Robert v Foxton Equities Ltd [2014] NZHC 726 (9 April 2014)

Last Updated: 16 April 2014

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV 2013-454-381 [2014] NZHC 726

BETWEEN	WARREN ROSS ROBERT, ZACH ROBERT & GAVIN ALEXANDER WHITE AS TRUSTEES OF THE ROSS ROBERT FAMILY TRUST Plaintiffs
AND	FOXTON EQUITIES LTD Defendant

Hearing:	6 March 2014
Counsel:	R T Wilson for Plaintiffs H L Quinlan for Defendant
Judgment:	9 April 2014

JUDGMENT OF THE HON JUSTICE KÓS (Discovery)

[1] An argument about discovery. The plaintiffs say that the defendant’s

_{discovery is deficient. They seek particular discovery of three further categories of}

_documents.¹

_{In addition, they challenge the defendant’s claims to privilege}

concerning 34 documents. The defendant has shifted its position in relation to the relevant categories of privilege applicable. But it still maintains that all 34 are privileged. The plaintiffs say I should inspect those documents to satisfy myself as

_{to the legitimacy of those claims.}

_Background

_{[2] The background is set out, helpfully, by Gendall J in an earlier judgment in a}

¹ Pursuant to r 8.19 of the High Court Rules.

related proceeding concerning a caveat lodged by the plaintiffs.²

_{relevant passages of that judgment in full:}

I will set out the

[3] The respondent [defendant] owns a large block of commercial land in Foxton containing 7.3 hectares (the total site) of which the caveated land forms part. In 2008 the respondent tried to sell the total site as a whole, but after several unsuccessful attempts, decided to subdivide it. A draft plan was drawn up subdividing the total site into 15 lots. On 10 June 2010 the respondent and the applicants [plaintiffs] entered into an Agreement for Sale and Purchase (the ASP) of Lot 6, delineated on this draft plan (Lot 6) containing an area of approximately 3370 square metres including one substantial commercial building. The ASP provided for a price of

$145,000.00 for this Lot 6 with a deposit of $14,500.00 to be paid when the ASP became unconditional. Lot 6 formed part of and straddled the boundaries of the existing titles WN870/17 and WN13C/790 which represented the caveated land. Clause 15(b) provided that the ASP was conditional upon Horowhenua District Council (the Council) approval of the proposed subdivision plan on conditions acceptable in all respects to the vendor by the 30^th day of June 2010 (which date was later extended to 30

_{October 2010). Clause 15(a) of the ASP provided that:}

15.0 (a) The vendor shall proceed with all due diligence and take all reasonable steps to have the attached proposed plan of subdivision approved by the Council and on receiving such approval shall in like manner prepare a title plan of subdivision, seek the Council’s approval of that title plan and have the title plan deposited in the Land Registry Office.

[3] I add here that cl 15(b) said:

15.0 (b) This contract is conditional upon the Council approving the attached proposed plan of subdivision on conditions acceptable in all respects to the vendor by the 30^th day of June 2010.

[4] I continue now from the judgment of Gendall J:

[4] Clause 8.7(2) of the ASP also required generally that:

The party for whose benefit the condition has been included shall do all things which may reasonably be necessary to enable the condition to be fulfilled.

[5] The ASP went on to provide that, after it was signed, the applicants could go into possession of Lot 6 paying a rental of $100 a week, which they did.

² Robert v Foxton Equities Ltd [2013] NZHC 1209.

[6] And, clause 8.7(4) of the ASP deemed conditions not to be fulfilled until notice of fulfilment was served by one party on the other. Such notice was required to be in writing according to clause 1.2(1).

[7] On 26 July 2010, the respondent applied for resource consent from the Council to effect the proposed subdivision and to define the new Lot 6. However, as consent was not obtained by 30 October 2010, the parties informally agreed to extend the timeframe.

[8] Finally, on 19 January 2011, the resource consent was granted. It was subject however to numerous conditions (the subdivision conditions). The subdivision conditions related amongst other things to sewer and storm water systems and to compliance with fire fighting supply provisions. Specifically, the respondent, in addition to other matters, was required to:

(a) ensure all buildings complied with the Fire Fighting Water Supply Code of Practice (Condition 9 – this alone it is now said would cost up to $1 million to fully comply with);

(b) install a new water main;

(c) create approximately 500 car parks; and

(d) replace all existing kerb and channels along the entire land boundary.

