MCINTOSH V FISK CA250/2015 [2015] NZCA 247

DRAFTMCINTOSH V FISK CA250/2015 [2015] NZCA 247 [16 June 2015]NOTE: INTERIM SUPPRESSION ORDER REMAINS IN FORCE UNTILDELIVERY OF THE HIGH COURT'S SUBSTANTIVE JUDGMENTIN THE COURT OF APPEAL OF NEW ZEALANDCA250/2015[2015] NZCA 247BETWEEN HAMISH MCINTOSHAppellantAND JOHN HOWARD ROSS FISK ANDDAVID JOHN BRIDGMAN ASLIQUIDATORS OF ROSS ASSETMANAGEMENT LTD (INLIQUIDATION)RespondentsHearing: 3 June 2015Court: Harrison, Miller and Cooper JJCounsel: J B M Smith QC and J L W Wass for AppellantJ H Stevens for RespondentsJudgment: 16 June 2015 at 10.30 amJUDGMENT OF THE COURTA The appeal is dismissed.B The appellant must pay the respondents' costs for a standard appeal on aband A basis together with usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by Harrison J)Introduction[1] The principle of open justice requires that all aspects of proceedings, both civil and criminal, are conducted in public. It extends to the identification of parties to litigation. Accordingly, a litigant seeking confidentiality in the nature of a name suppression order must show the interests of justice displace the presumption favouring publication.1 The threshold is high because any suppression order necessarily derogates from the principle of open justice and the right to freedom of expression.2[2] The issue in this appeal is whether MacKenzie J erred in declining an application by the appellant, Hamish McIntosh, for permanent suppression of name on the ground that he had failed to establish that the adverse consequences of publication displaced the open justice principle.3Background[3] Mr McIntosh is a barrister sole practicing in Wellington. He was until recently a partner in a national law firm. The respondents, John Fisk and David Bridgman, are the liquidators of Ross Asset Management Ltd (RAM).[4] As its name suggests, RAM held itself out as an asset management company, purportedly managing funds for the investing public. Mr McIntosh was one such investor.[5] David Ross, formerly a Wellington accountant, owned and operated RAM. The company failed in December 2012, immediately following the disclosure of Mr Ross' serial misappropriation of its funds. He was operating what it is known asa Ponzi scheme. Funds from new or existing RAM investors were used to pay out investors who wanted to withdraw funds. Estimated losses suffered by RAM investors as a result of Mr Ross' dishonesty exceed $100 million.1 Broadcasting Corp of New Zealand v Attorney-General [1982] 1 NZLR 120 (CA) at 123, citingScott v Scott [1913] AC 417 (HL) at 435. See also at 437–438; and Law Commission Access to Court Records (NZLC, R 93, 2006) at [2.2], cited with approval in R (Guardian News & MediaLtd) v City of Westminster Magistrate's Court [2012] EWCA Civ 420, [2013] QB 618 at [2].2 JXMX (A Child) v Dartford & Gravesham NHS Trust [2015] EWCA Civ 96 at [5]–[12].3 Fisk v Name Suppressed [2015] NZHC 827.[6] Mr McIntosh says he was an innocent beneficiary of the Ponzi operation. In April 2007 he invested $500,000 with RAM, all of which was borrowed from a major bank. In late 2011 he gave notice of withdrawal of his investment. The following month RAM repaid him $954,047.64; the surplus of $454,047.62 over his capital investment represented fictitious profits. Unknown to Mr McIntosh, the funds used to repay him came from new investments or the sale of shares held for other parties.[7] In July 2014 the liquidators issued separate proceedings against Mr McIntosh and two other former RAM investors on the same legal basis, alleging that RAM'srepayments were voidable transactions4 or prejudicial dispositions.5 The liquidators sought to set the transactions aside and recover the amount repaid.[8] Mr McIntosh does not challenge the factual foundation for the liquidators'claim. His defence, however, is that he gave value and, more particularly, changed his financial position in reliance on the repayments which he received in good faith.6He applied the repayment to discharge his bank debt. He has also incurred new financial obligations.[9] MacKenzie J heard the liquidators' substantive claim against Mr McIntosh earlier this year. His judgment is now written but he has decided to withhold delivery until resolution of issues arising from Mr McIntosh's application for namesuppression.7 On 19 August 2014 Williams J had granted him interim suppression.8On 17 April 2015 MacKenzie J heard the application for permanent suppression and on 24 April 2015 delivered the judgment under appeal. The Judge ordered, nevertheless, that the interim suppression order was to remain in force until delivery of his substantive judgment.[10] MacKenzie J carefully addressed all the grounds advanced by Mr Smith QC in support of Mr McIntosh's application. However, while expressing sympathy for4 Companies Act 1993, ss 292–297.5 Property Law Act 2007, sub-pt 6.6 Companies Act, s 296(3) and Property Law Act, s 349.7 Fisk v Name Suppressed HC Wellington CIV-2012-485-2591, 11 May 2015 (Minute of MacKenzie J) at [2].8 Fisk v McIntosh HC Wellington CIV-2012-485-2591, 19 August 2014 (Minute of Williams J).his position, the Judge was not satisfied that Mr McIntosh's grounds for seekingsuppression were sufficient to displace the open justice principle.Appeal[11] On appeal, Mr Smith QC submitted that Mackenzie J erred in principle in a number of respects. Counsel emphasised particularly the risks of publication to Mr McIntosh's new professional venture as a barrister. He has recently set up his own premises with attendant expense, which has been funded by borrowings. He is concerned because his prospects of establishing a sound professional practice rely on maintaining three essential attributes – ability, goodwill and reputation. As Mr Smith accepts, Mr McIntosh's ability is his principal asset and it is immune from any risk associated with publicity. But, he says, goodwill and reputation are fragile commodities; and both will be at real risk from publicity about this litigation and Mr McIntosh's investment in RAM.