CAMERON T/A WAIKANAE LAW V RABSON HC WN CIV-2012-485-1297

CAMERON T/A WAIKANAE LAW V RABSON HC WN CIV-2012-485-1297 [18 September 2012]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYCIV-2012-485-1297[2012] NZHC 2385BETWEEN EOIN MALCOLM DONALD CAMERONT/A WAIKANAE LAWPlaintiffAND MALCOLM EDWARD RABSONFirst DefendantAND MALCOLM EDWARD RABSON ANDTRISTAN GLEN WILL AS TRUSTEESOF THE MALCOLM RABSON FAMILYTRUSTSecond DefendantHearing: 30 August 2012Appearances: Mr C.R Carruthers QC with Mr G.J Harley for the PlaintiffMr C.J Kelly for the Second DefendantMr M E Rabson - Defendant in personJudgment: 18 September 2012JUDGMENT OF ASSOCIATE JUDGE DOOGUEThis judgment was delivered by me on18.09.12 at 4 pm, pursuant toRule 11.5 of the High Court Rules.Registrar/Deputy RegistrarDateCounsel:Mr C Carruthers QC and Mr G J HarleyMr C J KellyMr RabsonBackground[1] The claim which the plaintiff brings is for legal fees owing due to a retainer which both defendants are said to have given to the plaintiff. The claim, in other words, is pursuant to a contract to provide legal services. In order to succeed in his claim, the plaintiff will have to demonstrate, amongst other things, that the defendants actually did enter into the alleged contract.[2] The plaintiff has sought summary judgment against the defendants. The second defendants have filed their own application to strike out the plaintiff's claim.[3] So far as the summary judgment application is concerned, the following would appear to be the issues:a) Was it a term of the contract of retainer between the first defendant and the plaintiff that the solicitor and counsel who were to be briefed would take instructions on the basis that the cost of the services provided would be paid for on a private solicitor–client basis, or did the plaintiff accept the brief on a legal aid basis?b) Did the second defendants trust instruct the plaintiff to act for the defendant and to instruct Ms Harley as counsel to represent the trust in the appeal proceedings and, in particular:i) Was it necessary for both of the trustees to agree that the instructions as aforesaid were to be given?ii) Did the trustees both so agree?c) Do the amounts claimed from the trustees in some cases relate to work which the solicitor/counsel carried out for other entities?[4] If the summary judgment application founders on points (a) and (b), it will not be necessary to consider point (c).The summary judgment claim against the first defendant[5] Mr Rabson in effect says that while he instructed the plaintiff with regard to his relationship property proceedings, he did so on the basis that he would not be paying personally for the work but the cost would be carried by the Legal Services Agency. The enquiry, therefore, is whether the proceeding ought to be sent to trial on the question of whether Mr Rabson instructed the plaintiff and counsel on the basis that he would not be liable for the costs personally, but that the legal advisors would look to the Legal Services Agency for payment. Mr Rabson does not need to establish on the balance of probabilities that such was the case. He need only demonstrate that that question is a substantial issue in the proceedings. To do so, he will need to show that there is some support to be found for his position in the evidence. If he fails to do so, the plaintiff will have succeeded because of his averment that the defendant does not have any defence to the claim.[6] The factual issues involved in this part of the case are not straightforward. The brief of counsel whom the plaintiff instructed, Ms Harley, appears to have commenced in 2008. There is at least one document which dates from December 2008. This is an email Mr Rabson sent to Ms Harley, which sets out the details of the subject matter of the appeal proceedings concerning which Ms Harley was to be instructed. A significant feature of the case is that Mr Rabson completed an application to the Legal Services Agency. The application for legal aid was signed over a year after the brief commenced, on 27 January 2010. The application recorded that instructions had been received (presumably by Ms Harley) in December 2008.[7] Mr Rabson said that he selected Ms Harley to act for him as counsel in the first place because she was willing to take instructions on a legal aid basis and was authorised to do so. It would appear that Ms Harley had the task of progressing the legal aid application. As it turned out, legal aid was eventually declined.[8] Having regard to the evidence of Ms Harley and the contemporaneous documents, the Court can confidently conclude even at summary judgment stage thatthe brief commenced at the end of 2008 and that the legal aid application was not filed until over a year later. It is a relevant circumstance of the case that although Mr Rabson considered that he was covered by legal aid from the outset, inconsistently with that position he did not actually sign a legal aid application until a year later.