OPES PARTNERS NEW ZEALAND LTD v SDOGENERAL LTD [2021] NZHC 3147

OPES PARTNERS NEW ZEALAND LTD v SDOGENERAL LTD [2021] NZHC 3147 [22 November 2021]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2021-404-001879[2021] NZHC 3147UNDER Rule 8.20 of the High Court Rules 2016BETWEEN OPES PARTNERS NEW ZEALANDLIMITEDApplicantAND SDOGENERAL LIMITEDRespondentHearing: 18 November 2021Appearances: S D Campbell and JK Stringer for ApplicantS Moore for RespondentJudgment: 22 November 2021JUDGMENT OF WOOLFORD JThis judgment was delivered by me on Monday, 22 November 2021 at 2:30 pmpursuant to r 11.5 of the High Court Rules.Registrar/Deputy RegistrarSolicitors: WynnWilliams (S D Campbell), ChristchurchJessica O'Dea, AucklandCounsel: S Moore, Auckland[1] The applicant, Opes Partners New Zealand Limited (Opes), applies fordiscovery orders against the respondent, SDOGeneral Limited t/a Unlocked RealEstate (Unlocked), before the commencement of a substantive proceeding. It saysorders should be granted because discovery of the documents sought by Opes isrequired to establish what breaches of contract and/or fiduciary duties or misuse ofconfidential information have occurred (if any), when they occurred, and what loss ithas suffered as a consequence. Opes says that it can gain insight into these mattersonly through discovery, which would permit it to draft a proper and compliantstatement of claim against Unlocked.[2] The application is opposed by Unlocked. It says Opes' claim is speculative.Furthermore, it is not impossible or impracticable for Opes to formulate its claimwithout pre-trial discovery and any further particulars can be added to the claimfollowing post-commencement discovery undertaken in the usual manner.[3] Rule 8.20 of the High Court Rules allows the Court to make an order forparticular discovery before commencement of a proceeding. It provides:8.20 Order for particular discovery before proceeding commenced(1) This rule applies if it appears to a Judge that—(a) a person (the intending plaintiff) is or may be entitled toclaim in the court relief against another person (the intendeddefendant) but that it is impossible or impracticable for theintending plaintiff to formulate the intending plaintiff's claimwithout reference to 1 or more documents or a group ofdocuments; and(b) there are grounds to believe that the documents may be or mayhave been in the control of a person (the person) who may ormay not be the intended defendant.(2) The Judge may, on the application of the intending plaintiff madebefore any proceeding is brought, order the person—(a) to file an affidavit stating—(i) whether the documents are or have been in theperson's control; and(ii) if they have been but are no longer in the person'scontrol, the person's best knowledge and belief as to whenthe documents ceased to be in the person's control and whonow has control of them; and(b) to serve the affidavit on the intending plaintiff; and(c) if the documents are in the person's control, to make thosedocuments available for inspection, in accordance with rule8.27, to the intending plaintiff.(3) An application under subclause (2) must be by interlocutoryapplication made on notice—(a) to the person; and(b) to the intended defendant.(4) The Judge may not make an order under this rule unless satisfied thatthe order is necessary at the time when the order is made.[4] First, Opes has to establish that there is at least "the real possibility of a claim".1The threshold is met if there is "some basis of fact which takes matters beyond merefishing; mere trawling or speculation".2[5] I am satisfied from the two affidavits sworn by the sole director of Opes,Mr Nichol, and the two affidavits sworn by the sole director of Unlocked, Mr Osner,that this threshold is met. There was a commercial arrangement between the partiesto market and sell real estate. The arrangement involved splitting the commissionswhich were received, in various ways. The commercial arrangement evolved and wasmodified over time.[6] Opes alleges that in breach of the commercial arrangement, Unlocked failed topay Opes any commission on sales involving (a) clients introduced by Unlocked toproperties of developers with whom Opes had a relationship or (b) properties ofdevelopers introduced by Unlocked which were sold to clients of Opes. Unlockeddisputes that Opes was entitled to any commission on transactions of this type.[7] In terms of the commercial arrangement, Unlocked also had access to lists ofdevelopers with whom Opes had a relationship, as well as lists of Opes' propertybusiness clients. Unlocked says that some of the developers who had nationallyrecognised brands were already known to Unlocked and nothing in the commercialarrangement provided that Unlocked was not allowed to approach developers withwhom Opes also had an arrangement in order to facilitate sales of properties belongingto vendors not known to Opes.1 Exchange Commerce Corp Ltd v New Zealand News Ltd [1987] 2 NZLR 160 (CA).2 Welgas Holdings Ltd v Petroleum Corp of New Zealand Ltd (1991) 3 PRNZ 33 (HC) at 43 perMcGechan J.[8] Mr Nichol has also set out what he knows of transactions involving Unlockedand developers who were introduced by Opes to Unlocked such as Oaks Development,Williams Corporation and CBD Developments. He asserts that it was a breach of theircommercial arrangement for Unlocked to seek to work exclusively with thesedevelopers. Unlocked acknowledges that CBD Developments for instance has workedwith Opes in the past, but does not consider all the work that was done to completefour contracts with a fee revenue to Unlocked of $48,000 plus GST comes under anydiscussion of potential agreements with Opes.[9] Secondly, Opes has to establish that it is impracticable for Opes to formulateits claim without reference to documents under the control of Unlocked.