Livingstone v CBL Corporation Limited (in liquidation)

[2023] NZHC 2712

NON-PUBLICATION / CONFIDENTIALITY ORDERS AS SET OUT IN PARA [99](k) PENDING FURTHER ORDER.

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-2727

[2023] NZHC 2712

BETWEEN

BASIL IAN LIVINGSTONE

Plaintiff

AND

CBL CORPORATION LIMITED (IN LIQUIDATION)

First Defendant

Continued …

Hearing:

7 June 2023 and 11 July 2023 with further memorandum received

on 28 July 2023

Appearances:

P Skelton KC (on 7 June 2023), C Pearce and M Singh (for B I Livingstone)

F J Cuncannon and K R Muirhead (for T.E.A. Custodians Ltd and Argo Investments Ltd)

J Goodall KC and A Colgan (on 7 June 2023) (for CBL Corporation Ltd (in liq) and its liquidators B J Gibson and N Jackson)

K C Francis (on 7 June 2023) (for Sir J Wells, ACR Hannon, I K Marsh and NGP Donaldson and on behalf of P A Harris)

D Robinson (on 7 June 2023) (for the executor of the Estate of A L Hutchison)

D Chisholm KC (on 7 June 2023) (for CBL Insurance Ltd (in liq) and its liquidators K Johnstone and A J Grenfell) as an interested party

Judgment (leave to discontinue):

8 June 2023

Reasons (leave to discontinue) and remaining

judgment:

28 September 2023

LIVINGSTONE v CBL CORPORATION LTD (IN LIQUIDATION) [2023] NZHC 2712 [28 September 2023]

JUDGMENT OF GAULT J

This judgment was delivered by me on 28 September 2023 at 4:00 pm pursuant to r 11.5 of the High Court Rules 2016.

Registrar/Deputy Registrar

……………………………………

Continued …

AND

SIR JOHN WELLS

First Third Party

PETER ALAN HARRIS
Second Third Party

GEOFFREY JOHN TURNER as executor of the ESTATE OF ALISTAIR LEIGHTON HUTCHISON

Third Third Party

ANTHONY CHARLES RUSSEL HANNON

Fourth Third Party

IAN KELVIN MARSH
Fifth Third Party

NORMAN GERALD PAUL DONALDSON

Sixth Third Party

CIV-2019-485-642

BETWEEN

T.E.A. CUSTODIANS LIMITED as custodian of the Harbour Australasian Equity Fund

First Representative Plaintiff

ARGO INVESTMENTS LIMITED
Second Representative Plaintiff

AND

SIR JOHN WELLS

First Defendant

PETER ALAN HARRIS
Second Defendant

GEOFFREY JOHN TURNER as executor of the ESTATE OF ALISTAIR LEIGHTON HUTCHISON

Third Defendant

ANTHONY CHARLES RUSSELL HANNON

Fourth Defendant
IAN KELVIN MARSH
Fifth Defendant

NORMAN GERALD PAUL DONALDSON

Sixth Defendant

EURASIA INVESTMENT LIMITED
Seventh Defendant

SUNSHINE NOMINEES LIMITED
Eighth Defendant

OCEANIC SECURITIES PTE LIMITED
Ninth Defendant

FEDERAL PACIFIC GROUP LIMITED
Tenth Defendant

CARDEN JAMES MULLHOLLAND
Eleventh Defendant

C M TRUSTEE SERVICES LIMITED
Twelfth Defendant

CBL CORPORATION LIMITED (IN LIQUIDATION)
Thirteenth Defendant

TABLE OF CONTENTS

Introduction  [1]

Background  [9]

Harbour proceeding (CIV-2019-485-642)  [20]

Livingstone proceeding (CIV-2019-404-2727)  [26]

Settlement  [31]

Timetable directions  [33]

Leave to discontinue (reasons)

Applicable principles  [37]

Likelihood of recovery or likelihood of success  [43]

Amount and nature of discovery, evidence or investigation  [54]

Settlement terms and conditions  [55]

Recommendation and experience of counsel  [56]

Further expense and likely duration of litigation and risk  [57]

Recommendation of neutral parties, if any  [59]

Number of objectors and nature of objections  [60]

Presence of good faith, arms-length bargaining and the absence of collusion / the dynamics of and the positions taken by the parties during

the negotiation  [61]

Degree and nature of communication by counsel and the representative plaintiffs with class members during the litigation / whether class members

were given timely notice of the essential elements of the settlement  [63]

If counsel fees were negotiated in the settlement  [66]

Conclusion  [68]

Distribution directions

Applicable principles  [70]

Harbour proceeding  [73]

Livingstone proceeding  [85]

Ancillary orders

Confidentiality  [95]

Security for costs  [98]

Result  [99]

Introduction

[1]    Following the collapse of CBL group companies, these two representative proceedings and two proceedings brought by the Financial Markets Authority (FMA),1 have a liability hearing together scheduled to commence on 8 April 2024 for 8½ months. There are also related proceedings brought by liquidators,2 the first of which has a separate four month hearing allocated in 2025.

[2]    As a result of a mediation process, these two representative proceedings (and the liquidator claims) have been settled conditional on Court approval to discontinue.

[3]On 7 June 2023, I heard:

(a)Mr Livingstone’s interlocutory application for leave to discontinue representative proceeding and to approve distribution of funds;3 and

(b)the Harbour representative plaintiffs’ interlocutory application for

(1)  leave to discontinue representative proceeding; (2) approval of interim distribution of funds; and (3) ancillary orders.4

[4]    Mr Skelton KC, for Mr Livingstone, and Ms Cuncannon, for the Harbour representative plaintiffs, sought an urgent determination on leave to discontinue given the settlement remained conditional on Court approval to discontinue and the implications if the Court were to decline leave.

[5]    On 8 June 2023, I granted leave in each proceeding for the plaintiff/s to discontinue the proceeding by filing a notice of discontinuance on the basis that there are no issues as to costs between the parties.5 I indicated that my reasons would follow and that I would make distribution and ancillary directions in the Livingstone proceeding separately at a later date. I also made timetable directions in relation to

1      CIV-2019-404-2739 and CIV-2019-404-2745.

2      CIV-2019-404-2792 and CIV-2022-404-100.

3      Interlocutory application dated 16 May 2023.

4      Interlocutory application dated 22 May 2023. Following confirmation of an 11 July 2023 hearing date for distribution directions, the Harbour representative plaintiffs did not pursue an interim distribution of funds at the hearing on 7 June 2023.

5      Minute dated 8 June 2023.

the Harbour representative plaintiffs’ distribution hearing scheduled for 11 July 2023. In addition, I made confidentiality and non-publication orders in each proceeding.

[6]    On 10 July 2023, following a memorandum of counsel for the Harbour representative plaintiffs in advance of the hearing on 11 July 2023, I issued a minute varying the interim confidentiality / non-publication orders dated 8 June 2023.

[7]    On 11 July 2023, I heard the Harbour representative plaintiffs’ interlocutory application for approval of distribution methodology and ancillary orders.6 During that hearing, I sought clarification as to the scope of the permanent confidentiality / non-publication orders sought. The same day I issued a minute varying the current interim confidentiality / non-publication orders in each proceeding.7

[8]    This judgment provides my reasons for granting leave to discontinue and determines the applications for distribution and ancillary directions.

Background

[9]    For the purposes of this judgment, it is largely sufficient to repeat the relevant background from my judgment of 21 July 2022.8

[10]   CBL Corporation Ltd (in liquidation) (CBLC) is the parent company of a group of companies which operated as an international credit surety and financial risk insurer headquartered in Auckland. CBL Insurance Ltd (in liquidation) (CBLI) is a wholly owned subsidiary of CBLC owned through LBC Holdings New Zealand Ltd.

[11]   On or about 14 February 2012, the Reserve Bank of New Zealand (RBNZ) granted CBLI a provisional insurance licence under the Insurance (Prudential Supervision) Act 2010 (IPSA). From that date, CBLI was required to comply with the Solvency Standard for Non-life Insurance Business issued by RBNZ in October 2011 (Solvency Standard).9 This included maintaining a solvency margin.

6      Interlocutory application dated 21 June 2023.

7      Minute dated 11 July 2023.

8      Livingstone v CBL Corporation Ltd (in liq) [2022] NZHC 1734.

9      This was revoked and replaced by the Solvency Standard for Non-life Insurance Business 2014.

[12]   On or about 4 September 2013, RBNZ granted CBLI a full insurance licence under s 19 of IPSA. Pursuant to s 21 of IPSA, RBNZ imposed a condition on CBLI’s licence that it maintain a solvency margin in accordance with the Solvency Standard.

