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High Court of New Zealand Decisions |
Last Updated: 22 March 2012
IN THE HIGH COURT OF NEW ZEALAND NEW PLYMOUTH REGISTRY
CIV 2011-443-315 [2012] NZHC 509
IN THE MATTER OF the Trustee Act 1956
BETWEEN PAUL STEVEN YARROW Plaintiff
AND COLIN RITCHIE PETTIGREW First Defendant
AND DUNCAN DOVICO (NZ) LIMITED Second Defendant
AND DUNCAN DOVICO TRUSTEES LIMITED AND PAUL STEVEN YARROW AS TRUSTEES OF THE PS YARROW FAMILY TRUST NO 5
Third Defendants
Hearing: 13 March 2012 (Heard at Auckland)
Counsel: DM Connor and SJ Campion for plaintiff
AR Gilchrist for the first defendant and the first-named third defendant
MSR Lucas for the second defendant
Judgment: 16 March 2012
JUDGMENT OF ASSOCIATE JUDGE FAIRE
This judgment was delivered by me on 16 March 2012 at 4pm, pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date...............
Solicitors: Mayne Wetherell, PO Box 3797, Auckland 1140
Dennis J Gates, PO Box 222, Whangaparaoa
YARROW V PETTIGREW HC NWP CIV 2011-443-315 [16 March 2012]
Kennedys, PO Box 3158, Auckland 1140
Appearances
[1] Mr DM Connor and Ms JS Campion appeared and announced their presence as counsel for the plaintiff.
[2] Mr A Gilchrist appeared and announced his presence as counsel for the first defendant and the first-named third defendant. The court file discloses a statement of defence filed on behalf of the first defendant. No pleading has been filed on behalf of the third defendants. The notice of opposition to the application that I am required to determine is filed on behalf of the first defendant only.
[3] Further confusion arises from the document by virtue of the fact that Mr Gilchrist’s submissions are signed by him as counsel for the plaintiff. He clearly was not counsel for the plaintiff.
[4] These matters are recorded because it may be significant at a later time as to whether the third defendant, or one of them, participated in the hearing of this application.
[5] Ms Lucas entered an appearance on behalf of the second defendant and advised that her client abides the decision of the court in respect of the application that I am required to determine.
The application
[6] The plaintiff applies for an order that counsel for the first and third defendants, Mr Brian Henry, be disqualified from acting in this proceeding and that the costs of this application be paid by the first and third defendants. The application is made in reliance on r 1.20 of the High Court Rules, r 8.7 of the Lawyers: Conduct and Client Care Rules and upon the court’s inherent jurisdiction. Reference is also
made to the principles articulated in Black v Taylor.[1]
1.20 Lawyers' duties
(1) The duties imposed by these rules on lawyers do not limit a lawyer's obligations to a client or another lawyer or the court under the rules of conduct and client care for lawyers in New Zealand or other applicable ethical rules or guidelines.
(2) A lawyer who acts for a party to a proceeding, or is a party to any proceeding, must not, without the leave of the court, act for any other party to the proceeding who does not have the same interest in the subject matter of the proceeding.
(3) In this rule, lawyer includes the partner of a solicitor to whom subclause (1)
applies.
(4) In applying these rules, the court may have regard to the obligations referred to in subclause (1).
[8] Rule 8.7 of the Lawyers and Conveyancers Act (Lawyers: Conduct and
Client Care) Rules 2008 provides:
8.7 A lawyer must not use information that is confidential to a client (including a former client) for the benefit of any other person or of the lawyer.
8.7.1 A lawyer must not act for a client against a former client of the lawyer or of any other member of the lawyer's practice where—
(a) the practice or a lawyer in the practice holds information confidential to the former client; and
(b) disclosure of the confidential information would be likely to affect the interests of the former client adversely; and
(c) there is a more than negligible risk of disclosure of the confidential information; and
(d) the fiduciary obligation owed to the former client would be undermined.
8.7.2 Rule 8.7.1 is not breached where there is an effective information barrier between the lawyer who holds the confidential information of the former client and the lawyer who proposes to act for the new client.
8.7.3 An information barrier is effective when, in all the circumstances, there is a negligible risk that the confidential information in respect of the former client will be or has been disclosed to the new client or to any lawyer acting for the new client.
8.7.4 Unless the lawyer is unable to contact the former client, particulars of any information barrier must be disclosed to the former client prior to the lawyer commencing to act for the new client.
8.7.5 For the purposes of this rule 8.7, confidential information is presumed to be held by a practice when any lawyer who is a member of the practice has been a member of another practice that held the confidential information when that lawyer was a member, unless the lawyer concerned can demonstrate that he or she is not aware of the relevant confidential information.
