Financial Markets Authority v Du Val Capital Partners Ltd
[2024] NZHC 2527
•4 September 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV 2024-419-201
[2024] NZHC 2527
UNDER The Financial Markets Conduct Act 2013 IN THE MATTER OF
A without notice application for asset preservation orders, orders appointing receivers, and managers and receivers, and related and incidental orders
BETWEEN
FINANCIAL MARKETS AUTHORITY
Applicant
AND
DU VAL CAPITAL PARTNERS LTD
First Respondent
Continued…
Hearing: 2 September 2024 Counsel:
J Cooper KC and S T Hartley for the applicant D Nilsson for the eighth and ninth respondents M D Arthur for the receivers
J Johnson and L Campbell for Ms Stokes and Mr Cheong (interested parties)
R Stewart KC for Business Desk and NZ Herald
Date:
4 September 2024
JUDGMENT OF CAMPBELL J
[Access to court documents]
This judgment was delivered by me on 4 September 2024 at 4.00pm pursuant to Rule 11.5 of the High Court Rules
Registrar/Deputy Registrar
FINANCIAL MARKETS AUTHORITY v DU VAL CAPITAL PARTNERS LTD [2024] NZHC 2527 [4
September 2024]
AND DU VAL GROUP NZ LTD
Second Respondent
DU VAL IP HOLDINGS LTD
Third RespondentDU VAL PROP TECH LTD
Fourth RespondentCOASTWAY LTD
Fifth RespondentDU VAL CONNECT LP
Sixth Respondent
KARAPIRO CORPORATE TRUSTEES LTD
Seventh Respondent
JOHN KENYON CLARKE
Eighth RespondentCHARLOTTE CLARKE
Ninth Respondent
DU VAL MORTGAGE FUND LIMITED PARTNERSHIP
Tenth Respondent
DU VAL OPPORTUNITY FUND LIMITED PARTNERSHIP
Eleventh Respondent
DU VAL BTR GP LIMITED
Twelfth Respondent
DU VAL BUILD TO RENT LIMITED PARTNERSHIP
Thirteenth Respondent
DU VAL PROPERTY GROUP LIMITED
Fourteenth RespondentDU VAL INVESTMENTS LIMITED
Fifteenth RespondentDU VAL BUILDING LIMITED
Sixteenth RespondentContinued….
DU VAL PROPERTY GROUP LTD
Sixteenth Respondent
DU VAL LAND LIMITED
Seventeenth Respondent
DU VAL PROPERTY MANAGEMENT LIMITED
Eighteenth Respondent
DU VAL MANAGEMENT LIMITED
Nineteenth Respondent
DU VAL GP HOLDINGS LIMITED
Twentieth Respondent
AMBLE VALLEY LIMITED
Twenty-First Respondent
APRIL ELEMENTS LIMITED
Twenty-Second Respondent
CLARKE MEDIA GROUP LIMITED
Twenty-Third Respondent
BLUE RIVER HOLDINGS LIMITED
Twenty-Fourth Respondent
FLIPPING LIDS LIMITED
Twenty-Fifth Respondent
TTPP GENERAL PARTNER LIMITED
Twenty-Sixth Respondent
TRANS-TASMAN PACIFIC PARTNERSHIP LIMITED
Twenty-Seventh Respondent
IPM GENERAL PARTNER LIMITED
Twenty-Eighth Respondent
DIAMOND BOX LIMITED
Twenty-Ninth Respondent
WOODLE LIMITED
Thirtieth Respondent
Continued…
DU VAL CLUBS LIMITED
Thirty-First Respondent
DU VAL HC GP LIMITED
Thirty-Second Respondent
DU VAL HEALTH CLUBS LIMITED PARTNERSHIP
Thirty-Third Respondent
DU VAL CMUF GP LIMITED
Thirty-Fourth Respondent
DU VAL COMMERCIAL AND MIXED- USE FUND LIMITED PARTNERSHIP
Thirty-Fifth Respondent
BLUE FRAME HOLDINGS LIMITED
Thirty-Sixth Respondent
DU VAL BTR LIMITED,
Thirty-Seventh Respondent
DU VAL CMUF LIMITED
Thirty-Eighth Respondent
FARHAM LIMITED
Thirty-Ninth Respondent
FIJI LAND ACQUISITION LIMITED
Fortieth Respondent
SHRUB HOLDINGS LIMITED
Forty-First Respondent
TE AWA TERRACES LIMITED PARTNERSHIP
Forty-Second Respondent
DU VAL GP 1 LIMITED
Forty-Third Respondent
DU VAL NEW HOMES LIMITED PARTNERSHIP
Forty-Fourth Respondent
DU VAL GP 5 LIMITED
Forty-Fifth Respondent Continued…
DU VAL GP 8 LIMITED
Forty-Sixth Respondent
PARRY LIMITED PARTNERSHIP
Forty-Seventh Respondent
GET STARTED LIMITED