[13]   On or about 7 September 2015, CBLC lodged a product disclosure statement (PDS) with the Registrar of Financial Service Providers in connection with CBLC’s initial public offering (IPO).

[14]   On or about 13 October 2015, following the IPO, CBLC listed on the NZX and ASX.  The IPO raised $125 million.  The shares were issued at $1.55 per share on  12 October 2015, and between 13 October 2015 and 2 February 2018 traded at between $1.66 and $3.75 per share.

[15]   On 15 November 2017, CBLC’s board advised RBNZ that CBLI was likely to breach its solvency condition as at 31 December 2017 and required further reserve strengthening. In or around November 2017, CBLI’s appointed actuary recommended a further reserve strengthening as at 31 December 2017 of $147 million.

[16]   On or about 2 February 2018, NZX placed a trading halt on trading of CBLC’s shares. Immediately prior to the trading halt, the shares were trading at approximately

$3.17 per share.

[17]   On or about 8 February 2018, NZX suspended quotation of CBLC’s shares on the basis that it was concerned that CBLC was in breach of its continuous disclosure obligations.

[18]   On or about 23 February 2018, the Court made an order appointing interim liquidators of CBLI on the application of RBNZ, and placed CBLC (and nine of its subsidiaries) into voluntary administration.

[19]   On or about 12 November 2018, the Court made an order placing CBLI into liquidation. On or about 13 May 2019, the Court made an order placing CLBC into liquidation.

Harbour proceeding (CIV-2019-485-642)

[20]   The Harbour proceeding (commenced with an application dated 31 October 2019 seeking leave to bring the proceeding as a representative action) as amended alleges that from 2013 until its liquidation, at all material times CBLI was balance sheet insolvent, in breach of the minimum required solvency margin, was under- reserved, had not made appropriate provisioning for claims liabilities, and/or was in breach of, or was at material risk of failing to maintain, its licence conditions.10

[21]   The first cause of action against the directors alleges false or misleading statements made in connection with the IPO in breach of ss 57 and 82 of the Financial Markets Conduct Act 2013 (FMCA). The second cause of action against CBLC alleges the same breaches. The third cause of action against the directors alleges breach of continuous disclosure obligations in breach of s 270 of the FMCA and the listing rules. The fourth cause of action alleges the same breaches against CBLC. The fifth cause of action against the directors alleges breach of s 19 of the FMCA. The sixth cause of action alleges the same breaches against CBLC.

[22]   The seventh to ninth causes of action allege insider trading (s 241 of the FMCA). The insider trading relates to the sell down by Mr Harris, Mr Hutchison,  Mr Mulholland and entities associated with them of 20,000,000 ordinary shares to New Zealand and Australian investors on or about 5 April 2017.

[23]   On 21 August 2020, Lang J made orders by consent that the representative plaintiffs could sue on behalf of, or for the benefit of, all persons with the same interest in the subject matter of the proceeding who had already consented to or who would consent to being represented by opting-in.11 They are shareholders of CBLC who claimed to have suffered loss due to false and misleading statements in the PDS in connection with the IPO, breaches of continuous disclosure obligations, fair dealing provisions or insider trading. Class members could participate in only one of the two shareholder proceedings. Lang J’s orders also stated that the representative plaintiffs could only discontinue with the Court’s leave.

10     Second amended statement of claim dated 7 September 2021.

11     Minute of Lang J dated 21 August 2020.

[24]   To opt-in, claimants needed to execute a funding agreement (deed for provision of services in respect of litigation with LPF Litigation Funding No. 29 Ltd (LPF)) and a committee agreement (deed of arrangement and authority to bind) with members of the committee (Harbour Committee) by the opt-in date. By entering the committee agreement, claimants:

(a)gave the Harbour Committee full, irrevocable, and unconditional authority to:

(i)act for the claimants, including in the conduct and settlement of the Harbour proceeding; and

(ii)determine the proportionate percentage that each claimant has in relation to the claims; and

(b)agreed on the rights and processes to apply to the distribution of any funds resulting from settlement of the claims.

[25]   Under the committee agreement, the Harbour Committee has the choice to seek a ratifying vote of claimants, or the Court’s endorsement as to whether the committee’s distribution determination is fair and reasonable.

Livingstone proceeding (CIV-2019-404-2727)

[26]   The Livingstone proceeding (initial statement of claim dated 13 December 2019 and application seeking leave to bring the proceeding as a representative action dated 20 December 2019) as amended alleges that the following events and information were not disclosed:12

(a)That in 2013/2014 CBLI had written two insurance bonds providing defect insurance for apartment complexes in Denmark and had failed to properly account for them in its solvency margin from May 2013 onwards (the Danish bonds).

12     Third amended statement of claim dated 13 August 2021.

(b)That the funds making up a Bank of Samoa deposit were effectively encumbered and not available to CBLI to call upon and not properly accounted for in the solvency margin because of a back-to-back transaction, and Mr Hutchison was a director of the Bank of Samoa (the Samoa transaction).

(c)Receivables from Luxembourg, following a January 2017 acquisition of a shareholding in Securities and Financial Solutions Europe SA, which should have attracted a 100 per cent risk charge when calculating CBLI’s solvency ratio. In October 2017 CBLC agreed to sell the aged receivables to Castlerock Receivables Management Ltd at 50 per cent of their gross  value,  to  be  paid  in  instalments  over  five  years  (the Castlerock transaction). The Castlerock transaction was factored into CBLI’s solvency calculations as at 31 July 2017 and 31 August 2017, but this accounting treatment was subsequently not accepted by Deloitte and on 31 January 2018 the board resolved to cancel the Castlerock transaction. Absent the purported effect of the Castlerock transaction, CBLI was in breach of an RBNZ direction dated 25 July 2017 that it increase its minimum solvency ratio from 100 per cent to 170 per cent.

(d)Ongoing concerns about CBLI’s provisioning and regulatory compliance. The regulatory concerns led to a flurry of activity following a draft report by PwC UK on or about 21 June 2017 which found (among other things) that Elite Insurance Ltd (Elite) had a deficiency of €147 million in held reserves gross of reinsurance. Elite was a Gibraltar based company and CBLI’s largest single source of inwards reinsurance business – CBLI reinsured 80 per cent of Elite’s French business policies.

[27]   The first cause of action alleges breach of s 82 of the FMCA in relation to the IPO. In particular, it alleges the PDS and documents included in the register entry were false or misleading or likely to mislead in respect of provisioning for insurance claims, maintaining solvency, assessing and pricing underwritten risks and accuracy

of financial information. It alleges that CBLC and its directors breached s 82 by proceeding with the IPO and that, but for that breach, class members who bought shares could not and would not have done so. Alternatively, the price paid would have been less than $1.55 per share.

[28]   The second cause of action alleges breaches of continuous disclosure obligations under s 270 of the FMCA and the NZX and ASX listing rules by failing to disclose material information to the market. But for that breach, class members who bought shares would not have done so. Alternatively, they would have paid a lower price.

[29]   The third cause of action alleges misleading and deceptive conduct in breach of s 19 of the FMCA and s 9 of the Fair Trading Act 1986. These relate to statements in the PDS and register entry as pleaded in relation to the IPO, and non-disclosure of material information as pleaded in respect of continuous disclosure, together with statements in other documents subsequent to the IPO, and the failure to correct prior statements before 2 February 2018. But for that breach, class members who bought shares could not and would not have done so. Alternatively, class members would have paid a lower price.

[30]   On 21 August 2020, Lang J made orders by consent granting the application to bring the proceeding as a representative action. Class members are CBLC shareholders who purchased shares in the IPO, in placements and/or on the NZX and ASX markets after the IPO and still held shares at the date of the trading halt on      2 February 2018, who have suffered loss because those shares are now worthless. Class members could consent to join by entering a litigation funding agreement with Omni Bridgeway (Fund 5) Cayman Investments Ltd (Omni Bridgeway) by the opt-in date.13 The representative orders also stated that the plaintiff could only discontinue with leave of the Court.

13     Then named IMF Bentham (Fund 5) Cayman Investments Ltd. Group members engaged law firm Glaister Ennor.

Settlement

[31]   Under the proposed settlement set out in a confidential conditional Heads of Agreement dated 23 February 2023:

(a)the shareholders in the Harbour and Livingstone proceedings and the liquidators of CBLC and CBLI will receive a confidential amount to share between them;14

(b)full and final settlement will be on a no admissions basis and will extinguish all claims, and any potential claims, in respect of the matters in issue in the shareholder and liquidator proceedings;

(c)the liquidators will discontinue their proceedings and procure the consent of Bancorp Corporate Finance Ltd to the discontinuance of CIV-2022-404-100;

(d)the shareholder plaintiffs will apply for leave to discontinue;

(e)upon discontinuance, any security for costs held may be refunded or released;15 and

(f)subject to specific exceptions, the settlement details are confidential to the parties.

