Property Ventures Investments Ltd v Commissioner of Inland Revenue HC Auckland CIV 2009 409 001947
[2010] NZHC 136
•24 February 2010
IN THE HIGH COURT OF NEW ZEALAND
CHRISTCHURCH REGISTRY
CIV 2009 409 001947
BETWEEN IRON ORE NEW ZEALAND LIMITED
Plaintiff
ANDRIO TINTO MINING AND EXPLORATION LIMITED First Defendant
ANDTHE ATTORNEY GENERAL Second Defendant
Hearing: 23 February 2010 (by telephone) Appearances: J G Rutherford for Plaintiff
P R Jagose with S Fairbrother and H Verrier for First Defendant
T Smith and J Kerr for Second Defendant
Judgment: 24 February 2010 at 4.35pm
JUDGMENT OF ASSOCIATE JUDGE OSBORNE
As to order that solicitor cease to act
(and other matters)
Application for orders striking out claim or dismissing proceeding
[1] On 16 November 2009 the Court directed that the plaintiff file and serve an amended statement of claim, having regard to the grossly unacceptable state of the plaintiff’s pleading as it then stood. The Court directed the first defendant to file and serve any interlocutory application in relation to the plaintiff’s pleading by 18 December 2009.
[2] The first defendant on 18 December 2009 filed an application for orders striking out the whole of the plaintiff’s third amended statement of claim dated 27
IRON ORE NEW ZEALAND LIMITED V RIO TINTO MINING AND EXPLORATION LIMITED AND
ANOR HC CHCH CIV 2009 409 001947 24 February 2010
November 2009 and dismissing the proceeding (together with a further order which I
will come to below).
[3] The application was given as its hearing date 23 February 2010 and was served on the plaintiff.
[4] On 11 January 2010 the second defendant filed a parallel application.
[5] Counsel for the defendants seek a hearing date of the two applications and timetabling directions.
[6] Mr Rutherford, in advance of the hearing, filed a memorandum (dated 11
January 2010) which was discursive and had attached to it over 100 pages of materials which the Court assumes Mr Rutherford intended to be read by the Court. The heading to the document indicated that the plaintiff was seeking judicial assistance on negotiations on the commercial issues between the parties in response
to the defendants’ applications. The implication was that the Court should not deal with the applications until negotiations have been completed. The memorandum does not contain any good ground for delaying the defendants’ right to have their interlocutory applications determined by the Court promptly.
[7] Mr Jagose referred to the judicial review aspects of the plaintiff’s case which require that the striking out application be heard by a Justice of the Court: Reid v NZ Fire Service Commission (1995) 8 PRNZ 550.
i) I allocate one day to the hearing of the defendants’
applications for striking out and dismissal.
ii)I direct the Registrar, in consultation with counsel, to set those two applications down for hearing on the first available date.
iii)The plaintiff is to file and serve any notice of opposition and all evidence in opposition by 5 March 2010.
iv)The plaintiff, having earlier failed to file its notice of opposition in the time required by r 7.24(1) High Court Rules,
I extend the time for the filing of all opposition documents in relation to those two applications to 5 March 2010, and no later.
v)In the event no opposition is filed by 5 March 2010, leave is reserved to the defendants to have the Registrar bring on the applications for immediate hearing as unopposed applications.
vi)In the event opposition is filed in time, the following directions apply to the interlocutory hearing:
a. The defendants/applicants shall file and serve 5
working days before the hearing:
i. applicants’ submissions;
ii. a joint chronology; and,
iii. a bundle of the relevant Court documents including affidavits which are indexed and which have each page numbered.
b. The applicants’ submissions must contain:
i. reference to any specific passage in the evidence that the applicants will refer to at the hearing; and,
ii. a list of the name and correct citations of any authorities mentioned.
c. The plaintiff/respondent must file and serve not later than two working days before the hearing:
i. submissions that meet the requirements of the applicants’ submissions; and,
ii. if the respondent disagrees with the applicants’ chronology, a separate chronology noting areas of disagreement.
d.The applicants shall prepare and produce at the hearing of the applications a bundle of the authorities referred
to in submissions (the authorities to be included in the bundle need not include authorities referred to for a straightforward and uncontentious proposition).
Application for order requiring the plaintiff’s lawyers to cease acting in the proceeding
[8] Both defendants applied for an order requiring the plaintiff’s lawyers (Rutherford & Company) to cease acting in this proceeding. The grounds of the application were that Mr Rutherford had acknowledged that a member of his practice would be giving evidence (of a contentious nature) in the proceeding if necessary, such acknowledgement being made in the case management conference on 16
November 2009. I note that the solicitor on record for the plaintiff is Carlin John
Rutherford, an employee of Mr J G Rutherford in the firm Rutherford & Company.
[9] Mr Rutherford filed no opposition to the application. Rather, Mr Rutherford filed the memorandum to which I have referred dated 11 January 2010 in which he stated this:
Likewise Chapman Tripp are concerned that Rutherford and Company are acting as solicitors when one of its members may need to give contentious evidence. In order to set the record straight in that regard the man with the most intimate knowledge of the project Marcus Flis, recently appointed as a director of IONZ, will give evidence in the event of the below compromise not being acceptable, and senior counsel will be employed.