[9] The respondent says it started to work through the subdivision conditions with its advisors, and began engineering and surveying work. This was, it maintains, so it could understand the full extent of the subdivision conditions and to enable it to be in a position to negotiate those conditions with the Council. These negotiations took place from mid 2011. The applicants maintain they were never told directly from this point onwards right up to December 2012 whether the subdivision conditions were either acceptable or not acceptable to the respondent.

[10] In April 2011 however, Mr Lewis Townshend (Mr Townshend), the respondent’s agent for the sale of Lot 6, told the applicants of the resource consent, and requested payment of the $14,500.00 deposit. And, on 12 April

2011, Mr Townshend emailed the applicant a copy of the latest subdivision plan. He also forwarded an email between himself and Mr Kevin Pike (Mr

Pike), a senior employee of the respondent’s shareholder company and

“agent” of the respondent, stating that the engineering and survey work was underway, and titles for the stage 1 lots (which included Lot 6) were 8 – 10

months away. The applicant paid the deposit on 20 April 2011.

[11] In the meantime in about June 2011 the applicants, who had been renting Lot 6 for some time, discovered that the building on this property was in need of certain electrical repairs. It appears they tried through Mr Pike to get the respondent as landlord to pay for the repairs. Comments were made on behalf of the respondent and it seems the applicants accepted those comments at the time as being an intimation that, as they the applicants were now the owners of the building on Lot 6, they should pay for the work. The applicants say they then spent some $35,000.00 on these repairs, although it appears now that there may be some argument over whether the repairs were done and the amounts spent before the conversation/s in question took place.

[12] In any event, some months later in November 2011, the respondent entered into an agreement to sell another part of the total site (being Lot 4 on the plan containing about 2.4 hectares) to a third party, a Mr Jamieson. Significantly perhaps, this sale agreement contained no requirement for Council approval of the subdivision, or for the respondent to be satisfied with the conditions of Council’s subdivision consent, which were part of the ASP with the applicants. The evidence before me, however, is that this agreement for the sale of Lot 4 to Mr Jamieson did not proceed.

[13] The respondent contends now that it was in December 2011 that it realised the conditions of the Council’s subdivision consent were unacceptable, and it says it gave the applicants notice of this. As I have noted above, however, the applicants dispute that. The applicants say instead they were assured at the time by Mr Townshend the respondent’s agent that the subdivision was proceeding along nicely.

[14] Time marched on. Then, in mid 2012, the parties had a discussion about the applicants looking for alternative premises. The first-named applicant alleges that he asked if the applicants could get out of the purchase, but was told at the time by Mr Townshend that the ASP was unconditional and binding and the vendor would have the right to sue them if they tried to withdraw from the contract.

[15] On 16 August 2012 the parties met and it is said Mr Pike informed the applicants that an outside party was interested in purchasing Lot 6 for a price $100,000.00 over the figure the applicants were paying. The applicants say they rejected this option however. The respondent’s position is quite the contrary to this however. It maintains now that at about this time the applicants were clearly told the Council’s subdivision conditions were unacceptable.

[16] On this aspect, the applicants do acknowledge they were told in late

September 2012 of the problems with the Council’s conditions.

[17] On 6 November 2012, the respondent sent the applicants a “Termination Agreement”, advising it would not be possible to complete the subdivision due to the unreasonable conditions imposed by the Council. Under this Agreement, the respondent would pay the applicants $35,000.00, refund the deposit, and give the applicant the first right of refusal for Lot 6 if it were to be offered for sale later.

...

[19] On 14 December 2012 however, the respondent sent an email purporting to terminate the ASP by reason of non-fulfilment of clause 15(b). The respondent says that this simply confirmed a telephone conversation Mr Pike and Mr Robert for the applicants had on 11 December 2012.

Issues for trial

[5] It is agreed that the issues for trial are as follows:

(a) Issue 1: Was condition 15(b) fulfilled in fact?

(b) Issue 2: If not, did the defendant give actual or implied written notice of the fulfilment of condition 15(b)?

(c) Issue 3: If not, was condition 15(b) waived by the defendant and, if not waived by written notice, was the requirement to give written notice of waiver also waived by the defendant?

(d) Issue 4: If not, is the defendant, by virtue of its conduct or silence, stopped from relying upon the non-fulfilment of condition 15(b)?

(e) Issue 5: As at December 2012 was the defendant otherwise entitled to cancel the ASP because the costs of fulfilment of the condition of the subdivision consent were disproportionately high in regard to the benefits of the subdivision?

(f) Issue 6: If the purported cancellation is invalid, is the appropriate remedy specific performance or damages in lieu of specific performance?

(g) Issue 7: What is the appropriate form of any order for specific performance?

