Millar v Millar

[2013] NZHC 1302

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-5861 [2013] NZHC 1302

UNDER  the Trustee Act 1956 and the Court's inherent jurisdiction

IN THE MATTER OF       KENNETH THOMAS MILLAR, ROBYN LYNETTE MILLAR and LEICESTER JAC FORBES GOUWLAND as trustees of the KT & RL MILLAR INVESTMENT TRUST,

MILLAR INVESTMENT (NO.2) TRUST, PEARSE TRUST, KT & RL MILLAR FAMILY TRUST and PARKSIDE TRUST

BETWEEN  ROBYN LYNETTE MILLAR Plaintiff

ANDKENNETH THOMAS MILLAR Defendant

Hearing:                   16 May 2013

Counsel                   DAT Chambers QC for Plaintiff

AR Galbraith QC for Defendant

Judgment:                4 June 2013

JUDGMENT OF BREWER J

This judgment was delivered by me on 4 June 2013 at 4:00 pm pursuant to Rule 11.5 High Court Rules.

Registrar/Deputy Registrar

SOLICITORS:

Dyer Whitechurch (Auckland) for Plaintiff

Morton Tee & Co (Auckland) for Defendant

MILLAR v MILLAR [2013] NZHC 1302 [4 June 2013]

Introduction

[1]      The plaintiff seeks to remove the defendant as a trustee of five family trusts

(the Trusts).1

[2]      The trial date is 4 July 2013.

[3]      Counsel for the plaintiff is Ms Chambers QC. [4]       Counsel for the defendant is Ms Hinton QC.

[5]      The plaintiff, by interlocutory application filed on 5 February 2013, seeks an order  disqualifying  Ms Hinton  from  representing  the  defendant.    This  judgment determines that application.

Background

[6]      The plaintiff and the defendant are married.  They separated permanently in

2007.   Together with an accountant, they are the trustees of the Trusts.   The beneficiaries of the Trusts are principally themselves and their children.

[7]      The plaintiff pleads that the defendant has breached his legal and fiduciary duties as a trustee of the Trusts.  Particulars of the breaches go, essentially, to taking control of the Trusts, using assets of the Trusts for his own purposes and failing to act in the best interests of the beneficiaries.

[8]      The statement of claim is dated 28 September 2012.   It was preceded by skirmishing between Ms Chambers and the defendant’s solicitor, Mr Tee.   In his affidavit, Mr Tee deposes that he first advised Ms Chambers that Ms Hinton had been  instructed  to  act  for  the  defendant  on  31 August  2012.2      By  letter  dated

24 September 2012, the plaintiff’s solicitors advised Mr Tee:3

1      Ancillary orders are sought for appointing a new trustee, removing the Power of Appointment, requiring a report, and damages.

2      Affidavit of Stephen James Tee regarding alleged conflict sworn 5 February 2013.

3      Ibid, Exhibit “B”.

In the course of taking further instructions Mrs Millar has advised that she telephoned Ms Hinton to obtain advice in relation to relationship property matters prior to commencing the present negotiations with your client.  Our client recalls she discussed matters with Ms Hinton for about 40 minutes and that at the end of the conversation Ms Hinton advised that although she was happy to assist she would not be able to do so immediately.

[9]      The solicitors gave their view that:

Ms Hinton is conflicted and in the circumstances it would not be appropriate for her to act for your client or any of the entities.

[10]     The plaintiff, in her affidavit filed in support of her interlocutory application, describes her contact with Ms Hinton:4

