Nickle v Westpac Bank Samoa Ltd [2003] WSSC 35 (30 October 2003)

IN THE SUPREME COURT OF SAMOA
HELD AT APIA

BETWEEN:

ROSITA LEILANI NICKLE,
aka ROSITA LEILANI LABAN,
Store Proprietress of Sinamoga

Plaintiff

AND:

WESTPAC BANK SAMOA LIMITED
formerly known as PACIFIC COMMERCIAL BANK LTD
a duly incorporated company carrying on business in Samoa.
First Defendant

AND

ANA FANE
of Tulaele, Self-employed
Second Defendant

Counsel: Mr RS Toailoa for the plaintiff
Ms R. Drake for the defendant

Hearing: 24 October 2003
Decision: 30 October 2003

DECISION OF VAAI J

In these proceedings the plaintiff moves for an order to disqualify Ms Drake from acting as counsel for the defendant in these proceedings upon the grounds:

(a) that the plaintiff did seek the assistance of Ms Drake with regards to the present matter and in the course of which the plaintiff did disclose to Ms Drake certain information pertaining thereto which would constitute a conflict of interest; and

(b) that the plaintiff intends to call Ms Drake as a witness.

The second defendant is the step-daughter of the plaintiff and both of them are customers of the first defendant. In 1998 the first defendant lent to the second defendant about $30,000.00 on the security of a mortgage over the plaintiff’s land at Sinamoga and a personal guarantee of the plaintiff. The purpose of the loan was to construct a fishing boat jointly owned by the plaintiff and the second defendant which was operated by the second defendant and her husband. Both the plaintiff and the second defendant have prior existing loans with the first defendant.

In January 1999 the first defendant agreed to increase the second defendant’s existing loan to $85,000.00 and the plaintiff in response to a request from the second defendant executed a further deed of guarantee to secure the additional advance to the second defendant. The said deed of guarantee was executed by the plaintiff at her home in the presence of the second defendant and two officers of the first defendant.

It is the circumstances surrounding the execution of this deed of guarantee which is the subject of the present proceedings filed by the plaintiff against the first and second defendants. The plaintiff alleges that the second defendant and the officer of the first defendant assured her that the second defendant and her husband have been approved a loan of $300,000.00 by the first defendant to refinance all existing loans of the second defendant including those guaranteed by the plaintiff. It was this representation, the plaintiff alleges, which induced her into executing the deed of guarantee. Subsequently however when the plaintiff checked with the first defendant’s Manager Credit, Mr Albert Meredith, the plaintiff was told that the second defendant’s loan of $200,000.00 to be disbursed upon completion of security documents would not refinance the $85,000.00 loan which the plaintiff guaranteed.

In her affidavit in support of the application to disqualify Ms Drake, the plaintiff deposes that on or about 19^th February 1999 after she saw Mr Albert Meredith she went to see Mrs Drake after payment of consultation fee and she told Mrs Drake the history of the fishing boat saga leading up to the guarantee by her of the $85,000.00 loan to the second defendant. I set out paragraphs two to seven of her affidavit:

2. THAT further to the matters deposed to in my affidavit of 1^st August 2000 filed herein, I further say that on or about Friday the 19^th of February 1999, after I have had no joy with Mr Albert Meredith and not being able to see the General Manager of the Defendant Bank, I then decided to see Mrs Drake for help. I visited Mrs Drake’s office and paid the consultation fee and I was then able to see Mrs Drake.
3. I, told Mrs Drake everything right from the beginning and how I have been induced into guaranteeing the second Defendant’s loan variations on false representations made first by the Second Defendant and secondly by the Second Defendant and an officer of the First Defendant, Legalo Lauaki. I was in tears as I unfolded by heart-wrenching experience to Mrs Drake who was also in tears being moved by what I was telling her.
4. I do recall that Mrs Drake telephoned Mr Albert Meredith while I was still there but I was not sure what exactly they were talking about.
5. THE reason for me seeing Mrs Drake was to see if she could stop the disbursement of the commercial loan to the Second Defendant and her husband without first settling the Second Defendant’s loan that I had guaranteed. The impression I got, however was that there was nothing much she could do.
6. A few weeks later, I learnt that the Second Defendant was about to leave the jurisdiction. I again visited Mrs Drake’s office for help, and I paid her consultation fee. I had wanted Mrs Drake to stop the Second Defendant from leaving Samoa, when she has a huge loan that I am guaranteeing. I did not go back to Mrs Drake as I then decided to instruct Mr Toailoa to act for me.
7. GIVEN that I had disclosed everything pertaining to this case to Mrs Drake, I feel that it would be grossly unfair for her to act as Counsel for the First Defendant.
   

