Independent Public Business Corporation of Papua New Guinea v Motor Vehicles Insurance Ltd [2015] PGNC 51; N5982 (29 May 2015)

N5982

PAPUA NEW GUINEA
[IN THE NATIONAL COURT OF JUSTICE]

WS 1252 of 2010

BETWEEN:

INDEPENDENT PUBLIC BUSINESS CORPORATION
OF PAPUA NEW GUINEA
Plaintiff

AND:

MOTOR VEHICLES INSURANCE LIMITED
First Defendant/Second Cross Claimant

AND:

NOMINEES NIUGINI LIMITED
Second Defendant/First Cross Defendant to Second Cross Claim

AND:

NATIONAL SUPERANNUATION FUND LIMITED
Third Defendant

AND:

BENJAMIN TERENCE O'DWYER. TERENCE JAMES O'DWYER and BACKWELL LOMBARD CAPITAL PTY LTD
Second Cross Defendants to Second Cross Claim

AND:

DR JOHN MUA
Third Cross Defendant to Second Cross Claim

AND:

BERNARD FONG
Fourth Cross Defendant to Second Cross Claim

Waigani: Hartshorn J
2015: 29th May
: 11th June

Application pursuant to Rule 10 (4) and (5) Professional Conduct Rules and Order 12 Rule National Court Rules

Cases cited:
Papua New Guinea Cases

Peter Yama & Ors v. PNGBC Ltd (2008) SC922
British American Tobacco Ltd v. TST 4 Mile Ltd (2011) N4589
Paul Paraka Lawyers v. Public Officers Superannuation Fund Board (2014) SC1363

Overseas Cases

Kallinicos & Anor v. Hunt & Anor [2005] NSWSC 1181
Counsel:

Mr. E. G. Andersen, for the First Defendant/Second Cross Claimant
Mr. P. A. Lowing, for the Second Defendant/First Cross Defendant to Second Cross Claim

11th June, 2015

1. HARTSHORN J: This is a decision on an application for an order that Gadens Lawyers cease acting for Motor Vehicles Insurance Ltd (MVIL) the first defendant second cross claimant in this proceeding.

2. The application is made by Nominees Niugini Limited (NNL) the second defendant and first cross defendant to the second cross claim, on the basis that Gadens have a conflict of interest in this proceeding and are in breach of their professional obligations.

3. This is because Gadens previously acted for Independent Public Business Corporation of Papua New Guinea (IPBC) the plaintiff in this proceeding.

4. Gadens and MVIL oppose the application.

Background

5. This proceeding concerns an Equity Monetisation Contract (EMC) between MVIL and NNL. IPBC seeks to amongst others set aside the EMC as it is claimed that it was entered into in breach of certain statutory requirements.

6. The proceeding was commenced by IPBC in October 2010. In October 2011 IPBC changed its lawyers from Posman Kua Aisi to Gadens. In April 2014 Allens Linklaters filed a notice of change of lawyers to act for IPBC. On 23rd May 2014, Gadens filed a notice of ceasing to act for IPBC and on the same day filed a notice of change of lawyers to act for MVIL. Gadens have acted for MVIL since.

This application

7. NNL submits that as Gadens have acted in this proceeding for the plaintiff IPBC and now acts for a defendant MVIL, they are in breach of Rule 10 (4) and (5) Professional Conduct Rules. These Rules are as follows:

"(4) A lawyer or a firm of lawyers shall not represent or continue to represent conflicting interests in litigation.

(5) A lawyer for a firm of lawyers shall only represent or continue to represent two or more parties in any matters, other than litigation if-

(a) to do so is not likely to prejudice the interests of the client; and

(b) the client is fully informed of the nature and implications of the conflict: and

(c) the client voluntarily assents in writing to the lawyer or firm of lawyers acting or continuing to act;

(d) in the case of any town in which there are two or more firms of lawyers practising, the client has declined to place his instructions with another firm."

Preliminary

Not the applicant's complaint to make

8. MVIL submits that NNL's application is fundamentally misconceived and raises to preliminary points to support this submission.

