Ace-Kirker v Piper
[2017] NZHC 226
•21 February 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2016-404-500 [2017] NZHC 226
BETWEEN WAYNE LIONEL ACE-KIRKER
AND
MICHELLE LOUISE BAKER AS TRUSTEES OF THE UTOPIA FAMILY TRUST
Plaintiffs
AND
JAMES WILLIAM PIPER Defendant
Hearing: 21 February 2017 Appearances:
K Robinson for the Plaintiffs
R J Hollyman and S Laing for DefendantJudgment:
21 February 2017
ORAL JUDGMENT OF ASSOCIATE JUDGE R M BELL
Solicitors:
Shine Lawyers, Albany, Auckland, for Plaintiffs
Spencer Legal, Auckland, for Defendant
Copy for:
R J Hollyman, Auckland, for Defendant
ACE-KIRKER AND BAKER v PIPER [2017] NZHC 226 [21 February 2017]
[1] The plaintiffs, trustees of the Utopia Family Trust, sue the defendant, a patent attorney, for alleged breaches of professional duty which they say resulted in certain patent applications failing. Mr Piper applies for summary judgment. He says that the plaintiffs’ causes of action cannot succeed for the following reasons:
(a) their claim is barred by the terms of an agreement made in 2013 under which earlier litigation was settled;
(b)the claim is an abuse of process because they are litigating matters that Mr Ace-Kirker should have raised in the earlier proceeding;
(c) the plaintiffs as trustees of the Utopia Family Trust do not have standing to sue, as Mr Ace-Kirker was his client;
(d)he did not breach any professional duties because the retainer terminated at the end of March 2010 and the matters that the plaintiffs allege against him occurred after that date; and finally
(e) the plaintiffs did not suffer any loss. Mr Ace-Kirker had the opportunity to maintain his patents and was not prevented from doing so by Mr Piper. Any failure by Mr Ace-Kirker to maintain his patent application was a result of his own impecuniosity.
[2] There is no dispute as to the principles applying on a defendant’s application for summary judgment under r 12.2(2)of the High Court Rules. The Court of Appeal’s decision in Westpac Banking Corporation v M M Kembla New Zealand Ltd
remains authoritative. 1
1 Westpac Banking Corporation v M M Kembla New Zealand Ltd [2001] 2 NZLR 298 (CA) at
[60]-[64].
Background
[3] Mr Ace-Kirker is an inventor. His inventions include security devices and other products. While he is the inventor, the arrangements (or the evidence) as to the ownership of the intellectual property rights in his inventions and trade marks and the right to exploit them are not straightforward. At one stage there was a partnership between Mr Ace-Kirker and a Mr Birkett for the development of products invented by Mr Ace-Kirker. Later a company, XFactor Quality Products Ltd, was formed, in which Mr Ace-Kirker and Mr Birkett were shareholders. That is said to have replaced the partnership. Later, the Utopia Family Trust was formed. At the same time Mr Ace-Kirker says that he assigned various intellectual property rights to the Trust. Neither the deed of the Utopia Family Trust nor the deed assigning the intellectual property has been put in evidence.
[4] There is evidence of a licensing agreement between the Trust and XFactor Quality Products Ltd, under which the company had the exclusive right to manufacture, use, sell and maintain the intellectual property for all but one of the inventions for the security devices. Later the Utopia Family Trust entered into a licensing agreement with another company, Quest Developments Ltd, for the exclusive right to use intellectual property for another invention. Mr Ace-Kirker and Mr Birkett transferred their shares in XFactor Quality Products Ltd to the Utopia Family Trust.
[5] Mr Piper’s practice is known as Pipers. It is based in Auckland but at relevant times it had a Hamilton office which was run by Ms Tyrer-Harding. Mr Ace-Kirker lived in Hamilton. Out of preference, he dealt with the Hamilton office rather than Auckland. Ms Tyrer-Harding carried out extensive work for him including formulating, applying for and maintaining patents and trade marks, not only in New Zealand but also overseas. She apparently used the procedures available under the Patent Cooperation Treaty which allow for efficient overseas recognition of patents. In arranging overseas registration and patent maintenance she engaged overseas patent attorneys as sub-agents. She carried out Mr Ace- Kirker’s intellectual property work from May 2003 to March 2010.
