V J MADSEN-RIES & H D LEVIN AS LIQUIDATORS OF GENERATION FOODS LIMITED (IN LIQUIDATION) v FONTERRA BRANDS (NEW ZEALAND) LIMITED [2016] NZHC 1305

V J MADSEN-RIES & H D LEVIN AS LIQUIDATORS OF GENERATION FOODS LIMITED (INLIQUIDATION) v FONTERRA BRANDS (NEW ZEALAND) LIMITED [2016] NZHC 1305 [17 June 2016]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV 2015-404-003018[2016] NZHC 1305BETWEEN V J MADSEN-RIES & H D LEVIN ASLIQUIDATORS OF GENERATIONFOODS LIMITED (IN LIQUIDATION)ApplicantsAND FONTERRA BRANDS (NEWZEALAND) LIMITEDRespondentHearing: 8 June 2016Appearances: N H Malarao for the ApplicantsM D Branch for the RespondentJudgment: 17 June 2016JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSENThis judgment was delivered by me on17.06.16 at 4:30pm, pursuant toRule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDateBackground[1] On 20 September 2013 the applicants were appointed liquidators of GenerationFoods Limited (the Company) by order of the High Court at Auckland. Theappointment of the liquidators occurred when the Company was put into liquidationupon the application of the Inland Revenue Department filed on 20 May 2013.[2] The Company purchased milk products from the respondent (Fonterra) forsupply to tuck shops and traded at numerous Auckland schools. Fonterra suppliedmilk products to the Company from 12 March 2012 and between March and October2012 the Company accumulated a debt to Fonterra.[3] On 11 October 2012 the Company's account with Fonterra was placed on stopcredit at which time a balance of $30,526.78 was owed to Fonterra. Also on 11October 2012 the Company's account was referred to Fonterra's debt collection agent,Debt Force.[4] Between 11 October 2012 and 20 September 2013 the Company repaid mostof the debt to Fonterra. Payments to Fonterra between 11 October 2012 and 20September 2013 (transactions) totalled $29,650.86. The liquidators say thesetransactions were consistent with the repayment of a debt under a repaymentarrangement.[5] The liquidators say:(a) At the time of the transactions the Company was unable to pay its duedebts and therefore those transactions enabled Fonterra to receive moretowards satisfaction of a debt than it would otherwise have received orbe likely to have received in the liquidation of the Company.(b) Claims by creditors in the liquidation of the Company total $542,486and that assets in the liquidation of the Company have been insufficientto cover the costs of liquidation and no distribution has made to theCompany's creditors.(c) Fonterra was not entitled to repayment of its debt in priority to othercreditors and there is no evidence of any security held by Fonterra thatcould be realised.[6] The transactions occurred within the two year "specified period" as defined ins 292(5)(b) of the Companies Act 1993 (the Act).[7] On 26 March 2015 the liquidators served a notice to set aside insolventtransactions. On 22 April 2015 Fonterra delivered a notice of objection to theliquidators notice. On 10 December 2015 the liquidators filed this application to setaside those transactions they claim are insolvent transactions. By that applicationissued pursuant to s 292 of the Act they sought recovery from Fonterra of thosepayments made by the Company between 11 October 2011 and 20 September 2013totalling $29,650.86.[8] Section 292 provides a company's payments are voidable if made at a timewhen a company is unable to pay its due debts and enables another to receive moretowards satisfaction of a debt owed than would have been received in the company'sliquidation. Section 294 of the Act provides that those payments be treated astransactions and are recoverable if paid within two years of the date of the company'sliquidation.[9] Section 292(4)(B) provides an exception if the transaction was, for commercialpurposes, an integral part of a continuing business relationship e.g. a running accountbetween a company and a creditor of the company and where during the course of thatrelationship the level of the company's indebtedness is increased and reduced fromtime to time.[10] By its notice of opposition Fonterra claims that when it supplied those productsand when it received payments for those, a reasonable person in Fonterra's positionwould not have suspected and Fonterra did not have reasonable grounds forsuspecting, that the Company was or would become insolvent.[11] Section 296(3) provides a Court must not order the recovery of payments if theperson from whom recovery is sought proves that when the payments were receivedhe acted in good faith and a reasonable person in his position would not have suspectednor have reasonable grounds for suspecting the payments came from a company thatwas or would become insolvent, and he must have given value for the paymentsreceived or altered his position in the belief those payments were valid and would notbe set aside.