A v National Standards Committee
[2020] NZHC 563
•19 March 2020
ORDER PROHIBITING PUBLICATION OF APPELLANT’S NAME, THE NAMES OF THE COMPANIES INVOLVED IN THE TRANSACTIONS, THE NAMES OF THE TRUSTS INVOLVED IN THE TRANSACTIONS, THE COMPLAINANTS’ NAMES AND ANY OTHER PARTICULARS WHICH MIGHT LEAD TO THE APPELLANT BEING IDENTIFIED IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2019-404-001035
[2020] NZHC 563
UNDER The Lawyers and Conveyancers Act 2006 IN THE MATTER OF
Disciplinary proceedings under Part 7 of the Act
BETWEEN
A
Appellant
AND
NATIONAL STANDARDS COMMITTEE
Respondent
Hearing: 12 March 2020 Appearances:
D P H Jones QC and D J G van Hout for Appellant M Hodge and M J Mortimer for Respondent
Judgment:
19 March 2020
JUDGMENT OF WYLIE J
This judgment was delivered by Justice Wylie On 19 March 2020 at 12.00 midday
Pursuant to r 11.5 of the High Court Rules Registrar/Deputy Registrar
Date:…………………………
Solicitors/counsel:
Russell Legal/D P H Jones QC, Auckland Meredith Connell, Auckland
A v NATIONAL STANDARDS COMMITTEE [2020] NZHC 563 [19 March 2020]
Introduction
[1] The appellant, Mr A,1 appeals two decisions of the New Zealand Lawyers and Conveyancers Disciplinary Tribunal (the Tribunal).
(a)In its first decision,2 the Tribunal found Mr A guilty of two charges of misconduct, one under s 7(1)(a)(i) and the other under s 7(1)(a)(ii) of the Lawyers and Conveyancers Act 2006 (the Act).
(b)In its second decision,3 the Tribunal ordered that Mr A be struck off the role of barristers and solicitors. It declined to make non-publication and privacy orders in his favour and it awarded costs against him.
[2] The respondent, the National Standards Committee (the Committee), laid the charges against Mr A and prosecuted them before the Tribunal. It opposes the appeal.
Background
[3] At all relevant times, Mr A was a barrister and solicitor of the High Court of New Zealand and he held a practising certificate.
[4] Mr and Mrs B immigrated to New Zealand in 2006. They had substantial assets and they needed legal advice. Mr B saw an advertisement for Mr A’s services. He approached Mr A and Mr A started acting as Mr and Mrs B’s solicitor in early 2007. He continued acting as Mr and Mrs B’s solicitor, and as the solicitor for their trusts, until November 2012. Over that period, Mr A carried out a range of legal work for them – including setting up trusts, acting on the purchase of a property, giving tax advice, overseeing a construction contract, drafting wills and drafting documentation for the administration of their trusts. Relevantly, he acted for Mr and Mrs B in setting up their family trust – the B Family Trust – in December 2010. The trustee was a company which Mr A also assisted in establishing; Mr A and Mrs B were its directors and Mrs B was the sole shareholder. Mr A and Mr B also developed a personal as well
1 All relevant names have been anonymised in this judgment.
2 National Standards Committee v A [2019] NZLCBT 4.
3 National Standards Committee v A [2019] NZLCBT 11.
as a business relationship. They lunched regularly and from time to time they discussed some form of joint business venture.
[5] After the solicitor/client relationship broke down, Mr and Mrs B commenced civil proceedings against Mr A. Ultimately those proceedings were settled.
[6] In March 2017, Mr and Mrs B complained to the New Zealand Law Society about Mr A’s conduct. The complaint was referred to the Committee. It investigated the matter and, in July 2017, resolved that the complaint should be referred to the Tribunal.
[7] In May 2018, two charges were laid by the Committee against Mr A under the Act.
(a)It was alleged (charge one) that Mr A was:
(i)guilty of conduct that would reasonably be regarded by lawyers of good standing as disgraceful or dishonourable (s 7(1)(a)(i) of the Act); or
(ii)negligent or incompetent in his professional capacity and that his negligence or incompetence was of such a degree as to reflect on his fitness to practise or as to bring the legal profession into disrepute (s 241(c) of the Act); or
(iii)guilty of unsatisfactory conduct (s 12(a) and/or (b) of the Act).
(b)It was further alleged (charge two) that Mr A was:
(i)guilty of wilfully or recklessly contravening rr 5, 5.1, 5.2, 5.3,
5.4 and 5.5 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (the Rules) (s 7(1)(a)(ii) of the Act); or
(ii)negligent or incompetent (s 241(c)); or
(iii)guilty of unsatisfactory conduct (s 12(a) and/or (c) of the Act).
Detailed particulars were given in respect of each charge.
[8]Mr A admitted unsatisfactory conduct, but otherwise denied the charges.
The key transactions
[9] The charges against Mr A turned on two key transactions. Both are relatively straightforward.
NewCo
[10] The first related to monies that Mr and Mrs B, through the B Family Trust, made available to Mr A’s family trust – the A Family Trust – with the intention that the monies would be used to purchase shares in an entity referred to as NewCo.
[11] In early 2011, Mr A and Mr B met for lunch. They discussed entering into a “private equity venture” together. On 8 February 2011, Mr A sent an email to Mr B outlining his proposals for the venture. The email read as follows:
Hi [Mr B]
I am pleased that you and [Mrs B] are on board.
As it is an onshore investment, you should hold it in the [B] Family Trust.
It will be a transaction between [the B Family Trust] and our family trust, namely the [A Family] Trust … which currently owns 100% of the new company (“NewCo”) which in turn owns the opportunity to acquire the new [LNZ] group, whereby $200,000 is a payment to the [A Family] Trust for 10% of the equity in NewCo, which equity the [A Family] Trust will then transfer to the [B] Family Trust.
The position post your investment will then be [B] Family Trust holding 20%, [A Family] Trust holding 40% and [a third party] holding 40% of NewCo, which owns an Auckland office, a Nelson office, a [foreign city] office, all with experienced principals, staff, goodwill etc, plus $200k of working capital to lift the new combined equity to the next level.
Make sense?
[12] Mr B discussed this proposal with his wife and they agreed to become involved in the proposed joint venture. They assumed that Mr A had investigated and
undertaken due diligence on the LNZ Group, that he was in a position to recommend the proposed investment, and that he was considering their interests as well as his own.
[13] The B Family Trust paid $400,000 to the A Family Trust on 10 February 2011. The transfer to the B Family Trust of an interest in NewCo did not however eventuate, and ultimately NewCo did not acquire an interest in the LNZ Group. Mr A says that there were concerns about one of the other parties involved in the proposed joint venture. Mr and Mrs B say they were not told why the venture did not proceed. They accept that they did not however ask for their money back. Mr and Mrs B both gave evidence that Mr A was optimistic that more joint business opportunities would come along. Mr and Mrs B assumed that their money was sitting in an account waiting for a further investment opportunity.
[14]Unbeknownst to Mr and Mrs B at the time, Mr A used $119,560 of the
$400,000 paid to the A Family Trust by the B Family Trust to pay a deposit on a house and another $50,000 to pay a deposit on the purchase of another property. Both payments were for the benefit of Mr A or entities controlled by him. Other monies were used by Mr A to pay some of his law firm’s business expenses – for example, rent, salaries and the like.
