Bates v Valuers Registration Board
[2015] NZHC 1312
•15 June 2015
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
CIV-2014-485-11308 [2015] NZHC 1312
UNDER the Judicature Amendment Act 1972 IN THE MATTER OF
the Valuers Act 1948
BETWEEN
PETER DESMOND BATES Plaintiff
AND
THE VALUERS REGISTRATION BOARD
Defendant
Hearing:
Further submissions:
16 February 2015
26 March 2015
Counsel:
V E Casey with M S Anderson for Plaintiff
R K P Stewart with H L Coull for DefendantJudgment:
15 June 2015
Reissued:
22 June 2015
JUDGMENT OF THE HON JUSTICE KÓS
[1] A valuer sends an intemperate email to the president of the New Zealand Institute of Valuers. It concerns proposed reforms to the valuation profession being driven by lending institutions. Smaller valuation firms believe the reforms imperil their existence. The president, herself a member of a smaller firm, has been supportive of their stance. But of late her support has become more tepid. There are
rumours she has joined one of the large valuation firms.1 The valuer believes the
president has a conflict of interest. His email, copied to nine other valuers, suggests
that the president is “inept” or “corrupt”.
1 Rumours that later are confirmed.
[2] It is one of those foolish emails, written in the heat of the moment, that should never have been sent. Later the valuer apologises to the president.
[3] The president, doubtless, is upset. She threatens defamation proceedings. But she does not file them. She does not make any formal complaint about the valuer’s conduct. But the acting chief executive of the Institute makes a complaint. It is directed to the Valuers Registration Board, rather than the Institute. Both bodies have their own disciplinary processes. He says the email may be a breach of the Code of Ethics of the Institute. He says “this potential breach … could jeopardise
[the valuer]’s status as a registered valuer as per s 31 of the Valuers Act 1948.”2
[4] No one suggests the valuer acted in bad faith. No one, least of all the valuer, doubts he acted foolishly and impetuously. But no one now suggests that his registration as a valuer is seriously in question as a result. At most, a reprimand is appropriate.
[5] Yet, three and a half years later, this complaint still has not been heard by the Board. How have things reached such an impasse? Did the Board even have jurisdiction to inquire into the complaint? And should its decision to do so be quashed for bias or delay?
Background
[6] Mr Peter Bates is a registered valuer. He commenced practice as a valuer in
2002, and became a registered valuer in 2007. In 2010 he established his present firm, Bates & Associates Limited. He has been active in educating the profession, in particular in conjunction with Massey University where he studied. He was elected to the Auckland branch committee of the Institute, and of the Property Institute of New Zealand, in 2010 and 2011. He was an active opponent of the reforms referred
to earlier. I will describe them now in more detail.
2 Herein the Act.
Winds of change
[7] In 2011 the winds of change were sweeping through the valuation profession. What had been mooted was a clearing house system. Instead of borrowers obtaining valuations from valuers of their choosing, lenders would instead order the valuation (on the borrower’s behalf) through a valuation ordering system, or clearing house. That would then redirect the instruction to one of a panel of approved firms. The rationale was to remove relationships between valuers and clients that might result in valuations being “massaged” to enable lending. The change was a direct consequence of the global financial crisis at the end of the last decade. The scheme was to be run by Property IQ Ltd. It is a company associated with Quotable Value Ltd, a state-owned enterprise. Quotable Value itself owns a significant valuation firm, Darroch Ltd.
[8] In February 2011 the following motion was passed at the annual general meeting of the Auckland branch of the Institute:
The members at the meeting expressed the gravest concern as to the future of the profession should Quotable Value and its associated companies and subsidiaries’ proposed commercial initiative be successful, and urged the New Zealand Institute of Valuers, as a matter of urgency, to use all its resources to protect the position of the Institute, its members, the valuation profession and in the public interest.
[9] The then-president of the Institute, Ms Nicola Bilbrough, attended that meeting. She agreed to action the motion on behalf of the members. She was at that time an independent valuer in a small firm, Bilbrough Tiller & Co. In March 2011
Ms Bilbrough emailed members:
NZIV currently have grave concerns over the payment of the transaction fee and consider that it breaches our code of ethics. We have instructed solicitors to give an opinion. As such NZIV strongly recommend that no valuation company complete valuation work with Property IQ where a fee is paid for the supply of that work until legal clarification is obtained.
We are also concerned about the fiduciary relationship between the valuer and bank and valuer and client under this arrangement and again recommend that until there is clarification on this issue that valuation firms refrain from undertaking valuations under this relationship with Property IQ.
[10] Similar comments were made by her in April 2011 as well. By August 2011, however, Ms Bilbrough’s approach had seemingly tempered somewhat. In an email on 29 August 2011 she described the need for “a consistent and consolidated approach in managing the media around this very sensitive topic”. As a result of that email, and more particularly an article that appeared in the Sunday Star Times the day before on 28 August 2011, Mr Bates emailed Ms Bilbrough, along with nine other members of the Institute. Seven of them were not members of clearing house practices. They had shared concerns about allowing the new arrangements to take effect. That email was sent by Mr Bates on Monday 29 August 2011. The following day a reply was received from Ms Bilbrough. The content of the email was placatory, and broadly neutral to the clearing house proposals. It finished by suggesting that a media debate on the issue “is not in the best interests of the profession and may indeed be counterproductive”.
A foolish email is sent
[11] It appears at about this point Mr Bates heard from a senior member of the Institute that Ms Bilbrough had taken employment with one of the main clearing house practices. He was upset at the non-disclosure of that arrangement, despite the fact that he and others had been providing what he saw as sensitive commercial information to her at a time when she may have been in a conflict of interest. In fact, Ms Bilbrough’s employment at the large valuation practice CBRE was announced publicly a few days later, on 2 September 2011.
[12] But in the meantime Mr Bates wrote the email that got him into such trouble. Sent on 30 August 2011, it is headed up “Corruption or Indeptitude?” (sic). It will suffice to quote paragraphs 2 and 3:
It would appear from your position, your “dialogue” and your statements below that you are either utterly inept, corrupt or perhaps both. This is not an appearance I would in any way wish to conclude on.
