Mike Pero Mortgages Ltd v Mike Pero and Mike Pero Marketing Ltd

• Jurisdiction: New Zealand
• Judge: MATTHEWS
• Judgment Date: 11 November 2014
• Neutral Citation: [2014] NZHC 2798
• Docket Number: CIV-2014-404-002193
• Court: High Court
• Date: 11 November 2014

Between

Mike Pero Mortgages Limited

Plaintiff

and

Mike Pero

First Defendant

Between

Mike Pero Mortgages Limited

Applicant

and

Mike Pero Marketing Limited

Respondent

[2014] NZHC 2798

CIV-2014-404-002193

CIV-2014-404-001811

IN THE COURT OF APPEAL OF NEW ZEALAND AUCKLAND REGISTRY

Applications for orders restraining a law firm from acting for the plaintiff in two proceedings — firm had been instructed by defendant, personally and by companies he was associated with, on a range of issues — partner in Wellington office was acting for plaintiff — partner in Christchurch office of firm was currently acting for defendant's company in litigation — firm said that there would be no communication between the offices on the files — discussion of distinction between acting in commercial matters and litigation matters — fiduciary duty and in particular duty of loyalty to clients considered — whether the integrity of the judicial process was at risk from the proposed or continuing representation by counsel in these two cases against an existing litigation client.

Appearances:

G P Blanchard for Plaintiff/Applicant

D R Bigio and A E Malone for Defendant/Respondent

This judgment was delivered by me at 4.30 pm on 11 November 2014 pursuant to Rule 11.5 of the High Court Rules.

Registrar/Deputy Registrar

JUDGMENT OF ASSOCIATE JUDGE MATTHEWS

Introduction

1 On 4 July 2014 Mike Pero Marketing Limited (MP Marketing) served on Mike Pero Mortgages Limited a demand under s 289 of the Companies Act seeking payment of invoices rendered between April and June 2014 in a total sum of $8,625, for monthly director's fees for Mr Pero.

2 In proceeding CIV 2014-404-1811 (the 1811 proceeding) Mike Pero Mortgages Limited (MP Mortgages) applies to the Court for orders setting aside that notice, on the ground that there is a genuine and substantial dispute on whether or not the debt referred to in the demand is owing or is due, in terms of s 290(4)(a) of the Companies Act 1993 and that the demand is an abuse of process.

3 The application to set aside the demand has been filed by Buddle Findlay, solicitors. The solicitor acting is Mr S A Barker. The date of filing is 18 July 2014.

4 The application is opposed.

5 In proceeding 2014-404-002193 (the 2193 proceeding) Mike Pero Mortgages Limited sues Mr Pero and MP Marketing Limited, of which Mr Pero is the sole director, 1 raising a range of allegations including breach of a shareholder's agreement and the company constitution, shareholder repression, and breaches of certain provisions of the Companies Act 1993.

6 This proceeding is defended by both Mr Pero and MP Marketing.

7 The proceeding has been filed by Buddle Findlay. The solicitor acting is, once more, Mr S A Barker. The date of filing is 29 August 2014.

8 Mike Pero Marketing Limited has filed interlocutory applications in both proceedings for orders restraining Buddle Findlay from acting for Mike Pero Mortgages Limited.

9 Both applications are opposed.

10 Since 2007 Buddle Findlay has been instructed by Mr Pero personally and by companies he is associated with, on a range of issues. Most recently, he retained Buddle Findlay to act for him and for Pennylane Properties Limited, a company of which he is the sole director, in a proceeding against Aotearoa Property Trust. This proceeding is filed under number CIV 2013-009-1197. This instruction commenced in 2013, before Buddle Findlay commenced acting for MP Mortgages on the 1181 and the 2193 proceedings against Mr Pero and MP Marketing. It remains current. Therefore Buddle Findlay is acting on litigation against one of its own current clients.

11 Mr Pero and MP Marketing say that Buddle Findlay cannot act for another client in litigation against either of them. Mr Pero, personally, is a current client of the firm. MP Marketing is not, but it is closely associated with Mr Pero, and the sum in issue in the 1811 proceeding against that company represents fees for his services as a director of MP Mortgages.