9. The first point that I shall consider is that the application is unsustainable as it is being brought by a party which has never been represented by the alleged conflicted lawyer, Gadens. Such an application does not lie in the mouth of a party for whom the alleged conflicted lawyer has never acted. Reliance is placed upon the Supreme Court decisions of Peter Yama & Ors v. PNGBC Ltd (2008) SC922 and Paul Paraka Lawyers v. Public Officers Superannuation Fund Board (2014) SC1363.

10. NNL submits that although it is not a former client of Gadens, the application is bought by its lawyers in that capacity and as officers of this court, to bring to light what they perceive to be unethical conduct by Gadens in this proceeding. The unethical conduct is the conflict of interest occurring and continuing from the time Gadens accepted instructions to act for MVIL. Further, it is submitted that it is not in the interests of justice that Gadens should be allowed to continue to act for MVIL given the conflict of interest and this court should take into account the public perception of the profession and the damage that might be done to that important perception if a lawyer acts having a conflict of interest.

Consideration

11. In Peter Yama v. PNGBC (supra), the Court, of which I was a member, said at para 5 as to Rule 10 Professional Conduct Rules, the following:

"5. It is apparent that the scheme of Rule 10 is to regulate the relationship between a lawyer and his client. Section 1 Professional Conduct Rules inter alia, defines a client as "any person from whom a person accepts instruction". There is no evidence that Gadens have ever accepted instructions from the Guarantors. In this instance the client of Gadens is PNGBC, not the Guarantors. Gadens and its lawyers only have a duty to their client PNGBC, subject to the lawyers' duty to the court, to give 'undivided fidelity' to their client's interests. They do not owe a similar duty to the Guarantors. Rule 10 is inter alia, for the protection of a client. The Guarantors are not clients of Andersen/Gadens and they are therefore unable to avail themselves of the provisions of Rule 10 as they contend."

12. Similarly in Paul Paraka v. POSFB (supra), Gabi J, with whom Sakora J concurred stated at para 4:

".... there is also no evidence that either Eric Andersen or Gadens Lawyers have acted for the appellant in the past. It is not disputed that neither Eric Andersen nor Gadens Lawyers have ever acted for the appellant in this matter or a related matter previously. If Eric Andersen or Gadens Lawyers had acted for the appellant previously in this or a related matter and now acts for the respondents then the issue of conflict may be a legitimate complaint. Eric Andersen or Gadens Lawyers have never acted for the appellant in the past. In addition there is no complaint of conflict of interest against Eric Andersen or Gadens Lawyers by the respondents in this matter."

13. The remaining member of the bench, Sawong J, with whom Sakora J also concurred, made similar observations at para 102 of the judgment and expressly adopted the passage from Peter Yama v. PNGBC (supra) referred to previously.

14. In both Supreme Court cases referred to, the alleged conflict was at the complaint of a party who was never represented by the alleged conflicted lawyer.

15. NNL did not make specific submissions as to these two Supreme Court decisions and does not dispute that NNL was never a client of Gadens. This court is bound by a decision of the Supreme Court. Consequently NNL and its lawyers are unable to avail themselves of the provisions of Rule 10 Professional Conduct Rules in this instance.

There is no conflict

16. If NNL is able to rely upon Rules 10 (4) and (5) Professional Conduct Rules, the next preliminary point raised by MVIL is that there is no conflict between MVIL and IPBC at present and throughout the time of the representation of MVIL, MVIL and IPBC have not been in conflict. MVIL and IPBC may have been in conflict in the proceeding in the past, but because of a change of Board Members of MVIL and a change of position of MVIL, MVIL's position is not in conflict with that of IPBC. Evidence has been given on behalf of IPBC and MVIL in this regard.

17. NNL submits that there is a conflict of interest that has continued from the time Gadens accepted instructions to act for MVIL. As to the evidence given on behalf of MVIL and IPBC that there is no conflict of interest and that consents have been given, it is submitted that consents can only be given in matters other than litigation matters. Rule 10 (5) Professional Conduct Rules is very clear, it is admitted. It is that a firm may act for parties in other matters other than in litigation matters.