Mrs Drake, I accept has been counsel for the first defendant for a number of years; and in her affidavit in reply she does not deny that she was seen twice by the plaintiff. On both visits the plaintiff talked with Mrs Drake about her concern over the $85,000.00 loan to the second defendant which the plaintiff guaranteed.

During the first visit Mrs Drake confirmed that the plaintiff talked to her about the $85,000.00 loan to the second defendant from the first defendant which the plaintiff guaranteed. Mrs Drake also confirmed the plaintiff has been to see Mr Albert Meredith to withhold disbursing the large loan to the second defendant until the plaintiff’s guarantee liability has been taken care of first. Mrs Drake also confirmed that she in the presence of the plaintiff spoke to Mr Albert Meredith on the phone and Mr Meredith gave his version of the circumstances surrounding the $85,000.00 as well the large loans to the second defendant which contradicted what the plaintiff told Mrs Drake. Mrs Drake then explained to the plaintiff what was relayed by Mr Albert Meredith.

From the documentary evidence so far, I draw the conclusions that when the plaintiff consulted with Mrs Drake during the first visit the plaintiff has already seen Mr Albert Meredith. And the reason why the plaintiff saw Mr Meredith was because she knew that the large loan to the second defendant was about to be disbursed and it was her belief that her guarantee liability of $85,000.00 will be taken care of. How she came to have knowledge of the large loan approved by the first defendant for the second defendant is a contentious issue the resolution of which is irrelevant for my ruling on this application. Suffice to say that when she was not happy with what Mr Meredith told her, the plaintiff saw Mrs Drake after payment of consultation fee. In those circumstances I accept that the plaintiff told Mrs Drake of the circumstances surrounding her execution of the guarantee, the visit by the second defendant and officers of the first defendant and what transpired before the plaintiff executed the deed of guarantee. After all the plaintiff’s only concern when she visited Mr Meredith was the discharge of her guarantee from the proceeds of the large loan obtained by the second defendant from the first defendant.

Mrs Drake admits the plaintiff consulted her the second time, and again the subject was the guarantee liability of the plaintiff with the first defendant. The specific reason for the second visit is disputed but it is not important for present purposes.

In any event the plaintiff subsequently instructed Mr Toailoa who in addition to initiating proceedings for an interim injunction has filed these proceedings claiming damages against the first and second defendants and permanent injunction against the first defendant forbidding the first defendant from enforcing its rights under the mortgage. The claim for damages against the first and second defendants is based on allegations of false representations made by the second defendant and the officer of the first defendant to the plaintiff which induced the plaintiff to execute the deed of guarantee to secure the second defendant’s loans with the first defendant.

The plaintiff objects to Mrs Drake representing the first defendant in these proceedings. In the course of hearing submissions Mr Toailoa for the plaintiff raised another issue, namely, that Mrs Drake should also be disqualified from arguing the application before the court on the grounds that she has filed an affidavit opposing the application and she therefore knew or ought to know, she may be required as a witness. Mr Toailoa relies on rule 4.5 of the Code of Ethics of the New Zealand Law Society. Rules 4.5(1) states and 4.5(2) states:

(1) "Subject possibly to very exceptional cases, the nature of which it is difficult and inadvisable to attempt to lay down, it is improper for a practitioner to act as both counsel and witness in the same matter.

(2) If a practitioner knows, or has any reason to think that he may be required as, a witness he should not appear as counsel, and if he decides in such circumstances to act as counsel, he should not afterwards tender himself as a witness."

