Houghton v Saunders
[2019] NZHC 2318
•13 September 2019
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2008-409-348
[2019] NZHC 2318
BETWEEN ERIC MESERVE HOUGHTON
Plaintiff
AND
TIMOTHY ERNEST CORBETT SAUNDERS, SAMUEL JOHN MAGILL, JOHN MICHAEL FEENEY, CRAIG
EDGEWORTH HORROCKS, PETER DAVID HUNTER, PETER THOMAS and JOAN WITHERS
First DefendantsCREDIT SUISSE PRIVATE EQUITY INCORPORATED
Second Defendant
CREDIT SUISSE FIRST BOSTON ASIAN MERCHANT PARTNERS LP
Third Defendant
Hearing: 12 September 2019 Counsel:
C R Carruthers QC and P A B Mills for plaintiff
D J Cooper for first defendants (except Mr Magill and Ms Withers)
T C Weston QC for Mr Magill B D Gray QC for Ms Withers
J B M Smith QC and A S Olney for second and third defendants
Judgment:
13 September 2019
RESERVED JUDGMENT OF DOBSON J
[Stay]
HOUGHTON v SAUNDERS [2019] NZHC 2318 [13 September 2019]
[1] I convened a further call of this proceeding to respond to developments since my judgment of 15 August 2019.1 There has been continued non-compliance by the plaintiff with my orders for security for costs, provision of pleadings for individual claimants, provision of further affidavits of documents and a measure of non- compliance with timetable directions for service of briefs of evidence for claimants whose claims are to be advanced at the stage two hearing.
[2] On 30 August 2019, the defendants filed a memorandum seeking directions that, given the extent of non-compliance by the claimants, the stage two hearing in November 2019 be limited to the stage two claim brought by Mr Houghton.
[3] On 2 September 2019, the plaintiff lodged a notice of appeal against all elements of my 15 August 2019 judgment. The appeal includes challenges to:
· my ruling that components of the evidence of Mr Houston, an economic expert to be called for the claimants, be excluded on the basis that he opined on matters not within the scope of the untrue statement in the prospectus;
· my order for those claimants wishing to be heard at stage two being required to provide further affidavits of documents;
· my direction that there needs to be a pleading of material individual circumstances of each of the claimants to be heard at stage two; and
· orders I made for alternative forms of security for costs, pending the plaintiff being able belatedly to comply with orders made in my judgment of 14 June 2019 setting the quantum of security for stage two at
$1.65 million, which was to be provided by 12 July 2019.2
[4] No application for stay was made in respect of any of the orders in my 15 August 2019 judgment. At the outset of the current hearing, Mr Carruthers QC suggested that consideration of a stay should be unnecessary as developments could
1 Houghton v Saunders [2019] NZHC 2007.
2 Houghton v Saunders [2019] NZHC 1362.
await the outcome of the appeal, which has been granted priority for hearing on 9 October 2019. After clarifying with him the state of preparation for the stage two hearing, I considered the issues on the basis that Mr Carruthers was making an oral application for a stay.
[5] Counsel for the defendants opposed a stay of the orders requiring pleadings for individual claimants and the provision of further discovery affidavits. Their concern is the inability to reasonably prepare for trial starting on 7 November 2019 when the claimants are not committed to relevant details of their circumstances as individual investors. Further, for reasons traversed at the 8 August 2019 hearing, the formulaic explanations for the lack of documents discovered by individual claimants are inadequate.
[6] On the adequacy of discovery, Ms Mills argued, contrary to the order made in my 15 August 2019 judgment, that there had been sufficient compliance. She suggested that claimants could not reasonably be expected to identify and preserve documents for the long period which has elapsed, and this renders unreasonable any obligation for them to take further steps to locate documents.
[7] Somewhat unusual dynamics apply to this proceeding in that non-compliance with security for costs orders would ordinarily lead to defendants seeking a stay. For reasons I have previously traversed, the defendants wish this unusually stale and protracted proceeding to be progressed. In practical terms, they are concerned to commit the claimants to the most workable arrangements that can be achieved to minimise the prejudice in preparation of their defences whilst maintaining the present fixture.
[8] The practicalities of running the stage two trial are affected by the final number of claimants whose individual claims are to be heard. The intention ought to be to determine a cross-section of individual claims where their circumstances enable settlement discussions to occur in relation to the more than 3,000 claimant shareholders who have opted in to the proceeding. The proposed number of stage two claimants has reduced during this year. I have previously intimated a provisional view that a five week hearing could probably not accommodate more than, say,
15 claimants. I re-emphasised at the current hearing that the claimants ought, at least initially, to make the election as to those claimants whose claims are ready, and who could realistically be expected to be heard and determined in the length of fixture available.
[9] I have accordingly made further orders that the claimants are to make an election of approximately 15 claimants whose claims are sought to be determined at the stage two hearing, and to advise defendants’ counsel of their identity promptly – by 20 September 2019. Given particular concerns raised for the defendants about preparing a challenge to the foreshadowed claim for ACC and the extent of its non- compliance, Mr Carruthers accepted that ACC would not be among the final list of claimants.
