100 Investments Limited v Walker [2020] NZHC 165 (14 February 2020)

Last Updated: 28 February 2020

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY COMMERCIAL PANEL I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-001160 [2020] NZHC 165

BETWEEN

100 INVESTMENTS LIMITED First Plaintiff FTG SECURITIES LIMITED Second Plaintiff RFD FINANCE LIMITED Third Plaintiff TOMANOVICH HOLDINGS LIMITED Fourth Plaintiff .../2 cont’d

Hearing:	4 February 2020
Appearances:	A Barker QC for Plaintiffs A Cherkashina for First Defendant A L Holloway and J M Fitzgerald for Second Defendant D Bigio QC and N R Frith for Fourth Defendant
Judgment:	14 February 2020

JUDGMENT OF VENNING J (RECUSAL OF SOLICITORS)

This judgment was delivered by me on 14 February 2020 at 11.30 am, pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

Date...............

Solicitors: Canterbury Legal, Christchurch

Norling Law, Auckland Wotton Kearney, Wellington

Minter Ellison Rudd Watts, Auckland

Copy to: A Barker QC, Auckland D Bigio QC, Auckland

100 INVESTMENTS LIMITED v WALKER [2020] NZHC 165 [14 February 2020]

AND	ROBERT BRUCE WALKER First Defendant JOHN MARSHALL SCUTTER Second Defendant SPF NO 10 LIMITED (REMOVED) Third Defendant LPF GROUP LIMITED Fourth Defendant

Applications

[1] The first, second and fourth defendants have applied for orders to restrain Canterbury Legal from continuing to act as solicitor for the plaintiffs in this proceeding.¹

Background

[2] Property Ventures Ltd (PVL) was the parent company for a number of subsidiaries involved in individual property developments and investments. The relevant subsidiaries in relation to the plaintiffs’ claims are:

(a) Lichfield Ventures Ltd;

(b) Cashel Ventures Ltd;

(c) Tuam Ventures Ltd;

(d) Tay Ventures Ltd;

(e) Castle Street Ventures Ltd;

(f) Livingspace Properties Ltd; and

(g) St Asaph Ventures Ltd.

[3] PVL was placed in liquidation on 25 July 2010. Mr Walker was appointed liquidator.² Mr Scutter was appointed joint liquidator of PVL with Mr Walker from 4 June 2013. He remained in that role until 22 March 2018.

[4] At various dates between 13 December 2010 and 9 February 2012 the above subsidiaries were also placed in liquidation. Mr Walker was appointed sole liquidator of the subsidiaries.³

1. The third defendant has been removed from the Register. There is an application to be heard at a later date for its restoration.

² The liquidation was stayed until 10 February 2012.

³ Four other subsidiaries were also placed in liquidation. They are not relevant for present purposes.

[5] In 2012, Mr Walker brought proceedings against PVL’s former directors (including Austin Forbes QC, who was formerly counsel for the plaintiffs in this proceeding), PriceWaterhouseCoopers (PwC), Fright Aubrey Ltd and Richard Gibbons (jointly the PVL defendants) in relation to alleged breaches of duty said to have contributed to the PVL Group’s collapse in 2010 (PVL proceedings). On 27 May 2014, a further and separate set of proceedings brought against the PVL defendants was consolidated with the PVL proceedings.

[6] To fund the claim, the liquidators entered a litigation funding agreement with SPF No. 10 Ltd (SPF). SPF was a special purpose vehicle incorporated for the purpose of the PVL proceedings. It was a wholly owned subsidiary of LPF Group Ltd (LPF). It is currently removed from the Register of Companies.

[7] At various dates between 2014 and 2017 the liquidators of PVL reached confidential settlements with each of the PVL defendants (apart from the former directors). Under the settlements the PVL defendants agreed to pay certain amounts to the liquidators. In 2018, after concluding a final settlement with PVL’s former directors the liquidators discontinued the PVL proceedings.

[8] The plaintiffs in this proceeding, 100 Investments Ltd, FTG Securities Ltd, RFD Finance Ltd and Tomanovich Holdings Ltd allege that they were and are secured creditors of the above PVL subsidiaries, by reason of various assignments of security interests originally held over the subsidiaries by other creditors. As the PVL subsidiaries were also plaintiffs in the PVL proceedings, the plaintiffs claim they are entitled to a portion of the settlement proceeds. They seek to recover the same against Mr Walker and Mr Scutter as liquidators and against SPF and LPF as recipients of the settlement proceeds.