[9] During the period from late December 2008 up until the point where legal aid was declined, Ms Harley carried out substantial work in furtherance of her brief. This involved her undertaking the necessary work during 2009 and at least in the first part of 2010 to obtain leave to appeal. She was required to appear at the High Court in Wellington on 3–7 May. She also appeared on 7 July 2010 for the hearing of the appeal from the Family Court decision which was dealt with by Wild J. Surprisingly, notwithstanding the extensive work that Ms Harley undertook during this period, only one invoice was issued up until December 2010. I will discuss the invoices that were sent out in December 2010 shortly. The earlier invoice was dated 26 February 2009 and was for the fees of $5,623.25 and other disbursements. That account was paid by a company controlled by a trust associated with Mr Rabson on 31 March 2009.[10] That factor, in conjunction with the additional fact that a legal aid application was not actually signed until 27 January 2010, provides some support for theplaintiff's position. Ms Harley was required to start work immediately and, there being no expectation that a legal aid grant would be forthcoming shortly, she is likely to have taken up instructions on the basis that it would be Mr Rabson who would pay the fees. As I have said, consistently with that approach, Ms Harley did in fact invoice Mr Rabson on 26 February 2009 and that account was paid.[11] Against that, Mr Rabson claims that he made enquiries about legal aid as early as November 2008, which is about the time when the retainer commenced. He said that he was required to do that because all the assets that would have been available to him in companies and trusts from which he could obtain funds had been made subject to freezing orders. Consistent with his evidence he has produced in evidence a copy of an email that the Legal Services Agency sent to him on 7 November 2008, which contains a list of legal aid family lawyers in the Wellington region. Included in that list was the name of Ms Harley. There appears to be somecorroboration of this position from Mr Cameron, the plaintiff, that legal aid was discussed at a very early stage, it being mentioned in a handwritten file note that he made of a telephone conversation with Mr Rabson on 2 December 2008. As well, in an email which Mr Cameron sent to Ms Harley on 4 December 2008, he discussed the terms of the instructions that his firm was giving to Ms Harley. That was thatWaikanae Law (Mr Cameron's firm) would be responsible for collecting Ms Harley's fees and paying her:If we have funds available but if the client does not make full payment of your fee Waikanae Law will not be reliable (sic) for payment of the same. In the event that Mr Rabson is able to progress the matter on legal aid, we will in that event discuss the matter with you.[12] On the other hand, however, it cannot be overlooked that in October 2009,when Mr Rabson expressed dissatisfaction with Ms Harley's fees in an email that hesent to her, he did not make any reference to legal aid. Such a reference would have been expected if he had understood that his costs were being covered by legal aid to that point. In the same email Mr Rabson referred to the loss of his employment which had occurred recently. Ms Harley says that this was the event that led to the application being prepared and filed. That, it will be noted, is at a point approximately five months before a legal aid application was actually prepared andfiled. Ms Harley's evidence is that it was the loss of employment which providedthe impetus to making an application for legal aid. While Mr Rabson disputed that point, it may be that the loss of employment, after the brief had been in existence for some time, explains why legal aid was not sought at the outset of the solicitor–client relationship.[13] There is the further consideration that Mr Rabson arranged for one of MsHarley's invoices to be paid (at least indirectly) by the trust, the trustees of which arethe second defendants in this proceeding. This occurred at the beginning of 2009. It is unlikely that Mr Rabson would have permitted that to happen if he was indeed of the belief that his fees were being covered by legal aid.[14] In December 2010, Ms Harley submitted a number of accounts for payment to her instructing solicitor. Some of these concerned attendances as far back as July 2009. The invoices referred to both the relationship property proceedings and alsoother litigation, which are referred to as the Lotto Prize proceedings and the Hitchens proceedings.1[15] The plaintiff gave evidence that as at January 2009, a decision was made that the trust would be henceforth represented in the appeal proceedings by separate counsel, Mr Taylor. I do not see this circumstance as being of any particular assistance in the resolution of the factual dispute in this case.