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High Court of New Zealand Decisions |
IN THE HIGH COURT OF NEW ZEALAND
AUCKLAND REGISTRY
CIV-2006-404-103
BETWEEN NEVILLE JAMES GIBSON
First Plaintiff
AND PATRICK JOSEPH MCCORMICK
Second Plaintiff
AND MICHAEL JOHN FISHER
First Defendant
AND RICHARD DIGBY WALLIS
Second Defendant
AND HUSSEY & COMPANY
Third Defendant
AND HUNT EDWARDS
Fourth Defendant
AND LEGAL SERVICES AGENCY
Fifth Defendant
AND CLANCY FISHER OXNER BRYANT
Sixth Defendant
Hearing: 13 March 2009 and 29 June 2009
Appearances: Mr Gibson in person
Mr Dennett for First Defendant
Mr Greenwood for Second Defendant
Mr Atkinson for Fourth Defendant
Mr Taylor for Fifth Defendant
Judgment: 21 July 2009 at 10.30 a.m.
JUDGMENT OF ASSOCIATE JUDGE DOOGUE
This
judgment was delivered by me on
21.07.09 at 11.00 am, pursuant to
Rule
11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date...............
Keegan Alexander, P O Box 999, Auckland
Kennedys, P O Box 3158, Auckland
Jones Fee, P O Box 1801, Auckland
Mr
GDS Taylor, P O Box 5294, Wellington 6145
Copy: N.J Gibson, c/ P O Box 7774, Wellesley Street, Auckland 1141
GIBSON AND ANOR V
FISHER AND ORS HC AK CIV-2006-404-103 21 July 2009
Introduction
[1] Mr Gibson's litigation has a lengthy history. The brief
background was
described in the 2005 judgment of Young J in Minter Ellison Rudd Watts v Gibson
CIV 2002 404 1987:
[1]
These proceedings concern a relationship between Minter Ellison
Rudd Watts ("MERW") and its client Neville Gibson
and his
litigation with Arthur Andersen ("AA") then an international
accountancy firm. In 1991 AA sued
Mr Gibson for unpaid
accountancy fees. Mr Gibson counterclaimed. The litigation was
heard over 42 days
between 2001 and 2002. Mr Gibson eventually
got judgment against AA for $1.6 million including interest and
costs. Mr Gibson now alleges that MERW breached their fiduciary,
tortious, contractual, and ethical, duties
in the preparation of his case
against AA. He says the litigation was not prosecuted with diligence,
his eligibility for legal aid was not explained and MERW had a
conflict of interest between its financial interest
and its duties as
lawyers to Mr Gibson.
[2] Mr Gibson seeks equitable compensation for these breaches,
alleges
that the litigation should have been completed years earlier and
should have been funded by
legal aid. He seeks damages of
$6,183,000 arising from these breaches, and general and aggravated
damages
of $250,000.
[3] The plaintiff denies any breaches of duties owed to Mr Gibson. The
plaintiff submits
the following; that if there were any breaches after
1997 they were the responsibility of Mr Hurd, a partner of MERW
only until 1997; if there were breaches they were contributed to by
Mr Gibson; some of the allegations are barred by time (the
Limitation defence); and finally,
a release from liability given by Mr
Gibson to Mr Hurd in 2002 also applies to MERW.
[2] The parties to the present
application are Mr Gibson, the two counsel who
represented him in the 2002 litigation, their instructing solicitors and the Legal
Services Agency (LSA). Mr Gibson earlier discontinued his proceeding against the
third defendant and the application for security
for costs brought by that defendant
does not require further consideration.
[3] Mr McCormick, Mr Gibson's co-plaintiff, is
now bankrupt. The
applications against him do not need to be considered further.
[4] The 2002 litigation
might be described as the "third generation" of this
litigation. This time, Mr Gibson sues those who represented him on his litigation
against MERW who, themselves, represented him in earlier litigation.
[5] The 2002 litigation commenced when MERW sued the plaintiff
for legal fees
that he owed them. The plaintiff instructed the first defendant, Mr Fisher, to act as
his counsel in late 2002 until
November 2003 when the second defendant, Mr
Wallis, replaced Mr Fisher as counsel.
[6] Much of the 2002 case centred on the
actions of Mr David Hurd, the barrister
who was Mr Gibson's counsel in the first generation litigation, that is, the case
between
the plaintiff and AA. After 1997, MERW instructed barrister David Hurd
to act as counsel for Mr Gibson in the AA litigation. Mr Hurd
had been a partner at
MERW before becoming a barrister sole in 1997. On 20 November 2002 Mr Gibson
settled a claim against him by
Mr Hurd for unpaid legal fees of around $105,000.
[7] Mr Gibson was unsuccessful in the 2002 claim. Young J determined
although some MERW files were opened in AA's name, instructions came from
partners as managers or receivers of insolvent companies
and therefore no conflict of
interest existed. He concluded that there was nothing to show MERW failed to
pursue litigation properly
and diligently and that there was nothing objectionable in
MERW tailoring litigation to Mr Gibson's capacity to pay. Nor was there
any
reason for MERW to inform Mr Gibson about legal aid, as it was unlikely he would
have qualified. He also concluded that there
was no substance to the other
allegations that Mr Gibson made regarding MERW's competence. He also held that
Mr Gibson's agreement
with Mr Hurd did not cover MERW's actions. In the result,
MERW's claim for unpaid fees was accepted and Mr Gibson's cross-claim rejected.
The claims in negligence against the first and second defendants
[8] The first defendant, Mr Fisher, was Mr Gibson's initial
counsel. The second
defendant, Mr Wallis, replaced him and was counsel who appeared at the hearing of
the proceeding by Young J.
The complaints made against the first defendant arise out
of his acting as Mr Gibson's counsel from November 2002 to November 2003.
Inconsistently with this, he also pleads in paragraph 33 of his statement of claim that
Mr Wallis took over as counsel from June
2003.
