DEEP v AUCKLAND GOLD LINE CO-OPERATIVE TAXI SOCIETY LIMITED [2018] NZHC 2362

DEEP v AUCKLAND GOLD LINE CO-OPERATIVE TAXI SOCIETY LIMITED [2018] NZHC 2362 [7September 2018]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYI TE KŌTI MATUA O AOTEAROATĀMAKI MAKAURAU ROHECIV-2017-404-001516[2018] NZHC 2362BETWEEN RAMAL DEEPFirst PlaintiffSATNAM SINGHSecond Plaintiff(Continued list of Plaintiffs next page)AND AUCKLAND GOLD LINE CO-OPERATIVE TAXI SOCIETY LIMITEDDefendantHearing: 31 August 2018Counsel: L T Meys for PlaintiffsS S Khan and M G Orange for DefendantJudgment: 7 September 2018JUDGMENT OF WHATA JThis judgment was delivered by me on 7 September 2018 at 4.30 pm,pursuant to Rule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDate: .Solicitors: Neilsons Lawyers, OnehungaFortune Manning, Auckland(Continued list of Plaintiffs)SURINDER KUMARThird PlaintiffKAHLON KULVIR SINGHFourth PlaintiffVIPAN KUMARFifth PlaintiffJASVINDER PAL SINGH GILLSixth PlaintiffAMARJEET SINGHSeventh PlaintiffANIL KUMAREighth PlaintiffVIKAS SAHARANNinth PlaintiffKANWAL JIT SINGHTenth PlaintiffPRADEEP KUMAREleventh PlaintiffMANDIP SINGH GILLTwelfth PlaintiffSIKANDERJEET SINGH BAJWAThirteenth Plaintiff[1] I have an application for discovery before me.Background[2] The background to this matter was succinctly stated by Moore J in hisjudgment on strike out. I cannot improve upon it and it is repeated here:1[6] The 13 plaintiffs are (or were) all shareholders in Gold Line, andinvolved in it in some capacity, either as taxi drivers (for it or its subsidiaries),company directors and/or transport operators.[7] Gold Line was incorporated under the Industrial and ProvidentSocieties Act 1908 ("the Act"). In short, Gold Line was established so theplaintiffs and others, who had previously been contractors for companiesoperating the Auckland Airport taxi rank, could be part owners in a businesswhich held the tender for that taxi rank. Gold Line purchased Auckland TaxiService Ltd ("ATS") in order to bid for the tender, which it was awarded on11 March 2013.[8] The present dispute stems from the departure of a former member,Manmohan Dua, who left Gold Line in 2013 for a competitor. He attemptedto repurchase shares in 2015, but was denied. However, a new board ofdirectors was appointed at an election in October 2015. Following theelection, Mr Dua was then appointed as a director in early 2016. The plaintiffsallege this occurred without a Special General Meeting ("SGM") being called.The plaintiffs also claim Mr Dua became "effective managing director" in lateFebruary 2016, and from that point took a number of unlawful actions whichtargeted former directors and the plaintiffs...[10] In essence, the plaintiffs allege procedural failures which include thefailure to call an Annual General Meeting ("AGM"), transferring Gold Line'sbusiness to a subsidiary, and closing the plaintiffs out of the business. Theyhave challenged these actions on the basis they are ultra vires, unreasonableand non-compliant with the principles of natural justice. Because the partieshave resolved the strike out application, little more needs to be said about theseveral heads of claim at this stage.[3] It transpires that the strike out application was withdrawn based on anagreement about the scope of the proceedings. It is helpful to record the agreementreached as to the issues to be raised by the amended pleadings, namely:(a) SGM and constitutional review:1 Deep v Auckland Gold Line Co-Operative Taxi Society Limited [2018] NZHC 499.(b) Airport tender;(c) Appointment of directors;(d) Resolution to suspend meetings;(e) Refusing SGM requisitions;(f) Removal of members; and(g) Access to documents.The second amended statement of claim[4] The plaintiffs allege eight causes of action against the defendant, claiming thedefendant (in summary):(a) Made ultra vires decisions by refusing the plaintiffs access to Societyinformation, and choosing not to call annual AGMs;(b) Made an ultra vires decision in appointing additional directors withouta proper purpose and appointing Mr Dua, despite a resolution whichprohibited his appointment;(c) Made an ultra vires decision in declaring a prohibition on meetings andelections;(d) Did not act in accordance with natural justice when investigating theconduct of the plaintiffs, namely, by failing to adequately discloserelevant information, pre-determining the outcome of the investigation,and failing to consider the way the Society had previously determinedsuch issues;(e) Did not act in accordance with natural justice when making decisionsabout forfeiting the plaintiffs' shares, namely, by improperly makingthe decisions for political reasons and showing bias;(f) Acted illegally by refusing a requisition for a SGM and arranging forsignatories to the requisition to withdraw their support;(g) Did not treat members equally or consider the purposes of the Societyin deciding to move the Society's business into Auckland Taxi Service;and(h) Acted illegally by holding an SGM without notifying the plaintiffs andpurporting to make changes to the Society rules at it.The discovery application[5] The plaintiffs seek discovery and production of the following documents:(a) The defendant's shareholder register and share transfer book relating tothe period since 1 October 2015 to date;(b) All Board of Director Resolutions and Minutes since 1 October 2015to date;(c) The defendant's annual financial accounts relating to the financial yearsending March 2016 and March 2017; and(d) The defendant's bank statements from 1 October 2015 to date.