Haines House Removals Limited v Forde [2020] NZHC 2355 (10 September 2020)

Last Updated: 30 October 2020

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-000225 [2020] NZHC 2355

BETWEEN	HAINES HOUSE REMOVALS LIMITED First Plaintiff HAINES HOUSE HAULAGE NORTHLAND LIMITED Second Plaintiff
AND	MICHAEL JOHN FORDE First Defendant WHARE DEMOLITIONS LIMITED Second Defendant FORDE BROTHERS HOUSE REMOVALS LIMITED Third Defendant FORDE BROTHERS DEMOLITION LIMITED Fourth Defendant

Hearing:	8 September 2020
Appearances:	R Mark for Plaintiffs P A B Mills for Defendants
Judgment:	10 September 2020

JUDGMENT OF ASSOCIATE JUDGE P J ANDREW

This judgment was delivered by Associate Judge Andrew on 10 September 2020 at 3.30 pm

pursuant to r 11.5 of the High Court Rules Registrar / Deputy Registrar Date..........................

HAINES HOUSE REMOVALS LTD & OR v FORDE & ORS [2020] NZHC 2355 [10 September 2020]

Introduction

• [1] The first and second plaintiffs say that they are collectively known as the Haines Group and carry on the business of house removal.

• [2] The first defendant, Mr Michael Forde, was dismissed from his employment as a manager for the plaintiffs in February 2018. The plaintiffs say the dismissal was for serious misconduct. Mr Forde says he was unfairly dismissed.

• [3] In the substantive proceedings, the plaintiffs sue Mr Forde and companies associated with him for breach of fiduciary duty, breach of fidelity and secret profits.

• [4] The plaintiffs allege, amongst other matters, that Mr Forde undermined the Haines group’s business relationship with its customers and potential customers with a view to the future transfer of those relationships to Mr Forde and entities associated with him.

• [5] There are two outstanding interlocutory applications before the Court for determination:

(a) The plaintiffs’ application for particular discovery dated 8 May 2020, pursuant to r 8.19 of the High Court Rules 2016, in which discovery is sought of documents relating to business contacts of the plaintiffs and details of house sales entered into by the defendants; and

(b) The defendants’ amended application for discovery orders dated 31 July 2020, in which discovery is sought of the financial statements for Haines House Haulage Company Ltd for the financial years ended 31 March 2016, 31 March 2017, 31 March 2018 and 31 March 2019.¹

1. The Court has received a further memorandum from counsel for the defendants dated 8 September 2020 and in response to an issue about disclosure of documents relating to Khuswin Ltd.

Factual background

• [6] A number of critical factual allegations are in dispute. This includes the entity that employed Mr Forde and whether he was a sales manager for the Haines Group (that is, the first and second plaintiffs), as alleged by the plaintiffs, or whether he was the general manager of the “Haines House Removal Auckland business” as Mr Forde contends.

• [7] Mr Rodney Haines is the sole director and shareholder of both plaintiffs. He says he has been in the house removal business for 45 years. Mr Haines says the plaintiffs have, since incorporation, been the vehicle by which he carried out his house removal business.

• [8] Mr Forde was first employed as a house mover in March 2010.

• [9] In 2017, Mr Haines negotiated with a number of parties, including Mr Forde, to sell the house removal business.

• [10] In an amended statement of defence and counterclaim dated 6 July 2020, the defendants allege that, in December 2017, Mr Forde and Mr Haines entered into a contract whereby Mr Forde or his nominee would acquire the Haines House Removals, Auckland, business from the plaintiffs. The defendants allege that Mr Haines repudiated that contract, causing the defendants/counterclaim plaintiffs loss.

• [11] The defendants further say that as part of the December 2017 negotiations, the parties agreed that Mr Forde was entitled to purchase and sell houses for removal prior to the settlement date. That was agreed in order for Mr Forde to build up the stock required and to obtain sufficient capital to enable him to run the business and pay Mr Haines.

• [12] The plaintiffs say that following his termination, Mr Forde initially refused to leave the companies’ phone and laptop that he had been using as an employee. When he returned the laptop and mobile phone a couple of days later it is claimed that all the contacts had been wiped from them. It is also claimed that the SIM card had been

removed. The plaintiffs say that this meant that they had no details of the business contacts that Mr Forde had been dealing with prior to his dismissal.

• [13] On 16 February 2018, the plaintiffs were granted an interim injunction by this Court restraining Mr Forde, both in his personal capacity and as director of the second, third and fourth defendants, from contacting business contacts obtained during his employment with the plaintiffs.

