SM v LFDB

[2022] NZHC 1231

NOTE: PUBLICATION OF THE PLAINTIFF’S NAME OR ANY INFORMATION THAT COULD IDENTIFY THE PLAINTIFF IS PROHIBITED (INCLUDING THE NAME OF THE DEFENDANT)

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2011-404-6851

[2022] NZHC 1231

BETWEEN

SM

Plaintiff

AND

LFDB

Defendant

Judgment:

(On the papers)

31 May 2022

JUDGMENT OF BREWER J

This judgment was delivered by me on 31 May 2022 at 10 am pursuant to Rule 11.5 High Court Rules.

Registrar/Deputy Registrar

Solicitors:

Friedlander & Co (Auckland) for Plaintiff

Copy to: Peter McCutcheon (Auckland)

SM v LFDB [2022] NZHC 1231 [31 May 2022]

Introduction

[1]This Judgment decides an application by Mr McCutcheon1 for:

(a)Relief from the operation of a freezing order dated 24 April 2017 as amended from time to time (“the freezing order”); or

(b)For the freezing order’s variation, so that the applicant is not required to pay to the plaintiff all of the funds received from any entity associated with the defendant or the defendant for the payment of legal services.

Background

[2]                   How and why the  freezing  order  came  to  be  in  effect  is  irrelevant  to  Mr McCutcheon’s application.

[3]                   The defendant, LFDB, the subject of the freezing order, is debarred from pursuing claims against the plaintiff, SM, in whose favour the freezing order was granted. Again, the how and why of that is irrelevant to Mr McCutcheon’s application.

[4]                   In late 2020 the defendant instructed Mr McCutcheon to file judicial review proceedings against the plaintiff. He tried to do so:

(a)On 5 November 2020 the Registry advised Mr McCutcheon that the documents would not be accepted for filing because LFDB is debarred from the proceeding.

(b)Mr McCutcheon filed an application seeking review of the Registry’s decision.2

(c)In my Minute of 17 December 2020,3 I dismissed the application. I observed that the application rejected by the Registry was an abuse of process.

1      Interlocutory application on notice by a solicitor for relief from the High Court’s processes or the variation of a freezing order, dated 4 February 2022.

2      Notice of Application for the Review of a Registrar’s decision, dated 12 November 2020.

3      Reissued on 16 February 2021.

(d)On 8 February 2021, Mr McCutcheon filed and served a Notice of Appeal against my decision.

[5]                   Mr McCutcheon took no further steps. The plaintiff’s submissions describe the outcome:

47.On 7 September 2021, the Court of Appeal struck out the defendant’s appeal as an abuse of process and awarded costs.⁴ It said:

[26] … The fact of LFDB’s debarment  is  both  uncontestable and well documented. The [High Court] Registrar acted entirely properly in declining to accept his application for filing…

[29]    … [LFDB] seeks now to sidestep the need to [purge his contempt of the Court of Appeal’s orders] by the device of a fresh application in the High Court. As the Supreme Court earlier recognised, LFDB is gaming the court system. The application which he sought to file in the High Court was an abuse of process. The High Court having properly recognised that state of affairs and dismissed the application, LFDB’s appeal to this Court is likewise an abuse of process. The grounds for an order under rr 44A(1)(c) of the Rules are clearly established.

[6]                   Mr McCutcheon received from LFDB (through an Australian company, “DBA (AU)”) payments of $37,436.19 for his fees and disbursements (“the payments”).

[7]                   The freezing order applies to the payments. Under its terms, Mr McCutcheon is obliged to pay all the money he received from DBA (AU), plus interest, to SM.

[8]Paragraph 11 of the freezing order provides:

Any person (other than LFDB and any company or trust associated with LFDB) who is detrimentally affected by this order may apply to the Court by interlocutory application to discharge or vary this order upon three clear working days’ notice to SM.

[9]                   Mr McCutcheon submits he is detrimentally affected by the freezing order to the extent it should be varied to discharge him, in whole or in part, from having to remit the payments to SM.