Please immediately disclose if you are receiving money, or have arranged to receive money from PIQ, QV, CBRE or Telfer Young? By this, I mean either have engaged in contract with them for employment or sub-contractor services with the remuneration to be at present or in the future? Specifically, have you been negotiating to shift to CBRE?
Part of an email string, there were nine other recipients apart from Ms Bilbrough. All were valuers. Mr Bates says in his affidavit that he accepts that the email could have been more carefully drafted. He accepts that the use of the words “utterly inept” and “corrupt” were very strong and could have been better phrased.
[13] On 12 September 2011 Mr Bates apologised to Ms Bilbrough in a letter to her lawyer. The reason he was writing to her lawyer was that Ms Bilbrough appears to have threatened to bring defamation proceedings. She did not, however, issue those proceedings. Nor did she make any complaint against Mr Bates.
A complaint is made
[14] A complaint was instead lodged by the acting chief executive of the Institute, a Mr Smee, on 9 September 2011. Mr Smee had not been one of the recipients of the email. Mr Smee said that Mr Bates’ action in sending the emails to Ms Bilbrough and others “may be a breach of the Code of Ethics of the [Institute]”. He went on to say:
It would appear that this potential breach of the Codes [sic] of Ethics could jeopardise Mr Bates’ status as a registered valuer as per s 31 of the Valuers Act 1948.
An investigation takes place, very slowly
[15] Mr Bates was advised of the complaint by the Board on 13 October 2011. In accordance with s 32(1) of the Act, the Valuer-General was to investigate the matter and report on it to the Board. This the Valuer-General did for the next 20 months. In the course of that investigation Mr Bates raised a number of objections. Which ethics had he breached? Which members of the Board would consider the Valuer- General’s report, when completed? And how had the Board jurisdiction anyway? Mr Bates said that s 31 of the Act only contemplated charges of professional misconduct in the course of a valuer’s professional duties. This, rather, was a “complaint about a complaint”. At the time, Mr Bates was a law student at the Auckland University of Technology. It has to be said that some of his letters to the Valuer-General may not have assisted his cause.
[16] Mr Bates wrote to the Valuer-General again on 2 August 2012. He received no response to that letter. Remarkably, nothing very much seems to have happened until 1 May 2013 when he wrote again to the Valuer-General asking what was happening. The following day the Valuer-General wrote back to him advising that he was “awaiting assessment from the independent registered valuer” in relation to the Institute’s code of ethics.
[17] That assessment was prepared by a Mr Armstrong. He was a former member of the Board. For the last five of the 23 years he served he had been Deputy Chairman. After setting out his experience and the materials he had considered, Mr Armstrong concluded:
The matters set out in Mr Bates’ email of 30 August at 5.15 pm are to say the least very surprising and totally unacceptable from a professional registered valuer serving the public and addressing the President of the professional organisation.
Mr Armstrong then referred to cl 1.1 of the Institute’s Code of Ethics. That requires:
The first duty of each and every member is to render service to the member’s client or the member’s employer with absolute fidelity, and to practice [sic] their profession with devotion to high ideals of integrity, honour, and courtesy, loyalty to the Institute, and in a spirit of fairness and goodwill to fellow members, employees and subordinates.
Mr Armstrong concluded that the epithets in the email directed to Ms Bilbrough failed cl 1.1, and also cl 1.4. The latter provides:
No member shall prepare or certify any statement which is known to be or ought to be known to be false, incorrect, misleading, deceptive, or open to misconstruction by reason of a misstatement, omission or suppression of a material fact, any deceptive act, or otherwise.
The conclusion that the email also offended cl 1.4 is surprising, and patently wrong. That clause is concerned with valuation opinions and certificates. Ultimately no charges were laid under cl 1.4.3
[18] On 20 May 2013 the Valuer-General provided his investigation report to the
Board, pursuant to s 32(1). The report, given the extensive time taken to compile it,
is remarkably brief. It summarises the complaint, Mr Bates’ response, and it attaches
Mr Armstrong’s report. And that is all.
The first decision to inquire
[19] On 8 July 2013 the Board considered the investigation report and decided it was satisfied that there were reasonable grounds for the complaint. The Board would therefore hold an inquiry into the matter. In advising the decision the Board asked if Mr Bates had any objection to any of the four remaining members sitting.4
Mr Bates wrote back on 9 August 2013 objecting to two of the members of the Board being on the panel. He also noted the absence of notice of any particular charge against him.
[20] On 10 September 2013 the Board wrote to Mr Bates advising that a hearing would be set down in 2014. His objection as to membership was not adverted to. The Board was already conscious of the difficulty it might face achieving a quorum of three if more than one of the four remaining statutory members was conflicted. The minutes of the 8 July 2013 meeting had noted, “Can the Minister appoint another member? Justice cannot be frustrated.”
Charges are laid
[21] The letter of 10 September 2013 also enclosed the charges now laid. They were laid under s 31(1)(a) and (c), and were as follows:
THE CHARGES
1. Section 31(1)(c) of the Valuers Act 1948:
That you have been guilty of such unethical conduct in the performance of your duties as a valuer as renders you liable to a penalty provided by the Valuers Act 1948 in that your email to Nicola Bilbrough sent at 5.15 pm on 30 August 2011 headed “Corruption or indeptitude?”, which was copied to nine others, breached Clause 1.1 of the NZIV Code of Ethics which requires NZIV members to “practice their profession with devotion to high ideals of integrity, honour and courtesy, loyalty to the Institute, and in a spirit of fairness and goodwill to fellow members.
2. Section 31(1)(a) of the Valuers Act 1948:
That you have been guilty of such improper conduct as renders you liable to a penalty provided by the Valuers Act 1948 in that your email to Nicola Bilbrough sent at 5.15 pm on 30 August 2011 headed “Corruption or indeptitude?”, which was copied to nine others, breached Clause 1.1 of the NZIV Code of Ethics which requires NZIV members to “practice their profession with devotion to high ideals of integrity, honour and courtesy, loyalty to the Institute, and in a spirit of fairness and goodwill to fellow members.
