Z ENERGY LIMITED V OCEANA GOLD (NEW ZEALAND) LIMITED HC WN CIV-2012-485-1810

Z ENERGY LIMITED V OCEANA GOLD (NEW ZEALAND) LIMITED HC WN CIV-2012-485-1810 [20 February 2013]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYCIV-2012-485-1810[2013] NZHC 249BETWEEN Z ENERGY LIMITEDPlaintiffAND OCEANA GOLD (NEW ZEALAND)LIMITEDDefendantHearing: 19 February 2013(Heard at Wellington)Counsel: V.L. Heine - Counsel for the PlaintiffS.J. Fairbrother - Counsel for the DefendantJudgment: 20 February 2013JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALLUnder r 11.5 of the High Court Rules I direct the Registrar to deliver this judgment at 3.30 pm on 20 February 2013.Solicitors: Chapman Tripp, Solicitors, PO Box 993, Wellington 6140Simpson Grierson, Solicitors, PO Box 2402, WellingtonIntroduction[1] At the first case management conference in this proceeding on 19 February 2013, certain issues arose between the plaintiff and the defendant concerning discovery.[2] Counsel for the respective parties had filed a Joint Memorandum dated 14 February 2013 for this conference. Amongst other things, this acknowledged that the parties agreed in principle that standard discovery should be ordered subject to any modifications to those terms they might agree upon. The Memorandum continued that the parties had discussed and had attempted to agree the terms of the standard discovery (by categories of document) as set out in a Schedule attached to that Memorandum.[3] Although the majority of the standard discovery terms were agreed, there were several items in the Schedule however on which agreement could not be reached. It is that disagreement on those particular items which is before the Court here for resolution.[4] The issue before the Court now therefore is whether the direction made by me on 14 February 2013 for the parties by 30 April 2013 to provide standard discovery should include those categories of documents outlined in the agreed Schedule as follows:[1] (b) Documents recording or evidencing any profit made by Z Energy during the term of the agreement on any of the line items listed in Schedule 1 of the agreement (subject to any subsequent agreement excluding this category of documents)– statement of claim (5).(d) Documents informing or recording the Z Energy review of factors underlying the costs components during October 2009 to June 2010 (2009 Review), including the categories ofdocuments listed at para 19 of Barry Brosnahan's affidavit –statement of claim (10).(e) Documents informing or recording the decision to introducethe "Emissions Trading Scheme AGO Fee" (the ETS fee) from1 July 2010, the amount of that fee, and the reasons for those decisions – statement of claim (11).(f) If not captured in category (e), documents informing or recording the calculation of the ETS fee and the relationshipbetween that calculation and the "ETS obligation" – statement of claim (12) and (34).[5] Discovery of those documents referred to in the preceding paragraph [4]noted as para [1](b) and 1(d), (e) and (f) of the Schedule was proposed in each case by the defendant, but opposed by the plaintiff.[6] Shortly I will turn to consider the specific documents in question but, before doing so, it is useful to mention the requirements under the High Court Rules for standard discovery.Standard Discovery[7] Rule 8.7 High Court Rules deals with standard discovery and provides:8.7 Standard discoveryStandard discovery requires each party to disclose the documents that are or have been in that party's control and that are—(a) documents on which the party relies; or(b) documents that adversely affect that party's own case; or(c) documents that adversely affect another party's case; or(d) documents that support another party's case.[8] On this, McGechan on Procedure at para HR8.7.01 notes that standard discovery is narrower in scope then under the former Peruvian Guano test whichdealt with documents that are or may be relevant to issues in the proceeding or which may lead to a chain of enquiry.[9] And it needs to be remembered that the definition of "document" containedin r 1.3 High Court Rules is a very broad one and includes information electronically recorded or stored, and information derived from that information.[10] With these standard discovery requirements in mind I turn now to consider the specific documents in question here.Documents in Para [1](b)[11] This request for documents from the plaintiff made by the defendant relates to documents recording or evidencing any profit made by Z Energy during the term of the Supply Agreement on any of the line items listed in Schedule 1 to that Agreement. Schedule 1 of the Supply Agreement is outlined at para [11] of my 19 December 2012 judgment in this proceeding on the plaintiff's summary judgmentapplication.[12] In that Schedule 1, there appear to be over 25 line items listed. Notwithstanding this, as I understand both the plaintiff's claim in the presentproceeding and the defendant's defence and counter-claim, the essential issues which will be before the Court here relate to one line item in Schedule 1 under the heading"Government Taxes and Charges" and concern the Emissions Trading Scheme AGO Fee imposed by the plaintiff as an aspect of this pricing component.[13] That said, on its face I fail to see how the documents described in para [1](b) noted at [4] above are relevant here. Those documents requested specifically relate to profit made by Z Energy on any of the line items listed in Schedule 1 of the Supply Agreement. But, as I have noted above, my understanding of the position is that the only line item of real relevance here is that concerning Government Taxes and Charges.