PIONEER INSURANCE COMPANY LIMITED V A ANDERSON & ANOR HC NAP CIV 2007-441-882

PIONEER INSURANCE COMPANY LIMITED V A ANDERSON & ANOR HC NAP CIV 2007-441-882 22 October 2008IN THE HIGH COURT OF NEW ZEALAND NAPIER REGISTRY CIV 2007-441-882BETWEEN PIONEER INSURANCE COMPANY LIMITED Plaintiff AND A ANDERSON & ANOR Defendants Judgment: 22 October 2008 at 3.30 pmJUDGMENT OF ASSOCIATE JUDGE D.I. GENDALLThis judgment was delivered by The Registrar on 22 October 2008 at 3.30 p.m. pursuant to r 540(4) of the High Court Rules 1985.Solicitors: Stace Hammond, Solicitors, PO Box 19-101, Hamilton Sainsbury, Logan & Williams, Solicitors, PO Box 41, Napier Gilbert Walker, Solicitors, PO Box 1595, Shortland Street, Auckland 1140Introduction[1] The plaintiff, Pioneer Insurance Company Limited ("Pioneer") seeks an order that Mr KJ Crossland of Stace Hammond, Hamilton be permitted to continue to act as counsel and solicitor for the plaintiff in this proceeding. [2] This proceeding was commenced by Pioneer in November 2007 as a claim for summary judgment against each of the two defendants. One of the affidavits filed in support of the summary judgment application was that of Ms Toy-Cronin – a lawyer employed by Mr Crossland's firm Stace Hammond as a staff solicitor – sworn on 2 November 2007. An affidavit in opposition to the summary judgment application was sworn by the Defendant Robert Elvidge on 7 December 2007 which placed a portion of the evidence of Ms Toy-Cronin into contention. A short affidavit in reply was sworn by Ms Toy-Cronin on 20 December 2007. [3] On or about 23 April 2008, Pioneer's application for summary judgment was withdrawn and the claims have since been proceeding towards trial in the usual way. [4] Pioneer's present application arises out of the coming into force on 1 August 2008 of the Lawyers and Conveyancers' Act: (Conduct and Client Care) Rules 2008("CCCR"). The relevant rule, Rule 13.5.2, is contained within chapter 13 of the CCCR, the relevant portions of which provide as follows:"Lawyers as officers of Court13. 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. Independence in litigation13.5 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." (Emphasis Added)[5] On 1 August 2008, the date when the CCCR came into force, Stace Hammond notified the Court that a member of its firm was likely to give evidence, some of which may be of a contentious nature and sought an order under Rule 13.5.2 granting leave for Stace Hammond to continue acting for the plaintiff. [6] On 20 August 2008 I, made an interim order that Stace Hammond be permitted to act for the plaintiff pending final determination of the application.THE PREVIOUS RULES WHICH APPLIED UNTIL 1 AUGUST 2008[7] The CCCR which came into force on 1 August 2008 effectively replaced the Rules of Professional Conduct for Barristers and Solicitors ("Former Rules"). The corresponding rule in the Former Rules was rule 8.06 which provided:"8.06 A practitioner must not act as both counsel and witness in the same matter Commentary (1) If there is any reason for a practitioner to think that he or she may be required as a witness in a matter, the practitioner should decline to act as counsel. (2) The same principle applies to making an affidavit in a contentious matter where the practitioner is acting as counsel. (3) If, having started to act as counsel, the practitioner finds it necessary to make an affidavit in respect of the matter concerned, then the practitioner must immediately retire from the position of counsel, unless the Court, in the particular circumstances, directs that it is still appropriate for the practitioner to continue to act. (4) Even where an affidavit might appear to be in respect of a formal or non-contentious fact, it is prudent for the practitioner to have it made and sworn by some other person. (5) Where a practitioner, having already accepted instructions as counsel, becomes aware that a partner or employee of the practitioner might be called as a witness for the client, the practitioner must exercise care and professional judgment in deciding whether or not to continue as counsel in the matter. (6) The constraints expressed above apply to the same extent where a practitioner acts as both solicitor and counsel."