(h) Issue 8: What is the appropriate quantum of any order for damages in lieu of specific performance?

Particular discovery application

[6] The plaintiffs seek discovery of three categories of documents, as follows:

(a) Category 1: All correspondence and records of communications between the defendant or any of its agents on the one hand, and Alan Jamieson or any of his agents on the other hand, concerning the purchase by Mr Jamieson of proposed lot 4 of the proposed subdivision of the defendant’s land at Foxton, New Zealand (“the Foxton land”).

(b) Category 2: All correspondence and records of communications concerning the defendant’s attempts during or after 2012 to sell the whole or substantially the whole of the Foxton land to any third party.

(c) Category 3: All correspondence and records of communications between the defendant or its agents on the one hand and third parties on the other hand, comprising offers to purchase any of the proposed lots of the proposed subdivision of the Foxton land, or requests for options to purchase, or comprising negotiations for any such purchase or option to purchase.

General principles

[7] Rule 8.19 of the High Court Rules provides the Court may make an order for particular discovery after the proceeding has commenced where:

[I]t appears to a Judge, from evidence or from the nature or circumstances of the case or from any document filed in the proceeding, that there are grounds for believing that a party has not discovered 1 or more documents or a group of documents that should have been discovered ...

[8] The following general principles may be taken from decisions of this Court in ANZ National Bank Ltd v Tower Insurance Ltd and Southland Building Society v Barlow Justice Ltd:³

(a) A document should be discovered if it is relevant to matters which will actually be in issue before the Court.

(b) Relevance is determined by the pleadings.

(c) On an application for particular discovery under r 8.19, there must be prima facie evidence that the document exists and is in the party’s control (although the applicant need not prove that the document

_{actually exists).}

³ ANZ National Bank Ltd v Tower Insurance Ltd (2009) 15 ANZ Insurance Cases 61–816 (HC) at

[18]–[24]; Southland Building Society v Barlow Justice Ltd [2013] NZHC 1125 at [12]–[14].

(d) The applicant need no longer establish “necessity” for an order (in contrast to former r 300). However, the supposed regulatory relaxation may not be substantial: the order will still only be made in relation to documents that “should have been discovered”.

(e) The Court retains an overriding discretion as to whether to make an order.

Category 1: Jamieson documents

[9] As has been seen, the plaintiffs’ contract related to lot 6. About halfway through the period between the plaintiffs entering their contract in June 2010 and the defendant purporting to cancel it in December 2012, the defendant entered another contract with Mr Jamieson for the sale of lot 4. The details are referred to at [12] of Gendall J’s judgment. The plaintiffs have a copy of the final Jamieson contract. It does not include any condition requiring the defendant’s acceptance of the Council subdivision conditions. It was entered after those conditions had been specified by

_{the Council.}⁴ _{The defendant did not discover the final form of the Jamieson}

_{contract, because the plaintiffs already had a copy.}⁵

_{But the defendant did disclose a}

copy of an earlier draft contract, for a lesser purchase price, and signed by Mr

_{Jamieson (as purchaser) only.}

[10] Mr Wilson (for the plaintiffs) submits that the Jamieson contract and its extrinsic materials are relevant to Issue 1, noted at [5] above. The question here is whether the defendant had obtained a subdivision consent “on conditions acceptable in all respects” to it. A key question, I suppose, will be at what point in time that is measured. Conditions might be acceptable at one point, but not at another (either on further reflection, or because of subsequent events). Mr Wilson submits that the relevant point in time is January 2011, when the conditions were stated by the Council. Whatever the case, his clients are required to prove the state of mind of a body corporate. They can do so only by indirect evidence. He submits a significant

_{part of that evidence is the inference that can be drawn from the failure to include a}

⁴ The Council conditions were stated in January 2011; the Jamieson contract was entered into in

_{November 2011.}

⁵ See r 8.16(5)(b).

condition as to subdivision conditions in the Jamieson agreement, 10 months later, in

November 2011.

[11] Ms Quinlan (for the defendant) submits that the Jamieson-related documents, beyond the contract itself, are not relevant. She submits that a contract between parties A and B “cannot be used as an aide to the interpretation or application of an entirely separate contract between parties B and C.” She also submits that the entire factual matrix is relevant to an understanding of the Jamieson agreement. In the absence of that factual matrix, the documents are of no, or marginal, value in assessing the position as between the plaintiffs and defendant.

