DENHAM MARTIN V N-TECH LIMITED COA CA123/2011

DENHAM MARTIN V N-TECH LIMITED COA CA123/2011 7 July 2011IN THE COURT OF APPEAL OF NEW ZEALANDCA123/2011[2011] NZCA 310BETWEEN DENHAM MARTIN & ASSOCIATESAND GRANT SIDNAMAppellantAND N-TECH LIMITEDRespondentAND ST LUCIA INVESTMENTS LIMITEDSecond RespondentAND AS SET OUT IN THE ATTACHEDSCHEDULE "A"Third RespondentHearing: 22 June 2011Court: O'Regan P, Glazebrook and Ellen France JJCounsel: B D Gray QC and S Trafford for AppellantsC T Walker for First and Second RespondentsAppearance excused for Third RespondentsJudgment: 7 July 2011 at 11:00 AMJUDGMENT OF THE COURTA The appeal is allowed.B The respondents must pay the appellants costs for a standard appeal on a Band A basis and usual disbursements.REASONS OF THE COURT(Given by Glazebrook J)Table of ContentsPara NoBackground [1]The High Court proceedings [2]First discovery application [5]Second discovery application [9]Grounds of appeal [13]Ambit of Venning J's decisionVenning J's judgment [14]The position of the parties [23]White J's view [24]Our assessment [25]Other arguments [29]Result and costs [31]Background[1] This appeal concerns questions of discovery. The issue is whether agreements entered into by the respondents should be disclosed to the appellants.The High Court proceedings[2] The first and second respondents have filed a claim in the High Court against 121 defendants for breach of share purchase agreements. The agreements were components of two investment schemes, the Digitech Scheme and the New Zealand Investments Ltd Scheme.[3] Most of the defendants have denied liability under those agreements but one group, made up of the third respondents (known as the LSL defendants), has entered into agreements with the first and second respondents which are the subject of this appeal.[4] The LSL defendants have made third party claims against a number of parties, including the appellants, relating to amounts for which the LSL defendants are liable to the first and second respondents.First discovery application[5] On 29 October 2010 the appellants filed an application seeking an order for further and better discovery against the first and second respondents and the LSL defendants (collectively the respondents). The application was directed at documents relating to:(a) the negotiation of, and the effecting of, any agreement concerning the liability of the LSL defendants to the first and second respondents; and/or(b) any admission of liability by the LSL defendants to the first and second respondents.[6] On 1 November 2010 the LSL defendants filed admissions of claim which stated that each of the LSL defendants admitted the claim by the first and second respondents for breach of the share purchase agreement pleaded in the Statement of Claim.[7] On 10 November 2010, Venning J granted the appellants' application in part.1[8] No appeal was filed from Venning J's judgment.Second discovery application[9] On 8 December 2010 the first and second respondents produced to the appellants almost entirely redacted versions of 27 of the deeds of settlement entered into by the LSL defendants (the deeds). The redacted versions of the deeds disclosed only the paragraphs relating to the amount of conceded liability by the LSL defendants.[10] On 10 December 2010 the appellants filed a further application seeking:1 N-Tech Ltd v Abooth Ltd (in rec) HC Auckland CIV-2006-404-3362, 10 November 2010.(a) the full, complete and un-redacted discovery of the deeds; and(b) the respondents' claim to privilege and/or confidentiality in the un- redacted deeds to be set aside.[11] The respondents opposed the further application on the grounds that the redacted portions of the deeds are irrelevant, privileged and confidential.[12] The further application was heard in the High Court on 3 February 2011. In the High Court, White J inspected the un-redacted version of an example deed,without prejudice to the respondents' claims of privilege and confidentiality. In hisjudgment of 25 February 2011 White J held that:(a) Venning J's earlier judgment of 10 November 2010 determined therelevance of those parts of the deed that relate to loss and its quantification but not the relevance of other provisions;2(b) the redacted provisions relate to matters other than loss and its quantification and are not relevant to any issue in the proceedings;3(c) the deeds contain specific provisions relating to the respondents'agreed litigation strategy which are privileged under s 56 of the Evidence Act 2006, with the respondents having joint interests in the privileged material under s 66;4 and(d) confidentiality would not justify an absolute prohibition on disclosure.5Grounds of appeal[13] The appellants accept White J's findings on the issues of privilege andconfidentiality but submit that White J erred:2 At [19].3 At [20]–[21].4 At [35].5 At [40].(a) in deciding that Venning J had determined the issue of relevance in respect of those parts of the deeds that relate to loss and its quantification, but not in respect of other parts of the deeds;(b) in concluding that the redacted matters in the deeds are not relevant tothe issues in the LSL defendants' claim against the appellants;(c) in concluding that none of the redacted matters in the deeds would lead to a train of inquiry which would assist the appellants; and(d) in concluding that the redacted parts of the deeds relate to matters other than the question of loss and its quantification and are thereforeirrelevant to the issues in the LSL defendants' claim for indemnityagainst the appellants.Ambit of Venning J's decisionVenning J's judgment[14] As reported in Venning J's judgment, the initial application for particular discovery was:6... directed at documents relating to the negotiation of, and effecting of, any agreement concerning the liability of the LSL defendants to the first and second [respondents] and/or the admission of liability by those defendants.[15] The respondents did not dispute that there were documents of that kind. There was correspondence before the Court acknowledging that there were agreements between the respondents. The issue, as set out by Venning J, was"whether such documents are relevant".7 The agreements themselves were not before the Court.6 At [1].7 At [2].[16] Venning J was satisfied that the first and second respondents and the LSL defendants should discover any agreement between them supporting or leading to the admissions filed with the Court.8[17] The Judge accepted that the admissions do not of themselves prove anythingin relation to the LSL defendants' third party claims, but considered that:9[18] the admissions do quantify an aspect of the loss claimed by the defendants and the agreement pursuant to which the admissions were filed may be relevant to the quantification of that loss.