Morris v Morris
[2015] NZHC 2315
•23 September 2015
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV-2015-404-001365 [2015] NZHC 2315
UNDER the Partnership Act 1908 IN THE MATTER OF
an application for dissolution of partnership
BETWEEN
VERNON PETER MORRIS Plaintiff
AND
MARGARET CLARE MORRIS First Defendant
NEVILLE SHAW Second Defendant
Hearing: 21 September 2015 Counsel:
P F Chambers for the Plaintiff
S C Dench for the DefendantsJudgment:
23 September 2015
JUDGMENT OF EDWARDS J
This judgment was delivered by Justice Edwards on 23 September 2015 at 4.30 pm, pursuant to
r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Date:
Counsel: P F Chambers, Auckland
S C Dench, Auckland
Solicitors: Henley-Smith Law, Auckland
R S Walker, Auckland
MORRIS v MORRIS [2015] NZHC 2315 [23 September 2015]
Introduction
[1] Mr Morris seeks to restrain Mr Walker and his firm from acting for the defendants at a forthcoming judicial settlement conference and in the substantive proceeding.
[2] Mr Morris claims that Mr Walker has confidential and privileged information relating to Mr Morris which he has obtained in the course of his 45 year relationship acting for both Mr Morris and the first defendant (Mrs Morris), and in the course of acting for a partnership between Mr and Mrs Morris (Partnership). Mr Morris says that Mr Walker either is conflicted, or there is an appearance of a conflict of interest, so that disqualification is justified in the circumstances.
[3] Mr Walker does not dispute a long relationship with the parties, but deposes to very limited contact with Mr Morris and the Partnership over the course of the last twelve years. He denies having any confidential or privileged information of the sort relevant to the substantive proceeding. He also denies having a conflict of interest or giving the appearance of a conflict by continuing to be Mrs Morris’ solicitor on the record in this dispute.
Background
[4] Mr Morris has commenced proceedings against Mrs Morris and her partner, Mr Shaw in relation to alleged unauthorised drawings from the Partnership. The Partnership was set up between Mr and Mrs Morris following their separation in
1987. The Partnership held undivided relationship property including numerous properties, bank accounts, and for a period of time, a trucking business. The Partnership currently holds three properties which the parties have agreed should now be sold.
[5] Mr Morris first became concerned about alleged discrepancies in the Partnership accounts in December 2013. Mrs Morris engaged Mr Walker to act on her behalf in respect of these allegations in April 2014. The evidence suggests that Mr Morris engaged another solicitor, Mrs Rhonda Evans, to act on his behalf in
relation to the dispute. There was agreement between the parties that Bowden Williams, chartered accountants, would be instructed to undertake an independent review of the Partnership accounts going back to 2002. Mr Walker and Ms Evans exchanged correspondence regarding Bowden Williams’ appointment and the scope of the engagement.
[6] Bowden Williams reported back in August 2014. The report only analysed the financial records as far back as 2008. Mr Morris claims that Mr Walker must have been corresponding with Bowden Williams and somehow manipulated the review to be a lot narrower than was originally agreed. Mr Walker denies this. Mr Bowden has provided an affidavit explaining that the only reason they did not conduct their analysis back to 2002 was that they did not have the general ledger print-outs from the Partnership’s accountants prior to 2009 to reconcile with the cash book entries.
[7] Efforts to resolve the dispute were unsuccessful, and Mr Morris commenced proceedings on 19 June 2015. Mr Walker is the solicitor on the record for the defendants, but Mr Dench has been engaged as counsel. At the heart of the claim is an allegation that Mrs Morris and Mr Shaw misappropriated Partnership funds. The relief sought is an order that a constructive trust exists over the second defendant’s personal property and other assets, and an order for damages. Mr Chambers informs me that recent accounting reports indicate that the quantum of damages to be sought by Mr Morris at trial is approximately $500,000.
[8] On the same day as filing proceedings, Mr Morris sought a without notice interim freezing order in respect of funds held in the Partnership’s bank accounts. Heath J declined to make a freezing order in the terms sought but granted an interim injunction preventing the defendants from disposing of or dealing with partnership property.
[9] Mrs Morris deposes that on 22 June 2015, she discovered that Mr Morris had transferred the entire balance in one of the Partnership’s accounts ($158,634.59) to bank accounts in the name of Mr Morris’ family trust on 18 June 2015, that is, the day before Mr Morris sought a freezing order over the account. Mrs Morris says she
recognised the account number that the monies had been transferred to as Mr Morris’ family trust’s bank account number because she had historically prepared financial statements for that trust. She raised the matter of the transfers with Mr Walker.
