Gower v FTG Securities Ltd

[2020] NZHC 1105

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE

CIV–2018–409–000229

[2020] NZHC 1105

UNDER

s 34 of the Receiverships Act 1993

IN THE MATTER

of the receivership of Tuam Ventures Limited (in rec and in liq)

BETWEEN

COLIN ANTHONY GOWER and

STEPHEN JOHN TUBBS as receivers of Tuam Ventures Limited (in rec and in liq) Applicants

AND

FTG SECURITIES LIMITED

First Respondent

AND

ROBERT BRUCE WALKER as liquidator of Tuam Ventures Limited (in rec and in liq) Second Respondent

AND

BANK OF NEW ZEALAND

Third Respondent

AND

CROWN ASSET MANAGEMENT

Fourth Respondent

AND

B J HUNT

Fifth Respondent

Representation:

A J Forbes QC and H Weston for FTG Securities Ltd R P Coltman for Crown Asset Management Ltd
K M Paterson and A E Cao for Bank of New Zealand J Appleyard for C A L Gower and S J Tubbs

R B Walker in person

Judgment:

25 May 2020

(Determined on the papers)

GOWER v FTG SECURITIES LIMITED [2020] NZHC 1105 [25 May 2020]

JUDGMENT OF OSBORNE J

(on application for disqualification of lawyers)

[1]    Robert Bruce Walker, the second respondent in this proceeding (sued as liquidator of Tuam Ventures Ltd (in rec and in liq) (Tuam Ventures)), applies for an order restraining named persons from acting in this proceeding or any other proceeding relating to the liquidation of Tuam Ventures. The named persons are two solicitors, Grant Smith and Clive Cousins, and their legal entity, NZ Legal Ltd (known as “Canterbury Legal”). Throughout this proceeding, which was commenced on 17 April 2018, Mr Smith has been the solicitor for FTG Securities Ltd (FTG), the first respondent in the proceeding.

Background

[2]    This is one of four proceedings which have a close relationship, such that an order for their consolidation was made.

[3]    There are five sets of parties appearing in the proceeding, all represented by solicitors except Mr Walker, who appears in person. On 21 October 2019, the consolidated proceedings were set down for hearing subsequently scheduled to commence on 18 May 2020. With the intervention of COVID-19 restrictions, the hearing was on 30 April 2020 rescheduled to commence on 8 June 2020 (four days reserved). The pre-hearing timetable was amended to include, amongst other directions, that Mr Walker file and serve his submissions in one of the related proceedings (the -511 proceeding) by 15 May 2020 and his submissions in this proceeding (the -229 proceeding) by 22 May 2020.

[4]    All the proceedings require expeditious resolution. They concern significant contested funds in relation to which the receivers of Tuam Ventures filed the application for directions in this proceeding as long ago as April 2018.

Present application

[5]    Mr Walker applies specifically for an order restraining Messrs Smith and Cousins and Canterbury Legal from acting in this proceeding, or any other proceeding

relating to the liquidation or receivership of Tuam Ventures. The notice of application is dated 15 May 2019 but it was not filed and served until 20 May 2020. FTG, represented by Mr Forbes QC and Ms Weston, who have consistently been instructed to represent that party in the proceeding, filed a notice of opposition and counsel’s memorandum the following day, 21 May 2020. At the same time they sought an urgent conference, recording that they anticipated the Court in the circumstances may be prepared to deal with this application on the papers.

[6]    I urgently convened a conference on 22 May 2020. At the conference both Mr Walker and Mr Forbes agreed to my dealing with the application on the papers.

[7]    Before terminating the conference, I drew to Mr Walker’s attention in particular the final ground of opposition advanced by FTG, namely that his application is in the circumstances an abuse of process. I noted that the Court may have a particular concern in that regard over the timing of the application, given that Mr Walker was in breach of the timetable to file his submissions and the four day hearing was to commence in 10 working days’ time. In his application, Mr Walker had recorded that he had given FTG “fair notice of the matters raised in this application” because his solicitors had written to the lawyers setting out his concerns as to their representing FTG and inviting them to withdraw as solicitors on two separate occasions, 11 May 2018 and 22 June 2018. Mr Walker recorded in his notice of application:

FTG Securities has had ample opportunity to put in place alternative arrangements for its representation.

