MR CJ of Auckland v MS XL of Hamilton

 
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[2011] NZLCRO 41

LCRO 221/2010

BETWEEN

Concerning an application for review pursuantn to section 193 of the Lawyers and Conveyancers Act 2006

Concerning a determination of the Waikato Bay of Plenty Standards Committee 2

MR CJ of Auckland
Applicant
and
MS XL of Hamilton
Respondent
Counsel:

Mr CJ as the Applicant

Ms XL as the Respondent

The Waikato Bay of Plenty Standards Committee 2

The New Zealand Law Society

The names and identifying details of the parties in this decision have been changed.

Application for review from a decision of the Waikato Bay of Plenty Standards Committee which held the respondent had not misled the Court or withheld communications – substantive proceeding concerned a distribution agreement and termination of contract – Hamilton branch Legal Standards Officer was a partner in the same firm as the respondent – potential conflict – whether a practitioner could withhold alleged privileged communications from the LCRO – whether practitioner had misled the court.

The issues were: whether XL had misled the Court; whether XL could withhold alleged privileged communications from the LCRO; and whether there had been procedural irregularities.

Held: There had been potential for conflict. D had not distanced himself from the file and had assumed responsibility for some administrative matters notwithstanding that the complaint involved one of his partners. This highlighted issues for potential conflict in the Waikato region especially with the merger of two large firms. XI's comments regarding CJ's use of the complaints process were unjustified.

A practitioner could not claim privilege against an investigative body such as the Standards Committee or the Legal Complaints Review Office. However, CJ had had an opportunity during the course of the Court hearing to argue that the documents should have been produced. While XL had a duty not to mislead the Court, her next duty was to her client. It was not for her to make out CJ's claim. The documents did not support CJ's contention that the contract had been terminated and it was difficult to see that XL had any obligation to ensure that they were before the Court to prevent it being misled. Therefore the decision of the Committee was confirmed.

DECISION

Introduction

1

This review can be disposed of readily with regard to the conduct complained of. However, in the course of conducting this review, issues with regard to the procedures followed by the Standards Committee and the Respondent's assertions of privilege and confidentiality raise matters which deserve some detailed comment.

Background
2

The Applicant was the sole director of ABE. That company entered into a distribution agreement with ABF, under which that company was to purchase product, cut it to size, package it and supply the packaged product to customers. ABE held the supply contracts, and the business was made available to ABF through ABE. The agreement between the parties was that the gross profits were to be shared equally between ABE and ABF.

3

ABF failed to account to ABE for any of the profits, and when pressed, counter- claimed. Part of the counter-claim related to goods which ABF had acquired at the direction of ABE to supply to a customer, but that supply contract did not eventuate.

4

Proceedings requiring ABF to account for its profits and for a determination of the amount due to ABE were commenced..

5

The Respondent acted for ABF.

6

The complaints relate to the conduct of the Respondent in the course of these proceedings.

The complaints
7

The Applicant complained about two issues:

Stock
8

Part of the counter-claim by ABF related to stock which ABF had purchased at the direction of ABE. This stock was to be supplied to a customer who at that time was being supplied by a third party. ABE expected that third party to discontinue to supply the customer. Instead, the third party determined to continue the supply, and the stock purchased by ABF became superfluous.

9

A Judicial Settlement Conference took place on 10 November 2008. The Conference proceeded on the basis that the total amount of the stock was in the possession of ABF, and an arrangement was entered into whereby the parties would work together to dispose of the stock.

10

It was subsequently arranged that the Applicant was to visit the ABF premises for the purpose of viewing the stock.

11

On 20 November 2008, the Respondent wrote to Ms CK, Counsel for the Applicant, and advised as follows:–

Mr XK [the director of ABF] has been making substantial efforts to dispose of the X products. He is now satisfied that he has secured an arrangement whereby ABF can dispose of about 7/8 of the product. ABF continues to endeavour to dispose of the balance.

12

The meeting to view the stock took place at the premises of ABF on 10 December 2008. At that meeting, documentation was provided to the Applicant, amongst which was a “counter sales invoice” which showed that 7/8 of the stock had been disposed of in February 2008, well before the Judicial Settlement Conference.

13

The Applicant's complaint is that the Respondent was aware of this at the time of the Settlement Conference, and therefore had misled the Judge and the Applicant. He also complains that she was subsequently untruthful in advising Ms CK of the arrangements to dispose of 7/8 of the product, and also alleges that she tried to persuade the Court to abandon the need for inspection of the goods to avoid this fact being discovered.

14

Subsequently, as the dispute progressed towards Trial, all briefs of evidence referred to the fact that 7/8 of the stock had been sold, and the matter proceeded on that basis.

The emails
15

The second aspect of the Respondent's conduct about which the Applicant complains, relates to the evidence that was produced at the Trial.

16

On 13 September 2007 at 4.01 p.m., the Applicant had written by email to Mr XK advising that “ I am cancelling the distribution agreement I have with [ABF] Ltd, effective 15 October 2007.” This email was copied to Ms CL, who was acting for the Applicant at the time, and to Ms XJ at ABG, who was acting for ABF.

17

At 4.13 p.m., on the same day, Ms XJ sent an email to Ms CK which contained the following:–

Our client …asks that Mr [CJ] reconsider his notice of cancellation.

18

Ms CL responded on the following day, and advised that “[ABE] Limited is not prepared to reconsider its cancellation of the agreement. However, it is prepared to consider entering into a new written agreement with [ABF] Ltd.”

19

She then proposed that the parties should meet to discuss the terms of the new agreement and concluded her email by stating “…if the meeting is to take place on the above basis, [ABE] Limited will defer advising third parties of the cancellation of the previous agreement until after the meeting, as a sign of its good faith.”

20

In the course of preparation of the agreed Bundle of documents to be produced at the Trial the Respondent objected to the inclusion of the emails of 13 and 14 September which followed the Applicant's initial email. The Respondent objected to these being included, on the grounds that they constituted correspondence made in the course of attempts to settle the dispute, and therefore were privileged pursuant to section 57 of the Evidence Act.

21

Whether the agreement was cancelled or not was a crucial question, and the Applicant contends that the emails of 13 and 14 September which followed the Applicant's initial email on 13 September, clearly indicate that cancellation had not been effected, and that by excluding them the Respondent misled the Court.

The Standards Committee decision
22

The determination of the Standards Committee on each of the matters is recorded as follows:–

Stock

From a careful perusal of all the confidential paperwork that was made available by the practitioner, it was clear that the moment Ms [XL] became aware of the sale of some of the stock, the correct stock amounts were included in the proceedings and the final result reflected that, with no disadvantage to the complainant. The Standards Committee was only concerned with the actions of the practitioner and there was absolutely no evidence that Ms [XL] misled the Court.

Emails

The two emails that were alleged to have been withheld by the practitioner were not placed before the Court by the plaintiff as evidence nor was that contested at any stage. The complainant was represented by Counsel throughout and the Committee noted that it was not the practitioner's job nor appropriate for her to ensure that the complainant had all the appropriate evidence available to the Court for any hearing. The emails in question related to termination of a contract and after discussion on those, the plaintiff (through his Counsel) did not raise any issue in respect of the consequences of any such emails being available or otherwise. The Committee believes the complainant had ample opportunity to make argument both before and during the Court hearing to have those two emails admitted if he was seeking to rely on them. He was represented by competent legal Counsel and the onus was on him to ensure this took place, not on the practitioner acting for the opposing party. As a...

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