GREENMOUNT MANUFACTURING LIMITED V SOUTHBOURNE INVESTMENTS LIMITED HC AK CIV 2005-404-6675

GREENMOUNT MANUFACTURING LIMITED V SOUTHBOURNE INVESTMENTS LIMITED HC AK CIV 2005-404-6675 11 November 2008IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2005-404-6675BETWEEN GREENMOUNT MANUFACTURING LIMITED Plaintiff AND SOUTHBOURNE INVESTMENTS LIMITED Defendant Hearing: 2 October 2008 Appearances: Mr Tim Herbert for Plaintiff Ms S Grant for Defendant Judgment: 11 November 2008 at 12 noonJUDGMENT OF ASSOCIATE JUDGE DOOGUEThis judgment was delivered by me on11.11.08 at 12 pm, pursuant to Rule 540(4) of the High Court Rules. Registrar/Deputy Registrar DateCounsel:Mrs S Grant, Barrister, P O Box 4338, Auckland Lee Salmon Long, P O Box 2026, Shortland Street, AucklandBackground[1] This matter came before me in my Chambers List, 2 October 2008. Before the commencement of the list Ms Grant had filed a memorandum dealing with the question raised by solicitors for the plaintiff as to the part that the solicitor for the defendant, Mr Foley, should play in these proceedings. Essentially, what Ms Grant sought was an order that Mr Foley should be excused from compliance with the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 ("the Rules") which are made under the authority of the Lawyers and Conveyancers Act 2006 ("the Act"). [2] Both parties agreed that I can consider the matter and, if I think it appropriate, make orders even though the matter has been brought before the Court in an informal way, namely, by way of memoranda of counsel. [3] This proceeding concerns a claim by the plaintiff for specific performance of an agreement for sale and purchase of a commercial property. In the High Court the defendant was initially successful and the plaintiff's application for summary judgment was dismissed. On appeal to the Court of Appeal that decision was reversed and judgment entered for the plaintiff. There was then a further appeal to the Supreme Court which resulted in the matter being returned to the High Court for re-consideration. The High Court trial is to take place in approximately six weeks time. [4] The plaintiff has expressed concerns about continued participation in the proceedings by Mr Foley, a partner in the firm of Foley and Hughes. It is common ground that Mr Foley will be giving evidence at the trial. He acted as the conveyancing solicitor for the defendant when the parties initially negotiated their agreement for sale and purchase. In summary, one contentious issue that will need to be decided by the Court concerns the ability of the plaintiff to settle the agreement for sale and purchase at the time when it was under an obligation to do so. That in turn involves the question of whether legal tender was required or whether thepurchaser was excused from tendering settlement in that form. Certain actions and statements of Mr Foley are central to his part of the dispute. [5] Throughout the life of these proceedings Mr Foley has in addition been the solicitor on the record for the defendant. I must record, though, that Mr Foley is apparently not a litigation lawyer and his firm has instructed Mr J Miles QC and Ms S Grant as counsel and they have had the carriage of the proceedings so far. [6] Mr Foley has already provided some evidence in the sense that he has responded to interrogatories that were administered to him. [7] The principal issue here is whether the Court should make an order which permits the Mr Foley to continue acting as solicitor on the record.Professional Obligations[8] The Lawyers and Conveyancers Act 2006 came into force on 1 August 2008. Section 4 provides:4 Fundamental obligations of lawyers Every lawyer who provides regulated services must, in the course of his or her practice, comply with the following fundamental obligations: (a) the obligation to uphold the rule of law and to facilitate the administration of justice in New Zealand: (b) the obligation to be independent in providing regulated services to his or her clients: (c) the obligation to act in accordance with all fiduciary duties and duties of care owed by lawyers to their clients: (d) the obligation to protect, subject to his or her overriding duties as an officer of the High Court and to his or her duties under any enactment, the interests of his or her clients.[9] It would appear that s 4 is essentially confirmatory of the obligations that barristers and solicitors have long been understood to be under as officers of the High Court.[10] On 1 August 2008 new rules of conduct and client care for lawyers came into force. They contain the following provisions:Chapter 2 Rule of law and administration of justice 2. A lawyer is obliged to uphold the rule of law and to facilitate the administration of justice. 2.1 The overriding duty of a lawyer is as an officer of the court. 2.2 A lawyer must not attempt to obstruct, prevent, pervert, or defeat the course of justice.[11] Also relevant is Chapter 13 of the Rules which is headed "Lawyers as officers of court". Again the duty of lawyers to the Court is reiterated with clauses 13, 13.1, 13.2 which read as follows:13 The overriding duty of a lawyer acting in litigation is to the court concerned. Subject to this, the lawyer has a duty to act in the best interests of his or her client without regard for the personal interests of the lawyer. 13.1 A lawyer has an absolute duty of honesty to the court and must not mislead or deceive the court. 13.2 A lawyer must not act in a way that undermines the processes of the court or the dignity of the judiciary. 13.2.1 A lawyer must treat others involved in court processes with respect. 