Norris Ward McKinnon v Skelton
[2020] NZHC 1445
•24 June 2020
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2015-419-000429
[2020] NZHC 1445
BETWEEN NORRIS WARD McKINNON
Plaintiff
AND
DONALD ALFRED SKELTON
Defendant
Hearing: 10 December 2019 Appearances:
JD Savage for the Plaintiff
VA Whitfield & KJ Pennell for the Defendant
Judgment:
24 June 2020
RESERVED JUDGMENT OF ASSOCIATE JUDGE SMITH
This judgment was delivered by me on 24 June 2020 at 4pm pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors:
Norris Ward McKinnon, Hamilton V Whitfield, Hamilton
Norris Ward McKinnon v Skelton [2020] NZHC 1445 [24 June 2020]
TABLE OF CONTENTS
Para No. Introduction – the summary judgment application for recovery of fees [1] Norris Ward’s Statement of Claim [9] Mr Skelton’s defence and counterclaim [14] Norris Ward’s reply and statement of defence to counterclaim [23] Adjournment of the trial of the New Zealand proceeding – Minute of
Lang J
[27]
Evidence for Norris Ward in support [34] Evidence for Mr Skelton in opposition [67] Norris Ward’s evidence in reply [106] Summary judgment applications – legal principles [143] The issues to be decided [147] Issue (1): what is the effect of the decision of the Legal Complaints Review Officer on Mr Skelton’s complaint to the Law Society: does it preclude Mr Skelton from challenging Norris Ward’s fees claim in
this Court?
[152]
Issue (2) and (3): does Mr Skelton have a defence based on advice given by Norris Ward on the claim commenced against Mr Skelton in the
Supreme Court of Queensland?
[161]
Issue (4) and (5): does Mr Skelton have a defence based on alleged deficiencies in the pleadings filed by Norris Ward on his behalf in
the proceeding commenced by Mr Skelton in this Court?
[215]
Issue (6) and (7): was there an agreement under which Norris Ward would
not charge for its services for the period after the trial of the New Zealand proceeding was adjourned on 30 March 2015?
[223]
Issue (8) and (9): did Norris Ward act in breach of a duty to Mr Skelton in
requiring a waiver of claims as a condition of continuing to act in the New Zealand proceeding?
[240]
Norris Ward’s application for summary judgment on Mr Skelton’s
counterclaims
[255] Result [258]
Introduction
[1] The plaintiff (Norris Ward) is a Hamilton law firm. It issued this proceeding in December 2015 to recover the sum of $297,961.98 said to be owing by the defendant (Mr Skelton) for unpaid fees and disbursements.
[2] Mr Skelton filed a statement of defence on 23 February 2016, but the case did not progress any further at that stage. Mr Skelton had complained to the Law Society about Norris Ward’s performance and fees, and on 29 April 2016 Associate Judge Doogue made an order staying the proceeding until the complaint was determined by the Standards Committee of the Law Society.
[3] The Standards Committee dismissed Mr Skelton’s complaint in late 2018, and that decision was upheld by the Legal Complaints Review Officer (LCRO) on 17 May 2019. The stay of the proceeding was lifted by order made by Downs J on 29 August 2019.
[4] Following the proceedings before the Standards Committee and the LCRO, Norris Ward considered that Mr Skelton had no defence to its claims, and it sought leave to apply for summary judgment. That leave was granted by consent by Downs J on 11 September 2019.
[5] Further documents were then filed. Mr Skelton filed an amended statement of defence and counterclaim on 27 September 2019, and Norris Ward filed a reply and statement of defence to counterclaim on 15 November 2019. Norris Ward’s summary judgment application was made on 31 October 2019, and Mr Skelton filed a notice of opposition on 22 November 2019.
[6] Mr Skelton’s amended statement of defence and counterclaim contained a number of affirmative allegations pleaded as either set-offs or counterclaims. No leave was required for Norris Ward to seek summary judgment on Mr Skelton’s counterclaims, and the summary judgment application proceeded as an application by Norris Ward for summary judgment on both its own claim and on Mr Skelton’s counterclaims.
[7] At the hearing Mr Savage advised that $9,462.50 of the amount claimed by Norris Ward, being the amount of a costs award made against Mr Skelton on 30 March 2015 which was paid by Norris Ward, was included in the claim by mistake. Norris Ward accepts that it (and counsel instructed) agreed to meet those costs, and that Mr Skelton is not liable to reimburse Norris Ward for them.
[8]I now give judgment on Norris Ward’s application for summary judgment.
Norris Ward’s statement of claim
[9] In its statement of claim (the Claim), Norris Ward says that Mr Skelton is a “kiwifruit breeder”. They say that on 26 August 2013 he engaged them to provide legal services regarding a dispute he was having with his licensee, Z487 Limited (Z487).
[10] Norris Ward’s terms of engagement included an obligation on Mr Skelton to pay the firm’s bills within 14 days of issue. If payment was not made within 14 days, interest would be charged at a rate equal to the standard interest rate charged by BNZ Visa from time to time. The terms also included a provision entitling Norris Ward to charge for any recovery costs on outstanding debts, on a solicitor/client basis.
[11] On 12 February 2014, Mr Skelton instructed Norris Ward to retain Clive Elliott QC (Mr Elliott) to provide advice and attendances regarding the dispute with Z487, including acting as counsel in proceedings in this Court and in the Supreme Court of Queensland.
[12] Norris Ward says that between February 2014 and June 2015, it and Mr Elliott provided legal services as instructed, and issued regular bills for their attendances.
[13] The contract of retainer with Mr Skelton was terminated on 16 June 2015, and Norris Ward said that Mr Skelton has failed to pay five invoices issued between 31 October 2014 and 13 October 2015, totalling $297,961.98.
Mr Skelton’s defence and counterclaim
[14] Mr Skelton admits that he instructed Norris Ward to provide legal services in relation to the following matters:
(i)Proceedings initiated in the Supreme Court of Queensland by Z487, in which Z487 sought a declaration that a Head Licence entered into between Mr Skelton and Z487 in 2008 (the “2008 Licence”) was not validly terminated by Mr Skelton (the Queensland proceeding); and
(ii)The validity of Mr Skelton’s termination of a 2010 Head Licence (the “2010 Licence”) with Z487, and remedies as a result of alleged breaches of the 2010 Licence by Z487.
[15] Mr Skelton instructed Norris Ward to commence proceedings in New Zealand arising out of both the 2008 Licence and 2010 Licence (together the Licences) (the New Zealand proceeding).
[16] Mr Skelton says that things went awry in both the Queensland proceeding and the New Zealand proceeding. First, he made an unsuccessful attempt to have the Queensland proceeding stayed. The stay application was heard over three days, and costs awarded against Mr Skelton were estimated at approximately AUD$175,616.97.1
[17] Mr Skelton says that Norris Ward failed to advise him of the advantages and disadvantages of seeking a stay of the Queensland proceeding, including in the following respects:
(1)They failed to advise him of the likely costs that would be incurred in applying for a stay of the Queensland proceeding.
1 Mr Skelton reached a settlement with Z487 before the precise costs figure was assessed.
(2)They failed to advise him, until after the hearing of the stay application, of the costs that might be awarded against him if the stay application was unsuccessful.
(3)They advised him that it would be more beneficial for him to seek a stay of the Queensland proceeding, without apprising him of the risks of the application being unsuccessful.
[18] As far as the New Zealand proceeding is concerned, Mr Skelton says that the statement of claim prepared and filed by Norris Ward was deficient in the following respects:
(1)The statement of claim failed to include all grounds sought to be relied upon by Mr Skelton to justify his cancellation of the 2010 Licence.
(2)An amended statement of claim later prepared by Norris Ward pleaded unnecessary and unsustainable implied terms.
(3)The amended statement of claim sought proprietary remedies, but the property in issue had been dealt with by non-parties.
(4)The amended statement of claim pleaded breach of the Fair Trading Act 1986 (the FTA), but this was not sustainable.
[19] Mr Skelton says that Norris Ward failed to remedy these deficiencies prior to the trial of the New Zealand proceeding, and the trial had to be adjourned shortly after it commenced on 30 March 2015.
[20] Thereafter, Mr Skelton says that Norris Ward refused to continue to act for him unless and until he agreed to release it from any and all claims arising out of the firm’s services.
[21] By way of set-off or counterclaim, Mr Skelton alleges breach of contract, negligence, and breach of fiduciary duty on the part of Norris Ward. He says that he has suffered losses as a result of Norris Ward’s breaches, as follows:
(1)His costs in relation to the failed application to stay the Queensland proceeding.
(2)Costs awarded against him on the unsuccessful application to stay the Queensland proceeding (estimated at $190,000).
(3)Wasted costs arising from the adjournment of the trial of the New Zealand proceeding. Between the adjourned trial and the termination of Norris Ward’s retainer, costs of $41,059.15 were charged by Norris Ward (excluding disbursements), notwithstanding an agreement Mr Skelton had reached with Mr Samuel Hood of Norris Ward and Mr Elliott that he would not be charged for further time spent on the case from the date of the adjourned trial until the trial reconvened.
(4)Costs awarded against Mr Skelton in favour of Z487 on the adjournment of the trial of the New Zealand proceeding.
(5)Wasted costs incurred as a result of Mr Skelton having to engage other counsel, as a result of Norris Ward wrongly demanding a release from any claims as a condition of it agreeing to act further for him. Mr Skelton says that he incurred costs of $233,922.40 (including GST) in relation to obtaining alternative representation.
[22] On each of his counterclaim causes of action, Mr Skelton seeks an inquiry into damages under r 16.2 of the High Court Rules 2016. He estimates his damages to be in excess of $400,000.
Norris Ward’s reply and statement of defence to counterclaim
[23] Norris Ward denies that there was any agreement that it would not charge any further time from the date of the adjourned trial of the New Zealand proceeding until the trial reconvened.
[24] In respect of the Queensland proceeding, Norris Ward says that Mr Skelton instructed a Queensland solicitor to provide relevant services.
[25] It admits it owed fiduciary duties to Mr Skelton, but says that those duties were governed by its terms and conditions, by the provisions of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008, and by the common law.
[26]It denies any liability to Mr Skelton on his counterclaims.
Adjournment of the trial of the New Zealand proceeding – Minute of Lang J
[27] The events on the first morning of the (scheduled four day) trial of the New Zealand proceeding were described in a Minute of the trial Judge, Lang J, dated 30 March 2015.
[28] His Honour described the deficiency in Mr Skelton’s statement of claim, in the following terms:
[4] [Mr Skelton] originally proceeded on the basis that he had given [Z487] notice of several specified breaches of a contract. When [Z487] failed to remedy those breaches, [Mr Skelton] elected to terminate the contract. The briefs of evidence that [Mr Skelton] has served deal not only with the alleged breaches identified in the notice, however, but also with other alleged breaches. These are said to have occurred prior to the date of termination, but [Mr Skelton] maintains he had no knowledge of them at that point. As currently pleaded, however, the current version of the statement of claim does not cover this aspect of [Mr Skelton’s] claim. Rather, it deals only with the fact that [Z487] failed to remedy the breaches identified in the notice.
