Lifestyles Investment Group v Coral Investments Securities Limited (Struck Off)
[2017] NZHC 1639
•17 July 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-2352 [2017] NZHC 1639
BETWEEN LIFESTYLES INVESTMENT GROUP
Plaintiffs
AND
CORAL INVESTMENTS SECURITIES LIMITED (Struck off)
Former First Defendant TONY NOEL LUSBY Second Defendant
MACQUARIE BANK LIMITED and MACQUARIE INVESTMENT MANAGEMENT LIMITED
Third Defendants
Hearing: 29 March 2017 Counsel:
M C Black and J Waugh for plaintiffs
A M Callinan and N M Blomfield for third defendantsJudgment:
17 July 2017
RESERVED JUDGMENT OF KATZ J
This judgment was delivered by me on 17 July 2017 at 3.30 pm
Pursuant to Rule 11.5 High Court Rules
Registrar/Deputy Registrar
Solicitors: Devonport Law, Auckland Simpson Grierson, Auckland Witten-Hannah Howard, Auckland
LIFESTYLES INVESTMENT GROUP v CORAL INVESTMENTS SECURITIES LIMITED (Struck off) [2017] NZHC 1639 [17 July 2017]
Introduction
[1] The plaintiffs seek a review of Associate Judge Sargisson’s judgment staying these proceedings pursuant to s 24 of the Trans-Tasman Proceedings Act 2010 (“TTPA”).1 Her Honour found that an Australian court has the necessary jurisdiction to determine the matters in issue and that it is the more appropriate court to do so.
[2] The third defendants oppose the review application. They say that the plaintiffs have not discharged the burden of demonstrating that the Judge’s discretionary decision should be overturned.
Background
The plaintiffs’ claims
[3] The plaintiffs are a group of investors who have all lost funds invested with the former first defendant, Coral Investments Securities Ltd (“Coral Investments”). I refer to Coral Investments as the “former” first defendant as it has been struck off the Companies Register in Samoa, and therefore no longer exists as a legal entity.
[4] The second defendant, Tony Lusby, was the sole director of Coral Investments. The third defendants, Macquarie Bank Ltd and Macquarie Investment Management Ltd (together, “Macquarie”) are the financial and banking entities in Australia with whom the investment funds were held.
[5] The plaintiffs claim that Mr Lusby, through Coral Investments, defrauded them of over $12 million. Mr Lusby is said to have solicited funds from them for investment purposes. However, he did not invest those funds in the manner agreed but instead withdrew them from the Macquarie accounts and transferred them to various offshore accounts around the world. Mr Lusby is thought to be currently residing in South America. The plaintiffs advise that he is under investigation by the
New Zealand Police and Interpol.
1 Lifestyles Investment Group v Coral Investments Securities Ltd [2016] NZHC 2262.
[6] The investors allege that Macquarie knew that the account into which their funds were deposited was a trust or depository account, and that it was to be managed on trust for the depositors. They say that Macquarie knew or ought to have known that the account was being operated fraudulently and irregularly over a number of years by Mr Lusby, contrary to the purpose for which it was established and to the interests of its third party beneficiaries. The statement of claim pleads the following causes of action against the defendants (excluding Coral Investments, given that it has now been struck off):
(a) Breach of investment contracts – against Mr Lusby.
(b)Breach of fiduciary duty, breach of trust and equitable proprietary claim – against Mr Lusby.
(c) Breach of obligation in managing the trust accounts and liability as a constructive trustee – against Macquarie.
(d) Breach of duty of care – against Macquarie.
(e) Dishonest accessory and knowing receipt – against Macquarie.
[7] Macquarie denies the allegations against it. It says it had no involvement in the dealings between the plaintiffs, Mr Lusby, and Coral Investments. Its role was limited to the operation of a unit trust and a depository account in Australia. Further, it says it was obliged to follow Coral Investments’ instructions with respect to the transfer of monies from its accounts. At all times, it says, it has acted in accordance with the requirements of the Australian laws governing the operation of the relevant accounts. It disputes that it had any knowledge of the alleged fraudulent activity by Coral Investments and Mr Lusby.
[8] Mr Lusby has filed an extremely pro forma statement of defence (two paragraphs in length), “witnessed” in Columbia. Coral Investments did not take any steps in the proceedings, other than filing an address for service. It is not
clear when Coral Investments was struck off. The key protagonists in this litigation appear to be the plaintiffs and Macquarie.
