TPD 2018 Limited v Godfrey and Company Limited

[2020] NZHC 314

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2019-404-000093

[2020] NZHC 314

BETWEEN

TPD 2018 LIMITED

Plaintiff

AND

GODFREY AND COMPANY LIMITED

Defendant

Hearing:	16 December 2019
Appearances:	S O McAnally and N W Coyle for Plaintiff and Third Party R J Sussock for Defendant
Judgment:	28 February 2020

JUDGMENT OF ASSOCIATE JUDGE P J ANDREW

TPD 2018 LTD v GODFREY & CO LTD [2020] NZHC 314 [28 February 2020]

Introduction

[1]    The plaintiff (TPD), sues the defendant (Godfrey), for breach of fiduciary duty and breach of contract following the termination of an alleged joint venture agreement. The joint venture (JV) is said to have been a combination of two insurance loss- adjusting businesses set up with a view to a formal merger. The JV was set up in February 2011 following the second Canterbury earthquake.

[2]    The merger never eventuated and the plaintiff’s claim for equitable and other compensation arises from Godfrey’s alleged failure to account for revenue following the termination of the JV.

[3]In the present proceeding Godfrey makes the following applications:

(a)An application to disqualify Keegan Alexander, solicitors, from acting for the plaintiff and first third party;

(b)An application for orders for further and better discovery pursuant to  r 8.19 of the High Court Rules.

[4]    At issue is whether Keegan Alexander previously acted for Godfrey and whether it is likely that Mr Matthew Pasley of Keegan Alexander will be required to give contentious evidence. The ultimate question for determination is whether Keegan Alexander’s representation of TPD against Godfrey will impair the integrity of the judicial process. That is not dependent on any finding of culpable conduct on the lawyer’s part.

Factual background

[5]    In 2011, the company, Thomas Pasley & Associates Ltd (TPA), was engaged in the business of insurance loss-adjusting.

[6]    The first third party, CNZ (Auckland) Ltd (in liquidation) (CNZ), is the successor to all of the property, rights, powers and privileges of TPA following an

amalgamation dated 30 November 2013, pursuant to Part 13 of the Companies Act 1993.

[7]    TPD says that it is the assignee of all of the rights, title and interest of CNZ to the causes of action pleaded in the statement of claim.

[8]    TPA and Godfrey were competitors in the insurance loss-adjusting industry. In late 2010 they commenced talks about merging the two companies.

[9]    Following the second major Canterbury earthquake of 22 February 2011, they agreed that they should start working together with a view to a formal merger.

[10]   From February 2011, the two companies remained separate but traded together under the name “TPA Godfreys”. It was agreed that Godfrey would invoice and collect the receivables.

[11]   The terms of the arrangement/agreement between the two companies is in dispute.

[12]   Mr Thomas Pasley is a director of TPD and previously was a director of CNZ and TPA.

[13]   The brother of Mr Thomas Pasley, Mr Matthew Pasley, is a partner in the firm of solicitors, Keegan Alexander, Auckland.

[14]   In February 2013, Mr Thomas Pasley instructed Mr Matthew Pasley to re-issue a letter of advice he had written for TPA approximately 12 months earlier. That letter set out a potential “road map” for a formal merger between the two companies from a legal perspective.

[15]   Mr Matthew Pasley’s letter of 20 February 2013 was addressed to TPA Godfreys for the attention of Mr Thomas Pasley and Peter Ziegler, the directors of TPA. It was then circulated to the other directors and shareholders of both TPA and Godfrey with a view to encouraging discussions about a formal merger. Paragraph 1 of Mr Matthew Pasley’s letter read:

I refer to my discussions and our right to set up the steps which I see as being required to effect the merger of Thomas Pasley & Associates Ltd (TPA) and Godfrey and Company Ltd (Godfrey). I have endeavoured to do this in a neutral manner which I hope may be acceptable to both parties as a way forward.

