White v Lynch

[2014] NZHC 2819

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV 2014-404-2485 [2014] NZHC 2819

BETWEEN

AMANDA ADELE WHITE

First Plaintiff

ANNE LEOLINE EMILY FREEMAN Second Plaintiff

AND

CHRISTOPHER MAURICE LYNCH First Defendant

STUART GORDON SPENCE Second Defendant

CIV 2014-404-2282

BETWEEN  CHRISTOPHER MAURICE LYNCH Judgment Creditor

ANDAMANDA ADELE WHITE Judgment Debtor

CIV 2014-404-2284

BETWEEN  CHRISTOPHER MAURICE LYNCH Judgment Creditor

ANDANNE LEOLINE EMILY FREEMAN Judgment Debtor

Hearing:	11 November 2014
Counsel:	Ms A A White and Ms A L E Freeman, in person, Plaintiffs J Cooper for Messrs Lynch and Spence
Judgment:	13 November 2014

JUDGMENT OF HEATH J

This judgment is delivered by me on 13 November 2014 at 3pm pursuant to r 11.5 of the High Court Rules.

Registrar / Deputy Registrar

WHITE v LYNCH [2014] NZHC 2819 [13 November 2014]

The applications

[1]      Mr Lynch is a solicitor who was appointed as a co-trustee of the DCT Trust (the Trust).  The Trust was established after Ms White and Mr Spence began to live together in a de facto relationship.   Its purpose was to provide a vehicle through which Ms White could carry on her business activities.   Ms White’s mother, Ms Freeman, was the third trustee.

[2]      After Ms White and Mr Spence separated, a dispute arose about payments that had been “advanced” by Mr Spence to the Trust.  Proceedings were issued in this Court (the original proceeding) in relation to those issues.   On 19 June 2013, Priestley J entered judgment against Ms White and Ms Freeman in the sum of

$130,158.1

[3]      Ms White and Ms Freeman now believe that judgment was obtained  by dishonest (or improper) means.  They have issued another set of proceedings in an endeavour to set aside the judgment (the new proceedings).  They have also applied to this Court to set aside bankruptcy notices issued against each of them.

[4]      Mr Lynch and Mr Spence have applied to strike out the new proceeding. That application, together with the two applications to set aside the bankruptcy notices, have been set down for hearing on 24 November 2014.

[5]      On 11 November 2014, I heard argument on another two applications, both of which require determination before the 24 November 2014 hearing.  Ms White and Ms Freeman apply:

(a)      to join Mr Peter Wright as a defendant to the new proceeding.   Mr Wright is a barrister who was instructed to act as counsel for Mr Lynch and Mr Spence in the original proceeding; and

(b)to debar Mr Wright from acting for Mr Lynch and Mr Spence on any applications  and  substantive  hearings  arising  out  of  the  original

proceeding.

1      Spence v Lynch [2013] NZHC 1478.

Background

[6]      Ms White and Mr Spence lived together in a de facto relationship for about six years and five months.   Previously, each had been in a relationship that had failed.  They were alert to protecting their own financial positions.  On 14 August

2002, about one month after they began to live together, they entered into an agreement, under s 21 of the Property (Relationships) Act 1976.   Ms White was advised by a solicitor in Papakura, Mr Simpson.  Mr Lynch advised Mr Spence.

[7]      Priestley J, described the s 21 agreement as “essentially unremarkable”.   It

did not contain any reference to the Trust.  That was established by deed dated 25

February 2003.  Priestley J found that Ms White was “effectively the sole decision maker for the … Trust”.2

[8]      After Ms White and Mr Spence separated, disputes arose about the way in which Ms White had dealt with property of the Trust.  Mr Spence alleged that some of his money had been diverted into the Trust for its use, but had not been repaid. Although Mr Lynch had retired as a trustee on 9 October 2007, Mr Spence issued the original proceeding against him in November 2011 to recover the alleged debt.  Mr

Spence alleged that the Trust was indebted to him in the sum of $224,480.48.3

[9]      Mr Lynch agreed to pay $155,000 to Mr Spence, in settlement of his claim. Mr Spence assigned his claim to Mr Lynch, who then joined his former co-trustees, Ms  White  and  Ms  Freeman,  to  seek  contribution.    Mr  Spence  agreed  to  give evidence to support Mr Lynch’s claim.  At trial, the contest was between Mr Lynch (on the one hand) and Ms White and Ms Freeman (on the other).