Trans-Tasman Proceedings Act 2010
[9] The purpose of the TTPA is (in part) to streamline civil proceedings between
Australia and New Zealand in order to reduce costs and improve efficiency.2
Subpart 2 of Part 2 sets out the process under which a New Zealand court can decline jurisdiction on the grounds that an Australian court is the more appropriate forum. Section 21(3) provides that:
The New Zealand court may only stay the proceeding if it is satisfied that an Australian court has jurisdiction to determine the matters in issue and that it is the more appropriate court to determine those matters. In determining whether the Australian court is the more appropriate court, the New Zealand court must take certain matters into account. They are set out in section
24(2).
[10] Section 24 provides that:
(1) On an application under section 22, the New Zealand court may, by order, stay the proceeding if it is satisfied that an Australian court–
(a) has jurisdiction to determine the matters in issue between the parties to the proceeding; and
(b) is the more appropriate court to determine those matters.
(2) In determining whether an Australian court is the more appropriate court to determine the matters in issue between the parties to the proceeding, the New Zealand court must not take into account the fact that the proceeding was commenced in New Zealand, but must take into account the following matters:
(a) the places of residence of the parties or, if a party is not an individual, its principal place of business:
(b) the places of residence of the witnesses likely to be called in the proceeding:
(c) the place where the subject matter of the proceeding is situated:
(d) any agreement between the parties about the court or place in which those matters should be determined or the proceeding should be instituted (other than an exclusive choice of court agreement to which section 25(1) applies):
2 Section 3(1)(a).
(e) the law that it would be most appropriate to apply in the proceeding:
(f) whether a related or similar proceeding has been commenced against the defendant or another person in a court in Australia:
(g) the financial circumstances of the parties, so far as the
New Zealand court is aware of them:
(h) any other matters that the New Zealand court considers relevant.
Approach to be taken on review
[11] In staying the proceedings on grounds that Australia was a more appropriate forum, the Judge was exercising a discretion.3 The threshold for appellate intervention in a discretionary decision is higher than in a general appeal or review.
The plaintiffs must show that the Judge:4
(a)
(b)
acted on a wrong principle;
failed to take into account some relevant matter;
(c)
(d)
took account of some irrelevant matter; or
was plainly wrong.
[12]
As
the Court of Appeal observed in Alex Harvey Industries Ltd v
Commissioner of Inland Revenue, the role of an appellate court is not to review whether the Judge has given “undue weight” to some factor or “insufficient weight” to another:5
Weighing and balancing the various factors is an integral part of a Judge’s exercise of his or her discretion. This Court will not repeat that exercise unless the Judge has given such excessive weight to some factor or such patently inadequate weight to another as to be “plainly wrong”. The
3 Haines v Herd [2016] NZHC 1928 at [2]; citing Schumacher v Summergrove Estates Ltd [2014] NZCA 412, [2014] 3 NZLR 599 at [29]. Associate Judge Sargisson rightly adopted this position in the judgment under review: above n 1, at [13].
4 Shirley v Wairarapa District Health Board [2006] NZSC 63, [2006] NZLR 523 at [15]; Ophthalmological Society of New Zealand Inc v Commerce Commission [2003] 2 NZLR 145 (CA) at [13]; and Alex Harvey Industries Ltd v Commissioner of Inland Revenue (2001) 15
PRNZ 361 (CA) at [13].
5 Above n 4, at [14].
problem is that, if the phrases “undue weight” and “insufficient weight” have this meaning, they are tautologous and unnecessary. If, on the other hand, they do not have that meaning they suggest that the Court will be prepared to substitute its view for that of the Judge – which it will not do.
The decision under review
[13] The Judge carefully considered all of the relevant mandatory factors in s 24. There was no dispute that an Australian court would have jurisdiction to determine the matters in issue in the proceeding, as required by subs (1). In relation to the various factors set out in subs (2), the Judge found that:
(a) “The places of residence of the parties” favoured a New Zealand court, given the large number of New Zealand residents among the plaintiffs.6
(b)“The places of residence of the witnesses” also favoured a New Zealand court, given the number of likely witnesses for the plaintiffs and the fact that most appear to be located in New Zealand.7
(c) “The place where the subject matter of the proceeding is situated”
favoured an Australian court.8
(d) The difficulty in determining whether there was “any agreement between the parties about the court or place in which the matters in issue should be determined or the proceeding should be instituted” meant that that factor was neutral.9
(e) “Applicable law” favoured an Australian court, for the reasons I discuss below at [19] to [21]. Australian law would be most appropriate for the claims against Macquarie,10 but the position was less straightforward in respect of the claims against Coral Investments
