LEEDS AND WOOD v RICHARDS [2016] NZHC 3039

LEEDS AND WOOD v RICHARDS [2016] NZHC 3039 [13 December 2016]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV 2016-404-140[2016] NZHC 3039UNDER the Insolvency (Cross-border) Act 2006BETWEEN MICHAEL THOMAS LEEDS ANDNICHOLAS STEWART WOODApplicantsAND MURRAY RICHARDSFirst RespondentSTEINDLE WILLIAMS LEGALLIMITEDSecond RespondentHearing: 9 December 2016 (by telephone)Counsel: S Bisley for ApplicantsM Richards, in person, First RespondentP Davey for Second RespondentM J Whale, Independent SolicitorJudgment: 13 December 2016JUDGMENT (NO. 2) OF HEATH JThis judgment was delivered by me on 13 December 2016 at 4.30pm pursuant toRule 11.5 of the High Court RulesRegistrar/Deputy RegistrarSolicitors:Buddle Findlay, AucklandLowndes Associates, AucklandCopy to:M Richards, First RespondentP Davey, Auckland, Second RespondentIntroduction[1] Messrs Leeds and Wood (the trustees) are the trustees of the estate of Mr Murray Richards, who was adjudged bankrupt in England on 3 November 2015. The petitioning creditor was Vivendi SA, a French company that had obtained judgment against Mr Richards in the Chancery Division of the High Court in London in a sum of about £14 million.1[2] The trustees applied to the County Court at Croydon (the English Court) to issue a Letter of Request (the Request) to seek assistance from this Court. Their purpose is to obtain access to solicitors' files in New Zealand. The trustees believe information contained in those files may identify assets (that they suspect Mr Richards may have secreted away) that can be realised for the benefit of his creditors. The Request was issued by the English Court, on 16 November 2015.[3] Having obtained the Request, the trustees applied to this Court to obtain access to the files. They asked this Court to exercise the powers it could have used if Mr Richards had been adjudged bankrupt in New Zealand. Particular reliance was placed on ss 165 and 171 of the Insolvency Act 2006. The documents sought were in the possession of a firm of solicitors in Auckland, Steindle Williams Legal Ltd (the solicitors).[4] On 23 September 2016,2 for reasons given on 29 September 2016,3 I made orders under s 8 of the Insolvency (Cross-border) Act 2006 (the Cross-border Act) to provide assistance:4[6] (a) I appoint Mr Michael Whale, Barrister and Solicitor of Auckland, as an independent solicitor to review all files held by Steindle Williams Legal Ltd (whether in paper based or electronic form), and any trust account records independent of them, and determine whether they are matters in respectof which the joint trustees may exercise Mr Richards'powers to waive legal professional privilege.1 Vivendi SA v Richards [2013] EWHC 3006 (Ch).2 Leeds v Richards [2016] NZHC 2248.3 Leeds v Richards (Privilege) [2016] NZHC 2314, [2016] NZAR 1405.4 Ibid, at para [6].(b) Mr Whale and Mr Steindle shall confer and Mr Steindle shall arrange for all files and other paper based or electronic documents to be delivered to Mr Whale's office at a time tobe agreed. Mr Whale may discuss any relevant issues with Mr Steindle in forming a view on questions of privilege.(c) Mr Whale shall prepare a report for the Court, to be filed on or before 25 November 2016 which shall:(i) Identify the documents or other information in respect of which the joint trustees are entitled to waive privilege held by Mr Richards and to obtain copies of them.(ii) Identify those documents or other information in respect of which another entity (or entities) holds privilege and which the joint trustees are not entitled to obtain.(iii) Identify those documents and information in respect of which the joint trustees ability to waive privilege is in doubt, with a brief summary of the issues to be resolved before a determination on that issue can be made.(iv) Make such recommendations as he thinks fit with regard to the procedure to be followed to resolve outstanding issues, and to indicate whether he considers there is any impediment to providing a copy of his report to both Mr Bisley and Mr Richards.(d) Leave is reserved to Mr Whale to apply for further directions, on notice to both the joint trustees and Mr Richards.(e) This order shall lie in Court unsealed until such time as a memorandum has been signed by both Mr Bisley and Mr Whale confirming that acceptable arrangements have been entered into for fees incurred by Mr Whale to be paid by the joint trustees, in relation to the inquiries and reporting that he is required to undertake pursuant to this order. Leave to apply is reserved in the event of further direction on this issue being required.