[12] In support of the appeal Mr Smith also provided us with a close comparative analysis of the circumstances of Mr McIntosh's application with other cases. However, limited if any assistance is available from that approach. Once the relevant principles are identified, the inquiry becomes a very fact specific judicial evaluation, as this case illustrates.9DecisionRelevant factors(a) Investment decision[13] It is necessary to dissect, if only briefly, the components of Mr Smith'ssubmission that this case presents an unusual concentration of factors, to isolate what will be the prejudice resulting from publication. Disclosure that Mr McIntosh invested in RAM cannot of itself give rise to an appreciable risk. Like other members of the public, he borrowed in good faith to invest a substantial amount with what he understood to be a reputable and successful funds manager. He cannot be9 R v Legal Aid Board, Ex parte Kaim Todner (A Firm) [1999] QB 966 (CA) at 977A–C.criticised for that decision. While Mr Smith emphasises Mr McIntosh's expectationof confidentiality when investing, that is an incident of most personal investment decisions, insufficient in itself to warrant suppression in the circumstances of this case.(b) Liquidators' claim[14] Any appreciable risk to Mr McIntosh could only arise from two relatedevents consequent upon RAM's failure. The first is the liquidators' claim to clawback Mr McIntosh's investment and profits. We acknowledge that Mr McIntosh did not expect this consequence when making and later withdrawing his investment. However, litigation is frequently unforeseen, and is an ordinary (even if unwelcome) incident of commercial activity. Mr McIntosh's decision to defend the liquidators'claim cannot be the subject of any public opprobrium. He has an arguable defence open to him in law that he gave value and has also changed his financial position. Whether those defences prevail is for MacKenzie J to determine.[15] Like MacKenzie J,10 confirmed by Ms Stevens in this Court, we record theliquidators' acknowledgement that Mr McIntosh acted in good faith when requesting repayment of his RAM investment in 2011. He had no reason whatsoever to suspect Mr Ross' honesty or, more importantly, that the funds used to redeem his investmentand pay profits would originate from other RAM investors. His reason was commercially rational – he wished to retire debt and apply the funds for other purposes. His decision to request repayment cannot be faulted.[16] Accordingly, this factor can be discounted.(c) Mr McIntosh's defence[17] The second relevant event is the existence of Mr McIntosh's defence or, moreparticularly, its nature. In order to establish a change of position he has had to lead extensive evidence of his personal financial circumstances. Mr Smith said that much of that evidence is not merely personal but sensitive and can be expected to be the10 At [19].focus of media attention. Mr McIntosh apprehends that publicity about this material will damage his prospects at the bar.[18] In our judgment this is ultimately the only material factor. MacKenzie J gave it careful consideration when concluding:[29] One may feel considerable sympathy for the position in which [Mr McIntosh] finds himself, in respect of the matters which he raises. However, those matters are not of a sort which could outweigh the important principle of open justice. Much more than the personal and professional embarrassment which the respondent describes is required. It is worthy ofnote that Lord Woolf, following his comment that parties and witnessesmust in general accept the embarrassment and damage to their reputation and the possible loss which can be inherent in being involved in litigation, went on to note as exceptions situations where a party or witness can reasonably require protection. [Mr McIntosh]'s concerns are not of this sort. I do notconsider that the [Mr McIntosh]'s fear of harassment raises such concern forhis safety as to indicate a need for protection.[31] The only matter which requires specific consideration is the concern which [Mr McIntosh] raises as to the consequences for his business. [Mr McIntosh] says, and I readily accept, that he is at a sensitive stage with regard to the establishment of a new business on his own account. He fears that he is particularly vulnerable to the sort of publicity that his involvement as the respondent in this proceeding would bring. His business is currently his only source of income, such that having it significantly impaired would have severe financial consequences for him.[32] While sympathising with [Mr McIntosh]'s position, I have reachedthe clear conclusion that a potential risk to his business does not reach the high level required to outweigh the importance of the principle of open justice. I find no sufficient basis for a conclusion that potential customers who may be considering whether to use [Mr McIntosh]'s business may beswayed by irrational considerations which are not supported by, or are contrary to, any findings in the judgment. Accordingly, while [Mr McIntosh]'s fears as to the potential impact on his business are understandable, I do not consider that they are objectively supportable to an extent which gives rise to a real fear of consequences of the serious type which are necessary before an order for name suppression is justified.