MEDTRONIC NZ LTD v FINCH [2014] NZHC 266

MEDTRONIC NZ LTD v FINCH [2014] NZHC 266 [25 February 2014]IN THE HIGH COURT OF NEW ZEALANDAUCKLAND REGISTRYCIV-2012-404-007408[2014] NZHC 266BETWEEN MEDTRONIC NEW ZEALANDLIMITEDPlaintiffAND GREGORY DALE FINCHDefendantHearing: 10 February 2014Appearances: P F Dalkie for the PlaintiffNo Appearance of or for the DefendantJudgment: 25 February 2014JUDGMENT OF DUFFY JThis judgment was delivered by Justice Duffyon 25 February 2014 at 1.00 pm, pursuant tor 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Counsel: P F Dalkie, AucklandSolicitors: McDonald Law, Auckland[1] Medtronic New Zealand Limited (Medtronic) has applied for judgment by way of formal proof against Gregory Dale Finch, orthopaedic surgeon. It seeks to recover damages of $1,080,633.08 plus interest and costs from Mr Finch for orthopaedic supplies (being medical parts, items and devices) that it provided to him between 2008 and 2012 for which it has not been paid.[2] Mr Finch, who is represented by Phillip Rice, Barrister, and Edwin Morrison,Solicitor, has taken no steps in recent times to oppose Medtronic's claim. He wasadjudicated bankrupt on 2 December 2013 pursuant to his own application. Nonetheless, Medtronic has continued to pursue its claim against him. It sought leave of the Court to do so, which was not opposed by the Official Assignee. Leave was granted by Venning J on 11 December 2013 (see Medtronic New Zealand Limited v Finch HC Auckland CIV-2012-404-007408, 11 December 2013). The Registry sent a copy of Venning J's Minute to Mr Rice on 12 December 2013. Then,on 23 January 2014, the Registry sent an email to Mr Rice advising him that the formal proof hearing was to proceed on Monday, 10 February 2014. Accordingly, Mr Finch was given notice of the decision of Venning J regarding the continuation of these proceedings and the date of the formal proof hearing. There has been no response on behalf of Mr Finch, despite Mr Rice and the instructing solicitorsremaining on the Court record as Mr Finch's legal representatives.[3] Mr Finch no longer resides in New Zealand. However, if Medtronic can obtain judgment against him in this jurisdiction, it can then take steps in Western Australia, where Mr Finch now resides, to enforce the judgment in that state.[4] Earlier, Mr Finch was able to successfully oppose Medtronic obtaining summary judgment against him for this debt on the ground that he had an arguable defence; namely, that the debt was incurred by a company under which he traded and not by him personally: see Medtronic New Zealand Limited v Gregory Dale Finch[2013] NZHC 1252 per Katz J.[5] Pursuant to r 10.7 of the High Court Rules, this hearing has proceeded by way of formal proof. This rule provides that if the plaintiff appears and thedefendant does not, then the plaintiff must prove the cause of action so far as the burden of proof lies on the plaintiff. To prove its case, the plaintiff has relied on affidavit evidence. Rule 9.56 of the High Court Rules authorises a court to permit proof to be by way of affidavit, which in the present circumstances I find is appropriate.[6] I must first satisfy myself whether Medtronic is owed the monies that it claims or not. If I find that it is, the next step is to determine if the debt is owed by Mr Finch personally.[7] Medtronic filed evidence from Jeffrey Poole confirming the existence of the debt for the purpose of the summary judgment application. It relies on this sameevidence for formal proof of its claim against Mr Finch. Mr Poole's evidenceestablishes that Medtronic has provided orthopaedic supplies to the value of$1,080,633.08. Annexed to Mr Poole's affidavit are copies of invoices that recordthe supply and value of the supplies. Their specific character is apparent from the descriptions on the invoices. Further, I note that there has been no challenge either to the fact the supplies were provided, or to their value. I am satisfied, therefore, that supplies of the value claimed by Medtronic were in fact supplied by it.[8] Since the summary judgment application, Medtronic has provided more detailed evidence to address the defence that the debt was not incurred by Mr Finch personally. Despite Mr Finch no longer actively pursuing this defence, I need to be satisfied that the debt was payable by him personally.