[12] I do not think either of Ms Quinlan’s submissions can be sustained. First, the plaintiffs do not seek the background to the Jamieson contract in order to construe their own. Rather the documents are relevant to the question of whether the Council’s subdivision conditions were acceptable to the defendant at that particular point in time. Secondly, Ms Quinlan’s second argument is really the very reason why these additional documents (over and above the Jamieson contract itself, which the plaintiffs already have) must be relevant. The Jamieson contract represents a plain forensic point for the plaintiffs. Its relevance is accepted. The additional contextual material may strengthen (as the plaintiffs believe) or weaken (as the defendant believes) that forensic point. Whichever it may be, it is relevant.

[13] On the other hand, Ms Quinlan was on stronger ground in her submission that the scope of the documents sought was too broad. After some discussion, a compromise formula was reached. It is as follows:

All correspondence and records of communications between the defendant or any of its agents, on the one hand and Alan Jamieson or any of his agents on the other hand concerning the purchase by Mr Jamieson of proposed lot 4 of the proposed subdivision of the defendant’s land at Foxton, New Zealand prior to 5 November 2011 and all such documents on or after 5 November touching directly on the Council’s subdivision conditions.

[14] There will be an order under r 8.19 for particular discovery in those terms.

Category 2: Whole land sales documents

[15] I can be brief. The defendant now accepts the relevance of these documents. They have provided what they say are the relevant documents on a compact disc. However, they do not wish to have to list them formally.

[16] It follows that these documents should have been discovered, and that an order would be made under r 8.19. In the ordinary course, that would require an amended list of documents, formally listing those documents. Any other informal arrangement should be agreed. The defendant does not agree to informal discovery. In those circumstances the documents should be listed formally in an amended list.

_{The defendant will have to file such a list in any event, because of its changed}

_{position in relation to claims of privilege for some documents.}⁶

_{Of course, if the}

plaintiffs fail at trial, some of the additional expense associated with the additional listing will be recoverable from them by way of costs.

[17] There will therefore be an order for particular discovery of the category 2

_{documents, as described at [6].}

Category 3: Individual lots/sales documents

[18] Again I can be brief. Both the category 2 documents (the relevance of which is now accepted) and category 3 documents are relevant to Issue 5 noted at [5]. That is, to the question of whether the cost of fulfilment of the Council conditions for subdivision consent were disproportionately high as against the benefit of the subdivision to the defendant. It is likely that that issue will require valuation evidence from both sides. Valuers will be better informed in assessing cost versus benefit if they have access to actual negotiation evidence concerning the very lots on offer.

[19] After considering the issue further, Ms Quinlan very sensibly accepted the relevance of the material. An agreed (narrower) formula for discovery was then reached between counsel to accommodate her objections as to scope. The agreed

_{formula is as follows:}

⁶ See [22] below.

All correspondence and records of communications between the defendant or its agents on the one hand and third parties on the other hand comprising offers to sell or purchase any of the proposed lots of the proposed subdivision of the Foxton land or requests for options to purchase or comprising negotiations for any such other requests to the extent they illuminate the value of the lot or lots in question.

[20] There will, therefore, be an order for particular discovery in those terms.

Privilege review application

[21] The plaintiffs seek my review of privilege claimed by the defendants over 34 specific documents. These documents are said to be protected because of solicitor/client communication privilege (category 1), litigation privilege (category

2), or without prejudice communication privilege (category 3).

[22] However, the annexure provided by the defendant in its notice of opposition shows there has been a material change in some of the categories for which privilege was claimed. A number of documents for which category 2 privilege was claimed are now instead the subject of a category 1 privilege claim. That may be because it appears that the defendant cannot establish that it reasonably apprehended litigation any earlier than January 2013. That is, about a month after it purported to cancel the contract with the plaintiffs. Whatever the case, the result is that the defendant will need to file an amended list of documents.

[23] The defendant’s list of documents presently identifies various sub-categories within categories 1 and 2. In order to give greater clarity to the claims being made, I invited Ms Quinlan to file an amended annexure making clear, in relation to each of the 34 documents, what category of privilege now is claimed, what category of privilege formerly was claimed, and what relevant sub-category the claim to privilege now made falls within. Of course, it may be that a document is protected potentially by multiple categories, or multiple sub-categories.

[24] That invitation was accepted, in a memorandum dated 10 March 2014. It revises the basis for privilege claimed. Most of the litigation privilege claims are now abandoned, apart from a residual group of five documents.

[25] Some general points on the law of privilege need to be addressed before considering the privilege claims in more detail.

