Chui-I v Tang Shuo Development Company Ltd HC Wellington CIV 2006 485 1824
[2007] NZHC 2005
•17 August 2007
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV 2006 485 1824
BETWEEN CHIU CHUI-I, TIEN CHUNG CHING, LIN CHE-WEN, LIN YEOU-LUNG, LIN CHOW TANG, CHEN TANG, HO SUEI LAI AND YANG PEI CHI
Plaintiffs
AND TANG SHUO DEVELOPMENT COMPANY LIMITED
First Defendant
AND KENSINGTON SWAN Second Defendant
AND FOREST HARRISON Third Defendant
Hearing: 16 August 2007
Counsel: R J Hooker for Plaintiffs
M F McClelland for First Defendant No appearance for Second Defendant R K P Stewart for Third Defendant
Judgment: 17 August 2007
JUDGMENT OF WILD J
[1] Should the Court restrain Forest Harrison from acting for Tang Shuo
Development Co Limited in this proceeding?
[2] How and why does this question arise? And what is the answer? The first of these questions arises in this way. In this proceeding the eight plaintiffs sue Tang Shuo for return of monies they claim are due to them. They are Taiwanese who invested in Tang Shuo as part of a scheme to gain residency in New Zealand. The
CHIU CHUI-I, TIEN CHUNG CHING, LIN CHE-WEN, LIN YEOU-LUNG, LIN CHOW TANG, CHEN TANG, HO SUEI LAI AND YANG PEI CHI V TANG SHUO DEVELOPMENT COMPANY LIMITED AND ORS HC WN CIV 2006 485 1824 17 August 2007
scheme required them, in addition to paying fees to Tang Shuo, to subscribe NZD250,000 for shares in Tang Shuo. Tang Shuo used that capital for a property development project in Upper Hutt.
[3] Ms Lim was the solicitor at Kensington Swan who acted for Tang Shuo throughout. She handled the $250,000 each plaintiff was required to pay under the scheme. She received this payment from each plaintiff, held it in trust for the plaintiff, and then paid it out to Tang Shuo upon an irrevocable authority, once the plaintiff had obtained New Zealand residency. Ms Lim attended meetings with some of the plaintiffs to discuss immigration requirements and met and corresponded with some of the plaintiffs about Company business. Some of the plaintiffs were directors of Tang Shuo.
[4] Following completion of Tang Shuo’s property development project, the Company resolved to make an interim distribution of $70,000 to each shareholder and did so, except to the plaintiffs. Tang Shuo claims the plaintiffs are not shareholders and/or that they need to settle varying debts to the Company before qualifying for the interim distribution.
[5] On 23 November 2000 the plaintiffs instructed Ms Chan, then a solicitor with Ellis Gould, to act for them in claiming the $70,000 interim distribution from Tang Shuo. Ms Chan met with two of the plaintiffs, took instructions, wrote a letter of claim and later billed the plaintiffs, including for “advising” them.
[6] In 2002 Ms Chan and Ms Lim joined in partnership, forming Forest Harrison. They practise together as barristers and solicitors in Auckland. Ms Chan is the barrister (the litigator), Ms Lim the solicitor (the commercial/property lawyer).
[7] The plaintiffs brought this proceeding in August 2006. They claim against Tang Shuo payment of the $70,000 interim distribution upon several causes of action including debt, breach of contract, oppression as minority shareholders and breach of trust.
[8] Ms Lim has signed, as solicitor, a protest by Tang Shuo to this Court’s jurisdiction to hear this proceeding (I will come back to that protest). She has also signed, as counsel, an application by Tang Shuo to dismiss the proceeding or, in the alternative, for security for costs.
[9] The plaintiffs’ objection to Forest Harrison acting for Tang Shuo is primarily based on their instructions to Ms Chan at Ellis Gould to act for them in exactly the matter that is involved in this proceeding: a claim by them for the $70,000 interim distribution by Tang Shuo.
