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WHITEHOUSE, WATSON, WATSON, TRUSTEES OF THE WATSON WHITEHOUSE FAMILY TRUST AND OTHERS V WELLINGTON CITY COUNCIL HC WN CIV-2004-485-1415 [2005] NZHC 158 (28 October 2005)

IN THE HIGH COURT OF NEW ZEALAND
WELLINGTON REGISTRY
                                                                        CIV-2004-485-1415



               BETWEEN                       PAUL FLETCHER WHITEHOUSE,
                                             MARIE LOUISE
WATSON, SUSAN
                                             JANE WATSON, TRUSTEES OF THE
                                        
    WATSON WHITEHOUSE FAMILY
                                             TRUST AND OTHERS
                                     
       Plaintiffs

               AND                           WELLINGTON CITY COUNCIL
                                        
    Defendant


Hearing:       25 October 2005

Appearances: N. Hughes and T. Lamb for Plaintiffs
             J. Morrison for Defendant
             J. Grace for Mr Aharoni

Judgment:      28 October 2005

In accordance with r540(4) I direct the Registrar to endorse
this judgment with a
delivery time of 3.30pm on the 28th day of October 2005.


             JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL



Introduction


[1]    This judgment relates to an interlocutory application dated 7 October 2005 by
the defendant for an order
seeking further and better discovery against the first and
second plaintiffs.    The documents sought are noted at paragraph 4.2
of the
defendant's application in the following terms:

       4.2     Conveyancing files of the first plaintiffs and in particular,
sale and
               purchase agreements together with any correspondence and
               certificates passing between the
first plaintiffs and the second
               plaintiff prior to each of the first plaintiffs' settlement dates and any


WHITEHOUSE,
WATSON, WATSON, TRUSTEES OF THE WATSON WHITEHOUSE FAMILY TRUST
AND OTHERS V WELLINGTON CITY COUNCIL HC WN CIV-2004-485-1415 28 October
2005

                correspondence between the first and/or second plaintiffs and the
                developer or builder.

[2]
    The application is opposed by the plaintiffs.


Background Facts


[3]     Briefly, this case involves the conversion and development
of a central
Wellington office building at 126 The Terrace into residential apartments. The first
plaintiffs are the owners of one
of the apartments in the building, and they purport to
act as representatives of all the apartment owners.        I understand there
are 74
apartments in question.


[4]     The second plaintiff is the building's body corporate. The first-named first
plaintiff is
also the chairperson of the body corporate.


[5]     The plaintiffs' claim broadly is that the defendant, the Wellington City
Council,
was negligent in carrying out its inspection of conversion work on the
building, and in issuing final code compliance certificates,
that it breached its
statutory duties, and that its code compliance certificates constituted a negligent mis-
statement. Further,
the plaintiffs make a claim against the defendant alleging a
breach of the provisions of the Fair Trading Act 1986.


[6]     The
building in question was constructed in the early 1960's as an office
building. In the mid 1990's the building was redeveloped into
apartments by Terrace
Tower Developments Limited, a construction company which has since been struck
off the register.


[7]    
The defendant as the local authority involved over the course of the three
year redevelopment of the building, as I understand it,
carried out about 38
inspections. In 1997, presumably satisfied that the redevelopment works had been
completed in accordance with
the required standards, the defendant issued the first of
three final code compliance certificates in respect of the building work.

[8]    It seems that from early 1998 until 2001 leaks were found in various parts of
the building, including the foyer, the front
canopy, and in certain areas from shower
water leaking from apartment to apartment.


[9]    Various investigations were carried
out, from which it appears that the
apartments had not been waterproofed properly.


[10]   Of greater concern, however, appears to be a subsequent discovery made
by
building inspectors. This concluded that the developers had failed to comply with
passive fire protection standards in so far
as work required in the ceiling space of
particular apartments was concerned. Urgent remedial work was undertaken. I
understand the
total remedial work was at a cost of $408,133.00.


