Yang v Chen HC Auckland CIV 2007-404-1751

[2007] NZHC 1980

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2007-404-001751

BETWEEN  LIMIN YANG AND LIU YANG Plaintiffs

ANDPAUL YU PO CHEN Defendant

Hearing:         8 August 2007

Appearances: P McPherson for Plaintiffs

D Bigio and L Milne for Defendant

Judgment:      8 August 2007

ORAL JUDGMENT OF ASHER J

Solicitors:

Hesketh Henry Lawyers, Private Bag 92093 Auckland

Lee Salmon Long Barristers and Solicitors, PO Box 2026 Shortland Street Auckland

YANG V CHEN HC AK CIV 2007-404-001751  8 August 2007

Introduction

[1]      The plaintiffs in this case, Limin Yang and Liu Yang, have obtained an ex parte Mareva injunction against the defendant, Paul Yu Po Chen.  Mr Chen has filed an application to discharge that Mareva injunction.  One of the grounds put forward is that the plaintiffs have failed to provide adequate affidavit evidence to establish that their undertaking as to damages, which was filed with the ex parte application for the Mareva injunction, could be met from assets at the disposal of the plaintiffs. It is therefore very much in issue in relation to the  application for discharge whether the plaintiffs can satisfy the Court that they will be able to honour their undertaking.

[2]      The  plaintiffs,  who  oppose  the   application  to  discharge  the  Mareva injunction, bring the particular application presently before the Court.  They seek an order that if they provide details of their financial position, information as to the details of a bank account in New Zealand containing $1 million is:

… not be discussed with, shown or otherwise explained to the defendant by the  defendant’s  solicitor  and/or  counsel  or  discussed  with,  shown  or otherwise  explained  to  any  other  person  without  the  plaintiffs’  written consent or an order of the Court.

[3]      The grounds put forward include the assertion that the information as to the bank account is confidential and not relevant to the substantive issues in the proceeding.  It is claimed that the orders sought are necessary to protect the plaintiffs and Mr Guitang Liu, the husband of the first named plaintiff (Ms Limin Yang), and that the defendant will not be prejudiced by the orders sought.

[4]      Affidavits have been filed by Ms Limin Yang in which she sets out in detail the  circumstances  of  her  husband  Guitang  Liu’s  arrest  in  China,  where  he  is presently in custody.   She says that this is a “truly terrifying position” for  her husband and that disclosure of financial information is likely to have adverse effects for  him.    She  puts  forward  information  in  which  she  appears  to  indicate  that Mr Chen, the defendant, may be disclosing confidential information about Guitang Liu to persons in China who wish him harm.

[5]      In  the  substantive  proceeding  the  plaintiffs  allege  breaches  of  trust  and breaches of fiduciary and statutory duties by Mr Chen.  It is claimed that Mr Chen was entrusted by the plaintiffs with substantial assets that were under their control, and was the director of certain companies that owned some of those assets.   It is alleged that without the plaintiffs’ knowledge and consent Mr Chen has treated those assets  as  his  own.    Mr McPherson  in  his  submissions  for  the  plaintiffs  places particular emphasis on the fact that the plaintiffs’ current financial information has no relevance to those substantive issues in the present proceedings.

The  Mareva injunction

[6]      The foundation for the Court’s  jurisdiction to grant Mareva injunctions is the need to prevent judgments of the Court being rendered ineffective by a defendant removing assets from the jurisdiction or dissipating those assets.  The jurisdiction, first recognised in New Zealand Courts as part of its inherent jurisdiction, is now stated at r 239 of the High Court Rules.  Rule 239 reads:

239     Interlocutory injunction in relation to party's assets

(1)It is declared that the Court may grant an interlocutory injunction restraining a party from removing, or otherwise dealing with, assets in New Zealand whether or not the party is domiciled, resident, or present in New Zealand.

(2)The power to grant an interlocutory injunction of the kind described in subclause (1) does not limit the generality of the Court's power to grant interlocutory injunctions.

(3)A party who makes an application for an interlocutory injunction of the kind described in subclause (1) must, in making the application, identify any person who is not a party to the proceeding but who would be adversely affected by the granting of the injunction.]

[7]      There was initially some doubt as to whether an undertaking as to damages was necessary (Francis v Supreme Services Ltd (1987) 2 PRNZ 532; Sea Link Ltd v Tranzpacific Container Services Ltd (1982) 1 PRNZ 431).  However, r 239 has the effect of making a Mareva injunction an interlocutory injunction.   Therefore, the requirement in r 238(3) of the High Court Rules that an applicant for an interlocutory injunction must file a signed undertaking, applies to Mareva injunctions.

