Ellis v Moodie HC Wellington CIV 2007-485-598
[2007] NZHC 1953
•26 July 2007
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV 2007-485-598
BETWEEN ANTHONY JOSEPH ELLIS Plaintiff
ANDROBERT ALEXANDER MOODIE First Defendant
ANDR A & S P MOODIE LIMITED Second Defendant
ANDROBERT ALEXANDER MOODIE Third Defendant
ANDSUZANNE PATRICIA MOODIE Fourth Defendant
Hearing: 9 July 2007
Appearances: C J Tennet for Plaintiff
R A Moodie the First and Third Defendant in Person and on behalf of
Second and Fourth Defendants
Judgment: 26 July 2007
JUDGMENT OF ASSOCIATE JUDGE GENDALL
Introduction
[1] This is an application by the defendants to strike out the plaintiff’s claim.
[2] The plaintiff, Mr Ellis, is a barrister sole who acted for the first defendant, Dr Moodie, a barrister and solicitor, in certain contempt proceedings against him. The second defendant is a limited liability company through which Dr Moodie conducts
the financial affairs of his legal practice. The third and fourth defendants are Dr
ELLIS V MOODIE AND ORS HC WN CIV 2007-485-598 26 July 2007
Moodie and his wife, Suzanne Moodie, in their capacity as directors of the second defendant company. Mr Ellis’s claim involves a fees arrangement allegedly entered into by him and Dr Moodie.
[3] The defendants’ strike out application is opposed by the plaintiff.
Background facts
[4] Dr Moodie has long been involved as counsel in the Berryman litigation (Berryman v Solicitor-General HC WN CIV 2003-485-1041 and, more recently, CIV 2005-485-1795). During the currency of those proceedings he published an army engineer’s report provided to him on an undertaking of confidence. In consequence, the Solicitor-General brought proceedings against him alleging contempt of Court (the result of which is reported as Solicitor-General v Miss Alice HC WN CIV 2005-485-1026 14 February 2007).
[5] In 2005 Dr Moodie retained Mr Ellis to represent him as counsel in the contempt proceedings. Mr Ellis was formally instructed by a solicitor, Mr Key of Fielding. The letter of instruction from Mr Key to Mr Ellis was dated 22 April 2005 and stated:
As Dr R A Moodie’s solicitor, we instruct you to act on his behalf in respect of alleged contempt and related matters. Our instructions are on the basis that your fee is a matter between our client and yourself.
[6] It appears that in reality Dr Moodie dealt with Mr Ellis directly, and matters pertaining to fees were to be determined by Mr Ellis and Dr Moodie between themselves. Additional matters then arose. In his statement of claim Mr Ellis pleads that he was also instructed by Moodie & Co to act on three further matters (the “Dobson & Lithgow proceedings”, the “Amici Appeal” and the “Wild complaint”).
[7] The statement of claim goes on to allege that Mr Ellis and Dr Moodie agreed that Mr Ellis would be paid a reasonable fee on the contempt proceedings but that part of the fee would be deferred until Dr Moodie received his fee in the settlement of the Berryman litigation. Mr Ellis says that he agreed to this arrangement because
of Dr Moodie’s representations to the effect that his practice was conducted chiefly on a pro bono basis and accordingly he was not in a position to pay fees. Subsequently, Mr Ellis alleges he discovered that Dr Moodie had received substantial fees in connection with the successful conclusion of some employment litigation. Mr Ellis also obtained copies of the accounts for Dr Moodie’s legal practice, which he says record the receipt of substantial sums.
[8] Mr Ellis claims that Dr Moodie, by these misrepresentations, induced him to provide legal services (through Mr Key) and thus breached s 9 of the Fair Trading Act 1986 and committed tortious deceit, causing loss to Mr Ellis. He also pleads causes of action alleging unlawful trading and fraud on the part of the second defendant company and the third and fourth defendants in their capacity as directors of the company.
[9] In paragraphs [44] to [52] of his statement of claim Mr Ellis refers to his instruction by Moodie & Co for the “Dobson & Lithgow” proceedings, the “Amici Appeal” and the “Wild complaint”. I deal with the alleged misrepresentations relating to these matters at paragraphs [29] to [32] following.
Principles of strike out applications
[10] The power of the Court to strike out a claim is set out in Rule 186 of the High
Court Rules, which provides:
186. Striking out pleading
Without prejudice to the inherent jurisdiction of the Court in that regard, where a pleading—
(a) Discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading; or
(b) Is likely to cause prejudice, embarrassment or delay in the proceeding; or
(c) Is otherwise an abuse of the process of the Court,—
the Court may at any stage of the proceeding, on such terms as it thinks fit, order that the whole or any part of the pleading be struck out.
[11] The principles relevant to the determination of strike out applications are set out in Attorney-General v Prince and Gardner [1998] 1 NZLR 262. The application must proceed on the assumption that the facts pleaded in the statement of claim are true unless the pleaded allegations are entirely speculative and without foundation. Before striking out the claim the Court must be satisfied that the causes of action are so untenable that they could not possibly succeed: R Lucas and Son (Nelson Mail) Limited v O’Brien [1978] 2 NZLR 289; Takaro Properties Limited (in rec) v Rowling [1978] 2 NZLR 314.
[12] In addition, Prince and Gardner made clear that the strike out jurisdiction is one to be exercised sparingly and only in a clear case where the Court is satisfied that it has the requisite material: Gartside v Sheffield Young and Ellis [1983] NZLR
37; Electricity Corporation Limited v Geotherm Energy Limited [1992] 2 NZLR
641. However, the fact that an application raises difficult questions of law and requires extensive argument does not prevent the Court from exercising its jurisdiction to strike out.
[13] And in Adams v Joseph Banks Trust Limited (HC WN CP 244/91 4 March
1992) Master Williams QC observed, relevantly to the present application, that affidavits are admissible only to the extent they refer to incontrovertible facts, and that a plaintiff will ordinarily be given the opportunity to amend pleadings where the defect the subject of the strike out application is capable of remedy.
[14] Finally, a proceeding may be struck out under R186(c) if it is otherwise an abuse of the process of the Court. In Goldsmith v Sperrings Ltd [1977] 2 All ER 566 the Court held that an abuse of process will be established where the defendants first can show “that a litigant is pursuing an ulterior purpose unrelated to the subject matter of the litigation and that, but for his ulterior purpose, he would not have commenced proceedings at all” (p 586); or secondly where the plaintiff “has an ulterior motive, seeks a collateral advantage for himself beyond what the law offers, is reaching out to ‘effect an object not within the scope of the process” (p 582).
The statement of claim
[15] It is evident from the material filed to date in this proceeding that there is considerable disagreement as to the essential facts. There is particular disagreement as to the nature of the fees arrangement concluded between Mr Ellis and Dr Moodie.
[16] Dr Moodie, in his detailed eleven page application to strike out and in his submissions in support of that application, discusses in great detail the factual basis for the fees arrangement, as well as a number of other matters that are of only passing relevance to the dispute between the parties. Dr Moodie has also filed with the Court an extensive affidavit outlining the history of this dispute up to the present. It is evident that Dr Moodie takes a very different view of the essential facts to Mr Ellis.