[6] In February 2010 Ms Tyrer-Harding went on leave. Mr Piper arranged for a member of the Auckland office (Mr Allen) to look after the Hamilton office in her absence. Mr Allen reviewed the files of Mr Ace-Kirker and came to the view that while substantial work had been carried out, much of it had not been billed. He arranged for invoices for the unbilled work to be sent out.
[7] Mr Ace-Kirker’s response was to dispute the invoices. He said that he had not authorised the Auckland office to carry out any work for him. He wanted the invoices cancelled. He accepted that there were four invoices which Ms Tyrer- Harding had sent out before going on leave and which he was required to pay, but he disputed the rest. He sent an email on 25 March 2010 which included this:
You are not authorised to represent me or to conduct any work on my behalf and I formally request any files relating to myself or any of my companies you have obtained or are holding to forward immediately to Denise Tyrer- Harding in Hamilton. This instruction is legally binding on you and has been made under the Privacy Act, no.6.
[8] Pipers sent a response on 29 March 2010 giving reasons for the billing, advising that Pipers had a lien on all of Mr Ace-Kirker’s files until the accounts were paid, that the files would remain in Auckland and would be released only once the accounts were paid, and that Ms Tyrer-Harding would not be working on the files while money was still owing to Pipers. The letter had a reminder that Mr Ace-Kirker had not paid funds required for renewal of a European patent and that the patent would lapse.
[9] The letter included this:
Your letter of 25 March 2010 directs Piper to cease work on all of your files. We will accept that instruction and will write to all of our agents in all relevant countries indicating that you no longer wish Pipers to represent you. You will need to find alternative representation. However we will be retaining the files until the accounts have been paid.
That part of the letter may reflect a misunderstanding of Mr Ace-Kirker’s letter of
25 March 2010. His letter may be read as indicating only that he did not want Pipers Auckland office to do his intellectual property work but he wanted Ms Tyrer-Harding to continue working for him. It was not a formal termination of the retainer. In other words, it is arguable for the plaintiffs that Pipers’ letter of 29 March 2010 terminated
the relationship. The plaintiffs argue for the continuation of obligations after that date but they do not suggest that a client-patent attorney relationship as such lasted after 29 March 2010.
[10] There were other developments within Pipers. Ms Tyrer-Harding parted company with Pipers on 2 May 2010. She set up her own practice as a patent attorney. Since then she has carried out some work for Mr Ace-Kirker.
[11] Later in 2010 Pipers began a proceeding in the Auckland District Court claiming $170,124.78 plus interest for unpaid invoices. The defendants were Mr Ace-Kirker and Mr Birkett. They had separate representation. The case was run under the notice of claim procedure under the District Courts Rules that applied from
1 October 2009. The notice of claim, notice of response, part of Pipers’ information capsule and Mr Ace-Kirker’s information capsule have been included in the evidence.
[12] Essentially, Mr Ace-Kirker’s position was that while he recognised his liability for the four unpaid invoices that Ms Tyrer-Harding had sent before going on leave, he denied any liability for the other invoices. His case was that he had negotiated a costings strategy with Ms Tyrer-Harding and she had billed him in accordance with that strategy. He had paid all invoices that had been rendered, barring the four I have mentioned. The invoices sent out after she went on leave were not in accordance with the billing arrangements he had negotiated with Ms Tyrer-Harding.
[13] His information capsule includes a “will say” statement by him in which he stated that he had tried to obtain files from Pipers and that he had applied to the Privacy Commissioner for assistance. He maintained that he required access to the files so that he could prepare his defence for the claim. That was with a view to assessing the validity and reasonableness of the invoices which were the subject matter of the proceeding.
