Arena Alceon NZ Credit Partners, LLC v Grant
[2024] NZHC 3790
•12 December 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-2214
[2024] NZHC 3790
UNDER Sections 239ADS, 2390, 283, 284 and 286 of the Companies Act 1993 and Part 18 of the High Court Rules 2016 IN THE MATTER
of Ormiston Rise Limited (In Receivership and In Liquidation)
AND
IN THE MATTER
of Ormiston Rise Development Limited (In Receivership and In Liquidation)
BETWEEN
ARENA ALCEON NZ CREDIT PARTNERS, LLC
Plaintiff
AND
DAMIEN MITCHELL GRANT
First Defendant
ADAM STEVENSON BOTTERILL
Second Defendant
Hearing: 9 December 2024
(Telephone Conference)
Counsel:
D J Chisholm KC and S Knott for Plaintiff
R J Hollyman KC and G D Simms for Liquidator
Judgment:
12 December 2024
JUDGMENT OF ASSOCIATE JUDGE LESTER
(in respect of plaintiff’s application for further and better discovery)
This judgment was delivered by me on 12 December 2024 at 12:00 pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
ARENA ALCEON NZ CREDIT PARTNERS, LLC v GRANT [2024] NZHC 3790 [12 December 2024]
[1]This proceeding is set down for a four-day hearing beginning 24 March 2025.
[2] A telephone conference was scheduled for the afternoon of 9 December 2024 to address any interlocutory issues arising. While that conference was initially vacated, following Arena Alceon NZ Credit Partners, LLC (Arena) on 5 December 2024 filing an application for further and better discovery, the conference was reinstated. The application was opposed and counsel filed supporting memoranda. The application was heard at the telephone conference on 9 December 2024.
[3] The defendants are liquidators of Ormiston Rise Limited (in receivership and in liquidation) (ORL) and Ormiston Rise Developments Limited (in receivership and in liquidation) (ORDL).
[4] Three broad categories of documents were sought by Arena. The first category was a challenge to the confidentiality claimed by the defendants to the documents in Part 3 of their List of Documents. The second category concerns the extent to which the defendants had met their obligation to provide tailored discovery in terms of agreed Category 15. The third category related to two specific documents sought by Arena (a third document no longer being an issue by the time of the conference).
[5] Counsel had agreed categories of tailored discovery and, by memorandum dated 11 November 2024, sought directions by consent in relation to timetabling generally and the provision of tailored discovery. Orders were made as sought by the parties.
Defendants’ claim to confidentiality — category 1
[6] The onus is on the party claiming confidentiality to establish that each of the documents is confidential. Once confidentiality is established, to the extent there is an onus, it is on the applicant seeking to set aside the confidentiality claim.1
1 Payment Express Ltd v Paymark Ltd [2019] NZHC 2027 at [21].
[7] If a document is confidential then there is a balancing act in relation to prejudice.2 The exercise involves balancing the respective prejudices to each party to determine whether that balancing exercise weighs more heavily in favour of upholding the confidentiality restrictions or open disclosure.
[8] The defendants here claim confidentiality for four categories of document, at least three of which are related.
[9]The first category are proofs of debt filed in the administration of ORL.
[10]The second category are creditors’ lists.
[11]The third category is invoices and postal vote forms.
[12] Mr Hollyman KC, counsel for the defendants, submitted the Companies Act 1993 (the Act) provides the starting point in respect of the above documents is that they attract an inherent degree of confidentiality. That submission was made in reliance on s 256 of the Act which provides:
256 Duties in relation to records
(1)The liquidator of a company must—
(a)keep accounting records and other documents of the liquidation and permit those records, and the records and other documents of the company, to be inspected by—
(i)any liquidation committee appointed under section 314, unless the liquidator believes on reasonable grounds that inspection would be prejudicial to the liquidation; and
(ii)if the court so orders, a creditor or shareholder; and
…
[13] Mr Hollyman submitted, with reference to Levin v Lawrence, that this section means the default position is an individual creditor or shareholder is not entitled to the liquidator’s documents, that is, there is a presumption against disclosure.3
2 At [21].
3 Levin v Lawrence [2013] NZCA 394, (2013) 11 NZCLC at [27].
[14] In my view, a creditor or shareholder’s ability to apply to the Court for access to records is a different issue from whether the documents can properly be said to be confidential in the discovery context.