[12] What is clear in this case is that no defence is raised on the basis of there beinga continuing business relationship in the course of which net indebtedness would haveincreased and reduced from time to time. What is apparent is that during that periodfrom March to October 2012 when Fonterra supplied its product to the Company, nopayments for that product had been made. It was only after Fonterra placed theCompany's account on stop credit on 11 October 2012 that payments were made andthose continued until 20 September 2013.Application for particular discovery[13] What is unusual in this particular case is the liquidators' application forparticular discovery. Indeed it appears this application may be the first of its kind filedin connection with a liquidator's application to set aside transactions.[14] Upon this application questions arise about whether there is any proper basisfor it to be considered. Setting aside applications are required to be dealt with inaccordance with Part 19 of the High Court Rules as indeed are applications to set asidea statutory demand.[15] The application for particular discovery requests Court orders directingFonterra to file an affidavit stating whether groups of documents were generated by orcame into the possession of Fonterra in the period from 10 May 2011 to 20 September2013, including:(a) Copies of monthly statements issued by the respondent to the Company,showing new invoices paid, invoices paid and the balance outstandingeach month;(b) Any supply contract between the Company and the respondent;(c) Correspondence (including emails and attachments) and documentsreceived from or sent to the Company or its shareholder owner SharonMain (Ms Main);(d) Correspondence (including emails and attachments) and documentsreceived from or sent to Debt Force [an agent instructed to recoveroutstanding debts] relating to the Company or to Ms Main; and(e) Internal correspondence (including file reviews, default reports, emailsand file notes) regarding the Company or to Ms Main.[16] The liquidators say the documents would show whether Fonterra hadreasonable grounds for suspecting that the Company was or would become insolventand would therefore assist the Court in determining the liquidator's setting asideapplication. The liquidators say Fonterra's knowledge of the Company's insolvencyis not adequately addressed by Fonterra in its affidavit filed in opposition to the settingaside application.[17] The liquidators say Fonterra's knowledge of the Company's insolvency wasput in issue by the affidavit of Mr Levin in support of the setting aside applicationsand has also been put in issue by the affidavit of Ms Wilson, then credit manager ofFonterra, sworn on 11 June 2015 and provided to the liquidators in response to theirrequest for further information before the setting aside applications were filed [MsWilson's first affidavit].[18] It is clear that the onus of proof for a s 296(3) defence is on Fonterra. Theliquidators say the extent of Fonterra's knowledge is fundamental to their ability tochallenge the s 296(3) defence; and therefore discovery of the documents would ormight well assist the Court in determining the proceedings.[19] The liquidators say the order sought for tailored discovery is of a specificnature and is proportional in the context of the proceedings; that the documents arereasonably believed to exist and are or have been in Fonterra's possession or controland that it is reasonable to expect it would have maintained accounting records for thepayments and records of its trading relationship with the Company.Fonterra's opposition[20] By its notice of opposition Fonterra pleads:(a) Discovery is not available as of right in an originating application;(b) The case is not within the narrow band of marginal cases where theCourt has genuine difficulty in determining whether a party has madeout its case and where there is good reason to believe that discoverymight well assist in that determination;(c) Part 19 of the High Court Rules is directed at providing a speedy andinexpensive mechanism for determination which will not be achievedif the proceeding is delayed while a discovery process is undertaken;(d) The liquidators have not proved that discovery is necessary for them toadvance their case; and(e) The request amounts to a fishing expedition.[21] By her affidavit in opposition Ms Peacocke, senior corporate counsel forFonterra, deposes she has:(a) Undertaken a search for all internal Fonterra emails relating to theCompany;(b) Arranged for Fonterra's Hamilton accounts team to search their recordsrelating to the Company;(c) Contacted Credit Works (who purchased Debt Force); and(d) Has spoken to Fonterra's customer services team and asked them tosearch their records.[22] Ms Peacocke deposes Fonterra's enquiries have revealed:(a) Fonterra does not have any further internal emails to discover relatingto the Company;(b) The Hamilton accounts team could not locate any additional documentsto discover to the liquidators;(c) Credit Works did not have any additional emails over and above thatwhich Fonterra had already supplied; and(d) Its customer services team did not locate any further records includingany relevant emails relating to the Company.