[29] Counsel for Z487 strongly resisted any suggestion that Mr Skelton be permitted to amend his statement of claim to address this deficiency.
[30] Lang J recorded that he asked Mr Elliott to consider whether he wished to proceed with the trial based on the current pleading, or whether an adjournment would be sought so that the statement of claim could be amended to cover the additional allegations on which Mr Skelton now wished to rely. Having taken instruction, Mr Elliott advised the Judge that an adjournment of the trial was sought, so that the pleadings could be amended.
[31] Lang J granted the application to amend the statement of claim, and vacated the fixture. A new date was allocated for the resumption of the trial in August 2015, and directions were given for the filing of amended statements of claim and defence, and additional briefs of evidence.
[32] Lang J accepted that it was “highly unfortunate” that the shortcomings in Mr Skelton’s statement of claim had not been identified earlier. The procedural background leading up to the trial had mitigated the situation to some extent,2 but the “distractions in the process leading up to the trial” did not provide a ready explanation for the fact that a significant shortcoming in Mr Skelton’s pleadings was not discovered until very late in the piece.
[33] His Honour was satisfied that the late identification of the problem with the pleadings was a fact that justified an award of increased costs. Mr Skelton was also required to indemnify Z487 in respect of its counsel’s travel costs.
Evidence for Norris Ward in support
[34] Mr Hood, the managing partner of Norris Ward, provided an affidavit in support.
[35] Mr Hood said that, from the outset, Mr Skelton was adamant that Mr Lye, the controlling force behind Z487, had breached the Licences. However his concern was simply to have the Licences terminated; he did not believe that he would ever get any money out of Z487, and that was not his goal.
[36] Mr Hood explained that Z487 filed the Queensland proceeding when Mr Skelton terminated the 2008 Licence. It sought various remedies, including a declaration that the 2008 Licence remained on foot. Mr Skelton wanted all the
2The proceeding had been dealt with in a truncated manner, designed to accommodate the parties’ wish for an early trial. Mr Lye had effectively disengaged from the proceeding. He was not present at the telephone conference in December 2014 when the 30 March 2015 trial date was allocated, and it was not until some stage in February 2015 that Mr Lye instructed counsel. Up to that stage, the Court and Mr Skelton were proceeding on the basis that there was a realistic possibility that the trial might proceed by way of formal proof.
disputes resolved in New Zealand, as he suffered from medical difficulties that would prevent him travelling to Australia.
[37] On 5 February 2014, Mr Skelton engaged solicitors in Australia to seek to have the Australian claim moved to New Zealand. The Australian solicitors forwarded a Terms of Engagement letter to Mr Skelton.
[38] Although the 2008 Licence provided that the law of Queensland was the governing law, and Queensland the forum state, Mr Skelton believed that he had been fraudulently induced into signing the 2008 Licence. He believed that if he could prove fraud on the part of Z487 he could overturn the exclusive Queensland jurisdiction clause in the 2008 Licence. Following his instructions, his Australian solicitors sought to overturn the Queensland jurisdiction clause on that basis.
[39] Mr Hood said that the Judge hearing the stay application in the Queensland proceeding found that Mr Skelton’s evidence was not credible, and that he had not established misrepresentation or fraud.
[40] The New Zealand proceeding commenced when Mr Skelton applied to this Court for an injunction to restrain Z487 from dealing with his kiwifruit cultivars, and a declaration that he had validly terminated the 2010 Licence. Z487 applied to stay the New Zealand proceeding, but on 8 April 2014 Lang J held that the High Court of New Zealand was the more convenient and cost-effective forum for resolving the claims under the 2010 Licence.3
[41] Mr Hood described Z487 as a “determined litigant”. There were difficulties over agreeing categories of documents for discovery in the New Zealand proceeding, and when discovery was provided, there were thousands of double-ups and a large number of irrelevant documents. There were also claims by Z487 for confidentiality in respect of a large number of its discovered documents. Z487 then terminated its New Zealand lawyers’ retainer, and it effectively withdrew from the New Zealand proceeding in late December 2014. Mr Lye of Z487 did not respond to communications from the Court, and Z487 did not participate in the 19 December
3 Skelton v Z487 Ltd [2014] NZHC 707 at [78].
2014 telephone conference at which the March 2015 fixture was allocated. In those circumstances, Lang J offered Mr Skelton the choice of moving to a hearing on outstanding discovery issues, or obtaining an early trial date. Mr Skelton opted for the early trial date.
[42] The allocation of the 30 March 2015 trial date required Norris Ward to undertake a significant amount of work in a very tight timeframe. Mr Skelton was aware of that, and aware that there were risks associated with it.
[43] At the first day of the trial of the New Zealand proceeding, it became clear that the Court would not allow Mr Skelton to rely on evidence discovered post-termination. There was a break in the hearing to allow Mr Skelton to consider his options. During the break Mr Hood and Mr Elliott discussed with Mr Skelton the alternatives of seeking an adjournment to amend the claim, or continuing with the trial on the basis of the existing statement of claim. Mr Skelton elected to seek an adjournment.
[44] After the adjournment was granted, Mr Skelton asked Mr Hood if someone had “stuffed up”. Mr Hood said that he replied that nobody had stuffed up, but that the outcome was one that could occur when a party opted to go to an early trial without full discovery.
[45] Mr Hood came to the view that Norris Ward could not continue to act for Mr Skelton if he considered that he had a claim against the firm. On 6 May 2015, Mr Hood wrote to Mr Skelton setting out the basis on which Norris Ward would be prepared to continue acting for him. In the letter, Norris Ward said:
In relation to the future fees, we will continue to invoice you, however we do not expect immediate payment unless funds become available to you (for example, the sale of a particular cultivar) from either trading or asset sales.
[46]The letter recommended that Mr Skelton obtain independent legal advice.
[47] Mr Skelton then consulted Mr John O’Shea of O’Sheas Law. Some correspondence followed between Norris Ward and O’Sheas Law, but no agreement was reached. Norris Ward maintained the position that it would require a claims waiver from Mr Skelton if it were to continue to act for him.
[48] Mr Hood said that he tried to negotiate a fair basis on which Norris Ward would continue to act for Mr Skelton. He said that he sought the claims waiver because he considered that it would have been inappropriate, and contrary to his ethical obligations to Mr Skelton, to continue acting if Mr Skelton felt that the firm had been negligent.
[49] On 16 June 2015, O’Sheas Law wrote to Norris Ward advising that Mr Skelton was not prepared to accept the arrangements Norris Ward had put forward in respect of the continuation of the New Zealand proceeding. They advised that Mr Skelton had instructed Meredith Connell to act for him, and they asked that Norris Ward send its file on to Meredith Connell.
[50] Mr Skelton complained about the “claims waiver” condition to the Standards Committee, and later to the LCRO. Both of those bodies upheld Norris Ward’s decision to seek a waiver.
[51] Mr Hood provided copies of Mr Skelton’s complaint to the Standards Committee, and responses to the complaint provided by both Norris Ward and Mr Elliott. He also attached copies of the Standards Committee’s decision declining to act on the complaint and the LCRO’s decision upholding the views of the Standards Committee.
[52] Mr Hood denied that there was any agreement with Mr Skelton that Norris Ward would not charge for further time incurred after the adjournment of the trial of the New Zealand proceeding on 30 March 2015.
[53] Mr Hood accepted that Mr Skelton sought Norris Ward’s advice after the Queensland proceeding had been issued by Z487. Mr Hood sent Mr Skelton an email dated 23 January 2014, in which he said:
… my view is that you should not apply to transfer the proceeding to NZ because you are likely to lose such an application:
…
4. therefore my view is that if you apply to have the proceeding transferred to NZ (which application would cost somewhere in the vicinity of $10,000), an Australian Court will decline to transfer the proceeding to NZ … The money spent on applying to transfer the proceeding is better spent on defending Z487’s claim.
[54] Mr Hood said that Mr Skelton did not take that advice, because he was adamant that he could not travel to Australia for medical reasons, and he wanted all disputes to be resolved in New Zealand. He also considered he could prove that Z487 had acted fraudulently.
[55] In response to Mr Skelton’s allegation that Norris Ward did not provide detailed advice on the likely costs he would incur in the Queensland proceeding, Mr Hood said that costs estimates were provided by Mr Skelton’s Queensland lawyers. In their letter of engagement, the Queensland lawyers estimated that the costs of considering (i) jurisdictional issues and (ii) Mr Skelton’s prospects of success in defending the Queensland proceeding, would be $5,000 to $50,000, depending on whether a QC was instructed. On the issue of Mr Skelton’s potential liability for costs to Z487 if he was unsuccessful with his stay application, cl 34 of the Queensland lawyers’ terms of engagement, stated:
In some types of litigation … it is common for the court/tribunal to order an unsuccessful party to pay the costs of the successful party … if you are unsuccessful in the litigation, you may be ordered to pay the other party’s legal costs. If that happens, it is impossible to estimate with any degree of certainty the amount of those costs you will be required to pay.
[56] The Queensland lawyers also provided Mr Skelton with a copy of their Commercial Litigation Booklet. That booklet provided advice that costs (in Queensland court proceedings) generally follow the event, and that “this means that the unsuccessful party will be ordered to pay the legal costs of the successful party”.
[57] In response to Mr Skelton’s contention that Norris Ward advised him that it would be more beneficial for him to seek a stay of the Queensland proceeding, but failed to apprise him of the risks associated with that course if the application were unsuccessful, Mr Hood repeated that he initially advised Mr Skelton not to seek the stay. When Mr Skelton nevertheless instructed Norris Ward to proceed, and instructed the Queensland lawyers, he was given advice by the Queensland lawyers about the
risk that any application might not be successful. That advice included the following statement in the Commercial Litigation Booklet:
Litigation is inherently risky and uncertain … ultimately there is no certainty because of the adversarial nature of the process.
[58] On 17 April 2014, Mr Elliott sent Mr Skelton an email in which he set out several options for Mr Skelton’s consideration. Based on a number of factors set out in the email, Mr Elliott did advise Mr Skelton that it would be beneficial to seek a stay of the Queensland proceeding. One of the options recommended by Mr Elliott was:
2.Pursue NZ action and argue stay application in Australia (hearing in the next 3 to 4 months);
[59] Mr Hood said that his experience was that Mr Skelton was reluctant to listen to advice about the risks involved with litigation. He said that on several occasions both Norris Ward and Mr Elliott tried to explain to Mr Skelton the risks involved with this position. However, his response was usually that Mr Lye was a “crook”, and that it was a simple matter of terminating because of the breaches.
