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Truck Master Limited v Mastagard Waste Limited [2014] NZHC 1676 (17 July 2014)

Last Updated: 29 July 2014

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2014-409-000235 [2014] NZHC 1676

CIV-2014-409-000236

BETWEEN RDL TRANSPORT LIMITED Intending Plaintiff

AND MASTAGARD WASTE LIMITED First Intended Defendant

AND SEBASTIAN GRAEME STAPLETON Second Intended Defendant

CIV-2014-409-000324

BETWEEN MECLAN TRANSPORT LIMITED Intending Plaintiff

AND MASTAGARD WASTE LIMITED First Intended Defendant

AND SEBASTIAN GRAEME STAPLETON Second Intended Defendant

TRUCK MASTER LIMITED v MASTAGARD WASTE LIMITED [2014] NZHC 1676 [17 July 2014]

JUDGMENT OF ASSOCIATE JUDGE OSBORNE

_{as to pre-commencement discovery}

The applications

[1] The three intending plaintiffs (“the applicants”) had separate contracts to supply waste collection and disposal services to the first intended defendant (“Mastagard”). The applicants gave notice of cancellation of their contracts on 7

February 2014.

[2] The applicants seek orders as to discovery before they commence a proceeding.

[3] Directors of each of the three applicants believe their companies may have been underpaid for the contracted services. They want access to Mastagard’s documents in order “to obtain proper accounting and legal advice”.

[4] The second intended defendant (Mr Stapleton) is a director of Mastagard. He is also a director of other companies which the applicants say are related to Mastagard. The applicant’s directors depose that they suspect that Mastagard has, together with its related companies, been adjusting various expenses and income for its own ends and to the disadvantage of the applicants.

[5] The applicants assert that they may have claims for damages for breach of contract, through underpayment, and for relief under the Fair Trading Act 1986 against both Mastagard and Mr Stapleton as principal or secondary parties to misleading or deceptive conduct.

Opposition

[6] Mastagard and Mr Stapleton oppose the applications on various grounds, including that it is not impossible or impracticable for the applicants to plead their claims in accordance with the rules relating to pleadings without pre-commencement discovery.

[7] I have concluded that the applications must be dismissed at least because it is practicable or possible for the applicants to formulate their claims without discovery.

Pre-commencement discovery

The rule

[8] Rule 8.20 High Court Rules provides the pre-commencement discovery in these terms:

8.20 Order for particular discovery before proceeding commenced

(1) This rule applies if it appears to a Judge that—

(a) a person (the intending plaintiff) is or may be entitled to claim in the court relief against another person (the intended defendant) but that it is impossible or impracticable for the intending plaintiff to formulate the intending plaintiff's claim without reference to 1 or more documents or a group of documents; and

(b) there are grounds to believe that the documents may be or may have been in the control of a person (the person) who may or may not be the intended defendant.

(2) The Judge may, on the application of the intending plaintiff made before any proceeding is brought, order the person—

(a) to file an affidavit stating—

(i) whether the documents are or have been in the person's control; and

(ii) if they have been but are no longer in the person's control, the person's best knowledge and belief as to when the documents ceased to be in the person's control and who now has control of them; and

(b) to serve the affidavit on the intending plaintiff; and

(c) if the documents are in the person's control, to make those documents available for inspection, in accordance with rule

8.27, to the intending plaintiff.

(3) An application under subclause (2) must be by interlocutory application made on notice—

(a) to the person; and

(b) to the intended defendant.

(4) The Judge may not make an order under this rule unless satisfied that the order is necessary at the time when the order is made.

[9] The three-point analysis which I adopt¹ in relation to an application under r 8.20 requires me to be satisfied as to three matters:

(a) The intending plaintiffs are or may be entitled to claim relief against another person;

(b) It is impossible or impracticable for the plaintiff to formulate the claim without the documents sought; and

(c) There are grounds for belief that the documents may be or have been in the possession of the person concerned.

The adequacy of pleadings and particulars

Of the test of “impossible or impracticable” under r 8.20(1)(a) the Court of Appeal has stated in Exchange Commerce Corporation Ltd v New Zealand News Ltd² that what is meant is an “inability to plead the claim in accordance with the requirements of the rules”.³

[10] The terminology of r 8.20(1)(a) requires the Court to draw a distinction between documents which may be needed to sustain and pursue a claim to finality

_{and those which may be needed for proper pleading. I adopt the distinction in terms}

¹ Malayan Breweries v Lion Corp Ltd (1988) 1 PRNZ 629 (HC) per Wylie J at 631–632; Welgas

Holdings Ltd v Petroleum Corp of New Zealand Ltd (1991) 3 PRNZ 33 (HC) per McGechan J at

_40.