[23] Ms Peacocke states that Fonterra did not have a contract in place with theCompany for the supply of products; that the Company "just ordered products fromFonterra Brands and paid for them via our invoicing process".[24] By a second and updating affidavit dated 1 June 2016 (Ms Peacocke's secondaffidavit) Ms Peacocke deposes she had recently been made aware of some emails thatmay have already been archived by the Fonterra system (either because the peopleinvolved had left Fonterra or due to the age of the emails).[25] Ms Peacocke says the only way to retrieve these would be for Fonterra's ITprovider to conduct a retrieval of the relevant mail boxes – which would take a weekor so to do. Ms Peacocke states there is a small possibility that some additional emailsrelating to this matter could be retrieved by this process.The liquidators' case[26] By his affidavit in support of the liquidators' further discovery application MrLevin deposed that as part of the liquidators' investigations they reviewed theCompany's relevant records but were unable to find any Fonterra invoices orstatements; and therefore their investigation and analysis was based on paymentsidentified by the Company's bank statements. Those show that during the period 11October 2012 to 20 September 2013 the Company made payments to Fonterra of$29,650.86. He noted that those transactions payments were made with thedescription "DebtForce" or Debt Force" whereas payments before 11 October 2012were made with the description "Fonterra Brands" or "Fonterra", and were not madein respect to individual invoices.[27] It is Mr Levin's view that the transactions were made after the Companybecame insolvent and was unable to pay its debts.[28] Having received Ms Wilson's first affidavit the liquidators requested Fonterrato provide a transaction history showing all invoices raised by Fonterra and paymentsmade by the Company during the specified period. Mr Levin says Fonterra's solicitorsresponded stating they saw no reason to supply the information requested and declinedthe request; that further correspondence between the parties ensued and on 5November 2015 the liquidator's solicitors wrote to Fonterra's solicitors reiterating thata full transaction history was necessary to allow the liquidators to consider whetherthere was a continuing business relationship in the nature of a running account.Fonterra's solicitors responded and indicated the documents requested would not beprovided because in their view Ms Wilson's first affidavit contained sufficientinformation to comply with any obligations for pre commencement discovery.[29] Mr Levin responds that Ms Wilson's first affidavit did exhibit a number ofstatements of accounts but that:(a) The copy quality makes those difficult to read;(b) They appeared to record invoices or part-invoices outstanding after theallocation of receipts from the Company; and(c) He cannot determine whether they are a complete list of all the invoicesand receipts during the period.[30] Mr Levin deposes that as a consequence the liquidators have been unable touse Ms Wilson's first affidavit to undertake a running account analysis. Therefore hesays no transaction history has been provided to date.[31] Mr Levin's affidavit provides details of the Company's debt to Inland Revenue,which debt resulted in the Company being placed into liquidation. Mr Levin deposesthat on 15 October 2013 he met with Ms Main, the Company's principal. He said sheadvised him that the Company had a payment arrangement with Inland Revenue. Asa result the liquidators reviewed the Company's bank statements and found a numberof payments were narrated as being to Inland Revenue for arrears and that theseoccurred between 29 August 2011 until 13 December 2012 (with one further paymentmade on 14 June 2013).[32] Mr Levin deposes that the Company's bank statements record that theCompany was operating outside of its banking facility with dishonor fees anddishonored payments occurring from, at the latest, April 2011.[33] Mr Levin states the Company's financial records were reporting significantworking capital and net asset deficits in the period from 31 March 2011 to 31 March2012. As a result he says the Company was unable to pay its due debts and had greaterliabilities than assets from, at the latest, 31 March 2011. Mr Levin's assessment is thatthe Company was insolvent for the entire specified period.