JONES AND OTHERS (AS TRUSTEES OF THE WESTPARK MARINA ASSOCIATION TRUST) V AUCKLAND COUNCIL HC AK CIV-2010-404-2338

JONES AND OTHERS (AS TRUSTEES OF THE WESTPARK MARINA ASSOCIATION TRUST) V AUCKLAND COUNCIL HC AK CIV-2010-404-2338 27 January 2012IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2010-404-2338[2012] NZHC 29UNDER Part 30 of the High Court RulesIN THE MATTER OF a decision to sell WESTPARK MARINAland and a decision as to the volume ofdredging required at Westpark MarinaBETWEEN ALAN JAMES JONES, CHRISTOPHERJOHN GEDYE, CHARLES ANDREWHOWARTH, BRENT ALEXANDER IVILAND ALAN SEFTON (AS TRUSTEESOF THE WESTPARK MARINAASSOCIATION TRUST)PlaintiffsAND AUCKLAND COUNCILFirst DefendantAND WESTPARK MARINA LIMITEDSecond DefendantHearing: 27 January 2012Appearances: D B Hickson for PlaintiffsM E Casey QC with A J Davidson for First DefendantNo apperance for Second DefendantJudgment: 27 January 2012ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELLSolicitors:D B Hickson, P O Box 56613 Auckland 1445, for plaintiffsEmail: dhickson@ihug.co.nzKevin McDonald & Associates, P O Box 331-065 Auckland 0740Email: Kevin.Mcdonald@xtra.co.nzCopy for:Matthew E Casey QC/A J Davidson, P O Box 317 Auckland 1140, for first defendantEmail: matt@casey.co.nz / asher@casey.co.nzMichael J Ruffin, P O Box 1662 Auckland 1140, for second defendantEmail: mike.ruffin@vodafone.net.nzCase Officer: Iutita.Esekielu@justice.govt.nz[1] The plaintiffs apply for particular discovery against the first defendant under r 8.24 of the High Court Rules:8.24 Order for particular discovery against party after proceeding commencedIf at any stage of the proceeding it appears to a Judge, from evidence or from the nature or circumstances of the case or from any document filed in the proceeding, that there are grounds for believing that a party has not discovered 1 or more documents or a group of documents that should have been discovered, the Judge may order that party—(a) to file an affidavit stating—(i) whether the documents are or have been in the party's control; and(ii) if they have been but are no longer in the party's control, the party's best knowledge and belief as to when the documents ceased to be in the party's control, and who now has control of them; and(b) to serve the affidavit on any other party.[2] The documents that the plaintiffs ask the first defendant to discover are set out in a schedule to the application for discovery:1 The agreement for sale and purchase entered into between Waitakere Properties Limited as vendor and The Cove Limited as purchaser in respect of Lot 3, Deposited Plan 110480, Westpark Marina, Clearwater Cove, Hobsonville, in or about late 1999.2 The agreement for sale and purchase entered into between Waitakere Properties Limited as vendor and The Cove Limited as purchaser in respect of Lot 4 Deposited Plan 110480, Westpark Marina, Clearwater Cove, Hobsonville, in or about late 1999.3 All correspondence between Waitakere Properties Limited, Waitakere City Council, Westpark Marina Limited and The Cove Limited and any other party whatsoever, touching on or concerning the aforementioned agreements for sale and purchase.4 The report prepared by Waitakere Properties Limited in or about 2000 concerning its activities in connection with the development and sale of properties vested in Waitakere Properties Limited byWaitakere City Council pursuant to a Deed of Trust dated 20 November 1998.5 The distribution accounts prepared by Waitakere Properties Limited in or about 1999 or 2000 in respect of the sale of Lots 3 and 4, Deposited Plan 110480, Westpark Marina, Clearwater Cove, Hobsonville.6 The minutes and agendas of meetings of the former Waitakere City Council in its committees during the period 1998 to 2001 which contain entries touching on or concerning the sale of Lots 3 and 4, Deposited Plan 110480, Westpark Marina, Clearwater Cove, Hobsonville in or about late 1999.[3] The first defendant opposes on a number of grounds:1. It has taken all reasonable steps and made extensive efforts to locate documents relevant to the proceeding;2. All such documents have been available to the plaintiffs by providing their representative with access to Council records before the proceedings were started and providing copies of documents to theplaintiffs‟ solicitor;3. The documents already provided are sufficient, and the further documentation sought by the plaintiffs will not assist in deciding the issue of liability, which is the only matter for determination at this stage; and4. If made, the order for discovery would be oppressive and would result in disproportionate costs to the first defendant compared to the claimed potential relevance of the documentation sought.