[15] I consider the Companies (Reporting by Insolvency Practitioners) Regulations 2020 (the Regulations) provide better guidance as to what might be presumed to be information a liquidator is entitled to treat as confidential.
[16] A liquidator is required under cl 7 of the Regulations to provide six-monthly reports. Clause 7 spells out the detail of what is to be contained in the report which is to include, pursuant to cl 6(2), a list of every known creditor and if known, each creditor’s address for communication and a summary of the company’s known debts and liabilities including the amount owed to each class of creditor.
[17]From their initial report:
6 Prescribed information for liquidator’s initial report
…
(3)The liquidator may omit the following information from the initial report if the liquidator considers that the inclusion of those details in the report would materially prejudice the performance of the liquidator’s functions:
(a)the estimated value of an asset or a class of assets:
(b)any known pending proceedings to which the company is a party.
(4)The liquidator must omit from the initial report the address for communications of any creditor who, on the information available to the liquidator, may reasonably be assumed to be an individual (unless the individual has consented to the disclosure of the address in the report).
[18]The liquidator, under cl 7(3), may omit from his or her six monthly report:
… details of any amount received or paid if the liquidator considers that their inclusion would materially prejudice the performance of the liquidator’s functions.
[19] The three categories of documents set out above are not within the categories of information the liquidator can omit from a report or at least, there is no explanation
offered as to how the information in those documents could be withheld under the above exceptions.
[20] I cannot see how disclosure of the proofs of debt, creditor lists, or invoices and postal votes would “materially prejudice the performance of the liquidator’s functions”. The above clauses in the Regulations are a forewarning to creditors that the information they provide to a liquidator will, by default, be public information unless the liquidator is entitled not to disclose it because the information satisfies the clauses at [17] or [18].
[21] As Mr Chisholm KC, counsel for Arena, notes in his submissions, all the companies that filed proofs of debt are corporate entities so no privacy concerns arise, the proofs are for relatively modest sums and are not inherently confidential.
[22] The final category relating to confidentiality is described as involving numerous emails between Waterstone Insolvency (as they then were) and the directors of ORL. Mr Hollyman’s submissions did not attempt to explain why this material was confidential. Again, there was general reliance on s 256 of the Act but in terms of how confidentiality is understood in the discovery context, there are no privacy issues, sensitive financial information, or trade secrets said to be recorded in the emails.
[23] I am satisfied the claim for confidentiality in the Part 3 documents cannot be maintained.
Funding document and associated correspondence
[24]Category 15 of the tailored discovery provides:
[D]ocuments relating to any funding received, or arranged to be received, by the defendants relating to the administration and/or liquidation of ORL and the liquidation of ORDL and/or the litigation that the defendants are involved in, including any funding agreements.
[25] The defendants have provided a copy of a litigation funding agreement which is fully redacted save for from the cover page, recording the parties to the agreement. An unredacted copy has been requested by Arena’s solicitors but not provided.
[26] No further documentation regarding the funding agreement has been disclosed. Mr Chisholm submits it is highly likely there will have been surrounding documents concerning the funding agreement, for example, correspondence with the funder and the actual funding.
[27] I agree. It is unlikely a funding agreement came into existence fully complete without any surrounding documentation. Such surrounding material needs to be discovered.
[28] Mr Hollyman submitted some of the surrounding material may be privileged. If that is the case then the appropriate privilege can be claimed in the further list that will be required of the defendants.
[29] Mr Chisholm noted the redactions of the funding agreement were such that even the date of the agreement is not known. Mr Hollyman, while not conceding the point, appeared to recognise that Arena knowing the date of the agreement may be of assistance.