The form of each charge – “conduct ... as renders you liable to a penalty” is similar to the charges laid in Findlay v Valuers Registration Board, which I discuss later in this judgment.5
[22] Once charges were laid Mr Bates retained solicitors. On 1 November 2013 his solicitors wrote to the solicitor acting for the Board. The letter suggested that the Valuer-General give consideration to withdrawing the charges, on the basis that a formal apology would be given by Mr Bates. The letter went on:
We consider that the allegedly offending email is quite distinct from that which charges are generally brought [sic]. It is not the ordinary circumstance of an act or omission of a duty of a practitioner whilst carrying out usual duties as a valuer, for example undertaking an incorrect valuation. The correspondence was not broadly disseminated, but rather addressed only to a select group who were advancing what were, at the time, highly contentious issues. It was exchanged in the course of ongoing rigorous debate between many of the profession’s executive members.
[23] That initiative appears to have been unavailing. And Mr Bates continued to object to two of the four members of the Board. Although not stated explicitly in the correspondence, the essence of the objection was that these two Board members were involved in firms closely associated with the clearing house system, and held senior positions in firms that would benefit from that system. One was a director
and shareholder of such a company; the other an employee of Darroch.6
[24] Procedural wrangling continued for another six months. Submissions were filed. The Valuer-General opposed the recusal objection.
5 Findlay v Valuers Registration Board HC Hamilton M171/87, 14 December 1987. See [38] to
[51] below.
6 As to which, see [7] above.
A decision on recusal
[25] On 16 April 2014 the Board made a decision on the recusal issue. One or both the two objected-to members appear to have participated.7 The Board would have been inquorate if both had absented themselves. The Board resolved that Mr Gamby should be recused, but not Mr Taylor. The Board found that as an employee of Darroch Ltd, but not a shareholder, Mr Taylor was neither presumptively nor apparently biased. The Board referred to the apparent bias test in Saxmere Co Ltd v Wool Board Disestablishment Co Ltd.8 But as a shareholder in Telfer Young (Auckland) Ltd, a clearing house firm, Mr Gamby was potentially presumptively biased. And there was also a risk of apparent bias, given the perceptions of a fair-minded lay observer as to his impartiality in the particular circumstances of the complaint. In reaching its decision the Board observed:
The Board does not consider it necessary to determine the motives of
Mr Bates … for the purposes of determining the charges.
A second decision to inquire
[26] On 5 May 2014 a reconstituted Board (excluding Mr Gamby) reconsidered the investigation report. It made a second decision to proceed to an inquiry. The original charges were confirmed as appropriate.9 In advising the Board’s decision the Registrar stated that:
[The] allegations in regards the … clearing house arrangements are not a part of the Board’s determination of the complaints against Mr Bates.
Proceedings are filed
[27] On 2 September 2014 the Board convened a pre-hearing conference. A
hearing date of 1 December 2014 was notified. On 15 October 2014 this application for judicial review was filed. The Board then agreed to defer hearing the charges.
7 The decision is signed by the chairman only.
8 Saxmere Co Ltd v Wool Board Disestablishment Co Ltd [2009] NZSC 72, [2010] 1 NZLR 35.
9 See [21] above.
Statutory framework
[28] The Valuers Act 1948 is a somewhat antiquated piece of legislation. It has been only modestly amended since its inception. Mr Stewart quite correctly described some of its provisions as curious. Some provisions certainly are ill-suited to modern administrative law requirements. For instance, s 3 of the Act provides for a Registration Board of five members, one of whom is the Valuer-General. Three of
the five members form a quorum.10 There is no provision for the appointment of
alternate members in the event of a conflict of interest affecting more than two members. The drafting of the disciplinary provisions – ss 31 to 34 – is also unsatisfactory, as we shall see.
[29] The Act gives statutory recognition to the Institute. Section 9 provides for its incorporation, and s 11(2) provides:
Every valuer for the time being registered under this Act shall be a member of the Institute, whether or not he applies for membership thereof.
Section 16 of the Act provides for rules of the Institute. Section 16(1)(l) provides for a code of ethics to be adopted, and s 16(1)(m) provides that the rules may provide for the imposition of a fine of not more than $500 for a breach of rules. The Institute has made rules, and a copy was provided to me.
[30] The key provisions of the Act that I must deal with are the disciplinary provisions in ss 31, 32, and 33. I set them out now, so far as relevant here:
31Removal of name from register if registered valuer guilty of offence or grave misconduct
(1) The Board may cause the name of any registered valuer to be removed from the register if it is satisfied, after inquiry as hereinafter provided, but not otherwise,—
(a) that he has been guilty of such improper conduct as renders him in the opinion of the Board unfit to be registered under this Act, or has been convicted (either before or after his registration) of an offence punishable by imprisonment for a term of 2 years or upwards:
10 Section 4(3).
(b) that he has been convicted (either before or after his registration) of an offence which tends to dishonour him in the public estimation:
(c) that he has been guilty of such improper, unethical, or incompetent conduct in the performance of his duties as a valuer as in the opinion of the Board renders him unfit to be registered under this Act.
(2) Unethical conduct for the purposes of paragraph (c) of the last preceding subsection means conduct in breach of the code of ethics prescribed by the rules of the Institute.
…
32 Inquiry by Board into charges of misconduct
(1) Every complaint that any registered valuer has been guilty of any act or default specified in the last preceding section shall be referred to the Valuer-General who shall investigate the matter and report thereon in writing to the Board: provided that the Council of the Institute may appoint a person to investigate and report in writing to the Board on a complaint that a registered valuer has been guilty of an act or default specified in subsection (1)(c) of that section, and if it does so the Valuer-General shall not investigate the complaint and report thereon to the Board.
(2) The Board shall, unless it is satisfied that there is no reasonable ground for the complaint, hold an inquiry into the matter, and shall give to the valuer concerned not less than 30 clear days' notice in writing of its intention to hold the inquiry, and of the time and place of hearing, and of the nature of the charge to be inquired into. The notice may be served personally or by registered letter addressed to the valuer concerned at his last known place of business or abode.
