FRESH PREPARED LIMITED V STEVEN DE JONG AND ANOR HC AK CIV 2004-404-001264

FRESH PREPARED LIMITED V STEVEN DE JONG AND ANOR HC AK CIV 2004-404-001264 13 April 2006IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2004-404-001264BETWEEN FRESH PREPARED LIMITED Plaintiff AND STEVEN DE JONG First Defendant AND DJ'S FRUITS LIMITED Second Defendant Hearing: 12 April 2006 Appearances: Mr P Spring/Ms J V Bradley-Young for Plaintiff Mr S de Jong in Person Mr R B Hucker for Second Defendant Judgment: 13 April 2006JUDGMENT OF VENNING J On application for discovery and related ordersSolicitors: Keegan Alexander, Auckland Hucker & Associates, Auckland Copy to: S de Jong, Auckland steven@iconz.co.nzApplication for orders against the second defendant to enforce compliance and other orders[1] By consent this application is adjourned. It will be heard at 11.45 a.m. on 10 May 2006. [2] The plaintiff is to file and serve any affidavits in response by 1 May 2006.Application by plaintiff for further and better discovery against the first defendant[3] The plaintiff seeks orders requiring the first defendant to file and serve a further and better list of documents listing the following:(i) National Bank business card statements for the second defendant from 4 April 2005; (ii) National Bank account statements for the second defendant from 12 April 2005; (iii) National Bank account statements for the first defendant in the name of Mr S I and Mrs M de Jong from 11 March 2004; (iv) National Bank Thoroughbred Mastercard statements for the first defendant in the name of Mr S I and Mrs M de Jong from 13 April 2004; (v) National Bank account statements for the first defendant in the name of the de Jong Family Trust from 11 April 2004; (vi) GST Tax returns for the second defendant from 1 April 2005; (vii) Company Income Tax details for the second defendant from 1 April 2005; and (viii) Documents relating to the sale of the first defendant's interest in the second defendant.[4] At the outset of the hearing Mr Spring confirmed that documents (i) and (ii) have now been supplied. The only remaining issue is costs. The plaintiff no longer pursues documents in (viii). That leaves the documents in (iii) to (vii) inclusive.[5] Mr Spring submitted that the remaining documents sought by the plaintiff were relevant in terms of the issues defined by the pleadings. The plaintiff raises five causes of action against the first and/or second defendant. The causes of action are for breach of confidence, knowing assistance and breach of copyright. The remedies sought are an account of profits or an inquiry as to the damages for infringement of copyright, where applicable. The financial information is particularly relevant to the issue of the account of profits. [6] There have been a number of affidavits filed in support of and in response to the application for discovery. I have reviewed the affidavits and other materials. In support of the application for discovery of Mr and Mrs de Jong's personal bank account and Visa accounts at (iii) and (iv) Ms Pryor, a director of the plaintiff, says that in order for the plaintiff's forensic accountant to calculate its account of profits or inquiries as to damages it is necessary for him to have the complete financial records of the second defendant. They are available, but she says that those records do not provide a full and accurate statement of the trading activities of the second defendant. Ms Pryor explains:This is because the first defendant has significantly co-mingled his personal affairs with that of his second defendant company during the period in question. Because of this co-mingling it will be necessary for the forensic accountant to have access to the personal bank records of the first defendant and his wife in order to obtain the true revenues and expenditure of the second defendant.[7] Ms Pryor then goes on to refer to the discovery already provided which discloses examples of co-mingling in the form of personal and private expenditure being charged to the second defendant. Ms Pryor then refers to a representative selection of personal expenditure of the first defendant and his wife. That expenditure, however, follows from the analysis of the second defendant company's bank accounts, not from bank accounts previously supplied by the first defendant and his wife. Any expenditure by the second defendant company on behalf of the first defendant and his wife is clearly relevant. However such expenditure would be disclosed by the bank accounts of the second defendant which have already been disclosed.[8] Mr Spring suggested that the first defendant's personal bank accounts should be discovered to effectively provide an audit, a check of the position. I am not satisfied that it is necessary for the personal bank accounts of the first defendant and his wife to be disclosed without limit, for that purpose. The application is made on the basis of co-mingling of the second defendant's funds with the plaintiff. I am not satisfied that on the evidence before the Court a proper basis has been made for the submission made by Mr Spring which would lead to disclosure of all bank accounts of the first defendant and his wife without any exception, whether or not the entries relate to the second defendant. [9] However, I accept that if there are payments through the personal bank accounts of Mr de Jong and his wife that relate to the second defendant they would be relevant to the calculation of the second defendant's profits and losses. That would also reflect the co-mingling of the second defendant's assets and monies with the first defendant's accounts. On that basis I am prepared to direct discovery of the items at (iii) and (iv) but limited to discovery on the basis that the accounts may be redacted so that the only transactions disclosed are transactions relevant to the second defendant, namely payments made by the first defendants on behalf of the second defendant or monies received by the first defendant and his wife from the second defendant.The de Jong family trust from 11 April 2004[10] The plaintiff seeks discovery of bank account statements from the first defendant in the name of The de Jong Family Trust from 11 April 2004. The plaintiff refers to a bank account for that entity which discloses a balance of $566.92 in that account as at 8 April 2004. [11] Mr de Jong has deposed in an affidavit in opposition to the application that:All the National Bank De Jong Family Trust statements have been previously provided. There have been no further transactions since the previous statements were provided and no further statement exists.