Kim v Oh

[2013] NZHC 925

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IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-1306 [2013] NZHC 925

BETWEEN  YOUNG KWAN KIM Plaintiff

ANDYOUNG KEUN OH (TRADING AS KENTON CHAMBERS)

Defendant

Hearing:         8, 9, 10 April 2013

Appearances: J Ropati for Plaintiff

G J Thwaite for Defendant

Judgment:      30 April 2013

JUDGMENT OF COOPER J

This judgment was delivered by Justice Cooper on

30 April 2013 at 4.30 p.m., pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

Date:

Solicitors:

J Ropati, PO Box 90 232, Auckland

G J Thwaite, PO Box 6239, Wellesley Street, Auckland 1141

KIM V OH (TRADING AS KENTON CHAMBERS) HC AK CIV-2012-404-1306 [30 April 2013]

Contents

Introduction ............................................................................................................[1] The facts ............................................................................................................... [11] Before the judgment of Heath J ....................................................................[12]

After the judgment of Heath J ......................................................................[73] The allegations .....................................................................................................[90] The defences.........................................................................................................[96] The law ...............................................................................................................[108] Liability .............................................................................................................. [119] A solicitor/client relationship? ...................................................................[120]

Did the defendant fail to comply with his obligations pursuant to the /client relationship?...............................................................................................[131] Did the defendant’s failures cause the loss claimed by Mr Kim? ..............[147] Disentitling actions by Mr Kim? ................................................................[152] General and exemplary damages ...............................................................[157]

Quantum .............................................................................................................[164] Result..................................................................................................................[179]

Introduction

[1]      The  New  Korea  Herald  Ltd  (“NKHL”)  published  a  Korean  language newspaper circulated in New Zealand.   Between 7 March and 2 May 2008, the newspaper published seven articles about a Mr Jung Nam Lee.   The articles were published in printed form, and were also made available on-line on the newspaper’s website.

[2]      Mr Lee considered that the articles had defamed him.   He commenced a proceeding in relation to the articles in August 2008.  There were three defendants: NKHL, Mr Jong Ok Yoo, who was a director of NKHL and the newspaper’s editor, and Mr Young Kwan Kim, who was also a director of NKHL.   Mr Kim is the plaintiff in this proceeding.  Mr Oh, the defendant, practised as a solicitor in a firm which he called Kenton Chambers.   He is the sole principal of the firm.   Mr Oh accepted instructions to act for all three defendants in the defamation proceedings.

[3]      The trial of Mr Lee’s defamation claim was set down for hearing before Heath J in June 2010.  In circumstances that will be later described, Mr Oh’s firm withdrew on the eve of the trial.  Mr Yoo appeared for himself, but Heath J recorded that there was no appearance by or on behalf of NKHL or Mr Kim.   The claim against Mr Kim proceeded by way of formal proof, Heath J being of the view that Mr Kim had simply elected not to appear.

[4]      Heath J gave judgment for the plaintiff on 9 November 2010.1    He held that the articles were defamatory and that neither NKHL nor Mr Yoo had any defence to the claims.  He noted that Mr Kim was a director of NKHL and that, on Mr Yoo’s evidence, he was a benefactor who had not taken an active role in its operation. Nevertheless, he considered that on the balance of probabilities it was likely that the content of the articles would have been drawn to Mr Kim’s attention (at the latest) after the first article was published on 7 March 2008.2   Mr Kim had “taken no steps and, therefore, … brought no evidence to establish innocent dissemination” with the consequence that he could not rely on that defence, set out in s 21 of the Defamation Act 1992.3    He was also satisfied that Mr Kim was “sufficiently connected to the

publication to justify a claim against him”.4

[5]      Heath J awarded damages in the sum of $250,000, jointly and severally, against all three defendants, together with costs.

[6]      Mr  Kim,  who  lives  in  Christchurch,  found  out  that  judgment  had  been entered against him in late December 2010 when a Korean associate brought to his attention a Korean pamphlet which had been distributed in Auckland referring to the damages awarded against him and the other defendants.  It was his evidence that he had never been told of the withdrawal of Kenton Chambers, the fact that the trial had proceeded or that judgment had been entered against him.

[7]      After various procedural steps, Mr Kim was eventually successful in having the judgment entered against him set aside.  The Court of Appeal allowed evidence

1      Lee v The New Korea Herald Ltd HC Auckland CIV 2008-404-5072, 9 November 2010.

2 At [61].

3 At [62].

4 At [68].

to be called explaining the circumstances of Mr Kim’s non-appearance at the trial in the High Court.  In its decision of 19 December 2012,5 the Court of Appeal held that Mr Kim had known nothing about the withdrawal of counsel and, because notice had not been given to him in accordance with r 5.41(2)(b) of the High Court Rules, the requirements of r 5.41 had not been met.  There had been “an error in process”,6 and there were arguable defences that could have been advanced on his behalf.7  The claim against Mr Kim was remitted to the High Court for a re-hearing.   No re- hearing has taken place.

[8]      In  the  present  proceeding  Mr  Kim  seeks  to  recover  legal  costs  that  he incurred in having the High Court judgment set aside.   He alleges that in various respects Kenton Chambers breached obligations that it owed to him as his solicitor. Claims are advanced alleging breaches of contract, duty of care and  fiduciary duty. It is alleged that Kenton Chambers’ conduct resulted in the costs incurred in having the judgment set aside.

[9]      In addition, general damages are sought for anxiety and distress, and there is a claim for exemplary damages.

[10]     In response, Mr Oh says that there was no breach of duty, that his firm had acted throughout without being paid and, at the time of the alleged breaches of duty, the firm was not in fact acting for Mr Kim.

The facts

[11]     It is necessary to set out the facts in some detail.

Before the judgment of Heath J

[12]     Mr Yoo founded the New Korean Herald newspaper in October 1993.  The aim of the paper was to provide information and assistance to Koreans who had

recently arrived in Auckland to settle.

5      Kim v Lee [2012] NZCA 600.

6 At [23].

7 At [45].

[13]     Mr Yoo met Mr Kim in late 1993.   The latter was well known within the Korean community in New Zealand.  Mr Yoo asked Mr Kim whether he would be interested in making a donation to the newspaper, which at the beginning of its life was struggling financially because of its set-up costs.   Mr Kim agreed to make a donation and he did so in 1994, while making it clear to Mr Yoo that he did not want any interest in the newspaper and that his donation was provided to ensure the newspaper’s survival.

[14]     In  fact,  Mr  Kim  became  a  director  of  NKHL  and  a  shareholder  in  it. However, it was Mr Kim’s evidence that he had no personal or active involvement with the newspaper, or the preparation, publication or distribution of any of its articles.

[15]     Mr Lee’s defamation claim was served on Mr Yoo in early September 2008. Mr Yoo had known Mr Oh for over ten years, and made contact with him about the defamation claim.   They met to discuss it on 10 September 2008, together with a Mr Bharat Bhanabai, a barrister and solicitor who Mr Oh sometimes engaged in respect of litigation interests of clients of his firm.

[16]     Mr Yoo gave evidence that at the meeting he gave Mr Oh a copy of the proceedings, and that Mr Oh confirmed that Kenton Chambers was prepared to act for all the defendants. The first step would be to file a defence to the claim.

[17]     Mr Oh made some notes at the meeting which were produced in evidence. The notes were largely in English, with the exception of Korean lettering in which Mr Yoo’s name was set out.  I infer that the notes were in English in part to reflect the presence there of Mr Bhanabai and to record advice of a very preliminary kind that he evidently gave about defending the claim.

[18]     Under the heading “Proposed” there was reference to $20,000 plus GST and disbursements for “defence” and “until complete”.  There was also reference to the possibility of a counterclaim.

[19]     Mr Oh said that he made it clear to Mr Yoo at the meeting that he was not capable of acting as counsel and that Mr Bhanabai was to be “the barrister for the trial, and for the preparation up to the trial”.  Insofar as the reference to “$20,000” is concerned,  Mr  Oh  said  that  his  “prime  concern”  was  to  have  funds  to  pay Mr Bhanabai.  He said:

Mr Yoo understood the requirement for payment of funds.  As we are both fluent in Korean, he had ample opportunity to clarify the position.

[20]     He added that “funds were an indispensible element of my agreement to work for him”.   It was his evidence that he would not have accepted working without payment “in due course of those funds”.   However, he did not require immediate payment.  It was his belief that Mr Yoo was aware that Mr Bhanabai would not be appearing as a barrister unless “such funds were paid”, and that Mr Yoo had never told him that the payment would not be made.

[21]     Mr Bhanabai agreed that at the meeting he had said that a sum of $20,000 would be sufficient for his expected costs.   It was his evidence that Mr Yoo was asked to pay that amount into the Kenton Chambers trust account.  He said that he was in no doubt that Mr Yoo understood that $20,000 would be needed for the conduct of the case.

[22]     At the end of the meeting, Mr Yoo signed what he described in evidence as an authority for Kenton Chambers to act for him and NKHL.  Further, he gave Mr Oh Mr Kim’s contact details.  He said that Mr Oh told him he would contact Mr Kim directly.

[23]     The authority that Mr Yoo signed was in the following form:

Date:  2008

To Whom It May Concern:

I, The New Korea Herald Ltd (Jong Ok, Yoo) confirm that Ken OH/Sung Young MOON/Je Ha PARK/Tim HARRIS at Kenton Chambers, Level 8, Unite House, 300 Queen Street, Auckland, PO Box 7160, Wellesley Street, Auckland, represents me in connection with any matters involving the Immigration New Zealand and any legal matters.   If my aforementioned agents so ask you, I hereby authorize you to forward to them any documents or other information relating to my affairs.  I hereby waive any privacy rights

I may have under the Official Information Act 1982 and the Privacy Act

1993.

Yours faithfully,

[Mr Yoo’s signature]

[24]     Mr Kim was served with Mr Lee’s claim on 11 September 2008.   Mr Kim thereupon made contact with Mr Yoo to ask him what the claim was about.  Mr Yoo told him not to concern himself with the matter as he had already made arrangements for Kenton Chambers to act for all three defendants.   Mr Oh said that he did not know Mr Kim but referred to Kenton Chamber’s file records as indicating that Mr Je Ha Park, an employee of Kenton Chambers, had spoken twice to Mr Kim by telephone on 16 September.  The calls lasted for a total time of ten minutes and 19 seconds.

[25]     It is appropriate to record some evidence that Mr Oh gave about Mr Park.  He stated:

I involved my staff solicitor Mr Je Ha Park in the case.  He had just started with my firm as a complete novice.

Mr Park was a junior solicitor.  My intention was to allow him to work with Mr Bhanabai, so as to gain experience.  At his level, I could charge a lower fee.

[26]     Mr Kim did not give evidence about the telephone discussion with Mr Park, and Mr Park was not called to give evidence.  Mr Park or someone else at Kenton Chambers sent Mr Kim an authority which was in the same form as that which had already been signed by Mr Yoo.  Mr Kim signed the form and returned it, dating it

16 September 2008.   Mr Oh conceded that the authority form was one that was normally used for clients with immigration matters.  Its purpose was to permit the collection of information from third parties, particularly the Immigration Service and the Inland Revenue Department.  He noted in evidence that the form did not commit the firm to represent any party in litigation.  He accepted that the firm had not been engaged in respect of immigration matters, but thought it appropriate to note that Mr Kim had never rung him to inquire about the form.

[27]     For present purposes, the relevance of the form is simply that it shows that a relationship  of  client  and  solicitor  had  been  established  by 16  September  2008 between Mr Kim and Kenton Chambers, as had been envisaged at the meeting of

10 September.

[28]     Consistently with that, Mr Park sent a facsimile to the Registrar stating that Kenton Chambers acted for all three defendants in the proceeding that had been commenced by Mr Lee, and stating that a memorandum for the telephone conference then scheduled for 30 September would soon be filed.

[29]     On 26 September 2008 Kenton Chambers sent an Acknowledgement form (“the Acknowledgement”) to Mr Kim.  A facsimile cover sheet was signed by one Tina Hwang, a legal executive employed by the firm.  The heading of the cover sheet referred specifically to the defamation action commenced by Mr Lee, giving the Court  file  reference  and  the  names  of  the  parties.    During  Mr Kim’s  cross- examination by Mr Thwaite, counsel for Mr Oh, the cover sheet was translated by the interpreter who had been instructed by the plaintiff.  The translation given was as

follows:8

Dear Mr Kim,

How are  you,  this  is Je Ha  Park lawyer,  working  at  Kenton  Chambers lawyers.   Please refer to the document alleging to defamation case, that is documents for you to give a signature.  This document says you Mr Kim is personally not involved in the case of a defamation of the New Korea Herald Limited, that is the first word, second one is … the representing for you is given to — all the liabilities given to John Ok Yoo, director, of the company.