Subsidiary and parent companies

[26] Foxton Equities Ltd is the defendant in these proceedings. However it is accepted that for privilege purposes, communications involving Godfrey Hirst NZ Ltd (Godfrey Hirst) and its employees or agents can be treated as communications from Foxton Equities Ltd. This is because Foxton Equities Ltd is a subsidiary company, 100 per cent owned by Godfrey Hirst. The two operated together, indistinguishably, in the events at issue.

In-house counsel

[27] The defendant submits that Ms Pauling, the general manager (and, in effect managing director) of Godfrey Hirst, offered legal advice as in-house counsel to Godfrey Hirst. Ms Pauling holds a practising certificate, exhibited in her affidavit. Prior to becoming general manager, she was Godfrey Hirst’s in-house solicitor. The plaintiff submits that a legal adviser must be independent of the person they are advising. It is incompatible with the role of in-house counsel for the same person to also be the general manager of the defendant.

[28] I do not accept the plaintiffs’ submission.

[29] In-house counsel are “legal advisers” under s 54(1) of the Evidence Act 2006. In Bain v Minister of Justice Mr Bain contended that s 54 should be interpreted as requiring certain criteria relating to independence to be satisfied before legal advice privilege attaches.⁷ Specifically, he submitted that in the context of in-house counsel

_{the Court needed to be satisfied:}⁸

⁷ _{Bain v Minister of Justice [2013] NZHC 2123.}

⁸ At [22].

...that the author of any document, said to attract the privilege, is independent of the client's control and is able to give neutral legal advice uncompromised by bias.

Keane J rejected that submission and held that all that was required was that the person hold a current practising certificate. That meant they were subject to the profession's ethics and discipline, which was sufficient to demonstrate independence.⁹

[30] However, that does not mean all communications from in-house counsel are covered by privilege, particularly where they provide non-legal services to the company too:¹⁰

... the document for which the privilege is claimed must have come into being ‘in the course of and for the purposes of ... professional legal services’; and thus not in the course of or for the purpose of any other service.

Whether a particular communication or document is covered by privilege is a question of fact. Where in-house counsel have multiple duties, “whether or not solicitor-client privilege attaches ... depends on the nature of the relationship, the subject matter of the advice and the circumstances in which it is sought and

rendered.”¹¹

[31] Therefore the fact that Ms Pauling is also general manager of the defendant’s parent company does not affect her status as legal adviser for the purposes of privilege. She holds a practising certificate, and therefore she is a legal adviser. What matters is whether she was acting in her legal adviser (rather than general manager) capacity in the communications in issue.

[32] These were with a Mr Pike. He was responsible for management of the subdivision, not Ms Pauling. He sought legal advice from Ms Pauling on matters regarding the subdivision. Where Ms Pauling gave legal advice, it is privileged.

_{Where Ms Pauling gave managerial direction, it is not.}

⁹ _{At [72].}

¹⁰ _{At [72].}

¹¹ At [75] quoting R v Campbell [1999] 1 SCR 565 at [50]..

Agency

[33] The defendant submits that it retained Mr Truebridge of Truebridge Associates Ltd (TAL), a surveying firm, to act as its agent to obtain an acceptable subdivision consent from the Council. This included work on a potential application to amend the conditions of the consent. The plaintiff submits that TAL was not the defendant’s agent because the defendant continued to communicate directly with Chapman Tripp for legal advice. It was not within the scope of TAL’s agency to communicate with the solicitor to obtain legal advice.

[34] In Brandlines Ltd v Central Forklift Group Ltd Associate Judge Gendall undertook a broad examination of the New Zealand law of privilege as it relates to agency.¹² He held that there are two requirements to be satisfied before privilege can

be claimed in such circumstances:¹³

(a) [t]he third party acted as an agent in communicating with the client’s solicitor; and

(b) [t]he communication was for the purpose of obtaining or providing legal advice.

[35] To act as an agent, “[i]t is not sufficient ... that the third party passes on information to the client’s solicitor for the purpose of enabling legal advice to be given”.¹⁴ The third party must go further and have “assumed, the role ... client” in

_{communicating the information to the solicitor. It must have acted as the client’s}

_{“man on the spot”.}¹⁵

_{Importantly, where a third party has collected information for}

solicitors in the course of “performing a task that ordinarily would have been undertaken by the client itself” as opposed to a task normally performed by an

_{independent contractor, it is not necessary that the third party have “the capacity to}

¹² Brandlines Ltd v Central Forklift Group Ltd HC Wellington CIV-2008-485-2803, 11 February

_2011.

