Ebr Holdings Ltd ((in Liquidation)) v McLaren Guise Associates Ltd

• Jurisdiction: New Zealand
• Judge: Brewer J
• Judgment Date: 21 August 2015
• Neutral Citation: [2015] NZHC 1996
• Docket Number: CIV-2014-404-2008
• Court: High Court
• Date: 21 August 2015

Between

Ebr Holdings Ltd (In Liquidation)

Plaintiff

and

Mclaren Guise Associates Ltd

First Defendant

Nigel Dale Harrison

Second Defendant

[2015] NZHC 1996

Brewer J

CIV-2014-404-2008

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

Application by the defendants for review of a decision refusing to strike out the plaintiff company's claim in injurious falsehood, deceit, negligence and misuse of confidential information — the defendants were the plaintiff's accountants — the plaintiff (under the control of the liquidator) had sought to recover current account debts from its shareholders by way of a summary judgment application — the second defendant swore an affidavit in support of the shareholders' opposition to summary judgment to the effect that the accounts were wrong and the shareholders owed very little to the plaintiff— the second defendant repeated his statements when he was examined under oath by the plaintiff's liquidators — the plaintiff claimed that material statements were false and that the defendants knew they were false — consideration of UK Supreme Court decision that held there was no immunity for expert witnesses — whether witness immunity applied in respect of an affidavit sworn for the purpose of a civil court proceeding — whether liquidator examinations under s261 Companies Act 1993 (power to obtain documents and information) attracted witness immunity — whether the plaintiff's misuse of confidential information allegations were insufficiently pleaded — whether it was arguable that providing financial records to a company's directors post liquidation and to its shareholders was a breach of confidence.

Counsel:

P Murray and J O'Connell for Plaintiff

J N Bierre and L G Cox for Defendants

JUDGMENT OF BREWER J

This judgment was delivered by me on 21 August 2015 at 4:30 pm pursuant to Rule 11.5 High Court Rules.

Registrar/Deputy Registrar

Introduction

1 The defendants apply for review of a decision by Associate Judge Christiansen refusing to strike out the plaintiff's claim against them. 1

2 The defendants were the plaintiff's accountants prior to it going into liquidation. They prepared its annual accounts for the 2008 year. The accounts showed that the plaintiff's shareholders had significant current account debts. The plaintiff (under the control of its liquidators) applied for summary judgment against the shareholders for the debts as shown in the 2008 accounts. The second defendant (Mr Harrison) swore an affidavit in support of the shareholders' opposition to the application for summary judgment to the effect that the 2008 accounts were wrong. He annexed to his affidavit an updated financial statement summary which concluded that the shareholders collectively owed very little to the plaintiff. The summary judgment application failed.

3 Subsequently, Mr Harrison was examined under oath by the plaintiff's liquidators. 2 He affirmed the contents of his affidavit and the annexed updated financial statement summary.

4 The plaintiff claims that material statements made by Mr Harrison in his affidavit were false and that he knew they were false. 3

5 Likewise, the plaintiff claims that when Mr Harrison repeated or affirmed the statements under examination he knew them to be false. 4

6 The plaintiff pleads that it incurred significant costs as a result of what it says were the false representations. It had to investigate them, pursue the substantive claim when the summary judgment application failed, address the false representations during the course of the summary judgment proceeding and extend the period of the liquidation. It wants to recover these costs from the defendants.

7 The plaintiff also pleads that the defendants misused confidential company information by providing it to the shareholders so that the plaintiffs would have no or a reduced claim against the shareholders.

8 The defendants say that they cannot be sued by the plaintiff. That is because the affidavit sworn by Mr Harrison was for the purpose of a civil Court proceeding. At common law, witnesses in civil proceedings have immunity from being sued because of what they said in their testimony, or evidential statements. Likewise, the evidence given at the examination was either sufficiently connected to a civil proceeding in its own right (the liquidation proceeding) such as to give rise to witness immunity, or was so connected to the summary judgment proceeding as to fall within the witness immunity arising from it.

9 The defendants also say that the plaintiff's misuse of confidential information allegations are insufficiently pleaded, there is no breach of confidence on the facts and any misuse of confidential information could not have caused loss.