[6] The applications are supported by an affidavit of Mr Jasvinder Gill. Theaffidavit is short, but attaches various documents, including correspondence andaffidavits filed in the District Court. The probative value of much of this material isunclear. In any event, Mr Gill usefully summarises the basis for the discovery asfollows:3. Issues in the proceeding to which the documents sought in theapplication are relevant include:3.1 The plaintiffs allege that:(a) Directors in the Society were invalidly appointed andshareholders have also been added at various timeswithout asking existing shareholders;(b) The Society misrepresented the terms of and thenwrongfully altered the documents referred to as thepurported share surrenders and which the Societycoerced the first to third plaintiffs to sign;(c) It cannot be a coincidence that none of the plaintiffsreceived notice of the defendant's Special GeneralMeeting (SGM) 19 July 2017 and the Society musthave deliberately refused to post notices of that SGMto the plaintiffs;(d) The Society has deliberately tried to removeshareholders from the Society and replace them withnon-shareholder drivers who have no rights but theplaintiffs do not know who is still listed as ashareholder in the Society;3.2. The Society has made allegations against the plaintiffs (whichare denied) and decisions to forfeit their shares and/or stopthem from voting based on:(a) Non-payment of levies against the plaintiffs based onan incorrect understanding of how many shares theyeach own and denial that Society levies are notrequired to be paid during periods when ashareholder's vehicle cannot be operated for anyreason outside that shareholder's control;(b) Misconduct relating to previous management butwithout allowing them access to the shareholderregister and share transfer book to fairly defendthemselves and despite having promised to do so.4. I believe that the documents sought in the application (the relevantdocuments) are at the heart of this proceeding because they will helpto prove the above issues and in particular whether the Society has:4.1 Treated all shareholders equally and in preference to non-shareholders;4.2 Acted honestly and fairly in creating the purported sharesurrender documents;4.3 Wrongfully ignored the previous bylaws and informalmanagement of the Society when making politicallymotivated decisions to try remove shareholders.5. In addition I believe that the underlying motives of the Society inrefusing to disclose the relevant documents is that they will show that:5.1 The Society has tried to and/or succeeded in removing a largeproportion of shareholders since Mr Dua became involvedfrom about March 2016 and especially around June/July 2016when the Society moved its business into Auckland TaxiService Ltd (to avoid the District Court's order over the othersubsidiary Gold Line Taxi Limited). The removal ofshareholders means that their bond money which the Societyholds will therefore be divided amongst fewer and fewerpeople;5.2 The Society's directors have been paying themselves asignificant amount of money and do not want to lose theirposition as directors therefore they have prohibited elections.Plaintiffs' caseShareholder register/transfer book[7] The plaintiffs say that this class of document is relevant to the proceedingsbecause:(a) The transfer book and minutes will show that the Society oftendelegated decisions without formal resolution;(b) The shareholder register and transfer book will show that until Mr Duatook power, the Society allowed share transfers with oral permissionfrom the Board which bears on the claim by the seventh plaintiff,Amarjeet Singh, that the directors were wrong to hold that he had onlyone share because they do not have a formal written share transferapplication;(c) The shareholder register and transfer book will show that prior to thecurrent directors the Society did not require levies to be paid bymembers during periods when their taxis were unable to operate, aswell as showing that when this arises now, the new directors of theSociety are selectively demanding levies from political opponents butnot those members who are in their own faction; and(d) The shareholder register will show that many shareholders havereceived permission from the Society to operate for other organisationsat various times, which goes to the legitimacy of the directors' claimthat the plaintiffs breached their duties to the Society by driving forother companies;Financial statements and bank statements[8] The plaintiffs say that these documents are relevant because they provide:(a) A granular level of information about levies paid by drivers, which isrelevant to the plaintiffs' claim that Mr Dua has allowed othershareholders to vote whilst not paying levies;(b) Information about the sums the directors are now paying themselves.Board of directors' resolutions and minutes[9] The plaintiffs say that these documents are relevant because they show thatwhen making the challenged decisions the directors and/or Mr Dua:(a) Acted without authority from a board resolution and/or a vote at ageneral meeting;(b) Acted with actual or apparent bias towards the plaintiffs, in particularbecause they will show if the directors ever made a formal board