[8] Of some possible relevance to the present application is the fact that this proceeding was commenced at a time when the Former Rules applied. In respect of circumstances in which counsel had already accepted instructions and started to act, the Former Rules made a clear distinction between circumstances in which counsel then found it necessary himself to make an affidavit (R8.06(3)) and circumstances in which counsel became aware that a partner or employee of his might be called as a witness (R8.06(5)). More particularly:(a) Even in the former situation, there was no automatic disqualification of the practitioner from the position of counsel. Application could be made to the Court for a direction under R8.06(3) that it was still appropriate for the practitioner to continue to act as counsel. Moreover, even if the practitioner decided or the Court directed that the practitioner should step down as counsel, the Former Rules nonetheless envisaged that a member of that practitioner's firm might step in and act as counsel in the proceeding. And, as I understand it, in practice that was sometimes what occurred. (b) In the latter situation, R8.06(5) simply required that the practitioner was required to exercise care and professional judgment in deciding whether or not to continue to act as counsel in the matter. The decision as to whether or not to continue acting as counsel was thus one for the practitioner rather than the Court to determine. [9] According to the plaintiff, after instructions had been received from Pioneer, Ms Toy-Cronin a staff solicitor at Stave Hammond met with and/or had a series of telephone discussions with the defendant Mr Elvidge during the period July- September 2007. In her affidavit sworn on 2 November 2007 in support of the summary judgment application, Ms Toy-Cronin deposed, inter alia, as to the content of those discussions and annexed contemporaneous file notes which she had made. [10] It seems that, at that time, no objection was taken by either of the defendants to the decision by Mr Crossland to continue acting for Pioneer and to commence this proceeding acting as solicitor and counsel on Pioneer's behalf. Pioneer's application for summary judgment was withdrawn in April 2008. Statements of defence were filed by Mr Anderson and Mr Elvidge on 16 and 19 May 2008 respectively. On 19 June 2008 an application was made by Mr Anderson for leave to issue a third party notice, and an order granting leave was subsequently made on 20 August 2008.THE SCOPE OF THE NEW RULE – R. 13.5.2 CCCR[11] The CCR in their final form were signed under seal by the New Zealand Law Society on 18 July 2008, notified in the Gazette on 24 July 2008, and came into force on 1 August 2008. [12] The new rule 13.5.2 (noted at para. 4 above), which only applies where the evidence to be given is of a contentious nature, appears to introduce a different procedural approach to that which prevailed previously in that: (a) It makes no immediate distinction between the situation in which it is envisaged that a lawyer acting will give evidence on the one hand and the situation in which a partner or employee of the lawyer acting will give evidence on the other; (b) It requires that lawyer to immediately inform the Court and, unless the Court directs otherwise, to cease acting. Absent such a direction, it seems the entire firm to which counsel belongs is disqualified by virtue of the fact that a member of the firm or a lawyer employed by the firm is to give evidence. (The rule does not apply to barristers operating in the same chambers). [13] On 1 August 2008, Mr Crossland filed a request with the Court for permission to continue acting as counsel. The first-named defendant Mr Anderson has consistently indicated that he is content to abide by the decision of the Court in relation to that application. The position of the other defendant, Mr Elvidge, is slightly different. He confirms now that he will also abide the decision of the Court – albeit that he has nonetheless brought to the attention of the Court in an affidavit dated 9 September 2008 matters which may well be relevant to the issue of granting of leave. I will address this affidavit later in my judgment.THE APPLICATION OF R 13.5.2 IN THE PRESENT CASE[14] Prior to the introduction of the CCCR, New Zealand Courts had had occasion in a series of cases to review the principles applicable to removal of solicitors acting in civil proceedings – see for example Clear Communications Ltd v Telecom Corporation of New Zealand Ltd (1999) 14 PRNZ 477 (HC). The principles identified in those cases which are of particular relevance to a consideration of rule 13.5.2 appear to include: (a) Removal of a lawyer is not a retrospective sanction for past misconduct but a prospective measure to safeguard the future conduct of the particular proceedings; (b) A litigant should not be deprived of his or her choice of counsel without good reason; (c) The Courts should guard against allowing removal applications to be used as a tactical weapon to disadvantage the opposing party; and (d) A balance must be struck between the injustice of depriving a party of his or her lawyer of choice and the injustice of allowing that lawyer to continue in prejudicial circumstances. (e) Although the threshold for the exercise for the jurisdiction must not be set so high as never to be attained, there must be something exceptional before removal of a lawyer can be contemplated. It can be justified only in cases of truly egregious misconduct likely to infect future proceedings. [15] Where the issue is one of client conflict the Courts will be vigilant not to succumb to tactical applications. This is particularly so when the application is made late in the progress of a matter. Bishop v Bishop (28 July 2006), Asher J, HC Auckland, CIV 2002-404-3634.