10 Associate Judge Christiansen did not agree with the defendants.

The nature of review

11 A party can apply to the High Court for review of a decision by an Associate Judge. 5 The High Court's jurisdiction is appellate in nature. The onus is on the applicant to prove on the balance of probabilities that the Associate Judge's decision was wrong.

The Associate Judge's decision

12 Associate Judge Christiansen had to consider the defendants' strike out application against well known principles: 6

For this court's purposes these include:

• (a) Pleaded facts are assumed to be true.

• (b) A cause of action must be clearly untenable if it is to be struck out.

• (c) Difficult questions of law should not preclude a strike out option.

• (d) The Court should be wary of striking out a claim in a developing area of law. 7

13 The causes of action to be considered were the torts of deceit/injurious false representations, misuse of confidential information, and negligence.

14 The Associate Judge reviewed the law relating to witness immunity. He accepted that the leading New Zealand authority is Dentice v Valuers Registration Board. 8 There, Eichelbaum CJ held the rationale for witness immunity is to ensure the free and unfettered availability of witnesses in any cause by providing absolute immunity from civil action whether or not the evidence given was true or false, or given in good faith, or with malice. 9

15 However, what was new was a decision of the United Kingdom Supreme Court in Jones v Kaney. 10 The plaintiff argued that this case abolishes witness immunity for expert witnesses, in which category Mr Harrison lay.

16 It seems that Associate Judge Christiansen agreed with the plaintiff: 11

It appears, as Mr Murray has submitted, that Jones v Kaney does not only partially abolish witness immunity for claims in negligence by the party that retained the expert but rather that it appears clear from the judgment that all immunity from suit for expert witnesses was abolished and in this respect is consistent with the evolution of barristerial immunity.

17 In declining the application, Associate Judge Christiansen concluded:

• [76] In this case distinct causes of action are connected to what was contained in an affidavit and what was later said in a liquidator's examination, and in between what was done by the defendants in breach of obligations to the company. Witness immunity is claimed to provide a defence to these claims because the affidavit was offered as evidence in a District Court proceeding and the examination evidence was provided in response to a direction given as part of a Court supervised process.

• [77] In this Court's view a factual enquiry is needed which the present affidavits do not adequately provide for.

• [78] Witness immunity is a longstanding principle. It is not now quite the same as it has been. Documented change is evidenced by relatively recent English decisions suggesting that principles are not clear enough for our present purposes.

Grounds for review

18 The defendants' principal submission is that Associate Judge Christiansen erred in law in holding that Jones v Kaney abolished all immunity for expert witnesses. Particular reference is made by Mr Bierre to the judgment of Lord Collins:

• [71] This appeal is concerned only with the liability of the so-called “friendly expert” to be sued by the client on whose behalf the expert was retained.

  …

• [73] Nor of course is there anything in the present decision which affects the position of the adverse expert. It is not sufficient to say that the adverse expert presents no problem because the expert owes no duty to the client on the other side. There are wider considerations of policy which ought to prevent adverse experts from being the target of disappointed litigants, even if the scope of duty in tort were to be extended in the future. It is true, as McHugh J said in D'Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1, para 100 that except for the purpose of classification it may not matter whether the lack of legal liability stems from characterising it as an immunity or as an absence of duty of care. But it would be preferable to treat it as an immunity to emphasise the strong element of policy involved.

19 Mr Bierre made the submission that Associate Judge Christiansen appeared to treat this statement as being a minority view, preferring to rely on the judgment of Lord Phillips.

20 Mr Bierre relies on the subsequent decision of Baxendale-Walker v Middleton, a decision of the High Court of England and Wales, 12 and Chief Constable of South Wales Police v Daniels, 13 a further decision of the Court of Appeal of England and Wales, in support of the proposition that the change to the

law does not relate to the immunity of an expert witness from civil suit by an opposing party

21 There are seven different judgments in Jones v Kaney. It is not at all clear whether Lord Phillips intended his judgment to apply beyond the scope of the case he was deciding, and on my reading the majority limits the abolition of immunity to “friendly” experts. The weight of subsequent authority also favours this...