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AAM Limited v Exotica Enterprise Limited [2018] NZHC 3031 (22 November 2018)

Last Updated: 3 December 2018


IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2016-404-2850
[2018] NZHC 3031
BETWEEN
AAM LIMITED
First Plaintiff
MUMTAJ YUNUS AGARBATTIWALA
Second Plaintiff
AND
EXOTICA ENTERPRISE LIMITED
First Defendant
DARIUS KARANI
Second Defendant
MANUKA MASTERS LIMITED
Third Defendant
Hearing:
5 November 2018
Appearances:
F Pereira for the First Plaintiff
M Y Agarbattiwala, the Second Plaintiff, self-represented L Ponniah for the Defendants
Judgment:
22 November 2018


JUDGMENT (No.2) OF ASSOCIATE JUDGE R M BELL



This judgment was delivered by me on 22 November 2018 at 3:00pm

pursuant to Rule 11.5 of the High Court Rules.

.......................................

Deputy Registrar


Solicitors:

Pereira Law (Ferdinand Pereira), Auckland, for the First Plaintiff

Corban Revell (C Orton), Henderson, Auckland, for the First Defendant

Copy for:

Mumtaj Agarbattiwala, the Second Plaintiff

Lawrence Ponniah, Eastridge, Auckland, for the First Defendant



AAM LIMITED v EXOTICA ENTERPRISE LIMITED [2018] NZHC 3031 [22 November 2018]






[1] The plaintiffs apply for further discovery under r 8.19 of the High Court Rules. Their application goes to the adequacy of the defendants’ disclosure of financial records for the plaintiffs’ claims for breach of contract and misrepresentation on the defendants’ sale of a business. The plaintiffs say that the defendants have not discovered all the documents they were ordered to and that what they have disclosed shows that they should disclose other categories of documents. The defendants’ general response is that they have already disclosed what was ordered and there is no basis for requiring further discovery. Accordingly, there are two main questions:

[2] This is the third discovery application. In March 2017, by agreement Associate Judge Doogue directed standard discovery. The first and second defendants filed an affidavit of documents in April 2017. The third defendant filed a separate affidavit at the same time. Not satisfied with that discovery, especially the disclosure of the defendants’ financial records of the defendants, the plaintiffs applied for further discovery under r 8.19 of the High Court Rules. Associate Judge Christiansen ordered disclosure of specified classes of financial documents by the defendants.1 Neither side challenged his decision. The defendants filed affidavits of documents on 2 February 2018: one by the first and second defendants and a second by the third defendant. The defendants cross-applied for discovery, and security for costs. On 16 April 2018, I gave rulings for the plaintiffs to provide and further discovery.2 The plaintiffs filed the present application on 26 July 2018.

The parties’ representation





1 AAM Ltd v Exotica Enterprise Ltd [2017] NZHC 3033.

2 AAM Ltd v Exotica Enterprise Ltd [2018] NZHC 717.

[3] The parties’ representation has changed during the proceeding. At the start, the plaintiffs were represented by Vinci Law and instructed a barrister. The defendants were represented by Haigh Lyon. In 2017 the defendants changed solicitors. Mr Ponniah has been counsel for them since then. After Associate Judge Christiansen’s decision, Vinci Law no longer acted for the plaintiffs. At the hearing before me on 16 April 2018, Mrs Agarbuttiwala appeared in her own right. There was no lawyer for AAM Ltd. On 13 June 2018, Associate Judge Smith ruled that AAM Ltd should be represented by a lawyer. Mr Pereira was instructed for the company shortly afterwards. Ms Agarbattiwala has continued to act for herself. She has largely driven the present application. She has limited resources and has done much of the work on the application herself.

