R v Whimp
[2007] NZCA 111
•2 April 2007
ORDER PROHIBITING PUBLICATION OF THE JUDGMENT AND ANY PART OF THE PROCEEDINGS (EXCEPT THE RESULT AS SET OUT IN [57]) IN NEWS MEDIA OR ON INTERNET OR OTHER PUBLICLY AVAILABLE DATABASE UNTIL FINAL DISPOSITION OF TRIAL. PUBLICATION IN LAW REPORT OR
LAW DIGEST PERMITTED.
IN THE COURT OF APPEAL OF NEW ZEALAND
CA451/06 [2007] NZCA 111
THE QUEEN
v
BERNARD TERENCE WHIMP
Hearing: 27 February 2007
Court: Robertson, Arnold and Ellen France JJ Counsel: P B McMenamin for Applicant
M F Laracy and K Laurenson for Crown
Judgment: 2 April 2007 at 11 am
JUDGMENT OF THE COURT
A Leave to appeal is granted, but the appeal is dismissed.
BOrder prohibiting publication of the judgment and any part of the proceedings (except the result as set out in [57] in news media or on Internet or other publicly available database until final disposition of
trial. Publication in Law Report or Law Digest permitted.
R V WHIMP CA CA451/06 2 April 2007
REASONS OF THE COURT
(Given by Robertson J)
[1] This application for leave to appeal a pre-trial ruling of Judge Crosbie is grounded in an assessment of the scope of the power of a liquidator appointed under the Companies Act 1993 (the Act). Mr Whimp appeals against a decision rejecting his s 344A application challenging the legality of the actions of the Official Assignee (OA).
[2] The fundamental issues are whether what the OA did in connection with a company of which he was liquidator was lawful and if not whether evidence obtained should nonetheless be admitted on the basis of the R v Shaheed [2002]
2 NZLR 377 (CA) balancing test.
Background
[3] On 26 January 2004 the OA was appointed the Liquidator of Henry Holdings (Huntly) Ltd (HHL). On 15 March 2004 the OA was appointed Liquidator of Barberra Holdings Ltd, previously known as Capital Management Services Ltd (CMS) and referred to as such in this judgment.
[4] Both companies operated from offices at Level 8, 180 Manchester Street, Christchurch. There were a number of other companies and individuals which operated on this floor in fairly open plan facilities. There were spaces which appeared to be the base for various people, but the evidence disclosed physical intermingling of activities at the site and investigations suggest a good deal of intermingling at an operational level also.
[5] The premises were owned by McFarlane Buildings Limited and leased to
CMS. The evidence available was inadequate and unsatisfactory as to the status and
position of other entities or individuals, but for the purposes of the appeal it has been accepted that others were using the premises pursuant to undefined bare licences.
First visit
[6] On the morning of 16 March 2004, three employees of the OA – Joanne Coates, Paul Dennehy and Justin McCullough – went to the Manchester Street premises. They encountered various people including the applicant Mr Whimp, Angela Campbell (who had been a Director of HHL), Clinton Rains (a Director and shareholder of CMS), Alistair Scott-Booth, Tristram Whimp and Brent Baxter.
[7] On their arrival, the OA’s employees advised Mr Whimp and other occupants that they wished to collect any records held for CMS and HHL and to collect computers owned by those companies. The OA’s staff then systematically went into each of the office areas and looked through the papers on top of each of the desks. Any document that related to CMS or HHL was removed. The presence of such documents indicated that earlier advice that all material relating to CMS or HHL had been provided to the OA was not correct. The OA’s staff also perused the shelves for any relevant files. They opened files marked as belonging to CMS and HHL and any unmarked files. The staff also looked through a filing cabinet in Angela Campbell’s office. Serial numbers on all of the computers in the office were also checked, to see if any of them belonged to CMS or HHL. One computer was identified as belonging to CMS and removed. The OA’s staff were present in the office for over an hour.
[8] Mr Whimp objected to the OA’s staff being on the premises and to their endeavouring to exercise any powers. He contended that the offices of a number of companies were located on this level and that a computer (which the OA’s staff wanted to take as belonging to CMS) was subject to a security interest in favour of Fimiston Finance Ltd.