² Exchange Commerce Corporation Ltd v New Zealand News Ltd [1987] 2 NZLR 160 (CA);

_{Hetherington Ltd v Carpenter [1997] 1 NZLR 699 (CA) at 705.}

³ Exchange Commerce Corporation Ltd v New Zealand News Ltd, above n 2, per Somers J at 164.

of “finality” of Eichelbaum J in Gray v Trustees of the Crown Superannuation

Fund,⁴ where his Honour said:⁵

Note that in terms of the rule the impracticability has to relate to the formulation of the claim, not its pursuit to finality.

[11] Mr Maze placed emphasis upon the requirement that the applicants properly plead their claim. In his written synopsis, he submitted that by reason of not having access to the Mastagard’s documents, the applicants:

... cannot formulate a claim which sets out exactly how Mastagard has breached the contract, in what manner, and on what occasions during the course of the contractual relationship between the parties.

(Mr Maze’s emphasis)

[12] The requirements upon a plaintiff to state its case in a statement of claim are set out in r 5.26 High Court Rules which provides:

5.26 Statement of claim to show nature of claim

The statement of claim—

(a) must show the general nature of the plaintiff's claim to the relief sought; and

(b) must give sufficient particulars of time, place, amounts, names of persons, nature and dates of instruments, and other circumstances to inform the court and the party or parties against whom relief is sought of the plaintiff's cause of action; and

(c) must state specifically the basis of any claim for interest and the rate at which interest is claimed; and

(d) in a proceeding against the Crown that is instituted against the Attorney-General, must give particulars of the government department or officer or employee of the Crown concerned.

[13] Accordingly, the particulars required by r 5.26(b) are such as will “inform the

_{Court and the [defendant] of the plaintiff’s cause of action.”}

⁴ Gray v Trustees of the Crown Superannuation Fund (1986) 1 PRNZ 239 (HC); adopted in

Kerrendale Finance Ltd v DFC Ventures Ltd (No. 1) (1989) 2 PRNZ 674 (HC) per Barker J at

_{677; McLennan v Adams HC Greymouth CP6/97, 18 December 1997 per Master Venning.}

⁵ Gray v Trustees of the Crown Superannuation Fund, above n 4, at 240.

[14] The Court will insist upon as much certainty and particularity as is reasonable, having regard to the circumstances of the case.⁶

[15] In some circumstances, particulars can neither be reasonably expected nor appropriately sought by order from a plaintiff. The cases recognise that the usual expectation as to detailed particulars of a claim will give way in cases where the party which would be entitled to particulars has knowledge concerning those particulars which the other party does not have. This is an approach to the

requirements of pleading recognised in both England⁷ and in New Zealand.⁸ The

Courts recognise as adequate a pleading which pleads all material particulars other than those which can be derived only from information within the peculiar knowledge or control of the defendant.

[16] Ultimately, under r 8.20, the Court has a discretion whether or not to grant an order:⁹

The Judge may ... order ....

Pre-commencement discovery of confidential documents

[17] I adopt, in relation to documents which are commercially sensitive, the following summary in McGechan on Procedure:¹⁰

The Court’s discretion is particularly important in dealing with confidential documents. The potential for abuse of confidential business information obtained under r 8.20 has been recognised by the Courts. If an order to disclose such documents is made, it will often be appropriate for it to be only in respect of a very limited class of documents and to a small number of persons: British Markitex Ltd v Johnston [1987] NZHC 248; (1987) 2 PRNZ 535 (HC); Welgas Holdings Ltd v Petroleum Corp of NZ Ltd (1991) 3 PRNZ 33 (HC).

⁶ Ratcliffe v Evans [1892] 2 QB 524 (CA) per Bowen LJ at 532-533 adopted in Television New

_{Zealand Ltd v Newsmonitor Services Ltd (1992) 5 PRNZ 685 (HC) per Wylie J at 687.}

⁷ _{Ross v Blakes Motors Ltd [1951] 2 All ER 689 (CA).}

⁸ Hickson v Scales (1900) 19 NZLR 202 (SC); see also McGechan on Procedure at [HR 5.21.05] and the judgment of Master Faire in Prime v Hardie HC Auckland CP248sd01, 15 March 2002, at [12] adopting a passage from an older version of McGechan on Procedure at [HR 185.09].

