Watt v Dyer Whitechurch HC Auckland CIV 2007-404-571

[2007] NZHC 1629

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2007-404-00571

BETWEEN  REGINALD JAMES WATT  AS TRUSTEE OF THE WATT FAMILY TRUST

First Plaintiff

AND  REGINALD JAMES WATT  AS TRUSTEE OF THE WATT FAMILY TRUST

Second Plaintiff

AND  DYER WHITECHURCH Defendant

Hearing:         15 February 2007

Appearances: P J Dale for Plaintiff Applicants

Ms Stevenson for the Defendant Respondent

Judgment:      15 February 2007

(ORAL) JUDGMENT OF WINKELMANN J

Solicitors:

J Radley, Ellis Gould, Auckland
L Nicholson, Dyer Whitechurch, Auckland

Counsel:

P J Dale, Auckland

WATT & ANOR V DYER WHITECHURCH HC AK CIV 2007-404-00571  15 February 2007

[1]      The defendant is a firm of solicitors that has over a considerable period of time acted for the first plaintiff trustee, Mr Watt, in his personal capacity, and for the first and second plaintiff trusts.   The plaintiffs have issued proceedings asserting ownership of documentary materials presently held by the defendant and seeking orders directing the defendants to deliver up to the plaintiffs all the minute books, deeds, documents, financial statements, files, trusts, account ledger printouts and other records held by it on the plaintiffs’ behalf.

[2]      The  documents  in question  are  held  by the  defendant  in  its  capacity  as solicitors for Mr Watt and for the first and second plaintiff.   There has been correspondence between the parties over a period of time and requests have been made of the defendants to deliver up the documents.   Those requests have been declined on the grounds that a substantial sum of money remains outstanding in respect of legal services rendered by the defendant to the plaintiffs.   The plaintiffs have now made inter partes application for an interim injunction for the delivery up of the documents, the subject matter of the substantive proceeding.

[3]      The plaintiffs claim urgency exists  in respect  of gaining access  to  those documents such that interim relief is necessary. The plaintiffs are currently engaged in litigation with Mr Sharma, a former trustee of the plaintiff trusts.  That proceeding has a fixture in August 2007. Mr Dale has given some explanation as to the background  of that  litigation.    Mr  Watt  is  a  former  bankrupt.    Whilst  he  was bankrupt, transactions in which Mr Watt has an interest were undertaken through the trusts, of which Mr Sharma was a trustee.  Various allegations were made including that Mr Sharma acted in breach of trust.  Mr Dale says that the records in relation to the trusts and transactions in which the trusts were interested are difficult to reconstruct and that access to the files is necessary to assist in the preparation for that litigation.   He also says that access to the files is necessary for the plaintiffs to comply with their discovery obligations to Mr Sharma.

[4]      The defendant does not dispute the plaintiffs’ property in the files, but resists the application on three principal grounds.    First, the defendant asserts a lien over the files in respect of unpaid fees.  Secondly, the defendant says that one of the files

was opened in the name of the Watt Family Trust No. 1 and the Sharma Trust (the “Metropolis Carparking Limited” file).  The defendant is not free to release that file to  the  Watt  Family  Trust  without  authority  from  the  Sharma  Family  Trust. Ms Stevenson confirms that no request has been made of the Sharma Family Trust for authority to release the file.   The final ground upon which the application is resisted is that the defendant says it requires access to the files so that it can properly prepare for the fee revision.

[5]      Mr Dale confirms that the plaintiffs are prepared to pay the amount of the outstanding fees into Court as a condition of the files being provided to them. The plaintiffs dispute that those fees are properly payable but say that any prejudice to the defendant  by the release of the files in terms of the loss of its lien can  be adequately met in the interim by the payment  into Court of the amount  of fees outstanding.  Counsel before me agreed that the amount claimed by the defendant as against the first and second plaintiffs totals $34,686.72.

[6]      As to any potential prejudice to the interests of the Sharma Family Trust caused by delivery up of the Metropolis Carpaking file, the plaintiffs solicitors, Ellis Gould, are prepared to undertake that the file will be held at their and that they will hold the files intact pending further agreement between the parties or further order of the Court.

[7]      In relation to the defendant’s concern that it requires access to the files to prepare for the fee revision, Mr Dale argues that access to the files at the offices of Ellis Gould should be sufficient.  As to this last point, Ms Stevenson asked the Court to consider that if an order is to be made for delivery up of the files, that it should be an order for delivery up of copies of the files so  that the defendant  retains the originals.

[8]      Having had the opportunity to hear both counsel, I am satisfied that in terms of conventional principles to be applied in respect of applications for injunctions, there is a serious question to be tried.   It is not disputed by the defendant that the files are the property of the plaintiffs.  The defendant simply raises in respect of all files the issue of solicitor’s lien and in respect of one file an issue that there is

another entity that also has property interests in that file.  The fee, the subject of the claimed lien, is subject to challenge by means of the review procedure.

[9]      I am satisfied that with payment into Court of the amount of the disputed fee and with an undertaking from Ellis Gould as to the presentation of the files, the position of the defendant and the third party is adequately protected.

[10]     Assuming the provision of undertakings as to preservation of the files, and a payment into Court (that would be conditions of any order), I am satisfied that the balance of convenience clearly favours the plaintiffs.   They have an urgent requirement for the files, both to enable them to prepare for litigation shortly for hearing,  and  also  to  comply  with  discovery  obligations.     In  relation  to  that proceeding, I do not accept the defendant’s submission that copies of the documents would adequately meet the plaintiffs’ needs.  It is often important to have access to original documentation and also to have an opportunity to view the order in a file in which documents are held.

[11]     Taking a step back, there seems to me to be adequate to protect all parties potentially affected by these orders in the undertakings offered by the plaintiffs. I am therefore satisfied that it is in the overall interests of justice that orders be made in the following terms:

a)       There  will  be  an  interim  injunction  requiring  the  defendant  to forthwith deliver to the plaintiffs all minute books, deeds, documents, financial statements, files,  trust  account  ledger  printouts and  other records held on the plaintiffs’ behalf;

b)       The above order is conditional upon:

i)         the plaintiff within seven days paying into Court the sum of

$34,686.72, that amount to be held on interest bearing deposit pending further direction of the Court;

ii)       the plaintiffs’ solicitors to provide a written undertaking  to retain and hold the documents delivered up by the defendant intact pending further agreement between the parties or further order of the Court.

[12]    For the sake of clarity, the defendant is not required to deliver up the documentation until the two conditions set out above are met.

[13]     Mr Dale seeks costs on the application and today’s appearance.   That  is opposed by Ms Stevenson.  She submits that it is relevant to the issue of costs that the offer for payment into Court of the disputed fees was not made until the application  for  injunction  was  filed.    Further,  other  options  were  open  to  the defendant  as to  how they proceeded to  obtain the  files,  including  by  means  of discovery.   I think there is some force in Ms Stevenson’s argument that until the offer to make payment into Court was made, the defendant was acting reasonably in continuing to assert its lien.  However, once that offer was made, it is surprising that the  matter  had  to  proceed  to  a  hearing.    Further,  I  note  the  affidavit  filed  by Mr Bhanabhai in Court was completely inadequate in terms of informing the Court as to the basis for the lien.  I had to stand the application down so that counsel who was appearing could obtain further instructions, and a further affidavit to clarify the amount of fees still outstanding.  This has unnecessarily prolonged today’s hearing.

[14]     In those circumstances, the plaintiffs are entitled to costs on this application but limited to 2B attendance for the half day hearing.

Winkelmann J