Richmond v Raju HC Auckland CIV 2009-404-007078

[2011] NZHC 1466

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2009-404-007078

BETWEEN  COLLEEN MARGARET JOYCE RICHMOND

Plaintiff

ANDRAJU RAJU First Defendant

ANDKIRTI RAJU Second Defendant

ANDLALITA RAJU Third Defendant

ANDAARON SURAJ RAM KASHYAP Fourth Defendant

ANDBHARAT PARSHOTAM Fifth Defendant

Hearing:         8 April 2011

Appearances: P Finnigan for the Plaintiff

K Burkhart for the Fourth Defendant
G Wishart for the Fifth Defendant

Judgment:      12 April 2011

Reasons:        16 June 2011

JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSEN

This judgment was reissued by me on

16.06.11 at 4:30 pm, pursuant to

Rule 11.5 of the High Court Rules.

Solicitors/Counsel:

Registrar/Deputy Registrar

Date……………

P Finnigan, Thorne Thorne White & Clark-Walker, Auckland   – [email protected] /

[email protected] /
A Gilchrist, Barrister, Auckland – [email protected]

K Burkhart, Shieff Angland, Auckland - [email protected]

COLLEEN MARGARET JOYCE RICHMOND V RAJU RAJU HC AK CIV 2009-404-007078 12 April 2011

G Wishart, McElroys, Auckland – [email protected]

M Karam, Barrister, Auckland – [email protected]

[1]      This  judgment  concerns  the  plaintiff ’s  application  for  further  and  better discovery.  It also seeks leave to release Mr C W Bright, a solicitor from an implied undertaking on discovery not to refer to nor make use of documents disclosed in another proceeding.

Background

[2]      The events giving rise to this proceeding occurred in 2004.  The plaintiff is now 74 years of age.  For this proceeding she has been granted legal aid.

[3]      The first and second defendants are husband and wife.  The third defendant is their  daughter.    The  first  defendant  was  a  property  developer.    Commonly  he, through the identity of his wife or his daughter, would purchase a property with the view to subdividing it in order to build a second dwelling with the object that both the new and the old dwellings would be on sold.

[4]      The first defendant operated primarily through a company RS Builders (NZ) Limited, the shares of which were held by family members.   It transpires that at relevant times the first defendant was a bankrupt.

[5]      In January 2004 and following approach from the first defendant the plaintiff agreed to sell her Whitmore Road property for $350,000.  It is pleaded that the first defendant offered the plaintiff the inducement that he would construct an alternative home for her for $280,000.

[6]      Between January and April 2004 the first defendant obtained the plaintiff’s signature  to  a  document  to  purchase  the  back  lot  of  38  Mirinda  Street.    The agreement provided for a deposit of $140,000.

[7]      At  the  recommendation  of  the  first  defendant  the  plaintiff  consulted  the fourth defendant to act for her on the sale.

[8]      Settlement of the plaintiff’s sale was effected on 24 March 2004.  Transfer of the property was taken in the name of the third defendant.  That same day the first

defendant  induced  the  plaintiff  to  pay  to  him  the  sum  of  $140,000  from  the

Whitmore Road settlement.

[9]      Because the Miranda Street development was not completed by 24 March

2004, the plaintiff continued to rent the property she had sold.

[10]     The plaintiff moved into the Miranda Street property on about 8 April 2005. By that date she had paid to the first defendant further sums to the amount of the purchase price of $280,000 plus about $25,000 for extras.

[11]     In the latter part of 2005 the plaintiff learned that the Miranda Street property had not been transferred to her name.  She complained to both the first defendant and to the fourth defendant about this.  Apparently at all material times the property at

38 Miranda Street recorded the second defendant was the owner and the property was mortgaged with Bridgecorp.

[12]     On  27  March  2006  the  plaintiff  was  informed  by  Bridgecorp  that  the mortgage debt secured over the existing dwelling on the front and the new dwelling at the rear of Miranda Street was $794,117.39.  The property has since been sold by mortgagee sale.  The plaintiff received nothing back from those funds she advanced for the Miranda Street development.

Plaintiff ’s dealings with fourth and fifth defendants

[13]     The fourth defendant and the fifth defendant are solicitors from separate legal practices.  Initially the fourth defendant was instructed, he having been referred to the plaintiff by the first defendant.

[14]     The plaintiff recalls that on the date of the settlement of her property she was required to sign a document recording an increased sale price of $365,000.   It is alleged this was done dishonestly and fraudulently by the first defendant and for the purpose of securing additional funding for other developments.