CCL
[15]The second transaction involved another joint venture entity – CCL
[16] Initially in March, and then later in July and August, 2011, Mr A discussed another joint venture investment with Mr B. He proposed an investment in a joint venture company that would be called CCL. Mr and Mrs B thought that the company was to be a new entity and that they would be putting money in together with Mr A and his interests. Mr A sent an email to Mr and Mrs B on 29 July 2011, describing the proposal, detailing the three entities which, it was proposed, would be acquired by CCL, and enclosing a diagram of the proposed corporate structure.
[17]Mr A’s proposal regarding CCL was broadly as follows:
(a)the B Family Trust would purchase 50 per cent of the shares in CCL for a purchase price of $400,000. (Mr and Mrs B understood that the
$400,000 the B Family Trust had earlier paid to the A Family Trust for the NewCo investment that had not gone ahead was to be used for this purpose);
(b)there would be an equal contribution by Mr A and his wife through the A Family Trust;
(c)all shares in CCL would be held by Mr A’s trustee company, 50 per cent on trust for the B Family Trust and 50 per cent on trust for the A Family Trust;
(d)Mr A and Mrs B would be the directors of CCL; and
(e)profits would be shared equally.
[18] Mr and Mrs B agreed to purchase 50 per cent of the shares in CCL through the B Family Trust.
[19] On 1 August 2011, Mr A sent Mr B an email requesting an additional $144,000 to fund CCL and to make up the balance said to be required to purchase 50 per cent of an offshore entity that CCL was supposed to be acquiring. He asked that the transfer be “narrate[d]” as “share purchase”. Mr and Mrs B, through the B Family Trust, agreed to make the further advance requested, and the B Family Trust transferred the additional $144,000 to the A Family Trust on 2 August 2011.
[20] A week later, Mr and Mrs B met with Mr A. An agreement for sale and purchase had been pre-prepared by Mr A. It was signed by Mr A on behalf of the A Family Trust, and by Mr A and Mrs B as directors of the corporate trustee of the B Family Trust. It recorded that the B Family Trust was purchasing 50 per cent of the shares in CCL from the A Family Trust for $544,000. Mr A and Mrs B also signed a minute approving the purchase as directors of the corporate trustee of the B Family
Trust. Mr A’s separate trustee company signed a declaration of trust recording that it held 50 per cent of the shares in CCL on behalf of the B Family Trust.
[21] Mr and Mrs B gave evidence that, in the following months, they were asked to, and did, invest a further $1,041,500 with Mr A, and that CCL used the money to purchase shares in a range of businesses. CCL however was ultimately unsuccessful.
The Tribunal’s decisions
The liability decision
[22] The Tribunal started its liability decision by summarising the charges and the relationship between Mr A and Mr and Mrs B. It noted the Committee’s assertion that the charges against Mr A were concerned not with losses Mr and Mrs B claimed to have suffered, but rather with Mr A’s use of the funds advanced by Mr and Mrs B through the B Family Trust, and with Mr A’s actions in entering into a business relationship with Mr and Mrs B when he was also their lawyer.
[23] The Tribunal observed that charge one alleged five core particulars against Mr A, namely that he:
(a)received monies from Mr and Mrs B’s trust – the B Family Trust – that were paid on the understanding that they would be put to certain business uses, and that instead the funds were used by Mr A for his own benefit, or for the benefit of other entities associated with him, before any formal agreement for the use of the money was concluded;
(b)induced Mr and Mrs B to invest in what he described as a joint venture (the CCL proposal) when he and/or entities associated with him did not contribute matching (or indeed any substantial) sums;
(c)induced Mr and Mrs B to pay $544,000 for shares in CCL when there was no evidence to suggest that the shares were worth $544,000 and no independent valuation was provided;
(d)continued to use monies from the $544,000 provided for his own personal benefit rather than applying the funds towards the CCL joint venture; and
(e)did not suggest or recommend to Mr and Mrs B that they obtain independent legal or financial advice.
[24] In relation to charge two, the Tribunal noted the Committee’s underpinning submission, namely that Mr A should never have placed himself in the position he did nor participated in a close business relationship with Mr and Mrs B, and that in so doing, he breached relevant rules wilfully, or at least recklessly, and that his conduct in this regard reached the level of misconduct.
[25] The Tribunal summarised the factual background – broadly as above. It then turned to consider each of the charges.
[26]It dealt with each particular in charge one.
(a)It noted that Mr A did not dispute that he had used funds paid by Mr and Mrs B to purchase properties and to meet his firm’s expenses at a time when the agreement for Mr and Mrs B to purchase shares in NewCo had not been completed. It recorded Mr A’s assertion that he was entitled to use the funds for his own benefit because they were funds agreed between friends to be paid to the A Family Trust openly for his benefit. The Tribunal did not accept this explanation and found that Mr A was not entitled to use the funds. It held that the agreement with Mr and Mrs B in respect of NewCo was as set out in the email of 8 February 2011 – i.e. that Mr and Mrs B were to purchase an interest in NewCo, that they were to pay $200,000 to the A Family Trust to acquire that interest, and that they were to pay a further $200,000 to provide working capital for NewCo. The purchase did not proceed and the Tribunal considered that, at that point, Mr A held the monies in trust for Mr and Mrs B because the purpose for the advance had not
eventuated. The Tribunal found that there was no agreement that Mr A could take the money for his personal use.4
(b)The Tribunal found that the second particular was not proved. The Tribunal accepted that Mr and Mrs B had paid $544,000 to acquire 50 per cent of the shares in CCL, which were owned by the A Family Trust. It was alleged by the Committee that they did so on the understanding that Mr A would also be contributing money or value in some other form. The Tribunal referred to the agreement for sale and purchase of the shares, which recorded that the A Family Trust was the owner of 100 shares in CCL, and that it had agreed to sell 50 of them to the B Family Trust for a purchase price of $544,000. It also referred to the trustees’ minute recording that the trustees approved “funding for [CCL] and its operations as and when required and on terms and conditions to be assessed and agreed”. The Tribunal considered that these documents crystallised the matter and that Mr and Mrs B paid Mr A, through his interest in the A Family Trust, the purchase price for the shares in CCL. The Tribunal considered that Mr A then became free to deal with those monies as he chose, and that the funds paid were not a contribution to the capital of CCL.5
(c)The Tribunal found that the payment of $544,000 made by Mr and Mrs B for the CCL shares overstated the value of the shares, because there was nothing to value. It referred to evidence (from a forensic accountant, Mr Lane) that CCL had not commenced trading, and that there was no underlying logic supporting the payment made. It accepted that there can be situations where a purchaser may pay an inflated price above valuation because the purchaser has formed an opinion about the future prospects of the entity being purchased, but observed that that was not the case with CCL, because the proposal for the joint venture entity originated from Mr A.6
4 New Zealand Standards Committee v A, above n 2, at [23]-[28].
5 At [29]-[33].
6 At [33]-[39].
(d)The Tribunal found that particular four was not proved. It observed that Mr and Mrs B paid the A Family Trust $544,000 as the purchase price for its 50 per cent shareholding in CCL, and that thereafter Mr A was entitled to spend the monies as he saw fit. It held that the purchase price paid by Mr and Mrs B for the shares became the property of the A Family Trust, that the money did not belong to CCL, and that the money was not an advance by Mr and Mrs B to that company.7
(e)The Tribunal noted that Mr A accepted there had been a conflict and that he should have insisted that Mr and Mrs B seek independent legal advice. It noted Mr A’s assertion that he did raise the topic with Mr B on two occasions, but only in a joking manner. It was submitted on Mr A’s behalf that, while there was a failure by Mr A that failure did not support a finding of misconduct when considered in light of his relationship with Mr B. The Tribunal did not accept this submission.