[16] In the present case, the essential factors which Pioneer submits justify the granting of an order permitting Mr Crossland to continue acting as counsel are: (a) This proceeding had been on foot for 10 months prior to the CCCR coming into force. Under the former rules Mr Crossland was clearly entitled to act as counsel notwithstanding the fact that Ms Toy-Cronin was to give evidence. Nothing about that arrangement appeared to cause any disquiet to the defendants; and there was no challenge to Mr Crossland/Stace Hammond acting as counsel/solicitors for Pioneer, whether under the common law principles set out in Clear Communications or in reliance on the old rule 8.06. (b) The evidence of Ms Toy-Cronin was already before the Court in affidavit form prior to the introduction of the new rule. (c) It now transpires that Ms Toy-Cronin is due to leave Stace Hammond at the end of this year. The perceived potential impediment to Mr Crossland's independence it is said is cured by the fact that Ms Toy- Cronin will no longer be an employee of the firm to which Mr Crossland belongs. Interestingly, on a strict reading of the rule, even if Mr Crossland was disqualified now, once Ms Toy-Cronin leaves his firm's employment a possible argument exists that there would be no obstacle to Pioneer re-engaging Mr Crossland as counsel. (d) Pioneer has exercised its right to engage counsel of its choice; and the Court is told it has invested considerable capital in engaging him to conduct the case. It is argued there will be clear prejudice to Pioneer if Mr Crossland is now removed as counsel. (e) Counsel submits neither of the defendants will suffer any prejudice if Mr Crossland continues to be engaged as counsel. (f) An application of this kind necessarily involves the Court endeavouring to draw an appropriate balance between the interests ofjustice and the interests of Pioneer. It is submitted the interests of justice clearly favour the granting of an order in this case. Moreover, for the Court to disqualify Mr Crossland at this stage is argued to effectively allow the rule to have retrospective effect. [17] I now turn to address these issues.Judge alone proceeding – notification has already served a purpose.[18] When this matter comes to trial it will be tried by a Judge alone. In my view there is no realistic potential here for the Judge conducting the trial to be confused as to Ms Toy-Cronin's role or as to the nature of Ms Toy-Cronin's evidence. She will not be making submissions in the case. Her role will be confined to the giving of evidence on matters within her direct experience. [19] In that regard, the mandatory requirement for counsel to notify the Court serves an end in itself. The potential mischief which the rule addresses might be said in some part to be met by the act of notification.Prejudice to Pioneer[20] As I understand it, Pioneer is owned by CU Securities Ltd, whose shares are held to the benefit of the New Zealand Association of Credit Unions ("NZACU"). NZACU executives and officers of credit unions who are members of NZACU comprise Pioneer's board. [21] I am told that NZACU or its predecessor has retained Stace Hammond as its lawyers since 1961. Over that time the trustees and executives of NZACU say they have developed a relationship of trust and confidence with Stace Hammond, and over the last decade with counsel, Mr Crossland. Pioneer obviously does not wish to lose that relationship of trust and confidence in the present case. [22] Mr Crossland an experienced litigator is said to have experience clearly relevant to issues arising in the present case. In addition, by promptly bringing the present matter to the Court's attention Mr Crossland has shown that he is clearlymindful of counsel's duty of fidelity to the Court and his duty to ensure that he does not undermine the processes of the Court. [23] For Pioneer to now brief new counsel in my view would prejudice Pioneer in pursuing this matter, particularly given that this proceeding was commenced nearly one year ago. As I see the position, Pioneer would be required to absorb certain wasted costs in getting proceedings to this stage. It would also have to spend considerable time bringing new solicitors up to speed. That may result in the proceedings being further delayed, with consequent impact on the best use of the Court's time.Absence of Prejudice to the Defendants[24] The intent of the new rule 13.5.2 might well be seen as addressing the risk and/or perception of a loss of independence on the part of counsel, and consequential damage to the reputation and operation of the judicial process, rather than the risk of more direct prejudice to other parties to the proceeding. [25] Notwithstanding this, in my view there is no evidence before the Court here that any prejudice would be suffered by either of the defendants