5.6Friends continued to tell me I should see a lawyer and a number of people suggested I contact Anne Hinton QC.  I have tried to recall exactly when I phoned Ms Hinton, but I do not recall the exact date. I believe it was early 2011.  What I do recall is that I had no trouble getting her on the phone and being surprised that she talked to me for so long.  It was not a short couple of minutes phone call; it was at least 20 minutes.  When I initially spoke to my solicitors I thought the conversation could have been as long as 40 minutes but after thinking further about this I thought it was more accurate to say that the conversation was at least 20 minutes, and likely much longer.  I can remember standing in my kitchen in Arney Crescent making the phone call.  I am sure I gave her a timeline of the separation issues. Ms Hinton was nice to me on the phone.  We discussed my financial situation, including the property portfolio and the company.  She was very interested in me and my situation, she listened to me and I was grateful for that and at the end of the conversation she said that she would have liked to help me but that she was just too busy to take the matter on then.  I remember getting off the phone feeling quite confident that I was entitled to a fair division of our property.   I cannot recall if I asked her to recommend someone or if she volunteered names.   She did suggest I speak to Ms Hollings or a man,   whose   name   I  cannot   remember.     I  had   already  met Ms Hollings and had felt comfortable with her and so contacted her. I believe I arranged an appointment with Ms Hollings very shortly after my discussions with Ms Hinton.   I have now checked with Ms Hollings as to the first date I met with her in 2011 which was

7 April 2011.

5.7I told Ms Hinton what outcomes I hoped to achieve, how I wanted to proceed and felt confident after the phone call that I was entitled to my “fair share” of the money and estate.  I regarded the conversation as being confidential and would not have discussed the matters I did with Ms Hinton if I knew she was acting or would act for Ken.

4      Affidavit of Robyn Lynette Millar in support of interlocutory application on notice by the plaintiff seeking an order disqualifying Ms Anne Hinton QC from representing the defendant dated 7 February 2013.

[11]     Ms   Hinton   has   filed  an   affidavit   in   opposition   to   the  interlocutory application.5   Some of its contents, unsurprisingly, are in the nature of submissions.  I find the following passages to be relevant:

Ihave not at any time acted for or accepted instructions or even said I might accept instructions to act for Mrs Millar...  I have also not received confidential information or given advice to Mrs Millar.  I know this to be true because I have no file ever opened, no time record, no file note, nor any record of any sort relating to any communications with or on behalf of Mrs Millar.   Had I accepted instructions or even indicated I might accept instructions or elicited confidential information, I would have a record of that, in terms of a file note and a time record, at a minimum.   That is my invariable practice.

Mrs Millar says she spoke to me by phone about two years ago.  If this happened I have no recall of it whatsoever and the nature of the conversation would have to be very limited in light of the above.

If a phone conversation took place at all, it could only have been on the basis of Mrs Millar being told in the first place I would not act.  I used to take on average 3 or 4 calls each day, either direct from parties or from their lawyers, asking me to represent them, even though I was not taking on instructions.   Often these were people who already had lawyers, which is the position Mrs Millar describes. I considered I had an obligation as senior counsel to be courteous and  to  assist  people  to  find  the  right  legal  representation.    My practice was for my secretary to first speak to them to explain that I could not act and to try to sort out the matter of representation (she had a list of names, contact details and criteria for suitability) and then if I came free I might talk to them...  These calls were always quite superficial and did not elicit other than simple facts needed to determine the appropriate lawyer.   I did not keep records of these calls.   They could be a bit long-winded if people were uncertain about representation, as on Mrs Millar’s account she was.  She had already seen at least two lawyers and on her account was phoning a third.  I would not have elicited any confidential information and I would not have given advice.  On occasion these people tried to ask me for advice, which I found irritating, I would tell them very firmly I was not in any position to give any advice and they would need to ask the lawyer that they got to represent them.

[12]     The plaintiff responded to Ms Hinton’s affidavit:6

7.I strongly believe that I talked to Anne Hinton about the history of the matter and the various entities with sufficient information and

5      Affidavit of Anne Elizabeth Hinton in opposition to interlocutory application for disqualification sworn 19 February 2013.