…We require you to accept this.  Please check the attached document and if you agree to them, please give a signature and fax it back to our office, fax number 09 358 1903, thank you.  Have a good weekend.

[30]     The Acknowledgement that was attached to the e-mail read as follows:

8      I have some reservations about the accuracy of the translations given by the interpreter and because of his accent there were some evident inaccuracies in the transcript. The version of the answer printed here represents my best attempt to set out what the interpreter said, having listened to the recording of this passage of the evidence on a number of occasions.

To: Kenton Chambers Lawyers

ACKNOWLEDGMENT FORM FOR DEFENCE OF DEFAMATION CASE (2008-404-00-5072) JUNG NAM LEE V THE NEW KOREA HERALD LIMITED, JONG OK YOU & YOUNG KWAN KIM

(“the Case”)

Parties

Plaintiff:  Jung Nam LEE

First Defendant:  The New Korea Herald Limited

Second Defendant:                 Jong Ok YOO Third Defendant:   Young Kwan KIM

I Young Kwan KIM acknowledge and declare that:

(a)      I am not personally involved in the operation of The New Korea Herald Limited and the publication of the New Korea Herald (“the Korea Herald”);

(b)      I am not personally involved in the preparation of articles, publication or distribution of the Korea Herald;

(c)      Jong Ok YOO informed me of the above claim by Jung Nam

LEE and was advised to take independent legal advice;

(d)      I understand the nature and extent of my interest in relation to defending the Case could cause a conflict of interest between the three defendants under the Case;

(e)      I declined to take independent legal advice; (f)     I sign this Acknowledgement voluntarily;

(g)      I hereby delegate my full authority in relation to the defending of the Case for myself as the third defendant and for The New Korea Herald Limited as the first defendant to Jong Ok YOO, co-director of The Korea Herald Limited;

(h)      I understand that Jong Ok YOO on behalf of himself and The New Korea Herald Limited have decided to use Kenton Chambers Lawyers as the counsel in defending the case for the three defendants;

(i)        I declare that I will not hold Jong Ok YOO, The New Korea Herald Limited or Kenton Chambers Lawyers liable for any of the results in relation to the defending of or attendance to the matter in relation to the Case in any way.

[31]     Significantly, the Acknowledgement was in the English language.

[32]     Mr Kim accepted in cross-examination by Mr Thwaite that he had not sought independent legal advice before signing the form.  Effectively, he said he signed it because he trusted Mr Yoo.  Mr Kim signed the form on 29 September 2008 and sent it back to Kenton Chambers. The evidence establishes that that was at 9.02 a.m.

[33]     Paragraph (c) of the Acknowledgement contains the phrase “… and  was advised to take independent legal advice”.  Possibly, whoever drafted the document meant to say “I was advised …”.

[34]     Although Mr Kim’s English is not fluent, I record that he read his brief adequately and I am satisfied that he would have been able to understand the Acknowledgement form, notwithstanding that it was in the English language. However, I doubt that he was alive to the full implications of it without rather more detailed advice than he had been given in the facsimile cover sheet.  That conclusion is supported by other evidence he gave in answer to Mr Thwaite’s questions that he had not identified  any potential conflict between him and  Mr Yoo  and, despite paragraph (i), he had confidence that Kenton Chambers would exercise their best efforts on his behalf.  In cross-examination, he said that he interpreted paragraph (i) to mean:

… if something [happened] with Jong Yoo and New Korea Herald why do I

have to worry about them?  I mean that is exactly what I read at that time. …

and emphasised his trust for Mr Yoo.

[35]     Mr Ropati, counsel for Mr Kim, asked questions about the Acknowledgement in re-examination.  In particular, Mr Kim stated that before signing the document, his lawyers had not told him to take legal advice.  However, it is unclear how Mr Kim would have understood the question which asked whether “your lawyers” had given such advice.9   The position is also complicated by the wording of paragraph (c).  In the end, I think that all that can clearly be said is that Mr Kim signed the document

without   taking   legal   advice   and   the   cover   sheet   that   accompanied   the

Acknowledgement did not make it clear to him that he should seek independent legal

9      Mr Kim had stated in evidence that he used the Christchurch firm Young Hunter, but had not done so on this occasion.

advice.  If the intention of paragraph (c) of the Acknowledgement was that it operate to establish informed consent by Mr Kim to Kenton Chambers acting for all three defendants, I do not consider that it could do so.

[36]     Mr Oh gave evidence of a file record of a telephone discussion between Mr Kim  and  Mr Park later that  day.   The file  record,  in  Mr Park’s  handwriting recorded conversations with both Mr Yoo and Mr Kim.  The purpose of the calls was evidently  to  inform  Mr Yoo  and  Mr  Kim  about  a  case  management  telephone conference which had been scheduled for the following day, 30 September.  Insofar as Mr Kim was concerned, the note was as follows:

Mr Kim

[telephone number omitted] Told

[T]elephone Conference tomorrow 30/9/08

He only does financial supports

Told him we will update him constantly

[37]     Telephone records that were included in the agreed bundle of documents indicate that there was a phone call of about three minutes and 31 seconds’ duration, starting at 10.23 a.m.  I am satisfied this was the call in which Mr Park spoke to Mr Kim.

[38]     Mr  Kim  described  this  telephone  discussion  in  the  brief  he  read  as  his evidence in chief, by reference to the matters set out in the file note.  However, when cross-examined by Mr Thwaite about that telephone discussion, Mr Kim was unable to recall it. Specifically, he conceded that he could not in fact recall the phrase “update him constantly” being used in the telephone discussion.   He also said that he could not recall having seeing the file note previously.  Consequently, Mr Thwaite put it to Mr Kim that this part of his evidence must have been drafted for him on the basis of the file note.   Mr Kim did not give a direct response to this question, and I accept that Mr Thwaite’s proposition is likely to be correct.   However, Mr Oh referred to the file note in his own evidence, and the note was put in evidence.  It was Mr Park’s file note and I have no reason to doubt its accuracy.  I find that the file

note is likely to have been accurate.  For present purposes the important thing is that Mr Kim was evidently told that he would be updated constantly, and that may well have led him, at the time and subsequently, to believe that would be the case.

[39]     It appears that the telephone conference discussed did not in fact occur on

30 September.   However, on 3 October there was a brief telephone conference at which Mr Oh appeared for the first, second and third defendants.  Associate Judge Sargisson directed the defendants to file and serve their statement of defence by Friday 10 October, that discovery was to be provided by verified lists filed and served by 7 November, that inspection was to be completed by 28 November, that any interlocutory applications were to be filed and served by 12 December and that there would be a further case management telephone conference on 5 February 2009. Counsel were directed to file and serve memoranda for the purpose of the conference at least two days in advance of it.

[40]     On 13 November, Mr Park of Kenton Chambers wrote to solicitors acting for Mr Lee in the defamation claim providing an undertaking that had been signed by Mr Yoo as a director of NKHL that the newspaper would not publish any articles and/or publications in relation to the defamation proceeding until it was fully resolved.  There was no evidence that Mr Kim was advised or consulted in relation to that undertaking.

[41]     In the meantime, the date by which the defendants were to file and serve their statement of defence had come and gone.   On 14 November 2008 the defamation claim was mentioned before John Hansen J.  Mr Bhanabai acted for the defendants before John Hansen J.  The Judge made amended time-tabling orders, pursuant to which the statement of defence was to be filed and served by 4.00 p.m. on Monday

17 November.  He directed that the plaintiff would have leave to enter judgment as to liability and to set the matter down for a hearing on quantum unless the statement of defence was filed by that time.   He extended the time for provision of a list of documents to 28 November, and required inspection to be completed within 14 working  days  after  that.    A deadline  was  given  for  the  filing  of  interlocutory applications, fixed at 14 days after the completion of inspection.  He directed that the

matter be listed in the first Duty Judge List available after 9 February.  Costs were awarded in favour of the plaintiff, on a 2B basis, to be paid forthwith.

[42]     Mr Yoo gave evidence of attending a further meeting at the offices of Kenton Chambers in “mid-November 2008”.  Mr Park was present at the meeting, and there was a discussion about preparing a statement of defence.

[43]     The statement of defence was filed on 17 November 2008.   It was filed on behalf of each of the defendants and the defences raised did not differentiate between them.  Mr Bhanabai gave evidence that he assisted with helping to draft either that document, or an amended statement of defence that was subsequently filed.   I am satisfied having read the statement of defence, and having regard to the evidence given about Mr Park’s lack of experience, that Mr Bhanabai must have assisted with the drafting of the statement of defence.

[44]     For present purposes, it is also significant to note that at the end of the document, there was  a memorandum of the kind contemplated by r 5.44 which stated:

This Statement of Defence is filed by Ken Oh, Solicitor for the Defendants. The address for service of the defendant is at the office of Kenton Chambers, Solicitors, Level 8, 300 Queen Street, Auckland.

[45]     There followed statements referring to the post office box number of the firm, its DX number and facsimile number.

[46]     Plainly, Mr Oh was then, pursuant to r 5.38(1), the solicitor on the record for all three defendants.

[47]     Mr Yoo gave evidence that he had another meeting with Mr Park at Kenton Chambers’ offices some time in December 2008.   At that meeting, he provided Mr Park with further documentation which was relevant to the claim and he signed a list of documents on behalf of all three defendants, which was then filed. According to Mr Yoo, the meetings in September and December 2008 were the extent of his interaction with Kenton Chambers until 2010.  He said that, during the intervening period, he assumed that “everything was going well” because he had not heard from

the lawyers.  During that time, the Lee proceeding was mentioned before Asher J on

16 February 2009.  Mr Park appeared for the defendants.  The Judge extended the time for completion of inspection and the matter was set down for further mention on 30 March 2009.

[48]     On that day the matter came before Winkelmann J, who made an order in the following terms:

[1]       Counsel are in agreement that this proceeding is ready to be set down for trial and today is to be treated as the setting down date.   The hearing is to [be] before a Judge alone and counsel’s estimate is that it will take seven days to be heard.  There is a requirement for a Korean translator and counsel are to make all necessary arrangements in that regard.  They can obtain a list of approved translators from the Registry.

[2]       In  terms  of  timetable  orders,  for  the  purposes  of  Rule  9.2  the plaintiff is to file briefs of evidence 10 weeks before the trial date.   The defendants are to file their briefs of evidence 15 working days thereafter.

[3]       Leave is reserved to the plaintiff to apply for a case management conference under Rule 7.2.  This may be necessary if the plaintiff wishes to file reply briefs.  Mr Kohler anticipates this as [a] possibility since truth is one of the defences pleaded in the statements of defence.

[4]       Mr Kohler has also indicated that the plaintiff wishes to participate in a Judicial Settlement conference.   Mr Park for the defendants has no instructions in that regard, but has agreed that he will seek instructions and will file a memorandum on behalf of the defendants within seven days of today’s date advising whether the defendants are willing to participate in a Judicial Settlement Conference.   That memorandum should be directed to my attention.

Mr Park had again appeared for the defendants.

[49]     A file note made by Mr Oh indicates that he telephoned Mr Yoo to advise him that the matter had been set down for a fixture, and that there would be a judicial settlement conference by 6 April 2009.  Mr Park also noted “settle – ok by clients”. On 6 April, Mr Park filed a memorandum referring to the mention of 30 March, and stating that the defendants were willing to participate in a judicial settlement conference.  He stated that the defendants would prefer the settlement conference to take place in early 2010.

[50]     By  letter  dated  7 April  2009,  the  Registrar  advised  the  parties  that  the proceeding would be heard on Monday 28 June 2010.  Mr Yoo stated that he was not told about the trial date at that time.

[51]     The bundle of documents included an invoice dated 12 November 2009 in the name of NKHL, although the company’s address had not been inserted and it was unclear on the evidence whether it was ever sent.  It was in the GST inclusive sum of

$5,640 and the recitals referred to meetings, telephone discussions, and the preparation of the various Court documents that had been filed, correspondence with Mr Bhanabai and with Mr Lee’s counsel.  It made no mention of Mr Bhanabai’s fees. Mr Yoo said that he did not receive the invoice, and that he only became aware of it once the present proceeding was filed.

