C v Legal Complaints Review Officer

[2019] NZHC 1763

ORDER PROHIBITING PUBLICATION OF NAME OF THE APPLICANT EXCEPT IN ACCORDANCE WITH THE INTITULING OF THIS JUDGMENT.

ORDER PROHIBITING ANY SEARCH OF THE COURT’S FILE WITHOUT THE LEAVE OF A JUDGE.

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE

CIV-2018-404-1263

[2019] NZHC 1763

UNDER

the Judicial Review Procedure Act 2016

IN THE MATTER OF

a decision of the Legal Complaints Review Officer dated 20 March 2018

BETWEEN

C

Applicant

AND

THE LEGAL COMPLAINTS REVIEW OFFICER

First Respondent

JUDITH ROGERS
Third Respondent

Continued over ...

Hearing:

7 February 2019

Appearances:

R J Katz QC and L J Lindsay for Applicant No appearance for First or Third Respondent

B C L Charmley and F E Gourlay for Intervenor

Judgment:

25 July 2019

JUDGMENT OF PETERS J

This judgment was delivered by Justice Peters on 25 July 2019 at 12 pm pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar Date: ...................................

C v THE LEGAL COMPLAINTS REVIEW OFFICER [2019] NZHC 1763 [25 July 2019]

AND

THE STANDARDS COMMITTEE OF THE NEW ZEALAND LAW SOCIETY

Intervenor

Introduction

[1]        The applicant, C, seeks judicial review of a decision of the Legal Complaints Review Officer (“LCRO”) given on 20 March 2018 (“decision”). For present purposes the relevant part of the decision was a direction:1

[27]     … that a Standards Committee reconsider and determine:

(a)whether there is evidence of conduct on the part of [C] that was inconsistent with his obligations as a person enrolled under or by virtue of the [Lawyers and Conveyancers Act 2006 (“Act”)] as a barrister and solicitor of the High Court; and if so

(b)whether that conduct falls in any of the definitions of misconduct or unsatisfactory conduct in ss 7 or 12 of the Act.

[2]        The decision arose from a complaint that Ms Judith Rogers (“Ms Rogers”) had made to the New Zealand Law Society (“NZLS”) concerning C in December 2013. NZLS’s Auckland Standards Committee 2 investigated the complaint and, by letter dated 2 October 2014, advised Ms Rogers and C that it had decided to take no further action on the complaint.

[3]        On 14 November 2014, Ms Rogers applied to the LCRO to review the decision. There was a very significant delay in undertaking the review, quite possibly due to the LCRO being insufficiently resourced but, in any event, having heard the matter the LCRO made the decision to which I have referred.

[4]C seeks review on the grounds of:

(a)breach of natural justice; and

(b)errors of fact and law.

[5]        The LCRO abides the decision of the Court. Ms Rogers did not appear at the hearing of the application for judicial review. NZLS was originally named as the second respondent. It was subsequently removed as such by order of the Court and

1      CZ (LCRO252/2014) v XJ [2018] NZLCRO 27. The LCRO made the decision pursuant to Lawyers and Conveyancers Act 2006, s 209(1).

participated in the hearing before me as an intervenor. Ms Charmley and Ms Gourlay, who appeared for NZLS, made very helpful submissions in this matter.

Background

[6]        In 2008, Ms Rogers was successful on appeal to the High Court in seeking provision from the estate of her mother, Sarah Rogers, who had died in 2006.2 Courtney J ordered that Ms Rogers receive provision of $22,875 and, in a subsequent judgment, awarded Ms Rogers costs in both the Family and High Courts, these costs totalling $11,420.56.3 At the conclusion of her costs judgment, Courtney J said that the costs were “to be paid from the [Sarah Rogers] estate following the sale of the Kaeo property”.

[7]        The Kaeo property was one in which the Sarah Rogers’ estate was to benefit indirectly. Sarah Rogers’ father, Mr Keefe, had owned the property and had left it to Sarah Rogers’ five children, his grandchildren, in equal shares. One of the children, Michael, had predeceased Sarah, dying intestate in Australia. The Public Trustee in New South Wales was administering Michael Rogers’ estate which, when realised, was to be paid to Sarah Rogers or, as it turned out, to her estate.

[8]        Grace Rogers, another daughter, was the executrix of both the Sarah Rogers and Keefe estates. C was instructed to act for both, and Grace Rogers had authorised C’s firm to deduct the fees and disbursements incurred in respect of each estate from funds held in trust for that estate.

[9]        The Sarah Rogers estate had been distributed by the time of Courtney J’s judgments. Accordingly, whatever funds the estate derived from the sale of the Kaeo property would be the extent of the estate’s remaining assets. This was well understood at the time of Courtney J’s decisions, although for reasons I need not mention the Kaeo property was expected to sell for substantially more than it did.

