GBR Investment Ltd v Keung HC Christchurch CIV 2009-409-1486
[2010] NZHC 411
•19 March 2010
IN THE HIGH COURT OF NEW ZEALAND
CHRISTCHURCH REGISTRY
CIV-2009-409-001486
BETWEEN GBR INVESTMENT LTD
Plaintiff
AND SENG BOU (PAUL) KEUNG Defendant
Hearing: 18 March 2010
Appearances: A C Hughes-Johnson QC for Plaintiff
HDP van Schreven for Defendant
Judgment: 19 March 2010 at 4:45 pm
JUDGMENT OF ASSOCIATE JUDGE BELL
This judgment was delivered by me on 19 March 2010 at 4:45 pm
pursuant to Rule 11.5 of the High Court Rules.
Registrar/Deputy Registrar
Date: ………………….
Solicitors/Counsel:
Harmans Lawyers (G Riach), PO Box 13151, Christchurch
Clark Boyce, PO Box 25433, Christchurch
A C Hughes-Johnson QC, PO Box 286, Christchurch
GBR INVESTMENT LTD V S B (PAUL) KEUNG HC CHCH CIV-2009-409-001486 19 March 2010
[1] On 1 October 2009, the defendant filed an interlocutory application for orders restraining the firm Buddle Findlay, solicitors of Christchurch, or any partner, associate or solicitor in that firm from continuing to act for the plaintiff in the proceeding and restraining Austin Forbes QC, the plaintiff’s counsel, from continuing to act for the plaintiff on instructions from Buddle Findlay or any new firm of solicitors the plaintiff might appoint.
[2] The plaintiff is a company associated with the Koulanov family. Buddle
Findlay has acted for the Koulanov family since they came to New Zealand in the
1990s. Buddle Findlay also acted for the defendant and companies associated with the defendant in 2004 but have not acted since. The defendant says that as a result of Buddle Findlay having acted for him and his companies, Buddle Findlay has obtained confidential information which Buddle Findlay could use in the present proceeding brought against him. In particular, the Buddle Findlay lawyers who did work for him and his companies included a partner and member of Buddle Findlay’s litigation team. Buddle Findlay’s litigation team is now representing the plaintiff in the present proceeding, including one of the partners Mr Keung dealt with. Mr Forbes has never acted for Mr Keung or his companies, but the plaintiff wants him restrained as well because confidential information that Buddle Findlay obtained can be passed on to Mr Forbes to be used in this proceeding.
[3] The present litigation arises out of investments in properties at Goose Bay on the Kaikoura coast. Goose Bay Ranch Holdings Ltd is a farming and tourist company which owned the Goose Bay ranch. It also owned subsidiary companies, Moana Investment Property Ltd, Makura Settlement Ltd and PK Construction Ltd, which also owned associated properties. Mr Keung is the sole director of Goose Bay Ranch Holdings Ltd and the other companies. The shareholders of Goose Bay Ranch Holdings Ltd are GBR Investment Ltd, the plaintiff in this case, GBR Trustees Ltd, a company owned and controlled by Mr Keung, Valentine Trustees Ltd, a company controlled by Ms Valentine, Mr Bruce Raymond Head, a relative and business associate of Mr Keung, and his wife, Calm Water Enterprises Pty Ltd, an Australian company controlled by Mr Keung’s sister. The Koulanov’s company, GBR Investment Ltd, has 12.2% of the shareholding. GBR Trustees Ltd has 84.6% of the shareholding. Through GBR Investment Ltd, the Koulanovs invested
$2,900,000 in Goose Bay Ranch Holdings Ltd. They say that they were induced to make the investments in the company as a result of misrepresentations made by Mr Keung. The statement of claim pleads extensive misrepresentations alleged to have been made: as to the value of Goose Bay as an investment, housing for shareholders, further land purchases, new shareholders, financing, share swaps and management fees.
[4] The plaintiff’s causes of action against the defendant are for deceit, negligent misstatement, breach of the Fair Trading Act 1986, procuring breach of contract, wrongful interference with contract and with business interests. For all causes of action, the plaintiff claims damages of $2,900,000.
[5] Mr Keung says that he is director of a number of companies all within the Keung Group: Keung Corporation Ltd, Goose Bay Ranch & Tourism Ltd, Keung Custodian Ltd, Keung Management Ltd, Keung Investments Ltd, Goose Bay Ranch Ltd, Keung Developments Ltd, KI Commercial Ltd, Better Business Centre Ltd, Bernard Street Properties (2007) Ltd, New Zealand Trade Management Ltd, Beach Road Commercial Ltd, Moana Coastal Farm Ltd, NZ Geo-Technical Ltd, GBR Trustees Ltd, K Development Trustee Ltd, K Investment Trustee Ltd and GB Management Ltd.
[6] Mr Keung’s interest in the Goose Bay property goes back to late 2004 when Bernard Street Investments Ltd, later renamed Goose Bay Ranch Ltd, bought the Goose Bay property. The solicitors who acted for Mr Keung on the purchase were White Fox & Jones. Buddle Findlay did not act for Mr Keung or his companies on the purchase of the Goose Bay property or any of the neighbouring properties. They had by this stage fallen out. Title to the property later passed to Goose Bay Ranch Holdings Ltd.