12 Mr Pero and MP Marketing accept that there is no connection between the 1811 and 2193 proceedings, on one hand, and the Pennylane case on the other.

13 Mr Barker is a partner in the Wellington office of Buddle Findlay. Mr Palmer, a partner in the Christchurch office of Buddle Findlay, acts on the Pennylane case. The firm says there has not been and will not be any contact between the two offices on these cases, and, if necessary, undertakings will be given to the Court.

14 The issue is whether Buddle Findlay should be restrained from acting for MP Mortgages in either case, or both, given that in doing so it is acting against a client it currently acts for on another case, and a company closely associated with that client.

15 Counsel informed me they have been unable to locate any case in New Zealand where a court has ruled on this issue. Counsel referred me to cases decided in the United Kingdom, Canada and Australia. Before referring to those cases, and the respective submissions of counsel on them, it is appropriate in my view to reiterate the inherent jurisdiction of the Court to determine which persons should be permitted to appear before it as advocates. This is because this case concerns litigation, and there is a distinction drawn in New Zealand between acting on litigation, and acting on commercial transactions. And it is because all solicitors are officers of the Court, and the powers of the Court in relation to their conduct of cases before it are of fundamental importance.

16 In Black v Taylor, 2 the Court of Appeal confirmed that the Court has power arising from its inherent jurisdiction to restrain a barrister from acting where the interests of justice so require. The practitioner concerned had acted as counsel for members of a family over a long period. Later he accepted instructions to act against one member of the family. The Court of Appeal dismissed an appeal from the decision of the High Court in which a declaration was granted that the practitioner should not act further.

17 The following passages from the judgment of Richardson J are relevant to the issue now before the Court: 3

The High Court has an inherent jurisdiction to control its own processes except as limited by statute. As an incident of that inherent jurisdiction it determines which persons should be permitted to appear before it as advocates. In determining what categories of person may appear it does so in accordance with established usage and with what is required in the public interest for the efficient and effective administration of justice ( 3(1) Halsbury para 396).

…

An associated consideration is the fundamental concern is that justice should not only be done but should manifestly and undoubtedly be seen to be done…

…

The integrity of our system of justice depends on its meeting those standards. The assessment of the appearance of justice turns on how the conduct in question – here [counsel's] wish to be able to act as a counsel for the defendants against [a family member] – would appear to those reasonable members of the community knowing of that background.

In making that assessment the court will also give due weight to the public interest that a litigant should not be deprived of his or her choice of counsel without good cause. The right to the choice of one's counsel is an important value. But it is not an absolute.

18 His Honour went on to discuss the then current rule in the Code of Ethics governing the conduct of barristers and solicitors relating to acting against a former client.

19 Richardson J then discussed cases where courts had considered the due administration of justice. In conclusion Richardson J said: 4

Disqualification will ordinarily be the appropriate remedy where the integrity of the judicial process would 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.

20 This passage was cited with approval by Gilbert J in Torchlight Fund No. 1 LP (In Receivership) v NZ Credit Fund (GP) 1 Ltd & Ors. 5 In this case the Court restrained Buddle Findlay from acting against former clients.

21 With those principles in mind I refer to two passages from judgments in the United Kingdom, then cases in Canada and Victoria, which arose in relation to acting in litigation.

22 First, in Bristol and West Building Society v Mothew, 6 Millett LJ referred to the fiduciary duty owed by a firm to a client. He said:

A fiduciary is someone who has undertaken to act for or on behalf of another in a particular matter in circumstances which give rise to a relationship of

trust and confidence. The distinguishing obligation of a fiduciary is the obligation of loyalty. The principal is entitled to the single-minded loyalty of his fiduciary. This core liability has several facets. A fiduciary must act in good faith; he must not make a profit out of his trust; he must not place himself in a position where his duty and his interest may conflict; he may not act for his own benefit or for the benefit of a third person without the informed consent of his principal. This is not intended to be an...