Applications for security for costs
[9] The first, second, fourth and fifth defendants seek orders for security for costs
against Mr Gibson. The applications are based on r 5.45 of the High Court Rules,
which provides:
5.45 Order for security
for costs
(1) Subclause (2) applies if a Judge is satisfied, on the application of a
defendant,--
(a) that a plaintiff--
(i) is resident out of New Zealand; or
(ii) is a corporation incorporated outside New Zealand;
or
(iii) is a subsidiary (within the meaning of section 5 of
the Companies Act 1993) of a corporation
incorporated outside New Zealand; or
(b) that there is reason to believe that a plaintiff will be unable
to pay the costs of the defendant if the plaintiff is
unsuccessful in the plaintiff's
proceeding.
(2) A Judge may, if the Judge thinks it is just in all the circumstances,
order the giving
of security for costs.
[10] Mr Taylor, for the fourth defendant, correctly submitted that:
8. The Court of Appeal in A
S McLachlan Ltd v MEL Network Limited 16
PRNZ 747 emphasised that the discretion should not be fettered by
construing principles from previous cases.
9. In that case
the Court noted at paragraph 15:
"The rule itself contemplates an order for security where the plaintiff
will be unable to meet an adverse award of costs. That must be taken as
contemplating also that an order for substantial
security may, in effect,
prevent the plaintiff from pursuing the claim. An order having that
effect should
be made only after careful consideration and in a case in
which the claim has little chance of success. Access to the
Courts for a
genuine plaintiff is not lightly to be denied.
Of course, the interests of the defendants
must also be weighed. They
must be protected against being drawn into unjustified litigation,
particularly
where it is over-complicated and unnecessarily protracted."
[11] At the hearing Mr Gibson told me that he is the holder of a
permit to reside
in Australia. However, he further said that he did not accept that he was resident in
Australia for the purposes
of the Rules.
[12] I am in no doubt that Mr Gibson is in fact resident outside New Zealand.
The intituling to the statement
of claim describes Mr Gibson as being of Sydney,
Australia. Again, as Mr Taylor noted, in the affidavits filed by Mr Gibson in
opposition
to the defendant's applications for security for costs, Mr Gibson deposes
that he is "of Sydney".
Principles for determining applications
for security for costs
[13] I intend to be guided by the decision of the Court of Appeal in A S
McLachlan Ltd v MEL Network Ltd
(2002) 16 PRNZ 747 (CA), where it was said:
[15] The rule itself contemplates an order for security where the plaintiff
will be unable to meet an adverse award of costs. That must be
taken as contemplating also that an order for substantial
security
may, in effect, prevent the plaintiff from pursuing the claim. An
order having that effect
should be made only after careful
consideration and in a case in which the claim has little chance of
success. Access to the courts for a genuine plaintiff is not lightly to
be denied.
[16] Of course,
the interests of defendants must also be weighed. They
must be protected against being drawn into unjustified litigation,
particularly where it is over-complicated and unnecessarily
protracted.
[14] In order to assess
whether the plaintiff's claim has little chance of success,
some consideration obviously needs to be given to the issues in the case
and the
likelihood or otherwise of the plaintiff succeeding on all those matters necessary to
obtain a favourable judgment. In this
case, giving an assessment of the strength of
the plaintiff's case is not a straightforward matter but I will now attempt to do so.
The issues in this case
[15] Mr Gibson's pleading is difficult to follow. The easiest way to understand the
various allegations is to set them out in table form, which I now do. The table sets
out in summary form, the allegation and
other columns show against whom the
allegation is made. I have set out only the main heads of claim. The table is not
exhaustive.
Statement
Made
Made
Claim Made
of claim
against
against
against
paragraph
fourth
Mr
Mr
defendant
Wallis
Fisher
?
?
?
Counsel
in the 2002 case gave Mr Gibson, McCormick and Y Y Y 49, 10
others unjustifiably favourable
assessment of plaintiff's
chances of success against MERW on the matter of liability;
Counsel gave Mr Gibson unjustifiably favourable
assurance of Y 15
his prospects that substantial damages would be recovered
from MERW;
Counsel
breached his fiduciary obligation to advise Mr Y Y 28
Gibson of right to legal aid right
from outset which meant he,
Mr Gibson paid more in legal fees than he needed to;
Counsel mis-advised concerning quantum and contribution;
Y Y 18
Counsel failed to adhere to agreements he entered as to the Y 11, 42
amount of fees
that would be charged for different parts of the
work;
Y
Y Y 13, 37
HEK and Mr Fisher advised plaintiff that if his funds ran out
that counsel would continue with
the work on legal aid but
then resiled from this arrangement;
Counsel agreed that any legal charges he made for services
Y 13
provided would be at the same rates as were payable for
counsel under the legal aid regime;
Y Y 17
Counsel failed to advise
Mr Gibson that his counter-claims
against MERW for negligence and breach of contract were
statute-barred by section 4 of the Limitation
Act 1950. In
reliance on this advice, Mr Gibson says he pursued the
counter-claim to trial;
Counsel misadvised Mr Gibson about MERW
having been Y Y 18, 18(b),
subject to a conflict of interest because it had acted for AA;
18(c),
Y
Y 21
Counsel misadvised Mr Gibson that entry into a compromise
with Mr Hurd to pay him $105,000 for fees and grant
him a
release would not release MERW from liability;
Y
Y 22
Counsel uplifted Mr Gibson's files from MERW for the
purposes of discovery without waiting for MERW
to complete
discovery, and so involving Mr Gibson in great expense;
Statement
Made
Made
Claim
Made
of claim
against
against
against
paragraph
fourth
Mr
Mr
defendant
Wallis
Fisher
?
?
?