[10] Mr Walker wrote to Westpac Bank on 22 June 2015 seeking confirmation that the funds had been transferred to the account identified as Mr Morris’ bank account. Mr Morris refers to this letter as evidencing disclosure of Mr Morris’ confidential and personal information (i.e. bank account details) held by Mr Walker. Westpac Bank confirmed that the transfers had been made to Mr Morris’ account. It took steps to suspend that account.
[11] The hearing of the interim injunction application came before Lang J on
24 June 2015. His Honour made the following directions in relation to the funds withdrawn by Mr Morris:
I therefore direct that Mr Morris is to open a new bank account in his name and is to pay the sum of $154,584.42 into that account. He is then to make payments from the account as follows:
…
If possible, Mr Morris is to open the account so that Mrs Morris has online access to it to enable her to view the account at any given time, but not so as to be able to operate the account.
[12] On 25 June 2015, Mr Walker wrote to Westpac informing them of the minute of Lang J and stating that ideally Mr Morris should enable Mrs Morris to have online access to his new account. Mr Morris complains that this correspondence was improper because it failed to mention that the online access was for viewing purposes only. As it has eventuated, Mr Morris has set up the separate account but Mrs Morris has no online access at all.
[13] In a later minute dated 4 August 2015, Lang J directed there to be a judicial settlement conference to deal with the sale of the Partnership’s remaining three properties. I am told that the intention is for a further judicial settlement conference to be convened once these properties have been sold to deal with the substantive accounting issues at the heart of these proceedings.
[14] Mr Morris filed the application to restrain Mr Walker from acting on
11 August 2015. The matter has been considered under some urgency given the
Judicial Settlement Conference set down for 25 September 2015.
[15] At the hearing, Mr Chambers submitted a further memorandum which attached company records for Donald Trust Company Ltd. That company was incorporated on 1 July 2015. Mrs Morris, Mr Shaw and Mr Walker are all named as directors and shareholders of that company. Mr Chambers submits that this new evidence causes Mr Morris concern because it evidences a conflict of interest and it should have been disclosed in Mr Walker’s affidavits. Mr Dench did not have time to obtain detailed instructions regarding the company but confirmed from the bar that it was a trust company. There was no objection to the company records being received for the purposes of the hearing and they were so received.
Legal principles
[16] The legal principles relevant to the application were reviewed by Gilbert J in
Torchlight Fund No. 1 LP (in rec) v NZ Credit Fund (GP) 1 Ltd.1
[17] In that case, Gilbert J reviewed the principles arising out of the Court of Appeal’s case in Black v Taylor confirming that disqualification will normally be the appropriate response in cases where counsel’s representation of one party against another may impair the integrity of the judicial process.2
[18] The integrity of the justice system does not depend on findings of culpability against the lawyer concerned. However, the integrity of the justice system will be impaired where counsel has a conflict of interest or where there is an appearance of a
conflict of interest such that justice will not be seen to be done.3
1 Torchlight Fund No. 1 LP (in rec) v NZ Credit Fund (GP) 1 Ltd [2014] NZHC 2552, [2014] NZAR 1486.
2 At [12] citing from Black v Taylor [1993] 3 NZLR 403 (CA).
3 Torchlight Fund No. 1 LP (in rec) v NZ Credit Fund (GP) 1 Ltd, above n 1 at [13] citing Black v
Taylor, above n 2 at 418.
[19] Gilbert J went on to consider the principles arising out of Prince Jefri Bolkiah v KPMG (a firm), finding that the jurisdiction to restrain a solicitor stems from the need to protect confidential information.4 A plaintiff seeking to restrain a former solicitor from acting must establish:5
(a) That the solicitors are in possession of information which is confidential to the plaintiff and he or she has not consented to its disclosure; and
(b)That the information is or may be relevant to the new matter in which the interest of the other client is or may be adverse to his own.
[20] As Lord Millet observed in Prince Jefri, the burden on the plaintiff in meeting both limbs of that test is not a heavy one. The former may be readily inferred and the latter will often be obvious.6
[21] I note that the test in Prince Jefri is also consistent with r 8.7.1 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008, which provides:
8.7.1A lawyer must not act for a client against a former client of the lawyer or of any other member of the lawyer's practice where—
(a) the practice or a lawyer in the practice holds information confidential to the former client; and
(b) disclosure of the confidential information would be likely to affect the interests of the former client adversely; and
(c) there is a more than negligible risk of disclosure of the confidential information; and
(d) the fiduciary obligation owed to the former client would be undermined.