[14] Under the District Court rules a defendant may make a counterclaim. The forms allow for this. Mr Ace-Kirker did not make any counterclaim in that
proceeding. There is nothing in his notice of response to suggest that he was taking issue with the quality of the work carried out by Pipers or that he considered that the charges should be reduced on account of any set-off that he could raise in his defence against Pipers.
[15] The proceeding was to go to hearing in September 2013. On 16 August
2013, Mr Piper and Mr Ace-Kirker signed a settlement agreement. The recital included this:
1The plaintiff and the first defendant are parties to a proceeding in the Auckland District Court under number CIV-2010-004-2863 in which the plaintiff has sought judgment for payment of certain invoices.
2 The parties have agreed on a resolution of the claim.
[16] Under the agreement Mr Ace-Kirker was to pay $8,000 in two instalments. It provided:
This agreement is in full and final settlement of District Court proceeding
CIV-2010-004-2863.
It also provided for the filing of a discontinuance after payment had been made in full. Each party would pay its own costs. At the same time, counsel in the proceeding filed a joint memorandum. That recorded that the plaintiff, Pipers, discontinued against Mr Birkett entirely and recorded that a discontinuance against Mr Ace-Kirker would be filed once payment had been made. The fixture was accordingly vacated.
The claims in this case
[17] The statement of claim has two causes of action: for breach of contract and breach of fiduciary duty. In many respects they repeat the same allegations. For this proceeding, the plaintiffs focus more on the claim of breach of fiduciary duty.
[18] The fiduciary duty alleged is that Pipers had to:
(a) act at all times in the best interests of the family trust and Mr Ace- Kirker;
(b) provide clear estimates of costs and expected expenditure;
(c) worked to an agreed budget with the family trust and Mr Ace-Kirker; (d) at all times conducted themselves in a professional manner becoming
a patent attorney or a person otherwise engaged professionally in the intellectual property field; and
(e) comply with legal obligations that are required of patent attorneys or persons otherwise engaged professionally in the intellectual property field.
[19] The pleaded breaches are:
(a) The defendant submitted erroneous and historical invoices (some invoices over seven years old) that were not in accordance with the fees agreement pleaded at paragraphs 1.9 and 1.14 above;
(b) the invoices submitted by the defendant did not reflect a clear estimate of costs and expected expenditure for the defendant’s services to the UFT/Mr Ace-Kirker;
(c) the invoices submitted by the defendant failed to give UFT/Mr Ace- Kirker an effective filing strategy or worked to the previously agreed budget;
(d) the defendant failed to comply with the Patents Act 1953 for recovery of the invoices, which were disputed in any event;
(e) the defendant asked overseas agents to close their files and/or not to act for UFT/Mr Ace-Kirker in the absence of any abandonment instructions for the national patent applications, and where the invoices were disputed in any event;
(f) the defendant notified overseas agents that there was an accounts dispute to discourage their continued involvement with UFT/Mr Ace-Kirker;
(g) the defendant delayed notifying UFT/Mr Ace-Kirker that the overseas agents had been instructed to close their files;
(h) the defendant wrongfully maintained a lien over the files of UFT/and Mr Ace-Kirker against which he had issued invoices, files that were related to the inventions/patent applications at hand but did not have any invoices issued, files that were not even related to the inventions/patent applications at hand, and files that were transferred to Pipers from another patent firm with no costs owed;
(i) the defendant prevented UFT/and Mr Ace-Kirker from advancing and protecting the national patent applications; and
(j) the defendant failed to comply with the recommendations of the
Office of the Privacy Commissioner.
[20] The real nub of the plaintiffs’ complaints go to Pipers’ alleged actions after March 2010. They complain that Pipers did not let Mr Ace-Kirker have access to his files although they were entitled to it under Privacy Act principles, notwithstanding Pipers’ claim to a lien. They say that Pipers failed to advise them or forward to them notices as to the need for registrations overseas. They specifically refer to patent applications in New Zealand, South Africa, the United States, Australia and the People’s Republic of China.