[17] Mr Ellis rightly points out however that the vast majority of this material has no bearing on the present strike out application, which proceeds generally on the basis of the plaintiff’s pleadings in his statement of claim. The one caveat to that principle, as I have mentioned above, is where the pleadings are entirely speculative and without foundation. Consequently, in considering this application I have set aside Dr Moodie’s affidavit and I have had only limited regard to his submissions challenging the facts pleaded in the statement of claim. Those challenges are only relevant to the extent that they support a submission that the pleadings are entirely speculative and without foundation. There are parts of Mr Ellis’s pleading that might appropriately be categorised as such, but I think the essence of his pleading passes that test, and is probably sufficient to provide technical support to the causes of action he relies on.
The fees arrangement
[18] In his statement of claim, Mr Ellis alleges that Dr Moodie first approached him in April 2005 in order to engage him as counsel in the contempt proceeding. He pleads that Dr Moodie attended at Mr Ellis’s chambers in person. As I have noted at para [5] above, on 22 April 2005, Mr Key confirmed Dr Moodie’s formal
instructions in writing. As part of those instructions, Mr Key stated that Mr Ellis’s fees were to be a matter between Mr Ellis and Dr Moodie.
[19] In the course of their initial discussions in April 2005, Mr Ellis contends the parties agreed that he would be paid a reasonable fee recognising his skill and the expertise required, but that part of the fee would be deferred until Dr Moodie received his fee for the settlement or success of the Berryman litigation. He maintains also that the parties agreed that part of the fee would be generated through fundraising activities organised by Dr Moodie. Mr Ellis says he advised Dr Moodie that his hourly rate would be not less than Dr Moodie’s charge out rate.
[20] No agreement was reached by the parties as to what part of the fee would be deferred, or how much would be paid by fundraising.
[21] Mr Ellis maintains he agreed to this deferral arrangement because of representations made to him by Dr Moodie to the effect that Dr Moodie’s legal practice was essentially pro bono and that he had not received any substantial payment from any client for some time. He says he would not have agreed to this arrangement but for those representations.
Alleged misrepresentations as to financial position
[22] In August 2006, Mr Ellis says he read the decision of the Chief Judge of the Employment Court in Waugh v Commissioner of Police [2004] 1 ERNZ 450, in which Dr Moodie had acted for the applicant. That decision led Mr Ellis to believe that Dr Moodie had received fees of at least $289,000 if not $350,000 during 2004 as a result of his work on that case. In March 2007, Mr Ellis became aware of statements made publicly by Dr Moodie to the effect that he had earned much more than the amount indicated in the judgment.
[23] On 24 August 2006 Dr Moodie sent Mr Ellis a letter in which he confirmed his limited financial means and his inability to pay Mr Ellis any fees unless and until he received his costs for the Berryman litigation. Dr Moodie stated his intention to seek public financial support for the Berryman litigation and reassured Mr Ellis that
payment of some part of his fee would follow soon thereafter. Mr Ellis alleges that this representation was false in several material respects: Dr Moodie had withdrawn substantial sums of cash from the second defendant company; he and his wife had received substantial management fees from the company; he had received additional legal fees which had not been included in the company’s accounts; and the company’s accounts showed considerable end of year surpluses.
[24] In para 26 of the plaintiff’s statement of claim, Mr Ellis pleads that on 6
September 2005 Dr Moodie advised him by letter that he had received a “lump sum” payment for the Waugh proceedings, but that it was for a number of years of work. The value of the payment had been consumed by expenses incurred during the time he was acting on that case and accordingly the payment had not “actually amounted to much”. Mr Ellis says, on the contrary, the lump sum was at least $700,000, that he received further payments as part of that settlement and that Dr Moodie also had substantial assets distributed across various trusts and other arrangements.
[25] In support of that, Mr Ellis says that he received a copy of the second defendant company’s accounts from the Moodies’ accountant. He says those accounts showed that Dr Moodie’s legal practice – Moodie & Co – had been trading through the second defendant company, and that Moodie & Co had received substantial payments during the financial years ending March 2005 and March 2006.
[26] To briefly interpolate, it appears that Mr Ellis has obtained a certain amount of his information from a Ms Strachan, a barrister and solicitor, who previously worked as an associate to Dr Moodie. Dr Moodie, in his submissions before me, refutes the allegations made by Mr Ellis as to his financial position at the relevant time. As I have already said, those refutations are only relevant to the extent they support a submission that Mr Ellis’s allegations are entirely speculative and without foundation.
[27] For the purposes of the present strike out application it is appropriate to accept Mr Ellis’s general allegation that Dr Moodie misrepresented his financial position at the relevant time; that is to say the truth of that allegation is assumed for present purposes. However, I am not prepared to accept unconditionally all the
figures referred to by Mr Ellis in paragraphs 25 to 29 and 33 to 40 of his statement of claim. Some of those figures are apparently based upon the company accounts obtained by Mr Ellis. The basis for others is not at all clear. Particularly, I do not see what foundation Mr Ellis can possibly have to make the allegations in paragraphs
28, 29 and 35 of the statement of claim. Those allegations, as framed in the pleadings, do not arise from the company accounts and Mr Ellis admits he has no knowledge of the details of those allegations. It seems to me that those figures and allegations are entirely speculative, and the way those allegations are framed in the statement of claim provides me with no assurance as to their foundation.
[28] In the circumstances, no clear picture as to the exact extent of Dr Moodie’s alleged misrepresentations emerges from the pleadings. Accordingly, I am not prepared to accept the pleaded figures unconditionally. However, for the purposes of the present strike out application I will accept Mr Ellis’ allegation as to misrepresentation by Dr Moodie of his financial position generally. The essence of Mr Ellis’s allegation therefore must survive.
Alleged misrepresentations relating to additional proceedings
[29] As I have noted at para [6] above, in his statement of claim Mr Ellis goes on to refer to several additional proceedings that arose out of Dr Moodie’s initial instructions in respect of the contempt proceedings. Mr Ellis says that he received his instructions for these three additional proceedings from Moodie & Co, Barristers and Solicitors – Dr Moodie’s legal practice. Mr Ellis says that he has since discovered that Moodie & Co is the trading arm of the second defendant company.
[30] Mr Ellis says that he would not have accepted instructions from Moodie & Co had he known that it was the trading arm of a limited liability company. He says, in addition, that there was no discussion between Dr Moodie and himself about deferral of fees for these additional proceedings. Curiously, he then goes on to plead that these three additional matters were either governed by an implied term that costs would be deferred on identical terms with the contempt proceedings or in the alternative it was not an implied term and Dr Moodie is due to make immediate
payment as there was no agreement for deferral. He also contends Dr Moodie misled him by failing to advise him of the activities of the company.
[31] Later in his statement of claim, Mr Ellis goes on to reiterate that the second defendant company was trading unlawfully as a lawyer, through Moodie & Co. He also says that the second defendant company, as well as the third and fourth defendants, breached s 25 of the Companies Act 1993 by failing to ensure the company’s name was recorded on written communications from Moodie & Co.
[32] Finally, Mr Ellis alleges that the second defendant company was trading whilst insolvent as its shareholders’ current account was substantially overdrawn at various times during 2006 and neither the company nor the directors were in a position to repay its debts when they fell due.
Disbursements
[33] Mr Ellis’ pleading deals specifically with a claim for disbursements. He says that the payment of his disbursements by Dr Moodie was not the subject of any deferral agreement. The total value of disbursements tendered to Mr Key and Moodie & Co was $963.10, which amount remains unpaid and owing.
