Palmerston North City Council v Fortress Information Systems Limited

[2020] NZHC 1364

IN THE HIGH COURT OF NEW ZEALAND DUNEDIN REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTEPOTI ROHE

CIV-2020-412-000040

[2020] NZHC 1364

BETWEEN

PALMERSTON NORTH CITY COUNCIL

Plaintiff/Applicant

AND

FORTRESS INFORMATION SYSTEMS LIMITED

Defendant/Respondent

Hearing:

16 June 2020 (By way of telephone conference)

Appearances:

N Jessen for Plaintiff/Applicant

C J Shannon for Defendant/Respondent R Stewart for Stuff Ltd

Judgment:

17 June 2020

JUDGMENT OF DUNNINGHAM J

This judgment was delivered by me on 17 June 2020 at 11.30 am, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date: 17 June 2020

[1]    On 8 June 2020 I received a without notice application from the plaintiff, Palmerston North City Council (the Council), for an interim freezing order in respect of funds to the value of $675,958.40 held by the defendant, Fortress Information Systems Ltd (FISL).

PALMERSTON NORTH CITY COUNCIL v FORTRESS INFORMATION SYSTEMS LIMITED [2020] NZHC 1364 [17 June 2020]

[2]    I made the order on certain conditions including that the order would endure for just over a month, to 13 July 2020.1 I also reserved leave to FISL to apply to the Court to discharge or vary the freezing order on 48 hours’ notice to the Council.

[3]    Those orders were sealed on 10 June 2020 and a copy of the orders emailed to the director of FISL on 11 June 2020. FISL was formally served with the freezing order and the proceedings on 15 June 2020.

[4]    On 15 June 2020 Stuff Ltd published an article which reported on the judgment making the freezing order. As soon as FISL became aware of that, counsel for FISL filed a memorandum seeking an urgent interim suppression order.

[5]The grounds for seeking an interim suppression order were:

(a)the application was made without notice so FISL had not had a chance to be heard on the allegations;

(b)the freezing order (presently the judgment setting out the Council’s case) contains numerous allegations of fact, many of which FISL denies and, without a suppression order, there is a risk that the allegations will be taken as true and FISL’s business reputation adversely affected;

(c)FISL intends to apply to vary the freezing order if its bank will release funds for that purpose;

(d)FISL has been in business for over 20 years, employs a number of staff and has been severely affected by the COVID-19 lockdown measures which has caused hundreds of events to be cancelled.

[6]    On receipt of the memorandum, I arranged for a telephone conference to be convened as soon as practicable with the parties. Stuff Ltd had already been requested by FISL to take down the story and had declined. As a consequence, Stuff Ltd instructed Mr Robert Stewart as counsel and sought to be present at the conference. I

1      Palmerston North City Council v Fortress Information Systems Ltd [2020] NZHC 1278.

allowed that given he was a representative of an accredited media body, which would be directly affected if the order sought was made.

[7]    Just prior to the hearing FISL filed brief submissions which set out the jurisdiction to make suppression orders in civil cases and citing authority for the making of such orders in civil litigation, including where there had been prior publicity of the facts sought to be suppressed.

The submissions for FISL

[8]    Mr Shannon for FISL submitted that serious and irremediable damage would accrue to that company if an interim suppression order was not made. He argued that the public was protected by the freezing orders as any future funds received by FISL would be frozen.

[9]    He also explained (although I had no evidence to support it) that FISL took issue with many of the allegations made by the Council and recorded in the judgment, including that the amount payable was agreed. He said there were monies owed to FISL by the Council and a reconciliation process was required before the amount finally owing was quantified.

[10]   In terms of reputational risk, he considered the statement in the judgment where I held “there is a real risk that FISL has been using, or will use funds held on trust to meet its cashflow requirements, or debts unrelated to the trust fund”, was an adverse finding which could affect FISL’s commercial reputation.2

[11]   Mr Shannon also pointed to cases where prior publication was not a barrier to making a suppression order, noting that in R v X, it was said “… while one cannot undo that which has happened, there is still value in preventing further publicity (if suppression is otherwise justified).”3

2      Palmerston North City Council v Fortress Information Systems Ltd, above n 1, at [14].

3      R v X (No 2) [2015] NZHC 1245 at [12].

[12]   Mr Shannon’s written submissions concluded by saying that there is “value in a suppression order protecting Fortress’ interests, and ensuring it can exercise its right to a fair trial.”

