H v S [2017] NZHC 945 (11 May 2017)

Last Updated: 1 June 2017

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2013-404-2404 [2017] NZHC 945

BETWEEN	H AND H First Plaintiffs XYZ LIMITED Second Plaintiff
AND	S First Defendant S and Others as trustees of the T Trust Second Defendants S and Others as trustees of the P Trust Third Defendants

Hearing:	24 April 2017
Counsel:	CV Walsh for plaintiffs DM Connor for defendants
Judgment:	11 May 2017

JUDGMENT OF FITZGERALD J

_{[On application to review interlocutory order]}

This judgment was delivered by me on 11 May 2017 at 10:00 am pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

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

Solicitors: Davenports Harbour Law, Auckland (T McLeod) D Burgess Law, Auckland (D Burgess)

H v S [2017] NZHC 945 [11 May 2017]

Introduction

[1] This judgment concerns an application pursuant to High Court Rule 7.49 to partially rescind orders I made in a judgment delivered on 5 April 2017 (“April Judgment”).¹ The background to the underlying proceeding is summarised in my April Judgment and I do not repeat it here. The application seeks to rescind an order I made in the April Judgment lifting suppression orders in respect of some of the defendants to this proceeding.

Procedural history

[2] This proceeding was filed in May 2013. In a judgment delivered in April

2015, Associate Judge Smith made various suppression orders, including suppression

and anonymisation orders in relation to the parties’ identities.²

[3] The question of suppression was revisited by Asher J in a judgment dated

14 March 2016.³ Asher J continued the suppression orders (at the request of the defendants), largely on the basis that the allegations being made against the defendants were, at that time, untested.

[4] The substantive trial was to commence on 24 February 2017. However, shortly prior to that, the defendants filed an amended statement of defence, in which the first defendant, the first-named second defendant, the third-named second defendant and the second-named third defendant (referred to collectively in this judgment as the “related defendants”) admitted the causes of action against them. The remaining defendants continued their defence of the plaintiffs’ claims. All defendants continued to maintain the affirmative defence of ex turpi causa non oritur actio (no action shall arise from illegal acts).

[5] Subsequently, but prior to the substantive trial commencing, by joint memorandum, the parties advised that a confidential settlement had been reached

¹ _{H v S [2017] NZHC 644.}

² _{H v S [2015] NZHC 310.}

³ H v S [2016] NZHC 433.

which resolved all matters in the proceeding. As a result, the parties sought, by consent, an order that:

...all interim orders made in this proceeding are rescinded as the parties’

resolution deals with the issues to which those orders relate.

[6] Given the broad manner in which the parties’ request was framed, and the extensive history to the proceeding, I asked the parties to file a further joint memorandum, clarifying the particular “interim orders” to which the parties referred. In my minute making that request, I noted that a range of interim orders had been made in the proceeding, including:

(a) Those orders of Associate Judge Smith made on 2 April 2015 (including suppression orders in relation to the parties, information which may tend to identify them and those other entities referred to at [150](f) of Associate Judge Smith’s judgment of 2 April 2015);

(b) All subsequent orders made by the Court in this matter concerning

anonymisation of the various judgments issued...

[7] The parties subsequently filed a joint memorandum dated 15 March 2017, in which they sought orders continuing the interim suppression orders.

[8] I thereafter proceeded to determine whether those orders ought to continue, in light of the matters raised in the joint memorandum. In the April Judgment, I concluded that the interim suppression orders ought to continue, but not in respect of the related defendants.⁴

[9] The related defendants subsequently applied under r 7.49 for an order partially rescinding the orders made in my April Judgment. The effect of that application is to maintain the suppression orders against the related defendants. The related defendants also sought a stay (which I granted) of the suppression orders being lifted pending determination of the application.

_{[10] Two issues arise on the r 7.49 application:}

⁴ At [54] and [58].

(a) First, is this an appropriate case for the Court to exercise its jurisdiction under r 7.49 to review orders made in the April Judgment (i.e. rather than the related defendants appealing from those orders in the ordinary way)?

(b) Second, even if the answer to the first question is “yes”, should I

rescind or vary any of the orders I made in the April Judgment?

Is this an appropriate case for review pursuant to r 7.49?

[11] Rule 7.49 provides an alternative to appealing direct to the Court of Appeal from an interlocutory order.

[12] There is no dispute that the orders I made rescinding the interim suppression orders are “interlocutory orders” for the purposes of r 7.49. They are relief ancillary to the relief claimed in the parties’ pleadings.⁵

[13] The orthodox approach when a party wishes to challenge an order made by a court is of course to appeal from that order to a superior court. In most circumstances, it will be inappropriate for the court which made the order to, in effect, re-litigate the matter.

