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

• Jurisdiction: New Zealand
• Judge: Winkelmann,,Asher,Brown JJ
• Judgment Date: 19 December 2016
• Neutral Citation: [2016] NZCA 622
• Docket Number: CA691/2015
• Court: Court of Appeal
• Date: 19 December 2016

Between

Ebr Holdings Limited (In Liquidation)

Appellant

and

McLaren Guise Associates Limited

First Respondent

Nigel Dale Harrison

Second Respondent

[2016] NZCA 622

Court:

Winkelmann, Asher and Brown JJ

CA691/2015

IN THE COURT OF APPEAL OF NEW ZEALAND

Appeal against a decision of the High Court (HC) striking out claims for deceit/injurious falsehood and negligence on the grounds that expert witness immunity applied to the respondents — the respondents were the appellant's accountants prior to its going into liquidation — the annual accounts showed the shareholders having significant current account debts to the appellant — the appellant applied for summary judgment against the shareholders, but the second respondent swore in an affidavit that updated accounts revealed that the shareholders collectively owed very little to the appellant — this statement was repeated in an examination on oath by the appellant's liquidators under s261 Companies Act 1993 (CA) (Power to obtain documents and information) — the HC struck out causes of action in deceit/injurious falsehood and negligence, ruling that it was bound by the decision in New Zealand Defence Force v Berryman, and accordingly witness immunity was available to the respondents, including in respect of the s261 CA examination — discussion of Jones v Kaney (SC UK) which removed the immunity of an expert to a claim in negligence or breach of contract brought by the expert's client — whether witness immunity arguably did not apply in New Zealand following — whether strike out should have been refused on the ground that it was not possible to be certain that the claim could not succeed and the matter involved an area where the law was confused or developing.

Counsel:

P C Murray and K H Morrison for Appellant

J N Bierre and L G Cox for Respondents

JUDGMENT OF THE COURT

• A The appeal is allowed.

• B The order striking out the first and third causes of action is set aside.

• C The respondents must pay the appellant costs for a standard appeal on a band A basis and usual disbursements. We certify for second counsel.

REASONS OF THE COURT

(Given by Brown J)

Introduction

1 Causes of action alleging false representations by a chartered accountant in an affidavit and in a subsequent liquidator's examination under s 261 of the Companies Act 1993 were struck out by Brewer J in the High Court on the ground that witness immunity applied to those statements. 1

2 The appellant, EBR Holdings Limited (EBR), invites the Court to reverse that decision and hold that witness immunity should no longer apply to expert witnesses in civil proceedings in New Zealand. Reliance is placed on the decision of the Supreme Court of the United Kingdom in Jones v Kaney removing the immunity of an expert to a claim in negligence or breach of contract brought by the expert's client. 2

3 EBR secondly contends that witness immunity does not extend to an interviewee's statements in a s 261 examination. In any event, EBR submits that the Judge erred in not leaving for trial a determination of the application of witness immunity to the particular circumstances of the present case.

Factual background

4 The first respondent, McLaren Guise Associates Limited (MGAL), was EBR's accountant prior to its going into liquidation. The second respondent, Mr Harrison, is a director of MGAL and a qualified chartered accountant. The respondents prepared EBR's annual financial statements for the years ended 31 March 2006 to 31 March 2008. The 2008 financial statements recorded that EBR's shareholders had significant current account debts. EBR (under the control of its liquidators) applied for summary judgment against the shareholders to recover the debts evidenced in the 2008 financial statements.

5 Mr Harrison swore an affidavit in support of the shareholders' opposition to EBR's application for summary judgment to the effect that the 2008 financial statements were erroneous. He annexed to his affidavit an updated financial

statement summary which concluded that the shareholders collectively owed very little to EBR. The summary judgment application was accordingly dismissed. 3

6 Subsequently, Mr Harrison was examined under oath by EBR's liquidators under s 261 of the Companies Act. Mr Harrison affirmed the contents of his affidavit and the annexed updated financial statement summary.

7 EBR claims the material statements made by Mr Harrison in his affidavit were false and he knew they were false or he did not believe them to be true or was reckless as to their truth. A similar allegation is made in respect of Mr Harrison's repetition of those statements in the course of his examination by EBR's liquidators. The amended statement of claim dated 12 December 2014 pleaded three causes of action:

• (a) deceit/injurious falsehood;

• (b) misuse of confidential information; and

• (c) negligence.