⁹ _{Per High Court Rules, r 8.20(2).}

¹⁰ McGechan on Procedure, at [HR 8.20.04].

[18] The head-note to Welgas Holdings Ltd v Petroleum Corp of New Zealand Ltd accurately summarises the observations of McGechan J in that case when it records:¹¹

... Especially where commercially confidential documents are concerned, there is an obvious danger in permitting precommencement discovery. Where there is doubt as to whether the threshold of a real claim has been established, the Courts should be alert to prevent abuse and will not be indulgent towards applicants.

Draft statement of claim

[19] The applicants did not adopt the common practice of providing to the Court a draft statement of claim. Such a document, while highlighting areas of allegation which the intending plaintiff says it cannot complete without discovery, has the added benefit of succinctly explaining the nature of the claim by reference to matters known to the plaintiff be they as to contractual terms, breaches or other matters.

[20] I adopt the view expressed by McGechan J in Welgas Holdings Ltd v Petroleum Corp of New Zealand Ltd¹² when his Honour referred to the failure of the intending plaintiff in that case to provide a draft pleading. His Honour said:¹³

The plaintiff did not file a draft statement of claim, or indeed furnish even an initial detailed narrative of the claim in prospect. Such a course would be helpful to a Court considering a r 299 application, and I recommend it as future practice. The Master was left in the unsatisfactory position of being asked to extract some possible claim from the content of affidavits.

[21] As I will return to¹⁴ contentions as to the correct construction of the contract in this case were largely developed by directors of the applicant companies in their affidavits. This proved to be a distraction in the course of the hearing when it emerged that the (inadmissible) views expressed by Mr Trask¹⁵ as to a particular

_{interpretation of contract were disavowed by Mr Maze.}

¹¹ _{Welgas Holdings Ltd v Petroleum Corp of New Zealand Ltd, above n 1, at Headnote.}

¹² _{Welgas Holdings Ltd v Petroleum Corp of New Zealand Ltd, above n 1.}

¹³ _{At 46.}

¹⁴ _{See below at [24].}

¹⁵ Set out at [33]–[34] below.

The intended claim in contract

The contract rate of payment

[22] The applicants’ intended proceeding relates to the entitlement which each applicant had under its standard form contract for waste collection and disposal services. Mastagard was required to pay the applicants according to a Schedule of Rates which specified:

40% of Gross Cartage Fee

The Rates do not include GST and may be altered from time to time.

Submission for applicants on contract entitlement

[23] Mr Maze, for the applicants, said in his written synopsis that the applicants have a claim for breach of contract against Mastagard. He noted:

(a) The contracts provided for the applicants to receive “40% of Gross

Cartage”;

(b) The meaning of “Gross Cartage”, being a question of law, ought to be

interpreted to mean that:

(i) there is a cartage fee is that on each “job”;

(ii) the cartage fee is that paid by the end-customer for the service of conveying the skip; and

(iii) the applicants are entitled to 40% of that figure;

(c) Such an approach to the meaning of “Gross Cartage” accords with the plain meaning of the words used (by reference to the Oxford English Dictionary definitions and cl 25 of the contract requiring words and phrases to be interpreted in accordance with their common meaning);

(d) The evidence available to the applicants shows that on some occasions they were not paid for certain work.

The two implied terms

[24] Mr Maze submitted that there were two central (implied) terms of the contract which applied to the Schedule of Rates: –

(a) Where different contractors completed the delivery and removal jobs, an apportionment of dump fees had to be undertaken; and

(b) Invoicing had to be on a job-by-job basis.

Apportionment of dump fees

[25] The first grievance of the applicants is that Mastagard did not apportion dump fees to both delivery and removal jobs. Dump fees are the fees charged to Mastagard for dumping the contents of skips (which Mastagard in turn charged to its customers).