What the case is about


[4] In my judgment of 16 April 2018, I said:

[5] The proceeding arises out of an agreement for sale and purchase of a business in September 2015. The agreement, dated 1 September 2015, describes the vendor as Exotica Enterprise and the purchaser as Ms Agarbattiwala, or nominee. Ms Agarbattiwala is a director and shareholder of AAM Ltd. She nominated it as the purchaser. Mr and Mrs Karani are the shareholders and directors of Exotica Enterprise Ltd. Mrs Karani also holds a 50 per cent shareholding in Manuka Masters Ltd, the third defendant. The address of the business is given as Unit 3, 1 Bishop Dunn Place, Flat Bush, Auckland. The business to be sold is described as:

“Gift Shop Manuka Honey, Food and Beverage & Wine Products from New Zealand”

The agreement uses the Auckland District Law Society form for an agreement for sale and purchase of a business.3 The settlement date is 13 September 2015. There is a turnover warranty of $1,184,848 (excluding GST) for the period 1 April 2014 to 31 March 2015. The premises were leased for three years ending on 15 October 2016, with a right of renewal. The vendor gave a five year New Zealand-wide restraint of trade. The purchase price was

$475,000.


[6] The agreement has additional terms including clauses 20, 21, 22, 23 and 27 which are relevant to the plaintiffs’ causes of action:
  1. A list of products their retail distribution rights and brand names will be provided and attached to this agreement. The Vendor agrees that he will ensure the continuity of supply and

3 Auckland District Law Society form, 4th ed, 2008(3).

will not compete with the buyer in the retail market in New Zealand for a period of five years.

  1. The Vendor agrees and undertakes that he will hand over all business contacts buyers and suppliers over a period of 30 days Vendor assistance.
  1. The Vendor agrees that he will pass on all retail inquiries pertaining to items mentioned in clause 20 on a continuous basis.
  1. The Vendor agrees to announce before possession date in all his marketing materials printed and online that he has handed over the business of items specified in clause 20 to the buyer.

...

27 All distribution rights (sole, New Zealand wide and overseas) will be documented and signed prior to settlement date.


[7] At the same time, Ms Agarbattiwala and Mr Karani signed a memorandum of understanding:

Mumtaj Agarbattiwala is buying the retail business New from Zealand situated at Unit 3, 1 Bishop Dunn Place, Flat Bush, Auckland, which is a Liquor and Food and Beverage store. Along with that she will also be getting the name, trademarks and intellectual property associated with “New from Zealand”.

She will also have sole distribution rights for all Exotica Enterprise Products in New Zealand and India for a period of 2 years. After that if mutually beneficial to both parties the contract will be renewed.

All intellectual property and the brand Exotica Enterprise Ltd remain the property of Darius Karana. Exotica Enterprise Ltd will continue trading under the Directorship of Darius Karani and no shares or portion of this company is being sold in this transaction.


[8] After settlement, AAM Ltd operated the business under the name “New From Zealand”. Ms Agarbattiwala says that the purchase of the business was a disaster. In the first year, she made a loss of some $133,713 on a turnover of only $363,843.

