Clayton v Currie [2016] NZHC 2815 (23 November 2016)

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BETWEEN	VINCENT JAMES CLAYTON First Plaintiff
AND	LINDA JOYCE WESTBURY Second Plaintiff
AND	PHILIPPA ANNE CURRIE First Defendant
AND	RAYMOND DONNELLY & CO Second Defendant
AND	CROWN SOLICITOR AT CHRISTCHURCH Third Defendant
AND	ATTORNEY-GENERAL Fourth Defendant

Submissions:	(in writing) 16 September 2016 (Defendants) 19 October 2016 (1178 Plaintiffs) 30 September 2016 (1441 Plaintiffs) 20 October 2016 (Defendants in reply)
Representation	P L Machirus, N M Pelenato and G G Morell (1441 Plaintiffs) in person (on this issue) P N Allan for 1178 Plaintiffs J C Pike QC and S K Barr for Defendants
_Judgment:	_{23 November 2016}

[1] The Court imposed unless orders in relation to the discovery requirements in the plaintiffs’ very old proceedings. The defendants assert that the plaintiffs did not comply with the unless orders. The plaintiffs assert that they have now entirely met their discovery and inspection obligations, albeit late. They seek relief from the consequences of any aspect of non-compliance.

[2] The plaintiffs pursue claims against the same four defendants in two proceedings. Two of the plaintiffs issued their proceeding (the 1178 proceeding) in June 2011; the other three plaintiffs issued their proceeding (the 1441 proceeding) in August 2013.

[3] Normal case management of the 1178 proceeding was delayed through the defendants’ only partially successful application to strike out causes of action in that proceeding, with judgment delivered in June 2012.¹This was followed by a partially

_{successful review application by the defendants in October
2012,}²_{which was in turn}

followed by the defendants’ unsuccessful appeal and the plaintiffs’ successful cross- appeal in relation to the review judgment.³Finally, the Supreme Court in March

[4] From May 2015, this Court was able to recommence normal case management of the two proceedings. By that time Mr Allan was once again representing Ms Westbury, with the remaining plaintiffs in both proceedings self- represented. More recently, he has resumed representation of Mr Clayton also.

[5] The plaintiffs’ claims stem from a prosecution of 11 defendants in the Christchurch District Court in March 2015. The prosecution resulted from a Police investigation called “Operation Rhino”. A detailed factual background is conveniently set out in the judgment of the Court of Appeal.⁵

[6] “Operation Rhino” was focussed on a network of individuals believed to be involved with stolen goods. Following a trial in 2007 the plaintiffs (other than Ms Pelenato) were convicted and sentenced to varying terms of imprisonment. Subsequently the convictions were overturned. The overturn began with a successful appeal by Mr Machirus in November 2008 and there were other successful appeals, by consent.⁶

[7] The appeals against conviction succeeded by reason of the Court of Appeal’s finding that the accused had been placed in an unfair disadvantage through the non- disclosure of the sentencing notes relating to an alleged co-offender. Subsequently the prosecutions were stayed and the plaintiffs discharged under s 347 Crimes Act

1961, with the result that they were deemed acquitted of the charges they had faced.

[8] The plaintiffs’ claims against the first and third defendants are as persons

_{(public officers or otherwise) responsible for particular conduct
in relation to}

prosecutions while the second and fourth defendants are sued upon the basis of vicarious liability.

[9] The claims (which survived the strike out and appeal process) were for misfeasance in public office and breach of rights under the New Zealand Bill of Rights Act 1990 (NZBORA). Subsequently, the 1441 plaintiffs have amended their statement of claim to each include a cause of action in deceit. The plaintiffs all seek declarations relating to NZBORA breaches. In addition, they seek damages and/or compensation in relation to each cause of action.

[10] From May 2015, the two proceedings were case managed on a consolidated basis.⁷Dunningham J reviewed progress in relation to discovery. To that point discovery had occurred only informally on an ad hoc basis. On 15 May 2015, the Court ordered the plaintiffs to provide standard discovery by 15 June 2015. At the same time, the plaintiffs in the 1441 proceeding were directed to file an amended statement of claim by 27 July 2015.

served bundles of essentially identical documents on the defendants on 15-16 June

2015, the documents served did not comply with the standard discovery obligations. Counsel for the defendants brought the matter to the attention of the Court.

[12] On 8 October 2015, Dunningham J made what was in effect an amended order for discovery, directing the plaintiffs to comply with their discovery obligations (i.e. those steps previously ordered) by 23 October 2015. The date for

1441 plaintiffs to file an amended statement of claim was extended to 7 December

_{February 2016, memoranda were filed by counsel and the parties as to
remaining}

issues in relation to discovery (and other matters). By this time, I had taken over the conduct of the case management of the consolidated proceedings.

[14] In anticipation of a case management conference to be held on 9 March 2016, I issued a Minute. Having regard to the content of the plaintiffs’ lists of documents, it was clear that matters relating to discovery by the plaintiffs had still not been satisfactorily attended to. I recorded:

Directions need to be made in that regard. I anticipate that “unless orders” will be made at the next conference whereby the court will order the defaulting parties’ pleadings be struck out unless any amended timetable is strictly complied with.

[15] The scheduled case management conference took place on 9 March 2016. Mr Allan appeared for the plaintiff Westbury, all other plaintiffs appearing in person. Counsel for the defendants also appeared. Having regard to the self-representation of most plaintiffs, the Court during the conference traversed in detail inadequacies in the plaintiffs’ discovery to date. In 11 relatively lengthy paragraphs, I identified in a Minute dated 10 March 2016 (the March Minute) the relevant legal requirements in relation to discovery. Then, by reference to the plaintiffs’ lists as filed to date and the pleadings, I identified specific areas in which the plaintiffs had failed to properly identify and discover documents. I recorded:

[24] The failure to complete proper discovery has been continuing and the listing to date has been grossly deficient. It is appropriate that there be unless orders as sought by Mr Pike in advance of this conference. The plaintiffs accepted that the Court will be making unless orders. With that in mind I will be giving the plaintiffs who appear in person an additional 10 working days (beyond Ms Westbury’s period) within which to file and serve their lists of documents.