[15]     By the plaintiff ’s account the fourth defendant acted for her until after she had signed the agreement to purchase the Miranda Street property.

[16]     According to the fourth defendant he had no contact with the plaintiff after

24 March 2004 until approximately June 2004 when he received a letter from the fifth defendant confirming that the fifth defendant was acting for the plaintiff in respect of the Miranda Street purchase, by which agreement the first defendant was noted as vendor.

[17]     The fourth defendant noted that this advice was the first he heard about the Miranda Street transaction.   The fourth defendant asked the fifth defendant for a copy of the sale and purchase agreement.  The fourth defendant was then, as he had for some time earlier been, the first defendant’s solicitor.

[18]     The fourth defendant has deposed that at no time was he aware that the first defendant was a bankrupt.

[19]     The fifth defendant deposes that at the time he received instructions to act for the plaintiff in mid-2004 he knew the first defendant socially and was aware of his bankruptcy.   He had acted for the first defendant, his company and his family for some years previously on property transactions.  He deposes that on or about 26 May

2004 an unknown person delivered to him and unconditional agreement for the sale and   purchase   of   the   Miranda   Street   property.      He   wrote   to   the   plaintiff acknowledging its receipt.

[20]     On  25  August  2004  the  fourth  defendant  sent  a  facsimile  to  the  fifth defendant advising that the third defendant’s mortgagee had threatened to enforce its rights due to her default and enquired whether the plaintiff would agree to cancel the agreement if the deposit was refunded.

[21]     The fifth defendant wrote to the plaintiff inviting her contact and discussion. The plaintiff made contact about six weeks later.  He said it was then she informed him for the first time that the first defendant had agreed to build her a house at the Miranda Street property and she was concerned about its progress.  She said she had made loans to the first defendant totalling over $100,000, a significant portion of which had been advanced before the fifth defendant had been instructed on her behalf.

[22]     According to the fifth defendant he obtained a title search with a view to lodging a caveat to protect the plaintiff ’s interests, if such was needed.  Before that could be done the fifth defendant received an authority to uplift the plaintiff’s file for forwarding to her new solicitors.

The claim

[23]     The plaintiff sues to recover the value of her $280,000 investment in the Miranda Street property.  As well she claims the sum of $25,000 in respect of the further payments made for extras to the Miranda Street home.   Also, she sues to recover legal fees and other expenses incurred with the transaction.

[24]     The first defendant has taken no steps in defending the proceedings, and appears to have left New Zealand.  It is assumed that he has no funds to meet any judgment awarded against him.   In more recent times, the first defendant’s commercial activities have been the subject of enquiry by the Serious Fraud Office. The second and third defendants, although represented by counsel, have sought, and been granted, leave from the Court not to appear on this application, as the issues do not directly affect them.

[25]     The  plaintiff’s  claim  asserts  the  first,  second  and  third  defendants  were parties to dishonest schemes; and that in accepting instructions from the plaintiff the fourth defendant was conflicted because of his knowledge of the first defendant’s dishonest practices and because he acted also for Bridgecorp with funding arrangements.

[26]     It  is  pleaded  the  fourth  defendant  was  aware the first  defendant  had  no property or assets of his own; that despite his bankruptcy the first defendant was undertaking property purchases  and  sales  and  developments  and  was  borrowing funds using nominee purchasers/vendors/borrowers.

[27]   In the course of submissions to me Mr Finnigan highlighted certain correspondence by the fourth defendant to the fifth defendant which raised questions

about the integrity of processes connected to the dealings of the first, second and third defendants.

[28]     It is not necessary for me to go into this at this time.

[29]     It appears plain from the affidavits of the fourth and fifth defendants that in due course evidence will have to be given to clarify some of the recollections of the solicitors.  Likewise, some explanation needs to be given regarding facts and figures disclosed by the solicitors’ reporting statements made in the course of managing client affairs.

Considerations

[30]     These are applications which at first blush show all the appearances of a fishing expedition – in the hope of finding something that will verify suspicions of irregular behaviour.  Also, and because of the size of the discovery requested by the application it could prove onerous to comply with the order for discovery requested. In their submissions Ms Burkhart and Ms Wishart oppose the application on the grounds of relevance, oppression, and a claim that the applicant was doing no more than “fishing”.   These considerations are commonly reviewed in applications like these.