[9] The statement of claim of 3 November 2006 has 14 causes of action:
  1. The first is a claim for breach of the restraint of trade. It is alleged that Exotica and Mr Karani failed to hand over all buyers, failed to hand over all retail enquiries, and failed to announce in their advertising material that they had handed the business over to the plaintiffs. The damages are not quantified.
  1. The second alleges a breach of the agreement in failing to obtain distribution rights which were specified in the agreement. Loss is alleged, but damages are not specified.
  2. The third alleges a breach of the memorandum of understanding. It is claimed that Exotica and Mr Karani sold Exotica products on the products list to other parties in New Zealand and India. Loss is alleged, but damages are not specified. An injunction is also sought, restraining Exotica and Mr Karani from selling products to other parties in New Zealand and India.
  1. The fourth alleges a breach of the turnover warranty, although the breach is said to have been proved by the subsequent turnover. Loss is alleged but damages are not quantified.
  1. The fifth is an allegation that Exotica and Mr Karani did not transfer their website for the business to the plaintiffs on settlement. The plaintiffs had to set up their own website. While they claim loss, they have not quantified the damages.
  1. The sixth is under s 9 of the Fair Trading Act 1986. The defendants are said to have breached this section by continuing to include references to the business premises on their websites and in advertising and promotional material, and thereby establishing in the minds of the public a link between the premises and the defendants instead of with the plaintiffs. The plaintiffs seek an order for removal of those references to the premises and monetary relief which is not quantified.
  1. The seventh is a claim for damages under what is now s 35 of the Contract and Commercial Law Act 2017. The defendants are said to have represented to Ms Agarbattiwala that since 31 March 2015 they had spent considerable funds on the fit-out of premises and the value of the fit-out was $275,000, whereas the accounts show that the actual value of the fixed assets was only $218,00. The plaintiffs claim a loss of $58,000.
  1. The eighth cause of action is under s 9 of the Fair Trading Act 1986 and repeats the allegations for the seventh.
  1. In the ninth the plaintiffs say that the vendors failed to transfer all the stock in the business to the plaintiffs on settlement. Stock worth $2,700 (excluding GST) is said to have been retained. Damages in that sum are sought.
  1. The tenth alleges a failure to transfer a Jaguar motor vehicle, a fixed asset of the business. Damages of $120,000 are claimed.
  1. The eleventh alleges a breach of clause 6.1(a) of the agreement. This goes to liquor licensing requirements. Before the agreement, the defendants had received a requisition from the District Licensing Committee that the premises had to be physically divided into two shops, but they did not disclose that to the plaintiffs. Loss is alleged, but not quantified.
  2. The twelfth alleges that the plaintiffs ordered products from the defendants and paid $69,195 (including GST), but those products were not delivered. Damages of $69,195 are sought.
  1. The thirteenth alleges that the defendants failed to deliver on time stock ordered by the plaintiffs. Loss is alleged but damages are not quantified.
  1. In the fourteenth, the defendants are alleged to have failed to pay for stock taken by them on consignment and not returned. The value given is $24,217 (including GST).

[10] The defendants deny liability generally. Some of the issues they raise include the following: they say that Ms Agarbattiwala is contending that the business sold to her is wider than the agreement provided; they are entitled to carry on other businesses; Exotica Enterprise Ltd was the sole vendor; Mr Karani is not personally liable; the turnover warranty was for the entire business of Exotica Enterprise Ltd but not for the business actually sold. They have also counterclaimed. They say that they left money in ($250,000) which was to be repaid six months after settlement date but that was not paid. And they sue for $23,000 for stock supplied which has not been paid.

[5] Since then, the plaintiffs have filed an amended statement of claim. That generally repleads the causes of action in the statement of claim of 3 November 2016, but gives greater particulars.

[6] In his decision of 8 December 2018, Associate Judge Christiansen ordered the defendants to discover these documents:

[7] There was generally no dispute that the plaintiffs are entitled to disclosure of the defendants’ financial records as relevant to their claims. The plaintiffs’ application had sought more extensive classes of documents, including financial reports, management accounts, financial analyses, business plans, budgets, banking proposals and others. Their accountant had given them a shopping list of documents they should ask for. While Associate Judge Christiansen did not explain why he limited the discovery, I infer that he did so to keep it proportionate. There is no suggestion in his judgment that he considered that the other documents were irrelevant.

[8] The plaintiffs’ application seeks orders for the defendants to file and serve further affidavits as to these classes of documents:
  1. All itemised sales invoices showing client details, products and its quantity, price per unit, GST applicable if any, receipt of goods, when delivered, and bank statements showing the amount received for the sale for the financial years 31 March 2013 to 31 March 2017.
  1. An itemised purchase invoices, showing supplies details, GST no, products and quantity, price per unit, GST applicable if any, receipt or goods were delivered and bank statements showing amount paid for the purchases for the financial years 31 March 2013 to 31 March 2017.
  1. Every sale and/or purchase made on Bartercard/BBX4: an itemised invoice showing suppliers/purchaser details, a GST no, products and its quantity, price per unit, GST applicable if any, receipt or goods were delivered and


