100 Investments Ltd v Walker

[2024] NZHC 468

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV 2019-404-1160

[2024] NZHC 468

BETWEEN

100 INVESTMENTS LTD

First Plaintiff

Continued…

AND

ROBERT BRUCE WALKER

First Defendant

Continued…

Hearing:

1 March 2024

Appearances:

A Barker KC and R Hucker for the first to fourth plaintiffs in 1160 and the first to fourth defendants in 0274

D Salmon KC, N R Frith and H Jaques for the second defendant in 1160 and the sixth defendant in 0274

J MacGillivray and R Reeves for the third defendant in 1160 and the seventh defendant in 0274

D J Cooper KC for Mr Walker

J Moss and C Hanafin for the fifth to seventeenth defendants in 1160 and the first to thirteenth plaintiffs in 0274

Judgment:

6 March 2024

JUDGMENT OF CAMPBELL J

This judgment was delivered by me on 6 March 2024 at 2.30 pm pursuant to Rule 11.5 of the High Court Rules

Registrar/Deputy Registrar

100 INVESTMENTS LTD v WALKER [2024] NZHC 468 [6 March 2024]

CIV 2019-404-1160

FTG SECURITIES LTD

Second Plaintiff

RFD FINANCE LTD
Third Plaintiff

TOMANOVICH HOLDINGS LTD
Fourth Plaintiff

AND

LPF GROUP LTD

Second Defendant

SPF NO 10 LTD (In Liquidation) Third Defendant

KEVIN JOHN WHITLEY as Liquidator of Property Ventures Ltd (In Liquidation) Fourth Defendant

PROPERTY VENTURES LTD (In

Liquidation)

Fifth Defendant

CASHEL VENTURES LTD (In

Receivership and Liquidation) Sixth Defendant

TAY VENTURES LTD (In Receivership and Liquidation)

Seventh Defendant

LIVINGSPACE PROPERTIES LTD

(In Liquidation) Eighth Defendant

TUAM VENTURES LTD (In Liquidation) Ninth Defendant

CASTLE STREET VENTURES LTD (In

Liquidation) Tenth Defendant

LICHFIELD VENTURES LTD (In

Liquidation)

Eleventh Defendant

Continued…

ST ASAPH VENTURES LTD (In

Liquidation)
Twelfth Defendant

BEECHNEST LTD (In Receivership and Liquidation)
Thirteenth Defendant

92 LICHFIELD LTD (In Receivership and Liquidation)
Fourteenth Defendant

MONTECRISTO CONSTRUCTION

COMPANY LTD (In Liquidation) Fifteenth Defendant

FIVE MILE HOLDINGS LTD (In
Liquidation)
Sixteenth Defendant

CIV 2022-404-274

BETWEEN

KEVIN JOHN WHITLEY

First Plaintiff

PROPERTY VENTURES LTD (In

Liquidation) Second Plaintiff

FIVE MILE HOLDINGS LTD (In

Liquidation) Third Plaintiff

CASHEL VENTURES LTD (In Liquidation and Receivership)

Fourth Plaintiff

TAY VENTURES LTD (In Liquidation and Receivership)

Fifth Plaintiff

LIVINGSPACE PROPERTIES LTD

(In Liquidation) Sixth Plaintiff

BEECHNEST VENTURES LTD (In

Liquidation) Seventh Plaintiff

Continued…

AND

CASTLE STREET VENTURES LTD (In

Liquidation)
Eighth Plaintiff

LICHFIELD VENTURES LTD (In

Liquidation) Ninth Plaintiff

92 LICHFIELD LTD (In Liquidation) Tenth Plaintiff

ST ASAPH VENTURES LIMITED (In

Liquidation)
Eleventh Plaintiff

MONTECRISTO CONSTRUCTION

COMPANY LTD (In Liquidation) Twelfth Plaintiff

TUAM VENTURES LTD (In Liquidation) Thirteenth Plaintiff

100 INVESTMENTS LTD
First Defendant

FTG SECURITIES LTD
Second Defendant

RFD FINANCE LTD
Third Defendant

TOMANOVICH HOLDINGS LTD
Fourth Defendant

ROBERT BRUCE WALKER

Fifth Defendant

LPF GROUP LTD
Sixth Defendant

SPF NO 10 LTD (In Liquidation) Seventh Defendant

[1]    On the second day of this trial I heard five applications. I delivered oral decisions on four of the applications, with reasons to follow. I reserved judgment on the remaining application. This is my decision on that application, together with reasons for my decisions on the other four applications.

[2]An earlier judgment sets out the background to these proceedings.1

Mr Walker’s challenge to the secured creditor plaintiffs’ claim to privilege

[3]    In a judgment dated 15 December 2023, I directed the secured creditor plaintiffs to provide further discovery of documents recording communications between (broadly speaking) Mr Henderson or the secured creditors and Mr Whitley on particular topics.