[10]      The Kaeo property and some associated assets were sold in early 2012. The net proceeds of sale were paid to C as solicitor for the Keefe estate.  C deposited the

2      Rogers v Estate of Sarah Rogers HC Auckland CIV-2008-404-5637, 18 December 2008.

3      Rogers v Estate of Sarah Rogers HC Auckland CIV-2008-404-5637, 29 April 2009.

sum into the firm’s trust account for the Keefe estate, and then distributed in the five required shares, one of those shares being to the Public Trustee. The Public Trustee subsequently remitted a net sum back to C’s firm for the entitled beneficiary, that is the Sarah Rogers’ estate. C deposited this sum to the firm’s trust account for the Sarah Rogers estate.

[11]       C’s firms had substantial fees and disbursements outstanding in respect of attendances on the Sarah Rogers’ estate. These fees and disbursements were a debt due from the estate. C applied the sum received in part payment of those fees and disbursements, as a result of which the estate was without funds to pay any of the sums awarded to Ms Rogers.

Complaint to NZLS

[12]      Ms Rogers made several complaints in her letter to NZLS. The one relevant for present purposes is that, in applying the estate’s funds as he had, C had failed to act competently or to take reasonable care as a lawyer. The Standards Committee declined to take any further action on this aspect of the complaint, or any of the others for that matter. On this particular issue, the Committee was satisfied that no issue of professional conduct arose. Moreover, the Committee was satisfied that C was entitled to apply the funds to payment of his fees. The debt due in respect of C’s fees had priority to the awards in favour of Ms Rogers, which were due from the net, not gross, estate.

Application to LCRO for review

[13]      By application dated 14 November 2014, Ms Rogers applied to the LCRO to review the Standards Committee’s decision.

[14]The reasons Ms Rogers gave for the application were as follows:

The Standards Committee should have found that [C] had a duty to me as a beneficiary of my mother’s estate.

[C] should not have been able to take his fees before he accounted to me for my share of the estate. His fees were a result of the Court case which my sister lost and I won. She should pay those fees and not me.

[15]As to the outcome sought, Ms Rogers proposed that C:

... should be ordered to account to me and pay the money which he received after the Court case, in my mother’s estate.

[16]      The LCRO informed C of Ms Rogers’ application on 18 November 2014. That was followed by communications in which Mr Katz QC, counsel for C, sought particulars and other information. The last of this correspondence appears to have been on 6 July 2015 when the LCRO’s office advised it would be in contact when able to schedule a hearing date.

[17]      There was no further communication until an email from the LCRO’s office on 19 December 2017, so the best part of two and a half years later. This email was to inform the parties that Ms Rogers’ application for review would be heard in March 2018. This was met with immediate protest from C and Mr Katz who had assumed the application was not being pursued. The LCRO’s response was that C and Mr Katz were not required to attend the hearing if they did not wish to do so. In that case, it was said that if any questions remained after the hearing, the LCRO would “promptly address them to [C] in writing”.

Direction 6 February 2018

[18]      On 6 February 2018, the LCRO issued a direction noting that Ms Rogers’ complaint and application for review proceeded on the basis that C owed a professional duty to Ms Rogers. The LCRO expressed the preliminary view that no such duty existed “primarily because Ms Rogers was not [C’s] client”. The LCRO asked Ms Rogers for further information and clarification which was not forthcoming.

Hearing 7 March 2018

[19]      The LCRO heard the complaint on 7 March 2018. Ms Rogers was unwell and did not appear personally, or by counsel. Mr Katz appeared for C who was also present. The LCRO put some questions to C which he answered.

Discussion

[20]      The LCRO confirmed the Standards Committee’s decision that C did not owe professional duties to Ms Rogers, and that this answered most of her application for review. However, the LCRO went on to say:

[22]      Although [C] was in a position to deduct fees, he would have known that doing so would leave Sarah’s estate with nothing to satisfy the High Court orders in favour of Ms Rogers. [C] was an officer of the Court. The money he had received into his firm’s trust account for Sarah’s estate was touched by the Court’s orders. [C] knew or should have known he was subject to the High Court’s inherent jurisdiction.

[23]      The Committee did not consider whether, following the sale of the Kaeo property, [C] should have sought a direction from the High Court before deducting his fees.

[24]      That professional standards issue should be considered by a Standards Committee at first instance. As that is correct in principle, and preserves the parties’ rights to seek a review by this Office, comment has not been sought from the parties.

[25] In the circumstances, a direction is made pursuant to s 209(1) of the Act that a Standards Committee reconsider and determine whether there is evidence of conduct on the part of [C] that was inconsistent with orders made by the High Court.

[21]      In reaching her decision that the funds were “touched by an order of the Court” the LCRO referred to an earlier LCRO decision, SM v IW.4 That LCRO decision stemmed from proceedings regarding the ownership of various assets, including the proceeds of sale of a house. The High Court ordered that, except for two sums to be applied to the discharge of mortgages, the proceeds of sale were to be retained in trust pending further direction from the Court. The solicitors holding the funds applied some of the funds held in trust to their fee. The LCRO was critical of the solicitors for doing so, as the funds were “touched by an order of the Court”. The LCRO held that the solicitors were required to revert to the Court before applying the funds as they did.