[34] Regarding Fonterra's claims that it had no grounds for suspicion that theCompany was insolvent "at the time of the supplies or, alternatively, the time thepayment was received", Mr Levin responds that based on the documents andinformation provided to the liquidators, he notes:(a) On 12 March 2012 the Company placed its first order with Fonterra;(b) By 29 June 2012 $29,587 was overdue and another $5,269 was owedbut was not due for payment. According to the ledger annexed to MsWilson's first affidavit the Company had not paid any of the invoicesdating back to 12 March 2012;(c) On 29 June 2012 the Company was advised by email that payment wasrequired or the account would be placed in stop credit;(d) By 31 July 2012, no payments had been made by the Company and$34,855 was overdue, with further supplies of $1,862.32 not yet due;(e) Between 3 and 17 September 2012 a number of internal Fonterra emailsexpressed scepticism at Ms Main's excuses for failing to pay despitenumerous requests for payment. It appears from these emails thatFonterra viewed these excuses as a tactic by Ms Main to delay payment;(f) By 17 September 2012 $28,944 was overdue with a further $8,644 due;(g) On 17 September 2012 Fonterra advised Ms Main that:(i) the Company's accounts would be placed on stop credit on 24September if the amount owing was not paid;(ii) following that, if the amount owing had not been cleared inseven days, then all monies owing would be put through to adebt collection agency; and(iii) if there was a problem with credits, $300 could be deductedfrom the payment.(h) In response to Fonterra's email Ms Main offered to pay $10,000 toavoid going to debt collection, however Ms Wilson's reply that $27,082was required and noted that "we are not a bank".[35] It is Mr Levin's assessment for all these reasons that the Company was unableto pay its debts from at latest 31 March 2011 and from this date it was reportingsignificant working capital and net asset deficits and was unable to meet its obligationsto Inland Revenue.[36] Mr Levin states that based on the information provided to the liquidatorsincluding the annexure to Ms Wilson's first affidavit, Fonterra was aware of theCompany's financial difficulties.Counsels submissions[37] Mr Malarao for the liquidators submits Fonterra is playing its cards close to itschest, but those cards are slowly unravelling as further discovery continues to beprovided as he says Ms Peacocke's second affidavit confirms. By Fonterra's solicitorsemail dated 22 April 2015 copies of correspondence between the parties post 28September 2012 were provided. Then by email dated 28 September 2012 Ms Mainprovided copies of invoices to Fonterra wherein she highlighted claims of credits due.[38] By Ms Wilson's first affidavit she stated that putting an account on hold as inthis case, was Fonterra's normal response to trading outside of its normal terms. MrMalarao submits there is reference therefore to there being terms and the liquidatorswant to know what those are. The liquidators refer to an email dated 29 June 2012from Fonterra to Ms Main noting that she was "trading outside our terms" then thereis the email from Fonterra to Ms Main dated 31 July 2012 noting "the account will beput on stop credit and sent to the debt collection agency[39] An internal Fonterra email dated 17 September 2012 noted "every time Icontact the smokescreen is put up she is sick or a friend died or we need credits". Anemail from Fonterra to Ms Main dated 17 September 2012 noted that the monies owingon the ledger would be "put through to debt collection agency". A further Fonterraemail to Ms Wilson dated 21 September 2012 noted "if this is not paid then it will bepassed to the collectors and further costs will be incurred by the customer forcollection of the debt and the account will go on hold".[40] It is Mr Levin's view that any arrangement by which the debt was to go to adebt collector and for which the Company would be liable for collection costs,suggests that there is more about the party's trading arrangement than has been alreadydisclosed.[41] Mr Malarao submits an inference of the existence of further discoverabledocuments can be obtained from Fonterra's notice of opposition to the application forparticular discovery for in that document Fonterra asserts:(d) The applicants have not proved that discovery is necessary for them toadvance their case. The documents sought relate to Fonterra's casepursuant to s 296(3) of the Companies Act 1993.(e) The respondent has discovered the documents it relies on to advance itsdefence. If there is any doubt as to the sufficiency of the documentationthen the applicants have the opportunity to challenge any allegedmaterial non disclosure during cross-examination.[42] While it is Fonterra's case it has provided discovery of all of those documentsit would be required to the liquidators do not accept that has occurred. Counsel refersto the initial affidavit of Ms Peacocke wherein she deposed Fonterra did not have acontract in place with the Company for the supply of products; that the Company justordered products and paid for them via their invoicing process and that to the best ofher knowledge all relevant information that Fonterra held in relation to the Companyhas already been provided to the liquidators or disclosed as part of Fonterra's settingaside application.