[10]     Priestley J described the circumstances in which the proceeding came before him in these terms:4

[3]       The relationship of [Mr Spence and Ms White] lasts for six years and five months.   Despite the initial orthodox and sensible arrangements evinced by the trust and s 21 agreement, carelessness, confusion, and chaos rode in behind the couple.   Their family lived in properties owned by the

2      Spence v Lynch [2013] NZHC 1478 at paras [15] and [25].

3 Ibid, at para [7].

4      Ibid at paras [3] and [4].

trust.  [Mr Spence and Ms Freeman] advanced substantial sums to the trust. Startlingly no one took any steps to prepare annual accounts and balance sheets for the trust.  The s 21 agreement was never reconsidered or updated. The [T]rust’s bank accounts were used constantly and extensively by [Ms White] to pay domestic accounts.   [Mr Spence], because he respected [Ms White’s] financial acumen, gave her internet banking authority for his bank accounts.  The solicitor, advised [Mr Spence and Ms White] about a possible property sharing agreement, but one was never concluded.  When the couple separated [Mr Spence] lodged a notice of claim pursuant to s 42 of the Act. [Ms White], despite the domestic loss of [Mr Spence’s] income, continued to use the [T]rust as a vehicle to acquire further realty.

[4]       Four and a half years after [Mr Spence and Ms White] separated, the High Court is asked, through this proceeding, to sort out an unholy and totally unnecessary mess.   [Mr Spence] wants the money which found its way to the [T]rust returned to him.   [Ms White and Ms Freeman], who remain trustees, are exposed to the consequences of forthcoming mortgagee sales and could well be insolvent.  They blame [Mr Spence] and the solicitor for their unfortunate predicament.

The original judgment

[11]     On 19 June 2013, in a judgment given after a trial over eight days in May and June 2013 at which evidence was given both by witnesses of primary fact and experts, Priestley J entered judgment in favour of Mr Lynch in the sum of $130,158.5

Costs  were  subsequently  fixed  in  the  sum  of  $66,466,  plus  disbursements  and witness expenses.6

[12]     Before  the  trial,  Ms  White  had  endeavoured  to  obtain  internet  banking records that she believed would discredit evidence to be given by Mr Spence about the flow of money into and out of the Trust.   For various reasons into which it is presently unnecessary to go, Ms White was thwarted in her attempts to garner those records.  After the entry of judgment, Ms White discovered that banking records that she had been told did not exist, were available.   She analysed those records and prepared schedules which, if accepted, demonstrate that some of the evidence given by Mr Spence about payments that he made into the Trust was wrong.

[13]     Mr  White  and  Ms  Freeman  had  lodged  an  appeal  against  Priestley  J’s judgment.  Because the time to apply for a fixture and to file a case on appeal had expired, application was made to the Court of Appeal to remedy those defaults and to

appeal out of time against the subsequent costs decision.  A formal application was also made to seek permission to adduce the evidence on appeal. The “new” evidence consisted of the primary records obtained from the bank, and Ms White’s analysis of them.

[14]     Although unrepresented at trial before Priestley J, Ms White and Ms Freeman had the benefit of counsel in the Court of Appeal.   Nevertheless, that Court, in a judgment delivered on 2 July 2014, dismissed the application to  adduce further evidence.    The  nature  of  the  evidence  was  described  by  French J,  giving  the judgment of the Court of Appeal, in these terms:7

[13]  The  further  evidence  Ms  White  and  Ms  Freeman  wish  to  adduce consists largely of various bank statements covering the period of the relationship between Ms White and Mr Spence (July 2002 to December

2008), as well as an account reconciliation by Ms White and commentary on all the material. In total, there are approximately 1000 pages of additional material.

[14] Ms White says the reason she wishes to adduce this further evidence is to  shed  a  more  accurate  light  on  the  financial  interactions  between Mr Spence and the Trust than was provided to the High Court. In particular she wants to show the extent of the benefits Mr Spence took from the … Trust by way of financial remuneration or benefits that were only informally recorded. She submits that if this additional material had been placed before Priestley J, it would have had a material influence on the outcome. Indeed it is submitted that it would have resulted in Mr Spence being held to owe

$33,000 to the trustees.

(Emphasis added)

[15]     The Court of Appeal found that the evidence was not “fresh” and that some

of it was inadmissible.  French J said:8

[16]  We  accept  that  bank  statements  are  business  records  and  hence inherently reliable.  Not so the analysis by Ms White, some of which is, as [her counsel] conceded, inadmissible opinion evidence.