¹³ _{At [33].}

¹⁴ _{At [33].}

¹⁵ At [34].

instruct and/or receive legal advice from the solicitors in question on the clients’

behalf”.¹⁶

[36] In Wheeler v Le Marchant the defendants were faced with a claim for specific performance under a building contract.¹⁷ They claimed privilege in relation to letters to and from their surveyors. Jessel MR put the claim this way:¹⁸

What [the defendants] contended for was that documents communicated to the solicitors of the defendants by third parties, though not communicated by such third parties as agents of the clients seeking advice, should be protected, because those documents contained information required or asked for by the solicitors, for the purpose of enabling them the better to advise the clients.

[37] Jessel MR then held that communications to the solicitors by the surveyors - third parties who were not acting as “agents of the clients seeking advice” - were not privileged. But in cases where that condition was satisfied, privilege would extend to communications between the agents of the client and the agents of the solicitor:¹⁹

The actual communication to the solicitor by the client is of course protected, and it is equally protected whether it is made by the client in person or is made by an agent on behalf of the client, and whether it is made to the solicitor in person or to a clerk of subordinate of the solicitor who acts in his place and under his direction.

[38] Cotton LJ also emphasised the importance of the third parties being agents of the client seeking advice before privilege could attach. The work that the agents do must include “communicating with the solicitor to obtain legal advice”:²⁰

It is said that as communications between a client and his legal advisers for the purpose of obtaining legal advice are privileged, therefore any communication between the representatives of the client and the solicitor must be also privileged. That is a fallacious use of the word

‘representatives’. If the representative is a person employed as an agent on the part of the client to obtain the legal advice of the solicitor, of course he

stands in exactly the same position as the client as regards protection, and his

communications with the solicitor stand in the same position as the communications of his principal with the solicitor. But these persons were not representatives in that sense. They were representatives in this sense, that they were employed on behalf of the clients, the defendants, to do certain

¹⁶ _{At [35]–[36].}

¹⁷ _{Wheeler v Le Marchant (1881) 17 Ch D 675 (CA).}

¹⁸ _{At 681.}

¹⁹ _{At 682.}

²⁰ At 684.

work, but that work was not the communicating with the solicitor to obtain legal advice. So their communications cannot be protected on the ground that they are communications between the client by his representatives and the solicitor.

[39] In Mudgway v New Zealand Insurance Co Ltd Chilwell J considered a case where an insurer appointed a third party assessor to investigate a suspected arson.²¹

At the time, the insurer had no staff available to carry out the in-depth investigation necessary to defend a claim under the insurance policy. Chilwell J followed Wheeler v Le Marchant and held that the third party assessor was the insurer’s agent and therefore covered by privilege:²²

Counsel for the plaintiff advanced three main arguments. Her first was that no communication between Mr Hunter [an insurance assessor] and Mr Fookes [the insurer’s solicitor] is privileged, because the former was not the insurer's agent for the purpose of obtaining legal advice. She submitted that Mr Hunter was merely appointed to investigate and report on the facts to Mr Fookes ...

The first two arguments may be disposed of quite shortly. I am satisfied from the affidavits of Mr Robinson and Mr Kelliher that Mr Hunter was appointed to be the insurer's agent. He was appointed to act on behalf of the Unit because no members were then available to carry out the in-depth investigation required. There is no suggestion that if Mr Robinson had continued to act for the Unit that he would not have been the insurer's agent for the purpose of it obtaining legal advice. In my view, although Mr Hunter was not an employee, by appointing him agent of the Unit and requiring him to communicate through Mr Fookes, the insurer clothed him with the requisite authority...

In the present case, Mr Hunter was appointed to act on behalf of the insurer, to be its “man on the spot” as it were. The insurer, like all companies, must act through agents to whom it has given authority. In the present case, the insurer was acting through Mr Hunter...

In the Highgrade Traders case, the insurer instructed the various investigators to investigate and report. The investigators appear to have acted throughout as independent contractors, rather than under an appointment as agent as is the present situation. Mr Hunter was not “procured” by the insurer – he acted on its behalf.

[40] Given that privilege is now codified in the Evidence Act 2006, it is important to focus on the words of the statute. They support the view that to be an agent for the purposes of privilege, a person must be given authority to communicate with the

_{solicitor to obtain legal advice, and actually do so.}

²¹ _{Mudgway v New Zealand Insurance Co Ltd [1988] 2 NZLR 283 (HC).}

²² At 286-287.

[41] Section 54(1) describes “a person who obtains professional legal services”. Privilege then attaches to the communications between that same “person and the legal adviser”. I say the “same person” because there is no indication that Parliament intended the word “person” to have two meanings within the same sentence. A third party to whom privilege attaches must be operating under an agency agreement that encompasses them obtaining professional legal services.

