$1 Million Plus Costs Against Law Firm
"Hopeless" Legal Case Results In $1 Million Plus Costs
Against Law Firm www.LawFuel.co.nz
In a judgment today from Justice Rhys Harrison, a rare award of indemnity costs in the amount of $1.057,691.25 was made in respect of an action that arose from Clive Bradbury's "deep-seated sense of grievance" over the Bank's ending of a solicitor-client relationship with his firm, Bradbury & Muir ("B&M"), the Second Plaintiff. Bradbury was First Plaintiff in the action.
The action was heard in February this year with the claims against the Bank being "progressively abandoned" during the closing submissions on the seventh day. The issue of costs was reserved. Until now.
The Judge said that the five causes of action taken by the plaintiffs, which ranged from contractual breach to defamation, "were hopeless from inception in March 2006" and were "unarguable".
The Judge said that the award of indemnity costs is justified because the law firm's proceeding was not only hopeless, but used for ulterior purporses, namely to force a financial settlement from Westpac.
He said that he based this decision on what he described as "threats of exposure" leveled at the Bank by Clive Bradbury, including the joinder of individual bank employees ("a gratuitous and vengeful attack . .") the threat of joinder and a damages claim for nearly $14 million.
"I am satisfied that B&M abused this Court's process in pursuit of an ulterior motive - of applying improper pressure on Westpac to settle a claim which they knew was hopeless. Principal tools in the strategy were joining and applying to join individual bank employees as defendants, using the interlocutory process in an attempt to introduce adverse evidence relating to Westpac's taxation affairs, pleading intentional torts, and quantifying unsustainable and grossly inflated claims. B&M's threat was to expose all this in the public forum of a trial, and at great cost and inconvenience to Westpac, if the bank did not capitulate by paying a substantial sum."
The wide ranging litigation against the Bank was described by the Bank's lawyer, Stephen Kos QC as being taken "vexatiously, frivolously, improperly or unnecessarily" commenced and continued.
The Court also considered the Trinity investment scheme in which Bradbury and Muir were intimately involved, along with Gregory Peebles, head of Westpac's Asset Management Group.
The Judge commented that Bradbury was an astute and successful commercial operator as well as a competent solicitor. He did, however, make his own decision on whether or not to form a legal practice based largely around provision of Westpac's work and in particular based on the informal arrangement he enjoyed with Peebles.
A group of investors challenged the Commissioner's decisions by issuing proceedings in the High Court at Auckland. The issues for determination at trial before Venning J in late 2004 were whether the investors were entitled to the deductions or whether the investment arrangements amounted to tax avoidance. The Commissioner also alleged that the scheme was a sham.
Publication of the law firm's involvement in Trinity was a major cause of concern to the law firm and an application to suppress the firm's involvement in the scheme was rejected by the Court in 2004. This resulted in a Westpac enquiry and cessation of instructions to the firm.
Bradbury made frequent references to the fact that Westpac was itself the subject of a reassessment by the Commissioner to tax liability of nearly $600m on income earned from structured financing transactions entered into from 1999 and afterwards. The Commissioner contends that the transactions were designed to avoid tax.
The firm's problems were only compounded by Venning J's condemnatory findings about the veracity and reliability of evidence given by Mr Muir at trial: Accent Management Ltd v Commissioner of Inland Revenue HC AK CIV 2003-404- 002966 20 December 2004 at 
"An institutional client like Westpac could not afford the reputational risks of a continued association with a firm including Mr Muir. Nor could it continue to have any real degree of trust and confidence in the same entity," Justice Harrison said.
"Mr Bradbury sealed his firm's fate by his subsequent conduct," he said. This included an email to Richard Willcock, Group Secretary and General Counsel of Westpac, which said: " asserted that Venning J's judgment '. contains no adverse findings or comments relating to Bradbury & Muir. The firm itself had no involvement with the case .'. This assertion was at best for Mr Bradbury inaccurate and at worst deliberately misleading." Willcox summed up his attitude towards the law firm by stating:
"By the end of this process, I as Group Secretary and General Counsel, and Justin Moses as head of Legal Services for Westpac, had lost any sense of trust and confidence in Clive and Bradbury & Muir as a firm.
"It would be fair to say that we never managed to develop the sort of relationship with Bradbury & Muir and Clive Bradbury as the relationship partner that we had with all of our other panel law firms. Until now, however, that had never manifested itself in a way that was of any practical concern. Despite some initial frostiness, Bradbury & Muir had been complying with all of our relationship management requirements, in terms of financial reporting, quarterly certification, the use of WINs and participating in relationship management meetings to discuss new instructions they had received and the like.
"While the findings in the High Court judgment were obviously relevant to my decision, of greater importance to me was the attitude and approach which had been shown by Clive from the time I advised him of my intention to investigate what had occurred and to suspend new instructions in the meantime. By February, given Clive's attitude and approach to his firm's relationship with Westpac Legal Services, it was simply untenable to me that Bradbury & Muir would be invited to be a member of Westpac's new panel arrangement that would commence from 1 July 2005.
"I was, however, content for Bradbury & Muir to complete the current term on the basis that no new instructions would be given, largely because it was a pragmatic way forward. Bradbury & Muir were doing very little high end work and that effectively provided for a four month period of notice."
A subsequent letter from Clive Bradbury to the Bank was highly critical of the Bank. As Justice Harrison noted: "Mr Bradbury's letter denigrated Mr Willcock personally at length, accusing him and Westpac of 'rank hypocrisy' in relying on the Trinity tax case given Westpac's own differences with the Commissioner. He then summarised the details and results in a number of other transactions where he had represented Westpac. He concluded by expressing a willingness to meet and discuss settlement '. rather than expose [Westpac] to a publicly embarrassing Court case'. Westpac's reaction was measured but no progress was made towards resolution."
Bradbury's conduct was one of "continuous irrationality", he said. "Mr Bradbury treated Mr Willcock with open disdain, both directly and to other senior Westpac employees. He was rude and dismissive. He sought to demean and ridicule the senior employee within the bank who was ultimately responsible for their relationship."
The Judge referred to the "reasonableness" of the Bank's decision to terminate in all the circumstances. It was a decision, he said, that was "beyond challenge".
Although the Defendant sought full costs of over $1.6 million (which included almost $25,000 in photocopying, scanning and discovery costs), the Judge's ruling that "prolixity and confusion" were the hallmarks of the firm's various statements of claim and permitted the sum of $996,712 as actual legal costs, with $136,865.15 in disbursements.