[16] In the March Minute, I identified categories of documents which the plaintiffs were obliged to discover in these terms:

[21] In terms of the claims the various plaintiffs are pursuing they are also aware that they must give discovery of all documents relevant to the assessment of the value of what they claim to have lost through the defendant’s alleged conduct. If that relates to streams of income they must identify documents they still have and documents they previously had in relation to income, and documents which they know to be possessed by other parties (such as potential buyers). That will include documents such as financial statements, management accounts, records of income and returns made to the Inland Revenue Department. In the case of assets it will

similarly involve documents such as financial statements but will also extend to documents evidencing valuation (such as Government Valuations) or any valuation reports received. In the case of Mr Machirus’ claim he refers to offers made by a third party for the purchase of an asset. All documents which came into existence (whether correspondence, email, diary notes or otherwise) are discoverable documents.

[22] If relevant documents are not or have not been held by the plaintiffs but are known to be held by others (such as in the case of a party offering to purchase an asset of that party) the obligation of the plaintiffs in their affidavit documents is to identify the person who is likely to hold such documents and what documents they are.

[i] Unless by 6 April 2016, Ms Westbury files and serves a verified list of documents which complies with the High Court Rules the claim of Ms Westbury in the 1178 proceeding will be struck out.

[ii] Unless by 20 April 2016 the plaintiff, VJ Clayton, in the 1178 proceeding, and the plaintiffs, P L Machirus, N M Pelenato, and G G Morell, in the 1441 proceeding, each file and serve verified lists of documents which comply with the High Court Rules the claim of the defaulting plaintiff or plaintiffs will be struck out.

[18] On 16 May 2016, in anticipation of a conference scheduled for 19 May 2016, I issued a Minute noting that:

• the Court had been at pains to spell out the obligations of discovery, including of financial information. The Court would address whether the plaintiffs’ verified lists complied with the High Court Rules; and

• none of the amended statements of claim filed by the plaintiffs appeared to comply with the requirements of the High Court Rules in relation to pleading special damages (requiring particulars to be stated).

[19] At the time of the 19 May 2016 conference, the plaintiffs’ pleadings, including in relation to special damages, remained poor. Because of the inter- relationship between proper pleadings and adequate discovery, I focused discussion at the conference upon the more precise identification of the plaintiffs’ special damages claims and then on the classes of documents which would be relevant to the special damages claims. By reference to those documents, in a Minute dated 20 May

2016 (“the May Minute”) I ordered the plaintiffs within 10 working days to file and

serve verified lists of documents listing any documents (additional to those previously listed) which were relevant to the party’s claim for damages or were to be relied upon in any way by that party at trial. I recorded that “the parties have now had years in which to assemble the documentation on which they rely. I will be making a final order for discovery below.” I identified in the May Minute (without detracting from the generality of the discovery order to which I have referred), specific categories of documents which were relevant in relation to named plaintiffs.

[20] All the plaintiffs filed additional lists of documents on 2 June 2016. In late- July, I was on leave. In my absence, Mr Pike QC for the defendants filed a memorandum as to the plaintiffs’ defaults. The plaintiffs responded by memoranda. I reviewed the memoranda with counsel and the parties at a conference, upon my return, on 8 September 2016. In relation to the unless orders I recorded:

[4] By their memoranda dated 28 July 2016 and 30 August 2016 counsel for the defendants have set out their reasons for asserting that the Unless Orders made by the Court have taken effect with the consequences set out in the memorandum of 30 August 2016 especially at paragraphs 6 and 10 (in particular the plaintiffs’ actions in tort be struck out).

[5] As I was the Judge who made the Unless Orders it is appropriate that I determine whether they have taken effect and that I also determine whether, if so, the Court should grant any request by any of the plaintiffs to be relieved from the consequences of breach of the Unless Orders.

[6] I will determine these matters on the papers upon receipt of memoranda as now directed.

[a] By 16 September 2016 counsel for the defendants shall file and serve a Memorandum succinctly identifying the specific remaining breaches of the Unless Order relied upon by the defendants.

[b] By 30 September 2016 the plaintiffs shall file and serve memoranda setting out their response to the alleged breaches and, if seeking relief from any finding that the Unless Orders have taken effect, setting out that application for relief and any consequential directions sought.

[c] I will thereupon consider the issues on the papers – if counsel for the defendants considers that a brief Reply Memorandum is required, such is to be filed and served promptly and, in any event, no later than three working days after service of the plaintiffs’memoranda.

[21] The Court has since received the submissions identified at the start of this judgment. I now turn to consider the unless orders as they apply to each of the plaintiffs in turn.

[22] Mr Clayton sought compensation for NZBORA infringements and compensation or damages for misfeasance in public office (“misfeasance”) on account of losses suffered “not exceeding $1,000,000”. The damages or compensation are claimed for a loss which Mr Clayton particularises as “the first plaintiff was unable to work or provide for his family”.

[23] These were the pleadings of Mr Clayton which were current at the time he was required to provide discovery pursuant to the March Minute. The claim for compensation or damages of $1,000,000 have been the subject of a further amended statement of claim (dated 14 September 2016). In that pleading, Mr Clayton states that the $1,000,000 damages which he claims comprise general damages totalling

$900,000 and special damages (from inability to work and provide for his family) of

$100,000. There accordingly remains a special damages claim based on lost income, now limited to $100,000.