13.2.2 A lawyer must not discuss any case or matter before the court with any judicial officer involved in the proceeding either formally or informally outside of the rules of procedure that permit matters to be raised in the absence of the other party (such as in cases of urgency or where an ex parte application is justified). In cases of doubt, the lawyers for other parties (or if a party is not represented, then the party concerned) should be informed of any matters being brought before the court. 13.2.3 A lawyer must not have contact with jurors before a verdict and must not initiate contact with jurors after the verdict where the contact is likely to bring the system of justice into disrepute. 13.2.4 A lawyer must not, during the conduct of a proceeding, engage in any relationship with a witness that may have the effect or appear to have the effect of interfering with the fair disposition of the proceeding.[12] That is followed by the key provision to which the parties referred to me, clause13.5, which is headed "Independence in litigation":Independence in litigation 13.5 A lawyer engaged in litigation for a client must maintain his or her independence at all times. 13.5.1 A lawyer must not act in a proceeding if the lawyer may be required to give evidence of a contentious nature (whether in person or by affidavit) in the matter. 13.5.2 If, after a lawyer has commenced acting in a proceeding, it becomes apparent that the lawyer or a member of the lawyer's practice is to give evidence of a contentious nature, the lawyer must immediately inform the court and, unless the court directs otherwise, cease acting. 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. This rule does not apply where the lawyer is acting for himself or herself, or for the member of the practice whose actions are in issue.[13] This rule replaces the similar Rule 8.06 of the old New Zealand Law Society Rules of Professional Conduct which provided that a practitioner must not act as counsel and witness in the same matter. [14] The United Kingdom Solicitors' Code of Conduct 2007 contains a similar provision to the New Zealand rule at 11.06 which reads as follows:11.06 Appearing as a witness You must not appear as an advocate at a trial or act in the litigation if it is clear that you, or anyone within your firm, will be called as a witness, unless you are satisfied that this will not prejudice your independence as an advocate, or litigator, or the interests of your client or the interests of justice.[15] While that rule, of course, has no application in New Zealand, it does show that the inherent tensions between acting for the client and 'the interests of justice' are widely recognised. [16] In the commentary to the United Kingdom Rule in Cordery on Solicitors, the following passage appears:Appearing as a witness – 11.0625. The circumstances in which it will be proper for you to appear as an advocate at a trial or act in litigation when you are also a witness will be extremely rare. Factors you will need to consider include: (a) the nature of the evidence you are being asked to give, its importance to the case and in particular whether it is likely to be contested or is purely formal; (b) whether the situation would give rise to a conflict between you or your firm and your client. For example, it would not be appropriate for you to give evidence for another party (or, in a criminal case the prosecution); and (c) how your client would be affected if, having already accepted instructions to act, you were to stop acting. 26. Provided the evidence is unlikely to be contested on a factual basis, it will normally be acceptable for you to act as an advocate if a member of your firm is to give evidence. For example, if an employee of your firm has advised a client at a police station, and is required to give evidence as to the reasons for advising the client to exercise the right to silence, it would not be improper for you to act as an advocate in the case.Authorities[17] That practitioners must not act in the dual roles of counsel and witness has long been accepted by the Court of Appeal: see Hutchinson v Davis [1940] NZLR 490. And the rules of professional conduct referred to above are supported by the inherent jurisdiction of the Court to remove counsel who intends to give evidence in proceedings: see Beggs v Attorney-General [2006] 2 NZLR 129 at [21]. [18] The situation of a solicitor giving evidence has also been discussed in the Australian case of Jeffery v Associated National Insurance Company Limited [1984] 1 Qd R 238. This was a case where the insured owners of a trawler claimed on an insurance policy after the vessel became a total loss. The defence was that the insured had scuttled the vessel. The solicitor acting for the defendant gave evidence at the trial of a conversation that he had with another person. The conversation assumed considerable importance in the trial. It concerned an alleged statement made by one of the insured about what steps the insured need to take 'to lose his vessel so that he could claim against his insurance company'. The Judge haddifficulty in determining whether or not this conversation took place. He said, at page 245:My task in assessing the evidence in this subsidiary area was not made easier by the fact that the solicitor concerned remained on the record at all times as solicitor for the defendant, even after delivering a defence specifically relying upon the conversation between Mr Bryan and Mr Jeffery, when he knew that Mr Bryan was unlikely to come forward to verify the incident, and when he should have foreseen that he was likely to be personally involved in a controversial area. No doubt he did not think the matter through. In any case where a solicitor has reason to believe that he may be required to give evidence of a controversial kind in a proceeding, he should arrange for an independent solicitor to take over the matter so that his objectivity can not be questioned when he gives evidence.