IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

I TE KŌTI MATUA O AOTEAROA ŌTAUTAHI ROHE	

CIV-2022-409-584 [2023] NZHC 800	

IN THE MATTER	of a solicitor’s undertaking	
AND		
IN THE MATTER	of ROCKY PEAKS CONTRACTING LIMITED	

EX PARTE	
RICHARD MICHAEL SPROTT
Applicant	

Appearances:	A N Riches for Applicant	
Judgment:	17 April 2023	
	(Determined on the papers)	

JUDGMENT OF OSBORNE J

This judgment was delivered by me on 17 April 2023 at 4.00 pm pursuant to Rule 11.5
of the High Court Rules

Registrar/Deputy Registrar Date:

RE ROCKY PEAKS CONTRACTING LIMITED EX PARTE R M SPROTT [2023] NZHC 800 [17 April 2023]

Introduction

[1]	Richard Sprott has applied for an order releasing him from a solicitor’s undertaking to hold funds (the Funds) on trust. He applies for the Funds to be released from his firm’s trust account to the trustees (the Trustees) of the Brione Family Trust (the Trust).

[2]	This judgment proceeds by way of formal proof pursuant to r 15.9 High Court Rules 2016.

Background

[3]	On 1 December 2015 Mr Sprott gave an undertaking to Shaun Cottrell, a solicitor who at the time acted for Rocky Peaks Contracting Ltd (Rocky Peaks). Rocky Peaks was subsequently (on 20 June 2017) struck off the Companies Register. Its former directors Richard and Hillary Watherston (the Watherstons) are undischarged bankrupts (adjudicated on 20 August 2020).

[4]	A company, Kaikoura Pastoral Investments Ltd (Kaikoura), owned two farming blocks on the Okarahia Downs (the Property). The Property was leased by the Watherstons until they were evicted. Mr Watherston’s personal Property was placed into receivership by PGG Wrightson and PGW Rural Capital in 2013.

[5]	Mr Watherston placed a caveat on the title to the Property asserting he had an option to purchase the Property from Kaikoura. His application to sustain the caveat was dismissed.1 His application for a stay of the caveat decision was also unsuccessful.2

[6]	In 2015, the Trustees had entered into an agreement to purchase the Property (Agreement) from Kaikoura. The Trustees completed the purchase when the Watherstons’ caveat was not sustained. They also agreed to purchase such deer still on the Property as were owned by Rocky Peaks.

1	Watherston v Rocky Peaks & Kaikoura Pastoral Investments [2015] NZHC 2084.
2	Watherston v Rocky Peaks & Kaikoura Pastoral Investments [2015] NZHC 2429.

[7]	Ronald Schroeder was commissioned to value the deer still on the Property. He reported that there were several issues with how the deer were placed on the farm and the lack of separation between deer, causing difficulties with yarding. However, he issued a desk valuation of $68,091.50. Email correspondence in November 2015 shows that an agreement was reached between the parties regarding the immediate price to be paid. Because of difficulties with the stocktake, the livestock was to be provisionally purchased at 80% of the desk valuation ($54,473.20).

[8]	The trustees paid the $54,473.20 to Rocky Peaks.

[9]	Mr Sprott undertook to Kaikoura’s solicitor, Shaun Cottrell, to hold the remaining $13,618.30 in the trust account of his then-firm Bishopdale Law, pending a final stocktake. The sum held increased to $14,022.87 as interest accrued. The stock were to be counted and valued by Mr Schroeder in 2016. A discussion was to take place between the parties as to any deductions and, failing agreement, Mr Schroeder’s final determination of the appropriate price was to bind the parties.

[10]	The agreed stocktake, which was to take place by March 2016, could not occur in that time because of logistical difficulties. It was completed by Mr Schroeder in September 2016. In November 2016, Mr Schroeder issued a note as to his tallies and identified a shortfall in deer numbers. On the basis of Mr Schroeder’s 2016 deer tally the substantially lower stock figure resulted in a lowering of the valuation by $23,161. The solicitor’s account held only $13,618.30, leaving $9,542.70 payable by Rocky Peaks. Rocky Peaks refused to accept Mr Schroeder’s determination, insisting through Mr Cottrell in January 2017 the original deer were in fact still on the Property. The expected discussion between the parties did not take place. With the removal of Rocky Peaks from the Companies Register in June 2017, there can no longer be a finalised discussion between the parties.

[11]	Upon leave being granted to Mr Sprott to make this application under pt 19 High Court Rules, directions were made for service upon:

(a)	Mr Cottrell;

(b)	Mr Cottrell’s previous firm GCA Lawyers; and

(c)	the Secretary to the Treasury.3

Law

[12]	The Court looks at an undertaking, not in any technical or legislative fashion, but by reference to the evident substance and intention, to construe its meaning.4

[13]	The intention of the undertaking may become frustrated so that it is unreasonable to hold the solicitor to their undertaking, such as through the effluxion of time without finalisation or the parties’ intended steps. In such circumstances, the Court in its supervisory and disciplinary role relating to solicitors’ undertakings may release the solicitor.5

Analysis

[14]	The Court must look at the purpose and nature of the undertaking to construe its meaning. The Funds were transferred to the solicitor’s trust account in the expectation that they would be disbursed in accordance with the outcome of Mr Schroeder’s final determination. Rocky Peaks’ contest over stock numbers meant this did not occur. Rocky Peaks has now been removed from the Companies Register. The Secretary to the Treasury has not entered an appearance to identity any interest of the Crown in the Funds.

[15]	The intention of the undertaking has clearly been frustrated by the effluxion of time and events. The resolution of stocktake numbers to which the undertaking related is not going to occur. One of the two affected partners — Rocky Peaks — has been removed from the Companies Register, and the Secretary for the Treasury asserts no interest. The evidence indicates the entitlement of the Trustees to the Funds. Mr Schroeder’s uncontested evidence establishes that requiring Mr Sprott to remain

3	As required by s 324 Companies Act 1993
4	Australian Guarantee Corporation (NZ) Ltd v East Brewster Urquhart & Partners [1990] 2 NZLR 167 (HC) at 171.
5	Re AWS Legal Solicitors [2015] NZHC 2086; [2016] NZAR 1108; Amende v Kennedy [2017] NZHC 1593; Wright Asset Management Ltd v Marchi [2022] NZHC 3180.

bound by his undertaking would be unreasonable. The Trustees are entitled to the return of the Funds.

Order

[16]	I order:

(a)	Richard Sprott is released from his undertaking given to Shaun Cottrell on 1 December 2015 in relation to the Funds held in the trust account of Saunders and Co in relation to the Okarahia Downs’ stocktake; and

(b)	Mr Sprott is to cause the Funds (with accrued interest) to be paid to the trustees of the Brione Family Trust.

Osborne J

Solicitors:
Saunders & Co, Christchurch