[52]     According to Mr Yoo, whose evidence in this respect was not contradicted, he received a call from Mr Park in April or early May 2010.  It was only at that point that he became aware that the hearing for Mr Lee’s claim was to take place in June

2010.   Mr Yoo claimed also that it was at that point that Mr Park told him that

“Kenton Chambers required payment of $20,000 as a retainer for fees”.

[53]     I do not  accept Mr Yoo’s evidence on the required payment issue.   For reasons that I have earlier discussed, I am satisfied that the need to put Kenton Chambers in funds in the sum of $20,000 to cover Mr Bhanabai’s barrister’s fee would have been made plain at the meeting of 10 September 2008.  However, I do accept that advice of the hearing date was not given until either April or May 2010, as claimed by Mr Yoo.

[54]     On 28 April 2010 Mr Park made a note of a discussion that he had had with Mr Oh. When they spoke, Mr Oh told Mr Park that the firm could not proceed, as no money had been received from “the client”.  Mr Oh evidently told Mr Park that he should send a letter to the client requiring a deposit to be paid of $10,000.  He also told Mr Park at that point that he had initially agreed with Mr Yoo for the payment of

$20,000 as a barrister’s fee.  That Mr Park made a note of that fact suggests that he had not been aware of the requirement for the payment of $20,000 up to that point. On 28 April, Mr Park wrote to NKHL.   His letter did not mention  the fixture.

However, it did state that Kenton Chambers was waiting for the Court to allocate a date for a settlement conference.  Mr Park also wrote:

We understand that Ken Oh of our firm has advised you that we require approximately $20,000.00 to cover the barrister fee in this matter and please note  that  we  require  $10,000.00  in  our  trust  account  to  further  this proceeding.

We enclose a copy of our Trust Account for your reference. Please do not hestitate to contact us if you have any queries.

[55]     Another file note made by Mr Park on 29 April 2010 records unsuccessful attempts made by him to telephone Mr Yoo.  Then, on 25 May 2010, Mr Park wrote to NKHL in the following terms:

RE: CIVIL LITIGATION – DEFAMATION

We refer to the matter mentioned above.

We note that the hearing is now to be held on 28 June 2010.

As per our previous letter, we note that we urgently require you to transfer $10,000 to our trust account to further this matter.

Please do not hesitate to contact us if you have any queries. [Emphasis in original]

[56]     It should be noted that the implication of the words used in the second paragraph of the letter is that Kenton Chambers had recently been advised of the trial date of 28 June 2010.   In fact, that date had been advised in a letter  from the Registrar dated 7 April 2009.  It seems, however, that the letter of 25 May 2010 was the first advice given to Mr Yoo as to the actual hearing date.  In the meantime, the briefs of evidence of the five witnesses to be called to give evidence for the plaintiff at the trial had been provided to Kenton Chambers, together with a draft common bundle of documents, attached to an e-mail dated Friday 30 April.  Mr Yoo said that he was not told that briefs had been served, still less given copies of them.  I accept his evidence.

[57]     It is clear on the evidence that Kenton Chambers took no steps to advise Mr Kim as to any of these developments.  According to Mr Oh, he did not turn  his mind to Mr Kim nor think of him as a client.   Mr Oh’s attitude in this respect

emerges from his cross-examination by Mr Ropati in relation to the Acknowledgement form that was sent by Kenton Chambers to Mr Kim and which he signed on 29 September 2008:

Q.       See at paragraph (d) of that acknowledgment drafted by your firm you state –

A.        Yes, yes.

Q.        – “I understand the nature and extent of my interest in relation to defending the case could cause a conflict of interest between the three defendants under the case.”

A.        Yes.

Q.        So this was drafted by your law firm, so you recognise there’s a

conflict with these three defendants?

A.        Yes I think so, I briefly I considered.

Q.       And would you accept there was a possible conflict in your law firm acting for all three defendants?

A.       If I act for all three the law firm, maybe like then conflict interest might be happen.

Q.       And do you accept that you would have had an obligation to explain to Mr Kim what that conflict was?

A.       If I act for Mr Kim I need to explain to him. But at the time, I told you, I was not considered to Mr Kim.

Q.       And do you accept also that you had an obligation to explain the ramifications of that conflict?

A.        Sorry, ramifications?

Q.        Ramifications of that conflict.

THE COURT ADDRESSES MR ROPATI – DEFINE THE WORD CROSS-EXAMINATION CONTINUES: MR ROPATI

Q.        “Implications”?

A.        Sorry, would you ask the question –

Q.       Yes, do you accept you had an obligation to explain the implications of that conflict?

A.        Yeah, if I act for – if I think that or if I made a contract with Mr Kim for acting for him, then I have obligation to explain to him the conflict of interest.

Q.        And you had to ensure also that Mr Kim had a proper appreciation of the conflict, do you agree?

A.        Sorry, can you ask that question please?

Q.        Do you accept that you had to ensure that Mr Kim had a proper appreciation of the conflict and its implications?

A.        So can I understand your question as Mr Kim understand of conflict of interest? Sorry –

Q.        Well that’s your duty, because you’re their lawyer.

A.        No, I was not his lawyer.

Q.        So okay, so you’re saying –

A.        In, so in my position, okay so I know there’s – my staff the draft for all, like some presenting for his acting for Mr Kim, but if I knew it maybe then I can take more steps. But I, at the time I didn’t see all the documents.

Q.        So you're telling the Court that you did not obtain Mr Kim’s consent or informed consent to act for all three defendants because you were not his lawyer?

A.        Yes I think so, yes. If I – no. But my position is I’m the person who decide to act for or not. But like in result then my firm was acting for Mr Kim. That’s my position. But I didn’t see all the documents myself.

Q.        You did not tell Mr Kim to go to another law firm and take legal advice before signing this form, did you?

A.        No I didn’t.

Q.        And why was that?

A.        Because I told you, I never think Mr Kim was my client. If Mr Kim was my client, maybe then I can tell him, “You go to other lawyer and then take legal advice, because there’s a conflict of interest.”

[58]     Later in the cross-examination when Mr Ropati asked Mr Oh to comment on the claims of Mr Yoo and Mr Kim that they did not receive the briefs of evidence that had been served on behalf of Mr Lee, Mr Oh said:

I don’t know what’s Mr Park’s position, and my position that’s Mr Kim was not my client at the time, I think.  Because I didnt make any contract with him.

[59]     It was Mr Yoo’s evidence that in June 2010 he received several e-mails from Mr Park requesting that he pay a retainer to Kenton Chambers.  At that time he was in Korea.  He was not in a position to pay the retainer, so he requested that Kenton

Chambers seek an adjournment of the trial until he was in a better position to pay them.  In the result, Mr Park filed a memorandum dated 14 June.  The memorandum advised that “the defendant” (clearly a reference to Mr Yoo) was currently attending a business trip in Korea, and was expected to return to New Zealand on or around 27

June 2010.10   The memorandum advised also that “the defendants” were in “extreme

financial difficulties” and that they might have to apply for legal aid “to further defend the proceeding”.   Reference was made to an affidavit that was to be filed shortly.

[60]     An affidavit was prepared for Mr Yoo, who was still in Korea.  The affidavit was never executed, but Mr Park relied on it for the purposes of the adjournment application in unsworn form.  In the unsworn affidavit, Mr Yoo recorded that he was currently experiencing “extreme financial difficulties and hardship”.  It was claimed that one of the reasons for his trip to Korea was to obtain funding not only to be able to continue defence of the proceeding, but also to continue the publication of the New Korea Herald.   Mr Oh stated that Mr Yoo had not previously disclosed his desperate financial position to Kenton Chambers.

[61]     Rodney Hansen J heard counsel by telephone on 17 June.  Mr Park appeared for the defendants.  The adjournment application was declined.  In his minute of 17

June, the Judge recorded that there had been ample time to address issues of representation arising out of the financial difficulties of the first and second defendants.  He noted also that he had been given no information about the financial position of Mr Kim, whom he inferred did not share the financial difficulties being experienced by his co-defendants.   He observed that if the defendants were ill- prepared they only had themselves to blame and that they had had ample time to make the necessary financial and other arrangements.

[62]     Mr Park advised Mr Yoo that the adjournment application had failed in an e- mail sent the same day, stating that it was critical that a lawyer be “elected” without

delay.  Mr Park requested that Mr Yoo advise without delay whether he was “able to

10     It will be recalled that that date was the day before the scheduled commencement of the trial.

pay the minimum amount required to elect a lawyer”, adding “[a]s we have advised

multiple times, we are unable to proceed unless you can pay this fee”.11

[63]     After several unsuccessful attempts to reach Mr Yoo by telephone, Mr Park eventually managed to speak to him on the evening of 28 June.  Mr Park’s note of the discussion was as follows:

The client told12  they do not have any funds to support and continue this case.

They  say  they  will  uplift  all  the  files  and  will  appear  to  the  court  by themselves.

[64]     According  to  Mr  Yoo,  what  then  happened  was  that  Kenton  Chambers prepared and filed a notice of change of representation on behalf of the defendants, including Mr Kim, as well as an affidavit which he signed on their advice.  Mr Oh put the position slightly differently.  Commenting on the e-mails passing between Mr Yoo and Mr Park, he said that Kenton Chambers had pressed Mr Yoo to engage a new solicitor as the firm could not run the trial and, after initially refusing to do so, Mr Yoo was eventually willing to sign documents drafted by the firm. Mr Yoo filed these documents himself in the High Court.

[65]     The Notice of Change of Representation, dated 28 June 2010 was purportedly drafted pursuant to r 5.40 of the High Court Rules.  In it, Mr Yoo stated that “The Defendants”, for whom Kenton Chambers had previously acted “wishes (sic) to act in person”, and that they “now intends [sic] to act in person”.   In the affidavit he stated that he was the second defendant, a director of the first defendant (NKHL) and he was “also representing the third defendant” (Mr Kim).  There is no suggestion that in drafting these documents the person responsible at Kenton Chambers pointed out to Mr Yoo that he would not be able to appear for Mr Kim, and would need leave

to appear for NKHL.

11     The agreed bundle of documents included a number of e-mails that were exchanged between Mr Park and Mr Yoo between 14 and 22 June, translated into English. Mr Oh gave evidence that he had reviewed the English translation of these e-mails, and that it was correct. Neither counsel commented on the use of the word “elect” in this e-mail. I think it is likely to be a mis- translation, but I do not consider it appropriate to speculate about what the accurate translation would have been.

12     This note was in English, and the word “told” may mean that someone (presumably Mr Yoo)

told Mr Park the information noted.

[66]     Mr Kim gave evidence that he had no further contact or communication from anyone at Kenton Chambers regarding the proceeding following the 29 September

2008 telephone discussion that he had with Mr Park.  He was not challenged on that evidence, and I accept it.  Further, it appears that he was not told by Mr Yoo of the important staging posts such as the hearing date for the trial, the date by which briefs of evidence were to be exchanged for the defendants, the receipt and content of the plaintiff’s briefs of evidence or the fact that an unsuccessful application had been made to adjourn the trial and that it would have to proceed without him being represented.

[67]     Nor did Mr Kim take any steps to find out what was going on.  He spoke at one stage to his son, who practised law in the United States, and was apparently reassured by him that it was not unusual for civil litigation to proceed at a slow pace. He made the assumption that nothing of importance had occurred because he had not been contacted by Kenton Chambers.  He did not directly explain in evidence why he had not made an inquiry (whether of Kenton Chambers or Mr Yoo) as a director and shareholder of NKHL, but his lack of involvement in the company’s day to day operation would be a possible explanation for that.   In so far as the delegation to Mr Yoo was concerned, Mr Kim said that he thought it was up to Mr Yoo to ring him, not for him to ring Mr Yoo.   He did not hear from Mr Yoo for “almost two years”.

[68]     It should also be noted that during 2007 and 2008 Mr Kim was seriously ill, and his medical problems evidently continued after that.  A medical certificate dated

11 February  2011  from  Mr  Michael  Burt  was  included  in  the  agreed  bundle.13

Mr Burt is a consultant gastroenterologist practising in Christchurch.   His certificate stated that Mr Kim had a serious congenital liver condition, that resulted in a liver transplant operation performed at Auckland Hospital on 1 July 2007.  This resulted in a long period of recuperation, during which there were a series of ongoing problems.  Those included shingles, problems with medication related suppression of the bone marrow and the development of the end stage of renal failure.   Mr Burt

observed:

13     The certificate was originally attached to an affidavit sworn by Mr Kim in respect of an appeal to the Court of Appeal.