Consideration

18. As to Rule 10 (4), a lawyer or a firm of lawyers will be in breach of this rule if conflicting interests in litigation are represented or continued to be represented. There is no definition of "conflicting interests" in the Professional Conduct Rules.

19. The evidence of Bernard Eliuda, the company secretary of MVIL and Erastus Kamburi, the Chief Legal Officer of IPBC is amongst others that there is no conflict between IPBC and MVIL and that both parties are entirely content with Gadens acting for MVIL in this proceeding with full knowledge that Gadens did previously act for IPBC in this proceeding.

20. NNL's submission that relevant consents can only be given in non litigious matters, does not address the evidence of there now not being a conflict between IPBC and MVIL. There is no evidence to rebut that of Messrs. Eliuda and Kamburi. I am satisfied that there is now no conflict between IPBC and MVIL.

21. As to Rule 10 (4) Professional Conduct Rules, its drafting is sufficiently broad to allow a lawyer or a firm of lawyers to represent more than one interest in litigation so long as those interests are not conflicting.

22. Here, although there was conflict initially between IPBC and MVIL, Gadens then only acted for IPBC. When MVIL changed its position to that of IPBC, Gadens ceased to act for IPBC and commenced acting for MVIL. Gadens has not acted for MVIL when MVIL was in conflict with IPBC and Gadens has not acted for different positions in this proceeding. I am satisfied that Gadens are not in breach of Rule 10 (4) Professional Conduct Rules.

23. As to Rule 10 (5) Professional Conduct Rules, NNL submits that this Rule is very clear that a firm may act for two parties in other matters other than in litigation matters. I am satisfied from a reading of Rule 10 (5) that it only applies to matters other than litigation. This is because Rule 10 (5) follows Rule 10 (4) which specifically deals with litigation. Further, if Rule 10 (5) applied to all matters including litigation, it would render Rule 10 (4) redundant. Given this, I am satisfied that Rule 10 (5) Professional Conduct Rules does not apply in this instance.

24. For the above reasons, I am satisfied that there is now no conflict between IPBC and MVIL and that Gadens in acting for MVIL is not in breach of Rule 10 (4) and (5) Professional Conduct Rules.

Disqualification for conflict

25. NNL also relies upon Order 12 Rule 1 National Court Rules for the relief that it seeks - that is that Gadens cease to act for MVIL as it has a conflict of interest in this proceeding and that Gadens is in breach of its professional obligations. I have already found that Gadens is not in breach of Rules 10 (4) and (5) Professional Conduct Rules and that MVIL and IPBC do not now have a conflict. It follows that Gadens do not have a conflict of interest.

26. I considered the law on disqualification of a lawyer for a conflict in British American Tobacco Ltd v. TST 4 Mile Ltd (2011) N4589 and held that:

"1. As to the protection of TST's confidence's, it is incumbent on TST to establish that Blake Dawson is in possession of information which is confidential to TST and to the disclosure of which TST has not consented, and that the information is or may be relevant to the new matter in which the interest of BAT is or may be adverse to that of TST."

27. I also made reference to the case of Kallinicos & Anor v. Hunt & Anor [2005] NSWSC 1181, a decision of Breton J, and reproduced the following passage from His Honours decision at para 76:

"·During the subsistence of a retainer, where the court's intervention to restrain the solicitor from acting for another is sought by an existing client of the solicitor, the foundation of the court's jurisdiction is the fiduciary obligation of a solicitor, and the inescapable conflict of duty which is inherent in the situation of acting for clients with competing interests (Prince Jefri).

· Once the retainer is at an end, however, the court's jurisdiction is not based on any conflict of duty or interest, but on the protection of the confidences of the former client (unless there is no real risk of disclosure) (Prince Jefri).

· After termination of the retainer, there is no continuing (equitable or contractual) duty of loyalty to provide a basis for the court's intervention such duty having come to an end with the retainer (Prince Jefri; Belan v. Casey; PhotoCure; British American Tobacco; Asia Pacific Telecommunications; contra Spincode; McVeigh; Sent).

