McKay v Johnson - [2016] NZHC 466

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2014-404-2511 [2016] NZHC 466

UNDER
Part 19 of the High Court Rules and

section 34 of the Receivers Act 1993

IN THE MATTER

of H.B. Garments Limited (in Liquidation and in receivership) and HAD Garments Limited (in liquidation and in receivership)

BETWEEN

ANDREW JOHN MCKAY Applicant

AND

CLIVE ASHLEY JOHNSON First Respondent

GEOFFREY MARTIN SMITH Second Respondent

Hearing: 10 March 2016

Appearances:

R B Stewart QC and J Caird for the Applicant
First Respondent discontinued
Second Respondent in person

Reasons:

17 March 2015

REASONS FOR JUDGMENT OF MUIR J

This judgment was delivered by me on Thursday 17 March 2016 at 2.00 pm pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Counsel:
R B Stewart QC, Barrister, Auckland

Solicitors:
J C Caird, Simpson Grierson, Auckland

Copy to: Second Respondent

MCKAY v JOHNSON & SMITH [2016] NZHC 466 [17 March 2015]

Introduction

[1] On 10 March 2016 Mr Smith’s 97 page application to rescind inspection and search orders made by Brewer J on 10 December 2015 was set down before me as a preliminary matter prior to hearing the balance of Mr McKay’s substantive claims. Having heard argument I declined the application with reasons to follow. I did so on the assumption that I would then be hearing the substantive application. In the event, that application was adjourned part heard because of the late filing of an affidavit from Mr Smith and Mr McKay’s requirement to meet that with reply evidence. The reasons for my adjourning the case part heart are set out in my oral judgment on that date.

[2] I now give my reasons for having declined the rescission application.

Background

[3] On 10 December 2015 Mr McKay sought and obtained orders in the form annexed to this judgment on an ex parte basis. The operative part of the orders permitted the inspection of two identified documents, including all relevant meta data, and further authorised computer forensic expert, Mr Whale, to enter and search the premises for any computer or tablet device (“the Devices”). Such expert was also authorised to take clones of any devices or, if unable to do so, to remove them from the premises for the purpose of cloning. The orders also contained provision for supervision of their execution by an independent barrister (Mr Goodall), provision for a report by him and for involvement by the Court in any confidentiality, privilege or other issues arising from execution of the orders.

[4] The ex parte application arose out of claims made by Mr Smith in affidavits filed on 5 November 2015 and 3 December 2015 that he had, on 21 December 2013 served on Westpac Banking Corporation (Westpac) (on whose behalf Mr McKay had been appointed receiver), a notice under s 305 of the Companies Act 1993 requiring the election specified in s 305(1) (in default of which the security is to be taken as having been surrendered under s 305(9)). The affidavits also deposed…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading McKay v Johnson

Details

AGLC: McKay v Johnson [2016] NZHC 466
Case: [2016] NZHC 466
Decision Date: 17 March 2015

CaseChat Overview and Summary

McKay v Johnson [2016] NZHC 466 concerns an application made by Andrew John McKay, acting as a receiver for H.B. Garments Limited and HAD Garments Limited, to rescind inspection and search orders previously granted by Brewer J. The application was set down for hearing as a preliminary matter before Muir J on 10 March 2016. The orders, made ex parte on 10 December 2015, permitted the inspection of two specified documents, along with relevant metadata, and authorised a computer forensic expert to enter and search the premises for any computer or tablet devices ("the Devices") in order to locate the documents. The orders also included provisions for the supervision of their execution by an independent barrister, a report by that barrister, and the court's involvement in any confidentiality, privilege, or other issues arising from the execution of the orders.

The legal issues before the court were whether the inspection and search orders were lawfully obtained and whether they should be rescinded on the basis of alleged impropriety by Mr McKay. Mr Smith, the second respondent, argued that the orders were unlawfully obtained due to alleged mala fides and nondisclosure on the part of Mr McKay. He also contended that the orders were inappropriately made under Rule 9.34, which relates to the inspection of property, instead of under Part 33, which governs search orders.

Muir J rejected Mr Smith's arguments and declined the application to rescind the orders. The court found that Rule 9.34(2) clearly envisaged that collateral orders, such as search orders, may be made in support of the inspection order. The search in this case was entirely appropriate, as it was conducted to gain access to the documents sought, and there was no evidence to support Mr Smith's claims of significant risk of damage to the devices. Furthermore, the court held that even if there was some impropriety in relation to the search orders, it would not have been sufficient to justify rescission, as the evidence obtained was not the fruit of any such search.

In conclusion, Muir J declined Mr Smith's application to rescind the inspection and search orders and awarded costs on the application on a 2B basis in favour of Mr McKay.

Orders