Causes of action
[34] For a first cause of action, Mr Ellis says that Dr Moodie breached s 9 Fair Trading Act 1986 in that he conducted himself in trade in a manner that was misleading or deceptive and caused Mr Ellis loss. Mr Ellis claims he suffered losses of $106,165.43 – which reflects the sum total of the invoices he sent to Mr Key and to Moodie & Co in respect of the contempt proceedings, the Lithgow & Dobson QC proceedings, the amici appeal and the Wild complaint. Mr Ellis also seeks exemplary damages in the amount of $50,000.
[35] For a second cause of action, Mr Ellis claims Dr Moodie’s actions amount to the tort of deceit. Again, Mr Ellis claims losses of $106,165.43 as well as exemplary damages of $50,000.
[36] Mr Ellis’s third cause of action is against the second defendant company. The exact nature of that cause of action is not clearly identified in the pleadings: Mr Ellis simply alleges that the company was trading unlawfully and fraudulently. Mr Ellis claims losses in the amount of $18,344.44, which reflects the sum of the invoice sent by Mr Ellis to Moodie & Co for his work on the additional proceedings. Mr Ellis also claims $9,000 exemplary damages.
[37] The fourth cause of action repeats the third cause of action alleging fraudulent trading but as against the third and fourth defendants – the directors of the second defendant company.
Submissions
[38] As Mr Ellis correctly points out, and as I have already noted, much of Dr Moodie’s strike out application and his detailed submissions in support constitute a general denial of the facts as pleaded by Mr Ellis. I therefore set those matters aside. The following relevant points remain however:
a) Mr Ellis’s claim is in substance an attempt by him to sue for fees.
The nature of the relationship between a barrister sole and his or her client in New Zealand law precludes a barrister from suing the client for fees.
b)The defendants have never supplied or offered to supply goods or services to the plaintiff in trade and therefore their conduct does not fall within the ambit of s 9 of the Fair Trading Act 1986.
c) Mr Ellis’s damages are based on the invoices sent to Mr Key and Moodie & Co, which are in turn based upon a notional hourly rate that, first, is an invention and, secondly, was not communicated to Dr Moodie. Accordingly, the damages are at the least overstated.
[39] In reply, Mr Ellis argues that, in the first place, this is not an attempt by a barrister to sue for his fees. He maintains the causes of action do not seek to enforce
a contract between the parties, nor do they seek to recover a debt unpaid and owing. The causes of action he contends are based on statute and in tort and allege that Dr Moodie’s conduct has caused Mr Ellis to suffer damage. The essence of Mr Ellis’s claim is that Dr Moodie’s misleading and deceptive or deceitful conduct induced Mr Ellis to agree to act for him, thus forgoing the opportunity to expend his time and effort on other matters for which, presumably, he would have been paid. But for Dr Moodie’s misrepresentations, Mr Ellis maintains he could/would have billed the same hours to another matter and therefore his loss is the opportunity cost of not working on a remunerative basis on other matters.
[40] Secondly, Mr Ellis says that, in any event, the principle that a barrister cannot sue for his fees is no longer good law in New Zealand. He refers to Atkinson v Pengelly [1995] 3 NZLR 104, in which Tipping J outlined the rule against barristerial suit for fees. Mr Ellis says the inability of a barrister to sue for fees is a corollary of barristerial immunity. Lai v Chamberlains [2007] 2 NZLR 7 (SC) did away with barristerial immunity and therefore the rule against suit for fees requires reconsideration. In support of that, Mr Ellis refers to certain paragraphs in the decisions of Elias CJ and Tipping J in Lai, which he says support his submission. He also refers to s 61 of the Law Practitioners Act 1982, which affords barristers in New Zealand the same powers, privileges, duties, and responsibilities enjoyed by barristers in England. The Supreme Court in Lai held that s 61 did not freeze the powers and privileges of barristers in New Zealand as of the date that Act entered into force. Rather, s 61 provides a starting point from which the Courts can develop the common law as it relates to barristers. Thus, Mr Ellis argues, s 61 is not a barrier to this Court’s reconsideration of the rule against barristerial suit for fees.
[41] In support of his causes of action against the second, third and fourth defendants, Mr Ellis argues that the second defendant company was trading in a fraudulent and unlawful manner and that the third and fourth defendants were party to this. Mr Ellis says that the second, third and fourth defendants must be included in this proceeding because it has been Dr Moodie’s habit to conduct his legal practice through a number of different financial entities.
Characterisation – a barrister suing for fees?
[42] Dr Moodie’s primary submission is that the causes of action in this proceeding are simply a pretext and Mr Ellis’s real objective here is to sue for his fees. Mr Ellis denies that, arguing that the causes of action are arguable on their own terms. He also suggests that, at any rate, the rule against barristerial suit for fees is no longer good law.
[43] Turning first to that alternative argument, Mr Ellis’s submission is that barristerial immunity and the rule against barristerial suit for fees are mutually dependant, and that the removal of one necessitates the fall of the other.
[44] The starting point for this discussion is the decision of Justice Tipping in the High Court in Atkinson v Pengelly. In that case, the plaintiff was a barrister sole whose instructions were withdrawn by the instructing solicitor immediately before trial. A settlement at trial resulted in the payment of $150,000 to the solicitor’s trust account, over which the plaintiff claimed a lien. The resolution of the matter required Tipping J to consider the ability of a barrister to sue for his fees.
[45] Tipping J began by noting that in England a barrister has no right to sue for his fees. He cannot sue his instructing solicitor and he cannot sue the lay client. The reason the Judge gave for the inability of a barrister to sue for fees is that the obligation of the instructing solicitor is one of honour and not of debt. The Judge continued (at 111):
Throughout my time in the profession I have never heard it seriously suggested that barristers sole either have or should have the right to sue their instructing solicitors or their lay clients for their fees. Whilst the English rule that they cannot do so might be thought in some quarters commercially anomalous, the rule is of considerable antiquity and can fairly be said to be a fundamental feature of the relationship between a barrister and his clients, both lay and professional.
[46] Tipping J also considered that this position was indirectly recognised in the Law Practitioners Act 1982. Section 139 of that Act excludes from the definition of a “party chargeable” under a practitioner’s bill of costs an instructing solicitor who has paid or is liable to pay a barrister’s bill rendered to him. This indicates that when
the Act was passed the accepted background was that barristers could not sue for their fees. Regarding the possibility of a barrister suing a lay client for his fees, the Judge noted further that s 140 of the Act permits a solicitor to recover the barrister’s fees from the lay client as an itemised disbursement in the bill of costs. Accordingly, while the barrister cannot sue either the solicitor or the client for his fees, the solicitor can sue the client for fees, and the relationship of honour between the barrister and the solicitor requires the solicitor, as a matter of professional responsibility if not of law, to pay the barrister his fees. Indeed in Ethics, Professional Responsibility and the Lawyer – D Webb (2000) at para 15.7.2 the learned author confirms:
While a barrister may not sue for fees, the solicitor who is liable for them may sue to recover the amount from the client (94).
And at footnote 94:
(94) s.140 Law Practitioners Act 1982. It appears that the solicitor may sue for the fees even where it has been agreed that the lay client will pay the barrister direct and the solicitor will not be responsible for them: Findlay v Webb Morrice and Partners (HC Akld, AP 82-SW99, 6 September 1999, Robertson J). (Emphasis added)
[47] In Atkinson v Pengelly, Tipping J referred to the earlier decision of the Supreme Court in Robinson & Morgan-Coakle v Behan [1964] NZLR 650. There, an action for unpaid fees was brought against the defendant client by a firm of solicitors in respect of work done by one of the partners of the firm, Mr Robinson, in his capacity as both a barrister and solicitor. The defendant had been the subject of criminal proceedings, in which Mr Robinson had acted. The bill of costs therefore involved work performed both in his capacity as a barrister and in his capacity as a solicitor. The defendant argued that the plaintiff firm was unable to sue for the recovery of fees for work performed by Mr Robinson in his capacity as a barrister.