Counsel
took steps in litigation without authority from Mr Y 26
Gibson;
Counsel amended the
brief of evidence of witness McCormick Y Y 30
without approval of Mr Gibson and/or failed
to advise him of
adverse effects from doing so;
Y
Y 30
In breach of fiduciary obligation counsel owed to Mr Gibson,
obtained his agreement to amend terms of
retainer with
accounting expert advisor;
Mr Wallis owed Mr Gibson a duty of care to assist him in Y 39(c)
advancing his application for legal aid for the litigation against
42(f)
MERW and that Mr Wallis breached s 66 of the Legal
Services Act 2000 causing delays in progressing his
claim;
Y Y 39(d)
Counsel obtained
the agreement of Mr Gibson to "top up" of
42(i)
fees charged to LSA, This caused delay in finalising of legal
aid;
Y Y 39(d),46(b)
When MERW intervened with the LSA to oppose Mr
51
Gibson's application for legal
aid, counsel did not take
adequate steps to oppose MERW's contentions. It is alleged
that MERW filed an affidavit by a Ms Goode with
the LSA
which went unanswered; further letter from MERW's
solicitors to LSA 11.05.05 not responded to;
Counsel breached their obligations
to Mr Gibson by Y Y 42(b-)
negotiating with him an increase in their fees
In breach
of their fiduciary obligations, obtaining Mr Y Y 42(f)
Gibson's release for any liability
arising from the re-
negotiation of the fees;
Wallis agreed to represent Mr Gibson solely and not to take Y
42(f) (iv),
other clients;
42(g)
Y 44(c)
Counsel failed
to file an affidavit in opposition to MERW's
application for security for costs and the trial judge, Young J,
referred to applicant's
affidavit to detriment of plaintiff;
Wallis dismissed out of hand a settlement offer of $400,000 Y
45
advanced by MERW causing loss to Mr Gibson;
Wallis failed to counter correspondence that MERW sent to
Y 46
LSA in which MERW threatened to seek costs against LSA
Various failures on the part of Wallis
to follow instructions at Y 47
trial including to adequately cross-examine witnesses for
MERW
at trial;
Mr Wallis failed to follow instructions to produce electronic Y 48
evidence at
trial;
Y 13
Counsel agreed
that any legal charges he made for services
provided would be at the same rates as were payable for
counsel under the legal aid regime;
Counsel failed to seek instructions on settlement offer. Y 45
First and second defendant's
breach of duty
[16] A feature of the plaintiff's claim is that it alleges both breaches of duty to
take care and breach of fiduciary
obligations on the part of all three legal entities,
that is Mr Fisher, Mr Wallis and HEK. As will be apparent from the table of
issues,
the alleged negligence breaks down into certain broad categories. It is said that Mr
Fisher and Mr Wallis gave inaccurate
assurances of the prospects of success in the
litigation. They are also alleged to have given defective legal advice because they
overlooked matters such as the effect of the Limitation Act 1950. Other breaches of
duty of care include failing to take necessary
steps to protect the interests of Mr
Gibson, including making representations and providing material on his behalf to the
LSA. Other
omissions include those related to trial, such as failure to adduce proper
evidence and failure to cross-examine appropriately.
[17] Moreover, there are alleged breaches of fiduciary obligation, which centre on
the terms of the lawyers' obligations arising out of their retainer entered into by
Mr
Gibson. These include resiling from assurances given about fees; dealings with the
LSA in a way which the legal representatives
sought to advance their interests to the
exclusion of those of Mr Gibson; prevailing upon Mr Gibson to agree to discharge
them from
any liability for pre-existing breaches of fiduciary obligation; and other
matters.
Negligence
[18] The first, second and third
defendants were not, of course, liable for
negligence for the reason alone that they made a prediction of the outcome of a case
that
proved to be wrong. In order to judge the merits of a claim in negligence of this
type, the Court must consider a number of matters,
including the following:
a) What instructions were given to the counsel;
b) What information was available
to the counsel upon which to base the
advice and whether counsel failed to discover or ascertain other
information which he/she ought reasonably to have done which could
be relevant to the situation to be advised on;
c) What advice counsel actually gave;
d) Whether he brought sufficient skill, knowledge and experience
to the
task;
e) Whether counsel gave the matter adequate attention and
consideration;
f) Generally, whether the judgment arrived at was one that a competent
counsel in the
defendant's position could reasonably to have come to.
The claim that MERW acted in the 2002 litigation while subject to conflict
of
interest
[19] According to Mr Gibson's statement of claim, Mr Wallis and Mr Fisher
allegedly advised him that MERW had breached
its fiduciary duty to Mr Gibson by
acting for Arthur Andersen at the time when it was concurrently acting for Mr
Gibson.
[20]
Messrs Fisher and Wallis apparently accept they gave Mr Gibson some
assessment of his overall chances in the litigation that, no
doubt, included an
assessment of the conflict of interest claim. In my experience it would be surprising
if counsel had not done
so. What actual assessment Mr Fisher provided will no doubt
be closely examined if the matter goes to trial. At that point the Court
will enquire
into the reasonableness of the assessment that Mr Fisher made of Mr Gibson's
chances of success. Mr Gibson's claim would
appear to be that Mr Fisher and Mr
Wallis gave him positive advice about this claim.
[21] It is difficult to make an assessment
of the strength of this part of the
plaintiff's claim. It is not known what counsel actually said, including whether they
had any
reservations about it. The claim is redolent of the allegations that Mr
Gibson made against his solicitors in the 2002 case. Similar
considerations will no
doubt arise again in the present case. These will include the inherent probability or
otherwise of experienced
litigation lawyers giving firm predictions that he could
assume a high probability of success in the proceedings. This issue was
resolved by
Ronald Young J against Mr Gibson in the judgment that he entered in the
proceedings in the 2002 litigation.
[22]
If Mr Fisher and Mr Wallis did give positive advice about the conflict claim,
it would appear that either, or both, of them were
mistaken about it, given the terms
of Ronald Young J's judgment rejecting the claim based on a conflict of interest.
The plaintiff
claims that both the lawyers were negligent because of the way they
dealt with this claim.
[23] The alleged conflict of interest
was apparently put on the basis that it arose
out of acting for both parties. Apart from involving an understanding of the relevant
law as revealed through current authoritative decisions, the process of assessing the
strength of any claim based upon a conflict
of interest required certain factual
enquiries also to be made. It is not entirely clear what the plaintiff factually alleged.
It would appear that the information available to counsel did
not extend beyond the
circumstances involving MERW providing professional services for receivers of
companies, who were Arthur Andersen
personnel. This was not a case where the
factual circumstances, which counsel understood to be based upon reasonable
enquiries, proved
to be quite different and in unforeseeable ways when the
proceeding finally came to trial.
[24] It was also alleged that there
might have been a conflict because MERW was
trying to attract future work from Arthur Andersen.
[25] Ronald Young J rejected
the notion that there was any conflict of interest.
