Williams v Jones HC Auckland CIV 2003-404-6565
[2005] NZHC 1277
•10 February 2005
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2003-404-6565
BETWEENGARRY STEVE WILLIAMS HELEN WILMAR
Plaintiffs
AND ALAN VICTOR JONES
First Defendant
AND RODERICK BERNARD HARRISON
Second Defendant
CIV 2003-404-1203
AND BETWEEN MICHAEL GRIFFITH JONES
Plaintiff
AND ALAN VICTOR JONES
First Defendant
AND RODERICK BERNARD HARRISON
Second Defendant
CIV 2003-404-6569
AND BETWEEN RAYMOND JOHN CLARK AND
MERILYN JOY CLARK
Plaintiffs
AND ALAN VICTOR JONES
First Defendant
AND RODERICK BERNARD HARRISON
Second Defendant
CIV 2203-404-6577
WILLIAMS And Anor V JONES And Anor HC AK CIV 2003-404-6565 [10 February 2005]
AND BETWEEN DORIS IVY WILLIAMS
Plaintiff
AND ALAN VICTOR JONES
First Defendant
AND RODERICK BERNARD HARRISON
Second Defendant
Hearing: 10 February 2005 Appearances: P Finnigan for Plaintiff
M Black for Defendants Judgment: 10 February 2005
ORAL JUDGMENT OF PRIESTLEY J
Solicitors:
G McKay, McKay Hill, 62 Station Street, Napier
P A Craighead, Duthie Whyte, 6th flr, Duthie Whyte Building, 120 Mayoral Drive, Auckland Counsel:
M Black, Waterloo Towers, 20 Waterloo Quadrant, Auckland
P Finnigan, Level 10, Wyndham Towers, Cnr Wyndham & Albert Sts, Auckland
2
Introduction
[1] Today’s hearing embraces four proceedings. The issues they throw up are complex. Through no fault of counsel the proceedings are in a somewhat unsatisfactory state because of various sequential interlocutory applications made in recent months.
[2] The result has been that judges have made, properly and in a way which cannot possibly be criticised, a number of interlocutory orders which unfortunately overlap. What I intend to do today is make a number of orders and directions which hopefully will enable the Court and the parties to focus on essential but as yet unresolved issues.
Management of files and consolidation
[3] I recommend to the Auckland List Judge, Venning J, that at the expiration of the time period specified in this judgment and prior to the conference, these files be assigned to a judge. This will advance the proceedings in a swift and orderly fashion and without some of the difficulties to which I have just referred.
[4] Counsel agree that the allegations, the factual matrix, and the likely evidence and the legal issues thrown up by these proceedings are all identical and that it is appropriate for me to make an order consolidating all four proceedings. An order for consolidation is accordingly made.
[5] The proceedings in question are all to be consolidated with CIV 2003 404 6565 specifying G S Williams and H Wilmar as plaintiffs.
[6] The Court’s expectation would be that from henceforth, as is normal for a consolidated proceeding, only one fee is likely to be charged.
Background
[7] The plaintiffs’ Statement of Claim is basically grounded in contract. It is alleged that in 2000 the defendants, who were either acting as investment brokers or possibly as representatives of an investment broker, solicited investment monies from the plaintiffs. These investments allegedly were to yield a very high interest rate in the vicinity of 48% per annum. At the end of pleaded terms the defendants did not repay the investments, demand having been made.
[8] The involvement of the defendants and various non-parties will be the subject of evidence and indeed is relevant to issues of discovery. Highly relevant too is the fact that the Serious Fraud Office(“SFO”) has apparently investigated in depth various activities of the defendants and has prosecuted them. I am told by counsel there is a committal hearing scheduled later this month.
[9] It may well be that the monies passed from the plaintiffs to the defendants are irretrievably lost. Whether or not civil proceedings will achieve any useful objective remains to be seen. However, the plaintiffs are clearly entitled, both procedurally and constitutionally, to advance their civil claims and in particular to assess through traditional interlocutory processes whether or not the claims as currently pleaded needs to be amended.