[24] The March Minute required Mr Clayton to complete his discovery (on a standard discovery basis) by filing his verified list of documents within 10 working days. The Minute made it clear that it was for the plaintiffs to inform themselves as to their obligations in relation to discovery. But the Minute contained at [21] and [22] the specific discussion set out at [16] above identifying the need to identify documents which the plaintiffs either possessed or had previously possessed relating to income (including such documents as records of income and returns made to the Inland Revenue Department). Additionally, it was recorded that the plaintiffs needed (where relevant documents were known to be held by others) to identify the person likely to hold such documents and what documents they are.

[25] For the defendants, Mr Barr noted, in relation to the initial verified list filed by Mr Clayton in response to the unless order dated 6 April 2016, that the only document listed by Mr Clayton in the first part of his affidavit relating to his employment was a letter he had written to the Inland Revenue Department on 1 April

[26] At the 19 May 2016 conference the state of the 1178 plaintiffs’ pleadings was discussed. At that point, their statements of claim were still in the 23 March 2016 form, claiming for Mr Clayton a global sum of $1 million for compensation or damages. At the conference, Mr Allan clarified that a further amended statement of claim was to be filed with a breakdown of general and special damages as identified at [23] above (involving a claim for special damages of $100,000 arising from inability to work). The May Minute recorded that the special damages of $100,000 needed to be the subject of proper particulars as to the period involved, the work which would otherwise have been undertaken and the periodic rate at which such work would have been paid. I added that it was the obligation of Mr Clayton and others to support their claims by discovery of any documents which would be relied on to support the existence of such work or the calculations involved.

[27] Upon discussion with counsel and the parties I ordered that Mr Clayton within 10 working days file and serve a verified list of documents (additional to those previously listed) which were relevant to his claim for damages. In the case of Ms Westbury, I identified (without detracting from the generality of the discovery order) particular classes of documents which would be relevant:

Records relating to any employment or earnings she had both in the two years immediately before her trial and in the period to which her claim for damages relates, including any accounting records, and any returns she made for tax purposes and/or assessments of income by the Inland Revenue Department.

[28] It remained the position of counsel for the defendants at that point that the unless order had not been complied with and had therefore taken effect. The May Minute therefore did not record the further order I then made as an unless order. Rather, I expressed it as a “final order” for discovery. By its nature, the order was spelling out continuing deficiencies in the plaintiffs’ discovery and giving the plaintiffs a final opportunity to put their house in order before the Court considered any request for relief in relation to the unless order.

[29] By the May Minute, I also ordered that the plaintiffs provide inspection of their further documents within 10 working days after the filing of their verified lists.

[30] Accordingly, by the May Minute, the plaintiffs were given a final opportunity to make full discovery by 3 June 2016 and to 20 June 2016 to provide full inspection.

[31] Mr Barr submits that Mr Clayton has still failed to meet his discovery obligations. His submission (by reference to the relevant documents) was as follows:

33.1 Mr Clayton did not discover by 3 June 2016 / provide for inspection by 20 June 2016 records relating to his employment or earnings for the period of August 2005 to August 2007 (the two years prior to the second trial). The only discovered documents of this general description did not cover the relevant time-frame:

33.1.1 A discovered document from Inland Revenue records that Mr Clayton requested details of income in the name of “Vincent James Sibbald” (an alias) for the period of 1 April

2002 – 31 March 2006, in response to which Inland Revenue advised that they did not have any income details currently recorded relating to the period requested.

33.1.2 Discovered notices of assessment from the Australian Taxation Office refer to Mr Clayton’s taxable income for the years ending June 2011, 2013 and 2014.

33.2 The only document identified in Mr Clayton’s 2 June 2016 list of documents relating to his earnings in the relevant period was a letter dated 3 May 2016 from a Mr Boote. Provided by way of inspection on 4 July 2016, the letter states that in mid-2007 Mr Boote offered Mr Clayton a position of general manager in a bar business that he intended to purchase, which Mr Clayton accepted, but that he was

unable to employ Mr Clayton in September 2009 when Mr Boote began running the business. In response to the defendants’ request for proper discovery of contemporaneous documents relating to this offer, Mr Clayton advised by email (this issue was not addressed in the 7 September 2016 affidavit) that “there are no other documents relating to the position offered, there are no emails, there is nothing else with regard to the job offer that can be disclosed.” The defendants submit that, contrary to the direction in the March Minute, Mr Clayton has failed “to identify the person who is likely to hold [documents relating to this alleged offer) and what documents they are”.

33.3 Despite Mr Clayton having received by 11 July 2016 a bundle of documents relating to his insolvency that he considers to be relevant, and despite the defendants repeatedly advising Mr Clayton that it was his obligation to discover these documents by way of a further verified list, Mr Clayton did not do so until 14 September 2016:

33.3.2 Mr Clayton subsequently clarified that he had not yet received those documents from the government department from which he had requested them.

33.3.3 On 13 June 2016, the defendants requested that he forward those documents as soon as he received them and that the defendants would expect that he would provide a list in a supplementary discovery affidavit.

33.3.4 On 24 June 2016, Mr Clayton confirmed that he would do so and would make a supplementary list of any further discovery that may be disclosed.

33.3.5 On 28 June 2016, the defendants repeated their request that Mr Clayton provide a supplementary discovery affidavit listing all further relevant documents and forward the documents for inspection when he received them.

33.3.6 On 4 July 2016, Mr Clayton advised that he understood from the department that these documents were still “a week or two away”.