Ronald Young J found that it was the case that Arthur Andersen - or personnel
of
that firm - had from time to time instructed MERW to act, usually in circumstances
that involved those personnel in their capacity
as company receivers. The judge
referred to the authority, amongst others, of Russell McVeagh McKenzie Bartleet &
Co v Tower Corporation
[1998] 3 NZLR 641. That case is authority that a conflict
of interest will only arise where a firm of solicitors acts for both sides in the same
transaction
or matter or dispute. In Mr Gibson's case, while MERW had arguably
acted for Arthur Andersen and Mr Gibson, the two retainers involved
separate
matters. Nor was there any risk of problems arising from the possession of
confidential information.
[26] There
was also another problem not apparently touched on in the judgment
and that involves Mr Gibson's entitlement to compensation for
any breach of
fiduciary duty on the part of MERW. The law is stated in Laws of New Zealand at
paragraph 237 in the following terms:
However, when loss has been suffered by the plaintiff beneficiary rather than
gain been made by the defaulting fiduciary,
equity will award equitable
compensation to repair the loss. The Court adopts a strict approach in respect
of the remedy.
The causation test applied is a "but for" test, and there is
support for the principle that, once a breach of fiduciary duty
is held to have
been material in causing the loss suffered, speculation as to what cause the
aggrieved party would
have taken had he or she known the breach is
irrelevant. (I have omitted footnotes)
[27] Assuming, as I do, that is a correct
statement of the principles, what relief
could Mr Gibson have obtained if successful? That leads to an enquiry as to how
any breach
of fiduciary duty on the part of MERW was material to loss on the part of
Mr Gibson. Having posed the question, I will let it lie
with the comment that it is
difficult to see where the merits of this claim are.
[28] But even assuming that the fiduciary
claim in the proceedings in MERW was
always a doubtful starter, further tangled issues of causation and loss arise in the
current
claim against the legal advisors.
[29] The fact that counsel Mr Gibson retained may have been mistaken in taking
the view that
a conflict of interest arose does not necessarily establish negligence, as
I have stated elsewhere. The assessment that they
had to make involved
determination of numerous factual issues and legal analysis. It is difficult to say
which of the defendants
was required to do this work and how well it was done. The
facts and the law ought to have been closely investigated. As to legal
matters, one
would have supposed that the state of the law reflected in decisions such as Russell
McVeagh I would have been considered
by counsel in the course of researching
whether causes of action existed as part of the process of preparing advice or
opinions for
the client prior to litigation. But apart from those comments, it is not
obviously a matter that I can, or am required, to resolve
to any level of certainty on
the present application. From my limited overview of the case, though, it can be said
that questions
do arise about the adequacy of the advice that Mr Gibson received in
this area. But at this point, it is impossible to assess the
strength of the allegations
that they were negligent.
[30] The same claims that were made against Mr Fisher with regard to legal
aid
are apparently also made against Mr Wallis. The claim for negligence against Mr
Wallis is based on an assertion that Mr Wallis
made representations that
overestimated the prospects of success in Mr Gibson's claim against Minter Ellison.
Mr Wallis denies that
he stated to Mr Gibson or any person that liability was
completely established as alleged. He does accept that he gave it as his
view that the
plaintiff had good prospects of success.
The Limitation claim
[31] The plaintiff claims that counsel failed to
advise him that his counter-claims
against MERW for negligence and breach of contract were statute-barred by section
4 of the Limitation
Act 1950. In reliance on this advice, Mr Gibson says he pursued
the counter-claim to trial.
[32] Young J considered the limitation
issue in his judgment. The following
provides an overview of his conclusions:
[220] While not necessary to consider as part of this judgment, I set
out
below some brief views on the plaintiff's defence that a number of
the defendant's causes of action
are statute barred by s4 Limitation
Act.
[33] He continued at paragraph [223]:
[...] As to the allegations
of breach of contract, breaches are alleged
almost immediately upon acceptance of instructions and therefore
those breaches alleged up until 1996 (six years before the
commencement) would seem to be statute barred.
The breach of
fiduciary duty arising from the financial conflict would not be
subject to s4 Limitation
Act and would not be, therefore, statute
barred as the plaintiff pleads. I am not in a position to reach final
conclusions regarding the other limitation defence. In summary the
actions based on negligence are probably
not statute barred. Those
based on contract alleging breaches before 1997 probably are [...]
[34] I understand
that the reason the Judge considered he did not need to come to
a final view on the matter of limitation was that he had concluded
on other grounds
that Mr Gibson's claims against his legal advisors were not justified. If that is so,
the alleged negligent advice
on the Limitation Act 1950 did not cause any loss.
Quantum issues at trial
[35] In relation to quantum of the claim, Mr Gibson
alleges a general failure to
exercise reasonable care and skill in advising on quantum and issues of contribution.
This aspect of
the claim can be dealt with quickly because whatever its merits, it did
not cause any loss: Ronald Young J never got to the point
of determining this issue
of quantum.
The release of Mr Hurd
[36] I have referred to this claim at paragraphs [6] - [7] above.
[37] In dealing with this issue in his judgment Young J said:
[65] Mr Gibson accepts that this release at least means
that Mr Hurd's
actions from the beginning of 1998 until the conclusion of the AA litigation
are not under scrutiny
in this litigation. The extent of the release is a matter
of issue between the parties (particularly whether it extends to
Mr Hurd's
actions as a partner of Minter Ellison).
[38] But later in his judgment, Young J also said:
I am therefore
satisfied that the release did not release MERW's actions
from liability at any time and that the release applied only to
Mr Hurd's
actions from 1997 onwards when he became a Barrister sole.
[39] Had there otherwise been a good claim available
to Mr Gibson against
MERW, and had the Judge concluded that the terms agreed with Mr Hurd had the
effect of releasing that claim,
then Mr Gibson might have an arguable case under this
head. But neither of those two requirements can be met. The only loss that
Mr
Gibson could claim arising from this head of negligence is that he lost his claim
against MERW; that he suffered loss because
he had to forego damages that would
otherwise have been awarded to him in the litigation against MERW. But the Judge
came to the
opposite conclusion, viz, that the settlement with Mr Hurd did not bar
the claim against MERW.
Mr Gibson as a witness
[40]
A major element in the reasons why Mr Gibson failed was that the Judge did
not believe his evidence.