[26] Mr Maze referred to the evidence of Roy Lewis, the director and principal shareholder of RDL Transport Ltd. Mr Lewis in October 2013 had an email exchange with Mastagard in which he sought clarity as to the way in which Mastagard was dealing with dump fees. While the contractors were carting skips for both residential and commercial customers, Mr Lewis’s enquiry particularly related to residential (or “casual”) skip-hire. Mr Lewis was seeking to clarify how the dump fee was dealt with in relation to the initial delivery of the skip to the residential customer and its subsequent removal. Jacob Stapleton of Mastagard replied that the dump fees were entirely taken into account on the removal job (and not at all on the delivery job).

[27] The evidence is that the delivery and removal jobs are not necessarily undertaken by the same contractor. As a result, in the case of split jobs it will be the contractor undertaking the removal job who effectively bears the deduction of the dump fee, with the result that that contractor may sustain a loss for that particular job.

[28] Mr Lewis states that he does not accept that Mastagard is contractually permitted to “allocate” dump fees at all.

[29] Mr Maze accepted that the concept of “Gross Cartage” under each contract was arrived at by deducting dump fees paid by Mastagard from the cartage fee (inclusive of dumping) charged to the customer. Mr Maze accepted that for the Schedule of Rates under the contract to operate effectively there had to be a deduction of dump fees. He submitted that a likely implied term would be that the dump fees be deducted proportionately between the delivery and removal jobs. He suggested that the apportioning would probably be by reference to the mileage of each job. That said, through a reference in the exhibited correspondence to “weight” (a matter of significance because of road user charges) it is possible that the weight of material removed might also have to figure in any apportionment exercise required by any implied term.

Job-by-job invoicing

[30] A second grievance of the applicants is that Mastagard did not pay each contractor 40 per cent of the gross cartage fee based on individual jobs broken down to both delivery and removal. Mark Bourne, a director and principal shareholder of Truck Master Ltd, deposed that Mastagard could not track individual jobs and so could not provide information relating to his company’s work on a job-by-job basis. He produced email correspondence from Sebastian Stapleton in which Mr Stapleton recorded that Mastagard had historically not had the ability to track individual jobs even if it had wanted to. Mr Bourne deposed, in conclusion, that if Mastagard could not track individual jobs it seemed impossible that Mastagard could be paying 40 per cent of “Gross Cartage” for each job.

A third grievance

[31] In the applicants’ evidence there was mention of a third grievance which I

now mention in order to record that Mr Maze disavowed reliance upon it.

[32] The issue arose through the affidavit of Clay Trask, the sole director and shareholder of Meclan Transport Ltd. In his evidence, Mr Trask had developed a

proposition that Mastagard in calculating and paying 40 per cent of the gross cartage fee under the schedule of rates in each contract was not entitled to deduct the dump fees. (The documentary evidence indicates that the cost of dump fees variably accounted for 38 per cent or more of total sales).

[33] In his oral submissions, Mr Maze stated that the applicants do not place any reliance on that part of the evidence of Mr Trask. In particular, the applicants do not intend to argue that the gross cartage fee should include any dump fees. Such a proposition would be inconsistent with the two central propositions which the applicants intend to pursue on their contractual cause of action.

The resulting theory of the applicants’ case

[34] In the light of the confusion created by Mr Trask’s evidence, I invited Mr Maze in the course of the hearing day to refocus on the particular terms of the contract (whether express or implied) on which the applicants will rely for their claim against Mastagard.

[35] Mr Maze confirmed that the two areas which will be relied upon for breach of contract are requirements for:

(a) apportionment of dump fees where delivery and removal of a skip are dealt with by different contractors; and

(b) invoicing on a job-by-job basis.

The Mastagard response

The contractual causes of action

[36] Mastagard filed a notice of opposition together with evidence from a director, Sebastian Stapleton, and from three independent contractors. For the hearing, Mr Russ, for Mastagard, provided a written synopsis in which he analysed the claims on which the applicants appeared to intend to proceed. Mr Russ dealt with three apparently signalled claims.

Calculations inclusive of dump fees

[37] Mr Russ submitted that the applicants would not have a tenable claim relating to the view of “Gross Cartage” (as including dump fees) developed in Mr Trask’s evidence. The need for Mr Russ to develop this submission fell away with Mr Maze’s abandonment of that proposition.