[43] Mr Malarao submits Ms Peacocke's evidence is not sufficient to convince theliquidators that the discovery application is unnecessary. In essence they believe otherdocuments do exist. They say emails are exhibited which are not a full record ofcorrespondence; that emails have been rearranged and copied and pasted so that theyappear in a sequential order, and that selected emails have been provided rather thanthe full chain of correspondence.[44] Regarding Fonterra's suggestion that if there was any doubt as to thesufficiency of documentation the liquidators would have an opportunity to challengeany alleged material and nondisclosure during cross-examination counsel does notconsider this is an adequate solution given that some authors of emails in question willnot be available for cross-examination on the contents of their emails.[45] Mr Malarao rejects suggestions that the discovery application is a fishingexpedition. He says as liquidators they have no special knowledge of the affairs of theCompany prior to their appointment and have to rely on documents provided by therelevant parties.[46] Regarding Ms Peacocke's updating affidavit providing evidence of thediscovery of records located since Ms Peacocke's earlier affidavit was filed; the Courtis invited to consider that previous indications of complete discovery are unreliable.[47] In this case the liquidators also seek discovery also from Debt Force becausethey say Debt Force was Fonterra's agent and its knowledge of the Company'scircumstances are properly attributable to Fonterra. Otherwise, a creditor could escapeliability under the relevant statutory provisions by undertaking a practice of referringall debts to debt collection agencies at the outset. Such a practice Mr Malarao submitswould defeat the purpose of the voidable transaction regime and would allow theprincipal to put himself in a better position than he would have otherwise been if hehad personal debt with the debtor.[48] It is the liquidators case that discovery is necessary given the fact that a referralto a debt collection agency might be construed as evidence of knowledge of insolvencyand therefore that the Court is likely to find it helpful to know the circumstancessurrounding the referral of a debt to a debt collection agency or of any correspondencewith the debt collection agency regarding that debt.[49] Mr Malarao submits that correspondence between Ms Main and Debt Forcerelating to the debt is also highly relevant. He says that despite requests no suchcorrespondence has been provided.[50] Mr Malarao submits the Court has jurisdiction to order discovery on anoriginating application. In the Grange Limited v City Sales Limited1 the Courtconsidered there was jurisdiction to do so in the context of an application to set asidea statutory demand. In that case the Court considered discovery of the documentssought would confirm the applicant's case, give lie to that case, or help neither oneway nor the other.[51] Mr Malarao also refers to the High Court's decision in Shuttle PetroleumDistribution Limited v Caltex New Zealand Limited2 wherein the Court examined thegeneral statement of principle which applies in such an application. In that case theCourt held:[13] [t]he applications will be confined to those relatively narrow bandof marginal cases where an outlined defence including a defence of set-off ora counterclaim is made out but the Court encounters genuine difficulty indetermining whether or not the defence to the claim or the counterclaim doesexist. If the Court has reason to believe that discovery in the proceeding willor may assist that determination it may be appropriate to order discovery.[52] That case was also about an application to set aside a statutory demand. In thatcase the Court found there was a lack of information and difficulty in determiningwhether the counterclaim was of substance. The Judge found the information thatwould provide the claim was expected to be obtained from the discovery sought.[53] Mr Malarao refers the Court to the decision of Duffy J in Katavich3 whereinconsideration was given to principles relevant to discovery in originating applications.In that case Her Honour said:[15] The general expectation was that with an originating summons, theproceeding would be determined on the basis of affidavit evidence. However,it needs to be recognised that the procedure is used to bring a wide variety ofclaims before the Court. Hence, factors that militate against discovery inapplications to set aside statutory demand may have less strength in othertypes of claims which use this procedure. Nonetheless, an examination of therelevant case law reveals there is a reluctance to order discovery, except in anarrow band of marginal cases where the Court has genuine difficulty indetermining whether a party has made out its case, and where there issubstantial reason to believe that discovery would or might well assist in that1 (1999) 14 PRNZ 222 at 225.2 (2002) 16 PRNZ 126.3 Katavich v Meltzer HC Auckland CIV 2006-404-5968 29 May 2009.determination: see Shuttle Petroleum Distribution Ltd v Caltex New ZealandLtd (2002) 16 PRNZ 126.