[21] As part of its response, Pipers has given evidence, including from an independent expert, that someone in Mr Ace-Kirker’s position could still have arranged matters either directly himself or through another patent attorney so as to keep pending patent applications alive, even though Pipers had a lien on the files.
The standing of the trustees of the Utopia Family Trust
[22] The statement of claim pleads that Mr Ace-Kirker assigned his intellectual property rights in relation to his inventions to the Utopia Family Trust. Pipers represented the family trust in relation to the intellectual property in the inventions through Mr Ace-Kirker’s instructions and payments. It also pleads that Mr Ace- Kirker remained the applicant and inventor of the intellectual property in Pipers’ records, and on the records of the various intellectual property offices, on the basis that even after the family trust was created he was the trustee holding the intellectual property on behalf of the trust. Even when in a business partnership Mr Ace-Kirker remained owner/ applicant and inventor of the intellectual property. It would have been easier to understand this pleading if the trust deed and the deed of assignment of the intellectual property had been put in evidence. I will assume that the pleading is sound and that the allegations may be capable of proof.
[23] Pipers does not accept that position. It points to evidence that casts doubt on the entitlement of the trustees to sue. In particular, before the settlement was
negotiated in 2013, Mr Ace-Kirker swore an affidavit as to his means. It shows that he had very modest means. It refers to the Utopia Family Trust:
The trust has always been and remains inactive financially. No monies or property have ever been credited to the trust and thus no distributions have or can be made by it.
[24] When that was relied on in this case, Mr Ace-Kirker said in reply:
The statement I made in 2013 is completely accurate. All the intellectual property was in my name. The trust merely had the rights to rewards from the intellectual property, and there were no rewards at that stage. Nor have there been any rewards since then due to the conduct of Pipers.
It is understandable that Pipers would point to that evidence as showing that the intellectual property belongs to Mr Ace-Kirker and therefore the trustees do not have standing to sue.
[25] Notwithstanding that, the evidence at best only casts doubt on the claim that the trustees own the intellectual property. In a summary judgment application, it is necessary for the defendant to negate the plaintiffs’ claim entirely not just to suggest that it is weak or that there are good reasons to doubt it. If the trust deed and the deed of assignment relating to the intellectual property had been put in evidence, it would have been possible to have a clearer view. There is evidence from Ms Tyrer- Harding and Mr Ace-Kirker as to the deed of trust and as to the deed of assignment. For this summary judgment application I cannot dismiss that evidence as implausible or lacking in credibility.
[26] Pipers says that its client was Mr Ace-Kirker, not the trustees. Pipers’ evidence shows that Mr Ace-Kirker was recorded as the client who would be billed. The records apparently contain no evidence as to the trusteeship.
[27] On the other hand, Mr Ace-Kirker and Ms Tyrer-Harding (who is now in the Ace-Kirker camp) say that she was aware of the trust from the outset. At this stage of the case it is arguable for the trustees that the trust had intellectual property rights, and beneficial entitlement to them, that Mr Ace-Kirker was acting as agent for the trustees when he instructed Pipers to carry out, or to continue carrying out,
intellectual property work to protect the interests of the trust. Trustees may, of course, engage agents,2 and one trustee may act as an agent on behalf of all trustees.
[28] It is arguable for the plaintiffs that Mr Ace-Kirker was acting as agent for the trustees when he dealt with Pipers. It is not fatal to that that he did not instruct them as to the trusteeship. He may have been the agent acting for an undisclosed principal. The trustees, as principals, are able to sue on any contract entered into by Mr Ace-Kirker and also rely on any breaches of fiduciary duty which Pipers owed to Mr Ace-Kirker as their client.
Agencies
[29] It is also necessary to note that there are other agencies at play. Whether or not Mr Ace-Kirker engaged Pipers as a principal in his own right or as agent for the trustees, he appointed Pipers as agent to deal with the intellectual property rights. When it came to dealing with overseas intellectual property matters, Pipers engaged foreign patent and trade mark attorneys. They were the agents of Pipers and sub- agents of Pipers’ client.