Invoicing on a job-by-job basis

[38] There is no wording in the standard form contract to expressly require Mastagard to account on a job-by-job basis. To the extent that the applicants seek to have implied a term as to accounting on a job-by-job basis, Mr Russ submitted that the requirements for implication of a term cannot be established by the applicants. Mr Russ relies on evidence from the other independent contractors as to what was known to parties in the pre-contract stage. There is reference to knowledge of the way Mastagard worked its system with despatchers ensuring that there was an equal allocation of pickups and deliveries and, wherever possible, drivers were matched to the same pickup and delivery to avoid an unfair allocation of non-remunerative work. Mr Stapleton’s affidavit expanded upon that evidence. He also explained the accounting system which Mastagard had in place throughout the contract periods. Reports of revenue were generated on a monthly (not more regular) basis, precluding accounting on a job-by-job basis. Mr Stapleton also referred to and exhibited an “explanatory” document which was provided to drivers. The version he exhibited was the most recent version but he deposed that to the best of his knowledge a similar document was in circulation from 2012 to 2013. It contains a sample of the Monthly Schedule being used by Mastagard. The Monthly Schedule shows that the accounting was by total sales for the month (less dump fees) before arriving at total cartage fees and the figure for payment to the contractor based on 40 per cent.

[39] If the sample monthly schedule is found to have been supplied to each of the applicants at the time their contracts were being negotiated, it may represent a powerful factor against the implication of a contractual term which would have required Mastagard to break down its revenue to a job-by-job basis (rather than monthly) basis.

[40] Mr Maze objected to any reliance on the explanatory memorandum in this context as Mr Stapleton’s evidence lacks any precision as to whether the three applicants each received the document.

[41] The hearing before me was not a trial and I am not in a position, upon the basis of Mr Stapleton’s or the other affidavit evidence or exhibits, to conclude that the applicants will definitely fail to establish an implied term as to “job-by-job” accounting of the nature asserted by the applicants. I doubt whether the requested term meets the requirements for an implied term but an implied term of that general nature may be possible.

Apportionment of dump fees

[42] Mr Russ then turned to the possibility of an implied term as to the apportionment of dump fees across the delivery and removal jobs. He adopted what he had said in relation to the “job-by-job accounting” assertion. The evidence is that Mastagard had not operated its accounting in that way through the contractual periods and had always brought the dump fees into account on the removal job. The explanatory memorandum produced by Mr Stapleton contained explanation in relation to the 40 per cent of Cartage Fee entitlement under the Schedule of Rates which (if received by the applicants) would have explained the “averaging” approach adopted in the Mastagard accounting system. In the explanatory memorandum, several statements were made about the Schedule of Rates including:

Some jobs are more profitable than others.

and

Obviously there is (sic) jobs we make a handsome amount on and some less attractive. Our position is that OD’s take the good with the bad, as the average has proven to be very satisfactory. With contract customers we deal with the company can’t pick and choose its jobs.

[43] Mr Maze’s objection to reliance on materials such as the explanatory

memorandum was carried over to this implied term (as to the split delivery scenario).

[44] My earlier conclusion as to the “job-by-job” term applies equally to the “split scenario” term. The applicants may have substantial difficulty in establishing the requirements for the implication of such a term but I cannot in this context rule out the possible implication of a term of that general nature.

What the applicants can now plead

Breach of contractual terms?

[45] If the applicants establish either of the implied terms identified by Mr Maze, it is probable that the applicants will establish breach. That follows because on Mr Stapleton’s own evidence, for at least most of the contracts period Mastagard did not operate an accounting system which allowed Mastagard to account on a job-by-job basis or to apportion dump fees across delivery and removal jobs. Mr Maze accepted that discovery is not required to show that there were breaches of contract.

Amounts incorrectly calculated – quantum of damages

[46] Mr Maze submitted that, notwithstanding an ability to plead breaches of contract, it was not possible to plead the financial consequences of the breaches. He submitted:

(a) It remains unclear on what basis Mastagard was calculating “Gross

Cartage” at any particular time;

(b) The applicants cannot formulate a claim which sets out exactly how and when Mastagard had breached the contract;

(c) The applicants cannot assess exactly what loss Mastagard has caused it or plead such loss.

[47] Mr Maze submitted that any claim brought on the basis of the material that the applicants at present have would be so vague as to be vulnerable to an application to strike out or, at best, would require significant amendment post- discovery, at which point the materials sought may indicate the claim is not worth pursuing.

[48] I do not accept Mr Maze’s conclusion that the pleading which he is in a position to file would not constitute a proper or satisfactory pleading. I equally reject the conclusion that it is impossible or impracticable for the applicants to formulate their intended claim without reference to the documents they seek.