8 An application to strike out the statement of claim in reliance on the principle of witness immunity was declined by Associate Judge Christiansen for the dual reasons that recent English authority suggested that the principles were not sufficiently clear to support a strike out order and a factual enquiry was required which was not available on the affidavit evidence. 4

9 On review Brewer J ruled that the High Court was bound by the decision of this Court in New Zealand Defence Force v Berryman, 5 and accordingly witness immunity was available to the respondents. 6 That immunity applied both to the affidavit and updated summary of Mr Harrison offered as evidence in the District

Court, and to his subsequent comments in the liquidator's examination. Consequently, the Judge ordered that the first and third causes of action should be struck out as they related solely to statements made in those two situations covered by witness immunity. 7 However, he declined to strike out the second cause of action, misuse of confidential information, on the basis that it involved advice entirely distinct from the Court proceedings. 8

10 On 8 October 2015 EBR filed a second amended statement of claim adding two further causes of action:

• (a) negligent omission to act to correct false representations; and

• (b) a claim for an order for wasted costs against Mr Harrison under s 51G of the Judicature Act 1908.

11 Leave to appeal to this Court was granted by Brewer J on 3 November 2015. 9

Witness immunity generally

12 The longevity of the common law principle of witness immunity is manifest in the statement of Stout CJ in 1902 in Jellicoe v Haselden: 10

The cases are numerous in which Judges, counsel, witnesses, & c, have been held not liable for statements made by them in Courts, and it is not necessary to cite them. The law was laid down broadly by Lord Mansfield, CJ, in Rex v Skinner ( Lofft 55) as follows: “Neither party, witness, counsel, jury, or Judge, can be put to answer, civilly or criminally for words spoken in office.” Numerous cases since 1772 have followed that rule….

The original focus of the immunity was on defamation claims; 11 in New Zealand, such claims are now the subject of the absolute privilege conferred by s 14(1) of the

Defamation Act 1992. 12 Witness immunity has since been applied to bar other civil causes of action, such as negligence

13 In Darker v Chief Constable of West Midlands Lord Cooke observed that, while in principle absolute immunity is inconsistent with the rule of law, in a few strictly limited categories of cases it has been granted, grudgingly, for practical reasons. 13 The practical reasons which justify the immunity from suit enjoyed by a witness are to encourage freedom of speech in the judicial process, by relieving the witness of the fear of vexatious litigation, and to limit the scope for re-litigation. 14

14 The circumscribed nature of the common law immunity is reflected in the qualifications noted by this Court in New Zealand Defence Force v Berryman:

[68] We recognise that the immunity is limited. It is confined to what is said in court and necessary preliminaries to that (see Darker). It is also merely an immunity from civil suit. Thus an expert witness may face professional sanctions in respect of evidence, see for instance Meadow. And obviously criminal prosecution for perjury may result from the deliberate giving of false evidence. Claims of malicious prosecution are maintainable even though such a claim might necessarily involve impugning the evidence given during the preceding criminal proceedings. …

To those exceptions Lord Collins in Jones v Kaney added prosecutions for perverting the course of justice, contempt of court or misfeasance in public office. 15

The application of witness immunity to expert witnesses

15 While the immunity of witnesses of fact is settled law, 16 in England and Wales it seems to have been simply accepted that the immunity extended to expert witnesses. 17 As noted in Jones v Kaney there was no reported case where the

immunity was invoked against a claim for breach of a duty of care brought against a professional expert witness by his client until 1992 in Palmer v Durnford Ford. 18 In that case the proposition that immunity applied was not challenged, the live issue being the extent to which the immunity applied to work which was preliminary to the expert giving evidence

16 Coincidentally it was in 1992 that the first New Zealand reported case, the High Court decision of Eichelbaum CJ in Dentice v Valuers Registration Board, 19 recognised the immunity specifically in the context of an expert witness. The issue there was whether persons subject to the jurisdiction of domestic disciplinary bodies had immunity from prosecution before such tribunals in respect of evidence provided for the purposes of Court proceedings.

17 Palmer was followed in England by the Court of Appeal in Stanton v Callaghan, which concerned the circumstances in which an expert witness should be...