[10] Later in the memorandum Mr Rutherford commented on the unavailability of the plaintiff’s preferred senior counsel to act at this point, but stated that the Queen’s
Counsel in question would act as counsel in the event of a proposed compromise being declined and:
As usual, Rutherford and Company will simply be in an administrative role.
The rules as to independence in litigation
[11] Mr Rutherford and his firm must comply with the rules of conduct and client care for lawyers set out in the Schedule to the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008: see r 3.
[12] The requirements of independence in litigation are contained in Chapter 13. Of particular relevance in this case are the following provisions of r 13.5:
13.5 A lawyer engaged in litigation for a client must maintain his or her independence at all times.
13.5.1A lawyer must not act in a proceeding if the lawyer may be required to give evidence of a contentious nature (whether in person or by affidavit) in the matter.
…
13.5.3A lawyer must not act in a proceeding if the conduct or advice of the lawyer or of another member of the lawyer's practice is in issue in the matter before the court. This rule does not apply where the lawyer is acting for himself or herself, or for the member of the practice whose actions are in issue.
…
[13] Rule 1.20 High Court Rules provides that the duties imposed by the High Court Rules on lawyers do not limit a lawyer’s obligations to the Court under the rules of conduct and client care for lawyers in New Zealand.
Discussion
[14] Mr Rutherford indicated to the Court that he had not appreciated that if he wished to oppose the interlocutory application he needed to file a notice of opposition within 10 working days.
[15] I treated his subsequent comments to the Court as being an informal application for leave to be heard in opposition.
[16] Mr Rutherford emphasised that he intended to instruct Mr Hughes-Johnson QC to have the conduct of the litigation for the plaintiff. He made it clear that his focus in issuing the proceeding and in the voluminous documentation he had filed with his 11 January 2010 memorandum was to have the litigation as a back-drop against which the Court might, as some form of judicial supervision, direct the parties to negotiation of the issues which the plaintiff wishes to raise. The documents which Mr Rutherford filed indicate, as reflected in the passage quoted above at [10], that Mr Rutherford has taken the view that because of the limited intentions which he had for the proceeding, it was appropriate for his firm to regard itself as being something in the nature of a processor or purely administrative body, performing no professional role in relation to the litigation.
[17] The limited role which Mr Rutherford envisaged for himself and his firm – an “administrative” role only – is not an answer to an otherwise correct objection to a lawyer’s involvement in a proceeding. Mr Rutherford’s firm accepts the professional role of the plaintiff’s lawyer, with all the professional obligations that carries. The concept of a purely administrative role, far from dissipating any fears as to a lawyer’s involvement in that way, exacerbates the legitimate concerns raised by the defendants. The concept of a purely administrative role highlights a failure by Mr Rutherford to understand the level of responsibility which his firm owes to the Court when undertaking obligations as the solicitors acting for a party in litigation.
[18] The Court must then ask itself whether Mr Rutherford may be required to give evidence of a contentious nature in this proceeding.
[19] The test is not whether the lawyer will be required to give such evidence, but whether the lawyer may be so required. Mr Rutherford did not address further submissions to the Court on his potential involvement as a witness. I therefore proceed upon the basis that he stands by the point made in his memorandum (above, [9]) where he refers to Marcus Flis as being “the man with the most intimate knowledge of the project” and one who will give evidence in the event of an
intended compromise not being acceptable. I note that Mr Flis is described in the memorandum as having been “recently appointed as a director of [the plaintiff]”.
[20] Mr Rutherford’s position adopted in his memorandum does not cut across the distinct possibility of his being required to give evidence of a contentious nature. The proceeding refers to dealings between the plaintiff and the first defendant from September 2006 to September 2009. Mr Rutherford provides no detail as to the period during which Mr Flis has been an employee of the plaintiff, except that his appointment has been “recent” It is clear from documents which Mr Rutherford provided with his memorandum that for part of the period which is the subject of the litigation Mr Flis was employed in the Rio Tinto representative office and not by the plaintiff. It is also clear from the documents which Mr Rutherford attached to his memorandum that for substantial parts of the period referred to in the statement of claim Mr Rutherford was involved in the dealings which are referred to in the statement of claim, was attending meetings and engaging in correspondence. In a letter of 9 April 2009 he describes himself as both Chief Executive of the plaintiff and as director. On any view of the documents which Mr Rutherford has provided to the Court, his role was central.
[21] It is an inescapable conclusion that Mr Rutherford may be required to give evidence of a contentious nature in the proceeding.
[22] In these circumstances it would be inappropriate to grant leave to the plaintiff
to file a notice of opposition out of time. The plaintiff has failed to provide the Court with any foundation for arguable grounds of opposition to this aspect of the interlocutory application.