[10] The involvement of the SFO gives rise to several very important principles involving self-incrimination. These principles have been raised with previous Judges who have handled these proceedings. The Court is alert to them. Mr Black has, in his submissions, helpfully highlighted the complexity of the self- incrimination issue. It is clear from the authorities that important balancing exercises are involved.
[11] I observe that although Mr Black is correct when he states these proceedings are “permeated” by the self-incrimination issue, that observation cannot be used as a pretext for not complying in the normal way with interlocutory procedures such as discovery. In putting it that way I am not suggesting that counsel has adopted that approach. However, it is clear that difficulties flowing from self-incrimination,
coupled with the fact that the SFO has seized large numbers of potentially relevant documents, have bedevilled to some extent the discovery exercise.
[12] What Mr Finnigan for the plaintiff seeks to achieve in a general way is to some extent akin to a tracing exercise. Discovery is not a tracing exercise. The plaintiffs, understandably anxious about the fate of their investments, are endeavouring to ascertain precisely where those monies have ended up. This in my view is a legitimate exercise. Highly relevant to the proceedings and the pleadings are factual matters as to how the defendants dealt with the plaintiffs’ monies once, as I understand it, on the defendants’ recommendation, those monies were lodged in the bank account of an overseas entity in the Channel Islands. Other monies advanced by the plaintiffs may well have ended up in other destinations.
Previous orders
[13] I referred at the outset to the previous involvement of this Court. What has resulted are a number of orders which overlap. The issue of non compliance and whether the defendants should be debarred has been raised from time to time, as has the issue of further and better discovery. In that regard, there is no need for me to repeat the observations made by other Judges. This judgment of mine should be read in conjunction with the judgments of Laurenson J dated 24 August 2004, Heath J dated 24 November 2004, and Cooper J dated 22 December 2004.
[14] In essence Laurenson J, at the plaintiffs’ behest, made a number of specific orders for further discovery which are set out in paragraph 14 of his decision.
[15] Because it was the plaintiffs’ perception that there had been insufficient or non-compliance with those orders an application was made to the Court first for an unless order (dated 22 November 2004) which is before me today. Riding with that application were other orders in the nature of orders to secure property etc.
[16] Heath J directed this hearing before me and timetabled it. Additionally (paragraph 11 of his judgment) he ordered that the defendants were to file an affidavit disclosing specified information. The time period ordered by Heath J
required affidavits to be filed and served by 10 December. Although the defendants filed affidavits as directed, the plaintiffs’ perception, with which Cooper J agreed, was that the information had not been adequately provided Accordingly the plaintiffs successfully applied to Cooper J for unless orders which he made on 22 December. Justice Cooper in addition, made orders in the nature of a Mareva injunction or restraining orders in relation to the defendants’ assets in New Zealand.
[17] The defendants have filed a further affidavit dated 26 January 2005 which, in their counsel’s submission comply with Heath J’s direction and the unless order.
Discussion
[18] Mr Finnigan appears today in support of the plaintiffs’ 22 November interlocutory application which effectively seeks an unless order requiring discovery in identical terms to the orders of Laurenson J of 23 August. He does not wish to pursue, at this stage, the other orders specified in the 22 November application.
[19] In his submissions Mr Finnigan criticised the adequacy of the defendants’ 26 January 2005 affidavit. In his submission the defendants have not complied adequately with the 22 December unless order and are vulnerable to being debarred. Mr Finnigan, however, does not seek that remedy today. His preference is to compel the defendants to provide further discovery in terms of the various categories and subcategories specified by Laurenson J in August.
[20] When pressed Mr Finnigan sensibly informed the Court that his major anxiety was to ensure that there were no documents available to the defendants which might cause difficulties with the plaintiffs’ pleaded claim either now or at trial.
[21] Mr Black, in his submissions, considered that there had been adequate compliance with Cooper J’s unless order. However, he stressed the difficulties that the defendants face not only with the issue of self-incrimination but also the fact that (to use the words set out in the 26 January 2005 affidavit) “thousands of documents”
were in the hands of Crownthorpe International SA, an off shore entity, and also of course in the hands of the SFO.