[8]      In this case the plaintiffs did file an undertaking.  However, they did not file affidavit evidence setting out their personal assets so that the Court would have the ability to make a considered decision whether they could meet such an undertaking, if ultimately the Mareva injunction were shown to have been wrongly obtained, and the plaintiffs were liable for damages.  There is no doubt that it is good practice for all plaintiffs seeking Mareva injunctions to address the value of the undertaking in both the affidavits and memorandum filed in support of the ex parte application.

[9]      Tipping J in Automatic Parking Coupons Ltd v Time Ticket International Ltd (1996) 10 PRNZ 538 at 539, described a failure to provide evidence of a plaintiff’s financial position in an ex parte application for a Mareva injunction as an “extraordinary fact”.    He  went  on  at  540  to  describe  the  obligation  to  provide financial information as a “fundamental duty”.  While this is, with respect, clearly correct, it is nevertheless open to a party not to give details of its financial position, as it is not a mandatory requirement.   However, if the plaintiff chooses not to disclose financial information it is likely that no Mareva injunction will be granted. If no information is given, the plaintiffs should address this in the memorandum in support of the application, and an explanation provided.  It will only be in rare cases that a Court will grant a Mareva injunction  without being satisfied of the plaintiff’s ability to meet the undertaking.  The type of cases where a Mareva injunction might nevertheless be granted could include circumstances where the plaintiff provided satisfactory  evidence  of  the  particular  confidentiality  of  such  information,  or evidence that the plaintiffs’ impecuniosity was caused by the defendant’s wrongdoing.

[10]     This evidence of the plaintiffs’ financial position was not addressed in the initial papers filed in support of the ex parte Mareva injunction.   However, the plaintiffs have now filed affidavit evidence as to their financial circumstances, and will   file   more   subject   to   this   claim   for   confidentiality.      In   submissions, Mr McPherson has limited the request for confidentiality to the particular financial information relating to the $1 million deposit in New Zealand.   The plaintiffs are content for the Court and the defendant’s advisers to see the information, but not for the defendant to see it.  This is why they seek the confidentiality order.

The access of parties to all material filed in Court

[11]     The plaintiffs say that there is no good reason for the defendant to see any details about the money held in New Zealand, and that it is sufficient that his legal and other professional advisers see that information.  However, that is not the way in which such a confidentiality issue should be approached.  The starting point is that all material filed in the Court by a party should be accessible by all other parties. This is, of course, different from the principle of open justice.   It is based on the concept that parties to litigation should have access to all material filed, so that they can fully understand the case against them and make informed decisions.   It is presumptively prejudicial for a party to proceedings to not see all information that the Court or its opponent may see.  This could be seen as a breach of the entitlement in  s 27(1)  of  the  New  Zealand  Bill  of  Rights  Act 1990,  to  observance  of  the principles of natural justice.  As a matter of general practice it is not acceptable for the inspection of such material to be confined to professional advisers.

[12]     A  cautious  approach  has  been  adopted  in  such  cases  that  relate  to confidentiality issues when they arise on discovery.  In that area it has been said that the power to restrict a party from inspecting documents filed must be used sparingly and only where “there is a real risk that [the inspecting party] would use such right for a collateral and harmful purpose.”: Church of Scientology of California v Department of Health and Social Security & Ors [1979] 3 All ER 97. That case was considered in Corbans Viticulture Ltd v Zivkovich & Ors HC AK CIV 2001-404-

002246 28 May 2004 Harrison J, where it was observed that a party must make out a “strong case” to resist production of affidavit evidence to the parties.  As Buckley LJ commented in Warner-Lambeth Co. v Glaxo Laboratories Ltd (1975) RPC 354 at

360, a party should “normally be allowed to know as much about the facts as its advisers”.  Decisions are ultimately made in any proceeding by the party and not by the party’s advisers.

[13]     In this application the issue of disclosure of financial information does not arise in the context of discovery.  The relevance and importance of the documents is not to be measured against the issues that arise in the proceedings as it is in the discovery process.  Rather, the relevance and importance of the documents is to be

measured against the issue which the financial information will address, namely the plaintiffs’ ability to meet the undertaking should damages be ultimately awarded against them.   This is a narrow issue, which has no direct relationship with   the matters at issue in the pleadings.  When there is a pending hearing in relation to the setting aside of a Mareva injunction, decisions have to be made as to whether, if new information is filed, the application is pursued and on what basis.  The details of the financial information will be relevant to those decisions.   To make an informed decision in this case, it can be expected that Mr Chen, like any defendant, will wish to be able to examine and consider the material relied on by the plaintiffs (including bank account details put forward to show a financial ability to pay damages).