[9] The court’s inherent jurisdiction to supervise the conduct of counsel in court, including the ability to intervene where it appears that the conduct of counsel outside the court room may have a bearing on the conduct of a case, has been confirmed in a number of authorities.[2]
The opposition
[10] The first defendant pleads the following specific grounds for opposing the orders sought, namely:
(a) Mr Henry denies that he was consulted by the plaintiff in the matter of this proceeding;
(b) Mr Henry’s duties of loyalty and confidentiality will not be breached;
(c) By acting for the first and third defendants, Mr Henry is not in breach of any of his professional obligations;
(d) Mr Henry accepts that he acted for the plaintiff, Mr Yarrow, in a proceeding Yarrow v Yarrow;[3]
(e) Mr Henry accepts that he has acted for the plaintiff, Mr Yarrow, and his companies; and
(f) Mr Henry does not have any knowledge and cannot be held to have knowledge of the plaintiff’s weaknesses, fears and likely reactions within litigation over and above that held by the first defendant,
Michael Finnigan and Kevin Gillespie.
[11] The plaintiff has made this application promptly and at an early stage in this proceeding. The court file records that a statement of defence was filed on behalf of the first defendant on 25 July 2011. The plaintiff says that on 21 July 2011 he heard for the first time that Mr Henry would be representing two of the defendants, namely the first defendant and the first-named third defendant. He says that he immediately called his lawyers to express surprise at the news and asked if anything could be done to prevent Mr Henry from acting. His application was filed promptly and is recorded as having been filed on 12 August 2011.
This proceeding
[12] The plaintiff is a director of Yarrows (The Bakers) (NZ) Ltd, a company which is referred to in the court papers as “YTB”. He indirectly holds 72.6% of YTB shares. He is also a beneficiary of the PS Yarrow Family Trust No 5, referred to in the court papers as “PSYT5”.
[13] The second defendant is an accounting practice in New Plymouth. The first defendant has, at all material times, been an employee of the second defendant. He is also a director of the first-named third defendant. The first-named third defendant was, at all material times, controlled by the second defendant through its directors and by the first defendant.
[14] The plaintiff alleges that on or about 13 October 2009 the second defendant and/or the first-named third defendant received $297,615.73 into a trust account under their control on account of and for the benefit the PSYT5.
[15] The second defendant pleads an admission to this allegation to the extent that it acknowledges that at a later time it was advised that the moneys were to be held for the benefit of PSYT5.
[16] The first defendant’s pleading is unclear and, indeed, does not specifically answer the allegation that the fund of $297,615.73 was to be held on account of and for the benefit of the PSYT5.
[17] The plaintiff next pleads that the trust funds were paid without his consent to Southern Cross Investments Ltd and YTB. He pleads that this amounts to a breach of trust and is also evidence of knowing assistance to a breach of trust. He seeks judgment for the trust funds concerned.
[18] This short summary discloses that on the current state of the pleadings the central issue in this proceeding relates to the authority, if any, for the payment out of the second defendant’s, or the first-named third defendant’s, trust account of
$297,615.73 to companies that are now insolvent. The central issue relates to a transaction undertaken by the first defendant himself or by the first defendant and directors of the second defendant all in their capacity as directors of the first-named third defendant.
[19] The second defendant pleads that the payment in fact was made with the plaintiff’s consent pursuant to a consent provided by his attorney, Mr Michael Finnigan.
[20] On the material placed before me, Mr Henry has played no part in the central transaction that requires the court’s consideration in this proceeding. Nor is there any evidence that he gave advice to any person as to the steps to be taken in relation to the transaction that is the subject of this proceeding.
[21] The above summary has been extracted from the affidavits filed on this application and from the pleadings. Counsel, however, also referred to a memorandum which had been filed by counsel, Mr Henry, on 25 July 2011 for this proceeding. Its purpose was apparently to assist the court at a judicial case management conference held on 26 July 2011. It contains a summary of additional matters which are said to be relevant to this proceeding, including that:
6. The Paul Yarrow Trust No. 4 (which is not a party) entered into an agreement to purchase a building known as Volumex. The purchase, which was on behalf of Mr Yarrow, was to be funded by a loan from the National Bank and the proceeds from his mother, Melva’s, trust.
7. The trustees of The Paul Yarrow Trust No. 4 are understood to be the same as the Third Defendant.
8. When it was time to settle, the money was not available from the Melva Trust and Mr Yarrow and/or his Paul Yarrow Trust No. 4 entered into a short term loan from The Yarrow Group of Companies in the sum of $350,000 on the basis that this money would be repaid by the plaintiff and/or The Paul Yarrow Trust No. 4 when the money became available to him from the Melva Trust.