6      Affidavit of Robyn Lynette Millar in support of interlocutory application on notice for an order disqualifying Anne Hinton QC from representing the defendant and in reply dated 22 February

2013.

advice so that I felt confident after the phone call that I was entitled to my “fair share” of the money and estate.  If Anne Hinton said at the beginning of the conversation that she could not act I would never have gone on through all of that information.  I believe I told Mrs Hinton enough information to know that this was quite a big case and it was at that stage, towards the end of the conversation, that she raised issues in regard to her capacity to immediately start acting on my behalf.   As I wanted a lawyer who could act immediately we agreed that I would not engage her as counsel.

8.        I   am   quite   certain   that   during   that   telephone   conversation

Mrs Hinton elicited confidential information.

The competing submissions

[13]     Ms Chambers submits I should exercise my inherent jurisdiction to restrain a lawyer from acting in a particular case.   There is no doubt that this jurisdiction exists.7   It is triggered by circumstances “where the integrity of the judicial process would be impaired by counsel’s adversarial representation of one party against the other”.8    Such impairment can arise if a counsel’s previous dealings with the other party puts that counsel in a conflict of interest position such that if they continue with the case the appearance of justice, in the eyes of reasonable and informed members of the community, will be undermined.9

[14]     Ms Chambers further submits:

(a)       I should not go beyond these principles and look to the law governing breach of confidence.

(b)It  does  not  matter  that  Ms Hinton  has  no  recollection  of  any conversation with the plaintiff.10

(c)       In the family law context:

7      Black v Taylor [1993] 3 NZLR 403 (CA).

8      Ibid, at 412.

9      See, for example, Hana New Zealand Ltd v Stephens [2007] 1 NZLR 833 (HC).

10     Ibid; Sent v John Fairfax Publication Pty Ltd [2002] VSC 429; Burgess (Litigation Guardian of)

v Wu (2003) 235 DLR (4th) 341.

(i)“... the discretion to  restrain a lawyer from acting  may be applied more readily in the context of family law than in, say, commercial cases”;11

(ii)“... the sensitivity which even the most reasonable people feel about [family law] litigation when they are engaged in it calls for careful measures to secure not only that justice is done but also that it is apparent that it is done, an appearance which would not survive any general impression that lawyers can readily change sides”;12

(iii)Any evidential conflict between a client and a solicitor about whether confidential information was disclosed to the solicitor by the client should be resolved in the client’s favour on the basis of affidavit evidence alone.13

[15]     Mr Galbraith submits to the contrary that I should not resort to my inherent jurisdiction.  That is an exercise best left for those rare cases where the authorities relating to breach of confidence do not apply.  Black v Taylor, he submits, is one of those rare cases. This one is not.

[16]     In  Mr Galbraith’s  submission,  this  is  a  case  where  it  is  alleged  that confidential information has been disclosed to a lawyer who has an obligation to keep it confidential.  I should approach the decision as to whether Ms Hinton should be disqualified from acting for the defendant by reference to the law relating to confidential information.

[17]     Mr Galbraith submits:

11     Rosin v MacPhail (1997) 142 DLR (4th) 304 (BC CA) at [25].

12     D&J Constructions Pty Ltd v Head (1987) 9 NSWLR 118 (SC) at 123.

13     Mills v Day Dawn Block Gold Mining Co Ltd (1882) 1 QLJ 62 at 63; Marriage of Griffis (1991)

14 Fam LR 782 (Fam) at 790-791; Marriage of McMillan [2000] Fam CA 1046 (2000) 26 Fam
LR 653.

(a)      There is no presumption of disqualification.  The family law context is irrelevant; the Court has to consider the facts and the risk in the context of the particular case.14

(b)The risk here is small.  A 20 minute telephone discussion between the plaintiff who was seeking to identify suitable counsel for her relationship property difficulties is different in kind and degree to the situations in the cases relied upon by Ms Chambers.

(c)      The context of the case is distinct.  It is an application to remove the defendant as a trustee.

(d)No evidence has been given of any particular risk.  It is true that logic would not require the plaintiff to specify the very information she wants to be kept confidential.   However, there are well-established procedures by which information can be provided to a presiding Judge on a confidential basis.