[9] The records of CMS and HHL were intermingled with files belonging to other companies. The OA’s staff did not interfere with material that clearly related to those other companies. They did take 21 Eastlight files and one computer away.
[10] Late in the morning, the team from the OA’s office returned to their own offices and obtained confirmation that CMS was the lessee of Level 8,
180 Manchester Street, contrary to what the applicant had told them.
Second visit
[11] That afternoon, the three employees of the OA returned to the premises, together with Mr Rhys Cain, the OA for the South Island, and Hamish Robinson. Mr Cain advised those at the CMS office that his group of people were going to sort out documents for removal and that nothing was to leave the premises without being checked by OA staff. He informed the occupants that, as the OA, he was only interested in documents relating to CMS and HHL and that all other documents would be left. The occupants of the premises would be free to collect them the next day after a complete check of the offices had been made. The occupants were also informed that the locks were going to be changed.
[12] Members of the OA’s staff were posted on the exit to secure the office space. As the occupants were leaving the building they were asked whether they had any documents relating to CMS or HHL. All documents held by the occupants were checked. At least one briefcase was searched. Alistair Scott-Booth was asked to open his briefcase and one of the OA’s staff searched the contents to check whether any of the papers inside related to CMS or HHL.
[13] The staff found an ANZ cheque book and deposit book in the name of Colorado Investments Ltd. This book was uplifted and read closely by the OA’s staff. Occupants of the office were questioned regarding the contents of the book. The cheque book was retained by the OA. The OA was interested in Colorado Investments Ltd as this company was due to go into liquidation the following day.
[14] After the occupants had left, the OA and his staff started checking all the files in the premises and set aside any documents that related to CMS or HHL.
[15] During the course of the search of the premises, the OA’s staff made a list of documents relating to four other companies that were in liquidation and controlled by Mr M G Allott. Mr Cain expected that Mr Allott was going to resign as liquidator of these companies and that he would take Mr Allott’s place.
[16] The OA and his staff began gathering all documents they could find relating to CMS and HHL but realised that the job was too big to be completed that day. They secured the building with the intention of completing the task on 17 March.
[17] Mr Whimp telephoned the OA the next morning and told him he had been back to the building and taken what he needed. When the OA staff returned they found that about 50% of the material they had identified as relating to CMS and HHL had been removed overnight.
[18] Subsequently a notice was served on Mr Whimp under s 261 of the Act requiring him to deliver up all documents relating to CMS and HHL. On 23 March
2004, Mr Whimp delivered a small number of the relevant documents which the
OA’s staff had seen on 16 March but the bulk was not provided.
[19] Mr Whimp was charged with concealing or removing records, and failing to deliver up books, records and documents, under the Companies Act and a charge of burglary of the Manchester Street offices after the locks had been changed.
The District Court proceedings
[20] The s 344A application focused on the legality of “the searches” of the premises on the morning and afternoon of 16 March 2004.
[21] Judge Crosbie found that the entering of the property without a warrant was beyond the power accorded to liquidators in the Act, evidence was illegally obtained, but the search was not unreasonable. He also held that Mr Whimp lacked standing to
challenge the legality of the search and that in any event exclusion of the evidence would have been disproportionate to the breach in terms of Shaheed. He ruled evidence as to what occurred on 16 March was admissible at Mr Whimp’s trial.
[22] Since his decision was delivered, this Court has issued a judgment in R v Williams [2007] NZCA 52 which refocuses the appropriate basis for such an inquiry and analysis.
Discussion
Did the actions of the OA amount to a “search”?
[23] We consider the matter has to be approached on a different basis than has been adopted to date.
[24] In respect of HHL and CMS, from the respective times at which the OA was appointed as liquidator he became, by operation of law, the agent of these companies: ss 241(5) and 248(1)(a) of the Act.
[25] It is a misconception to consider that thereafter the OA needed any additional formal or informal, actual or implied authority to do anything in respect of the two companies. If there were assets, documentation or records relating to the companies at the Manchester Street premises the OA was entitled to deal with them in any way he thought fit.
[26] The lease of the premises was in the name of CMS. If all that the OA and his staff were doing was going into premises over which the OA had legal authority and control as the liquidator of CMS to pick up all documentation relative to the companies then there could be no complaint.