[32]   Among other conditions,16 the Heads of Agreement was conditional on the shareholder plaintiffs obtaining Court approval to  discontinue  their  proceedings. By 17 May 2023, all other conditions had been satisfied or waived.

14 How this settlement amount should be divided between the plaintiffs in each proceeding is not specified in the Heads of Agreement. Some division was dealt with in side agreements, including a 53:47% split between the shareholder plaintiffs and the liquidators (although from that a specific payment – of less than 0.5% – is payable by the shareholder plaintiffs to the CBLC liquidators to recognise an expense) and a 2/3:1/3 split between the liquidators of CBLI and CBLC. The split between the shareholder plaintiffs may require separate resolution but it only affects 6% of the total sum due to them and does not affect the proposed distribution schemes.

15 Omni Bridgeway will be released from the Deed Poll in respect of Adverse Costs.

16 These included conditions (i) relating to a side agreement involving [REDACTED] the Hutchison Estate and (ii) that the defendants reach arrangements satisfactory to the FMA.

Timetable directions

[33]   On 17 May 2023, I made timetable directions in each shareholder proceeding for class members to be served with the application and a covering letter, and providing leave to appear and be heard either in person or by VMR for class members who filed a notice of appearance (and, if opposing, a notice of opposition). I also made a non-publication order in respect of the confidential Heads of Agreement exhibited to the affidavit of Mr Porus dated 16 May 2023.

[34]   Class members were served on 22 May 2023 with the respective applications and covering letter updates.

[35]   There were no appearances in opposition. The shareholder plaintiffs’ solicitors received some email responses from class members, which were provided to the Court.

[36]   The applications were heard together and I address them together, relying on the evidence filed in each proceeding by consent. All parties either supported leave to discontinue or were content to abide the decision of the Court.

Leave to discontinue (reasons)

Applicable principles

[37]   Representative proceedings in New Zealand are provided for in the High Court Rules 2016,17 but are not currently governed by a comprehensive legislative framework.

[38]   In Southern Response Earthquake Services Ltd v Ross, the Supreme Court confirmed that the Court has an adjudicative power in its protective or supervisory jurisdiction to oversee and approve a settlement and the method of distribution in a representative action.18 The Supreme Court surveyed the approaches in Australia and Ontario which it considered the most helpful comparable jurisdictions.19 Referring

17     High Court Rules 2016, r 4.24.

18     Southern Response Earthquake Services Ltd v Ross [2020] NZSC 126, [2021] 1 NZLR 117 at [81]-[82].

19     At [66] and n 107.

first to the Australian Courts’ development of the tests to be applied, the Supreme Court said the main task is seen as assessing whether the settlement is a fair and reasonable compromise of the claims,20 citing the Federal Court of Australia’s decision in Camilleri v The Trust Company (Nominees) Ltd 21 as a useful summary of the test for settlement approval that has developed. The Court will also consider whether the settlement is undertaken in the interests of the members as a whole. The Court can have regard to a broad range of factors, including the settlement sums, prospects of success and likely outcome of litigation vis-à-vis the proposed settlement, legal and other expert advice, the likely duration and cost of the proceeding if continued to judgment, and the attitude of the group members to the settlement.

[39]As Moshinsky J said in Camilleri:22

(a)the central question for the Court is whether the proposed settlement is fair and reasonable in the interests of the group members considered as a whole;

(b)there will rarely be one single or obvious way in which a settlement should be framed, either between the claimants and the defendants (inter partes aspects) or in relation to sharing the compensation among claimants (the inter se aspects) – reasonable is a range, and the question is whether the proposed settlement falls within that range;

(c)it is not the task of the Court to ‘second-guess’ or go behind the tactical or other decisions made by the plaintiffs’ legal representatives, but rather to satisfy itself that the decisions are within the reasonable range of decisions, having regard to: the circumstances which are ‘knowable’ to the plaintiffs and their representatives; and a reasonable assessment of risks, based on those circumstances.

20     Southern Response Earthquake Services Ltd v Ross [2020] NZSC 126, [2021] 1 NZLR 117 at [71] and n 117.

21     Camilleri v Trust Company (Nominees) Ltd [2015] FCA 1468.

22     At [5], citations omitted.

[40]   Subsequent to the Supreme Court decision in Southern Response Earthquake Services Ltd v Ross, Osborne J granted leave to discontinue in Ross v Southern Response Earthquake Services Ltd.23 Osborne J said that in a settling discontinuance as opposed to a unilateral discontinuance, the standard to be applied is whether discontinuance, on the terms of the settlement, will be a fair and reasonable resolution of the plaintiffs’ claims in the interests of the members as a whole, both as between claimants and the defendant, and as between the claimants themselves.24

[41]   Osborne J adopted the following list of factors, largely taken from the approach in Ontario:25

(1)likelihood of recovery or likelihood of success;

(2)amount and nature of discovery, evidence or investigation;

(3)settlement terms and conditions;

(4)recommendation and experience of counsel;

(5)future expense and likely duration of litigation and risk;

(6)recommendation of neutral parties, if any;

(7)number of objectors and nature of objections;

(8)the presence of good faith, arms-length bargaining and the absence of collusion;

(9)the degree and nature of communications by counsel and the representative plaintiffs with class members during the litigation;

23     Ross v Southern Response Earthquake Services Ltd [2021] NZHC 3497.

24     At [3] and [130].

25     At [67] and [69], citing Warren K Winkler and others, The Law of Class Actions in Canada

(Thompson Reuters, Toronto, 2014) at 305-306.

(10)information conveying to the court the dynamics of and the positions taken by the parties during the negotiation;

(11)if counsel fees were negotiated in the settlement, and if so, how big a factor are they?

(12)whether class members were given timely notice of the essential elements of this settlement.

[42]   In Re Strahl,26 Mallon J similarly referred to the Supreme Court decision in Southern Response Earthquake Services Ltd v Ross and the Australian Federal Court decision in Camilleri v Trust Company (Nominees) Ltd.

Likelihood of recovery or likelihood of success

[43]   In his affidavit in support of the application, Mr Bascand, Chair of the Harbour Committee, considered their claims were strong. Similarly, Mr Porus, the plaintiff’s solicitor in the Livingstone proceeding, said he considered that Mr Livingstone has a strongly arguable case based on the causes of action pleaded and that the prospects of success in establishing liability are strong. Mr Porus stated that the preliminary expert evidence that Mr Livingstone has obtained concerning CBLI’s true financial and IPSA solvency position suggests strongly that CBLI was in breach of the solvency condition in its IPSA licence at the time of the IPO. Had the true position been publicly known, CBLC shares would never have been listed at all. On that counterfactual, none of the share purchases made by class members (whether in the IPO or subsequently) would have occurred and class members would not have suffered any of the losses they did.

[44]   However, Mr Porus noted that CBLC is in liquidation, with liabilities said to be in excess of $172 million. He noted that there is unlikely to be recovery of any money for the shareholders from CBLC itself. The theory of recovery is based on insurance policies that covered CBLC and its directors that would respond to the shareholders’ claims. There is, however, a finite pool of insurance proceeds that would need to be shared with some or all of the other claimants. Mr Livingstone had sought

26     Re Strahl [2021] NZHC 3608 at [22]-[25].

to establish that a charge existed over insurance proceeds under s 9 of the Law Reform Act 1936 for the benefit of shareholders, but Mr Porus considered that Lang J in an interlocutory judgment effectively decided that such a charge could not exist because the insurers were based offshore.27

[45]   Mr Porus considered that in the absence of a charge over the insurance proceeds, the legal costs incurred by the various defendants in relation to the shareholder proceedings and liquidator proceedings, which are to be heard together in an 8½ month trial commencing in April 2024 and in relation to a further subsequent trial on quantum, would significantly erode the insurance proceeds such that the shareholders may ultimately have a pyrrhic victory. In relation to the prospect of recovery against the directors personally, Mr Porus considered there are serious risks and unknowns.

[46]   He considered there would likely be little to no recovery from the insurance funds in the event that the Livingstone proceeding successfully went all the way to a quantum trial. He said there is also a prospect that some of the plaintiffs in other proceedings might obtain judgment before a final judgment was obtained in the Livingstone  proceeding  and  might  attempt  to  execute  their  judgment  before  Mr Livingstone could do so.

[47]   Mr Skelton acknowledged that Mr Porus does not explicitly mention how he obtained information about the available insurance cover and the directors’ personal assets but submitted it can be inferred that information about those topics was provided (confidentially) and tested as part of the mediation process.