[10] The absence of relevant pleadings of the circumstances of investing by each of the claimants is the most pressing concern in having the matter adequately prepared for substantive hearing. I am not prepared to grant a stay in respect of that order in my 15 August 2019 judgment. On the other hand, given the claimants’ continued opposition to providing such basic details as a matter of pleading, in order not to render their right of appeal entirely nugatory, I will defer the deadline for provision of the pleadings until the day after the Court of Appeal produces a results decision on this aspect of the appeal presently before it.
[11] Claimants’ counsel will have to contemplate the prospect of a results judgment on 9 October 2019, so that the pleadings for those claimants whose claims are to be heard at the stage two hearing will need to be prepared before then. Time will be of the essence in complying with that obligation.
[12] On the other hand, I am minded to grant a stay on terms in respect of the challenge to my order requiring completion of further discovery affidavits by those claimants whose claims are to be heard at the stage two hearing. I do not treat that order differently because of any reconsideration of the justification for my order, but rather because formal confirmation that further research has been undertaken to locate documents, and production of any that are found, is not quite as pressing as committing the claimants to individual pleadings. As I traversed with Ms Mills, the reality is that
the work needed to settle further discovery affidavits in the terms I have previously directed will need to be progressed prior to the Court of Appeal hearing. This is against the contingency that, if this aspect of the appeal is unsuccessful, I will require compliance with my order within eight working days of delivery of a results judgment. Again, time will be of the essence in complying.
[13] On the assumption that briefs have been served for the claimants nominated, and in the event that the Court of Appeal upholds the requirement for individual pleadings, the defendants are to be served the day after the Court of Appeal’s results judgment with individual pleadings for each of those claimants identifying the circumstances of their investment as previously directed by me.3 Further, if the claimants’ appeal against my order for further discovery is dismissed, the defendants would also be served in short order with the further discovery affidavits I have directed. Following service of whichever of these further pleadings and/or discovery affidavits are required, the defendants will have a period of three working days to notify plaintiff’s counsel of any individual claimant who the defendants object to being included. Grounds for objection must be relevant concerns of prejudice arising in preparing a defence, given the relative extent of non-compliance of previous orders that can be made out in relation to a particular claimant, and the adverse consequences for the defendants of that non-compliance.
[14] In the event that differences remain as to the identity of the individual claimants whose claims are to be advanced at stage two, counsel will have to refer those concerns back to me for a ruling.
[15] That leaves continuing non-compliance with both my original order for security for costs, and the alternative forms of such order that I intended to apply as a holding measure until security that complied with the original order was in place on terms acceptable to the defendants.
[16] In an affidavit sworn on 11 September 2019, Mr Gavigan, the alter ego of Joint Action Funding Limited (JAFL), the litigation funder involved, has deposed that arrangements are still being progressed to effect a form of after-the-event (ATE)
3 Houghton v Saunders, above n 1, at [35].
insurance on terms similar to those that were arranged to effect security for costs on various parts of stage one of the proceedings.
[17] I will not rehearse the history canvassed on this topic in my 15 August 2019 judgment, but note that there has been a concerning sequence of non-compliance by the plaintiff for several months. In procedural terms, I do not accept the plaintiff would be entitled to a stay of the effect of the present orders requiring security for costs. The defendants now face the prospect of continuing detailed preparation for the November hearing with no security for the costs that they are incurring.
[18] In practical terms, the claimants avoid any adverse consequences for default on their obligations, pending resolution of the appeal, to provide security because of the defendants’ election not to press for a stay.
[19] The defendants have applied by way of memorandum dated 11 September 2019 for me to now set the quantum of costs on three interlocutory steps in which they have succeeded, and on which thus far I have deferred making costs orders. Those applications are:
(a)the plaintiff’s unsuccessful strike-out application dismissed on 15 May 2019;4
(b)the defendants’ application for security for costs, granted in my judgment of 14 June 2019;5
(c)the omnibus applications dealt with on 8 August 2019 requiring further discovery, pleadings, compliance with orders for briefs of evidence and a challenge to parts of Mr Houston’s proposed evidence.6
[20] The defendants seek costs orders on those decisions in their favour jointly and severally against the plaintiff, JAFL and Mr Gavigan.
4 Houghton v Saunders [2019] NZHC 1061.
5 Houghton v Saunders [2019] NZHC 1362.
6 Houghton v Saunders, above n 1.
[21] I will settle costs on those applications. I direct that the plaintiff’s solicitors have a period of 10 working days from service of the 11 September 2019 memorandum to provide a memorandum in opposition to the quantum sought and to the application for the costs orders to be made personally against JAFL and Mr Gavigan. That is, a response is to be filed by 25 September 2019. On receipt of the memorandum for the claimants, I will consider whether a hearing is necessary or whether to deal with the issues on the papers, which is my present preference.
Dobson J
Solicitors:
Antony Hamel, Dunedin for plaintiff
Gilbert Walker, Auckland for first defendants (other than Mr Horrocks and Ms Withers) Wilson Harle, Auckland for Ms Withers
Clendons, Auckland for Mr Horrocks
Russell McVeagh, Wellington for second and third defendants
Counsel:
C R Carruthers QC and P A B Mills for plaintiff
D J Cooper for first defendants (other than Mr Magill and Ms Withers) T C Weston QC for Mr Magill
B D Gray QC for Ms Withers
J B M Smith QC and A S Olney for second and third defendants
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