[14] It is appropriate as I see it therefore to make a standard discovery order but limited to only certain of the documents requested under para [1](b). Instead of requiring discovery of documents relating to any of the line items listed in Schedule 1, this is to be limited to documents related to the "Government Taxes and Charges line item listed in Schedule 1 of the Supply Agreement only.[15] To this extent, the discovery application for documents under para [1](b) succeeds, but otherwise it fails.Documents in Paras 1(d), (e) and (f)[16] In the present case, as I understand the position, the adequacy of theplaintiff's review of the "Government Taxes and Charges" line item in Schedule 1 of the Supply Agreement is a significant issue.[17] Paras 10, 11 and 14 of the plaintiff's statement of claim make reference to this review (which is for the limited period from October 2009 to June 2010). These paragraphs note that, as a result of the review, the Emissions Trading Scheme AGO Fee was introduced and as such it is said the plaintiff complied with its obligations under clause 4 of the Supply Agreement.[18] On these aspects, in its statement of defence the defendant pleads that it had no knowledge of the review and denies that there has been compliance with the requirements of the Supply Agreement.[19] In response, before me, Ms Heine for the plaintiff acknowledged that the documents here were relevant here but questioned the scope of the discovery sought and the costs involved and contended that a proportional approach to this discovery was required. In this regard, she said the plaintiff was happy to provide the discovery sought by the defendants under these paragraphs 1(d), (e) and (f) provided it was confined to the ETS "Project Team".[20] As I understand the position, the ETS "Project Team" was a group ofapproximately 8-10 employees of the plaintiff who were assembled to engage in these Emissions Trading Scheme AGO fee issues at the time.[21] Before me, Ms Heine for the plaintiff went on to acknowledge that if at this point, the Court decides to confine this discovery simply to the members of the ETS"Project Team", the plaintiff would nevertheless agree to a leave reservation to cover matters. By this, leave could be reserved for the defendant to approach the Court further for additional discovery directions if it was thought necessary to widen the particular discovery obligation over these documents to include discovery by other officers and employees of the plaintiff.[22] As to these aspects, it is useful to refer to the affidavit of Barry Patrick Brosnahan dated 24 August 2012 filed in support of the plaintiff's earlier summaryjudgment application. Mr Brosnahan is employed as a commercial account manager at the plaintiff and in his affidavit referred to the establishment of the ETS "Project Team" and deposed as follows:19. I was not directly involved in the decision to review the Government Taxes and Charges so as to introduce the Emissions Trading Scheme AGO Fee. However, I understand that the review of the ETS scheme was conducted by Greenstone, from October 2009 to June 2010. I understand that this review involved the following:19.1 the establishment of a specific project team to review the ETS and oversee its implementation;19.2 a review of each contract, or group of contracts if applicable, with regards to ETS;19.3 an external audit that considered Greenstone's readiness for the ETS scheme. This specifically considered the defendant'sAgreement and mechanisms for pricing the ETS;19.4 external legal advice on implementing the ETS scheme acrossGreenstone's contracts;19.5 consideration of the amount that would be charged for ETS; and19.6 consideration of the way in which customers could pay for ETS.20. On the basis of this review, Z Energy decided that it would pass on the $12.50 to the defendant through the Emissions Trading Scheme AGO Fee. A similar approach was taken to other customers.[23] Bearing all these matters in mind, I take the view at this point with regard to these document groups outlined in paras 1(d), (e) and (f) of the Schedule, that to provide a degree of proportionality and to limit costs, initially a limited discovery order should be made here, subject to a reservation of leave as outlined at para [21]above. This proportional approach would see these discovery orders limited to discovery by the ETS "Project Team" as an initial step.[24] For all these reasons and for the avoidance of any doubt, orders are now made that the discovery directions and orders made at para [10] of my Minute of 19 February 2013 are also to require the plaintiff by 30 April 2012:(a) To provide by way of standard discovery documents recording or evidencing any profit made by Z Energy during the term of the Supply Agreement on the line item listed in Schedule 1 of the SupplyAgreement as "Government Taxes and Charges" (subject to any subsequent agreement excluding this category of documents); and(b) To also provide standard discovery on the part of the "Emissions Trading Scheme AGO Fee Project Team" (which I understand to beapproximately 8-10 employees) of the documents noted at [4] above under para 1(d), (e) and (f) only. This is to include any emails or documents in terms of r 8.7 High Court Rules that emanate from the ETS "Project Team" or are provided to the ETS "Project Team" at therequired time.[25] Leave is reserved for the defendant to approach the Court on 48 hours notice with an appropriate request if specific additional directions are required regarding the discovery of items 1(d), (e) and (f) of the Schedule noted above.[26] Costs with respect to these matters are reserved. If costs are in issue between the parties, appropriate memoranda may be filed sequentially.'Associate Judge D.I. Gendall'