Davidson v Auckland Standards Committee No 3

[2013] NZHC 2315

IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY

CIV-2012-404-7734 [2013] NZHC 2315

IN THE MATTER OF The Lawyers and Conveyancers Act 2006

IN THE MATTER OF       An appeal pursuant to s 253 of the Act

BETWEEN  BRUCE NELSON DAVIDSON Appellant

ANDAUCKLAND STANDARDS COMMITTEE NO 3

Respondent

CIV-2013-404-2215

IN THE MATTER OF The Lawyers and Conveyancers Act 2006

IN THE MATTER OF       An appeal pursuant to s 253 of the Act

BETWEEN  AUCKLAND STANDARDS COMMITTEE NO 3

Appellant

ANDBRUCE NELSON DAVIDSON Respondent

Hearing:                   15 August 2013

Counsel:                  C R Carruthers QC and D G Hurd for Mr Davidson

P Davey and M Treleavan for the Auckland Standards

Committee No 3

Judgment:                6 September 2013

JUDGMENT OF BROWN J

This judgment was delivered by me on 6 September 2013 at 3 pm, pursuant to r 11.5 of the High Court Rules

Registrar/Deputy Registrar

DAVIDSON v AUCKLAND STANDARDS COMMITTEE NO 3 [2013] NZHC 2315 [6 September 2013]

Solicitors:      Patterson Hopkins, Auckland

New Zealand Law Society, Auckland

Counsel:      C R Carruthers QC, Auckland

P Davey, Auckland

Table of Contents

Introduction .................................................................................................................... [1] The approach to the appeals ........................................................................................... [6] The factual background ................................................................................................ [10] The Tribunal’s decision on the charges ........................................................................ [27]

Appeal against the finding that the convictions tend to bring the profession into

disrepute ....................................................................................................................... [34]

The Tribunal’s alleged reliance on matters outside of the convictions and their

circumstances ............................................................................................................... [39]

The failure to formulate or apply a standard of conduct for activities outside the

practitioner’s practice, breach of which would tend to bring the profession into

disrepute ....................................................................................................................... [45]

The categorisation of Mr Davidson’s conduct as gross negligence ............................. [54]

The insignificance attributed to the lack of any complaint from the public arising from the convictions entered ................................................................................................. [61]

The majority’s final reasoning...................................................................................... [65] This Court’s assessment ............................................................................................... [72] Cross-appeal against the dismissal of the charge that the convictions did not reflect on

Mr Davidson’s fitness to practise ................................................................................. [82]

Alleged failure to consider the issue of trustworthiness .............................................. [84] Tribunal was wrong to rely on Ziems ........................................................................... [88] Alleged error in viewing conduct as a director separately from fitness to practise as a

lawyer ........................................................................................................................... [91]

The Tribunal erred in relying on references from people not called as witnesses ....... [96]

The Tribunal erred in concluding that the ASC3 accepted the public did not require

direct protection from Mr Davidson........................................................................... [100] This Court’s assessment ............................................................................................. [102] Appeal against penalty ............................................................................................... [103] The Tribunal’s penalty decision ................................................................................. [105] The issue of jurisdiction ............................................................................................. [108] Analysis .......................................................................................................................[115] This Court’s assessment of an appropriate penalty ................................................... [135] Disposition ................................................................................................................. [146]

Introduction

[1]      On 13 July 2012 the Auckland Standards Committee No 3 (“ASC3”) served a

charge on Mr Davidson which materially read as follows:

“Auckland Standards Committee 3 of the New Zealand Law Society charges that Bruce Nelson Davidson has been convicted of an offence punishable by imprisonment and the conviction reflects on his fitness to practise or tends to bring his profession into disrepute.

Particulars

On or about 2 September 2011 Mr Davidson was convicted of six offences under s 58(3) of the Securities Act 1978 that between 21 December 2006 and

6 July 2007 he signed or had signed on his behalf registered prospectuses for

Bridgecorp Limited and Bridgecorp Investments Limited that were distributed and included untrue statements as detailed in the indictment and summary of

facts in respect of those offences.

On or about 2 September 2011 Mr Davidson was convicted of four offences under s 58(3) of the Securities Act 1978 that between 21 December 2006 and

6 July  2007  he  was  a  director  of  Bridgecorp  Limited  and  Bridgecorp

Investments Limited that distributed advertisements which included untrue statements as detailed on the indictment and summary of facts in respect of those offences.

[2]     In a decision dated 28 November 20121 the New Zealand Lawyers and Conveyancers Disciplinary Tribunal (“the Tribunal”) found the charge proved on the second  limb that  the convictions  tended  to  bring the  profession  into  disrepute  but dismissed the charge on the first limb finding that the convictions did not reflect on Mr Davidson’s fitness to practise.

