Carlyle v McCardle HC Wellington CIV 2010-485-1292

[2010] NZHC 2201

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV 2010-485-1292

BETWEEN  ANTHONY STEWART CARLYLE Appellant

ANDJOHN VINCENT MCCARDLE & PETER REGINALD RICHARDSON

Respondents

Hearing:         8 December 2010

Counsel:         Appellant in Person

Respondents in Person

Judgment:      8 December 2010

JUDGMENT OF RONALD YOUNG J

Introduction

[1]      In 1989 the appellant was restricted from practising as a solicitor on his own account.   As a result the Law Society arranged for another solicitor to carry on Mr Carlyle’s practice.   Shortly afterwards as a result of an arrangement between Mr Carlyle and the respondents, the respondents agreed to take over the practice

formally run by Mr Carlyle and to employ Mr Carlyle as a solicitor.

ANTHONY STEWART CARLYLE V JOHN VINCENT MCCARDLE & PETER REGINALD RICHARDSON HC WN CIV 2010-485-1292  8 December 2010

[2]      The  arrangement  did  not  work.     In  1991  the  appellant  commenced proceedings in the High Court against the respondents.[1]   The proceedings were heard by Greig J.  The appellant was largely unsuccessful.  He obtained a modest judgment for the value of a number of items which had originally belonged to his legal practice which had been taken over by the respondents and not returned to him.

[1] Carlyle v McCardle HC Wellington CP 157-91, 21 February 1994.

[3]      On 7 December 2009 the appellant filed a statement of claim in the District Court at Porirua seeking judgment against the respondents for $45,780.84 together with compound interest.

[4]      The essence of the claim was that:

a)        the  appellant  had  paid  the  office  expenses  of  his  law  firm  from

6 March 1989 to 31 May 1989.  The damages sought were a “refund”

of the costs paid; and

b)GST “credit funds” relating to transactions before the appellant’s law firm  had  been  taken  over  by  the  respondents  had  been  wrongly retained by the respondents.

[5]      In the District Court the respondents sought an order that the proceedings be struck out.  Two grounds were advanced:

a)       the proceedings were statute bared by the Limitation Act 1950 and/or were   an   abuse   of   process   because   of   delay   in   pursuing   the proceedings; and

b)the  issues  pleaded  had  already  been  resolved  by  Greig J  in  his judgment of 1994, and this was in effect an attempt to relitigate issues already litigated and thus an abuse of process.

[6]      The Judge in the District Court struck out the proceedings.   The Judge concluded:

a)        the  claim  was  an  attempt  to  relitigate  the  issues  determined  by

Greig J;

b)if the proceedings were governed by the Limitation Act then they were filed outside of the limitation period, and if the cause of action was not covered by the Act then the delay was an abuse of process.

[7]      In this appeal the appellant says:

a)       the current claim is not an attempt to relitigate the proceedings ruled on by Greig J in 1994;

b)the  primary  cause  of  action  of  breach  of  fiduciary  duty  was  an equitable remedy not covered by the Limitation Act;

c)       the  strike  out  application  based  on  abuse  of  process  relied  upon evidence  and  submission  and  was  not  therefore  appropriate  for  a strike out.

More detailed background

[8]      The appellant was admitted as a solicitor in 1973.   On 4 November 1988

Mr Carlyle was suspended from practice by the New Zealand Law Society and in February 1989 the Law Society Disciplinary Tribunal forbad him from practising as a principal until further order.  Initially after Mr Carlyle’s suspension from practice his law practice was operated by a practitioner appointed by the local Law Society.

[9]      In February 1989 Mr Carlyle discussed his position with Mr McCardle and an agreement was reached between the appellant and respondents relating to the operation of the appellant’s law firm.   The exact terms of that agreement was the subject of the 1991 litigation.

[10]     Mr Carlyle’s  amended  statement  of  claim  in  the  original  proceedings (CP 157/91)  alleged  that  the  terms  under  which  he  was  to  act  as  an  employed solicitor of the respondents included: that the trust account of Mr Carlyle’s practice would be operated by the respondents; they would be paid $500 a week for the responsibility of oversight of the practice; Mr Carlyle would pay all of the office expenses with respect to the operation of the law firm from the fees earnt by him which he said would be paid to him by the respondents; the respondents would charge him a fee for the space occupied in their premises and the staff previously employed by him; the appellant was to continue to be responsible for a staff solicitor.

[11]     Unsurprisingly part of this claim was struck out well prior to trial.  It would obviously have been in breach of the Law Society’s prohibition against practice that Mr Carlyle continue his law practice as before but with some form of supervision by the respondents and with them having cheque signing authority as he pleaded in his statement of claim.

[12]     Thus by the time the case came to trial the issues between the parties had significantly narrowed.  The issues before Greig J can be summarised in this way:

a)       whether the respondents withheld money due to the appellant from work done by the appellant prior to his suspension from practice;

b)        whether the appellant was paid the salary agreed;

c)       whether the respondents wrongly took possession of the appellant’s office equipment;

d)a claim for consequential loss for the alleged misconduct of the respondents alleging that the appellant had lost the good will of his law practice; as a result he had been unable to pay a mortgage which resulted in a substantial loss on the sale of his house and a further loss of an insurance policy because of failure to pay premiums;

e)        the GST issue.

[13]     By trial therefore the appellant would have been well aware that he was unable to sustain a claim based on his assertion that he was somehow self-employed but under the supervision of the respondents and that his entitlements flowed from this self-employment.

[14]     In his judgment of February 1994 Greig J concluded, as to work-in-progress and debts rendered but unpaid:

... I am satisfied that the plaintiff has in fact received directly or by payment to or on his account all his proper entitlement to the work-in-progress and the  debts  rendered  but  unpaid  whether  the  relevant  time  is  taken  to  be

4 November 1988  or  6 March  1989.    (The  possible  dates  on  which  the respondents took over the appellant’s legal practice.)