[54] Mr Malarao notes the approach in Katavich was cited with approval byAssociate Judge Osborne in Walker v Gibbston Water Services Limited4. In her reviewof that decision5 Dunningham J confirmed the approach in Katavich and noted further:[25] However, the decision [to grant discovery] must be guided by whetherit will "achieve justice in the particular circumstances", and relevant factorsto be considered will include whether the applicant will suffer irreparableinjury if leave is not granted, whether there is prejudice to the opposing party,and whether there is a reasonable explanation for the delay in seekingdiscovery.[55] Mr Malarao states the High Court has recently accepted that in the context ofvoidable transaction cases there may be a wider need for discovery than indicated inKatavich.[56] He refers to the decision of Associate Judge Bell in McCullagh v Robt. JonesHoldings Ltd6. In that case His Honour noted:Liquidators have no special knowledge of the affairs of a Company they areappointed to be liquidators of; must less knowledge of what suppliers to theCompany suspect (or ought to suspect based upon information they have)about the (subsequently liquidated) Company's solvency. Fairness requires arespondent seeking to keep the benefit impugned transactions to discover alldocuments (whether supportive or adverse) that are relevant to their s 296(3)defence.[57] In this case Mr Malarao submits the approach of Associate Judge Bell shouldapply equally to liquidators who are confronted with a defence based on s 296(3).[58] Mr Malarao submits that discovery will assist the Court in determining theproceeding and it is in the interests of justice that the application be granted; that thematter of Fonterra's knowledge has been put in issue by Fonterra itself; and, that it isnot enough for Fonterra to say "it has discovered that the documents it relies on toadvance its defence" or "if there is any doubt as to the sufficiency of documentation4 [2014] NZHC 330.5 Walker v Gibbston Water Services Limited [2014] NZHC 484.6 (2015) 22 PRNZ 615.then the liquidators have the opportunity to challenge any alleged material non-disclosure during cross-examination".[59] Mr Malarao submits the onus rests on the respondent in relation to s 296(3),and basic fairness requires it to disclose all relevant documents and not just those thatit relies on for its defence.[60] Fundamental to the liquidators' claims in this regard is their belief that on theface of the documents already provided it appears that there are more documents inexistence which have not been provided.Considerations[61] Regarding the submission of counsel Mr Branch for Fonterra that theliquidators have approached their application for particular discovery in an incorrectway because they have treated it as an ordinary application for particular discoverywithout giving sufficient weight to the fact that discovery in an originating proceedingwill rarely be available; and because there has never been a case where discovery hasbeen ordered in favour of a liquidator against a creditor, Mr Malarao in responsesubmits the judgment of Associate Judge Bell in McCullagh indicates a change ofapproach. That case was also about claims of insolvent transactions. In that casehowever the particular discovery application was brought by the creditor seekingfurther discovery from the liquidators having challenged the liquidators claims thatsufficient discovery had been provided.[62] Those applications failed. In McCullagh, Judge Bell stated:[6] In originating applications, the parties seeking discovery must showthat discovery is necessary. The objective of securing the just, speedy andinexpensive determination of the proceeding will guide the discretion. Notonly relevance, but also proportionality will come into consideration. Thisapproach will also come into play when further discovery orders are sought –for variations under r 8.17 and for particular discovery under r 8.19.[7] On applications under r 8.19, the starting position is a presumptionthat the affidavits of documents already filed are conclusive. The partiesseeking further discovery has to establish that the existing affidavit ofdocuments is incomplete.[63] In our present case there is no dispute that the transactions in question areinsolvent transactions. Fonterra is presumed to have been aware of the Company'sinsolvency and bears the responsibility of proving it was not aware or could not havebeen reasonably been aware of that insolvency.[64] In our case the liquidators assert justification for further discovery claimingthey only want that which they believe exists in order to understand the nature of thearrangement between the parties.