[60] In respect of the New Zealand proceeding, Mr Hood said that Norris Ward repeatedly advised Mr Skelton from very early in the piece that the Licences were so badly worded and one-sided against him, that enforcement would be difficult. That necessitated looking at several options, such as agency and claims under the FTA. Mr Hood also advised Mr Skelton that he would need to plead several implied terms, although not all of those would be likely to be accepted by the Court.
[61] Mr Hood produced an email from Mr Elliott dated 20 October 2014, setting out some of these difficulties. Mr Elliott advised in this email that it would be necessary to ask the Court to imply certain terms into the agreements, or alternatively argue that Z487 was acting in breach of obligations owed to Mr Skelton as his agent. Mr Elliott’s strong recommendation was to approach the matter on three levels:
(1)To contend that Z487 was an agent, and therefore required to act with transparency and loyalty towards Mr Skelton.
(2)To contend in the alternative that Z487 owed fiduciary duties to Mr Skelton, because of his reliance on Z487.
(3)Further in the alternative, to contend that Z487 owed implied duties of good faith and/or that it was required to take adequate steps to make the agreement work properly. That would necessarily have included an obligation not to do anything inimical to the licensing of Mr Skelton’s varieties.
[62] Mr Elliott expressed the view that it was important to have a series of fallback positions at trial, and not put all eggs in one basket. Mr Skelton might not succeed on all of the arguments, but they would provide important context, and set the scene for what Mr Skelton’s counsel would say about breach by Z487.
[63] Mr Hood said that Norris Ward sought and obtained an opinion from Peter Watts QC on available restitutionary remedies. Mr Watts considered that it was possible to obtain such a remedy. But Mr Skelton was never told that all or any of the arguments referred to above would succeed.
[64] In respect of costs incurred by Mr Skelton between the adjournment of the trial of the New Zealand proceeding on 30 March 2015 and the termination of Norris Ward’s retainer in June 2015, Mr Hood said that the costs charged in that period covered a defended discovery application, appearance at a telephone conference, and amending the statement of claim. Mr Skelton instructed Norris Ward to undertake that work. At that time, he had advice from O’Sheas Law and he could have chosen to seek a longer adjournment of the trial if he had wished, to allow another lawyer to come up to speed.
[65] Mr Hood said he could not understand how the costs of Mr Skelton’s new counsel could be as high as $233,922.40. He suggested that the majority of the costs must relate to additional services carried out for Mr Skelton, to advance his position beyond the point to which Norris Ward had taken it. A complicated settlement agreement was negotiated and agreed since Norris Ward’s retainer was terminated,
and the costs of that would have been incurred by Mr Skelton regardless of the alleged breaches by Norris Ward.
[66] Finally, Mr Hood said that the settlement eventually agreed between Mr Skelton and Z487 was similar to two previous settlement offers made to him, one following the Queensland proceeding stay hearing and the other in the course of a mediation on 26 November 2014.
Evidence for Mr Skelton in opposition
Mr Skelton
[67] Mr Skelton said that he was a horticulturist, and bred various varieties of kiwifruit in New Zealand. He would then enter into licencing arrangements with parties who would market and sell the kiwifruit. They would pay royalties to him.
[68] Mr Skelton referred to the 2008 Licence and the 2010 Licence. He said that Z487 was withholding royalties due to him under the Licences, and had also breached the Licences. He wanted to terminate both Licences, and he sought advice about that from Norris Ward.
[69] The Queensland proceeding was commenced by Z487 in January 2014, and Norris Ward’s litigation team then became involved for Mr Skelton. Norris Ward recommended commencing proceedings in this Court, seeking a declaration that Mr Skelton had validly terminated both the 2008 Licence and 2010 Licence.
[70] It was Norris Ward who advised that Mr Elliott should be retained. He was described as an expert on plant variety rights, and his expertise would be required to deal with the proceedings. Norris Ward made it clear that they would not deal with the dispute without the involvement of Mr Elliott.
[71] Mr Skelton said that he told Norris Ward very early on that he could not afford significant legal fees. Mr Hood told him that an injunction would cost $30,000 to
$50,000 if a QC was engaged, and Mr Skelton replied that he had savings of $70,000.
He told Mr Hood that he could proceed on that basis. Mr Elliott also understood from the outset that Mr Skelton was short of money.
[72] Mr Skelton acknowledged receiving his Australian solicitors’ terms and conditions with their engagement letter. However Mr Hood and Mr Elliott continued to provide advice to him in relation to the Queensland proceeding, and both were his primary points of contact in relation to the Queensland proceeding. The advice given to him in relation to the management of the Queensland proceeding and the New Zealand proceeding was largely given by Mr Hood and Mr Elliott, and he understood that they gave instruction to his Australian solicitors. Mr Skelton did not have a lot of direct correspondence with his Australian solicitors.
[73] Mr Elliott was admitted to practise in Queensland, and Mr Skelton recalled that on one occasion Mr Elliott flew to Queensland to appear in the Supreme Court of Queensland for him, arguing an application for an adjournment.
[74] Mr Skelton acknowledged that Mr Hood’s early advice was that he should not apply to transfer the Queensland proceeding to New Zealand, because he was likely to lose. He acknowledged that there was an exclusive Queensland jurisdiction clause in the 2008 Licence, under which disputes were to be submitted to the Australian courts, and that this clause was drawn to his attention by Mr Hood. He said that Mr Hood told him that the cost of an application to transfer would be approximately
$10,000.
[75] However, the strategy changed after Mr Elliott became involved. Mr Elliott considered that a challenge to the jurisdiction of the Queensland Court was easily justified. However, no further estimate of costs was provided to Mr Skelton.
[76] Mr Skelton explained the issue about alleged fraud in the signing of the 2008 Licence. He said that Mr Lye altered the choice of jurisdiction clause in the 2008 Licence. The draft form Mr Skelton signed and sent to Mr Lye nominated New Zealand as the forum for the resolution of disputes, but Mr Lye returned the agreement to Mr Skelton for signature without pointing out that he had changed the jurisdiction clause to nominate Australia as the forum for resolving disputes. Mr Skelton told Mr
Hood and Mr Elliott about this, and both advised him to challenge the jurisdiction of the Queensland Supreme Court, to try to have everything dealt with in New Zealand.
[77] The application to stay the Queensland proceeding was lost because there was not sufficient evidence that Mr Lye had misrepresented the 2008 Licence. At the stay hearing, Mr Lye said that he had not been in New Zealand on a particular date, when Mr Skelton believed he had. Mr Lye produced his Australian passport as proof of his whereabouts at the relevant time, but Mr Skelton later discovered that Mr Lye also had a New Zealand passport. The New Zealand passport was never produced.
[78] Mr Skelton said he was flabbergasted when he learned that the costs awarded against him on the unsuccessful stay application would be in the region of $190,000. He said he had no warning beforehand that he could be exposed to that sort of liability. He is now aware, but was not then aware, that awards of costs in Queensland are dealt with differently from the New Zealand courts. In Queensland, a costs assessor is appointed to review and confirm costs.
[79] Mr Skelton did object to Z487’s costs claim, but the cost of pursuing the objection would have been AUD$10,000. Z487’s costs entitlement on the unsuccessful stay application was later factored into the settlement negotiated between Mr Skelton and Z487.
[80] Turning to the New Zealand proceeding, Mr Skelton agreed that in late 2014/early 2015 he wanted to progress the case to a hearing as quickly as possible. He said that issues with the statement of claim were only raised with him a week before the commencement of the hearing. Mr Hood sent him an email dated 23 March 2015, referring to a teleconference convened that day by Lang J. The Judge directed that the trial would deal only with liability, and not quantum, and the Judge would not allow an amendment to the statement of claim (Mr Hood explained that he wanted to amend the statement of claim to include an allegation that Z487 had repudiated the Head Licences by ignoring its obligations since termination). Mr Hood went on to advise that any amendment to the statement of claim at that stage would require an application to adjourn the 30 March 2015 fixture. Given that Mr Skelton had Z487 on the back foot, and the parties were working to a very strict timetable, Mr Hood assumed that it
would not be in Mr Skelton’s financial interest to delay the trial by seeking an adjournment. Mr Hood said that the trial would proceed “on the basis whether the determination in 2013 was effective”. If Mr Skelton succeeded on that, he would be entitled to damages arising from Mr Lye’s conduct in continuing to act as if Z487 was licensed. The advantage would be that the trial issues would be more focussed and manageable within the time allocated for the trial. Mr Skelton and his counsel would be better able to focus on the key issue of breach.
[81] Both Mr Hood and Mr Elliott advised Mr Skelton that if he wanted the trial to go ahead, he had to accept a few “crinkles” with the statement of claim. That would just mean that the focus at the hearing would be on obtaining confirmation that the 2010 Licence was validly terminated.
[82] Mr Skelton said he was really unhappy when Mr Hood and Mr Elliott both recommended during the break in proceedings on the first day of the trial that the hearing should not proceed further, because they would only be able to rely on part of the overall case against Z487. He described a discussion with Mr Hood and Mr Elliott during the break, when both lawyers insisted that the Judge had “got it wrong”, but said that Mr Skelton was likely to lose if he continued.
[83] Mr Skelton said that he told Mr Hood and Mr Elliott during the break that he much preferred to continue, but if they wished to delay the trial they would need to correct the mistakes and not resume charging fees until the morning of the resumed trial. Mr Hood and Mr Elliott went away and discussed things, and came back and accepted that proposal. They said that they would pay for all of the costs incurred as a result of the adjournment, including costs awarded to Z487 and the (wasted) costs of video conferencing that had already been incurred. That agreement was made orally, in a corridor at the Court.
[84] The costs Mr Skelton had to pay to Z487 as a result of the adjournment of the trial came to $9,462.50. The wasted cost of the video conferencing came to
$10,499.08. Those costs were charged to Mr Skelton by Norris Ward, and were included within a statement the firm sent to him on 13 October 2015.
[85] After the adjournment, Norris Ward continued to act. They incurred time valued at $34,247 (excluding GST) between 1 April 2015 and 16 June 2015. Mr Elliott incurred time of $6,260 (excluding GST), and there was a further $414 incurred by a junior barrister, Mr McQueen.
[86] There was some correspondence between Mr Skelton and Norris Ward after 30 March 2015 over a possible conditional fee agreement to take Mr Skelton through to the completion of trial in the New Zealand proceeding, but no arrangement was reached.
[87] Mr Skelton wrote to Mr Hood on 22 April 2015, raising concerns about the costs that had been incurred to date. He said in his email that he seemed to have been given a lot of faulty advice. He also contended that the Australian legal representatives “you appointed” were not up to scratch, noting that that view was shared by Mr Hood.
[88] Mr Skelton contrasted the early costs estimate (up to $50,000 with the involvement of a QC) with the overall fees charged to him to date - $929,160. Mr Skelton also said he was very concerned about Norris Ward wanting him to absolve them of all liability.