[7] In 2007, Keung Developments Ltd sold a property at Lansdowne Road, Christchurch, to the Koulanovs. Buddle Findlay acted for the Koulanovs on the purchase, with Mr Keung using other solicitors.
[8] On 15 August 2007, Mr Grigori Nikolayevich Koulanov agreed to buy shares
in Goose Bay Ranch Holdings Ltd. From there, there were various transactions involving the Goose Bay investments. Buddle Findlay did not act for either party in respect of Goose Bay until November 2008 when the Koulanovs consulted Buddle Findlay about their Goose Bay investment.
[9] On 19 October 2007, the plaintiff was incorporated. The plaintiff’s shareholder is Theodorus Investments Ltd which was incorporated on 7 June 2007. The shareholder of Theodorus Investments Ltd is Mr N W Russell, a partner of Buddle Findlay. He holds the shares on trust for the Koulanov family.
[10] On 3 December 2008, there was a shareholders’ meeting of Goose Bay Ranch Holdings Ltd. Later in December, Buddle Findlay wrote to Mr Keung threatening the issue of court proceedings.
[11] On 2 February 2009, there was a shareholders’ meeting of Goose Bay Ranch
Holdings Ltd. Mr Russell of Buddle Findlay attended this meeting holding a proxy
for the plaintiff. In that meeting, Mr Keung raised the issue of Buddle Findlay having a conflict of interest.
[12] On 17 February 2009, John Angland of Ronald Angland & Son, Leeston, solicitors, wrote to Buddle Findlay raising the issue of conflict of interest. There was further correspondence both from Mr Keung in person and by lawyers on his behalf with Buddle Findlay raising allegations of conflict of interest.
[13] On 27 March 2009, the plaintiff filed a without notice application in the High Court at Christchurch seeking orders that Goose Bay Ranch Holdings Ltd and its subsidiaries be put into interim liquidation. An application that these companies be put into liquidation was also filed, relying on the just and equitable ground. Interim liquidators were appointed on 31 March 2009.
[14] On 9 July 2009, Buddle Findlay filed the present proceeding in the High
Court at Christchurch.
[15] In July 2009, Clark Boyce wrote on Mr Keung’s behalf to Buddle Findlay, again raising the conflict of interest issue with Buddle Findlay responding.
[16] On 30 September 2009, the present application was filed.
[17] On 16 November 2009, Associate Judge Gendall heard the applications for Goose Bay Ranch Holdings Ltd, Moana Investment Property Ltd and Makura Settlement Ltd to be put into liquidation. In the meantime, PK Construction Ltd had been put into liquidation on an application by a creditor. The application was heard from 16 to 19 November 2009. Buddle Findlay acted for GBR Investment Ltd in this proceeding and instructed Mr Forbes. Mr Keung swore affidavits in that proceeding. Mr Forbes cross-examined Mr Keung at length.
[18] In the application for liquidation orders, there was no application like the one made in this case to restrain either Buddle Findlay or Mr Forbes from acting for GBR Investment Ltd.
[19] On 27 November 2009, Associate Judge Gendall gave his decision on the liquidation proceedings. He dismissed the applications in respect of Moana Investment Property Ltd and Makura Settlement Ltd but ordered that Goose Bay Ranch Holdings Ltd be put into liquidation.
[20] On 9 December 2009, Moana Property Investments Ltd and Makura Settlement Ltd were placed into liquidation on the resolution of its shareholder, Goose Bay Ranch Holdings Ltd.
[21] For Buddle Findlay, Mr Mark William Russell, a commercial law partner, has represented the Koulanov family throughout. He says he has never acted for Mr Keung or his companies.
[22] Mr William John Palmer is a litigation partner in Buddle Findlay. He is assisting the plaintiff in the present proceeding. He has acted for Mr Keung in the past. Mrs Susan Rowe is a solicitor employed by Buddle Findlay. She is not presently engaged in work on the present proceeding, but has done litigation and
related work for Mr Keung in the past. Ms Kelly Foley is another litigation lawyer
in Buddle Findlay. She has not acted for Mr Keung in the past but is presently assisting the plaintiff in the proceeding against the defendant. Mark Alfred Odlin is a commercial/conveyancing partner in Buddle Findlay. He has acted for the Keung Group in the past but is not taking any part in the present litigation for the plaintiff against Mr Keung. Information held by Buddle Findlay about Mr Keung and his companies is accordingly available to those handling this case for the Koulanovs.
[23] Buddle Findlay accepts that in the past they have acted for Mr Keung and companies in his group and that while they were solicitors for Mr Keung and his group they received confidential information. Buddle Findlay do not propose to put in place any special arrangements such as a Chinese wall to ensure that any confidential information as to Mr Keung and his group is not used in the present proceeding against Mr Keung.
