Crown Asset Management Limited v Nattrass

[2015] NZHC 1435

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2011-409-2413 [2015] NZHC 1435

BETWEEN

CROWN ASSET MANAGEMENT

LIMITED Plaintiff

AND

STUART JOHN NATTRASS First Defendant

EDWARD ORAL SULLIVAN Second Defendant

ROBERT ALEXANDER WHITE Third Defendant

MARGARET JANE HUBBARD as executrix of the estate of the late ALLAN JAMES HUBBARD

Fourth Defendant

AND

VERO LIABILITY INSURANCE LIMITED

Third Party

Hearing:

24 June 2015

(On the papers)

Appearances:

M D Arthur and J A McMillan for Plaintiff
P C Creagh and G P Curry for First Defendant
PHB Hall QC, B R Green and K H Cook for Second Defendant
R B Squire QC and T M Gresson for Third Defendant
A S Butler and O C Gascoigne for Fourth Defendant
M C Smith, O M De Pont and C T Walker for Third Party

Judgment:

24 June 2015

JUDGMENT OF MANDER J ON ACCESS

[1]      Further to my minute of 14 April 2015, I have received submissions from the parties to this discontinued proceeding regarding an application on behalf of Chris

Lee and Partners Limited (CLPL) to access the pleadings.

CROWN ASSET MANAGEMENT LIMITED v NATTRASS & ORS [2015] NZHC 1435 [24 June 2015]

[2]      As a prospective litigant, CLPL seeks access to this material for the following reasons:

(a)      Preference shareholders in FCS Loans Limited (in receivership and in liquidation), formerly South Canterbury Finance Limited (SCFL), represented by CLPL are considering the commencement of proceedings, including against former directors of SCFL.

(b)Access  to  the  pleadings  is  said  to  be  necessary  in  order  for  the preference shareholders to:

(i)identify the allegations made by the plaintiff against directors of SCFL (and the directors’ responses to such allegations); and

(ii)      assist in the drafting of pleadings against the former directors.

(c)      The  preference  shareholders  have  an  interest  in  the  proceedings brought by the plaintiff against former directors of SCFL.

The parties’ positions

[3]      The  plaintiff  in  the  discontinued  proceeding,  Crown  Asset  Management Limited, has requested the Court to consider its view on the search application.  It will abide the decision of the Court on the understanding the only documents that will be made available to the applicant will be the pleadings requested.  Counsel for the plaintiff also makes the following relevant observations in an endeavour to assist the Court:

(a)      The proceeding was discontinued.  The allegations and responses in the pleadings remain untested, and have not been verified in any way.1

(b)There is an interest in maintaining confidentiality of documents and information provided to the Court in relation to proceedings that have

1      Sanofi-Aventis Deutschland GMBH v AFT Pharmaceuticals Ltd [2012] NZHC 1051, (2012) 21

PRNZ 130 at [16].

not reached trial, on the basis of the orderly and fair administration of justice, and the protection of confidentiality.

(c)      Reference is made to remarks made by Associate Judge Matthews on an earlier application to access these documents (“the BusinessDesk application”), that there is already “a substantial amount of evidence and factual material” available in the public domain which may assist the applicant in formulating any claim.2     The applicant may have overstated the necessity of accessing these pleadings.

[4]      The plaintiff has requested certain directions restricting the applicant’s access

to the pleadings, if the Court is minded to grant the application.3

[5]      The first defendant submits that it is common commercial practice for the parties  to  discontinue  disputes,  and  that  unless  a  compelling  interest  of  justice requires  disclosure,  the  parties’ privacy should  be  maintained.    Further,  if  such privacy is not generally maintained by the Court, there may be adverse consequences in terms of litigants preferring arbitration or other modes of dispute resolution in preference to resort to the Court.  Secondly, for international disputes where there is a choice of venues, the parties may be more likely to choose “privacy-enhancing” jurisdictions.

[6]      The first, second and third defendants, and the third party all adopt and support the submissions in opposition made by the fourth defendant.  Essentially, the fourth defendant submits that Associate Judge Matthews’ reasoning for dismissing the BusinessDesk application has equal application in the present circumstance.  The defendants’  submission  was  that  r  3.16  considerations  weigh  against  CLPL’s

application.

2      Crown  Asset  Management  Limited  v  Nattrass  HC  Christchurch  CIV-2011-409-002413, 17

December 2014 at [18].