[48] Perry J reiterated the English rule that a barrister is not permitted to sue for his fees but noted that he was not strictly required to determine the application of that rule in New Zealand because the claim was brought on behalf of a practitioner acting both as a barrister and as a solicitor. However, he observed in relation to the position of a barrister sole, adopting a passage in 3 Halsbury’s Laws of England, 3rd ed. 16, 44-45, that (at 655):
The employment of a barrister is a purely honorary one in the sense that it confers on him no legal right to remuneration for his services; hence the remuneration of a barrister is called honorarium, as opposed to merces.
…
An express promise by the client himself to pay fees to counsel for his advocacy, whether made before or during or after the litigation, has no binding effect; the relation of counsel and client renders the parties mutually incapable of making any legal contract of hiring and service concerning advocacy in litigation. The requests and promises of the client and the services of counsel create neither an obligation nor an inception of obligation nor any inchoate right whatever capable of being completed and made into a contract by any subsequent promise.
[49] Perry J considered the resolution of the case required consideration of the degree to which the English rules relating to the practice of barristers were incorporated into New Zealand. The Judge observed that a key difference in the New Zealand context is that practitioners here are entitled to hold practicing certificates as both barrister and solicitor. With regard to the position of a practitioner practising both as a barrister and as a solicitor, Perry J referred to the decision of O’Donaghue v Downer and Co Ltd [1953] NZLR 758 in which a firm of solicitors, each of which practised as both a barrister and solicitor, included fees in their capacity as counsel as a disbursement on the bill of costs. Fair J held, in that case (at 760):
It seems clearly established in New Zealand that a solicitor, practising also as a barrister, is entitled to charge fees as a barrister for work as such; and that a firm in which the barrister is a partner may charge solicitor’s fees in respect of work done by either himself, or other members of that firm as solicitors, in addition to charging a fee in respect of services as barristers.
[50] Perry J held that this approach reflected the reality in New Zealand that in many cases, and throughout our legal history, many practitioners had practised both as barristers and solicitors. The tradition of recording fees incurred as counsel as a disbursement on the bill of costs was merely a recognition of the formal application of the barrister’s intervention rule, which had no substantive application in the case of a practitioner acting as both barrister and solicitor. Perry J thus concluded that, whatever the degree of incorporation of the English rule against barristerial suit for fees, an exception applied in the case of a practitioner who acted in both capacities. That principle was confirmed in Rees v Sinclair [1974] 1 NZLR 180.
[51] The current position in New Zealand therefore, in reliance on Atkinson and Robinson, and subject to Mr Ellis’s submission in relation to Lai v Chamberlains, is that while a practitioner acting as both barrister and solicitor is entitled to sue for fees, a barrister sole is not so entitled. There are two interrelated reasons. The first is that the relationship between the barrister sole and the instructing solicitor is a unique relationship of honour and agreements as to fees do not give rise to an obligation of debt. The only obligations of the instructing solicitor in terms of fees are those set out in the Rules of Professional Conduct, the breach of which may result in disciplinary proceedings against the instructing solicitor, but not a claim at law for money unpaid and owing.
[52] The second reason preventing a barrister sole from suing for his fees is the lack of contractual capacity between a barrister sole and a lay client. This is referred to both in the quoted passage from Robinson and in Atkinson at 112, where Tipping J doubts the existence of contractual capacity on the part of barristers and lay clients, the one to the other. The point is made again in the judgments of Elias CJ and Tipping J in Lai (at [15] and [98] to [99]) as providing an early justification for barristerial immunity. The lack of any contractual obligation between barristers sole and their clients prevented clients from suing in negligence. (That obviously changed with the advent of Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465, which established the existence of a duty of care in tort, rather than contract, for negligent misstatements.) Finally, the lack of a contractual relationship between a barrister sole and his lay client was instrumental in declining summary judgment in Bungay v Andrews (HC WN CP 723/90 14 December 1990), in which Mr Bungay QC took proceedings against his client when the cheque she had given him for his fees was dishonoured. Master Williams QC held that, as there could be no contractual relationship between the plaintiff and the defendant, it followed that the plaintiff could not satisfy the Court that the defendant had no defence to his claim, for example that the cheque was given for a total failure of consideration.
[53] There are some, much older, decisions of the Supreme Court that might cast doubt on the principles outlined above. They are Elliott v Burke (1887) 5 NZLR
197, Watt and Cohen v Willis (1909) 29 NZLR 58 and In re Singer, Martin v Singer
[1929] NZLR 301. All are discussed in the judgment in Robinson as supporting the exception established in that case.
[54] In Elliott v Burke, Burke was the defendant in proceedings before a jury to recover money alleged to have been paid under duress. Burke appeared in person initially, but at the trial was represented by counsel. Burke obtained the services of counsel directly, without the intervention of a solicitor. The jury found in Burke’s favour and the question then arose as to Burke’s entitlement to costs. Burke argued that he was entitled to disbursements, including fees owing to his counsel.
[55] Williams J held that if the matter had arisen in England fees to counsel would not have been allowed as disbursements, the reason being that in England the “etiquette of the profession” required that a barrister receive instructions only through a solicitor. Accordingly, if a barrister chose to put himself in direct communication with his client without the intervention of a solicitor he would be presumed to have acted gratuitously. In New Zealand, however, the Judge held that the intervention rule was of doubtful application. Therefore (at 198):
I see no special reason why, if a client chooses to out himself in communication with his advocate and does not employ a solicitor, but appears in person, the client should not tender, and the advocate accept, a fee for his services. If it be the case that the advocate is retained, and if he has been paid, or if there has been an honest promise that he shall be paid, then I think the fee might properly be treated as a disbursement in estimating the disbursements that the litigant is entitled to recover against his adversary.
[56] This passage might suggest the existence of contractual capacity between a barrister and his client where they agree as between themselves the matter of the barrister’s fee. That would obviously be of relevance to this case where the fee to be paid to Mr Ellis it seems was determined as between Mr Ellis and Dr Moodie directly.
[57] However, Elliott is distinguishable on two bases. The first is that the case involved a question of the litigant Burke’s costs in defending the proceedings, and whether they included his fees to counsel. The decision of the Court is therefore not directed towards the enforceability of counsel’s fee on a contractual basis against
Burke, but rather whether the failure to retain the services of an intervening solicitor meant that Burke could not enforce his costs against the opposing litigant.
[58] The second basis for distinction is that the ratio in Elliott depended on the non-application of the intervention rule in New Zealand, and its status as a rule “of professional etiquette merely” in England. Presently, the intervention rule has undoubted legal force in New Zealand, notwithstanding it is stated principally in Rule 11.03 of the Rules of Professional Conduct. In the first place, the failure to observe the intervention rule may result in disciplinary proceedings against the barrister: for example Kaye v Auckland District Law Society [1998] 1 NZLR 151 and B v Canterbury District Law Society [2002] 3 NZLR 113. In the second place, a failure to observe the rule may have consequences for the conduct or enforceability of other legal proceedings: for example Time Ticket International Ltd v Broughton [1996] 2 NZLR 177. In that case the claim was struck out on the basis that the plaintiff company had failed to commence the proceedings through a solicitor, notwithstanding that the director of the company, who filed the proceedings, was a practising barrister. One of the reasons given was that the director was unable to act directly for the plaintiff company as a barrister sole without the intervention of a solicitor, and therefore could not have properly commenced the proceedings.