[41] Young J in his judgment
made adverse credibility findings against Mr
Gibson. Indeed, the Judge concluded that in parts of his evidence he was untruthful,
as opposed to being mistaken. Laurenson J, the trial Judge at the Arthur Andersen
trial, also considered that Mr Gibson was not a
candid witness.
[42] It also has to been borne in mind that predicting how a witness will perform
in the witness box particularly
under cross-examination - is not easy. On
occasions, counsel's expectations prove to be well wide of the mark. Lacking the
benefit of foresight, Mr Wallis, in particular, may have hoped
that Mr Gibson would
make a better impression on the judge than proved to be the case. Mr Gibson's
performance, we now know, played
a major part in the failure of his case. Not even
he complains that his counsel should have foreseen that factor.
[43] This reinforces
the impression I have that this was not a perfectly good case
that failed because the plaintiff had defective legal representation.
Settlement offer
[44] As I understand Mr Gibson's case, he complains that he was given an
unrealistic assessment at the commencement
of the case. At that point, no serious
offer of settlement had been received. The later, and rather generous, settlement
offer that
MERW made was still in the future and would not have influenced
counsel's thinking.
Additional reason why Mr Gibson failed in the
2002 litigation
[45] A factor peculiar to the litigation against MERW was that his legal advisors
had achieved very considerable
success for Mr Gibson in complex and protracted
litigation. Such results are hardly to be expected of indolent or negligent counsel.
Coupled with this is the fact that the trial Judge in the Arthur Andersen litigation
went out of his way to compliment counsel for
the plaintiff, Mr Hurd, on his conduct
of matters. While not a decisive factor, this circumstance would give cause for
sensible people
to pause and not rush into litigation based on negligence allegations
against those same legal advisors. What I am suggesting is
that there could be
difficulty in squaring the excellent result obtained in the AA case with later
allegations that counsel was somehow
not up to it.
The legal aid funding issue
The legal aid issues in detail
[46] The following appear to be Mr Gibson's principal
claims relating to legal
aid.
[47] Mr Gibson alleges that he entered into an agreement with Mr Fisher that if
Mr Gibson's own
financial resources were insufficient to pay Mr Fisher's fees and
assuming Mr Gibson was granted legal aid, then Mr Fisher would
conduct the
MERW litigation at legal aid rates. Mr Gibson alleges that Mr Fisher later reneged
on this agreement, and in continuing
to charge at his usual rate, Mr Fisher was in
breach of his fiduciary and contractual obligations to Mr Gibson.
[48] Mr Fisher's
position on the legal aid claim is stated as follows:
4.9 Even if Mr Gibson was entitled to legal aid in the MERW litigation
(of which there is no evidence) there is no independent evidence
supporting the allegation by Mr Gibson,
and Mr Fisher denies the
allegation, of such an undertaking by Mr Fisher.
[49] Broadly speaking, the plaintiff
makes the same allegations against Mr Wallis
and Mr Fisher concerning legal aid, which is to the effect that Mr Wallis undertook
to act for Mr Gibson on legal aid but later declined to honour that undertaking.
[50] Mr Gibson also alleges also that Mr Wallis'
requirement `a top-up' of the
legal aid led to delay in processing his legal aid claim. I assume that Mr Gibson also
claims that
he suffered loss as a result of this alleged breach.
[51] Mr Gibson's application for legal aid in the 2002 litigation was initially
declined. After a series of appeals and a judicial review application, the decision of
the LSA has now come to hand, finally declining
legal aid on the grounds:
a) That the merits of the claim were insufficient to justify a grant of the
magnitude sought;
b) The plaintiff ought to have accepted the offer of $400,000 made to
him.
[52]
As matters stand, the latest decision of the LSA must be viewed as the last
word on the matter.
Discussion of legal aid claims
[53] As to the first part of the claim, because Mr Fisher's alleged duty was to
carry out his retainer on a legal aid basis -
if legal aid were actually to be granted -
there can have been no breach by him. That is because legal aid was never granted.
To the extent that
the same claim is made against Mr Wallis, it must also fail.
[54] As to the "top-up" of legal aid issue delaying processing of
Mr Gibson's
claim, I am unable to understand what loss he suffered. That claim is not a claim of
any real substance.
Separate claims
against Mr Wallis
Breach of Legal Services Act 2000
[55] It is claimed that Mr Wallis owed Mr Gibson a duty of care to assist
him in
advancing his application for legal aid for the litigation against MERW and that Mr
Wallis breached s 66 of the Legal Services
Act 2000. That provision is to the
following effect:
66 Listed providers not to take unauthorised payments
No
listed provider may take payments from or in respect of a person to
whom services are provided under any scheme unless the
payments are
authorised by or under this Act, or by the Agency acting under the authority
of this Act or any regulations
made under it.
[56] In his statement of claim, Mr Gibson raises the following matters in respect
of this cause of action:
a) That Mr Wallis' breach of s 66 caused delays in having the plaintiff's
claims against MERW dealt with.
b) That Mr Wallis failed to seek instructions on settlement offer
c) Mr Wallis preferred his own financial
interests over Mr Gibson's
interests in negotiating a "top-up" in addition to legal aid as part of the
agreement to represent Mr Gibson.
[57] Mr Wallis's account of matters is:
13. During the negotiations leading
up to the agreement to act for Mr
Gibson in his claim against MERW I offered to represent Mr Gibson
in return for payment by legal aid plus a "top-up". The "top-up" was
a category of remuneration recognised by the
Legal Services Agency
(LSA) under which I would receive a specified percentage from the
LSA on top
of the standard legal aid rates contingent on Mr Gibson
succeeding in his case.
[58] The fact that Mr Gibson failed
to get legal aid means that it is unlikely that
Section 66 has any application to his case. If Mr Wallis did not receive any legal
aid
payments, then logically he cannot have been in breach of s 66.
Claim that Mr Wallis failed to seek instructions on settlement
offer
[59] Mr Gibson also claims that Mr Wallis failed to seek instructions about a
settlement offer that in excess of $400,000
that MERW made prior to trial. When
the offer was not accepted in time it lapsed. Mr Wallis' position is that Mr Gibson
was fully
aware of the details of the offer and the deadline for acceptance and gave
no instructions to accept the offer.