[23] Although the application as at present framed does not refer expressly to r
13.5.3 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules (above, [12]), that rule is equally applicable in this case. The conduct and advice of the lawyer for the plaintiff is in issue in the matter before the Court. It is again clear from the documents provided by Mr Rutherford that his legal advice was guiding the plaintiff in its actions through the relevant period. By way of example, there is a point in the correspondence in 2008 when under a heading “Life and Times of the
IONZ/Rio Farm in Agreement” Mr Rutherford refers to “Conditions Precedent” and then proceeds to give what he calls “JGR [being his initials] interpretation”. He then sets out a number of statements as to the correct interpretation of various conditions of the arrangements and rights and consequences of termination.
[24] The Supreme Court, in Vector Gas Ltd v Bay of Plenty Energy Ltd [2010] NZSC 5, recently had cause to visit the role of a firm as solicitors in that litigation. In his judgment Wilson J (with whom Blanchard, Tipping, McGrath and Gault JJs concurred) made this comment:
[146] Russell McVeagh’s letter dated 5 October and their two letters dated
15 October were written under the name of Mr McIntosh. Chapman Tripp’s letters dated 8 and 15 October were written under the name of Mr Hodder.
[147] Whatever the court or tribunal in which they are appearing, it is undesirable for practitioners to appear as counsel in litigation where they have been personally involved in the matters which are being litigated. In that situation, counsel are at risk of acting as witnesses and of losing objectivity.
[148] These dangers have long been recognised. In 1940, Myers CJ stated clearly in Hutchinson v Davis [[1940] NZLR 490 (CA)] that “a practitioner cannot be allowed to act in the dual capacities of counsel and witness”. Northcroft and Blair JJ agreed. Correspondence between counsel on other than plainly non-contentious issues after litigation has commenced is best avoided, as the rules for lawyers’ conduct make clear, but is of less concern than the involvement of counsel in the matters which gave rise to that litigation.
[149] The present appeal illustrates the risks of counsel losing objectivity and of acting as a witness if they were personally involved in that way…
[25] On the facts of the present case, the discussion as to the involvement of “counsel” has relevance to the role of Mr Rutherford’s firm as solicitor on the record. Rule 13.5.3, to which Wilson J did not directly refer, makes this clear, for the solicitor on record is a lawyer acting in the proceeding.
[26] As it is, Mr Rutherford has continued to appear as counsel on each occasion this matter has been called. He has repeatedly indicated that he intends to involve counsel only when the proceeding reaches trial.
[27] Had it been necessary, I would have found it inappropriate for Mr Rutherford
or his firm to continue to act as solicitors for the plaintiff in this proceeding by reference to r 13.5.3, as well as by reference to r 13.5.1.
Order as to representation
[28] I order that Carlin John Rutherford and the firm Rutherford & Company shall promptly, and in any event no later than 28 February 2010, cease to act for the plaintiff in this proceeding.
[29] The plaintiff is to file and serve on every other party to the proceeding a notice of change of representation complying with r 5.40 of the High Court Rules by 5 March 2010.
Costs
[30] The defendants have each succeeded on their interlocutory application in relation to an order as to representation.
[31] I invited submissions from Mr Rutherford both as to whether there was any reason costs should not follow the event and as to whether he accepted that it would
be appropriate for the Court to order costs on a 2B basis. Mr Rutherford requested that the Court accept his apology for not having been active in relation to opposing the interlocutory application, and said that he had been out of the country at times since the applications were made. When I questioned Mr Rutherford as to the days
on which he had been out of the country since the first defendant filed its application
on 18 December 2009, he corrected himself and said that he had not been out of the country during that period, but had been out of the country earlier. It is of concern to the Court that the statement Mr Rutherford first made to the Court was incorrect.
[32] Mr Rutherford then went on to ask that the Court not award costs against the plaintiff, having regard to the fact that the plaintiff has been focusing its efforts on pursuing a negotiated or mediated outcome as an alternative to the litigation
proceeding. As regards the appropriate level of costs, if costs are awarded, Mr
Rutherford indicated he did not have an understanding of the nature of the scale and
of banding under the High Court Rules. I therefore explained to him that 2B represented an award on an “average” case involving “average” time. Mr Rutherford did not suggest that there was anything inappropriate about a 2B award, save that he repeated that the focus of the plaintiff has been on achieving a negotiated resolution.
[33] Costs should follow the event on the order I have made as to representation.
I also consider that this is an appropriate case for an award on a 2B basis. In reaching that conclusion I note a degree of irony in that at the first case management conference Mr Rutherford had suggested that the proceeding should be categorised as 3. I reserved the categorisation at that time (see Minute dated 16 November 2009). I am satisfied that in relation to this particular aspect of the interlocutory application, 2B is an appropriate approach. Counsel are free to argue for a different categorisation in relation to the proceeding generally
Costs order
[34] I order that the plaintiff pay to each of the defendants the costs associated with the interlocutory application as to representation and the order made thereon on a 2B basis (each), such costs together with disbursements to be fixed by the Registrar, to be paid by the plaintiff in any event.
Solicitors:
Rutherford & Company, Christchurch
Chapman Tripp, Wellingto
Crown Law, Wellington
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