COMMERCIAL FINANCE & SECURITIES LIMITED V MCKAY HILL & COMPANY AND ORS HC NAP CIV-2003-441-884

COMMERCIAL FINANCE & SECURITIES LIMITED V MCKAY HILL & COMPANY AND ORS HC NAP CIV-2003-441-884 9 December 2005IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY CIV-2003-441-884BETWEEN COMMERCIAL FINANCE & SECURITIES LIMITED Plaintiff AND MCKAY HILL & COMPANY First Defendant AND MCKAY HILL Second Defendant AND DONALD BRUCE ROBERTSON WOOD, CHRISTINE MARIE ROSS AND RICHARD HENRY HILL AS TRUSTEES OF THE MCHARDY TRUST Third Defendants AND DONALD BRUCE ROBERTSON WOOD Fourth Defendant Appearances: P. Rice for Plaintiff B.R. Carter for First, Second and Third Defendants P. Napier for Fourth Defendant Judgment: 9 December 2005 In accordance with r540(4) I direct the Registrar to endorse this judgment with a delivery time of 2.00pm on the 9th day of December 2005.JUDGMENT OF ASSOCIATE JUDGE D.I. GENDALL Introduction[1] The plaintiff applies in reliance on Rule 369 High Court Rules for an order for examination of:a) Stuart Grant Neilson; and b) Christine Marie Ross as witnesses before a Judge or Registrar or Deputy Registrar of this Court. [2] The application is made upon the grounds that the witnesses have material evidence and they are intending to depart from New Zealand by the end of January 2006 and prior to the trial of this proceeding, and that they do not intend to return. [3] The application is opposed by the fourth defendant. [4] The first, second and third defendants have indicated that they will abide the decision of the Court. They do note in a memorandum filed for this application that they believe that it is essential, however, that any evidence which is taken should be taken before the Trial Judge. [5] Section 369 provides the Court with a wide discretion when considering whether to grant leave to take evidence prior to trial. [6] McGechan on Procedure at para HR369.04 states:HR369.04 Location of witnessWhether an order will be made at all is a matter of discretion. Where the intended witness is within New Zealand, orders have been common in the case of illness, inability to travel, or intended departure abroad (in the latter case when the hearing is still distant)And at para HR369.07 McGechan states:HR369.07 DiscretionJurisdiction to make the order is discretionary; the prime criterion is whether justice required an order: Ra Ora Stud Limited v Oliver (1991) 5 PRNZ 132.[7] Here, the plaintiff contends that the proposed evidence is material to the claim against the fourth defendant. The plaintiff says it will assist in proving that the fourth defendant possessed financial information concerning the Neiloss Group which he failed to disclose to the plaintiff.[8] Mr Neilson, the principal witness concerned, was at all material times a director of the companies in the Neiloss Group. The witness Ms Ross is his partner. [9] One of the companies in the Neiloss Group, Neilson Horticulture Limited, was wound up on the petition of the Commissioner of Inland Revenue on 27 September 2001. At that point it apparently had arrears of PAYE of $220,919.96, of which $172,764.60 remained unpaid. [10] Mr Neilson is an undischarged bankrupt who is not likely to be discharged before June 2006. [11] The plaintiff states that the evidence of Mr Neilson in particular is central to the plaintiff's causes of action against the fourth defendant. The plaintiff says that it believes his evidence is critical to establish: (1) The circumstances leading to the liquidation of Neilson Horticulture Limited; (2) His bankruptcy; (3) That the Neiloss Group as a whole was in default of GST and PAYE obligations which led to the winding up of two further companies in the Neiloss Group; (4) The extent of his own personal indebtedness; and (5) His dealings with the fourth defendant and the fact that Mr Wood was aware from his dealings with Mr Neilson of all the matters outlined in paragraphs (1)-(4) above. [12] So far as Ms Ross is concerned, the plaintiff contends that she is also a material witness because it is believed that she also had conversations with Mr Wood, and similarly, she can provide critical evidence.[13] Apparently, the plaintiff has approached Mr Neilson and Ms Ross, and it appears that their position is that they would prefer to appear in this matter by way of subpoena rather than to provide affidavit evidence. [14] A synopsis of the proposed evidence has been set out in letter form from counsel for the plaintiff to counsel for the defendants (on the basis of their undertaking not to cross-examine the witnesses on any discrepancies between the synopsis and the witnesses' oral testimony). [15] The witnesses apparently have indicated that by the end of January 2006 they intend to leave New Zealand on a permanent basis. The plaintiff notes that there can be no certainty that they will be able to be reached while living abroad, or that they would co-operate in giving evidence by video link. It notes, however, that whilst the witnesses remain in New Zealand, they are susceptible to being called by subpoena. [16] The plaintiff's position is that failure to make the orders sought will seriously prejudice the plaintiff's case against the fourth defendant. On the other hand, making the orders sought would cause only minimal inconvenience and cost to the fourth defendant, and then only should the strike out application filed in this proceeding by the fourth defendant on 8 September 2005 be successful. [17] The plaintiff maintains that there seems little other significant effect on the other defendants in this matter if an order for the taking of this evidence is made. [18] In his opposition to the present application, counsel for the fourth defendant referred to New Zealand Towel Supply and Laundry Ltd v NZ Tri-cleaning Co Ltd[1935] NZLR 204 (CA). In this case the Court of Appeal overturned an order that witnesses' evidence be taken in Australia. In response, however, Mr Rice for the plaintiff noted that this was a passing-off case, and the evidence of the witnesses was said to be irrelevant, in that it related to evidence of passing-off in Australia which was not the issue before the Court. [19] Mr Napier for the fourth defendant did not, however, that the Court of Appeal in this case did say (at p220):The onus is on the respondents of showing that the evidence is material and that an injustice would be done if, owing to the refusal of the Commission, it cannot be adduced.And (at page 221):in order to show that the application should not be dismissed upon those grounds, it is essential for the respondents to show very clearly that refusal would result in relevant and material evidence being shut out of the trial, and so work an injustice.