[3]      Subsequently at a penalty hearing on 4 April 20132  the Tribunal imposed a censure and made costs orders against the practitioner as follows:

(a)       75 percent of the Standards Committee costs were awarded against the practitioner pursuant to s 249;

(b)Costs of the Tribunal in the sum of $11,800 were ordered to be paid by the New Zealand Law Society pursuant to s 257; and

1      Auckland Standards Committee No 3 v Davidson [2012] NZLCDT 35.

2      Auckland Standards Committee No 3 v Davidson [2013] NZLCDT 14.

(c)       The  practitioner  was  to  reimburse  the  New  Zealand  Law  Society  in

respect of 75 per cent of the Tribunal’s costs pursuant to s 249.

[4]      On  21  December  2012  Mr  Davidson  filed  a  notice  of  appeal  against  the Tribunal’s decision finding him guilty on the second limb.   On 5 February 2013 the ASC3 filed a notice of cross-appeal against that part of the Tribunal’s decision that the convictions did not reflect on Mr Davidson’s fitness to practise.

[5]      Then on 1 May 2013 the ASC3 filed an appeal against the Tribunal’s decision on penalty.  The ASC3 does not seek to appeal against the costs orders but seeks an order for suspension and/or imposing a fine in addition to the censure by the Tribunal.  The notice of appeal was framed on the basis that the penalty decision was a discretionary decision: the grounds of appeal were that the penalty was manifestly inadequate or that the Tribunal had failed to take, or to adequately take, into account certain matters.

The approach to the appeals

[6]      The right of appeal to this Court conferred by s 253(1) of the Act must be by way of rehearing: s 253(3)(a).  Consequently, subject to the issue as to the approach to be  taken  to  penalty decisions  discussed  below,  the  approach  to  consideration  of  a rehearing appeal in Austin, Nichols & Co Inc v Stichting Lodestar applies.3 On hearing the appeals this Court may confirm, reverse or modify the Tribunal’s decision appealed against: s 253(4).

[7]      I explored with counsel the issue as to the appropriate approach to be taken by the Court in relation to penalty decisions.   Ultimately counsel adopted the common position that the approach taken by Wylie J in Auckland Standards Committee 1 v Fendall4 was appropriate, namely that an appeal against penalty must be determined by reference to the rather stricter criteria discussed in Kacem v Bashir5 and by the Court of Appeal in May v May.6    Shortly after the hearing the judgment of the Full Court in

Sisson v The Standards Committee (2) of the Canterbury-Westland Branch of the New

3      Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103; [2008] 2 NZLR 141.

4      Auckland Standards Committee 1 v Fendall [2012] NZHC 1825.

5      Kacem v Bashir [2010] NZSC 112; [2011] 2 NZLR 1.

6      May v May [1982] 1 NZFLR 165 (CA).

Zealand Law Society7 came to my attention.  The Full Court there considered the recent divergence of view on this issue:

[14]     Recent  cases  show  a  divergence  of  view  concerning  the  correct appellate approach in disciplinary cases. Under both the Law Practitioners Act

1982 and the Lawyers and Conveyancers Act 2006, appeals against any order or decision of a disciplinary tribunal are by way of rehearing; s 118(2) and s

253(3)(a), respectively.   In Bhanabhai v Auckland District Law Society, a full Court (Priestley, Heath and Winkelmann JJ) favoured a divided approach whereby professional misconduct findings were to be considered afresh, but

penalty decisions by reference to the principles that govern the exercise of a discretion.  In  Parlane v New  Zealand  Law Society  (Waikato  Bay of Plenty

Standards Committee (2)), Cooper J concluded that penalty decisions involved an evaluative exercise, were not discretionary in nature, and that the appellate Court  should,  therefore,  form  its  own  view.  But,  in  Auckland  Standards

Committee (1) v Fendall, Wylie J preferred the approach adopted in Bhanabhai. Most recently, in Hart v Auckland Standards Committee (1) of New Zealand

Law Society, a full Court (Winkelmann, Lang JJ) concluded that, credibility determinations  and  matters  involving  technical  expertise  aside,  an  appellate Court must come to its own view on the merits of misconduct and penalty

decisions without deference to the views of the Tribunal.

[15]     This division of opinion flows from the difficulty in applying Austin, Nichols  & Co  Inc  v  Stichting  Lodestar in  the  present  context. We  think it unnecessary  to  record  the  reasons  advanced  in  support  of  the  various viewpoints. We prefer the view that both misconduct findings, and the resulting penalty decision, require an assessment of fact and degree and entail a value judgment; such that it is incumbent upon the appellate Court to reach its own view on both aspects. We found the decision of the Supreme Court in Kacem v Bashir helpful in arriving at this conclusion.

(citations omitted)

[8]      Subsequently  memoranda  dated  21  and  22  August  2013  respectively  were received from the ASC3, annexing Sisson and Sorensen v New Zealand Law Society (Auckland Standards Committee Number 2),8  and from Mr Davidson, annexing Blackstone v Blackstone9  and Rowley & Skinner v Commissioner of Inland Revenue.10

The latter memorandum observed that Sisson and Sorensen were simply two further instances of the differing judicial views on the nature of a penalty decision.

[9]      Pending appellate direction I will adopt the Sisson approach it being the most recent view of a Full Court of this Court.