  1. BBX allows access to a global trading portal and appears to operate in a manner similar to Bartercard. See www.bbxworld.com
bank statements/Bartercard statements showing amount paid for the purchase/sale for the financial years 31 March 2013 to 31 March 2017.
  1. All sale or purchases invoices, bank statements, evidence of payment, supplier invoice of tangible assets, purchases, and payment made for Exotica Enterprise Ltd for the financial years 31 March 2014 to 31 March 2016.
  1. For zero-rated sales provide:
  1. All itemised sales invoices showing clients, full verifiable details. Products, quantity ordered and prices.
  1. All Performa invoices, bill of lading, export certificates;
  1. bank statement supporting payment received for the sales;
  1. acknowledgment of goods delivered;
  1. all itemised purchase invoices, payment evidence from bank statements, cash payment receipts from suppliers.
  1. All bank statements, credit cards, credit or debit notes for Exotica Enterprise Ltd required for the financial years 31 March 2013 to 31 March 2017.
  1. Each category of documents must be grouped and bundled respectively into a separate and list in the separate annexure of the affidavit, clearly identifying the documents sought in their control and, if not, who has it in the control.

[9] The plaintiffs’ application has been guided by their accountant’s requests for further documents. A letter from the accountant dated 26 June 2018 says that to determine the turnover warranty and quantify the statement of claim, she requires the following:

Exotica Enterprise Ltd for the period 1 April 2013 to 31 March 2018 -

Manuka Masters Ltd information request from 1 April 2015 to 31 March 2018 -


And the accountant adds:

For each of the companies we need a full breakdown of each deposit so we can match invoices raised to the bankings. Also, a full breakdown of each purchase by supplier and date paid.


[10] In applications for further discovery under r 8.19 it is standard to refer to Asher J’s four-stage approach in Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd:5

(a) Are the documents sought relevant, and if so how important will they be?

(b) Are there grounds for belief that the documents sought exist? This will often be a matter of inference. How strong is that evidence?

(c) Is discovery proportionate, assessing proportionality in accordance with Part 1 of the Discovery Checklist in the High Court Rules?

Weighing and balancing these matters, in the Court’s discretion applying r 8.19, is an order appropriate?


5 Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd [2015] NZHC 2760 at [14].

[11] In this case however further discovery under r 8.19 has already been ordered. That raises the question whether the court can order more discovery when it has already decided how much discovery is required. The defendants have a sound starting point for their opposition: they should not be vexed with ongoing discovery applications when the extent of discovery has been fixed after an opposed hearing and they have complied with an order under r 8.19. While a procedural discovery order does not have the same effect as a substantive judgment on the merits, considerations of finality and efficient case management suggest that the court should be reluctant to entertain repeated discovery applications. The High Court Rules show that there is greater room to re-open interlocutory directions. Under r 7.50 case management orders made in chambers may be varied if circumstances change. Under r 7.51 an interlocutory order improperly obtained may be rescinded. That is to be contrasted with judgments on the merits which may be set aside only if they were fraudulently obtained (subject of course to rights of appeal).6 But these exceptions show that as a general rule a decision on an interlocutory application should stand. The plaintiffs start with a more challenging task than the usual applicant seeking an order under r 8.19. There are two ways the plaintiffs can get some traction: by showing that the defendants have not complied with Associate Judge Christiansen’s order, and by showing that in light of discovery made so far, his order should be varied.

[12] Rule 8.17 allows the court to vary a discovery order:

(b) there has been a change of circumstances that justifies reconsideration.

The plaintiffs’ application referred only to r 8.19, not to r 8.17, but I do not consider that it is unfair to consider their application under both rules. In Torbay Holdings Ltd v Napier I said:7
  1. Commissioner of Inland Revenue v Redcliffe Forestry Venture Ltd [2012] NZSC 94, [2013] 1 NZLR 804.
  2. Torbay Holdings Ltd v Napier [2014] NZHC 1198 at [14]. See also West Harbour Holdings Ltd v Tamihere [2014] NZHC at [20].