33.3.7 On 14 July 2016, the defendants wrote to Mr Clayton to advise that they had received on 11 July 2016 a memory stick containing a folder headed “110 clayton insolvency” that contained 292 files: the defendants stated that Mr Clayton would need to provide a supplementary discovery affidavit listing all relevant documents that he had now received and that it did not satisfy his obligations under the Rules simply to provide copies of the documents.

33.3.8 On 24 July 2016, Mr Clayton wrote that he proposed providing a supplementary discovery affidavit at a later date (when he completed third party discovery).

33.3.9 On 25 July 2016, the defendants wrote to Mr Clayton (via his instructing solicitor) advising that the defendants relied upon the timetabling directions issued by Osborne AJ and did not consent to any further extensions of time.

33.3.10 In their memorandum of 28 July 2016, the defendants submitted that the provision of a bundle of documents by way of a memory stick did not satisfy Mr Clayton’s discovery obligations.

33.3.11 On 14 September 2016, the defendants were served with a supplementary list from Mr Clayton. Mr Clayton states in his affidavit that the annexed schedule lists the documents earlier provided to the defendants. The defendants are not in a position to confirm whether this is the case, but note that the schedule lists 247 additional documents and the electronic folder earlier provided to the defendants contained 292 files.

[32] Mr Barr submits that Mr Clayton’s non-compliance with the discovery directions is compounded by his failure to comply with the May Minute direction that the special damages claim of $100,000 must be the subject of proper particulars as to the period involved, the work which would have otherwise been undertaken, and the periodic rate at which such work would have been paid. When Mr Allan filed the further amended statement of claim with Mr Clayton and Ms Westbury on

[33] In brief submissions, Mr Allan emphasised what he described as the “substantive compliance” by Mr Clayton. He noted that Mr Clayton’s further supplementary list had been required only in order to address two additional matters, namely the itemising of documents relating to Mr Clayton’s bankruptcy (already discovered on a group basis but not properly itemised) and an issue as to duplication of some documents. Mr Allan noted that all documents had through the subsequent list been itemised and had now been re-provided by way of inspection.

[34] Once (following the issuing of the unless orders) Mr Clayton’s pleading was amended in relation to damages, the true focus of attempts to obtain comprehensive discovery from Mr Clayton has been on the special damages component of his claim

($100,000). While a failure to adduce relevant evidence relating to the allegation of special damage would substantially affect that aspect of Mr Clayton’s claim, it would not affect the much larger claims for compensation and/or damages based on misfeasance in public office or the claim for NZBORA compensation.

[35] It is now clear that in relation to old events (Mr Clayton’s employment in the August 2005 to August 2007 period immediately preceding his second trial), Mr Clayton himself held no relevant records and was dependent upon obtaining records from other organisations (such as the Inland Revenue Department). His failure to do so at an earlier date has led to delay and has also affected the defendants through the cost of pursuing compliance. But it appears clear that Mr Clayton has finally identified the persons likely to have held relevant documents and, where possible, obtained those for provision by way of discovery.

[36] In his submission, Mr Barr suggested that there was one specific instance of Mr Clayton failing to identify the person likely to hold relevant documents. The person in question was a Mr Boote. Mr Clayton in his affidavit has identified the letter he received from Mr Boote which refers to “an offer” of employment. There is, however, no suggestion that any written document was involved. I cannot conclude in this regard that there has been a failure to identify a person who is likely to hold a relevant document.

[37] Notwithstanding my acceptance of Mr Allan’s submission that Mr Clayton’s substantive obligations in relation to discovery now appear to have been complied with, the breaches which led to the making of the unless order and the subsequent delay in finalising discovery obligations involved significant breaches of those obligations. On the other hand, Mr Clayton’s reframing of his claim has in the meantime reduced the place of the special damages issue from one representing the major claim in the litigation to a significantly lesser component. To the extent that there are documents which might support or cut across Mr Clayton’s special damages claim, I am satisfied that they are now before the parties.

[38] I am not satisfied in relation to Mr Clayton’s breaches of the unless order that there was a deliberate flouting of it. It is clear that because of the historical nature of the relevant employment issues, the unless order implicitly required Mr Clayton to identify and then pursue information from a group of people or organisations who might have held historical records. The time taken to finalise those steps speaks more of muddlement than a flouting of the unless order.

[39] I am not satisfied that justice would be served in Mr Clayton’s case by precluding him from pursuing his NZBORA and misfeasance claims by reason of his delay in finalising his discovery and his (thereby) breach of the unless order.

[40] I will accordingly be making an order that the unless order not take effect as against Mr Clayton.

...the forced sale of [Ms Westbury’s] businesses due to damage to reputation totalling as follows:

That was the content of Ms Westbury’s special damages claim at the time I made the

[43] In her amended claim filed 23 March 2016, Ms Westbury’s claim for compensation or damages became $750,000. She removed her pleading as to damages (totalling $1,004,000) for the forced sale of three businesses.

[44] At the conference on 19 May 2016, Mr Allan explained that $675,000 was claimed by way of general damages and $175,000 by way of special damages (now a total of $850,000). To the extent that there was an existing pleading which gave any degree of particulars as to the special damages, it lay in two sentences:

The second plaintiff lost her General Manager’s certificate as a result of the

[45] At the conference, Mr Allan accepted that the pleading of special damages required further particularisation, with an amended pleading to be filed.

[46] In the May Minute I made, in relation to Ms Westbury, an identical discovery order to that made for Mr Clayton, requiring a verified list within 10 working days and inspection within 10 working days thereafter.

[47] Ms Westbury, in her amended pleading subsequently filed, has expressly identified her claim for special damages (for loss of income) as being $175,000. She pleads that that is “as a result of the loss of her general managers certificate and her inability to find work in her chosen field”.

[48] Ms Westbury initially filed a verified list of documents dated 6 April 2016, which was substituted by an updated list (following the 19 May 2016 conference) dated 2 June 2016.