[48]   In the circumstances, Mr Skelton submitted that although class members could potentially obtain judgment for an amount significantly in excess of the settlement offer if the proceeding went to trial, the likelihood of actually recovering sums in excess of the settlement offer are very slim due to the erosion of the insurance cover and the likely inability to satisfy a greater judgment from other sources of funds.

27     Livingstone v CBL Corporation (in liq) [2021] NZHC 755.

[49]   Mr Bascand also said that senior counsel’s advice to the Harbour Committee was that their likely share of the settlement is very likely to provide a much better net financial outcome than if the matter went to trial. He also referred to the amount of insurance cover and said the lack of a charge may mean in effect the insurance proceeds would need to be shared between all plaintiffs; that legal fees would substantially deplete the insurance; and referred  to issues of risk, cost and delay.  Ms Cuncannon added that they did not accept that the insurance proceeds would be in one pot and said the agreed split between the shareholder plaintiffs and the liquidators reflected their view. She said the Harbour plaintiffs took comfort from the involvement of CBLC’s counsel since it was both a plaintiff and defendant.

[50]   I have seen the Heads of Agreement and other confidential evidence which indicates the total settlement sum. The evidence also indicates the sum to be received by the shareholder plaintiffs and consequently the liquidator plaintiffs.

[51]   I was conscious that Lang J’s interlocutory judgment did not determine the s 9 issue. Lang J was dealing with a strike out application by CBLC in respect of a cause of action seeking a declaration under s 9. He considered that it was not possible to make a factual finding that the location of the debt was outside New Zealand.28 There was limited admissible evidence and the insurers were not heard. 29 The relevant cause of action was not a convenient means to establish an entitlement to insurance moneys.30

[52]   I was also conscious that the shareholder plaintiffs and their legal teams did not have access on discovery to the insurance documents – expected to be a policy specifically relating to the IPO (POSI policy) and a more general Directors and Officers (D&O) / statutory liability policy. However, there was eventually agreement by insurers to share the potential level of insurance cover, legal costs to the relevant date and the likely future legal costs of defending all of the CBL proceedings. Moreover, CBLC and CBLI and their liquidators had access to information about the

28     Livingstone v CBL Corporation (in liq) [2021] NZHC 755 at [20].

29     At [21]-[22].

30 At [22].

insurance policies and were involved in the mediation/settlement process.31 I heard from their senior counsel, Mr Goodall KC and Mr Chisholm KC respectively, who supported the settlement. Mr Chisholm indicated there was no insurance charge and the liquidators say there was one pot for all claimants. The mediation/settlement process was conducted by an  experienced  and  respected  professional  mediator, Ms Dean KC. Ms Cuncannon advised that Ms Dean had given permission for her view, that the proposed settlement is in the best interests of the claimants, to be conveyed to the Court.

[53]   In the most unusual circumstances of this complex litigation, I am satisfied that the shareholder plaintiffs’ assessment of the likelihood of recovery was soundly based. The total loss suffered by the group members represented by Mr Livingstone was calculated to be just under $80 million (excluding interest) and the claim by the Harbour plaintiffs was quantified at approximately $192 million (excluding interest). The claims by the liquidators of CBLC and CBLI were $100 million and $316 million respectively (excluding interest).32 Yet almost 53% of the settlement payment is allocated to the shareholder plaintiffs. As to the amount, the insurance potentially available was a small percentage of the total claims and would erode as the proceedings progressed. The only practical way of achieving a settlement in this complex multi-proceeding context (also involving cross-claims and third party claims) was by negotiating a global arrangement.

Amount and nature of discovery, evidence or investigation

[54]   I accept that discovery and preparation of evidence in the shareholder proceedings are enormous tasks. Although Mr Porus said that inspection was paused when mediation was in prospect  to  conserve  costs,  Mr  Skelton  submitted  that  Mr Livingstone’s legal team had undertaken sufficient investigations to satisfy themselves of the strength of the case. As indicated, the more fundamental issue was the prospect of recovery.

31     The FMA also had access to information about the insurance policies, and were involved in discussions in the settlement process.

32     I was told the total of all claims in the shareholder and liquidator proceedings exceed $800m, which may include interest.

Settlement terms and conditions

[55]   I have summarised the key settlement terms above without needing to state specifically the confidential sums identified either in the Heads of Agreement or in the other evidence.

Recommendation and experience of counsel

[56] I have already referred to Mr Bascand’s evidence of senior counsel’s advice to the Harbour Committee at [49] above. Mr Porus said he believed the settlement is fair, reasonable, and in the best interests of all members of Mr Livingstone’s class. Mr Skelton endorsed that recommendation. He has experience in representative proceedings, having acted as counsel for the plaintiffs in Ross v Southern Response and other matters.

Further expense and likely duration of litigation and risk

[57]   If, as Mr Porus noted, the case does not settle, the path forward is an 8½ month trial on liability, followed (if liability is established) by a further stage or stages dealing with quantum. Mr Porus considered that allowing for the possibility of appeals, a final outcome might not be reached until 2027 or 2028. He estimated the future costs for the liability hearing alone to be in excess of $2.5 million plus GST, excluding experts’ fees.

[58]   Mr Bascand said that the Harbour Committee’s assessment also took into account the legal and other costs associated with the liability trial and stage 2 loss issues.

Recommendation of neutral parties, if any

[59]I have referred to the view of Ms Dean at [52] above.

Number of objectors and nature of objections

[60]   As indicated, no person opposed leave to discontinue. No objections to the settlement were received from class members.

Presence of good faith, arms-length bargaining  and  the  absence  of  collusion  / the dynamics of and the positions taken by the parties during the negotiation

[61]Like counsel, I deal with these two factors together.

[62]   Understandably, given the confidential nature of the mediation/settlement process and the confidentiality terms in the Heads of Agreement, there was limited direct evidence relevant to these factors. Senior counsel who had participated in the settlement negotiations provided further context at the hearing. It is evident that the process involved a two day mediation, which included the insurers’ legal teams, and ongoing negotiations before the (amended) Heads of Agreement was entered into on 23 February 2023. In the mediation/settlement process conducted by Ms Dean KC, the shareholders, liquidators, defendants and insurers had competing interests and were represented by experienced  legal  teams,  mostly  involving  Kings  Counsel. In these circumstances and given the parties’ conduct of the proceedings, which I have case managed since 2020, I am satisfied there was arms-length bargaining.

Degree and nature of communication by counsel and the representative plaintiffs with class members during the litigation / whether class members were given timely notice of the essential elements of the settlement

[63]I also deal with these two factors together.

[64]   I did not have full visibility of the class member updates during the litigation.33 Counsel updated the Court in relation to the Heads of Agreement in April 2023. Following a memorandum of 6 April 2023, I convened a face-to-face case management conference in all six CBL related proceedings on 20 April 2023. Counsel sought  a  one  day  priority  fixture,  which  was  accommodated  on  7  June  2023.  I convened a further case management conference on 17 May 2023 (by which time Mr Livingstone’s application had been filed) and made timetable directions including for service on class members as indicated above, which then occurred on 22 May 2023.

33 In the Livingstone proceeding Mr Porus said that class members were kept informed by way of updates at key stages of the proceedings except for the mediation (and the months leading up to it) due to confidentiality. He indicated the last prior update to the Livingstone class members was in January 2022. The interval between that and the May 2023 update was unfortunate.

[65]   The 22 May 2023 updates to class members by Mr Porus and the Harbour Committee respectively were comprehensive. There was then a relatively tight timeframe for responses by 31 May 2023 with the hearing on 7 June 2023,34 but this reflected the need for priority at least in relation to leave to discontinue. I consider that in the circumstances class members were given adequate timely notice of the settlement. None suggested otherwise.

If counsel fees were negotiated in the settlement

[66]   Legal fees were not negotiated during the settlement. They have been dealt with in accordance with the contractual terms and conditions agreed to by class members on an opt-in basis. At least in this context and given the approach to legal fees in New Zealand,35 while the net amount class members are to receive under the settlement is relevant to whether it is fair and reasonable, I do not see it as the Court’s role to approve or vary legal fees as part of settlement approval.36

[67]   Similarly, the litigation funders’ fees were not negotiated as part of the settlement. They are payable in accordance with the contractual terms in the funding agreements that all class members signed up to in advance.37

Conclusion

[68]   Taking into account all these factors, and most particularly the likelihood of recovery, I am satisfied the settlement of the shareholder proceedings is a fair and reasonable compromise of the claims – it falls within the range of reasonable settlements. I address fairness among claimants in relation to distribution directions further below.

34     This was particularly tight in the case of the Livingstone proceeding which also sought distribution directions.

35     Under the Lawyers and Conveyancers Act (Conduct and Client Care) Rules 2008.

36     See also Te Aka Matua o Te Ture | The Law Commission Class Actions and Litigation Funding

(NZLC R147, 2022) at [11.136].