[9] Medtronic has filed further evidence to prove that the debt was incurred by Mr Finch in his personal capacity. The evidence takes two forms. First, there is evidence which goes to show that the debt was incurred by Mr Finch personally. Secondly, there is evidence that undermines Mr Finch's credibility, as this evidencestrongly suggests that Mr Finch has forged evidence to make it look as if Medtronic was invoicing a limited liability company, rather than Mr Finch.[10] Christopher Miller, who works for Medtronic, has deposed that over theyears, he has chased Mr Finch for payment of the debt. He describes Mr Finch'spromise to pay the debt and having made part payments for orthopaedic supplies from Medtronic. Mr Miller says that Medtronic continued to supply Mr Finch because its products are unique and it did not want to deprive the ultimate users of those products (patients) from access to them. Mr Miller has annexed email correspondence showing promises from Mr Finch to pay Medtronic. These emails include references from Mr Finch to using proceeds from the sale of his family hometo help his "business" to pay Medtronic. Mr Finch says "business", which suggestshe is acknowledging that it is a business debt that he owes to Medtronic.[11] John Kidd, an employee of Scionz Limited (Scionz), the New Zealand agent of Medtronic, has deposed that Mr Finch has paid Medtronic invoices addressed to him personally. Mr Kidd has annexed copies of those invoices and copies of payments made by Mr Finch using his personal credit card up to early 2011. Afterthat, he used what he described as a "business" credit card. Mr Kidd has also annexed Medtronic's bank statements, which show payments from a cardholderdescribed as G D F Holdings. It is not clear if this is the full description of thecardholder's name. If it is, this is not a limited liability company. If the descriptionis abbreviated, it might refer to a limited liability company, but then again it might not. Certainly the copies of the invoices all show them as being addressed to Mr Finch.[12] Gregory Desmond, who is the managing director of Medtronic's agent inNew Zealand, has deposed that he had meetings with Mr Finch where he promised to pay the outstanding monies owed to Medtronic. Mr Desmond says that Mr Finch never kept his word regarding these payments.[13] In opposition to the summary judgment application, Mr Finch deposed that he ran his surgical practice through Greg Finch Orthopaedics Limited. He said it is common practice for orthopaedic surgeons to do this. He annexed copies of his contracts with Southern Cross Hospitals and the Accident Compensation Corporation, which show those entities contracting with his company. He said that some medical suppliers addressed their invoices to his company and some to him personally, even though it was his company that had ordered the supplies. In this regard, Mr Finch acknowledged that he had promised to pay the debt, but he assertedthat he had never admitted it was owed by him personally. He said that his promises to use the sale of proceeds of properties owned by a family trust to repay the debthad referred to him using that money to lend to "my business" to pay Medtronic. This is a rather general statement however because the term "my business" is, at itsbest for Mr Finch, ambiguous. Sole traders often separate their personal expenditure from their trading expenditure and may well create artificial loans between the two.Thus, the term "business" does not necessarily refer to the company, Greg FinchOrthopaedic Limited. Nonetheless, I note that Mr Finch strongly denies that the debt was incurred by him personally.[14] Mr Finch's evidence was supported by the evidence of Gary Baird, who is anaccountant who prepared GST returns and income tax returns for Greg Finch Orthopaedics Limited. Mr Baird deposed that he was aware of the debt owed to Medtronic and had always treated it as a debt owed by the company. He annexedlists of the company's creditors prepared as at 31 March 2010 and 31 March 2011,which show the company owed a debt to Medtronic of over $1,000,000. The debtwas included in the company's balance sheets and the accounts payable for thoseyears. He deposes that the debt to Medtronic was also included in the GST returns of the company.