[59] Singer is also distinguishable on the basis that it assumes a subordinate role for the intervention rule, which is no longer the law in New Zealand. In that case, Mr Singer, a barrister and solicitor, was engaged by Mr Martin to represent him in criminal proceedings. Mr Singer had heard that Mr Martin had not paid fees owing to other practitioners and therefore required him to pay two-thirds of the agreed fee in advance. Mr Martin did so, but immediately prior to the trial decided to retain other counsel and required Mr Singer to return his bill. Mr Singer declined to do so and instead sent Mr Martin a bill of costs recording his fees, with credit allowed for the amount already paid. Mr Martin objected to that bill and applied to the Registrar for taxation of the fee. The bill of costs recorded services tendered by “counsel” and so Kennedy J concluded that Mr Singer had been acting for Mr Martin in his capacity as a barrister only. The question for the Court was therefore, “whether the fee charged by a barrister, who is not also acting as solicitor for the client, for his
services as barrister may be referred to the Registrar for taxation under the Law
Practitioners Act 1908” (at 302).
[60] Kennedy J noted, at 302, that:
In England there is no rule of law, but only one in etiquette, that a barrister should be instructed by a solicitor: Bennett v Hale. I think, therefore, there was nothing to prevent Mr Singer, although both a barrister and solicitor, agreeing with Mr Martin, in a matter which fell within the scope of work of a barrister as such, to act in that matter as barrister and to render or agree to render service as a barrister as distinct from service as a solicitor. He might act as counsel, although he was at no time solicitor for Mr Martin, the person employing him.
[61] This case is accordingly distinguishable on two bases. First, as already mentioned, it presumes a subordinate role for the intervention rule. Secondly, the case proceeds on the assumption that Mr Singer was only acting in his capacity as barrister, notwithstanding the lack of an instructing solicitor, because of the note accompanying his bill of costs stating it was for services rendered by “counsel”. As Mr Singer was both a barrister and solicitor, had the same situation occurred in the wake of the judgment in Robinson, the more natural result might have been to simply hold that Mr Singer could render an account as a solicitor for work done by him in both capacities. The only outstanding issue would have been his rendering of his counsel’s fee as a fee rather than as a disbursement, but as Perry J observed in Robinson, that practice was really just a formal recognition of the intervention rule applicable in England, which did not apply to a barrister who was also a solicitor. Now, of course, it is a firm rule by virtue of its incorporation in s 140 of the Law Practitioners Act 1982.
[62] Finally, in Watt & Cohen Edwards J said (at 661):
I have not lost sight of the fact that in England an action for negligence will not lie against a barrister. This is because in England the functions of a barrister are in theory honorary, and he cannot recover his fees. In this Dominion this theory does not prevail, and a barrister can sue for his fees…
[63] While this statement might seem to support Mr Ellis’s case, it was put to one side by Perry J in Robinson. The statement in Watt & Cohen is strictly obiter and Perry J held it should be accepted only with caution, and in any event was only
applicable with reference to the particular facts of that case, in which the work done was a combination of solicitor’s work as well as barrister’s.
[64] Subject to Mr Ellis’s submission about the effect of Lai, therefore, I conclude that a barrister sole in New Zealand may not sue either his instructing solicitor or the lay client for his fees. The further question is whether the removal of barristerial immunity changes this position.
[65] Essentially, Mr Ellis makes three points in support of his submission that the rule against barristerial suit for fees is no longer good law:
a) The rule is anachronistic and serves no useful purpose. It is farcical to maintain a position that renders a barrister’s fee unenforceable at law simply because he or she chooses to act as a barrister sole rather than as a solicitor as well.
b)Certain passages in the judgments of Elias CJ and Tipping J in Lai suggest that the rule against barristerial suit for fees is the corollary of barristerial immunity and when one falls so does the other.
c) Section 61 of the Law Practitioners Act, which establishes the position of barristers in New Zealand law, did not freeze that position as of the date of enactment, and accordingly it is open to the courts to reconsider the rule against barristerial suit for fees.
[66] The first and third submissions are subject to the same criticism, that regardless of their merit, the law continues to state that barristers may not sue for fees. In my view this is clearly established at some length in the foregoing discussion. As Tipping J put it, the rule is of considerable antiquity, and there is more than sufficient authority establishing the existence of the rule to prevent me from any attempt to summarily overturn or ignore it. Albeit that the rule has a common law basis, and it would be open to the appellate courts to overturn it after careful consideration at some time in the future, it is not open to me to do away with
it in the absence of clear authority indicating the rule is no longer good law in New
Zealand.
[67] That brings me to the crux of this issue, which is Mr Ellis’s submission that an implication of the Supreme Court judgment in Lai is that the rule against barristerial suit for fees no longer applies. As I see it there are really two passages that might support Mr Ellis’s submission. I set them out in full.
[68] From the judgment of Elias CJ:
[15] In England, barristers did not enter into contracts for their professional services. As a result, it was held in the eighteenth century that barristers could not sue for their fees. [] The immunity of barristers from civil liability was recognised a little later, whether initially as a result of the absence of contractual obligations between barrister and client is not clear. [] It was however rationalised on that basis in some of the subsequent cases. []
[16] In New Zealand, the Supreme Court Ordinances of 1841 [] and
1844 and the subsequent Law Practitioners Acts of 1854 and 1858, in what were clearly intended as temporary expedients, permitted anyone enrolled as
a barrister or solicitor to act in both capacities. There was no clear impediment to their entering into contracts with clients for professional
litigation services and it seems they could sue for unpaid fees. [] After the Law Practitioners Act 1861 and until enactment of the Law Practitioners
Act 1982, barristers could practise as solicitors and those admitted as both could combine their practices as both. Most did so. Whether they could therefore also be sued for breach of contractual duties of care and skill in the
performance of litigation services was uncertain until Rees v Sinclair adopted the immunity as restated in Rondel v Worsley. Although thedetermination that legal practitioners are immune from liability for negligence in respect of in-Court work was not necessary for disposal of the appeal in Rees v Sinclair itself, it has been treated as authoritative in
subsequent cases. []
[69] From the judgment of Tipping J:
[98] In medieval times, barristers, as we now know them, were liable in negligence and, so it seems, were able to take action to recover their fees. [] During the sixteenth century there was a revival in interest in many facets of life in ancient Greece and Rome. Included in this renaissance was the study of Roman law. It was a well-established tenet of Roman law that advocates had no contractual right to sue for their fees. In that respect they had no contract with their clients and what they received for their services was in the nature of an honorarium. []
[99] The importation of this Roman law approach into the English common law resulted in the medieval view being overtaken by the view that as there was no contract between barrister and lay client, or between barrister
and instructing solicitor for that matter, there was no basis for any action for breach of any duty to take care. Until the twentieth century there was no recognised general cause of action for negligence, outside contract, in relation to services rendered by a professional person. The absence of any contractual basis for a claim against a barrister, and the corresponding inability of a barrister to sue for outstanding fees, was generally seen as the basis upon which barrister’s so-called immunity was based.