The settlement agreement of 16 August 2013
[30] Pipers submits that by reason of the terms of the settlement agreement, the trustees are barred from suing for breach of contract and breach of fiduciary duty. It relies strongly on Nandro Homes Ltd v Datt.3 In its submission, the settlement agreement of 16 August 2013 resolved not only Pipers’ claim against Mr Ace-Kirker but also any claims which Mr Ace-Kirker and the trustees might have against Pipers. There is generally no dispute as to the principles applied in determining the meaning of a contract. There is no difference for settlement agreements. An objective approach is applied. Regard must be had to context. I have disregarded Mr Ace-
Kirker’s assertions as to what he thought the words meant, and I have disregarded evidence as to the parties’ negotiations.
[31] As to context, Pipers sued Mr Ace-Kirker for unpaid fees for work carried out up until March 2010. Mr Ace-Kirker’s position was that while he was a client of Pipers and was liable for pay their fees, he accepted liability for the four invoices and disputed the claim for unbilled work. In short, this was a billing dispute. I note again that he did not dispute the quality of the work that had been carried out, and he did not allege any failure to perform, any delay in performance or any defective performance. He did not suggest that there had been a total failure of performance, and he did not allege any cause of action against Pipers.
[32] Because this was a claim for professional fees, Mr Ace-Kirker could not run a common law defence of abatement – that is, the abatement defence recognised in the leading decision of Mondel v Steel.4 That decision recognised that for some contracts (sale of goods and building contracts are standard examples) the payer may resist a claim for payment by showing that the value of what was supplied was less than that contracted for. But that does not apply to all contracts. A claim for freight is a well-known exception, as is a claim under a bill of exchange. But another exception, perhaps less often recognised, is a contract to provide professional
services. In Mondel v Steel a case was cited of a claim by a solicitor for unpaid fees. In such a case the right to refuse payment arises only if there is a complete absence of performance. Similarly, Mr Ace-Kirker did not make any counterclaim and did not assert any right of set-off (under statute or contract or at equity) in response to the claim by Pipers. The issues in the case were accordingly essentially a billing dispute and nothing more. Indeed, Mr Piper, in Mr Ace-Kirker’s “will say” statement complaining about the lien, was directed at the billing issue and his inability to assess the reasonable value of Pipers’ services. The agreement settled a billing dispute but not anything else.
[33] Some settlement agreements purport to be a settlement of all issues between the parties whether raised in the particular proceeding or not. There are drafting challenges with resolving unknown claims – as shown by Bank of Credit and Commerce International v Ali.5 But I accept for this proceeding that any possible claims by Mr Ace-Kirker against Pipers were knowable. The agreement was made
in August 2013. By that stage Mr Ace-Kirker must have been aware that many of his patents had lapsed. But read in context, the present agreement does not purport to settle anything more than a billing dispute, the subject of the claim against Mr Ace- Kirker.
[34] The decision in Nandro Homes Ltd v Datt6 relied on by Pipers can be distinguished. Ms Datt was the purchaser under an agreement for sale and purchase of a property. Nandro Homes Ltd cancelled for non-payment of the deposit. Ms Datt began a proceeding for specific performance, in which she denied that a settlement notice had been given, and denied any failure to comply with the settlement notice. She lodged a caveat against the title. She sued for specific performance. When an application for interim injunction came before the court, the parties entered into an agreement to settle matters. The recitals to the agreement said:
The parties have agreed upon terms to resolve all issues between … in
respect of the above matters and record the terms of this agreement herein.
And clause 5 said:
These settlement terms constitute full and final settlement of the proceeding and all other claims between the Datts, Nandro and Mrs Kalkat relating to the matters recited above and the property.
[35] Later, Ms Datt began another proceeding. This time she sued Nandro Homes Ltd for breach of contract and negligence, and sued other defendants in deceit. Her allegations of breach of contract and negligence were the same matters that she had relied on in the proceeding for specific performance. She contested the validity of the settlement notice. Instead of running a specific performance proceeding she was trying to raise it by way claiming breach of contract and negligence. In those circumstances, Asher J had little difficulty in finding that she was precluded from doing so, in terms of the agreement. He also held that the agreement was in any event an abuse of process for litigating something that had been resolved earlier.