[27] With respect, it seems to us that the District Court Judge misconceived the role of the liquidator with regard to the relevant companies. The liquidator was not a third party, but the agent of the companies and the sole means by which the companies could lawfully exist, act or operate.
(1) A liquidator has the powers -
(a) Necessary to carry out the functions and duties of a liquidator under this Act; and
(b) Conferred on a liquidator by this Act.
(2)Without limiting subsection (1) of this section, a liquidator has the powers set out in Schedule 6 to this Act.
[29] There can be no issue that the liquidator had legal authority to go to the premises and retrieve documents. The liquidator had an entitlement to do what he was doing as an incidence of his appointment.
[30] Mr McMenamin submitted on behalf of the applicant that the OA could not have had the authority to search the premises because at most a liquidator can require documents of the company to be delivered: s 261 of the Act.
[31] This argument misses the point. Powers contained in ss 261 to 274 of the Act relate to dealing with third parties. The OA was trying to deal with companies which he directly controlled. The OA did not require consent or licence from anybody to deal with the two companies, and their assets, of which he was the liquidator.
[32] Judge Crosbie found that the position of the OA and his staff in the afternoon was different from that which had existed in the morning because by then he had confirmation that CMS was the lessee of the property and it was the licensor in respect of others who were there. That is a difference without any significance in this case. The OA’s power in respect of property which belonged to CMS and HHL was identical morning and afternoon.
[33] On both the visits on 16 March, irrespective of the words used by some of the OA’s witnesses in their written briefs, where the OA was simply accessing documents to which he had a legal right and in respect of which he had legal responsibility, there was no search in terms of s 21 of the New Zealand Bill of Rights Act 1990 (NZBORA).
[34] The issue which requires further analysis is whether, in the course of exercising his lawful rights and responsibilities in respect of the two companies, the OA or his agents acted unlawfully in respect of the third party licensees who were also using the same premises.
[35] Difficulties in respect of this aspect of the case include imprecision as to the actual physical set-up of the floor in question, the inter-relationship in law between the various entities which were operating from there, and the extent to which the OA and his team were influenced and affected by what they were anticipating was about to occur in respect of other companies operating from the premises.
[36] Operating from the Level 8 office complex were four companies which had gone into voluntary liquidation by way of shareholder resolutions between
12 December 2003 and 27 February 2004. On 16 March Mr Allott, a chartered accountant and insolvency practitioner, was the liquidator. As we have said, in respect of each of these entities the OA anticipated that on 17 March Mr Allott would resign as liquidator and the OA would be appointed. That is precisely what occurred but on 16 March it was a mere possibility.
[37] Also operating from the premises was Certa Holdings Limited (formerly Colorado Developments Limited). In respect of that company there was a listing in the High Court at Christchurch on 17 March 2004 for winding up. In fact that is what occurred and the OA was appointed as receiver but he had no power on
16 March.
[38] In lawfully and properly seeking out the records and property relating to the two companies for which the OA was liquidator, did he and his agents unlawfully interfere with the records and property of the other companies in respect of which he had no lawful position as at 16 March?
[39] Obtaining a warrant is a means to make lawful what otherwise would be a trespass of property and goods. A warrant was not needed to deal with property over
which the OA had lawful authority, but if there were to be an interference with the activities and documents of third parties, it would be necessary. Anticipatory action was not justified.
[40] Because of the analysis the District Court Judge adopted, it was unnecessary for him to fully consider this aspect. The inquiry is further complicated by the fact that the OA witnesses not infrequently used the word “search” to describe whatever they were doing. They did this even at times and in circumstances in which it is clear there was no search in terms of s 21 of NZBORA.
[41] We are forced nonetheless to conclude that on both visits the OA’s team went further than it was entitled to in rummaging through material which was not obviously related to the two companies in which they had an interest. The OA was entitled to take material obviously related to the two companies which was in plain view. However, the OA and his staff undertook unlawful searches when they searched desks, shelves and filing cabinets of offices/personnel not connected to CMS or HHL and when they searched the cheque book belonging to Colorado Investments Ltd.
[42] Joanne Coates, one of the OA’s employees, also described a process whereby staff were allowed to leave after their personal belongings had been “checked”. She also referred to “looking into” a briefcase.