[24] Mr Forbes has filed a memorandum in this Court in which he has advised that
he has never acted for Mr Keung or his companies. The only information Mr Forbes has about the defendant has been obtained from acting against him on earlier occasions and from information provided by the Koulanovs. He says that Buddle Findlay have not given him any information arising from their having previously acted for Mr Keung.
[25] Buddle Findlay acted for Mr Keung from May 2004 until November 2004. Mr Keung also says that there was an initial contact with Mr Palmer at Buddle Findlay in 2003 but Mr Palmer denies this. It is not suggested that any confidential information passed between Mr Keung and Mr Palmer in 2003.
[26] Buddle Findlay acted for Mr Keung and his companies on a number of matters. The lawyer-client relationship came to an end in November 2004 when Mr Keung’s companies did not pay Buddle Findlay’s fees. Buddle Findlay issued a statutory demand against Keung Investments Ltd. Keung Investments Ltd applied to the High Court for an order setting aside the statutory demand. On 15 April 2005, an agreement to settle between Buddle Findlay and Keung Investments Ltd was signed and Associate Judge Christiansen issued a minute on 18 April 2005 recording that all
matters were settled. Later that year, Buddle Findlay handed over all their Keung files.
[27] There is disagreement between Mr Keung and Buddle Findlay as to the nature and extent of work undertaken by Buddle Findlay and the knowledge and information that Buddle Findlay gained from acting for Mr Keung and his companies.
[28] In Black v Taylor [1993] 3 NZLR 403 the Court of Appeal recognised that while the Court could make a declaration or issue an injunction against a lawyer to restrain him from acting against former clients, the matter could also properly come before the Court by way of interlocutory application. In this case, counsel did not suggest otherwise. The basis for the Court’s intervention is the Court’s inherent jurisdiction to ensure the due administration of justice. Courts have restrained lawyers from acting where knowledge of a former client would constitute misuse of confidential information. In D & J Constructions Pty Ltd v Head (1997) NSWLR 118, 123, Bryson J. expressed the need for justice to be done this way:
Cautious conduct by the court is appropriate because the spectacle or the appearance that a lawyer can readily change sides is very subversive of the appearance that justice is being done. The appearance which matters is the appearance presented to a reasonable observer who knows and is prepared to understand the facts.
[29] In Russell McVeagh McKenzie Bartleet & Co. v The Tower Corporation
[1998] 3 NZLR 641 at 651, the Court of Appeal laid down the test to be followed in New Zealand when a former client applies to have his lawyer restrained from acting against him on the basis of confidential information imparted by the client to the lawyer:
It is necessary to go back to the basic issue, which is the protection of confidential information from disclosure. In our view this issue should be addressed by the Court applying a principled approach, for which it is neither necessary nor desirable to lay down a series of propositions covering a variety of different hypothetical situations, which are likely some time later to be found non-exhaustive. Three questions emerge. The first is whether confidential information is held which if disclosed is likely to affect the concerned (former) client’s interests adversely. The second is whether in the particular factual circumstances, viewed objectively there is a real or appreciable risk that the confidential information will be disclosed. The third, which arises if the first two questions are answered affirmatively, is
whether recognising the significance and importance of the special fiduciary relationship which gives rise to the duty of protection, the Court’s discretionary power to disqualify should be exercised.
All three questions will frequently overlap. The nature and sensitivity of the information, the extent of the risk, and the adverse effect of possible disclosure are likely to affect all three inquiries. In making the final determination as to whether enjoinder in the nature of disqualification is appropriate, the Court will also need to take into account the competing factors of a person’s right to the services of a solicitor of choice, and the corresponding right of the solicitor to offer his or her services to the public generally. Mobility within the profession, as it is sometimes termed, is relevant. Access to specialist services and market competition are also matters relevant to the public interest. A balancing exercise of this kind, which is mindful of the interests of all directly concerned, but does not undermine the integrity of the fiduciary relationship, is more likely to meet the overall ends of justice than rigid rules imposed by the Court.
We would therefore reject the notion of an irrebuttable presumption, and also that of a rebuttable presumption. The preferable approach is the common sense practical one of assessing the evidence. The circumstances will dictate whether there is an unacceptable risk of disclosure of information. Where there is possession of relevant information, in the absence of negating evidence of protection the Court will readily infer there is a risk of disclosure.
[30] The test above has been criticised. Indeed, in Bolkiah v KPMG [1999] 2 AC
222 at 237, Lord Millett rejected the balancing exercise as inappropriate. Of course, the Court of Appeal’s decision binds this Court. But I see nothing in the Court of Appeal’s decision that suggests that a former client should not be protected if there is a real, and not just a fanciful, risk of confidential information he has given his lawyers then being used against him.
[31] In Bolkiah v KPMG at 235, Lord Millett said:
The only duty to the former client which survives the termination of client relationship is a continuing duty to preserve the confidentiality of information imparted during its subsistence.
Accordingly, it is incumbent on the plaintiff who seeks to restrain his former solicitor from acting in a matter for another client to establish
i) that the solicitor is in possession of information which is confidential
to him and to the disclosure of which he has not consented and
ii) that the information is or may be relevant to the new matter in which the interest of the other client is or may be adverse to his own.