[16] The issue that arises between the plaintiff and the first defendant is whether the defendant has an arguable defence on grounds that no enforceable agreement came into effect between him and the plaintiff authorising the plaintiff to instruct Ms Harley on his behalf in terms whereby Ms Harley's entitlement to professionalcosts would be either on the basis of a legal aid grant (if the first defendant was successful in obtaining same) or otherwise on a different solicitor/client basis. There is no substantial dispute, in my view, that Mr Rabson gave authority to Mr Cameron to instruct counsel to act in the matter. The issue is on what basis Ms Harley was briefed.[17] In this case, there may be some explanation available to Mr Rabson which could allay concerns about his account of matters being inconsistent with the surrounding circumstances. There may be justifiable scepticism about a claim that Ms Harley, having commenced work at the end of 2008, was prepared to leave the legal aid application on hold on the ground that there was no hurry to get it completed. But against that, it must be borne in mind that by the time she eventually sent the accounts that she did, which was towards the end of 2010, she had in fact worked without substantial payment for nearly two years. It is unusual for a practitioner to carry such a large amount of unpaid invoices for so long. Further, it was obviously after the date when the decision of the Legal Services Agency to decline legal aid was in dispute that Ms Harley produced the backlog of accounts calculated on an ordinary counsel–client basis. These two last events may be connected.1 The proceedings were Hitchens v Double Zero Holdings Ltd CIV-2009-485-1961; Rabson v Double Zero Holdings Ltd CIV-2009-485-2052 and Croad v Rabson CIV-2010-485-793.[18] If there was no enforceable contract, then Mr Cameron is not able to sue Mr Rabson for Ms Harley's legal costs. Ms Harley cannot sue Mr Rabson directlybecause of the intervention rule which applies in New Zealand:2Traditionally a barrister sole had no contractual relationship with a lay client and could not sue for fees. This rule still applies as the direct intervention rule, although subject to certain exceptions. But for the application of the direct intervention rule, barristers sole would be in the same position as those holding practising certificates as barrister and solicitor, who may sue for fees.[19] The parties must agree on sufficient elements of their contract to make it a binding bargain. In the present context that means that for there to be a complete contractual agreement, the plaintiff would have to show that the parties agreed on the basis upon which he and Ms Harley would charge for their legal services. Agreement on the matter of fees would be an essential element of a contract of the kind under discussion. At the most basic level, there would need to be agreement as to whether Ms Harley was to invoice the matter as a private counsel–client engagement or whether she would accept a brief on the basis that the client was to apply for legal aid. Having regard to the overall evidence in this case, there is uncertainty on this point.[20] For all these reasons, I am of the view that the present case is not one in which the Court would be justified in granting summary judgment to the plaintiff against Mr Rabson. My conclusion is that there are doubts about whether they can recover against Mr Rabson in contract. For present purposes that is sufficient on thesubject of Mr Rabson's liability. The application for summary judgment against himis dismissed.Did the second defendant trustees instruct the plaintiff/Ms Harley to act for them?[21] In addition to suing Mr Rabson for the fees, the plaintiff also sues his trust, the trustees of which are the second defendant.[22] In the notice of opposition which he filed, Mr Will states that he was never a client of the plaintiff, who was never instructed to act on his behalf.2 Laws of New Zealand Lawyers and Conveyancers (online ed) at [81]. Footnotes omitted.[23] Mr Rabson and Mr Will deny that the trust ever instructed Ms Harley. This position primarily rests on the evidence which Mr Will provided in affidavit form.[24] The plaintiff, however, invites me to ignore the evidence which the second defendants have given, and particularly the evidence of Mr Will, on the ground that that evidence is inconsistent with the surrounding circumstances of the case and there is extrinsic evidence which establishes that the averment cannot be correct. It will therefore be necessary to summarise the main aspects of the factual background to the dealings between the parties.