[15] Mr Finch and Mr Baird filed further evidence that showed the company madepayments towards Medtronic's debt, which is consistent with the company being thedebtor.[16] The evidence of Mr Finch and Mr Baird shows that, as matters stood at the time the evidence was filed in Court, Mr Finch had an arguable defence toMedtronic's claim. This was recognised by Katz J when she refused summary judgment against Mr Finch. However, following Katz J's decision, Medtronicobtained discovery orders, which enabled Medtronic to gain access to two of Mr Finch's computers and the information stored thereon. Medtronic engaged aforensic computer expert, Dr Allan Watt, to examine the information. In short, subsequent to the dismissal of the summary judgment application, Medtronic has filed evidence that shows that Mr Finch fabricated evidence to support his opposition to that application.[17] In his affidavit evidence in opposition to the summary judgment application (sworn on 1 March 2013), Mr Finch produced a quote from Medtronic dated 10 July 2007 addressed to "Greg Finch Orthopaedics Ltd" (exhibit H):... the plaintiff [Medtronic] was well aware of Greg Finch Orthopaedics Limited as is evident from a quotation sent in July 2007 addressed to"Mr G Finch Orthopaedics Ltd" a copy of which is attached marked "H".Mr Finch relied on exhibit H as evidence proving that Medtronic had traded with the company, rather than him personally.[18] However, Medtronic's records show something different from exhibit H.They contain a copy of a quote dated 10 July 2007 that replicates the detail of exhibit H in all but one respect: namely, the quote is addressed to "Mr G Finch".[19] Mr Kidd deposed on 5 July 2013 that records of all sales of Medtronic's products in New Zealand are held on Scionz's electronic record system and that only a summary form of those records is maintained by Medtronic at its Sydney office. Mr Kidd could find no record of a quote in the form of exhibit H ever being sent from Scionz. He did, however, find a record of a quotation dated 10 July 2007,which was sent to "Mr G Finch". He attached a copy of this record to his affidavit as exhibit "JLK6". The only difference between the details on exhibit H and those onexhibit JLK6 is the name of the addressee.[20] Andrew Parker, who is also an employee of Scionz, has sworn an affidavit dated 5 July 2013 in which he deposed to being the person responsible for preparingall quotes for the sale of Medtronic's products in New Zealand. He has also deposedthat he prepared the quote now known as exhibit JLK6. Mr Parker has confirmed that he did not prepare the document now known as exhibit H.[21] Both Mr Kidd and Mr Parker assert that exhibit H is not a document preparedby Scionz and that Mr Finch's assertion that exhibit H is a document generated byMedtronic or its agent, Scionz, is false.[22] Then there is the evidence of Medtronic's forensic expert, Dr Watt. Dr Watt lectures at Macquarie University in the Centre for Policing, Intelligence andCounter Terrorism. He has a doctorate of philosophy in forensic computing from the University of South Australia. Dr Watt explains how the two computers provided to him by Mr Finch pursuant to the discovery orders were cloned and then examined. Dr Watt has provided a carefully reasoned and detailed report dated 16 October 2013, which fully describes the investigations that he conducted (with a co-worker, Brent Whale) and how he has arrived at his conclusions. In short, Dr Watt has concluded that:(a) He could not find any electronic record of the document exhibit H (the quotation dated 10 July 2007 addressed to Mr G Finch Ltd) being received from Medtronic;(b) He did, however, find an electronic record of document JLK6 (the quotation dated 7 July 2007 addressed to Mr G Finch); and(c) Dr Watt's expert opinion was that the quotation produced as exhibit H by Mr Finch was a forgery and there exists another computer on which this forgery was produced.[23] Following the release of Dr Watt's report on 2 December 2013, Mr Finchdeclared himself bankrupt in New Zealand on his own petition. This meant that Medtronic could no longer proceed with its claim against him without leave of the Court. This was granted by Venning J on 11 December 2013.