[18]     In submissions in reply,15  Ms Chambers emphasises that the jurisdiction “to restrain a breach of confidence is separate from and does not subsume the inherent jurisdiction of this Court to control its own processes”.   The former jurisdiction relates to conflicts of interest arising in a non-litigation context.  The latter relates to the  need  for  the  Court  to  ensure  the  probity  of  its  processes.    It  is  the  latter jurisdiction that the plaintiff has invoked in her application and upon which she relies.

Discussion

[19]     An application to disqualify counsel requires the Court to examine the rights of the parties to the litigation.  An applicant may apply for that examination broadly in reliance on the Court’s inherent jurisdiction or more narrowly by invoking legal

rights to prevent the disclosure or misuse of confidential information.  In some cases

14     Russell McVeagh v Tower Corp [1998] 3 NZLR 641 (CA); Bolkiah v KPMG [1999] 2 AC 222 (HL).

15     Reply submissions on behalf of the plaintiff in support of interlocutory application to disqualify

Ms Anne Hinton QC from representing the defendant, dated 23 May 2013.

the approach adopted will be of significance because pleadings define issues and hence the limits of evidence and argument.  But no matter the approach, the central issue will be whether the rights identified mean there is a conflict of interest, or potential for conflict of interest, such that disqualification is required.  Resolution of this issue will depend on the facts of the case.

[20]     In almost every case the focus will be on whether the counsel concerned is in possession of confidential information supplied by the applicant party under conditions of confidence.  But not always.  Black v Taylor is an example of a case where the focus was more on the proper response of the Court where the conflict of interest was submitted to have arisen from a broad professional relationship of some

30 years’ duration:16

In one sense the appeal is concerned with the standard to be applied to practitioners in determining what constitutes a disqualifying conflict of interest.   But the identification and application of the relevant principles depend upon the facts of the particular case. In other fact situations it may be appropriate  to  focus on confidential information in relation to particular affairs of the former client and the breach of confidence or fiduciary duty which may ensue if the lawyer acts against that former client.  That has been the main thrust of the approach in many cases in various jurisdictions discussed by McGechan J and canvassed in argument on the appeal.  On my assessment of the present facts the narrower question for consideration is whether a Court is entitled to conclude that the proper administration of justice  warrants  refusing  to  allow  a  lawyer  who  has  acted  for  family members over a long period to take sides and act as counsel for one party in an intra-family dispute.

[21]     The rights of the parties once identified must be balanced:17

On the one hand, there is the right of the respondent party to a fair hearing and to avoid being opposed by counsel who is in possession of confidential information so that justice may not be done or may not be seen to be done. On the other hand, there is the right of the appellants to the counsel of their choice.

[22]     I do not see any conflict between Black v Taylor and Russell McVeagh v Tower Corporation.  The former applied the analysis to a case focused on inherent jurisdiction and the latter to a case focused on legal rights.  That is because the facts

of the cases were different and hence pleaded differently.

16     Black v Taylor, above n 7, at 407.

17     Ibid, at 419 per McKay J.

[23]     In this case the plaintiff, in her interlocutory application, pleads (relevantly):

She  had  a  telephone  conversation  with  Ms Hinton  that  lasted  at  least

20 minutes;

During the conversation the plaintiff disclosed confidential information about

her relationship property matters to Ms Hinton;

Because of this disclosure, Ms Hinton has a conflict of interest;

Theconflict  of  interest  is  such  that  the  proper  administration  of  justice requires  Ms Hinton  to  be  disqualified  from  continuing  to  act  for  the defendant;

Disqualification is necessary not only so that justice is done but also so that it

is seen to be done.

[24]     From this, I take the issues to be:

(a)       Was there disclosure of confidential information?

(b)      If so, does that create a conflict of interest in the present proceeding? (c)      If  it  does,  is  it  necessary  in  the  interests  of  justice  to  disqualify

Ms Hinton?