[89] With respect to the Queensland proceeding, Mr Skelton denied that he instructed Mr Hood or Mr Elliott to take steps contrary to their recommendations. He accepted that he was concerned about his ability to travel to Australia, and he told them of that concern. Norris Ward and Mr Elliott both recommended that he seek a stay of the Queensland proceeding.
[90] Mr Skelton said that Mr Hood and Mr Elliott continued to provide him with advice about the Australian proceeding after the Australian firm was instructed, and it was Mr Hood and Mr Elliott who decided on the best courses of action, both in the Queensland proceeding and the New Zealand proceeding. He said that there was no discussion about the risks of a substantial costs award being made against him.
[91] Mr Skelton said that he paid $129,300.78 to his Australian solicitors. He has been unable to separate out Mr Elliott’s accounts for his appearances in Queensland, but he noted that Mr Elliott’s invoice for September 2014 alone (which included the Australian hearing on 29 and 30 September 2014) totalled $38,314.50 (including GST). That did not include any of the time Norris Ward spent on the Queensland proceeding, nor any of Mr Elliott’s time prior to September 2014. Mr Skelton estimated that it was likely that in excess of $200,000 was incurred by him for costs in relation to the Queensland proceeding.
[92] Mr Skelton noted that, in Mr Elliott’s letter to the Law Society, Mr Elliott said that he recommended one approach, but another lawyer could well have recommended another approach. Mr Elliott also said in his letter that Mr Skelton knew the upsides and downsides, and that transferring the Queensland proceeding to New Zealand would put him in a strong position when he could not travel to Australia. In response to those statements, Mr Skelton said that if he had known of the risk of incurring such high costs on the stay application, he would have told Mr Hood and Mr Elliott that he could not afford to do it (they already knew that, because he had made them aware of his financial limitations). The “downsides” were never raised with him.
[93] By the time the hearing of the New Zealand proceeding was adjourned on 30 March 2015, all of Mr Skelton’s resources were largely depleted. Norris Ward also knew that.
[94] In response to Mr Hood’s contention that Mr Skelton eventually settled his dispute with Z487 on terms that did not require him to pay the costs award on the unsuccessful stay application, Mr Skelton said that the settlement agreement with Z487 included provision for resolution of all costs, and that his existing liability to pay Z487 the costs award was a factor in the negotiations leading to the ultimately concluded agreement. Only limited funds were returned to Mr Skelton under the settlement agreement with Z487. These were split between the parties, and Mr Skelton’s portion of $30,000 was paid to Meredith Connell.
[95] Mr Skelton confirmed that he has incurred costs of $233,922.40 with Meredith Connell. He has paid $182,755.95 to that firm, but has not paid the balance because of his financial position.
[96] Mr Skelton rejected Mr Hood’s suggestion that the eventual settlement reached with Z487 was similar to a proposal made to him at the mediation.
Ms Fionnghuala Cuncannon
[97] Ms Cuncannon is a partner in the commercial litigation team at Meredith Connell. She was instructed by Mr Skelton to take over the conduct of the litigation with Z487, in June 2015.
[98] Following her instruction, Ms Cuncannon reviewed copies of documents obtained from Mr Skelton and from the Court file in the New Zealand proceeding. She formed the view that there were deficiencies in the way the case had been pleaded and the evidence briefed. She did not believe that those deficiencies could realistically be addressed in the time available time before the trial resumed in August 2015. She sought Mr Skelton’s instructions to apply to adjourn the trial.
[99] An initial application for adjournment was declined by Lang J following a telephone conference on 25 June 2015. The Judge considered that every effort should be made to ensure that the August 2015 fixture went ahead. However, if Mr Skelton’s solicitors considered that their client’s position was irretrievable, leave was reserved to make a further application for adjournment, supported by affidavit evidence.
[100] A further application for adjournment was made on 29 June 2015. Further information had been made available to Ms Cuncannon by the solicitors acting for Z487, and Ms Cuncannon considered that substantial changes would be needed to the case as pleaded in order for justice to be done between the parties. She expressed the view that the amendments made by Norris Ward after the adjournment on 30 March 2015, and the evidence then briefed, were inadequate. She sought the Court’s leave to file a fourth amended statement of claim, and to add two additional defendants (one of whom was Mr Lye).
[101] On 15 July 2015, the parties to the New Zealand proceeding agreed to adjourn the trial. A joint memorandum of counsel was filed, and the resumed hearing scheduled for August 2015 was vacated.
[102] Ms Cuncannon’s concerns over the pleadings filed by Norris Ward including the following:
(1)Mr Lye was sole director of two companies. One of them was Z487, and the other was Global Plant IP Pty Limited (Global Plant). Funds Z487 ought to have accounted to Mr Skelton for had been deposited in Global Plant’s bank account. Despite that, Global Plant had not been joined as a defendant. Thus the party from whom proprietary remedies had been sought in the statement of claim had never had the money, and the party that did have the money was not named as a defendant.
(2)The statement of claim sought to imply terms into the 2010 Licence, imposing fiduciary obligations on Z487. But Z487 was already a fiduciary, given the principal-agent relationship between Mr Skelton and Z487. The proposed implied terms were not necessary to give business efficacy to the 2010 Licence.
(3)Most of the representations relied on in the cause of action Norris Ward had pleaded under the FTA were made outside New Zealand, in relation to services performed outside New Zealand. They did not fit within the limited extra-territorial application of the FTA.
(4)A cause of action had been pleaded alleging conversion occurring in South Africa, but expert evidence on the law of South Africa had not been briefed (as required by the “double actionability” requirement for torts committed in other countries).
(5)Forensic accounting evidence was needed, but the work that had been done failed to reconcile invoices with bank statements demonstrating whether money had been paid and, if so, where it had gone.
(6)Further particulars of the alleged breaches by the defendants, identifying each of the individual contracts relied on, had not been provided.
[103] Ms Cuncannon appears to have put significant time and effort into achieving the settlement, including travelling to both Wellington and Sydney to meet with Mr Lye’s lawyers. The settlement reached appears to have reflected a fair degree of commercial complexity in the activities Mr Skelton and Mr Lye would each be able to undertake going forward.
[104] Ms Cuncannon confirmed that Meredith Connell sent Mr Skelton two invoices, totalling $233,922.40. She confirmed that Mr Skelton has paid all but $50,000 of that sum.
[105] Ms Cuncannon assessed that she spent 204 hours on matters concerned with the settlement. A further 71.3 hours were spent reviewing certain contracts that should have been provided on discovery by Mr Lye and/or Z487, but were only made available for inspection in the course of a due diligence process that Ms Cuncannon carried out after settlement had been agreed in principle.
Norris Ward’s evidence in reply
Mr Hood
[106] Mr Hood denied telling Mr Skelton that an injunction would cost a maximum of $30,000, or up to $50,000 if a QC was engaged. He also denied Mr Skelton’s evidence that no further estimate of costs was provided.
[107] Mr Hood said that he tried to be as transparent as possible about his firm’s likely costs. At a meeting with Mr Skelton on 11 February 2014 he told Mr Skelton that it would cost at least tens of thousands of dollars if not $100,000, to obtain an injunction against Z487. Just filing the application would probably cost $15,000 to
$20,000. Mr Skelton told him to go ahead. Mr Skelton said that he had just subdivided a property, and he had the cashflow to go ahead. Mr Hood recommended that Mr Elliott be instructed, and Mr Skelton asked him to approach Mr Elliott.
[108] Mr Hood said that he would never have mentioned $30,000 to $50,000 as a “maximum” amount for legal costs. Indeed, on 22 February 2014 he emailed Mr Skelton and said that Mr Elliott and he considered that injunction costs would be “closer to $50,000 plus GST and disbursements, if not higher”. He told Mr Skelton that the proceedings were very complex, and he was not sure how much Mr Elliott would charge. He told Mr Skelton “this is going to be a very expensive exercise”.
[109] The injunction application was filed, but the matter was overtaken by the jurisdictional dispute and other issues. Mr Hood said that he would have had no idea of the potential cost of the Queensland proceeding. On 25 July 2014, he emailed Mr Skelton and told him that the estimate he had given earlier in the year only related to the injunction application, and had been overtaken by the jurisdiction issues and discovery.
[110] Mr Hood sent another email to Mr Skelton on 26 September 2014. He said that he was not in a position to give Mr Skelton an estimate of future costs, but told him that the firm’s work in progress was around $30,000, and that Mr Elliott’s time would be greater.
[111] Mr Hood wrote again to Mr Skelton on 12 November 2014, shortly before the scheduled mediation. He told Mr Skelton that it was “impossible to predict what the costs will be”, but if the case went to trial he probably wouldn’t get any change out of
$300,000 (plus GST and Court fees). He said that the actual costs of going to trial could be even greater than that. On 26 February 2015 he told Mr Skelton: “I hate to guess what the next two months will cost, but I am betting it will be at least $150,000 (plus GST)”.
[112] Mr Hood said that he could not recall Mr Skelton complaining about those estimates or saying that he could not afford the fees.
[113] Mr Hood acknowledged that he and Mr Elliott were involved in the Queensland proceeding. That made sense, as they could utilise material already prepared for the New Zealand proceeding. However, when it came to matters of
Queensland law, they deferred to Mr Skelton’s Australian solicitors, who advised Mr Skelton directly. Mr Hood said:
I did not, and was not asked to, and could not provide Mr Skelton with advice in regard to Queensland law or civil procedure, including costs. I am not qualified to practise in Australia. I was and remain largely unaware of how the Queensland Court deals with costs issues. I could not be expected to competently advise Mr Skelton on costs in Queensland. This is exactly why I advised Mr Skelton to engage a lawyer in Queensland to advise him on these types of issues.
[114] Mr Hood produced an email from Mr Skelton’s Australian solicitors dated 26 March 2014, in which the Australian solicitors said:
… we will have a good chance to stay it here and Lye may even decide to consent to it …
[115] The stay application in Queensland was set down for a one-day hearing. On 2 May 2014, Mr Elliott wrote to Mr Skelton’s Australian solicitors expressing the view that three days would be required, and saying that Mr Hood agreed with the time estimate. He also advised that Mr Skelton would need to give evidence by video link from Hamilton.
[116] Mr Skelton’s Australian solicitors then raised the possibility of withdrawing the stay application, although they noted that a late withdrawal would probably expose Mr Skelton to significant costs. Mr Skelton himself picked up on that – in an email dated 2 May 2014 he asked his Australian solicitors what amount they anticipated as the “significant” costs that would be payable on a withdrawal. The Australian solicitors replied the same day, saying “twenty-thirty thousand”.