[24] The opinion evidence of Dr Watt and the affidavits of Mr Kidd and Mr Parker sworn in July 2013 are unchallenged. Medtronic argues that its unchallenged evidence shows that Mr Finch has forged exhibit H to support his defence.Medtronic also points to Mr Finch's subsequent conduct in declaring himselfbankrupt as being an attempt to avoid the continuation of the proceedings, and the exposure of his connection with the fabrication of exhibit H.[25] It is well settled that in a civil case, "the difference between the civil andcriminal standards [of proof] diminishes with the seriousness and ... the criminality of the issue": see Budget Rent A Car Ltd v Auckland Regional Authority [1985] 2NZLR 414 at 425 per Somers J. Findings of forgery and the fabrication of evidence are of the utmost seriousness. I consider, therefore, that I should apply a standard of proof that is analogous with that applied in criminal cases.[26] I find the evidence of Mr Kidd and Mr Parker and that of Dr Watt to be convincing. The evidence leaves me in no doubt that:(a) Neither Medtronic nor its agent, Scionz, issued the quotation known as exhibit H;(b) The quotation dated 10 July 2007 that Scionz did issue is the document known as JLK6;(c) Exhibit H is a forgery, which has been adapted from JLK6; and(d) Given the reliance that Mr Finch has placed on exhibit H and the assertions he made about this document in his affidavit, I am also satisfied that Mr Finch had knowledge of, and some association with this forgery.[27] The conclusions I have reached on the false character of exhibit H and Mr Finch's association with that document have also caused me to doubt his general denials regarding the procurement of products from Medtronic. In this regard, Iprefer the evidence of Medtronic's deponents. Accordingly, I am satisfied thatMedtronic supplied products to Mr Finch personally and is yet to receive payment for those supplies. I find, therefore, that it is entitled to the judgment that it seeks against Mr Finch in its prayer for relief.[28] Judgment is entered for Medtronic against Mr Finch in the sum of $1,080,633.08. Medtronic is also entitled to interest under the Judicature Act 1908 on the judgment sum. Leave is reserved to Medtronic to file a memorandum setting out the quantum of the interest.[29] Medtronic sought costs on a 2B basis up to 1 March 2013, which is when Mr Finch filed his affidavit with exhibit H attached. From then on, Medtronic seeks an award of indemnity costs. Medtronic is entitled to category 2B costs up to 1 March 2013. I consider that Mr Finch's reliance on exhibit H is conduct thatjustifies an award of indemnity costs from when he filed the affidavit. This document backed up the assertions made in his affidavit that Medtronic has contracted with his company and not him personally. It is likely to have influencedKatz J to refuse Medtronic's summary judgment application. The use of, and reliance on fabricated evidence is flagrant misconduct, which is the very type of conduct that entitles an affected party to an award of indemnity costs: see Bradbury v Westpac Banking Corporation [2009] 3 NZLR 400 (CA). See also r 14.6 of the High Court Rules, which permits an award of indemnity costs where a defendant has acted improperly in defending or taking a step in a proceeding.[30] Medtronic has calculated 2B costs up to 1 March 2013 as being $12,139.00 and, accordingly, it is awarded costs in that sum. From 1 March 2013 onwards, it calculates its indemnity costs at $56,902, being its actual costs from that time onwards. An award of indemnity costs does not necessarily reflect actual costs, though it is higher than scale costs. I consider that here, Medtronic should recover up to 80 per cent of its actual costs, which comes to $45,521.60. The total sum of the costs award is $57,660.60.[31] Medtronic also sought disbursements of $4,654.20 and additional disbursements of AU$35,267.65 to cover the costs of Dr Watt. I am satisfied that the claim for disbursements is reasonable and so order accordingly.Result[32] Judgment in the sum of $1,080,633.08 is entered against Mr Finch.[33] Medtronic is entitled to interest under the Judicature Act on the judgment sum. Leave is given to Medtronic to file memorandum calculating interest under the Judicature Act.[34] Medtronic is awarded costs of $57,660.60 against Mr Finch and disbursements of $4,654.20 and AU$35,267.65.Duffy J