The submissions for the Council

[13]   Mr Jessen, for the Council, advised that the Council opposed the making of a suppression order. He pointed out there was no suggestion that there had been a failure to apply the rules regarding suppression, either by the Council or by Stuff Ltd.

[14]   In respect of the publication which had occurred to date, he considered the article was already in the public realm and there was no prospect of “putting the cat back in the bag”. He also pointed out that there were at least two other media reports on the subject of the struggle that FISL was having in refunding payments received for tickets. Thus, even if this story was required to be taken down, it would not stop all adverse publicity about FISL’s financial state.

[15]   Mr Jessen also argued that the public was entitled to know that the company was having difficulties in making payments. The article correctly reported on the decision, and a fair-minded businessman would take note of the fact that these were interim orders made on a without notice application. They did not finally determine whether the allegations made by the Council were correct.

[16]   In any event, this was a case where there were competing considerations and people doing business with FISL were entitled to know that it is having difficulties in making payments. Having that knowledge would allow event organisers to take appropriate precautions in their business arrangements with FISL to ensure money which was received by FISL on behalf of the organiser, and payable to it, was protected.

Submissions for Stuff Ltd

[17]   Mr Stewart advised that Stuff was involved because it had been requested to take down the article but declined to do so. He accepted that prior publication is not

determinative of an application for suppression. However, he considered it was not justified in this case for the reasons outlined by Mr Jessen.

[18]   To the extent there might be reputational risk or damage to FISL, he considered the undertaking provided by the Council was sufficient protection. In any event, the principle of open justice prevailed in this case, and a fair-minded reader would see the judgment for what it is, being a without notice decision made at first instance and without hearing from the other side which did not determine the merits of the Council’s claim. He also added that FISL’s director had been approached by Stuff Ltd for comment, but he declined to make any.

[19]   Finally, he said there was no suggestion that fair trial rights were jeopardised by the article when the merits of the case will be determined by a judge.

Discussion

[20]   While the starting point is the fundamental principle that justice should be open, and subject to the full scrutiny of the media, the Courts are able to make orders suppressing information in civil proceedings in the exercise of their inherent powers. As was said in Erceg v Erceg:4

The need to protect trade secrets or commercially sensitive information … are obvious examples of situations where such orders may be justified. However, the courts have declined to make non-publication or confidentiality orders simply because the publicity associated with particular legal proceedings may, from the perspective of one or other party, be embarrassing (because, for example, it reveals that a person is under financial pressure) or unwelcome (because, for example, it involves the public airing of what are seen as private family matters).

[21]   The Supreme Court in Erceg went on to identify the threshold for making an order saying:5

…the party seeking the order must show specific adverse consequences that are sufficient to justify an exception to the fundamental rule, but agree that the standard is a high one.

4      Erceg v Erceg [2016] NZSC 135 at [13].

5 At [13].

[22]   In the present case I accept, albeit without evidence to that effect, that publicity about the decision made on the without notice application for freezing orders will have a degree of prejudicial effect on FISL’s business. However, I am not satisfied that such adverse effect is sufficient to warrant the making of a suppression order, particularly when there has already been full publication of the decision.

[23]   I accept the Council’s submissions that there is a public interest in knowing that FISL has not been able to make payment of a significant sum of money despite the passage of several months and when, on the evidence I have reviewed, FISL’s director has said that payment would be made. I consider a business entity dealing with FISL is entitled to make enquiries as to how its funds will be protected if FISL is contracted to be its ticketing agent.  Such  a business  entity would  weigh  up  the  20 years of business experience that FISL has, with its current acknowledged cashflow difficulties, in deciding how to structure such an arrangement.

[24]   Furthermore, I consider FISL has, and will have, the opportunity to put its side of the story and, given the media interest in this litigation, it can reasonably be expected to get coverage.

[25]   In short, given the preliminary nature of the decision (to preserve funds while the dispute advances through the Courts), the public interest in knowing that such claims are being made, and the fact these issues are already in the public domain, all satisfy me that FISL has not justified the need for an interim suppression order suppressing the judgment granting the freezing order.

[26]I therefore decline to make an order as sought.

Solicitors:

Cooper Rapley Lawyers, Palmerston North Duncan Cotterill, Christchurch

Copy To:
R Stewart, Stuff Ltd