[19] Mr Smith accepted that on an appeal against the exercise of a judicial discretion Mr McIntosh must establish one of the settled grounds for appellate intervention – that is, the Judge exercised his discretion on a wrong principle, erred in law, gave inappropriate weight to a relevant consideration or was plainly wrong.[20] The Judge's approach was, Mr Smith submitted, wrong because he declined to weigh the extent to which the public interest is served by publication of Mr McIntosh's name; and then to balance that against the factors favouringsuppression. In his submission, based on the Supreme Court's decision in Hart v Standards Committee (1) of the New Zealand Law Society, the correct requirement is to strike a balance between open justice considerations and the interests of the party who seeks suppression.11 In this context the open justice principle is not an article of faith, never to be departed from.[21] However, we note that Hart was a decision on a leave application, and in the different context of a lawyer seeking name suppression in disciplinary proceedings. We do not read that leave judgment as modifying or changing the test settled by earlier authorities in this Court. We are satisfied that MacKenzie J applied the correct test by inquiring whether the potential risks to Mr McIntosh's practicereached the high level necessary to displace the principle of open justice.[22] Our conclusion on this ground would be sufficient to dispose of the primary ground of Mr McIntosh's appeal. However, we add our agreement withMacKenzie J's reasoning.[23] A degree of perspective is required when addressing Mr McIntosh'sapplication. Publication of details of his financial fortunes since 2011, to the extent that they are taken from the substantive judgment of the High Court, will inevitably cause him some personal stress and embarrassment.12 But that information could not possibly call into question his probity or character. Both are essential elements of his professional goodwill or reputation. At worst, publication will show that he has made a property investment that was not profitable and needed the money he had invested with RAM in order to meet his obligations. We are not satisfied, however, that such information is likely to matter to the decision of a rational solicitor or client wishing to engage Mr McIntosh on the basis of his professional skill.11 Hart v Standards Committee (No 1) of the New Zealand Law Society [2012] NZSC 4.12 R v Legal Aid Board, above n 9, at 978F–G.[24] When the extraneous considerations are put to one side, Ms Stevens is correct that it is the nature of Mr McIntosh's defences, not the nature of the liquidators'claims, which places his finances in issue. His decision to raise those defences has consequences, as it does for any other party raising a changed position defence. Inparticular, the public cannot readily evaluate the High Court's substantive decisionwithout having details of his circumstances which are very likely to identify him, particularly among the small audience whose reaction most concerns him.Other factors[25] Mr Smith submitted that the Judge erred in two other material respects. One was to discount or give no weight to the fact that Mr McIntosh is not a volunteer but is being forced into this litigation against his wishes. This is a variant of an argument which we have already addressed. We are not satisfied that the Judge erred. By the very nature of civil litigation, defendants are invariably forced to participate against their wills. Mr McIntosh is no different.[26] The other alleged error is in discounting Mr McIntosh's concerns as being nomore than personal and professional embarrassment. While the Judge did refer to this factor, he did so in the correct context of confirming that much more than that reaction is required to outweigh the open justice principle. Moreover, that factor was not decisive.[27] Mr Smith also characterised this as a test case. It is the first to reach trial, but as Ms Stevens pointed out it is only one of three pending. We do not think this consideration justifies non-publication.13 Nor does the record suggest that the liquidators have pursued publication of his name in an attempt to force investors to settle.[28] For these reasons, the appeal must be dismissed. We add that Mr McIntosh'sbest prospects of vindication rest with MacKenzie J's substantive judgment which is about to be released.14 If he is successful, his decision to defend and the grounds for13 See Clark v Attorney-General (2004) 17 PRNZ 554, [2005] NZAR 481 (CA) at [41], affirmingMuir v Commissioner of Inland Revenue (2004) 21 NZTC ¶18,894 at [41]–[45].14 R v Legal Aid Board, above n 9, at 978F–G.it will be publicly justified; but in any event the judgment will explain and give the context in which he sought to rely on the statutory defences under the Property Law Act and the Companies Act. Whatever is the result, Mr McIntosh's probity orprofessional reputation could not fairly be called into question.[29] In this respect, we note that the effect of our decision will leave intact the terms of MacKenzie J's order that the interim order for suppression remains in forceuntil delivery of his substantive judgment. Mr McIntosh's name is suppressed until that event. Any issues about the contents of the substantive judgment to be made available for publication, must be addressed in the High Court.Result[30] The appeal is dismissed.[31] Mr McIntosh must pay the liquidators' costs for a standard appeal on a band A basis together with usual disbursements.Solicitors:Gibson Sheat, Wellington for AppellantBell Gully, Wellington for Respondents