Poros v Burney
[2017] NZHC 3254
•20 December 2017
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2017-404-932 [2017] NZHC 3254
BETWEEN SPYRIDON POROS
Plaintiff
AND
MAURICE BURNEY Defendant
Hearing: 1 December 2017 Appearances:
K Crossland for the Plaintiff
W C Pyke for the DefendantJudgment:
20 December 2017
JUDGMENT OF ASSOCIATE JUDGE R M BELL
This judgment was delivered by me on 20 December 2017 at 11:00am
pursuant to Rule 11.5 of the High Court Rules
………………………………………………….
Registrar/Deputy Registrar
Solicitors:
Shieff Angland, Auckland, for the Plaintiff
Brookfields (David Neutze), Auckland, for the Defendant
Counsel:
Warren C Pyke, Auckland, for the Defendants
POROS v BURNEY [2017] NZHC 3254 [20 December 2017]
[1] Mr Poros, the plaintiff, challenges the privilege asserted by Mr Burney, the defendant, in communications between himself as solicitor and his client, Ms Kylie Bax, between mid-September 2013 and mid-November 2013. Mr Poros says that he also holds privilege in them. Moreover, in a hearing in a criminal proceeding, a District Court Judge ordered disclosure of these documents under s 67(1) of the Evidence Act 2006 on the ground that they were made to further a dishonest purpose.
[2] The documents in Mr Burney’s affidavit of documents are identified as MJB.01.P001-MJB.01.P054, MJB.02.P001 MJB.02.P023 and MJB.03.P001. In the District Court the Judge identified the documents as 57, 58, 61, 62, 63, 68, 77, 80, 88,
89, 110, 114, 115, 134, 162 178, 245-252 and 325.
[3] Mr Poros is suing Mr Burney for breach of retainer when Mr Poros was deprived of an interest in a property to be bought by Ms Bax and himself. Mr Burney is the Bax family lawyer. He acts for her parents, for Ms Bax and for the trustees of the Gold Eye Trust, a trust associated with Ms Bax. She was married to Mr Poros.
[4] Ms Bax owned a property in New York. According to Mr Poros she told him that it was their property. He says that it was marital property under New York’s matrimonial property statute. Mr Crossland said that evidence as to New York law will show that a spouse takes an immediate interest in marital property, unlike New Zealand law under which a spouse who is not a legal owner of relationship property has no more than a claim, which may result in that person receiving an interest upon division by court order or agreement.1 Ms Bax sold the New York property. They came to New Zealand with their children in 2013. The proceeds of sale were sent to New Zealand.
[5] They made an agreement to buy a property in Cambridge. The copy of the agreement in evidence shows that they are both named as purchasers. A reference to
the Gold Eye Trust was crossed out. Ms Bax instructed Mr Burney to act on the
1 There is a complication that in 2009 Ms Bax settled the property on a revocable trust.
purchase. The agreement shows him as the purchasers’ lawyer. Some of the correspondence by Mr Burney refers to him acting for both Ms Bax and Mr Poros as his clients. Mr Burney dealt directly with Ms Bax. There were no direct dealings between Mr Burney and Mr Poros. Notwithstanding that, he was acting for both on the purchase under the agreement for sale and purchase.
[6] There was a nomination under which the trustees of the Gold Eye Trust took title, instead of Ms Bax and Mr Poros. The authenticity of Mr Poros’ signature on the deed of nomination is in issue. Mr Poros denies that he signed the deed. He has provided an affidavit by a document examiner stating that the signature is not
Mr Poros’. Mr Poros says that he was removed as purchaser without his knowledge or consent. Mr Burney, as settlor of the Gold Eye Trust, also removed Mr Poros as a beneficiary. The purchase of the property was completed on 29 November 2013 with the trustees taking title. Part of the proceeds of sale of the New York property funded part of the purchase price. Later the property was transferred to Ms Bax’s parents.
[7] The couple separated in 2014. That is when Mr Poros found that he did not have an interest in the property. Mr Burney had a trespass notice served on Mr Poros.
[8] There was a criminal prosecution against Mr Poros. Ms Bax was the complainant. Mr Poros sought non-party disclosure of documents by Mr Burney and the Baxes under the Criminal Disclosure Act 2008. The Criminal Disclosure Act allows the court to order disclosure by non-parties: ss 24 – 29. Section 33 gives non- parties a right to appeal with leave to the Court of Appeal against any order under s 29. The application for non-party disclosure went in two phases. First there was a direction given for the deed of nomination to be disclosed.2 The Baxes and Mr Burney unsuccessfully challenged the District Court decision. The Court of Appeal dismissed the application for leave to appeal.3 There was a second hearing in the District Court for disclosure of further documents. Judge Marshall ordered disclosure of the
documents now in issue in this application.4 He decided under s 67(1) of the Evidence
2 R v Poros [2015] NZDC 19333.
3 M v R [2015] NZCA 587.
4 R v Poros [2015] NZDC 24912.
Act that the documents were made for a dishonest purpose. He was satisfied to a prima facie case standard, as required by s 67(1).