Rather, it was satisfied that the particular was proved.8
[27] The Tribunal then considered relevant authorities bearing on the issue of what amounts to the disgraceful or dishonourable conduct. The Tribunal noted an observation made by a full High Court in Shahadat v Westland District Law Society,9 where the terms were differentiated:
“Dishonest” may carry a connotation of “fraudulent”, whereas “dishonourable” behaviour may cover a wide range of disgraceful, unprincipled, wrongful acts or omissions comprising blatant breaches of duties owing by a professional person.
[28] The Tribunal noted the submissions made for the Committee that if one or more of the particulars for charge one was proved, then the charge of misconduct was made out. It accepted the Committee’s submission that particulars one, three and five were proved, and that accordingly the charge of misconduct in charge one was made out.10
7 At [40]-[43].
8 At [44]-[47].
9 Shahadat v Westland District Law Society [2009] NZAR 661 (HC) at [31].
10 National Standards Committee v A, above n 2 at [53]-[56].
[29] In relation to charge two, the Tribunal noted that it did not allege outright dishonesty or the particular failings that were covered by charge one. Rather, it was underpinned by the submission that Mr A should never have placed himself in the position he did, nor continued to participate in a close business relationships with his clients Mr and Mrs B.11 The Tribunal cited the relevant rules referred to in the notice of charge, and observed that they make it clear that the lawyer-client relationship transcends any other relationship that a lawyer might have with a client, be it business or personal. It accepted the submission that the introduction of a business relationship puts at risk the client relationship. It noted that the rules respond to the potential conflict by placing an absolute prohibition on any situation where compromise is possible.12 The Tribunal observed that the Committee was alleging wilful or reckless contravention of the rules by Mr A. It discussed the approach to wilfulness and recklessness set out in decided cases, noting that, in line with the authorities, it is not necessary to prove that the practitioner had a dishonest intention to act in a manner contrary to professional standards.13
[30] The Tribunal found that the relationship of trust and confidence was “hopelessly compromised” by Mr A having a financial interest in his client’s investments, having been the one to foster that interest in the first place. It noted that Mr A sent his emails about his joint venture proposals from his work email, and signed off as a partner of his law firm. In one of the emails, he referred to “our families’ new venture”, while also offering legal advice. The Tribunal considered that Mr A had blurred the roles he held. The Tribunal considered that Mr A’s conduct breached rr 5, 5.1, 5.2, 5.3 and 5.5 of the Rules. It observed that Mr A had not exercised his professional judgment solely for Mr and Mrs B and that the arrangements were favourable to Mr A’s own interests. It observed that he operated under the compromising influence of his own potential to gain, and that by entering into the business relationships and continuing to act for Mr and Mrs B, Mr A abused the relationship of confidence and trust. The Tribunal considered that Mr A must have foreseen that what he was doing might breach the rules, and that in any event, he could not plead ignorance. It found that the breaches by Mr A of the relevant rules reached
11 At [57].
12 At [58]-[61].
13 At [62]-[65].
the threshold of misconduct, noting that Mr A did not turn his mind to the application of the rules when he should have done so, and notwithstanding that he was an experienced lawyer, having spent a number of years in practice. It noted that he was active in soliciting Mr and Mrs B to enter into the transactions, requiring them to pay hundreds of thousands of dollars. Further, it noted that Mr A was aware that he should have recommended that Mr and Mrs B obtain independent advice, but that he had not properly advised them about that.14
[31] The Tribunal acknowledged the submission made on behalf of Mr A that he has diagnosed post-traumatic stress disorder (PTSD), and that that should be seen as a necessary context to his offending. The Tribunal found however that this was not a factor in determining the level of seriousness of the offending, noting that it was Mr A who generated all of the proposals to invite Mr and Mrs B to enter into the transactions.
The Tribunal did not find a nexus between the condition and Mr A’s conduct.15
[32]The Tribunal found both charges one and two proved.
The penalty decision
[33] The Tribunal summarised its findings in the liability decision. It also recorded that its function in imposing a penalty did not have, as its primary purpose, punishment, but rather that the predominant purposes were to advance the public interest, to maintain professional standards, to impose sanctions on a practitioner for breach of his or her duties and to provide scope for rehabilitation in appropriate cases.16
[34] The Tribunal then turned to consider the seriousness of Mr A’s offending. It noted the submission made to it that, while the Tribunal had not found that Mr A had acted fraudulently, its findings that he used funds that he was not entitled to, and sold shares that had no value, was conduct that in itself was dishonest. The Tribunal accepted that submission, noting that Mr A’s conduct with Mr and Mrs B lacked
14 At [68]-[75].
15 At [77].
16 National Standards Committee v A, above n 3, at [1]-[6].
openness and was focused on his own interests.17 It expressed the view that Mr A’s conduct was of a “most serious and condemnatory nature”, and that the starting point for a penalty was being struck off.18
[35] The Tribunal recorded the competing submissions and noted various authorities referred to it. It noted a submission made for Mr A that he had practised without blemish for many years and it referred to various references that had been made available attesting to his good character and reputation within the profession and with his clients. It also noted the submission that Mr A has had an ongoing struggle with mental health issues. The Tribunal nevertheless considered that the references did not assist, given its findings of serious misconduct in the liability decision. Rather, it observed that Mr A had had a “spectacular fall from grace”. It also repeated its finding in the liability decision there was no nexus between Mr A’s diagnosed mental health condition and his conduct. The Tribunal concluded that there were no matters in mitigation that persuaded it that a penalty less than a strike off should be imposed. It observed that in reaching that decision, it had taken into account the detrimental impact Mr A’s actions had had on his former clients.19
[36] The Tribunal then turned to consider whether or not Mr A’s name should be suppressed. The Tribunal noted that it had been careful to “neutralise any reference to sensitive matters”. It was not satisfied that it was necessary to order non-publication of Mr A’s name. It considered that open justice and the public interest overrode the interests of Mr A, given that he had fallen well below professional standards.20
[37] It then dealt with the issue of costs. It noted the competing submissions, and concluded that Mr A, having been found guilty of serious misconduct, should be subject to a costs order in the usual way, rather than have the profession bear the burden of the costs incurred. It directed that Mr A was to pay the costs of the prosecution in the sum of $46,166. It certified its own costs in the sum of $11,666,
17 At [12]-[13].
18 At [15]-[16].
19 At [17]-[35].
20 At [36]-[38].
directed that they were payable by the New Zealand Law Society, but ordered that Mr A was to refund that sum to the Society in full.21
The appeal
[38] Initially, Mr A’s appeal related only to the sentence imposed. Mr A sought a reduction in the sentence, and the imposition of a lesser penalty. Mr A then sought leave to file, out of time, an amended notice of appeal, challenging the liability decision as well. Leave was granted to him in this regard by Powell J on 6 August 2019 and an amended notice of appeal was filed.
[39] In regard to the liability decision, Mr A contended that four findings made by the Tribunal were wrong, namely:
(a)that there was no nexus between his diagnosed mental health condition and his conduct;
(b)that the value of the shareholding in CCL was overstated;
(c)that the shares in CCL had no discernible value; and
(d)that evidence given by a Mr Lane should be accepted, whilst evidence of a Ms Popova should be disregarded.