(f) All questions of costs in relation to attendances undertaken by Steindle Williams Legal Ltd to comply with orders of the Court and to participate in the proceeding as second respondent are reserved. A timetable to resolve any outstanding issues shall be fixed at the next call.(g) In the event that Mr Richards' application to annul hisbankruptcy is successful, leave is reserved to him to apply to rescind this order, subject to any questions of costs thatremain in issue involving either Mr Whale or Steindle Williams Legal Ltd.(h) Mr Whale shall confer with Mr Bisley over the documents filed in this proceeding which he requires before embarking on his tasks and they shall be provided to Mr Whale at no cost.(i) As between the joint trustees and Mr Richards, all questions of costs are reserved.(j) The Registrar shall allocate a hearing before me at 9am on the first available date after 5 December 2016 for further directions to be made. Counsel for the joint trustees and Mr Richards personally shall file memoranda no later than 4pm on 1 December 2016 setting out the orders that they seek.[5] Mr Whale reported to the Court on 28 November 2016. On 2 December 2016, he provided a supplementary report. The second report considered some additional files that the solicitors had made available to him after his first report had been prepared, and answered a particular query raised by Mr Richards in respect of one of the files.The competing positions[6] A further hearing was held by way of a telephone conference, on 9 December 2016. The purpose of that hearing was for me to hear from the parties on the directions to be made to facilitate provision of documents (to which they are lawfully entitled) to the trustees.[7] Mr Richards lives in Sydney. However, he is in England at present to prosecute attempts to annul his bankruptcy.5 A telephone conference was convened so that he could be heard.[8] The competing positions were:(a) Mr Bisley, for the trustees, submitted that all of those files in respect of which Mr Whale had expressed the opinion that Mr Richards held privilege personally, or jointly with another person, should be made available to the trustees immediately. In respect of other documents,5 See paras [10]–[12] below.Mr Bisley submitted that the Court should inspect them and reach its own conclusions.(b) Mr Richards took the view that it was premature for even the first class of documents to which Mr Bisley had referred to be made available to the trustees. He continues to challenge his adjudication in bankruptcy in England, and harbours concerns about a conflict of interest on the part of the trustees. Mr Richards sought the opportunity to inspect the documents in New Zealand. He submitted that the Court should not make orders until such time as he had done so and had been given the opportunity to make informed submissions on questions of privilege. Mr Richards emphasised that delays in the inspection process may be unavoidable due to his difficulties in meeting costs of travel.[9] Mr Davey appeared for the solicitors. They abide the decision of the Court. I also heard from Mr Whale. He had no submissions to make, but indicated he would be prepared to continue to assist the Court, if requested to do so.The English bankruptcy proceeding[10] At the previous hearing, and at the telephone conference on 9 December 2016, Mr Richards expressed concerns about the bona fides of the trustees. Although Mr Richards disputes the legitimacy of the order of adjudication made by the English Court, I repeat the observation that I made in my reasons for judgment of 29 September 2016:6[36] As I indicated to Mr Richards during the course of argument, I was not prepared to embark upon a reconsideration of whether the English bankruptcy order was properly made. I have before me a sealed order of an English Court confirming that Mr Richards is bankrupt in that jurisdiction, something that is necessary implicit in its Request also. Unless that order were annulled or otherwise set aside by a Court of competent jurisdiction in England and Wales, I am satisfied that I should act on it and grant relief under the Request, if otherwise appropriate to do so.(Footnote omitted)6 Leeds v Richards (Privilege) [2016] NZHC 2314, [2016] NZAR 1405, at para [36].[11] Since my judgment was delivered, Mr Richards has applied to the English Court for an order annulling his bankruptcy. On 29 November 2016, his application was dismissed. Mr Richards has indicated that he intends to seek permission to appeal to the Court of Appeal out of time. No application has yet been filed.