Over the last 5-6 years while I’ve been looking after him he has had a series of very complicated medical problems, he has been very unwell and I’m sure at times this would have affected his ability to tend to his business and legal matters.    In  particular  he would  find it  very difficult to  attend  to  legal proceedings in person.

[69]     Mr Thwaite put it to Mr Kim that he was in fact too sick “to be concerned about the particulars of a court action” and Mr Kim agreed.   He also agreed that during 2008 and 2009 he had left it to Mr Yoo to take whatever action was required in relation to the defamation proceeding.

[70]     The trial proceeded before Heath J on 29 June 2010.  Mr Yoo appeared for himself.  In a minute that he issued at the outset Heath J recorded that Mr Park had appeared but had “no real instructions” to act for the defendants, and that he had sought leave to withdraw.  However, Heath J also noted that Mr Park would remain to assist Mr Yoo on any matters that arose during the evidence of Mr Lee, saying that he would “reconsider where matters should go after Mr Lee’s evidence in chief”.  He recorded that Mr Yoo could represent himself.  He observed that NKHL could not be represented other than by counsel without the leave of the Court.  As to Mr Kim, he had elected not to attend the proceeding and that he could “not be represented other than by a lawyer”.

[71]     I have already summarised the result.14   Heath J did not expressly refer in the judgment  to  his  “reconsideration  of  where  matters  should  go”.    However,  he recorded that: 15

Mr Yoo appeared on his own behalf, though his former counsel, Mr Park, agreed  to  stay  and  assist  him in  a  role  akin  to  a  McKenzie  Friend.    I permitted him to do so and thank Mr Park for his assistance.  No appearance was entered on behalf of The New Korea Herald Ltd or Mr Kim.  The claim proceeds by way of formal proof against them.

[72]     Later, the Court of Appeal referred16 to a minute that Heath J issued in which the Judge referred to having declined leave for Mr Yoo to appear on behalf of either

NKHL or Mr Kim.

14     At [4] above.

15     Lee v The New Korea Herald Ltd HC Auckland CIV 2008-404-5072, 9 November 2010 at [4].

16     Kim v Lee [2011] NZCA 256 at [21].

After the judgment of Heath J

[73]     As noted above,17  Mr Kim was alerted by an acquaintance to the fact that judgment had been entered against him.  He was shocked.  He was unable to obtain advice immediately because of the Christmas legal vacation, but he spoke to Mr Yoo in mid-January 2011.  Mr Yoo told him that he had instructed new lawyers to appeal against  the judgment  on  his  behalf.   After  attempting unsuccessfully to  contact various lawyers in Christchurch to assist with his own position, Mr Kim received a letter of demand in late January.  He spoke to Mr Yoo again and found out that he had instructed Brookfields.  Mr Kim flew to Auckland on 2 February to consult with that firm and a barrister who had been instructed, Mr Ryan.  He instructed them to act for him.  Brookfields were able to uplift the files from Kenton Chambers.

[74]     On 8 February 2011, Mr Corlett, a senior associate employed by Brookfields wrote to Mr Kohler, the barrister who had acted for Mr Lee to obtain Heath J’s judgment. Mr Corlett wrote that Mr Kim had not been advised about the trial date, the withdrawal of Kenton Chambers, the High Court judgment of 9 November 2010 or his rights of appeal in relation to the judgment.  In the circumstances, there were strong grounds for the Court of Appeal to extend the time within which Mr Kim could appeal.   The letter sought Mr Lee’s consent to that course being followed, noting that such consent had already been granted in respect of an appeal by Mr

Yoo.18

[75]     Mr Kohler replied on 10 February, advising that Mr Lee would not consent. Brookfields then filed an application in the Court of Appeal.  It was accompanied by an affidavit sworn by Mr Kim in which he said that neither Kenton Chambers nor Mr Yoo had advised him of the date of the High Court fixture, the withdrawal of Kenton Chambers, the delivery of judgment on 9 November or any rights of appeal. He also gave evidence about his state of health, stating that when the articles about Mr Lee were published he had been “basically home bound” and unable to undertake work of any nature”.  Mr Kim’s application was also supported by an affidavit by

Mr Yoo.

17 At [6].

18     The Court of Appeal granted Mr Yoo an extension of time for appealing on 2 February 2011.

[76]     Mr Lee maintained his opposition to the application which was the subject of oral argument and subsequent written submissions because of a point raised by the Court during the hearing.  The issue raised was that the steps taken in relation to the withdrawal of Mr Park did not appear to have been in accordance with the High Court Rules.19 The Court observed at [18] that r 5.41 recognised three mechanisms by  which  a  party’s  solicitor  on  the  record  could  be  removed:    the  first  by interlocutory application by the solicitor concerned for an order declaring that he or she has ceased to be a solicitor on the record for the party;  the second, in terms of

r 5.40 (the rule that had been referred to in Mr Yoo’s notice); the third, by the filing of a notice by the relevant party that he or she intends to act in person.  Here, there had been no attempt to withdraw using the first mechanism, and neither the second or third mechanisms could be utilised by Mr Yoo in relation to Mr Kim.  Nor was it possible,  of  course,  for  Mr  Yoo  to  represent  Mr  Kim  in  the  proceeding. Consequently, the withdrawal had been ineffective in so far as Mr Kim was concerned.

[77]    Having noted how Heath J had dealt with the issue of Mr Kim’s non- appearance, the Court said:

[22]     Against this background, it is strongly arguable that Mr Kim has suffered a serious injustice. He understood that he was being represented in the proceedings by Kenton Chambers Lawyers, who took instructions from Mr  Yoo.   He   also   understood   that   he   would   be   kept   informed   of developments with the litigation, as is confirmed by the lawyer’s contemporaneous file note.  Mr Kim was neither kept informed, nor was he represented  at  trial.  Although  the  question  of  his  involvement  in  the company and its operations had been put in issue prior to trial, he had no opportunity at trial to address matters relevant to potential defences based on his non-involvement. As it turned out this was critical, given the basis of the Judge’s findings against him.

[Footnotes omitted]

[78]     In the circumstances and given the reasonably prompt steps he had taken to instruct solicitors in relation to an appeal, the Court considered that it was necessary

to grant Mr Kim’s application for an extension of time.20    The Court also made a

19     Kim v Lee [2011] NZCA 256 at [17]. With respect, it was Mr Oh who was the solicitor on the record in terms of r 5.38 (his name having appeared on the memorandum located at the end of the statement of defence), not Mr Park, but the point is not significant for present purposes.

20 At [23].

“suggestion as to the way forward”21 which it accepted could not be binding on the parties, and was based only on the material before the Court, which it acknowledged was untested and might be incomplete.  It thought that there was a strong argument that the hearing in the High Court had miscarried as far as Mr Kim was concerned. In  summary,  the  possibility  identified  was  that  Mr  Kim  could  be  given  the opportunity to advance evidence in support of the defence he had raised that he was not involved in the operation of NKHL or the publication of the articles at issue in the proceeding.   The Court suggested that could be achieved if the matter were referred back to the High Court “for determination of Mr Kim’s non-involvement defence (as a separate question) in light of whatever further evidence he might

advance”.22  That would mean allowing the substantive appeal by consent.

[79]     After the Court of Appeal’s judgment, there were some discussions in relation to a possible settlement, but they did not come to fruition.  Next, in August 2011, Mr Kim applied for the rehearing of his “non-involvement defence” de novo.  This was in accordance with the suggestion that had been made by the Court of Appeal, but without the step, contemplated as necessary by that Court, that the appeal would first have been allowed.   Mr Lee opposed the application and, after hearing the

parties, Heath J rejected it on 9 November 2011.23

[80]     He emphasised that the Court of Appeal had not envisaged that the High Court would order a rehearing, and had made it clear that agreement was a prerequisite to the rehearing, following the appeal being allowed by consent if agreement could be reached to do so.24   He rejected a contention advanced on behalf of Mr Kim that the Court could order a rehearing in its inherent jurisdiction.25   In the circumstances, it was unnecessary for him to address the merits of the application,

but he went on to note that Mr Kim had made a decision to leave conduct of the proceeding in the hands of Mr Yoo and the solicitors instructed.  They had not kept

him informed of developments, but equally he had not made inquiries to ascertain

21     At [26]-[29].

22 At [28].

23     Lee v The New Korea Herald Ltd (No 2) HC Auckland CIV 2008-404-5072, 9 November 2011.

24 At [29].

25 At [41].

progress.26    Heath J also noted that Mr Kim’s potential defence of non-involvement had been the subject of discussion in his judgment of a year earlier and observed that if his analysis had been wrong, then that could be corrected on appeal.   He then noted that Mr Lee was elderly, and nothing which he had done was such as should disentitle him to the fruits of his judgment.  He indicated that had it been necessary to do so, he would have found in favour of Mr Lee on the merits of the claim, and dismissed the application on that basis.27

[81]     Mr Kim filed an appeal to the Court of Appeal against Heath J’s judgment of

9 November 2011.   In the meantime, he had sought a further extension of time to appeal against the original judgment of 9 November 2010, the extension previously granted by the Court of Appeal in its decision of 2 February 2011 having expired on

4 July 2011.   The application for a further extension of time was granted by the Court of Appeal in a judgment delivered on 21 February 2012.   In doing so, the Court noted that Mr Kim could have been more timely in his reponse to the first extension of time, and that pursuing a rehearing in the High Court was no reason not

to  file  the  notice  of  appeal  within  the  proper  timeframe.28     At  [11],  the  Court

observed:

[11]      However, given the reason for the extension of time granted by this Court in its 3 June 2011 judgment, and the fact that Mr Kim was following a suggestion of this Court in seeking a rehearing in the High Court, we are prepared to grant one further extension. We grant that further extension on the condition that the notice of appeal must be filed and served by 2 March

2012, together with the application to adduce further evidence.

[82]     The further extension was granted subject to the payment by Mr Kim of

Mr Lee’s costs on the second extension application.

[83]     This time, Mr Kim did file a notice of appeal raising substantive issues in relation to Heath J’s judgment of 9 November 2010.  He also sought leave to adduce further evidence on the appeal, which he supported by an affidavit of 25 February

2012. The application to adduce further evidence was opposed by Mr Lee.

26 At [44].

27 At [47].

28     Kim v Lee [2012] NZCA 19 at [10].

[84]     The Court of Appeal granted the application in a judgment dated 14 June

2012.29     In the course of doing so, after setting out the background,  the Court expressed  its  surprise  that  Mr Kim’s  application  to  adduce  further  evidence  in support of the appeal had been opposed:   without evidence, the appeal would be pointless, and Mr Kim would be in the same position he had been in at the trial before Heath J.30   The Court also rejected the submissions that had been advanced by Mr Kholer on Mr Lee’s behalf that Mr Kim’s proposed evidence was neither credible or cogent.  The Court observed that no assessment of Mr Kim’s credibility could be made until he gave evidence and in particular was cross-examined upon it and upon any other matters relevant to his credibility.31   On this occasion, because opposition

had been “ill founded”,32  the Court ordered Mr Lee to pay costs as for a standard

application, but uplifted by 50 percent.

[85]     On  18 July,  Mr Kim  withdrew  his  appeal  against  Heath J’s  judgment  of

9 November 2011.   On 12 and 13 November, the Court of Appeal then heard the substantive appeal against Heath J’s judgment of 9 November 2010.  The appeal was allowed  in  a judgment  delivered  on  19 December  2012.33     The Court held  that Kenton Chambers withdrew as Mr Kim’s counsel in breach of r 5.41 of the High Court Rules.  By the time the matter was heard by the Court of Appeal, the parties were in agreement that that was the case.34    The Court was satisfied that there had been an error in process.35

[86]     Although the Court thought it odd that Mr Kim  had failed to take any action in the absence of contact from Kenton Chambers, it accepted that he had simply assumed that Kenton Chambers would contact him if there was something he needed to know.36    It identified four factors which supported that conclusion.   First, there was the fact that Mr Kim had discussed the position with his son who had told him that dealing with the matter would take a long time.   Secondly, Mr Kim had been

unwell as a result of his liver transplant for the relevant part of 2008, and had not

29     Kim v Lee [2012] NZCA 248.

30 At [12].

31 At [14].

32 At [18].

33     Kim v Lee [2012] NZCA 600.

34 At [13].

35 At [23].

36 At [32].

focused on the litigation.  Thirdly, Mr Kim’s account was supported by the evidence of Mr Yoo.  Mr Yoo denied telling Kenton Chambers that he had full authority to act on Mr Kim’s behalf. The Court quoted from evidence by Mr Yoo that in a discussion with Mr Kim, he mentioned that he had already instructed Kenton Chambers and that it would be better for him to select his lawyer, and for Mr Yoo to “authorise

everything”.37

[87]     The final factor that influenced the Court of Appeal was that nothing had been advanced from Kenton Chambers questioning Mr Kim’s assumption (that is, the assumption that if there was something he needed to know Kenton Chambers would contact him).

