Munford v M R & L E Munford Limited
[2019] NZHC 1192
•29 May 2019
IN THE HIGH COURT OF NEW ZEALAND PALMERSTON NORTH REGISTRY
I TE KŌTI MATUA O AOTEAROA TE PAPAIOEA ROHE
CIV-2018-454-92
[2019] NZHC 1192
BETWEEN MICHAEL RICHARD MUNFORD
Plaintiff
AND
M R & L E MUNFORD LIMITED
First Defendant
HAYDEN TRAVIS RANKIN
Second DefendantJANARA NZ LIMITED and JANARA ENTERPIRISES LIMITED
Third Defendants
Counsel: J Mahuta-Coyle for plaintiff
J Grace for first second and third defendants
Judgment:
29 May 2019
JUDGMENT OF ASSOCIATE JUDGE JOHNSTON
[On the papers]
[1] The background of this litigation and the contentions of the parties were canvassed in my interim judgment dated 1 April 2019.1 That interim judgment should be read together with this final judgment. I do not propose to reiterate the background here.
[2] The Court is, or rather was, being asked by the plaintiff to make an order precluding the same solicitors and counsel from acting for both the second defendant, Mr Hayden Rankin, and the first defendant, M R & L E Munford Ltd, essentially on the basis that their interests conflict.
1 Munford v M R & L E Munford Ltd [2019] NZHC 636.
MUNFORD v M R & L E MUNFORD LIMITED [2019] NZHC 1192 [29 May 2019]
[3] In my interim judgment, I concluded that there was no reason why Mr Rankin and the company should not be represented by the same solicitors and counsel in relation to what I identified as the first and second limbs of the claim (pleaded in the first, second and third causes of action), but that their interests conflicted in relation to the third limb of the claim (pleaded in the fourth cause of action).
[4] Rather than make a blanket order precluding the same solicitors and counsel acting for Mr Rankin and the company, I suggested that another approach might be for the first and second limbs of the claim to be severed and go to trial, leaving the third limb to be resolved if necessary at a later stage.
[5] Because that was not something that was explored during the course of the hearing, I invited counsel, Mr Mahuta-Coyle for the plaintiff and Mr Grace for the defendant, to provide further submissions on that point.
[6]They have done so by memoranda.
[7] For the plaintiff, Mr Mahuta-Coyle opposes any order for severance. He submits that the causes of action that make up the first and second limbs of the claim involve allegations by the plaintiff against Mr Rankin rather than the company and therefore that the company need not be represented. He then submits that in any event the company is not in a position to engage solicitors to act for it in this litigation. In relation to this his contention is that the organ of the company with authority to engage solicitors is the board, the board consists of two directors, Mr Munford and Mr Rankin, and that, as they have directly opposing interests, the board is deadlocked.
[8] On those bases, Mr Mahuta-Coyle contends that the company’s resources cannot be expended to meet the costs of this litigation.
[9]Mr Mahuta-Coyle continues:
22… the plaintiff asks the Court to resolve the interlocutory application presently before it by making the following [slightly] amended orders:
22.1an order that the second defendant’s solicitors and counsel cease taking steps in the litigation on behalf of the first defendant company; and
22.2an order that the second defendant account to the Court and to the first defendant for any monies hitherto used for the second defendant’s legal representation in relation to these proceedings, but that were provided by the first defendant or paid from its accounts.
23If the Court is not minded to resolve the application as the plaintiff contends, the plaintiff opposes an order of severance, and withdraws any opposition to the continuation of the defendants’ existing representation arrangements.
[10] On behalf of Mr Rankin, the company and the third defendants, Mr Grace supports the severance of the third limb of the claim from the first and second. He submits that severance would enable J H West and him to continue to act for both Mr Rankin and the company in relation to the first and second limbs.
[11] Mr Grace submits that whilst it may be correct that the plaintiff makes no allegations against the company in the first and second limbs of his claim, the company nevertheless has an interest in the outcome of those claims because they concern company property.
[12] Insofar as the first and second limbs of the claim are concerned, the view I take is that the important point is not so much against whom the plaintiff levels any allegations of wrongdoing but rather whether the company — as opposed to Mr Rankin — has an interest in the outcome. Clearly it has. If the Court were to conclude that the plaintiff had made out the first and second limbs of the claim, one outcome of this would be to denude the company of a substantial asset, that is to say the property at 92 Tararua Road.
[13] Turning to the ability of the company to engage solicitors and participate in the litigation, I should first say that the argument now advanced by Mr Mahuta-Coyle on the plaintiff’s behalf that the company is deadlocked at board level is not one that received any attention in the affidavit evidence or was advanced in argument at the original hearing on 18 March 2019.2
2 There was one sentence in Mr Mahuta-Coyle’s written submissions dated 11 March 2019 that questioned how the company could have resolved to instruct lawyers at all, but the matter was not explored beyond that.
[14] In those circumstances, I do not think it would be appropriate for me to reach any concluded view on the point.
[15] I propose to resolve this matter by reference to and in reliance on r 5.36(1)(a) of the High Court Rules 2016. In short, the defendants’ solicitors having filed and served defences, instructed counsel and engaged in the litigation purportedly on behalf of all three defendants, the Court is entitled to assume, without further enquiry, that they are authorised to act for those parties.
[16] That approach may be open to the criticism that it is artificial in the face of the argument that is now developed by Mr Mahuta-Coyle in his memorandum as to whether J H West (and Mr Grace) could have been instructed by the company. However, in the circumstances, the Court is left with no choice but to approach matters on that basis.
[17] It follows that I am not prepared to make the orders now sought by the plaintiff and described in paragraphs 22.1 and 22.2 of Mr Mahuta-Coyle’s memorandum quoted above.
[18] In those circumstances, Mr Mahuta-Coyle says that the plaintiff withdraws his original application.
[19]However, that leaves two points unresolved.
[20] First, although I have relied on r 5.36(1)(a) to resolve the immediate question before the Court, that does not deal with the underlying issue of whether or not J H West (and Mr Grace) have been properly instructed by the company. As I see it, that is a matter for them to consider. If it transpires that the company has not instructed J H West (and Mr Grace), then there will certainly be ramifications in terms of whether the company’s resources have been or can be properly expended in defending this claim.
[21] Second, even if the company is in a position to and has engaged J H West to act for it in this litigation, the difficulty I referred to in my interim judgment that
Mr Rankin’s interests and those of the company conflict in relation to the third limb of the claim means that the same solicitors and counsel cannot act for both parties in relation to that issue. As I see it the only practical option is therefore to order the severance of the third limb of the claim from the first and second, and I make such an order pursuant to r 10.15 of the High Court Rules.
[22] The Registrar is to liaise with counsel to arrange a case management conference to deal with any outstanding interlocutory matters, set the first and second limbs of the proceeding down for trial and make any necessary pre-trial directions.
[23] Costs are reserved. If counsel are unable to resolve costs — as the Court would expect them to be able to do — they may come back to me by memorandum.
Associate Judge Johnston
Solicitors:
Integra Law Ltd, Paraparaumu for the plaintiff
J H West, Paraparaumu for the first, second and third defendants
0