37     Omni Bridgeway has agreed to waive some additional amounts it is entitled to under its funding agreement.

[69]   For these reasons, I granted leave in each proceeding for the plaintiff/s to discontinue the proceeding by filing a notice of discontinuance on the basis that there are no issues as to costs between the parties.38

Distribution directions

Applicable principles

[70]   In Southern Response Earthquake Services Ltd v Ross, the Supreme Court indicated that the Court’s adjudicative power in its protective or supervisory jurisdiction to oversee and approve a settlement extends to the method of distribution in a representative action.39 In relation to distribution, as Moshinsky J said in Camilleri, the question is whether the proposed arrangements for distributing the fixed pool of settlement funds between the claimants are fair and reasonable;40 that is, fair and reasonable inter se.

[71]Moshinsky J continued:

40         In this case, as in many representative proceedings, the manner in which the settlement sum is to be distributed requires assumptions to be adopted and judgment calls to be made. There are different classes of claimants within the body of group members here, and it is necessary to arrive at some model that fairly and reasonably divides the settlement sum between those classes, recognising the differences in their respective claims. There is no single approach which alone can qualify as reasonable for sharing the fixed pool of funds among the claimants. Inevitably, adjustments in a given approach will be favourable for certain group members at the expense of others.

41         The question, therefore, can only be whether the model is within the bounds of fairness and reasonableness in its attempts to balance what are, unavoidably, conflicts between the interests of the different claimants.

42         As mentioned above, the applicants’ solicitors have constructed the SDS for managing the distribution of the settlement funds among the claimants. The SDS, including the Loss Assessment Formula, reflects various ‘judgment calls’. There is no doubt that other permutations of the distribution scheme could have been adopted. The question on this application is whether the SDS, as presented now, is within the bounds of reasonableness in achieving a broadly fair, ‘rule of thumb’ distribution between the claimants.

38     Minute dated 8 June 2023.

39     Southern Response Earthquake Services Ltd v Ross [2020] NZSC 126, [2021] 1 NZLR 117 at [79]-[82].

40     Camilleri v Trust Company (Nominees) Ltd [2015] FCA 1468 at [39].

43         The cases indicate a number of factors relevant to the assessment whether a proposed distribution scheme is fair and reasonable having regard to the interests of the group as a whole. Some of these factors are as follows:

(a)        whether the distribution scheme subjects all claims to the same principles and procedures for assessing compensation shares;

(b)        whether the assessment methodology, to the extent that it reflects ‘judgment calls’ of the kind described above, is consistent with the case that was to be advanced at trial and supportable as a matter of legal principle;

(c)        whether the assessment methodology is likely to deliver a broadly fair assessment (where the settlement is uncapped as to total payments) or relativities (where the task is allocating shares in a fixed sum);

(d)        whether the costs of a more perfect assessment procedure would erode the notional benefit of a more exact distribution;

(e)        to the extent that the scheme involves any special treatment of the applicants or some group members, for instance via ‘reimbursement’ payments – whether the special treatment is justifiable, and whether as a matter of fairness a group member ought to be entitled to complain.

44         There are also procedural factors which relate to the fairness of a proposed distribution process, such as:

(a)        whether appropriate individuals have been nominated to administer the scheme;

(b)        whether the procedures for lodging and assessing claims are appropriate and to be conducted in a timely manner;

(c)        whether the scheme incorporates appropriate ‘checks and balances’, such as procedures for ensuring consistency between assessments and meaningful opportunities for review (and objection) by group members.

[72]   As Ms Cuncannon submitted, it is necessary to consider principled distinctions. It is not the case that a pro rata sharing based on maximum assessed losses is the start and end of the matter. This is inherent in the Supreme Court’s endorsement in Southern Response Earthquake Services Ltd v Ross of the test in Camilleri, which indicates that there will rarely be one single or obvious way in which a settlement should be framed including in relation to sharing the compensation among

claimants.41 In Re Strahl, Mallon J adopted a weighted distribution based on different prospects of success between two classes of claimants.42 A principled distinction was also applied in Webster (Trustee) Ltd v Murray  Goulburn  Co-operative  Co  Ltd (No. 4).43 Ms Cuncannon also noted that the final report of Te Aka Matua o Te Ture | The Law Commission on Class Actions and Litigation Funding states that equitable treatment should not prevent principled distinctions between class members, such as where one group of class members would be more likely to succeed in establishing liability or a higher quantum of loss if the matter proceeded to trial.44

Harbour proceeding

[73]   Following the 7 June 2023 hearing, the Harbour Committee sent further updates to class members on 9 and 16 June 2023. The 9 June update advised class members of the timetable for support or opposition. The 16 June update explained to class members the Harbour Committee’s proposed two-step distribution methodology.

[74]   The Harbour representative plaintiffs’ application for approval of distribution methodology sought the following orders:45

Approving distribution methodology

(a)approving the distribution methodology proposed by the committee constituted under an agreement dated 18 October 2019 (Harbour Committee) in the following terms:

(i)for the purpose of conducting the distribution assessment the Claims Administrator is to use the trade data held by Meredith Connell as at 7 July 2023;46

(ii)the assessed loss of each claimant is the difference between the price paid for all shares purchased by the claimant and the price received from shares that were sold by the claimant (i.e. the difference between purchases and sales (if any));

41 Southern Response Earthquake Services Ltd v Ross [2020] NZSC 126, [2021] 1 NZLR 117 at [71] and n 117, referring to Camilleri v Trust Company (Nominees)  Ltd  [2015] FCA 1468 at [5]. See also Camilleri at [40]-[44], quoted above at [71].

42 Re Strahl [2021] NZHC 3608.

43 Webster (Trustee) Ltd v Murray Goulburn Co-operative Co Ltd (No. 4) [2020] FCA 1053.

44 Te Aka Matua o Te Ture | The Law Commission Class Actions and Litigation Funding (NZLC R147, 2022) at [11.126].

45 Interlocutory application dated 21 June 2023.

46     At the hearing, Ms Cuncannon acknowledged that this date for trade data held could be the date  of the order. That would enable Meredith Connell to use any updated data, without requiring a further checking process.

(iii)the distribution methodology is to have two steps:

(A)step one: apportioning 10 cents per share in respect of each IPO share still held at the halt of trading (assessed using a last-in-first-out accounting basis where claimants also purchased on-market and sold shares) provided that claimant has been assessed as having an overall loss; and

(B)step two: a pro rata sharing of the remainder of the settlement funds proportionate to each claimant’s assessed loss;

(iv)any settlement funds that have not been paid to claimants within 120 days of the Court’s judgment are to be redistributed under step two to the other claimants or, if the Harbour Committee considers the cost of doing so would be disproportionate, paid to the Inland Revenue Department as unclaimed money;

[75]   Under the terms of the LPF funding agreement and the committee agreement, this distribution applies to the settlement payment to the Harbour plaintiffs less legal and other litigation costs (project costs) and LPF’s fee.  As this is an opt-in claim,  the Harbour Committee does not seek wider approval of the settlement distribution scheme. The litigation funder’s fee and litigation costs that each claimant agreed to pay at the outset are the only deductions that are to be made from the settlement funds.

[76]   Ms Chipperfield’s evidence confirmed that the Harbour Committee understood that it was required to seek a fair and equitable way to share the settlement funds, and that this required consideration of any principled distinctions between class members.

[77]   The Harbour Committee considered there was a principled distinction between those who purchased at IPO and on-market based on the legal claims and the prospects of recovery that should be reflected in the distribution methodology. In considering the balance between the IPO and on-market purchases, the Harbour Committee took into account:

(a)the risk that the Court would reject the “no IPO” theory of loss, and the consequent need to prove the individual impact of each of the alleged disclosure failures;

(b)the argument that the POSI and D&O insurance policy proceeds could be general assets available to all creditors/claimants under s 9 of the Law Reform Act 1936;

(c)the lack of information about when the switch between the two insurance policies would have occurred;

(d)the fact that individual contributions made by directors were made on a global basis; and

(e)the practical need for all claims to be settled together.

[78]   The Harbour Committee considered it appropriate to acknowledge the legal advice that the IPO claims were the strongest and the expected contribution of the POSI policy to the settlement funds. The Harbour Committee modelled the impact of apportioning 10, 20 and 30 cents per IPO share still held at the trading halt before proposing 10 cents in step one.

[79]   The Harbour Committee had already considered and rejected a pro rata only approach before it approached Mr Livingstone to see if a common methodology could be agreed. Mr Livingstone proposed a pro rata approach. The Harbour Committee does not agree that a pro rata only approach is a fair methodology when the strength of the different claims and prospects of recovery are considered.