4 Prince Jefri Bolkiah v KMPG (a firm) [1999] 2 AC 222 (HL) at 234.
5 At 234–235.
6 At 235
[22] The underlying policy behind the exercise of the Court’s jurisdiction was
described by Lord Millet in the Prince Jefri case as follows:7
It is in any case difficult to discern any justification in principle for a rule which exposes a former client without his consent to any avoidable risk, however slight, that information which he has imparted in confidence in the course of a fiduciary relationship may come into the possession of a third party and be used to his disadvantage. Where in addition the information in question is not only confidential but also privileged, the case for a strict approach is unanswerable. Anything less fails to give effect to the policy on which legal professional privilege is based. It is of overriding importance for the proper administration of justice that a client should be able to have complete confidence that what he tells his lawyer will remain secret. This is a matter of perception as well as substance. It is of the highest importance to the administration of justice that a solicitor or other person in possession of confidential and privileged information should not act in any way that might appear to put that information at risk of coming into the hands of someone with an adverse interest.
(footnotes omitted)
[23] Knowledge of personalities, characters, and relationships is relevant information which may be derived from a professional relationship over a number of years. As Richardson J said in Black v Taylor:8
It would not be unreasonable for a family member to feel chagrin and concern to find a lawyer who had built up knowledge of that kind was able to consciously or unconsciously draw on it when acting against that member of the family.
[24] That sort of knowledge was significant in Black v Taylor where the High Court Judge inferred from the lengthy retainer that the counsel concerned was in possession of at least some privileged material belonging to the wife which might:9
only consist of impressions of the wife’s personality gained after many hours of confidence, which could be exploited by a skilful advocate presented with those impressions.
7 At 236.
8 Black v Taylor, above n 2 at 408.
9 At 411.
[25] These principles must be balanced against the competing principle that a litigant should not be deprived of his or her choice of counsel without good cause. That right is an important value but it is not an absolute, and there are many examples in practice where that right is subordinated to other public interests.10
Analysis
[26] At first glance, the lengthy relationship Mr Walker has had with both parties to the dispute raises the spectre of justice being subverted. It may be readily inferred that Mr Walker has obtained knowledge of Mr Morris’ affairs, or at the very least, his personality traits, fears and foibles as a result of knowing Mr Morris for a long period of time. That alone suggests that the safer course may have been for Mr Walker to decline to act for any of the parties to the dispute, particularly once litigation had commenced.
[27] However, on closer examination of the particular circumstances in this case, I am not persuaded that the lengthy association is sufficient to warrant an order disqualifying Mr Walker from acting. My reasons for reaching that conclusion are set out below.
Scope of prior engagements
[28] Despite the long duration of the association, it is apparent that Mr Walker has not acted for Mr Morris or the Partnership in any substantive sense for some time. The last time Mr Walker personally acted for Mr Morris was in 2003 in relation to a contracting out agreement for a de facto relationship. The other solicitor at his firm acted on another contracting out agreement for Mr Morris in 2006. That same solicitor also sent Mr Morris’ trust deed to Mrs Morris in 2012 apparently so that Mr Morris could obtain advice from another solicitor on a power of attorney, change of will and Trust Deed. That did not involve any advice to, or even consultation
with, Mr Morris.
10 Black v Taylor, above n 2 at 409.
[29] In respect of the Partnership, the only retainer Mr Walker’s firm has had in recent times is to undertake the conveyancing work in relation to the sale of four properties belonging to the Partnership, with the last property (Howlett Street) sold in 2012. That conveyancing work was all carried out by the other solicitor at Mr Walker’s firm. There is no evidence before me of any relevant confidential or privileged information, even in the sense of personal traits or characteristics, having been imparted as a result of that work.
[30] The limited nature of the instructions in the last 12 years distinguishes this case from that in Black v Taylor. That case was an appeal from the decision of McGechan J disqualifying a lawyer from acting for the estate in circumstances where he had previously acted for the plaintiff, deceased and other family members over a lengthy period of time. The Court of Appeal referred to McGechan J’s finding that over the years, “a considerable quantity of information, indeed covering most aspects of the family and company affairs, would have been given by the Taylor family as a
whole to [the solicitor concerned]”.11
[31] Similarly, in Torchlight Fund No. 1 LP (in rec) v NZ Credit Fund (GP) 1 Ltd, Gilbert J referred to the fact that “considerable confidential and privileged information over a 14 year period in the course of providing instructions on hundreds of matters” had been entrusted to the firm concerned.12 Evidence of that nature is not before me in this application.
[32] I accept that Mr Walker, or his firm, may have gleaned general information about Mr Morris’ personality as a result of work undertaken on his behalf over the years. But this would only be information of a generalised nature, and not in the same category as the information derived from a close confidential relationship built up over a lengthy period as was the position in Black v Taylor.
[33] Furthermore, the generalised nature of this information will have little relevance to the determination of the substantive proceeding. As all parties accept,
the issues at the heart of the substantive proceedings will be determined by the
11 Black v Taylor, above n 2 at 407.
12 Torchlight Fund No. 1 LP (in rec) v NZ Credit Fund (General Practitioner) 1 Ltd, above n 1 at
[27].
Court’s view of the expert accounting evidence adduced by each party. Mr Morris’ general character and personality traits are unlikely to be of any relevance to the disposition of the substantive proceeding.