[9] Mr Burney has claimed privilege on behalf of his clients for those documents in his affidavit of documents. The Baxes have not consented to disclose them.
[10] Mr Poros’ application under r 8.25 of the High Court Rules is on two grounds:
(a) joint privilege under s 66 of the Evidence Act 2006 applied so that
Mr Poros was entitled to access to those documents;
(b)the court should apply the District Court’s decision as a matter of issue estoppel to hold that privilege has already been set aside under s 67(1).
As Mr Pyke for Mr Burney pointed out, the application does not ask me to find independently of the District Court’s decision that privilege did not attach because of s 67(1). While Mr Burney filed a notice of opposition, there are no affidavits opposing the application. If this court were to decide the question under s 67(1) afresh, Mr Pyke advised that further evidence would be tendered.
[11] In most applications to challenge privilege under r 8.25 the applicant seeks discovery of documents that they have not yet seen. In this case however Mr Poros already has copies of the documents because of the District Court ruling. The documents are relevant: they deal with steps taken to exclude Mr Poros from taking title. The question is whether the Baxes may claim privilege in this proceeding. If they cannot, Mr Poros will be entitled to use them as documents discovered by Mr Burney.
[12] In a minute of 22 November 2017 I directed service of the application on the Bax interests. An affidavit of service was filed after the hearing. The Baxes did not appear at the hearing and did not take any steps to oppose Mr Poros’ application. Nor have they sought an order that Mr Burney should not disclose the documents in this proceeding.
Joint interest privilege
[13] There was a lawyer-client relationship between Mr Burney and both Ms Bax and Mr Poros. The agreement for sale and purchase they signed named him as their lawyer for the transaction. Between 7 and 11 September 2013 Mr Burney sent a letter of engagement to Ms Bax for the purchase of the Cambridge property. It is not addressed to Mr Poros. It is however clear that Mr Burney was acting for both.
Mr Burney identified them as the purchasers in a letter of 26 September to the vendor’s lawyer. Mr Poros left Ms Bax to deal with the purchase. In that she was his agent. So she instructed Mr Burney in her own right and also on behalf of Mr Poros.
Mr Burney was her agent and Mr Poros’ sub-agent.
[14] The retainer lasted at least until the purchase was completed. At the start
Mr Poros would need a lawyer or conveyancer to attend to settlement on behalf of
Ms Bax and himself. That was Mr Burney. The retainer did not end when Ms Bax instructed Mr Burney that Mr Poros was not to take title. Mr Poros remained a party and liable under the agreement for sale and purchase, even if the nomination were effective. Under the Auckland District Law Society agreement for sale and purchase the parties used, Mr Poros remained liable under cl 1.4(2):
Where the purchaser executes this agreement with provision for a nominee, or as agent for an undisclosed principal, or on behalf of a company to be formed, the purchaser shall at all times remain liable for all obligations on the part of the purchaser.
As the purchasers’ lawyer Mr Burney continued to act for them both to see that their liabilities under the agreement were discharged. That included while he acted on the nomination. Mr Burney cannot say that he acted only for Ms Bax after he received her instructions that Mr Poros was not to take title.
[15] Joint interest privilege has been found when a married couple instruct a lawyer to act for them, even when their interests are distinct. Each has the right to inspect the lawyer’s records of their transactions. An early example is Warde v Warde where Lord
Truro LC said:5
5 Warde v Warde (1851) 3 Mac & G 365 at 368.
I cannot entertain the idea that after Mrs Warde has been induced to deal with her peculiar interests, in reliance upon the advice of an attorney introduced to her by her husband for the purpose of giving that advice, she is to be told that the attorney is not to be considered as having acted on her behalf and as her attorney to the extent of giving her any right to enquire into or inspect the documents which were the foundation of the advice so given to her, and upon which she acted. I cannot consider the husband and the wife as strangers to each other in the transaction, but as united in seeking to obtain one common object and effecting one common purpose.
The matter applies even more so when their interests are not distinct.6
[16] Ordinary agency principles also give Mr Poros the right to inspect Mr Burney’s records. An agent is under a duty to give his or her principal records of transactions made during the agency. In Yasuda Fire & Marine Insurance Co of Europe Ltd v Orion Marine Insurance Underwriting Agency Ltd Colman J said:7
Because the agent's duty to provide records of transactions to the principal is founded on the entitlement of the principal to the records of what has been done in his name, termination of the agent's authority to enter into further transactions should have no bearing on the continuance of the duty to provide pre-existing records pertaining to the period when transactions were authorised. Accordingly, in the absence of express agreement to the contrary, the agent's duty to provide to his principal the records of transactions effected pursuant to the agency must subsist notwithstanding termination of the agent's authority. That, as I have held, is a duty that is imposed by law in consequence of the existence of the agency relationship and is not founded on the existence of a contract of agency.