…
(4) The Valuer-General or, as the case may be, the person appointed under the proviso to subsection (1) to investigate the complaint shall not be competent to act as a member of the Board for the purposes of the inquiry or of the deliberations of the Board thereon.
…
33 Further disciplinary powers of Board
(1) After any inquiry made as provided in the last preceding section into a complaint against any registered valuer the Board may, by writing under the hand of the chairman, reprimand the valuer or impose a penalty on him not exceeding $10,000, or may both reprimand him and impose such a penalty, and may in addition to or in lieu of reprimanding him or imposing any monetary penalty suspend his registration for a period not exceeding 12 months.
…
(5) The powers conferred on the Valuers Registration Board by this section are in addition to its powers under sections 31 and 32.
[31] The legislative history is illuminating in one respect. The disciplinary provisions in the Act are little changed since their original introduction in 1948. There is, however, one significant deletion to s 31 as it originally was enacted That is the removal of a proviso to s 31(1)(c). It had read:
Provided that the Board may in its discretion, in any case to which paragraph (c) of this subsection applies, in lieu of causing the name of the valuer to be removed from the register, deal under section thirty-three of this Act with any registered valuer who has not previously been adjudged by the Board guilty of any conduct of a kind set out in the said paragraph (c) or suffered any penalty imposed under the said section thirty-three.
The proviso (which was confined to s 31(1)(c) alone) was repealed by s 2 of the Valuers Amendment Act 1980, part of an omnibus law reform enactment. The explanatory note to the Statutes Amendment Bill 1980 makes clear that this was done to enable the Board to reprimand, fine or suspend a valuer found guilty of improper, unethical or incompetent conduct for a second time. The note continues that, absent amendment, the only penalty that might be imposed on a second such finding was deregistration.
Parallel disciplinary process?
[32] As noted earlier, the Institute’s rules also provide for a disciplinary process. In particular, rule 27 provides that a range of penalties, ranging from reprimand to removal from the roll of members exists in the event of improper admission, dishonourable conduct, or breach of the code of ethics, amongst other things. However this rule, both sides now agree, applies only to unregistered valuers.11
Only one Institute rule appears to exert disciplinary authority over registered
valuers.12
[33] The question that will need to be addressed, however, is whether the Act intended the Board to have jurisdiction only above a certain threshold (provided in s
11 Supplementary submissions filed, 26 March 2015.
12 Rule 133(4) permitting the Institute to fine (up to $500) for breach of the code of ethics.
31), and the Institute jurisdiction below it (regardless of whether the Institute has in fact exerted that authority).
Application for review
[34] Mr Bates’ statement of claim advances six causes of action. The first is that the Board’s decision of 5 May 2014 to again hold an inquiry was biased. That was because Mr Taylor remained a member of the Board that made that decision. The second cause of action alleges error of law by the Board failing to consider whether the alleged conduct “was sufficiently serious to meet the threshold test in s 31”. The third cause of action overlaps with the second: it alleges error of law via want of jurisdiction: the Board “has jurisdiction to direct an inquiry only into conduct ... that may render a valuer unfit to be registered”. This threshold argument is the point of law at the heart of Mr Bates’ claim. The fourth cause of action concerns unreasonableness and failure to take into account relevant considerations. In essence the principal relevancies alleged concern similar matters to those asserted in the second and third causes of action: whether there was reasonable ground for a complaint that the plaintiff’s conduct rendered him unfit to be registered, whether that conduct was in the course of the performance of his duties as a valuer, the apology (or offer to apologise) and delay, in particular. The fifth cause of action concerns abuse of process, and is wholly focused on delay. The sixth cause of action is a further bias allegation based on the fact that Mr Taylor is to sit on the inquiry. It also pleads that by correspondence or decisions made by the Board, it has pre- determined certain key issues in the inquiry.
Review premature?
[35] One matter I must address now is whether judicial review is available at this point, or whether it is premature. After all, Mr Bates has an inquiry ahead of him at which he may be vindicated. And he has rights of appeal under s 34.13 Ms Casey submitted, however, that this was one of the exceptional cases where judicial intervention at this point in the statutory process was appropriate. Issues such as
want of jurisdiction, bias, predetermination and prejudice caused by delay were not
13 See for example, the decision of the Supreme Court in Tannadyce Investments v Commissioner of Inland Revenue [2011] NZSC 158, [2012] 2 NZLR 153 at [5]–[6].
matters that could be remedied by the Board inquiry procedure. These claims (in essence excluding the fourth cause of action) were therefore suitable for determination at this stage.
[36] Sensibly, and unsurprisingly, Mr Stewart did not contest the appropriateness of judicial review at this point. The Board itself seeks a determination on the key issues in this case, at this juncture. A statutory power of decision is involved.14
Determination now, by way of judicial review, is not premature. Authority tends to confirm that acknowledgment.15
Issues
[37] This proceeding gives rise to three primary issues:
(a) Issue 1: Should the decision of the Board to inquire into the complaint be quashed for error of law?16
(b)Issue 2: Should the decision to inquire be quashed for bias or predetermination?17
(c) Issue 3: Should the decision to inquire be quashed for delay?18
Argument before me reflected that broad organisation of ideas.
Issue 1: Should the decision of the Board to inquire into the complaint be quashed for error of law?
[38] This issue is dominated by the threshold argument referred to at [34], although it is not confined to it. I start with a brief summary of the submissions, turn to the earlier decision of this Court in Findlay v Valuers Registration Board, and then
evaluate the competing contentions.
14 See for example, Cooke v Valuers Registration Board [2014] NZHC 323 at [8].
15 See for example, Marlborough Aquaculture Ltd v Chief Executive, Ministry of Fisheries [2003] NZAR 362 (HC) and Zhao v New Zealand Law Society [2012] NZHC 2169, [2012] NZAR 894.
16 In effect the second, third and (to a limited extent) the fourth causes of action are subsumed into
Issue 1.