[49] Had Mr Maze filed a draft statement of claim it would have clearly set out both the details of the written contract itself and the implied terms as identified by Mr Maze. It would have identified that, throughout the life of each contract Mastagard at each accounting point committed breaches of the implied terms by failing to individually account for jobs and to apportion dump fees on a job-by-job basis. The pleading would then in relation to the amount of the claim have stated that the amount of the claim would be quantified following discovery of Mastagard’s documents. Such a pleading, although lacking final detail of the quantum of the claim, would have been a proper pleading for the reasons I have set out at [13]–[16] above.

[50] As the judgment of Eichelbaum J in Gray v Trustees of the Crown Superannuation Fund¹⁶ emphasises, the Court’s focus under r 8.20 is upon the proper formulation of the intending plaintiff’s claim, not upon the pursuit of that claim to finality.

[51] This is a case, as Master Venning observed of the case in McLennan v Adams¹⁷ where discovery may well disclose whether or not the pleading can be sustained and the claim proved. But, as his Honour then observed, that is often the case when proceedings are issued. It is a very different question from whether or not the claim can be properly pleaded.

[52] These claims can be properly pleaded by the applicants with the information they already hold.

¹⁶ _{Quoted above at [11].}

¹⁷ McLennan v Adams, above n 4.

The possible pleading of other breaches – “problems in the summaries”

[53] Beside the applicants’ allegations that Mastagard was in breach of two implied terms, the applicants’ evidence identified other incidents which they asserted constituted “particular problems arising from the [monthly] summaries”. Mr Lewis, for instance, referred to a January 2014 invoice by which his company was charged for gantry deck work which was not in fact done until February 2014. He refers also to diesel charges which Mastagard deducted at a rate of approximately $1.50 per litre in January 2014 compared with approximately $1.30 per litre in other months.

[54] A difficulty for the Court in assessing whether such matters give rise to possible claims lies in the fact that Mr Maze did not provide a draft statement of claim and therefore has not identified particular terms of the contract which are said to have been broken by Mastagard. That approach made difficult the assessment which is required of the Court under r 8.20(1). As a result the applicants have fallen short of making it “appear to a Judge” (as required by r 8.20(1)) that there may be a claim in this regard.

[55] Furthermore, if there are claims in relation to the “particular problems arising from the summaries”, then the fact that the applicants have identified those particular problems would strongly indicate that they are in a position to plead the nature of the problem in question. If damage flowing from the problem cannot be quantified without discovery, the position is parallel to the arguments in relation to implied terms.

The intended claim under the Fair Trading Act

The intended complaint

[56] In his written synopsis Mr Maze submitted that there were two potential claims under the Fair Trading Act for misleading and deceptive conduct. First there would be a claim in relation to the Monthly Schedules provided to the applicants and in particular, assertions contained in the summaries relating to:

(a) Deductions made from the money which Mastagard said it owed to the applicants; and

(b) The gross cartage figures represented on the documents.

Secondly, there would be a claim relating the manner in which “dump fees” were

quantified by Mastagard and its related companies.

[57] At the hearing Mr Maze advised me that the applicants were no longer relying upon the second area of potential claim (quantification of dump fees), with the consequence that any need for pre-commencement discovery in relation to a Fair Trading Act claim relates now only to the first proposition relating to Monthly Schedules.

[58] The three deponents for the applicants each spoke about deductions recorded on the Monthly Schedules. Mr Bourne’s evidence was illustrative of the criticism of monthly statements. He deposed –

37. The only way I could think of to exercise any oversight of MWL was to analyse the percentage of dump fees per total sales as shown on the summary and to check any other deductions. This has lead TML to challenge summaries on more than one occasion and I have noted the concerns relating to the following:

a. significant variations in the percentage of dump fees per

“total sales” listed on the summaries provided by Mastagard;

b. when TML challenged MWL over the summaries this has sometimes resulted in changes to the amount MWL paid TML, but without anything to substantiate the figures either before the change to the amount paid or afterwards;

c. unexplained variation in the amount charged by MWL to

TML for the same service, without warning or explanation;

d. MWL charging TML for goods or services not provided.

[59] Mr Bourne and the other deponents gave further, specific examples of what they said were deductions for work not performed, two of which (in Mr Lewis’s

_{evidence) I referred to earlier.}¹⁸

¹⁸ See [53] above.