• [14] The defendants allege that there was a failure by the plaintiffs to adequately disclose to the Court important factual matters that they have pleaded in their counterclaim.

Relevant legal principles

• [15] The Court adopts a four-stage test under r 8.19 of the High Court Rules, one which focuses on relevance and proportionality. In Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd, Asher J set out the approach as follows:²

(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?

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

• [16] In Robert v Foxton Equities Ltd, Kós J referred to the general principles in the following terms: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.

2. Assa Abloy New Zealand Ltd v Allegion (New Zealand) Ltd [2015] NZHC 2760, [2018] NZAR 600 at [14].

³ Robert v Foxton Equities Ltd [2014] NZHC 726, [2015] NZAR 1351 at [8].

(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).

(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”.

Application by plaintiffs for particular discovery (r 8.19)

• [17] In their application of 8 May 2020, the plaintiffs seek particular discovery of the following documents:

(a) All documents relating to any contact by the first defendant and/or any of the defendants, with any business contact(s) of the plaintiffs, which business contacts were obtained or known by the first defendant during his employment with the plaintiffs; and

(b) All house sale and/or purchase agreements (or agreements involving the removal of a house) entered into by the first and third defendants (or any one of them) since February 2018.

• [18] The relevance of the documents sought is in dispute. Relevance is of course to be determined by the pleadings and the test is whether there is prima facie evidence that the documents exist and are in the party’s control.

• [19] I find that the documents sought are clearly relevant. At paragraph 18 of the amended statement of claim dated 30 April 2020, the plaintiffs plead, amongst other things, that, since his dismissal on 2 February 2018, Mr Forde:

(a) Has contacted Haines group customers using contact lists stored on the company laptop and phone; and

(b) Continued to contact customers and employees of the plaintiffs in breach of the court order dated 16 February 2018.

• [20] I accept that the plaintiffs’ evidence filed in support of the application is contested and, ultimately, Mr Forde’s evidence might be preferred at trial. However, the veracity of the evidence is not a matter I can determine at this interlocutory stage. The evidence from Mr Fenton, the plaintiffs’ manager, does provide prima facie evidence that the documents sought exist, are in the defendants’ control and relate directly to the allegation at paragraph19 of the amended statement of claim — namely, the allegation that Mr Forde has entered into house sale or purchase contracts with business contacts obtained during his employment with the plaintiffs (and which includes Khuswin Ltd in or about September 2019).

• [21] The evidence from Mr Fenton is that, in September 2019, he received a phone call on the phone number used by Mr Forde. That is said to be the phone number which was previously used by Mr Forde when he was employed by the first plaintiff. The plaintiffs allege that when Mr Forde was dismissed in February 2018, he returned the company phone and laptop, but all contact details had been wiped. It is then claimed that Mr Forde obtained a new phone with an almost identical phone number.

• [22] Mr Fenton says that the woman he spoke to clearly thought she was talking to Mr Forde. The woman said she had an asbestos report for the house and it was apparent, according to Mr Fenton, that she was buying or selling a house. Mr Fenton then made enquiries and discovered that the phone number that the woman had rung from was from a client called “Khuswin Ltd”, who had purchased three houses from Mr Forde in 2017 when he was a manager employed by the plaintiffs.

• [23] For his part, Mr Forde says he sent his mobile phone and laptop back to the plaintiffs on 5 February 2018 and did not remove the SIM card from it. He further says that he was able to obtain a new cellphone from Spark and was able to use his new SIM card which connected to his new cellphone. He uses that cellphone for his work at Forde Brothers House Removals Ltd. He says that he does not use business contacts for Haines House Removals Ltd and never has.

• [24] I acknowledge that Mr Forde emphatically rejects the claims of breach of fiduciary duty and breach of the duty of fidelity, and he maintains that he does not have business contacts obtained during his employment with the plaintiffs. However,

relevance for the purposes of discovery is to be assessed by reference to the pleadings and not by one party’s version of disputed events.

• [25] I accept the submission from Ms Mills, for the plaintiffs, that Mr Forde had disclosed the documents relating to Khuswin Ltd (and now relied upon by the plaintiffs) in one of his affidavits of documents already filed. However, that is not necessarily an answer to the question of whether the plaintiffs have demonstrated, to a prima facie basis, that there are other documents in existence in the category sought. Likewise, the fact that Mr Forde never signed the alleged Khuswin Ltd contracts is not decisive on the issue of relevance. In that regard, I note that Mr Forde accepts that in 2017 he sold two houses to Khuswin Ltd.

• [26] No issue of proportionality arises in relation to the plaintiffs’ application and Ms Mills did not suggest otherwise.