[36] In my judgment this case is different. The agreement resolved a billing dispute. The settlement did not deprive Mr Ace-Kirker of the right to take any
proceedings for any causes of action he might have against Pipers. Accordingly, in
6 Above n 3.
my judgment the terms of the settlement agreement of August 2013 do not preclude the trustees from suing under the causes of action in this proceeding.
The abuse of process defence
[37] Pipers submits that even if the trustees’ claim is not barred under the terms of the settlement of August 2013, the proceeding is an abuse of process because Mr Ace-Kirker ought to have raised these claims when Pipers sued him in 2010.
[38] The abuse of process argument is founded on the well-known dictum of
Sir James Wigram V-C in Henderson v Henderson:7
In trying this question, I believe I state the rule of the Court correctly, when I say, that when a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matters which might have been brought forward as part of the subject matter in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident omitted part of their case. The plea of res judicata applies, except in special circumstances, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation in which the parties, exercising reasonable diligence, might have brought forward at the time.
[39] Pipers relied on Johnson v Gore Wood & Co in support of the abuse of process argument.8 The case is relevant because the House of Lords recognised that a subsequent proceeding may be an abuse of process if it attempts to relitigate matters that have been resolved by a settlement agreement. In other words, there can be vexation and harassment in a proceeding where a claim has been earlier resolved by agreement, just as when it is resolved by judgment.
[40] In his speech Lord Bingham of Cornhill noted that abuse of process under Henderson v Henderson is separate and distinct from cause of action estoppel and issue estoppel, although there are elements in common.9 The underlying public
interest is the same. There should be finality in litigation and the parties should not
7 Henderson v Henderson (1843) 3 Hare 100 at 114-115.
8 Johnson v Gore Wood & Co [2002] 2 AC 1 (HL(E)).
be twice vexed in the same matter. That public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation in the interests of the parties and the public as a whole. The bringing of a claim and the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. Merely because a matter could have been raised in the earlier proceeding does not mean that it should have been, so as to make the later proceeding necessarily abusive. Rather than adopt a dogmatic approach, Lord Bingham considered that there should be a broad, merits-based judgment, which takes account of the public and private interests involved, and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it issues which could have been raised before. Just as it is not possible to list all possible forms of abuse, it is not possible to formulate any hard and fast rule to determine whether on given facts abuse is to be found or not.
[41] The speech of Lord Millett is also important. He agreed that where a prior proceeding has been settled it is necessary to protect the integrity of the settlement and to prevent the defendant from being misled into believing that what he thought was a complete settlement of the matter in dispute was not the case because an
unsuspected matter remains outstanding. He said: 10
It is one thing to refuse to allow a party to relitigate a question which has already been decided; it is quite another to deny him the opportunity of litigating for the first time a question which has not previously been adjudicated upon. This latter (though not the former) is prima facie a denial of the citizen’s right of access to the court conferred by the common law and guaranteed by Article 6 of the Convention for the Protection of Human Rights and Fundamental Freedoms (1953). While, therefore, the doctrine of res judicata in all its branches may properly be regarded as a rule of substantive law, applicable in all l save exceptional circumstances, the doctrine now under consideration can be no more than a procedural rule based on the need to protect the process of the court from abuse and the defendant from oppression.
He also noted that there is a difference between being able to raise a matter and whether a party should have raised a matter.
[42] In my judgment, this proceeding is not an abuse of process under the principles recognised in Johnson v Gore Wood & Co (which had been applied in New Zealand).11 In the earlier proceeding in the District Court, Mr Piper was the plaintiff and Mr Ace-Kirker was the defendant. Mr Ace-Kirker could not have raised the matters the subject of the present proceeding as a defence to Mr Piper’s claim. That arises from the common law defence of abatement not being available. The matter really turns whether it can be an abuse of process to make a claim when there was no counterclaim for the same matter against the plaintiff in the initial
proceeding.