and Mr Lusby. As to this latter point, the Judge found that even if
6 Above n 1, at [27].
7 At [33].
8 At [35].
9 At [36] and [40].
New Zealand law applied, this would pose little difficulty for an
Australian court.11
(f) “The financial circumstances of the parties” favoured a New Zealand court, given that it was inevitable the plaintiffs would face greater expense if they were required to proceed in Australia rather than New Zealand, and this could be a disincentive to them pursuing the proceedings, contrary to the interests of justice.12
(g) Another relevant matter was that limitation issues might arise if proceedings are recommenced in Australia, due to the length of time between issuing proceedings in New Zealand and in Australia.13 That issue, however, could be addressed through the provision of appropriate undertakings by Macquarie, to the extent it concerned the claims against it.14
[14] Ultimately, the Judge concluded that Australia is the most appropriate forum for the proceedings. The key issue raised by this review is whether the Judge erred in her assessment of four of the above factors, namely:
(a) the place where the subject matter of the proceeding is situated;
(b) the law that it would be most appropriate to apply in the proceedings; (c) the financial circumstances of the parties; and
(d) limitation issues.
The place where the subject matter of the proceeding is situated (s 24(2)(c))
[15] The Judge observed that:15
Ultimately the subject matter is most concerned with allegations of loss by breach of trust and fiduciary duty and knowing assistance in the breach, in
11 At [45].
12 At [54]-[55].
Australia. The requisite knowledge is, on the plaintiffs’ pleadings, founded in the information that Macquarie is obliged to obtain from its account holder under the Australian statutory regime.
[16] It necessarily followed that this factor favoured an Australian court:
[35] To the extent that “subject matter’ of such a kind can be said to be “situated” in a place, this factor favours an Australian court as being the more appropriate to determine the matters in issue. The question of subject matter does not however favour an Australian court with quite the same force as it would if it were land situated in Australia. It is a factor to be weighed with others.
[17] The plaintiffs submitted that the Judge failed to give sufficient and proper consideration to the fact that the subject matter of their claims is situated in and occurred in New Zealand, where the representations were made to investors and the breach of trust causes of action originated. However, the Judge specifically considered the fact that although the Macquarie causes of action were primarily situated in Australia, the plaintiffs’ misrepresentation claims against Coral
Investments and Mr Lusby arose out of events that took place in New Zealand.16 On
balance, however, she found that the Australian connection was stronger.
[18] As I have noted above, it is not for this Court to reassess the weight the Judge gave to various relevant considerations. In any event, however, I am satisfied that the conclusion the Judge reached in relation to this particular factor was one that was open to her. The subject matter of the proceedings had connections to both countries. However, following the initial marketing of the investments in New Zealand, the relevant conduct appears to have all taken place in Australia. That is where the funds were held, and where any breach of contract or breach of trust occurred. It seems likely that the key disputes in the proceedings will relate to what happened in Australia, after the funds were invested there. It was not unreasonable for the Judge to conclude in the circumstances that the subject matter of the proceedings was more closely connected to Australia than New Zealand.
The law that it would be most appropriate to apply in the proceeding
(s 24(2)(e))
[19] The Judge analysed the applicable law in some depth.17 She concluded that it was “reasonably plain” that Australian law would be the most appropriate law to apply to the causes of action against Macquarie and said that “counsel for the plaintiffs did not press any argument to the contrary”.18 This was the factor that weighed most strongly in favour of an Australian court being the most appropriate court.19
[20] The Judge noted Macquarie’s argument that the proper law of the claims against Coral Investments was Australian law, given that the contracts were allegedly breached in Australia. And the misappropriation of funds relevant to the claims against Coral Investments and Mr Lusby took place in Australia.20 She also acknowledged the plaintiffs’ argument that insofar as Australian law applies, that factor is of no great significance in determining the appropriate court. That is
because, in the plaintiffs’ submission, the equitable claims can be determined equally capably by a court in either jurisdiction. Further, because the contracts were entered into in New Zealand, the Contractual Remedies Act 1979 applies, which has no equivalent in Australia.21
[21] Overall, however, the Judge concluded that an Australian court would be better placed to assess the claims against Macquarie, because it is an Australian financial institution that is subject to a specific statutory context and regulatory regime in that jurisdiction. She considered that an Australian court will be familiar with that regime and therefore able to more efficiently determine the proceedings.22
Further, she considered as unsettled the Australian law of “knowing assistance” in
the breach of trust context to be unsettled. It was accordingly preferable for this issue to be considered and determined by an Australian court.23