[60] This issue
involves a conflict of evidence. I have to say that the claim that a
barrister in Mr Wallis' position deliberately failed to communicate
the offer, or
overlooked the need to do so, while possible, is inherently unlikely.
Conclusion
[61] I have deliberately confined
my review of this case to what I see as being the
main points. Mr Gibson will no doubt take the view that very important parts of
his
claim needed to be placed in the balance in considering the merits and strengths of
his case. I believe that those elements that
I have covered represent Mr Gibson's
best grounds for succeeding against the three legal advisors.
The claims against HEK
[62]
The claims against HEK are closely similar to those against the other two
legal advisors. I do not consider it necessary to carry
out a separate analysis of the
merits of those claims.
Overall prospects of success in the claim against the three legal advisors.
[63] Mr Gibson failed on the 2002 litigation for a few essential reasons. These
included the fact that Ronald Young J did not
consider that MERW had been under
any conflict of interest at the time that it acted for Mr Gibson. He further took a
decidedly favourable view of the quality of the work done by the
lawyers Mr
Gibson, namely, Mr Hurd and Doctor Patterson. No doubt the very favourable
result that they had obtained for
Mr Gibson also influenced his thinking.
[64] Mr Gibson's prospects in the present case are also heavily dependent on what
the
Court makes of him as a witness. He has not been favourably assessed in the
earlier two rounds of litigation as I have noted in paragraph
[40]. That may well be
an augury of how that witness might be expected to perform should he be required to
again give evidence in
the High Court.
[65] Of course, it is always possible that the Judge coming fresh to the 2002
proceedings would take a more
favourable view of Mr Gibson's credibility. What
assessment a Court will make of a witnesses veracity is sometimes hard to anticipate
and the position often does not clarify until after there has been cross-examination
and a detailed comparison of the witnesses account
of matters with contemporary
circumstances and documents.
[66] There are other aspects of Mr Gibson's character, apart from
credibility, that
might give pause for thought in the present litigation. I do not think it is unfair to
say that he has given the
impression of having tunnel vision when it comes to his
claims. To say he has been single-minded about pursuing the various rounds
of
litigation would be an understatement. All of this is unlikely to escape the attention
of a Court assessing his objectivity and
reliability as a witness in the current
litigation.
[67] Given these background circumstances, the detail of decisions about
whether
or not a given item of evidence should have been adduced and whether a particular
line of cross-examination should have been
pursued are likely to not have had any
material affect on the outcome of the proceedings. Even if there was a failure to
follow instructions
or a negligent decision made in these areas, it is going to be
difficult for Mr Gibson to show that they caused him any loss.
[68]
My overall appreciation of Mr Gibson's prospects is necessarily limited by
the restricted nature of the enquiry that can be carried
out in the context of an
application for orders fixing security for costs. Nonetheless I am required to make
some assessment of
the prospects of success which Mr Gibson can expect with his
claim against Mr Fisher.
[69] Most of the causes of action are plainly
unlikely to succeed because no loss
seems to have been caused (e.g. the legal aid complaints). Others may succeed but
one cannot
be very confident about them because they depend heavily on Mr
Gibson's evidence being accepted.
[70] None of the claims in my
view, judging the matter overall, are ones that if
one were counsel, one would promote with any particular enthusiasm.
[71] Standing
back and looking at matters overall, I would not rate Mr Gibson's
chances of obtaining a successful outcome in the present litigation
as even
approaching a 50/50 chance of success. In making my own judgment I think it is
sensible not to overlook what sort of impression
the litigation made on Ronald
Young J as well.
[72] Overall, I consider that:
a) Mr Gibson's claims generally are
not likely to succeed because of:
i) Mr Gibson's credibility;
ii) Other factors impacting
adversely on the impression he would
make on a Court that is, his lack of balance and "tunnel-
vision";
b) The claim about the advice on prospects of success is unlikely to
succeed because
of:
i) The relevant improbability that counsel would give an
emphatic and unequivocal
forecast of success;
ii) The consideration that counsel's obligation was not to
guarantee
success but, rather, to undertake with all proper care
the task of estimating the plaintiff's prospects of success in the
proceedings.
iii) The absence of any written record of advice on this subject.
c) The
claim based on failure to assist with the legal aid application has
very low prospects of success because:
i) Mr Gibson never received a grant of legal aid;
ii) Therefore his lawyer could not have been
in breach of his
obligations which are said to have been contingent on such a
grant.
d) The negligence claim relating to the failure to advise on the
Limitation Act 1950 claim is likely
to fail because no loss was
suffered.
[73] On the other side of the balance sheet, there may be question marks
over
counsel's understanding of the alleged conflict of interest between MERW acting for
Mr Gibson on the one hand, and having previously
having acted for AA on the other.
[74] Finally, there is one further aspect which is relevant. Mr Gibson is a self-
represented
litigant who understandably has some difficulty dealing with what has
become a complicated case. I mean no disrespect to him when
I say that his
pleadings are of excessive length and lack shape and focus. All of this is
symptomatic of his problems
in dealing with the litigation. These are further
grounds for caution in predicting that he might enjoy success in the current
case.
Fifth defendant
[75] The plaintiff sues the fifth defendant for negligence and misfeasance in
public office. The following
table sets out the particulars of claims against the fifth
defendant.
Statement of
Claim claim Paragraph
The LSA is alleged to
have breached its obligations to
Mr Gibson in the following ways:
Taking into account an affidavit filed on behalf of
51
MERW when considering Mr Gibson's claim for legal
aid;
Failing to grant legal aid when expert advisor
51(a)
determined 28 April 2005 that Mr Gibson's claims had
merit;
Duty of care owed by Specialist
legal advisor to Mr 51(a)
Gibson;
Various instances of LSA allegedly acting unlawfully 51(c)(iv)
in course of processing Mr Gibson's legal aid
application including: receiving and considering letter
from Mr Fisher
and Mr Wallis 27 June 2005;
Failing to grant legal aid when specialist legal advisor 51(e)
recommended a grant;
LSA breached duties because grant officer who had 51(f)
previously dealt with application dealt with second
application;
LSA in declining to grant legal aid engaged in conduct 51(h)
calculated to harm Mr Gibson;
Generally instructing inappropriate persons to consider 51(h)
Mr Gibson' legal aid file;
Failing to give proper
reasons for its decisions; 51
Suppressed documents when Mr Gibson applied for 51(i)
review;
Failing to properly re-consider Mr Gibson's 51(j)
application when required to by Review Panel and
engaged in conduct calculated to harm him.