[40] In regard to the penalty decision, Mr A challenged the following findings made by the Tribunal:
(a)that he acted dishonestly;
(b)that dishonesty is broader than criminal fraud or fraudulent behaviour;
(c)that his conduct was of a most serious and condemnatory nature;
(d)that the starting point in considering penalty was striking off.
21 At [39]-[41].
He also asserted that the Tribunal erred in:
(e)failing to adequately consider its responsibility to facilitate his rehabilitation;
(f)placing insufficient weight on evidence provided in support of his good character;
(g)finding that there were no matters raised in mitigation;
(h)declining the application for non-publication of his name and disregarding the evidence given for him by Dr Haxell on the possible consequences of publishing his name;
(i)finding that open justice and the public interest overrode his need for non-publication; and
(j)awarding full costs against him.
Nature of the appeal
[41] The appeal was brought pursuant to s 253(1) of the Act. Pursuant to s 253(3)(a) (and the relevant High Court Rule – r 20.18) it proceeded by way of rehearing.
[42] Where there is a general right of appeal, the onus is on the appellant to satisfy the Court that it should differ from the decisions under appeal. If the Court is so satisfied, it is entitled to confirm, reverse or modify the Tribunal’s decision, to consider the factual issues afresh and to come to its own view on the merits of the case. The Court may or may not find the reasoning of the Tribunal persuasive. As noted by Elias CJ in Austin Nichols & Co Inc v Stitching Lodestar:22
Those exercising general rights of appeal are entitled to judgment in accordance with the opinion of the appellate court, even where that opinion is an assessment of fact and degree and entails a value judgment. If the appellate
22 Austin Nichols & Co Inc v Stitching Lodestar [2007] NZSC 103, [2008] 2 NZLR 141 at [16].
court's opinion is different from the conclusion of the tribunal appealed from, then the decision under appeal is wrong in the only sense that matters, even if it was a conclusion on which minds might reasonably differ. In such circumstances it is an error for the High Court to defer to the lower Court's assessment of the acceptability and weight to be accorded to the evidence, rather than forming its own opinion.
[43] The appeal against the Tribunal’s costs decision is not however a general appeal. The Act confers a discretion on the Tribunal to award costs against a practitioner found to have behaved unprofessionally.23 The criteria for a successful appeal against the exercise of that discretion are stricter. An appellant must show error of law or principle, the taking into account of irrelevant considerations, a failure to take into account relevant considerations, or that the decision on costs was plainly wrong.24
Analysis
Preliminary observations
[44] I consider each of the grounds of appeal in turn. Before doing so, I observe as follows:
(a)Mr A did not dispute what happened and he accepted that his conduct was unsatisfactory. He apologised unreservedly to Mr and Mrs B, to the profession and to the New Zealand Law Society for what occurred. At the hearing before the Tribunal, he put forward his version of events, not to deny responsibility, but rather to put in issue whether his conduct could be characterised as disgraceful and dishonourable, whether he had acted in such a way as to reflect on his fitness to practice, and as being relevant to whether striking off was the appropriate penalty. He did not seek to resile from this position on the appeal.
(b)The Tribunal’s decisions are, in my view, relatively superficial. A number of the findings made are conclusory. There is little analysis of the evidence or the extensive arguments advanced by counsel. Some
23 Lawyers and Conveyancers Act 2006, s 249.
24 Kacem v Bashir [2010] NZSC 112; [2011] 2 NZLR 1.
findings made do not fully dealt with reflect the issues the Tribunal was asked to address – for example, in relation to particulars (b) and (c) in charge one (see above at [23]). This is unfortunate, particularly given recent criticisms of the quality of the Tribunal’s decisions by this Court,25 and observations repeatedly made by the Court of Appeal about the need for decision-makers to give clear and transparent reasons for their decisions.26
(c)The nature and purpose of the duty to give reasons is well settled. Reasons must be given, first, to maintain openness in the administration of justice and public confidence in the justice system; secondly, to enable the person affected by the decision to understand why the decision was made and to assure him or her that the evidence and arguments were assessed in accordance with the law; thirdly, to enable decisions to be assessed by a Court on appeal or on application for review; fourthly, to improve the quality of decision-making and to guard against erroneous or arbitrary decisions; and finally, in the disciplinary context, because the matters constituting misconduct are likely to be relevant to any future application for readmission.27
(d)Reasons should be proper, intelligible and adequate in all the circumstances. They must be sufficient to enable the parties to understand the basis for the decision, having regard to the nature of the hearing and the importance and seriousness of the matters at stake.
(e)These matters are particularly important in cases such as the present where professional reputation and the ability to continue practising law are at stake. A lawyer’s conduct is a matter of public concern, and allegations of professional misconduct should be openly and fully dealt
25 See Belgiorno-Nettis v Auckland Unitary Plan Independent Hearings Panel [2019] NZCA 175 at [46]-[50].
26 J v Auckland Standards Committee 1 [2018] NZHC 2706 at [28]-[29]; On appeal J v Auckland Standards Committee 1 [2019] NZCA 614; And see Auckland Standards Committee 3 of New Zealand Law Society v W [2011] 3 NZLR 117 (HC) at [27]-[30].
27 GE Dal Pont Lawyers’ Professional Responsibility (6th ed, Thomson Reuters, Sydney, 2017) at [23.45].
with. Inadequate reasons pose very real difficulties for this Court on any appeal, particularly where, as here, the Tribunal’s reasoning on various issues overlaps and only some of the Tribunal’s findings are challenged on appeal.
The liability decision
(i)Nexus between Mr A’s diagnosed mental health condition and his offending
[45] As noted above, the Tribunal did not find a nexus between Mr A’s diagnosed mental health condition and his conduct.
[46] Mr Jones QC, appearing on behalf of Mr A, submitted that no reasons for this conclusion were given. I do not consider that this is altogether correct. The Tribunal’s first finding that Mr A’s condition was not a factor in determining the level of seriousness of his offending is conclusory and unsupported by any analysis. The second observation however – that Mr A generated the proposals inviting his clients to enter into the transactions – is at least a partial reason for the finding, albeit a reason that, without further explanation, it is not particularly helpful.
[47] Evidence was presented at the hearing by Dr Haxell, a registered psychologist. He stated that he had seen Mr A on a regular basis since March 2015. He confirmed that Mr A had disclosed to him significant issues he has had to face. He considered that Mr A shows significant aspects of PTSD, and that this has caused significant long- standing behavioural problems. . He ventured that Mr A has nevertheless managed to cope by seeking to please others, by staying in control, by not valuing himself and his achievements, but by working extremely hard to be successful professionally and financially. Dr Haxell later stated his opinion in regard to the charges as follows:
I was not working with Mr A when the issues related to the Law Society enquiry occurred. In regard to what has happened in regard to the complaint, I can only suggest that the self-destructive behaviours were congruent with the types of historic psychopathology and related patterns I have been describing above. It is possible in my view that as his life situation deteriorated around him … Mr A may have tried even harder to compensate and tried or been tempted to take riskier behaviours as a result … It is also quite possible that opportunities concerning secrecy and power … would have been particularly difficult for Mr A to have managed insofar as the maintenance of professional boundaries was concerned. … This is not to say
that I can (or will) attribute all of Mr A’s behaviours to his history … and clearly he does have to take responsibility for his actions, however it is difficult, in my view, to consider these behaviours without taking into account the context within which they occurred. … there is no way [Mr A] could not have been significantly affected psychologically by what has happened ...