[4] The background to the matter is that the plaintiffs are attacking transactions of the former Waitakere City Council in the late 1990s. With the passage of time, and with the reorganisation of local government in Auckland, it has proved difficult to locate all documents which might have been readily available if the proceeding had been initiated shortly after the transactions were carried out. It is those practicalproblems that face the court and the parties in dealing with this discovery application.[5] On 29 October 2010, Mackenzie J gave a decision1 dismissing applications by the defendants to strike out the statement of claim. His decision gives a useful background to the litigation, and I draw on that.[6] The plaintiffs are the trustees of the Westpark Marina Association Trust which was established to represent the interests of berth-holders at Westpark Marina in the Upper Waitemata Harbour near Hobsonville. They seek judicial review of certain decisions of the Council relating to the marina. They also seek relief against both the Council and Westpark Marina Ltd, the operator of the marina, for alleged breaches of an alleged trust said to exist in favour of the berth-holders. They also challenge Council decisions on costs of dredging.[7] The marina comprises a boat harbour, sea walls, and associated shore facilities on land reclaimed from the Waitemata Harbour. The reclamation and construction of the marina was authorised by a local Act of Parliament, the Waitemata City Council (West Harbour) Empowering Act 1979. That was a special Act of Parliament under s 175 of the Harbours Act 1950, authorising a reclamation. The Waitemata City Council (formerly the Waitemata County Council) was the local authority within whose territorial jurisdiction the site of the marina was located during the 1970s.[8] Under the local government re-organisation in 1989, the Waitemata City Council was replaced by the Waitakere City Council and that Council has, in turn, been taken over by the Auckland Council under the Local Government (Auckland Council) Act 2009. The Empowering Act 1979 vested 39 hectare of seabed at Clearwater Cove in the upper Waitemata Harbour in the Auckland Harbour Board, and authorised the Waitemata City Council to reclaim not more than 12.5 hectares of land to construct a boat harbour. Following reclamation, the reclaimed land was to be transferred to the Council for a boat harbour. The development of the marina was subject to contractual arrangements between the Harbour Board and the City1 Jones v Waitakere City Council HC Auckland CIV-2010-404-2338 29 October 2010.Council, entered into in accordance with provisions of the Empowering Act. Under those arrangements, the Harbour Board was to issue a licence for the marina seabed to the Council, which would issue a sub-licence to the marina operator. Westpark Marina Ltd is the marina operator.[9] Briefly, the contractual arrangements entered into between the Auckland Harbour Board and the Council in1983 under the Empowering Act provided that:1. the Council would not itself undertake the development of the boat harbour but would sponsor its development by contracting with the developer;2. the Auckland Harbour Board would grant a licence to the Council, which would in turn grant a sub-licence to the developer, to enable the reclamation and associated development of the boat harbour to proceed subject to Harbour Board approval; and3. on completion of the boat harbour development, the reclaimed land would be transferred without consideration from the Harbour Board to the Council, and the Harbour Board would grant the Council a licence to the remainder of the foreshore and seabed occupied by the boat harbour. The Council would grant a lease of the reclaimed land and a sub-licence of the foreshore and seabed areas to Westpark Marina Ltd.[10] In a later approval of the development, including a subdivision of the reclaimed land into a number of lots, the Harbour Board specified that several lots were to be "irrevocably tied to seabed licences (while in force) to be held in commonby the marina operator". These lots included lots 3 and 4 with which this proceedingis concerned.[11] Licences and sub-licences were entered into in 1987. Leases of lots 3 and 4 from the Council to Westpark Marina Ltd were registered in 1988. It was a requirement of the development sub-licence between the Council and WestparkMarina Ltd in 1985 that the leases of lots 3 and 4 amongst others should contain a provision that the lessee should at all times be the same person as the sub-licensee of the seabed and foreshore areas.