[14] However, the authorities are clear that in some circumstances, it will be appropriate for the court which made the interlocutory order to carry out such a review. Those circumstances include:⁶

(a) When there was not full argument at the initial hearing; (b) If some relevant point of evidence was overlooked;

(c) If there has been a material change of circumstances; or

_{(d) Some other special circumstances have arisen.}

⁵ _{See the definition of “interlocutory order” in r 1.3.}

⁶ Carter v The Coroner’s Court at Wellington [2015] NZHC 2998 at [11].

[15] The purpose of the review jurisdiction is ultimately to provide the opportunity for reconsideration of interlocutory orders upon a fuller argument.⁷ It has also been held that there is no requirement on review of establishing that the original order was “manifestly wrong”. As Thomas J stated in Strathmore Group Ltd

v Fraser:⁸

Where review is permitted because fuller consideration of the issue is warranted, it would be inconsistent to then limit the advantage of that fuller consideration by imposing a requirement that the original decision must be manifestly wrong.

[16] Mr Connor, counsel for the related defendants, relies on the fact that there had not been full argument or a hearing prior to the orders being made in the April Judgment. He submits that, given I had requested the parties file a joint memorandum confirming the particular interim orders to be rescinded, the parties, and particularly the related defendants, were constrained as to content of the parties’ response to that request (given the need for the joint memorandum to be agreed by all parties).

[17] I do not accept that submission. My request that the parties file a joint memorandum sought clarification of the parties’ earlier joint memorandum in which they sought rescission of all “interim orders”. Further, if the parties had not in fact been able to reach an agreed position, the mere fact that a joint response had been sought would not, in my view, have prevented each party from filing its own memorandum in any event. A party could hardly be criticised for not agreeing to a joint memorandum with which they did not agree.

[18] Nevertheless, the point remains that there was not full argument or a hearing in respect of those matters raised in the parties’ joint memorandum dated 15 March

2017. I accordingly consider that this is an appropriate case for review pursuant to

_{r 7.49.}

⁷ Jolland Ltd v Whitley [1948] NZGazLawRp 150; [1949] NZLR 290 (SC) at 292; see also Graebar Holdings Ltd v Taylor

_{[1989] 2 NZLR 10 (CA).}

⁸ Strathmore Group Ltd v Fraser (1990) 3 PRNZ 665 (HC) at 668.

Should the orders made in the April Judgment be varied and/or rescinded?

Evidence in support of the application

[19] Prior to the r 7.49 application being heard, the related defendants sought leave to file affidavit evidence in support of the application. In Ballantyne Trustees Ltd v Papprill Hadfield & Aldous Solicitors Nominee Company Ltd,⁹ and after an extensive review of the authorities, Associate Judge Osborne summarised the position in respect of evidence on an application pursuant to r 7.49. In short, while a party is entitled, as of right, to file affidavit evidence in support of the application, if the application follows a full hearing and an opportunity for full preparation, then the applicant must satisfy the same tests as are applied in relation to fresh evidence on appeals, before the court will take that evidence into account.¹⁰

[20] The April Judgment did not follow a full hearing with evidence and submissions. I accordingly admitted the affidavit evidence filed on behalf of the related defendants and have taken it into account in considering the application for review.

The basis for the orders made in the April Judgment

[21] In my April Judgment, I addressed the parties’ application for continuing name suppression against the principles set out in the Supreme Court’s recent decision in Erceg v Erceg.¹¹ I do not repeat that discussion here. It is sufficient for current purposes to summarise the approach as follows:

(a) The party seeking the suppression order must show specific adverse consequences that are sufficient to justify an exception to the

_{fundamental rule of open justice. The standard is a high one.}¹²

9. Ballantyne Trustees Ltd v Papprill Hadfield & Aldous Solicitors Nominee Company Ltd [2016] NZHC 2414.

¹⁰ _{At [62].}

¹¹ _{Erceg v Erceg [2016] NZSC 135, [2017] 1 NZLR 310.}

¹² At [13].

(b) The suppression must accordingly be necessary to secure the proper administration of justice, although the “proper administration of justice” is to be construed broadly.¹³

[22] I concluded in the April Judgment that it was appropriate to continue suppression in respect of the plaintiffs. This was on the basis that:

(a) The orders were necessary to protect confidential and privileged information in respect of the plaintiffs. Serious allegations of illegality in three different jurisdictions had been made against the plaintiffs, which they firmly denied. It was not in dispute that the genesis of the allegations was information communicated by the plaintiffs to the first defendant during their solicitor/client relationship. That material was accordingly prima facie privileged and strictly confidential. The substantive allegations made on the

basis of that information will now not be tested or resolved.¹⁴

(b) As the proceedings had been resolved by way of a confidential settlement prior to the substantive hearing phase, the principles of open justice have less force and more weight will be given to the parties’ privacy concerns.

