Carolan v NZ Real Estate Credit Limited
[2017] NZHC 156
•14 February 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2014-404-000483 [2017] NZHC 156
BETWEEN MICHAEL JOSEPH CHRISTIAN
CAROLAN Plaintiff
AND
NZ REAL ESTATE CREDIT LIMITED First Defendant /
First Counterclaim Plaintiff
GEORGE KERR Second Defendant
Defendants continued over
Hearing: 8 February 2017 Counsel:
No Appearance by the Plaintiff (attendance excused) J K Goodall and E D R Offner for the Defendants
M A Corlett QC for the Non-Party Applicant
Judgment:
14 February 2017
JUDGMENT OF EDWARDS J
This judgment was delivered by Justice Edwards on 14 February 2017 at 4.00 pm, pursuant to
r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date:
Counsel: M A Corlett QC, Auckland
J K Goodall, Auckland
Solicitors: Lee Salmon Long, Auckland
Lowndes Jordan, Auckland
CAROLAN v NZ REAL ESTATE CREDIT LTD [2017] NZHC 156 [14 February 2017]
EQUITY PARTNERS CAPITAL MARKETS LIMITED
Third Defendant /
Second Counterclaim Plaintiff
EQUITY PARTNERS LIMITED Fourth Defendant /
Third Counterclaim Plaintiff
EQUITY PARTNERS ASSET MANAGEMENT LIMITED Fifth Defendant /
Fourth Counterclaim Plaintiff
CLAYMORE FINANCIAL SERVICES LIMITED
Sixth Defendant /
Fifth Counterclaim Plaintiff
Introduction
[1] A non-party, Millinium Asset Services Pty Ltd (Millinium), requests permission to access the Court file to obtain information which it says is relevant to proceedings in the Cayman Islands. The defendants oppose the request.
The request
[2] Millinium is an acting trustee of the Bear Real Opportunities Fund (Bear), although its formal status as trustee is disputed by the defendants and is currently the subject of separate proceedings in Australia. Bear is a partner in Torchlight Fund LP (Torchlight), an exempted limited partnership domiciled in the Cayman Islands.
[3] The general partner of the partnership is Torchlight GP Ltd (General Partner) which is wholly owned by Pyne Gould Corporation Ltd (PGC), a listed company on the New Zealand Stock Exchange. The second defendant in this proceeding, Mr George Kerr, is the managing director and majority shareholder of PGC.
[4] A number of partners in Torchlight have filed a petition in the Cayman Islands seeking to wind up the partnership on the grounds that they have lost trust and confidence in the General Partner and Mr Kerr. The petitioners include Aurora Funds Management Ltd as trustee for Bear, Crown Asset Management Ltd and the Accident Corporation of New Zealand. The trial of the winding up petition is due to commence on 20 February 2017.
[5] A related proceeding has been commenced by the General Partner against Millinium and those partners who have filed the petition, alleging conspiracy by unlawful means to quit the partnership.
[6] Millinium filed its request for access to the Court file by letter dated 15 July
2016. At the time of the request, the trial of this proceeding had taken place, but the judgment had not yet been delivered.1 Although Millinium was not aware of the
nature of the dispute at issue in the proceeding at that stage, it nevertheless
1 Fogarty J delivered judgment on 29 July 2016 in Carolan v New Zealand Real Estate Credit Ltd
[2016] NZHC 1757.
considered that documents on the Court file might have some relevance to the issues in the winding up petition.
[7] The request has since been refined. Mr Corlett confirms that the scope of the request is limited to the documents specified in r 3.9(2), that is, pleadings, affidavits, written statements, documents admitted into evidence, and any evidence given orally at the hearing. He characterised the request as an interested party wanting to see whether there was anything on the public record which was germane to the Cayman Islands proceeding.
[8] Millinium has a particular interest in accessing the statements and oral evidence of Mr Carolan, Mr Kerr and Mr Darby, and the documentary exhibits produced at trial, including a copy of a settlement agreement between Mr Kerr and Mr Darby.