17 At [41]-[51].
18 At [44].
19 At [62].
20 At [43](d).
[22] On review, counsel for the plaintiffs did not accept that Australian law applied to the Macquarie causes of action and said that no concession to that effect had been made before the Judge. Mr Black struggled, however, to articulate any proper basis on which New Zealand law might apply to those causes of action, applying orthodox conflicts of laws principles. The plaintiffs’ submissions conflated two separate issues: the first is as to the applicable law; and the second is whether, in the event that Australian law applies, the Judge gave too much weight to the desirability of having Australian courts applying or determining that law.
[23] In respect of the first issue, I find no error in the Judge’s conclusion that Australian law applies to the causes of action against Macquarie, applying orthodox conflict of laws principles. In accordance with the principles referred to at [12] above, having correctly determined this factor, the weight that the Judge gave it was ultimately a matter for her. Nevertheless, I will address the parties’ submissions on this issue, given that they were detailed and formed a key focus of the review application.
[24] The plaintiffs took particular issue with the Judge’s reliance on the Australian statutory and regulatory context, and also the apparent uncertainty regarding the law on dishonest assistance in Australia. Mr Black submitted that New Zealand courts are well-placed to deal with such issues of Australian law. The Judge therefore erred, in his submission, in concluding that this was a significant factor in favour of the proceedings being determined in Australia.
The Australian statutory and regulatory context
[25] As I have noted, the Judge found that there were two factors that weighed in favour of an Australian court deciding issues of Australian law:24
The first relates to the statutory context and regulatory regime in Australia that applies to Macquarie’s activities there, which features as an important element in the statement of claim. Though small differences between the two countries’ regulatory regimes are unlikely to pose any difficulty for a New Zealand court, it has to be acknowledged that the Australian courts are likely to have a familiarity with Australian regime that would be beneficial
to the efficient determination of matters in issue around the information that
Macquarie has or should have had about the purpose of the account.
[26] Mr Black submitted that the claims against Macquarie are focused on the information that the bank has or should have had about the purpose of the Macquarie account, and that this primarily involves simple factual issues about the information that was conveyed. He further submitted that:
There is nothing overtly complicated in statutory or regulatory terms, in considering that information, and which should disqualify a New Zealand Court objectively taking it into account. This is particularly given the overreaching legal principles and obligations (in relation to the bank) that apply to trust, duty of care and "knowingly" accessory liability principles.
[27] I accept Ms Callinan’s submission, however, that the Judge’s view of the wider relevance of the Australian statutory and regulatory regime is well-supported by an analysis of the statement of claim. The third cause of action is based on alleged mismanagement of the “trust” account. This was a unit trust account and was therefore subject to a particular regulatory regime contained in the Corporations Act 2001 (Cth). The fourth cause of action alleges that Macquarie owed the plaintiffs a duty of care and acted negligently in the management of Coral Investments’ accounts, in breach of the various standards Macquarie was required to adhere to as a prudent banker. Those accounts were regular bank accounts and were therefore subject to a different regulatory regime from the unit trust.
[28] I also note the plaintiffs’ plea that Macquarie “failed to comply with the
express provisions of [the Australian Securities and Investment Commission Act
2001 (Cth)] and any relevant regulations and laws governing reporting, deposits, securities, suspicious transactions and their control or disbursement ... and the [Electronic Funds Transfer] Code of Conduct”. This again reinforces the significance of the Australian statutory and regulatory regime.
[29] The evidence of Mr Frare, who is an in-house lawyer at Macquarie, is that the allegations in the statement of claim raise issues under a range of Australian legislation including the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth), the Australian Securities and Investment Commission Act 2001, the Corporations Act 2001 and regulations relating to managed investment schemes.