[25] The plaintiff points out that at the stage where Ms Harley was instructed there had already been a round of litigation in the Family Court which had been broughtby Mr Rabson's former partner, Mr Rabson and the trust. That dispute was the subject of a hearing at the Family Court in Wellington on 8 August 2008. The central issue in that proceeding had been whether a substantial lotto prize which Mr Rabson had won was the result of a ticket that he bought in his own right, so that the winnings became his personal property which were subject to the provisions of the Property (Relationships) Act 1976 or whether they belonged to the second defendant trust and would therefore be beyond the reach of the former partner.[26] It is correct that in at least some of the invoices, references are made to Ms Harley representing the trust — although the trust appears to have been involved in the other cases as well as the one concerned with relationship property. One of the invoices, Invoice 5255, is broken down into costs charged to Mr Rabson and those to the trust (being $120,000 and $60,000 respectively).[27] The second defendant trustees took part in the Family Court litigation. Their position was that the lotto proceeds that belonged to the trust were not relationship property and that the claimant had no entitlement to them. Mr Will gave an affidavit to that effect, dated 7 May 2008. He also gave evidence before Judge Ullrich QC in the Family Court, which is referred to in her judgment.33 See for example G v R FAMC Porirua FAM-2007-091-892, 4 September 2008 at [46].[28] The conclusions of the Family Court Judge were adverse to the trust and to Mr Rabson. It was against this background that the plaintiff alleges both Mr Rabson and the trustees of the second defendant agreed to retain the services of Ms Harley so that an appeal could be brought from the Family Court decision. It would no doubt have been to the advantage of the trust if the appeal was successful.[29] Another significant part of the background is that Mr Will did not sign the client retainer agreement with the plaintiff. That document, which was signed on 20 November 2008, was signed only by Mr Rabson.[30] Ms Harley duly drafted an appeal against the judgment of the Family Court. Applications were made ancillary to that appeal for an extension of time for the trustees to appeal out of time. Mr Will swore an affidavit in September 2009 which was directed towards factual issues bearing upon whether the lotto proceeds were the property of Mr Rabson or the trust. Mr Will has since deposed that while he gave an affidavit to assist the trust and possibly Mr Rabson, he never agreed to the trust briefing Ms Harley. He gives as his reason the fact that the trust did not have the money that would be needed to meet an obligation to Ms Harley.[31] It is also relevant that Dobson J's judgment of 19 December 2008 records Ms Harley as appearing for both Mr Rabson and for the trust.4[32] There was considerable discussion about the circumstances in which Mr Will, the other trustee, paid a cost award which was made against the trustees. In an email exchange which took place around 29 March 2010, Mr Will sought advice as towhether the costs award should be paid to the other party's solicitors. Ms Harley advised him to pay it into Mr Cameron's account. In fact Mr Will paid the money from his own resources apparently with the intention that he would recover the amount later from the trust when it was able to repay him.[33] My assessment of this evidence is as follows. Mr Will knew that a Court order had been made against him and Mr Rabson as the trustees. There was no basis upon which he could assume anyone else would be paying the Court order for costs4 R v G HC Wellington CIV-2008-485-2279, 19 December 2008.against him. He therefore paid it. I do not agree that his action in doing so establishes that he thereby affirmed instructions which Mr Rabson had given to Ms Harley.[34] In this case the plaintiff considers that inferences are available in the circumstances of this case which show that Mr Will agreed with the trust instructing the plaintiff and Ms Harley.[35] It is part of the plaintiff's case that he must have appreciated that the affidavit was required for the purposes of an appeal brought both by Mr Rabson and the trust. The fact that Mr Will gave affidavits is relied upon as showing that the trust had an interest in the outcome of the litigation.[36] The essence of the submission for the plaintiff is that there is no doubt that Ms Harley or the plaintiff considered that they were authorised to act for the trust on the appeal and Ms Harley actually purported to do so. The plaintiff/Ms Harley were supported in their efforts by Mr Will. The trust stood to benefit if the appeal was successful.[37] Against that, it needs to be borne in mind that even though the plaintiff says that both Mr Rabson and Mr Will were to be the clients, the plaintiff did not note that crucial material when he drew up the only contemporary written document which bears on the issue, namely, the retainer letter.