Forty-Eighth Respondent
DU VAL EDUCATION LIMITED PARTNERSHIP
Forty-Ninth Respondent
ORANGE PINEAPPLE LIMITED
Fiftieth Respondent
RISING HOLDINGS LIMITED
Fifty-First Respondent
TECHWAY LIMITED
Fifty-Second Respondent
TRIBAL HOLDINGS LIMITED
Fifty-Third Respondent
WATER ALLEY LIMITED
Fifty-Fourth Respondent
DU VAL GP LIMITED
Fifty-Fifth Respondent
HILLSIDE CROSSING LIMITED PARTNERSHIP
Fifty-Sixth Respondent
DU VAL GP 4 LIMITED
Fifty-Seventh Respondent
DU VAL DEVELOPMENT FUND NO. 14 LIMITED PARTNERSHIP
Fifty-Eighth Respondent
DU VAL GP 7 LIMITED
Fifty-Ninth Respondent
EARLSWORTH LIMITED PARTNERSHIP
Sixtieth Respondent Continued…
DU VAL GP 9 LIMITED
Sixty-First Respondent
HILL TOP APARTMENTS LIMITED PARTNERSHIP
Sixty-Second Respondent
DU VAL GP 10 LIMITED
Sixty-Third Respondent
SUNNYVALE TERRACES LIMITED PARTNERSHIP
Sixty-Fourth Respondent
DU VAL GP 11 LIMITED
Sixty-Fifth Respondent
EDMONTON ROAD LIMITED PARTNERSHIP
Sixty-Sixth Respondent
C.A.P.A.C LTD (trading as iCLAW) Sixty-Seventh Respondent
[1] This judgment deals with applications that have been made to access court documents in this proceeding, and an associated issue.
Background
[2] On 1 August 2024, the Financial Markets Authority (FMA) made a without- notice application for orders under ss 522–524 of the Financial Markets Conduct Act 2013 (FMCA). The orders included interim asset preservation orders in respect of each of the 67 respondents, and orders appointing interim receivers of the property of all the respondents except for the sixty-seventh.
[3] I made those orders the same day. I refer to the respondents who were placed into receivership as the Du Val entities.
[4]I also made several associated orders. These included:
(a)An order that the receivers report to the Court within ten working days on certain matters, including whether in their opinion any Du Val entity should be released from receivership and any alternative form of administration (such as statutory management) was appropriate.
(b)An order prohibiting the searching or copying of the court file or any documents filed in this proceeding, without the leave of a Judge.
[5]The receivers filed a report dated 16 August 2024 (the Receivers’ Report).
[6] Soon thereafter, the FMA made a recommendation to the Minister responsible for the administration of the Corporations (Investigation and Management) Act 1989 (CIMA) that many of the Du Val entities be placed into statutory management, with the receivers appointed as statutory managers. The Minister accepted the recommendation and gave the requisite advice to the Governor-General. By an Order in Council made under s 38 of CIMA, a number of the Du Val entities were placed into statutory management as from 6 pm on 21 August 2024.
[7] The effect of the Order in Council is that the first, second, tenth through thirty- first and thirty-fourth through sixty-sixth respondents are now in statutory management.
[8] On 20 and 27 August 2024, I made directions that the receivers serve the Receivers’ Report on every respondent who had taken steps in the proceeding, including various interested parties who had filed notices of appearance. Those directions were subject to the condition that the Report was to be used for the sole purpose of allowing the recipients to prepare their responses to this proceeding, and that its content was otherwise kept confidential pending further orders of the Court.