[8]Mr Walker did not produce copies of his correspondence.

[9]    In response to my raising these matters, Mr Walker, who had recently begun acting for himself, indicated that under the COVID-19 restrictions he had been “stuck in Auckland” and had been unable to get to his Wellington office. He stated that the two letters by which his solicitors had requested the FTG’s lawyers’ withdrawal had not been answered.

[10]   Mr Walker stated that the form of his interlocutory application had been in existence for some time but that it had “laid in abeyance”.

[11]   In response, Mr Forbes would have made more detailed submissions but I requested that he focus on Mr Walker’s statements in relation to the letters of May and November 2018. Mr Forbes informed me that there had been a substantive response sent to Mr Walker’s solicitors.

[12]   A copy of that response was provided at my direction following the conference. It is a letter dated 18 May 2018 written by Mr Smith in response to the 11 May 2018 letter. It may be described as something in the nature of an interim response because there was to follow a hearing on 28 May 2018 concerning which no objection was taken to Mr Smith’s continuing to act. Mr Forbes was unable to identify any specific response given to the 22 June 2018 letter, but noted that thereafter there had been substantial ongoing correspondence between the solicitors on both sides.

The substantive grounds of Mr Walker’s application

[13]   Mr Walker in his application set out a background of related parties for whom Canterbury Legal (and Messrs Smith and Cousins) have acted. Reference is made to David Henderson and his wife Katrina Buxton as well as companies (including Tuam Ventures) which formed part of the Property Ventures group. Mr Walker recorded that, whereas he now represents the interests of Tuam Ventures as liquidator, Canterbury Legal previously acted for Tuam Ventures. He stated that subsequently Canterbury Legal on behalf of FTG negotiated arrangements in relation to the debts and securities which are now relied upon by FTG against Tuam Ventures. Mr Walker asserted in his application that any claim by FTG to rights in this proceeding will call into question the conduct and advice of Canterbury Legal. Mr Walker referred to other proceedings in which Mr Smith has been or may be required to give evidence on contentious matters. He asserted that transactions involved in this proceeding may require evidence from Mr Smith.

Notice of opposition of FTG

[14]   Mr Forbes submitted a detailed notice of opposition, identifying 10 specific grounds of opposition. It is unnecessary that I identify each of the grounds as I am satisfied that Mr Walker’s application must be dismissed in any event upon the basis that it is an abuse of process. As discussed below, that has regard to the history of this proceeding and the hearing due to commence in less than two weeks’ time. Matters of that nature were properly articulated in the notice of opposition but it is sufficient that I determine this application in terms of the over-arching ground relating to abuse of process.

Abuse of process

[15]   The High Court Rules 2016 specifically provide for the striking out of a pleading and the dismissal of the proceeding or counterclaim on specified grounds. That includes the likelihood to cause prejudice or delay and also where there is “otherwise an abuse of the process of the court”.1 While no express parallel provision is made for the dismissal of an interlocutory application on such grounds, the Court has always held such inherent power over its processes.2

[16]   The Court of Appeal’s discussion of the power under the Rules in Commissioner of Inland Revenue v Chesterfields Preschools Ltd is equally applicable to the exercise of the inherent jurisdiction where interlocutory matters are concerned.3 The Court stated that the grounds of strike-out listed in r 15.1(1)(b)–(d) concern the misuse of the Court’s processes. Pleadings which are likely to cause prejudice or delay require an element of impropriety and abuse of the Court’s processes. The express ground relating to abuse of process extends beyond the other grounds and captures all other instances of misuse of the Court’s processes. That said, the jurisdiction to dismiss a proceeding is only used sparingly.

[17]   I am satisfied that in the circumstances relating to this interlocutory application the sparing use of the jurisdiction is justified.

1      Rule 15.1(1)(d).

2      As recognised in r 15.1(4).

3      Commissioner of Inland Revenue v Chesterfields Preschools Ltd [2013] NZCA 53, [2013] 2 NZLR 679 at [89].

[18]   There is no adequate explanation of the gross delay in bringing the application. Contrary to what Mr Walker stated to me at the conference, there had been at least an interim response to his demands that FTG’s solicitors withdraw from this proceeding. In view of Mr Walker’s concern that there had been no response to his solicitors’ June 2018 letter, it was incumbent upon Mr Walker to pursue the issue through interlocutory application in a timely way if he was to cut across FTG’s right to choose its representation. Mr Walker and his solicitors throughout 2019 and into 2020 were well aware that the combination of FTG’s solicitors and the briefed barristers were taking steps on behalf of FTG and preparing on the basis that FTG’s interests would be represented at the hearing by those solicitors and barristers.