It is helpful to keep in mind the combined effect of rr 8.17 and 8.19. Rule 8.17 allows the court to vary the terms of a discovery order if attempted compliance shows a need for a variation or a change of circumstances justifies reconsideration. Rule 8.19 allows the court to order further discovery if there are grounds for believing that a party has not discovered documents that should have been. The rules may be invoked when a party contends that further discovery is required. Both rules give the court a discretion whether to order further discovery. The court will take into account whether the orders sought are proportionate to the subject matter of the proceeding. Generally, if the court is persuaded that the additional discovery sought is relevant and proportionate, it will be a rare case that does not come within one or other of the rules. As Associate Judge Osborne noted in Southland Building Society Ltd v Barlow Justice Ltd, discovery may be an evolving process under which the parties recognise the need for refinements to original directions as the case requires. He gave both rules a wide construction.


[13] The plaintiffs’ application clearly sought more extensive disclosure than had been originally ordered. The defendants were alive to the point. Their notice of opposition stated that it was “not in the overall interests of justice to order any further particular discovery, having regard to the documents already discovered, the peripheral nature of the documents and the proportionality of the inconvenience and cost of the discovery.”

Have the defendants complied with Associate Judge Christiansen’s discovery

order?


[14] The plaintiffs say that not all the documents required to be disclosed have been, and that the documents which have been disclosed show that there are discrepancies in the defendants’ records, which justify more extensive discovery. Ms Agarbattiwala submitted a schedule to show discrepancies between the financial performance of Exotica Enterprise Ltd as shown in its annual financial statements and in actual invoices. Comparisons were made for each year for annual turnover, overseas sales and purchases/costs of goods sold. Financial statements for all relevant years gave figures under these heads. There were gaps and discrepancies with invoices.

[15] As for gaps:

[16] For discrepancies, invoices for sales and for purchases were disclosed for all other periods for annual turnover, other sales and costs of purchases, but in every case the totals of the invoices were less than the figures in the annual financial statements. Ms Agarbattiwala referred to invoices of the defendants produced on discovery. The defendants had, for the financial year ending 31 March 2014, not disclosed any sales invoices from 1 April to 29 May 2013. She referred to two invoices issued in 2015 numbered 163 made out to Shenzhen J D Brothers Marketing Management Company Limited in Shenzhen, China. Both are FOB. One of them is for $8,500. The other is for $51,067. Both are for manuka honey and soap. Ms Agarbattiwala says that she obtained one invoice from the purchaser, the other was discovered by the defendants.

[17] The plaintiffs referred to a GST return for Exotica Enterprise Ltd for the period ending 30 September 2015. The zero-rated supplies include alleged supplies to J D Brothers in China. The charges come to $70,000. Ms Agarbattiwala contacted J D Brothers, who provided records showing that there were only two payments to Exotica Enterprise Ltd in that period – NZ$30,460 and NZ$7,050, a total of $37,510.

[18] There were two invoices numbered 491, one dated 18 December 2014 to Global Security Solutions for $660 for gift baskets to be paid by Bartercard - $660.00. The second, dated 22 December 2014, is to New Line Universal NZ Ltd for Royal Nectar face lift for $3,168.00. While the purchasers were both in New Zealand and the supplies would not be zero-rated (in contrast with export sales), the GST was not identified on either invoice.

[19] Ms Agarbattiwala brought a compact disc with copies of other documents stored on it. She referred to some of the documents on the disc to develop her submissions. While the defendants could be expected to deal with copies of financial records put in evidence and included in the case book for the hearing, they could not respond to matters arising from documents on the compact disc. I have not taken those documents into account. Even so, Ms Agarbattiwala has done enough to suggest that
there are questions as to the adequacy of the defendants’ discovery and the accuracy of the defendants’ financial records.

Invoices for the year ending 31 March 2013


[20] The performance of the company for the year ending 31 March 2013 can be seen in the financial statements for the year ending 31 March 2014, but invoices for the year ending 31 March 2013 were not disclosed. Mr Ponniah submitted that Associate Judge Christiansen did not order disclosure for the year 1 April 2012 to 31 March 2013.