[12] Mr Richards has also signalled an intention to apply to the English Court to obtain an order either removing the trustees for reasons of conflict of interest, or preventing them from pursuing this proceeding until such time as any removal application has been determined.The issues[13] There are three issues that I need to consider in deciding how to proceed. They are:(a) Should I make an order for release of the documents in respect of which Mr Whale has found no impediment to the trustees immediately? I call this the "no privilege" issue.(b) In relation to documents in respect of which there are arguable issues as to privilege, how should they be addressed? In other words, what steps should be taken to enable Mr Richards to deal adequately with this issue and to have his views taken into account by the Court? Icall this the "privilege contestability" issue.(c) What, if any, continued role can Mr Whale play in either process?[14] There are also outstanding questions of costs. To date, Mr Whale's costshave been met by the trustees, in accordance with one of the directions that I made on 23 September 2016.7 There are the questions of costs in relation to attendances undertaken by the solicitors to comply with Court orders. Finally, there are questions of costs as between the trustees and Mr Richards.7 Leeds v Richards (Privilege) [2016] NZHC 2314, [2016] NZAR 1405, at para [6](e), set out at para [4] above.Analysis(a) The "no privilege" issue[15] In his reports, Mr Whale has helpfully summarised those documents in respect of which he has formed a conclusion that the privilege attaching belongs, jointly or independently, to Mr Richards. In that situation, the privilege can be waived by the trustees.[16] Mr Whale has examined all of the files provided by the solicitors, with oneexception. The exception involves "two 5 gigabyte mobile disks and 2 terabyte hard drive" that were given by Mr Richards to the solicitors for "safe keeping". Mr Whale has withheld examining the documents contained on those devices because of concern about the cost of engaging technical assistance, and to ensure information is not corrupted.[17] In submissions filed in advance of the 9 December 2016 hearing, Mr Bisley, for the trustees, provided helpful schedules of those documents in respect of which Mr Whale found no privilege issues arose and those which he considered were contestable. Mr Bisley's schedule of documents in respect of which Mr Whale reported that no questions of privilege arose states:SCHEDULE 11. All of the documents referred to in paragraph 8 of the Report.2. All documents in Box 2.3. In Box 2, all documents relating to the following files:(a) Murray Richards – 2011 General File (paragraph 11 of the Report)(b) Murray Richards – the Vivendi SA Proceedings (paragraph 12 of the Report).(c) New Mara Trust – Company Incoprporation (paragraph 15 of the Report.(d) New Mara Trust – 2014 Investments (paragraph 16 of the Report)(e) New Mara Trust – General matters 2014 (paragraphs 17 to 18 of the Report).4. In Box 3, all documents relating to the "Mara Investment Trust –Joint Venture with Dean Wylie" file (paragraph 25 of the Report).5. In Box 4:(a) All documents relating to the following files:(i) Murray Richard – Emirates Dispute (paragraph 28)(ii) Murray Richards – Incorporation of Boutique Wines of NZ Limited (paragraph 29 of the Report).(iii) Murray Richards – General File (paragraph 34 of the Report).(b) In relation to the "Boutique Wines of Ne4w Zealand TradingTrust – Accounting File" file, the documents in the first folder that are identified as being non-privileged (paragraph 30 of the Report), and all the documents in the second folder (paragraph 32 of the Report).[18] Mr Bisley submits that this information should be made available to the New Zealand based solicitors for the trustees immediately. While, having regard to the time that has passed since the Request was issued by the English Court, I am inclined to make an order, I retain a residual concern about doing so when an allegation of conflict of interest has been made. That is based on information provided by Mr Richards, which may or may not be true. However, there is, at least, an embryonic foundation for the allegation.[19] I propose to deal with this issue by ordering Mr Whale to deliver the fileslisted in Mr Bisley's Schedule 1 to the New Zealand based solicitors for the trusteeson Friday 27 January 2017. That order will be self-executing unless, before that date, a further Request is received from the English Court asking this Court to suspend or discharge that order. Such a request might be made by the English Court at first instance or, if permission to appeal the refusal of Mr Richards' application foran annulment were granted, by the Court of Appeal.