[22] The production of discoverable documents to the Court thus far is not in a satisfactory state. The defendants have provided one list of documents dated 21 September 2004. That list refers to a number of manila ring binder folders. Mr Finnigan tells me inspection has revealed nothing of relevance in those folders. Paragraph 9 of the 21 September list refers again to Crownthorpe International SA and the Serious Fraud Office.
[23] Mr Black specifically referred to paragraphs 28 to 32 inclusive of the defendant Mr A V Jones’s 26 January 2005 affidavit which in a general narrative way refers to “thousands of documents”, the role of Crownthorpe International SA; the involvement of the SFO or a Serious Fraud Office in the United Kingdom, and other perceived impediments.
[24] Finally I note that copies of various documents have from time to time been exhibited to various affidavits filed in response to previous orders of this Court to make various points.
Discovery
[25] What I think is required is to ensure that the defendants, in the manner which all litigation parties are obliged to follow, discover documents in the prescribed way, an orderly way, and a comprehensible way so both the Court and counsel can see without difficulty;
a) what documents are available
b) in respect of which documents, if any, privilege is claimed
c) what documents have passed beyond the power possession and control of the defendants
d) what documents, if any, still in the defendants control may qualify for self-incrimination privilege.
[26] I note that rule 298 of the High Court Rules specifies the various categories which should be contained in an affidavit of documents.
[27] I accept it may well be that a large number of documents have passed beyond the defendants’ control. I express the firm view that the various categories or classes of document in that position should be indicated with some specificity.
[28] In particular, in completing the discovery exercise which I will order, the defendants, in respect of documents no longer in their possession, should depose whether there are any documents in the following categories;
a) the terms of engagement between either them and/or Kingsbourne Investment Services Limited or any other entities in respect of which the plaintiffs were agents or representatives on the one hand, and Crownthorpe International SA or any other off shore manager on the other hand.
b) any specific instructions given by the defendants or any entities they represent to fund managers either on shore or off shore,
c) any portfolio reports, management reports or any individual investor reports which fund managers may have provided to the defendants.
[29] Having directed this specific focus (but it is as I am sure counsel appreciate by no means an exclusive focus), I make an unless order that the defendants are to provide further and better discovery in terms of para 1.1 to 1.4 inclusive of the plaintiff’s interlocutory application dated 22 November 2004. (See paragraph [ ] for the compliance period)
[30] The further and better discovery is to be in the prescribed affidavit of documents form. Is to observe scrupulously the categorisation contained in the interlocutory application (all imported from Laurenson J’s judgment) “the investment basis class”, and the “transaction commission class”, and “the proposed “SFO class”.
[31] It might be helpful for the affidavit of documents, within those specified categories, to list as prescribed subcategories the Rule 298 matters.
[32]In general one would expect the defendants to discover, in itemised form;
a) all documents which they currently have
b) all documents they used to have but no longer do
c) documents they have in respect of which incrimination privilege is claimed.
[33] I appreciate the relevant High Court Rules also provides categories which can be dealt with in the usual way.
[34] I appreciate that in making the order there will undoubtedly be some repetition and duplication of other discovery and quasi-discovery exercises on which the defendants have hitherto embarked. However, I believe it is in the interests of justice, and in particular essential to the orderly progression of these proceedings, that the defendants list all documents in the traditional way in one place.
[35] In making these orders as I have, I have deliberately put to one side for future determination by this Court the important principle of self-incrimination which will need to be revisited in respect of specific documents if it remains an issue.
Interrogatories
[36] Given some of the huge gaps which, on the defendants’ evidence to date, may well exist in the available documents. I consider the Court will be assisted by some answers to specific questions. I accept it is possible (although I shall endeavour to avoid it), some of those questions may raise issues of self-incrimination. If so, that can be raised, and dealt with at a future date.