7      Sisson v The Standards Committee (2) of the Canterbury-Westland Branch of the New Zealand Law

Society [2013] NZHC 349, [2013] NZAR 416.

8      Sorensen v New Zealand Law Society (Auckland Standards Committee Number 2) [2013] NZHC

1630.

9      Blackstone v Blackstone [2008] NZCA 312, (2008) 19 PRNZ 40.

10     Rowley & Skinner v Commissioner of Inland Revenue [2011] NZSC 76, (2011) 25 NZTC 20-0512.

The factual background

[10]     Mr Davidson was a legal practitioner and director of Bridgecorp Limited (in receivership and liquidation) (“Bridgecorp”) and Bridgecorp Investments Limited (in liquidation) (“Bridgecorp Investments”).

[11]     On 2 September 2011 Mr Davidson pleaded guilty to 10 offences under s 58 of the Securities Act 1978 relating to untrue statements that had been made in prospectuses and investment statements that had been issued by Bridgecorp and Bridgecorp Investments.

[12]     Section 58 provides in material part:

(1)     Subject to subsection (2) of this section, where an advertisement that includes any untrue statement is distributed,—

...

(b)     If the issuer of the securities is a body, every director thereof at the time the advertisement is distributed—

commits an offence.

(2)       No person shall be convicted of an offence under subsection (1) of this section if the person proves either that the statement was immaterial or that he or she had reasonable grounds to believe, and did, up to the time of the distribution of the advertisement, believe that the statement was true.

[13]     Subsections (3) and (4) contain essentially similar provisions in relation to a registered prospectus.

[14]     On 7 October 2011 Mr Davidson was sentenced by Andrews J to nine months home detention, 200 hours of community work and ordered to pay reparation in the sum of $500,000 to the Registrar of the High Court of Auckland. The facts recited below are taken from Her Honour’s sentencing notes of 7 October 2011 and the agreed summary of facts upon which that sentencing proceeded.

[15]     The charges to which Mr Davidson pleaded guilty were in respect of untrue statements  in  prospectuses  and  investment  statements  issued  by  Bridgecorp  and

Bridgecorp Investments dated 21 December 2006 and distributed up until 6 July 2007 and extension certificates to the prospectuses dated 30 March 2007.

[16]     The untrue statements were in four categories:

1.     The first was that Barcroft Holdings Limited was not a related party;

2.The second group of untrue statements were to the effect that Bridgecorp would not and did not provide credit or advance loans other than in accordance with good commercial practice and internal credit approval policies.  As a result of this statement investors were led to believe that Bridgecorp was a prudent lender, when it was not, and significant funds were advanced with little if any adherence to proper, prudent commercial lending criteria.

3.The  third  group  of  untrue  statements  was  that  Bridgecorp  had  never missed an interest payment or repayment of principal when due.

4.The fourth  group of untrue statements  was  that  Bridgecorp’s  financial position as at 21 December 2006 was as it had been set out in the altered accounts for the year ending 30 June 2006.  In fact Bridgecorp’s financial position had substantially deteriorated by December 2006 and it faced a liquidity crisis.

[17]     All the untrue statements led to investors being misled.  After the misleading prospectuses,  investment  statements  and  extension  certificates  were  issued,  about

$27.7 million was invested and $91 million was reinvested in Bridgecorp or Bridgecorp

Investments.   When Bridgecorp went into receivership in July 2007 approximately

$459 million of secured debenture stock was outstanding to some 14,500 debenture holders and Bridgecorp Investments had approximately $28.8 million outstanding to members of the public.

[18]     Mr  Davidson’s  guilty  pleas  were  entered  on  the  basis  that  at  the  time  the

statements were made he genuinely and honestly believed that they were true.  However

he accepted that his belief was not reasonable in the light of what he knew or ought to have known.   It was accepted that his offending did not involve dishonesty or any intentional wrongdoing.

[19]     The  nature  of  Mr  Davidson’s  culpability  is  perhaps  best  captured  in  the

following extract from Andrews J’s sentencing notes:

[26]     Mr  Davidson,  your  position  as  Chairman  of  the  Board  involved leadership.  You had the primary obligation to ensure that Board meetings and discussions  were  conducted  efficiently  and  effectively.     The  Institute  of Directors Code of Practice for Directors states that the chairman’s role involves ensuring that all directors receive sufficient and timely information so that adequate information is before them on issues which require their decision.11

However, as you have acknowledged, you were too forgiving of deficiencies, and not sufficiently alert to problems, or insistent on receiving full information.

[20]     The summary of facts incorporated an analysis of the public funds which were invested in Bridgecorp and Bridgecorp Investments in the period between 21 December

2006  and  2  July 2007,  the  period  in  which  the  misleading  offer  documents  were distributed to the public.   That analysis indicated that $25,376,046.39 of funds were invested and $85,853,175.37 of funds were reinvested in Bridgecorp on the basis of the misleading offer documents.

