Kawasaki v Piechazek
[2024] NZHC 401
•29 February 2024
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2023-404-000308
[2024] NZHC 401
BETWEEN YOSHIE KAWASAKI and WILSON McKAY TRUSTEE COMPANY (246123)
LIMITED as Trustees of the Y K Family TrustPlaintiffs
AND
RICHARD PIECHAZEK
First Defendant
RIVERCITY HOLDINGS LIMITED
Second DefendantTAYLOR’D SOLUTIONS (2007)
LIMITED
Third Defendant
SOLAR CHEM ROOFING LIMITED
Fourth Defendant
Hearing: 2 February 2024 Counsel:
S Wroe for the Plaintiff
S Kilian for the First and Second Defendants
Judgment:
29 February 2024
JUDGMENT OF ASSOCIATE JUDGE BRITTAIN
This judgment was delivered by me on 29 February 2024 at 3.30 pm
Pursuant to r 11.5 of the High Court Rules.
…………………..
Registrar/Deputy Registrar
Solicitors / Counsel:
Kilian & Associates, Auckland S Wroe, Auckland
KAWASAKI v PIECHAZEK [2024] NZHC 401 [29 February 2024]
Introduction
[1] The plaintiffs, Yoshie Kawasaki (Ms Kawasaki) and Wilson McKay Trustee Company Ltd, are the trustees of the YK Family Trust (the Trust). In 2017, the Trust purchased a residential property at 64 Lucerne Road, Remuera, Auckland.
[2] In this proceeding, the Trust alleges that the house on the property was a defective building at the time of purchase. Negligent renovation work completed for the Trust then compounded the problems. The Trust’s causes of action include:
(a)a claim against the first defendant, Richard Piechazek (Mr Piechazek), alleging a negligent pre-purchase inspection of the house; and
(b)a claim against the second defendant, River City Holdings Ltd (River City), alleging negligent management of the renovation work carried out on the house after the Trust’s purchase.
[3] Mr Piechazek is a director of River City. They have engaged Mr Killian of Killian & Associates to represent them in this proceeding. Killian & Associates previously acted for Ms Kawasaki and the Trust from October 2015 to May 2017. The Trust has applied for an order restraining Mr Killian and Killian & Associates from acting for Mr Piechazek and River City in this proceeding.
[4]The Trust advances three grounds in support of its application:
(a)Killian & Associates is in possession of confidential information of Ms Kawasaki and there is a risk that this will be disclosed, likely to affect the Trust’s interests adversely.
(b)Mr Killian’s representation of Mr Piechazek and River City is not in the interests of justice. Mr Killian gained knowledge of Ms Kawasaki’s personality and character from acting for Ms Kawasaki from 2015 to 2017. This will give him an unfair advantage if he is required to examine and cross-examine witnesses at trial, and in conducting any settlement negotiations.
(c)There is a risk that Mr Killian may be called as a witness.
[5] Mr Piechazek and River City oppose the application. On their behalf, Killian & Associates argues that none of the grounds advanced by the Trust, whether considered in isolation or cumulatively, justify the order sought.
Background
[6] Ms Kawasaki engaged Killian & Associates when she and her brother were seeking to obtain residency in New Zealand through the investor category. Killian & Associates was engaged to provide advice on how to structure the proposed financial affairs of Ms Kawasaki and her brother in New Zealand. The focus was on taxation consequences.
[7] Killian & Associates’ retainer did not extend to general immigration matters. Ms Kawasaki had instructed an immigration lawyer, Garrett Wong, to deal with her immigration.
[8] Ms Kawasaki says that she and Mr Killian had several meetings, and they discussed her business, finances and investment goals. The time records of Killian & Associates state that the meetings took place in Garrett Wong’s office.
[9] On 29 August 2016, Killian & Associates provided Ms Kawasaki with written advice on possible structures for her investment in New Zealand, including a recommended structure. The advice was primarily generic in nature, regarding the ownership structures available to Ms Kawasaki. The written advice does not record any details about Ms Kawasaki’s financial position, except to record that Ms Kawasaki and her brother would need to invest NZD 3,000,000 to qualify for the investor category for immigration.