[12] In 1998, the Waitakere City Council transferred lots 3 and 4 to Waitakere Properties Ltd. Waitakere Properties Ltd was a wholly-owned subsidiary of Waitakere City Holdings Ltd. Waitakere City Holdings Ltd and Waitakere Properties Ltd were LATEs - local authority trading enterprises. They were Council wholly-owned companies. Waitakere Properties Ltd further subdivided lot 3 and from late 1999 on, subdivided lots were on-sold for residential development to purchasers unconnected with the Council. Lot 4 was at about the same time transferred to The Cove Ltd, a company unconnected with the Council, and that company subdivided lot 4 and on-sold the residential lots. The Cove Ltd is a company associated with Mr Brent Alexander Ivil, one of the plaintiffs.[13] The essence of the plaintiffs‟ claim is that in terms of the Empowering Act and the deeds entered into as part of the development arrangements, lots 3 and 4 were to be irrevocably tied to the seabed licence and were to be held by the Council for the purposes of a boat harbour. The plaintiffs seek relief against both the Council and against Westpark Marina Ltd, arising from the sale of lots 3 and 4:1. They seek judicial review of the decision of the Council to transfer lots 3 and 4 to Waitakere Properties Ltd with a view to disposing of lots 3 and 4 to a party other than a marina operator and for use other than for a boat harbour. The plaintiffs seek a declaration that that decision was ultra vires and illegal.2. They also allege that the Council held the freehold estate of lots 3 and 4 on trust for, amongst others, the berth-holders represented by the plaintiffs. The plaintiffs assert that as trustee the Council was required to hold the freehold estate in lots 3 and 4 in perpetuity for use as a boat harbour, and that the sale of the lots to a party other than the marina operator for purposes other than for use as a boat harbour and associatedfacilities, was a breach of trust which has caused damage to the plaintiffs. They seek damages.[14] For this case it is not necessary for me to consider claims against Westpark Marina Ltd as the marina operator. No discovery has been sought against it.[15] There is also a cause of action seeking a judicial review of decisions made relating to dredging of the boat harbour. That part of the plaintiffs‟ claim is not relevant for the present application.[16] The Auckland Council largely admits that the development of the marina under the Empowering Act, with the associated approvals, leases and licensing, all proceeded as the plaintiffs allege. It admits that the Waitakere City Council transferred lots 3 and 4 to Waitakere Properties Ltd in 1998 and that Waitakere Properties Ltd on-sold the properties as alleged by the plaintiffs. It says that it was empowered to do so and, while it is not stated in its pleadings, I understand that it relies on s 230 of the Local Government Act 1974.[17] While admitting the transactions, the Auckland Council denies they were ultra vires or illegal. As to the second cause of action, it does not accept that there was a trust in the terms alleged by the plaintiffs, and it also says that in any event there was no breach of trust. The plaintiffs‟ allegation of breach of trust turns on theallegations in the first cause of action, that the disposal of lots 3 and 3 was unauthorised. The Council also says that, even if there were a breach of trust, the plaintiffs have not suffered any loss so as to give them any right to claim damages.[18] In a minute of 14 July 2011, Venning J directed that there were to be split hearings, with the first hearing to determine liability and the second to determine any damages question, if required. For the present application, the plaintiffs‟ discoveryapplication is directed only at discovery for determining liability.[19] Mr Ogilvie has sworn a narrative affidavit for the plaintiffs, to which he has exhibited a number of documents which he has obtained by approaching the Council directly. These include:1. An extract from minutes of the Waitakere City Council‟s CorporateAffairs Committee of 11 February 1998 giving approval for a public notice to be given under s 230 of the Local Government Act of theCouncil‟s intention to vest the fee simple estate of the on-shore portion of Westpark Marina in Waitakere Properties Ltd.2. The minutes of a Council meeting of 8 April 1988 approving the transfer of the properties.There is no dispute that Waitakere Properties Ltd later on-sold the properties, and that is apparent from the Council records exhibited to Mr Ogilvie‟s affidavit.