[38] Although they have not put it in these words, the substance of the position which is taken by the trustees is that the real protagonist in the relationship property proceeding was Mr Rabson and that where necessary the trustees would at the request of Mr Rabson provide evidence which he needed for what was essentially a relationship property dispute. On this view of it, the plaintiff/Ms Harley must have been labouring under an error in purporting to represent the trust.[39] It is not the function of the court hearing a summary judgment application to adopt a view which best reflects the preponderance of probabilities. There can be cases where notwithstanding a denial of liability, and even sworn evidence from thedefendant that he is not liable, the court is nonetheless driven to the view that the existence of a defence is not arguable.[40] My view is however that after reviewing all the evidence and hearing the submissions there remains an issue in this case that ought to go to trial. One of the matters which the court will need to consider is whether the parties were simply at cross purposes as to who the client was.[41] For those reasons too, I conclude that the claim against the second defendants does not reach the point where summary judgment should be granted against them.[42] My conclusion is that it remains a reasonably arguable issue whether the second defendants actually instructed Mr Cameron/Ms Harley to act on their behalf in the appeal and whether they are therefore liable for the costs rendered for legal services provided in relation to that appeal.The unanimity point[43] The second defendants also advanced other points by way of defence. The main line was that trustees can only be sued where they have unanimously agreed to assume liability under contracts. Because I have come to the conclusion that the second defendants have an arguable defence on other grounds, it is not necessary for me to consider this issue.[44] The unanimity point has however been relied upon by the second defendants in support of their strike out application and I will consider it in the next part of the judgment.The second defendants' strike out application[45] It remains to deal with the second defendants' application for a strike outorder.[46] The strike out application is brought on the grounds that:a) the second defendants never instructed the plaintiff to act as their solicitors;b) the trustees are required by law to act unanimously and any decision to appoint the plaintiff as solicitor to the trust needed to be made unanimously; further that no such unanimous decision was ever made;c) the plaintiff's claim does not disclose any reasonably arguable cause of action, it is frivolous, vexatious and an abuse of the processes of the court.[47] The substance of the grounds for applying to strike out is as follows. It is contended that if instructions were given to the plaintiff for the provision of services to the second defendant trustees, the instruction to that effect came from one of the trustees only, Mr Rabson. The second defendants now say that if there was any necessary offer and acceptance involving the trust, both trustees ought to have been involved and not only Mr Rabson. In the absence of the participation of both trustees in this process, no contract binding Mr Will came into existence. Mr Kelly relied upon authorities that included Rodney Aero Club Inc v Moore.5[48] The position was summarised in Equity and Trusts in New Zealand where it was said:6Similarly if one of a number of trustees enters contracts to sell trust assets, the sale cannot be enforced against the trust estate.[49] It is therefore the case that if Mr Will were to be bound to the contract instructing the lawyer, he would needed to have entered into the contract himself.Mr Kelly's point was that there is no evidence that he did so. Indeed, Mr Will hasexpressly averred that he did not.[50] Mr Carruthers in reply referred me to the case of Messeena v Carr.7 That was a case where the trustees had the discretion to acquire an annuity for the beneficiary under a will. The judgment of Lord Romilly MR contains the following:5 Rodney Aero Club Inc v Moore [1998] 2 NZLR 192 (HC) at 195.6 Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Brookers, Wellington) at [5.3.1(10)].I had some doubts at first whether, as the discretion was to be exercised by the two trustees and one only had acted, the discretion had been properly exercised; but I have come to the conclusion that as the other trustee approved and sanctioned what was done by the one who made the payments, no breach of trust was committed.[51] It was Mr Carruthers' submission that what occurred in this case correspondsto what happened in Messeena and therefore the ground for strike out upon which Mr Will relies cannot be sustained.