[10] In September 2016, Ms Kawasaki informed Killian & Associates that she wished to purchase a family home. Mr Killian did not wish to undertake the conveyancing, so he introduced Ms Kawasaki to a conveyancing solicitor in another firm, Mr Baker.
[11] Killian & Associates completed the legal work to establish the Trust. The trust deed was executed on 27 September 2016, witnessed by Mr Killian. Killian & Associates provided advice on tax matters affecting Ms Kawasaki and the Trust.
[12] In February 2017, Ms Kawasaki began looking at 64 Lucerne Road as a potential purchase. Mr Baker introduced her to Mr Piechazek, and Ms Kawasaki instructed Mr Piechazek to carry out a pre-purchase inspection. Mr Piechazek did so and provided verbal advice to Ms Kawasaki. Ms Kawasaki signed a contract to purchase 64 Lucerne Road in February 2017. The purchase was settled in March 2017, with the Trust taking title.
[13] Killian & Associates was involved in the purchase transaction to the extent of the work required to establish the Trust, including incorporation of the then corporate trustee, YK Family Ltd.
[14] Shortly after settlement of the purchase, the Trust engaged River City to manage the renovation work on the house.
[15] Killian & Associates ceased acting for Ms Kawasaki and the Trust in May 2017. Killian & Associates has had no contact with Ms Kawasaki since then.
[16] The Trust commenced this proceeding in 2023. Mr Piechazek and River City instructed Mr Killian because Mr Piechazek has known him for 23 years, although this proceeding is the first matter in which Mr Piechazek has instructed Killian & Associates to act on his behalf.
Legal principles
[17] There is no blanket prohibition on a lawyer acting against a former client. However, this Court has inherent jurisdiction to restrain counsel from appearing before the Court in a proceeding, where to allow them to do so may impair the integrity of the judicial process1 (the general principle).
1 Black v Taylor [1993] 3 NZLR 403 (CA).
[18] The general principle can apply where counsel appearing for a party played a role in the matters which are being litigated, and as a result:
(a)the lawyer may be called upon to defend their own advice, potentially leading to the lawyer losing objectivity and independence; 2 or
(b)the lawyer may be required to give relevant evidence of a contentious nature in the proceeding.3
[19] To warrant restraint in these circumstances, there must be a reasonable likelihood that the lawyer’s advice or conduct will be an issue in the proceeding, or that the lawyer will be called as a witness. Mere speculation is insufficient.4
[20] The general principle can also apply where a lawyer ought not to act for a former client in order to protect the client’s confidential information.5 Authority diverges on the conceptual basis for restraint in this circumstance, and whether restraint is also available where the lawyer has knowledge of the former client, as distinct from confidential information.
[21] In Black v Taylor,6 the Court of Appeal approached the issue based on the broader interests of justice, influenced by the relevant rule in the operative code of conduct, which referred to the lawyer’s prior knowledge of “the former client or of his or her affairs…”.7 Richardson J held that knowledge of the former client may itself disqualify the lawyer from acting.8 McKay J noted the commentary suggested that a
2 Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5, [2010] 2 NZLR 444 at [147] per Wilson J: “… it is undesirable for practitioners to appear as counsel in litigation where they have been personally involved in the matters which are being litigated. In that situation, counsel are at risk of acting as witnesses and of losing objectivity”; Kooky Garments Ltd v Charlton [1994] 1 NZLR 587 (HC).