[21] As a matter of interpretation, that is not correct. The schedule to the application for further discovery before Associate Judge Christiansen sought disclosure of documents “for the years 31 March 2013 ... 31 March 2017”. That means that documents up to the end of each financial year were to be disclosed beginning from the start of that year. Associate Judge Christiansen did not expressly say “31 March” for each year, but he adopted that part of the plaintiffs’ application. He directed discovery to 31 March for each year he ordered. That is consistent with standard usage. He could not have intended to have ordered discovery for each year beginning 1 April. He gave his decision in December 2017. In ordering disclosure of financial statements for 2017, he could not have meant disclosure of financial statements for the year beginning 1 April 2017 because that year was still running and financial statements for that year did not exist then. The same interpretation applies to each year before.

[22] On the other hand, I do not require Exotica Enterprise Ltd to disclose invoices for the year ending 31 March 2013. That is because the plaintiffs’ accountants have required disclosure only from 1 April 2013. The accountants’ letter of 26 June 2018 is a relevant change of circumstance under r 8.17(2). Since the accountants do not require earlier documents to prepare their advice and evidence for this case, it would be disproportionate to require the defendants to disclose earlier documents.

Financial statements for the year ending March 2015


[23] The defendants did not discover financial statements for the year ending 31 March 2015. Associate Judge Christiansen order did not require those financial statements to be disclosed. That non-disclosure does not matter, because the plaintiffs were able to work out what the 2015 statement said from the financial statements for 2016. Ms Agarbattiwala accepted that the plaintiffs had not suffered any prejudice because the 2015 financial statements had not been disclosed.

Invoices 1 April to 29 May 2013


[24] The plaintiffs have shown reason to believe that Exotica Enterprise Ltd has not disclosed invoices from 1 April 2013 to 29 May 2013. There is no reason to suggest that Exotica Enterprise Ltd was not trading during that time. There are likely to be invoices for sales and purchases in that period.

Other invoices


[25] The sums stated for annual turnover, overseas sales and costs of purchases in the financial statements are not fully supported by disclosed invoices. Potential explanations include:

(a) the defendants hold those documents but have not disclosed them;

(b) The defendants used to hold the documents but no longer have them;

(c) There no further invoices.

[26] On an application for further discovery under r 8.19, the court is not required to make conclusive findings as to reasons why complete discovery has not been made. It is sufficient if there are grounds for believing that a party has not discovered documents that should have been discovered. If it turns out that there are no further invoices, that will still be important for the proceeding. That will throw doubt on the accuracy of the defendants’ annual financial statements. If there are further invoices,
they should be disclosed. Requiring further discovery of invoices will help in establishing accurate trading figures.

[27] It is clearly in the interests of the defendants to disclose any further invoices that they have not disclosed already, because non-disclosure will allow the plaintiffs to argue at trial that the sums given in the statements of financial performance are inaccurate. That may make their case for a breach of the turnover warranty stronger.

[28] The plaintiffs have accordingly established that there are grounds to believe that the defendants have not disclosed documents that Associate Judge Christiansen ordered them to discover.

Should other documents be disclosed?


[29] The defendants’ attempted compliance with Associate Judge Christiansen’s discovery order has shown a need for additional discovery. There are discrepancies and gaps in their discovery which are likely to make it difficult to establish accurate trading figures for the defendants. There is no assurance that those discrepancies will be cured by requiring the defendants only to disclose what Associate Judge Christiansen ordered. The existence of invoices with the same number issued in the same period but with different details suggests that further checks are required. Bank statements, credit card statements, Bartercard and BBX records are source documents which can be cross-checked against invoices to establish trading figures.

[30] I offered the plaintiffs the option of not requiring the defendants to file any further discovery affidavits. At the substantive hearing they could make their case on the defendants’ existing discovery, point to its inadequacies and invite the court to draw inferences why the defendants had not carried out discovery properly. The plaintiffs did not want to take up my offer. Their response was that they preferred to establish accurately the trading figures for the defendants rather than rely on inferences. That position is understandable.
[31] Given that the discovery to date is inadequate and leaves it open to the court to draw adverse inferences against them, the defendants should also welcome the opportunity to put their discovery right.