[19] In another Queensland case, Chapman v Rogers, ex parte Chapman [1984] 1 Qd R 542, a solicitor gave evidence on a drink drive prosecution in the Magistrates' Court. The solicitor had been involved in events that occurred on the night when the respondent was detained and breath tested. The solicitor gave evidence about his observations of the respondent and other matters on the night in question. Campbell CJ after referring to the background of the case said:However, for the reason that it is desirable to avoid any suggestion of real or apparent conflict between the duty to the court and the obligation to the client, I consider that it is generally unwise for a solicitor, who is not himself appearing as advocate or as instructing solicitor in court but who is aware that it is likely that he will be called as a material witness (other than in relation to formal or non-contentious issues), to continue, either personally or through his firm, to represent the client if this can be reasonably avoided. It may be unavoidable in some cases such as those involving complex commercial issues. I do not suggest, and it was not suggested to the magistrate or to us, that the solicitor's evidence in this case should not have been accepted and acted upon by the magistrate in relation to the matters of fact sought to have been established thereby. However, I have mentioned the matter generally as I think it is desirable that it be drawn to the attention of the legal profession.[20] The Chapman decision was a full Court of Queensland decision but the other two Judges did not associate themselves with the Chief Justice's remarks. [21] In another Australian case, Yamaji v Westpac Banking Corporation (No. 1)(1993) 115 ALR 235 at 236, Drummond J, sitting in the Federal Court, approved the comments made by Campbell CJ in Chapman v Rogers. Drummond J, though, while approving what Campbell CJ said about the required standard of conduct, declined to intervene to restrain the solicitors in the case before him. His refusal to do soapparently arose from an apprehension that he did not as a Federal Court Judge have 'disciplinary jurisdiction' over practitioners. The Judge approached the issue from the perspective of whether the conduct of the solicitor breached some equitable obligation which was owed to the opposite party and which would justify the issue of an injunction. He concluded that it did not. The comments by the Judge are strictly obiter but it is of interest that he saw no reason to dissent from the remarks made by Campbell CJ. [22] An interesting footnote to the Yamaji judgment appears in the judgment of Windeyer J in Scallan v Scallan [2001] NSWSC 1078 where, after referring to other authorities including Yamaji the Judge said at [10]:[10] Drummond J in Yamaji v Westpac Banking Corp (1993) 42 FCR 431 stated that breach of the rule of professional conduct would not found jurisdiction for an injunction unless such jurisdiction arose as a result of the power of the Supreme Court to control its practitioners. Accepting that jurisdiction exists in this Court, the basis on which an injunction was sought was not clearly articulated by counsel for the applicants other than upon the basis of the decision in Chapman v Rogers and the passage which I have set out. Nevertheless I proceed on the basis that the true argument was that there was some risk of conflict between the duty of the solicitor to the court and the duty of the solicitor to the client. That supposed conflict really assumes that a solicitor might give tailored or biased evidence or even false evidence to assist a client, or to support the solicitor's actions so as to negative negligence, but that same conflict could perhaps be said to arise where a solicitor advises a client on discovery. It is, I think, apparent that the conflicts would only arise if the solicitor had an interest in the result of an action, additional to his interest in doing his best for a client to have success in an action.[23] Windeyer J considered that in general it was not unusual for instructing solicitors in contested probate proceedings to give evidence as to facts relevant to instructions for an execution of a will. The Judge said that he did not consider that those circumstances involved some conflict of duty which would justify the Court intervening.Discussion[24] The above authorities and the way in which r 13.5.2 is structured make it clear that the presumption is that a lawyer will not act in the circumstances with which that Rule is concerned. The Court has a dispensing power under the Rule,though. In order to inform the decision about whether the dispensing power ought to be exercised in this case, it is helpful to consider the authorities discussed above and the application of the relevant principles underlying the Rule to this case. [25] The considerations that are mentioned in Cordery are relevant in the present case. It is noted that circumstances in which a solicitor should continue to act in litigation when also a witness 'will be extremely rare'. It is also relevant to the present proceeding to enquire whether the evidence is 'likely to be contested or is purely formal'. I interpolate that it can be said of the evidence in this case that it is at the heart of the dispute between the parties; it is not of a formal nature and has been, and no doubt will continue to be, fiercely contested. [26] The following comments can be made about the significance of the Rules in the present context. [27] The requirement that a lawyer be 'independent' in litigation seems to express the familiar enough idea that a lawyer must keep his roles separate and avoid situations where he or she is potentially compromised in discharging