[12] Mr Spring submitted that there must have been further bank statements as there was a credit balance. However, Mr de Jong has deposed that there have been no further transactions since the previous statements. I am not prepared to go behind Mr de Jong's deposition. On the basis of the evidence currently before the Court there have been no further transactions since April 2004. Even if there were further bank statements they could not possibly be relevant in those circumstances.GST tax returns[13] I understand that the plaintiff has had access to GST tax returns to March 2005 as was referred to in the defendant's original list of documents. The issue seems to be the missing GST tax returns. [14] The liquidators have advised that the returns for the periods March 2004, March 2005, November 2005 and January 2006 are missing from the file. GST returns for the second defendant (while trading) are clearly relevant. Mr de Jong indicated he would be able to recreate the November 2005 GST return (the second defendant having ceased operating in mid October) and the January 2006 return would be a nil return. [15] Mr de Jong is to recreate the November 2005 GST return and provide a copy to the plaintiff. He is also to depose formally that the January 2006 return would be a nil return. I accept that if it was a nil return it would be irrelevant and there would be no need to recreate such a return.Company income tax details for second defendant[16] As discussed with counsel there appears to be some confusion between the plaintiff, the liquidators and Mr de Jong regarding this matter. In their application the plaintiff seeks company income tax details for the second defendant from 1 April 2005. Mr de Jong's response is that such materials are in the possession of the liquidators.[17] The plaintiff says that is misleading because the liquidator's response is that:Income tax returns are prepared on an annual basis. The March 2005 return has been prepared and lodged. The March 2006 return has not been prepared.[18] That advice was provided by letter of 23 March 2006. It is hardly surprising the March 2006 return had not been prepared at that time. It appears the liquidators were directing themselves to the formal tax returns which of course are prepared on an annual basis. [19] Mr Spring explained that the plaintiff seeks discovery of the source documents. That is not clear from the application. [20] Mr de Jong's position is that all source documents relevant to the March 2006 year have been supplied to the liquidators. It is not clear to the Court from the correspondence and other information before it whether the liquidators consider they have been formally asked for that information. I decline the application at this stage. The plaintiff should make a sufficiently clear request for those documents from the liquidators in the first instance.Result/Orders[21] Given the proximity of the fixture, the following orders are made: a) The first defendant is to make discovery of the National Bank account statements for the first defendant in the name of Mr S I and Ms M de Jong from 11 March 2004 and the National Bank Thoroughbred Mastercard statements for the first defendant in the name of Mr S I and Mrs M de Jong from 13 April 2004 on the following terms: i) The discovery is to be made by the first defendant providing copies of the documents to the plaintiff's solicitors by24 April 2006.ii) The copies provided may be redacted to ensure the statements only disclose entries that show payments made by either S I or M de Jong on behalf of the second defendant or monies received by either S I or M de Jong from the second defendant. b) The first defendant is to recreate the November 2005 GST return and provide a copy to the plaintiff's solicitors by 24 April 2006. c) The first defendant is to swear a further affidavit to confirm the GST return for January 2006 was a nil return. That affidavit to be filed and served by 24 April 2006.Request for adjournment[22] This case is scheduled for trial in the week of 22 May 2006. Five days are allocated. Mr Spring has suggested that up to 10 days may now be required, primarily because the first defendant now represents himself. Mr Spring also noted the second defendant is in liquidation and he understood the first defendant may not have assets to meet any judgment. On that basis he sought an adjournment of the fixture. Mr de Jong opposes the request. I understand the plaintiff intends to call three witnesses (including one accountant). Mr de Jong intends to call three or perhaps four witnesses. Five days should still be sufficient for this case if the parties remain focussed on the issues. Mr de Jong was focused in his submissions before the court today. Insofar as the execution of any judgment is concerned, that is for counsel and the plaintiff. It does not affect the fixture. I decline the application for adjournment. The case will proceed in the week of 22 May 2006.Costs[23] Given the result of these applications (including documents that have already been provided) I consider costs should lie where they fall on the matters argued before the Court today. Order accordingly. __________________________ Venning J