Mr Henry’s association with the plaintiff
[22] Both Mr Yarrow and Mr Henry have filed affidavits. Perhaps understandably there is some difference between them as to the nature of their prior involvement. As is usual in interlocutory applications there has been no cross-examination of either deponent. Mr Henry says that he had no knowledge of the Volumex transaction other than that the first defendant had managed to arrange a deal that ensured that the plaintiff had a substantial asset outside of the Westpac guarantees. This is important background in this proceeding. Mr Henry says that at a time when he attended a Yarrow board meeting when the plaintiff was represented by Mr Dennis King as his legal counsel, Mr Yarrow made comments about the first defendant having taken money out of the Duncan Dovico Trust Account without his authority.
[23] Mr Yarrow claims that he consulted Mr Henry and Mr Henry’s business partner, Mr Gillespie, about the issues in this proceeding, and that he received advice from Mr Henry that the issue was very difficult. Mr Henry denies that Mr Yarrow came to him and Mr Gillespie to discuss the breach of trust.
[24] Mr Henry says the first time he became aware of the allegation that the first defendant had misappropriated Mr Yarrow’s money was when he was told of it by the first defendant.
[25] His paragraph 2.4.1 appears to be slightly at odds with what he is saying in
paragraph 2 concerning Mr Yarrow’s claim that he sought advice from Mr Henry in
relation to the subject matter of this claim. The suggestion is made on Mr Henry’s behalf that perhaps Mr Yarrow was confusing it with an earlier issue that involved the dispute with Mr Yarrow’s brother, John Yarrow. I do not regard this aspect as critical to my determination of this application.
[26] It appears that Mr Henry met Mr Yarrow approximately nine years ago. Mr Henry was first retained as Mr Yarrow’s lawyer during the sale of Mr Yarrow’s father’s shares in YTB. Mr Henry’s business partner, Mr Gillespie, was also introduced and was, in fact, appointed a director of Yarrows. Mr Henry says this was to help with the family feud between the plaintiff and his brother, John. Mr Henry was involved in a proposed deed of family arrangement which the plaintiff’s father had instigated.
[27] Mr Henry says that he was involved in matters relating to the family arrangement. Arbitration proceedings were involved. Mr Henry says that he worked closely with Mr Michael Finnigan who, according to the papers, had been appointed the plaintiff’s attorney. All of these events led to a settlement of proceedings resulting in the plaintiff becoming the owner of the shares that were in dispute.
[28] Mr Henry says that the settlement, however, involved serious profit misrepresentation. The plaintiff had relied on the representation and, as a result, proceedings against Mr John Yarrow were commenced and Mr Henry was instructed by the plaintiff but was paid for by the Yarrow Group of Companies. Mr Henry says that the major involvement in this proceeding from the plaintiff’s perspective was, in fact, conducted by Mr Colin Pettigrew, Mr Michael Finnigan and Mr Kevin Gillespie, although the plaintiff did attend on some meetings. There was a further settlement agreement. Mr Henry acknowledges that he was engaged to conduct further specific litigation. He accepts that the plaintiff
trusted me to look after his interests as well as the company’s throughout this dispute. He left the proceeding to me, Michael Finnigan and Kevin Gillespie. I report to Paul directly and to the Board of the Yarrow’s Group.
[29] There is then a reference by Mr Henry to the plaintiff attending at his home. There is a difference of view between the plaintiff and Mr Henry as to how often
there were such contacts. Mr Henry acknowledges one only, which occurred at a time when he says he was laid up with an illness and when the contact was initiated so that advice could be given.
[30] There was yet a further involvement concerning the plaintiff’s employment with the Yarrow Company. That had led to a situation where Mr Gillespie and the plaintiff, according to Mr Henry, were not on good speaking terms. Mr Henry acknowledges that the plaintiff regularly spoke to him about the structure of the group of companies. Mr Henry acknowledges that there was another issue regarding sexual misconduct with an employee of a Japanese customer. He says he acted in that matter for the company, not the plaintiff, and that the claim was settled.
[31] There is then in the papers some difference as to just how much social contact there was. Perhaps significantly the Yarrow board, which had previously met at the board room of Buddle Findlay, barristers and solicitors, or on the North Shore, started to use Mr Henry’s board room. Mr Henry says he attended some of those board meetings for the purposes of discussion and receiving instructions and would then leave. Mr Yarrow was not always present at the board meetings.
[32] Mr Henry then refers to a dispute over the transaction called “Minto”, which involved a dispute between the plaintiff and Mr Kevin Gillespie. Mr Gillespie, he acknowledges, is a close personal friend. Mr Henry says he did not know the full circumstances of the transaction but as Mr Yarrow was making serious allegations against Mr Gillespie, he would not accept instructions.