[100] When, in Hedley Byrne & Co Ltd v Heller & Partners Ltd, [] the House of Lords allowed claims to be brought in tort for negligent misstatements and advice, without the need for any contractual relationship between the parties, the traditional underpinning of barrister’s immunity could no longer be supported. It was not long before the immunity was reviewed in Rondel v Worsley. [] The House of Lords decided that the immunity was still justified on public policy grounds which required it to be limited to in-Court work.
[70] Mr Ellis’s submission is that comments such as these demonstrate that barristerial immunity and the rule against barristerial suit for fees are mutually dependent, and the removal of one necessitates the removal of the other. However, that is not what the quoted passages say. Rather, as I see it, they explain that early in the development of barristerial immunity, both the immunity and the inability of a barrister to sue for fees rested on the same rationale, namely the lack of any contractual relationship between the barrister and the client. Later, in the wake of Rondel v Worsley [1967] 3 All ER 993 barristerial immunity was placed on a public policy footing instead. This was necessary because the decision in Hedley Byrne permitted actions in negligence against barristers notwithstanding the lack of contractual obligations. Hence, if barristerial immunity were to survive, it needed to be placed on new foundations. The removal of barristerial immunity in Lai therefore involved a rejection of the public policy basis of the immunity but, crucially for the purposes of the present case, the Court in Lai did not reject the rationale that underpins the inability of a barrister to sue for his fees, namely the lack of contractual capacity. Accordingly, in my view Lai does not assist Mr Ellis.
[71] That interpretation is also apparent in Rees v Sinclair. There, McCarthy P noted, at 186, that it had sometimes been contended that as the immunity of an English barrister had often been stated to be founded on the fact that he has no contractual relationship with his client and cannot sue for his fees, there could be no reason why a New Zealand barrister and solicitor, if he is entitled to sue for his fees as held in Robinson, should receive the same immunity. McCarthy P held that that
argument failed in light of the approach in Rondel v Worsley, which based the immunity on public policy grounds.
[72] Finally, Atkinson v Pengelly at one point compares barristerial immunity and the rule against barristerial suit for fees, at 111:
A ruling that a barrister can sue for his fees in New Zealand could have wider ramifications. Such a ruling might undermine the general rule allowing barristers immunity from suit for litigation and matters sufficiently connected with litigation.
[73] Read in light of the surrounding authorities, it becomes clear that the point Tipping J is making in this passage is that allowing barristers to sue for fees would imply a contractual relationship between barrister and client, which would in turn provide a basis for the client to sue the barrister other than in tort. Of course the answer to Tipping J’s concern is that even if there were such a contractual relationship barristerial immunity would have applied nonetheless due to its public policy rationale. For our purposes, however, it is clear that Tipping J did not intend to suggest that the removal of barristerial immunity would, per se, entail the removal of the rule against barristerial suit for fees. Rather, he was suggesting the reverse: that the removal of the rule against barristerial suit for fees might undermine barristerial immunity.
[74] I conclude for those reasons that the rule preventing a barrister sole from suing for his fees survives the reconsideration of barristerial immunity in Lai v Chamberlains. Albeit that the rule may be anachronistic and worthy of reconsideration, at present it remains the law in New Zealand. Mr Ellis’s first submission accordingly fails.
[75] Dr Moodie says that Mr Ellis, by his causes of action, is simply trying to recover fees owing to him, in contravention of the rule against barristerial suit for fees. I agree with that characterisation. Mr Ellis has invoiced Mr Key and Moodie
& Co for the hours that he has worked on Dr Moodie’s case. It is not clear whether he has attempted to recover from Mr Key the $87,820.99 fees he has rendered to Mr Key. It does seem that his attempts at this point to recover the total fees from Dr Moodie have been flatly rejected. He has now instituted these proceedings against
Dr Moodie claiming damages in the amount of those invoices. Despite Mr Ellis’s averment that his causes of action are not an attempt to recover his fees, I am satisfied that Mr Ellis is in reality trying to achieve that result by another way. This conclusion in my view is supported by the entire history of this dispute which demonstrates Mr Ellis’s attempts, by various means, including allegations against Dr Moodie in the media and a referral to the District Law Society, to recover the fees he says are outstanding. It is clear, therefore, that Mr Ellis has instituted these proceedings with the ulterior motive of seeking a collateral advantage beyond what the law offers; this is an abuse of process in accordance with Goldsmith v Sperrings Ltd. I therefore strike out his causes of action as an abuse of the process of this Court.
[76] However, in case I am wrong in reaching that conclusion, I will now go on to consider the plaintiff’s causes of action on their own merits. When one examines these causes of action it will become clear that they are also untenable, and that their untenability is symptomatic of the fact that they are really just an attempt by another path to achieve that which is prohibited: the recovery by a barrister sole of his fees.
Causes of action arguable?
[77] The pleadings in Mr Ellis’s statement of claim are confusing and, at times, it is not obvious what the basis is for the causes of action he pleads against the defendants. I am particularly troubled by the causes of action against the second, third and fourth defendants. It is not clear what the relevance is of the second defendant company’s allegedly unlawful trading to Mr Ellis’s position and his allegation of damage suffered. Unfortunately, however, in the strike out application argued before me, the elements of the causes of action were not subjected to substantial challenge by the defendants. The legal basis for those causes of action was not explored in any but the most generic terms and accordingly Mr Ellis has not been put to argument in their defence. Therefore, though I express reservations as to the viability of many of the causes of action, I prefer to determine this application on the more straightforward question of loss and damage suffered.
[78] I must also record my concern at the inclusion in the statement of claim of a number of allegations which, as I see it, are not relevant to the plaintiff’s cause of action and may well have been included solely in order to discredit Dr Moodie or cast aspersions upon his character. I refer specifically to:
a) The allegation at para 25, bullet point 3, that Dr Moodie had perpetrated a fraud on Ms Strachan a person who is not a party to this proceeding.
b)The passing insinuation at para 25, bullet point 4, that Dr Moodie may have gambled his income or assets away;
c) The direct allegation at paras 39-40 that Mrs Moodie received management fees as a tax evasion exercise;
d)The reference in para 61 to fraud, undue influence and theft allegedly committed against Ms Strachan.
[79] Those are serious allegations and in my view they are unnecessary as they are irrelevant and do not go to the pleaded cause of actions. Cowles v Prudential Assurance Co (1957) NZLR 124 and Davis v Russell McVeagh [1994] 2 NZLR 175.
[80] A statement of claim should not be treated as an opportunity to perpetrate a collateral attack on the character of a defendant. And it is clear that scandalous and irrelevant material of this kind included in pleadings will be struck out – Van der Kaap v Attorney-General (1996) 10 PRNZ 162.
[81] Returning to Mr Ellis’s overall statement of claim pleading, in this he claims compensatory damages as well as exemplary damages under each cause of action. As I have noted, the essence of his claim to damages is that, but for the misleading or deceitful conduct, or the unlawful and fraudulent trading, Mr Ellis would not have agreed to act for Dr Moodie and therefore would have expended his energies elsewhere, in the process earning a fee for his efforts. He therefore quantifies his loss on the basis of the value of the invoices he sent to Mr Key for Dr Moodie’s
contempt proceedings (totalling $87,820.99) and to Moodie & Co. for the other proceedings (totalling $18,344.44). Those invoices reflect the billable hours he says he expended on Dr Moodie’s case, and therefore the billable hours that would have been charged elsewhere and, presumably, to some other instructing solicitor who provided a paying client. That analysis is an essential element of each of the causes of action he has pleaded against the defendants.
