LOOI HONG KOK (also known as LEWIS LOOI) v EXCEED FITNESS AND HEALTH LIMITED [2018] NZHC 1909

LOOI HONG KOK (also known as LEWIS LOOI) v EXCEED FITNESS AND HEALTH LIMITED [2018]NZHC 1909 [30 July 2018]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2017-404-1047[2018] NZHC 1909BETWEEN LOOI HONG KOK (also known as LEWISLOOI)PlaintiffAND EXCEED FITNESS AND HEALTHLIMITEDandRUDOLF JOHANNES HUIJSMANS(also known as RUDI HUIJSMANS)DefendantsHearing: 25 July 2017Appearances: Lewis Looi, Plaintiff in personE Grove for the DefendantsJudgment: 30 July 2018JUDGMENT OF ASSOCIATE JUDGE R M BELLThis judgment was delivered by me on 30 July 2018 at 4:00pmpursuant to Rule 11.5 of the High Court Rules.Deputy RegistrarSolicitors:Fencible Law (Richard Galbraith), Howick, Auckland for the DefendantsCopy for:Lewis Looi, Brisbane 4077, Queensland, AustraliaChris Patterson Barrister Ltd, Auckland, for the Defendants[1] This decision is about Mr Looi's application for further and better discoveryunder r 8.19 of the High Court Rules. As Mr Looi now lives in Queensland, Australia,the hearing was by telephone conference, as directed in my minute of 21 June 2018.[2] I directed standard discovery on 7 December 2017. The defendants filed theiraffidavit of documents on 20 February 2018.[3] Rule 8.19 of the High Court Rules says:8.19 Order for particular discovery against party after proceedingcommencedIf at any stage of the proceeding it appears to a Judge, from evidence or fromthe nature or circumstances of the case or from any document filed in theproceeding, that there are grounds for believing that a party has not discovered1 or more documents or a group of documents that should have beendiscovered, 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, theparty's best knowledge and belief as to when the documentsceased to be in the party's control and who now has control ofthem; and(b) to serve the affidavit on the other party or parties; and(c) if the documents are in the person's control, to make those documentsavailable for inspection, in accordance with rule 8.27, to the otherparty or parties.[4] In Assa Abloy New Zealand Ltd v Allegion (NZ) Ltd, Asher J set out a four-stage approach:1(i) Are the documents sought relevant, and if so how important will theybe?1 Assa Abloy (NZ) Ltd v Allegion [2015] NZHC 2760 at [14].(ii) Are there grounds for belief that the documents sought exist? This willoften be a matter of inference. How strong is that evidence?(iii) Is discovery proportionate, assessing proportionality in accordancewith Part 1 of the discovery checklist in the High Court Rules?(iv) Weighing and balancing these matters, in the court's discretion isapplying r 8.19 more appropriate?In this case, it is not necessary to work through all of those steps.[5] Exceed Fitness and Health Ltd operated a gym at 490 Ti Rakau Drive, BotanyDowns, Auckland. Mr Huijsmans is the director of Exceed Fitness and Health Ltd.Under an agreement of 6 May 2016, Fit Pit Ltd, a company of which Mr Looi is adirector and shareholder, bought the business for $190,000 - $180,000 for tangibleassets and $10,000 for intangible assets. Mr Looi guaranteed performance by Fit PitLtd. The agreement includes a turnover warranty of $385,000 (excluding GST) forthe 12 months ending 31 March 2016. There is a five year restraint of trade. Thevendor undertook to provide assistance for 90 days following possession. There is adue diligence condition. On settlement, the purchaser paid $100,000 with the balanceto be paid by three instalments of $30,000 each, payable on 30 June, 31 July and31 August 2016. The purchaser gave a first ranking general security agreement overthe business as security for the payment of $90,000.[6] The business failed. It defaulted in paying the balance of the purchase price.Exceed Fitness and Health Ltd appointed receivers on 18 October 2016. After thereceivership, there was a shortfall of $79,182.10 which Mr Looi paid under hisguarantee. He sues to recover that $79,182.10 plus damages for distress andhumiliation. He alleges misleading and deceptive conduct contrary to s 9 of the FairTrading Act. His complaint is that Exceed Fitness and Health Ltd had a licence tooperate as a "Les Mills" gym, and the defendants promoted the business as having thatlicence but once Fit Pit Ltd took the business over, the licence was not transferred.Membership of the gym fell off and Fit Pit Ltd was unable to attract many newcustomers.[7] For the discovery application, Mr Looi says that there are other matters hewants to claim against Exceed Fitness and Health Ltd and Mr Huijsmans but at thisstage those matters are not in his pleadings. That affects discovery obligations.Pleadings determine relevance. The case of the party seeking discovery is assumed tobe true, that is, the case set out in the pleadings. The court generally does not try themerits of the case before deciding what discovery to order. Under standard discovery,a document is relevant if the document or its contents could be used in evidence at thetrial. For that, the relevance test under s 7(3) of the Evidence Act 2006 must besatisfied: there must be a tendency to prove or disprove anything that is ofconsequence to the determination of the proceeding. While these matters are wellestablished, I have set them out because Mr Looi did not understand them. He is nota lawyer and does not have any relevant legal training. That has led to difficulties withhis discovery application, because he was not aware of the relevance requirements.