[9] Canterbury Legal’s directors acted for the PVL Group of Companies, including the PVL subsidiaries until PVL was placed in liquidation in July 2010. Mr Cousins was also a founding director of PVL and remained a director until 2001. On the present information before the Court, Canterbury Legal also acted for the current plaintiffs in relation to the assignments relied on.
[10] Two of Canterbury Legal’s directors, Clive Cousins and Grant Smith, are the shareholders of two of the plaintiff companies, 100 Investments Ltd and FTG Securities Ltd.

Procedural matters

[11] The file is a Commercial Panel case assigned to Wylie J. The defendants brought two applications: first, an application to strike out the proceedings; and the second, an application to restrain Mr Forbes and Canterbury Legal from acting as counsel and solicitors for the plaintiffs in this proceeding.

[12] Mr Barker QC was instructed to act for the plaintiffs to defend the applications. On 31 January 2020, counsel filed a joint memorandum confirming that, following provision of the plaintiffs’ submissions in opposition to the application to strike out, the defendants would not pursue that application. The strike out application was resolved on the basis the plaintiffs would file an amended statement of claim consistent with the proposed amended pleading Mr Barker had referred to in those submissions. Costs were reserved.

[13] Counsel also confirmed that Mr Forbes had agreed to withdraw as counsel for the plaintiffs. The issue of costs was also reserved on that aspect of the application. Timetable directions were made to deal with the issue of costs.

[14] That left as the only remaining issue the defendants’ application to recuse Canterbury Legal from continuing to act as solicitors for the plaintiffs.

[15] Although the file was assigned to Wylie J, given his past personal relationship with Mr Forbes, the applications for strike out and recusal were referred to me to be dealt with. It was convenient for me to deal with the remaining recusal application and I will also deal with the issue of costs on the related applications. The substantive file will, however, otherwise continue to be managed by Wylie J.

The law

[16] In Li v Liu, the Court of Appeal confirmed the basis upon which the jurisdiction to recuse solicitors is to be exercised:⁴

[23] ... The court has inherent jurisdiction to disqualify counsel or solicitors from acting where to allow them to do so would impair the integrity of the judicial process. That said, the court should not lightly interfere in a party's fundamental right to counsel of their choice, particularly where considerations of delay in the application, inconvenience, or sunk cost favour the affected party. Further, the court should be vigilant in preventing objections whose purpose is only to disrupt or inconvenience the other side. To allow the judicial process to be played in this tactical fashion would itself be an unacceptable impairment.

[17] The overriding issue is the obligation of the Court to maintain the integrity of the judicial process and to preserve public confidence in the judicial system.⁵

Issues

[18] The application to restrain Canterbury Legal raises the following particular issues:

(a) Would Canterbury Legal be in effect defending their own conduct or advice to the plaintiffs given the issues raised in the proceedings?

(b) Whether Canterbury Legal, in particular Mr Smith, may be required to give contentious evidence in the proceeding?

Would Canterbury Legal be in effect defending their own conduct or advice to the plaintiffs given the issues raised in the proceedings?

[19] Rule 13.5.3 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 provides:

13.5.3 A lawyer must not act in a proceeding if the conduct or advice of the lawyer or of another member of the lawyer’s practice is in issue in the matter before the court. ...

⁴ Li v Liu [2018] NZCA 528, [2019] NZAR 259 (footnotes omitted).

⁵ Black v Taylor [1993] 3 NZLR 403 (CA) at 408.

[20] As Thomas J observed in Kooky Garments Ltd v Charlton:⁶

... Where the acts or omissions of the law firm, including situations where the actions of the client are based on advice given by the solicitors, are at the heart of the question in issue, the firm is, in a real sense, "defending" its actions or advice. There is, in such circumstances, a danger that the client will not be represented with the objectivity and independence which the client is entitled to and which the Court demands.

[21] In his submissions, Mr Barker sought to recategorise the issue of concern as being that Canterbury Legal and its predecessor firm had previously acted for PVL and its subsidiaries. The defendants’ objection is somewhat more direct than that. The defendants say Canterbury Legal propose to represent the plaintiffs in this litigation where they have previously been involved in the matters to be litigated in this case and, in some instances, where they have advised the subsidiaries against whom the plaintiffs seek to enforce their securities.