[82] Mr Ellis’s claim for damages is effectively a claim for the value of a lost chance – the chance to work for other (paying) clients. The Court of Appeal discussed the proper approach to damages representing the loss of a chance in Benton v Miller & Poulgrain (a firm) [2005] 1 NZLR 66. In that case, the plaintiff Mr Benton retained the services of the defendant firm to advise him on the purchase of his wife’s half share of the matrimonial home. The defendant failed to advise the plaintiff of the implications of the Matrimonial Property Act 1976. When the plaintiff and his wife separated, the wife was able to obtain a one-half interest in the home under the provisions of that Act, notwithstanding the plaintiff’s earlier purchase of her share. It was clear that the defendant had been negligent in its advice. The District Court Judge who first heard the claim however was not satisfied that the plaintiff had suffered any loss, as the claim for damages depended on the plaintiff establishing that, upon receiving proper advice, he and his wife would have entered into a s 21 agreement declaring the home to be the plaintiff’s separate property. There was no way to know whether or not that would have in fact occurred and therefore no way to be sure that the plaintiff would have avoided loss.
[83] On appeal, the Court of Appeal distinguished between the evidential approach required for historical facts and hypothetical facts where loss of a chance is alleged. The historical facts are those which are alleged to have actually occurred in the history of the dispute. In Benton, the historical facts were those that described the status of the property at the time the transactions were entered into by the plaintiff. Those facts were either true or false (“all or nothing” as the Court put it), as a matter of historical fact, and accordingly their truth had to be established by the plaintiff to the balance of probabilities. In contrast, the hypothetical facts where those facts which the plaintiff alleged would have occurred but for the negligent conduct of the defendant. As the Court put it, at 79:
In contradistinction, what would have happened if [the defendant] had given appropriate advice to Mr and Mrs Benton is not a matter of historical fact (given that such advice was not given). Rather it involves counter-factual analysis – that is, the asking and answering of the hypothetical question.
[84] In respect of hypothetical facts, the Court of Appeal drew a further distinction between hypothetical facts about how the plaintiff would have acted in the absence of the breach, and hypothetical facts about how a third person would have acted. In respect of hypothetical facts about the plaintiff’s conduct, the all or nothing approach is usually appropriate:
So if the plaintiff shows that it is more likely than not that he or she would have acted in a particular way, the Court acts on the assumption that this is the way the plaintiff would have acted. If this is not established as being more likely than not, then the Court acts on the basis that the plaintiff would not have acted in that particular way.
[85] However, hypothetical facts about how others would have acted do not have to be established on an all or nothing basis. Rather, the plaintiff must identify the probability that the third person would have acted in the manner alleged. The degree of probability then determines the extent of recovery as a question of quantification of damages. Hence, in Mr Benton’s case, he had to establish on the balance of probabilities that he would have entered into a s 21 agreement had he received proper advice. However, he only had to show a more than speculative chance that his wife would have entered into such an agreement, and then the probability of that event occurring would determine the extent of his recovery.
[86] In undertaking that assessment, the Court said, at 81:
In making a “loss of chance” assessment, broad judgments are called for. At one end of the spectrum, very low probabilities are unlikely to be reflected in an award of damages. So if the chance of avoiding an adverse event is as low as say one in ten, a Court will probably reject the claim rather than fix damages at ten per cent of the cost to the plaintiff associated with those adverse events. At the other end of the spectrum that approach is sometimes, but not always, adopted. So a 90 per cent chance of avoiding an adverse event may result either in complete recovery of all losses associated with that adverse event (on the theory that the chance of not avoiding those losses was sufficiently speculative to be able to be ignored) or alternatively a discount of ten per cent for contingencies.
[87] In the present case, therefore, Mr Ellis would have to establish on the balance of probabilities that he would have expended elsewhere the time he in fact expended
on the Moodie case. However, what he would have in fact earned had he directed his attentions to other cases is not a matter entirely within his control and therefore stands to be determined in accordance with these “loss of a chance” principles. The extent of his recovery would depend on the Court’s assessment of what he likely would have earned elsewhere.
[88] All of that said, however, Mr Ellis faces a more immediate problem, which I think is dispositive of this application, and that is his inability to formulate a viable claim for damages. On the basis of Mr Ellis’s pleading, the value of his lost chance is represented by the difference between what he says he might have obtained had he directed his energies towards other paying clients (his hypothetical position) and what he in fact obtained through entering into the fee arrangement with Dr Moodie (his current position). That is the basis upon which he has put his case in order to avoid the accusation that he is suing for his fees in his capacity as a barrister. Therefore, on the “loss of a chance” assessment, and on the basis upon which Mr Ellis has put his case, that is the alleged measure of his damage.
[89] What Mr Ellis in fact obtained by entering into the fee arrangement (his current position) is pleaded at paragraphs 14 to 20 in Mr Ellis’s statement of claim. The relevant passages state:
14. There was no initial record of payment of fees other than the instructions of John Key, of 22 April 2005, which stated, “our instructions are on the basis that your fee is a matter between our client and yourself”.
15. In April 2005, the Parties agreed that the Plaintiff would be paid a reasonable fee recognising the skill and expertise required, but that part of the fee would be deferred until Dr Moodie received his fee for the settlement or success of the “Berryman proceedings”.
16. It was agreed that part of the payment would be paid from fundraising to be organised by Dr Moodie.
17. The Plaintiff advised his hourly rate would not be less than Dr Moodie’s charge out rate.
18. No agreement was reached as to what part of the fee would be deferred, or how much would be paid by fundraising.
19. The Plaintiff was induced into this fee deferment arrangement upon the fraudulent representations of Dr Moodie that his practice was essentially pro bono. He advised that he operated essentially a “pro bono practice” and had
not received any large payment from any client for quite some time, and that part of the fee would be raised by fund raising.
20. The Plaintiff in reliance of [sic] these representations, agreed to deferral of an unspecified part of the fee.
[90] It is evident from this passage that Mr Ellis did not agree to forgo a fee for his services. On the contrary, he insists that the agreement always envisioned him being paid “a reasonable fee” calculated on a basis not less than Dr Moodie’s charge out rate. The fee arrangement, by Mr Ellis’s own pleading, contemplated the deferral of part of Mr Ellis’s fees, not that Mr Ellis would act on a no-fee basis. Further, Mr Ellis states that there was no agreement to defer in respect of the instructions from Moodie & Co (para 50 statement of claim), nor was there agreement to defer recovery of his disbursements (para 53 statement of claim). That is the proper characterisation of his current position as it is described in his pleadings.
[91] By contrast, Mr Ellis says that, had Dr Moodie not misrepresented his financial position to him, he would have not agreed to act for him and would instead have acted for other clients who, it is presumed, would have paid him. That is his pleaded hypothetical position. Mr Ellis therefore quantifies the difference between his current position and his hypothetical position (the lost chance) as the value of the invoices he sent to Dr Moodie, which represents the bills that would have been recovered elsewhere.
[92] There are a number of problems with that pleading, which I think demonstrate the non-viability of this proceeding as a matter of law. In undertaking the following discussion I bear in mind that, because this is a strike out application, the claim to damages must be untenable on the pleadings.