17 Encompassing the first and sixth causes of action.
18 The fifth cause of action.
Submissions
[39] Ms Casey submits that the disciplinary powers of the Board arise only in relation to the very serious conduct described in s 31. That is, s 31(1)(a) to (c) represent a threshold for inquiry. More minor conduct is not dealt with by the Board, but can be dealt with by the Institute. The disciplinary process should not be used as a form of punishment for minor misdemeanours that do not engage public interest in the maintenance of professional standards or the integrity of the profession in the eyes of the public. I should differ from the decision of Doogue J in Findlay v
Valuers Registration Board which did not infer such a threshold in ss 31–33.19
[40] As a secondary argument, Ms Casey submitted that the first charge – brought under s 31(1)(c) – must concern “unethical conduct in the performance of [Mr Bates’] duties as a valuer”. The sending of an email to the president of the Institute, in relation to a political issue being debated by the Institute, did not fall within those terms.
[41] Mr Stewart argues that I should follow the decision of Doogue J in Findlay. He submits that I can only find for Mr Bates if I also find that Findlay is wrong. A complaint against a valuer does not have to allege the conduct in question was such that, if sustained, would render the valuer unfit to be registered. It is sufficient that the charge makes it clear that the conduct alleged renders the valuer liable to penalty under the Act. That penalty may be a lesser one under s 33.
[42] As to the secondary argument, Mr Stewart submitted that the Board is not required to consider whether the conduct was in the performance of Mr Bates’ duties as a valuer. In any event the communication was to a fellow registered valuer.
Findlay
[43] In Findlay a registered valuer was charged under s 31(1)(c) of the Act with gross over-valuation of a horse stud, and making an excessive mortgage
19 Findlay v Valuers Registration Board HC Hamilton M171/87, 14 December 1987.
recommendation. The relevant focus of the decision concerns the meaning of the opening words in s 32(1):
Every complaint that any registered valuer has been guilty of any act or default specified in the last preceding section shall be referred to the Valuer- General who shall investigate the matter and report thereon in writing to the Board.
[44] The valuer submitted that for there to be “complaint” for the purposes of s 32(1), the letter of complaint must allege one of the matters set out under s 31(1). For example, “that the valuer had been guilty of incompetent conduct in the purpose [sic] of his duties as a valuer as in the opinion of the Board would render him unfit to be registered under the Act”.20 The Board was not bound to investigate the matter unless there was a proper complaint in such terms.
[45] The Board’s submission was that a letter of complaint which related to one of the matters in s 31(1), that would suffice. The complaint did not have to refer to whether or not the conduct complained of was so serious that it would render the valuer unfit to be registered. It merely had to indicate that there was conduct complained of “which could be improper, unethical or incompetent conduct, or any other which could come under the provisions of s 31(1).”
[46] Doogue J agreed with the Board’s submission. He held that the Board would need to look carefully at the complaint before it to ensure it was “truly a complaint”, before entering upon the disciplinary proceedings against the valuer.21 The construction contended for by the valuer in that case would require a predetermination as to whether, in terms of s 31(1)(c), the conduct complained of would render the valuer unfit to be registered. That, in the Judge’s view, would make a nonsense of the section. Doogue J said:22
Once the section is read in a plain and ordinary way by referring words “act or default” to improper unethical or incompetent conduct in the performance of valuer’s duties, then any letter or complaint that clearly establishes a complaint about such an act or default is one which the first defendant should properly consider under s 32(1) of the Act.
20 At 18.
21 At 20.
22 At 21.
What was needed was for there to be “a clear complaint about incompetent conduct
… in the performance of his duties as a valuer.” As Doogue J put it:
The only issue for me at this time is whether the letter of 4 June 1986 to the New Zealand Institute of Valuers contained a complaint which required to be referred to the Second Defendant and required to be investigated by him with a report thereon to the First Defendant.
[47] Three things need to be said about Findlay at this juncture.
[48] First, it will be observed that the focus of Findlay is somewhat different from this case. It concerned the form of complaint received and processed. It was not directly concerned with whether ss 31–32 in combination create a threshold for investigation and inquiry. In Findlay the valuer’s alleged actions might indeed have resulted in his being deregistered. The existence of a threshold was not material. In Mr Bates’ case it is common ground that his actions cannot conclude in deregistration. The existence of a threshold is relevant to him, whereas in Findlay it was not.
[49] Secondly, the valuer’s argument in Findlay was a hopeless one. Apart from the arid formalism associated with it, it would have required the complainant to express the complaint in terms incorporating the unknown outcome of a third party evaluation by the Board. That is apparent when one looks again at the submission summarised in [44] above. A complaint could not sensibly be expressed in those terms.
[50] Thirdly, it follows that the complaint must be about one of four things: (a) “improper conduct” by a registered valuer;
(b)entry of a conviction for an offence punishable by imprisonment for a term of two years or more, against such a valuer;
(c) conviction for another offence; or
(d)“improper, unethical or incompetent conduct in the performance of his duties as a valuer”.
The distinct question that then arises in this case (but did not arise in Findlay) is whether the Valuer-General or the Board must then filter any such complaint according to a threshold of seriousness. That is, whether complaints should only proceed to investigation and inquiry if sufficiently serious that, as pleaded by Mr Bates, “the conduct ... may render a valuer unfit to be registered”. This is a more sophisticated argument than that advanced in Findlay.
Analysis
[51] It cannot be part of the “complaint” to which s 32(1) applies that it incorporate the unknown outcome of a third party evaluation by the Board provided for in s 31(1)(a), (b) or (c) (as to the impropriety making the valuer unfit to be registered or the offence actually dishonouring him in the public estimation). The complaint must simply and essentially allege one or more of the four alternatives noted in [50]. That is as far as the decision of Doogue J in Findlay goes. It is unnecessary for Mr Bates’ case for me to differ from it, and for reasons already given I see no justification for doing so.
[52] As I observed before, the real question in this case is whether the Valuer- General or the Board must then filter any such complaint according to a threshold of seriousness. Mr Bates pleads that the Board must do this. And he pleads that complaints should only proceed to investigation and inquiry if sufficiently serious that “the conduct ... may render a valuer unfit to be registered”. Although I was attracted initially to the argument, there prove to be a number of profound difficulties with it.