[49] Subsequently, documents purporting to be those of Ms Westbury were provided by Mr Clayton along with his discovery. One set of documents was provided (electronically) by Mr Clayton on a memory stick containing 134 files labelled collectively “Westbury insolvency”.

[50] Counsel for the defendants pursued both the filing of a verified list by Ms Westbury which properly covered all documents and the provision of documents for inspection by Ms Westbury herself (and not by Mr Clayton).

[51] For the defendants, Mr Barr submitted that Ms Westbury had failed to meet her discovery obligations for the following reasons:

June, 14 July 2016, and 25 July 2016, Ms Westbury has not responded to requests for her to provide documents by way of inspection. As noted in this correspondence, whilst Mr Clayton has forwarded documents to the defendants, purporting to act for Ms Westbury, the defendants do not accept that Mr Clayton can act on Ms Westbury’s behalf.

39.2 Further, amongst other documents that Mr Clayton purported to forward to the defendants on Ms Westbury’s behalf was a memory stick containing 134 files labelled “Westbury insolvency”. Despite the defendants advising Ms Westbury (letters of 14 July and

25 July 2016 above) that these documents must be discovered by way of a supplementary list of documents, this has never occurred.

[52] As with Mr Clayton’s non-compliance with the discovery directions, counsel submitted that the non-compliance was compounded by Ms Westbury’s failure to comply with the direction in the May Minute that the claims for special damages must be pleaded and particularised.

[53] It transpired, after counsel for the defendants had filed their submissions, that Ms Westbury on 30 September 2016 filed a supplementary (verified) list of documents. The affidavit (in parallel with Mr Clayton’s) refers to Ms Westbury having made enquiries of other organisations such as the Inland Revenue Department and her bank. Although the list includes items which appear likely to relate to her previous income (such as “documents relating to “Masters Bar” and “Embankment”), it is not possible to view the list as identifying what documents relating to Ms Westbury’s historical income she possesses.

[54] For Ms Westbury, Mr Allan submitted that Ms Westbury has now met her discovery and inspection obligations. Mr Allan proffered no explanation for Ms Westbury’s failure to provide a supplementary list dealing with the shortcomings identified in the May Minute within the timetable laid down in that Minute. The supplementary list was not sworn by Ms Westbury until 30 September 2016.

[55] Taking into account the extent of Ms Westbury’s allegation of special damage ($175,000), I am not satisfied on the basis of the items listed in her supplementary list that even the supplementary list is comprehensive. There are, for instance, no documents in the nature of any financial statements relating to businesses of which Ms Westbury had been general manager or of her earnings record from such employment in either Part 1 (documents in her possession) or in Part 4 (documents no longer in her possession).

[56] Even if I was satisfied that Ms Westbury has finally filed a comprehensive list of documents, the failure to explain her lack of attention to her discovery duties in the period following March (when the unless order was made) is stark. She has provided no adequate explanation for her failure.

[57] That said, as with Mr Clayton’s claim, the special damages claim is now identified through re-pleading as only a portion of the total damages claim. The continuing failure from March to September 2016 has its primary importance in relation to special damages.

[58] In terms of the overall justice of the case, I am not satisfied that it would be appropriate to relieve Ms Westbury in relation to the special damages claim from the consequence of breach of the unless order. In relation to the remainder of her claim (for general damages or compensation), I am satisfied that there justly should be relief.

[59] In the 1441 proceeding, the three plaintiffs (including Mr Machirus) pursue the same two causes of action as the 1178 plaintiffs (NZBORA breaches and misfeasance) together with a third cause of action in deceit.

[60] The current form of Mr Machirus’s pleading is an amended statement of claim dated 15 July 2016. It is against that pleading which Mr Machirus’s compliance with his discovery obligations falls to be measured.

The 1^stplaintiff suffered loss of building 43 Aitchison Ave, loss of future profits and businesses at 43 Acheson Ave that was in process of being completed into a tavern. The 1^stplaintiff Machirus claims $1,000 weekly from period 30/10/2005 to 30/8/2007. This is based on forecast of what the business would have made, $80,000 would be a conservative estimate of what it would have made in that period.

After the restraining order under the proceeds of Crime act (sic) was made against the 3 properties on the 30^thSeptember 2005, the banks called up the mortgages. The 1^stand 3^rdplaintiffs lost control of their properties. Acheson Ave had no mortgage.

[62] Mr Machirus filed verified lists of documents initially on 20 April 2016 and

[63] For the defendants, Mr Barr submitted that Mr Machirus had failed to meet his discovery obligations for the following reasons:

10.1 Mr Machirus has not provided for inspection a number of the documents listed in his verified lists that have been requested by the defendants, as set out in the defendants’ letter to the plaintiffs (–

10.2 In a letter dated 4 July 2016, Mr Machirus advised that he had received documents from the Department of Inland Revenue, Christchurch City Council Liquor Licensing, and the New Zealand Police (Bundle at 19–20). The defendants responded that it was Mr Machirus’s responsibility to assess any further documentation for relevancy and to list relevant documents in supplementary affidavits

(Bundle at 27–28). Mr Machirus has not served a further verified list of documents.

10.3 On 20 July 2016, Mr Machirus advised the defendants that he would not be responding to the defendants’ requests for proper discovery and inspection until his medical situation had been resolved (Bundle at 32). Mr Machirus took no further steps to comply with his discovery and inspection obligations and, notwithstanding that Mr Machirus was in a position to serve the defendants with interrogatories on 9 September 2016, did not (i) instruct a lawyer; (ii) provide any evidence of his medical situation; (iii) apply for an extension of time from the Court.