[23] I concluded, however, that a different approach was warranted in respect of the related defendants. This was on the basis that:

(a) There was a legitimate public interest in the identity of the related defendants, give the related defendants had admitted the allegations made against them, including breach of fiduciary duties flowing from

_{the first defendant’s role as the plaintiffs’ solicitor.}

¹³ _{At [18].}

¹⁴ The related defendants submit that continuation of the suppression orders in respect of the plaintiffs involves an assumption that the defendants’ affirmative illegality defence would have failed. That is not correct. The orders in respect of the plaintiffs simply reflect, inter alia, the fact that the affirmative defence of illegality had not been, and would not be, tested and resolved in court proceedings.

(b) There was no suggestion or evidence of how performance of the settlement agreement would be adversely affected or eroded by lifting the suppression orders in respect of the related defendants.

(c) There was no evidence suggesting that publication of the related defendants’ identities would lead to anything greater than the inevitable discomfort (including financial) and embarrassment that often flows from public disclosure of the fact and nature of proceedings before the court.

(d) No particular basis had been suggested why identification of the related defendants would undermine anonymisation of the plaintiffs.

(e) As such, specific adverse consequences justifying an exception to the fundamental rule of open justice had not been demonstrated in respect of the related defendants.

Submissions on the review application

[24] The plaintiffs filed a memorandum stating they are comfortable with the orders made in the April Judgment and they accordingly abide by any further orders of the Court on this application.

[25] Mr Connor’s submissions on behalf of the related defendants may be summarised as follows:

(a) First, one side of publication may well undermine the anonymisation of the plaintiffs’ names, on the basis that certain legislative and regulatory actions may be triggered in the event of publication of the related defendants’ identities.

(b) Second, the first defendant is currently facing a New Zealand Law Society investigation (but not yet charges), and lifting the suppression orders might entail publication of information that may prejudice a fair handling of any such proceedings, or render them nugatory

because of the effect any one-sided media coverage might have the

applicant’s practice.

(c) Third, there is a real risk that publication will erode successful implementation of the parties’ settlement agreement, given the adverse effect publication may have of the first defendant’s practice, and thereby his source of income necessary for that successful implementation.

(d) Fourth, the consequences of publication of the related defendants’ identities will be significantly more adverse to the first defendant than the embarrassment and discomfort which is an inevitable consequence of litigation of this kind.

[26] The affidavit evidence filed in support of the application addresses each of the points outlined above.

[27] In short, Mr Connor submits that, given the particular “cocktail” of factors at play in this case, there are specific adverse consequences for the related defendants flowing from publication which justify an exception to the general rule of open justice.

Discussion

[28] Having had the benefit of fuller argument on behalf of the related defendants, and having considered the evidence filed in support of the application, I am satisfied that this is an appropriate case in which to review the orders made in the April Judgment. This means that the suppression and anonymisation orders will continue to apply to the related defendants. I set out my reasons for this conclusion in the following paragraphs.

[29] First, I do not attach significant weight to any residual risk of the plaintiffs’ identities becoming known as a result of publication in respect of the related defendants. In this context, it is of note that the plaintiffs themselves do not press for the continuation of the suppression orders in relation to the related defendants on this

basis; as noted, they abide by the decision of the Court on this application.¹⁵ Further, many of the matters raised in the evidence on this topic are speculative. The evidence also suggests that the horse may have already bolted in any event, at least in respect of certain regulatory investigations that have already been performed.

[30] I also do not place any significant weight on the suggestion that publication could somehow adversely affect the conduct of the continuing Law Society investigation. This particular point was not developed during oral argument and no specific consequences are alluded to. Accordingly, while I accept as a broad proposition that publication might have some relevance to or affect on the investigation, I do not consider this factor itself justifies revisiting the orders made.

[31] I am satisfied, however, that publication of the related defendants’ identities could have an adverse impact on the successful implementation of the settlement agreement (which is to occur over a period of several months). In particular, and without disclosing the nature or content of the confidential settlement that has been reached, I am satisfied that publication could lead to adverse financial consequences for the related defendants which are likely to have an impact on their ability to fully perform the settlement agreement. It is in the interests of justice that parties to litigation of this kind reach a commercial resolution and that the resolution is successfully implemented.