Mr Poros can require Ms Bax to account to him as his agent for how she has dealt with his interest as purchaser and likewise can look to Mr Burney as the sub-agent instructed by Ms Bax.
[17] The finding of joint interest privilege is consistent with the Court of Appeal’s decision in Gemini Personnel Ltd v Morgan & Banks Ltd.8 And with s 66(1)(b) of the Evidence Act 2006:
A person who jointly with some other person or persons has a privilege
conferred by any of sections 54 to 60 and 64 in respect of a communication, information, opinion, or document—
6 See Re Konigsberg [1989] 1 WLR 1257 at 1265-1266.
7 Yasuda Fire & Marine Insurance Co of Europe Ltd v Orion Marine Insurance Underwriting
Agency Ltd [1995] QB 174 at 185-186.
8 Gemini Personnnel Ltd v Morgan & Banks Ltd [2001] 1 NZLR 672 (CA).
(a) is entitled to assert the privilege against third parties; and
(b) is not restricted by any of sections 54 to 60 and 64 from having access or seeking access to the privileged matter; and
{c}may, on the application of a person who has a legitimate interest in maintaining the privilege (including another holder of the privilege), be ordered by a Judge not to disclose the privileged matter in a proceeding.
That Act is concerned with rules of evidence: see the purpose stated in s 6 and the fundamental principle in s 7. This case is about whether documents are protected from inspection and later use in the proceeding, even if no-one wants to put them in evidence. I have applied substantive rules of disclosure to find joint interest privilege and that Mr Poros is a privilege holder. In the case of legal professional privilege, those substantive rules are expressly saved in the Evidence Act.9 Section 66(1)(b) is consistent with those substantive rules, but does not itself decide the question here.
Can Mr Burney re-litigate the District Court ruling under s 67(1) of the Evidence
Act?
[18] Even though I have found that Mr Poros has privilege in the documents in question, counsel asked that I also rule on his second ground - that privilege in the documents has already been set aside by the judgment of the District Court of
14 December 2014. This part of the decision is obiter and is given in case I have erred in finding for Mr Poros on joint interest privilege.
[19] District Court Judge Marshall applied s 67(1) of the Evidence Act to say that documents that were otherwise privileged should be disclosed:
A Judge must disallow a claim of privilege conferred by any of sections 54 to
59 and 64 in respect of a communication or information if satisfied there is a prima facie case that the communication was made or received, or the
information was compiled or prepared, for a dishonest purpose or to enable or aid anyone to commit or plan to commit what the person claiming the privilege
knew, or reasonably should have known, to be an offence.
9 Evidence Act 2006, s 53(5).
The Evidence Act does not apply directly to privilege for discovery, but the test under the subsection restates the common law test. The reference to it is a shorthand way of applying the common law.10
[20] Having held that the documents sought were relevant11 the judge said:12
[21] In my view there is a prima facie case of communications between the complainant and Mr Burney indicating that on the complainant’s part at least there was a dishonest purpose to exclude Mr Poros without his knowledge from having any interest in the property which was subject to the agreement for sale and purchase they both signed, whether that was on the basis of an
alleged forged document or being duped into signing is not for final determination by me, just that there is prima facie evidence that Mr Poros may
have been disenfranchised from obtaining a legal interest in real estate through the dishonest actions of the complainant. Obviously, those really are issues
finally to be determined in another context.
[22] In my view my finding is that I disallow the claim for privilege in respect of the documents I identified in my second minute of 25 September
2015 at paragraph [3] and order that they be disclosed to the defendant.
[21] Mr Crossland says that this is a matter of issue estoppel. He cites Harlen v Ministry of Social Development as authority that findings in a criminal proceeding may be issue estoppel in a civil case.13 Some elements of res judicata are satisfied. There is identity of parties. Mr Burney and Ms Bax were parties to the proceeding in the District Court as respondents to a non-party disclosure application. They had the right to call evidence and make submissions under s 27. They had a right of appeal under s 33(2). The subject matter was the same. Both in the District Court and here the question is whether privilege should be set aside under the crime-fraud exception. The standard of proof in both hearings is the same. The court has to be satisfied to the standard of a prima facie case.14
[22] I do not, however, accept that the District Court decision was one of substance or going to the merits. It was a procedural decision made under a statute whose purpose is to promote fair, effective and efficient disclosure of relevant information