[16]   On 22 March 2013, the shareholders of the two companies met and discussed a merger. Both Mr Thomas and Mr Matthew Pasley were in attendance. The agenda for the meeting had been prepared by Mr Matthew Pasley. Mr Matthew Pasley took handwritten notes at the meeting and it lasted approximately nine hours.

[17]   At the meeting the parties discussed the issue of the existing 62.5 per cent/37.5 per cent split of revenue between the two companies.

[18]   Subsequent to the meeting Mr Matthew Pasley started drafting a shareholders’ agreement, an agreement for the sale and purchase of the Godfrey business, an agreement for the sale and purchase of the TPA business and a shareholder loan agreement.

[19]   In late May 2013, the shareholders of TPA decided they would not proceed with a formal merger. The plaintiff says it was agreed that the two companies would, from that time, stop trading together subject to the said JV being “run-off” through to the end of 31 October 2013.

[20]   On 13 November 2013, Godfrey accounted to TPA for $300,000. However, TPA believed it was owed (as at 31 August 2013) $1,720,950 as its share of the net proceeds of the JV.

[21]   In the main proceedings, TPD pursues the balance that it says Godfrey must account to it for, as representing TPA’s residual share of the net profit for the JV.

[22]   Mr Matthew Pasley issued invoices for his services to TPA. One of those invoices dated 28 March 2013, in the total sum of $15,111, was paid by Godfrey (albeit addressed to TPA) at the instigation of Mr Thomas Pasley.

Application to disqualify

Relevant legal principles

[23]   In Black v Taylor, the Court of Appeal confirmed that the courts have an inherent jurisdiction to disqualify a solicitor from acting against a former client.1 Richardson J considered that disqualification will normally be the appropriate response in cases where counsel’s representation of one party against another may impair the integrity of the judicial process:2

Disqualification will ordinarily be the appropriate remedy where the integrity of the judicial process will be impaired by counsel’s adversarial representation of one party against the other. The decision to disqualify is not dependent on any finding of culpable conduct on the lawyer’s part. Disqualification is not imposed as a punishment for misconduct. Rather it is a protection for the parties and for the winder interests of justice. The legitimacy of judicial decisions depends in large part on the observance of the standards of procedural justice. Where the integrity of the judicial process is perceived to be at risk from the proposed or continuing representation by counsel on behalf of one party, disqualification is the obvious and in some cases the only effective remedy although considerations of delay, inconvenience and expense arising from a change in representation may be important in determining in particular cases whether the interests of justice truly demand disqualification.

[24]   The purpose of the jurisdiction is to ensure the courts may effectively see that justice is done and is seen to be done in any given case.3 In terms of the appearance of justice, the question for the court turns on how the conduct in question would appear to reasonable and fair-minded members of the community knowing of the relevant background. When the concern is misuse of confidential information, the test is whether, from an objective point of view, a reasonably informed person would regard there as being real or appreciable risk of disclosure of that information.4

[25]   The jurisdiction must, however, be exercised with circumspection5 and a litigant should not be deprived of the fundamental right to counsel of its choice without

1      Black v Taylor [1993] 3 NZLR 403.

2      At 412.

3      Black v Taylor, above n 1, Cook J at 406, Richardson J at 408 and McKay J at 418 (CA).

4      Russell McVeagh McKenzie Bartlett & Co v Tower Corporation [1998] 3 NZLR 641 at 651 (CA).

5      Black v Taylor, above n 1, at 406 per Cooke J; Russell McVeagh McKenzie Bartlett & Co v Tower Corporation, above n 4, at 651.

good cause.6 The bringing of such an application without proper grounds, as a tactic to discomfort the other party, is an abuse of process.7

[26]   In Prince Jefri Bolkiah v KPMG (a firm), Lord Millett held that the Court’s jurisdiction to intervene on behalf of a former client is based on the need to protect confidential information.8 Where status as “former client” is established and the new matter relates to the matter on which the solicitor previously acted, “the court should infer that confidential information was imparted unless the solicitor satisfies the court that no information was imparted which could be relevant”.9 Furthermore, although the burden of proof is on the plaintiff “it is not a heavy one”.10