[22] As noted, the basis of the plaintiffs’ claim in this proceeding is that they are secured creditors of the PVL subsidiaries and have a right to share in the proceeds of the settlement of the PVL proceedings. They rely upon assignments of the security interests granted by the PVL subsidiaries to other creditors to create those rights. On the information currently before the Court, Canterbury Legal were responsible for the chain of transactions involving the securities including the assignment to the plaintiffs.

[23] It is the potential challenge to the assignments that is of particular concern in this case. The validity of the assignments will clearly be in issue.

[24] It is also relevant that in a previous case involving FTG, FTG Securities Ltd v Bank of New Zealand, the High Court found the assignment of a security to FTG, which had been arranged by Canterbury Legal, to be ineffective as against the Bank of New Zealand (BNZ) and put the firm on notice of a potential claim against it.⁷

[25] In issue in the FTG case was whether an assignment of a security over Tuam Ventures Ltd was valid. A clause in a deed of priority between BNZ and Canterbury Finance Ltd prevented assignment of the security without the consent of both lenders.

⁶ Kooky Garments Ltd v Charlton [1994] 1 NZLR 587 at 589.

⁷ FTG Securities Ltd v Bank of New Zealand [2018] NZHC 1516.

Canterbury Finance assigned the deed to another entity, Crown Asset Management Ltd (CAML). CAML then purported to assign the debt to FTG. FTG relied on the assignment of the security interests to claim a second charge over Tuam Ventures Ltd’s assets.

[26] In the course of the decision, Gendall J made the following findings:⁸

[44] Canterbury Legal corresponded with CAML over these matters between April 2015 and late June 2015. During the course of those discussions, evidence before the Court shows that CAML raised the issue of BNZ needing to acknowledge the arrangement between CAML and FTG in some way. FTG advised, however, that it wished to keep the transaction strictly confidential. Indeed, in that evidence, which took the form of emails dated 3 and 8 June 2015, FTG firmly resisted any approach being made to BNZ for its consent or approval on the stated grounds that it was “important that this transaction be kept strictly confidential at this stage.” Counsel for the BNZ and counsel for the Liquidator both contend now that, despite this, FTG throughout had full knowledge of the requirement for the Bank’s consent or approval and took a calculated risk in proceeding without it.

[27] And then later, having held the purported assignment to be ineffective, the Judge went on to observe:⁹

[104] The fact that, as I have found here, the purported assignment of the loan debt and securities to FTG is ineffective from a technical view point does not necessarily prevent FTG arguing that it can claim as an equitable assignee. However, this has not been directly pleaded or argued before me here. The position on this would need to be pleaded and proved by FTG. Counsel for the other parties here indicate it is likely to be disputed. Obviously it would also be subject to general equitable doctrines and before me counsel opposing noted that this would include a consideration of issues such as clean hands and otherwise. I repeat, however, that these issues were not before me. They have not been addressed in the evidence or submissions to date. If appropriate, they will need to fall for subsequent determination. Also, for subsequent determination will be a recent claim by the Liquidator that, in any event, the surplus TVL funds here are actually held on an institutional constructive trust for TVL and/or one of its related entities.

[105] Lastly, addressing claims that unfairness will result from a finding that FTG’s assignment is invalid, I am satisfied that this is simply not the case. The current situation arises directly from what is said to be FTG’s deliberate disregard for cl 15 of the Priority Deed. And, as I note above, FTG may still have equitable rights against the funds in issue. I note too, by way of postscript and for completeness, that if the technical ineffectiveness of the assignment arose from incorrect legal advice at the time of the purported assignment, FTG may well have recourse against its legal advisors and their insurers in the ordinary way.

⁸ FTG Securities Ltd v Bank of New Zealand, above n 7.

⁹ FTG Securities Ltd v Bank of New Zealand, above n 7.

[28] It is correct that on appeal the Court of Appeal considered that Gendall J did not need to go so far as to find the assignments were invalid against all parties and in all circumstances.¹⁰ Nevertheless, the Court found the assignment to be invalid as against BNZ and also concluded that FTG took a risk in acting as it had.¹¹

[29] Mr Barker submitted that if the Court in these proceedings was to ultimately hold the assignments were not effective, the plaintiffs may wish to consider the advice they had received but that would be an issue for the plaintiffs to pursue later, in another proceeding. He made the point that solicitors often continue to represent a client when documents they have been involved in drafting or advice may be in issue and that something more was required for recusal.