between the prosecution and the defence, and by non-parties for the purpose of
10 As applied in decisions starting with R v Cox and Railton (1884) 14 QBD 153.
11 R v Poros [2015] NZDC 24912 at [13].
12 At [21]-[22].
13 Harlen v Ministry of Social Development [2012] NZHC 669, [2012] NZAR 491 at [5]-[12].
14 As under O’Rourke v Darbishire [1920] AC 581 (HL).
criminal proceedings.15 The need for a substantive decision can be seen in Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2).16 In that case one of the questions was whether there could be issue estoppel on a judgment of a West German court as to capacity to sue. Lord Guest held that for res judicata a decision had to be final and conclusive on the merits.17 A decision on a preliminary point as to capacity to sue was not final or conclusive. Circumstances could change. Lord Upjohn was to similar effect.18 A decision as to capacity to sue cannot give rise to issue estoppel. All the more so with a decision whether disclosure of documents should be ordered for a criminal proceeding. Such procedural rulings do not decide the substance of issues between the parties to a proceeding. Because such procedural rulings do not go to the substantive merits of the issues between the parties, they do not give rise to issue estoppel.
[23] That is not however the end of the matter. If the matter were confined to applying the black letter rules as to res judicata, Mr Poros would have to apply afresh in this proceeding for a decision whether there is a prima facie case that the communications were made for a dishonest purpose. Mr Burney and the Bax interests have had one opportunity in which to contest that. They failed. If they were given a second opportunity and failed again, Mr Poros will have been put to extra work and expense to no good purpose. On the other hand, if Mr Burney and the Bax interests succeeded the second time, that would give rise to inconsistent judgments of different courts on the same issue – a matter likely to bring the administration of justice into disrepute. In Reichel v MacGrath, Lord Halsbury LC said:19
It would be a scandal to the administration of justice if, the same question having been disposed of by one case, the litigant were to be permitted by changing the form of the proceedings to set up the same case again. … There must be an inherent jurisdiction in every court of justice to prevent such an abuse of its procedure.
15 Criminal Disclosure Act, s 3(1).
16 Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] 1 AC 853 (HL).
17 At 935.
18 At 948. Lord Wilberforce on the other hand held that it had not been shown that the West German judgment was final and conclusive under West German law – 971-972.
19 Reichel v MacGrath (1889)14 AC 665 (HL) at 668.
[24] It has been recognised that it may be an abuse of procedure to make repeated unsuccessful applications.20 Equally, when a party has been successful in a procedural ruling, it may also be abusive for the other party to contest the same issue a second time when the procedural point is a live issue in the second proceeding. Bryant v Collector of Customs21 is an example where a procedural ruling in one case could not be relitigated in a second proceeding. In the first criminal proceeding evidence as to admissions made by the accused charged with theft was held inadmissible as the trial judge was not satisfied that they had been made voluntarily. The accused was prosecuted a second time before another judge on a charge of smuggling the same goods into New Zealand. The prosecution tried to rely on the admissions which had been rejected at the earlier trial. The Court of Appeal held that it was an abuse of process for the Crown to relitigate the voluntariness of the statements made by the accused.22
[25] In this context, a judgment as to abuse of process is a:23
broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not.
The following matters make it an abuse of process for Mr Burney to contest or deny that the documents were made for a dishonest purpose:
(a) as parties to the proceeding in the District Court he and the Baxes appeared and contested Mr Poros’ application for non-party discovery;
(b) the issue is the same;
(c) the standard of proof is the same in the criminal proceeding and the civil proceeding;
20 Woodhouse v Consignia Plc [2002] EWCA Civ 275, [2002] 1 WLR 2558 at [55].
21 Bryant v Collector of Customs [1984] 1 NZLR 280 (CA).
22 At 284.
23 Johnson v Gore Wood & Co [2002] 2 AC 1 (HL) at 31.
(d) Mr Burney had a right of appeal, but did not exercise it;
(e) while the decision was procedural, disclosure of documents for a criminal proceeding, the issue, whether the documents were made for a dishonest purpose, may be applied outside the proceeding in which the finding was made;
(f) it would be oppressive to require Mr Poros to prove the matter a second time; and
(g) re-litigation risks giving inconsistent judgments on the same matter.
[26] For these reasons, I find in light of the District Court decision that the privilege is set aside that Mr Burney’s continued assertion of privilege is abusive. Mr Poros is accordingly entitled to use in this proceeding the documents the subject of the ruling of the District Court in December 2015.
Result
[27] Mr Burney’s claim to privilege for the documents in issue is disallowed.
Mr Poros may use those documents in this proceeding.
[28] Costs are reserved. If counsel cannot agree costs, memoranda may be filed.
……………………………….
Associate Judge R M Bell
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