[48] Before the Tribunal, the Committee did not dispute Dr Haxell’s opinion, but it did contest the extent to which the Tribunal should accept it and what impact it should have on the Committee’s findings as to Mr A’s conduct. Counsel for Mr A submitted that, when Mr A met Mr and Mrs B, he was in emotional despair and felt in awe of Mr B, so that the usual balance of power in the solicitor-client relationship was tipped upside down. Counsel however also acknowledged that Mr A had accepted unequivocally that he had failed to manage the appropriate boundaries and that he deserved of the consequences. It was acknowledged that Mr A’s condition was not an excuse, but rather, that it provided “necessary context on how Mr A’s judgment was able to lapse so seriously”.
[49] Mr A now relies on further evidence, which he obtained leave to file.28 The evidence is from Dr Goodwin, who is a consultant psychiatrist. Dr Goodwin prepared a report dated 29 November 2019. He refers to Mr A’s background and psychiatric history and comments that, through his adult years, Mr A has developed a number of maladaptive coping mechanisms, including a behavioural addiction to work. He considered that Mr A presents with a history of PTSD, that he has significant problems in trusting others, but that he is also, paradoxically, deferential to those in power. He also considered that Mr A tends to become immediately weak and subservient to those he perceives as being more powerful than himself. He expressed the opinion that Mr A would have found it extremely difficult to challenge Mr B, and that Mr A would have been likely to have acquiesced in any requests that Mr B made of him. He considered that this situation would limit Mr A’s capacity to independently advise Mr B, and that this would in turn have created a situation in which any blurring of the boundaries between professional and personal relationships could more easily take place. He expressed the view that Mr A appears to have little insight into, and few skills in managing the conflicts between being a professional adviser and a business partner, and that while he may have potentially appreciated and foreseen the risks, he
28 A v National Standards Committee [2020] NZHC 392.
did not appear to have had any significant skills in separating out the roles. Dr Goodwin expressed the opinion that there was a strong nexus between Mr A’s diagnosed condition and his conduct, because Mr A displays “very clear difficulties in knowing what his role is within relationships”, and because he has “a lifelong propensity to be deferential to those in power”.
[50] I accept the evidence of both Dr Haxell and Dr Goodwin that Mr A has little insight into the risk that personal, business and professional boundaries can easily become blurred and that he had difficulty in managing those boundaries with Mr and Mrs B as a result of his mental health difficulties. I also accept that Mr A has a propensity of be deferential to those in power, that he perceived Mr B as being in a position of power, and that he was deferential to, and admiring of, Mr B. Mr A gave evidence of this as well from his personal perspective. However, I agree with the submissions made by Mr Hodge, for the Committee, that it is difficult to see how these traits are applicable to the unchallenged finding that Mr A took approximately
$200,000 of Mr and Mrs B’s money and spent it on properties and business expenses for his own benefit. Neither Dr Haxell nor Dr Goodwin gave evidence that Mr A’s acknowledged conditions were causative of him conducting himself in this way. Indeed, Dr Haxell expressly says, in the passage from his letter quoted in [38] above, that he could not attribute all of Mr A’s behaviours to his history and that Mr A does have to take responsibility for his actions. Even if it is acknowledged that Mr A, as a result of his psychological history, has a propensity to be deferential to those in power, and that he deferred to Mr B, there is nothing to suggest that Mr B directed Mr A to spend the money. Nor is there anything before the Court to explain why it was deferential to Mr B for Mr A to spend Mr and Mrs B’s money for his own benefit. Neither Dr Haxell or Dr Goodwin expressed the view that Mr A’s condition deprived him of the ability to appreciate the wrongfulness of his conduct. Mr A’s own actions in accepting that his conduct was at least unsatisfactory, and his evidence that he was aware that he should have advised Mr and Mrs B to get independent advice, suggest that he did have that appreciation.
[51] Accordingly, I do not accept that the opinions expressed by Dr Haxell and Dr Goodwin undermine the findings made by the Tribunal as to Mr A’s culpability. While I accept that Mr A’s conduct has to be seen in context, and that his
acknowledged health issues are part of that context, on the materials before me, the context does not excuse what occurred.
[52] I am not persuaded that the Tribunal erred in its conclusion in this regard and I reject the first ground of appeal. I do however accept that Mr A’s acknowledged mental health difficulties are relevant to the penalty decision, and in particular to name suppression. I deal with this below.
(ii)Value of the shareholding in CCL
[53]Particular (c) alleged by the Committee was as follows:
That [Mr A] induced [Mr and Mrs B] to pay $544,000 for shares in [CCL] when there was no evidence to suggest that the shares were worth $544,000 and no independent valuation was provided.
[54] The Tribunal in its decision does not directly deal with this issue. It does not discuss inducement by Mr A (other than to note, earlier in its decision, that Mr A proposed the joint investment involving CCL). Rather, the Tribunal focused on the evidence of Mr Lane who prepared evidence in support of Mr and Mrs B’s civil proceedings against Mr A. The Tribunal noted Mr Lane’s evidence that the payment of $544,000, made by Mr and Mrs B through the B Family Trust to the A Family Trust, overstated the value of the shares by that sum. It noted Mr Lane’s observation that CCL had never traded and that it had no assets (or liabilities) at the time the share purchase agreement was concluded.
[55] The Tribunal did not expressly discuss evidence given for Mr A by Ms Popova. Ms Popova is a chartered accountant and she had also prepared evidence for Mr and Mrs B’s civil proceedings against Mr A. She produced that brief of evidence before the Tribunal. She noted that CCL – itself a start-up entity – was proposing to acquire other start-up entities, which would require significant seed capital. She observed that projections relied on by the board of CCL, including Mrs B, foresaw significant revenue and value at a future point, and once the start-up businesses had matured. She noted that the $544,000 paid for the shares was agreed between Mr and Mrs B and Mr A, based upon their future expectations and projections about the performance of
CCL. She opined that that is very common for start-up businesses, which do not have any commercial history.
[56] The Tribunal acknowledged that there can be situations where a purchaser may pay an inflated price above valuation because that purchaser has formed an opinion about future prospects, but stated that that was not the case in the present situation, because the proposal for the joint venture company CCL originated from Mr A.
[57] Mr Jones QC, appearing for Mr A, criticised the Tribunal’s finding, noting that Mr Lane’s argument was predicated on his assertion that the company had not traded and that therefore there was nothing to value. He noted that Mr Lane conceded in cross-examination that all methodology comes back to an expectation as to future economic benefit, and he argued that Mr Lane had ignored that expectation. He submitted that the Tribunal erred in accepting Mr Lane’s evidence and in rejecting Ms Popova’s view and that it did so without analysis or reasoning. He argued that the Tribunal’s finding in relation to particular (c) should be quashed, because the particular had not been proved.
[58] Mr Hodge accepted that the Tribunal’s reasoning in regard to particular (c) was scant and that the Tribunal went further than was required by holding, in effect, that the shares were worth nothing. He did however note that Ms Popova did not value the shares in CCL, and commented that there was nothing tangible to value.
[59] I accept in large part the criticisms made of the Tribunal’s decision. In my judgment, the Tribunal’s findings in relation to particular (c) rather miss the point. The Committee was not alleging that the shares were worth nothing. Rather, it was asserting that they were sold by Mr A, through the A Family Trust, to Mr and Mrs B, through the B Family Trust, for $544,000 when no independent valuation was obtained, and when there was nothing to support the purchase price proposed by Mr A and then agreed between the parties.