[42] That approach is supported by s 51(4), which emphasises the importance of authorisation:

A reference in this subpart to a communication made or received by a person or an act carried out by a person includes a reference to a communication made or received or an act carried out by an authorised representative of that person on that person's behalf.

[43] I find that TAL (through its employee Mr Truebridge) was acting as the defendant’s agent in relation to the exercise of obtaining a workable subdivision consent from the Council. This included work on a potential application to amend the conditions of the consent. It required TAL to obtain legal advice on that work. I am satisfied that Godfrey Hirst clothed TAL with the authority to obtain legal services from Chapman Tripp directly on behalf of Godfrey Hirst. And, thereby, the defendant.

[44] In one of the earliest emails Chapman Tripp confirmed its instructions. It referred to the Council communicating with “Truebridge/Godfrey”. This suggests that Chapman Tripp treated TAL as equivalent to Godfrey Hirst for the purposes of the consent application. It was TAL that attended meetings on behalf of Godfrey Hirst with the Council. Godfrey Hirst asked TAL for confirmation on what instructions ought to be given when Chapman Tripp raised queries. While Mr Pike (from Godfrey Hirst) continued to play an active role in managing the project of subdivision overall, he was deferential to TAL’s expert view of how the consent application process should proceed.

[45] I do not accept the submission that because Mr Pike continued to also ask for legal advice directly from Chapman Tripp (although always copying in TAL), TAL could not be Godfrey Hirst’s agent in communications with Chapman Tripp.

Mr Pike and Mr Truebridge’s rights to instruct Chapman Tripp were not mutually exclusive. The agency need not entail exclusive communication.

[46] In these circumstances, I am satisfied that TAL was an agent of Godfrey Hirst for the purpose obtaining a workable subdivision consent from the Horowhenua District Council, including obtaining legal advice.

Solicitor/client privilege

[47] Chapman Tripp and in-house counsel legal advice to defendant/Godfrey Hirst: There are 13 documents in this group. They are internal emails that the defendant submits, in part at least,²³ were communications made for the purpose of obtaining or providing legal advice from both Chapman Tripp and Ms Pauling (as in- house counsel). The defendant claims they all are covered by solicitor/client

_privilege.

[48] Having reviewed the documents, I uphold the privilege claims. I am satisfied that the privilege explanations now given by the defendant in its memorandum of

_{10 March 2014 are correct, and that the privilege claims are sustainable.}

[49] Truebridge Communications: There are six documents in this group. They involve emails between the defendant, Godfrey Hirst, Chapman Tripp and TAL. The defendant claims they all are covered by solicitor/client privilege, on the basis that TAL was its agent in communicating with (and instructing) Chapman Tripp.

[50] Subject to the next paragraph, I uphold the privilege claims in respect of all six documents in this group. I am satisfied that the claims made in the memorandum of 10 March 2014 are correct, and sustainable.

[51] I am not presently satisfied, however, that all parts of the following documents are privileged:

(a) Document 022.037: The section comprising the Truebridge/Pike email of 26 September 2012 (1.59 pm) does not appear to me to have been

²³ Where some portion of the document is redacted, and the remainder released.

prepared for the purposes of obtaining legal advice. It appears to be a transactional interpolation.

(b) Document 022.069: The Truebridge/Hayman email that begins this string is not privileged. It may, of course, have been discovered separately.

Unless the defendant shows cause why these parts are privileged, contrary to my impression, the privilege claims in relation to these parts are not sustained.

[52] Draft documents prepared by Chapman Tripp: The defendant claims solicitor/client privilege in relation to this group of eight documents. The defendant submits they are documents prepared by the defendant’s legal advisers for the purpose of giving legal advice or assistance.

[53] I uphold the privilege claims in respect of all eight documents in this group.

[54] I accept the defendant’s submission, citing Kupe Group Ltd v Seamar

_{Holdings Ltd, that drafts “may be privileged”.}²⁴ _{But, as Master Kennedy-Grant put}

it once, “[t]he issue must be considered in relation to individual documents”.²⁵ As ever, context is everything.