3      In reliance on Body Corporate 188889 v Withers (2009) 19 PRNZ 608 (HC) at [4].

The mandatory considerations

[7]      Rule 3.16 of the High Court Rules lists the matters which the Court must consider in determining this application.  In addition to the nature of, and the reasons for, the application, the Court must take into account each of the following matters:

(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.

[8]      There is no presumption in favour of granting access.  The factors in r 3.16 are not hierarchical, and a balancing exercise is required.4

Determination of application

Nature of, and reason for, the application

[9]      While r 3.16 does not require an applicant to establish a legitimate interest, the  Courts  are  less  likely  to  be  sympathetic  to  persons  who  cannot  show  a

“recognisable and legitimate public or private purpose” for seeking access.5

4      Schenker Attorney-General v Commerce Commission [2013] NZCA 114, (2013) 22 PRNZ 286 at [37].

5      Commerce Commission v Air New Zealand [2012] NZHC 271 at [30].

[10]     A request for information will not be illegitimate only because the applicant is pursuing a private interest.6   However, as Associate Judge Bell observed in Sanofi- Aventis Deutschland GMBH v AFT Pharmaceuticals Ltd, a private rationale for access “may not carry as much weight as other reasons for a request which may go to more important public interest considerations”.7

[11]     The  stipulated  reason  for  accessing  the  pleading  is  a  submitted  need  to identify the allegations made by the plaintiff against the defendants, and to assist in the drafting of pleadings.  Research for the purposes of “parallel” litigation of earlier proceedings which did not reach the stage of substantive hearing needs to be approached with some caution.   The defendants have emphasised Associate Judge Matthews’ observations in the BusinessDesk application of a “real risk” of prejudice resulting from the untested nature of the allegations in the pleadings that were sought

in that application.8    However that application was made by a member of the news

media, presumably for the purpose of wider distribution to be public.

[12]     It should also be noted the pleadings may be of questionable utility, given the allegations made against the defendants related to events occurring between 2004 and  2008.     Fresh  allegations  made  along  similar  lines  may  have  limitation difficulties.  The interests of the parties to the proceedings in respect of which the pleadings are sought may also be different from those seeking access to the files.  It is to be anticipated that the applicant will be cognisant of such limitations, however, the utility of the requested material is to be considered against those objections.

The orderly and fair administration of justice

[13]     The Courts have generally recognised the importance of not allowing non- party access to, or scrutiny of, party-party information, in the interests of the orderly and fair administration of justice.9     There is an important value in being able to

conduct private litigation, at least until a public hearing, in the interest of promoting

6      Sanofi-Aventis Deutschland GMBH v AFT Pharmaceuticals Ltd, above n 1, at [6].

7 At [6].

8      Crown Asset Management Limited v Nattrass, above n 2, at [19].

9      Sanofi-Aventis Deutschland GMBH v AFT Pharmaceuticals Ltd, above n 1, at [7]-[9]; Hotchin v

APN New Zealand Ltd (2011) 20 PRNZ 484 (HC); Yarrow v Finnigan HC New Plymouth, CIV-
2011-443-330, 15 July 2011.

cooperation and candour between the parties.  Such considerations weigh against the

exercise of the Court’s discretion.

[14]     However, in GDF I LPP v Melview (Kawarau Falls Station) Investments Ltd, an applicant successfully sought access to pleadings to assist in anticipated litigation between the applicant and the defendant involved in the earlier proceedings.10    In that case, two of the three proceedings in respect of which the application was made had not yet reached a substantive hearing, and the third had been settled.  Potter J granted access to the pleadings, finding the applicant’s freedom to seek information was not outweighed by any countervailing factor set out in r 3.16.11

[15]     Similarly, in Body Corporate 188889 v Withers, Duffy J held that no harm arose from permitting an applicant’s solicitor to see documents that could be of assistance to him for the purpose of a proposed pleading.12   Her Honour considered that granting the application would assist in the orderly and fair administration of justice if the applicant barrister was able to review the document where orders had previously been made.  In that case, however, the litigation involved an application

said to be of an uncommon type, and orders were made in resolution of the proceeding the subject of the search request.