[60] The relationship between a solicitor and his or her client is a fiduciary relationship. Once the relationship is formed, the solicitor becomes subject to fiduciary obligations and is required to act in the best interests of his or her client and
with absolute fairness and openness to the client. The solicitor is bound to observe the utmost good faith towards the client and, without the client’s informed consent, cannot have a personal interest in any transaction involving the client. Moreover, where, as here, there is a personal benefit to the lawyer, more than full disclosure is required. The transaction cannot be upheld unless there is not only disclosure, but the solicitor can also “further show that the transaction was, in itself, a fair one”.29 To prove fairness, the solicitor has to show that the transaction was as advantageous to the client as it would have been if he had been endeavouring to sell the property to a stranger.30 In a related context, it has been held that a company director under fiduciary obligations must take care to ensure that the value attributed to assets sold is fair, and that that is likely to involve, at the very least, a contemporaneous independent valuation of the assets being sold and acquired.31
[61] Here, as Mr Jones acknowledged, there is no evidence that any attempt was made by Mr A to value the shares in CCL which Mr A, through his family trust, was selling to Mr and Mrs B, through their family trust. There was certainly no independent valuation obtained. When the issue was put to Mr A in the course of cross-examination, he was unable to account for the value attributed to the shares, other than to say that:
This share purchase was a convenience. It was a way to say this is what’s been spent. This is what’s needed. … That’s all it is. I’m not saying to them: “hey, guess what? This company’s worth [$]544[000] …”
[62] Accordingly, I find that particular (c) in charge one was proved, albeit for rather different reasons than were found by the Tribunal.
(iii)The shares in CCL had no discernible value
[63] This issue is related to the previous issue and it does not require separate consideration.
29 Demerara Bauxite Co Ltd v Hubbard [1923] AC 673 (PC) at 681-682.
30 And see, Andrew Butler (ed), Equity and Trusts in New Zealand, (2nd ed, Thompson Reuters, Wellington, 2009) at [13.3.2(a)].
31 Sojourner v Robb [2007] NZCA 493, [2008] 1 NZLR 751 at [31].
(iv)Acceptance of Mr Lane’s evidence and disregard of Ms Popova’s evidence
[64] As noted, in finding that particular (c) was proved, the Tribunal referred to and accepted Mr Lane’s evidence, but did not expressly refer to Ms Popova’s evidence.
[65] Nothing flows from this alleged error, and accordingly I deal with it only briefly.
[66] In my judgment, the Tribunal did, albeit obliquely, refer to Ms Popova’s evidence. It did not name her, but it appears from its reasoning that it was alive to the substance of her evidence. It referred to submissions made by counsel appearing for Mr A that Mr Lane’s conclusion was flawed, because he did not conduct a valuation of the shares using recognised methods of valuation. That was the thrust of Ms Popova’s evidence. Further, the Tribunal accepted a submission made by counsel for Mr A that there are situations where a purchaser may pay an inflated price above valuation because the purchaser has formed an opinion about future prospects. Again, it would seem likely that this observation was informed by Ms Popova’s evidence.
[67] While I do not consider that the Tribunal ignored Ms Popova’s evidence, or this aspect of Mr A’s case, in my view, it would have been preferable had it dealt with the issue rather more clearly, and expressly referred to Ms Popova’s evidence.
[68] Mr Jones did criticise Mr Lane, and suggested that he had not been independent of Mr and Mrs B. I do not consider that there is anything in this criticism. Mr Lane made it clear that he had advised Mr and Mrs B in regard to the civil proceedings that they had commenced against Mr A. He was cross-examined about his previous involvement. Ms Popova was in exactly the same position. Her evidence was prepared for the purpose of the civil proceedings as well, and the Tribunal cannot have been unaware that both Mr Lane and Ms Popova had previous involvement in the matter. In any event, even if this criticism were able to be made out, it would have no consequence for the Tribunal’s finding on particular (c).
[69]I now turn to the appeal against the penalty decision.
The Penalty Decision
(i)That Mr A acted dishonestly
[70] As noted, the Tribunal reiterated its liability findings, recording that it had found Mr A’s conduct in relation to charge one to be disgraceful or dishonourable. It noted that Mr Hodge, for the Committee, submitted that “proven dishonesty” had been established and that this should lead to a strike off. It also recorded Mr Hodge’s submission that, while it had not made a finding of any outright fraudulent behaviour by Mr A, its findings that Mr A used funds he was not entitled to and sold shares that had no value, was conduct that was dishonest. The Tribunal recorded that it agreed with these submissions. It observed that Mr A’s conduct with his clients lacked openness and was focused on his own interests. It then went on to record that if it was wrong in finding Mr A’s conduct was dishonest, it was nevertheless dishonourable conduct, and that such conduct can encompass unprincipled wrongful acts or omissions, comprising blatant breaches of duties owed by a professional person.32
[71] Mr Jones noted that there was no allegation of dishonesty in the charging document. He submitted that dishonesty is a serious allegation, that natural justice requires that any such allegation be clearly stated in the charging documents, and that any such finding be supported by commensurate proof. He referred to a judgment of Muir J – Ellis v the Auckland Standards Committee 3.33
[72] Mr Hodge accepted that the charge alleged disgraceful and dishonourable conduct, but he argued that such conduct can, in appropriate cases, also be described as dishonest. He argued that the Tribunal in the penalty decision simply used dishonest as an adjectival description of the conduct it found proved.
[73] The grounds on which charges may be brought against a lawyer before the Tribunal are set out in s 241. They are misconduct, unsatisfactory conduct, gross negligence or incompetence, or conviction of a serious offence. Dishonesty per se cannot be charged, but it is of course a paradigm example of misconduct.
32 National Standards Committee v A, above n 3, at [11]-[14].
33 Ellis v the Auckland Standards Committee 5 [2019] NZHC 1384 at [51].
[74] As noted above at [7], Mr A was charged with disgraceful or dishonourable conduct, gross negligence or incompetence, or unsatisfactory conduct. The charges did not allege dishonesty, but given s 241, that is not surprising. There nothing in the particulars given for each charge expressly alleging dishonesty, but detail of the allegations made was fully set out. Dishonesty was not put to Mr A in cross- examination, and the Tribunal did not use the words “dishonest” or “dishonesty” in its liability findings. I agree with Muir J that,34 if a Tribunal is to be asked to find disgraceful or dishonourable conduct of the basis of dishonesty, then dishonesty should generally be put directly to the practitioner concerned both in the particulars given in the charging document and at the hearing. Nevertheless, I am not persuaded that the use of the word “dishonest” by the Tribunal in the penalty decision in the present case was inappropriate.
[75]The Tribunal found that:
(a)Mr A took approximately $200,000 from monies his clients had advanced to him for a specific purpose for his own benefit and purposes; and
(b)Mr A received $544,000 from his clients for the purchase of shares when there was no evidence to support that value.
