IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY CIV [2015] NZHC IN THE MATTER OF the Insolvency Act 2006

Transcription

1 IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY CIV [2015] NZHC 2703 IN THE MATTER OF the Insolvency Act 2006 AND IN THE MATTER OF BETWEEN AND the bankruptcy of DAVID IAN HENDERSON HAVENLEIGH GLOBAL SERVICES LIMITED AND FM CUSTODIANS LIMITED Judgment Creditors (Substituted Creditors) DAVID IAN HENDERSON Judgment Debtor Hearing: 27 October 2015 Appearances: J Foster and C R Vinnell for Official Assignee D I Henderson (Bankrupt) in Person T Cooley as counsel assisting the Court Ruling: 3 November 2015 RULING (NO. 9) OF ASSOCIATE JUDGE OSBORNE as to claim of privilege HAVENLEIGH GLOBAL SERVICES LIMITED v HENDERSON [2015] NZHC 2703 [3 November 2015]

2 Introduction [1] David Henderson, a bankrupt, is being publicly examined pursuant to s 295 Insolvency Act [2] Ms Foster appears (with Mr Vinnell) as counsel for the Official Assignee. Ms Foster, in questioning Mr Henderson, has produced to Mr Henderson a copy of an dated 16 January 2011 which Mr Henderson sent to Grant Smith, a lawyer with Canterbury Legal Services Limited (the ). Mr Smith had provided legal services to Mr Henderson and entities associated with him. Ms Foster, having put the to Mr Henderson, asked him a series of questions in relation to its content. I also asked a number of questions. Later that day the examination was adjourned for some weeks to enable Mr Henderson to present his own further evidence. The examination was to resume on 27 October [3] The reads: From: Dave Henderson Date: To: Sunday, 16 January pm Grant Smith Grant I wanted to start the year on something of a constructive step. I am keen to have a decent session with you as soon as it works for you. I want to give you a decent overview of our plans for the year and to strategies with you. I want to go over the following in a reasonable specific way: 1. Get an exact handle on the groups outstanding costs to you and to discuss realistic payment plans. 2. Get a list together of the litigation in train and likely litigation and some estimates and times attached to these. Maybe Eric can prepare something here. You and I can also discuss the merits of each action, have a heirachy (sic) and look at the returns. 3. Go over all the productive things we intend doing and any legal work that will flow from those.

3 There are a number of good opportunities we need to advance. And I haven t forgotten your assurance to me that if I do go bankrupt then we would really have some fun. Talk soon, Dave. [4] Mr Henderson wrote the to Mr Smith some six weeks after he had been adjudicated bankrupt. 1 [5] In anticipation of the resumed hearing, Mr Henderson filed, as directed by the Court, a brief of his further evidence. [6] In his brief, Mr Henderson stated: Ms Foster produced an exchange between myself and my lawyer, Mr Smith. I consider that this exchange is privileged and also subject to quarantine provisions. The Issues [7] The issues which arise can be considered under two headings: (a) Privilege (i) Does the privilege under s 54(1) Evidence Act 2006 ( s 54 privilege ) for communications with legal advisors apply to the ? (ii) By reason of Mr Henderson s bankruptcy, does his privilege vest in the Assignee? (iii) Is the Assignee s interest affected by any joint privilege shared with entities associated with Mr Henderson? (iv) Must the claim of privilege be disallowed under s 67(1) Evidence Act? 1 Havenleigh Global Services Ltd v Henderson HC Christchurch CIV , 29 November 2010.

4 (b) The quarantine directions (i) Is the a document affected by quarantine directions made by the Court? (ii) If so, should the Court make a further order authorising the Assignee s tendering of the in the examination (with examination upon it)? The quarantine direction in the 18 March 2014 judgment [8] The quarantine direction is contained in a judgment which I delivered on 18 March [9] The quarantine direction was given by the Court in anticipation of Mr Henderson s public examination. Robert Walker, as liquidator of Property Ventures Limited and other liquidated companies, had come into possession of a hard-drive containing information in the form of documents relating to Mr Henderson s property, conduct or dealings. I ordered Mr Walker to deliver to the Assignee a copy of the hard-drive. 3 I imposed a quarantine condition which read: 4 In the event that the Official Assignee considers that any document by its content might reasonably attract privilege (within the meanings covered by ss 54, 55 and 56 Evidence Act 2006) such documents are to be quarantined by the Official Assignee and not disclosed in the absence of further order of the Court. [10] This is the quarantine direction on which Mr Henderson relies in addition to his claim of privilege. Privilege A communication attracting privilege? [11] Section 54(1) Evidence Act provides: Havenleigh Global Services Limited v Henderson [2014] NZHC 499. At [138]. At [138][(b)(iii).