[20] Mr Graham Wakefield, now a consultant, had been employed by the Waitemata City Council and the Waitakere City Council from 1979 to 2003 in various roles. In particular, from 1987 to 2003 he held a dual role as corporate secretary and corporate solicitor. He was responsible for reports that led to the Council approving the transfers. He is one of the people in the Council who dealt with the plaintiffs on their requests for documentation. In his substantive affidavit, Mr Wakefield says that he has made extensive enquiries of numerous sources to try to obtain documents that might assist in shedding light on the exact chain of events that led to the sale of lots 3 and 4. His affidavit describes the enquiries he has made. In particular, he says he has tried to track down records of Waitakere Properties Ltd. He says:I understand that if such files of WPL exist they are held in a large store-room known as the „bunker‟ at the ex-Waitakere City Council offices at Henderson. I understand that approximately 150 to 200 boxes of WPL documents are held in the bunker, which may contain information relating to the relevant time-frames. The boxes are unlabelled and a full check of their contents would take considerable time. Such a search has not been undertaken at this stage but Council staff have investigated a representative sample of about 15 of the boxes but have not found anything relating to the sale of lots 3 and 4.[21] He says that he spent some time himself searching agenda records and minutes for the period 1998 to 2001 but has not located anything material to the disposal of lots 3 and 4. He says that the Council has looked at the documentary record for cases where the sale of lots 3 and 4 was commented on. He says that apartfrom observing that event as a historical fact, there is nothing in that material that tells anything more than the documents already exhibited to Mr Ogilvie‟s and hisown affidavits. He says that the search for contemporaneous documents has been hampered by the passing of time since the events in question, because of changes in staff and legal counsel over that period, the fact that neither Waitakere Properties Ltd nor the Waitakere City Council still exist, and that record-keeping may not have been ideal. He says that the level of record-keeping by individual Council staff on keeping records was haphazard and incomplete.[22] In effect, the Auckland Council is saying that the documents sought in the discovery application might exist. It does not deny the existence of the documents. It would like to obtain those documents itself in any event, but to locate those documents now would require an exhaustive and time-consuming search of cartons of unlabelled documents.[23] For their part, the plaintiffs do not accept that the problem is as great as Mr Wakefield makes out. In his reply affidavit, Mr Ogilvie identifies that councils do have an archival system, and do have a way of locating identified files, and a system where numbers are allocated for particular files. The plaintiffs believe that a suitably diligent search would locate the records.[24] As a late development, in the course of the hearing Mr Hickson volunteeredthat the plaintiffs themselves were prepared to go into the „bunker‟ and, undersupervision, undertake a search. Mr Casey indicated that he did not have instructions to deal with that proposal.[25] There are two significant considerations for this application:1. The degree of relevance of the documents sought by the plaintiffs; and2. The alleged inconvenience and difficulty in now locating the documents where exhaustive searches might be required.[26] On relevance, the plaintiffs invoke the Peruvian Guano test.2 They say that the agreements for sale and purchase are relevant because they could throw light on the case. They claim that those documents are central to the claims for judicial review and breach of trust. The plaintiffs also suggest that the agreements might contain terms or references to matters that could give rise to a train of enquiry toadvance the plaintiffs‟ case and they suggest that the person who signed the documents could be an important witness.[27] As to correspondence concerning the sale of the land, the plaintiffs say that the correspondence could throw light on the legal reasoning adopted by the Council at the time to justify the sales. They say that the Waitakere Properties Ltd report and distribution of proceeds of sale are relevant on liability issues as apparently evidencing the plans of the Council and Waitakere Properties Ltd in dealing with the lots transferred to it. They say that agendas and minutes of Council meetings are relevant in terms of evidencing decisions of the Council.