[76] Before the Tribunal, Mr A argued that he had an agreement with Mr and Mrs B to the effect that he could spend $200,000 of the $400,000 advanced pending a further investment opportunity becoming available. The Tribunal rejected this argument. It found that there was no agreement that Mr A could take the money for his personal use immediately. This finding has not been challenged on appeal. Nevertheless, before me Mr Jones argued that the issue was simply one of timing. He argued that it is incorrect to say that the investment in NewCo never took place, and that the February 2011 arrangements were simply the beginning of a private equity venture, which was about investing in more than one business. He put it to me that Mr A’s use of the $200,000, advanced by Mr and Mrs B through the B Family Trust to the A Family Trust, was “a mistake in timing” in circumstances where documentation of the
34 At [52].
private equity venture was scant. Mr Jones said that Mr A simply acted prematurely before the formalised documentation for the private equity venture had been put in place, and that his thinking throughout was that the private equity venture was underway, and that he could use the money allocated to the A Family Trust to spend as he saw fit.
[77] The difficulty from Mr A’s perspective with these arguments is that the Tribunal made clear findings on these issues and they have not been challenged on appeal. The Tribunal:
(a)dealt with the NewCo proposed joint venture and the CCL joint venture separately and clearly considered that they were separate transactions;
(b)concluded that Mr A was not to entitled to use $200,000 of the funds made available for the NewCo transaction, when that transaction did not proceed. Rather, he held the funds on trust for his clients;35
(c)noted the submission made for Mr A that he genuinely believed that he was entitled to use the initial $200,000 paid in February 2011 for his own purposes, and that Mr A believed this because the payment was not in respect of a single transaction, but rather was part of an overarching private equity venture;
(d)rejected this submission, recording that its findings in respect of particulars (a), (c) and (e) did not support the argument; and
(e)went on to record that particulars (a), (c) and (e) had been proved, and that the charge of misconduct had been made out.36
[78] In my judgment, the present case can be distinguished from Muir J’s judgment in Ellis v Auckland Standards Committee 5. In that case, the factual findings made by the Tribunal did not exclude the practitioner’s explanation that he had billed a client
35 National Standards Committee v A, above n 2, at [27].
36 At [54]-[55].
twice through oversight rather than dishonesty. In those circumstances, for the Tribunal to go on and characterise the double billing as bordering on dishonesty in its penalty decision, was inappropriate. But in the present case, the Tribunal’s expressly dismissed the explanation offered by Mr A for what happened. Once the Tribunal found that there was no agreement that Mr A could spend any of the money advanced by Mr and Mrs B for the NewCo joint venture, and that Mr A held the funds in trust when the NewCo venture did not eventuate, there was no basis on which Mr A could think that he could spend $200,000 on himself. In those circumstances, the use of the adjective “dishonest” in the penalty decision for the conduct the Tribunal found proved was not inappropriate. Nor was the use of the word “dishonest” inappropriate once the Tribunal found that Mr A sold shares in CCL to Mr and Mrs B’s trust without first obtaining evidence of their value.
[79] I note that this Court (sitting as a full Court) has endorsed a description of dishonesty at the penalty stage in another decision – Sisson v Standards Committee 2 of the Canterbury-Westland Branch of the New Zealand Law Society.37 There the charges against the practitioner alleged that she deducted funds from a client’s trust account to pay her own fee. Before the Tribunal, there were competing accounts given by the practitioner and by her client as to whether or not the practitioner had authority to deduct the funds. The charges against the practitioner alleged that she had deducted the funds in circumstances where she knew she had no authority to do so. The Tribunal found the charge proved. In its penalty decision the Tribunal discussed the practitioner’s conduct under the heading “Elements of Dishonesty and Breach of Trust”. The High Court agreed that this characterisation was apt. It noted as follows:
[38] The segment of the Tribunal’s decision from which we have just quoted is headed ‘Elements of dishonesty and breach of trust’. We considered this an apt description of the culpability in this case. There were two elements to the dishonesty. The first was in deducting costs of … when the appellant knew she had no authority to do so, notwithstanding that she was owed fees calculated on a legal aid basis. …
[39] The second element of dishonesty lay in the answers given to the Standards Committee on 11 March 2009, and thereafter replicated in evidence given to the Tribunal in response to the charges. The appellant fabricated an explanation for her actions, namely that she had discussed a switch to a private retainer and obtained her client’s agreement to this course. There were
37 Sisson v The Standards Committee 2 of the Canterbury-Westland Branch of the New Zealand Law Society [2013] NZHC 349, [2013] NZAR 416.
numerous pointers to the fact that this was untrue. Yet, the appellant persisted in this untruth to the very end.
[80] The word “dishonesty” can be used, as an appropriate shorthand description of factual findings made, where the findings warrant that label.
[81] In the present case, the factual findings made support the description of dishonesty. It would have been preferable if the word “dishonesty” had been used in the particulars of the charges and if dishonesty had been put to Mr A in cross- examination, but there can be no argument that the facts leading to the descriptor “dishonest”, and the substance of the Committee’s case, were fairly put in the charge notice and in the cross-examination of Mr A. Mr A has not persuaded me that the use of the word “dishonest” by the Tribunal in its penalty decision was inappropriate. Rather, it was, in my judgment, a shorthand label used to describe conduct which could properly be said to be dishonest.
(ii)Dishonesty is broader than criminal fraud or fraudulent behaviour
[82] In this decision, the Tribunal agreed with a submission made by Mr Hodge for the Committee, that Mr A’s conduct, while not dishonest in a fraudulent sense, was dishonesty that did not need to be narrowed down to criminal fraud or fraudulent behaviour.
[83] Mr Jones took issue with this conclusion. He noted that the Tribunal did not refer to any authority to support this conclusion, and that it did not provide appropriate reasoning to support it. He referred to the decision of this Court in Shahadat v Westland District Law Society38 and argued that the Tribunal conflated the concepts of what is dishonest and what is dishonourable.
[84]I do not accept Mr Jones’ submission.
[85]In Shahadat, the Court noted as follows:
[31] It is important to bear in mind that "dishonesty" can have different connotations. (It may describe criminal acts. But it may comprise, acting deceitfully towards a client, or deceiving a client through acts or
38 Shahadat v Westland District Law Society, above n 9.
omissions). "Dishonourable" behaviour on the part of a practitioner may well be different to that which is seen to be "dishonest" in the fraudulent sense. "Dishonest" may carry a connotation of "fraudulent", whereas "dishonourable" behaviour may cover a wide range of disgraceful, unprincipled, wrongful acts or omissions comprising blatant breaches of duties owing by a professional person.
[86] I do not consider that the Tribunal’s findings cut across these observations. Actions that reflect on a practitioner’s integrity will usually amount to misconduct. Dishonestly taking a client’s money will be misconduct, but lesser instances of dishonesty can also amount to misconduct. Similarly, a breach of a fiduciary duty, for example, selling an asset to a client without being able to show that the sale was at a fair value, can amount to dishonest conduct and be an instance of misconduct of a most serious kind.39 The Tribunal did not find that Mr A’s conduct was dishonest in a fraudulent sense. Rather, it considered that his conduct was dishonesty that did not need to be narrowed down to criminal fraud or fraudulent behaviour. As noted in Shahadat, dishonourable behaviour on the part of a legal practitioner can be different to that which is seen to be dishonest in a fraudulent sense. There is however nothing in Shahadat which suggests that dishonest behaviour cannot also be dishonourable behaviour even though the behaviour or dishonesty is not fraudulent.
(iii)Mr A’s conduct was of a most serious and condemnatory nature
[87] Mr Jones’ submissions in this regard referred back to Mr A’s diagnosed mental health condition. In effect, he was arguing that the condition mitigated against the seriousness and condemnatory nature of Mr A’s conduct. I have already dismissed that ground of appeal above.