[80]   Ms Cuncannon rejected Mr Skelton’s suggestion that the IPO weighting based on a greater chance of success and the greater contribution from the POSI policy was speculative and conjecture. The question is whether there are meaningful differences between the class members.

[81]   The Harbour Committee also considered how to ensure any methodology was easy to apply and did not incur further significant expense. The Committee did not seek to differentiate further between early and late on-market purchases. It did not seek to assess individual interest claims. It also did not seek to weight recovery towards small shareholders as a claimant had suggested. The Committee’s view was

that there was no principled basis to incorporate the size of shareholding into a distribution methodology given the possible significance of recovery to small investors, noting that even the largest claimants are ultimately investors on behalf of many individuals. It said there was no bright line between the different interests of claimants based on either the size of their investment or the amount of their assessed loss.

[82]   None of the Harbour Committee members personally gains from the settlement or seeks payment for the  work  done  as  a  member  of  the  Harbour  Committee. No claimant sought to file a notice of opposition or appear at the distribution hearing but one claimant suggested that the Harbour Committee’s preferred methodology was influenced by the proportion of IPO shares held by a representative plaintiff. However, the Harbour Committee transparently addressed with class members the connections between Harbour Committee members and the representative plaintiffs and the proportion of each representative plaintiff’s shares that were purchased in the IPO.

[83]   I accept that, as the Harbour Committee explained to claimants in its communications, the distribution methodology reflects its attempt to fairly balance all of the matters of principle and also the practical factors that arise in this case. I accept the proposed IPO weighting reflects a principled distinction. The Harbour Committee’s evidence indicates it has carefully weighed matters, with the benefit of advice, in seeking to achieve a fair apportionment between class members.

[84]   Overall, I consider that the Harbour distribution methodology is fair, reasonable and in the interests of the class members inter se. It should be approved.

Livingstone proceeding

[85]   Mr Livingstone’s application to approve distribution of funds sought the following orders:

Receipt of settlement proceeds

(b)Any share of settlement proceeds paid to or received on behalf of  Mr Livingstone (Livingstone Settlement Sum) will be held by the solicitors for the plaintiff in an account named the “CBLC Settlement

Distribution Account” on trust for Mr Livingstone and the Group Members that he represents.

Distribution of Livingstone Settlement Sum

(c)The   Livingstone   Settlement   Sum   is   to   be   distributed   to   Mr Livingstone, and to the other Group Members represented by him, in accordance with the terms of the Settlement Distribution Scheme (SDS), a copy of which is annexed to the affidavit of Jack Porus affirmed on 16 May 2023 as exhibit “C”.

(d)Jack Porus, of Auckland, solicitor, is appointed Administrator of the SDS.

(e)The Administrator is directed to undertake his duties as Administrator, in accordance with the terms of the SDS and any directions made by the court.

(f)Mr Livingstone’s claim for reimbursement for his time and expenses is approved in the amount of $8,700, or such other amount as the court considers appropriate, and will be  paid  by  the  Administrator  to Mr Livingstone pursuant to clause 8.1 of the SDS.

(g)The Administrator has liberty to apply to the Court for any directions required in relation to any matter arising under the SDS.

(h)The Administrator is to file an affidavit within 28 days of the completion of the administration of the SDS providing a report on all material matters regarding the administration of the SDS, including the number of Group Members who received a distribution and the Administration Costs incurred, and attaching a statement of account showing funds received and disbursed from the Administrator’s CBLC Settlement Distribution Account.

[86]   The SDS applies a distribution methodology on a pro rata basis, relative to each class member’s loss calculated according to a Loss Assessment Formula at Schedule B of the SDS. Each class member’s loss is calculated on a ‘no transaction’ basis; that is, the total purchase price paid for their shares less the proceeds 47 (if any) made on the sale of their shares prior to 2 February 2018. The SDS provides for a review mechanism if class members disagree with the Administrator’s assessment of their loss. After deducting legal and other project costs and Omni Bridgeway’s fee, the pro rata distribution is then made from the Residual Settlement Sum.

47   By memorandum dated 10 July 2023, Mr Livingstone’s counsel sought to amend paragraph 3 of the Loss Assessment Formula by substituting the word “proceeds” for “profit”. That amendment appropriately reflects the intent.

[87]   With one exception dealt with below, legal and other costs were agreed up front and Mr Livingstone as representative plaintiff is not being preferred over other group members.

[88]   At the first hearing, Mr Skelton submitted the orders sought are appropriate. He acknowledged that the Harbour plaintiffs propose a different distribution approach, weighting claims related to shares purchased in the IPO more heavily, but sought approval of Mr Livingstone’s pro rata approach. He relied on Webster (Trustee) v Murray Goulburn Co-operative Co Ltd (No 4),48 where the distribution methodology approved made no distinction between the claims of class members who purchased following a PDS and those who subsequently purchased on-market (but did distinguish between those who purchased on-market after a corrective statement was made).

[89]   I accept that Mr Livingstone supports a pro rata approach even though he personally would stand to gain more under a distribution weighting claims related to shares purchased in the IPO more heavily. I also note that although the distribution methodology affects the split issue between the shareholder plaintiffs because pro rata distribution between all shareholders  would  benefit  the  Livingstone  claimants,  the split issue is for separate determination (if necessary) and does not affect whether the Livingstone distribution methodology is fair and reasonable.

[90]   Having subsequently heard the distribution application by the Harbour plaintiffs, at which Mr Pearce for Mr Livingstone made further submissions as well, I am satisfied that the Livingstone SDS’s pro rata distribution methodology is also fair and reasonable as between the class members, that is within the range of reasonable sharing methodologies. Even accepting the IPO claims had a greater chance of succeeding at trial and accessing the insurance, the view that the prospects of preferential recovery may be doubted in the absence of a statutory charge is a reasonable one. The expected contribution of the POSI policy to the settlement funds is a factor but is not determinative. Also, I acknowledge that the Omni Bridgeway funding agreement to which the Livingstone class members signed up provided that,

48     Webster (Trustee) v Murray Goulburn Co-operative Co Ltd (No 4) [2020] FCA 1053.

subject to Court order, the balance of a settlement sum (after deducting funding and legal fees) would be distributed on a pro rata basis by reference to the amount of the claims.

[91]   The Court’s duty to ensure the settlement is fair and reasonable necessarily extends to the appointment of an administrator of the approved settlement scheme.49 Mr Porus is an appropriate person to be appointed Administrator of the Livingstone SDS. It is also appropriate that the Administrator be directed to undertake his duties in accordance  with the  terms of the SDS and any directions made by the  Court.   Mr Porus should have liberty to apply to the Court for any directions required in relation to any matter arising under the SDS. It is also appropriate that he report to the Court on completion of the settlement administration.

[92]   Overall, I conclude that the proposed Livingstone SDS is fair and reasonable as between the class members and should be approved.

[93]   Mr Livingstone seeks reimbursement of $8,700 for his time at $100 per hour. He acknowledges that payment was not promised at the outset. Mr Skelton submitted that reimbursement payments are commonly made to class action plaintiffs in Australia. I accept it is well established that a plaintiff who has sacrificed time and/or incurred expenses in prosecuting the proceeding on behalf of group members should be entitled to a reimbursement.50 This, however, is to be distinguished from any time and expense pursuing the plaintiff’s own claim.51

[94]   Here, Mr Livingstone has produced time and attendance records for 67 hours spent attending to duties as the representative plaintiff. I accept that this claim is reasonable. However, I am not prepared to approve future time on the basis of an estimate. Mr Livingstone is entitled to $6,700.

49     Damian Grave, Ken Adams and Jason Betts Class Actions in Australia (3rd ed, Thomson Reuters, Sydney, 2022) at [19.980].

50     Damian Grave, Ken Adams and Jason Betts Class Actions in Australia (3rd ed, Thomson Reuters, Sydney, 2022) at [19.550].