[43] I start with this: if Pipers had successfully sued Mr Ace-Kirker and obtained judgment against him, the entry of judgment would not have barred a separate proceeding by Mr Ace-Kirker and the trustees seeking damages for breach of contract – even if that was the contract on which Pipers had sued. That follows from the Mondel v Steel point. Even if the common law defence of abatement were available, a failure to invoke that defence does not bar a claimant from bringing a separate proceeding alleging breach of contract. An example can be seen in s 54 of the Sale of Goods Act 1908 under which a buyer, alleging breach of warranty, may defend a proceeding and seek abatement. The buyer also has the option of paying and bringing a separate proceeding. The Sale of Goods Act is widely regarded as a codification of the common law. It reflects the position of other contracts where the defence of abatement may be raised at common law. We see that in building contracts where payment by an employer does not bar the employer from suing later for building defects.
[44] In the circumstances of this case, it may have been possible for Mr Ace- Kirker to bring a counterclaim although there would be complications because of the parties. While Mr Ace-Kirker was personally responsible for paying fees that he had run up, any cause of action for breach of duty by the owners of intellectual property would need to be brought by the trustees as the owners, not by Mr Ace-Kirker alone.
But I take it that some way could be found to accommodate that, complicated as it
11 See, for example, Z v Dental Complaints Assessment Committee [2008] NZSC 55 at [63];
Chamberlains v Lai [2006] NZSC 70, [2007] 2 NZLR 7 at [62] per Elias CJ, Gault and Keith JJ.
would have been. There was no duty on him to do so. He was entitled simply to contest his inability to pay the bills and later to make a claim for breach of duty.
[45] In my judgment the law would become unnecessarily complicated if judges were now to start insisting that defendants are required to raise counterclaims at the time they are sued, rather than to leave them for later proceedings. Historically counterclaims were not available until the 19th century. Before that a defendant alleging a claim against a plaintiff was required to bring a cross action. Bringing a cross action is always open. It allows the party to choose the time to bring it. In
short, except in an insolvency context, set-off is optional, not mandatory.
[46] There are different issues in this proceeding from the other one, a billing dispute on the one hand, allegations of breach of professional duty on the other. One case turns on events before March 2010, the other on events afterwards. It is not an abuse of process to allow Mr Ace-Kirker to bring the present proceeding, even if he could have raised the matter in the 2010 proceeding. Accordingly I dismiss the argument as to abuse of process.
The termination of the retainer
[47] Pipers submits that with the termination of the retainer on 25 March 2010 any duties that it owed to Mr Ace-Kirker and trustees came to an end. In response, Mr Robinson submitted for the plaintiffs that duties may survive the end of a contract. As an example, Pipers asserted lien rights and it had a duty not to throw out Mr Ace-Kirker’s files. He argued that even some fiduciary duties may survive termination of a patent attorney/client relationship.
[48] In my judgment this area is not clear-cut. Ordinarily, in a commercial context, the termination of an agency brings a contract to an end. The agent is released from further performance. Sometimes the agent may continue in performance. That may happen where the agent is part-way through performance of a task which is to result in remuneration for the agent.
[49] Another aspect is that on termination of the agency the agent may need to bring sub-agencies to end as well. The authority of the sub-agent terminates with the termination of the agency. Commercially, Pipers would want to notify their sub- agents of the end of the relationship so as to save the sub-agents from carrying on doing any work needlessly and to avoid exposing themselves to further bills from sub-agents when they did not have funds from their principal. That may point towards a clean-cut break.
[50] But there is an aspect of this case that suggests that there is some lingering duty after this. That comes, in part, from an independent patent attorney giving evidence as an expert. He says:
While it may be common for a previous agent to hold on to physical files, etc, for example where there has been a dispute over payment, it is my experience that most agents adopt a professional attitude and will provide basic details concerning matters contained in the client’s IP portfolio.