[30] Given this context, the Judge did not err in concluding that the Australian courts’ familiarity with the applicable statutory and regulatory regime is a relevant consideration. The purpose of the TTPA is to reduce costs and improve efficiency. Although a New Zealand court would be capable of determining any issues of Australian law, with the assistance of expert evidence on the topic, it would clearly be more efficient for an Australian court to do so
Liability as an “accessory” to a breach of trust
[31] The plaintiffs’ fifth cause of action relies on the principle that a third party accessory (here, Macquarie) may be liable to beneficiaries if it knowingly assists another (here, Coral Investments) to act in breach of trust. In relation to this cause of action, the Judge was influenced by perceived uncertainties in Australian law as to the knowledge required of an accessory. She stated that:
[47] The second [factor] relates to the test to be applied to establish the necessary knowledge on the part of the accessory in the law of knowing assistance. Accepting what Professor Rickett says about the law being “essentially the same” in the two jurisdictions, uncertainty remains. The law in Australia on the point is not settled.
(footnotes omitted).
[32] The Judge held that this uncertainty made it more efficient for the courts in
Australia to determine the relevant issues:
[49] The alternative is for New Zealand courts to determine matters of Australian law on significant elements of the plaintiffs’ claim as matters of fact with the assistance of expert evidence, which, as counsel submits, is less efficient and likely to involve significantly greater cost.
[33] Mr Black challenged this conclusion, submitting that:
the applicable principles (on accessory liability) do not require numerous legal experts and the application of complex and developing legal principles that can only be applied by a NSW Court … given all the relevant authorities, it is not such an onerous or difficult task for the applicable principles to be only applied in NSW and not by the NZ Courts.
[34] The classic formulation of the knowledge required to establish accessory liability is that of Lord Selborne LC in Barnes v Addy. A person will be liable as an accessory if he or she assists “with knowledge in a dishonest and fraudulent design
on the part of the trustees”.25 This approach was endorsed by the High Court of Australia in 1975, in the leading case of Consul Development Pty Ltd v DPC Estates Pty Ltd.26 The author of Equity and Trusts in Australia summarises subsequent developments in the Australian law of knowing assistance as follows:27
On the traditional formulation, what attracts liability in that person (the “accessory”) is her or his knowledge of the trustees’ “dishonest and fraudulent design”. In what ostensibly remains the leading case on the point in Australian law, Consul Development Pty Ltd v DPC Estates Pty Ltd, their Honours therefore focused on the level of knowledge sufficient to attract this liability. Notwithstanding its venerated status, given fulsome endorsement by the High Court over 30 years later in Farah Constructions Pty Ltd v Say- Dee Pty Ltd, Consul was no paragon on clarity on the point. The stream of Australian case law debating the appropriate knowledge threshold following Consul is testament to this. In an attempt to avoid detailed inquiry into levels of knowledge, the Privy Council in Royal Brunei Airline Sdn Bhd v Tan redirected the relevant inquiry, and the touchstone for the accessory’s liability, to one grounded solely in whether or not the accessory had behaved dishonestly.
(footnotes omitted).
[35] Australian and United Kingdom law in this area has therefore diverged on the issue of accessory liability. In Farah Constructions Pty Ltd v Say-Dee Pty Ltd the High Court of Australia acknowledged the radical difference between the decision of the Privy Council in Royal Brunei Airlines Sdn Bhd v Tan28 and the High Court’s own earlier decision in Consul on this issue. Although the High Court foreshadowed that it might revisit Consul in an appropriate case, it said that:29
Until such an occasion arises in this Court, Australian courts should continue to observe the [Consul] distinction mentioned above and, in particular, apply the formulation in the second limb of Barnes.
[36] New Zealand courts, on the other hand, have followed the United Kingdom’s
Royal Brunei approach.30 Professor Justice Paul Finn, writing extrajudicially, has
referred to this as a “radical departure” from the traditional approach:31
25 Barnes v Addy (1874) 9 LR Ch App 244 at 252.
26 Consul Development Pty Ltd v DPC Estates Pty Ltd (1975) 132 CLR 373 at 395-396 per Gibbs J
and 408 per Stephen J.
27 G E Dal Pont Equity and Trusts in Australia (6th ed, Thomson Reuters, Pyrmont (NSW), 2015)
at [38.65].
28 Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378 (PC).
29 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at [163].
30 Fletcher v Eden Refugee Trust [2012] NZCA 124, [2012] 2 NZLR 227 at [67]; Wong v Burt [2005] 1 NZLR 91 (CA) at [52]-[58]; Vero Liability Insurance Ltd v Heartland Bank Ltd [2015] NZCA 288 at [39]-[40]; US International Marketing Ltd v National Bank of New Zealand Ltd
What is not another story is the radical departure first in the UK – and then in New Zealand – from the traditional understanding of the second limb of Barnes v Addy. Royal Brunei, as far as it goes, represents a real attempt to put accessorial liability in equity on a principled and coherent footing. The hallmark of accessorial liability is the third party’s dishonest participation in a breach of fiduciary duty or breach of trust.