[9] The settlement agreement is said to be potentially relevant to related party transactions involving both Mr Darby and Mr Kerr. The pleading in the winding up petition refers specifically to the acquisition of property in Wanaka from companies associated with Mr Kerr and Mr Darby.
[10] It is also believed that the Court file may contain information related to transactions between the General Partner and Equity Partners Infrastructure Company (EPIC). In his judgment dated 29 July 2016, Fogarty J observed that the relationship between Mr Carolan and Mr Kerr broke down when Mr Carolan blocked the appointment of Mr Kerr’s preferred nominee to the EPIC board of
directors.2 The sale and purchase of shares in EPIC is specifically referred to in the
winding up petition.
[11] Finally, Millinium says that the ultimate holding company of the first defendant is Torchlight Real Estate Group, which is a Cayman Islands company. Millinium considers it is likely that this company is associated with the
General Partner in the Cayman Islands and there may be material on the Court file
2 At [9].
which is relevant to the related party transactions the subject of the winding up petition.
The opposition
[12] The defendants oppose the request on a number of grounds.
[13] They question the status of Millinium in making the request given it is not a party to the winding up petition, and its status as Bear’s trustee is in dispute. They contend that the information on the Court file is irrelevant to the matters in issue in the Cayman Islands litigation and accordingly submit that the reasons for the request are very weak.
[14] The fact that there has been an extensive discovery process in the Cayman Islands is a further ground of opposition. The defendants submit that granting access to Millinium would effectively circumvent that discovery process.
[15] The defendants also argue that access would not be appropriate in this case given the personal and confidential nature of much of the material held on file. Further, this Court would not be able to supervise or limit the use of any documents that were disclosed.
[16] Finally, the defendants submit that there is no public interest in this case, but to the extent that there is, it is satisfied by the release of Fogarty J’s judgment.
[17] The plaintiff abides the decision of the Court, and was excused from attending the hearing.
Legal framework
[18] The application falls to be determined under r 3.9 as the request was made
during the “substantive hearing” stage of proceedings as defined in the rules.
[19] There is a presumption of access under r 3.9, but such a presumption does not apply once an objection to access is made.3 The Court has a broad discretion to determine opposed requests in any matter considered just, taking into account the factors in r 3.16.4 Rule 3.16 provides as follows:
3.16 Matters to be taken into account
In determining an application under rule 3.13, or a request for permission under rule 3.9, or the determination of an objection under that rule, the Judge or Registrar must consider the nature of, and the reasons for, the application or request and take into account each of the following matters that is relevant to the application, request, or objection:
(a) the orderly and fair administration of justice:
(b) the protection of confidentiality, privacy interests (including those of children and other vulnerable members of the community), and any privilege held by, or available to, any person:
(c) the principle of open justice, namely, encouraging fair and accurate reporting of, and comment on, court hearings and decisions:
(d) the freedom to seek, receive, and impart information:
(e) whether a document to which the application or request relates is subject to any restriction under rule 3.12:
(f) any other matter that the Judge or Registrar thinks just.
[20] The “nature of and reasons for the request” referred to in the opening words of r 3.16 drives the analysis of the remaining factors set out in the rule. The courts are likely to be less sympathetic to persons who cannot show a “recognisable and legitimate public or private purpose” for seeking access.5
Analysis
[21] There is real strength in Mr Corlett’s submission that Millinium could have obtained much of the information it now seeks by simply attending the trial. The
request to access the Court file is consistent with the core principle of open justice.6
3 Schenker AG v Commerce Commission (2013) 22 PRNZ 286 (CA) at [21].
4 At [14].
5 Commerce Commission v Air New Zealand [2012] NZHC 271 (HC).
6 Rule 3.16(c).
[22] But the open justice principle is not unfettered. In the context of a request to inspect the Court file, it must be weighed in light of the nature of, and the reasons for, the request, and the other factors listed in r 3.16.
[23] In this case, the purpose of the request is essentially private in nature. Although some of the petitioners to the winding up proceeding are public entities, the ultimate objective is to obtain information to assist with private litigation overseas. The open justice principle does not carry as much weight as it would if there was a public purpose behind the request.