[30] Mr Hollyman submitted one of the orders sought in the statement of claim is an order that the defendants be required to provide full disclosure to creditors and shareholders of all funds received in the liquidation of ORL and ORDL including the without information in the liquidator’s reports and the identity of any party who is providing or has previously provided litigation funding to ORL or ORDL. Mr Hollyman notes the disclosure of the identity of the Funder in the redacted funding agreement meets the second of these orders. However, Mr Hollyman submits that Arena is seeking to obtain through discovery, what it seeks by way of substantive relief in the proceeding. I accept the force of this point that disclosure of the funding agreement and of the funds received would overtake one of the orders sought in the claim, but the strength of the point is undermined by it having been agreed that discovery would be given in terms of the category 15 documents. Once that was agreed then, absent a valid claim that the documents are confidential, the discovery order applies.
[31] I note details of funding received by the liquidator is a matter to be included in the information in the liquidator’s six monthly report. However, details of amounts received may be omitted if the threshold of material prejudice set out at [17] above is met. Here, the defendants do not explain why that threshold is met, albeit their reports assert the right to omit applies. The threshold of “material prejudice” may not always be met even if a document is confidential but a liquidator’s clear reporting obligations, in my view, inform when confidentiality can be claimed for material that otherwise must be included in the liquidator’s reports. For example, a funding agreement may require confidentiality which, if breached, may cause the Funder to withhold funding which would prejudice the liquidator in performing their function.
[32] However, in this case the liquidator does not attempt to explain why the information covered by category 15 of the tailored discovery is confidential or why the threshold of material prejudice from [17] above is met. Where the claim for confidentiality is challenged, as I have said, the onus is on the defendants to establish confidentiality. I am not satisfied that a basis for confidentiality has been established by the liquidator in respect of the funding arrangements beyond the bare assertion in the liquidator’s reports that the material prejudice exception applies.
[33] This is not a situation as in Waterhouse v Contractors Bonding Ltd, where the issue was whether a litigation funding agreement was an abuse of process.4 The issue here is firstly, whether the document is discoverable — that has been agreed by the parties in agreeing to category 15 and secondly whether the documents are confidential. In my view, the documents are not confidential. That is not altered by the overlap of category 15 with one of the orders sought in the statement of claim. That this outcome may have been an unintended consequence of agreeing to a category 15 discovery is not the point. The discovery orders have been made and are not challenged.
[34] Accordingly, I am satisfied that the claim for confidentiality in respect of category 15 cannot stand and the defendants are to provide full discovery of that category. I so direct.
4 Waterhouse v Contractors Bonding Ltd [2013] NZSC 89, [2014] 1 NZLR 91.
Specific document requests
[35] The first document is a note referred to in a document that has been discovered. Mr Hollyman submitted the document was not relevant. Mr Chisholm submitted the document fell within discovery category 1 and discovery category 8. The short point is that if the defendants do not believe the document is relevant then its disclosure cannot prejudice their position. It is one document, so requiring it to be produced is not disproportionate or burdensome. In fairness to Mr Hollyman, he did not strongly resist this disclosure.
Second category of documents
[36] The second category of documents sought arises from a reference by Mr Grant to a “back and forth to determine whether [Mr Grant] was able to act as administrator and setting the relevant consent to act”. This is said to be correspondence with Foundation Developments Ltd.
[37] The above passage in quotes appears in another document discovered by the defendants.
[38] Mr Hollyman understood all such documents had been already disclosed. In the affidavit of documents that is to be provided by the defendants, they are to identify the documents in their discovery that make up the “back and forth” and confirm all such documents have been discovered.
[39] The further affidavit required by this judgment is to be provided by 5.00pm on 19 December 2024.
Costs
[40] There is no reason why costs should not follow the event. While counsel did not make submissions on costs, 2B would seem appropriate. If no costs submissions
are made within five working days, this costs order is that the defendants are to pay the plaintiff costs on a 2B basis for this application, plus disbursements as fixed by the registrar.
Associate Judge Lester
Solicitors:
Simpson Grierson, Auckland Wynn Williams, Auckland
Copy to counsel:
D J Chisholm KC, Barrister, Auckland R J Hollyman KC, Barrister, Auckland A J Peat, Barrister, Auckland
0
3
0