[76] For the reasons set out in the above table, Mr Gibson asserts that the Legal
Services Agency acted negligently in a breach of his statutory duties to Mr Gibson
and that it set out to act in a way calculated
to harm him.
[77] The tort of misfeasance in public office is correctly described in the
following passage
from the Laws of New Zealand: Tort, Misfeasance in a Public
Office, paragraph 336:
336. General. The tort of misfeasance
in a public office has its origin in
the premise that public powers are to be exercised for the public
good.1 The tort is committed where a public officer abuses his or
her
office and causes damage to another person.2 The plaintiff must
prove the following four elements:
first, that the defendant is a
"public officer"; second, that the defendant acted in the exercise or
purported exercise of his or her office; third, that the defendant acted
with malice towards the plaintiff,
or with knowledge that he or she
was acting invalidly and that damage to the plaintiff would result;
and fourth, that the plaintiff suffered damage as a result of the
defendant's conduct.3
(Footnotes not included)
[78] This claim is in a category of its own in that it has not been considered by the
Court in prior
proceedings, as is the case with the subject matter of the negligence
claims.
[79] There has not been any argument to speak
of on the merits that would assist
in assessing the strength of the plaintiff's case. However, as Mr Taylor for the fifth
defendant
points out, all of the issues raised in this litigation were, or could have
been, raised in the appeal proceedings that Mr Gibson
issued following a refusal of a
grant of legal aid. Mr Taylor also raised the possibility that if the current
proceedings
that the plaintiff has brought seek to raise matters that could have been
litigated in earlier proceedings, the plaintiff may be
vulnerable to an application to
strike out.
[80] It may be pertinent to note that the plaintiff would not even be able to
establish that the LSA made the wrong decision on his legal aid application. He is
driven to arguing that even though the agency's
decision was vindicated on review
and appeal, the processes it followed in reaching its decision were tainted. This
leads into what
is, in my view, the real problem that Mr Gibson has with this claim
which arises from the requirement that he demonstrate that he
suffered damages as a
result of the defendant's conduct.
[81] There are other problems as well. An example is the allegation
that the Legal
Services Agency was in breach of its obligations in declining legal aid when a
specialist legal advisor had recommended
a grant. That would seem to elevate the
status of a recommendation beyond a justifiable level and to treat it as resulting in a
mandatory
requirement that legal aid be granted if such an advisor thought it should
be. Such a conclusion seems unlikely to be arrived at
by the Court in considering his
claim.
Mr Gibson's financial position
Submissions by fifth defendant on financial strength
[82]
In his submissions, Mr Taylor for the fifth defendant made the following
points. He referred me to a statutory declaration, made
on 3 May 2006 in support of
an application for legal aid, in which Mr Gibson declared that:
· His income for the previous
12 months was nil.
· He did not have a legal interest in his home;
· That he had a small sum of money held in bank
accounts. The form is
difficult to read but appears to state that the amount held is $2,930.
· That his other assets
had a value between $5,000 and $10,000;
· That he had debts and liabilities in excess of $1,000,000.
[83] In December
2007, the Court of Appeal ordered Mr Gibson to pay costs to
MERW in excess of $200,000.
[84] Mr Gibson is not currently practising
as a dentist and does not hold a
practising certificate.
[85] Mr Gibson does not depose to having any source of income but
merely states
that he has qualifications that allow him to seek employment in fields other than
dentistry. There is no suggestion
that he has found such employment.
[86] Mr Gibson deposed that, but for the litigation that he is engaged in, he could
be gainfully
employed. This suggests that there is little prospect of Mr Gibson
obtaining employment before the completion of this matter.
[87] Mr Gibson states that he has significant contingent
assets. However, he does
not state what these assets are and what they are contingent upon.
[88] Mr Gibson's application showed
he earned no income.
[89] At the hearing before me, that Mr Taylor for Fifth Defendant submitted that
after certain adjustments
were made, the net deficiency of assets in 2006 at between
$717-844,000.
What Mr Gibson says about his financial position
[90]
The key point that Mr Gibson made was that his financial position has
improved since he applied for legal aid in that;
a) He has work;
b) While he has debts, he has negotiated with creditors with the result
that
all his debt is now "long" debt which is "mostly not called upon".
[91] He said his total debt was $700,000, which is more than
the defendants
suggested. But he always paid his debts, given time, he said. He said he had made
progress with his debts as follows:
Reduction of costs ordered in favour of MERW 150,000
Reduction of costs he was ordered to pay
Complaints 87,000
Assessment Committee
McKay Hill professional fees write off (estimate)
40,000
Total reductions 277,000
[92] As to the other debts
at an earlier point in these proceedings, he said that a
costs order that had been made against him by the Complaints Assessment
Committee was subject to appeal. That appeal has now been resolved and the extent
of his liability has been reduced.
[93] He
said that the work that he does is as a business consultant or similar. As
part of that he is assisting some parties which include
his brother a property
developer to recover large debts which are owed. He said that the payment that he
receives for this type
of work is results-based. He did not disclose how much he
would receive from this source, and when he might receive it. In his submissions
Mr
Gibson stated his confidence that he would in fact obtain substantial income from
this source. There was no evidence provided
by him about this matter.
[94] Mr Gibson does not appear to own any property that could be used to meet
his debts. In previous
hearings he said that he had a security over a property situated
in the Nelson area but he the latest information he gave me is that
that property has
now been sold without Mr Gibson receiving any payment.
[95] Mr Gibson's evidence concerning his financial affairs
can only be described
as difficult to understand. In the end, my conclusion on the point is that the only
certainty is that Mr Gibson
has debts of at least $700,000.