[21]     Distribution  of  the  prospectuses  and  investment  statements  in  the  period

21 December 2006 to 6 July 2007 took a number of forms.  All the offer documents including the prospectuses and the investment statements were available from the Bridgecorp website.

[22]   There were about 14,500 investors in Bridgecorp as at the time of its receivership/liquidation.    It  was  a  large  finance  company  with  a  broad  base  of individual, rather than institutional, investors.   Its advertising was far-reaching across multiple forms of media and the offer material was distributed far and wide about the country.

[23]     Annexed to the statement of facts were extracts from the Bridgecorp prospectus including a letter from the Chairman and Managing Director signed by Mr Davidson

and a profile of the directors of Bridgecorp.

11     Code of Practice for Directors (The Institute of Directors in New Zealand (Inc), 2005).

[24]     Immediately above Mr Davidson’s signature in  the letter was  the following

statement:

RESPONSIBILITY AND ACCOUNTABILITY

We understand that the decision to invest is an extremely important one.  For this reason, we treat the management of your investment very seriously. As part of this, Bridgecorp is committed to ensuring that best practice corporate governance structures and principles are maintained at all times and that the highest ethical standards are adhered to.   We have adopted the principles developed by the New Zealand Securities Commission as the framework for corporate governance of Bridgecorp.  These principles form the foundation for our Corporate Governance Charter which is available on our website at welcome you as a potential investor in Bridgecorp Limited.  Our success to date is based firmly on the support we have from our investors and, because of this, we are committed to maintaining our high standards, quality products and exceptional customer service.

[25]     The directors’ profiles included a photograph of each and a brief description of

their experience preceded by the statement:

The directors have a wide range of experience and skills covering the legal, financial, property, marketing and business sectors.

[26]     Mr  Davidson’s  profile  was  first  and  adjacent  to  his  photograph  was  the

following statement:

Bruce is a consultant to a national firm of solicitors.   He is chairman of Law Retirement  Plans  Limited,  a  former  counsellor  and  past-president  of  the Auckland District Law Society, a former counsellor and vice-president of the New Zealand Law Society and is a director of several private companies.  Bruce is also a trustee of several charitable trusts.   Bruce has been a director and chairman of the Bridgecorp Group of companies since 1988.

The Tribunal’s decision on the charges

[27]     The   Tribunal   were   unanimous   that   the   convictions   did   not   reflect   on

Mr Davidson’s fitness to practise and hence the first limb of the charge was dismissed.12

The  Tribunal  were  divided  on  the  issue  whether  the  charges  tended  to  bring  the profession into disrepute.  By a majority of three to two the Tribunal found the charge

on the second limb was made out.

12 At [9].

[28]     Although the Tribunal was divided on the finding that Mr Davidson was guilty of the charge under the second limb, the decision was written as a composite decision. Towards the end of the decision there are discrete sections recording the views of the majority and the minority although in the minority’s reasons there are references back to earlier passages in the decision.  As a consequence the decision is not especially easy to negotiate.  A further consequence of the composite decision is that the identity of the majority  and  minority  members  was  not  disclosed.    This  prompted  counsel  for Mr Davidson to seek a direction from the Court that this information be disclosed by the

Tribunal.13

[29]     The difference in view on the second limb of the charge was highlighted at the commencement of the decision in the introductory paragraph:

[1]       This case has proved to be one of the most difficult thus far faced by the Tribunal.  The difficulty arises, not from the complexity of the factual matrix, that is the collapse of the Bridgecorp Group of companies; the Tribunal is well used to complex facts.  Nor does the difficulty only arise from the tragedy of the situation, both for all of those investors who suffered from the collapse of the companies or to the practitioner in facing these charges at the end of a distinguished career. The difficulty arises most acutely when the Tribunal has to assess the viewpoint of a reasonable person, informed of the surrounding circumstances.  It transpires that the reasonable perspective in question, which will be discussed in this decision, is not a universal one among Tribunal members.

[30] The Tribunal’s unanimous decision with reference to the first limb of the charge is very succinct: indeed it is captured in [9].14 I draw attention to three matters in that paragraph:

1.It was accepted that Mr Davidson was a competent lawyer about whom no complaint had ever been made;

2.The Standards Committee accepted that the public did not require direct protection from Mr Davidson; and

13     See the Minute of Katz J dated 23 July 2013 and report from the Chair of the Tribunal of 9 August

2013.

14     See also at [37] where the Tribunal noted that it had found support for its unanimous view in Ziems v

Prothonotary of the Supreme Court of New South Wales [1957] 97 CLR 279, below n 21.

3.       In that respect the Tribunal considered that Mr Davidson’s conduct as a

director could be viewed separately from his conduct as a lawyer.

[31]     I draw attention to the third of those points in [9] because, in addition to a difference of view between the majority and minority as to the categorisation of the offending (a matter specifically raised on the appeal), the issue of the separation or otherwise of Mr Davidson’s qualification as a lawyer from his role as Chairman of Bridgecorp was a significant point of dichotomy between the two views within the Tribunal on the second limb.