[11]   The plaintiffs claim against the defendant for loss and damage and seek
by
way of relief a number of declarations, special damages of $418,000.00 and damages
for the inconvenience and stress caused to
the first-named first plaintiff.


Counsel's Arguments and My Decision


[12]   The present application for further and better discovery
against the plaintiffs
is broadly made under Rule 300 High Court Rules. In terms of this Rule 300 and
Rule 295, documents "relating
to any matter in question in the proceeding" are
required to be discovered, that is the discovered documents must be relevant.


[13]   The long-established test of relevance is that of Brett LJ in Compagnie
Financiere et Commerciale du Pacifique v Peruvian
Guano Co  (1882) 11 QBD 55
(CA) at p63:


       "It seems to me that every document relates to the matters in question in the
       action, which not only
would be evidence upon any issue, but also which, it
       is reasonable to suppose, contains information which may - not which
must ­
       either directly or indirectly enable the party requiring the affidavit either to
       advance his own case or to
damage the case of his adversary. I have put in
       the words `either directly or indirectly' because, as it seems to me, a
 
     document can properly be said to contain information which may enable the
       party requiring the affidavit either to advance
his own case or to damage the

        case of his adversary, if it is a document which may fairly lead him to a train
        of
inquiry, which may have either of those two consequences:..."
        (emphasis added)


[14]    This "train of enquiry approach"
from the Peruvian Guano test has been the
subject of some criticism over the years. It has been suggested that the test results in
a "monumentally inefficient" process, and indeed the test has been the subject of
judicial criticism in New Zealand in Air New Zealand
Limited v Auckland
International Airport Limited (High Court Auckland, Priestley J, M1634-SD00, 30
April 2001). In this case Priestley
J. noted that the documents under scrutiny in the
Peruvian Guano case were few in number and significantly fewer than were likely
to
be involved in the case before him.


[15]    Notwithstanding this, the Court of Appeal in M v L [1999] 1NZLR 747, 750
have referred
to and implicitly adopted this test for relevance in New Zealand as set
out in Peruvian Guano, although in doing so, it was noted
that it is an "expansive"
test.


[16]    However, parties are only required to discover those documents which are
relevant to a
matter in question in the proceedings (see New Zealand Rail Ltd v Port
Marlborough New Zealand Ltd  [1993] 2 NZLR 641 at page 644 per Richardson J).


[17]    Relevance is determined by the pleadings and in terms of R.300(2) an order
is not to be
made unless the Court is satisfied that it is necessary at the time when the
order is made.


[18]    Here, Mr Morrison for the defendant
contends that some of the 74 apartment
purchasers who are represented by the plaintiffs have already discovered certain
conveyancing
documents from their conveyancing files, and therefore he contends
they must have accepted that these documents are relevant. Mr
Morrison notes that
it is in particular the contracts whereby each represented plaintiff purchased their
apartment together with
the s36 Certificate (especially with respect to those parties
who purchased their apartments after 14 November 2002) which are the
principal
subject of the current application.

[19]    Mr Morrison contends that the point here is a simple one. As to the purchase
contracts and related conveyancing documents, he argues that these are highly
relevant to the issue of whether the plaintiffs relied
upon the Council's code
compliance certificate in acquiring their respective apartments. He claims that if
purchases occurred before
completion and issue of a code compliance certificate
then in the absence of some condition in the purchase contract to the contrary,
there
can be no claim by a plaintiff to any degree of reliance upon the code compliance
certificate.


[20]    He claims also that
these documents are relevant to establish whether or not
there may have been some levy on apartment owners or purchasers to fund
the
remedial work undertaken, which was known at the time of purchase or otherwise.


[21]    It is against this background that
Mr Morrison for the defendant argues that
the documents sought must be considered to be relevant, necessary and discoverable.


[22]
   In turn, Mr Hughes for the plaintiff argued that provision of the conveyancing
files in question should not be ordered, because
the files were not relevant, and this
would only create further delay in this proceeding for the plaintiffs.