[60] There are at least two significant hurdles for the applicants’ claims under the Fair Trading Act. First, all the complaints they raise appear to relate to what would, if proved, amount equally to breaches of the contract. For instance if the total dump fees deducted are not the correct figures, or if the figures have been deducted for goods and services which were not provided, the applicants will be contractually entitled to a refund. Secondly, the applicants’ own evidence indicates that the applicants availed themselves of the contractual mechanism for correcting errors in payment. Thus, for instance, Mr Trask refers to challenges which he made in mid-

2013 for charges for relief drivers which he deposes were subsequently removed. That said, it appears on a fair reading of the applicants’ evidence that some issues now raised were not specifically raised by the applicants during the period of the contract and were therefore not the subject of any consideration of error correction.

[61] The contracts have now come to and end and with them the error correction procedures under the contracts. There may be a tenable argument that any uncorrected, erroneous Monthly Schedules were provided in breach of the Fair Trading Act and that the remedies under that Act are an appropriate way of addressing any financial consequences.

[62] In terms of r 8.20 High Court Rules, the applicants may have a claim under the Fair Trading Act.

The intended defendants

[63] The applicants know who the appropriate defendants to a Fair Trading Act claim would be.

[64] Mastagard, as the party which presented the Monthly Schedules, is the obvious defendant in relation to the claim.

[65] Mr Maze submits that the applicants also have a viable claim under the Fair Trading Act against Mr Stapleton pursuant to s 43(1)(c) of the Act on the basis he aided, abetted or procured a breach of the Act by Mastagard. Under s 43(3)(e) of the

Act the Court might order both Mastagard and Mr Stapleton to refund money lost by the applicants through the erroneous statement of deductions.

Impossible or impracticable to formulate the claim?

[66] Mr Maze submitted that the applicants, without access to Mastagard’s full records for the contract period, will not be able to identify the further instances of erroneous deductions which he submits are likely to have occurred. He says that it is impossible or impracticable for the applicants to formulate their intended claim on the present information.

[67] I do not find there to exist the impracticability or impossibility which Mr Maze asserts. The Monthly Schedules set out the calculations and the deductions made in each monthly period. The function of that information under each contract was in part to enable each applicant to check the calculations at the time and if necessary to invoke the error corrections procedure under the contracts. Each applicant must be taken to have known at the time what events or circumstances were likely to have required deductions and to be able to call for a check of what was deducted. It is clear that in relation to a number of deductions the procedure was invoked and in several cases corrections made. Where the applicants are not satisfied that corrections were made in relation to identified deductions, the applicants are in a position to plead the instances in which they say the Monthly Schedules were misleading. If on reflection the applicants believe that there are further instances of inappropriate deductions, they have the Monthly Schedules from which to identify those and to formulate their pleadings. The fact that there may be further investigations or calculations required so as to establish the exact loss flowing from a misrepresented deduction does not render inadequate the pleading which the applicants are already in a position to formulate and file.

[68] Accordingly, the applicants have not established in relation to a Fair Trading

Act claim the threshold required for a pre-commencement discovery order under r

8.20(a) High Court Rules.

Conclusion – claims in contract and under the Fair Trading Act

[69] Pre-commencement discovery is not required in relation to either the potential claims in contract or the potential claims under the Fair Trading Act. The prerequisite for a pre-commencement discovery order under r 8.20(1)(a) High Court Rules have not been established.

Other considerations

[70] By reason of the conclusions I have already reached, it is unnecessary that I make determinations on two further issues which arose in the course of submissions. I will therefore deal with them briefly.

Commercial sensitivity of requested documents

[71] An additional ground of opposition relied upon by Mastagard was that the documents sought by the applicants are commercially sensitive. That was explained in Mr Stapleton’s evidence by reference to two particular factors. First, Mastagard has in recent times sold its business operation to an independent party. The purchaser took over Mastagard’s existing client base and information. Mr Stapleton deposes that the purchaser obtained undertakings from Mastagard as to its confidential information, such as in relation to client pricing. There is accordingly the confidentiality interest of a third party to be taken into account. Secondly, whether or not there had been a sale to an independent party, Mr Stapleton says that the information sought as to customers and pricing is by its nature commercially sensitive so that any release or circulation would be damaging.