[117] On the costs agreement Mr Skelton says was reached at the Court on 30 March 2015, Mr Hood said there was no discussion or agreement with Mr Skelton on that day or at all. He said that on the drive back to his office from the Court on 31 March 2015, Mr Skelton told him he would pay Norris Ward’s outstanding invoices, and that beyond such expenses, he only had a further $150,000 for future trial costs. Mr Hood produced a copy of a file note dated 30 March 2015, recording his conversations with Mr Skelton on that date. The note recorded that Mr Skelton asked him whether Mr Elliott’s services would still be required. Mr Hood told him that they would, and that
Norris Ward would have to come to some sort of arrangement with Mr Skelton to keep his costs down. The file note confirms that Mr Skelton said that he had previously received an indication of $150,000 (plus GST) on top of the fees he already owed, and that he would be able to pay that amount in the future. The note recorded that Mr Hood said that he would talk to his partners and Mr Elliott and get back to Mr Skelton.
[118] Mr Hood said that in the correspondence after 30 March 2015, Mr Skelton never referred to any alleged agreement that Norris Ward and Mr Elliott would not charge fees until the morning of the resumed trial. On the contrary, he offered to pay significant sums of money to Norris Ward for future work.
[119] Mr Hood said that he did not send an invoice to Mr Skelton between 30 March 2015 and October 2015 because he was waiting to finalise the basis on which the fees would be charged. In the meantime, Norris Ward continued to incur significant costs in advancing the proceedings against Z487, including through a defended discovery application. He said that he stayed in touch with Mr Skelton’s independent solicitors in respect of this work, and that he had no idea Mr Skelton would refuse to pay for it. Indeed, O’Sheas Law told him that Mr Skelton had at least $130,000 to pay for Norris Ward’s ongoing services.
[120] In response to Ms Cuncannon’s affidavit, Mr Hood said that, in April 2015, Mr Skelton was very clear that he did not want a “Rolls Royce” approach to the proceeding – he was happy with a minimalist approach, and he understood that he would need to leave some good claims aside (for example, a claim against Mr Lye personally). He repeatedly told Mr Hood that his main priority was getting a Court determination that he had validly terminated the Licences. He was not interested in joining Mr Lye or Global Plant because of the costs.
[121] On the alleged deficiencies in the pleadings in the New Zealand proceeding, Mr Hood said that the various options were explored with Mr Skelton, including in emails from Mr Elliott dated 24 February and 16 October 2014. There was also an email from Mr Hood to Mr Skelton in October 2014, and further emails in April 2015. Mr Hood said that the various supplementary causes of action (implied terms in the Licences, breach of fiduciary duty and/or breach of a duty of good faith) were justified.
He referred to written advice received from Mr Elliott on 20 October 2014, in which the need for additional causes of action was traversed. The main problem identified by Mr Elliott was that the Licences (prepared by Mr Lye) were badly worded, and biased towards Mr Lye.
[122] Mr Hood said that if Norris Ward had continued to act for Mr Skelton the firm would have been ready for trial in August 2015. Its costs would have been significantly below Meredith Connell’s fees of approximately $200,000.
Mr Elliott
[123] Mr Elliott said that no recommendation was in fact made to challenge the jurisdiction of the Queensland Court; rather, the recommendation was to seek to stay the Queensland proceeding while the New Zealand proceeding was progressed. Mr Elliott said in his response to the Law Society complaint that:
We had warned Mr Skelton that the prospects of obtaining a stay were not that good (given that the Supreme Court of Queensland has a track record for not doing so where overseas parties are involved), but they were reasonable. [Mr Skelton] knew the upsides and downsides and gave instructions to proceed.
[124] Mr Elliott said that he researched stay applications heard by the Supreme Court of Queensland, and also sought advice from practitioners in Queensland and other states of Australia. The consensus was that, overall, the Queensland courts were not particularly sympathetic to arguments seeking to oust or limit their jurisdiction. Mr Elliott said that he passed that advice on to Mr Skelton. Mr Skelton was aware of the risks.
[125] Mr Elliott described Mr Skelton’s record keeping as poor, and said that obtaining documents and instructions from him was “time-consuming and unsatisfactory”. That meant that he and Norris Ward had to try to piece things together themselves, as best they could. That took considerable time and added significantly to the cost.
[126] Mr Elliott said that he understood from the outset Mr Skelton had limited funds, that things would have to be done efficiently, and that costs would have to be kept to a minimum. For that reason, Mr Elliott tried to find the quickest and most
effective solution to the problem. He saw Mr Lye as a liability for Mr Skelton, and he agreed with Mr Skelton’s assessment that the sooner he could extricate himself from his arrangements with Mr Lye the better. Mr Elliott’s focus was therefore on quick and effective results, with the principal target being to obtain a declaration that the Licences had been validly cancelled. That remained the prime objective throughout the litigation, and it was approved by Mr Skelton.
[127] Mr Elliott described the early stages of the New Zealand proceeding. Z487 applied for a stay of the New Zealand proceeding on the basis that the Supreme Court of Queensland was the appropriate forum. Lang J dismissed that application, but declined to grant any form of injunction to Mr Skelton. The Judge said that the better course was to case manage the New Zealand proceeding to an early substantive hearing. His Honour indicated that he would assume jurisdiction over the entire dispute, provided the Australian Court concurred in that view.
[128] That seemed a pragmatic and sensible approach to Mr Elliott, but it did require Mr Skelton to seek a stay of the Queensland proceeding while the New Zealand proceeding was pursued. Mr Elliott said that he explained the pros and cons to Mr Skelton at length, and he approved the strategy proposed.
[129] Mr Elliott also considered that Mr Skelton would be at a disadvantage if he was forced to give evidence by video link in the Australian Court. He anticipated that credibility would be a critical issue, and took the view that it was important that Mr Skelton give evidence in front of the trial Judge. He also wanted to maintain a home- town advantage by having the proceedings determined in New Zealand.
[130] Mr Elliott said it became apparent that Mr Lye intended to delay matters as much as he could. He pushed for the Australian Court to assume jurisdiction over the 2008 Licence, and Mr Elliott was required to appear in the Supreme Court of Queensland by video link from Auckland at a directions hearing.
[131] Mr Elliott expressed the strong view that applying for an order staying the Queensland proceeding was justified. There were reasonable prospects of success, and significant potential benefits if the application was successful.
[132] While Lang J was prepared to proceed with a substantive trial of the New Zealand proceeding, dealing only with the 2010 Licence, for the reasons set out above Mr Elliott and Norris Ward had also asked the New Zealand Court to rule on the validity of the termination for breach of the 2008 Licence. A positive result on that issue would effectively dispose of, or at least significantly resolve, all of the most material liability aspects of the case. It would also allow Mr Skelton to say to his licensees that the agreements in New Zealand and Australia had been validly terminated, with the result that Mr Lye had no rights to deal in Mr Skelton’s plant varieties. Mr Skelton could then get his business back on track, which was his primary objective.
[133] Mr Skelton told Mr Elliott on a number of occasions that Mr Lye had no money. He did not expect to get a cent out of Z487 and Mr Lye. What he wanted was to get his plant varieties back so that he could license them himself to a potential future licensee he had lined up.
[134] Mr Elliott rejected Ms Cuncannon’s criticisms of the pleadings in the New Zealand proceeding, including in particular the decision not to add Mr Lye and Global Plant as defendants. Mr Elliott pointed out that neither Mr Lye nor Global Plant were parties to the Licences, and on the issue of the validity of the termination, Z487 was the proper party to join. If Mr Skelton was successful, Mr Lye and Global Plant would, in practical terms, be left without a leg to stand on.
[135] The potential joinder of other parties was discussed with Mr Skelton. Mr Elliott and Mr Hood made it clear that the decision whether to pursue Mr Lye and/or Global Plant was one for Mr Skelton to make. But if he elected to join them, the New Zealand proceeding would be complicated and expensive, as they would need to be served outside the New Zealand jurisdiction. With two parties outside New Zealand, the jurisdictional argument might also swing in favour of Australia.
[136] Mr Elliott said that all options were carefully discussed with Mr Skelton, and that his clear impression from those discussions was that Mr Skelton was fully aware of the risks and benefits of each option.
[137] Addressing the events leading up to the March 2015 trial of the New Zealand proceeding, Mr Elliott referred to the difficulties obtaining discovery from Mr Lye towards the end of 2014, and the December 2014 decision to ask Lang J to set the proceeding down for trial in March 2015, to try to force Mr Lye’s hand.
[138] Notwithstanding the allocation of the trial date, by the end of January 2015 nothing had been heard from Mr Lye for months. It appeared that he would simply ignore any judgment of the New Zealand Court, and that it would be appropriate to start preparing for a formal proof hearing. That was discussed with Mr Skelton at length, and again Mr Elliott’s impression was that Mr Skelton understood the position.
[139] Just over a month before the scheduled trial, Mr Lye resurfaced. He had retained his Australian counsel to represent himself in the New Zealand proceeding, and it became apparent that he intended to defend the claim. That sudden change meant that Mr Elliott and Norris Ward had to prepare for trial in the space of just over a month. That created real pressure.
[140] Mr Elliott and Norris Ward amended the statement of claim to tidy up a couple of issues. Thereafter, there was significant interlocutory activity, including having to deal with the very detailed statement of defence which raised a number of new issues (including alleged deficiencies in Mr Skelton’s termination notice). There were significant remaining problems with Z487’s discovery, and Mr Skelton’s legal team were scrambling to get their discovery documents in order. On numerous occasions in this period, when Mr Elliott and Norris Ward thought their discovery was complete, Mr Skelton found additional documents. Collating and putting documents together for the common bundle was an enormous task, and, as the situation kept evolving, there was a massive bundle of trial documents which counsel tried to refine and limit just before the trial (with only limited success).
[141] Mr Elliott described the disputes with Z487 and Mr Lye as complicated on many different levels. He stood by the recommendations he made throughout, based on the circumstances existing at the time. He noted that most of the decisions about the conduct of the litigation involved judgment calls, and he did not believe that the advice given to Mr Skelton was flawed or erroneous in any way.
[142] Finally, on the alleged fees agreement reached in the corridor of the Court on 30 March 2015, Mr Elliott rejected Mr Skelton’s claim that he and Mr Hood agreed not to resume charging fees until the morning of the resumed trial. Mr Elliott and Mr Hood did not say that there were any mistakes, and they certainly did not say they would not charge any fees until the trial resumed. Mr Elliott agreed that they did say that they would meet any award of costs arising from the adjournment of the trial. There was no acknowledgement about mistakes, no agreement to refrain from charging fees until the morning of the resumed trial, and no agreement to meet the costs of the video conferencing.
Summary judgment applications – legal principles
[143]Rule 12.2 of the High Court Rules 2016 provides:
12.2 Judgment when there is no defence or when no cause of action can succeed
(1)The court may give judgment against a defendant if the plaintiff satisfies the court that the defendant has no defence to a cause of action in the statement of claim or to a particular part of any such cause of action.