The defendants’ response


[32] Mr Ponniah said that he was taken by surprise. He sought an adjournment to take instructions and prepare a response. He said that the plaintiffs’ application was insufficiently particularised. He criticised the plaintiffs’ omissions for over-generality. If what the plaintiffs had presented orally had been set out in written submissions, he would have understood the application better.

[33] While parts of the plaintiffs’ application may be criticised as unnecessary, a careful reading of the application would have identified the matters the plaintiffs relied on to say that the defendants’ discovery was inadequate:8. The casebook for the hearing has many supporting documents as a schedule filed with the application, which the plaintiffs relied on to support their arguments. To avoid prejudice to the defendants I have disregarded the documents on Ms Agarbattiwala’s compact disc.

[34] To a large extent, the defendants have brought any difficulties on themselves.
In my decision of 16 April 2018 I said:9

[22] Both sides have accountants assisting them. The plaintiffs have an independent forensic accountant – a Mr Lazelle. He was first engaged by lawyers initially instructed for the plaintiffs. The defendants have an accountant who is known to Mr Ponniah to be independent and was engaged solely for the purpose of this hearing. Apparently he does not otherwise act for the defendants. I expect those accountants to have a good understanding of the financial records they would expect each side to make available to determine financial losses. Each accountant should also be able to ascertain what financial records are held by the party for whom they are instructed. Moreover, the accountants should be able to confer with each other as to documents that are available for discovery and which can be made available. In short, I see benefits in the accountants becoming actively involved in the discovery process to ensure that all relevant documents are produced and that discovery is also proportionate. Rule 8.2 directs co-operation between the parties on discovery. Co-operation can be enhanced in this case if the parties instruct their accountants to liaise with each other as to documents to be collated and made available.

8 See paragraphs 5 and 6 of the application which run for three pages

9 AAM v Exotica Enterprise Ltd [2018] NZHC 717.

[35] Mrs Agarbattiwala took that up. She sent emails to the accountant instructed for the defendants and to Mr Ponniah to resolve outstanding discovery issues. She made no progress with that. Given the duty of co-operation under r 8.2 of the High Court Rules it is disappointing that the defendants were not prepared to discuss Mrs Agarbattiwala’s concerns as to the adequacy of their discovery. Having stalled in co-operating with the plaintiffs on resolving discovery issues, and having put the plaintiffs to the trouble of making a formal application for further discovery, I see no reason to allow the defendants further opportunity to stall.

Perjury allegation


[36] The plaintiffs’ application refers to alleged perjury by the defendants. They say that the defendants lied in their affidavits of documents. It is unnecessary to take that aspect up. In a case such as this, carrying out discovery properly is challenging, even with expert assistance. While I require further discovery because I am not satisfied that the defendants have complied with Associate Judge Christiansen’ orders, I have no basis for saying that the defendants’ directors lied in their discovery affidavits. The errors in discovery are consistent with honest mistakes. This application has shown the need for the defendants to make further discovery, but it does not require the court to take a punitive approach.

Outcome


[37] I am satisfied that Exotica Enterprise Ltd has not complied with Associate Judge Christiansen’s discovery orders because of the gaps in discovery and the discrepancies. Further discovery is required to establish trading figures. That goes not only to requiring disclosure of documents that should have been discovered but also other documents to establish accurately the company’s trading figures. The unsatisfactory disclosure by Exotica Enterprise Ltd makes it prudent to require similar by Manuka Masters Ltd, a related company. It is not however necessary to require disclosure of documents for the year ending 31 March 2013.

[38] I make the following orders:

(2) Within 20 working days of this decision Manuka Masters Ltd is to file and serve a further affidavit of documents in which it will disclose bank statements, credit card statements, Bartercard and BBX records from 1 April 2015 to 31 March 2018.

(3) The Registrar is to arrange a face-to-face conference after 30 working days to review compliance with these orders and to give further case management directions.

(4) The plaintiffs have costs on the application. I invite the parties to confer as to costs. If they cannot agree, memoranda may be filed and I will decide costs on the papers.

(5) Leave is reserved to apply for further directions.




.....................................

Associate Judge R M Bell

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