For the moment in this setting Royal Brunei’s burden is something for New
Zealanders to ponder. For Australians, it is a distant prospect.
[37] Ms Callinan submitted that which of these two tests is to be preferred may well be significant in this case as the statement of claim appears to be based on the Consul formulation. She submitted that the High Court of Australia’s observations in Farah were obiter and it is quite possible that the expert witnesses on Australian law will differ as to which approach is to be preferred. Ms Callinan submitted that the Judge was correct to characterise the law in Australia on this issue as not being settled.
[38] I do not accept that Australian law on accessory liability in this context can fairly be characterised as “unsettled”, although the application of the relevant principles in a particular case may well be uncertain. As I have noted above, the High Court of Australia expressly stated in Farah that unless and until the issue is reconsidered by that Court, Australian courts should continue to observe the Consul distinction and, in particular, apply the formulation in the second limb of Barnes v Addy. A more accurate characterisation of the current state of Australian law in this area is perhaps Professor Justice Paul Finn’s extrajudicial description of it as
“settled, but lame.”32
[39] Australian law in this area is “settled” in that the approach in Consul is to be followed unless and until the High Court directs otherwise. However, as quoted above, Dal Pont notes that Consul was “no paragon on clarity on the point”,
evidenced by the “stream of Australian case law debating the appropriate knowledge
[2004] 1 NZLR 589 (CA) at [58]-[61]; and Westpac New Zealand Ltd v MAP and Associates Ltd [2011] NZSC 89, [2011] 3 NZLR 751 at [25]-[29]. In the latter case, the Supreme Court discussed Barlow Clowes International Ltd (in liq) v Eurotrust International Ltd [2005] UKPC
37, [2006] 1 WLR 1476, which built upon the reasoning in Royal Brunei.
31 Justice Paul Finn “Knowing Receipt and Knowing Assistance: Balkanising Equity” (paper presented to 25th Annual Banking & Financial Services Law & Practice Conference, Queenstown, July 2008) at 15.
32 Above n 31, at 9.
threshold following Consul”. Indeed a key reason for the Privy Council’s decision in Royal Brunei to move away from the traditional approach was to avoid the “tortuous convolutions” that arose in its application.33
[40] Accordingly, although my reasoning differs in some respects from that of the Judge, I agree with her conclusion that it would be preferable and more efficient for Australian courts to apply Australian law on the issue of knowing assistance, given that the exercise may well be far from straightforward. The Judge’s view is consistent with the well-established principle in The Eleftheria, that in general, and all other things being equal, it is more satisfactory (from the point of view of ensuring that justice is done) for the law of a foreign country to be decided by the courts of that country. As well, the treatment of expert evidence as a factual issue
places limitations on the scope of an appeal.34 An appeal in this case cannot be
discounted given the sums involved and the wider significance of this case to
Macquarie.
[41] I am not suggesting that a New Zealand court would not be able to determine the relevant issues with the assistance of expert evidence on Australian law. However, the focus of the TTPA is on efficiency. It would clearly be more efficient and cost-effective for an Australian court to chart the somewhat murky waters of the Australian law on knowing assistance.
The Contractual Remedies Act 1979
[42] The plaintiffs allege in their first cause of action against Coral Investments and Mr Lusby that the latter made various representations to them including that 75 per cent of the monies invested would be held on interest-bearing deposit with
Macquarie, with the balance of 25 per cent used for trading in Australian securities.
33 Above n 28, at 391-392.
34 The Eleftheria [1970] P 94 (QB) at 105, referred to in Kiwi Air Ltd v UTS Geophysics Pty Ltd
[2013] NZHC 3236 at [33]-[36]; Club Mediterranee NZ v Wendell [1989] 1 NZLR 216 (CA) at
220; Society of Lloyd’s & Oxford Members’ Agency Ltd v Hyslop [1993] 3 NZLR 135 (CA) at
142-143 and 154; Clements v Thurlow [2012] NZHC 2449 at [53]; Eight Mile Style, LLC v New Zealand National Party [2015] NZHC 2409 at [67]; and Kidd v van Heeren [1998] 1 NZLR 324 (HC) at 331-332. See also Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] 1 NZLR
289 (PC) at [47]-[57] as to the need to call further expert evidence to deal with new factual issues. This poses a practical difficulty in that witnesses may need to be recalled as the factual narrative of the case unfolds.
