the

29 June 2012 affidavit. The Associate Judge also noted that in Part 2 of the schedule to the latest affidavit there were ten documents for which privilege was claimed, whereas in his 29 June 2012 affidavit there were no documents in his control for which he claimed privilege. The Associate Judge considered that, since Mr Bell had been legally represented, his affidavit of documents had dramatically expanded. The Associate Judge considered that it was reasonable in the circumstances for SLW to bring the “unless order” application because Mr Bell was not assisting a proper discovery process and had not complied with the orders of Clifford J.

[19] The Associate Judge ordered 2B costs plus disbursements to SLW on their “unless order” application up to 30 January 2013 but excluded costs for the hearing of the application on that date. He declined to order costs for the hearing because once the draft affidavit of documents had been prepared (which Mr Bell’s counsel undertook would be filed) it was unnecessary for SLW to proceed with the hearing.

My assessment

[20] I reject Mr Bell’s submission that the Associate Judge was wrong to refer to the inclusion of privileged documents in the last affidavit of documents filed by Mr Bell. Mr Bell says that he only instructed a lawyer in the months after the “unless order” was sought. However there are documents in Part 2 of the schedule which pre-date the “unless order” application whereas in previous affidavits Mr Bell had not listed any documents in that part of the schedule.

[21] The more important point is whether Mr Bell’s affidavit dated 29 June 2012 failed to comply with Clifford J’s discovery order made on 8 June 2012. That is because that was the basis on which the “unless order” had been sought. As to that, the Associate Judge considered that when the “unless order” application was made Mr Bell “was not assisting a proper process being concluded by each party”. The Associate Judge did not elaborate on this other than by comparing the last affidavit filed with the earlier affidavits. I agree with Mr Bell that the Associate Judge was required to consider more than that the later affidavit was more expansive than the former affidavit. That is because a simple comparison of that kind did not take into account Mr Bell’s position that the later affidavit was not a concession that the former affidavits were inadequate.

[22] Clifford J was satisfied that Mr Bell had two categories of documents that were relevant and which ought to have been discovered. They were notes prepared by him for the purposes of meeting with SLW and “any accounting and tax records and information relating to the lost benefit of Resident Withholding Tax and interest deductibility ...”.

[23] As to SLW meeting notes, Mr Bell’s affidavit described “Box undated notes prepared by me for the purposes of meeting with the plaintiff”. The affidavit therefore described the first category of documents required by Clifford J’s orders. SLW’s complaint about the first category of documents was that it “fails to identify the documents he has in respect of the communications with the plaintiff ...”. However Clifford J ordered that Mr Bell was to list “by reference to a description of type and subject matter, but not by individual document”. It is therefore not apparent to me that Mr Bell’s affidavit failed to comply with the order made in respect of the first category.

[24] As to the second category of documents Mr Bell’s affidavit referred to his “RWT tax certificate for $38,304”. Other than that, the affidavit did not refer to any “accounting and tax records and information” unless those records were included within what Mr Bell described as “copies of correspondence between the plaintiff and third parties as discovered by the plaintiff”.

[25] SLW’s complaint about the second category of documents was that Mr Bell’s counterclaim put in issue tax claims for which there could be documents which were not disclosed. Those were said to include tax returns assessments and dealings with third parties (including Mr Bell’s accountants, other lawyers, the IRD and the Banks). This description encompasses more than what Mr Bell purported to discover (i.e. Mr Bell’s RWT certificate and correspondence between “the plaintiff [SLW] and third parties”). However, the submissions on behalf of SLW made to me did not explain which documents in the last affidavit of documents fell within Clifford J’s order for discovery of “any accounting and tax records and information

relating to the lost benefit of Resident Withholding Tax and interest deductibility”.8

[26] Mr Bell maintains that anything other than his RWT certificate is either irrelevant or not in his possession. It may be that Mr Bell is wrong about this. However it is not appropriate that I undertake a detailed review of that when the Associate Judge’s decision did not do so. In my view it was an error to find non- compliance simply on the basis that the later affidavit contained more documents than the former. In my view the Associate Judge needed to assess whether the additional financial and tax records discovered in the last affidavit fell within Clifford J’s description and were relevant to the claim.