(2)The court may give judgment against a plaintiff if the defendant satisfies the court that none of the causes of action in the plaintiff’s statement of claim can succeed.
[144] The proper approach to be taken to a plaintiff’s application for summary judgment was considered by the Court of Appeal in Krukziener v Hanover Finance Ltd, where the Court said:4
The question on a summary judgment application is whether the defendant has no defence to the claim; that is, that there is no real question to be tried: Pemberton v Chappell [1987] 1 NZLR 1 at 3 (CA). The Court must be left without any real doubt or uncertainty. The onus is on the plaintiff, but where its evidence is sufficient to show there is no defence, the defendant will have to respond if the application is to be defeated: MacLean v Stewart (1997) 11 PRNZ 66 (CA). The Court will not normally resolve material conflicts of evidence or assess the credibility of deponents. But it need not accept uncritically evidence that is inherently lacking in credibility, as, for example where the evidence is inconsistent with undisputed contemporary documents or other statements by the same deponent, or is inherently improbable: Eng Mee Young v Letchumanan [1980] AC 331 at 341 (PC). In the end the Court’s assessment of the evidence is a matter of judgment. The Court may take a
4 Krukziener v Hanover Finance Ltd [2008] NZCA 187, [2010] NZAR 307 at [26].
robust and realistic approach where the facts warrant it: Bilbie Dymock Corp Ltd v Patel (1987) 1 PRNZ 84 (CA).
[145] The Supreme Court has confirmed that the fact that the Court may be required to determine questions of law does not preclude summary judgment. In Zurich Australian Insurance Ltd v Cognition Education Ltd, the Court said:5
… in other situations falling within the broad test (that is, the “no arguable defence” test applied on summary judgment), there will be what can properly be described as “disputes” even though they are ultimately capable of being determined by a summary process.
[37] To explain, it has been well established in New Zealand since Pemberton v Chappell that a court can properly determine questions of law on a summary judgment application, and that this includes issues of contractual interpretation. The Court of Appeal has accepted that such a determination may be made even though the question of law is difficult and requires argument (including reference to authority). In International Ore & Fertilizer Corp v East Coast Fertiliser Co Ltd, a case under the old bill writ procedure, Cooke P, by analogy with the summary judgment procedure which had just been introduced in New Zealand, said that where the facts were adequately ascertained and the Court could be confident that the point of issue turned on pure questions of law or interpretation, it should be prepared “to determine, on adequate argument, even difficult legal questions”. Similarly, in Jowada Holdings Ltd v Cullen Investments Ltd, McGrath J, delivering the judgment of the Court of Appeal, said that a court should be prepared to grant summary judgment “even if legal arguments must be ruled on to reach the decision”.
(footnotes omitted)
[146] The principles applicable to an application for summary judgment by a defendant were discussed by Elias CJ in Wesptac Banking Corp v MM Kembla NZ Limited:6
[61] The defendant has the onus of proving on the balance of probabilities that the plaintiff cannot succeed. Usually summary judgment for a defendant will arise where the defendant can offer evidence which is a complete defence to the plaintiff’s claim.
…
[62] Application for summary judgment will be inappropriate where there are disputed issues of material fact or where material facts need to be ascertained by the Court and cannot confidently be concluded from affidavits. It may also be inappropriate where ultimate determination turns on a judgment only able to be properly arrived at after a full hearing of the evidence.
5 Zurich Australian Insurance Ltd v Cognition Education Ltd [2014] NZSC 188, [2015] 1 NZLR 383 at 404.
6 Westpac Banking Corp v MM Kembla NZ Limited [2001] 2 NZLR 298, (2000) 14 PRNZ 631 at [61] - [63].
Summary judgment is suitable for cases where abbreviated procedure and affidavit evidence will sufficiently expose the facts and the legal issues. Although a legal point may be as well decided on summary judgment application as at trial if sufficiently clear (Pemberton v Chappell [1987] 1 NZLR 1), novel or developing points of law may require the context provided by trial to provide the Court with sufficient perspective.
[63] Except in clear cases, such as a claim upon a simple debt where it is reasonable to expect proof to be immediately available, it will not be appropriate to decide by summary procedure the sufficiency of the proof of the plaintiff’s claim. That would permit a defendant, perhaps more in possession of the facts than the plaintiff (as is not uncommon where a plaintiff is the victim of deceit), to force on the plaintiff’s case prematurely before completion of discovery or other interlocutory steps and before the plaintiff’s evidence can reasonably be assembled.
The issues to be decided
[147] In my view, Mr Skelton has failed to raise any arguable case of breach of fiduciary obligations by Norris Ward. I accept Mr Savage’s submission that the main fiduciary duty a lawyer owes to his or her client is a duty of loyalty to the client, and the core aspects of that duty are:7
(a)to act in good faith towards the client;
(b)not to profit out of the trust placed in the lawyer by the client;
(c)not to place the lawyer in a position where his or her duty and interest may conflict; and
(d)not to act for his or her own benefit or the benefit of a third party without the fully informed consent of the client.
[148] It seems to me that none of those duties is in issue on the basis of the evidence which has been put forward by the parties. The fees waiver issue arguably comes closest, but Norris Ward was not acting for Mr Skelton on that issue – he was advised by O’Sheas Law on it.
7 Cook v Evatt (No 2) [1992] 1 NZLR 676 at 685.
[149] It follows that Mr Skelton’s counterclaims and/or set-offs must be based in either negligence or breach of his contract of retainer with Norris Ward. In either event, the core question for summary judgment purposes will be whether Norris Ward arguably failed to carry out its professional services to the level of care and skill one would reasonably expect from competent solicitors carrying out similar work in New Zealand. For that reason, the issues set out below are framed without reference to the particular cause of action relied upon by Mr Skelton (breach of contract or negligence).
[150] The following are the issues to be decided on Norris Ward’s application for summary judgment:
(1)What is the effect of the decision of the LCRO: does it preclude Mr Skelton from challenging Norris Ward’s fees claim in this Court?
(2)If the answer to Issue 1 is “no”, has Norris Ward clearly shown that Mr Skelton has no defence based on his contentions that:
(a) Norris Ward was negligent, or otherwise in breach of a duty owed to him, in failing to advise him that the prospects of successfully staying the Queensland proceeding were not high? or
(b) Norris Ward was negligent, or otherwise in breach of a duty owed to him, in failing to sufficiently warn him of his costs exposure on the stay application in the Queensland proceeding (including the extent of any liability he might have for the costs of the other party if the stay application was unsuccessful)?
(c) Norris Ward was negligent, or otherwise in breach of a duty owed to him, in advising that it would be more beneficial for Mr Skelton to seek a stay of the Queensland proceeding, without apprising him of the risks of the application being unsuccessful?
(3)If the answer to Issue 2(a), (b) or (c) is “no”, is it reasonably arguable for Mr Skelton that he is entitled to set off some or all of his costs incurred on the stay application in the Queensland proceeding against the sum now claimed by Norris Ward? If so, how much?
(4)Has Norris Ward clearly shown that Mr Skelton has no defence based on his contention that Norris Ward and/or Mr Elliott was negligent, or otherwise in breach of a duty owed to him, in preparing Mr Skelton’s pleadings in the New Zealand proceeding?
(5)If the answer to Issue 4 is “no”, did Mr Skelton arguably suffer damage as a result of the (arguable) negligence or breach of duty? If so, what sum or sums, if any, is he arguably entitled to set off against the sum now claimed by Norris Ward?
(6)Is it reasonably arguable for Mr Skelton that he made an oral agreement with Mr Hood and/or Mr Elliott acting on Norris Ward’s behalf at the Court on 30 March 2015, under which Norris Ward would not charge any further time from the date of the adjourned trial unless and until the trial in the New Zealand proceeding is reconvened?
(7)If the answer to Issue 6 is “yes”:
(a) Is it reasonably arguable for Mr Skelton that he is not liable for the
$41,059.15 billed by Norris Ward for their attendances (and those of Mr Elliott) after 30 March 2015?
(b) Is it reasonably arguable for Mr Skelton that he is entitled to set off other amounts against the sum now claimed by Norris Ward, including part of the costs charged by Meredith Connell?
(8)Has Norris Ward clearly shown that Mr Skelton has no arguable defence based on his contention that Norris Ward acted in breach of its contract of retainer with him (or otherwise in breach of a duty owed to
him), when it refused to continue to act for him unless and until he agreed to release Norris Ward from any and all claims arising out of its services?
(9)If the answer to Issue 8 is “yes”, what loss has Mr Skelton arguably suffered as a result of the breach of contract or duty? Is he entitled to set off part or all of any such loss against the sum now claimed by Norris Ward?
[151]I will address each of these issues in turn.
Issue (1): What is the effect of the decision of the LCRO: does it preclude Mr Skelton from challenging Norris Ward’s fees claim in this Court?
[152] Section 152 of the Lawyers and Conveyancers Act 2006 (the LCA) materially provides:
152 Power of Standards Committee to determine complaint or matter
(1) A Standards Committee may,—
(a) after both inquiring into a complaint and conducting a hearing with regard to that complaint; or
…
make 1 or more of the determinations described in subsection (2).
(2) The determinations that the Standards Committee may make are as follows:
(a) a determination that the complaint or matter, or any issue involved in the complaint or matter, be considered by the Disciplinary Tribunal:
(b) a determination that there has been unsatisfactory conduct on the part of—
(i) a practitioner or former practitioner; or
(ii) an incorporated firm or former incorporated firm; or
(iii) an employee or former employee of a practitioner or incorporated firm:
(c) a determination that the Standards Committee take no further action with regard to the complaint or matter or any issue involved in the complaint or matter.
…
(4) Subject to the right of review conferred by section 193 and to section 156(4), every determination made under subsection (1) and every order made under section 156 or section 157 is final.
[153] Mr Skelton’s complaint did include a complaint about the amount of costs he had been charged by Norris Ward and Mr Elliott. The Standards Committee was ultimately satisfied that, having regard to a report it had obtained from a costs assessor, and considering various other considerations, the fees charged were fair and reasonable in the circumstances. It determined to take no further action on the complaint, including that part of the complaint that related to the fees charged to Mr Skelton, under s 152(2)(c) of the LCA.
[154]Section 161 of the LCA materially provides:
161 Stay of proceedings for recovery of costs
(1) If, under section 141, a Standards Committee gives notice to a practitioner or former practitioner or an incorporated firm or former incorporated firm that it has received a complaint under section 132(2) about the amount of a bill of costs rendered by that practitioner or former practitioner or incorporated firm or former incorporated firm, no proceedings for the recovery of the amount of the bill may be commenced or proceeded with until after the complaint has been finally disposed of.
(2) Where a Standards Committee makes a final determination on a complaint made under section 132(2), it must certify the amount that is found by it to be due to or from the practitioner or former practitioner or incorporated firm or former incorporated firm in respect of the bill and under the determination.