[9]On 27 August 2024, I also:
(a)Discharged the interim asset preservation orders, including the orders appointing receivers and managers, made in respect of the thirty-second and thirty-third respondents.
(b)Discharged the order appointing receivers and managers made in respect of the respondents that are now subject to statutory management.
(c)Made timetable directions for any application by the FMA for continued or amended orders, and directed the Registrar to schedule a one-day hearing on the first available date from 14 October 2024.1
[10] The FMA’s application for orders under the FMCA has yet to be heard or determined on an on-notice basis.
Applications for Access to Court Documents
[11] On 28 August 2024, I scheduled a hearing to determine three applications to access documents on this file. The applications were from:
1 My minute of 27 August 2024 mistakenly refers to a one-hour hearing.
(a)Hamish McNicol, of the National Business Review. Mr McNicol applied to access “the full court file”.
(b)Oliver Lewis, of Business Desk/NZME. Mr Lewis applied to access the formal court record.
(c)Anne Gibson, of the New Zealand Herald. Ms Gibson applied to access the order sought by the FMA that receivers be appointed to various Du Val entities.
[12] Mr Stewart KC appeared at the hearing for Business Desk/NZME and the New Zealand Herald. At the hearing he extended those organisations’ applications to include access to all documents filed in the proceeding, such as the FMA’s application for orders under the FMCA, the affidavits and other documents filed in support of that application, and the Receivers’ Report.
[13]Mr Melville of the National Business Review attended the hearing.
[14] On 30 August 2024, Ana Maykot, of Television New Zealand, applied to access the Receivers’ Report and “any other relevant documents to Duval”. There was no appearance by or on behalf of Television New Zealand at the hearing.
The parties’ positions in response to the applications
[15] The following parties made submissions at the hearing: the FMA, the eighth and ninth respondents (the Clarkes), Ms Stokes and Mr Onn (who are interested parties, being limited partners in the tenth respondent, Du Val Mortgage Fund LP), and the receivers. The sixty-seventh respondent (iCLAW) and Lindeman Investments Ltd and 47 other minority shareholders in the fourteenth respondent (who are interested parties) (the minority shareholders) filed memoranda but did not appear. Two other interested parties, Mr Dalzell and Mr Desmond, abided the court’s decision.
[16]The positions of the parties were as follows:
(a)Formal court record. There was no opposition to access to the formal court record, subject to redactions being made in respect of any private information such as bank account details.
(b)Documents (apart from the Receivers’ Report) in addition to the formal court record. The FMA, the Clarkes and iCLAW opposed access to these documents. Ms Stokes and Mr Onn and the minority shareholders supported access. The receivers did not express a view on access to these documents.
(c)Receivers’ Report. The Clarkes opposed access to the Receivers’ Report. The FMA and Ms Stokes and Mr Onn supported access. The receivers abided the Court’s decision, but said that independently of the access applications their preference was to be able to provide the Report to investors. The minority shareholders and iCLAW abided.
Decisions on access
[17] The applications are governed by the Senior Courts (Access to Court Documents) Rules 2017 (Access Rules).
Formal court record
[18] The “formal court record” means, relevantly to these applications, the register or index kept by the registry of documents that have been filed, and any judgment, order or minute of the court.2 The formal court record does not include documents such as applications, affidavits, or memoranda of counsel.
[19] Under r 8 of the Access Rules, every person has the right to access the formal court record relating to a civil proceeding. By r 6, that general right of access is subject to any court order limiting access. One of the orders I made on 1 August 2024 prohibited access to the court file without the leave of a Judge.
2 Senior Courts (Access to Court Documents) Rules 2017, r 4.
[20] I am satisfied that leave should be granted to access the formal court record, subject to any redactions that may be justified to protect privacy interests. The order requiring leave was made because of concerns that access to documents might lead to unfair publicity of untested allegations against the Du Val entities, might prejudice the FMA’s ongoing investigation, might disclose commercially-sensitive information or might impinge on privacy interests. The formal court record does not currently present those concerns, other than in respect of some private information that can be redacted. As noted, all parties accepted that access should be granted to the formal court record on this basis.
