HIH Casualty and General Insurance (NZ) Ltd (in liq) HC Auckland CIV 2009-404-3637
[2011] NZHC 613
•24 February 2011
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2009-404-3637
IN THE MATTER OF section 284 of the Companies Act 1993
AND IN THE MATTER OF HIH Casualty and General Insurance
(NZ) Ltd (in liquidation)
AND IN THE MATTER OF FAI (NZ) General Insurance Company
(in liquidation)
AND IN THE MATTER OF an application by Metalcraft Industries
Ltd
Hearing: 24 February 2011
Counsel: PR Cogswell for applicant, Metalcraft Industries Ltd
JA Craig for HIH Casualty and General Insurance (NZ) Ltd
Judgment: 24 February 2011
(ORAL) JUDGMENT OF ASSOCIATE JUDGE DH ABBOTT [on application for directions]
Solicitors: Simpson Grierson, Private Bag 92 518, Auckland cogswell+jaduram Lawyers, PO Box 6343, Auckland
RE HIH CASUALTY AND GENERAL INSURANCE (NZ) LIMITED (IN LIQUIDATION) HC AK CIV 2009-
404-3637 24 February 2011
[1] The liquidators of FAI (NZ) General Insurance Company Ltd (in liquidation) (FAI NZ) and HIH Casualty & General Insurance Company Ltd (in liquidation) (C&G NZ) have applied for directions to assist them in seeking and determining claims by FAI NZ and C&GNZ policy holders. Certain directions have already been given in a judgment delivered on 10 September 2010 (referred to as “the
judgment”).1
[2] Metalcraft Industries Limited (Metalcraft) is a former policy holder with FAI NZ and C&G NZ. It is facing claims in respect of allegedly negligent building work, and may wish to bring a claim under the policies. There is very limited time in which to do so.2 Metalcraft has made an interlocutory application for access to a number of documents filed with the Court in this proceeding.
[3] Metalcraft has served its application on the liquidators. The parties have reached agreement on terms under which the liquidators have agreed not to oppose the application.
The application
[4] Metalcraft seeks access to the following documents filed with the Court:
(a) A memorandum prepared by counsel for the liquidators regarding the position of policy holders joined in an adjudication under the Weathertight Homes Resolution Services Act 2006, in particular as to whether there exists a finite date by which a public liability policy holder must receive notice of an adjudication claim to establish whether the claim is within limitation periods (the affidavit was
identified at paragraph [43] of the judgment).
1 Re HIH Casualty and General Insurance (NZ) Ltd (in liquidation) and FAI (NZ) Company (in liquidation) HC Auckland CIV-2009-404-3637 10 September 2010.
2 Ibid, at [64](a)(iii), a direction was given that claims were to be made by 1 March 2011.
(b)The affidavit of an actuary (Mr JR Gibbs), from KPMG in Sydney, who carried out an actuarial review assessing the value of contingent, unliquidated claims and made recommendations as to what provision should be made by the liquidators to cover these contingent claims (identified at paragraph [46] of the judgment).
(c) The affidavit of another actuary (Mr NR Christie), from Melville Jessop Weaver in Auckland, who conducted a peer review of Mr Gibbs’ affidavit (also identified at paragraph [46] of the judgment).
(d)A memorandum submitted by counsel for the liquidators summarising the affidavits of Mr Gibbs and Mr Christie (identified at paragraph [47] of the judgment.
Metalcraft’s interest
[5] Metalcraft is a roofing company that both supplies and installs its products to residential and commercial properties. It faces claims, inter alia in the Weathertight Homes Tribunal, arising from allegedly negligent building works. These claims currently are contingent, and unliquidated. They could arise in one of two ways: either by way of a Notice of Adjudication filed by an eligible homeowner with the Weathertight Homes Tribunal, or by Metalcraft being joined as a respondent in an existing adjudication.
[6] At this point, Metalcraft has no way of ascertaining the exact extent of their liability arising from either situation. However, it is possible that should such a claim arise from events which occurred in a period for which cover exists, it will wish to make a claim under the policies issued by FAI NZ and C&G NZ.