[19]   To require FTG at this point, two weeks before a four-day hearing, to instruct other solicitors, who would have none of the background of the present solicitors, would clearly be to the prejudice of the interests of FTG. There is a plain misuse of the Court’s processes, and in particular its interlocutory proceedings, to bring an application relating to a party’s representation so close to the hearing. That is especially so when Mr Walker had identified a concern over representation more than two years ago.

[20]   The timing of the application has a further abusive element in that, if FTG was to have had the opportunity to file evidence in relation to the grounds of conflict raised by Mr Walker, that would have taken time away from FTG at an important point in the preparation for the hearing.

[21]   These various considerations justify dismissing the application as an abuse of the Court’s interlocutory processes.

[22]   Had Mr Walker put forward properly detailed evidence as to his assertion that Mr Smith, having been involved in most or all of the relevant transactions, may have been required to give evidence, I would have reflected further on whether the Court’s supervision of solicitors should have cut across the consequences of the present application constituting an abuse of process. As it is, there is no such properly detailed evidence. I have Mr Walker’s bare assertion that Mr Smith may be required to give evidence and that he acted on most or all of the relevant transactions. Against that, Mr

Forbes states from the bar that there is no prospect that Mr Smith or any person from his firm will be required to give evidence in the consolidated proceedings. No witnesses are being called and there is no affidavit evidence of Mr Smith or any person at his firm included in the proposed common bundle of documents for the hearing.

[23]   In these circumstances there must be real doubt as to whether Mr Smith’s continuing to act as solicitor for FTG in this proceeding raises any serious issue in terms of professional duty. However, by reason of my finding in relation to abuse of process, it is unnecessary that I determine this application on that additional ground.

[24]   To the extent that Mr Walker sought orders against the solicitors from acting in any other proceeding relating to the liquidation or receivership of Tuam Ventures, the application was clearly inappropriate. The application was made as an interlocutory application in this proceeding. It would be inappropriate, even if an order had been justified in relation to the representation of FTG in this proceeding, to make such a sweeping order in relation to any other proceeding involving Tuam Ventures (whether existing or yet to come).

Outcome

[25]   I dismiss Mr Walker’s interlocutory application dated 15 May 2019. I order that Mr Walker pay the costs of the first respondent in opposing the application. I reserve the quantum of costs and disbursements. In the event the parties disagree on the quantum the first respondent is to file and serve any memorandum in relation to quantum within 20 working days (four page limit) and Mr Walker is to file and serve any memorandum in reply within five working days thereafter (four page limit).

[26]   I record that the first respondent has applied for indemnity costs. I record my tentative view that it is appropriately a case for increased costs under r 14.6(3)(b)(ii) on the basis that the application lacked merit. That is as contrasted with cases where a party has behaved either badly or very unreasonably as identified by the Court of Appeal in Bradbury v Westpac Banking Corp.4 Here, Mr Walker left the making of his application far too late but that circumstance has to be seen in the context of the

4      Bradbury v Westpac Banking Corp [2009] 3 NZCA 234, [2009] 3 NZLR 400 at [27]–[28].

previous withdrawal of the solicitors who had until then acted for Mr Walker through this proceeding.

[27]   As between Mr Walker on the one hand and the applicants and other respondents on the other hand, I reserve costs. The interlocutory application was addressed to those other parties (as well as to FTG) and counsel appeared at the brief conference which was convened after the filing of the interlocutory application. However none of those other parties filed opposition. My tentative conclusion is that there must be no order as to costs in favour of those other parties. My order (without further direction) will be that there will be no order as to costs in favour of those other parties unless any relevant application (by way of memorandum) is filed and served within 20 working days.

Osborne J

Solicitors:

Canterbury Legal, Christchurch

Counsel: A J Forbes QC and H Weston, Christchurch Duncan Cotterill, Auckland

Buddle Findlay, Christchurch Chapman Tripp, Christchurch

Copy to: R B Walker