51     Caason Investments Pty Ltd v Cao (No 2) [2018] FCA 527 at [176].

Ancillary orders

Confidentiality

[95]   In relation to confidentiality,  the  applications  sought  permanent  orders.  As indicated, I have made interim orders in each proceeding that certain documents not be published or disclosed, and not searched on the Court file without order of the Court, beginning with the joint memorandum of counsel dated 19 April 2023. Further interim orders relating to documents filed for the applications  were last  varied on  11 July 2023 as follows:

Pending further order, I vary the current interim orders in each proceeding as follows:

The following documents are not to be published, and are not to be searched on the Court file, without order of the Court:

(i)confidential exhibit  B to the affidavit of Mr  Porus dated   16 May 2023 (the Heads of Agreement);

(ii)confidential exhibit A to  the  affidavit  of  Mr  Singh  dated 2 June 2023 (Mr Porus’s privileged and confidential letter to class members dated 22 May 2023);

(iii)the unredacted version of the affidavit of Mr Bascand dated 22 May 2023 filed on 6 July 2023;

(iv)affidavit of Mr Clark dated 2 June 2023;

(v)the unredacted version of the Harbour representative plaintiffs’ synopsis dated 2 June 2023 containing confidential numbers relating to the settlement;

(vi)the two bundles of correspondence with class members handed up at the hearing on 7 June 2023 which identify some class members;

(vii)the unredacted version of the affidavit of Ms Chipperfield dated 21 June 2023 filed on 6 July 2023;

(viii)the affidavit of Mr Clark dated 4 July 2023.

[96]   The joint memorandum of counsel dated 27 July 2023 seeks final confidentiality orders as follows:

Final confidentiality orders sought by Harbour and Livingstone representative plaintiffs

7Mr Livingstone’s view is that it is appropriate that final confidentiality orders are made in respect of the following documents:

(a)confidential exhibit B to the affidavit  of  Mr  Porus  dated 16 May 2023 (the Heads of Agreement);

(b)confidential exhibit A to the affidavit  of Mitch Singh dated 2 June 2023 (Mr Porus’ privileged and confidential letter to class members dated 22 May 2023); and

(c)exhibit B to the affidavit of Mitch Singh dated 2 June 2023 (correspondence with class member).

8The Harbour representative plaintiffs’ view is that it is appropriate that final confidentiality orders are made in respect of the following documents:

(a)affidavit of Mr Clark dated 2 June 2023;

(b)the two bundles of correspondence with class members handed up at the hearing on 7 June 2023 which identity some class members; and

(c)the affidavit of Mr Clark dated 4 July 2023.

9The following documents filed in the Harbour proceeding contain some information that is currently marked confidential but is likely to become public later this year because the parties to Heads of Agreement have agreed a variation dated 14 May 2023 (Variation):

(a)the unredacted version of the affidavit of Mr Bascand dated 22 May 2023;

(b)the unredacted version of the Harbour representative plaintiffs’ synopsis dated 2 June 2023; and

(c)the unredacted version of the affidavit of Ms Chipperfield dated 21 June 2023.

10The Variation provides that information that is currently confidential may be disclosed after the later of:

(a)31 October 2023; and

(b)the date judgment is delivered by the High Court on the pecuniary penalties payable by CBLC and/or the Independent Directors to the FMA (whichever judgment is first in time) in the FMA’s continuous disclosure proceeding (CIV-2019-404- 2745).

…

13Counsel acknowledge that there is some complexity because the date that  the  Variation  will   be   operative   is   currently   unknown.  Mr Livingstone and the Harbour representative plaintiffs consider that

the following process/orders are workable and appropriately balance the various interests:

(a)the documents listed at [7] and [8] are not to be published or searched without leave of a judge;

(b)public versions of the documents listed at [9] are to be filed within seven days of these orders with the information that should remain confidential even after the Variation is operative redacted;

(c)the unredacted versions of the documents listed at [9] are not [to] be published or searched without leave of a judge;

(d)the public (redacted) versions of the documents listed at [9] are not [to] be published or searched without leave of a Judge before the Variation is operative;

(e)the information at [11] is not to be published before the Variation is operative;

(f)the Court’s judgment is to be circulated to counsel 48 hours before it is made publicly available to enable counsel to address any confidentiality issues arising; and

(g)if the Court considers it should refer to information in its reasons that may be publicly disclosed only after the Variation is operative, an interim version of the judgment is issued which preserves the confidentiality of that information in the meantime.

[97]   I appreciate counsel’s attempt to balance the various interests. I am broadly comfortable with the scope of the confidentiality orders sought. I accept too that the Court has power to make permanent confidentiality orders in cases where there are specific adverse consequences sufficient to justify an exception to the fundamental principle of open justice.52 However, rather than making permanent orders or issuing an interim judgment, I consider the preferable course is for the confidentiality orders sought to be made as interim orders pending further determination, for four main reasons. First, it has been unnecessary in this judgment to refer to the confidential settlement sums and an interim judgment is therefore unnecessary and undesirable. Secondly, as I said in my minute of 11 July 2023, I consider the media should have a further opportunity for input before permanent orders are made. This is to ensure that proper weight is given to the principle of open justice. Thirdly, circumstances may change again before the Variation takes effect and permanent orders should be

52     Erceg v Erceg [2016] NZSC 135, [2017] 1 NZLR 310 at [13].

considered with up-to-date information. Fourthly, the shareholder proceedings remain extant in any event, at least pending completion of the administration of the settlement.

Security for costs

[98]   Given the terms of settlement, it is appropriate to release security for costs and release Omni Bridgeway from the Deed Poll in respect of Adverse Costs.

Result

[99]Accordingly, I make the following distribution and ancillary orders:

Harbour proceeding

(a)Approving the distribution methodology proposed by the committee constituted under an agreement dated 18 October 2019 (Harbour Committee) in the following terms:

(i)for the purpose of conducting the distribution assessment the Claims Administrator is to use the trade data held by Meredith Connell as at the date of this order;

(ii)the assessed loss of each claimant is the difference between the price paid for all shares purchased by the claimant and the price received from shares that were sold by the claimant (i.e. the difference between purchases and sales (if any));

(iii)the distribution methodology is to have two steps:

(A)step one: apportioning 10 cents per share in respect of each IPO share still held at the halt of trading (assessed using a last-in-first-out accounting basis where claimants also purchased on-market and sold shares) provided that claimant has been assessed as having an overall loss; and

(B)step two: a pro rata sharing of the remainder of the settlement funds proportionate to each claimant’s assessed loss;

(iv)any settlement funds that have not been paid to claimants within 120 days of the Court’s judgment are to be redistributed under step two to the other claimants or, if the Harbour Committee considers the cost of doing so

would be disproportionate, paid to the Inland Revenue Department as unclaimed money.

(b)Leave is granted to the Harbour representative plaintiffs to seek further directions.

Livingstone proceeding

(c)Any share of settlement proceeds paid to or received on behalf of Mr Livingstone (Livingstone Settlement Sum) will be held by the solicitors for the plaintiff in an account named the “CBLC Settlement Distribution Account” on trust for Mr Livingstone and the Group Members that he represents.

(d)The  Livingstone  Settlement  Sum  is  to  be  distributed  to  Mr Livingstone, and to the other Group Members represented by him, in accordance with the terms of the Settlement Distribution Scheme (SDS), a copy of which is annexed to the affidavit of Jack Porus affirmed on 16 May 2023 as exhibit “C”.53

(e)Jack Porus, of Auckland, solicitor, is appointed Administrator of the SDS.

(f)The Administrator is directed to undertake his duties as Administrator, in accordance with the terms of the SDS and any directions made by the court.

(g)Mr Livingstone’s claim for reimbursement for his time and expenses is approved in the amount of $6,700 and may be paid by the Administrator to Mr Livingstone pursuant to clause 8.1 of the SDS.

(h)The Administrator has liberty to apply to the Court for any directions required in relation to any matter arising under the SDS.

(i)The Administrator is to file an affidavit within 28 days of the completion of the administration of the SDS providing a report on all material matters regarding the administration of the SDS, including the number of Group Members who received a distribution and the Administration Costs incurred, and attaching a statement of account showing funds received and disbursed from the Administrator’s CBLC Settlement Distribution Account.

53     As amended in accordance with n 47 above.

(j)Omni Bridgeway (Fund 5) Cayman Investments Limited, previously known as IMF Bentham (Fund 5) Cayman Investments Limited (the Funder) is released from the Deed Poll in respect of Adverse Costs dated 11 August 2020, and all orders requiring Mr Livingstone to hold security for the costs of enforcing the Deed Poll (in the sum of $30,000) are vacated.

