NZ Iron Sands Holdings Ltd v Toward Industries Ltd

• Jurisdiction: New Zealand
• Judgment Date: 20 June 2019
• Neutral Citation: [2019] NZHC 1416
• Date: 20 June 2019
• Docket Number: CIV-2017-404-001975
• Court: High Court

[2019] NZHC 1416

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

COMMERCIAL PANEL

CIV-2017-404-001975

Between

NZ Iron Sands Holdings Limited

Plaintiff

and

Toward Industries Limited

First Defendant

Taharoa Ironsands Limited

Second Defendant

Appearances:

Counsel:

M O'Brien QC and M H A Ho for Plaintiff

J E Hodder QC and J A McKay for First Defendant No appearance for or by Second Defendant

NZ Iron Sands Holdings Ltd v Towards Industries Ltd [2019] NZHC 1416 Civil Evidence, Civil Procedure — discovery — legal advice privilege — communications between company management and in-house counsel — Evidence Act 2006 — High Court Rules

“Application by NZ Iron Sands Holdings Ltd (“NZIS”) or an order requiring Towards Industries Ltd (“TIL”)to produce documents for inspection by a Judge or independent Queens Council to determine whether privilege had been properly claimed under s54 Evidence Act 2006 (“EA”) (privilege for communications with legal advisers) and that TIL undertake searches of, and provide discovery of documents held by, various named custodians. The application was made in reliance on r8.15 High Court Rules (“HCR”) (affidavit of documents), r8.19 HCR (order for particular discovery against party after proceeding commenced) and r8.25 HCR (challenge to privilege or confidentiality claim).

Most of the claims for privilege asserted by TIL were made under s54 EA and many of the communications were between management and in-house counsel at TIL. The dispute had arisen out of unsuccessful attempts by NZIS to purchase the shares in the second defendant, Taharoa Ironsands Ltd (“Taharoa”) from TIL. There had been several proceedings involving discovery.

The issue was whether the documents should be produced.

The Court had a discretion whether to inspect a document, and r8.25 HCR did not qualify that discretion in any way. Where in-house counsel had multiple duties, whether or not privilege attaches to any particular document depends on the nature of the relationship, the subject matter of the advice, and the circumstances in which the advice was sought and rendered.

Seven Network Ltd v News Ltd [2005] FCA 142 set out observations regarding priv8ielge and in-house legal adviser which the Court agreed with. The purpose for which the document was prepared was particularly important in relation to in-house counsel, because they may be in a closer relationship to the management than outside counsel, and therefore more exposed by participation in and the commercial aspects of an enterprise. In order to attract privilege, the legal adviser should have an appropriate degree of independence so as to ensure that the protection of legal professional privilege is not conferred too widely. There was no bright line separating the role of a lawyer advising in-house and his or her participation in commercial decisions.

Given the fine calls that were required and the need to ensure that the substantive issues in dispute were fully and properly heard by reference to all properly admissible material, the most sensible solution was to direct discreet inspection of sample documents, to see whether there had been any systemic error, which may have resulted in an overly liberal approach being taken to the issue of legal professional privilege. Authorities in the United Kingdom suggested that in such circumstances, investigation by a Judge not connected with the case was preferable. The Court adopted that approach.

NZIS was to nominate for inspection 52 documents. TIL was to make those documents available in full to the Court for inspection by an Associate Judge.

JUDGMENT OF WYLIE J

Introduction

1 This proceeding arises out of unsuccessful attempts by the plaintiff, NZ Iron Sands Holdings Ltd (NZIS), to purchase the shares in the second defendant, Taharoa Ironsands Ltd (Taharoa), from the first defendant, Toward Industries Ltd (TIL).

2 TIL is a wholly owned subsidiary of BlueScope Steel Ltd (BSL), an ASX listed company.

3 Very broadly, NZIS says that it entered into a conditional agreement with TIL to purchase the shares in Taharoa on 14 November 2016, that the agreement required both TIL and it to use all reasonable endeavours to ensure that each condition was fulfilled by 14 December 2016, to cooperate and provide all reasonable assistance to each other to fulfil each condition, to keep the other fully informed of communications with relevant third parties, and not to do anything likely to hinder fulfilment of the conditions. NZIS says that TIL failed to comply with these obligations and then wrongly terminated the agreement on 15 December 2016, asserting that the conditions had not been met.