[27]   While the rules of professional conduct are not determinative in an application, they are to be applied as part of determining the standard by which it is necessary to enable the courts to discharge their functions in the administration of justice.11

[28]   The fiduciary relationship between a solicitor and a client comes to an end when the retainer is terminated. However, the solicitor has a continuing obligation to protect the former client’s confidential information. This obligation is of fundamental importance and must be strictly observed.12 The obligation is confirmed in r 8.7.1 of the Lawyers and Conveyancers Act (Lawyers: Conduct in Client Care) Rules 2008 which provides:

8.7.1A lawyer must not act for a client against a former client of the lawyer or of any other member of the lawyer’s practice where –

(a)the practice or a lawyer in the practice holds information confidential to the former client; and

(b)disclosure of the confidential information would be likely to affect the interests of the former client adversely; and

(c)there is a more than negligible risk of disclosure of the confidential information; and

6      Black v Taylor, above n 2, at 409 per Richardson J; Li v Liu [2018] NZCA 528 at [23].

7      Black v Taylor, above n 1, at 420.

8      Prince Jefri Bolkiah v KPMG (a firm), [1999] 2 AC 222 at 234 (HL).

9      Martin v Gray (1990) 77 DLR 4th 249, referred to by McKay J in Black v Taylor, above n 1, at 704 and Richardson J at 698.

10     Prince Jefri Bolkiah v KPMG (a firm), above n 8 at 235.

11     Black v Taylor, above n 1, at 419.

12     Torchlight Fund No 1 LP (in receivership) v NZ Credit Fund (GP) 1 Ltd [2014] NZHC 2552 at [19].

(d)the fiduciary obligation owed to the former client would be undermined.

[29]   The types of information that the courts are prepared to protect are broader than what might ordinarily be understood as confidential information. In Black v Taylor, Cooke J cited with approval McGechan J’s description of the type of information that is relevant:13

Last, the lawyer (in particular the family solicitor) gets to know personalities. He gets to know something, and often a good deal, of a former client's weaknesses, fears and reactions. It is as much information passed on as is verbal or written description. Like all information, it can be misused for another person. There could be cases, perhaps, with a former client witness' credibility crucial, where such knowledge of personality inevitably acquired by virtue of the former solicitor/client relationship could amount to a real information consideration. There will be cases where a former client's very real fears that he will be cross-examined from a position of unfair superiority should be given due consideration.

[30]   The defendant’s application also relies upon r 13.5 of the Conduct in Client Care Rules. Rule 13.5 reads:

13.5A 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.

13.5.2If, after a lawyer has commenced acting in a proceeding, it becomes apparent that the lawyer or a member of the lawyer’s practice is to give evidence of a contentious nature, the lawyer must immediately inform the court and, unless the court directs otherwise, cease acting.

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.

13.5.4A lawyer must not make submissions or express views to a court in any material evidence or material issue in a case in terms that convey or appear to convey the lawyer’s personal opinion on the merits of that evidence or issue.

13     Black v Taylor, above n 1, at 693.

Analysis and decision

[31]The issues I need to determine are as follows:

(a)Did Keegan Alexander ever act for Godfrey as its solicitors?

(b)If so, does Keegan Alexander hold confidential information about Godfrey?

(c)If yes, is there more than a negligible risk of disclosure of the confidential information if Keegan Alexander continues to act for TPD?

(d)Is it likely that Mr Matthew Pasley will be required to give evidence of a contentious nature in these proceedings (r 13.5.2)?

(e)In all the circumstances, would a reasonable and fair-minded member of the community, knowing all of the background, conclude that in the interests of the integrity of the judicial system, Keegan Alexander cannot continue to represent TPD?