[7] In addition to claims of which it is already aware (and has notified), Metalcraft also needs to estimate the amount of any claim for which it has any contingent liability or which is for an unliquidated amount. To do this, Metalcraft submits that it will need to consider both the methodology behind, and adequacy of,
the provision that the liquidators have made for contingent claims, referred to in the judgment.3 Metalcraft considers that the methodology followed to determine the total provision of $2,500,000 may have been flawed.
[8] In summary, Metalcraft seeks the documents for two reasons:
(a) to assist it in acquiring an understanding of the methodology adopted by the liquidators’ actuarial experts to assess the value of contingent and unliquidated claims generally, and thereby enable Metalcraft to form an informed view as the claim it wishes to lodge in the liquidation; and
(b)to enable it, as a contingent creditor, to consider whether to seek leave under s 284 of the Companies Act 1993 to apply for directions in relation to a matter arising in the liquidation of FAI NZ and C&GNZ, namely the adequacy of the provision.
The rules for seeking access
[9] The High Court Rules prescribe the procedure for obtaining access to information in a Court file. Where an application is made to the Court for access to the Court file outside of a substantive hearing, the request is dealt with under r 3.13 of the High Court Rules. The Judge may refuse an application under r 3.13 or grant it in whole or in part without conditions, or subject to any conditions that the Judge thinks appropriate: see r 3.14.
[10] The Judge or Registrar has a broad discretion to deal with the application in such manner as the Judge or Registrar considers just (r 3.13(7)). However, r 3.16 requires the Judge or Registrar considering an application under r 3.13 to consider the nature of and reasons for the application and to take into account each of the
following matters relevant to the application:
(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 all 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 r 3.12;
(f) Any other matter that the Judge or Registrar thinks just.
[11] The factors required to be considered in r 3.16 point to a balancing exercise between the principle of open justice and potential public interest in the proceedings, and the privacy and expectations of confidentiality of the parties.
[12] The current regime for access to court documents was introduced by the High Court (Access to Court Documents) Amendment Rules 2009 and significantly altered the test for allowing access to court documents. Particularly relevant to the current application by Metalcraft as a third party, are the comments of Wild J in BNZ Investments v Commissioner of Inland Revenue,4 which involved an application by an Australian law firm, Maddocks, for access to evidence for the purpose of parallel proceedings being pursued in Australia:
[12] The current rules shifted the emphasis from the nature of a person’s interest to the nature of the information requested, with almost a presumption of disclosure, unless the content of the information provides a good reason for non-disclosure. Further, the two-step test described by the
Court of Appeal in McCully is now a single balancing test; there is no preliminary question of eligibility.
...
[15] I consider the threshold for a non-party such as Maddocks to obtain access to Court documents is now considerably lower. That lowering has been achieved in two ways. First, the two-step test has been replaced by an overall balancing test. Secondly, the substance of the test has shifted. It now focuses on open justice and freedom of information, almost to the point of creating a presumption of disclosure.
Discussion
[13] Although the parties have reached agreement on terms, the Court must still be satisfied that this is a suitable case for making an order. This requires a consideration of factors for and against Metalcraft’s application.
Factors favouring disclosure
[14] As discussed in BNZ Investments v Commissioner of Inland Revenue,5 the current rules shifted the emphasis from the nature of the applicant’s interest to the nature of the information requested, with almost a presumption of disclosure unless the content of the information provides a good reason for non-disclosure. Several factors relating to the nature of the documents sought by Metalcraft weigh in favour of disclosure in this instance.
[15] First, the affidavits were adduced as evidence by counsel for the liquidators in the proceedings. Similarly, the memoranda were submitted to be read by the Court. Whether the documents have been adduced as evidence or not has been held to have bearing upon the presumption of “open justice”. Wild J, in his judgment in BNZ Investments v Commissioner of Inland Revenue alluded to this consideration:6
[33] If the documents in question have not been adduced in evidence, or have not been read by the court at some other (i.e. non-evidentiary) stage, the moral impetus behind “open justice” did not apply, because the material never entered the public domain.
[36] ... It is clear that the principle of open justice is paramount, effectively creating a presumption of disclosure. This presumption is easily displaced if the request is for documents that were not read in or read by the Court, because the principle of open justice rests on the premise that such documents have entered the public domain.
