Bannock v Monaco Management Limited
[2015] NZHC 640
•1 April 2015
IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY
CIV-2013-409-001701 [2015] NZHC 640
BETWEEN MICHAEL WILLIAM BANNOCK,
ANNE MARGARET BANNOCK and OXFORD STREET TRUSTEES (2010) LIMITED as trustees of the M & A BANNOCK FAMILY TRUST and ORS Plaintiffs
AND
MONACO MANAGEMENT LIMITED First Defendant
MONACO VILLAGE LIMITED
(In Receivership and In Liquidation) Second Defendant
SCOTT PATRICK SANDERS Third Defendant
Hearing: 16 March 2015 Appearances:
R A Edwards for Plaintiffs
A D Marsh for First and Third Defendants
No Appearance for Second DefendantJudgment:
1 April 2015
JUDGMENT OF ASSOCIATE JUDGE MATTHEWS
on Return of Privileged Material
[1] The plaintiffs in this proceeding challenge the validity of certain financial transactions, under the Securities Act 1978. A summary of the basis of the plaintiffs’ case appears in a judgment issued on 17 March 2015, in relation to the plaintiffs’ application for further and better discovery.
[2] The plaintiffs have instructed senior counsel. Counsel provided the plaintiffs with an opinion. The third defendant, Mr Sanders, has a copy of that opinion.
BANNOCK and ORS v MONACO MANAGEMENT LIMITED and ORS [2015] NZHC 640 [1 April 2015]
[3] It is common ground that privilege in the opinion was held by the plaintiffs. [4] The plaintiffs apply for an order directing return of the opinion.
[5] Mr Marsh informs me that:
(a) The privileged document was not received by any of the defendants from any of the plaintiffs, but from another source which he has not identified.
(b)His clients have undertaken not to use the document or refer to its contents in evidence in this proceeding.
(c) Nonetheless, they refuse to hand it back or undertake to destroy all copies that they hold.
[6] The defendants have already used the contents of the document in evidence as an annexure to an affidavit filed in support of their application for security for costs. Ms Edwards says that in communications with some of the plaintiffs recently Mr Sanders has also made it clear that he has other surrounding documentation sourced from the plaintiffs’ legal advisors. It seems that Mr Sanders may be using this material in discussions with some of the plaintiffs to dissuade them from carrying on with this case, but Mr Sanders has not had an opportunity at this point to explain what use he is making of the material. Furthermore, in a recent memorandum Ms Edwards says that Mr Sanders has disclosed it to the Law Society in support of an unsuccessful complaint against the plaintiffs’ solicitor.
[7] Ms Edwards accepts that she cannot point me to any authority, nor any provision, in the Evidence Act 2006 or rule in the High Court Rules for the order that she seeks. She relies on the inherent jurisdiction of the Court. Mr Marsh says that there is no proper basis for the order sought, that it cannot be made under the inherent jurisdiction of the Court and, in any event, an order is not required due to the plaintiffs’ undertaking. He says that the real effect on the plaintiffs is that Mr Sanders knows the advice they have received so, metaphorically speaking, the horse has bolted.
Discussion
[8] A convenient point to start this discussion is a passage from B v Auckland District Law Society.1 The case concerned some privileged documents which had been made available by counsel for the party in whom the privilege was vested to counsel acting for the Auckland District Law Society on condition that privilege was not waived. Later the receiving party, the Law Society, refused to return them:
[69] The Society argued that, once the documents were produced to Mr Ennor, they ceased to be privileged. Their Lordships consider that this is playing with words. It confuses the nature of the documents with the rights to which the arrangements with Mr Ennor gave rise. The documents are privileged because they were created for the purpose of giving or receiving legal advice. If they are not produced voluntarily, production cannot be compelled. If they are produced voluntarily, the right to withhold production no longer attaches to them. In that sense the privilege may be said to be lost. But they are the same documents, and it is not inappropriate to describe them as privileged. Their inherent characteristics are the same. The policy which protected them from unauthorised disclosure is the same. The cat is still a cat. It can be put back in the bag.