Similarly, in his affidavit in reply, Mr Allen says:
I confirm that Pipers would readily have provided information if asked. As recorded in Pipers’ email dated 31 March 2010, Pipers never wanted to see any loss of IP rights.
Amongst the overseas patent attorneys, there seems to be a pattern of advising of potential lapses of applications notwithstanding the termination of their agency. It seems arguable that patent attorneys recognise that they may have some form of professional obligation to see to the interests of their former clients, even those who have not paid their bills. But on the argument presented so far it is uncertain whether that amounts to more than a sense of professional obligation – that is, whether there is a legal duty which may result in liability if not followed.
[51] It may be arguable that even on termination of an agency there is a transitional period before there is a complete cessation of relations. It may be that a fuller hearing may show that what seems to be a general practice amongst patent attorneys does go to their obligations. As I say, the matter was not fully explored in argument. Further argument is required which may also require fuller evidence from people within the profession. While I regard this aspect of the plaintiffs’ claim as weak, I cannot say that it is bound to fail at a final hearing. As the Court of Appeal
recognised in Westpac Banking Corporation v M M Kembla Ltd, a claim cannot be dismissed simply because it appears to be weak.12
The “no loss” argument
[52] Pipers also submitted that the plaintiffs have suffered no loss. Their evidence was that notwithstanding the termination of the relationship, Mr Ace-Kirker was able to save some of his overseas patents. They relied on the evidence of the independent patent attorney as to steps that could have been taken. They referred to an admission by Mr Ace-Kirker that at the relevant period he was without funds. That passage needs to be read in context as Mr Ace-Kirker makes it clear that he was facing difficulties through Pipers’ assertion of their lien.
[53] The argument as to “no loss” goes to causation. Causation arguments are very fact-specific. They generally are not amenable to summary judgment treatment because of the need to examine facts carefully. Because of the special onus on defendants in summary judgment applications, and because it is not possible at this stage to know how all the evidence may come out, I decline to make “no loss” findings against the plaintiffs.
Pruning the statement of claim
[54] There are aspects to the statement of claim that are objectionable because they traverse matters that were resolved by the settlement agreement of August 2013. I identify in particular paragraphs (a) to (d) of the particulars set out in [19] above.
[55] I also note that some of the allegations that remain do not allege arguable breaches of duty by a patent attorney. I see nothing objectionable in Pipers having notified the overseas agents of the termination of the agency. In discussion, Mr Robinson refined the allegation to say that there were breaches of duty in advising of the billing dispute and in messages to the overseas agents to discourage any continued involvement with the family trust and Mr Ace-Kirker. There may also
be something in the allegation of refusing to allow access to files over which a lien
12 Above, n 1. [64].
was maintained, given the access principles under the Privacy Act. The matters that the plaintiffs can arguably maintain against Pipers are restricted. Many of the matters they complain about are really the ordinary consequences of termination of an agency for which both parties seem to share responsibility. Having said that, there seems to be a sliver of a case against Pipers. I cannot say with complete confidence that both the plaintiffs’ causes of action are bound to fail.
[56] I dismiss the application for summary judgment.
Costs
[57] I reserve costs on the application. In many unsuccessful applications for summary judgment by defendants I have granted the plaintiff costs. That has usually been on the basis that the defendant is able to assess the merits of the case before bringing the application. While the defendant has been unsuccessful on this occasion, and some of the arguments could have been predicted, on the liability questions the plaintiffs have got home very narrowly. That, in my judgment, suggests that I should follow the normal approach of reserving costs.
Case management directions
[58] I direct the Registrar to arrange a first case management conference. Ahead of the conference I invite the parties to confer as to the pleadings. In particular I suggest that the plaintiffs refine their pleadings as to breach of duty, to specify with greater particularity how duties have survived the termination in March 2010 and what duties were breached after that date. The plaintiffs will also be required to define the quantum of their damages claim before the close of pleadings can be allocated. I also ask the parties to confer as to discovery.
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Associate Judge R M Bell
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