by allowing Mr Crossland to continue as counsel. [26] In this regard, I refer to the following specific matters: (a) Mr Anderson has consistently indicated an intention to abide the ruling of the Court and has not raised any suggestion of prejudice. (b) Mr Elvidge has now indicated a preference to abide the ruling of the Court. In relation to the memorandum and affidavit dated 9 September 2008 placed before the Court on behalf of Mr Elvidge in respect of the present application it is noted: (i) By its prompt notification made on 1 August 2008, Pioneer has effectively sought to confirm its understanding that MrCrossland's ongoing involvement would not cause any prejudice to Mr Elvidge. (ii) That when notification was first made, Mr Elvidge filed a memorandum dated 7 August 2008 indicating that he wished to be heard in respect of the matter. (iii) A series of correspondence between counsel ensued which reached no satisfactory conclusion. (iv) On 20 August 2008 I issued a minute in this matter which included a direction that "by 10 September 2008 any party who opposes (the present) application is to file and serve an appropriate opposition together with any material in support." (v) On 9 September Mr Elvidge filed his affidavit in relation to the representation issues and a memorandum of counsel. Both the affidavit and the memorandum expressly noted that Mr Elvidge did not formally oppose the application. Those documents nonetheless sought to put before the Court certain new matters which, by implication at least, might argue against an order allowing Mr Crossland to continue as counsel. (vi) In particular, comment was now made in relation to the possible involvement of another partner in Stace Hammond, Mr Wilson. (vii) In his affidavit Mr Elvidge expresses the view that the attendance by Mr Wilson at a meeting with the defendant may be relevant in this proceeding. Mr Elvidge says Mr Wilson's involvement in the meeting was "controversial". His counsel also alleges in his memorandum that StaceHammond did not provide all relevant information to the Court. Neither Mr Elvidge nor his counsel however indicated how the meeting may be relevant to matters at issue. It is not something pleaded in Mr Elvidge's statement of defence. (viii) Pioneer has not called Mr Wilson to give evidence and its counsel confirms it does not intend to do so. In the information which he has placed before the Court Mr Elvidge might be taken to suggest that he may call Mr Wilson himself. That is a matter for him to determine. Notably in paragraph 8 of the memorandum from Mr Elvidge's counsel, it is suggested that Mr Wilson's involvement in the factual issues "is more relevant to the interests of the other defendant Mr Anderson". The Court has heard nothing on this issue from Mr Anderson and as noted above he abides the Court's ruling. (ix) Counsel confirm Mr Wilson is the Managing Partner of Stace Hammond and that he has worked for NZACU since 1981. The relationship of trust and confidence over the years built up between NZACU and Stace Hammond it is said is in large part due to Mr Wilson's special expertise in the law related to Credit Unions. (x) Counsel advise Mr Wilson is not a litigator advocating for Pioneer here. As I see it, there is even less chance that the finder of fact here might be confused about his role in the proceedings than there would be in Ms Toy-Cronin's case if Mr Elvidge subpoenaed Mr Wilson to give evidence for Mr Elvidge. [27] Pioneer has indicated that it is its express wish that Mr Crossland continue to act for it in this proceeding. These wishes are of some importance in circumstancessuch as the present. If Pioneer (and Mr Crossland as counsel in this matter) do not consider that Pioneer's interests are prejudiced or conflicted here by the giving of evidence by a member of counsel's firm, then in my view the defendants arguably can have little reason to object on that score. Such an analysis as I see it can flow under the new rule 13.5.2 here, particularly given the earlier principles contained inClear Communications. Of further relevance here is the fact that the new rule has only come into force part way through the conduct of this proceeding and that even if Ms Toy-Cronin's evidence is contentious, she will no longer be an employee of Stace Hammond when this matter proceeds to trial. In my view the overriding independence obligation of Mr Crossland as counsel for the plaintiff under Rule 13.5 CCCR would not be compromised in the circumstances prevailing here. And finally, I am satisfied that neither defendant will suffer prejudice if Mr Crossland continues to be engaged as counsel and solicitor for Pioneer in this proceeding. [28] For these reasons I am satisfied that the Court should exercise its discretion to allow Mr Crossland and Stace Hammond to continue to represent Pioneer in this proceeding. [29] A direction to this effect in terms of Rule 13.5.2 CCR is now made.'Associate Judge D.I. Gendall'