[16] The affidavits and memoranda that Metalcraft seeks were read by the Court in the course of the proceedings. They have entered the public domain. Prima facie, they should be made available to Metalcraft.
[17] Furthermore, they do not appear to consist of sensitive, “private information” in the sense of that discussed in ASB Bank Ltd v Versalko,7 where the interest in protecting the confidentiality of vulnerable bank customers’ account details was held to outweigh any public interest in disclosure. Similarly, they do not appear to carry the sensitivity of those in Darby v Team Kiwi Racing Ltd,8 where Courtney J held that the existence of a tentative settlement agreement containing confidentiality provisions was a key factor outweighing any basis on which access might be permitted on the principles of open justice. The option of redacting certain private or confidential aspects of a document is also available to the Court, (and has been adopted by the parties in their agreed terms).
[18] Finally, in taking the public step of applying to the Court for directions regarding the liquidation of FAI NZ and C&GNZ, the liquidators have, to an extent, undermined any potential position of confidentiality. As soon as they did so an immediate public interest in the matter arose, at least to the extent of all creditors of FAI NZ and C&GNZ subject to potential contingent liabilities, of which Metalcraft is one.
[19] It is also significant that the application is not opposed (on the basis of the agreed terms). While this does not mean disclosure will be automatically granted, it is a relevant consideration in the exercise of a balancing of competing interests.
[20] While less emphasis is now placed on the nature of an applicant’s interest in
disclosure, it is still a factor available to be considered by the Court, and cases have
continued to do so. Metalcraft submits that it seeks the documents in order to give the best possible estimate for its claim in respect of contingent liabilities (and unliquidated amounts). There is an element of personal, rather than public, interest in this application, in that the ultimate benefit is for Metalcraft itself. However, as discussed in BNZ Investments Ltd v Commissioner of Inland Revenue,9 a “further and unintended consequence” of making open justice a paramount consideration, as opposed to focusing on the interests of the applicant, is that it:
[34] ... allows applicants who are acting for their personal interest, rather than in the public interest, to ride on the coattails of the concept of “open justice”. The Courts have accepted that unintended consequence as one that must be tolerated for the sale of the wider principle.
In that case, an Australian law firm’s interest in documents for the purposes of aiding parallel litigation in Australia was held to be sufficient to compel disclosure, despite not being directly in the interests of the public.
Factors against disclosure
[21] Factors relating to commercial sensitivity in relation to either the affidavits or memoranda can count against disclosure, but are clearly met in this case by the terms agreed between the parties.
[22] FAI NZ and C&G NZ may have many creditors who have held insurance policies with them during the relevant periods. Whether a distinction should be drawn between public disclosure, as opposed to disclosure to Metalcraft only, may need to be considered but is not raised on the present application.
Decision
[23] Metalcraft needs to make a claim in the liquidations of FAI NZ and C&G NZ
by 1 March 2011, so there is a degree of urgency to the application.
[24] The parties have agreed to terms for disclosure, on the basis of which the liquidators are not opposing the application.
9 BNZ Investments v Commissioner of Inland Revenue, above n 4, at [34].
[25] I am satisfied, after taking into account the factors for and against, and the terms reached, that the orders sought should be made.
[26] I make orders as follows:
(a) The liquidators are immediately to provide Metalcraft with copies of the documents identified in paragraph [4] above, subject to:
(i)Redaction by the liquidators of material from the two affidavits to remove limited references to privileged information and personal information identifying certain policy holders and/or claimants with matters on foot before the Weathertight Homes Tribunal (being information personal to those policy holders/claimants and irrelevant to the actuarial issues being considered by the deponents); and
(ii)Confirmation by Metalcraft of the disclaimers contained in the KPMG Australia report and the Melville Jessop Weaver report, and in particular that it will not rely on those reports or hold KMPG Australia or Melville Jessop Weaver liable if it elects to rely on the reports.
(b)Leave is reserved to Metalcraft or the liquidators to bring this application back before the court for further directions in respect of any matters arising out of the documents, and in particular as to any redaction by the liquidators of material from the two affidavits.
[27] There is no order as to costs.
DH Abbott
Associate Judge
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