[33] So, in summary, Mr Henry acknowledges that he does have some knowledge of Mr Yarrow’s companies, the financial arrangements that have been entered into, and the persons to whom Mr Yarrow turned to for advice, including himself. That knowledge has been derived over a period of nine years. It arises from briefs received and from general contact with Mr Yarrow concerning Mr Yarrow’s company interests.
[34] I do not regard this case as one that can be dealt with on the basis that Mr Henry’s contact with Mr Yarrow was solely on the basis of briefs he received to act as counsel.
[35] In the absence of a general retainer a barrister does not have any continuing duty of loyalty to a client once the retainer ends.[4]
[36] Mr Henry’s contact with Mr Yarrow went beyond that which would be undertaken by a barrister accepting instructions through an instructing solicitor. I mean no criticism of Mr Henry’s actions in prior cases for Mr Yarrow. Obviously, he was able to obtain successful outcomes for Mr Yarrow. That, however, is not the issue.
[37] Mr Henry’s own assessment of the position deserves respect. However, a barrister does not have an absolute and independent right to determine whether he should act in a proceeding.[5]
[38] The court’s power to restrain a barrister acting arises from the court’s inherent jurisdiction where the interests of justice require that that step be taken. The exercise of the inherent jurisdiction of the court to ensure that justice is done, and seen to be done, provides a more satisfactory basis for determining the issue of whether the barrister and/or solicitor should be restrained from acting than relying on a rule that treats knowledge of a client (as distinct from knowledge of his affairs)
gained through a professional association as confidential information.[6]
[39] The court will not overlook the general right of a party to be represented by the solicitor or counsel of their choice.[7] That right must, however, give way to the overriding principle of protecting the integrity of the judicial process.[8] Having said
that, it is recognised that where there are no conflict situations arising, a party should
not lightly be deprived of their counsel of choice and the jurisdiction to restrain counsel from acting should be exercised only sparingly.[9]
[40] Mr Henry undoubtedly would have obtained considerable information concerning Mr Yarrow’s financial position, the financial position of his company, its relationship with trusts and what could be expected by way of financial assistance, particularly from trusts. The extent to which that might have provided assistance to complete the transaction that is at the centre of the issue in this proceeding might well be relevant. Mr Henry confirms knowledge of bank guarantees given and the effect on Mr Yarrow. I would expect all of that background to be helpful when one comes to analyse the steps that were taken to secure finance for the transaction that is at the centre of this proceeding. It would also indicate what particular difficulty Mr Yarrow was facing at the time the transaction was sought to be completed. Some of that information would, of course, be confidential to Mr Yarrow.
[41] When I look at the facts in the round I reach the conclusion that Mr Henry, for a substantial period of time and a number of cases and events that in some instances did not reach the stage of litigation, has simply come too close to Mr Yarrow, his companies, and Mr Yarrow’s business affairs for the court to be satisfied that the integrity of the judicial process would be maintained by him acting against Mr Yarrow in this case.
Conclusion
[42] I order in terms of paragraph 1.1 of the application as moved with the result that Mr Henry is disqualified from acting in this proceeding for the first defendant and the first-named third defendant.
Costs
[43] Counsel asked that I reserve costs. Costs are accordingly reserved. If the parties are unable to agree memoranda in support, opposition and reply shall be filed
and served at seven-day intervals.
[44] The Case Officer who has charge of this file shall allocate a case management conference on the first available date after the expiry of four weeks from the date of issue of this judgment. Counsel shall file and serve for the allocated conference memoranda that deal with the items listed in Schedule 5 to the High Court Rules two working days before the conference.
[45] Counsel are reminded of the obligation imposed by rr 8.2 and 8.11 of the
High Court Rules in relation to the parties’ discovery obligations and the need to
cover that position in the memoranda that are filed for the conference.
JA Faire
Associate Judge
[1] Black v Taylor [1993] 3 NZLR 403 (CA).
[2] Re a solicitor (1987) 131 SJ 1063; Davies v Clough (1837) 8 Sim 262, 59 ER 105; Re a firm of
Solicitors [1992] 1 QB 959; Kooky Garments Ltd v Charlton [1994] 1 NZLR 587 (HC).
[3] Yarrow v
Yarrow HC New Plymouth CIV-2008-443-71, 14 August
2009.
[4] BOC
New Zealand Ltd v Trans Tasman Properties Ltd (1996) 10 PRNZ 199
(CA).
[5]
Black v Taylor, above n
1.
[6]
Ibid.
[7]
Equiticorp Holdings Ltd v Hawkins [1993] 2 NZLR 737 (HC) at
739.
[8] Kooky Garments Ltd v Charlton, above n 2.
[9] Russell McVeagh McKenzie Bartleet v Tower Corporation [1998] 3 NZLR 641(CA) at 651 and 655.
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