Although the burden of proof is on the plaintiff, it is not a heavy one. The former may readily be inferred; the latter will often be obvious. I do not think it is necessary to introduce any presumptions, rebuttable or otherwise, in relation to these two matters. But given the basis on which the jurisdiction is exercised, there is no cause to impute or attribute the knowledge of one partner to his fellow partners. Whether a particular individual is in possession of confidential information is a question of fact which must be proved or inferred from the circumstances of the case.
[32] These matters are equally applicable under the Court of Appeal’s test in
Russell McVeagh McKenzie Bartleet & Co v Tower Corporation.
[33] It is accordingly necessary to find out whether information that a client has given his lawyer on an earlier occasion is relevant to any matter in which the interests of the former client may be adversely affected.
[34] Chief Justice Doyle of the Supreme Court of South Australia, made a slightly similar point in Nasr v Viherbaara (2005) 91 SASR 222 at 229:
If a solicitor is in possession of confidential information provided by a former client, being information relevant to a matter in which the solicitor now proposes to act against that client, and which might be used to the advantage of the proposed new client and to the disadvantage of the former client, then I consider that an injunction should be granted, on the basis of the risk that the information might be misused as a result of the conflicting duties now imposed on the solicitor. In that sense it might be said that the Court acts on the basis of a theoretical risk because, it does not concern itself with what the solicitor will actually do. But I do not agree that the Court should intervene on the basis of a theoretical risk that the solicitor has confidential information from the former client that might be used to the disadvantage of that client. My view is that there must be a finding of fact about the imparting of relevant confidential information, before the Court can intervene.
[35] Because of the requirement that information formerly disclosed in confidence must be relevant to the matters now in issue, the Court needs to be able to make a determination as to relevance. Accordingly, in these applications, it is not helpful for
an applicant to make general sweeping assertions of confidentiality without identifying how the information imparted in confidence is relevant to the proceeding now before the Court. In Corrs Pavey Whiting & Byrn v Collector of Customs (Victoria) (1987) 74 ALR 428, 437, Gummow J said:
As I have indicated, the case is to be approached in terms of the general law, not as a case of confidence protected by contract but as one, if anything, of
confidence protected in equity. It is now settled that in order to make out a case for protection in equity of allegedly confidential information, the plaintiff must satisfy certain criteria. The plaintiff:
i) must be able to identify with specificity, and not merely in global terms, that which is said to be the information in question, and must also be able to show that
ii) the information has the necessary quality of confidentiality (and is not, for example, common or public knowledge),
iii) the information was received by the defendant in such circumstances
as to import an important obligation of confidence, and iv) there is actual or threatened misuse of that information.
[36] Mr Hughes-Johnson very properly drew my attention to this passage in the judgment of the Court of Appeal in Carter Holt Harvey Forest Ltd v Sunnex Logging Ltd [2001] 3 NZLR 343 at [27]:
The initial threshold is appropriately a low one because of the nature of the obligation of confidentiality which the lawyers accepted in their written agreements when undertaking the mediations. Beyond pointing to the general circumstances of the particular case – here the apparently overlapping claims arising out of a similar factual background of purchases of machinery and equipment on the basis, as alleged, of representations by CHHF – it should not be required by the parties seeking to ensure the protection of this confidential information that it must spell out particular matters of concern. To ask it to do so might be to ask it to reveal the very matter it is seeking to keep to itself. Moreover, it may not be able to be sure exactly what the lawyers have learned from their observations during the mediation process. The disadvantage it is seeking to prevent may be as subtle as something which may have been observed by the lawyers in the body language of either of its representatives. Even an observation of that kind might give the lawyers a tactical advantage in deciding how to pursue the claim of their other client.
[37] While the Sunnex case did not involve a claim of a former client against a lawyer now acting against him, the above dictum cannot be distinguished on the basis that it applies only to disclosures made in a mediation. And an over-rigorous insistence on specificity may undermine the purpose of protecting confidential information. But if the Court is to make an informed decision as to relevance, it must have adequate information before it.
[38] I do not understand the Court of Appeal to be saying in the Sunnex decision that the inquiry into relevance should be dispensed with. The inquiry is necessary to
prevent unmeritorious qualifications to disqualify lawyers, a matter McKay J was alive to in Black v Taylor [1993] 3 NZLR 403: “I would expect any court to be on its guard against the misuse of its process in this way.”
[39] It is necessary to see what information Mr Keung gave Buddle Findlay and then to see whether that information is relevant to the present proceeding. Mr Keung has made various complaints against Mr Russell, as the Koulanov’s lawyer. However, it is clear that until 2008 when the Koulanovs instructed him about the Goose Bay matters, Mr Russell had had no dealings with Mr Keung and had not received any information from Mr Keung as solicitor for Mr Keung or his companies. In his first affidavit, Mr Keung claimed that Buddle Findlay acted for Keung Developments Ltd on its sale of a property in Lansdowne Road to the Koulanovs. This is not correct. Buddle Findlay acted for the Koulanovs on the purchase. The lawyer handling the purchase for the Koulanovs was Blake Cescon, not Mr Russell. In a later affidavit, Mr Keung accepted that he had earlier been incorrect.