[53] The first is that there is simply no indication in the parliamentary debates accompanying enactment that the disciplinary processes in the Act were to be confined to charges of grave misconduct only.
[54] A second difficulty is that if such threshold was intended by parliament, the drafting of ss 31 to 33 was a most curious and unsatisfactory way of imposing it.
[55] A third difficulty is what role such a threshold would leave for the alternative penalties in s 33. That provision is now strangely marooned in the Act. Section
33(5) has always stated that the powers conferred in that section are “in addition” to the Board’s powers under ss 31 and 32. There is no other cross-reference between the three provisions. Originally the repealed proviso to s 31(1)(c) created a discretion to divert from deregistration under that limb to a lesser s 33(1) penalty. But that cannot have been s 33’s sole original function. It would provide a necessary alternative in any case where a charge is properly brought, but a penalty less severe than deregistration was deserved. Section 33 has work to do, and its work is not confined to s 31(1)(c).
[56] Let us imagine a valuer who has committed some minor offence contrary to public morals. He is convicted. The sentence both available and imposed is less than two years’ imprisonment. He is in fact fined $250 and told not to make a nuisance of himself again. The offence dishonours him in the public estimation, and he is charged under s 31(1)(b). I should have thought that s 33 is there for exactly this sort of case. Is s 33 there only to provide a penalty fallback if a charge potentially meriting deregistration is later found not to deserve so extreme a penalty? Or is it there, as s 33(5) suggests, to provide an additional range of potential penalties; ones that the prosecutor is entitled to aim for without overreaching for deregistration? The latter seems to me more consistent with the intent of parliament, so far as it can be discerned from the words of the Act and the debates.
[57] A fourth difficulty (connected to the second) is that the inference of such a threshold appears inconsistent with s 32(2). That provides that the Board shall hold an inquiry “unless it is satisfied that there is no reasonable ground for the complaint”. In effect, Mr Bates is contending there is an implicit extension to that subsection, which is that the Board must also reject the complaint if it is satisfied that the alleged misconduct complained of is insufficiently grave to result in deregistration. The argument for implicit constraint B is more difficult in light of the existence of explicit constraint A.
[58] A fifth difficulty is defining the threshold. The pleading is that a complaint should only proceed to investigation and inquiry if sufficiently serious that “the conduct ... may render a valuer unfit to be registered”. How is that to be resolved in practice? It might serve to exclude a few cases, such as the present one, where no
properly directed Board could deregister Mr Bates. But there will be a substantial body of complaints which lie in a very grey area: deregistration is a possible (but perhaps unlikely) consequence. How possible must it be to clear the threshold? The applicable standard is entirely unclear. And then there is the distinct basis for complaint under s 31(1)(b) involving conviction for an offence punishable by less than two years’ imprisonment “which tends to dishonour him in the public estimation”. Another threshold?
[59] A sixth difficulty is by whom the threshold assessment is to be performed. Mr Bates suggests the Board. Statutes governing disciplinary processes often impose a threshold clearance procedure.23 It would be unusual for the ultimate tribunal to be tasked with clearance. In particular, clearance at a high threshold, as opposed to clearing out complaints on the basis that they are inconsequential or frivolous.24 The subject of disciplinary process would be justly nervous if the ultimate tribunal has made a preliminary finding that conduct is sufficiently serious to render him or her liable to deregistration. That simply invites later allegations of predetermination. The Act seems to be attempting to avoid exactly that in requiring the Valuer-General to investigate complaints in s 32(1) and (2), and providing in s
32(4) that he is not then to sit on the ensuing inquiry. The Act also requires a distinct prosecutor to be appointed by the Valuer-General.25
[60] In combination I find these difficulties defy an answer admitting the threshold contended for. I therefore find that ss 31 to 33 do not impose a threshold requirement for a complaint to amount to “grave misconduct” before a registered
valuer may be the subject of investigation and inquiry.
23 See for example, Education Act 1989, ss 139AT and 139AV; Health and Disability
Commissioner Act 1994, s 38; Lawyers and Conveyancers Act 2006, s 152; Veterinarians Act
2005, s 43; Real Estate Agents Act 2008, s 79.
24 For example, in s 79 of the Real Estate Agents Act 2008 a complaints assessment committee may determine that a complaint is inconsequential or frivolous. It may otherwise determine the
merits of the complaint itself upon inquiry (up to the level of a finding of unsatisfactory conduct)
or refer the complaint up to the Real Estate Agents Disciplinary Tribunal: ss 82, 89 and 91. This may be characterised a “low threshold finding” by a potential decision-maker, unlike the high threshold finding Mr Bates says the Board should make here. A somewhat similar process exists in the Health and Disability Commissioner Act 1994, ss 38, 45–50.
25 Section 32(5).
[61] I turn now to Mr Bates’ secondary argument.26
[62] The charge against Mr Bates under s 31(1)(c) derives solely from his sending of an email to the president of the Institute and nine other valuers. It related to the actions of the president in the clearing house scheme debate. In my view the sending of that email cannot amount to “improper unethical or incompetent conduct in the performance of his duties as a valuer”. The email has nothing to do with any professional commitment assumed by Mr Bates in the course of his practice. I do not consider the word “duties” was intended to embrace ethical responsibilities of courtesy, to the extent these exist under the Institute’s code of ethics. I do not accept Mr Stewart’s submission that it is enough that the communication was to a fellow registered valuer. The sending of an email on an issue of professional interest only may engage s 31(1)(a), but it does not engage s 31(1)(c).
[63] Mr Bates’ email may also conceivably amount to a breach of the Institute’s code of ethics. If so, it falls to be determined in a complaint dealt with by the Institute under r 133(4). It is not a matter for the Board under s 31(1)(c).
Conclusions and remedy
[64] The Board has not erred in law in inquiring into the charge brought under s 31(1)(a). That is so despite the fact that Mr Bates’ actions in sending the email cannot be categorised as “grave misconduct”, and cannot render him liable to be removed from the register of valuers.