[88]     The Court further observed that there was a factual question about the extent of Mr Kim’s involvement in, and knowledge of, publication of the articles that Heath J had found to be defamatory.  It noted that Heath J had observed that there was no evidence from Mr Kim to support a factual finding that he did not know of the  intended  publication.    On  a  rehearing,  Mr  Kim  would  be  able  to  advance

evidence on that issue.38   The fact that he was a director of the company publishing

the newspaper did not necessarily mean that he would share the liability of the company.  It would be a question of fact and degree, as to whether he should be seen as having taken part in the publication of the defamatory articles.39     Finally, the Court observed that, had he been present at the hearing, Mr Kim might have been able to raise issues as to contribution between the defendants.40    The Court was of the view that, in all the circumstances, there were arguable defences available to Mr Kim, it was fair that they should be heard, and the appeal should therefore be allowed.41

[89]     Consequently, the judgment in the High Court against Mr Kim was set aside, and the claim against him was remitted to the High Court for a rehearing.

37 At [35].

38 At [42].

39 At [43].

40 At [44].

41 At [45].

The allegations

[90]     On 9 April 2013, on the second day of the trial, I granted leave to Mr Kim to file an amended statement of claim clarifying the pleading insofar as an allegation of breach  of  fiduciary  duty  was  concerned.    Although  Mr Thwaite  opposed  the amendment, he responsibly acknowledged that the amended pleading added little, and in particular did not require any evidence to be adduced which was not already the subject, or intended to be the subject, of evidence at the trial.   There was no prejudice  to  the  defendant  from  allowing  the  amendment  and  I  granted  the application accordingly.

[91]     As amended, the statement of claim pleads causes of action alleging breach of contract or retainer, negligence and breach of fiduciary duty.  The three causes of action share a common factual foundation.   Mr Kim alleges that in breach of the terms on which they had been retained, Kenton Chambers:

(a)       Failed to obtain Mr Kim’s informed consent to be able to act for him,

NKHL and Mr Yoo.

(b)Failed to disclose to Mr Kim all material information relevant to the defamation claim (including information concerning the progress of the proceeding, the trial date, the date for providing evidence, the requirement for payment of $20,000 before Kenton Chambers would continue to act for Mr Kim, the fact of the application for withdrawal as his solicitors, the High Court judgment of 9 November 2010 and Mr Kim’s appeal rights against that judgment).

(c)      Failed to promote and protect Mr Kim’s litigation interests (including failing to affirmatively plead that he had no personal involvement or knowledge of the allegedly defamatory articles, including their publication, despite that being specifically stated in the Acknowlegment that the firm required Mr Kim to sign;  and failing to affirmatively plead the defence of “innocent dissemination” under s

21 of the Defamation Act 1992).

(d)Terminating the retainer without providing Mr Kim an opportunity make arrangements to pay a $20,000 retainer for his representation at the trial, and failing to give him reasonable notice of termination. Further,   the   withdrawal   notice   was   prepared   and   filed   in circumstances where Mr Yoo could not act for Mr Kim.

[92]     It is then alleged that as a result of the breaches of the terms of retainer, Mr Kim was left unrepresented at the trial with the result that jugdment in the sum of

$302,628 was entered against him by way of formal proof, he had to engage alternative legal representation at his own expense to take the necessary steps to have the judgment set aside and suffered financial loss in doing so.   In the amended statement of claim as it stood at the hearing, the sum sought was $117,077.93. However, Mr Kim now accepts that he can only properly claim $89,784.63 of that sum having regard to costs awards in his favour in the Court of Appeal which he accepts ought to be recovered from Mr Lee.  A memorandum seeking to reduce the quantum of the claim accordingly was filed by counsel for Mr Kim on 11 April 2013. Claims are also advanced for general damages for anxiety and distress, for which a sum of $50,000 is sought as compensation.

[93]     The negligence cause of action alleges breach of an obligation to exercise all reasonable care and skill in acting for Mr Kim on the defamation claim.  It is alleged that that duty was breached by virtue of the same omissions and/or conduct as is relied on in respect of the breach of contract claim.  The same loss is claimed under this head, but an award of exemplary damages is sought in addition, also in the sum of $50,000.

[94]     Essentially, the same breaches and failures are relied on in respect of the allegation  of  breach  of  fiduciary  duty.    This  is  not  a  case  where  there  is  any suggestion of the defendant having had a personal interest in the subject of the litigation, or that the firm had acted for a number of parties without disclosing the fact of so acting to them all.  Nor is this really a case properly to be analysed on the basis that the defendant concealed material facts from Mr Kim (such as the hearing date and the receipt and content of the briefs of witnesses to be called by Mr Lee)

that it knew about because of acting for other parties.42    It is more straightforward, and I think preferable, to consider the failure to keep Mr Kim informed on such matters in terms of any duty of care owed to Mr Kim.

[95]     In the circumstances I do not further discuss the claim of breach of fiduciary duty.

The defences

[96]     In response, the defendant pleads general denials to the allegations but also no fewer than 19 affirmative defences, one of which (the fourth) was abandoned at the trial.  The general denials included a denial of the plaintiff’s allegation that on or about 16 September 2008, Mr Kim had entered into a contract of retainer with Kenton Chambers to represent him in relation to all matters concerning the defamation claim. The denial was in the following terms:

Defendant admits that the two documents were signed and that each speaks

for itself, but otherwise denies the allegations … .

[97]     Another key denial (pleaded in respect of the alleged breach of the terms of the retainer) simply reads:

Defendant says that Plaintiff’s agent was advised of the requirement for a

retainer for a barrister, and otherwise denies the allegations … .

[98]     This is consistent with pleadings advanced as the first affirmative defence that:

(a)      Mr Kim did not pay any money to the defendant, whether for legal fees or disbursements, and made no promise of payment;

(b)No contract existed between the plaintiff and the defendant because the plaintiff provided no consideration to the defendant and/or the parties had no intention to create legal relations;

(c)       The defendant had no contractual obligation to the plaintiff;

42     See the discussion of fiduciary duties in Clark Boyce v Mouat [1993] 3 NZLR 641 (PC) at 648.

(d)      The defendant breached no contractual obligation;  and

(e)       The defendant incurred no liability to the plaintiff.

[99]     As the second affirmative defence, the defendant asserts that the defendant owed no duty of care to the plaintiff, and as the third affirmative defence, that no fiduciary obligation was owed.

[100]   In the fifth and sixth affirmative defences, the defendant alleges that the payment of the sum of $20,000 to cover Mr Bhanabai’s fees as counsel was a condition   precedent,   or   condition   subsequent,   for   the   defendant   accepting instructions or being obliged to continue to take steps for Mr Kim in the High Court litigation.  As the seventh and eighth affirmatives defences, it is said that the basis upon which Kenton Chambers became involved was that Mr Bhanabai would be engaged as counsel and that the scope of work undertaken by Kenton Chambers would be limited to matters which did not require the prior engagement of Mr Bhanabai as counsel.   It is said that such non-barristerial work was in fact carried out.

[101]   The  ninth  affirmative  defence  is  that,  as  detailed  in  Heath  J’s  second judgment (dated 9 November 2011), the judgment of 9 November 2010 against the plaintiff represented a proper application of the relevant legal principles to the facts. It is claimed that in fact Mr Kim had no proper defence to the defamation claim and that he should be liable to Mr Lee for the costs of the judgment.  Mr Thwaite put that defence in a somewhat softened form in argument.  He claimed that a determination of loss to the plaintiff could not be made at this time, but that the best assessment of liability  was  that  found  in  the  judgment  of  9  November  2011,  which  in  fact considered Mr Kim’s possible defences.  He argued that that judgment had not been overturned on the merits, but on the basis of procedural error.  Mr Thwaite claimed that should a retrial occur, and Mr Kim be found liable again, then his expenses incurred in setting aside the judgment will be wasted expenditure.

[102]   The  tenth  affirmative  defence  is  that  the  cessation  of  the  defendant’s

involvement as the solicitor on the record was effected by the notice of change of

representation dated 28 June 2010, and/or by order of the Court, “for neither of which Defendant is responsible”.  As part of this defence it is also claimed that the losses alleged by the plaintiff were not caused by the defendant, and that the plaintiff has suffered no loss by reason of any action or inaction by the defendant.

[103]   Alternatively, Mr Thwaite submitted that the plaintiff had suffered no loss since the fees for procedural matters that had been incurred in respect of Brookfields’ attendances were approximately equal to what would have been charged for a seven- day trial (as had been estimated prior to the allocation of the fixture for the trial).

[104]   Other matters raised by way of affirmative defence include (the eleventh and twelfth affirmative defences) a series of arguments raised on the basis that instead of the  procedures  that  had  been  followed  by  way  of  appeal  and  application  for rehearing, a simpler and far less expensive procedure could have been followed under r 10.9 of the High Court Rules.  It is claimed that this would have been a far less expensive course than that actually followed.  It is also contended (the thirteenth affirmative defence) that the fees charged for the procedure that was in fact followed were excessive and in any event, that the evidence called is insufficient to establish that the Brookfields’ invoices paid by Mr Kim were sufficiently particularised.

[105]   Other affirmative defences allege that:

(a)      Mr  Kim  allowed  Mr  Yoo  to  assume  responsibility  for  giving instructions to the defendant and that Mr Yoo had been advised about the trial date and the need for payment of $20,000 for counsel.  The defence  purported  to  raise  issues  of  waiver  and  estoppel  (the fourteenth affirmative defence).

(b)In drafting the statement of defence the defendant had relied upon the advice of Mr Bhanabai, which it was entitled to do  (the fifteenth affirmative defence).

(c)      Mr Kim had contributed to his own loss by failing properly to read the statement of claim;  by appointing Mr Yoo as his agent when the latter

had his own interests to protect, was impecunious and ineffective;  in failing to make any payment to Kenton Chambers, or to initiate any contact  with  them;    and  failing  to  maintain  proper  contact  with Mr Yoo;  and in failing to inquire about the Acknowledgement which he had signed on 29 September 2008 (the sixteenth affirmative defence).

(d)Mr Kim had acted in breach of the Fair Trading Act 1986, being at all material times engaged in trade as a director of NKHL knowing that a payment of $20,000 was required to meet Mr Bhanabai’s fees while not intending to make payment of that  amount  nor disclosing his unwillingness or inability to do so (the seventeenth affirmative defence).

[106]   In addition, the statement of defence pleaded set-offs   for the amount of reasonable fees for services rendered between September 2008 and June 2010 and for the costs awarded in Mr Kim’s favour against Mr Lee by the Court of Appeal (labelled respectively the eighteenth and nineteenth affirmative defences).

[107]   The issues raised are conveniently addressed under the headings of liability, actions by Mr Kim said to disentitle him to the relief claimed, and quantum, and I will proceed on that basis.  Before doing so, however, it is appropriate to set out the relevant law that needs to be applied.

The law

[108]   The  relationship  of  solicitor  and  client  gives  rise  to  certain  fundamental duties that must be fulfilled by the lawyer.

[109]   A statement of the nature these duties appears in the judgment of Woodhouse

J in Bannerman Brydone Folster & Co v Murray:43

In general the duty of a solicitor depends upon his implied warranty to exercise reasonable skill and care on behalf of his client.  He is not liable for

43     Bannerman Brydone Folster & Co v Murray [1972] NZLR 411 (CA) at 429.

“mistake in a nice and difficult point of law” but he must measure up to the degree of professional competence which would be exercised by the reasonably competent and careful solicitor in the particular circumstances. However the circumstances can vary greatly.  And as the cause of action is breach of contract for improper performance of the implied undertaking the exact nature of the duty really depends upon what it can fairly be said the solicitor has been employed to do.