[65] While access to the discovery process is not prohibited the Court has beencareful to limit its availability in an originating application. Routinely in these casesneither a liquidator nor a creditor has to give discovery. The prime purpose of theoriginating proceeding process is a focus upon efficiency and cost effectiveness.[66] As the relevant insolvent transaction provisions provide, a presumption ofinsolvency is created if the transactions occur within a certain period prior toliquidation. Until the decision of the Supreme Court in Allied Concrete Ltd v Meltzer7creditors assumed a significant responsibility to prove claims of a defence.[67] The fact remains that insolvent transaction proceedings are not ordinaryproceedings. The effective reasons for these being originating applications mustcontinue to apply. It follows that access to orders for discovery should occur in therarest of cases.[68] This Court does not consider the present application fits into that category.[69] An almost forensic approach has been adopted on behalf of the liquidators insupport of arguments that there must be more even though Fonterra's evidence is thatit has discovered all it has available.[70] The liquidators refer to an email from Fonterra to Ms Main dated 31 July 2012stating that because of a lack of response to calls or emails "the account will be put on7 [2015] NZSC 7.stop credit and sent to the debt collection agency which you will incur the costs untilall monies are paid up".[71] Implications of terms of trade and apparent obligations to pay collection costsand agency are, the liquidators say, to be inferred. However it was not untilsubmissions were filed that claims of a trading arrangement beyond that indicated bythe aforesaid email, have been suggested. Also, it is not clear for what purpose furtherdiscovery is required – even if the Court was to infer that there was other evidenceavailable to assist the liquidators – which the Court does not.[72] It is not clear for what purpose monthly statements could assist the Court. Thedates of payments made have not been in doubt. Clearly what is sought by theliquidators is evidence of a trading relationship. However, matters in issue betweenthe parties upon the setting aside applications have nothing to do with claims of acontinuing trading relationship.[73] Regardless Ms Peacocke deposed by her initial affidavit Fonterra does not haveany further internal emails relating to the Company to discover; that Fonterra'saccounts team accessed an old system to check if there were any additional documentswere stored but none could be located for discovery to the liquidators. She deposedthat [Debt Force] also provided two confirmations of payment from Westpac but apartfrom which Ms Peacocke says she has not received anything else from [Debt Force]over and above that already provided.[74] Ms Peacocke's second affidavit referred to old records having been found butmentioned a time and cost involved in accessing those. The fact of that secondaffidavit having been provided belies suggestions of concealment.[75] Of course, time and cost is a relevant element if requests for further particularsare to be considered.[76] Some challenge was made regarding the fact that Ms Peacocke may havebreached a provision of the Lawyers and Conveyancers Act Rules 2008 when shewitnessed Ms Wilson's first affidavit – because they were both Fonterra employees.However, she is not acting as a solicitor in this proceeding. Ms Peacocke's affidavitsought to be treated as providing an affidavit of documents. The Court considers thereis no reason to go behind what is contained in those affidavits.Summary[77] Of course the Court retains a discretion to order discovery in appropriate casesbut to grant the application for particular discovery in this case would provide ageneral endorsement to this practice occurring whenever a creditor, who bears theresponsibility for proof, claims they have no knowledge of insolvency nor any goodreason to suspect the same. The fact is it will only be in rare cases that discovery oughtto be provided.[78] As earlier noted the purpose of the originating proceeding process is for speedand inexpensive resolution. As Mr Branch submits it has always been the case, todate, that what is put forward by the creditor in a voidable transaction case is donewithout the benefit of discovery; that while that gives the creditor (and indeed aliquidator) some latitude in deciding what is discovered, it is important to recognisethat there are three checks which work to balance the process out and those include:(a) Lawyers involved in voidable transaction proceedings have a duty notto mislead the Court;(b) The liquidators have a right to cross examine any deponents;(c) The liquidators have access to all of the documentation between theparties because they have access to a company's documentation.[79] In this case the Court does not accept it is being misled by those same claimsprovided in support of further discovery. Although not obliged to, Fonterra haveprovided significant discovery.