Issue (a): Did Keegan Alexander ever act for Godfrey?

1. This turns on a close assessment of the role of Mr Matthew Pasley.

[33]   There is no dispute that Mr Matthew Pasley acted for his brother, Thomas, and TPA for many years; the critical issue is whether in early 2013 he acted for both TPA and Godfrey.

[34]   I accept that Mr Matthew Pasley’s role in the matters in dispute was a limited one. He never dealt directly with Godfrey, its directors or shareholders separately or independently of TPA – and his involvement was confined to attending the meeting on 22 March 2013, providing advice in the letter of 20 February 2013 and drafting fairly standard commercial documentation that was never finalised or executed.

[35]   However, despite his limited role, the better interpretation in my view is that Mr Matthew Pasley did act as solicitor for both TPA and Godfrey. That is consistent

with what Mr Matthew Pasley has described in his affidavit as “common” for groups of actual prospective shareholders to approach one lawyer with common instructions to prepare a shareholders’ agreement and associated venture.

[36]   Godfrey paid the Keegan Alexander invoice of 28 March 2013 in the substantial sum of $15,111 on what appears to be the understanding that it was a client of Keegan Alexander, together with TPA. Godfrey did so on the basis that it was in receipt of legal advice from Keegan Alexander and had also received draft legal documentation that was of benefit to it. In my view, Mr Matthew Pasley has recognised his dual role acting for both Godfrey and TPA in his letter addressed to “TPA Godfreys” of 20 February 2013, where he stated:

I have endeavoured to do this in a neutral manner which I hope may be acceptable to both parties for a way forward.

[37]   The contention that there is no legal entity “TPA Godfreys” may strictly speaking be correct, but it is no answer to the claim Mr Matthew Pasley was not acting for both TPA and Godfrey. The clear intention of the letter of 20 February 2013 was to provide legal advice relating to the proposed merger for the benefit of both TPA and Godfrey – and Mr Matthew Pasley accepts that he knew that his advice was to be circulated to Godfrey. He also attended the meeting of 22 March 2013 in his capacity as legal adviser to both parties. Godfrey paid for the full cost of his attendance. The evidence also suggests that he continued to act for both parties up until May 2013.

[38]   These arrangements were, as Ms Sussock submitted, somewhat casual; that is probably a reflection of the sibling relationship between the Pasleys and a recognition by Mr Matthew Pasley that in accordance with his practice, he would, following his initial draft of the necessary documentation, have recommended to each shareholder that they obtain independent advice. I do not doubt the good practical sense of that approach. However, with the benefit of hindsight, it would have been prudent at the outset, namely in February 2013, for Mr Matthew Pasley to have clarified and recorded his role and for him to have advised Godfrey expressly (again recorded) that it would ultimately be necessary for it to obtain independent legal advice. Where there is more than a negligible risk of conflicting duties for a lawyer acting for more than one client, he/she cannot act for more than one party without the prior informed consent of all

parties concerned.14 I accept that Mr Thomas Pasley, in his email of 22 February 2013, referred to the “expectation” that Godfrey may wish to have its own legal advice too and the possibility of having a third lawyer for the merged entity to “avoid the lawyer being seen to favour anyone”. However, the better approach would have been for  Mr Matthew Pasley to have assumed direct responsibility and for him to have recorded in writing the informed consent.

Issue (b): Does Keegan Alexander hold confidential about Godfrey and is there more than a negligible risk of disclosure of the confidential information (if any) if Keegan Alexander continues to act for TPA?

[39]   Rule 8 of the Client Conduct and Client Care Rules sets out the primary rule in relation to a client's confidential information:

8. A lawyer has a duty to protect and to hold in strict confidence all information concerning the client, the retainer, and the client's business and affairs acquired in the course of the professional relationship.

[40]   There is an expanded definition of confidential information in the footnote to the rule:

Information acquired during the course of the professional relationship that may be widely known or a matter of public record (such as the address of the client, criminal convictions, or discharged bankruptcy) will nevertheless be confidential information.