orSGM decision against the plaintiffs; and(c) Failed to take into account relevant considerations including theSociety's rules, the purpose of the Society, the Society directors'representations, and the Society's direct control of subsidiaries.Assessment[10] I decline to make the orders as sought. The central issue for discovery isrelevance. The pleadings are prolix. Multiple allegations of misconduct are made inrespect of the managing director, Mr Dua. But this is a judicial review proceedingabout the lawfulness of specific decisions made by the defendant. Only documentsthat are relevant to the legality and or fairness (in an administrative law sense) of thosedecisions are relevant. General broad-brush claims of improper bias will not justifythe type of open ended discovery now sought by the plaintiffs. Mr Khan's contentionfor the defendant, that the discovery sought is tantamount to a fishing expedition tobolster a generic claim of bias, is well made.[11] To illustrate, Mr Meys sought discovery of all the defendant's Board minutessince 2015 because this might show inconsistent treatment by the Board of theplaintiffs as compared to other shareholders. Similarly, Mr Meys sought the financialstatements of the defendant since October 2015 because it might show improperdealings by the directors. I am not prepared to make discovery orders on that wide-reaching basis for a judicial review claim about specified decisions. Discovery is notan opportunity to gather information in the hope of finding evidence that mightcorroborate serious claims tantamount to misfeasance. Such claims should not bemade without prima facie evidence to support them.2 Mere speculation based on theimpugned decisions made is not enough. Rather, the scope of the discovery soughtmust be properly tethered to the causes of action.[12] I have a further concern. The discovery application in respect of the shareregister and transfer book if granted, effectively renders the first cause of action moot.In that cause, the plaintiffs seek a declaration that the decision of the defendant torefuse to provide that information was unlawful. To my mind, it is patently an abuseof process to achieve by discovery what they might not achieve in the result.[13] Finally, as Mr Khan notes, the discovery is premature. The defendant has notyet filed complete affidavits in response to the pleaded claims. That affidavit evidencemust respond to the claims and will need to include relevant supporting documentaryevidence in respect of the decisions being challenged. Claims of bias will need aresponse to the extent they are relevant to the pleaded claims. Any affirmativeresponse to the plaintiffs' claims, for example about disparate treatment ofshareholders based on non-payment of the levies, will need to be supported byfinancial records available to the defendant. Mr Khan will be familiar with his and thedefendant's obligations to the Court in terms of transparency. It may be that much ofthe documentary material sought will be provided as part of that process. To the extentthat there is no documentary material directly on point, the evidence will need to state2 Commissioner of Inland Revenue v Redcliffe Forestry Venture Ltd [2012] NZSC 94, [2013] 1NZLR 804 at [33]as much. If having reviewed this evidence, the plaintiffs are not satisfied with thediscovery information, they may apply for specific further discovery.[14] I am prepared, however, to grant discovery on a tailored basis having regard tothe decisions under review and each cause of action. Having discussed the claims withMr Meys, I make the following orders:(a) In respect of the share register and share transfer book, the defendantmust discover all share register and share transfer book entries relatingto the matters pleaded at [40] (including any records of dealings withNardeep Singh's share) and [84.1] (relating only to levies owed by MrGill and Mr Singh) of the Second Amended Statement of Claim(SASOC).(b) In respect of the Board of Director Resolutions and Minutes, thedefendant must discover all resolutions and minutes relating to theactions or decisions of the Board pleaded at [28], [29], [33], [34], [56],[76], [84], [91], [92], [93], [94] and [96.1] of the SASOC.(c) In respect of the financial accounts and bank statements, the defendantmust discover all financial accounts and bank statements relating to thelevies referred to at [84.1] (relating only to the levies owed by Mr Gilland Mr Singh) of the SASOC.(d) I grant leave to the parties to seek clarification as to the scope ofdiscovery within 5 working days. For avoidance of doubt, none of theseorders are intended to require the defendant to discover generallyinformation held in respect of decisions or actions of the Board inrelation to other shareholders. Rather, I anticipate the defendant willfile affidavits responding to the general claims of bias with supportinginformation.(e) I grant leave to the plaintiffs to seek further and better discovery within10 working days of receipt of the defendant's evidence.[15] No orders were made in respect of filing of evidence. The parties are to file ajoint memorandum proposing a timetable for completion of the discovery process andexchange of evidence.[16] The defendant is entitled to its costs, on a 2B basis, on this application, less10 per cent to reflect the plaintiffs' partial success. Quantum will be fixed by theRegistrar.