[70] There is another confusion also. The appellants want to recover the documents because they are privileged. But they do not rely on privilege to found their cause of action. A party who has parted with possession of documents may have a right to recover possession on any one of a number of grounds. He may reclaim them because they belong to him; or because he has a contractual right to recover them; or because they are confidential; or because he has parted with them for a limited purpose and equity will not permit the recipient to retain them once that purpose is fulfilled. In the present case the documents are both privileged and confidential, but the appellants do not rely on privilege or confidentiality to found their claim to recover them. They rely on the terms of the arrangements under which they were supplied and the limited purpose for which they permitted use to be made of them. Their case is that there is no legal basis on which the Society can retain and make use of the documents free from the limitations which Mr Lusk imposed and Mr Ennor accepted.
[71] The fact that the claim to recover the documents is made on equitable grounds does not mean that it must yield to an overriding countervailing public interest. The documents are both confidential and privileged. Whether a claim to the return of such documents is based on a common law right or an equitable one, the policy considerations which give rise to the privilege preclude the Court from conducting a balancing exercise. A lawyer must be able to give his client an unqualified assurance, not only that what passes between them shall never be revealed without his consent in any circumstances, but that should he consent in future to disclosure for a limited purpose those limits will be respected: see Goddard v Nationwide Building Soc [1987] QB 670, per Nourse LJ at p 685.
1 B v Auckland District Law Society [2003] UKPC 38, [2004] 1 NZLR 326.
[9] It is plain from this passage in the judgment that there may be equitable grounds to require the recovery of privileged documents or, as on the facts of that case, a common law right to return of the documents. The Privy Council emphasised the absolute necessity for a lawyer to be able to give a client an unqualified assurance that what passes between them will never be revealed without his consent in any circumstances.
[10] In ISTIL Group Inc and another v Zahoor and another, the Court said:2
[74] The position on the authorities is this. First, it is clear that the jurisdiction to restrain the use of privileged documents is based on the equitable jurisdiction to restrain breach of confidence. The citation of the cases on the duty of confidentiality of employees makes it plain that what the Court of Appeal was doing in Lord Ashburton v Pape was applying the law of confidentiality in order to prevent disclosure of documents which would otherwise have been privileged, and were and remained confidential. Second, after a privileged document has been seen by the opposing party, the court may intervene by way of injunction in exercise of the equitable jurisdiction if the circumstances warrant such intervention on equitable grounds. Third, if the party in whose hands the document has come (or his solicitor) either (a) has procured inspection of the document by fraud or (b) on inspection, realises that he has been permitted to see the document only by reason of an obvious mistake, the court has the power to intervene by grant of an injunction in exercise of the equitable jurisdiction. Fourth, in such cases the court should ordinarily intervene, unless the case is one where the injunction can properly be refused on the general principles affecting the grant of a discretionary remedy, e.g. on the ground of delay.
[11] It is clear from these authorities that the plaintiffs in this case may apply to the Court for an injunction based on the equitable jurisdiction of the Court to restrain breach of confidence. The opinion in issue is without question privileged, it is arguable that privilege has not been waived, and it appears there is evidence available to show that Mr Sanders is using the document for his own purposes without regard for the overriding public interest summarised by the Privy Council in B v Auckland District Law Society. Prima facie, if evidence can be given in relation to Mr Sanders’ activities, the basis of an equitable claim against Mr Sanders seems to have been established.
[12] That is not presently the issue before the Court. On this application the Court is asked to step around an apparent cause of action which appears to be a pathway to
2 ISTIL Group Inc and another v Zahoor and another [2003] EWHC 165 Ch, [2003] 2 All ER
252.
achieve the outcome the plaintiffs seek, and to require return of the document by an order under the inherent jurisdiction of the Court.