[110]   More  succinctly,  in  Frost  &  Sutcliffe  v  Tuiara,44   the  Court  of  Appeal referred45 to the solicitor’s contractual duty, created by implied term, to exercise such skill, care and diligence as is required in all the circumstances, including the scope of the retainer.

[111]   That case may also be noted because of the Court’s conclusion that in most cases where there is a contract between the parties, the duties owed by the lawyer will be co-extensive in contract and tort,46  and that it will be only rarely that the tortious duty exceeds the contractual obligation.  A situation envisaged where that might  be  the  case  is  where  the  terms  of  the  retainer  purported  to  exclude responsibility for the advice given, or its accuracy.  The Court observed that such an exclusion: 47

...might be thought so antithetical to the professional relationship between the parties that the purported exclusion might not be effective to oust the solicitor’s general responsibilities in tort.

[112] The point was left open, however, because the Court did not consider it necessary to decide it in that case. Here, the nature of clause (i) of the Acknowledgement might be thought to be an exclusion of the kind discussed, but as I understand it, the defendant has not sought to rely on it directly. In any event, for a number of reasons, I would not apply it to negative any duty that the defendant owed to Mr Kim. To do so would in my view be in effect to negative the very existence of the relationship between solicitor and client, a relationship which I find existed for reasons that I later set out. It should also be noted that s 4 of the Lawyers and Conveyancers Act 2006 (“the Act’) provides that every lawyer must comply with a

number of fundamental obligations, including:

44     Frost & Sutcliffe v Tuiara [2004] 1 NZLR 782 (CA).

45 At [11].

46     At [11] and [17].

47 At [24].

(c)       the  obligation to  act in accordance  with all  fiduciary duties and duties of care owed by lawyers to their clients:

If that is a fundamental obligation, it would be wrong to contemplate that it could be excluded by agreement.

[113] The cases discussed show that whether there has been a failure in any particular case to fulfil the duty of care owed to the client will depend on all the circumstances and the retainer. That inquiry, however, is likely to be guided by the very detailed rules defining the obligations of lawyers set out in the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (“the Conduct and Client Care Rules”), which came into force on 1 August 2008. Those Rules replaced the Rules of Professional Conduct made under s 17 of the Law Practitioners Act 1982.

[114]   It was suggested that the Rules of Professional Conduct might constitute terms implied in the contract of retainer by custom,48 on the basis that the rules were “universal across the profession in New Zealand, known to all practitioners, not excluded by the terms of any contract, and reasonable”.  Thus it was said they met “all the requirements of being customary terms of contract and are incorporated on this basis.”   Mr Ropati made a submission along these lines with reference to the

Conduct and Client Care Rules, where the argument would apply with equal force. However, the authority relied on, Woods v Ellingham & Co Ltd,49  is a judgment discussing general principles for terms to be implied by custom, and the proposition has not been endorsed in any case that I have been able to find concerning the solicitor/client relationship.

[115]   As noted in  the third edition of Burrows, Finn and Todd Law of Contract in New Zealand one of the requirements for a term to be implied by custom is that the custom must have acquired such notoriety that the parties must be taken to have

known of it and intended that it should form part of the contract.50   That proposition

48     Duncan Webb Ethics, Professional Responsibility and the Lawyer (2nd ed, LexisNexis, Wellington, 2006) at [5.3.3].

49     Woods v Ellingham & Co Ltd [1977] 1 NZLR 218 (SC).

50     Burrows, Finn and Todd Law of Contract in New Zealand (3rd ed, LexisNexis, Wellington, 2007)

at [6.3.1].

is qualified by the statement, based on Whitcombe and Tombs v Taylor,51 that it is not necessary that the custom be actually known by the party to be bound, if he or she “dealt in, or the contract was made in, or was to be performed in, the district or country where the custom prevails”.

[116]   The latest edition of Chitty on Contracts notes52 that the basis on which such usages  may be incorporated is  the assumption that  the parties did  not mean  to express in writing the whole of the contract by which they intended to be bound, but intended to contract by reference to the known usages, or that “the courts are spelling out what both parties know and would, if asked, unhesitatingly agree to be part of the bargain”.53    I doubt that could be said in this case in respect of the very detailed

provisions of the Conduct and Client Care Rules.54   Moreover the Rules are statutory

in origin. It would be odd, I think, to say that a statutory instrument (which might be altered from time to time) should be regarded as incorporated by custom. And if the Rules are to be incorporated, why not relevant provisions of the Act itself, such as the fundamental obligations in s 4?

[117]   I consider the more legitimate approach is not to treat the provisions of the Conduct and Client Care Rules as incorporated by custom, but rather to have regard to them in assessing whether or not the lawyer has met the appropriate standard of professional conduct.  On that approach, relevant Rules in the circumstances of this case include:

(a)       Rule 3, in Chapter 3 of the Conduct and Client Care Rules provides that:

In providing regulated services to a client, a lawyer must always act competently and in a timely manner consistent with the terms of the retainer and the duty to take reasonable care.

(b)       Rule 4.2 which provides that a lawyer who has been retained by a client must complete the regulated services required by the client under the retainer unless:

51     Whitcombe and Tombs v Taylor (1908) 27 NZLR 237 (SC) at 240.

52     H G Beale (ed) Chitty on Contracts (31st ed, Sweet and Maxwell, London, 2012) at [13-019].

53     Liverpool City Council v Irwin [1977] AC 239 (HC) at 253.

54     The common law already imposes an obligation to exercise reasonable care and skill, as cases such as Bannerman Brydone Folster & Co v Murray above n 42, demonstrate.

(c) the lawyer terminates the retainer for good cause and after giving reasonable notice to the client specifying the grounds for termination.

“Good cause” can include the failure of the client to pay a fee on the agreed basis or, in the absence of an agreed basis, a reasonable fee at an appropriate time.   It also includes a failure by the client to give timely instructions to the lawyer.

(c)      Rule 4.2.3, which provides that a lawyer must not terminate a retainer or withdraw from proceedings where the client has failed to make satisfactory arrangements for payment, unless the lawyer has had due regard to his or her fiduciary duties, and given the client reasonable notice to enable the client to make alternative arrangements for representation.

(d)Rule 4.2.4, which requires a lawyer terminating a retainer to give reasonable assistance to the client to find another lawyer.

(e)       Rule 7, which provides that a lawyer must promptly disclose to a client all information that the lawyer has or acquires that is relevant to the matter in respect of which the lawyer is engaged by the client.

(f)      Rule 7.1, which provides that a lawyer must take reasonable steps to ensure that a client understands the nature of the retainer, keep the client informed about progress on the retainer, and  consult the client about the steps to be taken to implement the client’s instructions.

(g)Rule  11.3,  requiring  that  a  lawyer  in  practice  on  his  or  her  own account  must  ensure  that  the  conduct  of  the  practice  (including separate places of business) and the conduct of employees is at all times competently supervised and managed by a lawyer who is qualified to practise on his or her own account.

(h)Rule 13, which states that the overriding duty of a lawyer acting in litigation is to the court concerned, but subject to that, the lawyer has

a duty to act in the best interests of his or her client without regard for the personal interests of the lawyer.

(i)Rule 13.3, which provides that subject to the lawyer’s overriding duty to the court, a lawyer must obtain and follow a client’s instructions on significant decisions in respect of a conduct of litigation.   The instructions should be taken after the client is informed by the lawyer of the nature of the decisions to be made and the consequences of them.

[118]   A failure to comply with the Conduct and Client Care Rules does not of itself give rise to a cause of action and the present proceeding does not expressly allege or rely on a breach of the Rules.  However, where a claim is advanced which alleges a breach of contractual or tortious duties on the part of solicitors, if it can be shown that the conduct in question does not comply with the Rules, that will generally be an indication that there may have been a breach of duties owed by the lawyer to the client, subject of course to the express terms of the retainer.

Liability

[119]   The principal issues that arise as to liability can be approached by asking the following questions:

(a)       Whether there was a solicitor/client relationship between Mr Kim and

Kenton chambers?

(b)If so, did the defendant fail to comply with his obligations pursuant to that  relationship?    This  will  require  consideration  amongst  other things of the effect of the Acknowledgement of 29 September 2008 and the right of Kenton Chambers to cease acting (and for Mr Oh to withdraw as solicitor on the record) in the circumstances in which that occurred.

(c)       Did  the  defendant’s  failures  (if  any)  cause  the  loss  claimed  by

Mr Kim?

(d)      Can Mr Kim sustain his claims for general and exemplary damages?

A solicitor/client relationship?

[120]   I am satisfied on the evidence that there was a contract of retainer pursuant to which Mr Kim retained Kenton Chambers to act for him in connection with the litigation that had been commenced by Mr Lee.  The facts on which that conclusion is  based  begin  with  the  initial  meeting  between  Mr Yoo  and  Mr Oh  (at  which Mr Bhanabai was also present) in early September 2008.  It was at that meeting that Mr Oh confirmed that Kenton Chambers was prepared to act for all the defendants. Following that meeting, it is clear that Kenton Chambers sent Mr Yoo and Mr Kim separately what was evidently a standard form.   The purpose of the form was to ensure that information could be obtained from third parties.  In Mr Kim’s case he had a discussion with Mr Park of Kenton Chambers about that form and (I infer) about the litigation itself on or about 16 September.  He signed the form and returned it.

[121]   Insofar as is relevant for present purposes, the form that Mr Kim signed, as was the case with the form signed by Mr Yoo, noted that Kenton Chambers represented him (Mr Kim) in connection with “any legal matters”.  That form is only consistent with such a relationship having been established at around about that time.

[122]   The form was closely followed by the Acknowledgement that Mr Kim signed on 29 September 2008.   In that document, amongst other things, Mr Kim asserted that he understood that Kenton Chambers might have a conflict of interest in acting for all three defendants, that he had declined to take independent legal advice, had signed  the  acknowledgement  “voluntarily”,  and  delegated  his  full  authority  to Mr Yoo in respect of “the defending of the case for myself as the third defendant”. He also recorded that Mr Yoo had decided to use Kenton Chambers’ lawyers as counsel in defending the case “for the three defendants”.   Despite the somewhat tortuous language of that Acknowledgement, once again it is only consistent with

Mr Kim expecting Kenton Chambers to assume the role of acting for him in respect of Mr Lee’s claim, and with Kenton Chambers agreeing to do so.

[123]   Thereafter,  there  were  a  series  of  actions  that  were  taken  by  Kenton Chambers in relation to the claim which demonstrated that they were acting as Mr Kim’s solicitors in respect of it. Those actions included:

(a)      The  memorandum  of  26  September  2008,  signed  by  Mr Park  as counsel for the defendants, asserting that “we have just been recently instructed to act for the first, second and third defendants (‘the Defendants’) in this case.”

(b)      Mr Oh’s appearance in the case management telephone conference

before Associate Judge Sargisson on 3 October 2008.

(c)      Filing a statement of defence on 17 November 2008 on behalf of the first, second and third defendants, in which Mr Oh was named as their solicitor.

(d)Filing an amended statement of defence on 16 December 2008 in which Mr Oh was again named as the solicitor on the record for Mr Kim as well as the other defendants.

(e)      Preparing and filing a list of documents for the first, second and third defendants and filing it on 16 December 2008.

(f)      Mr  Park’s  appearances  before Asher  J  on  16 February  2009,  and before Winklemann J on 30 March 2009.

(g)The memorandum signed by Mr Park on 6 April 2009, advising the Court that the defendants were willing to participate in  a judicial settlement conference.

(h)Preparing for execution by Mr Yoo (although in the end he did not sign it) an affidavit which was subsequently relied on for the purposes of the adjournment application.

(i)Preparing  and  filing  a  memorandum  dated  14  June  2010,  and preparing  and  filing  the  notice  of  application  for  adjournment  on behalf of all three defendants on 16 June 2010.

(j)       Mr Park’s  appearance in  the telephone conference to  advance the

adjournment application before Rodney Hansen J on 17 June 2010.

[124]   In the circumstances, I am in no doubt that Mr Oh and Mr Kim were in the relationship of solicitor and client.

[125]   As has been seen, one of the defences raised by Mr Oh is that the relationship was conditional on the payment of the sum of $20,000 so as to be able to engage the services of Mr Bhanabai.