[23]    He argued
that there were only five bases upon which the defendant could
argue the relevance of the material sought:


               (1) That
if any plaintiff used an independent inspector to inspect their
                  individual apartments, then that inspection snapped
the chain of
                  causation or alternatively supports a finding of contributory
                  negligence.


   
           (2) That "times have moved on" in that pre-purchase inspections are
                  commonplace, as is the ability of
each plaintiff to obtain a LIM
                  report.

            (3) Each of the plaintiffs were able to protect himself or
herself
                contractually by virtue of the standard warranty clause in their
                agreements for sale and
purchase.


            (4) The defects in the plaintiffs' apartments were patent rather than latent
                defects.



           (5) There is no evidence that the plaintiffs placed reliance on the
                defendant's inspections.


[24]  
Mr Hughes then dealt at some length with each of these five arguments,
which he noted the defendant had raised as defences to the
plaintiffs' claim and
referred to the decision of Judge McElrea in the District Court in Waitakere City
Council v Smith  [2005] DCR 300.


[25]   Although I am satisfied that there may be something in several of the
arguments which Mr Hughes has raised, I take the view
that in particular, both the
purchase contracts and the s36 Certificates must be regarded as relevant in this
proceeding, bearing
in mind the wide Peruvian Guano test of relevance noted above.


[26]   It is sufficient, in my view, to note simply that the terms
of any of the 74
agreements for sale and purchase of the respective apartments may in their purchase
prices alone (if, for example,
these were calculated on some discounted basis, to take
into account known or likely defects) or in any of the specific provisions
in each
individual contract, be seen as relevant to matters in question in this proceeding.
Notwithstanding suggestions in the Smith
case and in Invercargill City Council v
Hamlin [1994] 3 NZLR 513 (CA), these matters may potentially go right to the heart
of the
reliance issue, which, as I see it, will form a significant part of the Court's
consideration of this matter at trial.


[27]   So,
too, in my view, are the provisions of the s36 Certificates, which
themselves may conceivably set out details of any defects in the
premises or any
levies imposed upon parties for repairs or otherwise. These would also obviously go
to the awareness of individual
purchasers as to possible fire safety and other

compliance matters or issues over levies. This is a matter the Body Corporate could
comply with.


[28]    With all these matters in mind, in my view, the defendant's application here
must succeed.


[29]    In terms
of the broad Peruvian Guano test, I am satisfied that the documents
sought by the defendant here are relevant. Further, I am satisfied
that an order for
discovery is necessary at this point, and that for each of the plaintiffs concerned, it
could not in any way be
considered oppressive to discover the conveyancing files
and other material sought here.


[30]    I say this mindful of the general
comments on discovery questions in
McGechan on Procedure at paragraph HR293 Intro.02;

        One of the primary aims of the various
processes of discovery is to ensure
        that the parties are not taken by surprise if the proceeding ultimately goes to
    
   trial; each party should be able to assess the strengths and weaknesses of the
        other's case at a relatively early stage.

        Discovery procedures are aspects of the rules intended to prevent parties
        keeping their cards close to their chests.


Order


[31]    The defendant's application has succeeded.


[32]    An order is now made that the first and second plaintiffs
are by 9 December
2005 to make further and better discovery by filing and serving by that date an
affidavit verifying all documents
in, or which have been in their possession, custody
or power relating to conveyancing files of the first plaintiffs, and in particular
sale
and purchase agreements, together with any correspondence and certificates passing
between the first plaintiffs and the second
plaintiff prior to each of the first plaintiffs'
settlement dates, and any correspondence between the first and/or second plaintiffs
and the developer or builder.

[33]    As to costs, these are reserved. If they are in issue between the parties, then
appropriate
memoranda can be filed, and unless either party requests to be heard on
the matter, I will decide the issue of costs on the papers.


                                               ________________________________
                                              
Associate Judge D.I. Gendall




Solicitors:
Hughes Robertson, Wellington for Plaintiff
Heaney & Co, Auckland for Defendant