[32]     That distinction is captured in the contrast between [44] and [47]:

[44]      The majority of the Tribunal say that a reasonable person fully informed of the background of the offending would draw a link between the fact that the leader of the Boards of these failed companies was an experienced commercial lawyer, and that this must tend to reflect on the reputation of the profession as a whole.   We observed that Mr Davidson himself said: “...my professional and commercial reputation has been greatly diminished, if not entirely destroyed.” These words would tend to suggest his reputation as a lawyer was included in that self-assessment.

...

[47]     The minority consider that reputation of public company directors may well have been diminished, but that this does not automatically translate into a tendency  to  bring  the  legal  profession  into  disrepute,  merely  because  the director who has fallen short in that role, is also a lawyer.

[33]     The  overall  thrust  of  the  difference  in  view  between  the  majority  and  the minority is captured by contrasting paragraphs [45] and [46]:

[45]     The practitioner was misled by others, but this does not excuse his conduct.  With his experience in commercial matters, he ought to have known what questions to ask, when to ask them, what to do when they were not answered to his satisfaction, and what strategies to adopt to deal, for example, with the Chief Executive with whom he had worked for a long period, and whom he knew had misled the Board long before matters came to a head in mid-

2007.  The majority believes Mr Davidson’s conduct involved a major departure

from the standard of care expected when a director performs a statutory duty. The public would expect a senior practitioner to have done better, and this

failure must lower the reputation of the profession as a whole.

[46]     If the reputation of the profession as a whole can be damaged by the conviction of a lawyer on the basis of his naivety or overly trusting nature, then that reputation must be a fragile creature indeed.  The minority consider that the reasonable person, fully apprised of the background circumstances of this offending, including the views of the sentencing Judge in that there was a

significant failure in duty as a director, but no impairment of integrity, would not tend as a result to have less confidence in the profession as a whole, or consider its reputation besmirched.

Appeal against the finding that the convictions tend to bring the profession into disrepute

[34]     The requirement of s 241(d) is that the conviction must be of such a nature that it “tends to bring” the profession into disrepute.  I note in passing that the test of “tends to bring” was the requirement in both former s 112(1)(c) and (d) whereas in the current s

241(c) the requirement has been elevated so as to in fact “bring” the profession into disrepute.  However s 241(d) continues to have a threshold of tendency only.  As noted below in the discussion of the grounds of appeal, this involves a tendency to detract from or lower the reputation of the legal profession in New Zealand.15

[35]     I consider that the Tribunal correctly directed itself on the threshold in the first part of its paragraph [11]:

It does not need to be shown that the conviction has actually brought the profession into disrepute.  It is sufficient to show that it tends to do so where the tendency is to be measured against what would be thought by a reasonable person  who  is  fully  informed  of  all  the  relevant  issues  surrounding  the conviction and the charge itself.  The notional reasonable person may be a non- lawyer or may be a lawyer or have a close connection with the profession. Lawyers and non-lawyers may react differently when analysing the tendency, there is likely to be a wide spectrum of views in both groups.   The Tribunal needs to infer from all the circumstances known to it, what is likely to be sought by a notional reasonable person regardless of connection with or disconnection from the profession.

[36]     The Tribunal appropriately adopted an objective approach as endorsed by the Court of Appeal in W v Auckland Standards Committee 3 of the New Zealand Law Society:16

We see no error in the approach which Duffy J adopted in the present case of considering whether reasonable members of the public, informed of all relevant circumstances, would view W’s conduct as tending to bring the profession into disrepute.    We  agree  too  that  the  issue  is  necessarily  to  be  approached objectively, taking into account the context in which the relevant conduct occurred – here, the giving of the undertaking and its breach.  The subjective

15     Complaints Committee of the Canterbury District Law Society v W [2009] 1 NZLR 514 (HC) at

[81].

16     W v Auckland Standards Committee 3 of the New Zealand Law Society [2012] NZCA 401, [2012] NZAR 1071 at [45].

views of the practitioner giving the undertaking are irrelevant.  So too, are the views of the practitioner or party receiving the undertaking.

[37]     The notice of appeal dated 21 December 2012 listed nine respects in which it was contended that the decision of the Tribunal finding that the appellant’s convictions tended to bring the profession into disrepute was wrong in fact and in law.  However in the appellant’s synopsis of submissions, noting that a number of those grounds overlapped and some were illustrative of others, the grounds were helpfully distilled into the following aspects:

1.        The  Tribunal’s  reliance  in  its  decision  on  matters  outside  of  the

convictions and their circumstances;

2.The failure to formulate or apply a standard of conduct for activities outside the practitioner’s practice, breach of which would tend to bring the profession into disrepute;

3.        The categorisation of Mr Davidson’s conduct as gross negligence;

4.The insignificance attributed to the lack of any complaint from the public arising from the convictions entered;

5.        The majority’s final reasoning including that:

(i)       A fully informed reasonable person would draw a link between

Mr Davidson’s status as an experienced commercial lawyer;

(ii)As a senior commercial lawyer, the public would have expected Mr Davidson to have done better in his roles as a director and chairman; and

(iii)That  this  “must  lower  the  reputation  of  the  profession  as  a whole”.