No confidential or privileged information relevant to dispute
[34] Related to the above is the fact that there is no evidence that Mr Walker retains specific confidential or privileged information which would be relevant to the substantive partnership dispute.
[35] Mr Chambers points to the bank account details as being an example of confidential and personal information held by Mr Walker. But Mr Morris does not depose as to how Mr Walker would have come into possession of that information as a result of Mr Walker’s prior engagement on behalf of Mr Morris.
[36] Mr Walker deposes that his firm did not hold this information. Rather, the bank account details were received from Mrs Morris who noted that substantial funds had been transferred out of the partnership account to another account which she recognised as Mr Morris’ personal account. In the absence of any evidence to the contrary, I accept Mr Walker’s affidavit evidence on this point. I do not consider the reference to Mr Morris’ bank account details to be evidence of personal or confidential information received by Mr Walker in the course of his (limited) engagements for Mr Morris.
[37] Similarly, I do not regard the correspondence with Bowden Williams, or with Westpac Bank, to evidence possession of confidential or personal information by Mr Walker. Mr Morris’ complaint appears to be more concerned with the conduct of Mr Walker as a solicitor generally, rather than any specific complaint about disclosure of confidential and privileged information that Mr Walker may have gleaned as a result of his previous engagements on behalf of Mr Morris.
[38] Mr Chambers referred me to the fact that Mr Walker’s firm holds the conveyancing file relating to the sale of the Howlett Street property and this sale might be relevant to the accounting exercise to be undertaken in the substantive
proceeding. That may be so, but none of that information is confidential or privileged to Mr Morris. Disclosure of that information does not place Mr Walker or his firm in a position of conflict, and nor does it create the appearance of conflict.
[39] In summary, I am not satisfied on the evidence before me that Mr Walker would hold confidential and privileged material relevant to the substantive proceeding which would warrant disqualifying him from acting for Mrs Morris in this case.
Mr Walker as witness
[40] Mr Chambers submitted that Mr Walker was likely to be called to give evidence at the substantive trial regarding his correspondence with Bowden Williams and on that basis Mr Walker should be disqualified. I do not agree. As Mr Chambers accepted, the determination of the substantive proceeding will turn on the expert evidence called by both sides as to the drawings made by each partner, and the position as reflected in the accounts. The nature of Mr Walker’s correspondence with Bowden Williams as to the scope of the accounting exercise to be undertaken by that firm is irrelevant to the ultimate determination of the issues in the proceeding. As currently pleaded, Mr Walker’s evidence would be irrelevant to the issues to be determined at trial.
No actual conflict
[41] Finally, Mr Morris deposes that up until August 2014 he believed that Mr Walker was acting for the Partnership and was therefore in an actual conflict position in acting for both Mrs Morris and the Partnership. In his first affidavit, Mr Morris states that when he began to question the Partnership accounts and the apparent misappropriation of funds, he was in regular contact with Mr Walker who was advising him throughout on how to address his concerns.
[42] Mr Walker disputes that he was acting for the Partnership at any time and states that he made it clear that he was acting for Mrs Morris throughout. Mr Walker says that the first time he heard about the Partnership dispute was when Mrs Morris
instructed him about it. He wrote a letter to Mr Morris on 14 April 2014 referring to having received copies of the correspondence sent by Mr Morris to Mrs Morris, and concluding the letter by enquiring whether Mr Morris had instructed a solicitor. The response to that letter was received from Mrs Rhonda Evans on 22 April 2014. Her letter recorded that she had received instructions to act for Mr Morris. Subsequent correspondence was exchanged between Mr Walker and Ms Evans as solicitors for their respective parties. Mr Walker says he cannot recall many telephone conversations with Mr Morris, as alleged, although he may have talked to him on the phone once or twice. He vehemently denies advising Mr Morris or the Partnership during these telephone calls.
[43] Having reviewed the key correspondence and affidavit evidence on this issue, I do not think there is any evidence to substantiate a finding that there was an actual conflict of interest or that Mr Walker was acting for both the Partnership and Mrs Morris at the same time.
[44] Neither do I think that position is altered by the very recent formation of a trust company in which both defendants and Mr Walker are directors and shareholders. That alone does not create a conflict of interest warranting disqualification of Mr Walker from acting.
Conclusion
[45] In summary, I do not consider this is a case which warrants restraining Mr Walker from acting as solicitor on the record for Mrs Morris and Mr Shaw. There is no evidence that Mr Walker is in possession of any confidential or privileged information that may be of any relevance to the substantive proceeding. This is not a case where disqualification is required to protect the integrity of the judicial system.
Result
[46] The application is dismissed.
[47] If costs cannot be agreed, then any application for costs should be filed within 10 working days of receipt of this judgment, with any memorandum in
response filed five working days thereafter.
Edwards J
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