[30] But in his decision Gendall J clearly flagged as a possibility that the advice of Canterbury Legal would be directly in issue. Canterbury Legal are on notice. The potential conflict should be addressed now. To that extent, the position is even stronger than it was before Thomas J in Kooky Garments, when the Judge went on to say:¹²

There is no sound reason to presume or accept that the solicitors must first have the opportunity to clarify whether their client is liable as a result of their actions or of acting on their advice before confronting the conflict.

[31] Mr Barker also noted that there had been no pleading challenging the assignments as yet.¹³ However, the issue is clearly a live one. It has been the subject of a previous decision. It was referred to in general terms in the affidavit evidence filed by the defendants and was a focus of Mr Bigio’s submissions to the Court.

[32] The issue is not restricted to FTG’s position as discussed in the FTG Securities Ltd case. The validity of the assignments will be challenged, not only in relation to that issue, but also in relation to other grounds and other plaintiffs. For example, Mr Walker has identified a number of grounds of challenge to the assignments:

(a) An assignment between Dominion Finance Group Ltd (Dominion) and South Canterbury Finance Ltd (SCF) dated 25 June 2009 transferred to

¹⁰ FTG Securities Ltd v Bank of New Zealand [2019] NZCA 16 at [60].

¹¹ At [60]–[62].

¹² Kooky Garments Ltd v Charlton, above n 6, at 589.

¹³ No defences have yet been filed.

SCF (through which FTG claims) only the debts of Cashel Ventures Ltd (Cashel) and Hotel So Ltd. The guarantors, including Tuam Ventures Ltd, remained indebted to Dominion less $1. Dominion purported to assign its debts against Tuam Ventures Ltd to SPF and ultimately to PVG Securities Trustees Ltd. There is a dispute as to which party holds the debt.

(b) Notably, the original term loan between Cashel and SCF only permitted an assignment to “any one or more bank or financial institutions”. FTG is not on its face a bank or financial institution.

(c) The plaintiffs also rely on a loan from Equitable Life Insurance Co Ltd to Castle Street Ventures Ltd, which contains a no assignment clause. The FTG decision is particularly relevant to this issue.

(d) 100 Investments Ltd claims that Lichfield Ventures Ltd owes it
$4,228,151.85. It appears this fails to account for an insurance settlement of $2,950,000.00 received from Lichfield Ventures Ltd’s insurer. There are likely to be issues relating to how the realisation should be treated.

[33] Mr Barker submitted that even if the transactions would be in issue there was no suggestion that the advice given would be in issue. He referred to the following passage from the decision of Asher J in HMI Technologies Ltd v Signopsys Electronic Signs Ltd:¹⁴

[15] Courts should hesitate before automatically concluding that lawyers who have had some involvement in the train of events leading up to a proceeding have a lack of objectivity or independence. If that step does not mean they will be required to give contentious evidence, and their conduct or advice is not in issue, rr 13.5-13.5.3 may not be breached. The independence of the lawyer may be no different from that of any other lawyer acting for a long-standing client. In the New Zealand context with its fused profession, there is no unacceptable degree of conflict of interest in counsel acting in litigation for long-standing clients. There are obvious cost advantages in a party retaining its lawyers for the purposes of litigation, as well as the benefit of maintaining and drawing on an ongoing relationship. A client’s ability to

14. HMI Technologies Ltd v Signopsys Electronic Signs Ltd, HC Auckland CIV-2009-404-1520, 10 July 2009.

have their lawyers of choice acting for them should not be interfered with unless there is good reason to do so.

[34] But the case of HMI Technologies Ltd is readily distinguishable. It involved an objection to solicitors and counsel receiving confidential documents and examining them. The basis of the objection was a suggestion that the contents of a letter written by the solicitors would be contentious and in issue in the proceeding. However, as Asher J observed, although the contents of the letter were contentious, the solicitors only relevant action had been to send the letter on their client’s instructions. The solicitors and counsel would not be required to defend or explain their actions. Their client would do that. The solicitors’ conduct or advice was not in issue, save for the mechanical acknowledgement of sending the letter itself. In contrast, in the present case, Canterbury Legal apparently acted on the assignments in issue. Canterbury Legal were involved in giving advice on the matters that will be directly in issue in the proceeding. Their advice as well as the transactions will be in issue.