[25]     I turn to the facts.  No deponent was cross-examined.  Where the affidavits of the  plaintiff  and  Ms Hinton  conflict  I  am  left  to  draw  inferences  based  on  the contents of the affidavits and bearing in mind the onus of proof on the plaintiff.

[26]     I find, on the balance of probabilities:

(a)       There  was  a  telephone  conversation  between  the  plaintiff  and

Ms Hinton.  It took place in early 2011.  It lasted around 20 minutes.

(b)The  plaintiff’s  purpose  in  telephoning  Ms Hinton  was  to  assess whether   she   should   seek   Ms Hinton’s   legal   representation   on relationship property matters between the plaintiff and the defendant.

(c)      In the course of the conversation the plaintiff described her situation to Ms Hinton generally in the way to which she has deposed.

(d)      The plaintiff did not discuss the Trusts.18

(e)      Ms Hinton has no memory of the conversation.  She made no note of it.

(f)      Ms Hinton did not give legal advice to the plaintiff.   At most, in response  to  the  general  account  she  received  of  the  plaintiff’s situation, she outlined the legal framework relating to the division of relationship property so that the plaintiff could conclude that she was entitled to “her fair share”.

(g)No retainer was given.   Ms Hinton told the plaintiff that because of her other commitments she could not act for the plaintiff at that time.

[27]     In my view, whatever the plaintiff told Ms Hinton about her relationship property matters was told in confidence and received under an obligation of confidence.19

[28]     The   confidential   information   does   not   relate   directly  to   the   present proceeding.  This is an application for removal of the defendant as a trustee of the Trusts.  There is no evidence that the general description given to Ms Hinton of the plaintiff’s relationship property situation is relevant to the issues in this case.

[29]     Even if it could be, I do not find that there is more than a negligible risk that the confidential information imparted to Ms Hinton could be misused:

18     The plaintiff does not depose that she did.

19     See, generally, The Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules

2008, Chapter 8.

(a)       The telephone conversation was brief and general; (b) It occurred two years ago;

(c)       It was the first and only contact between the plaintiff and Ms Hinton;

(d)Ms Hinton  has  no  memory  of  it,  and  no  way  of  refreshing  her memory;

(e)      If participating in the proceeding did stimulate Ms Hinton’s recall, there is no evidence that the information imparted could have any bearing on the proceeding.

[30]     Looking more broadly at the situation, as Ms Chambers submits I must, I do not  find  that  the  interests  of  justice  nevertheless  require  Ms Hinton  to  be disqualified:

(a)      A reasonable person, having a reasonable understanding of the facts, would not see an appearance of injustice in Ms Hinton acting.   The facts are far removed from Black v Taylor20  and Hana v Stephens.21

The facts are also more favourable to the defendant than the facts in Russell McVeagh22 were to the plaintiff in that case which was successful in being permitted to act.

(b)I do not accept that family law cases cast a stricter duty on counsel, or should be treated more carefully by the Courts.  The duty is the same in all cases.  The Court’s process of analysis is the same.  It might be that the issues between the parties in family disputes may influence the balance the Courts must make.  But that would be little different to a  case,  say,  where  an  accused  was  at  risk  of  imprisonment  or  a

businessman of financial ruin.

20     Black v Taylor, above n 7.

21     Hana v Stephens, above n 9.

22     Russell McVeagh v Tower Corp, above n 14.

[31]     The plaintiff’s application sought Ms Hinton’s disqualification on all matters pertaining to relationship property disputes between the plaintiff and the defendant. I cannot go beyond this proceeding.  If I could, I would not.  Each case will be fact- specific.

Decision

[32]     I find:

(a)       There was disclosure of confidential information by the plaintiff to

Ms Hinton;

(b)That disclosure does not create a conflict of interest in the present proceeding;

(c)      Even if it did, in the circumstances of this case the risk of misuse of the confidential information is negligible and it is not necessary in the interests of justice to disqualify Ms Hinton.

[33]     The application is dismissed.

[34]     The defendant is entitled to costs on a 2B basis.  The defendant may ask the

Registrar to fix them.

Brewer J