[65] The Board has however erred in inquiring into the charge brought purportedly under s 31(1)(c). That charge is quashed.
Issue 2: Should the decision to inquire be quashed for bias or predetermination?
[66] I can be briefer in relation to the second and third issues.
26 See [40] and [42] above.
Bias
[67] In its decision of 16 April 2014 the Board held that, as a shareholder in one of the clearance house valuation firms, Mr Gamby would have to stand aside from the hearing. This was on two bases, but the one that is important is apparent bias. That is, that a fair-minded lay observer might reasonably apprehend that Mr Gamby might not bring an impartial mind to the hearing.
[68] In the same decision, the Board concluded that the same considerations did not apply to Mr Taylor, who was not a shareholder or director at his valuation firm (also a clearing house valuation firm). The distinction, frankly, is barely articulated in the decision. The doctrine of necessity is not relied upon in the decision.
[69] Ms Casey submits in this case, where the context of the complaint is apparent bias and no financial interest of clearing house companies is involved, the presence or absence of a proprietary interest is not a significant factor. Both Messrs Gamby and Taylor are senior managers in their companies, and well known representatives of those companies in the profession.
[70] Mr Stewart contends that a material difference does exist. Mr Taylor is not an owner or director of his firm. He is simply a senior valuer in its rural valuations division. But in any case Mr Stewart does rely on the doctrine of necessity. It is a recognised exception to the rule against bias. If it does not apply here, the Board will be inquorate and would be unable to determine this complaint.
[71] There is force in the submission made by Ms Casey. The issue here is not one of presumptive bias by reason of pecuniary interest. If Mr Gamby is apparently biased by reason of his management and participation in his firm, Mr Taylor’s connection (albeit less senior) with his firm (itself a subsidiary of the firm at the very heart of the clearing house proposals) should cause a fair-minded lay observer concern. The fact that Mr Taylor lacks a direct pecuniary interest (as a shareholder) or a direct governance responsibility (as a director) is of limited significance where the allegation is apparent rather than presumptive bias. Given the degree of dissension in the profession over the clearing house proposals, a fair-minded lay observer would be unlikely to think the distinction took the Board into a safe haven.
Indeed that observer might well think an employee of a clearing house practice would be prone to influence, even if unwittingly, in the general interests of his employer.
[72] In the end, however, I need not form a final view on bias. That is because I accept that the principle of necessity would apply to except bias here. The exception exists to ensure that “the rules of natural justice cannot be invoked to frustrate the intended operation of a statute which sets up a tribunal and requires it to perform the statutory functions entrusted to it.”27 The existence of this exception was confirmed again recently by the High Court of Australia in British American Tobacco v Laurie.28 Similar declarations of principle have been made in New Zealand cases, although it does not appear to have actually been applied in any of them.29 A similar situation to the present one arose in Jones v Architects Board of Western Australia.30
There rigid application of the apprehended bias principle would also have left the respondent board inquorate. Necessity was acknowledged by the Court as an answer to that outcome. In the end it was one consideration underlying a discretionary decision not to quash the board’s decision.31
[73] This is not a case in which other Board members may be substituted. Members of the Board are appointed by the Minister of Land Information. Mr Taylor cannot be dismissed by the Minister.32 There is no provision for additional or alternate members. If Mr Taylor is not to sit on this matter, then either the Board cannot determine it or he must resign to permit another person to be appointed by the Minister. The process for reappointment is uncertain and is likely to result in significant further delay.
[74] Natural justice is a modestly flexible concept, adaptable to exigency created by the statutory scheme. Necessity is a recognised exception to bias, and therefore
27 Laws v Australian Broadcasting Tribunal [1990] HCA31, (1990) 170 CLR at 88.
28 British American Tobacco v Laurie [2011] HCA 2, (2011) 242 CLR 283 at [146].
29 Air New Zealand Ltd v Wellington International Airport Ltd [2009] NZCA 259, [2009] 3 NZLR
713 at [168]; NZI Financial Corp Ltd v New Zealand Kiwifruit Authority [1986] 1 NZLR 159 (HC) at 164; Williams v Auckland Co-operative Taxi Society Ltd HC Auckland M2176/98, 15
February 1999 at 11.
30 Jones v Architects Board of Western Australia [2004] WASCA 219.
31 At [38] and [68].
32 Section 3(4).
to the ordinary operation of natural justice. The assurance of natural justice given in s 27(1) the New Zealand Bill of Rights Act 1990 is to that flexible right, not to a brittle proxy. Necessity is a very rare exception, but it is part of the fabric of natural justice. The degree of apparent bias here is not so profound that resignation altogether by Mr Taylor is required. Mr Taylor may sit, and the Board may determine the complaint. But in doing so it would need to act with scrupulous care to ensure that fair process is observed, and fair evaluation undertaken. In particular the Board would need to ensure that no reasonable complaint of predetermination could be made.
Predetermination
[75] Predetermination is a species of actual bias. The allegation in this case concerns the two observations quoted at the conclusion of [25] and [26] above.
[76] Ms Casey submitted that those observations supported a conclusion that the Board had predetermined that the truth of the concerns raised in the email, and the context in which the email was sent, were irrelevant and would be disregarded by the Board. The issues were however important to Mr Bates’ defence. It would be unfair of him to defend charges before a tribunal that had already pre-determined the key aspects of his defence.
[77] Mr Stewart submitted that these statements are not predetermination. The Board accepts that the plaintiff’s motives and the underlying truth of the allegations may be relevant to penalty in the event the charge is proved. It has not yet ruled out any evidence the plaintiff wishes to produce as to liability. To the extent it might be seen to have done so, it may be persuaded otherwise, or directed by the Court to give consideration to particular matters.
[78] The first statement, which I have quoted at [25] above, forms part of the decision of the Board on the issue of whether Messrs Gamby and Taylor should stand down for apparent bias. The Board considered what was required to prove the charges. It said that it accepted the submission put forward by counsel for the Valuer-General that it was the “tone, context and audience of Mr Bates’ communication that was the focus”. Not whether the allegations against
Ms Bilbrough (and by implication Property IQ, Quotable Value, CBRE or Telfer Young) could in fact be substantiated. It then made the observation quoted at [25] above.