[8] I can only give discovery directions in the light of the current pleadings.I intend however to give Mr Looi the opportunity to amend his pleadings. If he doesso, I encourage him to obtain legal advice to ensure that he runs his case according tothe practice and rules of court.[9] Now for the categories of documents he seeks.Full records and correspondence of Exceed website[10] Mr Looi says that the website is relevant to show what Exceed Fitness andHealth Ltd offered its customers, including the number of Les Mills classes and othergroup fitness classes, the types of gym membership offered, and the fitness equipmentin the gym.[11] In response, the defendants deny that the website is relevant, but they go on topoint out that the website was shut down after the sale in June 2016. They point outthat the website and its web pages are publicly available for free online at the onlineinternet archive: www.archive.org. They say that archived versions of the website goback to 2011.[12] Mr Looi acknowledges that he could access documents on that site. Given thatthese documents are publicly available and Mr Looi may access them, it is notnecessary to require the defendants to make an affidavit of documents about them.Full records and correspondence of the Exceed Facebook account[13] Mr Looi says that copies of the Facebook account will prove the establishmentof the gym, including photos, videos of gym classes, communications of thedefendants with gym staff, Les Mills instructors and members. He also says that on18 October 2016, when Fit Pit Ltd was put into liquidation, Mr Huijsmans made apersonal comment on a Facebook page which defamed Mr Looi.[14] In opposition, the defendants say that the Facebook account was closed in July2016. They concede that it may be possible to restore the Facebook account but theysay that that is not necessary for this case. They say that they operated a gym whichran Les Mills classes and there has already been adequate disclosure of documentsrelating to the Les Mills classes. They refer, in particular, to a pre-purchaseinformation bundle which includes a section on contracts and agreements and refersto a Les Mills licence agreement.[15] In my judgment, it would be disproportionate to require the defendants torestore a closed-down Facebook page. Under discovery a party is required to disclosea document in their control, but they cannot be required to create documents or torestore them.[16] As to the message published by Mr Huijsmans on 18 October 2016, there is norelevant pleading. The statement was made after the company was put intoreceivership. It appears that any damage for which Mr Looi is suing had alreadyoccurred when the company was put into receivership. It is not apparent that anystatements made by Mr Huijsmans upon the receivership added to any damage. IfMr Looi considers that Mr Huijsmans' statement of 18 October 2016 has caused himdamage on top of whatever damage he may have suffered from earlier misleading ordeceptive conduct by the defendants, he will need to add a new cause of action. If hewants to take that matter further, he should take legal advice to ensure that any causeof action is soundly based.Full records and correspondence of Trade Me account[17] Mr Looi says that that the Trade Me account would show communications withother potential purchasers and will show what was included in the sale of the gym.[18] In response, the defendants say that there was a Trade Me account but it wasdeactivated in 2016. The Trade Me advertisement has already been discovered. Whilethe Trade Me account was the initial point of contact for some prospective purchasers,later communications were via email or in person. Purchasers were given informationpacks and those have already been disclosed.[19] The defendants accept that they operated under a licence given by Les Millsand they therefore do not contest that part of Mr Looi's case. Given that, I do notregard it as necessary to require further discovery under this head. The discovery madealready seems appropriate. There will be obvious practical difficulties in requiringdiscovery for a Trade Me account that has been deactivated.Full financial statements of Exceed Fitness, including proof of the income andexpenditure for the last five years.[20] Mr Looi explained that turnover fell markedly after he took over the businessand he therefore wishes to probe the gym's turnover in earlier years. He says that theExceed Fitness and Health Ltd warranted a turnover of $442,750 for the 12 monthsending 31 March 2016.[21] The defendants point out that the warranty was for $385,000 (excluding GST)and there was no warranty as to future turnover. It only warranted what it had earned.[22] There is no relevant pleading as to turnover. Accordingly, the documentssought by Mr Looi are not relevant. If Mr Looi wishes to allege that the defendantsmisrepresented turnover, he will need to change his pleadings. Again, before doingso, he should take legal advice. Discovery is not ordered under this head.The Ezypay membership account for the last five years.