Interim non-publication

(k)Interim non-publication / confidentiality orders pending further order of the Court as set out in paragraph 13 (a) to (f) of the joint memorandum of counsel dated 27 July 2023.54

Gault J

54 See [96] above.

Solicitors / Counsel:

CIV-2019-404-2727

Mr P Skelton KC, Mr S Jeffs, and Mr C Pearce (for the plaintiff Basil Ian Livingstone), Barristers, Auckland

Mr J Porus and Mr M Singh (plaintiff’s instructing solicitor), Glaister Ennor, Auckland Mr J K Goodall KC (for the defendant CBL Corporation Ltd (in liq)), Barrister, Auckland Ms A Challis and Mr A Colgan (defendant’s instructing solicitor), McElroys, Auckland

Mr M Corlett KC (for the 1st third party Sir John Wells, the 4th third party Anthony Charles Russel Hannon, the 5th third party Ian Kelvin Marsh and the 6th third party Norman Gerald Paul Donaldson), Barrister, Auckland
Mr T J Lindsay and Mr S McNae (1st, 4th, 5th and 6th third parties instructing solicitor), Lindsay & Francis, Auckland

Mr D M Salmon KC (for the 2nd third party Peter Alan Harris), Barrister, Auckland

Mr T Mullins, Mr J Cundy and Ms T Hu (1st defendant’s instructing solicitor), LeeSalmonLong, Auckland

Mr J Billington KC and Ms C M Meechan KC (for the 3rd third party Geoffrey John Turner as executor of the Estate of Alistair Leighton Hutchison), Barristers, Auckland

Mr G Turner, Ms T Wood, Mr D Robinson and Mr D Morley (2nd defendant’s instructing counsel), Duncan Cotterill, Auckland

CIV-2019-485-642

Mr JBM Smith KC, Mr M G Colson KC and Mr J Orpin-Dowell, Barristers, Auckland/Wellington (for the first representative plaintiff T.E.A. Custodians Ltd and the second representative plaintiff Argo Investments Ltd)

Ms F Cuncannon, Ms K Muirhead and Ms T Jenkin (representative plaintiffs’ instructing solicitors), Meredith Connell, Auckland

Mr M Corlett KC (for the 1st defendant Sir John Wells, the 4th defendant Anthony Charles Russell Hannon, the 5th defendant Ian Kelvin Marsh and the 6th defendant Norman Gerald Paul Donaldson), Barrister, Auckland
Mr T J Lindsay and Mr S McNae (1st, 4th, 5th and 6th third parties instructing solicitor), Lindsay & Francis, Auckland

Mr D M Salmon KC (for the 2nd defendant Peter Alan Harris), Barrister, Auckland

Mr T Mullins, Mr J Cundy and Ms T Hu (3rd defendant’s instructing solicitor), LeeSalmonLong, Auckland

Mr J Billington KC and Ms C M Meechan KC (for the 3rd defendant Geoffrey John Turner as

executor of the Estate of Alistair Leighton Hutchison and 10th defendant Federal Pacific Group Ltd), Barristers, Auckland

Mr G Turner, Ms T Wood, Mr D Robinson and Mr D Morley (2nd defendant’s instructing counsel), Duncan Cotterill, Auckland
Mr J K Goodall KC (for the 8th defendant Sunshine Nominees Ltd and the 13th defendant CBL Corporation Ltd (in liq)), Barrister, Auckland

Ms A Challis and Mr A Colgan (8th and 13th defendants’ instructing solicitor), McElroys, Auckland Mr DPH Jones KC (for the 11th defendant Carden James Mullholland and the 12th defendant

CM Trustee Services Ltd), Barrister, Auckland

Mr CDSC Morris (11th and 12th defendant’s instructing solicitor), CMQ Law, Auckland

Copy to:

CIV-2019-404-2739

Mr J A Farmer KC and Mr JCL Dixon KC (for the plaintiff Financial Markets Authority), Barristers, Auckland

Ms A Callinan, Mr J Caird and Ms N Blomfield (plaintiff’s instructing solicitors), Simpson Grierson, Auckland

Mr J K Goodall KC (for the 1st defendant CBL Corporation Ltd (in liq)), Barrister, Auckland Ms A Challis and Mr A Colgan (1st defendant’s instructing solicitor), McElroys, Auckland Mr D M Salmon KC (for the 2nd defendant Peter Alan Harris), Barrister, Auckland

Mr T Mullins, Mr J Cundy and Ms T Hu (3rd defendant’s instructing solicitor), LeeSalmonLong, Auckland

Mr J Billington KC and Ms C M Meechan KC (for the 3rd defendant Geoffrey John Turner as executor of the Estate of Alistair Leighton Hutchison), Barristers, Auckland

Mr G Turner, Ms T Wood, Mr D Robinson and Mr D Morley (2nd defendant’s instructing counsel), Duncan Cotterill, Auckland

Mr DPH Jones KC (for the 4th defendant Carden James Mullholland), Barrister, Auckland Mr CDSC Morris (4th defendant’s instructing solicitor), CMQ Law, Auckland

CIV-2019-404-2745

Mr J A Farmer KC and Mr JCL Dixon KC (for the plaintiff Financial Markets Authority), Barristers, Auckland

Ms A Callinan, Mr J Caird and Ms N Blomfield, Simpson Grierson, Auckland (plaintiff’s instructing solicitors)

Mr J K Goodall KC (for the 1st defendant CBL Corporation Ltd (in liq)), Barrister, Auckland Ms A Challis and Mr A Colgan (1st defendant’s instructing solicitor), McElroys, Auckland

Mr M Corlett KC (for the 2nd defendant Sir John Wells, the 4th defendant Anthony Charles Russell Hannon, the 6th defendant Norman Gerald Paul Donaldson and the 7th defendant Ian Kelvin Marsh), Barrister, Auckland
Mr T J Lindsay and Mr S McNae (1st, 4th, 5th and 6th third parties instructing solicitor), Lindsay & Francis, Auckland

Mr D M Salmon KC (for the 3rd defendant Peter Alan Harris), Barrister, Auckland

Mr T Mullins, Mr J Cundy and Ms T Hu (3rd defendant’s instructing solicitor), LeeSalmonLong, Auckland

Mr J Billington KC and Ms C M Meechan KC (for the 5th defendant Geoffrey John Turner as executor of the Estate of Alistair Leighton Hutchison), Barristers, Auckland

Mr G Turner, Ms T Wood, Mr D Robinson and Mr D Morley (2nd defendant’s instructing counsel), Duncan Cotterill, Auckland

Mr DPH Jones KC (for the 8th defendant Carden James Mullholland), Barrister, Auckland Mr CDSC Morris (8th defendant’s instructing solicitor), CMQ Law, Auckland

CIV-2019-404-2792

Mr D Chisholm KC and Mr M J Tingey (for the 1st plaintiff CBL Insurance Ltd (in liq) and 2nd

plaintiffs Johnstone and Grenfell as liquidators of CBL Insurance Ltd (in liq)), Barristers, Auckland Mr D M Hughes, Ms L M Van and Mr JVR James (plaintiffs’ instructing solicitor), Anthony Harper, Auckland

Mr D M Salmon KC (for the 1st defendant Peter Alan Harris), Barrister, Auckland

Mr T Mullins, Mr J Cundy and Ms T Hu (3rd defendant’s instructing solicitor), LeeSalmonLong, Auckland

Mr J Billington KC and Ms C M Meechan KC (for the 2nd defendant Geoffrey John Turner as executor of the Estate of Alistair Leighton Hutchison), Barristers, Auckland

Mr G Turner, Ms T Wood, Mr D Robinson and Mr D Morley (2nd defendant’s instructing counsel), Duncan Cotterill, Auckland

Mr M Corlett KC (for the 3rd defendant Sir John Wells, the 4th defendant Anthony Charles Russell, the 5th defendant Norman Gerald Paul Donaldson and the 6th defendant Ian Kelvin Marsh), Barrister,

Auckland

Mr T J Lindsay, Mr K Francis and Mr S McNae (3rd, 4th, 5th and 6th defendants’ instructing solicitor), Lindsay & Francis, Auckland

CIV-2022-404-100

Mr J K Goodall KC (for the plaintiffs), Barrister, Auckland

Ms A Challis and Mr A Colgan (plaintiffs’ instructing solicitor), McElroys, Auckland Mr D M Salmon KC (for the 1st defendant Peter Alan Harris), Barrister, Auckland

Mr T Mullins, Mr J Cundy and Ms T Hu (3rd defendant’s instructing solicitor), LeeSalmonLong, Auckland
Mr J Billington KC (for the 2nd defendant Geoffrey John Turner as executor of the Estate of Alistair Leighton Hutchison), Barrister, Auckland
Mr G Turner, Ms T Wood, Mr D Robinson and Mr D Morley (2nd defendant’s instructing counsel), Duncan Cotterill, Auckland

Mr M Corlett KC (for the 3rd defendant Sir John Wells, the 4th defendant Anthony Charles Russell, the 5th defendant Norman Gerald Paul Donaldson and the 6th defendant Ian Kelvin Marsh), Barrister,

Auckland

Mr T J Lindsay (3rd, 4th, 5th and 6th defendants’ instructing solicitor), Lindsay & Francis, Auckland Mr C Walker KC (for the 7th defendant), Barrister, Auckland

Ms C Bryant and Ms C Robertson (7th defendant’s instructing solicitor), Hesketh Henry, Auckland