[79] Its conclusion that the truth of the allegations and motives of Mr Bates were irrelevant to liability for the charges is curious. Plainly any truth in the allegations could be highly material. So too might Mr Bates’ motives, when the focus of the charge concerned ethical obligations of integrity, honour, loyalty and fairness. To apparently rule out such considerations, before the formal inquiry had been commenced, was unfortunate to say the least.
[80] The context of the second statement – [26] above – was this: Mr Bates’ counsel had drawn the Board’s attention to foreshadowed complaints from the Property Institute and the Valuers Council to the Commerce Commission about the clearing house arrangements being in breach of the Commerce Act 1986. The reply quoted at [26] is from the registrar and is in response to that letter. I accept Mr Stewart’s submission that the letter was supposed only to convey that the legality of the clearing house arrangements was not in issue.
[81] I do not consider that the second statement by the registrar is pre- determinative, although it was unfortunate. The first statement, coming as it does directly from the Board, is more concerning. However, I accept that the degree of determination, made in the context of a procedural question as to recusal, rather than in a direct consideration of the merits, was not so grave as to compel quashing of the remaining charge. If and when it is considered by the Board, the Board would need to bear in mind that the narrowing of focus suggested in its recusal decision has been held by this Court to be unjustifiable and wrong.
Conclusions
[82] I have held that the apparent bias that would occur by Mr Taylor remaining a member of the Board hearing the inquiry is spared in this instance by reason of necessity. The Board would otherwise be inquorate, and unable to determine the charges at all. And I do not consider that the high threshold for predetermination has been met for the remaining charge to be quashed.
Issue 3: Should the decision to inquire be quashed for delay?
[83] The email, the subject of the complaint, was sent almost four years ago, in August 2011. Within two weeks complaints had been made. Before the complaint was notified to Mr Bates, he had already apologised to Ms Bilbrough.
[84] The Valuer-General’s investigation of the complaint took 20 months. I find that quite extraordinary. On any view this was not a difficult complaint to evaluate.
[85] As soon as he was notified of the charges, Mr Bates raised his concerns about the composition of the Board. The Board took another eight months to resolve that issue. As we have seen, it resolved that Mr Gamby should not sit. Mr Stewart has submitted that Mr Bates must have appreciated that by raising the recusal issue, the prosecution of the complaint would necessarily be delayed. That may be so, but Mr Bates was plainly entitled to make that objection. Moreover, his objection was sound. It was not dealt with promptly by the Board.
[86] This complaint concerned a relatively minor conduct matter. It should never have been suggested that Mr Bates’ registration might be in doubt if found guilty. One of the two charges was misconceived. I accept Ms Casey’s submission that there is no question of risk to the public or the valuation profession involved.
[87] Even allowing for time having stopped in October 2014 when these proceedings were filed, Mr Bates has for three years been facing the suggestion that his foolish email, for which he immediately apologised, could result in his deregistration. Only at the hearing of this proceeding was it made clear to him that it would not.
[88] Mr Bates deposes in his affidavit:
The professional and emotional toll of having serious disciplinary charges that could lead to the loss of my professional registration and the end of my career hanging over my head for this long has been immense
…
I have to explain the charges and process against me to clients who engage me, and I am sure that the fact that there are outstanding charges, which under the Act sound very serious, has had an impact on my business.
Apart from these matters, I accept that Mr Bates has suffered other prejudice caused by delay. Two witnesses as to the context in which the emails were sent, whom he wished to call, are now deceased. They are Messrs Gribble and Brady, formerly leading members of the valuation profession.
[89] It is of essence that disciplinary processes must be efficient. Procedural difficulties associated with them should not become a penalty imposed before the subject’s guilt is even established. In this case that is exactly what has happened. A young valuer who acted impetuously, but not in a manner that is a threat either to the public interest or to his own continuance in the profession, has had a complaint which might supposedly “jeopardise [his] status as a registered valuer” hanging above him for a period of time that is now simply unconscionable.
[90] I find this is a case where there has been an unwitting but clear abuse of process by the Board. I accept that the Board has been confronted by difficulties, particularly delays caused by the Valuer-General’s investigation (in turn caused by delays by his delegate). It has also faced a complicated question of potential bias in the composition of the Board. (Although I note that complexity had more to do with the consequences of the finding than the issue of whether there is apparent bias in the first place.) But the matter must be looked at overall, and from the reasonable perspective of the subject of the disciplinary process. In my view Mr Bates has suffered an unacceptable abuse of process by reason of delay.
Conclusions and remedy
[91] I am left with the question of what remedy is appropriate in relation to the remaining charge under s 31(1)(a).
[92] I have found four considerations of particular relevance. First there is apparent bias, although the Board is spared by reason of necessity. Secondly, observations made by the Board involved an unfortunate measure of predetermination, although not to such a degree as to be unlawful. Thirdly, there has
been unreasonable and excessive delay, of at least three years, to the prejudice of Mr Bates. Fourthly, the substance of the charge is minor misbehaviour at most and engages no public interest in the conduct of the valuation profession.
[93] In the whole combination of these four circumstances I do not consider that further pursuit of the remaining unquashed charge can be warranted in the public interest.33 I therefore direct that the charge against Mr Bates under s 31(1)(a) of the Act be stayed.
Result
[94] The charge brought against Mr Bates under s 31(1)(c) of the Act is quashed. [95] The charge brought against Mr Bates under s 31(1)(a) of the Act is stayed.
[96] Costs should follow the event. If they cannot be agreed, I will receive memoranda.
Stephen Kós J
Solicitors:
DAC Beachcroft New Zealand, Auckland for Plaintiff
Izard Weston, Wellington for Defendant
33 See Zhao v Legal Complaints Review Officer [2012] NZHC 3247, [2013] NZAR 193 at [100]– [102]; Harold v Legal Complaints Review Officer [2012] NZHC 145, [2012] 2 NZLR 559 at [54]–[55].
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