[24] That does not mean that the purpose is illegitimate. There is no suggestion that Millinium is making the request to access documents in order to secure a competitive advantage, or for any other ulterior purpose. The concerns which troubled the Court in Commerce Commission v Air New Zealand are not present in this case.7 Accessing the Court file in order to assist with separate proceedings
between different parties is a legitimate reason to seek access to the Court file.8
[25] The legitimacy of that purpose is not affected by any uncertainty concerning Millinium’s status in relation to the winding up petition. Although Millinium is not a named party to the petition, and its position as Bear’s trustee is in dispute, it clearly has an interest in the Cayman Islands proceeding as evidenced by the fact that it is a named party in the related conspiracy proceeding.
[26] Although the purpose of the request is legitimate, the reasons put forward in support are not particularly compelling in my view. The relevance of the material on the Court file to issues in the winding up proceeding is far from clear. This proceeding concerned the status of advances made by the defendants to Mr Carolan. That transaction is not one of the related party transactions at the centre of the winding up petition. Although there is some commonality between the proceedings in terms of the people and entities involved, the subject matter of each proceeding
appears to be quite different.
7 Commerce Commission v Air New Zealand, above n 5.
8 Rule 3.16(a). See also E-trans International Finance Ltd v Kiwibank Ltd [2015] NZHC 2164 at
[12].
[27] In any event, questions of relevance are properly the domain of the Grand Court of the Cayman Islands. If, as Mr Corlett submits, there is likely to be information on the Court file which is relevant to the winding up petition, then disclosure of that information should be pursued through a discovery application made in the Cayman Islands. In my view, the fact that there is an alternative route to
pursue the freedom to seek, receive and impart information9 is significant in the
overall balancing exercise.
[28] Pursuit of the access request by way of a formal discovery application provides a process by which the rights and interests of all parties (including non- parties) may be protected. That is particularly important in this case where there are confidential and commercially sensitive documents on file.10 Those documents include a heavily redacted settlement agreement which is the subject of a non- disclosure order made by Fogarty J during the course of the trial. I am not persuaded that there is any reason to revisit that order.
[29] The other confidential documents were the subject of an agreed protocol whereby inspection was limited to certain people, and subject to certain conditions. Mr Goodall informs me that all the confidential documents were included in the trial bundle. They were not subject to any specific confidentiality orders, as there was no attendance by the media or third parties at trial, and agreement between the experts obviated any need to refer to it in oral evidence or in Fogarty J’s judgment. The confidential and private nature of some of the material on file weighs against the grant of access in this case.
[30] The discovery process has other advantages too. This Court is limited in its ability to monitor the use of information obtained from the Court file when the applicant is not domiciled in New Zealand, and the information will be used in an overseas jurisdiction. A formal discovery application in the Cayman Islands would allow the Grand Court of the Cayman Islands to supervise and enforce disclosure
obligations.
9 Rule 3.16(d).
10 Rule 3.16(b).
[31] The Grand Court of the Cayman Islands has already made extensive discovery orders in the winding up proceeding. The General Partner was ordered to provide discovery of a wide range of documents, including material filed in other New Zealand proceedings. Granting access to the Court file would effectively circumvent those orders and undermine the protections which are afforded by the discovery process. In that respect, I consider the grant of access would be at odds
with the orderly and fair administration of justice.11
[32] Standing back and considering these factors as a whole, I am not persuaded that the grant of access in this case would be in the interests of justice. A discovery application in the Cayman Islands provides an alternative route by which disclosure may be pursued. That is the appropriate forum for the determination of questions of relevance, the protection of confidential information, and the enforcement of disclosure obligations. For all these reasons, the request must be declined.
Result
[33] The request for permission to access the Court file is declined.
[34] If the parties cannot agree on costs, then a memorandum seeking costs may be filed within 10 working days of receipt of this judgment, with a memorandum in
reply filed five working days thereafter. Costs will be determined on the papers.
Edwards J
11 Rule 3.16(a).
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