[40] Mr Keung’s dealings with the litigation team in Buddle Findlay requires more detailed examination. One of the first matters Mr Keung instructed Buddle Findlay on was to make a claim against his former lawyers for $190,000. Mr Keung says that this included reviewing over two years of history of the Keung Group’s operations and business practices, including understanding the financial and legal structures relating to the Keung Family Trust and the Keung Group and the impact financially that claim had on them.
[41] Mr Palmer explains that Buddle Findlay prepared draft proceedings against the former lawyers but those proceedings were never filed. The proceedings related
to the purchase of a property at Akaroa where the former lawyers were alleged to have failed to confirm a condition and Mr Keung’s company missed out on buying the property. Mr Keung gave Buddle Findlay some documents to support the claim, including a valuation of the Akaroa property and quotes for a building that was to have been constructed on it but the information did not extend to a review of the Keung Group’s operations and business practices and it was unnecessary to
understand the financial and legal structures of the Keung Family Trust and the Keung Group.
[42] I accept Mr Palmer’s explanation. It makes sense that in a missed opportunity claim, a lawyer would require information about the value of the Akaroa property, but would not need to obtain wider information about the financial interests of the Keung family. The information required to bring a claim against former lawyers over a failed conveyancing transaction in 2004 is not relevant to the Koulanovs’ claim against Mr Keung over the investment in Goose Bay.
[43] Mr Keung instructed Buddle Findlay on a dispute involving a property at Harpers Road, Christchurch. He gave Buddle Findlay a valuation for the Harpers Road property. On Mr Keung’s instructions, Buddle Findlay lodged a caveat against the property. The other party to the dispute on the Harpers Road property was Fab Cars. Buddle Findlay advised Mr Keung, corresponded with solicitors on the other side, gave advice in relation to that dispute, but none of the information relating to the dispute with Fab Cars is in any way relevant to the Koulanov’s claim against Mr Keung.
[44] Another matter Mr Keung instructed Buddle Findlay on was Crown Wholesale Properties Ltd. Buddle Findlay say that there was extensive work on the Crown Wholesale Properties dispute during June 2004. Settlement proposals were made and rejected. The last event on that file was a letter from the solicitors on the other side of 23 July 2004, where it was indicated that proceedings would be issued. There is no evidence that any information relating to this dispute could be relevant to the Koulanov proceeding.
[45] Mr Keung says that Buddle Findlay also acted on a matter involving “Air Snorkel Fiji”. Mr Palmer says he has no recollection of matters relating to Air Snorkel Fiji. In response, Mr Keung says that files returned to him referred to Air Snorkel Fiji. In further response, Mr Palmer says that these may be files opened by former solicitors which were returned to Mr Keung after their relationship terminated. However, I can see nothing in the Air Snorkel Fiji matter that would be
relevant to the present proceeding. There was no evidence explaining what bearing
it had to the Goose Bay dispute.
[46] In Buddle Findlay’s file for Mr Keung regarding Astute Ltd, a Mr Fairbrother had appointed Mr Keung to act as his agent to assist in negotiating in a dispute with Mr Fairbrother’s employer. At Mr Keung’s request, Buddle Findlay drew up a deed for him, although advising that was not necessary. The work on this file related to employment law issues and is not relevant to the present proceeding.
[47] In its file regarding Classic Spares & Repairs, Buddle Findlay acted for Mr Keung in a disputed account for repair of a boat motor. The information given in connection with this consumer dispute is not relevant to the matters in issue in this proceeding.
[48] In Buddle Findlay’s file for Mr Keung regarding Pat Copp, Buddle Findlay acted for Mr Keung on a personal grievance notified by a former employee alleging constructive dismissal. Buddle Findlay advised Mr Keung on the dispute and corresponded with the former employee’s lawyers. The matters covered included corresponding about claims against the former employee for breaches of her employment contract, canvassing defamation proceedings, although these were not issued. None of the matters in this employment dispute have any bearing on the Koulanov proceeding.
[49] Mr Keung says that in 2004, he discussed with Mr Palmer a proposal to purchase a 20% shareholding in Hossack Station Ltd, a large high country station near Hanmer Springs. He says Buddle Findlay prepared a confidentiality deed for the transaction. In the end, he did not go ahead with the purchase of the shares. Mr Palmer says that Mr Keung did ask Buddle Findlay to prepare a confidentiality agreement for his possible investment in Hossack Station Ltd. Susan Rowe, a staff solicitor, drew up the agreement and provided it to Mr Keung. Their work on the Hossack Station Ltd investment went no further than that.