5 54 Privilege for communications with legal advisers (1) A person who obtains professional legal services from a legal adviser has a privilege in respect of any communication between the person and the legal adviser if the communication was (a) (b) intended to be confidential; and made in the course of and for the purpose of (i) (ii) the person obtaining professional legal services from the legal adviser; or the legal adviser giving such services to the person. [12] Mr Henderson submits that the attracted s 54 privilege because: (a) he was a person obtaining professional legal services from a legal advisor; (b) the was a communication between him and that legal advisor; (c) it was intended to be confidential; and (d) it was made in the course of and for the purpose of his obtaining professional legal services from Mr Smith. [13] I agree that the attracted s 54 privilege by a straightforward application of the section. [14] The contains references to the groups outstanding costs and to we and our. However, whether or not Mr Henderson was obtaining the legal services in whole or in part for the benefit of another, it remains the fact that it was he, through the , who was seeking to obtain the ongoing services. He was doing so in the context of what he recorded to have been Mr Smith s assurance that the two of them would really have some fun if Mr Henderson went bankrupt. In that context, Mr Henderson spoke of a number of good opportunities we need to advance. Whether or not Mr Henderson, as an adjudicated bankrupt, ought to have been involved in such steps is not a matter which alters the facts relevant to a s 54 enquiry. His dealings meet the factual requirements of s 54.

6 In whom does the privilege reside? [15] The starting point for the consideration of privilege in this case is the fact that Mr Henderson is bankrupt. By s 101 Insolvency Act 2006, all his property at the date of his bankruptcy vested in the Assignee. Pursuant to s 102 of the Act, all property Mr Henderson acquired from the commencement of his bankruptcy (because he has not yet been discharged) vests in the Assignee. That includes his income. 5 [16] Any products of Mr Henderson s personal production since adjudication (through the productive things we intend doing ) would accordingly vest in the Assignee. The s 54 privilege in communications with legal advisers relating to such activities if arising by application of the provisions of s 54(1) therefore vests in the Assignee. They are communications about the Assignee s property. [17] I previously considered this same issue in my 18 March 2014 judgment in relation to the documentary issues which arose at that time. 6 I there stated: [110] Mr Henderson in his submissions appeared to implicitly accept that in relation to documents as to Mr Henderson s dealings with lawyers in relation to his own affairs, the privilege in any such documents resides in the Assignee. Such is the settled law. As accepted by Mr Vinnell for the Assignee, such vesting of privilege in the Assignee does not extend to advice obtained by the bankrupt in relation to his or her compliance with the Act or the bankrupt s conduct of any step in a proceeding between the bankrupt and the Assignee. [18] This treatment of an effective unity of identity between a trustee in bankruptcy and a bankrupt was articulated by Anderson J in Re Wong v Official Assignee. 7 His Honour applied the Chancery Division judgment of Peter Gibson J in Re Konigsberg (a bankrupt) ex p the trustee v Konigsberg. 8 [19] On the present issue, I am dealing with a document (the ) of the same nature as the class of documents dealt with in the 18 March 2014 judgment See Re Burney (a bankrupt), ex parte Official Assignee [1955] NZLR 1071 (SC); Brooker s Insolvency Law and Practice (online looseleaf ed, Thomson Reuters) at [IN ]. Havenleigh Global Services Limited v Henderson, above n 2. Re Wong (A bankrupt) v Official Assignee [1997] NZFLR 300 (HC) at 6. Re Konigsberg (a bankrupt) ex p the trustee v Konigsberg [1989] 3 All ER 289 (Ch).

