Tierney v Anderson [1995] CKHC 6; 104.1993 (24 April 1995)

IN THE HIGH COURT OF THE COOK ISLANDS
HELD AT RAROTONGA
(CIVIL DIVISION)
Plaint. No 104/93

BETWEEN

JOHN DENIS TIERNEY
of Rarotonga, Accountant
Plaintiff

AND

BERT E. ANDERSON
of Canada, Businessman
Defendant

Counsel: M.C. Mitchell for Plaintiff
R.W. Holmes for Defendant

Hearing; 30 & 31 August & 1 September 1995
Judgment: 24 April 1995

JUDGMENT OF QUILLIAM C.J.

This judgment must be read in conjunction with the judgment in action 81/92 Anderson v Arnold & others delivered contemporaneously. I do not propose to set out any of the background in the present action as it is sufficiently covered in the other case.

Briefly, on 8 April 1991 the Plaintiff was appointed by the Defendant as the receiver of the Auto Marine Ltd pursuant to a debenture given by that company to the Defendant's agent to secure loans. Prior to accepting appointment as receiver the Plaintiff required the Defendant to execute a Deed of Indemnity in accordance with the usual practice of receivers. In the Deed, which the Defendant executed on 5 April 1991, the Defendant covenanted to indemnify the Plaintiff for whatever action he should take in the receivership.

The Plaintiff was concerned to ensure that the debenture under which he was appointed was valid and enforceable and for this reason sought advice from Clarkes who were acting for the Defendant. It was soon apparent that the debenture may not be enforceable and, as set out in the contemporaneous judgment, it was necessary in the end for the Plaintiff to apply to the High Court for a declaration. The High Court held that the debenture was not enforceable but that relief could be granted under the Illegal Contracts Act 1987, and such relief was granted. On appeal, however, the Court of Appeal held that, because of the intervention of the Development Investment Amendment Act 1991, relief could not be granted. The amount secured under the debenture could not therefore be recovered. It was accordingly not possible for the plaintiff to complete the receivership.

The Plaintiff had, however, incurred considerable expense and on 12 August 1993 commenced the present action to recover his fees and his disbursements and also his legal and other costs amounting in total to $25,166.20 and interest thereon.

The Defendant has denied liability and has counterclaimed for $128,675.79 being the balance owing by Auto Marine Ltd to the Defendant.

There can be no doubt that the Plaintiff was properly appointed receiver, and that the Deed of Indemnity signed by the Defendant was a valid and binding document. The amount claimed by the Plaintiff does not appear to have been contested.

The claim is resisted upon the grounds that the Plaintiff should, before accepting appointment, have taken competent legal advice as to the validity of the debenture, and that he ought to have been aware that that debenture was unenforceable.

It is very clear form the evidence that the Plaintiff took legal advice throughout and this does not seem to be disputed. The Defendant's complaint was that the legal advice which the Plaintiff received was negligently given and was wrong, and that therefore the Defendant should not be liable for the Plaintiff's fees. I know of no principle of law to support this proposition, and it cannot properly form the basis for any defence in the Plaintiff's claim.

The Defendant is liable to the Plaintiff, the quantum is not in issue, and there will therefore be judgment for the Plaintiff for the amount claimed, namely $27,773.12. The Plaintiff is also entitled to costs.

On the counterclaim, the fact that there has been held in action 81/92 to be no liability by Clarkes to Mr Anderson means that this counterclaim cannot succeed.

It should be mentioned that the advice given to the Plaintiff by Mr Moore was that the debenture may be enforceable because of the absence of approval by the Monetary Board, but that if this was so relief could be expected to be granted under the Illegal Contracts Act 1987. At the time that advice was given it was correct. It was only the unexpected intervention of the 1991 Amendment which resulted in the amount secured under the debenture being irrecoverable.

There must, therefore, be judgment for the Plaintiff on the counterclaim also, together with costs.

QUILLIAM C.J.