[50] In connection with the Hossack matter, Mr Keung alleges that the purchase of the Hossack shares was to be in the name of the Vault Trust, and he goes on to say
that the Vault Trust purchased Goose Bay using Goose Bay Ranch Ltd. Mr Keung’s response to Mr Palmer’s statement that he has no recollection of the Vault Trust is to produce a file label which has “Vault Trust Ltd” on it which, he says, came in an archive box from Buddle Findlay. Mr Palmer still maintains that he has no recollection of the Vault Trust. Although I am not clear on its extent, it is possible that between May and August 2004, Buddle Findlay did receive some information from Mr Keung about the Vault Trust. Mr Keung says that Vault Trust is a part of the management ownership of Goose Bay investments. He is not required to go further than that, lest that involve the disclosure of what he wants to protect. But if that information was given to Buddle Findlay, I accept Mr Palmer’s evidence that he has no recollection of it. Aside from producing a copy of a file cover with the words “Vault Trust Ltd” on it, Mr Keung has not produced any further evidence as to the Vault Trust, such as documents extracted from Buddle Findlay files, which would suggest that the information relating to the trust was recorded in some tangible or permanent form. Mr Palmer says that Buddle Findlay has searched documents prepared for Mr Keung and can find no reference to Vault Trust. While some confidential information about Vault Trust may have passed to Buddle Findlay, I do not accept that Buddle Findlay have retained it, either in Mr Palmer’s mind or elsewhere.
[51] Mr Palmer says that Mr Keung did not discuss with him his decision not to proceed with the Hossack Station purchase. Mr Palmer also says that Mr Keung did not discuss with him the possibility of purchasing land in Goose Bay. He also confirms that Buddle Findlay did not assist Mr Keung to put together the management structure that arranged the purchase of the land in Goose Bay. Given that Mr Palmer is a litigation partner in a firm where lawyers work in defined areas of practice, I do not accept that Mr Keung would look to Mr Palmer for advice on a property purchase or that Mr Palmer would advise Mr Keung on a property purchase. Buddle Findlay did not open any files relating to Goose Bay and did not give any advice in relation to management structures for Goose Bay. As Buddle Findlay handed over their files to Mr Keung, if Buddle Findlay had had any such files or had given the advice he alleges, I expect that Mr Keung would be able to provide documentation to the Court evidencing that advice. He has not done so.
[52] Mr Keung says that Buddle Findlay prepared funding applications for entities
in the Keung Group. Mr Palmer says that Buddle Findlay had no records of having prepared any funding applications and there is no documentary evidence of Buddle Findlay handling, preparing or lodging any funding applications for the Keung Group.
[53] Mr Keung refers to his company, KI Commercial Ltd, owning 11 Bernard Street, Christchurch. He says that Buddle Findlay did the refinancing of it, trusts, deeds and details. What happened is that Mr Keung’s company, KI Commercial Ltd, transferred 11 Bernard Street, Christchurch, to Better Business Centre Ltd, another Keung company. Mr Odlin, a conveyancing partner, acted on the transaction. He confirms that this was a straightforward conveyancing transaction which did not involve any refinancing, trusts or deeds. Mr Odlin does say that he also gave brief advice on an agreement for KI Commercial Ltd relating to the possible development of the Bernard Street property. Neither of these matters has any relevance to the Goose Bay investment.
[54] Mr Odlin also says that he had a discussion with Mr Keung about another instruction for a second mortgage advance for Better Business Centre Ltd but this instruction did not proceed and Buddle Findlay did not act on that transaction.
[55] Mr Keung says that his actions relating to 11 Bernard Street involve loan advances for Better Business Centre Ltd which required providing Buddle Findlay with all past and present trading information of the Keung Group and its current and future plans. He says that the ownership structure for Bernard Street involved a trust, refinancing of securities and raising a first and second mortgage finance from Canterbury Mortgage Trust and Southern Finance. He says that Buddle Findlay knew from that transaction the leasing arrangements, cross-guarantees and financial aspects of the transaction. He says he retains an interest in the Bernard Street premises although the entity owning the asset has changed.
[56] In response, Mr Odlin, as the solicitor who acted for for Better Business
Centre Ltd, has reviewed matters. He confirms that Buddle Findlay did not receive
all past and present trading information on the Keung Group and its current and
future plans in relation to that transaction. He says that Buddle Findlay’s files do not contain any such material. He says that Buddle Findlay did not take part in arranging approval of finance with Canterbury Mortgage Trust. Canterbury Mortgage Trust did send a letter containing an offer of finance but it was addressed directly to Better Business Centre Ltd and the date of the letter is before Buddle Findlay opened the file on that transaction. He says that Buddle Findlay had no need to see any trading or financial information about the Keung Group. He also explains that Buddle Findlay were not advised that Better Business Centre Ltd was acting as their trustee for Keung Investments Ltd. On the information given to him, he believed that Better Business Centre Ltd was to be the legal and beneficial owner of the Bernard Street property. The information Mr Keung gave him did not go to trusts and underlying beneficial interests. He says that Buddle Findlay acted on securing one mortgage against the Bernard Street property. This mortgage was in favour of FM Custodians Ltd as trustee for Canterbury Mortgage Trust. Buddle Findlay did not act in relation to raising the second mortgage finance from Southern Finance Ltd. While Buddle Findlay was aware that the Bernard Street property was subject to a lease, Buddle Findlay did not provide any advice on the lease. The only financial aspects of the transaction which Buddle Findlay were aware of was the amount borrowed to finance the purchase and the purchase price of the property. He has no knowledge of any later transactions affecting the Bernard Street property and,
as far as he is aware, Buddle Findlay did not give any further advice about the property.