[43] In determining the lawfulness of these actions, it is critical to know the extent to which there was consent to this activity and how far the OA’s staff went beyond dealing with items in plain view. The OA has not established whether what occurred was with consent. Similarly, the scope of what was involved in checking personal documents is unclear. We have to assume then that there was no consent and that personal belongings were gone through. In these circumstances, these further steps were also unlawful.
[44] We do not overlook the fact that the licences of the other occupants of
Level 8 were purported to be revoked (or at least suspended). A revocation of a bare
licence must be reasonable. Summary removal of all the other entities which had, for some period of time, been operating from the premises could not be reasonable.
[45] Powers under the Act needed to be employed where third parties were involved and we are persuaded that insufficient regard was had to this aspect. In all the circumstances they were searches which were unlawful. In respect of the five other companies at least there was unsustainable action by the OA and his staff. In their desire to locate and secure what they were entitled to, they were too vigorous and intrusive in respect of property and persons over which they had no rights.
[46] We are satisfied that both the first and second visits became in time to be searches in breach of s 21 of NZBORA.
Shaheed balancing exercise
Visit 1
[47] The breach of s 21 was not serious in this instance. The OA lawfully entered the premises and sought out property under his rightful control. The intrusion became unlawful when the OA began intervening in areas legitimately occupied by other companies and their personnel. However, given the lack of clarity as to which areas were rightfully controlled by CMS and HHL it is easy to comprehend how this may have occurred.
[48] All the activities were conducted from commercial premises, thereby lessening the privacy interests of those who were there: see Thomson Newspapers Ltd v Canada (Director of Investigation and Research, Restrictive Trade Practices Commission) [1990] 1 SCR 425. Further, Mr Whimp’s connection with the property searched was weak, if not non-existent. None of the documents identified by the OA belonged to Mr Whimp. The content of the documents will not be used in evidence against Mr Whimp as the sole question at trial is whether documents of HHL or CMS existed which he removed and did not return to the OA.
[49] While the OA may have acted beyond his powers in fossicking out documents belonging to the other five companies after summarily evicting the licensees from the premises, such actions cannot be said to amount to bad faith. We do not consider that in searching the five other companies’ documents there was a deliberate misuse of power for an ulterior purpose.
[50] The offences that Mr Whimp faces are less serious than many. Most are quasi-criminal matters.
[51] Evidence that there were documents of CMS and HHL at the premises on
16 March which vanished is central to the prosecution’s case.
[52] We are satisfied that disallowing the evidence of what was seen on the morning visit would be a disproportionate response to any breach which may have occurred.
Visit 2
[53] The second visit in the afternoon involved a more serious breach of s 21. The OA has no right to search an individual’s belongings without consent looking for property – even property which is under the control of the OA. Section 261 of the Act gives the OA the power to require third parties to deliver up documents belonging to the company in liquidation. However, this power is only exercisable upon written notice: s 261(1). This power cannot give rise to a right to go as far as the OA did.
[54] The privacy interests were also increased. The looking into a bag involves a far greater privacy interest than rummaging in a commercial office building.
[55] The actions of the OA are mitigated in part by the circumstances of the urgency in this case. The possible destruction of evidence can alleviate the seriousness of the breach: R v Te Whatu (2002) 6 HRNZ 673 (CA). An analogy can be drawn to this case where there was a distinct possibility that documents rightfully belonging to the OA, and essential to the OA’s ability to carry out his duties, would
be removed from the premises and possibly destroyed. Orders to deliver documents made in accordance with s 261 had previously been partially ignored with regard to HHL. We are unable to agree with Judge Crosbie’s assessment that there was no urgency. The truth of the position is best demonstrated by what happened overnight when the OA thought he was leaving the material in a secure place, but the records and documents disappeared.
[56] We are satisfied that, in the particular circumstances of this case, to disallow the evidence about what documents were in the office building on 16 March would be a disproportionate response to the breach.
Result
[57] Although we view the case on a different basis to the District Court Judge, the appeal is dismissed and the order under s 344A as to admissibility is confirmed.
[58] We make an order prohibiting publication of the judgment and any part of the proceedings (except the result as set out in [57] in the news media or on the internet or other publicly available database until final disposition of trial. Publication in law report or law digest is permitted.
Solicitors:
K J McMenamin & Son, Christchurch, for Applicant
Crown Law Office, Wellington