[41]   As I have already noted above, the role of Mr Matthew Pasley in acting for Godfrey was a very limited one. There is no reason to doubt or challenge his recollection of the events described in his affidavit as follows:

12.I must point out that I have little unassisted recollection of these matters. It needs to be borne in mind that my involvement was over six years ago and for a very limited period of time. For that reason I have looked back to my file, which is pretty small, to refresh my memory.

13.I do not recall meeting any of the Godrey directors or shareholders, or having any conversation of any kind with any of them, other than in a meeting on 22 March 2013. I now have very little recollection of any of them.

14     Rule 6.1.1 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008.

[42]   The bare and fleeting relationship between Keegan Alexander and Godfrey is fundamentally different from the solicitor/client relationship at issue in Black v Taylor, where the solicitor had acted for some decades for members of the Taylor family and where over a long period, having obtained a good working grasp of the family structure and dynamics, he sought to take sides in an intra-family dispute.15

[43]   I accept that the issue of the 62.5/37.5 per cent “split” was discussed at the meeting of 22 March 2013. However, there is nothing in the handwritten notes of  Mr Matthew Pasley, the agenda for the meeting or in the evidence generally, that might infer that Mr Matthew Pasley acquired any relevant confidential information about Godfrey that might credibly be of any concern to it. The letter of 22 February 2013 was circulated to both parties and, as Mr Matthew Pasley states, it was “formulaic and fairly standardised”.

[44]   Ms Sussock submitted that Mr Matthew Pasley may have gleaned some sense of the vulnerability of Godfrey's position in the current dispute as a result of his acting for it, but there is no real evidence to support that submission and, in any event, the focus of the meeting and the advice and interaction between Mr Matthew Pasley and Godfrey appears to have been very much on prospective matters, namely the then- proposed formal merger. It is for the applicant to adduce evidence establishing that the lawyer in question had access to confidential information and reliance on the “conceptual possibility” that the lawyer could access the defendant's confidential information is not enough.16

[45]   In all the circumstances I find that Keegan Alexander does not hold confidential information about Godfrey. Even if I am wrong on that issue, I would conclude that there is not more than a negligible risk of disclosure of any confidential information if Keegan Alexander continues to act for TPD. Mr Matthew Pasley's role was a very limited one, his file contains little information and he has very little recollection of the events at issue.

15     Black v Taylor, above n 1.

16     L & M Cole Holdings Ltd v Bathurst Resources Ltd [2017] NZHC 2333 at [60].

Issue (c): Is it likely that Mr Matthew Pasley will be required to give evidence of a contentious nature in these proceedings (r 13.5.2)?

[46]   If Mr Matthew Pasley is to give contentious evidence, then Mr McAnally, as a member of Keegan Alexander, must cease acting, unless the Court directs otherwise. In Li v Liu, the Court of Appeal held that the test is not whether the solicitor will be a necessary witness but whether there is a reasonable likelihood that he or she will be called as a witness; that is sufficient to make the possibility more than speculation and the threat to the integrity of the judicial process real.17

[47]   The assertion by Ms Sussock that it is likely that Mr Matthew Pasley will be required to give evidence must obviously be taken seriously. Mr McAnally responsibly accepted as much but further contended that such a submission needs to be critically examined.