[20] Mr Napier for the fourth defendant referred also to the recent case of Gedye v Johannink (unreported, HC AK, CIV-2004-404-1555, Asher J) in which an application for a witness' evidence to be called early was refused. There, however, the application was made extremely late, some three weeks before the scheduled hearing date, and the point of the application appeared to be simply to save the witness from needing to delay an overseas holiday. As Mr Rice for the plaintiff pointed out, this is an entirely different situation from that applying in the present case. [21] It is clear here that the plaintiff's application does seek an indulgence. As I have noted above, the letter from counsel for the plaintiff setting out a proposed brief of the evidence in particular of Mr Neilson, but also by association that of Ms Ross, was placed before the defendants. Having viewed this letter, I am satisfied that the proposed evidence of the witnesses is material here. [22] And, as I see it, the defendants cannot complain that they will be taken entirely by surprise if the orders for examination sought are made. In my view, there will be adequate time for the defendants to prepare a cross-examination. [23] Other objections to the application advanced by the fourth defendant include a complaint that he has not had the opportunity to conduct inspection. This includes what he says are a large number of documents held by the liquidators of the various companies comprising the Neiloss Group. Mr Rice for the plaintiff noted, however, that the decision to delay inspection was one taken by the fourth defendant, given that he has filed a strike out application, and therefore this is entirely his own choice. This contention, in my view, has merit.[24] A further point raised by the fourth defendant is that Mr Neilson as an undischarged bankrupt in terms of s128 Insolvency Act 1967 would be unlikely in any event to be able to leave New Zealand and thus should be available as a witness at trial. Section 128(1)(f), however, prohibits the departure of an undischarged bankrupt unless he has "first obtained consent of the Official Assignee". Although it is unnecessary to explore in any great detail, whether such approval may be likely to be given, the risk of departure on a permanent basis by Mr Neilson, in my view, is a sufficient factor here. [25] Further objections raised by the fourth defendant are that if this application succeeds, it is not at all certain that the evidence would be heard by the Trial Judge, and further that the fourth defendant would have to cross-examine the witnesses without the benefit of knowledge of what the plaintiff and the other parties' witnesses will say, and without the further benefit of the fourth defendant being thoroughly briefed. [26] As to whether the evidence would be heard by the Trial Judge, this can in most cases be met by an appropriate direction to the Registrar, but I am satisfied that in any event, it is not an insurmountable problem if someone other than the Trial Judge might take the evidence in question. [27] As to the other matters I have noted in paragraph [25] above, as I see it, these matters can in large measure be met by adopting a similar procedure to that outlined in the case of Iverson v Zendel Industries (NZ) Ltd (1993) 7 PRNZ 205. As McGechan on Procedure at para HR369.14 notes, in that case:where an expert witness was about to leave New Zealand for two years, the Court ordered that the witness be examined by the plaintiff before trial, but protected the defendant's position by reserving them the right to seek an opportunity for further cross-examination if necessary, either by bringing the witness back to New Zealand when and if he was available, or by the taking of further evidence overseas.[28] In my view, if the present application is to succeed, a similar order to that made in Iverson would be appropriate.[29] In summary then, under all the circumstances here, I am satisfied that the plaintiff has done enough to discharge the onus upon it to show that the evidence of Mr Neilson and Ms Ross is relevant and material, and that an injustice might occur if it was unable to be adduced. There is enough before the Court to suggest that the witnesses in question are likely to depart New Zealand, and on a permanent basis, and that the orders sought by the plaintiff should be made. [30] I am satisfied, too, that any prejudice to the fourth defendant and the other defendants by the granting of this application would be minimal. As I see the position, it is in the interests of justice that the Court exercises its discretion here to make the orders sought.Conclusion[31] The plaintiff's application therefore succeeds. [32] An order is made for the examination of: a) Stuart Grant Neilson; and b) Christine Marie Ross on oath before a Judge or a Registrar or Deputy Registrar of this Court at the earliest available time (given that the witnesses may be due to leave New Zealand by 31 January 2006) and at a place to be designated by the Registrar. [33] The right is reserved to any of the defendants to seek the leave of this Court at any time for further cross-examination of the said Stuart Grant Neilson and/or the said Christine Marie Ross if this is thought to be necessary, either by bringing the witness back to New Zealand when and if he/she was available, or by the taking of further evidence of that witness overseas.[34] As to costs, these are reserved. __________________________Associate Judge D.I. GendallSolicitors:Grove Darlow & Partners, Auckland for Plaintiff McKay Hill, Napier for First, Second and Third Defendants Keegan Alexander, Auckland for Fourth Defendant