Re AWS Legal Solicitors - [2015] NZHC 2086

IN THE HIGH COURT OF NEW ZEALAND INVERCARGILL REGISTRY

CIV-2015-425-60 [2015] NZHC 2086

IN THE MATTER of a Solicitor's Undertaking

AND

IN THE MATTER

of Hokonui Shearing Limited

BETWEEN

AWS LEGAL SOLICITORS Applicant

Hearing: On the papers

Judgment:

31 August 2015

JUDGMENT OF DUNNINGHAM J

[1] This is an application by AWS Legal, a law firm, for an order releasing it from its undertaking given on 8 July 2008.

[2] The application was commenced by way of originating application and, on 10

July 2015, Nation J granted leave for the application to proceed in this way.

[3] He also directed that the application be served on Smith, Wood and Woods, solicitors of Gore, being the firm of solicitors who were then acting on behalf of Mr Terrence Pohatu, and to whom the relevant undertaking was given.

[4] Nation J directed that service on Smith, Wood and Woods, would also be deemed to be service on Mr Pohatu and, if either Mr Pohatu or Smith, Wood and

AWS LEGAL SOLICITORS (Hokonui Shearing Ltd) [2015] NZHC 2086 [31 August 2015]

Woods wished to oppose the application, they were to file a notice of opposition within 30 days of the documents being delivered to Smith, Wood and Woods.

[5] The Court has now received evidence that the application was served on Smith, Wood and Woods on 17 July 2015. A letter from Mr Gray, a partner of that firm, also confirms that he contacted Mr Pohatu, who agreed to accept service of the documents at his address at 32 Norfolk Street, Riversdale, Southland, by post, and the documents were forwarded to Mr Pohatu in that way.

[6] Accordingly, the time for filing any opposition expired on 17 August 2015 but no steps have been taken by Mr Pohatu or his solicitors. The applicant now seeks that an order is made in terms of the draft filed with the application.

Background

[7] In 2008, AWS Legal was acting for Roger Kidd, a director of, and shareholder in, Hokonui Shearing Ltd (HSL). The firm of Smith, Wood and Woods of Gore, acted for the other director and shareholder of HSL, Mr Pohatu. The relationship between the two directors broke down and, in due course, it was agreed that the assets of HSL would be sold to a new company established by Mr Kidd, the debts of HSL paid off, and the remaining funds of HSL would be divided between the two shareholders.

[8] There were disagreements between the shareholders concerning the current accounts, with Mr Pohatu claiming he was entitled to more from the net proceeds of sale than Mr Kidd because of what he claimed to be a smaller current account. As it was not possible to resolve this dispute before settlement of the sale and purchase agreement of the assets of HSL to Mr Kidd’s new company, it was agreed that Mr Kidd would deposit personal money into AWS Legal’s trust account so that if, when the current accounts were finalised, there was…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2015] NZHC 2086
Decision Date: 31 August 2015

CaseChat Overview and Summary

The case involves an application by AWS Legal Solicitors to be released from an undertaking given on 8 July 2008. The application was brought before the High Court of New Zealand, Invercargill Registry, and was heard on the papers. The applicant seeks to be released from its undertaking to hold $80,000.00 deposited by Roger Kidd, a shareholder of Hokonui Shearing Ltd (HSL), in its trust account until the current accounts are finalised and agreed upon by the shareholders. The undertaking was provided to Smith, Wood and Woods, the solicitors acting for the other shareholder, Terrence Pohatu, to facilitate the sale of HSL's assets to a new company established by Kidd.

The central legal issue in the case was whether AWS Legal could be released from its undertaking, given that over six years had passed since the funds were deposited and the current accounts were not finalised. The applicant argued that both potential claimants, Pohatu and HSL, were now statute-barred from making a claim due to the passage of time. The applicant also highlighted that HSL had been struck off the Companies Register for failing to file an annual return since 2010. Furthermore, AWS Legal contended that the intended purpose of the undertaking had been frustrated by the effluxion of time, as there had been no attempt to finalise the current accounts or make any claim within the six-year period.

The court considered the purpose of the undertaking, which was to provide assurance to Pohatu that there were funds to satisfy any required balancing of current accounts in HSL. The court found that the intended purpose of the undertaking had been frustrated by the passage of time, as there had been no attempt to finalise the current accounts or make a claim within six years for any adjustment. The court also acknowledged that the situation appeared to have arisen through no fault of Kidd, and there was no reason why he should be kept out of these funds any longer because AWS Legal remained bound by its undertaking. Additionally, Pohatu, having been notified of the proceedings, had taken no steps to oppose the making of an order discharging AWS Legal from its undertaking.

Based on these findings, the court ordered that AWS Legal be released from its undertaking given in the letter dated 8 July 2008. This decision allows AWS Legal to distribute the funds held in its trust account to Kidd, as the intended purpose of the undertaking had been frustrated by the passage of time and lack of any attempt to finalise the current accounts.

Orders