Whether or not Mrs Drake has breached or is in breach of her ethical responsibilities is a matter for the appropriate professional body which regulates and supervise the conduct of her practice. Professional bodies properly undertake supervisory functions over their members and lay down codes of culture and conduct to be adhered to. Violations and breaches of those conduct come within the jurisdiction of the professional body. The court on the other hand has an independent function. It will exercise its jurisdiction to provide a remedy when there has been a breach of duty recognised by law. Legal duties are enforceable by the courts; moral and ethical responsibilities are not.

I now come to consider the main application, namely that Mrs Drake should be disqualified from acting as counsel for the first defendant.

In her written submissions Mrs Drake refers to the decision of the NZ Court of Appeal in Russel Mc Veagh McKenzie Bartleet & Co. v Tower Corporation delivered 25^th August 1998. But I do not consider the issues involved in that case to bear any resemblance or relevance to the present issues. Russel Mc Veagh McKenzie Bartleet & Co. is one of New Zealand’s mega law firms with its principal offices in Wellington and Auckland. One of the partners in the Wellington was instructed by Tower Corporation concerning a taxation issue on a particular transaction while another partner in the Auckland office was instructed by another client to advise on a proposed take over of Tower Corporation. In the litigation which followed as a consequence of take over bid Russel Mc Veagh McKenzie & Bartleet on the application by Tower Corporation were disqualified from representing one of the parties. The factual situation and the legal implications in that case are very distant and far removed from the factual situation here.

In my view the essential issue here is the inherent jurisdiction of the Court to control the conduct of proceedings and those who appear before it. It has always been recognised that the court has an inherent jurisdiction over those who may be allowed to represent parties and the jurisdiction extends to the propriety of the advocate appearing in a particular case to ensure due administration of justice and the need to preserve confidence in the judicial system. See R v Visitors to Lincoln’s Inn ex-parte Calder (1992) 3 WLR 994; Re GJ Mannix Ltd (1984)1 NZLR 309; Black v Taylor (1993)3 NZLR 403. In Black v Taylor (supra) it is stated by Richardson J. at page 408 line 35:

"Another aspect of the inherent jurisdiction is the control of a particular proceeding in the court. There the court’s concern is with the administration of justice in a particular case and in the generality of cases and with the associated basic need to preserve confidence in the judicial system. .....................

An associated consideration is the fundamental concern that justice should not only be done but should manifestly and undoubtedly be seen to be done (R v Sussex Justices, ex-parte McCarthy (1924)1 KB 256, 259). ..................

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."

His honour then continued to embark on a discussion of Australian and Canadian authorities where counsels have been restrained as advocates on the grounds that knowledge of the former client has been a factor in the court’s decision to hold that for the practitioner to continue acting would constitute a misuse of confidential information. He concluded, adopting the approach of the Full court of the Ontario Divisional Court in Everingham v Ontario (1992)88 DLR (4^th)755. He said at page 412:

"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. ............. Rather it is a protection for the parties and for the wider interests of justice. The legitimacy of judicial decisions depends in a large part on the observance of the standards of procedural justice."

Bearing in mind the need to uphold the integrity of the judicial process, there is no doubt in my mind that Mrs Drake and her law practice should be restrained from being an advocate in these proceedings. She has seen the plaintiff not once but twice. She was told by the plaintiff of the circumstances surrounding her execution of a guarantee in favour of the first defendant to secure loans by the second defendant. The plaintiff was down and stressed out and in her presence Mrs Drake conversed on the phone with the Manager Credit of the first defendant. As counsel for the first defendant Mrs Drake will in the course of litigation cross-examine the plaintiff on matters the plaintiff told Mrs Drake in confidence. Mrs Drake cannot compartmentalise her mind so as to screen out what has been syphoned from the plaintiff and what was obtained from the first defendant or somewhere else.

On the evidence I have as indicated already that the inherent jurisdiction of the court is the most appropriate approach in the circumstances to determine the question before the court rather than by approaching it from the principles and rules of misuse of confidential of information or conflict of interest.

Conclusion

The court in the exercise of its inherent jurisdiction to control its proceedings grants the applicant and Ms Drake and her law office is injuncted and disqualified from taking further part in these proceedings. Unless parties agree to costs counsels shall file memorandum.

JUSTICE VAAI