[4]    The secured creditors provided that further  discovery  in  an  affidavit  by  Mr Henderson on 29 January 2024. They claimed litigation privilege over 372 of the 436 documents that were listed.

[5]    Mr Cooper KC, on behalf of Mr Walker, challenged those claims to litigation privilege. He proposed that I use the procedure in r 8.25(2) of the High Court Rules 2016 to inspect a sample of the documents over which privilege was claimed. The secured creditors opposed that proposal.  Mr Hucker,  who delivered  submissions  on their behalf, submitted that documents should not be inspected under r 8.25(2) unless there was credible evidence that the lawyers had misunderstood their duty, were not to be trusted, or there was no reasonably practicable alternative to such inspection.

[6]    Litigation privilege is governed by s 56 of the Evidence Act 2006. The privilege arises where communications are made or received for the dominant purpose of “preparing” for a proceeding or apprehended proceeding. In Beckham v R, the Supreme Court said that the dominant purpose test should be applied “with some rigour”.2

1      100 Investments Ltd v Walker [2023] NZHC 3732.

2      Beckham v R [2015] NZSC 98, [2016] 1 NZLR 505 at [84].

[7]    Litigation privilege is not available merely because a communication has something to do with a proceeding, or is made or received with a proceeding in mind. The communication must be made or received for the dominant purpose of preparing for the proceeding. Mr Cooper had identified two documents over which the secured creditors had claimed litigation privilege (before subsequently disclosing the documents). I considered that these documents were merely communications that had something to do with this proceeding but that their purpose was not to prepare for this proceeding, and that they therefore did not attract litigation privilege. I considered there was a risk that privilege had been incorrectly claimed over other communications that were made at about the same time (namely, early on in Mr Whitley’s appointment as liquidator).

[8]    For these reasons, I decided that I would inspect a sample of the documents (though not  the entirety  of the sample proposed by Mr Cooper)  for the purpose     of deciding the validity of the secured creditors’ claim to privilege. I directed the secured creditor plaintiffs to produce those documents to me so that I could inspect them for the purpose of deciding the validity of their claim to privilege.3

LPF’s challenge to Mr Whitley’s claim to litigation privilege over his examination of Ryan Eathorne

[9]    Ryan Eathorne assisted Mr Walker in the liquidation of the PVL companies. In 2023, Mr Whitley required Mr Eathorne to be examined under s 261 of the Companies Act 1993. That examination occurred in May 2023, by Zoom. The Zoom meeting was recorded.

[10]   Mr Whitley claimed litigation privilege over the recording of the examination. He said that information discussed in the examination was prepared, and the examination was made, for the dominant purpose of preparing for Mr Whitley’s proceeding.

3      Ordinarily it is preferable that a Judge other than the trial Judge undertake the inspection. No party suggested that course. It would have been impractical, given that the trial was underway and that Mr Cooper wished to have any documents (assuming privilege was set aside) for the purposes of cross-examining the first two witnesses.

[11]   LPF challenged that claim to privilege. Mr Salmon KC, for LPF, submitted that a liquidator should make clear whether the results of any examination are to be kept confidential. He said that Mr Whitley had not told Mr Eathorne that the examination was intended to be private or confidential. He also submitted that a s 261 examination could not attract litigation privilege because the s 261 process was inconsistent with the examination being confidential or having the necessary purpose to attract the privilege.

[12]   Mr Moss, for  Mr Whitley,  acknowledged  that  a  liquidator  should  advise a participant whether an examination is confidential or not. But he submitted that this was for the participant’s benefit, in order to give them the opportunity to decline to submit to an examination where the liquidator intends to conduct the examination on an open,  rather than private and  confidential basis.  He said  that in the  absence of  a liquidator clarifying the position the examination should be presumed to be confidential in nature.

[13]   It was common ground that confidentiality is a prerequisite to a claim for litigation privilege.4 I accept that the liquidator’s obligation to advise a participant whether an examination is confidential or not, and confidentiality itself, is for the participant’s benefit.5 But this does not mean that in the absence of a liquidator clarifying the position there should be a presumption that the examination is confidential in nature. Rather, whether the interview is confidential depends on the particular facts (of which an absence of any clarification by the liquidator is only one).

[14]   Mr Eathorne made an affidavit. He deposed that the emails he received from Mr Whitley or his counsel in the lead up to the examination did not contain any reference to the examination being confidential. He said that the only restriction on the use of the examination was at his request. He asked that the contents of his examination not be shared with David Henderson. Mr Whitley did not agree to that but did agree not to share the recording of the examination with Mr Henderson.