3 Li v Liu [2018] NZCA 528, [2019] NZAR 259 at [25].
4 Li v Liu, above, at [37]; 100 Investments Ltd v Walker [2020] NZHC 227, [2023] 3 NZLR 78 at [39].
5 Russell McVeagh McKenzie Bartleet & Co v Tower Corporation [1998] 3 NZLR 641 (CA).
6 Black v Taylor, above n 1.
7 At 409 per Richardson J (emphasis added); see also at 417–419 per McKay J.
8 At 409 per Richardson J.
lawyer’s prior knowledge of a client is likely to give rise to a conflict of interests.9 Cooke P agreed with the reasons of both Richardson J and McKay J.10
[22] In Russell McVeagh McKenzie Bartleet & Co v Tower Corporation,11 the Court of Appeal took a narrower approach, considering whether it was necessary to restrain the law firm from acting to protect the client’s confidential information from disclosure, notwithstanding that the relevant rule in the code of conduct was the same as the operative rule considered in Black.12 The application for a restraining order had been advanced by the client based on a breach of fiduciary duty or possession of confidential information. The client did not rely on the inherent jurisdiction of the Court.13
[23] The Court of Appeal did not rule out the broader approach taken in Black.14 Henry J, writing for the majority, held that Black was not relevant to the issues raised.15 Blanchard J confirmed that a law firm has a duty to its client not to put itself in a position which presents a real risk of misuse of the law firm’s knowledge about the client, as distinct from the risk of disclosure of confidential information.16 Russell McVeagh did not have knowledge of the client which engaged the broader principle.17
[24] Henry J stated the relevant questions when considering protection of confidential information from disclosure:18
(a)whether confidential information is held which, if disclosed, is likely to affect the former client’s interests adversely;
(b)whether there is an objective real and appreciable risk that the confidential information will be disclosed; and
9 At 419 per McKay J.
10 At 405 per Cooke P.
11 Russell McVeagh McKenzie Bartleet & Co v Tower Corporation, above n 5.
12 At 676–677 per Blanchard J. The Court considered the Rules of Professional Conduct for Barristers and Solicitors, adopted by the New Zealand Law Society and published in 1996. Rule
1.05 was identical to r 1.06 consider in Black v Taylor.
13 At 647 per Henry J.
14 At 649 per Henry J; see also at 677 per Blanchard J.
15 At 649 per Henry J.
16 At 677–678 per Blanchard J.
17 See at 678 per Blanchard J.
18 At 651 per Henry J.
(c)if the first two questions are answered in the affirmative, whether the Court should exercise its discretionary power to disqualify the lawyer from acting.19
[25]In Russell McVeagh, the firm was not disqualified from acting.20
[26] In Prince Jefri Bolkiah v KPMG, a case decided after Black and Russell McVeagh, the House of Lords held that the jurisdiction in the United Kingdom to restrain a lawyer from acting against a former client is limited to situations where the restraint is necessary to protect confidential information.21 Lord Millett stated that the former client bears the burden and must establish:22
(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.
[27] In New Zealand, the relevant rule in the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 is now r 8.7, which relevantly provides:
Use of confidential information prohibited
8.7 A lawyer must not use information that is confidential to a client (including a former client) for the benefit of any other person or of the lawyer.
8.7.1A lawyer must not act for a client against a former client of the lawyer or of any other member of the lawyer’s practice where—
(a)the practice or a lawyer in the practice holds information confidential to the former client; and
(b)disclosure of the confidential information would be likely to affect the interests of the former client adversely; and
(c)there is a more than negligible risk of disclosure of the confidential information; and
(d)the fiduciary obligation owed to the former client would be undermined.
19 At 651 per Henry J.
20 At 654 per Henry J; at 679 per Blanchard J.
21 Prince Jefri Bolkiah v KPMG [1993] 2 AC 222, [1999] 1 All ER 517 (HL) at 236.
22 At 235.
…
[28] Rule 8.7.1 has a narrower focus than its predecessors, including the rule under consideration in Black and Russell McVeagh. In particular, the rule now focuses solely on confidential information, and no longer refers to a lawyer’s prior knowledge of a client.
[29] In Torchlight Funds No 1 LP (in rec) v NZ Credit Fund (GP) 1 Ltd,23 a case decided after r 8.7 came into force, Gilbert J considered Black and Bolkiah, and approached the case on the basis of protection of confidential information, without resorting to a broader principle based on the law firm’s general knowledge of the client.