[31]     To be relevant the document sought must relate to a matter in question in the proceeding.  Also it must contain information which may either directly or indirectly enable the plaintiff to advance her case.   In this proceeding the documents sought relate to an entirely different proceeding.   It is said therefore that they are not relevant to the matters in issue in this proceeding.  Specifically it is alleged that the documents produced in the Kumari/Nair proceeding, in which Mr Bright acted for those named plaintiffs against the first defendant and related entities, are relevant because they may show a pattern of conduct or of a system used, similar to the conduct alleged in this wherein knowing assistance, conspiracy, a breach of fiduciary duty or other duties of care are alleged.

[32]     The applicant is seeking discovery of files in which the fourth defendant has acted for the defendants and other related parties covering a time period of approximately nine years.  Ms Burkhart submits that the documents cannot be said to be relevant to establish any pattern of conduct to show the fourth defendant should have been aware, and had a duty to inform or warn the plaintiff about, in that short period  he  acted  for  her  in  2004  and  in  the  outcome  of  which  her  sale  was successfully concluded and the proceeds were remitted to her account.

[33]     Evidence of similar facts will be admitted where such are relevant to the determination of the matter in issue, where there is a nexus between the similar fact in the matter, and provided the evidence is not oppressive or unfair and that the other side has had notice of it and is able to deal with it. [1]

[1] Mao-Che v Armstrong Murray [1992] 6 PRNZ 371.

[34]   The Court naturally hesitates to permit a net to be cast too widely in circumstances where there is evidence of other claims of negligence made or established against a defendant.  However if that evidence might tend to illustrate a system operated by a professional defendant then appropriate further discovery may be allowed.  It matters not that the information sought relates to a period subsequent in time and not prior to the time raised by a plaintiff’s allegations.

[35]     There is enough in the long association of the fourth defendant in particular but also, by acknowledgement, the fifth defendant also for the scope of enquiry raised by this proceeding to be enlarged to provide a review of professional systems and processes with a client whose business practices may well be dishonest and deceitful.  This is so even though those lawyers have cooperated with the Serious Fraud Office enquiry of their clients and whose own practices have not, in that process, apparently given cause for further enquiry.

[36]     What  then  of  the  challenge  of  “oppression”  to  the  requirement  of  any

discovery.

[37]     I think that challenge is met by Mr Finnigan’s offer to permit discovery to be

effected by a process that identifies the name of the solicitor file and a general

description of what it contains – without the need to separately identify each document within that file.

[38]     If in that process questions arise regarding the contents of the file then those can be raised upon further enquiry on behalf of the plaintiff.

[39]     Another compelling factor in my consideration of this application is the fact that in the related Kumari/Nair proceeding there had been disclosure of a number of historical files by the solicitors in response to claims of practice and process not dissimilar to those raised upon this proceeding.   In this proceeding the fourth defendant has made discovery of a number of other (about 15 in all) files in response to the current allegations, but not those same files discovered in the Kumari/Nair proceeding.

[40]     I well understand counsels’ reasons for limiting discovery to files created in that same period covered by this proceeding.  However, in the circumstances of this case I think there is proper cause to extend the area of enquiry to include all those files referred to in Sschedule one of the Further and Better Discovery Application, or at least such of those that have not already been discovered.

[41]     It follows that it is proper in the circumstances to release Mr Bright who acted  as  solicitor  and  counsel  in  Kumari/Nair  proceeding  against  the  fourth defendant, from any express or implied undertaking imposed and arising from the discovery provided by the fourth defendant in that proceeding if and when giving evidence in this proceeding, to refer to and to make use of the Kumari/Nair documents as necessary.

Conclusion

[42]     The  particular  circumstances  of  this  case  give  proper  cause  for  further enquiry into the professional services provided by the fourth and fifth defendants on behalf of the first, second and third defendants.

[43]     In this case there is a potential for significance and therefore relevance in the outcome of the enquiry.    Considerations  of oppression  can  be overcome in  the manner I have suggested in paragraph [37] herein.

[44]     I have been somewhat sparse in identifying those reasons for suggesting there may   be   proper   cause   for   further   scrutiny   of   professional   records   in   the circumstances.  I have considered it appropriate to take that approach.

[45]     The application is successful in all respects.  The fourth and fifth defendants

shall each meet half of the plaintiff’s costs calculated on a category 2B basis.

[46]     Leave is reserved to the parties to apply to clarify any issues of compliance that may arise in the giving of effect to the orders made herein.

Associate Judge Christiansen