[10] Yesterday’s hearing left me in no doubt that Forest Harrison cannot properly act for Tang Shuo in this proceeding, and must be restrained from doing so. My concern is primarily with Ms Chan. A solicitor who has acted for a claimant in relation to a dispute with another person cannot subsequently act for that other against the claimant in that very same matter. Fundamentally, the solicitor has a debarring conflict of interest. The fact that it is Ms Chan’s partner, Ms Lim, who is now acting for Tang Shuo against the plaintiffs makes no difference: the two ladies’ firm Forest Harrison cannot act.
[11] I agree with Mr Hooker that Black v Taylor [1993] 3 NZLR 403 (CA) is the authority binding me here. The judgments make it clear that the test is “what is needed or may be permitted to ensure in a particular case both justice and the appearance of justice” (Cooke P at 406). In his more comprehensive judgment, Richardson J noted that the “appearance of impropriety” or the “appearance of justice” are the touchstones of Australian and Canadian authority respectively. He concluded at 412:
… Where the integrity of the judicial process is perceived to be at risk from the proposed or continuing representation by counsel on behalf of one party, disqualification is the obvious and in some cases the only effective remedy although considerations of delay, inconvenience and expense arising from a change in representation may be important in determining in particular cases whether the interests of justice truly demand disqualification.
[12] At 418 McKay J considered:
It is essential to the functioning of the Court as a Court of justice that it must be able to prevent a barrister acting as counsel in a matter in which he has a
conflict of interest, or in which he appears to have a conflict of interest such that justice will not be seen to be done. The fact that a barrister who so acted would be subject to the disciplinary powers contained in Part VII of the Law Practitioners Act 1982 does not in any way diminish the inherent jurisdiction of the Court to control proceedings before it in such a way as to enable justice to be done and to be seen to be done.
[13] Assume this proceeding goes to trial. Some reasonably minded uninvolved observers are in Court. They learn that Ms Chan, having previously accepted the plaintiffs’ instructions to sue Tang Shuo to recover the interim distribution, is now the partner in Forest Harrison acting for Tang Shuo against the plaintiffs. They learn this Court overruled the plaintiffs’ protest that this simply is not right. I am in no doubt that the confidence of those observers in the due administration of justice would be severely shaken. I can hear them asking themselves and each other “how can this be allowed?”.
[14] Counsel referred me to a number of other cases. One of them, perhaps particularly relied upon by Mr Hooker, is Carter Holt Harvey Forests Ltd v Sunnex Logging [2001] 3 NZLR 343 (CA). I do not find Sunnex other than generally helpful and supportive of my decision. The solicitors there had not acted both for and against their client; the focus was on whether they might, consciously or unconsciously, use confidential information. That information had been gained by them while acting for Rua in a mediation with Carter Holt. The concern was that the solicitors might use it when acting for Sunnex against Carter Holt in a subsequent but factually identical Court proceeding. The Court of Appeal debarred the solicitors from acting. I am not here concerned with whether Ms Chan had obtained confidential information while acting for the plaintiffs. My concern is with the appearance of the firm in which she is now a partner with Ms Lim acting against the plaintiffs in the very same dispute.
[15] Ms Chan and Ms Lim offer a Chinese wall, and an undertaking not to communicate with each other about this proceeding. On that basis counsel for Forest Harrison, and to a lesser extent Tang Shuo, rely on Russell McVeagh McKenzie Bartleet & Co. v Tower Corporation [1998] 3 NZLR 641 (CA) as authority that Forest Harrison can properly continue to act for Tang Shuo in this proceeding.
[16] Just as the Court of Appeal (Thomas J excepted) in Russell McVeagh did not see its earlier decision in Black v Taylor as “being of relevance” to the circumstances in Russell McVeagh, so I do not see Russell McVeagh as being of relevance to the situation here.
[17] The question in that case was whether the Court should debar Russell McVeagh from acting for GPG in a bid to takeover Tower. Russell McVeagh’s takeover team was in its Auckland office. A different partner, this time in the Wellington office, had given unrelated tax advice to Tower. Russell McVeagh had put a “Chinese wall” in place to ensure no confidential information passed from the Wellington tax team to the Auckland takeover team.