[96] Mr Gibson claims that all or part of the debt he owes is "long debt". I
understand that
by this he means it is debt not currently requiring to be repaid. Just
what the terms of the debt are is uncertain and the factual
position is unsupported by
testimony from those involved or by supporting documents. It does not seem likely
that the Complaints
Assessment Committee, for example, would regard what Mr
Gibson owes as being a long-term debt in the sense that it is debt that is
not required
to be paid in the next few months. I accept that the fact that MERW has not
apparently taken steps to enforce its debt
is noteworthy and may point to the
existence of some agreement to defer payment.
[97] In his application for legal aid, Mr Gibson
disclosed a debt owed to a Mr
McAlister. Mr McAlister has filed an affidavit in which he says that he has "made
no call on the
debt and Mr Gibson is free to repay it was [sic] he pleases and when
he considers his financial circumstances will allow it."
Mr McIntosh, another
creditor of Mr Gibson, made similar remarks about the status of his debt.
[98] I do not consider it is
any answer for Mr Gibson to claim that his debts are
"long debts". That amounts to nothing more than an assertion that he owes debts but
that he does not expect to have to pay them
until some time in the future.
Significantly, he does not say what will trigger his repayment obligations and
whether his not having
to pay now is a mere forbearance on the part of his creditors
or whether they are contractually prevented from enforcing their debts
until a future
date.
[99] I have little doubt that those to whom Mr Gibson owes money would not
stand back if the point was
reached where Mr Gibson failed in the litigation and the
defendants moved to enforce costs orders. They would almost certainly act
and the
defendants would then find themselves competing with these creditors. So the
present intentions of those creditors
who fall into the so-called "long debt" category
do not have the relevance that Mr Gibson assumes.
[100] If, of course, Mr Gibson
established that he had no legal liability to pay a
substantial part of his debts for some years, that might make some difference.
But
that has not been demonstrated to be the case.
[101] Mr Gibson does not have conventional employment paying an ascertainable
salary nor has he provided any sort of evidence of what he has earned in the recent
past or an intelligible budget which would inform
the Court as to what he expects to
earn in the short term. His claimed sources of income are nebulous and any
entitlement to income,
even by his account of matters, is contingent on him
achieving successful outcomes apparently by means of a successful debt collection.
No information is given which would justify confidence that such an outcome is
likely. There is, therefore, no reason to suppose
that Mr Gibson can satisfy his debts
from current earnings. He does not appear to have any line of credit that he can
resort to in
order to meet his obligations. My conclusion is that he cannot pay or
make provision for paying his existing current debts. Against
that background, the
Court is driven to the conclusion that he would not be able to pay any additional
costs that might be ordered
in the present litigation.
[102] My overall conclusion is that it is likely that Mr Gibson will be unable to pay
costs ordered
against him in the litigation if he fails.
Mr Gibson's submission that his impecuniosity is due to actions of defendants
[103]
In principle it is open to a litigant such as Mr Gibson who claims
impecuniosity to show that this came about because of his involvement
in litigation
which financially ruined him and which he embarked upon on the basis of negligent
advice. However, there has to be
a reasonable case first made out that the failings of
the lawyers actually caused the problem. In this case, that requires the Court
to
again factor in the strength of the claim considerations. It would be quite unfair for a
lawyer, for example, to be blamed for
the failure of the litigation and resulting
financial impecuniosity when a substantial reason for the case failing was explicitly
stated by the trial Judge to be that he did not believe the client on important points.
[104] In this case, the chain of logic
linking the undoubted fact of Mr Gibson's
impecuniosity to the failure of the litigation and then to the assertion that it was the
fault of their legal advisors and the Legal Services Agency is too tenuous. I do not
consider that it would be just that otherwise
meritorious applications for security for
costs should be defeated on this ground.
Should orders for security for costs be made?
[105] Mr Gibson's claim is not a strong one against any of the defendants. It is
likely that because of his financial position he
will not be able to meet any orders for
costs that might be made against him in this proceeding. This is not a case where the
Court
should refrain from making an order on the ground that it is the actions of the
defendants that have rendered the plaintiff impecunious.
[106] I am aware that if the Court makes an order for security, the practical effect
may be to bring Mr Gibson's proceedings to a permanent halt. That is a weighty
factor
that the Court must take into account in deciding if an order for security for
costs ought to be made.
[107] Against the last consideration
must be balanced the consideration that the
defendants are entitled to be protected against the financial consequences of being
caught
up in litigation that has little merit and which will cost them a lot of money to
defend.
Conclusion
[108] In my view orders
in terms common to all the defendants should be made for
each defendant other than the fifth defendant, who has sought security for
a lesser
figure than the other defendants.
[109] There is no reason to differentiate between the other defendants.
Amount of
orders
[110] I have no doubt that the proceedings have been, and will continue to be,
expensive for the defendants. Every
step in the proceedings seems to be
accompanied by great volumes of paper. Prolix and duplicatory pleadings, late filing
of court
documents and general disorganisation have exacerbated, and will continue
to exacerbate, the expense. I have no reason to believe
that this pattern will not
continue. It was for these reasons that the hearing of the current application overran
from its first
fixture and had to be adjourned part-heard. In the end the one day time
estimate became one and a half days actual hearing time.
[111] My approach shall be that the amount to be ordered should not go beyond
what is necessary to make reasonable provision for
security for costs in the light of
the objective of the rule. That objective is to ensure so far as is reasonably possible
that the
defendants, if successful, are not left holding costs orders which are empty
and of no assistance in meeting their out of pocket
expenses because of the plaintiff's
inability to pay.
[112] I understand that the consequences of this order may be those described
in A
S McLachlan Ltd v MEL Network Limited that I have cited at paragraph [10]. That
is, the order I am going to make may have the
effect of preventing Mr Gibson from
pursuing his case. While such a result will have a very adverse effect from Mr
Gibson's point
of view, nonetheless the justice of the case requires that it be made.
Orders
[113] The appropriate orders, I consider, are to
direct payment of $35,000 security
for the first, second and fourth defendants. In the case of the fifth defendant, the
amount ordered
is $15,000. The security is to be provided in two tranches, with the
first half to be paid within four weeks of the date of this
judgment and the balance by
31 January 2010. The security is to be provided in the form of cash and is to be
lodged with the Registrar
of the Auckland High Court.
[114] I further consider that it is appropriate to order, as the defendants have
sought, that the proceedings
be stayed in the meantime.
_____________
J.P. Doogue
Associate Judge
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