[38]     I first address each of those grounds of appeal before turning to consider my own assessment.

The  Tribunal’s  alleged  reliance  on  matters  outside  of  the  convictions  and  their

circumstances

[39]     It was argued for Mr Davidson that the charge he faces was one rooted in convictions under the Securities Act which were for strict liability offences and that the charges did not allege any other or greater breaches of duty by Mr Davidson.  It was asserted however that the Tribunal had cast the net more widely and effectively embarked upon a consideration of Mr Davidson’s general discharge of his duties as a director and shareholder, reliance being placed particularly on its references to the

findings of Miller J in Davidson v Registrar of Companies17 and the cross-examination

of Mr Davidson before the Tribunal.

[40]     Noting,  for  example,  the  reference  in  [20]  of  the  Tribunal’s  decision  to Mr Davidson’s admission that he could have been “more forensic”, the submission was that in the end result the majority decision was significantly based on its perception of Mr Davidson’s general performance of his statutory duties as a director and that those were matters that were not subject to the charge except to the limited extent that they were part of the background to the convictions.   By contrast it was asserted that the convictions were narrow in their ambit relating simply to the issue of untrue statements in the offer documents.

[41] When evaluating this criticism it is important to read the Tribunal’s decision in its entirety. In a number of paragraphs the Tribunal made explicit reference to the fact that the charge concerns the convictions of Mr Davidson for the offences.18 The Tribunal does so specifically in relation to the second limb (of tending to bring the profession into disrepute) in [11].

[42]    Furthermore in several paragraphs the Tribunal analyses the nature of “the offending”.19   Such analysis of the nature of the offending needs to be seen against the background that counsel for Mr Davidson had referred the Tribunal to remarks made by Heath J, in the course of sentencing under the same section of the Securities Act in

R v Moses,20  concerning the different levels of offending possible under s 58.   The

17     Davidson v Registrar of Companies [2011] NZLR 542 (HC).

18     At [9] and [37].

19     At [12], [16], [40] and [44].

20     R v Moses HC Auckland CRI-2009-004-1388, 2 September 2011.

Tribunal at [14] cites a statement by Heath J to the effect that s 58 contemplates a spectrum of offending that must carefully be analysed to determine its level of seriousness and the degree of culpability that each offender bears.

[43]     So far as concerns the reference to Mr Davidson’s admission that he could have been “more forensic”, that reference in [20] of the decision follows the discussion of Mr Davidson’s evidence as to the policies which he had instituted to ensure that the proper and safe commercial lending practices claimed by the company were adhered to. That material is referred to, as the Tribunal makes clear in [17], in order to recount some of the detail of the processes which led to the untrue statements being made which were the subject of the charges.  I do not consider that in embarking upon that discussion the Tribunal was undertaking a consideration of Mr Davidson’s general discharge of his statutory duty as a director which consideration is asserted by the appellant to involve a fundamental error.

[44]     On the contrary I consider that when read in its entirety the Tribunal’s decision demonstrates that the Tribunal was closely focused on the convictions the subject of the charges  and  not  on  some  broadly-based  consideration  of  Mr Davidson’s  general performance as a director.   Indeed I consider that the Tribunal’s focussed approach is manifest in its comments at [7] of the decision:

We have been provided with a copy of Her Honour’s decision on sentencing. We have also been provided with a lengthy decision of his Honour Miller J which related to the Registrar of Companies having prohibited Mr Davidson from being a Director or Manager of a company for two-and-a-half years.  That decision provided useful background information, however we remind ourselves that it dealt with different subject matter from the charge under consideration by the  Tribunal  and  the  appeal  was  argued  on  the  papers  without  viva  voce evidence being heard from Mr Davidson.

The failure to formulate or apply a standard of conduct for activities outside the practitioner’s  practice,  breach  of  which  would  tend  to  bring  the  profession  into disrepute

[45]     The appellant argued that the Tribunal never finally dealt with his submission that to satisfy s 241(d) the conduct arising outside his practice had to attract some moral opprobrium.  He further said that the Tribunal had failed to attempt to formulate when such conduct could meet the test set out in the second limb of the charge.

[46]     The appellant argued that conduct outside the ambit of the practitioner’s practice could only tend to lower the reputation of the profession as a whole if it exhibited some quality incompatible with the responsibilities of the profession such as dishonesty or lack of integrity.  The lack of any such quality in the appellant’s conduct was said to be the critical missing link which was the basis for the minority’s conclusion that the charge had not been proved.  The decision of the High Court of Australia in Ziems v

Prothonotary of the Supreme Court of New South Wales,21 discussed by the Tribunal at

[33]-[35], was relied upon as an illustration of the need for such an element.

[47]     I am unable to accept the appellant’s argument on this issue for two reasons:

(a)     First, because I do not consider that it is appropriate to import into s 241(d)

some minimum threshold requirement; and

(b)Secondly, because in my view the proposed threshold requirement would be unduly high.