[28] Relevance has to be assessed by reference to what is in issue in the proceeding. The documents for which discovery is sought relate to the disposal of lots 3 and 4 within the reclaimed land. If the Council were denying that it had transferred lots 3 and 4 to Waitakere Properties Ltd, or that Waitakere Properties Ltd disposed of the properties, then the documents sought would have greater relevance. But as the disposal of properties is not in issue, the matter is rather whether the transfers were legally valid. That is a question of law, not a question of fact.[29] To determine that question of law the plaintiffs already have and have put in evidence the relevant documents they need to make out their case. In particular, paragraph 33 of the second amended statement of claim lists documents which are relied on to show that the council‟s decisions were ultra vires. The validity of the transfers will stand or fall on the matters identified in paragraph 33 of the statement of claim, for which documentation is already available. The validity will not turn on the subjective considerations of councillors or council staff.2 Compagnie Financiere et Commerciale du Pacifique v Peruvian Guano Ltd (1882) 11 QBD 55 at 63.[30] In considering this relevance question, I find that the comments of Priestley J in Air New Zealand v Auckland International Airport3 are useful:In some judicial review cases discovery may be unnecessary. In others, limited discovery may assist. In some cases it is conceivable that discovery in the nature of general discovery might be required. Issues such as these should be determined on a case by case basis in the exercise of the Courts‟powers under s 10(2)(i) of the Judicature Amendment Act 1972.[31] I have also found pertinent His Honour‟s comments4 as to the time, effort and cost of discovery as being relevant matters in determining to what extent discovery should be required.[32] Bearing in mind that I am only required to decide what documents need to be disclosed for liability purposes, I find that the documents which the plaintiffs seek have, at best, marginal relevance.[33] Against that must be taken into account the Council‟s plea that it has already made extensive enquiries and that to go through all the boxes referred to by Mr Wakefield in his affidavit would be a long, exhausting, and possibly a fruitless process.[34] There is authority that these kinds of considerations can be relevant in determining how discovery ought to be directed. Such authority goes back to 1873 in Elmer v Creasy,5 where Lord Chancellor Selbourne said:The court may be trusted to exercise a proper control over any attempt on theplaintiff‟s part to press for any such minuteness of discovery as would beeither vexatious or unreasonable, as indeed it can do in every case in which it is satisfied that any kind of discovery is required vexatiously or oppressively.[35] Bray on Discovery, a text written in 1885, indicates that the expense, inconvenience and trouble in obtaining documents is not a stand-alone objection tomaking discovery but it does go to the court‟s discretion as to how far it directsdiscovery:63 Air New Zealand v Auckland International Airport (2001) 16 PRNZ 783 at [35].4 At [36]-[46].5 Elmer v Creasy (1873) LR 9 Ch 69 at 73-74 per Selbourne LC.6 Bray on Discovery (1885) (Reeves and Turner, London) at 298.The following matters do not independently or by themselves constitute objections to discovery which is clearly material for the determination of an issue immediately and certainly about to come on for trial ... though they are elements which would be taken into consideration by the court where the discovery is not so clearly material ...(a) Expense, inconvenience, trouble ...[36] An Australian text, Cairns‟ The Law of Discovery in Australia,7 says:The court has an inherent jurisdiction to prevent litigation being conducted oppressively. This can be used to stop oppressive requests for discovery. Production of documents may be oppressive when a large bulk has to be produced and the work is not justified by the benefit that will be derived. ...[37] Similarly, a modern English text on discovery, Disclosure by Paul Matthews and Hodge M Malek QC, deals with the same point8 and refers to the case law before the Civil Procedure Rules (although it indicates that the same approach would apply under the Civil Procedure Rules). The approach set out in that text is consistent with earlier authorities. There is a helpful citation from the case, Molnlycke AB v Proctor and Gamble (No.3):9"An order may be refused on the ground that it is unduly oppressive to the party giving discovery. The court takes account of such considerations as the value of the discovery to the person seeking it and the burden imposed on the party giving it, with a view to restricting the volume of documents and the labour and expense involved to that which is necessary for fairly disposing of the issues in the case."