Eaton v LDC Finance Limited

[2016] NZHC 390

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2008-409-1140 [2016] NZHC 390

BETWEEN

STEPHEN DESMOND EATON AND

SEDDON JAMES MARSHALL Plaintiffs

AND

LDC FINANCE LIMITED First Defendant

PRICEWATERHOUSECOOPERS Second Defendant

PERPETUAL TRUST LIMITED Third and Counterclaim Defendants

BUDDLE FINDLAY Fourth Defendant

AND

ANDREW JOHN HARDING AND MURRAY SCHOLFIELD

Second Counterclaim Defendants

Hearing:	8 March 2016
Counsel:	O Meech for Sherwin & Walshe (Auditors) - applying H Rennie QC for First Defendant - abiding P Fee and R Stewart for Second Defendant - opposing M Smith for Third and Counterclaim Defendants - opposing C Bryant for Fourth Defendant - opposing P Chisnall for Plaintiffs - opposing (Via telephone conference)
Judgment:	9 March 2016

JUDGMENT (No 3) OF FOGARTY J

This judgment was delivered by me on 9 March 2016 at 4.30 pm, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date: ………………………….

EATON v LDC FINANCE LTD [2016] NZHC 390 [9 March 2016]

[1]      In the course of the GFC, two finance companies in Nelson failed: Finance and Investments (F&I) and LDC Finance Limited (LDC).

[2]      Messrs Eaton and Marshall, on behalf of a large number of depositors in F&I, brought  these  proceedings  against  the  receivers  of  LDC  and  against  Perpetual Trustee Limited (Perpetual) as the trustee of LDC.

[3]      The plaintiffs succeeded in recovering the sum of $7,792,197.36.

[4]      The judgment was appealed and set down for hearing in April 2013.   In March, the parties entered into a conditional settlement agreement, some of the terms of which are confidential and the Court made two orders

[5]      Related proceedings are currently before the High Court at Nelson – CIV-

2012-442-391, LDC Finance Ltd & ors v Miller & ors.  The Nelson proceeding is a claim by LDC and its investors against LDC’s directors, Perpetual (as trustee) and LDC’s auditors, Sherwin, Chan & Walshe (SCW).   The auditors and the directors seek  discovery  in  the  Nelson  proceeding  of  the  settlement  agreement  reached between the parties in this proceeding.

[6]      The settlement agreement is within the control of two of the parties to the Nelson  proceedings,  LDC  and  Perpetual,  being  parties  to  this  proceeding.   All counsel are in agreement that the settlement agreement is relevant (in a discovery sense) in the Nelson proceeding.

[7]      When  discovery of the  settlement  agreement  was  raised  by SCW in  the

Nelson proceedings, Associate Judge Matthews stated:1

In my view it is not appropriate for me to order on this proceeding that this document be discovered if to do so would breach the orders of the Court made on the Eaton proceeding.  After discussions with counsel I direct that the document is to be discovered in this proceeding if counsel obtains dispensation from the Court on the Eaton proceeding for the purpose of discovery of the document in this proceeding.

1 Minute of Associate Judge Matthews, 13 August 2019, at [19].

[8]      Accordingly, this application is made by the auditors and the LDC directors for access to the terms of the settlement.

[9]      PriceWaterhouseCooper   and   Buddle   Findlay,   the   second   and   fourth defendants in these proceedings, oppose.

[10]     The principal argument in favour of lifting the confidentiality orders was advanced by Mr Meech, counsel for the auditors.   His first point was that, in the Nelson proceedings, calculation of loss depends in part on determining the net loss upon receivership which includes the net position following the settlement.  One of the consequences of the settlement was money going from the receivership of LDC back to the receivership of F&I.

[11]     Part of the case of the auditors in the Nelson proceeding was that the loss was not caused by them but by other professional advisers, and that the settlement and the content thereof is relevant to the chain of causation, or be a relevant break causation of loss.

[12]     In reply, Ms Smith and Ms Fee, for the accountants and solicitors, advanced two arguments.   First, there is now information in the public domain sufficient to give a reasonably clear picture of the quantum of the settlement.  In particular, there was reference to the report of the receivers of LDC as to the transfer of funds from that receivership to F&I.  I presume that one can compare that data with the publicly awarded damages to the plaintiffs in these proceedings.  Secondly, Ms Fee pointed out that the first judgment in these proceedings does not examine any liability of the accountants  or  the  solicitors.    The  claims  against  those  two  parties  had  been separated and were to be the subject of a later trial.

Analysis

[13]     There is a tension between the acknowledgement of all  counsel that the settlement agreement is discoverable under normal principles but for the confidentiality and the continuing justification for the confidentiality orders, when one focuses on the parties engaged in the first proceedings, ignoring the Nelson proceedings.

[14]     At best, it seems to me, the relevance of the confidential agreement only goes to assessment of the size of any damages that might be awarded in the Nelson proceedings by taking into account distributions under the first set of proceedings.

[15]     For these reasons, at the end of the oral argument, I told counsel that I would not be lifting the orders of confidentiality and sealing of the file, in the meantime.  I do, however, reserve leave to renew the application at any time, because the development of the Nelson litigation may throw into sharper perspective the need for information from these proceedings in order that justice be done in the Nelson proceedings.

[16]     Accordingly, the application for the lifting of confidentiality and the sealing of the file fails at this time.  Leave to apply again.

[17]     Costs lie where they fall.

Solicitors:         Gibson Sheat, Wellington

Fee Langstone, Auckland
Minter Ellison Rudd Watts, Wellington