Such representations are pleaded as terms of the contract pursuant to s 4 of the Contractual Remedies Act 1979, entitling the plaintiffs to remedies under ss 9 and 10 of that Act, or at common law. The plaintiffs say that the Judge failed to give proper consideration to the fact that Australian courts have no jurisdiction to make orders under the Contractual Remedies Act.
[43] The Judge addressed this issue as follows:35
It is plain on the plaintiffs’ pleading that they rely on [the Contractual Remedies Act], but there is nothing about it to indicate that it would be a difficult matter for an Australian court to deal with the legal and factual issues raised or to apply New Zealand law. No particular reason has been suggested as to why an Australian Court could not deal with the relevant cause of action against Coral Investments and Mr Lusby, or why the form of relief sought by the plaintiffs should be awarded. Damages can be as readily awarded by an Australian court as a New Zealand court.
[44] A similar issue was considered by Randerson J in Rimini Ltd v Manning Management and Marketing Pty Ltd. In that case the New Zealand-registered plaintiff also indicated that it intended to seek relief under the Contractual Remedies Act, and submitted that only New Zealand courts have jurisdiction to make orders
and grant relief under that Act. Randerson J disagreed, noting that:36
If these proceedings are heard in the Supreme Court of New South Wales, then it will be for that Court to determine whether to apply the Contractual Remedies Act and/or to grant relief under it. However, even if the Courts of New South Wales refuse to grant relief under the Contractual Remedies Act, I do not consider that will disadvantage the plaintiff in any way. The Contractual Remedies Act is not an exclusive code. ...
…
The plaintiff does not seek any greater relief under the provisions of the
Contractual Remedies Act than is available at common law.
[45] Those observations are equally apt here. I am not persuaded that the Judge erred in her analysis of this issue. The weight she gave it, in the overall exercise of
her discretion, was ultimately a matter for her.
35 Above n 1, at [45].
36 Rimini Ltd v Manning Management and Marketing Pty Ltd [2003] 3 NZLR 22 (HC) at [52]-[53].
The financial circumstances of the parties, so far as the New Zealand court is aware of them (s 24(2)(g))
[46] The Judge found that the financial circumstances of the parties was a factor that supported the proceeding being determined in New Zealand. She stated that:
[54] It cannot be overlooked that it is inevitable there will be greater expense for the plaintiffs if they are required to proceed in Australia rather than in New Zealand, and that whether they are financially secure or not, this expense will be in addition to the substantial loss they say they have suffered. It would be blind to ignore the risk that having to have their claims dealt with in an Australian court could be a disincentive to pursuing the proceeding and having the claims determined on their merits. That would not be in the interests of justice.
[47] There can be no dispute, therefore, that this factor was addressed and it was weighed in favour of a New Zealand forum. The plaintiffs seek to adduce further evidence, however, which they submit would justify even greater weight being given to this factor. The evidence is in the form of an affidavit from John Trefor Williams, who is the Chairman of the plaintiffs’ recovery group. Macquarie opposes admission of Mr Williams’ affidavit on the basis that it is neither fresh, nor sufficiently cogent.
[48] An appeal or review will generally proceed on the evidence that was before the decision-maker at the time of his or her decision. The parties are not entitled, as a matter of course, to attempt to bolster their case by filing new evidence in support of an appeal or review. In exercising its discretion as to whether to grant leave to file
new evidence, the Court will generally have regard to the following factors:37
(a) Whether the evidence could have been obtained with reasonable diligence for use at the trial.
(b) Whether the evidence appears to be cogent and credible.
(c) Whether the evidence would have had an important influence on the outcome of the case (in other words, whether the evidence is material).
(d)Whether admitting the evidence would require further evidence from other parties and cross-examination.
37 V P v R H [2015] NZHC 260 at [7].
[49] These matters are not exhaustive. The over-arching consideration will always be the importance of doing justice in the particular case.38
[50] The plaintiffs’ position in the hearing before the Judge was that “if they have to recommence, conduct and attend the New South Wales Court this will result in additional financial costs and disbursements [to] them as parties”. This was based on Mr Williams’ evidence at the time. Mr Williams now says, however, that the plaintiff group (comprising 54 plaintiffs) will be unable to fund the proceedings if they are required to recommence proceedings in Australia. In particular, he deposes that the five plaintiffs who have financially supported this proceeding to date have “decided” that they are not able to further fund the cost of these proceedings in New South Wales. The other smaller investors “are no longer prepared (or able) to provide funds”. It is not clear from Mr Williams’ affidavit how many plaintiffs are no longer “prepared” to fund the proceedings and how many are not “able” to do so.