Protection of confidentiality, privacy interests and privilege

[16]     Where confidential information is contained in the material, the Court is likely to  be  reluctant  to  allow  access.13      Leave  to  search  and  access  files  will generally be more readily granted in respect of pleadings rather than affidavits.14

The success of each application, however, will obviously depend upon the nature of the information contained in the requested document.   Confidentiality was not accepted as a reason for refusing access to the three sets of pleadings in Melview,

which was a similar application to the present.15

10     GDF I LPP v Melview (Kawarau Falls Station) Investments Ltd [2012] NZHC 677.

11     At [14]-[16].

12     Body Corporate 188889 v Withers, above n 3, at [5].

13     Rule 3.13(b); Schenker AG v Commerce Commission, above n 4.

14     Pratt Contractors Ltd v Palmerston North City Council (1992) 5 PRNZ 556 (HC) at 559.

15     GDF I LPP v Melview (Kawarau Falls Station) Investments Ltd, above n 10.

[17]     It appears the personal information disclosed in the requested pleadings is limited to the residential addresses, professions and dates of directorship of the SCFL directors.  Given the public interest in and media coverage of the fortunes of SCFL, it may reasonably be supposed this information is already in the public domain. The directors’ privacy interest in this personal information would not be sufficient to outweigh the general public interest in open justice or the applicant’s freedom to

seek, receive and impart information.16

Open justice and freedom of information

[18]     In Commerce Commission v Air New Zealand, Asher J observed a distinction between r 3.16(c) (the principle of open justice) and r 3.16(d) (freedom to seek, receive and impart information).17    His Honour observed that the principle of open justice  has  “little  relevance  to  an  application  by  a  private  party  pursuing  a commercial purpose”, whereas the latter freedom is directly relevant when an interested private party is seeking information for its own purposes.18   The Court of Appeal upheld this distinction in Schenker AG v Commerce Commission, with the qualification that the principle of open justice might not be of such limited relevance in the context of non-party applications.19   In the circumstances of the case, however, the Court considered that Asher J was correct to focus on r 3.16(d).

[19]     As I have already observed, Associate Judge Matthews concluded on the similar  BusinessDesk  application  that,  given  the  discontinued  nature  of  the proceeding and the related fact the documents sought recorded mere allegations, access would not advance the principle of open justice, or the freedom to seek,

receive  and  impart  information.20    Associate  Judge  Matthews  considered  that

discontinuation of the proceeding before hearing reduced the importance of those factors in the r 3.16 balancing exercise.21

16     Glaister v Amalgamated Dairies Ltd [2003] NZAR 149, (2002) 16 PRNZ 756 (HC) at [7].

17     Commerce Commission v Air New Zealand Ltd, above n 5, at [31].

18     At [31], affirmed by the Court of Appeal in Schenker AG v Commerce Commission, above n 4, at

[37]-[39].

19     Schenker AG v Commerce Commission, above n 4, at [24].

20     Crown Asset Management Limited v Nattrass, above n 2, at [11]-[14].

21     At [14], citing Murray v Ministry of Justice [2014] NZHC 2959 at [24].

Decision

[20]     While I am mindful of the approach taken by Associate Judge Matthews in the BusinessDesk application in respect of a request by the media, I am not minded to depart from the approach taken by Potter J in GDF I LPP v Melview (Kawarau Falls Station) Investments Ltd,22 and Duffy J in Body Corporate 188889 v Withers.23

The applicant has only sought access to the pleadings and the applicant must be presumed to appreciate that the documents sought comprise only allegations. I do not consider access to that limited category of material is likely to prejudice the orderly and fair administration of justice in terms of the type of considerations recognised at [13]. Privacy considerations can adequately be recognised by appropriate conditions placed on the access granted.

[21]    Accordingly, access to the pleadings is granted subject to the following conditions:

(a)      The  applicant  is  to  use  the  pleadings  solely  for  the  purpose  of assisting in the drafting of pleadings.

(b)The applicant is to keep the pleadings confidential to itself and its legal advisors.

(c)      The applicant is to hold copies of the pleadings only for the purposes identified in the application, and must destroy any copy of the pleadings once they are of no further use to the drafting of the pleadings.

(d)Access to the pleadings will be available following the expiration of five working days from the date of this judgment, unless within that period the defendants, by memorandum filed in this Court and served on the applicant, identify any specific matters in the pleadings which require  protection  of  confidentiality,  or  privacy  interests  of,  or  in

relation to, the defendants that have not otherwise been identified.  If

22     GDF I LPP v Melview (Kawarau Falls Station) Investments Ltd, above n 10.

23     Body Corporate 188889 v Withers, above n 3.

such memoranda is filed and served, this judgment will not take effect until a Judge has considered and ruled on issues properly raised by the defendants.