[126]   However, the statement of defence was pleaded on the basis that there was no contract to perform services.   Mr Thwaite submitted that to keep the case alive, Mr Oh had “reluctantly, and somewhat begrudgingly” filed the minimum documents, e.g. the statement of defence, and a list of documents.  Because Mr Kim provided no consideration, Mr Oh and/or the parties had no intention to create legal relations. The same absence of the payment of “consideration” was also relied on to negative the existence of a duty of care, or any fiduciary duty.   There was in fact no satisfactory evidence that Kenton Chambers had ever billed any of the defendants for legal services.  I was referred to an invoice dated 12 November 2009 headed for the attention of NKHL.  The invoice was for the total amount of $5,640 (inclusive of GST).  No address had been inserted on the invoice contrary to the firm’s normal practice.  Mr Oh said in evidence that he had instructed Mr Park to prepare and send the invoice, but he did not know whether that had been done.  There is no evidence that, even if sent to NKHL, the invoice was drawn to Mr Kim’s attention by Kenton Chambers or anyone else.

[127]   In fact, as Mr Oh’s case developed, Mr Thwaite did not rely on any unpaid invoices sent by Kenton Chambers to any of the defendants.  Rather, he focused on the  non-payment  of  the  $20,000  retainer  for  Mr Bhanabai’s  attendances  on  the matter.   It will be recalled that that was the estimate that had been given for his involvement in the matter, including at the trial.   I have already referred to the evidence given by Mr Yoo in respect of that payment, which I find Kenton Chambers had required at the initial meeting when Mr Oh, Mr Bhanabai and Mr Yoo were present.  However, once again, there is no suggestion that Mr Kim was ever asked to make a payment in that amount.

[128]   According to Mr Oh, the arrangement made was that the sum would be paid “as soon as possible”.  Mr Thwaite submitted that payment should have been made within a reasonable time.  In any event, it should have been by the end of 2008 or

2009.

[129]   However, quite apart from the fact that the statement of defence did not rely on non-payment of the $20,000 sum, I have already noted that Kenton Chambers continued to act right down to the eve of the trial.  Also, on 28 April 2010, Mr Park wrote to NKHL requiring payment of $10,000.  A payment in that amount was, of course, not made either.   Kenton Chambers continued to act, notwithstanding the absence of any payment on account of Mr Bhanabai’s costs.  In the circumstances, I reject the suggestion that the requirement for such a payment was a condition precedent or subsequent to the formation of the relationship of solicitor and client between Kenton Chambers and Mr Kim.

[130]   That, of course, is not to say that Kenton Chambers was obliged to continue to act in the case of non-payment of invoices properly rendered nor in the absence of the payment of a retainer for counsel.  However, once the relationship was formed, if it was to be brought to an end for the failure to make required payments, that should have been done at an appropriate time.  Since it also involved withdrawal under the High Court Rules, there should have been compliance with the requisite procedures for such withdrawal. That would have required notice to Mr Kim.

Did the defendant fail to comply with his obligations pursuant to the solicitor/client relationship?

[131]   I have earlier summarised the key allegations advanced by the plaintiff.55

Broadly, those allegations are failure to obtain Mr Kim’s informed consent to Kenton Chambers acting for all three defendants, failure to disclose to Mr Kim all material information  relevant  to  the  defamation  claim,  failure  to  promote  and  protect Mr Kim’s litigation interests and terminating the retainer without providing Mr Kim an opportunity to make arrangements to make payments necessary for his representation at the trial.

[132]   I consider that the most serious of the allegations made are those that allege the failure to disclose to Mr Kim material information relevant to the defamation claim (particularised in [91](b) above), terminating the retainer without providing Mr Kim  an  opportunity  to  make  arrangements  to  pay  a  $20,000  retainer  for Mr Bhanabai, and failure to give him reasonable notice of termination (as set out in [91](d) above).

[133]   Leaving aside the issues of general and exemplary damages, the loss which Mr Kim seeks to recover is in relation to legal fees expended in having a judgment entered against him by default set aside.   I consider it is clear on the facts that Mr Kim was unaware that the trial date had been established, unaware of the date by which evidence had to be provided, unaware of the withdrawal of Kenton Chambers and unaware of the reason for it.  The fact is that when the trial date arrived, Mr Kim would have been in no position to proceed because his case would have been completely unprepared.  There is no evidence that, at any stage, Kenton Chambers asked him to pay any amount on account of the services that they had provided, nor that he was asked to pay $20,000 so as to secure the services of counsel at the trial. He was given no notice of the intention of Kenton Chambers to withdraw or of the circumstances that led to it.

[134]   I  consider  that  in  all  these  respects  Kenton  Chambers  breached  the obligations that the firm had to Mr Kim pursuant to the solicitor/client relationship.

55     At [91] above.

The duties that I consider applied, and were breached, are reflected in the provisions of the Conduct and Client Care Rules that I have already discussed.  In particular, the failures to advise Mr Kim of the date fixed for the trial, the date by which his evidence was due, the fact of their withdrawal and the reasons for it meant that Kenton Chambers did not comply with their duty to act competently and timeously, exercising due care to protect Mr Kim’s interests.  Nor did they promptly disclose relevant information, keep him informed about progress, consult him about the steps to be taken, or obtain and follow his instructions on significant decisions in respect of the conduct of the litigation.

[135]   It is unclear from the judgment of the Court of Appeal of 19 November 2012 whether Mr Kim’s Acknowledgement of 29 September 2008 was before the Court. Because it was not referred to, I infer that it was not.   In addition, I have had the benefit of evidence from Mr Yoo, Mr Kim and Mr Oh, all of whom have been cross- examined in this hearing.  I have already summarised the evidence that they gave on the question of legal representation for Mr Kim.

[136]   The Acknowledgement delegated Mr Kim’s “full authority in relation to the defending of the Case” both in relation to the newspaper and himself to Mr Yoo.  It recorded his acknowledgement that Mr Yoo had decided to use Kenton Chambers as counsel and declared that he would not hold Mr Yoo, the newspaper or Kenton Chambers liable for any of the results.

[137]   It  is  to  be  noted  that  the  Acknowledgement  did  not  state  that  Kenton Chambers were absolved from the obligation they would otherwise have had to report to him from time to time about the progress of the litigation.  That obligation would extend to such important milestones in the litigation as the fact that it had been set down, the trial date allocated, receipt and content of the evidence to be relied on by Mr Lee and the date by which the defendants’ evidence had to be served.

[138]   Nor would the Acknowledgement absolve Kenton Chambers from its primary obligation to protect Mr Kim’s position in relation to the drafting of a statement of defence that properly raised any issues available to him on the facts in defence of the

claim, and ensuring that the relevant evidence available to be called on his behalf was marshalled and briefed.

[139]   I do not consider that Kenton Chambers can properly rely, insofar as Mr Kim is concerned, on the fact that Mr Yoo did not provide funds as had been requested. The firm owed duties to Mr Kim.  It was, of course, entitled to be paid for what it did, but it never asked Mr Kim for money or pointed out to him that money that it was  expecting  Mr Yoo  to  pay  had  not  been  paid.    I  consider  that  responsibly protecting Mr Kim’s position should have involved Kenton Chambers asking him for money when it was not forthcoming from Mr Yoo.   The fact that Mr Yoo, in the Acknowledgement, had delegated his “full authority” Mr Yoo under clause (g) of the Acknowledgement did not entitle the defendant to ignore Mr Kim from that point on.

[140]   The Court allocated the fixture date in a letter dated 7 April 2009, a date which was over 14 months in advance of the scheduled commencement of the trial. At  the  latest,  preparation  should  have  been  commenced  once  that  notice  was received.  It was then or shortly after that, that Kenton Chambers, acting properly, should have been raising issues about the absence of funds.  Then, if funds were not forthcoming, they would have been able to withdraw in sufficient time to ensure that Mr Kim would have been able to appoint alternative lawyers to protect his interests. Rules 4.2, 4.2.3 and 4.2.4 of the Conduct and Client Care Rules were not complied with.

[141]   Nor do I consider that in the circumstances of this case there was compliance with  rr 7  and  7.1.   There was  an  obligation  to  consult  with  Mr Kim  about  the forthcoming hearing date and their intention to withdraw.  I also consider that there was non-compliance with rr 13 and 13.3.

[142]   Mr Oh seemed to take the view that the established relationship with Mr Yoo meant that no separate regard had to be given to the position of Mr Kim, nor as to the firm’s duties in relation to him.  In the passages that I have quoted above, he took the position that Mr Kim was not in fact the firm’s client.  That, of course, is directly contrary to the series of actions that were in fact taken on Mr Kim’s behalf.

[143]   Nor was it appropriate for Mr Oh, as he did in his evidence, to attempt to draw  a  distinction  between  himself  and  Mr  Park.    Mr  Park  was  a  very junior employee.   Mr Oh himself described him as a “complete novice”.   Such a person should not have been left in sole charge of this file, as appears to have occurred.  As the principal of the firm it was Mr Oh’s responsibility to see that the litigation was properly managed and, when funds were not forthcoming, he should not have left the file effectively to languish with Mr Park until it was too late for proper action to be taken (especially on behalf of Mr Kim) to defend Mr Lee’s claim at the trial.  In my opinion Mr Oh failed to comply with r 11.3 which required him to supervise Mr Park competently at all times.

[144]   I acknowledge that there was evidence that Mr Oh, at relevant times, was grieving for the loss of his wife.  One must sympathise with him because of that, but the consequence should not have been to ignore the existence of the litigation and leave its conduct to Mr Park. The fact that he was evidently and understandably, at a low ebb was a reason that he should have turned away the work.

[145]   I also record evidence that was given by Mr Oh to the effect that Mr Yoo effectively insisted that Kenton Chambers act for him, refusing to be deflected by Mr Oh’s initial reluctance to become involved.  The fact is that Kenton Chambers did act for all three defendants, right down to the point where the firm purported to withdraw. The Court has to proceed on the basis of what occurred.

[146]   I conclude that in the respects discussed, the defendant failed to comply with his professional obligations to Mr Kim.   There was a failuire to comply with the specific Conduct and Client Care Rules already discussed, this meant that r 3 was also breached.  His conduct was negligent and in breach of contract.

Did the defendant’s failures cause the loss claimed by Mr Kim?

[147]   Leaving  aside  the  general  and  exemplary  damages  claims,  the  loss  that Mr Kim seeks to recover is the legal costs that he incurred as a result of the steps taken to set aside the judgment entered in his absence by Heath J.

[148]   As  has  been  seen,  the  ninth  affirmative  defence  asserts  that  Heath J’s judgment, of 9 November 2010, properly dealt with the actual defences sought to be raised substantively by Mr Kim.   It was said that if the matter was re-tried and Mr Kim found liable again because his non-involvement defence lacked substance, then the costs  incurred  in  setting aside  the original  judgment  would  have been wasted.  It was said that in reality Mr Kim had no defence to the defamation claim. If Heath J’s judgment of 9 November 2010 had been upheld on the merits, there would be liability for $250,000 plus costs and disbursements, a sum significantly higher than the legal fees charged by Brookfields for the attendances related to setting aside the judgment.   Consequently, it was argued that Mr Kim suffered no loss by reason of any action or inaction by the defendant.

[149]   That argument cannot be maintained in the face of the Court of Appeal’s decision of 19 November 2012,56 which was to the effect that there were matters that Mr Kim could validly raise in his defence.  Further, and of real relevance for present purposes, the circumstances leading to the defendant’s late withdrawal on the eve of the trial resulted in the judgment being entered against Mr Kim without a hearing in which he was able to participate.  The costs sought to be recovered under this head are costs which he should not have had to occur had the defendant complied with his professional obligations to Mr Kim.   Mr Kim’s right to have his defence properly

propounded was what was lost.  I reject this defence.

[150]   Another defence raised claimed that the defendant was entitled to rely on Mr Bhanabai’s  advice.    One  of  the  allegations  made  in  the  statement  of  claim centered on the potential for a conflict of interest between Mr Kim and the other defendants given the potential for him to raise the defence of non-involvement in the publication and distribution of the articles claimed to be defamatory.  There was a related  allegation  that  the  defendant  had  failed  to  plead  Mr Kim’s  lack  of involvement.  The fifteenth affirmative defence related to that issue, the defendant asserting that he was entitled to rely on the advice of Mr Bhanabai.