[37] Rule 282 of the High Court Rules empowers the Court to order any party to file and serve on any other party a Rule 283 statement. In terms of Rule 282(2) the
Court should not make such an order unless it is satisfied it is necessary at the time it is made. I am so satisfied, particularly given the fact that months have passed since the discovery exercise was embarked upon and particularly since the clear objectives of the orders made by Laurenson J in August 2004 have yet to be reached. I see nothing in the commentary in McGechan on Procedure attaching to Rule 282 which would restrict me in this area.
[38] Accordingly the defendants are ordered, pursuant to Rule 282, to file a statement complying with Rule 283 answering the following questions:
a) In respect of each plaintiff’s initial deposit by way of investment, where specifically was the money deposited transferred to? If this information is not personally known to you why not?
b) Do you have any personal knowledge of the ultimate destination of the monies paid by each plaintiff? If not who would have?
c) Was there some specific contractual arrangement between you and Crownthorpe International SA relating to the investment and general management of the plaintiffs’ funds? If so what were its terms and when were those terms concluded?
d) At any stage after the plaintiffs made their respective investments did you receive any particular portfolio reports, investment reports or management reports from any entity relating to those investments? If so where are these reports? If not, why were no such reports received?
[39] Although these questions are cast, and deliberately so, in slightly different terms from the questions posed by Heath J in November, and although they may not be quite as specific as Mr Finnigan, would want to establish some form of chain to track or follow the fate of the monies, in my view, given the specific terms of the statement of defence and counsels’ helpful submissions today, these questions should be asked and answered.
[40] They should be answered candidly. If self-incrimination issues are raised by some of the questions, that should be spelled out specifically by the defendants in their answers.
Time periods
[41] The defendants are ordered to comply with these directions relating to discovery and Rule 283 within 28 days.
Future matters
[42] The following matters remain at large. They are to be addressed at the conference I shall direct. At that conference counsel are to indicate how much Court time is necessary to resolve outstanding issues. They are:
a) Whether there has been adequate compliance with the unless order and the Rule 282 order which I have made today.
b) Whether in those circumstances there is any need to pursue the issue of the defendants’ alleged non-compliance with Cooper J’s unless order.
c) The defendants’ extant application for a stay.
d) Self-incrimination privilege if it is raised.
e) Other interlocutory matters.
f) Whether any modification of the restraining orders made by Cooper J on 22 September 2004 need be made
g) .Trial date and duration.
[43] The Registrar is directed in consultation with Mr Finnigan and Mr Black to allocate a conference (one hour’s duration,) with whichever judge is assigned to
these consolidated proceedings by Venning J, as soon as possible after 16 March 2005.
[44] The Registrar is also directed to refer these files and my minute to Venning J for the recommended assignment, as a matter of urgency.
Costs
[45] Mr Finnigan has correctly drawn my attention to Rule 48E to the effect that, unless there are special reasons, costs on a proposed interlocutory application should be awarded. I consider, for good reason, that to award costs at the moment would be premature. Mr Finnigan is right when he observes that his interlocutory application has largely succeeded; was opposed in December 2004 by the defendants; and that costs should in terms of the Rule follow the event.
[46] The reason why I consider special reasons currently exist is that the orders I have made are somewhat different from the orders originally moved. The defendants’ stance at this hearing has been one which, in a general way, accepts these should be orders in the nature of tidying up orders provided the self- incrimination principle is not prejudiced. These matters, in my view, impact on quantum of costs. I prefer to leave costs at large (although with an indication that probably the plaintiff is entitled to some award), until such time as it can be determined whether the orders I have made today are complied with and in particular whether the matters which were at large today have been resolved by the time of the conference I have directed.
[47] If there is non-compliance or there is not a satisfactory resolution that would impact on the award of costs appropriate for today’s hearing.
[48] I indicate also that the appropriate scale for costs, if this becomes necessary to determine, would be 2B scale.
[49]Costs are reserved.
Other Matters
[50] In terms of paragraph 4(b) of Cooper J’s judgment the restraining order made by him is modified to permit, if necessary, an additional $6,500.00 plus GST in addition to the $5,000.00 specified by Cooper J to be expended by the defendants’ lawyers on any costs reasonably incurred to comply with the orders I have made today.
....................................................
Priestley J
0
0