[48]     So far as the first reason is concerned the authorities demonstrate that it is undesirable to import into the section additional criteria.  In Complaints Committee of the Canterbury District Law Society v W22 the Full Court remarked:23

The use of the epithet reprehensible is appropriate in the case of professional misconduct, but it is not a useful description to assist in deciding the degree of negligence that warrants a disciplinary finding measured by whether it reflects on fitness to practice or tends to bring the profession into disrepute.  That means a “tendency” to distract from, or lower, the reputation of the legal profession in New Zealand.   Professional misconduct will have this effect, but behaviour which  does  not  necessarily  amount  to  professional  misconduct  may  be  in separate category of offending in terms of s 106(3)(c).  Reliance on epithets is not helpful in this context. No gloss should be placed on the statutory test.

[49]     That approach was endorsed by the Court of Appeal in W v Auckland Standards

Committee 3 of the New Zealand Law Society:24

We  also  endorse the  remarks  made  by the  Full  Courts  in both  Complaints

Committee No 1 of the Auckland District Law Society v C  and Complaints

21     Ziems v Prothonotary of the Supreme Court of New South Wales [1957] 97 CLR 279.

22     Complaints Committee of the Canterbury District Law Society v W [2009] 1 NZLR 514.

23 At [81]. It is possible that the Full Court was intending to use the word “detract” rather than

“distract”.

24     W v Auckland Standards Committee 3 of the New Zealand Law Society [2012] NZCA 401 at [44].

Committee of the Canterbury District Law Society v W that the use of epithets such as “reprehensible” to describe particular types of conduct is unhelpful and that no gloss should be placed on the language used by the statute.

[50]     The majority’s  conclusion  applying the objective test  identified  in [11]  was stated in [44] and [45] which I have recited above.  In my view the majority did not err in omitting to import or apply a threshold requirement of the kind contended for by Mr Davidson.

[51]     However if it were permissible to identify a minimum threshold then in my view a requirement that the conduct must attract some degree of moral opprobrium would be unduly high.  The Full Court in Complaints Committee of the Canterbury District Law Society v W   made the point that there is no hierarchy of seriousness as between the

paragraphs25  and in W v Auckland Standards Committee 3 of the New Zealand Law

Society, in the context of a discussion about honest mistake as to the interpretation of an undertaking, the Court of Appeal observed that negligence giving rise to a breach of an undertaking may still have a tendency to bring the profession into disrepute even if the practitioner is honestly mistaken about the scope of his responsibilities.26

[52]     As noted, reliance was placed on Ziems in support of Mr Davidson’s contention. However Ziems was concerned solely with the issue of whether a person convicted of an offence was a fit and proper person to practise at the Bar.  That emphasis is apparent in some of the passages cited to me from the decision of Kitto J in the majority.27

But it will be generally agreed that there are many kinds of conduct deserving of disapproval, and many kinds of convictions of breaches of the law, which do not spell unfitness for the Bar; and to draw the dividing line is by no means always an easy task.

...

The conviction relates to an isolated occasion, and, considered by itself as it must be on this appeal, it does not warrant any conclusion as to the man’s general behaviour or inherent qualities.  True, it is a conviction of a felony; but the fact that as a matter of technical classification it bears so ugly a name, ugly because the most infamous crimes are comprehended by it, ought to be disregarded, lest judgment be coloured and attention diverted from the true nature of the conviction.  It is not a conviction of a premeditated crime.  It does

25     The decision in that case concerned s 106 of the Law Practitioners Act 1982.

26 At [51].

27     Dixon CJ and McTiernan J dissented.

not indicate a tendency to vice or violence, or any lack of probity.  It has neither connection with nor significance for any professional function.

[53]     It is entirely understandable that the Ziems decision would be influential with the Tribunal  on  the  first  limb  of  the  charge  as  [37]  clearly  demonstrates  that  it  was. However I do not consider that Ziems provides support for the proposition advanced in this case by Mr Davidson that a threshold of some degree of moral opprobrium is necessary in order for a Tribunal to conclude that a conviction will tend to bring the profession into disrepute.

The categorisation of Mr Davidson’s conduct as gross negligence

[54]     The difference of view as to categorisation flowed from a consideration of the sentencing comments of Heath J in R v Moses where His Honour accepted that s 58 contemplates a spectrum of offending that must carefully be analysed to determine its level of seriousness.  He identified three categories:

(a)     at the most serious end offending involving dishonesty;

(b)    conduct that could be categorised as either reckless or grossly negligent;

and

(c)     cases  involving  innocent  misrepresentation  arising  out  of  a  greater  or lesser degree of carelessness.

[55]     The  difference  between  the  majority  and  the  minority  was  captured  in  the following passage in their decision:28

The majority of this Tribunal categorises the offending as being squarely within Heath J’s second level being “a major departure from the standard of care expected when a director performs a statutory duty”.   The minority sees the offending as closer to Heath J’s third level being “... an innocent misrepresentation arising out of greater or lesser degrees of carelessness”.  The minority sees the behaviour as at the very top of that third category and perhaps straying into the lower end of the second category.