[57] Mr Keung tries to link Bernard Street to the Goose Bay investment by saying that later when it became necessary to purchase a property in Moana Road, he and Mr Koulanov discussed using Bernard Street to fund the settlement. He says that Mr Koulanov was against this, claiming that Mr Koulanov had been negatively influenced by the disclosure about a date in valuations and says that the Keung Group made losses because of the need for alternative financing. However, from the limited conveyancing work that Buddle Findlay did on the Bernard Street property, I cannot see how any information that Buddle Findlay received in relation to the Bernard Street property has any bearing on any later difficulties in financing the settlement of the Moana Road transaction, let alone the present proceedings.
[58] Mr Keung says that Buddle Findlay advised him in reviewing an individual employment agreement for Keung Investments Ltd staff. This specifically related to Peter Clayton who was to be employed as a project manager for the intended development and operation of the Goose Bay Farm. In response, Mr Palmer says that any work that Mr Clayton did for the Keung Group in relation to Goose Bay happened without Buddle Findlay’s knowledge. I cannot see how advice on an employment agreement for Mr Clayton has a bearing on the matters in issue in the present proceeding.
[59] Mr Keung says that Buddle Findlay prepared deeds relating to a payout in his relationship with a public company in the telecommunications industry and this was directly related to his net worth. He says it was part of the foundation for his financial success. In a later affidavit he claims that this work was done on Buddle Findlay’s file relating to Astute Finance Ltd. Buddle Findlay simply confirm that they did not act in this matter at all and they have no knowledge of the matters Mr Keung is talking about.
[60] More generally, Mr Keung asserts that when he instructed Buddle Findlay in
May 2004, they were to be the Group lawyers and he gave them a thorough briefing
on all the affairs of the Keung Group so that they had a thorough understanding of all the Keung entities. He tries to create the impression that Buddle Findlay knew the innermost workings of the Keung Group. Buddle Findlay reject this. They say that they were instructed piecemeal on discrete matters and they were never given an overarching view of the entire Keung Group and were not required to have this understanding to handle the specific instructions they were given.
[61] I prefer what Buddle Findlay say. If a law firm had been briefed to the extent that Mr Keung describes, there would be some documentation showing this. Neither Mr Keung nor Buddle Findlay have put any such evidence before the Court. The only document of that nature referred to in the evidence is one which Mr Koulanov says Mr Keung gave him.
[62] Buddle Findlay also point out that many of the companies Mr Keung refers to were incorporated after they stopped acting for him. One has also been struck off.
They imply that it would be difficult to use information as to those companies in
2004 in the present proceeding against Mr Keung. I accept that to a limited extent only.
[63] Another factor is that Mr Keung is a very mobile client. In this proceeding I have learnt that law firms he has instructed are White Fox & Jones, Buddle Findlay, Robert Angland & Son, Clark Boyce and the Auckland offices of Russell McVeagh. Sitting in the summary judgment and caveat list on Monday morning, I also learnt that he had fallen out with Chapman Tripp over the payment of fees. Mobile clients tend to give instructions on discrete matters, rather than engage a law firm on a general retainer. That is consistent with what Mr Keung did with Buddle Findlay in 2004.
[64] None of the matters on which Mr Keung instructed Buddle Findlay gave rise
to information in Buddle Findlay which could be relevant to the Koulanov claim against Mr Keung except in the possible case of Vault Trust. On that case I have found that Buddle Findlay no longer have that information.
[65] There is, however, one further aspect: the “getting to know you” principle. This comes from the judgment of Gillard J in Yunghanns v Elfic Ltd (unreported, Supreme Court, Victoria, 3 July 1998), cited in Mintel International Group Ltd v Mintel (Australia) Pty (2000) 181 ALR 78 at 87:
But the degree of particularity of the confidential information must depend on all the circumstances. Often it cannot be identified for fear of disclosure.
In considering this factor it must be borne in mind that a solicitor makes notes, forms views and opinions of clients and observes things that the client may have forgotten or overlooked. In some cases the circumstances of the retainer and the nature of the legal work will be sufficient to establish the nature of the confidential information. In this regard the relationship between solicitor and client may be such that the solicitor learns a great deal about his client, his strengths, his weaknesses, his honesty or lack thereof, his reaction to crisis, pressure or tension, his attitude to litigation and settling cases and his tactics. These are factors which I would call the “getting to know you” factors. The overall opinion formed by a solicitor of his client as a result of his contact may in the circumstances amount to confidential information that should not be disclosed or used against the client.
[66] In the Mintel decision, Heerey J went on to hold that the principle was inapplicable in that case because counsel in that case had simply met the client and
formed the impression that he was an intelligent and educated man who had shown some originality in proposing settlement ideas in a mediation. Heerey J held that that fell short of requiring the kind of restriction contended for.