[13] The inherent jurisdiction of the Court is a separate and independent jurisdiction, which stands on its own foundation. Whilst until the late 1800s it appears to have been confined to a summary jurisdiction to be exercised in relation to contempt of court, it is now clear that the jurisdiction exists to prevent oppression or injustice of the process of litigation and to enable the Court to control and regulate its own proceedings. Its underlying premise is that the process of the Court must be used properly, honestly and in good faith and must not be abused. It is said that the Court will not allow its function as a court of law to be misused and it will summarily prevent its machinery from being used as a means of vexation or
oppression in the process of litigation.3
[14] Neither counsel was able to direct me to any case where the inherent jurisdiction of the Court has been exercised in circumstances such as the present. This application must therefore be decided on the basis of the general principles to which I have referred. Some assistance can be derived from Elworthy-Jones v Counties Trustee Co Ltd.4 In that case the defendant maintained that the plaintiff was communicating with certain third parties with the intention of defeating his rights as a litigant. Heath J accepted that he had jurisdiction to restrain a party from putting inappropriate collateral pressure on another party to litigation to abandon a
defence of the proceeding, though in the event he found a factual basis upon which he could invoke the inherent jurisdiction of the Court in this way was not made out.
[15] Here, there is a suggestion that Mr Sanders is using the material he has obtained to place collateral pressure on some of the plaintiffs with a view to persuading them to abandon their claim. As in Elworthy-Jones, however, an evidentiary foundation for this allegation is not made out. Elworthy-Jones indicates acceptance by the Court that there is inherent jurisdiction to prevent conduct of the
kind described. In the present case a direction that the document be returned to the
3 L H Jacob “The Inherent Jurisdiction of the Court” (1970) CLP 23.
4 Elworthy-Jones v Counties Trustee Co Ltd (2002) 16 PRNZ 392.
plaintiffs would have that effect, but the evidence for the plaintiffs does not establish that this is occurring.
[16] Counsel referred me to r 13.9.4 of the Lawyers and Conveyancers Act
(Lawyers: Conduct and Client Care) Rules which provides:
If a lawyer becomes aware that privileged information or documents have been inadvertently released in circumstances where privilege has not been waived, the lawyer must not disclose the contents of the material to a client, must inform the other lawyer (or litigant if unrepresented) of the release, and must return any documents forthwith. This rule applies despite the rules relating to disclosure contained in Chapter 7.
[17] This rule applies to the solicitors for the defendants. It is plain from the material before me that they are aware that a privileged document has been released, and privilege has not been waived. I cannot state with certainty that this was inadvertent, but it certainly appears so: I am informed by counsel for the plaintiffs that none of the plaintiffs have released or agreed to release the document. If this is the case, the defendants’ solicitors appear to be under an obligation to return the document to the plaintiffs.
[18] It is not for the Court to make a final determination of any obligation under this rule. That is the role of the Law Society. The solicitors may not be in a position to return the document because they do not, themselves, hold it. It is for the Law Society to determine this and any other issues arising in relation to this rule. I refer to it, however, because along with the remedies potentially available to the plaintiffs to which I have already referred, it is another means by which they might take action to achieve return of the document. And it underscores the gravity with which inappropriate use of privileged material is regarded.
[19] Given that there are other possible remedies available to the plaintiffs, and that at least so far as a remedy in equity is concerned, it appears that a prima facie case can be made out, I am not prepared to order the return of the opinion under the inherent jurisdiction of the Court. It is more appropriate for a decision to be made on a properly formulated claim for a recognised remedy than on a summary basis by way of exercise of the Court’s inherent jurisdiction. That way there would be more detailed evidence before the Court than is before me, placing the Court in a better
position to determine whether the documents are still privileged, a point which
Mr Sanders seems to challenge.
[20] Nothing in this judgment should give Mr Sanders any comfort that this Court condones his retention of the document in question, let alone his use of it in the manner which I have set out, or at all. For my part, I do not consider his undertaking not to use the document in this proceeding to be a satisfactory response.
[21] Nor is Mr Marsh’s peremptory dismissal of the position taken by the plaintiffs as a waste of court time and resources in any way appropriate. I have already drawn attention to the obligation on the defendants’ solicitors under the rules which govern their professional conduct. I invite Mr Sanders and the defendants’ solicitors to review the stance they are presently respectively taking without the plaintiffs being put to the expense of having to seek return of the document through the channels which are available to them, and which are identified in this judgment.
[22] I make orders as sought in paragraphs 1(a) and 1(d) of the application.
[23] Costs are reserved.
J G Matthews
Associate Judge
Solicitors:
GCA Lawyers, Christchurch
Saunders Robinson Brown, Rangiora
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