A Client’s Right to Exclusivity

The courts have considered the question of whether a lawyer may act for a client in one set of proceedings but against that client in another set of unrelated proceedings. In some cases the court will not permit this even though there is no same matter conflict or suggestion that confidential information might be disclosed.

This was the outcome of Mike Pero Mortgages Limited v Mike Pero Mortgages Limited [2014] NZHC 2798.  A Wellington-based partner of Buddle Findlay acted for Mike Pero Mortgages in two proceedings against, variously, Mike Pero Marketing and Mr Mike Pero.  Meanwhile a partner in another office of Buddle Findlay was acting for Mr Pero in litigation against a third party. Buddle Findlay was therefore acting on litigation against one of its own current clients.

Mike Pero Marketing successfully applied to have Buddle Findlay restrained from acting for Mike Pero Mortgages.

The Court reiterated the principle of fundamental importance, being the Courts’ rights to determine which persons should be permitted to appear before it as advocates (as recognised in Black v Taylor). This arises from the Court’s inherent jurisdiction to restrain a barrister from acting where the interests of justice so require.

The relevant test from Black is that of the reasonable observer: the appearance of justice turns on how the conduct in question would appear to those reasonable members of the community knowing of the background.

Associate Judge Matthews undertook a detailed review of related case law including from other jurisdictions and concluded:

• Different principles apply to lawyers appearing for clients in litigation to those acting on commercial matters.
• Lawyers owe a fiduciary duty to clients, a fundamental aspect of which is the duty of loyalty. The duty of loyalty to an existing client is breached by acting against that client in litigation. The fact that the risk of passing on confidential information is controlled, does not alter that position.

On that basis, Buddle Findlay was restrained from acting against Mike Pero Mortgages. The decision was not appealed and has not been overruled – and remains good law. Its practical application is that in some circumstances of a long-standing relationship between lawyer and client, the courts will not permit the lawyer to act against the client notwithstanding the absence of a conflict of interest.