[48]   I accept that Godfrey’s defence makes it clear that it is an issue in the proceedings whether there was a separate agreement between the parties that is not related to the merger but whether the arrangements were all part of the same agreement, the terms of which included interim arrangements. However, on the evidence before me it is difficult to conclude that it would be likely that Mr Matthew Pasley could give substantially relevant evidence about that particular issue or any other contentious issue. I reject Ms Sussock’s submission that Mr Matthew Pasley was “in the middle of all of this”. I accept that he set the agenda for the meeting, attended the meeting and took notes of what occurred. However, the notes of the meeting and the evidence generally suggest that Mr Matthew Pasley’s role was not central and he was there only to provide advice on the somewhat mechanical and prospective commercial legal arrangements pertaining to the yet  to  occur merger. Mr Matthew Pasley was one of a number of persons in attendance at the meeting and it is not apparent why it would be important for him (as opposed to the others present) to give evidence about what took place. Mr Matthew Pasley cannot give evidence as to what other parties might have meant by any statements they made at the meeting. Godfrey has been unable to identify the real relevance of any evidence Mr Matthew

17     Li v Liu, above n 6, at [37].

Pasley might give beyond simply referring to his handwritten notes which record “37.5/62.5 done deal?”.

[49]   It is also difficult to see what evidence Mr Matthew Pasley might give beyond what he has already stated in his affidavit in these proceedings:

32.My recollection of the meeting, and there is nothing in my notes or the minutes of the meeting that Mr Godfrey has produced that is inconsistent with it, is that the discussions were prospective. I do not recall there being any discussion around what the existing arrangements were between the parties other than the fact that they had been working on the assumption that the appropriate division of net profit was 62.5/37.5 in favour of Godfrey & Co Ltd.

33.The discussion was general and I participated so far as it was relevant to what Tom has asked me to do at the outset which would suggest a structure for a merged entity and a “road map” as to how that might be achieved from a legal point of view.

[50]   Mr Matthew Pasley is of course a commercial solicitor and attended the March 2013 meeting in that capacity and with a view to drafting the relevant documentation.18 Consistent with that role, after the meeting, he started drafting the relevant shareholder's agreement for sale and purchase of the Godfrey business and the shareholder loan agreement.

[51]   There is no evidence that at the time there was any real controversy or dispute between the parties and there is no reason to doubt Mr Matthew Pasley’s claim that he tried to be neutral and that his role was a confined one. In my view, this case is quite different from Li v Liu, where the firm of solicitors was disqualified because the Court was concerned its continuation would place it in a position where employed solicitors “may face conflicting duties to the court, the Lis and their employer”.19

[52]   I find that it is not likely that Mr Matthew Pasley will be required to give evidence of a contentious nature in these proceedings.

18 Richard Scragg The Ethical Lawyer: Legal Ethics and Professional Responsibility (Thomson Reuters, Wellington, 2018) at 240-241, citing Mike Pero Mortgages Ltd v Pero [2014] NZHC 2798, [2015] 3 NZLR 246

19 Li v Liu, above n 6, at [42].

Issue (d): In all the circumstances would a reasonable and fair-minded member of the community, knowing all of the background, conclude in the interests of the integrity of the judicial system, Keegan Alexander cannot continue to represent TPD?

[53]   This is the ultimate and critical issue which involves the balancing of various factors. The focus is of course upon protecting the integrity of the judicial system, but the authorities also make it clear that the Court should not interfere in a party's fundamental right to counsel of their choice, particularly where considerations of delay in the application, inconvenience, or sunk cost favour the affected party.20

[54]   In considering the perspective of a reasonable and fair-minded member of the community, it is troubling that of the $22,225.25 total fees rendered by Keegan Alexander for services relating to the merger between TPA and Godfrey (five invoices over the period April 2012 to July 2013) Godfrey paid the lion’s share, namely

$15,111. I accept that the five invoices in evidence are all issued in the name of TPA and it appears that it was Mr Thomas Pasley, separately from Mr Matthew Pasley, who persuaded Godfrey to pay the invoice ($15,111) of 28 March 2013. I also accept that a number of the earlier invoices, albeit for  modest sums, relate to  a time when     Mr Matthew Pasley was not acting for Godfrey. However, it is understandable that Godfrey should be concerned about Keegan Alexander’s ongoing role acting for entities associated with TPA and in litigation arising out of the failed merger where Godfrey paid for most of Keegan Alexander’s fees for services relating to that merger. A reasonable and fair-minded member of the community might also feel some disquiet arising from the appearance of Mr Matthew Pasley’s firm, having previously represented both the parties, continuing to act for his brother’s company (and entities associated with it). However, that is not a matter that Ms Sussock placed any real reliance on and apart from the bare fact that the two men are brothers, such a factor should not be overstated.