10.4 Of the documents listed in Mr Machirus’s verified lists, it would appear that only documents 7 and 8 from the 20 April list refer to commercial arrangements involving Mr Machirus. Mr Machirus has failed to provide for inspection documents 7 and 8 (each described as “Sale and purchase agreement”, and dated 15 November 2006 and

10.5 In respect of the alleged losses in the ASOC, Mr Machirus has not provided any documentation in relation to the alleged “loss of building 43 Achison Ave, loss of future profits and businesses at 43

[64] As in the case of the 1178 plaintiffs, Mr Barr submits that Mr Machirus’s non-compliance with the discovery directions is compounded by the state of his pleadings which do not particularise how the alleged misfeasance and deceit (alleged to have occurred at the time of the second trial in August 2007) could have caused loss in relation to the Achison Avenue property for the period October 2005 to August 2007.

[65] In the course of conferences in mid-2016, the Court was informally advised that Mr Machirus’s conduct may be affected by memory loss, in relation to which Mr Machirus has subsequently provided an affidavit with supporting medical certificate. The evidence indicates that Mr Machirus suffers memory loss which is likely to deteriorate over time. In a joint memorandum filed by the 1441 plaintiffs, Mr Machirus refers to the evidence as to his medical situation but does not suggest that that medical situation has prevented him from completing tasks such as listing the documents in his possession or from making enquiries of those who may hold such documents on his behalf.

[66] In relation to the Achison Avenue property, which is at the centre of Mr Machirus’s special damages claim, it is likely either that Mr Machirus has documentation relating to his previous ownership of the property and the subsequent reporting by the mortgagee on the mortgagee sale process or, if not, that he must have previously held such documents. He must also be able to identify where relevant documents might be.

[67] In his submission, Mr Machirus purports to refer to an indication given by the Court that might have cut across the need for Mr Machirus to comply with discovery obligations in the normal way. In particular, Mr Machirus states that “it was made clear by Judge Osborne that the process should be undertaken with minimum duplicity and to keep the processes as simplified as possible”. Mr Machirus goes on to suggest that the defendants are already in possession of “the complete file of the premises at 43 Achison Avenue”.

[68] Mr Machirus’s implicit suggestion that he did not have to fully comply with his discovery obligations in relation to evidence of special damage is without foundation. When the 19 May 2016 conference took place and the May Minute followed, it was clearly required that both the generality of the requirements under the unless order for completion of standard discovery and the specific requirements for disclosure of documents relating to special damages had to be fully complied with.

[69] Nothing in the material before the Court provides adequate excuse for Mr Machirus’s failure to identify the documentation he must have held in relation to Achison Avenue or (where others such as the mortgagee might hold relevant information) the identity of other persons likely to hold information.

[70] Mr Machirus’s medical condition might have provided some explanation for some slippage of time or inattention to detail but it does not explain the continuing failure to list the relevant documents and other information required in discovery. Much more recently (27 October 2016) I held a further case management conference at which Mr R J Maze appeared for the three 1441 plaintiffs. In the circumstances, I

provided to Mr Maze a brief further period in which he might take instructions and file any additional submissions relating to the present matters. As it transpired, Mr Maze did not file further submissions.

[71] I consider that Mr Machirus’s situation should justly be treated in the same way as that of Ms Westbury. In other words, it is just that Mr Machirus’s pleadings in relation to special damages be struck out but that he be excused from the consequences of non-compliance in relation to the balance of his claims.

[72] Ms Pelenato’s pleadings have consistently referred to the forced closure of her businesses. In particular, she has referred to the closure of the business known as Harry’s on Gloucester and the Aranui Café Bar. She has alleged that those businesses were closed due to her damaged reputation and to Mr Machirus being in prison.

40) The 2nd plaintiff suffered loss and damage as a direct result of the actions of the defendants, acting jointly and severally including forced closure of the 2nd plaintiffs businesses due to damage reputation and the 1^stplaintiff and 2^ndplaintiff being in prison.

The value of “Harry’s on Gloucestor” is the 3rd offer from Brian Andrews Auctioneer on behalf of the New Zealand Metropolitan Trotting Club iNC.

Mr Matthew Jarden had several licences for taverns in 2006, 2007 and 2008. The offer for Aranui Bar was not completed because of the damage to the reputation to the bar and owner of the Bar. The Liquor inspectors wanted the Bar closed. Pelenato and Machirus were both in prison so Jarden pulled out because of all the bad publicity and the effect it might have had on his other bar. The

[74] The need for discovery of all documents relating to the acquisition, the operation and offers for the purchase of those businesses in the two years prior to Ms Pelenato’s trial was the subject of detailed discussion in the 19 May 2016 conference.

[75] The May Minute (without detracting from the generality of the discovery order already made) identified the particular classes of documents required from Ms Pelenato:

All documents which relate to the acquisition of the businesses known as Harry’s on Gloucester and Aranui Café Bar, any valuation done of either business, any document (whether letter, email, diary record or otherwise) relating to offers made on either business, all records relating to the assets of either business, all records relating to the income and/or outgoings of either business including all returns made in the two years prior to Ms Pelenato’s trial and in the period to which the claims relate including returns made to the Inland Revenue Department, (whether for income, GST or otherwise) and any assessments made by the Department in that period, and including any correspondence with the Department of Internal Affairs in relation to gaming machines or the revenue from gaming machines.

[76] Ms Pelenato filed an initial verified list of documents dated 20 April 2016 in response to the unless order. She filed a further verified list dated 2 June 2016 following the May Minute.