[21] The only private information currently in the formal court record that I consider can appropriately be redacted in order to protect privacy interests is contained in orders 3.1(b)–(d) and associated schedules 1 and 2 of the sealed orders dated 1 August 2024. The applicants may access the formal court record, subject to those redactions to the sealed orders.
Documents (apart from the Receivers’ Report) in addition to the formal court record
[22] If a non-party is not entitled to access a document under r 8, they may apply for access under r 11. Rule 12 provides that in determining an application under r 11, a Judge must consider the nature of and reasons given for the request and take into account each of the following matters that are relevant to the application (or to any objection to the application):
(a)the orderly and fair administration of justice:
(b)the right of a defendant in a criminal proceeding to a fair trial:
(c)the right to bring and defend civil proceedings without the disclosure of any more information about the private lives of individuals, or matters that are commercially sensitive, than is necessary to satisfy the principle of open justice:
(d)the protection of other confidentiality and privacy interests (including those of children and other vulnerable members of the community) and any privilege held by, or available to, any person:
(e)the principle of open justice (including the encouragement of fair and accurate reporting of, and comment on, court hearings and decisions):
(f)the freedom to seek, receive, and impart information:
(g)whether a document to which the request relates is subject to any restriction under rule 7:
(h)any other matter that the Judge thinks appropriate.
[23] Rule 13 sets out the approach to balancing the matters referred to in r 12. Rule 13 provides:
13 Approach to balancing matters considered
In applying rule 12, the Judge must have regard to the following:
(a)before the substantive hearing, the protection of confidentiality and privacy interests and the orderly and unfair administration of justice may require that access to documents be limited:
(b)during the substantive hearing, open justice has—
(i) greater weight than at other stages of the proceeding; and
(ii) greater weight in relation to documents relied on in the hearing than other documents:
(c)after the substantive hearing,—
(i) open justice has greater weight in relation to documents that have been relied on in a determination than other documents; but
(ii) the protection of confidentiality and privacy interests has greater weight than would be the case during the substantive hearing.
[24] Mr Stewart submitted there was considerable public interest in the appointment of interim receivers to the Du Val entities and in the other orders that the Court has made under the FMCA. He said the public should be able to see why the FMA, as the financial regulator, took the serious step of applying for these orders. Mr Melville agreed. He said there was currently a perception of secrecy as to why the orders were sought and made, and that the orders had real implications for creditors of the Du Val entities. Mr Johnson, counsel for Ms Stokes and Mr Onn, adopted Mr Stewart’s position. He added that the Du Val investors had been in an information vacuum for two years and that refusing access would continue that.
[25] I accept there is considerable public interest in this proceeding. In particular, I accept there is significant interest, both from Du Val investors and creditors and from the public generally, as to why the FMA applied for orders under the FMCA in respect of the respondents. The principle of open justice is engaged. That principle is a
fundamental one, albeit it does not create a presumption of disclosure. The freedom to seek, receive and impart information is also relevant here, particularly as the applicants are media organisations.3
[26] However, this proceeding is at a stage before the substantive hearing. Rule 13 provides that at that stage the protection of confidentiality and privacy interests and the orderly and fair administration of justice may require that access to documents be limited. In Greymouth Petroleum Holdings Ltd v Empresa Nacional Del Petróleo, the Court of Appeal explained why:4
[25] These divisions [in r 13] reflect that during the substantive hearing open justice has greater weight, in particular in relation to documents admitted in evidence. When a court is engaged in hearing a dispute its workings, including documents referred to or relied on, should be open to full scrutiny by all members of the public, unless there are particular and strong reasons to the contrary. The public should be able to follow and understand the hearing process. However, prior to and after the substantive hearing, the importance of public scrutiny is less, as the court is not hearing and resolving the dispute. Prior to the hearing there is no guarantee the case will go to hearing at all. Therefore open justice has less weight. The parties are entitled to the protection of confidentiality and privacy within reasonable limits, given that they have not at that point aired the dispute in public. …
[27]The Court of Appeal reinforced this point in Crimson Consulting Ltd v Berry:5
[39] … When matters are still at the pleadings stage, there is an element of unfairness on parties in the publication of one side of the story. The allegations in the statement of claim have not yet been tested by the giving of evidence. There being no hearing in court, the need for transparency and public scrutiny is less, because pre-trial the court is generally not determining substantive issues.