• [27] In weighing and balancing all these matters, as a matter of discretion, I conclude that the plaintiffs’ application for particular discovery should be granted. The documents sought are both relevant and potentially of importance to the plaintiffs.

Application by defendants for discovery order dated 31 July 2020

• [28] In their amended application for discovery orders dated 31 July 2020, the defendants seek discovery of the financial statements for Haines House Haulage Company Ltd for the financial years ending between 31 March 2016, 31 March 2017, 31 March 2018 and 31 March 2019.

• [29] In the amended application, the defendants advise that in early July 2020, counsel for the plaintiffs, Mr Mark, provided to the counsel for the defendants the following documents:

(a) All the financial statements and documents for Haines House Removals Ltd and Haines House Haulage Northland Ltd (the first and second plaintiffs); and

(b) Haines House Haulage Company Ltd documents, being the profit and loss documents for the financial years ended 31 March 2018 and 2019.⁴

• [30] The defendants’ application is opposed by the plaintiffs, who say the documents relating to Haines House Haulage Company Ltd are not relevant. It is argued that that company is not a party to the proceedings and no allegations are made in respect of it.

• [31] I reject the submission that the documents sought are not relevant.

• [32] It is clear from the evidence that the first and second plaintiffs, referred to in the amended statement of claim as the Haines group, are related to, and closely connected with, Haines House Haulage Company Ltd. The companies have the same directorships and holdings, and the evidence relied upon by the defendants, namely exhibits A and B to the affidavit of Mr Forde sworn 18 August 2020, provide prima facie evidence that Haines House Haulage Company Ltd is not simply a stand-alone company focusing solely on providing equipment to the trading entities (that is, the other companies) but an integral part of the Haines group.

• [33] In circumstances where the identity of Mr Forde’s employer (see the amended statement of defence dated 6 July 2020 at paragraph 1) and the identity of the correct Haines House company that was a party to the alleged December 2017 contract (which Mr Haines says the plaintiffs wrongly repudiated) are at issue, the documents sought from Haines House Haulage Company Ltd are, in my view, relevant. This finding is reinforced by the fact that there was no written employment contract for Mr Forde, and Mr Mark contended that Mr Forde was employed by a number of the Haines companies. The arrangements were clearly loose.

• [34] It is also pertinent to note that the plaintiffs have already provided, to the defendants, profit and loss statements for Haines House Haulage Company Ltd. That is some acknowledgement by the plaintiffs that documents held by that company are relevant to matters at issue.

4. The documents provided by the plaintiffs were in response, the defendants say, to their application of 19 June 2020.

• [35] There can be little doubt that the documents sought by the defendants may well be important to the defendants’ counterclaims (as well as to their defence) and, again, no issue of proportionality arises.

• [36] In weighing and balancing all these factors, I conclude that the defendants’ application should be granted.

Result

• [37] I grant both applications, namely the plaintiffs’ application for particular discovery dated 8 May 2020 and the defendants’ amended application for discovery dated 31 July 2020.

• [38] I make the following orders:

(a) The first defendant is to provide discovery of all documents referring to any contact by him and/or any of the defendants, with any business contact(s) of the plaintiffs which business contacts were obtained or known by the first defendant during his employment with the plaintiffs;

(b) The first and third defendants are to provide discovery of all house sale and/or purchase agreements (or agreements involving the removal of a house) entered into by any of them or any one of them since February 2018;

(c) The first defendant is to file and serve an affidavit within 14 days listing all the documents referred to at [38]](a);

(d) The first and third defendants are to file and serve an affidavit within 14 days listing all documents referred to at [38]](b); and

(e) The defendants are to make copies of the above referred documents available for inspection by the plaintiffs in accordance with r 8.27 of the High Court Rules 2016.

• [39] In relation to the defendants’ application, I make the following orders:

(a) The plaintiffs are to provide discovery of the financial statements for Haines House Haulage Company Ltd for the financial years ended 31 March 2016, 31 March 2017, 31 March 2018 and 31 March 2019 (and when they become available, the financial statements for 31 March 2020);

(b) The plaintiffs are to file and serve an affidavit within 14 days listing all documents referred to at [39]](a); and

(c) The plaintiffs are to make copies of those documents available for inspection by the defendants in accordance with r 8.27 of the High Court Rules 2016.

• [40] As to costs, I am of the preliminary view that both parties have had some success and there should be no order for costs. Costs should lie where they fall. If the parties cannot agree on costs, then memoranda are to be filed and served within 14 days.

Associate Judge P J Andrew