[77] Mr Barr submits that Ms Pelenato has failed to meet her discovery obligations for the following reasons:

17.1 Initially, documents requested by the defendants for inspection were forwarded under the cover of correspondence in the names of the three plaintiffs (-1441) (Bundle at 13-14). However, subsequent correspondence and inspection was forwarded in the name of Mr Machirus only (Bundle at 19-23, 29). Ms Pelenato failed to respond to a request from the defendants that she confirm whether she relied upon the documents forwarded by Mr Machirus (Bundle at 25, 31). No correspondence was received from Ms Pelenato following Mr Machirus’s advice to the defendants on 20 July 2016 that he would

not be responding to any requests from the defendants until his health issues had resolved (Bundle at 32).

17.2 In any event, even based on the documents forwarded by way of inspection by Mr Machirus, Ms Pelenato has not provided for inspection a number of the documents listed in her verified lists that have been requested by the defendants, as set out in the defendants letter to the plaintiffs (-1441) dated 14 July 2016 (Bundle at 25-28).

17.3 In respect of the alleged losses in the ASOC, Ms Pelenato has not discovered any documentation in relation to:

17.3.3 the reputation damage caused to these businesses by the alleged tortious acts;

17.3.4 official records of Ms Pelenato’s imprisonment (the reference to imprisonment in the statement of claim does not appear to relate to the “Operation Rhino”, at which she was acquitted of all charges);

(a) the dates on which the offers were made; (b) the form in which the offers were made; (c) to whom the offers were made;

(f) the authorisation given by the Board of New Zealand Metropolitan Trotting Club Inc to make the offers; and

17.3.7 the value of “Aranui Cafe Bar” at the time of the alleged tortious acts;

17.3.8 the alleged offer by Matthew Jarden for “Aranui Cafe Bar”, including:

17.3.9 Finally, in terms of the matters identified in the May Minute, Ms Pelenato has not discovered any of the specific documents identified in the May Minute but, rather, has asserted in her 2 June verified list of documents:

- These documents were either taken by the Police whilst executing search warrants and not returned or subsequently lost as a result of the Christchurch Earthquakes

[78] On this basis, Mr Barr submits that Ms Pelenato has not satisfied her discovery obligations for documents relevant to whether such offers as she received:

(b) reflected the true value of the businesses immediately prior to the alleged tortious acts; and

[79] Mr Barr submits that, as with other plaintiffs, Ms Pelenato’s non-compliance with the discovery directions is compounded by the state of her pleadings which still do not particularise how:

(a) the alleged misfeasance and deceit (said to have occurred at the time of the second trial in August 2007) was causally connected to the forced closure of “Harry’s on Gloucester” and “Aranui Bar Café”; or

[80] Ms Pelenato has not particularised those aspects of her claim despite the direction in the May Minute that she do so.

[81] In the written submission filed by the three 1178 plaintiffs, the only sentence relating to Ms Pelenato’s verified list states, “No further relevant documents are in the possession of the 2^ndPlaintiff that the Defendants or their counsel do not already have”.

[82] As in the case of other plaintiffs, the belief that other parties may already possess copies of relevant material does not excuse a failure to comprehensively list relevant material in an affidavit of documents.

[83] Furthermore, the absence of any identification of documents (whether in the possession of Ms Pelenato or another party) in relation to the numerous assets, businesses and financial transactions which Mr Barr identified in his submissions indicates, as a probability, that Ms Pelenato has failed either to make the necessary enquiries into the existence of documents or has failed to properly identify the whereabouts of documents of which she must be aware. I do not overlook the fact (having regard to the state of Ms Pelenato’s pleadings) that one or more of the offers to which Mr Paterson refers may have been substantially oral. Even if her subsequent evidence were that that was the case (ie the offers were only oral) there must be a range of documents or other records relating to the businesses to which she ascribes such significant values.

[84] Ms Pelenato has failed to meet the requirements of the unless order. I am satisfied that the just outcome is that her special damages claim remain struck out. On the other hand, it would not be just that she be precluded from pursuing the balance of her claims. Orders will be made to that effect.

[85] In the context of the three causes of action commonly pursued by the 1441 plaintiffs, Mr Morell pursues special damages.

41) The 3rd plaintiff suffered loss and damage as a direct result of the action of the defendants acting jointly and severally including the forced sale of 38 Shaw Avenue and 512 Worcestor St Christchurch. Due to damage, reputation and proceeds of crime restraining orders on the properties. The 3rd Plaintiff Morell lost control over properties and did not pay the mortgage. The defendants have all documents and valuations in their possession regarding the sale and court documents. Re forced the sale of 512 Worcester St costs included:

42) The 3rd plaintiff suffered loss and damage of $200.000 D\B Breweries litre age agreement grant with the property at 38 Shaw Avenue as security. Upon the 3rd defendant placing proceeds of crime action on the property D\B Breweries called up its security. It was due to damage to reputation and the D\B Caveat being called up on the property at 38 Shaw Ave the actions of the Crown, all documents are in the Crowns (sic) and defendants (sic) possession.

43) The 3rd Plaintiff wishes to be in the same position in regard to the properties before the Proceeds of Crime orders were placed on the property. The first and third Plaintiff were not convicted of any charges at the Operation Rhino Trial. To get the proceeds from the Court order the first or third plaintiff had to be convicted of an offence.

45) After the restraining order under the proceeds of Crime, act was made against the 3 properties on the 30th September 2005, the banks called up the mortgages. The 1^stand 3^rdplaintiffs lost control of their properties.

[87] By the unless order, Mr Morell initially was required to file a verified list of documents by 6 April 2016. He did not do so until 20 April 2016 when he filed a list identical to that of Mr Machirus.