[72] While the need for such protection may in some cases be addressed by strict limits as to the scope of a pre-commencement discovery order and as to the persons with access to discovered documents,¹⁹ the reasonable needs of protection of commercial sensitivity may in some cases militate in favour of all discovery issues being dealt with in the normal post-commencement discovery stage. At that point the issues in the litigation are more likely to have been clearly defined and the Court

_{may minimise the risk that an unnecessarily broad range of documents is ordered to}

¹⁹ See, for instance, British Markitex Ltd v Johnston [1987] NZHC 248; (1987) 2 PRNZ 535 per Wylie J at 543;

Welgas Holdings Ltd v Petroleum Corp of New Zealand Ltd, above n 1, at 50 per McGechan J.

be discovered. This may be particularly important in a case such as the present where an independent party has purchased the business and acquired rights in the information.

Relevance of the modern discovery regime

[73] The second issue which I do not need to resolve is the extent to which the modern discovery regime,²⁰ and in particular the mandated focus on proportionality to subject matter, might affect the exercise of the discretion under r 8.20. Rule 8.20 is but one rule as to discovery and as such is subject to the proportionality requirements established by r 8.2(1) and other provisions. By its nature an assessment of proportionality will be the more difficult where there are no pleadings to define the subject matter of the proceeding, as occurs in a pre-commencement stage. The difficulty in that is exacerbated when, as in this case, the intending

plaintiffs elect not to provide a draft statement of claim.

[74] There may be a number of means by which the Court in a case such as the present can ensure proportionality at the normal discovery stage. In the present case the applicants seek discovery of a wide range of documents over the entire period of the contracts. A proportionate approach to discovery, if ordinary discovery orders were being made, might be to require the defendant to provide identified classes of documents over a limited sample period to enable plaintiffs to assess whether the resulting information and calculations establish either the existence of breach or a worthwhile level of claim. In his written synopsis, Mr Maze expressly recognised that the discovery sought in this case may not merely lead to significant amendment after the completion of discovery but might also indicate that the applicants’ claims are not worth pursuing. If it transpired, after focussed discovery, that the claims for the particular period were worth pursuing, then a proportionate response to discovery might lead to the discovery of the documents for the whole remaining period.

[75] I do not resolve the present application on this basis but had it been necessary to do so, I would have been inclined to the view that the new discovery regime with

_{its emphasis on proportionality and tailored discovery, and its inherent flexibility,}

²⁰ Effective on 1 February 2012, by High Court Amendment Rules (No 2) 2011.

made it more appropriate to deal with all matters of discovery in this case after commencement.

Consolidation

[76] Counsel filed a memorandum in which the parties consented to the consolidation of the three applications. It is appropriate that consolidation be formally ordered. The costs of the proceedings can then be dealt with in terms of the consolidated proceeding.

Costs

[77] Counsel agreed that in relation to the interlocutory application, costs ought to follow the event. I adopt that as the just outcome.

[78] The appropriate categorisation of the proceeding is Category 2 and the appropriate band is B.

[79] The first and second intended defendants should have a single set of costs on each application. There needs to be recognition in relation to costs that the three applications were conveniently heard together with consequential time and costs savings. Schedule A attached to this judgment sets out the calculation which I consider to be just in relation to the applications.

Orders

[80] I order:

(a) The three proceedings are by consent and pursuant to r 10.12 High

Court Rules consolidated and shall be referred to by the CIV. No.

2014-409-235, with the intending plaintiffs appearing respectively as first, second and third according to their order in the 235/236/324 proceedings.

(b) The applications are dismissed;

(c) Truck Master Limited is to pay one set of costs and disbursements to Mastagard Waste Limited and Sebastian Graeme Stapleton in the sum of $2,955.70;

(d) RDL Transport Limited is to pay one set of costs to Mastagard Waste

Limited and Sebastian Graeme Stapleton in the sum of $2,955.70;

(e) Meclan Transport Limited is to pay one set of costs to Mastagard

Waste Limited and Sebastian Graeme Stapleton in the sum of

$2,955.70.

Associate Judge Osborne

Solicitors:

R A Fraser & Associates, Christchurch

Fletcher Vautier Moore, Nelson

_{SCHEDULE A}

1. Costs

_{Time allocation}

Daily recovery rate @ Category 2 $1,990.00

Total $2,845.70

2. Disbursements

Notice of opposition $110.00