[28] This is not to say that the principle of open justice and the freedom to seek, receive and impart information are irrelevant at the pre-hearing stage.6 It is merely to say, as reflected in r 13, that these matters carry less weight pre-hearing than during a hearing.
3 Crimson Consulting Ltd v Berry [2018] NZCA 460, [2019] NZAR 30 at [33].
4 Greymouth Petroleum Holdings Ltd v Empresa Nacional Del Petróleo [2017] NZCA 490, [2017] NZAR 1617.
5 Crimson Consulting Ltd v Berry [2018] NZCA 460, [2019] NZAR 30.
6 In Crimson Consulting Ltd v Berry [2018] NZCA 460, [2019] NZAR 30 at [40] the Court of Appeal said that these matters remained relevant pre-hearing and that “[t]ransparency of the court process at all stages is in the public interest”.
[29] The Court of Appeal’s observations are particularly relevant to this proceeding, for three reasons. First, not only is the proceeding at the pre-hearing stage, it was commenced on a without-notice basis. The respondents have yet to formally respond in any way to the FMA’s application.
[30] Secondly, the FMA sought orders under ss 522–524 of the FMCA. Under s 522, orders can be sought in (broadly) two situations. One is where the FMA is carrying out an investigation into whether a person has contravened financial markets legislation. The other is where a prosecution or civil proceeding has begun against a person alleging such contraventions. In this case, the former situation applied. The FMA was carrying out an investigation, but no prosecution or civil proceeding had been commenced. That remains the case. This proceeding will not substantively determine any allegations of contravention.
[31] Thirdly, on 1 August 2024 the FMA sought, and the court granted, only interim orders. Under s 524 of the FMCA, if an application has been made for orders under s 522, the court may, if the court considers it is desirable to do so, before considering the application, grant an interim order – namely, an order that is expressed to have effect pending the determination of the application. The threshold for granting an interim order is not high. The FMA does not have to show a prima facie case of liability on the part of the person alleged to have engaged in the contravention, though the FMA does have to show that good grounds exist for its investigation.7 The court also has to be satisfied that an order is desirable.
[32] In these circumstances, several of the r 12 matters weigh against granting access to documents other than the formal court record. Those documents primarily consist of the FMA’s without-notice application, the affidavits in support and the memorandum of counsel in support. These all contain untested allegations. Allowing access to them could result in an unbalanced impression being given of the issues in the proceeding. That would not be consistent with the orderly or fair administration of justice. Granting access would also result in disclosure of private or commercially sensitive information that is not justified (at this stage of the proceeding) by the open
7 Financial Markets Authority v Hotchin [2011] 3 NZLR 469 at [54].
justice principle. There is also a possibility of criminal charges arising from the matters addressed in these documents. Access to these documents while the allegations are unanswered and untested may prejudice the respondents’ fair trial rights.
[33] There is a related matter that also arises from the nature of this proceeding. The FMA’s investigation is ongoing. The FMA has issued a confidentiality order under s 44 of the Financial Markets Authority Act 2011 (FMAA). This order prohibits the publication, communication, disclosure or sharing by anyone of any information, document or evidence that is provided or obtained in connection with its investigation. The confidentiality order continues, notwithstanding that the FMA commenced this proceeding, albeit that the order is now subject to this court’s supervisory jurisdiction.8 I accept the submission of Ms Cooper KC, counsel for the FMA, that because of the level of detail in the FMA’s application and supporting documents, granting access to them would prejudice its ongoing investigation and might prejudice future investigations. That would not be consistent with the orderly administration of justice.
[34] Overall, I consider that at this stage of the proceeding the balance lies heavily against granting access to documents other than the formal court record (leaving the Receivers’ Report to one side).
Receivers’ Report
[35] The Clarkes were the only parties to oppose granting access to the Receivers’ Report. Mr Nilsson, counsel for the Clarkes, submitted that it was not possible to draw a clear line between the content of the Report and the content of the FMA’s application and supporting documents. He submitted that they should therefore be treated the same way, with access denied. As a fallback, he submitted that if the Report was to be released, it should be redacted.