[14]     I therefore approach this application on the basis that it will only be in an exceptional case that a confidentiality order will be made in relation to the details of the financial position of an applicant for an interim injunction, including a Mareva injunction.   I consider that the same caution adopted by the Courts in relation to confidentiality orders relating to the inspection of documents in discovery should also be adopted in relation to confidentiality orders relating to affidavit evidence in interlocutory proceedings.   It must be shown also that on a balancing exercise the need for confidentiality outweighs any prejudice or injustice to the defendant who is deprived of the usual right to know what is in all documents filed.

The basis for the confidentiality order

[15]     I have no doubt that a confidentiality order can be made in an appropriate case in relation to an affidavit as to financial circumstances made in an interim injunction application, or parts of it.  Often in the course of discovery such orders are made in the context of a party disclosing trade secrets to another, potentially hostile, party.  These trade secrets can relate to financial information.  There is an example of such a confidentiality order in the decision of Custom Technology Systems Ltd v Honeywell Ltd HC AK CL 11-02 11 April 2003, Rodney Hansen J, where the order concerned the disclosure of trade discounts and margins.   That was a case that related to discovery and production in substantive proceedings.   However, in the Mareva context, affidavit material showing trade discounts and margins could be similarly confidential.

[16]     Another example of the type of information that could be confidential can be seen in Arab Monetary Fund v Hashin & Ors (1989) 1 WLR 565 at 577. There a limited confidentiality order was sought in relation to disclosure, not by the plaintiff as here, but by the defendant in a Mareva context. That defendant had an obligation to disclose details of the identity of certain persons pursuant to the Mareva orders that had been made by the Court. A confidentiality order was made because of the danger that the information in issue could be communicated to persons in Iraq and then used to the severe detriment of individuals in that country. Morrit J referred to the jurisdiction to make such a confidentiality order as “a limited jurisdiction to be exercised only in exceptional circumstances.” I accept that in exceptional circumstances potential harm to third parties from full disclosure could be a basis for a confidentiality order against a plaintiff in the Mareva context.

[17]     I also bear in mind that the claim for confidentiality must ultimately be proportionate to any disadvantage or injustice to the opposing party.   There is a balancing process to be carried out, and there could be occasions where disclosure is ordered of even truly confidential information, because if it were not the other party would suffer a disproportionate detriment.

The need for confidentiality in relation to this application

[18]     It is not sufficient, therefore, for the plaintiff to say that there is no pressing or obvious need for the defendant to see the material in the affidavit, and effectively place the burden of showing a need for disclosure on the defendant.   Rather, the burden is on the plaintiff to show that this is one of those exceptional cases where a confidentiality order should be made.  The plaintiffs must provide a proper evidential foundation for the proposition that they will suffer potential harm if the disclosure to the defendant takes place.

[19]     The difficulty with the plaintiffs’ application is that no evidence has been provided to show such adverse consequences to the plaintiffs if there is disclosure. The information as to the whereabouts of the money will do no more than provide the Court with details of the account in which $1 million is held.  The plaintiffs do not  explain  how  the  disclosure  to  the  defendant  of  the  details  of  where  that

$1 million is held could harm the plaintiffs.  There is no arbitrary or unlawful way in which the $1 million could be accessed by a person not entitled to it.  The fact that Mr Liu is in custody in China and that there may be parties who wish him ill does not explain why disclosure of this particular information could cause harm.

[20]     I note that the defendant does not oppose the Court making an order that the information disclosed should be confidential to the parties and their professional advisers only and  that  it  is  not  to  be  communicated  to  any third  parties.    The defendant is, therefore, content for the information to be treated as if it was information  provided  by way of  discovery,  with  the  implicit  condition  that  the information cannot be used for purposes other than those connected to the proceedings: Alterskye v Scott [1948] 1 All ER 469, Soft-Tech International Pty Ltd v Ball (1990) 2 PRNZ 254 and Wilson v White [Undertaking] (2005) 17 PRNZ 537 (CA)).

[21]     I conclude that this is not one of those rare cases where a confidentiality order should be made to prevent an identified risk of harm to a party if full disclosure to the parties took place.

[22]     I am, however, prepared to make the order preventing dissemination of the information beyond the parties and their professional advisers, as some evidence has been provided by the plaintiffs which indicates that there are third parties who have malevolent intentions towards the plaintiffs.

Result

[23]     The application is declined.

[24]     That portion of the defendant’s affidavit to be filed in opposition to the application  to  discharge  the  Mareva  injunction  which  provides  details  of  the plaintiffs’ bank accounts in New Zealand is to be treated as confidential to the parties and their professional advisers, and not to be disclosed to third parties or used for any purpose not connected to this litigation.

Costs

[25]     The defendant having successfully opposed the application is entitled to costs which I order on a 2B basis plus reasonable disbursements.

……………………………..

Asher J