(3) The certificate of the Standards Committee or, as the case may be, the decision of the Legal Complaints Review Officer on a review of the determination is final and conclusive as to the amount due.
…
[155] An issue might be thought to arise as to the effect of sections 152(4) and/or 161(3), providing that a determination or decision of the LCRO on a review of a Standards Committee determination is final, or “final and conclusive as to the amount due”. However I do not consider that provision affects the defence and counterclaims Mr Skelton has pleaded.
[156] The broad effect of s 161 of the LCA appears to be that the section is to operate as a stay in respect of quantum, but not in respect of liability.8
8 McGuire v Sheridan HC Wellington CIV-2009-485-1901, 4 March 2010; Simpson Grierson v Gilmore (2009) 19 PRNZ 865, and (on the effect of the similar s 155(2) in the Law Practitioners Act 1982); Erwood v Glasgow Harley [2002] 1 NZLR 251, (2001) 15 PRNZ 451.
[157] In Wynn Williams & Co v Kain,9 French J considered that a certificate under s 161 is expressly limited to the determination of a complaint under s 132(2) of the LCA, namely a complaint about the amount of a bill, and it does not prevent the Court from looking at liability issues. Although Her Honour noted that the Standards Committee has expertise in relation to quantum issues, the same is not necessarily true in relation to liability issues.10 It would be draconian for the legislation to have the effect that a s 161 certificate prevented the courts from looking at issues of liability and consequently preventing litigants from bringing their cases.11
[158] In this case, the various defences and counterclaims raised by Mr Skelton generally raise matters going to his liability for the costs claimed, or Norris Ward’s alleged liability to him for alleged breaches of duty. Matters such as whether or not Norris Ward was negligent or in breach of duty in advising Mr Skelton on the Queensland proceeding, in preparing Mr Skelton’s pleadings, or in requiring the claims waiver, are matters involving issues of liability. As such they are not caught by the “finality” provisions in the LCA. Similarly, the issue of whether there was an agreement made on 30 March 2015 that Norris Ward would not charge any fees for further attendances until the morning of the resumed trial, is clearly a liability issue.
[159] What the “finality” provisions of the LCA would preclude, is any attempt Mr Skelton might have made to reopen the amounts charged by Norris Ward for the work that it and Mr Elliott carried out on his behalf. But I do not think he has done that in his statement of defence and counterclaim – contending (for example) that Norris Ward breached a duty by failing to warn Mr Skelton about his likely costs exposure, is not the same as a complaint that the fees actually charged were excessive for the work done.
[219] I conclude on this issue that Mr Skelton may have an arguable defence, but only in respect of “the late identification of the problem with the pleadings” referred to by Lang J in his Minute of 30 March 2015.
Issue (5): If the answer to Issue 4 is “no”, did Mr Skelton arguably suffer damage as a result of the (arguable) negligence or breach of duty? If so, what sum or sums, if any, is he arguably entitled to set off against the sum now claimed by Norris Ward?
[220] The costs awarded against Mr Skelton on 30 March 2015 ($9,562.50) clearly flowed from the pleading deficiency identified by Lang J, but they are no longer part of Norris Ward’s claim. However there was also a “direct” cost associated with the adjournment, in the form of wasted video conferencing costs for the trial ($10,499.08). It must be arguable that the wasted video conferencing costs flowed from the adjournment, and that they were sufficiently proximate to any breach by Norris Ward that Mr Skelton has a reasonable argument that he should not have to pay them.
[221] Beyond that loss, I think there would inevitably have been some further loss associated with Mr Skelton and his legal team having to re-draft the statement of claim to correct the pleading deficiency identified by Lang J, and either Norris Ward or some other law firm having to “start again” for the resumed trial in August (another law firm if the arguable breach relating to the pleading entitled Mr Skelton to cancel his contract with Norris Ward, and he did in fact cancel (and not affirm)). These are both issues which I do not consider suitable for determination on a summary judgment application.
[222] Correcting the deficiency in the pleading would not have cost much, as the arguments were already identified before the hearing on 30 March 2015. And if Mr Skelton’s termination of the contract with Norris Ward is to be construed as a cancellation, the “reading in” time for Ms Cuncannon would not have been such as to take the total loss beyond the $41,000 level. Time taken by Ms Cuncannon (beyond the reading in stage) on steps she considered were necessary but which had not been taken by Norris Ward would presumably not have added to the loss – if Norris Ward had taken the steps, Mr Skelton would have been obliged to pay Norris Ward for the work anyway. Subject to those observations, it is impossible to assess precisely what
that loss would have been, but I think it safe to say that it would not have exceeded the $41,069.15 charged by Norris Ward for its attendances after 30 March 2015. I conclude that the amount of loss arguably suffered by Mr Skelton as a result of the (arguable) negligence or other breach of an Issue (4) duty is the sum of $10,499.08, plus a further sum which cannot now be quantified but which cannot be higher than
$41,059.15. Again, I consider that Mr Skelton’s claims for these sums are so closely connected with Norris Ward’s claims against him that it would be inequitable to permit Norris Ward to take judgment for the amount it claims without bringing them to account. Mr Skelton is therefore arguably entitled to set these claims off against Norris Ward’s claim.
Issue (6): Is it reasonably arguable for Mr Skelton that he made an oral agreement with Mr Hood and/or Mr Elliott acting on Norris Ward’s behalf at the Court on 30 March 2015, under which Norris Ward would not charge any further time from the date of the adjourned trial unless and until the trial of the New Zealand proceeding reconvened?
[223] Mr Skelton said in his evidence that the oral agreement was made in a corridor at the Court, during the break when Lang J stood the matter down to allow Mr Elliott and Mr Hood to take instructions on whether amendments to the statement of claim would be sought. Mr Skelton said that he gave Mr Hood and Mr Elliott two choices. He said that he much preferred continuing on that day, but that if they wished to delay the trial then they needed to correct the mistakes and not resume charging fees until the morning of the resumed trial. Mr Skelton said that Mr Hood and Mr Elliott went away and discussed things, and came back and said that they would accept that option and would pay for all of the costs incurred as a result. He said that those costs included any costs awarded to Z487, and the costs of the video conferencing that had already been incurred.
[224] Mr Skelton referred in support of his contentions that Norris Ward did not in fact send any fees account in the months immediately after the aborted March 2015 trial. They only sent a final account to O’Sheas Law in October 2015, after their retainer had been terminated. He also referred to Mr Elliott’s response to the Law Society to Mr Skelton’s complaint, in which Mr Elliott said that he had agreed to meet 50 per cent of the costs award following the adjournment of the trial on 30 March 2015, with Norris Ward to meet the other 50 per cent.
[225] Mr Skelton contended that Norris Ward reneged on the oral agreement. He said that he could only guess that Mr Hood subsequently put the arrangement to his partners and they did not agree. For his own part, he said that he was in a bind by that stage. Norris Ward was proposing a conditional fee agreement that he was not happy with, and they were insisting on a release before they would continue to act. With the reconvened trial only three months away, he had no option but to try to resolve matters with Norris Ward unless and until he could find another law firm to assist.
[226] Apart from acknowledging an agreement to meet the costs awarded to Z487 on 30 March 2015, Mr Hood and Mr Elliott both deny that there was any oral agreement as alleged.
[227] Mr Elliott said in his evidence that he and Mr Hood did not acknowledge any mistakes during the conversation at the Court, and they “certainly” did not say that they would not charge any fees until the trial resumed.
[228] Mr Hood said in his reply affidavit that there was no such discussion or agreement with Mr Skelton on the day of the adjourned trial or at all. He said that, on the drive back to his office from the Court, Mr Skelton told him that he would pay Norris Ward’s outstanding invoices and that, beyond such expenses, he only had a further $150,000 for future costs. He referred to subsequent correspondence with Mr Skelton and with O’Sheas Law, in which no mention was made of the alleged oral agreement.
[229] I find for Norris Ward on the issue of the alleged oral fees agreement. First, the existence of the agreement is denied by both Mr Elliott and Mr Hood. Secondly, I think it implausible that Mr Elliott and Mr Hood would have agreed to work for nothing over a period of approximately four months, in litigation which had already proved to be very time consuming. There would need to be new pleadings on both sides, and some new evidence, and Norris Ward would not have known what new steps/tactics Z487 might take or employ during the four months between 30 March 2015 and early August 2015. In short, it seems very unlikely that two senior legal practitioners would have made an agreement of the kind for which Mr Skelton now contends. Thirdly, it seems improbable that Mr Hood would have entered into any such arrangement
without obtaining the approval of his partners or any partnership committee that might have had authority to commit Norris Ward to such an arrangement.
[230] Those considerations are supported by the correspondence between the parties (including O’Sheas Law on Mr Skelton’s behalf) in the period from early April 2015 to early June 2015. On 11 April 2015, Mr Hood sent an email to Mr Skelton recording that on Monday, 31 March 2015, Mr Skelton had raised the prospect of a conditional fee arrangement for future services. Mr Hood said that he had discussed the matter with his partners, and he attached a letter proposing a conditional fee agreement.
[231] Mr Skelton replied by email on 22 April 2015. He did not mention the alleged oral agreement made at the Court in this email. On the contrary, he proposed what appears to be essentially the arrangement for which he now contends, as a new arrangement.
[232] After having complained about allegedly faulty advice, and various aspects of the handling of the matter by Norris Ward, Mr Skelton said:
Because this abandonment was due to your fault I do not think there should be further fees from [30 March 2015] to the new date of 3/8 – that puts me in the same position as I was on 30/3 and further the award of costs should of course be met by you [it was not my fault].
The abandonment was due to a faulty statement of claim and thus you were required to submit an amended statement …
[233] Mr Skelton went on in his 22 April 2015 email to discuss various ways in which he might fund the New Zealand proceeding going forward.
[234] Following a meeting between Mr Hood and Mr Skelton on 28 April 2015, Norris Ward sent a letter to Mr Skelton dated 6 May 2015 advising that Norris Ward would continue to act for Mr Skelton through to the trial in August, subject to a number of conditions relating to fees. The detail of the proposal does not matter for present purposes, except to say that (i) the proposal included a requirement that all currently invoiced and outstanding fees (approximately $130,000) would be paid by 31 May 2015, (ii) Norris Ward would accept a substantial discount on work in progress, (iii) although they would continue rendering fees invoices in the future, Norris Ward would
not expect immediate payment unless funds became available to Mr Skelton, and (iv) Norris Ward could recoup its unpaid fees and unbilled time from any money Mr Skelton might recover at trial.
[235] There followed a period in which Norris Ward attempted to reach agreement with O’Sheas Law on payment of outstanding costs and costs going forward. Again, there was no mention in the correspondence from O’Sheas Law that an agreement had already been reached orally with Mr Skelton covering the period to the resumption of the trial in August.