the obligations that arise from one role by obligations arising from another. [28] First, the lawyer as witness should not be, in any part of his or her involvement in the Court process, partisan. Once litigation starts and once a lawyer is pulled into the process, it would seem that his or her responsibilities become re- defined. While no doubt a lawyer must loyally and forcefully act to pursue his or her client's interests even to the extent that they might be damaging to the interests of other parties – always of course subject to his or her legal obligations to act ethically, honestly and in conformity with the law and his or her duties as an officer of the Court – the position is quite different if he or she has engaged as a witness in the proceedings. Witnesses, unlike advocates, owe no duty to a party in respect of evidence given in Court: Lord Hoffman in Arthur J S Hall & Co v Simons [2002] 1 AC 615 at 698 [29] No doubt this is the reason why the new Rules insist upon 'independence in litigation'. The policy underlying r 13.5.2 is founded on a clear recognition that,presumptively, to concurrently act as a solicitor in proceedings and to give evidence in the proceedings involves a conflict which must be resolved in favour of the obligations that the witness assumes to the Court. To this extent the rule is consistent with the approach that Courts have taken when considering whether counsel should be restrained from acting in a particular case. In Beggs v Attorney- General [2006] 2 NZLR 129 Miller J said :[20] Black v Taylor involved counsel who was said to have a conflict of interest in that he had received confidential information about the party against whom he proposed to act. However, the decision established that the jurisdiction is not confined to such cases. It is available where the public interest in the administration of justice, which transcends the particular case and includes maintenance of public confidence in the judicial system, requires that the Court intervene. That typically occurs where there is a conflict between counsel's duty to the Court and his or her duty to the client or self-interest, but there is no limit on the conduct that may qualify. The question in any case is whether removal is necessary to safeguard the future conduct of the litigation (Clear Communications v Telecom Corporation of New Zealand Ltd (1999) 14 PRNZ 477 at p 482).[30] But the rule would now seem to go further. It would appear to reflect an assumption that, absent special circumstances, the continuation of a solicitor/client relationship is inimical to the duties that the lawyer who intends to give evidence owes to the Court. [31] In this case, of course, the lawyer is not intending to appear as counsel. He intends to continue in the role of what might be described as a litigation solicitor, if he is permitted to. The clearest statements of the principle that a lawyer should not be a witness in a case in which he is acting have been concerned with cases where the lawyer is acting as counsel. [32] In the Scallan case which I mentioned at paragraph [22], Windeyer J expressed some sceptiscm about the justification for requiring a litigation solicitor to withdraw where the sole reason is that he intends to give evidence. While the reasons the judge gave are of some force, it must be assumed that those who drafted the New Zealand Rules took a different view.[33] My conclusion is that unless the character of the evidence that the solicitor intends to give is non-controversial or uncontested, or unless there is some other compelling reason, a solicitor who intends to give evidence at trial should not act as the solicitor for the party who intends to call him to give evidence. [34] Ms Grant thought that the fact that counsel from the independent bar were retained reduced the importance of Mr Foley's part in the proceedings. However, in my view the Rules make it clear that engagement in litigation is relevant whether in performing the roles traditionally discharged by counsel or those by litigation solicitors performing out of Court tasks. The key factor is that a solicitor involved in advancing the litigation has the normal solicitor's duty to act only in his or her client's interests and that must influence his or her sympathies and allegiances in the matter. Unless it is unavoidable, a lawyer should not allow himself to be in a position where circumstances of his own making necessarily raise questions about his objectivity and his commitment to the truth in the proceeding. [35] Ms Grant also said that even if the Rule applies, the Court should make an order dispensing with the obligation on Mr Foley because not to do so would result in considerable inconvenience and expense. A new lawyer would need to be properly briefed on the proceedings and would need to be introduced not only to the files, but also to the client. A new lawyer would also need to discharge the formalities now required in the form of entry into a service provider agreement with the client and other matters. [36] I cannot regard these as sufficient reason to excuse the solicitor here from compliance with the rule. While the matters raised are not to be dismissed as trivial, their relative importance is slight and in the circumstances of this case it seems to me they could not justify the Court making an order exempting Mr Foley from the requirements of Rule 13.5.2.Conclusion[37] In my view the Court should not make the order which the defendant seeks in respect of its solicitor, Mr Foley. I therefore decline the application. Counsel should attempt to come to agreement on the matter of costs and if they do not should file brief memoranda of no more than three pages each within 10 working days. _____________ J.P. Doogue Associate Judge