(b) The "privilege contestability" issue[20] There are two categories of documents in respect of which decisions will need to be made involving privilege before an order that the documents be disclosed to the New Zealand based solicitors. The first concerns those files in respect ofwhich Mr Whale has identified potential disputes as to privilege. The second involves the mobile disks and the hard drive.8[21] I deal with the mobile disks and hard drive first. Mr Bisley submitted that no further steps need be taken to access documents contained in those devices until after the trustees had reviewed the legal files to be disclosed. I will defer that aspect for further consideration at a later time.[22] Documents identified by Mr Whale as raising questions of privilege are set out in Schedule 2 to Mr Bisley's submission:SCHEDULE 21. In Box 2, documents relating to the "Mara Investment Trust – JVwith Catamarans NZ Limited" file (paragraphs 13 and 14 of the Report).2. In Box 3, documents relating to the following files:(a) Mara Investment Trust – Silverdale Purchase (paragraph 19 of the Report).(b) New Mara Investments Limited – Tune Hotels (paragraph 20 of the Report).(c) New Mara Trust – Re-documenting Trust Deed (paragraph 21 of the Report).Although any privilege attaching to documents in this file was identified by Mr Whale as being held, at least jointly, by Mr Richards, this opinion may have been based at least in part on the incorrect understanding that Mr Richards is settlor of the New Mara Trust.(d) Mr Richards – Carpenter JV v Valencia Boat Scheme (paragraphs 22 and 23 of the Report).(e) New Mara Trust – Austrian Venture (paragraph 24 of the Report).(f) Mara Investment Trust – Purchase Selwyn/Bayview Roads Paihia (paragraphs 26 and 27 of the Report).3. In Box 4:(a) documents relating to the following files:8 See para [17] above.(i) P4NZ Trading Trust – Purchase 22 Ngapipi Road, Orakei (August 2002) (paragraph 33 of the Report).(ii) Mara Investment Trust – Orakei Marina Administration (paragraph 35 of the Report).(iii) New Mara Trust – trust Administration (paragraph 36 of the Report).(b) In relation to the "Boutique Wines of New Zealand TradingTrust – Accounting File" file, the documents in the first folder that are identified as being privileged (paragraph 30 of the Report).[23] Mr Richards has raised some concerns in relation to files involving the "New Mara Trust", even though Mr Whale considered that privilege in respect of the relevant documents is, at least jointly, held by Mr Richards.[24] In my view, there are three things that need to happen before decisions can be made about whether files falling into this category can be delivered to the trustees. They are:(a) I will need evidence from Mr Steindle to provide the names of the person (or persons) from whom instructions were received and the person or persons whom he regards as being entitled to waive privilege. Reasons for each of the views would need to be expressed.(b) Mr Richards should be able to inspect the files, and to provide evidence himself as to whether he is the person who can waive privilege. If not, I would expect that Mr Richards would be able to identify the person who has capacity to do so, and to explain why.(c) To the extent that there were any documents remaining in dispute, Mr Richards should be examined before a judicial officer in respect of the privilege issues, so that proper determinations may be made. It may also be necessary, in the event of any conflict of evidence, for Mr Steindle to be examined at the same hearing.[25] In my earlier judgment, I explained why I considered this Court had jurisdiction to appoint Mr Whale to investigate the questions of privilege. Fundamentally, I was exercising the inherent jurisdiction of the Court in a manner consistent with the statutory insolvency regime operative in New Zealand. For completeness, I note that this was an issue I discussed specifically in the context of a s 8 application, in Williams v Simpson.9[26] The power to convene an examination of a person subject to an order of adjudication in bankruptcy made out of New Zealand was discussed, in the context of an application for interim relief on a claim brought under Schedule 1 of the Cross- border Act. In Williams v Simpson,10 the order made in that case was to authorise the Official Assignee at Hamilton (as the Court's agent) to summon Mr Simpson to beexamined before an Associate Judge of the High Court. The examination was to be conducted in accordance with s 166 of the Insolvency Act 2006.