[67] This case is different. Two of Buddle Findlay’s litigation lawyer acted for
Mr Keung over a relatively short period, but at least for some of that time, their work
for him appears to have been intense. Mr Palmer speaks of the need to put other work aside to deal with Mr Keung’s problems. Over that time, Mr Palmer cannot help having taken on board information of the sort discussed by Gillard J in the Yunghanns case. The matter is important, because this is information that a lawyer takes on board often without expressly recording it and it is information that he uses to mould his advice to his client. The subconscious effect cannot be lightly dismissed. That is information that Buddle Findlay has acquired about Mr Keung in the lawyer-client relationship and is confidential in the sense that it was not publicly available and Buddle Findlay would not have gained that information but for the relationship. It is information that is valuable to lawyers representing the Koulanov family in their claim against Mr Keung because it gives them information about Mr Keung that would not otherwise be available – except for the next matter. But for the conduct of the defendant at the liquidation hearing, I would hold that the information Buddle Findlay gained about Mr Keung under the “getting to know you” principle would be sufficient to disqualify them from acting against him in the Koulanov case.
[68] The nature of the claims against Mr Keung is particularly relevant. The claims of misrepresentation, especially that in deceit, raise matters of credibility. In matters of family law and criminal law, the courts have shown a greater sensitivity to matters of confidence (See Dal Pent “Lawyers’ Professional Responsibility” 3rd ed 2006, paragraph 8.110, p 195.) While this case is not a matter of family law or criminal law, allegations of fraud are treated very seriously and because of their seriousness, the courts expect allegations of fraud to be proved to a high standard (albeit not beyond reasonable doubt). In the context of a claim for deceit, knowledge of the sort discussed in the Yunghanns case is a distinct advantage to the other side.
[69] There is a further event of significance – the defended winding-up application
in November 2009 before Associate Judge Gendall. Buddle Findlay acted for GBR Investment Ltd in that case and instructed Mr Forbes. Although Mr Keung and his lawyers had communicated their objections to Buddle Findlay acting for the Koulanovs right from the beginning of the dispute, Mr Keung and his lawyers did not take any steps to obtain an order disqualifying Buddle Findlay from acting for the Koulanovs in the liquidation applications. Mr Keung explains this omission on the basis that the issues in that case, winding-up on the just and equitable ground, were different from the issues in the present case in that Buddle Findlay’s earlier dealings with him did not disqualify them from acting in the liquidation applications. Given the relevance test, a client can consistently come to the view that one case does not involve the improper use of confidential information imparted in a solicitor- client relationship, but that a later one does. Mr Hughes-Johnson properly accepted that Buddle Findlay could not rely on any waiver or estoppel argument.
[70] In the liquidation proceedings, Mr Keung had sworn affidavits. Mr Forbes cross-examined him on those affidavits. Mr Hughes-Johnson advised me, without objection from Mr van Schreven, that the notes of evidence recording the cross- examination run for some 96 pages and that the cross-examination was pointed, demanding, thorough and searching. While the matter of the alleged misrepresentations was not directly in issue in that case and Associate Judge Gendall did not make any findings in respect of the alleged misrepresentations, Mr Keung’s veracity was very much alive in the cross-examination.
[71] Any information under the “getting to know you principle” as to how Mr Keung could behave as a witness and as a litigant was no longer confidential. It was now on public display. The Koulanovs, Buddle Findlay and Mr Forbes learnt far more about how Mr Keung behaves as a witness, his demeanour as a witness and his veracity during the hearing of the liquidation application than they could have learnt by asking Mr Palmer or Mrs Rowe or other members of Buddle Findlay what they remembered of Mr Keung four or five years before.
[72] Given this ample public disclosure of his demeanour as a witness, any residual information under the “getting to know you” principle is insignificant. The
effect of Mr Keung having been cross-examined at length in the liquidation proceeding is that he can no longer claim relevant confidentiality under the “getting to know you” principle.
[73] Given that the only relevant confidential information imparted by Mr Keung
to Buddle Findlay has been overtaken by the later public display of the same information, there is no basis now for restraining Buddle Findlay and Mr Forbes from acting for the plaintiff in the present proceeding.
[74] In coming to this conclusion, I have not taken into account the competing factors referred to by the Court of Appeal in the Russell McVeagh decision. It has been unnecessary for me to do so. Whether the dsescriptors “appreciable”, “acceptable” or “real” are used, I see no risk of Buddle Findlay or Mr Forbes making improper use of information disclosed by Mr Keung and his companies to Buddle Findlay in 2004 which would require them to be disqualified from acting for the plaintiff in the present case.
[75] Accordingly, I dismiss the application.
[76] The parties agreed that the appropriate allowance for preparation is two days. The hearing took three-quarters of a day. I award the plaintiff costs on the 2B scale
in the sum of $6000 plus disbursements (if any) to be approved by the Registrar.
R M Bell
Associate Judge
0
3
1