[88] By reason of the failure of Mr Morell (and others) to identify in their affidavit documents relating to their special damages claims, the specific needs of that discovery were the subject of the May Minute by which Mr Morell was directed to produce specified documents:

Mr Morell – all correspondence or other documentary evidence relating to the calculation of the $200,000 referred to as damage flowing from the provision of the property at 38 Shaw Avenue as security, including all documents relating to the value and disposal of that property and any indebtedness attaching to it and its equity and the accounting for the proceeds of any sale.

[90] For the defendants, Mr Barr submitted that Mr Morell has failed to meet his discovery obligations for the following reasons:

25.1 Initially, documents requested by the defendants for inspection were forwarded under the cover of correspondence in the names of the three plaintiffs (-1441) (Bundle at 13-14). However, subsequent correspondence and inspection was forwarded in the name of Mr Machirus only (Bundle at 19-23, 29). Mr Morell failed to respond to a request from the defendants that he confirm whether he relied upon the documents forwarded by Mr Machirus (Bundle at 25, 31). No correspondence was received from Mr Morell following Mr Machirus’s advice to the defendants on 20 July 2016 that he would not be responding to any requests from the defendants until his health issues had resolved (Bundle at 32).

25.2 In any event, even based on the documents forwarded by way of inspection by Mr Machirus, Mr Morell has not provided for inspection a number of the documents listed in his verified lists that have been requested by the defendants, as set out in the defendants letter to the plaintiffs (-1441) dated 14 July 2016 (Bundle at 25-28)

25.3 In respect of the alleged losses in the ASOC, Mr Morell has not discovered any documentation in relation to:

25.3.1 As to when and how Mr Morell “lost control” over the properties at 38 Shaw Avenue and 512 Worcester Street and as to his failure to make the required payments over the mortgages held over those properties.

25.3.3 How he has quantified/intends to quantify any loss he suffered in relation to the loss of the “$200.000 D\B Breweries litre age agreement grant with the property at 38

25.3.4 In short, in terms of the matters identified in the May Minute, Mr Morell has not discovered documentary evidence relating to his calculation of his loss flowing from the provision of 38 Shaw Avenue as security.

[91] Mr Barr submits that Mr Morell’s non-compliance with the discovery directions was compounded by the state of his pleadings which do not particularise how the alleged misfeasance and deceit (said to have occurred at the time of the second trial in August 2007) impacted on his agreement with Dominion Breweries and the forced mortgagee sales of 38 Shaw Avenue and 512 Worcester Street (alleged to have occurred as a result of the Proceeds of Crime proceedings commenced in 2005). Mr Morell has not amended his pleadings to particularise the nature, particulars and calculations of his alleged losses despite being directed to do so in my May Minute.

[92] In relation to the documents identified in his verified list, Mr Morell’s

(b) the defendants have all documents in their possession in relation to the valuations and dealings with 38 Shaw Avenue and 512 Worcester Street; and

(c) the defendants have all documents in their possession in relation to the DB Breweries agreements, guarantees, caveats and all financial matters.

[93] As in the case of Ms Pelenato, Mr Morell’s affidavits failed to meet the requirements of the unless order. The obligation upon Mr Morell was to identify in his list both the relevant documents which he holds and those which he knows to exist in the hands of others. On his own submissions, particularly having regard to the content of his affidavits, it is clear that he has not complied with his obligations. Furthermore, there is strong reason to conclude, having regard to the less-than- detailed nature of Mr Morell’s submission as to the documents already in the hands of the defendants, that not all relevant documents are covered by Mr Morell’s submission. An example of that, as submitted by Mr Barr, is the documentation which must exist relating to Mr Morell’s calculation of a $200,000 loss flowing from the actions of DB Breweries. Relevant documents must exist in that regard.

[94] As in the case of Ms Pelenato, Mr Morell has failed to comply with the unless order in that he has failed both in his April 2016 list and in his June 2016 list to identify relevant documents. The breach has continued notwithstanding the specific requirements of listing under the High Court Rules and the identification of those requirements as set out in the defendants’ submissions which were filed on the

[95] It is just that Mr Morell’s special damages claim remain struck out but, as with other plaintiffs, it would not be just that he be precluded from pursuing the balance of his claim. Orders will be made to that effect.

[96] I will be reserving costs. The subject-matter of this judgment is a request by each of the plaintiffs for an indulgence. Having regard to the record of the various plaintiffs’ litigation, the defendants’ opposition to the grant of any indulgence was appropriate – it was appropriate that the matter be tested and that the Court reach a

decision on that basis. The Court needed fully developed submissions in order to properly consider whether an indulgence was appropriate and, if so, to what extent.

[97] As it is, four of the plaintiffs have not been relieved of the consequences of their breach of the unless order in relation to their special damages claims. To that extent they have been unsuccessful and costs would normally follow the event.

[98] In the case of at least some of the plaintiffs, the matter may be complicated by an existing or imminent grant of legal aid. Now that all plaintiffs are represented, it is appropriate that counsel in the first instance have discussion as to the correct outcome by reason of any existing or imminent grant of legal aid and, in the event there is no such impact, counsel should confer as to the appropriate costs and disbursements orders. Failing that, the applicant for any order of costs and disbursements is to file a memorandum (three page limit in relation to each party against whom costs are sought) to be followed within five working days by a memorandum in reply (same page limit).

(a) The 1178 first plaintiff, Vincent James Clayton, is fully relieved from the consequences of his breach of the unless order dated 10 March

2016 (the unless order) so that his claims in the 1178 proceeding are not struck out.

(b) The remaining 1178 and all 1441 plaintiffs are partially relieved from the consequences of their breaches of the unless order, to the extent that the only claims which shall remain struck out are their claims for special damages.

(c) The costs and disbursements of the plaintiffs’ applications for relief from the consequences of the breaches of the unless orders are reserved.

High Court of New Zealand Decisions

Clayton v Currie [2016] NZHC 2815 (23 November 2016)