[17] More importantly, the evidence is not fresh. The financial records were all in existence and were discoverable at the time of the trial. Mr Spence’s bank statements had been discovered in the Family Court for the purposes of relationship property litigation between Ms White and Mr Spence. As for the Trust’s bank statements, these were in the control of Ms White and Ms Freeman.

[18] Ms White attempts to justify the failure to obtain the statements by blaming the bank and the fact that she was not legally represented. The record does not, however, suggest that the bank was to blame. In any event, even if the bank were at fault, there were steps that Ms White and Ms Freeman could have taken. The fact they were self-represented in our view does not excuse the failure to take those steps.

[19] All litigants, whether self-represented or not, are under an obligation to put their best case at trial and must live with the litigation strategy they choose to adopt. On appeal, parties are not entitled to recast their case by adducing new evidence, which is what the appellants in this proceeding are effectively attempting to do.

[20] We have come to a very clear view that it is not in the interests of justice to allow the further evidence to be adduced. There are no compelling or exceptional circumstances.

(Emphasis added; footnotes omitted)

The new proceeding

[16]     The  new  proceeding  is  based  on  the  evidence  that  was  rejected  for  the purpose of the appeal. There are, as the Court of Appeal observed, two aspects to the evidence.  The first involves the bank records that Ms White contends were not made available to her prior to the hearing of the initial claim.  The second comprises Ms White’s analysis of it, and some commentary.

[17]     While there seems to be a contest over the materiality of the “new” evidence, it should be possible for the calculations made by Ms White to be verified (or not) by an independent accountant.   I do not propose to embark upon a consideration of whether such evidence would be sufficient to withstand the strike out application brought by Mr Lynch and Mr Spence.  At the hearing of that application, the nature of the evidence given by Ms White will need to be considered against the testimony given by Mr Spence before  Priestley J, and an assessment made about whether there is sufficient materiality to allow the new proceeding to continue.  On the face of it, if there were a real prospect that Priestley J might have reached a different view about the credibility or reliability of Mr Spence’s evidence (had the bank records been available) an issue of materiality may arise.

[18]     I expect that the parties will be in a position to confirm the calculations made by Ms White, or to agree upon any arithmetical adjustments by the time of the 24

November 2014 hearing.

Application for joinder

[19]     Ms White, who presented argument on behalf of herself and her mother, seeks to join Mr Wright on the basis that he failed to take steps to advise the Court of Appeal:9

of the “undeniable and unchallengeable evidence (bank statements of [Mr Spence]  and  bank  statements  of  [the  Trust]  (with  summaries)  which confirmed that Mr Wright’s client [Mr Spence], had filed and given evidence at the High Court Trial which was substantially inaccurate and/or misleading and/or false, which, as evidenced by the outcome of the Trial, benefited Mr Wright’s other client, [Mr Lynch], to obtain a judgment against [Ms White and Ms Freeman] via fraudulent and/or improper means.

[20]     Ms White accepts that Mr Wright did not know of the evidence on which she relied when he conducted the trial in the High Court.   That, in itself, causes difficulties for Ms Wright and Ms Freeman.   On that approach, there can be no causal nexus between any misconduct alleged on the part of Mr Wright and the judgment obtained by Mr Lynch and Mr Spence before Priestley J.

[21]     In my view, there is nothing to suggest that Mr Wright did anything other than to follow his instructions when presenting argument to the Court of Appeal. The issue of materiality was at large.10   There is nothing to suggest that Mr Wright held the view that materiality was irrelevant.  Even if he had, any failure to disclose cannot be linked to the judgment obtained in the High Court.

[22]     Rule 4.56 of the High Court Rules sets out the test for joinder:

4.56   Striking out and adding parties

(1)       A Judge may, at any stage of a proceeding, order that—

…

9      As pleaded in para 11 of the draft Statement of Claim that includes Mr Wright as a proposed defendant.

10     White v Spence [2014] NZCA 298, at para [14]; set out at para [14] above.

(b)      the name of a person be added as a plaintiff or defendant because—

(i)       the person ought to have been joined; or

(ii)      the  person's  presence  before  the  court  may  be necessary to adjudicate on and settle all questions involved in the proceeding.

(2)      An order does not require an application and may be made on terms the court considers just.

(3)      Despite subclause (1)(b), no  person may be  added as a  plaintiff without that person's consent.

[23]     It is significant that Mr Wright did not act for Ms White and Ms Freeman, but for their adversaries.  Only in rare circumstances will any duty of care be owed by a lawyer to a party to litigation who is not his or her client.11   While it is now open to

sue barristers in relation to their conduct of litigation,12 I can see no tenable basis on

which it can be argued that Mr Wright owed any duty to Ms White and Ms Freeman;

much less that he breached such a duty.