[55]   In support of the application to disqualify, Ms Sussock relies upon the Victorian Supreme Court decision of Spincode Pty Ltd v Software Pty Ltd21 which involved a case regarding a failed merger. There, the Court found that the solicitor had attended meetings between the participants and there were discussions with him, or at least in

20     Li v Liu, above n 6, at [23].

21     Spincode Pty Ltd v Software Pty Ltd [2001] VSC 248.

his presence, as to whether there was an agreement between the shareholders, what constituted that agreement and whether there should be an agreement and what the content of that agreement should be. The fact that the other party was present during those discussions did not mean that the information imparted was not confidential. The appellate court upheld the decision of the lower court granting an injunction to prevent a firm of solicitors from continuing to act for Spincode in proceedings it had taken to have the company wound up.

[56]   I accept that there are some similarities between the facts here and the Spincode case. However, it is clear that in Spincode the conduct of some of the solicitors involved was clearly reprehensible (not the case here) and the role of those solicitors was far  more  extensive  than  the  relatively  bare  and  fleeting  involvement  of  Mr Matthew Pasley in this case.

[57]   In the circumstances of this case, I find that a reasonable and fair-minded member of the community, knowing all of the background, would conclude that the integrity of the judicial system would not be impaired by Keegan Alexander continuing to represent TPD. The jurisdiction is to be exercised with circumspection and the authorities describe the threshold for removal of a party's chosen representative as a high one.22 As I have been emphasising, Mr Matthew Pasley’s relationship with Godfrey was a very limited one. While he did attend the nine-hour meeting in March 2013, his focus (consistent with his role as a commercial legal adviser), was on drafting the necessary legal documentation to implement the proposed merger. It is unlikely he acquired any confidential information about Godfrey or any information that Godfrey might be concerned about, though I acknowledge that the jurisdiction to disqualify is not dependent upon such a finding. Mr Matthew Pasley’s involvement was more than six years ago and for a very limited period of time. As he notes in his affidavit his file is pretty small and his recollection of the events very limited. I understand that perception of Godfrey, but there is no real evidence to establish that there would be some undue advantage to TPA or corresponding prejudice to Godfrey were Keegan Alexander to continue to represent entities associated with Mr Thomas Pasley.

22     Burgess v Malley [2016] NZCA 585 at [9], citing Accent Management Ltd v Commissioner of Inland Revenue [2013] NZCA 155, [2013] 3 NZLR 374 at [32].

[58]   I acknowledge that in considering the integrity of the judicial process, it is not necessary for the Court to find any culpable conduct on the lawyer’s part (which is not present in this case) and that my finding on whether r 13.5.2 of the Lawyers Conduct and Client Care Rules is engaged, is not determinative of this ultimate issue. However, the high threshold for disqualification has not been met.

[59]   Having concluded that Keegan Alexander's representation of TPD against Godfrey will not impair the integrity of the judicial process, the application by Godfrey to disqualify Keegan Alexander must be dismissed.

Application for particular discovery by defendant - r 8.19 of the High Court Rules

[60]   The defendant seeks discovery from the plaintiff and first third party of the following:

All documents (including correspondence, records of communications and financial records) relating to the failed merger between Thomas Pasley & Associates and Godfrey not already discovered by the plaintiff or first third parties.

[61]   The defendant says that the application for discovery is related to the application to disqualify Keegan Alexander. The defendant submits that decisions on the necessary extent of discovery and on the theory of the case appear to have been made in a context where it suited Keegan Alexander to say that there was a separate joint venture agreement entered into in 2011 prior to their involvement, as they can then continue to say that they did not act in relation to the separate joint venture.

