Financial Markets Authority v Warminger [2015] NZHC 2306 (23 September 2015)

Last Updated: 9 October 2015

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

COMMERCIAL LIST

CIV-2015-404-001727 [2015] NZHC 2306

UNDER	The Securities Markets Act 1988
BETWEEN	FINANCIAL MARKETS AUTHORITY Plaintiff
AND	MARK WARMINGER Defendant

Hearing:	(On the papers)
Judgment:	23 September 2015

_{JUDGMENT OF VENNING J}

This judgment was delivered by me on 23 September 2015 at 11.45 am, pursuant to Rule 11.5 of the

High Court Rules.

Registrar/Deputy Registrar

Date...............

Solicitors: Meredith Connell, Auckland Cook Morris Quinn, Auckland Bell Gully, Auckland

Chapman Tripp, Auckland

Copy to: J B M Smith QC, Wellington

M Corlett, Auckland

NBR

FINANCIAL MARKETS AUTHORITY v WARMINGER [2015] NZHC 2306 [23 September 2015]

Introduction

[1] The Financial Markets Authority (FMA) has issued civil proceedings seeking pecuniary penalties against Mr Mark Warminger for trading carried out while employed by Milford Asset Management Limited (Milford) between December 2013 and August 2014. The FMA alleges Mr Warminger’s trading amounted to market manipulation in breach of s 11B of the Securities Markets Act 1988.

Application

[2] Mr Hunter from the National Business Review has applied to the Court for access to the Court file being the statements of claim and defence (and supporting documents).

[3] The application was referred to counsel for the FMA and Mr Warminger. The FMA’s position is neutral. It abides the decision of the Court on the application but as a number of third parties are named in the statement of claim who are not parties to the proceeding it advised them of the application. As a result counsel for Milford has advised that Milford is neutral and will abide the decision of the Court. Memoranda has been filed by counsel for two of the third parties referred to in the proceeding. Both seek as a condition of any release to any non-party redactions to the names of any of their specifically named staff, and in one case redactions to its name and the names of any trading firms. They each seek a copy of the redacted statements of claim and defence if released to any other non-party, as at present they have not received copies of the documents.

[4] Other parties have also made similar requests. Counsel for the defendant opposes the application.

[5] The proceedings are at a very preliminary stage. Although a statement of defence has been filed the next appearance in the Commercial List scheduled for 2

October 2015 will be a directions conference.

[6] The Court is required to take into account the nature of and reasons for the application together with the following matters to the extent they are relevant:¹

(a) the orderly and fair administration of justice;

(b) the protection of confidentiality and privacy interests; (c) the principle of open justice;

(d) the freedom to seek, receive and impart information; (e) any other relevant matter.

[7] As confirmed by the Court of Appeal in Schenker AG v Commerce Commission² no one particular factor has primacy. The exercise required to be carried out by the Court is a balancing exercise.

[8] In support of the application for access Mr Hunter gives as his reasons:

This case is of significant public and commercial interest. It involves allegations of market manipulation by an employee of a major fund manager with a large amount of public money under its control.

The details of the allegations are also of great interest to the market as a whole, since they will ultimately help define the boundaries of acceptable trading behaviour.

However, without public release of the documents in advance of a hearing it could be a long time before this information emerges, during which period investors and the market will be ill-informed about these important issues.

[9] The justification for seeking the detail of the pleadings at this stage is because of the significance of public and commercial interest in it and the fact details of the allegations would be of great interest to the market as a whole “since they will ultimately help define the boundaries of acceptable trading behaviour” and without

_{disclosure “the market will be ill-informed about these important issues”.}

¹ _{High Court Rules, r 3.16.}

² Schenker AG v Commerce Commission [2013] NZCA 114.

The orderly and fair administration of justice

[10] There is already information publicly available about the general nature of the allegations. The FMA has issued a full press release in which it detailed the allegations in the following way:

The FMA alleges the trading falls into the following categories:

• placing small trades directly on market in one direction, followed by large off-market trades in the opposite direction;

• trading that manipulates the closing price; and

• trading conducted in order to set the price, rather than for a genuine commercial purpose.

[11] The FMA’s press release went on to provide further information about the proceedings against the defendant Mr Warminger.

[12] Until the particular allegations before the Court are determined by the Court I accept there is force in Mr Morris’ submission for Mr Warminger that the detail of the allegations are obviously untested. Publication of the contents of the untested allegations will not advance the understanding of what is or is not acceptable behaviour beyond what was contained in the FMA press release. It is what is ultimately established (following the hearing) that will determine the boundaries of acceptable or non-acceptable conduct.

[13] Further, where, as here, there is a detailed statement of claim with a number of allegations involving the actions of third parties who are not parties I do not consider the orderly and fair administration of justice will be served by disclosure at this point in time given the nature of this case.

The principle of protection of confidentiality and privacy interests

[14] The confidentiality of the third parties who are named in the proceedings is a relevant factor. Of itself it may not be determinative. It could be met by appropriate redactions.

The principle of open justice

[15] The principle of open justice referred to in r 3.16 is in the context of “encouraging fair and accurate reporting of, and comment on, court hearings and decisions”. The present case is some way away from a hearing or decision. That principle of open justice does not support the reporting of allegations which are as yet unproven. It is also relevant in terms of open justice and public awareness that the FMA has issued its own press release which details the general nature of the allegations against the defendant.

Freedom to seek, receive and impart information

[16] In the context of this allegation this consideration adds little to the application. The relevance is the information sought to be obtained and to be released.

Any other matter

[17] As Mr Morris also notes there are a number of non-parties who seek to have their position protected by a redaction. The reality is that the redactions required to address privacy concerns would make the documents difficult to follow. Further, there is a request by the non-parties for access on the basis of this particular application. In other words if access is granted to them then they seek further access. That is not an appropriate. They should make their own application or at least the application should be considered by them as non parties with a proper interest in the proceeding. Their interests are different to those of Mr Hunter or the NBR.

[18] There is also the related point made by the FMA’s counsel. The potential exists for relevant non-parties to be witnesses in the proceeding. There is the possibility that disclosure of the pleadings may influence the evidence they might ultimately give.

Conclusion

[19] Standing back and weighing the purpose of the application, the above relevant factors, and the existing press release by the FMA, I am satisfied that in this

case disclosure of the pleadings at this stage of the process is not appropriate and I

_{decline the application.}

Venning J