7 [20] By reason of the unity of identity before Mr Henderson and the Assignee in relation to Mr Henderson s property, the privilege which Mr Henderson would assert in law vests in the Assignee. Impact of joint privilege [21] Mr Henderson submits that, because the subject-matter of the extends to the legal affairs of corporate entities associated with him, privilege attaches to the also in favour of those entities. [22] The subject of joint privilege was a live issue in my 18 March 2014 judgment. Mr Henderson was objecting to the Assignee having access to documents which may have attracted joint privilege, in that these related to legal affairs of both Mr Henderson and his associated entities. [23] I found that the asserted joint privilege did not affect the Assignee s right to access such documents. I stated: [131] The focus of Mr Henderson s submissions on privilege was on documents involving the lawyers of companies with which Mr Henderson is associated. The assumption in the present case is that Mr Henderson would hold some documents which relate to advice obtained by such companies. Mr Vinnell noted Re Konigsberg as authority for the existence of jointly-held privilege. Mr Vinnell submitted in his additional submissions that the advice given to such a company will properly be obtained by the Assignee from Mr Henderson as it will fall into one or both of two categories: (a) (b) The company in providing Mr Henderson with a document has waived both its confidentiality and its privilege; and The privilege is jointly-held by Mr Henderson, with Mr Henderson s aspect of privilege parting to the Assignee. [132] Where there is litigation privilege which might be claimed, such is a privilege against disclosure to another party in litigation. Mr Vinnell submits that the passing of documents from Mr Henderson s hands to the Assignee does not offend litigation privilege. [133] Finally, Mr Vinnell also relies upon s 150 of the Act. The Assignee is thereby entitled to obtain the same documents sought from Mr Henderson (any documents relating to the bankrupt s property, conduct and dealings) from a third party by warrant. Such a power reinforces Mr Vinnell s primary arguments as to the Assignee s right to obtain documents not being cut across by privilege.

8 [24] Mr Henderson submitted that, having regard to a joint privilege in the , the Court should not permit the Assignee to use the in the public examination at least until other parties who might claim privilege have the opportunity to do so. For the reasons expressed in my 18 March 2014 judgment, I find that the existence of any joint privilege did not preclude the Assignee s access to (and now use of) the . In relation to the , the Assignee effectively walks in Mr Henderson s shoes. Disallowance of privilege under s 67(1) Evidence Act [25] The Assignee, in the alternative, relies on s 67(1) Evidence Act which provides: 67 Powers of Judge to disallow privilege (1) A Judge must disallow a claim of privilege conferred by any of sections 54 to 59 and 64 in respect of a communication or information if satisfied there is a prima facie case that the communication was made or received, or the information was compiled or prepared, for a dishonest purpose or to enable or aid anyone to commit or plan to commit what the person claiming the privilege knew, or reasonably should have known, to be an offence. [26] The Assignee relies particularly on that part of s 67(1) which focuses on a personal plan to commit something which the person reasonably should have known was an offence. [27] Mr Foster submits that the evinces an intention on the part of Mr Henderson to take part in the management or control of a business, conduct which is (without the consent of the Assignee) prohibited under s 149 Insolvency Act. [28] Given my finding as to the position in relation to the underlying privilege, it is unnecessary that I conclude whether s 67 Evidence Act requires me to disallow the claim of privilege in any event. I consider there to be a compelling case for disallowance under s 67(1) having regard to the low threshold of a prima facie case, but I leave the matter there.

9 The quarantine direction [29] The quarantine direction is set out at [9] above. [30] Mr Henderson submits that the Assignee should not be permitted to rely on the and the examination conducted in relation to it. He says that the Assignee has used his in breach of the quarantine condition. [31] Mr Foster submits that Mr Henderson s submission rests on a misinterpretation of the quarantine condition. The quarantine condition in relation to documents which the Assignee considers might reasonably attract privilege was not imposed to quarantine documents in which Mr Henderson s privilege vested in the Assignee. The quarantine was addressing the privilege which Mr Henderson personally retained in the remaining categories of documents which I identified at [130] of the 18 March 2014 judgment, being advice in relation to the bankrupt s compliance with the Insolvency Act 2006 or the bankrupt s conduct of proceedings between himself and the Assignee. The does not deal with such subjectmatter. The quarantine direction does not apply to the . [32] It is therefore unnecessary to deal with the provision within the quarantine direction which reserved to the Court the right to make further orders in relation to quarantined documents. 9 Had the quarantine order, correctly construed, required the Assignee to quarantine documents where the bankrupt s privilege had vested in the Assignee, the present situation would have justified the making of a further order authorising the Assignee to use the in the way done. Ruling [33] No further order or direction is required. The Assignee has used a document according to her entitlement. 9 Above at [9].

10 [34] The is appropriately before the Court in the public examination and the examination of Mr Henderson in relation to the is and remains part of the record of examination. Solicitors: Anthony Harper, Christchurch Kensington Swan, Auckland Copy to: Mr D I Henderson, Christchurch. Luke Cunningham Clere, Wellington Associate Judge Osborne