[32] The further evidence filed also supports the submission that the adverse consequences of publication, in relation to the well-being of first defendant in particular, may be significantly greater than the normal embarrassment and discomfort which attends publication in a case of this kind.¹⁶ I accept that the likely particular impact of publication on the party seeking suppression will always be relevant to the inquiry.¹⁷ I do not propose to address the matters raised in the

_{evidence in detail in this judgment. However, while the matters identified in the}

¹⁵ Though noting that in the 15 March 2017 joint memorandum, the plaintiffs did support the continuation of the orders in respect of the related defendants on this basis.

¹⁶ For example, being of significantly greater impact than those personal and reputational matters raised by the practitioner in X v Standards Committee (No 1) of the New Zealand Law Society HC Auckland CIV-2011-404-7750, 13 December 2011; see also Hart v Standards Committee (No 1) of the New Zealand Law Society [2011] NZCA 676 at [8].

¹⁷ Hart v The Standards Committee (No 1) of the New Zealand Law Society [2012] NZSC 4 at [3].

evidence already exist (i.e. they will not be brought about by publication itself), I am satisfied that publication would exacerbate and further contribute to them.

[33] The evidence also discloses that other than one complaint in 2007, which was dismissed, the first defendant has not been subject to any other complaints (other than the a complaint made by the plaintiffs to this proceeding, in relation to the matters arising out of this proceeding). I was also advised at the hearing that the plaintiffs have since made a further and broad-ranging complaint to the Law Society, which covers “every corner of the case”. The matters in issue are now appropriately before the Law Society.

[34] I am also mindful of the fact that the parties have entered into a private and confidential resolution of the proceeding prior to the substantive hearing phase. The allegations have not, therefore, been tested or ventilated in open court. While the related defendants have, on the pleadings as filed, accepted the causes of action

against them (but maintained the affirmative illegality defence),¹⁸ the authorities

nevertheless confirm that the principles of open justice have less force prior to the substantive hearing phase of a proceeding, and more weight will be given to the parties’ privacy concerns.¹⁹ At least in part, this is due to the fact that access to the court file will not further the cause of open justice, given the materials will not assist the understanding of and reporting on a proceeding where no hearing has taken place.²⁰

[35] Accordingly, in light of the combined effect of those matters addressed at [29] to [34] above, I am satisfied specific adverse consequences have been demonstrated that justify an exception to the general rule of open justice, particularly

_{where the proceedings have not and will not reach the substantive hearing phase.}

¹⁸ Though like the plaintiffs, I am somewhat sceptical of the first defendant’s explanation that his desire to see a good outcome for the plaintiffs was the primary reason for admitting the causes of action and thereby “breaking the impasse” between the parties. The other reasons given for the causes of action being admitted may carry more weight, but the fact remains that the causes of action have been admitted.

¹⁹ See for example, GDF I LLP v Melview (Kawarau Falls Station) Investments Ltd (in Rec) [2012] NZHC 677, (2012) 12 PRNZ 125; Sanofi-Aventis Deutschland GMBH v AFT Pharmaceuticals Ltd [2012] NZHC 1051, (2012) 21 PRNZ 130.

²⁰ See the observations of Asher J in H v S, above n 2, at [9].

[36] I make two final points.

[37] First, and unlike many proceedings which are resolved prior to the substantive hearing phase, the allegations against the related defendants do not remain wholly untested, in that they have at least been admitted in the amended pleading filed. As such, I consider it appropriate that continuing suppression of publication be subject to confirmation that this fact is before the Law Society.

[38] Second, this judgment and its reasoning ought not to guide or influence any issues in respect of suppression that arise in proceedings, if any, which might flow from the current complaints before the Law Society. To the extent it might arise as an issue, suppression in that context would need to be considered afresh, in light of:

(a) the specific purpose of any such process and proceedings (taking into account the purpose of such proceedings and the underlying legislation);²¹ and

(b) the fact that one of the grounds relied on by the first defendant for seeking the continuation of the suppression orders is so he can engage with the Law Society in an “open and orderly way”.

Result

[39] I accordingly make an order rescinding the order made at [58](b) of the April Judgment. This order is conditional upon counsel for the related defendants filing a memorandum within five working days of the date of this judgment confirming those matters at [37] above.

[40] For the avoidance of doubt, the orders made at [58](a), (d), (e), (f) and (g) of the April Judgment continue to take effect.

21. See, for example, s 3(1) of the Lawyers and Conveyancers Act 2006. See also the observations of the Disciplinary Tribunal in Hawkes Bay Standards Committee v RH Hill [2010] NZLCDT

28 at [9], as quoted in Standards Committee No. 1 v Hart [2011] NZLCDT 5 at [10].

Costs

[41] Neither party addressed the question of costs. Given the nature of the application and that the plaintiffs abided the order of the Court, I consider it is

_{appropriate that costs lie where they fall.}

Fitzgerald J