[30] In 100 Investments Ltd v Walker, Campbell J went a step further and considered that the circumstances in which a lawyer will be restrained from acting against a former client are limited to the protection of confidential information.24 Campbell J noted that r 8.7.1 is consistent with the Court of Appeal’s approach in Russell McVeagh and the House of Lords’ decision in Bolkiah. Campbell J’s reasoning was cited with approval by Venning J in Osmond New Zealand Ltd v Universal Pharmaceuticals Ltd.25
[31] The rule in the code of conduct is not necessarily coterminous with the legal principle preventing a lawyer from acting against a former client in a proceeding, but the rule does indicate relevant public policy concerns.26
[32] The broader principle in Black, expressed in the judgment of Richardson J with which Cooke P agreed, has not been reversed by the Court of Appeal. In my view, this Court continues to have jurisdiction to restrain a lawyer from acting against a former client where the lawyer possesses sufficient prior knowledge of the client so that it is not in the interests of justice for the lawyer to act against the client in litigation. However, in nearly all such cases the lawyer will also possess confidential information
23 Torchlight Funds No 1 LP (in rec) v NZ Credit Fund (GP) 1 Ltd [2014] NZHC 2552, [2014] NZAR 1486.
24 100 Investments Ltd v Walker, above n 4, at [56].
25 Osmond New Zealand Ltd v Universal Pharmaceuticals Ltd [2023] NZHC 2559.
26 Black v Taylor, above n 1, at 409 and 412 per Richardson J.
of the client, and such cases are better disposed of on that basis. To a great extent, the issue and distinction turns on how “confidential information” is defined.27
Confidential information
[33]Ms Kawasaki relies on two categories of confidential information:
(a)information regarding her financial position, discussed with Mr Killian in 2016; and
(b)information relevant to the steps that she took before purchasing 64 Lucerne Road and her decision-making process, including in respect of the pre-purchase inspection by Mr Piechazek.
Information regarding Ms Kawasaki’s financial position
[34] Ms Kawasaki has not provided a detailed description of the type of financial information that she says she passed on to Mr Killian in their discussions. She simply describes it as discussions about her:
… general business and finances, my reasons for coming to New Zealand, my investment goals and my desire to become a New Zealand resident.
[35] Mr Killian accepts that he “knew some limited information” about Ms Kawasaki and the Trust. Plainly, Mr Killian knew that Ms Kawasaki and her brother would need at least NZD 3,000,000 to immigrate to New Zealand under the investor category, and that Ms Kawasaki had the resources to purchase 64 Lucerne Road.
[36] Even if Mr Killian possessed additional information regarding Ms Kawasaki’s financial position, disclosure of any such information cannot adversely affect the interests of Ms Kawasaki or the Trust in this proceeding. First, the issues in this proceeding focus on Ms Kawasaki’s decision to purchase 64 Lucerne Road, her
27 At 406 Cooke P observed, in response to McGechan J’s observation about knowledge of the personality of a client: “Whether that kind of consideration should be put exclusively under the heading of confidential information is in my view unimportant. As to those who may be allowed to represent parties to argue cases, the Courts have an inherent jurisdiction”.
alleged reliance on a verbal pre-purchase report by Mr Piechazek, and construction work that was completed after settlement. There is no pleading in the statement of claim, or the statement of defence of Mr Piechazek and River City, which puts in issue the financial positions of Ms Kawasaki or the Trust.
Information relevant to the steps that Ms Kawasaki took before purchasing 64 Lucerne Road
[37] Ms Kawasaki says that she discussed the purchase of 64 Lucerne Road with Mr Baker. No detail is provided, but this may have included her reasons for purchasing the property, her knowledge of the state of the property and the verbal pre-purchase report from Mr Piechazek. Those matters are relevant in this proceeding and may be the subject of cross-examination.
[38] Ms Kawasaki did not discuss these matters directly with Mr Killian. Any information on these matters that Ms Kawasaki gave to Mr Baker may be subject to legal privilege.
[39] The time records of Killian & Associates record that Mr Killian had two telephone discussions with Mr Baker about the purchase, described as follows:
(a)27 September 2016:
Discussions with Fred baker (sic) and ensuring Deeds are signed by client.
(b)23 February 2017:
discussions surrounding the Trust purchasing a property, discussions with Fred Baker and with Kevyn Botes, advice to client regarding changing trustee, setting up new ltd Liability company YK Family Ltd, draft Deed of retirement and appointment of trustee, to client for signature, to IRD for IRD number and to BNZ and Fred to settle transaction.