4 TIL, again very broadly, says that it fully discharged its obligations under the share purchase agreement, that the conditions were not fulfilled by 14 December 2016, that when the deadline specified in the agreement expired, it had no obligation to and did not waive the same, and that it properly terminated the agreement in accordance with its terms.

Discovery —background

5 Regrettably, and as is all too common, particularly in commercial proceedings, achieving satisfactory discovery has proved to be difficult.

6 After extensive toing and froing between the parties, counsel eventually agreed to tailored discovery and, on 28 June 2018, I made an order in accordance with their agreement. I required that tailored discovery be attended to by 5 October 2018. I also ordered that any further interlocutory applications regarding discovery (or otherwise) were to be filed and served by 9 November 2018.

7 Taharoa complied with the 5 October 2018 date. Neither NZIS nor TIL did so. Both filed their affidavits of documents late. They then said that they needed more time to consider the discovery which the other had provided and that they could not comply with my further direction that any further interlocutory applications regarding discovery be filed and served by 9 November 2018. Time was extended and on more than one occasion.

8 On 5 February 2019, NZIS filed an application against TIL seeking particular discovery and consequential orders. Inter alia, it challenged claims to privilege made by TIL, sought the disclosure of specific emails identified in an affidavit sworn by its executive director, Selva Nithan Thirunavukarasu, and an order directing that TIL reconsider all of its various claims to privilege, file an affidavit individualising each document dated between 14 November 2016 and 21 December 2016 (the “critical period”) and provide detail of the privilege claimed for each.

9 TIL filed a notice of opposition. It also filed an interlocutory application seeking that Mr Thirunavukarasu's affidavit not be read and that it be removed from the Court file (or sealed). It asserted that the affidavit referred to and exhibited privileged documentation provided to NZIS in the course and for the purposes of an unsuccessful mediation between the parties.

10 On 8 March 2019, NZIS filed an amended application, again seeking particular discovery and consequential orders. TIL filed a fresh notice of opposition.

11 The applications were called before me on 26 March 2019. After hearing from counsel, I indicated to the parties my preliminary view that:

(a) it was not open to NZIS to put before the Court privileged documents made available to NZIS by TIL in the course of the mediation; 1 and

(b) the discovery undertaken by both TIL and NZIS — where documents over a given date range were listed in bulk, without itemising the same, and where privilege was claimed on a global basis, without detailing the claim to privilege for each document — was unsatisfactory, and not in accordance with the directions I had made on 28 June 2018, which inter alia required that lists of documents “specifically enumerate and described all documents claimed to be privileged”.

Neither party required a judgment from me on those issues and there was a measure of agreement between them. In anticipation that it might crystallise the disputes between them, both agreed to file amended lists of documents individually listing all documents in respect of which privilege had been claimed and detailing the grounds for the claim to privilege for each document so listed.

12 Individual listings of documents created over the critical period and in respect of which privilege had been asserted, were exchanged on 3 April 2019.

13 Unfortunately, this process did not resolve all difficulties between the parties, and, on 24 April 2019, NZIS filed a second amended application relying on rr 8.15, 8.19 and 8.25. It sought that:

• (a) TIL produce to a Judge or independent Queen's Counsel the following documents for inspection, so that a determination can be made as to whether privilege has been properly claimed:

  • (i) each document for which privilege has been claimed under s 54 of the Evidence Act 2006, including documents parts of which have been redacted for privilege; or

  • (ii) all documents for which privilege is claimed under s 54 of the Evidence Act and which were created over the critical period, and any board paper or part of any board paper of BSL.

• (b) TIL undertake searches of, and provide discovery of documents held by, various named custodians — namely board members, senior management staff and communications personnel with BSL, a director of TIL, and management personnel of New Zealand Steel Mining Ltd (now Taharoa).

14 This amended application was also opposed by TIL.

Submissions

15 Mr O'Brien QC, for NZIS, noted that TIL has discovered on an open basis relatively few documents over the critical period. He argued that it is inconceivable that there were not more open documents of relevance over that period, and...