Discussion

[15]     To return therefore to the appellant’s claim in these proceedings.   To deal with the second part of the claim relating to GST first.  The appellant’s GST claim has already been the subject of judgment by Greig J.  The Judge was satisfied that the appellant had received all his proper entitlement arising from the operation of his law firm before suspension.

[16]     As to this Greig J said:

The next claim which it is convenient to deal with is a claim that GST or sums held in accounts within the trust account for GST were closed although no specific monetary claim is made in respect of this.  This constitutes part of the arrangements which were proceeded with in the operation of the practice in the continuation of the trust account and its various parts and the maintenance of the GST administration, numbers and other items, accounts with the Revenue, as was previously operated in the name of Mr Carlyle.  I am satisfied that all GST amounts were properly paid and that there is no liability and there was no liability to account to Mr Carlyle in respect of these items.

[17]     It is well established that a litigant cannot bring proceedings for a claim which has been the subject of litigation and decision by another court.[2]   I agree with the Judge that the appellant’s attempt to relitigate this matter in the District Court is an abuse of process.  On this ground the appeal must fail.

[2] See  Carl Zeiss Stiftung  v  Rayner  and  Keeler  Ltd  [No 2]  [1967] 1 AC 853; Yat  Tung

Investment Co Ltd v Dao Heng Bank Ltd [1975] AC 581.

[18]     In any event it is difficult to see how the appellant could be “entitled” to any GST.  Each account he sent out, as to the fee component, would have charged the client GST.  When the GST payment was received from the client the appellant must account for it to the Inland Revenue Department.   The transactions are therefore neutral as far as the appellant is concerned in any event.

[19]     As  to  the  first  part  of  the  appellant’s  claim  seeking  reimbursement  for expenses paid I agree with the Judge in the District Court that this was an essential part of the claim before Greig J.  The appellant’s case before the High Court in 1991 was that he remained the principal of his law firm and that he was entitled to the fees he earned and had the responsibility to pay the expenses of the law firm.

[20]     The respondents disputed that claim and before trial sought an order striking out parts of the appellant’s claim.  The Associate Judge (then a Master) struck out those parts of Mr Carlyle’s claim which maintained that he was the principal of the law  firm  and  therefore  entitled  to  the  fees  and  responsible  for  the  expenses. Mr Carlyle therefore knew well before the commencement of trial in 1993 that he could not maintain such a claim.  If Mr Carlyle had then thought he could pursue a claim for expenses he claimed to have paid on behalf of the respondents then he could have done so at that time.  He did not challenge the Master’s decision.  He did not replead in an attempt to claim expenses that he now says he paid which the respondents should have paid.

[21]     Given  Greig J’s  conclusion  as  to  work  in  progress  and  debts  ([14])  the appellant’s claim in the District Court is a clear but impermissible challenge to his finding.  As at the date the respondents took over the operation of the appellant’s law firm  the Judge  found  that  the  appellant  was  owed  nothing for  fees  or  work  in progress.   Until 31 May (the end date of the appellant’s claim) the only source of funds to pay the running expenses of the law firm were the fees earned by or on behalf of the respondents.

[22]   I am satisfied therefore that these proceedings are essentially the same proceedings that have been previously resolved by Greig J.   Mr Carlyle pleaded a particular view of the facts which was not accepted.  It is not now open to him to replead the case on a completely different factual basis.  The facts have already been explored as have the legal issues in Greig J’s decision.   I therefore agree with the District  Court  Judge  that  these  proceedings  are  an  attempt  to  relitigate  matters already litigated and are therefore an abuse of process.

[23]     As to the limitation point whether the proceedings are directly covered by the Act or whether they are subject to the supervision of the Court as actions in equity the Judge was clearly right to strike out the claims.  If the cause of action is contract or tort then the delay from the event until the filing of these proceedings is almost

15 years well outside the six year limitation period.  There is no claim that any of the circumstances in Part II of the Act apply extending the limitation period.   If the proceedings are based on an equitable cause of action then the substantial delay from

1989 to 2009 is ample justification to dismiss the proceedings for abuse of process.

[24]     In any event if this was a claim in equity it would be barred by assessing an appropriate limited period by analogy.   When (assuming this to be the case) the appellant paid the expenses with respect to the law firm he must have known that he did  not  own  the  business  and  that  the  obligation  to  pay the  expenses  was  the respondents’.   The relationship between the appellant and the respondents was a contractual one.  Given these facts there is no reason to extend any limitation period, by analogy, beyond six years.

[25]     The decision and conclusions of the District Court Judge were correct.  The appeal is dismissed.

Costs and disbursements

[26]     I  am  prepared  to  allow  the  respondents  costs  on  a  category 2B  basis acknowledging in doing so that the respondents’ partnership was represented by one of the lawyer partners, Mr McCardle.[3]   There is ample justification for a costs award in this case.  The respondents clearly established the District Court proceedings were an attempt to relitigate the 1991 proceedings and in any event given 20 years had passed since the alleged cause of action arose it was inevitable the appellant would be prevented from pursuing this litigation.

[3] See Brownie Wills v Shrimpton [1998] 2 NZLR 320 (CA).

[27]     In accordance with Brownie Wills v Shrimpton the costs of instructing or attending upon a client cannot be claimed by the respondent as part of its costs given client  and  counsel  are  one  and  the  same.    Disbursements  as  approved  by  the

Registrar.

Ronald Young J

Solicitors:

A S Carlyle, 190 Springs Road, RD 2, Reporoa 3083

J V McCardle, Breaden McCardle Chubb, PO Box 140, Paraparaumu, email:  [email protected]