[40] There is no evidence that Mr Baker passed on any confidential information to Mr Killian regarding Ms Kawasaki’s decision-making process when she purchased 64 Lucerne Road. Mr Killian’s time records do not refer to any discussion of this
nature. It is not apparent that Mr Baker would have had cause to discuss these matters with Mr Killian.
[41] Mr Killian was involved on the periphery of the purchase transaction, and I am satisfied that there is no evidence that he holds any confidential information which, if disclosed, would likely affect Ms Kawasaki’s and the Trust’s interests in the litigation adversely.
Mr Killian’s knowledge of his former client
[42] Counsel for Ms Kawasaki referred to Mr Killian having formed an impression of Ms Kawasaki from acting for her, with knowledge of her attitude to risk and financial motivations. Counsel submitted that this would give Mr Killian an unfair advantage if called upon to examine or cross-examine witnesses, and during any settlement negotiations.
[43] Mr Killian’s retainer and his dealings with Ms Kawasaki from 2015 to 2017 were limited. The time records of Killian & Associates refer to four meetings between Mr Killian and Ms Kawasaki. Read as a whole, the time records confirm that Mr Killian’s focus was on tax advice and establishing the Trust.
[44] These circumstances are far removed from the facts in Black, where the lawyer had a lengthy relationship with the former clients, in one case for more than 30 years, acting for the former clients as well as other members of the family for that extensive period. The family history was directly relevant to the estate litigation in question. In those circumstances, the lawyer’s knowledge of the clients disqualified him from acting against them in the estate litigation.
[45] That is not the situation here. Mr Killian is not in possession of such a degree of knowledge of Ms Kawasaki’s personality and character so that acting against her in defective building litigation is not in the interests of justice.
Mr Killian as a potential witness
[46] This ground was not advanced in the notice of application. The Trust has not requested to issue a subpoena to Mr Killian. In submissions, counsel for Ms Kawasaki argued that Mr Killian may be called to give evidence regarding Ms Kawasaki’s command of English.
[47] Counsel submitted that this issue arises in two respects. First, in the context of Ms Kawasaki’s dealings with Mr Piechazek, when Mr Piechazek provided his verbal pre-purchase report. There is a dispute regarding the contents of the verbal report given by Mr Piechazek to Ms Kawasaki. Secondly, in the context of instructions given by Ms Kawasaki, and verbal agreements between Ms Kawasaki and Mr Piechazek, during the renovations.
[48] In the Trust’s statement of claim, the Trust pleads that Ms Kawasaki spoke “conversational (but not fluent) English” at the material times. Mr Piechazek and River City plead that Ms Kawasaki spoke fluent English.
[49] In her affidavit, Ms Kawasaki gives her evidence in English, and there is no reference to any assistance from a translator. Ms Kawasaki will be a witness if this proceeding goes to trial, and her command of English will no doubt be tested.
[50] At trial, there is likely to be evidence from numerous parties involved in the renovation work, in addition to Mr Piechazek who is likely to give evidence regarding the pre-purchase report as well as the renovation work. There may be other witnesses who are available to give evidence regarding Ms Kawasaki’s command of English.
[51] Mr Killian is an unlikely witness on that topic. Any evidence he might give would be subject to issues of legal privilege. At this stage of the proceeding, there is no reasonable likelihood that Mr Killian will be called as a witness. It is not appropriate to restrain him from acting for Mr Piechazek and River City on that basis.
[52] If Mr Killian is subsequently served with a subpoena, and the subpoena is not set aside, then Mr Killian will be compelled to withdraw as counsel. At this stage of the proceeding, Mr Piechazek and River City are free to run that risk.
Conclusion
[53] There is no basis to restrain Mr Killian from acting for Mr Piechazek and River City in this proceeding. The Trust’s application is dismissed.
[54] My preliminary view is that the first and second defendants are entitled to one award of costs, on a 2B basis. If counsel are unable to agree costs, then:
(a)the first and second defendant may file and serve written submissions on costs, of no more than four pages, by 8 March 2024;
(b)the plaintiff may file and serve written submissions of costs, of no more than four pages, by 15 March 2024;
(c)I will then determine costs on the papers.
Associate Judge Brittain
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