· However, the court always has inherent jurisdiction to restrain solicitors from acting in a particular case, as an incident of its inherent jurisdiction over its officers and to control its process in aid of the administration of justice (Everingham v. Ontario; Black v. Taylor; Grimwade v. Meagher; Newman v. Phillips Fox; Mitchell v. Pattern Holdings; Spincode; Holborow; Williamson v. Nilant; Bowen v. Stott; Law Society v. Holt). Prince Jefri does not address this jurisdiction at all. Belan v. Casey and British American Tobacco Australia are not to be read as supposing that Prince Jefri excludes it. Asia Pacific Telecommunications appears to acknowledge its continued existence.

· The test to be applied in this inherent jurisdiction is whether a fair minded, reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting, in the interests of the protection of the integrity of the judicial process and the due administration of justice, including the appearance of justice ( Everingham v. Ontario; Black v. Taylor; Grimwade v. Meagher; Holborow; Bowen v. Stott; Asia Pacific Telecommunications).

· The jurisdiction is to be regarded as exceptional and is to be exercised with caution (Black v. Taylor; Grimwade v. Meagher; Bowen v. Stott).

· Due weight should be given to the public interest in a litigant not being deprived of the lawyer of his or her choice without due cause (Black v. Taylor; Grimwade v. Meagher; Williamson v. Nilant; Bowen v. Stott).

· The timing of the application may be relevant, in that the cost, inconvenience or impracticality of requiring lawyers to cease to act may provide a reason for refusing to grant relief (Black v. Taylor; Bowen v. Stott)."

28. In this instance, NNL, notwithstanding that it was never a client of Gadens, and there is no evidence that Gadens is in possession of information which is confidential to NNL, submits that it is not in the interests of justice that Gadens should be allowed to continue to act for MVIL, and this court should take into account the public perception of the profession and the damage that might be done to that important perception.

29. Brereton J refers to the court's inherent jurisdiction to restrain lawyers from acting in a particular case and that the test to be applied is whether a fair minded reasonably informed member of the public would conclude that the proper administration of justice requires that a legal practitioner should be prevented from acting, in the interests of the protection of the integrity of the judicial process and the due administration of justice. This jurisdiction is to be regarded as exceptional and to be exercised with caution and due weight should be given to the public interest in a litigant not being deprived of the lawyer of his or her choice without due cause.

30. In this instance, when regard is had to my finding that there is now no conflict between IPBC and MVIL, that Gadens have not breached Rules 10 (4) and (5) Professional Conduct Rules and have not represented or continue to represent conflicting interests in this proceeding, and given that there is no evidence that Gadens possesses confidential information of NNL, and that NNL was never a client of Gadens, I do not consider that a fair-minded reasonably informed member of the public would conclude that the proper administration of justice requires that Gadens be restrained from acting for MVIL in this proceeding.

31. In arriving at this conclusion, I have also taken into account that the inherent jurisdiction should be exercised only in exceptional circumstances, be exercised with caution and that due weight should be given to the public interest in a litigant not being deprived of the lawyer of his or her choice without cause.

Conclusion

32. In conclusion, this application fails as NNL, never being a client of Gadens cannot avail itself of Rules 10 (4) and (5) Professional Conduct Rules. Alternatively, Gadens have not breached those Rules as Gadens have not represented or continue to represent conflicting interests in this proceeding and Rule 10 (5) does not apply to litigation matters. Further, it is not in the interests of justice that Gadens be restrained from acting for MVIL in this proceeding.

Orders

33. The formal Orders of the Court are:

a) the relief sought in paragraph 2 of the notice of motion of Nominees Niugini Ltd filed 26th May 2015 is refused;

b) Nominees Niugini Ltd shall pay the costs of Motor Vehicles Insurance Ltd of and incidental to the hearing of paragraph 2 of the said notice of motion;

c) time is abridged.
_____________________________________________________________
Gadens Lawyers: Lawyers for the First Defendant
Leahy Lewin Lowing Sullivan Lawyers: Lawyers for the Second Defendant