[35] The involvement of Canterbury Legal and its directors is apparent by the exchange Mr Smith, then appearing in the Supreme Court, had with the Bench in the FTG case when seeking leave to appeal:

MR SMITH: Thank you, Your Honours. I’ll try to be very quick. Just on the consent issue, the background to that is that the view was taken, I think, that retrospective consent was not an option. It was nevertheless sought and the BNZ refused to engage. So taking Your Honour’s point, we could, of course, be here arguing today three years after the case was first filed about the consent issue but that’s not what we’ve ended up. We may yet end up there.

In terms of the commerciality of it, it’s a standard clause in the deed of priority at the time. There’s nothing unusual about the clause for the deed of priority used at the time. It was in 2008, I think, is it? The...

O’REGAN J: Is that a matter of evidence or are you just telling us that from the bar?

MR SMITH: I think it is a matter of evidence, actually, Sir. Certainly, what is undoubtedly a question of evidence, and this cuts both ways, is that since that time the deeds of priority, this Bankers Association form, deeds of priority have been changed and the equivalent clause actually doesn’t require consent. It requires that the assignee, sorry, the assignor get the agreement of the assignee to abide by the terms of the deed of priority, but it doesn’t require that to be referred back to the other party at that point in time, the other mortgagee party. So effectively we’re arguing for interpretation of this clause that is now the standard clause in the form of deed of priority used by the Bankers Association and that comes back to the question of commercial

purpose and, of course, the – and this comes back to Linden’s. So Linden’s is...

[36] While I accept Mr Barker’s submission that in a number of cases solicitors appear in litigation where their firm has been involved in the underlying transaction, the answer must always lie in the context. In Vector Gas Ltd v Bay of Plenty Energy Ltd, the Supreme Court admonished senior counsel who appeared as counsel where their advice recorded in correspondence was in issue but took the matter no further.¹⁵ But in that case, the Court was presented with a fait accompli by the time it had reached the Supreme Court. Neither party had taken the point. In the present case, the defendants have raised the issue, and it is perhaps timely to remind practitioners of their obligations and for the Court to confirm the importance of the integrity of the Court process.

[37] In the present case, on the information currently before the Court, Canterbury Legal’s advice to the plaintiffs relating to the assignments will be directly in issue. As Mr Bigio observed, if there is an argument that the securities might be valid on an equitable basis the issue of clean hands will be directly relevant given the comments of the Court in the FTG case.

[38] Mr Barker also suggested that, with Mr Forbes agreeing to stand down as counsel and independent counsel acting, the potential for conflict was reduced. But he properly accepted that the engagement of counsel could not fully answer proper concerns about the role of an instructing solicitor.

[39] There is a further overlay in the present case relating to the advice provided by Canterbury Legal. Canterbury Legal is listed as the contact and was again, I infer, responsible for advising upon and registering financing statements on the Personal Property Security Register in respect of the plaintiffs’ claimed security interests in SPF without SPF’s consent. There was an exchange of correspondence between Canterbury Legal and SPF’s liquidator regarding the matter in July 2019. Canterbury Legal take the position that consent was not required under ss 88 to 91 of the Personal Property Securities Act 1999. However, the fourth defendant’s position is that there

15. Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5, [2010] 2 NZLR 444 at [51] and [146]– [149].

was never a transfer of the collateral security so there was no basis to register the security. Again, the advice recorded in correspondence authored by Canterbury Legal is contentious and will be in issue.

[40] The defendants sought to rely on the decision of Associate Judge Lester in Fruit Shippers Ltd v Petrie for the proposition that the threshold is whether there was a more than negligible risk that the advice given by the solicitors would be put into issue.¹⁶ For my part, I am not sure that the test should be at that relatively low level but even if the threshold required a reasonable likelihood of the advice being put in issue (similar to the established threshold for the giving of evidence), I consider it to be more than met in this case.

[41] For the above reasons I am satisfied that Canterbury Legal will be in effect defending their own advice to the plaintiffs in the course of these proceedings. To allow them to continue to act would affect the integrity of the Court process.

Whether Canterbury Legal, in particular Mr Smith, may be required to give contentious evidence in the proceeding?

[42] Mr Barker submitted that at present it could not be said there was a reasonable likelihood that Mr Cousins or Mr Smith would need to give evidence and, if that became apparent at a later stage then, as Conduct and Client Rule 13.5.2 contemplates, the position could be addressed at that time. However, the Court has to deal with the application on the basis of the information put forward at present. On the basis of that information, I am satisfied there is a reasonable likelihood of one or both of them being required to give evidence. Even if that were not the case, the finding as to their advice being in issue is sufficient to determine the application.