[10] I am satisfied that access to such documents would enable Opes to properlydraft the proceeding from the outset. A draft statement of claim has been prepared.However, it only pleads the limited breaches of which Opes is currently aware, basedon the information currently available. It relies on inferences of breach drawn fromthe facts presently known. It also does not plead the loss suffered by Opes as that ispresently unascertainable.[11] I am also satisfied that subsequent discovery cannot cure pleading issuesbecause the scope of discovery obtained in the ordinary way under r 8.5 of theHigh Court Rules is determined by the pleadings.[12] The orders sought in the application relate to the following documents said tobe in Unlocked's control:(a) Documents relating to any active or former agency agreements enteredinto by Unlocked or the sole director of Unlocked, Mr Osner, betweenApril 2017 – June 2021.(b) Documents relating to any agreements for sale and purchase of realestate where Unlocked or Mr Osner provided real estate agency workin relation to that transaction between April 2017 – June 2021.(c) Documents relating to commissions or income paid to Unlocked orMr Osner for property transactions that Unlocked or Mr Osnerprovided real estate agency work in relation to between April 2017 –June 2021, including but not limited to bank statements and invoices.(d) Documents relating to any communications between Unlocked,Mr Osner and any of the entities or persons (or their representatives)listed in Schedule One.[13] Opes seeks orders relating to documents between April 2017 – June 2021.Unlocked says that the relationship between the parties began on 2 August 2017 andOpes should not be entitled to inspect documents prior to the date of the relationship.[14] There is a one-page agreement between the parties dated 2 August 2017. It is,however, quite limited in scope and does not appear to cover all aspects of the parties'relationship. The exact nature of the relationship is very much in dispute. Mr Nicholsays in his affidavit that agreement was reached in or around April 2017. Mr Osnersays in his affidavit that there was no "official relationship" prior to 2 August 2017.Although there may not have been a signed written agreement prior to 2 August 2017,I am prepared to accept for the purpose of this application that there may well be an"unofficial relationship" before then. The four-month time difference does not, in anyevent, appear to be all that material.[15] I therefore have no difficulty with the orders numbered 1 and 4, but I find thatorders numbered 2 and 3 are too broad. Unlocked has business which is completelyunrelated to that of Opes. There is no basis for Unlocked to provide discovery of that.Orders 2 and 3 should be narrowed to exclude any confidential documents relating toUnlocked's own clients who are not listed in the Opes list of developers annexed asSchedule One to the application or in a list of clients to be provided by Opes toUnlocked. The list of clients to be provided by Opes is to be kept confidential and notto be disclosed to any other person other than Unlocked's counsel and Mr Osner, thesole director of Unlocked.[16] There will, accordingly, be the following orders:(a) That Mr Osner file and serve an affidavit on behalf of Unlocked within15 working days following the provision of a client list by Opes stating:(i) whether the following categories of documents are, or havebeen, in Unlocked's control:1. documents relating to any active or former agencyagreements entered into by Unlocked or Mr Osner betweenApril 2017 – June 2021;2. documents relating to any agreements for sale and purchaseof real estate involving any person listed in the Opes list ofdevelopers or in the Opes list of clients where Unlocked orMr Osner provided real estate agency work in relation tothat transaction between April 2017 – June 2021;3. documents relating to commissions or income paid toUnlocked or Mr Osner for property transactions involvingany person listed in the Opes list of developers or in theOpes list of clients where Unlocked or Mr Osner providedreal estate agency work in relation to that transactionbetween April 2017 – June 2021, including, but not limitedto bank statements and invoices;4. documents relating to any communications betweenUnlocked, Mr Osner and any of the persons listed in theOpes list of developers or in the Opes list of clients.(ii) If any of the documents have been but are no longer in thecontrol of Unlocked stating to Mr Osner's best knowledge andbelief as to when the documents ceased to be in Unlocked'scontrol and who now has control of them.(b) That Unlocked make the documents within Unlocked's controlavailable to Opes for inspection at the time of filing and serving theaffidavit in accordance with r 8.27 of the High Court Rules 2016 andthe listing and exchange protocol.(c) Confidentiality orders over the following information on the termsoutlined in Schedule 2 to the interlocutory application on the basis itcontains commercially sensitive information about Opes' business.(i) Information relating to the amount of commission Opes chargeson the sale of a development;(ii) Information relating to the terms of its commercialarrangements with Unlocked and Mr Osner;(iii) Information relating to Opes' business model;(iv) Information relating to the identities of the developers it hasrelationships with and persons contained in the list of clients tobe provided by Opes to Unlocked.(d) The costs of and incidental to this application are reserved.[17] Leave is also granted to the parties to vary or amend the above orders if theyare impracticable to comply with or in any other way are unduly onerous.____________________________Woolford J