[36] I consider a clear line can be drawn between the Receivers’ Report and the FMA’s application and supporting documents. The former is quantitatively and qualitatively different from the latter. The FMA’s application alone ran to 16 pages.
8 Commerce Commission v Air New Zealand Ltd [2011] NZCA 64, [2011] 2 NZLR 194 at [109].
There were two affidavits in support, plus an associated 65-page application for a search warrant (with another affidavit in support of that). A 27-page memorandum of counsel made submissions on the applicable law and charted the way through the other material. These documents included extensive and detailed allegations against the respondents.
[37] The Receivers’ Report is very different. The body of the report, leaving aside contents and title pages, consists of 25 pages. It is mostly a very high-level report. It identifies three main reasons for its recommendation that the majority of the Du Val entities be placed into statutory management: (1) there are “irregularities that warrant further investigation”; (2) there are complexities which make it difficult to treat some Du Val entities independently from others; and (3) there are risks to investors and creditors that would arise from a multiplicity of insolvency processes across the Du Val group of entities.
[38] Granting the media access to this Report will allow the public to understand, at a general level, the reasons that the interim orders were made in the first place and some of the reasons that the Minister accepted the FMA’s recommendation that statutory managers be appointed to many of the Du Val entities. Granting access does not give rise to the same concerns that would arise were access granted to the FMA’s application and supporting documents. The Report lacks the detail found in the FMA’s documents, and consequently there is no commercially-sensitive material and almost no private information. The Report does not make allegations, but rather expresses concerns and the need for further investigation. The lack of detail in the Report means that, as Ms Cooper confirmed, the FMA’s ongoing investigation would not be prejudiced.
[39] Accordingly, I consider that the media applicants should be granted access to the Receivers’ Report, subject to any specific redactions that can be justified.
[40] I consider that page 30 of the Report should be redacted in its entirety. This contains private information in respect of which the Clarkes have a reasonable expectation of privacy.
[41] Mr Nilsson submitted that various passages in the Report, generally those in which the receivers express concern and the need for further investigation, should be redacted for the same reasons he sought that the FMA’s application and supporting documents not be accessed. I do not accept that submission. These passages are expressed at such a level of provisionality and generality that I consider granting access would not lead to an unbalanced impression or prejudice fair trial rights. Allowing the media to access the Report with these passages intact strikes an appropriate balance, at this stage of the proceeding, between the matters in r 12 that are relevant to the access applications.
Associated issue: distribution of Receivers’ Report
[42] Independently of the access applications, an issue has arisen between the parties and the receivers as to whether the receivers should be able to distribute the Receivers’ Report to persons with an interest in the receiverships. Given that I am granting the media applicants access to the Report, the receivers should be at liberty to distribute the Report to such persons, and in such manner, as they see fit, subject to redaction of page 30. I will direct accordingly.
[43] The Receivers’ Report has been served on various respondents and interested parties on the condition that the Report was to be used for the sole purpose of allowing the recipients to prepare their responses to this proceeding, and that its content was otherwise kept confidential pending further orders of the Court. Except in respect of the redaction to page 30 of the Report, this condition will have to be discharged given that I am granting access to a redacted version of the Report.
Result
[44]I grant the four media applicants access to:
(a)The formal court record, subject to redactions from the sealed orders dated 1 August 2024 of orders 3.1(b)–(d) and schedules 1 and 2.
(b)The Receivers’ Report dated 16 August 2024, subject to redaction of page 30.
[45]I otherwise decline the access applications.
[46]I direct:
(a)The receivers to file, as soon as possible, a version of the Receivers’ Report with page 30 redacted, so that it may be provided to the media applicants.
(b)That the receivers may distribute the Receivers’ Report dated 16 August 2024 to such persons, and in such manner, as they see fit, subject to redaction of page 30.
(c)The Registrar to prepare a version of the sealed orders dated 1 August 2024 with orders 3.1(b)–(d) and schedules 1 and 2 redacted.
(d)The condition on which the Receivers’ Report has been served (namely, that it is to be used by the recipients for the sole purpose of allowing the recipients to prepare their responses to this proceeding, and that its content is otherwise kept confidential) is discharged, except in respect of the redaction to page 30 of the Report that I have made when granting access to the Report.
Campbell J
0