[62]   The defendant says that the reason for the breadth of the request for further and better discovery is because of the respective parties’ positions and the fact that Keegan Alexander has stated in its correspondence that it has not discovered documents relating to the merger, but only documents that relate to the joint venture.

[63]    In Assa Abloy NZ Ltd v Allegion (NZ) Ltd, Asher J sets out a widely accepted four-stage approach the Court usually follows when considering an application under r 8.19.23 The focus is on relevance and proportionality:

23     Assa Abloy NZ Ltd v Allegion (NZ) Ltd [2015] NZHC 2760 at [14].

(a)Are the documents sought relevant, and if so, how important will they be?

(b)Are there grounds for belief that the documents sought exist?

(c)Is discovery proportionate?

(d)Weighing and balancing these matters, and the Court’s discretion, applying r 8.19, is an order appropriate?

[64]   On the question of whether the documents exist, Godfrey relies upon the handwritten notes of Mr Matthew Pasley that are attached to his affidavit in opposition to the application to disqualify Keegan Alexander. Those handwritten notes had not been included in the plaintiff’s or CNZ’s discovery.

[65]   It is clear that the key issue of relevance is not to be determined by reference to one party’s (i.e. the plaintiff’s) theory of the case; all of the pleadings must be considered.

[66]   I reject the submission by TPD that Godfrey’s statement of defence can only be interpreted to exclude Mr Godfrey’s contention that there were simply interim terms agreed initially between the parties on the basis that the merger would happen shortly. Ultimately, TPD’s interpretation of events may be correct. However, at this interim stage, I find, as Ms Sussock submitted, that documents relating to the failed merger are relevant. Godfrey has squarely put at issue the critical question of whether there was a separate agreement that is not related to the merger or that the arrangements were all part of the same agreement, the terms of which included interim arrangements.

[67]   Furthermore, I find that the documents relating to the merger may well be of some importance to Godfrey, there are grounds for believing that further documents exist and, in the circumstances, it would not be overly burdensome for the plaintiff to provide the discovery sought. I acknowledge that the terms of the discovery order

sought are expressed in broad terms, but the evidence suggests that the documents in the category sought will not be extensive or raise any problem of proportionality.

[68]   I accordingly grant the defendant’s application for particular discovery pursuant to r 8.19 and make the following orders:

(a)I order that the plaintiffs and the first third party are to file an affidavit stating whether these documents described at [60] above are or have been in the parties’ control and if they have been but are no longer in their control, their best knowledge and belief as to when the documents ceased to be in their control and who now has control of them; and

(b)The affidavit is to be served on the defendant and if the documents are in the plaintiff’s and/or first third party’s control, those documents are to be made available for inspection as soon as reasonably practicable. The affidavit is to be filed and served within 14 days.

Result

[69]   The application by the defendant to disqualify Keegan Alexander, solicitors, from acting for the plaintiff and the first third party, is dismissed.

[70] The application by the defendant for particular discovery pursuant to r 8.19 is granted on the terms set out at [68] above.

[71]   As to costs, I am of the preliminary view that costs should lie where they fall. Both parties have had a measure of success and in my view the application to disqualify Keegan Alexander was not without merit. However, in relation to the plaintiff's and first third party’s application for enforcement of a discovery order against the defendant (29 August 2019) I order that the defendant pay costs to the plaintiff on a 2B basis plus disbursements. It is clear that the affidavit of documents now filed by the defendant (December 2019) was filed late and in breach of timetable directions.

[72]   In relation to the outstanding application by the plaintiff and first third party for further particulars (dated 13 September 2019), I direct that counsel are to file a memorandum within 14 days with a proposed solution for the determination of that matter.

[73]   If the parties cannot agree on the question of costs on the two applications the subject of this judgment, then short (no more than three pages) memoranda are to be filed and served within 14 days.

Associate Judge P J Andrew