[18] Again, the judgment focuses on confidential information. Counsel for Forest Harrison and Tang Shuo fasten on the majority’s comments about Chinese walls and the limited availability of some types of legal advice in New Zealand:
… Although the concepts of Chinese walls and cones of silence leave much to be desired, and cannot be allowed to obscure the realities of life and the ordinary behaviour and incidents of relationships where individuals practise together in a firm, internal control measures may nevertheless in some circumstances be both appropriate and sufficient to ensure protection. Other aspects of today’s conditions must also be kept in mind. New Zealand is still comparatively small, and in some professional areas the availability of expert advice is limited. That availability should not be unduly restricted by Court-imposed control or sanctions which are not required in the overall interests of justice to protect individual rights. …
(654-655)
[19] The submission for Forest Harrison is that the Chinese wall offered by Ms Chan and Ms Lim is sufficient protection for the plaintiffs, while the limited availability in New Zealand of Mandarin speaking lawyers is a powerful factor in favour of allowing Forest Harrison to continue acting for Tang Shuo.
[20] However delightfully apt a Chinese wall between Ms Chan and Ms Lim may be, it is not an answer where the firm has only the two partners in the same and only office.
[21] Russell McVeagh was an immediately contentious decision. In Bolkiah v KPMG [1999] 2 AC 222 the House of Lords unanimously rejected the “balancing exercise” undertaken by the majority in Russell McVeagh. In his judgment in Hana New Zealand Ltd v Stephens [2007] 1 NZLR 833, Asher J does not refer to Russell McVeagh, I suspect because he considered discretion the better part of disagreement.
[22] I have not overlooked that debarring Forest Harrison from acting will cause Tang Shuo considerable inconvenience and expense. Ms Lim has been its solicitor throughout its New Zealand business activities. Subject to any confidences she owes the plaintiffs, she can of course give evidence for Tang Shuo, although that prospect seems inconsistent with her claim that she has no relevant knowledge, and thus no conflict of interest.
[23] After I had voiced growing concern during yesterday’s hearing, Mr
McClelland offered, as a pragmatic solution, that:
• Forest Harrison be permitted to continue to act for Tang Shuo until this
Court has determined Tang Shuo’s protest to this Court’s jurisdiction.
• If the Court accepts jurisdiction, Forest Harrison will step aside.
[24] I said earlier that I would revert to Tang Shuo’s protest to jurisdiction. On
27 November last year Goddard J ordered that:
• The application I am dealing with be deemed to be a separate proceeding rather than an interlocutory proceeding.
• Forest Harrison be cited as third defendant.
• The representation issue be determined before the Court determine whether it has jurisdiction to hear the plaintiffs’ proceeding.
[25] Tang Shuo’s protest to jurisdiction is based on its claim that this proceeding should be determined in Taiwan. Mr McClelland could not resist bolstering this
submission by informing me that a hearing would be available in the Court in
Taiwan within about two months of filing!
[26] Mr Hooker rejected Mr McClelland’s pragmatic solution, primarily because he considers different (I assume he anticipates more objective) solicitors acting for Tang Shuo may take a different view about the forum conveniens for the plaintiffs’ claim.
[27] I must also reject Mr McClelland’s constructive solution. Accepting it is inconsistent with my decision that, as a matter of the due administration of justice, this Court cannot permit Forest Harrison to act for Tang Shuo in this proceeding – not in any aspect of the proceeding.
[28] The plaintiffs’ application succeeds. I make an order restraining Forest
Harrison from acting for Tang Shuo in this proceeding.
[29] Forest Harrison and Tang Shuo are to pay the plaintiffs’ costs of this proceeding on a 2B basis, with disbursements as fixed by the Registrar failing agreement. I have noted but reject the plaintiffs’ claim that Forest Harrison indemnify them for their costs.
Solicitors:
Vallant Hooker & Partners, Auckland for Plaintiffs Forest Harrison, Auckland for First Defendant Izard Weston, Wellington for Third Defendant
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