(iv)Starting point in considering penalty was a strike off
[88] As Mr Jones’ acknowledged, this point was contingent on Mr A being successful in having the finding of dishonesty quashed. I have held that the Tribunal’s reference to dishonesty was not inappropriate. Given the Tribunal’s findings, a strike off was clearly the starting point penalty. There was a serious breach by Mr A of the fundamental duties he owed to his clients. In such circumstances, a striking off will
39 Duncan Webb, Kathryn Dalziel and Kerry Cook, Ethics, Professional Responsibility and the Lawyer, (3rd ed, LexisNexis, Wellington, 2016) at [4.3.6].
generally be appropriate.40 Charges involving proven dishonesty will usually be found to have demonstrated conclusively that a practitioner is unfit to continue to practise as a lawyer.41
(v)Rehabilitation
[89] Mr Jones submitted that the Tribunal erred in disregarding Mr A’s suggestion that he could be supervised by a well established and reputable law firm. Mr Jones argued that proposal provided the Tribunal with an opportunity to assist Mr A with his rehabilitation, and that in disregarding it, the Tribunal erred in not seeking to impose the least restrictive outcome available to it.
[90] I disagree. The suggestion of supervised employment was made by Mr A to avoid not only strike off, but also any suspension. Here, there were findings of serious misconduct, tantamount to dishonesty, which involved the taking of client monies. The proven facts would not be adequately met by a penalty that would have seen no interruption to Mr A’s ability to practise law.
(vi)Evidence of good character
[91] A number of references were filed on behalf of Mr A attesting to his good character and reputation and to the high regard in which he was held by both colleagues and clients.
[92] The Tribunal did refer to these references, and also to the fact that Mr A had practised for a number of years without issue. The Tribunal commented that references to good character do not however assist against findings of serious misconduct. It noted that Mr A had had a spectacular fall from grace.
[93] I agree with the Tribunal’s observation. The findings of misconduct against Mr A were serious and references and letters of support do not mitigate the seriousness of a solicitor taking a client’s money. The aim of professional discipline is primarily
40 McDonald v Canterbury District Law Society HC Wellington N215/87, 10 August 1989 at [12];
Shahadat v Westland District Law Society, above n 9, at [30].
41 Hart v Auckland Standards Committee 1 of the New Zealand Law Society [2013] NZHC 83, [2013] 3 NZLR 103 at 185-187; Webb, above n 39, at [4.3.6].
protective rather than punitive and considerations that can mitigate punishment in a criminal context have less impact in the disciplinary setting.42
(vii)Other mitigating factors
[94] It was argued that the Tribunal erred in not placing any or any sufficient weight on various mitigating factors, including:
(a)the nexus between Mr A’s diagnosed mental condition and his conduct;
(b)Mr A’s unblemished record;
(c)that Mr A had apologised to Mr and Mrs B and sent them a cheque for the monies he had taken for his own benefit;
(d)Mr A’s acceptance of responsibility and his remorse.
[95] The Tribunal did not expressly refer to some of these matters. It would have been preferable if it had done so. It did refer to Mr A’s diagnosed medical condition and it repeated its findings in this regard in its liability decision. It has been observed that evidence of this kind does not ordinarily carry much weight in the disciplinary context, because it does not address the protective role of disciplinary proceedings, especially for misconduct that involves dishonesty.43
[96] I am not persuaded that the Tribunal erred in striking off Mr A. None of the various factors argued, either singularly or collectively, sufficed to avert a penalty of strike off, given the seriousness of Mr A’s conduct, and recognising that the primary purpose in these proceedings is public protection and maintenance of proper professional standards.
42 Dal Pont, above n 27, at [23.155].
43 Dal Pont, above n 27, at [23.145]
(viii)Effect of publication of Mr A’s name
[97] Dr Haxell gave evidence that there is a risk of self harm or suicide by Mr A in the event of publication of his name or identifying information. That evidence was not challenged. Further, Dr Goodwin considered that Mr A’s mental state is at best fragile and that his issues are of long standing. He did not consider that there are any options available which mitigate the risk of harm to Mr A, or of those close to him, if name suppression is not granted. He considered that the risks of name suppression, if refused, are significant, and that Mr A reports ongoing and significant suicidal ideation, that is “barely managed currently”.
[98]I accept this evidence. There was nothing to contradict it.
[99] I acknowledge that, for name suppression under s 240 of the Act, good evidence is required to displace the presumption of open justice, and that the circumstances have to compelling to tip the balance against that presumption, recognising that “facing disciplinary charges is a stressful and embarrassing process for all practitioners”.44 What is required is a balancing of public and private interest.45
[100] In my judgment, there was sufficient evidence before the Tribunal, and certainly more than sufficient evidence before me, to displace the presumption of open justice. I am satisfied that the risk of self harm and/or suicide is a real and appreciable possibility if Mr A’s name is not suppressed. Accordingly, I allow this aspect of the appeal and reverse the Tribunal’s decision in this regard.
(ix)Award of full costs
[101]The Tribunal awarded full costs against Mr A.
[102] Mr Jones argued that a proportion of the Committee’s costs must have related to “rework” undertaken, due to its own delays, and in any event, that the Committee was only partially successful in its proceedings against Mr A.
44 Canterbury-Westland Standards Committee No. 1 v Grave [2016] NZLCDT 8 at [42].
45 Hart v Standards Committee (No 1) of the New Zealand Law Society [2012] NZSC 4 at [3].
[103] Mr Hodge responded by asserting that the Committee was put to a lot of additional work, because of matters raised by Mr A which were irrelevant to the issues before the Tribunal. He also noted that Mr A endeavoured to shift blame to Mr and Mrs B, and that all of this increased the costs which were incurred.
[104] I am not persuaded that the Tribunal erred in regard to these issues. There is discretion to award costs against a practitioner found to have behaved unprofessionally
– s 249(1) – and it is generally accepted that members of the profession should not have to bear the costs of proceedings brought for the primary purpose of protecting the public.
[105] I do not consider that there is any proper basis to interfere with the exercise of the discretion as to costs by the Tribunal in the present case. There is nothing to suggest that the Tribunal erred in law or principle, that it took into account an irrelevant factor, that it ignored a relevant factor, or that its decision was plainly wrong. Mr A did not dispute the substantive facts and did admit unsatisfactory conduct. He nevertheless defended the proceedings, alleging that he was entitled to use the
$200,000, and that his conduct did not amount to either misconduct or gross negligence or incompetence. He also attacked the credibility of Mr and Mrs B. The Tribunal found against him in relation to all of these issues, and it was entitled to make a costs order as a consequence.
Result
[106] The Tribunal’s decision is upheld, except in relation to name suppression. In that regard, I suppress:
(a)Mr A’s name;
(b)the names of the companies involved in the transactions;
(c)the names of the Trusts involved in the transactions;
(d)the complainants’ names; and
(e)any other particulars which might lead to Mr A being identified.
[107]In all other respects, the appeal is dismissed.
Costs
[108] The Committee is entitled to its reasonable costs and disbursements on the appeal. In this regard, I direct as follows:
(a)within 10 working days of the date of this judgment, the Committee is to file a memorandum seeking costs and disbursements;
(b)within a further 10 working days, Mr A is to file a memorandum in response;
(c)memoranda are not to exceed five pages;
I will then deal with the issue of costs and disbursements on the papers, unless I require the assistance of counsel.
Wylie J
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