[93] First, the difference that Mr Ellis identifies between his current position and his hypothetical position is plainly misstated. His pleading as to damages presumes that in his current position he has no possibility of recovering fees and that, had he not entered into the fee arrangement with Dr Moodie, he would have recovered fees. That assessment manifestly conflicts with his current position as he has pleaded it, in which his entitlement to fees is simply deferred in part. Therefore, Mr Ellis cannot allege that he has suffered damage representing the value of the invoices he sent to
Dr Moodie because, according to his own pleading, it was always contemplated under the fee arrangement that he would recover the value of those invoices (or a “reasonable fee” comparable to those invoices).
[94] The only basis upon which Mr Ellis can allege he has suffered damage in the amount of the invoices is that Dr Moodie has denied liability to pay his fees whereas another client would have paid promptly. However, that allegation of damage is not actionable, as Mr Ellis’s entitlement to fees in either case, current or hypothetical, would have been unenforceable due to his inability to sue to recover them. Accordingly, were I to hold that Mr Ellis has suffered damage by virtue of Dr Moodie’s denial of his entitlement to fees I would be converting a contractual measure of damages into a tortious measure and allowing Mr Ellis to recover his fees by the back door. That is precisely what he is not entitled to do by virtue of the rule against barristerial suit for fees.
[95] Mr Ellis is therefore unable to plead damage representing the value of the invoices, as that cannot reflect the difference between his current position and his hypothetical position. What remains to him is to plead damage representing the difference between an entitlement to fees deferred (the current position, as actually pleaded) and an entitlement to fees arising immediately (the hypothetical position). That is the only genuine difference, in that, had he been retained by other clients, Mr Ellis’s implied allegation is that he would not have agreed to defer fees in respect of them, but would have insisted on being paid immediately.
[96] Immediately it will become apparent that this measure of damage must be considerably less than the damages Mr Ellis has in fact pleaded, representing the value of the invoices. Moreover, it is not a measure of damage which applies to the fees invoiced to Moodie & Co. or to Mr Ellis’s disbursements, as Mr Ellis has stated in his claim that the arrangement did not contemplate deferral of those. However, even putting those aside, in my view there is a more fundamental problem with a measure of damages representing the difference between the current position and the hypothetical position.
[97] The problem with that conception of damage is that it is simply not capable of any quantification at this point, and there is no reason to believe that it would be capable of quantification at trial. That is because the entitlement under the fee arrangement has not yet matured. It is entirely possible that Dr Moodie will recover fees in a settlement for the Berryman litigation and will accordingly fulfil his part of the fee arrangement. Conversely it is also possible that he will deny any obligation to pay Mr Ellis, or that he will agree to pay, but only in part.
[98] The issue here is that the full extent of the current position is not known, and cannot be known until the fee arrangement matures. In turn, the difference between the current position and hypothetical position is not capable of quantification until the full extent of the current position is known. In Benton the full extent of the current position was known – Mr Benton suffered damage in the amount of $90,000 by virtue of having to convey his half share in the house to his former wife. Hence, the Court had a comparator against which to measure the value of the lost chance. Here, there is no comparator, because we cannot know to what extent, or even if, Dr Moodie will fulfil the fee arrangement. This is not simply an issue of assessing the probabilities and using that assessment to determine an appropriate discount in the quantum of the award. The extent to which the fee arrangement will be fulfilled is not a hypothetical – it either will or will not be fulfilled as a matter of fact. It is therefore an “all or nothing” question, as the Court in Benton put it. It is simply that it is an all or nothing question which cannot as yet be determined.
[99] The full extent of the current position is also not simply a question of fact which should go to trial rather than being determined at the strike out phase. There is no reason to expect that the Berryman litigation will have been resolved come the trial date. The problem here is not that Mr Ellis has failed to plead the full extent of the current position – it is that the full extent of the current position is unpleadable until it has occurred. Any pleading, therefore, as to the difference between Mr Ellis’s current position and his hypothetical position is entirely speculative, without foundation, and incapable of proof. The result is that, to the extent that there is a dispute between the parties about loss suffered, it is a dispute in potentia only and one in respect of which the Court cannot rule. In short, the claim is premature.
[100] I therefore conclude that Mr Ellis’s claim to compensatory damages is untenable as there is no viable formulation of damage as a matter of law.
[101] It may seem as though I am overcomplicating the position, but the existence of these complexities in my view illustrates the central issue in this proceeding, which is that Mr Ellis has had to tie himself in knots to avoid the conclusion that he is simply attempting to sue for his fees. His inability to formulate a viable claim for damages is symptomatic of that central issue and demonstrates that Mr Ellis’s claims are not tenable in the absence of an entitlement to sue for fees. As I see the position, this also confirms my earlier conclusion that this proceeding ought to be struck out as an abuse of process.
[102] Mr Ellis also claims exemplary damages of $50,000 in addition to compensatory damages. In respect of his cause of action under s 9 of the Fair Trading Act his entitlement to remedies is prescribed by s 43, which does not empower the Court to grant exemplary damages. In respect of deceit, exemplary damages may sometimes be appropriate: Mafo v Adams [1970] 1 QB 548, Archer v Brown [1985] QB 401. However, in accordance with A v Bottrill [2003] 2 NZLR
721 (PC) the conduct in question must be “outrageous”.
[103] In my view Mr Ellis’s pleadings here do not allege conduct that can properly be characterised as “outrageous” and therefore warranting exemplary damages notwithstanding the intentional nature of the conduct alleged. I say that for three reasons. First, the Court of Appeal has stated that awards of exemplary damages should be rare: Television New Zealand Ltd v Quinn [1996] 3 NZLR 24. The allegations in this proceeding are not exceptional in any respect and do not rise to the threshold necessary to warrant exemplary damages. Secondly, the Court is reluctant to award exemplary damages in disputes that are essentially commercial in character: Watson v Dolmark Industries Ltd [1992] 3 NZLR 311. In such cases, compensatory damages remedying the plaintiff’s loss are usually sufficient. Thirdly, in this case Mr Ellis has not at this point suffered any actual loss. It would therefore be a strange result if Mr Ellis could bring proceedings claiming exemplary damages to punish a defendant who, by his conduct, has not caused Mr Ellis any loss.
[104] Finally, I note that, were Mr Ellis to reconstitute this proceeding as an action for breach of contract, not only would he be unable to pursue his fees, he would also be unable to claim exemplary damages according to the Court of Appeal in Paper Reclaim Ltd v Aotearoa International Ltd [2006] 3 NZLR 188.
[105] The combination of those factors leads me to conclude that Mr Ellis’s pleadings are not capable of establishing an entitlement to exemplary damages.
Conclusion
[106] For all these reasons, Dr Moodie’s strike out application succeeds.
[107] Mr Ellis’s claim discloses no reasonable cause of action that could possibly succeed. In addition, his claim which is effectively to recover his fees as a barrister sole must be seen as an abuse of process in the sense that it is a proceeding stemming from an improper motive or for an ulterior purpose – Goldsmith v Sperrings Limited.
[108] An order is now made striking out Mr Ellis’s statement of claim.
[109] As to costs these are reserved. If counsel are unable to agree on this issue they may file and serve memoranda as to costs sequentially (plaintiff’s memorandum first and defendants’ memorandum ten working days later with any reply memorandum from the plaintiff five working days thereafter) and in the absence of any party wishing to be heard on the issue I will decide the question of costs on the basis of the material before the Court.
"In accordance with r 540(4) I direct the Registrar to endorse this judgment with a delivery time of
1.00 pm on the 26th day of July 2007."
D Gendall AJ
Solicitors:
Moodie & Co, Feilding for First and Third Defendant, and on behalf of Second and Fourth Defendant
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