[22]      Having received the LCRO’s decision, on 3 April 2018 NZLS advised Mr Katz that a Standards Committee would consider the point the LCRO required. In its

4      SM v IW LCRO 29/2014, 8 March 2016.

submissions as intervenor, NZLS has informed the Court that future steps will be determined by the outcome of this application.

Submissions

[23]Mr Katz submits that the LCRO erred in several respects, but two in particular.

[24]      First, Mr Katz submits the LCRO acted in breach of natural justice. This is due to the lengthy delay between receipt of the application for review and the hearing of the application. It is also due to the LCRO’s failure to put to C the point on which the decision turns, that is that the funds in trust were subject to a Court order. The result of this failure was to deny C a right to be heard on a, or the, critical point. C’s affidavit evidence, filed in support of this application, is that the LCRO did not put the basis of the decision to him at any time, and, indeed, this is confirmed by [24] of the LCRO decision.

[25]      Ms Charmley did not take any issue with Mr Katz’s submissions on this point. She acknowledged that where a legal authority, SM v IW in this case, is material to a fact finder’s decision, it should “generally be disclosed to the parties”.

[26]      Secondly, Mr Katz submits the LCRO’s decision was unreasonable, because it was based on errors of fact and law. Mr Katz submits that C was not acting as an “officer of the Court” when he applied the funds in Sarah Rogers’ estate in part payment of the fees due to his firm and nor was the LCRO correct to say the funds were “touched by an order of the Court”. The only statement that could conceivably be construed in that way was Courtney J’s statement that the costs awarded should be paid “following” receipt of the Kaeo funds. Mr Katz submitted, correctly, that there is clear authority that C was entitled to do as he did.5

[27]      Ms Charmley did not accept that C was not acting as an officer of the Court. In NZLS’s submission, every lawyer is fundamentally an officer of the Court. That said, Ms Charmley acknowledged the Standard Committee’s decision that C’s fees,

5      Schaefer v Schuhmann [1972] 1 All ER 621 at 6270–E; Breuer v Wright [1982] 2 NZLR 77 at 86/20; and McCormack v Foley [1983] NZLR 57 at [62]–[63].

being a debt due from the Sarah Rogers’ estate, would have priority over Ms Rogers’ claim as a judgment creditor.

[28]      Mr Katz submits that, if I accepted either ground for review, I should set aside the LCRO decision, rather than remit the matter back. Quite aside from the delay that there has been, C has retired from practice, has had to bear his own legal costs, and the complaint continues to hang over his head. In those circumstances, it is said to be entirely unfair the matter should continue.

Discussion

Breach of natural justice

[29]      There was a breach of natural justice for the reasons Mr Katz advanced. The LCRO is required to conduct any review in accordance with the rules of natural justice.6 Quite aside from the issue of delay, the LCRO was required to inform C of the point the LCRO was considering and give him an opportunity to be heard on the matter. That did not occur. It follows that I propose to set aside the LCRO’s decision.7

[30]      I mean no disrespect to the detailed submissions Mr Katz made on the second ground by not determining the point. It would lengthen this judgment considerably if I were to do so, and I would have to caveat my comments, given the absence of any party in opposition. What I can say, however, is that there is considerable force in  Mr Katz’s submissions that C conducted himself properly throughout, and that the situation which prevailed in SM v IW was different from the present.

Relief

[31]      For the reasons Mr Katz advanced, I am also satisfied that no useful purpose would be served by directing the LCRO to reconsider the application for review.

[32]      C has also applied for name suppression and ancillary orders preventing the searching, copying or inspection of the Court file without leave of a Judge. In support

6 Lawyers and Conveyancers Act 2006, ss 200 and 206.

7      Judicial Review Procedure Act 2016, s 16(2). See also Stewart v Legal Complaints Review Officer

[2016] NZHC 916, [2016] NZAR 900 at [74].

of these applications, Mr Katz submits that, as an application for judicial review is a practitioner’s only avenue for redress from a procedurally flawed LCRO decision, it would be wrong to require a practitioner who vindicates his or her rights in this Court to forgo the confidentiality afforded them before the LCRO. I accept these submissions and shall make these orders also.8

Result and orders

[33]The application for judicial review is granted.

[34]      The decision and direction in CZ (LCRO252/2014) v XJ is set aside, with no order that the LCRO reconsider the matter.

[35]      I make an order prohibiting publication of C’s name except in accordance with the intituling of this judgment.

[36]      I make an order prohibiting any search, copying or inspection of the Court file without the leave of a Judge.

Costs

[37]      The parties may make brief submissions on costs and disbursements if they wish.

Peters J

Solicitors:           McVeagh Fleming, Auckland

Meredith Connell, Crown Solicitor, Auckland Kayes Fletcher Walker Ltd, Manukau

Counsel:            R J Katz QC, Auckland

Copy for:           Third Respondent

8      For examples of such orders being made see Q v Legal Complaints Review Officer Q v Legal Complaints Review Officer [2013] NZCA 570 at [61] and [67]–[68]; and A (A firm of Solicitors) v District Court at Auckland [2012] NZCA 246, [2012] 2 NZLR 844 at [97].