[19] The Judge said:[16] To establish their claim against the [appellants] the LSL defendants will have to prove a duty, breach and loss. The agreement leading to the admissions cannot have any relevance to the existence of a duty or its breach. However, it is relevant to the issue of loss, which is an essential element of the cause of action pleaded by the LSL defendants against the [appellants]. An obvious way to prove loss will be to establish the LSLdefendants' liability to the [first and second respondents] under the sharepurchase agreements. The agreement which preceded the admissions will record the acceptance of such liability and is likely to provide the basis for its quantification.[17] Put another way, to support their claim against the [appellants] the LSL defendants will inevitably rely on their liability to the [first and second respondents] under the share purchase agreements. The agreement concluded between the [first and second respondents] and the LSL defendants is the prime document that provides the basis for that admitted liability. At the very least, discovery of that document may lead the [appellants] on a train of inquiry which may enable them to advance their defence. It may provide a basis to challenge the defendants' claim, at leastas to quantum. For that reason the settlement agreement leading to the admissions from the LSL defendants, is discoverable.(Emphasis added.)[20] The Judge, however, refused the application in relation to documents detailing the negotiations which resulted in the agreement. He said:[18] I am not, however, able to accept Mrs Fee's submission that thediscovery should extend to all documents relating to the negotiation of and giving effect to the agreement. It is accepted that there has been a concluded agreement reached between the LSL defendants and the [first and second8 At [14].9 At [15].respondents]. That agreement will record the terms upon which the parties settled the matters in issue between them. The negotiations that [preceded] it have been effectively subsumed in the final agreement. It is not, in the circumstances, necessary to go behind that final agreement. It is not, in the circumstances, necessary to go beyond that final agreement, particularlybearing in mind that the Court's discretion to order particular discoveryshould be exercised in a conservative way.(Emphasis added.)[21] The Judge then made the following order:10[The respondents] are to discover the document or documents which record any agreement concerning the liability of the LSL defendants to the [first and second respondents] or any admission of liability by the LSL defendants to the [first and second respondents] (apart from the formal admissions filed with the Court).[22] Venning J, however, left the issue of privilege for further argument. He said:[21] I record that Mr Walker indicated that common interest privilege would be claimed in relation to the agreement if discovery was ordered. If, on reflection, that claim is maintained, the [appellants] will no doubt wish to challenge the claim to privilege. On receipt of any such application, the Registrar is to refer it to me. I will issue a minute with directions to convene a one hour hearing before me at 9.00 a.m. prior to the end of the year.The position of the parties[23] The appellants submit that Venning J's decision is not limited in the way suggested by White J. The respondents' position11 is that White J was correct in hischaracterisation of Venning J's decision.White J's view[24] White J accepted12 that Venning J's order for further and better discoveryrequired production of documents which recorded any agreement concerning the liability of the LSL defendants to the first and second respondents or any admission of liability by the LSL defendants to the first and second respondents. However, he10 At [20](a).11 At the hearing of this appeal the third respondents supported the submissions of the first andsecond respondents (and were excused from appearing at the hearing). The full list of the thirdrespondents is set out at Schedule A to the Notice of Appeal.12 At [18].considered that, as the order was made without Venning J having seen the deeds, it was based on an assumption that the agreements would contain provisions relating to the issue of loss and its quantification. As such, he decided that he should address the question of relevance on the basis that Venning J had determined the issue only in respect of those parts of the deeds that related to loss and its quantification.13White J noted that counsel had not argued that the doctrine of res judicata prevented him from approaching the matter in this way.14Our assessment[25] It is clear that the documents referred to in Venning J's order at [20](a) of hisjudgment are the same documents set out at [1] of his judgment. There is no indication that he is referring to only part of those documents.[26] The reasons he gives for the documents being relevant are that they may have relevance to the quantification of loss,15 or at least lead to a train of inquiry that may enable the appellants to advance their defence (at least as to quantum).16 These reasons are formulated in terms of the whole of the documents and not to part of them. Equally in [18], Venning J operates on the assumption that the whole of the agreements will be made available.[27] We therefore accept the appellants' submission that the judgment ofVenning J required (subject to the question of privilege) that the whole of the documents recording any agreement concerning liability of the LSL defendants to the first and second respondents or any admission of liability to be discovered. On this analysis, the issue of relevance had been determined and should not have been revisited.[28] If the respondents considered that Venning J had misunderstood the nature of the documents at issue then they should have applied for a recall of the judgment or13 At [19].14 Ibid.15 At [16].16 At [17].appealed. Likewise, if they considered Venning J's judgment to be incorrect, theyshould have appealed. They did not.Other arguments[29] The parties made a number of arguments relating to relevance. We do not address those and therefore make no comment on the issue of relevance. We have not sighted the full copies of the deeds and we cannot make findings in the abstract. Further, there is no appeal from Venning J's judgment before us.[30] This decision is limited to deciding that White J should not have revisited the question of relevance, which had already been decided by Venning J.Result and costs[31] The appeal is allowed.[32] The documents are discoverable in terms of Venning J's order but subject to White J's findings on privilege.[33] If there are issues with the extent of privilege, these should be dealt with in the High Court.[34] The respondents must pay the appellants costs for a standard appeal on a Band A basis and usual disbursements.Solicitors:Jones Fee, Auckland for AppellantsGilbert Walker Solicitors, Auckland for First and Second RespondentsLee Salmon Long Solicitors, Auckland for Third Respondents