[236] Neither Mr Skelton nor O’Sheas Law rejected the suggestion that Norris Ward would be entitled to continue to render fees invoices for work done between 30 March 2015 and the resumed trial. On the contrary, in a proposal put by O’Sheas Law to Norris Ward on 2 June 2015, Mr Skelton offered to pay $130,000 within seven days and a further $20,000 within the next six weeks (the latter payment being subject to Mr Skelton receiving a GST refund anticipated within the ensuing three to four weeks). The proposal is inconsistent with the oral agreement for which Mr Skelton now contends, and I do not consider that the pressure that I accept he was under adequately explains his failure to even mention the agreement he now says was made at the Court.
[237] Finally, Mr Skelton did not mention the alleged oral agreement in his complaint to the Law Society. The alleged agreement appears to have been raised for the first time in Mr Skelton’s defence filed in this proceeding.
[238] In the circumstances just described, I accept Mr Savage’s submission that this is one of those summary judgment situations where the Court should take the “robust and realistic” approach referred to by the Court of Appeal in Krukziener v Hanover Finance Ltd.21 When he came to prepare his statement of defence in this proceeding Mr Skelton may well have believed that the oral agreement was made as he contends, but the agreement is not consistent with either the evidence of Mr Elliott and Mr Hood or the correspondence from Mr Skelton and O’Sheas Law, in the period immediately after the agreement is said to have been made. Mr Skelton’s email of 22 April 2015
21 Krukziener v Hanover Finance Ltd, above n 4.
suggests that, by that date, he had developed a firm view that he should not be liable for any further costs pending the resumption of the trial, and it may be that he has mistakenly incorporated that firm belief into his recollection of what was actually discussed and agreed at the Court on 30 March 2015. But whatever the explanation, I am satisfied that Mr Skelton’s evidence on the issue does not meet the credibility threshold required to show that he has an arguable defence. Applying the robust and realistic approach approved in Krukziener, I conclude on this issue that it is not reasonably arguable for Mr Skelton that the alleged oral agreement was made.
Issue (7): If the answer to Issue 6 is “yes”:
(a)Is it reasonably arguable for Mr Skelton that he is not liable for the $41,059.15 billed by Norris Ward for their attendances (and those of Mr Elliott) after 30 March 2015?
(b)Is it reasonably arguable for Mr Skelton that he is entitled to set off other amounts against the sum now claimed by Norris Ward, including part of the costs charged by Meredith Connell?
[239] In view of my answer to Issue 6, there is no need to provide an answer on these issues.
Issue (8): Has Norris Ward clearly shown that Mr Skelton has no defence based on his contention that Norris Ward acted in breach of its contract of retainer with Mr Skelton (or otherwise in breach of a duty owed to him), when it refused to continue to act for him unless and until he agreed to release Norris Ward from any and all claims arising out of its services?
[240] Rule 4.2 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (“the Conduct and Care Rules”), materially provided:
Duty to complete retainer
4.2 A lawyer who has been retained by a client must complete the regulated services required by the client under the retainer unless –
…
(c) the lawyer terminates the retainer for good cause and after giving reasonable notice to the client specifying the grounds of termination.
[241]Rules 5.11 and 5.12 of the Conduct and Care Rules provided:
5.11 When a lawyer becomes aware that a client has or may have a claim against him or her, the lawyer must immediately –
(a)advise the client to seek independent advice; and
(b) inform the client that he or she may no longer act unless the client, after receiving independent advice, gives informed consent.
5.12 A lawyer may resume acting for a former client where the matter in dispute has been resolved.
[242] Following the adjournment of the trial of the New Zealand proceeding, the position appears to have been this:
(1)Mr Skelton was in breach of his strict obligation under Norris Ward’s terms of engagement to pay his legal fees within 14 days;22 and
(2)He had made it clear (including in his email of 22 April 2015) that he considered he had been given faulty advice, and that the abandonment of the trial on 20 March 2015 was Norris Ward’s fault.
[243] Norris Ward correctly recognised that the situation required that Mr Skelton receive independent legal advice, and he was referred to O’Sheas Law for that purpose. Norris Ward did, with the apparent approval of Mr Skelton and O’Sheas Law, carry out some further work in the New Zealand proceeding that could not reasonably be deferred, while they endeavoured to reach agreement with Mr Skelton on a basis on which they might continue to act for him.
[244] Norris Ward put a detailed proposal to Mr Skelton on 6 May 2015, which included requirements that Mr Skelton agree (among other things) that:
(a)the work done to date was acceptable;
(b)the fees charged were reasonable in the circumstances; and
22 The terms and conditions provided at cl 7, that bills were to be paid no later than 14 days following the date of issue of the bill. If a bill was not paid within 14 days, Norris Ward was entitled to stop doing further work for the client.
(c)he had no claim against Norris Ward or Mr Elliott in relation to the work done to date.
[245] Mr Skelton in fact accepted those terms in an email from O’Sheas Law dated 3 June 2015, provided an arrangement could be reached on other matters (which included payment for Norris Ward’s work in progress). Unfortunately no agreement was reached on the other matters, and Mr Skelton terminated Norris Ward’s contract and instructed Meredith Connell.
[246] I do not consider Mr Skelton has any arguable defence based on this Issue. First, the context of the negotiations has to be borne in mind. On the one hand, Mr Skelton appears to have been in substantial breach of his payment obligations to Norris Ward. On the other, Mr Skelton had potential claims against Norris Ward. In that situation, the parties were negotiating on an arms-length basis to see if they could agree terms on which Norris Ward could continue to act.
[247] No question of negligence or breach of fiduciary obligation could arise, as no mistake or carelessness is alleged in the negotiations, and Mr Skelton was separately advised. The argument for Mr Skelton is that Norris Ward acted in breach of a duty to act in Mr Skelton’s best interests when it insisted on the claims waiver.
[248] But that cannot be right. Any duty to act in Mr Skelton’s best interests could only have been intended to apply to Norris Ward’s implementation of Mr Skelton’s instructions – it could not have been intended to apply to matters concerning unpaid fees owing by Mr Skelton, claims against the firm that may have been raised by him, or indeed any other situation where the interests of Norris Ward and Mr Skelton were obviously opposed.
[249] The Standards Committee and the LCRO both found that seeking the fees waiver did not breach the Conduct and Care Rules, and I doubt that it could be the place of this Court, hearing a summary judgment application, to second-guess those decisions. It was for Mr Skelton to persuade me that seeking the fees waiver as a condition of continuing to act amounted to a breach of the law, as opposed to a breach
of applicable professional standards (although the two may often converge), and he has not done that.
[250] The issue between Norris Ward and Mr Skelton was not just about Mr Skelton’s threatened claim – it was also about Norris Ward’s very substantial unpaid fees and work in progress, matters which I think it was entitled to have resolved before it agreed to continue acting for Mr Skelton. No amount of “informed consent” from Mr Skelton could fix the fees issue, and fees appears to have been the issue on which the negotiations between the parties between April and June of 2015 foundered.
[251] I agree with the Standards Committee that if Mr Skelton had not terminated Norris Ward’s retainer in June 2015, the Court would have granted the firm leave to withdraw from the New Zealand proceeding. The lack of agreement on payment terms, coupled with the threat of possible claims against the firm (which had only been withdrawn on the basis that agreement could be reached on payment of fees), would together have made it impossible for Norris Ward to discharge its duties to Mr Skelton objectively and effectively. And if Norris Ward was entitled to withdraw, Mr Skelton could not have effectively removed that entitlement by agreeing to the firm continuing to act, without either of its concerns (unpaid fees and claims against it) being resolved. Norris Ward was in my view (at the very least) entitled to require that Mr Skelton’s claims against it be resolved before it agreed to continue acting, and that is all the claims waiver was intended to achieve.
[252] I also agree with the Standards Committee that the decision of Heath J in Burgess v Monk, where an application by counsel for leave to withdraw in the middle of a long trial, is distinguishable.23 There, the client had withdrawn the complaint against counsel, and the interests of the other parties if a long trial had to be abandoned part way through were strong factors pointing against allowing counsel to withdraw. Nor does there appear to have been a substantial unresolved fees issue.
23 Burgess v Monk, above n 18.
[253] For all those reasons, my answer to Issue (8) is “yes”. Norris Ward has clearly shown that Mr Skelton has no defence based on his contention that the firm acted in breach of any duty owed to him by refusing to continue to act for him unless and until he agreed to release it from any and all claims arising out of its services.
Issue (9): If the answer to Issue 8 is “no”, what loss has Mr Skelton arguably suffered as a result of the breach of contract or duty? Is he entitled to set off part or all of any such loss against the sum now claimed by Norris Ward?
[254] In view of my answer to Issue (8), there is no need to provide answers on these Issues.
Application for summary judgment on Mr Skelton’s counterclaims
[255] Rule 12.2(2) applies. Under that rule, Norris Ward is required to show that none of Mr Skelton’s claims can succeed.
[256] I am satisfied that Norris Ward has done that. First, the counterclaim for alleged breach of fiduciary obligations cannot succeed, for the reasons given earlier in this judgment. Secondly, I have found that the claims for breach of contract and negligence either cannot succeed or they are properly brought as set-offs, for amounts less than the amount claimed by Norris Ward. In either event, there is nothing which can survive as an arguable counterclaim for breach of contract or negligence.
[257] Summary judgment will therefore be entered for Norris Ward on each of Mr Skelton’s counterclaims. That is of course without prejudice to his right to argue the set-off defences which I have found are arguable for him (to the extent I have found them to be arguable), at the trial of the proceeding.
Result
[258]Judgment is entered for Norris Ward as follows:
(1)For the sum of $277,900.40 (the claim of $297,961.98 less the costs award of $9,562.50 and the video conferencing costs of $10,499.08), minus the following two amounts:
(a)the sum of $41,059.15 referred to at [222] of this judgment; and
(b) the sum of AUD$115,616.97 referred to at [214] of this judgment, converted to New Zealand dollars as at 20 November 2015 (the date Mr Skelton entered into the deed of settlement with Z487, Global Plant IP Pty Ltd, and Mr Lye).
(2)Leave is reserved to the parties to apply further if they cannot agree on the New Zealand dollar amount at order 1(b) above.
Judgment is entered for Norris Ward on Mr Skelton’s counterclaims.
(4)Norris Ward’s claims for the sums of $10,499.08, $41,059.15, and the New Zealand dollar equivalent of AUD$115,616.97 are to proceed to trial.
(5)Counsel may file memoranda on costs and interest if they cannot agree. Any memorandum from Norris Ward is to be filed and served with 15 working days. Any memorandum from Mr Skelton is to be filed and served within 10 working days of his receipt of Norris Ward’s memorandum.
(6)The Registrar is to arrange a case management conference for the first practicable date after 1 September 2020.
Associate Judge Smith
4
0
1