Other considerations

[43] A number of other, peripheral matters were raised in the course of submission. The point was taken for Canterbury Legal that Mr Walker could have raised these issues in earlier proceedings, the suggestion being that the defendants were seeking a tactical advantage in forcing Canterbury Legal to be recused. But, as Ms Cherkashina

¹⁶ Fruit Shippers Ltd v Petrie [2019] NZHC 2694 at [117].

submitted, there were a number of good reasons why the point was not taken in the various other proceedings involving the dispute between the associated entities and Mr Walker. I adopt the following summary from her submissions:¹⁷

2.3 ...

1. 100 Investments Ltd v IAG NZ Ltd (CIV 2016 – 409 - 888) – The First Defendant was seeking leave to be heard in that proceeding, however, leave was rejected. Hence, the First Defendant was not in a position to raise issues with representation (either formally or informally).

2. PVG Securities Trustee Ltd v 100 Investments Ltd (CIV 2018

- 404-2838) – The subject matter of proceeding involved a different set of issues, specifically there were no issues associated with the securities and assignments, or the settlement proceeds. No issues with representation was raised by the First Defendant in that proceeding (either formally or informally).

100. 100 Investments Ltd v Walker (CIV 2017-485-1041) – The matter was resolved by consent in early stages and there was no need to consider representation issues. Consequently, no issues with representation were raised by the First Defendant in that proceeding (either formally or informally).

4. CIR v Livingspace Properties Limited (CIV 2010-409-2323)

– The matter concerned an application for production of documents under s 261 of the Companies Act 1993 from Kristina Louise Buxton, the director of the First to Third Plaintiffs. The orders were made by Court on 29 May 2018, however, there has been no compliance by Ms Buxton with those orders. The issues with representation were raised on an informal basis (noted in memorandum). A restraint has not been sought formally to avoid undue delay to the hearing of the application.

5. Gower v FTG Securities Limited (CIV 2018-409-229) – The proceeding involved an assignment of securities from Crown Asset Management Limited to FTG Securities Limited. Those same securities provide the basis for the claim in this proceeding by FTG Securities Limited. The issues with representation became apparent only over time, and the First Defendant raised (informally) those issues on 11 May 2018, around two weeks before the hearing date. The First Defendant did not proceed with making of a formal application to Court in order not to interfere with the upcoming fixture. The hearing resulted in finding that FTG Securities Limited did not take a proper assignment of the debts and securities it relied on (both of which were administered on the advice from Canterbury Legal. An appeal

¹⁷ First Defendant’s submissions, dated 21 January 2020 (footnotes omitted).

was made subsequently to the Court of Appeal (unsuccessful), and the Supreme Court (leave to appeal declined).

[44] Further, to the extent there was any basis to the objection that Mr Walker should have acted earlier, which on the current information before the Court I do not accept, the objection does not apply to the second and fourth defendants.

[45] The defendants also sought to make something of the fact that Mr Cousins and Mr Smith are the ultimate shareholders of 100 Investments Ltd and FTG Securities Ltd. Mr Hide, a director of 100 Investments Ltd, has sworn an affidavit stating that they hold the shares as bare trustees. Mr Barker advised that his instructions were that the position was the same in relation to FTG Securities Ltd. I do not place particular weight on the fact of the shareholding but note that, even if they do hold the shares as bare trustees, they would still have obligations as trustees which might place them in a potential position of conflict given the advice that the firm has given to the plaintiff companies.

[46] Finally, Mr Barker submitted it may be inconvenient for the plaintiffs to instruct alternative solicitors as well as alternative counsel. But at this relatively early stage of the proceeding it should not cause any particular material delay to the proceedings particularly as the plaintiffs have acknowledged a significant repleading and refocusing of the claim will be required.

[47] In any event, applications for recusal are to be determined on whether the Court considers the integrity of the Court process requires recusal, not the convenience of the parties.

Result

[48] For the above reasons the applications by the first, second and fourth defendants to restrain Canterbury Legal from continuing to act in the proceeding succeed. Orders accordingly.

Costs

[49] Costs to each of the defendants on a 2B basis would be generally appropriate save for the following adjustment. The fourth defendant had the main running of the argument. Although all defendants filed submissions, the first defendant effectively adopted the submissions of the second defendant with some minor additions. The time allowed in relation to the first defendant for the preparation of submissions will be on a time band A basis. Otherwise the defendants are each to have costs on a 2B basis. I do not certify for second counsel.






Venning J