[38] Those considerations are pertinent in this application. If I were to uphold theplaintiffs‟ application in the terms in which it was filed, I may be subjecting the council to a very lengthy search of documents which are held in the boxes in the bunker. It was suggested that each box might take one hour to go through thoroughly. It is foreseeable, then, that a diligent search might take a month or more for someone working full-time. It was suggested that a charge-out rate of $200 per hour might be applied. That may be overstating it, but the commitment of time for documents of only marginal relevance means that discovery which would require those kind of steps, is disproportionate to the issues in this case.7 Cairns: The Law of Discovery in Australia (1984) at 131.8 Paul Matthews and Hodge M Malek QC Disclosure (London, Sweet & Maxwell 2007) at 206para 8.20.9 Molnlycke AB v Proctor and Gamble (No.3) [1990] RPC 498 at 503.[39] I bear in mind that there are some cases where lengthy enquiries are required and where extensive steps may have to be taken to obtain documents. Smellie J dealt with such a case in the Equiticorp10 litigation, where he required the Crown to obtain documents from its agent in London and he contemplated that the Crown might have to issue proceedings in the High Court in London to obtain the documents of its agent. He considered that was necessary to ensure that those steps were to required to ensure that discovery was carried out properly. But this is not the Equiticorp case, and such extensive requirements are not needed here.[40] But for Mr Hickson‟s proposal while making submissions, I would have dismissed the application. Mr Hickson offered what he hoped would be a practical alternative, namely that the plaintiffs would themselves undertake a search of the bunker and go through the documents to find what would be required.[41] Mr Casey was placed in difficulty because the matter was only advanced in the course of the hearing and he did not have instructions. It may be that the parties can work out some suitable arrangement. It may save time. Mr Hickson believes that the enquiries can be more focussed. If the plaintiffs were to search the cartons of files themselves, I would expect such an exercise to be supervised by a suitable Council employee, and I would expect the plaintiffs to meet those costs. I also accept that there needs to be protection against misuse of documents. For example, documents which might go to the privacy of persons, should not be used for purposes unconnected with this litigation. If an arrangement like that can be worked out, then that may allow the plaintiffs to obtain documents, albeit of marginal relevance, without imposing undue cost and expense on the Council. I do not give any directions as to that today. Instead, what I intend to do is to adjourn this application to a chambers list, to allow the parties to see whether some proposal along those lines can be worked out.[42] I adjourn this matter to Friday, 23 March 2012 at 2:15pm to see whether the parties have been able to work out some arrangements themselves.10 Equiticorp Industries Ltd v Hawkins [1994] 2 NZLR 738.[43] I have also discussed briefly with the parties what further case management directions are required for the case. Mr Hickson indicates that he will file anamended pleading to tidy up some aspects of the plaintiffs‟ case but will not beadvancing any new matters. He also says that an affidavit in reply will be required but that can only be done once any further discovery has been attended to.[44] I hope that by 23 March 2012 the parties will be in a position to discuss arrangements for hearing which should include discussions as to estimates of hearing time required and whether cross-examination will be required. Given that the matter is not fully completed, I do not propose to make any order for costs on this application as at present.[45] Mr Casey has pointed out that Associate Judge Abbott allocated a case management conference for 28 February 2012. Because of the direction that I have just given such a conference may not be useful. Accordingly I vacate that conference, and I will deal with case management directions on 23 March 2012.............................................Associate Judge R M Bell