[27] SLW’s submissions referred to a range of other documents that were not included in the 29 June 2012 affidavit. In addition to tax returns, financial statements and IRD documents (which might be within Clifford J’s order), these were said to include Langley Twigg documents, BDO Accountants correspondence and file documents, Marainanga property sale documents, BNZ documents and

privileged documents.9 However Clifford J’s order did not refer to these categories

of documents. While these documents might have met the Peruvian Guano10

_{relevance test (and might also need to be discovered if the new approach to}

8 I have checked SLW’s submissions made to the Associate Judge. Its submissions dated

5 November 2012 (for the hearing on 12 November 2012) included some discussion of why categories of documents were relevant to the pleadings, but did not discuss why those documents were within Clifford J’s judgment.

9 The submissions made to the Associate Judge for the hearing on 12 November 2012 which was adjourned also appear to seek to advance the unless order application not on the basis of Clifford J’s order but on the basis that there were also discoverable documents outside those categories.

10 Compagnie Financiére et Commerciale du Pacifique v Peruvian Guano Co, above n 5.

discovery were applied), an unless order filed on the basis of non-compliance with Clifford J’s order needed to relate back to the documents the Judge identified as requiring discovery.

[28] One of Mr Bell’s issues with the SLW approach is that they neither proceeded to inspect his documents following his affidavit of 29 June 2012 nor permitted him to inspect their documents. He says had they done so, SLW would have realised that they already had all relevant documents. For SLW it is said that this is not so. Subsequent to Mr Bell’s last affidavit of documents, SLW has inspected Mr Bell’s documents. Counsel for SLW advises that Mr Bell has relevant documents that SLW did not have and that they will be pursuing further requests for discovery as a result of this inspection. While that is interesting it is not appropriate that I uphold the Associate Judge’s order on this basis.

[29] It appears that SLW initially approached discovery by requiring Mr Bell to comply strictly with the High Court Rules. They were entitled to do so but it meant that discovery became stuck in the formalities of what was required to be listed rather than focussed on what would assist SLW in conducting their defence to the counterclaim. In its submission to me SLW contended that discovery remained to be carried out under the old discovery rules because these were the rules in place when discovery was first ordered. However Clifford J took a different approach no doubt aimed (unsuccessfully as it transpired) at achieving a co-operative and pragmatic way forward. Be that as it may it does seem that SLW’s present counsel are looking to take a more pragmatic approach and it is hoped that discovery will be able to advance to SLW’s satisfaction.

[30] In my view the Associate Judge’s costs order must be quashed. That is because it was made without expressly considering whether Mr Bell had failed to discover documents within the second category of documents identified by Clifford J. I have considered whether the costs decision should be referred back to Gendall AJ to determine this. I have decided that it is not appropriate to do so. That is partly because it seems that a large part of SLW’s concern is with discovery related to matters that were not within the terms of Clifford J’s orders and it was non- compliance with those orders on which the application was based. It is also because

it is in the interests of all parties that the proceedings move forward and focus on discovery of documents that SLW need. Present counsel for SLW advises that they now know what they want and will be pursuing these documents. In my view, if SLW experience any further difficulties in obtaining relevant documents it would be appropriate for costs orders to be made.

[31] I note that there is no appeal from the 2B costs order made by the Associate Judge at the 12 November 2012 hearing. That costs order therefore remains. That order was made because of the last minute adjournment sought on Mr Bell’s behalf and was therefore not dependent on an assessment of Mr Bell’s compliance with Clifford J’s discovery order.

[32] I also note that Clifford J reserved costs on the application for further and better discovery he heard. The Associate Judge said in his 4 February 2013 judgment that if costs on that application were still in issue, memoranda were to be filed and referred to Clifford J for his consideration. It seems that memoranda were duly filed but they never made their way from the file to the Judge. That will now occur. SLW may yet therefore receive a costs order on that application.

[33] Mr Bell should not assume that this judgment provides vindication of the approach he took to discovery. It does not. My decision to quash the costs order is made because in my view the Associate Judge did not take the correct approach to the matter. The decision not to refer it back to the Associate Judge is made in the exercise of my discretion because it will involve the parties in more unnecessary costs, when discovery now looks to be proceeding in a more co-operative and constructive way, and some costs have already been ordered in SLW’s favour in

relation to the discovery process.11

Result

[34] The Associate Judge’s decision to award costs as set out in his judgment of

13 February 2013 is quashed. For the avoidance of doubt the costs decision made on

_{12 November 2012 remains. Also for the avoidance of doubt I note that there is an}

11 High Court Rules, rr 14.1 and 14.7(g).

outstanding costs application which relates to the application for further and better discovery heard by Clifford J. The memoranda relating to that will be forwarded to Clifford J for his consideration.

Mallon J

Solicitors:

DLA Phillips Fox, Wellington for the Plaintiff