[151]   Although Mr Kim did raise these issues in the statement of claim, I do not consider that any issue relating to the potential conflict of interest, or the adequacy of

56     Kim v Lee [2012] NZCA 600.

the pleading to Mr Lee’s defamation claim has been causative of the losses claimed. As I have earlier held, the losses arise from the circumstances of the late withdrawal and the fact that Mr Kim was not left in a position of being able to properly mount his defence at the trial.

Disentitling actions by Mr Kim?

[152]   As has been seen, some of the defences raised claim that Mr Kim’s conduct should disentitle him to the relief claimed.   I have already addressed the general allegation that was based on the fact that he delegated matters to do with the conduct of his defence to Mr Yoo.

[153]   There was, however, a specific allegation based on waiver and estoppel.  This is based on the fact that as Mr Kim’s agent, Mr Yoo never expressed dissatisfaction with the legal work that was in fact done for him through the agency of Mr Yoo.  Nor had he made any inquiry of the defendant as to the progress of the litigation, or given any  instruction  directly  in  relation  to  its  conduct.    Another  of  the  affirmative defences said that Mr Kim had contributed to his own loss by failing to make proper inquiry of the defendant, failing to request that he be updated about the High Court litigation, failing to make proper contact with his agent, Mr Yoo, and failing to make any payment to the defendant which had led to the non-engagement of counsel.

[154]   Once again, I think these defences must be rejected on the facts, and on the basis that the losses claimed relate directly to the circumstances in which counsel withdrew, leaving Mr Kim unable to mount a proper defence.  It was imprudent of Mr Kim  not  to  be  more  proactive  in  making  inquiry about  the  progress  of  the litigation.   However, that is perhaps explicable on the basis of his ill-health at the relevant times, and the fact that he had been advised by Mr Park that he would be constantly updated.  He was in the circumstances, I think, entitled to assume that if anything of importance arose he would be told about it.  I have already expressed the view that the defendant should have raised with him the issue about non-payment of the retainer for Mr Bhanabai.  I have also noted that Mr Kim was never billed by the defendant.

[155]   I do not accept that these matters should prevent Mr Kim from recovering the costs incurred in setting aside the judgment.

[156] Another matter that can be briefly addressed under this heading is the defendant’s purported reliance on the Fair Trading Act 1986.  The allegation is that Mr  Kim  acted  deceptively  in  trade  as  a  director,  of  NKHL.    He  allowed  the defendant to undertake considerable work without revealing that he had no intention of paying any sum towards Mr Bhanabai’s fee.  I do not consider that this argument can be sustained against Mr Kim on the facts.  While I accept that a $20,000 retainer for Mr Bhanabai was discussed at the meeting on 10 September 2008, there is no evidence that Mr Kim was ever asked to make or contribute to that payment, or that he said he would.  There is no factual basis here for a finding that he did anything that was misleading or deceptive, or likely to be.  Consequently, I reject this defence.

General and exemplary damages

[157]   The statement of claim sought an award of general damages in respect of anxiety and distress suffered by Mr Kim as a result of the defendant’s breaches of duty and contract. A sum of $50,000 was sought under this head.

[158]   Mr  Ropati  did  not  expand  on  this  claim  in  his  closing.    Mr Kim  gave evidence that the entry of judgment against him by default had been the cause of anxiety and distress.  Mr Thwaite submitted that the stress would have been caused by the conduct of Brookfields in not adopting the available procedure under r 10.9 rather than by any action of Mr Oh.   This overlooks the anxiety that would have flowed from the entry of judgment itself, and the fact that there would have been ongoing anxiety whatever step was taken to attempt to have the judgment set aside.

[159]   I  have  no  doubt  that  the  lengthy  process  that  was  necessary  before  the judgment could be set aside would have been the cause of anxiety and distress to Mr Kim.  However, the position is complicated by the fact that at the relevant times, Mr Kim was suffering ill-health as a result of his liver condition.   There was no particular evidence directed at what the toll taken by the litigation would have been. In the circumstances, I have found it very difficult to assess to what extent his mental

state was exacerbated by the events that occurred in relation to the judgment in favour of Mr Lee and the steps taken to set it aside.

[160]   I do think it appropriate to allow something under this head, but in all the circumstances  I do  not  think  the  evidence  would  justify an  award  greater  than

$5,000.

[161]   There was also a claim for exemplary damages in the sum of $50,000. Again, Mr Ropati did not deal with this in his closing address.

[162]   In  Bottrill  v  A57   the  Privy  Council  observed  that  the  cases  where  it  is appropriate to make an award of exemplary damages are exceptional and, in the absence of intentional wrongdoing or conscious recklessness, instances will be “exceptional and rare indeed”.58    While I have been critical of the conduct of the defendant in this case, I do not think that it is one where there has been intentional wrongdoing or conscious recklessness.  Rather, the defendant failed to comply with his professional obligations to Mr Kim.

[163]   I do not consider that this is a case for exemplary damages.

Quantum

[164]   A number of issues raised by the defendant concern the quantum of Mr Kim’s

claim.

[165]   I address first the claim that Mr Kim failed to mitigate his loss by selecting and  implementing  the  most  direct  and  least  expensive  procedure  to  restore  his position by overturning the judgment.  The allegation was that Mr Kim should have

applied under r 10.9 of the High Court Rules. That rule provides:

57     Bottrill v A [2003] 2 NZLR 721 (PC).

58 At [64].

Judgment following non-appearance may be set aside

Any verdict or judgment obtained when one party does not appear at the trial may be set aside or varied by the court on any terms that are just if there has, or may have been, a miscarriage of justice.

[166]   As this is a rule that appears to be designed for exactly the situation that arose, there does appear to be substance in Mr Thwaite’s submission that an application under that Rule should have been made, instead of the process that was followed, which was an attempt to remedy the situation by appeal.

[167]   It is apparent from the determined steps that Mr Lee took to hang on to the judgment that he had obtained by default that any action taken by Mr Kim to set the judgment aside would have been met with opposition.  I think it likely that even if an application had been made under r 10.9 it would have been opposed by Mr Lee and probably taken on appeal if Mr Kim had succeeded in the High Court.  It will be recalled that when Brookfields originally wrote to Mr Kholer seeking to resolve the issue of whether the time for appealing could be extended, Mr Lee rejected the proposal.    He  maintained  his  opposition  even  when  made  aware  by  Mr Kim’s affidavit  of  the  fact  that  Mr Kim  had  not  been  aware  of  the  fixture  date,  the withdrawal of Kenton Chambers or the delivery of judgment by Heath J.

[168]   I  also  consider  it  likely  that  Mr  Lee  would  have  sought  to  challenge Mr Kim’s  account  of  the  circumstances  in  which  the  defendant  withdrew  from representing him.   Nevertheless, I do think it likely that following the procedure allowed for by r 10.9 would likely have resulted in a less costly process than that which was adopted.  The Court of Appeal, for example, would not have been in the position of feeling obliged to make the “suggestion as to the way forward” which it

did59  and it is probable that the r 10.9 route would have been less complicated and

given rise to fewer interlocutory processes than proved necessary before the matter was finally able to be resolved in that Court.

[169]   At one stage Mr Thwaite argued that because Mr Kim had only led evidence about the costs of the proceedure that was in fact followed, he could not sustain

damages  claimed  for  any  lesser  amount  should  the  Court  conclude  that  an

59     Kim v Lee [2011] NZCA 256 at [26]-[29].

application should have been made under r 10.9 and that it would have been less costly.  However, that submission cannot be right.  It is a question of assessing what lesser amount Mr Kim is entitled to.   Having said that, there are difficulties in assessing what the costs might have been had Mr Kim applied under r 10.9.  In the end, it must be a matter of judgment and I assess that had r 10.9 been relied on, it is possible that the costs involved would have been less by about 15 percent.  I propose to allow for such a reduction in the damages claimed.

[170]   Another issue raised specifically directed at quantum concerned the fact that Mr Kim only discovered invoices that he had received from Brookfields and paid, without the detailed material that plainly accompanied them when sent to Mr Kim. Typically, the invoices that were produced contained recitals which read:

Our fee for all attendances to date relating to this matter as set out in the attached schedule of attendances.

[171]   Mr Thwaite complained that the schedules of attendances referred to were not in fact attached to the relevant invoices that were discovered and made available for inspection.   He argued that, in their absence, it was not possible for the Court to conclude that the time charged was reasonable.  Further, he alleged that because the fee statements were not sufficiently particularised there had in fact been a breach of the Conduct and Client Care Rules.

[172]   I reject the latter contention.  It is plain on the face of the invoices that they were  accompanied  by an  attached  schedule  of  attendances.    On  the  balance  of probabilities, I find that the invoices would have been sufficiently particularised. There is also no basis upon which I could conclude other than that the fees charged were reasonable.  A challenge to the adequacy of discovery was not advanced prior to the hearing.  Nor was there any explicit challenge to the fees charged in respect of the work carried out, apart from the contentions in the statement of defence that Mr Kim could not properly recover in this proceeding work which was the result of a failure to meet time limits, and for the appearance of two counsel at hearings.

[173]   As to the failure to meet time limits, Mr Thwaite did not identify which particular instance of this he relied on and I take the view that any unecessary costs

in that respect can be appropriately accommodated within the 15 percent reduction to which  I have  already referred.    I am  equally not  inclined to  make  any further deduction in respect of the attendance of two counsel and in that respect I have not been persuaded that overall it would be proper to conclude that the costs charged by Brookfields for the work they did were excessive.

[174]   The eighteenth affirmative defence claimed entitlement to a set-off in respect of costs for legal work that was in fact carried out by Mr Oh.  Various items were referred to together with scale costs on a 2B basis in respect of those items.  Items claimed for included commencement of the defence in the defamation proceedings, preparation for the first management conference and other attendances, the most substantial of which was preparation of the list of documents on discovery.   That work was completed by 16 December 2008.

[175]   The final item proposed to be claimed was in respect of the application for adjournment for which a sum of $960 was referred to, although that and all of the items in the list, which in accordance with the scale in the High Court Rules totalled

$11,840, were to be the subject of a 50 percent increase said to equal “a reasonable solicitor/client cost”.  In the result, it was claimed that $17,760 should be deducted from any sums payable to Mr Kim so as to reflect the legal work carried out.

[176]   There are a number of difficulties with this approach.  First, it makes Mr Kim responsible for the costs of all the work, when he was only one of three defendants. Second, I do not see why he should be liable for any amount in respect of the application for adjournment of the hearing, when he was not even aware that a fixture had been allocated, still less of the need to apply for an adjournment.   In

addtion, I have already referred60 to the fact that an invoice was prepared in the name

of NKHL on 12 November 2009.  While it is unclear whether that invoice was sent it shows that the defendant intended to charge the sum of $5,640 for the work carried out to that point.   It seems to me that that invoice should be taken as the best indication of what the defendant was intending to charge for the work.   I would divide that amount by three to arrive at the figure properly payable by Mr Kim.  That

is a sum of $1,880.

60     At [51] above.

[177]   In addition disbursements in the sum of $890 were claimed in respect of filing fees and photocopying.   The same approach would leave Mr Kim liable for one-third of those costs, that is the sum of approximately $297.

[178]   The final issue raised in respect of quantum has been accommodated by means  of  the  memorandum  filed  by  Mr  Ropati  on  11 April  2013.    As  earlier discussed, this reduced the amount of the claim from $117,077 to $89,784, so as to reflect the costs awards against Mr Lee made by the Court of Appeal and able to be recovered from him.  This was in effect to concede the issue raised in the nintenth affirmative defence.

Result

[179]   For the reasons discussed, I consider that Mr Kim is entitled to succeed on his claim   which   is   now   reduced   to   $89,784   in   accordance   with   Mr Ropati’s memorandum of 11 April 2013, subject to the following paragraphs.

[180]   I have held that there should be a reduction of 15 percent so as to reflect the quantum issues raised by Mr Oh.  That reduces the total to $76,316.  I have also held that there should be a further reduction in respect of the legal work carried out in the sum of $1,880 and disbursements of $297, a total of $2,177.   If that amount is deducted from $76,316, the result is $74,139.

[181]   To that should be added the sum of $5,000 general damages for anxiety and distress. The total amount of the judgment is therefore $79,139.

[182]   I  reserve  questions  of  costs.    If  they  cannot  be  agreed  I  will  receive memoranda from the parties:   from the plaintiff within ten working days of this judgment and from the defendant within ten working days of receipt by him of the plaintiff’s memorandum.