[24]     I accept Ms Cooper’s submissions, made on behalf of Messrs Lynch and Spence, that the discretion under r 4.56 should not be exercised to order joinder of Mr  Wright.    I  regard  the  claim  as  weak.    Mr  Wright  is  not  alleged  to  have participated in any wrongdoing that led to the original judgment being entered.  The allegations go beyond negligence and allege improper behaviour of a type that is not adequately particularised.  It is unnecessary to join Mr Wright as a defendant to the new proceeding in order to ensure all questions before the Court may be adjudicated

upon appropriately.13

[25]     The application for joinder is dismissed.

Application for disqualification of counsel

[26]     The principles applicable on an application to disqualify solicitors or counsel from acting for a particular client were reviewed recently by Gilbert J in Torchlight

11     For an example, in the context of an agreement certified by lawyers under s 21 of (what was then the) Matrimonial Property Act 1976, see Connell v Odlum [1993] 2 NZLR 257 (CA).

12     Lai v Chamberlains [2007] 2 NZLR 7 (SC).

13     High Court Rules, r 4.56(1)(b)(ii).

Fund  No  1  LP  (in  receivership)  v  NZ  Credit  Fund  (GP)  1  Ltd.14      The  Judge considered earlier authority; in particular Black v Taylor15 and Prince Jefri Bolkiah v KPMG (A Firm).16

[27]     In the absence of the joinder of Mr Wright as a party to the proceeding, it is necessary  for  Ms  White  and  Ms  Freeman  to  point  to  some  other  relevant circumstance that would justify debarring Mr Wright from acting for Mr Lynch and Mr Spence in the future; or, put another way, to justify removing Mr Lynch’s and Mr Spence’s right to counsel of choice.

[28]     As Gilbert J recognised in Torchlight, the inherent jurisdiction of the Court to disqualify a solicitor from acting for an opposing party must be linked to protection of the integrity of the judicial process.   Albeit in the context of an application to disqualify a solicitor from acting against a former client, Richardson J put the point in this way in Black v Taylor:17

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 wider 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.

[29]     No authorities were cited to me to suggest that the jurisdiction has been exercised in the absence of an established conflict of interest or conduct that might impinge adversely on the judicial process.   Although Ms White contends that Mr Wright should have told the Court of Appeal that the new evidence was “undeniable

and  unchallengeable”  and  demonstrated  that  Mr  Spence  “had  filed  and  given

14     Torchlight Fund No 1 LP (in receivership) v NZ Credit Fund (GP) 1 Ltd.14 [2014] NZHC 2552.

15     Black v Taylor [1993] 3 NZLR 403 (CA).

16     Prince Jefri Bolkiah v KPMG (A Firm) [1999] 2 AC 222 (HL) at 234–236 (Lord Millett).

17     Black v Taylor [1993] 3 NZLR 403 (CA) at 412 (Richardson J). To similar effect, see 418–419 (McKay J).

evidence” before Priestley J “which was substantially inaccurate and/or misleading and/or false” in order to enable Mr Lynch to obtain judgment against Ms White and Ms Freeman by “fraudulent and/or improper means”,18  I do not consider that such bald allegations can be justified on the evidence before me.

[30]     Further analysis is not required.   It will be clear from my findings on the joinder application that I do not accept there is any plausible foundation for an allegation that Mr Wright acted improperly in his role as counsel for Mr Lynch and Mr Spence.

[31]     In my view, there is no basis on which Mr Wright can be disqualified from acting on proceedings arising out of the original judgment.  The application for an injunction to restrain him from so doing is also dismissed.

Costs

[32]     Ordinarily, costs would follow the outcome of these applications.  However, because they are closely linked to the issues to be addressed at the hearing on 24

November 2014, I reserve costs to be determined by the Judge who hears those applications on that day.

[33]     For the assistance of that Judge, as presently advised I can see no reason why costs on a 2B basis together with reasonable disbursements should not be ordered.

Result

[34]     The applications to join Mr Wright to the new proceeding and to restrain him from acting for Messrs Lynch and Spence in relation to applications and substantive

hearings arising out of the original proceedings are dismissed.

18     See para [19] above.

[35]     Costs are reserved.

Delivered at 3.00pm on 13 November 2014

Solicitors:

Lucas & Mabin, Auckland
Counsel:

P J Wright, Auckland

Copy to:
Ms White and Ms Freeman

P R Heath J