[51] I accept Ms Callinan’s submission that the evidence the plaintiffs seek to adduce on review is not fresh. Further, it has limited cogency, in large part due to the lack of supporting detail provided. For example, the “top five investors” who have apparently been funding the litigation are not identified and no evidence has been provided as to their respective financial positions. Nor has any evidence been provided of the financial circumstances of the other 49 plaintiffs. It is therefore not possible to draw any conclusions as to whether the plaintiffs as a group are unwilling to fund Australian proceedings or unable to do so.
[52] I do note, however, Mr Williams’ evidence that the plaintiffs have entered into some form of nominal fee arrangement with their New Zealand counsel. This is evidence that was available at the time of the hearing before the Judge and should have been put before her if it was believed to be relevant to her assessment of this factor. I also note Mr Williams’ evidence that the plaintiffs have been unable to find someone to act for them in Australia on a similar basis to their New Zealand lawyers,
albeit it appears that only one Australian law firm has been approached. Again, the
38 High Court Rules 2016, r 2.3(4)(b). That rule has been revoked, but is applied on a transitional basis.
relevant inquiries (which would need to extend beyond one law firm) could and should have been made prior to the original hearing.
[53] Almost all of the new evidence could have been obtained with reasonable diligence for use at the original hearing. Given the lack of supporting detail, including detail relating to the financial position of the lead plaintiffs, the new evidence could not realistically have had an important influence on the outcome of the application if it had been before the Judge. I therefore decline to admit it.
[54] The financial means of the plaintiffs and their ability to afford the litigation is just one factor amongst the various mandatory considerations in the TTPA. The ability of a party to fund proceedings is not a determinative factor.39 As I have noted above, this was a factor that the Judge found weighed in favour of New Zealand proceedings (albeit perhaps not as heavily as the plaintiffs had wished).
Limitation issues (s 24(2)(h))
[55] The final issue raised by the plaintiffs’ application for review is that of limitation. In particular, there is a risk that the plaintiffs could be prejudiced if any of the defendants raised limitation defences in the Australian proceedings that would not be available to them in the New Zealand proceedings.
[56] The Judge dealt with this issue in a pragmatic way, by ordering a stay on terms. If the plaintiffs recommence proceedings in New South Wales, Macquarie has undertaken not to raise any limitation defences arising between that time and the filing of proceedings in New Zealand in 2015. Mr Lusby has not provided such an undertaking. I note, however, that he currently appears to be somewhere in South America and, apparently, is the subject of police inquiries. If his conduct of these proceedings is any indication, he seems unlikely to engage in any Australian
proceedings in a meaningful way (if at all).
39 Schumacher v Summergrove Estates Ltd, above n 3, at [51]. See also Skelton v Z487 Ltd [2014] NZHC 707 at [52]-[53].
[57] In my view the Judge dealt with limitation issues in a pragmatic and appropriate way. If Mr Lusby raises limitation issues in Australia, the stay of the New Zealand proceedings could be lifted (if appropriate). The possibility of that occurring, however, is not a determinative factor. I accept Macquarie’s submission that it should not dominate the balancing process in relation to the key issues of concern to the real protagonists – the plaintiffs and Macquarie.
Conclusion
[58] The plaintiffs have not discharged the onus on them to satisfy the court that the Judge:
(a) acted on a wrong principle;
(b) failed to take into account some relevant matter; (c) took account of some irrelevant matter; or
(d) was plainly wrong.
[59] The Judge took into account all of the factors she was required to under s
24(2) of the TTPA. She did not make any material errors in her assessment of those factors and her decision is not “plainly wrong”. There is accordingly no basis for this Court to intervene in the exercise of the Judge’s discretion to stay these proceedings.
Result
[60] The application for review is dismissed.
[61] Macquarie is the successful party and, in accordance with the usual principles, costs would normally follow the event. As I have not heard from the parties on costs issues, however, I direct that if costs cannot be resolved between the parties, then:
(a) any memorandum on behalf of Macquarie is to be filed and served by
31 July 2017; and
(b) any memorandum in response from the plaintiffs is to be filed and
served by 14 August 2017.
Katz J
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