4      Beckham v R [2015] NZSC 98, [2016] 1 NZLR 505 at [93]–[94].

5      See the explanation in ANZ National Bank Ltd v Sheahan [2012] NZHC 3037, [2013] 1 NZLR 674.

[15]Mr Whitley did not make an affidavit in response.

[16]   It follows that Mr Eathorne, for whose benefit any confidentiality would have arisen, did not want or ask for confidentiality, except in respect of Mr Henderson. Mr Whitley agreed to a limited restriction with respect to Mr Henderson. Mr Whitley did not ask for or propose any other confidential terms. In these circumstances, I consider that the examination was not confidential.

[17]   For those reasons, I found that the Whitley parties did not have a privilege   in Mr Whitley’s examination of Mr Eathorne.

Collateral waiver

[18]   Mr Whitley has waived  privilege in every privileged document belonging    to the PVL companies that he has seen. He has, however, sought to maintain privilege over such documents that are held by third parties (such as former solicitors or counsel for the PVL companies) where he has not yet seen the documents.

[19]   LPF has been seeking documents from Justin Smith KC and Meredith Connell, who were respectively senior counsel and solicitors for the PVL companies. Both appear to hold documents over which the PVL companies (and now Mr Whitley) could claim privilege. Mr Whitley has been taking the position that, although he is likely  to waive any privilege, he needs to see the documents before doing so.

[20]   LPF said Mr Whitley’s position was an unnecessary impediment to its trial preparation. It sought an order that the Whitley parties had collaterally waived privilege in any privileged documents that belong to them and are held by third parties.

[21]   Mr Moss submitted that the documents, though held by third parties, belong to the PVL companies, of which Mr Whitley is now liquidator. He said Mr Whitley was therefore entitled to see the documents first, rather than the documents going to LPF. He said that Mr Whitley was likely to continue to waive privilege on the documents as he saw them, but that he was entitled to see them first.

[22]   The principle of collateral waiver prevents a party from presenting the court with a selective view of the relevant evidence. The principle arises where a party has waived privilege in relation to a communication that is helpful to the party’s case on an issue, while asserting privilege over other communications on the same issue that may be unhelpful to its case. In such circumstances there is a collateral waiver of privilege over those other communications.6

[23]   Mr Whitley has waived privilege over a vast number of privileged documents. I consider it  inevitable that he has collaterally waived privilege over in respect       of communications on any issues arising in the PVL proceedings, any issues relating to Mr Walker’s duties as a liquidator, and any issues relating to negotiations between Mr Walker and/or Mr Scutter (on the one hand) and LPF and/or SPF (on the other).

[24]   Mr Moss did not dispute that there had been a collateral waiver. But his position remained that the documents should first come  from the  third  parties to  Mr Whitley, who would then make the call whether to waive privilege. With respect, given that there has been a collateral waiver, there is no privilege left for Mr Whitley to consider waiving.

[25]   Mr Moss had a related concern. He asked that I direct that the defendants promptly provide to the Whitley parties any of these third-party documents that they obtained. Mr Salmon had no issue with such a direction.

[26]   I therefore found that the Whitley parties have collaterally waived privilege in any documents belonging to them and held by third parties that address any of the following issues:

(a)The carriage of the PVL proceedings.

(b)Mr Walker’s duties as liquidator.

6      NZX Ltd v Ralec Commodities Pty Ltd [2015] NZHC 241; and Capital + Merchant Finance Ltd v Perpetual Trust Ltd [2015] NZHC 1233 at [29]. The collateral waiver principle overlays s 65 of the Evidence Act 2006 because the Act does not purport to be a complete code as to waiver of privilege.

(c)Negotiations between Mr Walker and/or Mr Scutter (on the one hand) and LPF and/or SPF (on the other).

[27]   I reserved leave to any party to apply to amend the above descriptions of the issues. I directed that any party obtaining such documents from a third party promptly provide them to all other parties.

Application by secured creditor plaintiffs to serve Mr Hussey’s brief

[28]   On 23 February 2024, the secured creditor plaintiffs applied under r 9.8 to serve a brief of evidence of Shane Hussey. The defendants opposed leave.

[29]   Rule 9.8 provides that the acceptance and use of a supplementary brief is at the discretion of the trial Judge. The ultimate question is where the interests of justice lie, weighing the respective prejudice to the parties if leave is or is not granted.

[30]   The secured creditors said,  correctly,  that  the  defendants  were  very  late in serving their briefs. One of the briefs that the defendants served, on 16 February 2023, was from William Apps. The secured creditors said that they should be provided with an opportunity to reply to Mr Apps.

[31]   Mr Hussey is an accountant. He specialises in providing opinions on financial disputes. He was instructed by the secured creditors to consider the losses claimed in the PVL proceedings and the extent to which they represented losses suffered by the PVL subsidiaries.