4      LFDB v SM [2021] NZCA 445.

Mr McCutcheon’s submissions

[10]               Mr McCutcheon is a sole practitioner. In his affidavit sworn 4 February 2022 he deposes:

(a)He was misled by LFDB “into believing that the freezing order was a historic document, no longer operative”.5

(b)LFDB supplied him with an earlier version of the freezing order on  14 September 2020.6 However, Mr McCutcheon “did not read it as being so abnormally wide as to even apply to any money received by lawyers for providing basic legal advice and services (something I understood was normally excluded from the operation of freezing orders). I had no proper notice that the freezing order remained in force”.7

(c)He stopped acting for LFDB “immediately on receipt of the formal service of the freezing order on 10 February 2021”.8

(d)He was aware of the abuse of process issue and knew that LFDB was debarred. He spoke on the telephone to a Queen’s Counsel and formed the view it would not be an abuse of process to file judicial review proceedings on behalf of LFDB.

(e)Generally, he took reasonable steps upon instructions, genuinely believing he was acting professionally. The payments are very significant in the context of his practice.

5      At 10.

6      The earlier freezing order, made on  26  November  2015,  was  in  identical  terms  so  far  as Mr McCutcheon’s obligations are concerned.

7      At 12.

8      At 15.

Discussion

[11]               I start with the basic point that the payments, by orders of the Courts, belong to SM. Mr Hollyman QC is correct when he submits:

2.The orders made since 27 October 2015 included orders:

a.Freezing all assets in the defendant’s name, possession and control (including DBA(AU)) until such time as he satisfies all judgment debts to the plaintiff (including her half share of DBA(AU)).⁹

b.Requiring any lawyer to:

i.pay over all monies or the equivalent of all monies received from or for the defendant/associated companies and trusts since 27 January 2015 plus interest at the rate of five per cent per annum from the date of receipt; and

ii.pay costs of $2,500 on failing to comply within five working days.¹⁰ (unless order)

[12]               Mr McCutcheon is not an innocent third party. He is a lawyer who decided to accept instructions despite knowing LFDB was debarred, despite having the earlier version of the freezing order and despite, as he accepts, having knowledge of the preceding litigation.

[13]               Mr McCutcheon submits he was naïve. I accept that. I accept also that he was unfamiliar with this area of law, discussed the abuse of process issue briefly with a Queen’s Counsel, and generally tried to do his best for his client.

[14]               However, what Mr McCutcheon did not do was check whether the freezing order was still in force. Nor did he read with sufficient care the copy supplied to him by LFDB. Further, he did not read with sufficient care the preceding judgments of the Courts. For example, he “scan-read” the Court of Appeal’s judgment of 29 June 201611 but did not apparently reflect on the Court’s noting (at [23]) the rejection of

9      Freezing orders dated 27  January  2015;  5  February  2015;  11  March  2015;  3  June  2015;  26 November 2015; 21 March 2016; and 24 April 2017.

10     Orders dated 15 March 2017.

11     LFDB v SM [2016] NZCA 295.

LFDB’s application to vary the freezing order to enable him to pay legal expenses in New Zealand.

[15]               The result was that Mr McCutcheon prepared, and attempted to file, a proceeding which was plainly an abuse of process.

[16]In my view, Mr McCutcheon was at best reckless.

[17]               In essence, Mr McCutcheon received money he should have realised belongs to SM, used it to fund his attempts to file proceedings against her, and now asks the Court to permit him to keep some or all of it because he was acting mistakenly but genuinely. To grant his request would be to unjustly prefer Mr McCutcheon’s interests as counsel for LFDB to those of SM.

Decision

[18]Mr McCutcheon’s application is dismissed.

[19]               SM is entitled to costs. If they cannot be agreed then SM is to file a memorandum by 1 July 2022. Mr McCutcheon’s reply is to be filed by 5 August 2022.

Brewer J