[52] The broad allegation in the statement of claim is that the defendants were clients of the plaintiff from 2008 to 2011. The pleading alleges, at least implicitly, that the parties were in a contractual relationship with each other. The defendantdoes not assert that the plaintiff's pleading inherently lacks viability at law or that the plaintiffs are not able to enforce it, for example, because of limitation reasons. What the second defendants do allege in effect is that on examination of legal and factual issues in the course of the strike out application, the Court will be able to conclude that the primary allegation of the plaintiff that there was a contract cannot be sustained.[53] Tipping J summarised the principles relating to strike out applications in his judgment in Marshall Futures Ltd (in liq) v Marshall with his statement of principle being accurately summarised in the head note to the reported case as follows:8The Court must be satisfied that it has the requisite materials and the necessary assistance from the parties to reach a definite and certain conclusion that the claim cannot succeed before it should be struck out. The application will be determined primarily on the pleadings and the allegations of fact by the plaintiff being treated as correct, but the Court might also have regard to affidavits filed for and against the application from which it might be able to discern that a properly pleaded and arguable cause of action could be raised. In a case where the plaintiff can undoubtedly start again, being within time, the Court should only strike out if satisfied that on the best view of the facts from the plaintiff's point of view, the plaintiff could not succeed at law, or alternatively, where the pleading is so deficient as to require a de novo start rather than an amendment (see p 323 line 22, p 323 line 30, p 324 line 1).7 Messeena v Carr (1870) LR 9 Eq 260 at 262–263 per Lord Romilly MR.8 Marshall Futures Ltd (in liq) v Marshall [1992] 1 NZLR 316 (HC).[54] The plaintiff did not have to plead, and did not plead, by what process the defendants entered into the contract. Had the plaintiff for example pleaded that Mr Rabson entered into the contract as agent on behalf of himself and Mr Will, it might have been possible for the second defendants to persuade the court to strike out the statement of claim on the basis that it is not legally possible for trustees to delegate the powers to agents in the way that the statement of claim contemplated. It may have been possible for the defendants to have succeeded on this point had theybrought an application for defendant's summary judgement. They did not elect totake this course. I accept that Mr Carruthers at one point in the arguments addressed me on the application of the authority of Kembla9 — an authority on defendant'ssummary judgment — but there was no detailed argument on the availability of summary judgment in the circumstances of this case. Nor did Mr Kelly address me on that aspect of the matter. In those circumstances I would be reluctant to treat the application for strike out as though it included an application in the alternative for defendant's summary judgment.[55] However the factual contentions upon which the application to strike out rests cannot be taken as established by the court for the purposes of the application. Without the factual platform that I have spoken of, the strike out application cannot succeed. The result is that the application to strike out is to be dismissed.Stay pursuant to the Lawyers and Conveyancers Act 2006[56] A complaint was made concerning the fees charged. The defendants say thatbecause of s 161 of the Act the proceedings should be stayed. The plaintiff on theother hand drew my attention to the fact that s 161(1) only imposes a stay in suchcircumstance:Until after the complaint has been finally disposed of.9 Westpac Banking Corp v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA).[57] There is no doubt that the complaint has been disposed of in this case. Mr Rabson, in the memorandum that he filed with leave and which was dated 13 September 2012, said that:The complaint is alive and proceeding and relates to fees whether they are legally aided fees or not. The evidence is that the Law Society misunderstood the complaint in any event so that the decision is of no assistance to the Court.[1] The fact is that whether or not Mr Rabson agrees with the decision that the Law Society made all remedies under that Act have been exercised, albeit unsuccessfully from the perspective of the defendants. There is no substantial ground upon which the Court could conclude that the proceeding is still subject tothe statutory stay. That ground of defence could not of itself defeat the plaintiff'ssummary judgment application.Conclusion[58] Costs on the applications for summary judgment and to strike out are reserved in both cases.[59] The parties should confer concerning a timetable for advancing the proceeding from this point having regard to issues such as how timetable for filing statements of defence and whether discovery is to be ordered under r 8.7 or r 8.8 of the High Court Rules.[60] The Registrar is to allocate a case management conference at the earliest available date._____________J.P. DoogueAssociate Judge