[32]   Mr Barker KC, counsel for the secured creditors, said that a key issue in this proceeding arose from the fact that PVL received a lump sum in settlement of claims on behalf of PVL and the PVL subsidiaries, but no apportionment was made of that sum. He submitted that one of the alternatives that the secured creditors will invite me to consider is to undertake some form of apportionment. He said that Mr Hussey’s evidence is relevant to that exercise, and that it responds to Mr Apps’ evidence on the same issue.

[33]   A combination of two factors persuaded me that I should decline leave. First, and as Mr Barker acknowledged, the secured creditors have known for a long time that the apportionment question was an issue in these proceedings and that Mr Apps had a particular position on it. Indeed, in late 2020 the secured creditors sought to file an affidavit from Mr Hussey addressing this very issue (in the context of an interlocutory application). The secured creditors did not explain why they did not serve a brief from Mr Hussey at the same time as their other briefs.

[34]   Secondly, the defendants would be prejudiced if the secured creditors were granted leave to offer Mr Hussey’s brief. The defendants would, of course, have to be allowed to lead further evidence from Mr Apps in response to Mr Hussey’s brief. The defendants said that this would require a substantial amount of work and that it could not be done before Mr Apps is scheduled to give his evidence. An adjournment would therefore follow. Mr Barker said that the work required for Mr Apps to respond was much less. However, I do not think it is for the plaintiffs to dictate the manner in which the defendants may wish to respond to Mr Hussey’s proposed evidence.

[35]   Mr Barker also said that any risk of an adjournment was a result of the defendants serving their briefs very late, just short of the trial.   That point might     in other circumstances have much force. But the situation that has arisen here is not  a result of the late service of the defendants’ briefs. It is a result of the secured creditors’ unexplained decision to refrain from serving a brief from Mr Hussey at the same time as their other briefs.

[36]   I therefore declined leave to the plaintiffs in the 1160  proceeding to serve  Mr Hussey’s brief.

Application by the Whitley parties to amend their pleadings

[37]   The Whitley parties applied to amend their statement of claim.   They filed    a draft fourth amended statement of claim. This tracked the amendments.

[38]Two amendments are not opposed:

(a)An amendment to [86]. This is part of the first cause of action, a claim against Mr Walker alleging he misapplied voidable preference recoveries. Mr Moss clarified that the last three words of the proposed amendment (“that owned them”) would be deleted.

(b)Amendments that reduce (from about $17.2 million to about $16.9 million) the amount by which the Whitley parties allege SPF was overpaid under the Funding Agreement.

[39]I grant leave to the Whitley parties to make those amendments.

[40]   Another group of amendments is opposed. In the second cause of action, the Whitley parties propose:

(a)To add, at [91], an alternative claim that “the Court can assess and declare unlawful”. It is not clear what it is alleged the Court can assess and declare unlawful. I proceed on the basis the allegation is intended to be that the Court can assess and declare unlawful the payments referenced in [90].

(b)To make amendments to the prayer for relief:

(i)At paragraph A, to add a reference to s 73 of the Contract and Commercial Law Act 2017 and to add an alternative claim for a declaration that court approval for the Funding Agreement and Distribution Agreement can retrospectively be refused or that those agreements were illegal.

(ii)At paragraph C, to add a reference to s 73 of the Contract and Commercial Law Act and to add an alternative pleading that for the reasons pleaded at [102]–[105] of the statement of claim the Distribution Agreements were illegal.

[41]   The defendants opposed leave on the basis that the pleading of illegality with respect to s 73 was not properly particularised. Mr MacGillivray, counsel for SPF,

submitted that if particulars were provided it would be apparent that any claim based on s 73 was time-barred.

[42]   I consider that there are already sufficient particulars for the proposed amendments to [91] and to paragraph A of the prayer for relief. This is because [90]–

[92] of the statement of claim already plead that the Funding Agreement and Distribution Agreement, and/or the payments made under them, were unlawful. “Unlawful” is sufficiently synonymous with “illegal”. In turn, [90] and [91] state (including by reference to [73]) the legal and factual basis upon which it is alleged those things were unlawful/illegal. Further, the proposed amendments do not make new factual allegations.

[43]   I therefore see no prejudice to the defendants and grant leave to the Whitley parties to make those amendments. To be clear, the Whitley parties will not be permitted to advance any other bases upon which the agreements or payments are alleged to have been unlawful/illegal.

[44]   I do not grant leave for the proposed amendment to paragraph C of the prayer for relief.   Paragraph C refers to paragraphs in the statement of claim that make     no allegations of unlawfulness or illegality. There are therefore no particulars provided of the alleged unlawfulness or illegality.

Campbell J