[23] Mr Looi says that the defendants warranted a membership of over500 members. He says that after the sale, membership dropped by between 15 to20 per cent. He contends that there was a breach of the sale and purchase agreement.[24] The agreement for sale and purchase does not have any warranty as to futuremembership numbers nor as to existing membership numbers. Mr Looi has notpleaded any misrepresentation as to membership numbers. Accordingly, discovery isnot required under this head. That may change if he were to amend his pleadings, butagain he should take legal advice before doing soAll records and correspondence with Les Mills[25] Mr Looi says that documents relating to Les Mills are relevant to his claim,especially the transfer of the gym business to Fit Pit Ltd.[26] In response, the defendants say that they have disclosed all relevant documents.In particular, they have disclosed the Les Mills licence agreement and thecorrespondence relating to the later attempts to transfer the licence to Fit Pit Ltd.[27] Mr Looi has not shown reason to believe that there are additional relevantdocuments which should have been disclosed but have not been.All records and correspondence with Alistair Russell, sales manager of Technogym,and Scott Rough, service manager of Technogym[28] Technogym supplied gym equipment. Mr Looi says that there should berecords relating to breakdowns, repairs and servicing. He says that some of theequipment was not in good working condition and he had to buy more equipment toreplace what Fit Pit Ltd took on purchase.[29] Mr Looi has not included this allegation in his statement of claim. It isaccordingly not relevant to discovery under the current pleading. Again, if he wishesto allege a cause of action in respect of gym equipment, he will need to amend hispleadings and again he should take legal advice before doing so.All records and correspondence with Chris Blong[30] Mr Blong is the landlord of the gym premises. Mr Looi says that there was aproblem with a leaky roof and that had an adverse effect on the gym business.[31] That is not a pleaded issue in this proceeding. In the absence of any pleadingagainst the defendants in respect of defects in premises, there is no basis for orderingdiscovery under this head. Again, if Mr Looi wishes to add allegations as to defectsin the premises, he should take legal advice first.All records and correspondence with the defendants' solicitors and barristers[32] Mr Looi does not understand that any communications between the defendantsand their lawyers for the conduct of the proceeding are privileged and immune frominspection. He has shown no reason for not upholding the privilege in thosecommunications. No orders are required under this head.All records and correspondence with the receivers[33] While Mr Looi is disappointed with the outcome of the receivership, he hasnot pleaded any claim against the defendants in respect of the conduct of thereceivership. It would be difficult to do so. By and large, receivers are agents of thecompany, not agents of the secured creditor. In the absence of any relevant pleading,discovery under this head is not required.All records and correspondence with Shannon Gallagher[34] Mr Looi says that Shannon Gallagher was the gym manager who had beenemployed by the defendants. She continued working in the gym under Fit Pit Ltd'sownership. Mr Looi says that he dismissed her for discriminating against anotheremployee on account of race.[35] There is no pleading about this. It is not clear what cause of action Mr Looicould have against the defendants in respect of Shannon Gallagher. If Mr Looi wishesto make some claim against the defendants under this head, he will need to amend hispleadings to show a new cause of action. Again, he should take legal advice first.All records and correspondence with Exceed staff – Colin Treacy, Caron Kaveney,Andrew Lenton[36] These were gym staff employed by the defendants. There is no relevantpleading about them. I see no basis for ordering discovery in respect of them underthe current statement of claim. Again, if Mr Looi does consider that he has some claimin respect of them, he will need to amend his statement of claim and again he shouldtake legal advice first.All records and correspondence with Les Mills' instructors[37] Mr Looi has not shown any basis for believing that there are undiscloseddocuments under this head, which are relevant to the current pleadings.[38] Overall, Mr Looi has not shown any basis for ordering for further discovery inthe light of his case, as it is now pleaded. The application is accordingly dismissed.[39] The defendants are entitled to costs on the application. The defendants are tofile their memorandum as to costs within 10 working days of this decision. Mr Looiis to file and serve his response within a further 10 working days. I will then decidecosts on the papers.[40] Mr Looi should advise whether he intends to amend his statement of claim. Ifhe does not give that advice before the end of August 2018, I direct the Registrar torefer the file to me so that I can make an order transferring this proceeding to theDistrict Court..Associate Judge R M Bell