[55] Here the first context is that Chapman Tripp were drafting letters to be sent, ultimately, to the plaintiffs’ solicitors cancelling (or, to be more correct, terminating) the sale and purchase contract. It is apparent on the face of the draft letters that the prospect of a dispute was in contemplation. That is relevant not to litigation privilege in this case, but solicitor/client privilege. Because of risk, the letters were sensitive, and needed careful crafting, with solicitor and client input. They were sent for client review, and review resulted in variation. They transcend the merely transactional. They fall thus within the scope of this passage from Baroness Hale’s

_{speech in Three Rivers District Council v Bank of England:}²⁶

²⁴ _{Kupe Group Ltd v Seamar Holdings Ltd [1993] 3 NZLR 209 (HC) at 213.}

²⁵ _{At 213.}

²⁶ Three Rivers District Council v Bank of England [2005] 1 AC 610 (HL) at [62].

I understand that we all endorse the approach of the Court of Appeal in Balabel v Air India [1988] Ch 317, and in particular the observation of Taylor LJ at 330, that “legal advice is not confined to telling the client the law; it must include advice as to what should prudently and sensibly be done in the relevant legal context”. There will always be borderline cases in which it is difficult to decide whether there is or is not a ‘legal’ context. But much will depend upon whether it is one in which it is reasonable for the client to consult the special professional knowledge and skills of a lawyer, so that the lawyer will be able to give the client sound advice as to what he should do, and just as importantly what he should not do, and how to do it. We want people to obey the law, enter into valid and effective transactions, settle their affairs responsibly when they separate or divorce, make wills which will withstand the challenge of the disappointed, and present their best case before all kinds of court, tribunal and inquiry in an honest and responsible manner.

[56] The other draft documents at issue are drafts of sale and purchase agreements for lots 1 to 13 of the defendant’s land. Again these were sent to the client for review. They seem to me to fall squarely within the scope of the principle expressed in the Kupe Group decision. They were produced to explore a potential transactional relationship, on which legal advice necessarily would be needed. The ultimate expression of that advice, an executed (or unexecuted but exchanged) form of contract, will be transactional and bereft of privilege. But the tentative steps leading up to that, involving legal advice in the form of unexchanged drafting of a future, potential transaction, will attract privilege.

[57] No contrary authority was cited by Mr Wilson, and I have not in the time available located any.

Litigation privilege

[58] The defendant claims litigation privilege in relation to four remaining documents because it says litigation was reasonably apprehended at the latest, on

11 January 2013.

[59] The issue is whether these documents were “made, received, compiled, or prepared for the dominant purpose of preparing for a proceeding or an apprehended

_{proceeding”.}²⁷

_{When might the defendants have first contemplated litigation?}

²⁷ Evidence Act 2006, s 56.

[60] This is a question of fact. It is possible that litigation was more probably than not contemplated earlier than 11 January 2013. But I am satisfied that litigation was in prospect on 11 January 2013. All the documents in this category were created after that date. Disagreement over whether condition 15(b) had been satisfied was clear and Mr Robert had lodged a caveat on the property. It would have been within contemplation of all concerned that litigation might well be necessary to have it removed.

[61] I uphold the privilege claims in relation to all five documents in this group. Again I am satisfied that the privilege claims made in the defendant’s memorandum of 10 March 2014 are correct, and are sustainable. Some of the documents could, indeed, have qualified under ordinary solicitor/client privilege (when they involve advice being sought from Ms Pauling – for example document 100.1288 – or advice from Chapman Tripp on aspects of the caveat hearing – for example document

100.1461).

Settlement negotiation privilege

[62] The defendant submits that two documents are privileged under s 57(2) of the Evidence Act 2006. That is, they are confidential documents that the defendant has prepared, or caused to be prepared, in connection with an attempt to negotiate a settlement of the dispute.

[63] I uphold the privilege claims in respect of both documents. One is an email written by an employee of the defendant, sent internally to Ms Pauling. It discusses draft terms of a settlement offer. The other concerns a short half-line redaction in an email from Mr Pike to Ms Pauling, discussing an offer by a third party to purchase the whole site. I am satisfied that the portion redacted (which concerns possible settlement terms) is privileged under s 57(2).

Result

[64] The plaintiffs’ application for particular discovery is granted, on the terms set out in [13], [17] and [19] above.

[65] The plaintiffs’ challenge to the defendant’s privilege claim is dismissed, save as noted at [51] above. If the defendant wishes to persist in claiming privilege in the two exceptions there noted, it must file and serve submissions within 14 days.

[66] My overall conclusion reflects, however, the substantial change of stance by the defendant in the content of its privilege claims. The basis of claim changed for

16 out of the remaining 32 documents.

[67] In the circumstances the plaintiffs are entitled to costs. If these cannot be agreed, I will receive brief memoranda (i.e. not exceeding three pages).

Stephen Kós J

Solicitors:

Nicholsons, New Plymouth for Plaintiffs

Chapman Tripp, Auckland for Defendant