[80] To its credit Fonterra provided significant discovery before the liquidators filedtheir application. Cross-examination would enable the liquidators to test Fonterra'sclaims that everything has been discovered.[81] The fact remains, as Associate Judge Bell noted in McCullagh that a liquidatoras the holder of a company's records must be assumed to have any documents whichpass between the parties and between the company and any other relevant party. Inthis case the liquidators have not in any detail explained what attempts they have madeto locate the documents from the company's records. The Court should expect theliquidators to provide a summary of their search of company records to explain thatwhich they say does not apparently exist. Similarly the Court would have expectedthe liquidators to have interviewed Ms Main for one assumes she could have informedthem regarding her perception of knowledge that any creditor may have had of theCompany's insolvency.[82] A modest amount only is at stake in this case. Already the costs of thisproceeding must be considerable. If discovery is ordered compliance costs will beincurred. A 2B award in the substantive proceeding would add significant expense forthe party that fails when the setting aside is heard.[83] Mr Branch submits that considerations of the liquidators' own investigativedeficiencies suggest in this case that what is sought upon their application is a fishingexpedition. Yet, the liquidators continue with claims of wanting to prove a continuingbusiness relationship existed. However as Mr Branch points out clearly therequirements of a continuing business relationship were never present. Thereforemuch of that which is sought by the liquidators upon its particular discoveryapplication is likely to be of no relevance at all, including the monthly statementswhich the liquidators say they require to properly assess the trading relationship.[84] Mr Branch is correct that that relationship required no further assessment;supplies were made, no payments were made, the matter was passed on for debtcollection, and the payments were received.[85] The liquidators say they want to assess documents supporting claims of theexistence of a supply contract. But it seems clear there is no evidence indicatingknowledge of or indeed suspicion by the liquidators that any such contract existed.[86] The liquidators' application also seeks documents relating to the knowledge ofinsolvency issue. Suggestions have been made that Ms Peacocke's second affidavitprovides evidence of the discovery of additional documents. The Court does not agreewith that assessment for it is clear by Ms Peacocke's second affidavit that she does notsay she knows what is contained in those additional records discovered. She merelysays that there may be something of relevance in them – and as earlier noted time andexpense would be required to discover what those old system records contained.[87] Regarding claims by the liquidators relating to knowledge of insolvency indocuments exchanged between Fonterra and Debt Force, Ms Peacocke says CreditWorks had supplied electronic printouts of its database which Ms Peacocke providedto the liquidators, and she says it has not provided her with any additional informationover and above that which Fonterra has already provided.[88] As Mr Branch submits there is neither allegation nor evidence that the DebtForce documents are in Fonterra's power (as a principal) and therefore if theliquidators think Debt Force has more documents than Fonterra, then a non partydiscovery application will be necessary.[89] Regarding the liquidators claims relating to internal file notes etc. made byFonterra, Ms Peacocke responded that Fonterra's customer services team did notlocate any further records including any relevant emails relating to the Company. MsPeacocke deposes having arranged a full search of Fonterra's records to ascertainwhether it held any other documentation relating to the Company and she says havingcompleted her search to the best of her knowledge all documentation that Fonterraholds has been disclosed to the liquidators.Result[90] This is not an appropriate case for particular discovery to be directed by theCourt.[91] The liquidators' claims of concealed documentation are speculative. A modestamount only (about $30,000) was at stake. The costs and time involved to provideparticular discovery would be disproportionate to any outcome. This is not one ofthose cases which is likely to present the Court with genuine difficulty in determiningwhether or not a creditor could prove it did not know or have reasonable cause to knowwhether a company was insolvent when payments were received for productssupplied.Judgment[92] The liquidators' application's for particular discovery is dismissed.[93] The liquidators are ordered to pay Fonterra's costs on a 2B basis together withdisbursements.Associate Judge Christiansen