[27] I am satisfied that the same jurisdiction may be exercised to make an examination order in the context of s 8(3) of the Cross-border Act. The fact that this Court is empowered to make an examination order in cases involving recognition under Schedule 1 to the Cross-border Act demonstrates that there are no policy reasons why such an order should not be made in reliance on s 8.11 Examination before an Associate Judge will enable a judicial officer to give binding rulings on questions of privilege after the Court has heard evidence from Mr Richards in respect of each of the disputed questions of privilege.[28] My intention is to appoint Mr Whale to conduct that examination as the Court's agent. Ordinarily, that could be done by the Official Assignee, but I havebypassed that official in dealing with the current applications. The examination should be conducted in a manner that does not involve the participation of counsel9 Williams v Simpson HC Hamilton CIV-2010-419-1174 (Reasons for Judgment 6), 10 November 2010, at para [28] and Williams v Simpson HC Hamilton CIV-2010-419-1174, 10 November 2010, (Judgment No. 7) at paras [15]–[20]. See also Re Roslea Path Ltd [2013] 1 NZLR 207 (HC) at paras [162] and [163], and Omegatrend International Pty Ltd (in liq) v New Image International Ltd HC Auckland CIV-2010-404-4098, 5 October 2010 (Associate Judge Faire), at paras [8]–[14].10 Williams v Simpson HC Hamilton CIV-2010-419-1174, 17 September 2010; [2011] BPIR 938 at para [56](c).11 The power to make an examination order is conferred by Article 21(d) of the Schedule 1 to the Insolvency (Cross-border) Act 2006.for the trustees. My concern is to ensure that the trustees only gain access to information to which they are lawfully entitled.Orders[29] For those reasons, I make the following orders:(a) The files and documents to which reference is made in Schedule 1 toMr Bisley's submissions12 shall be delivered by (or on behalf of) Mr Whale to the New Zealand based solicitors for the trustees on Friday 27 January 2017. However, if a Letter of Request from the English Court were received by this Court on or before 26 January 2017 asking this Court to suspend or discharge that order, it will be suspended or discharged.(b) Mr Steindle shall file and serve an affidavit giving the names of the person or persons from whom he received instructions in respect ofthe files and documents listed in Schedule 2 to Mr Bisley'ssubmissions.13 He shall indicate the person or persons whom he regards as being entitled to waive privilege, and shall give reasons for those views. That affidavit shall be filed and served on or before 27 January 2017.(c) Mr Richards shall be provided access to the files and documents in dispute during the week of 27 February 2017, on a date to be agreed with Mr Whale. They shall be inspected at a location and under the supervision of Mr Whale, or a person nominated by Mr Whale. Mr Richards shall file and serve an affidavit by 4pm on 3 March 2017 setting out his view as to the person or persons who have the capacity to waive privilege in the documents. An explanation shall be given for the view he has formed, in that regard.12 See para [17] above.13 See para [22] above.(d) Mr Richards is summoned to be examined before Associate Judge Bell, at the High Court at Auckland, on Monday 6 March 2017 at 10am. Mr Richards will be asked questions by Mr Whale, in the absence of the solicitors for the trustees. The examination will be conducted on the basis outlined in s 166 of the Insolvency Act 2006.After hearing Mr Richards' evidence and taking into account evidence from Mr Steindle, the Associate Judge will rule on questions of privilege and give directions as to the files and documents that shall be provided to the New Zealand based solicitors for the trustees, and when.(e) Questions of access to the mobile disks and hard drive are adjourned for further consideration, after the examination of Mr Richards on 6 March 2017.[30] I understand that Mr Bisley and Mr Davey will confer in relation to payment of the reasonable costs of the solicitors in complying with all orders of the Court. That will include the provision of an affidavit in terms of my present orders. Questions of costs may be raised before me at the next case management conference, if they have not been resolved by agreement.[31] The trustees shall make appropriate arrangements with Mr Whale for payment of his fees in terms of the orders made on 23 September 2016, and the additional services requested of Mr Whale in this judgment. If agreement cannot be reached, leave to apply for further directions is reserved.[32] As between the trustees and Mr Richards, costs are reserved.[33] A further case management conference shall be convened before me after the Associate Judge has ruled on all questions of privilege.______________________________P R Heath JDelivered at 4.30pm on 13 December 2016