[56]     For  the  appellant  it  is  contended  that  Mr  Davidson’s  conduct  does  not  fit sensibly into Heath J’s gross negligence (second) category but rather that the minority’s

28 At [16].

categorisation of the conduct as within Heath J’s innocent error (third) category was

correct.

[57]     I would first make two points about the exercise of categorisation.  As Heath J noted, s 58 contemplates a spectrum of offending.  While the identification of sectors within the spectrum (such as “gross negligence”) is helpful up to a point, the boundaries between such sectors are not absolute and there will be, at least in some cases, a degree of overlap.   That is reflected in the approach of the minority29  in the present matter which saw the offending as “closer to Heath J’s third level” while at the same time seeing the behaviour “as at the very top of that third category and perhaps straying into the lower end of the second category”.

[58]     Secondly,  while  Heath  J’s  second  category  is  captioned  “gross  negligence” Heath  J  elaborated  upon  the  content  of  that  category  as  referring  to  conduct  that involves a major departure from the standard of care expected when a director performs a statutory duty.

[59]     The ASC3 cited a number of instances of Mr Davidson’s conduct to support the majority’s view that Mr Davidson’s conduct amounted to such a departure from the expected standard of care.   However in my view it suffices to refer to the view of Andrews J who adopted a starting point of three years and three months imprisonment in respect of offending which had a maximum penalty of five years imprisonment.   I

note too that the minority30 recognised the fact of the sentencing Judge’s view that there

was a significant failure in duty as a director, albeit no impairment of integrity.

[60]     For these reasons I do not consider that the majority erred in its assessment of

Mr Davidson’s conduct.

29 At [16].

30 At [46].

The insignificance attributed to the lack of any complaint from the public arising from the convictions entered

[61]     The Tribunal’s decision addresses for the first time the absence of any complaint made about Mr Davidson to the Law Society31  following the third quotation from the Ziems case.  The point is revisited in that part of the decision recording the majority’s view:

[41]      We have referred earlier in this decision to the fact that no complaint has been made about Mr Davidson and that there is no evidence that either clients or colleagues see his offending as being likely to reflect on the reputation of the profession as a whole.

[42]      However we have taken into account that making a complaint about Mr Davidson might not be a course of action which members of the public would consider even if they viewed Mr Davidson’s actions as reprehensible.   The majority  of  the  Tribunal  believe  that  members  of  the  public  expect  the profession to take whatever action is necessary to monitor and maintain the professional  standards  of  its  members.     This  would  tend  to  reduce  the significance for members of the public of there not having been a complaint made about Mr Davidson.

[62]     While   acknowledging   that   the   majority’s   reasons   had   some   validity, Mr Davidson argued that those reasons missed the point because in the aftermath of a case as heavily publicised as Bridgecorp it might reasonably have been expected that members of the public would have approached the Law Society whereas there was, it was submitted, a deathly silence.

[63]     Counsel for the ASC3 submitted that this was a matter of speculation and that in any event the subjective views of members of the public or practitioners were irrelevant and would have been reached without being informed of all the relevant circumstances. I consider that both those points have validity.  So far as the latter point is concerned I note  again  the  observations  of  the  Court  of  Appeal  in  W v Auckland  Standards Committee 3 of the New Zealand Law Society cited at [36] above.32 The issue is to be approached objectively and subjective views are irrelevant. As to that, if there had been a number of letters to the Law Society from disappointed investors it would have been

open to Mr Davidson to submit that such letters should not be taken into account

31 At [36].

32 At [45].

because one could not know the particular set of facts or motivations which had prompted those communications.

[64]     Consequently I do not find that the majority of the Tribunal erred in its approach to this issue.

The majority’s final reasoning

[65]     This ground of appeal was directed at the content of [43]-[45] of the decision. Criticism was directed at the asserted linkage between Mr Davidson’s leadership of the boards of the failed companies and his professional status as an experienced commercial lawyer.  It was further contended that a fundamental flaw in the majority’s reasoning lay in equating the damage to Mr Davidson’s own professional reputation (including as a lawyer) with a tendency to adversely impact on the reputation of the profession as a whole. The submission is captured in the following final propositions:

Fundamentally however, there is no expressed or logical connection between their findings and the positive damage to the reputation of the legal profession as a whole.   Nor did the majority give any significance to the fact that the convictions arose from conduct outside Mr Davidson’s practice as a lawyer.

[66]     In response the ASC3 contended that the conclusions drawn by the majority were simple, logical and succinctly stated.  It argued that offending which reflects badly on a lawyer’s personal reputation can also adversely reflect on the legal profession as a whole.  It drew attention to the majority’s analyses of the prospectuses and investment statements which referred to the fact of Mr Davidson’s roles with a national law firm and  in  Law  Society  administration.     In  particular  they  endorsed  the  majority’s

conclusion33    that  Mr  Davidson  was  sold  to  readers  of  the  prospectuses  as  an

experienced commercial lawyer with a distinguished career such that the clear implication of the biographical details was that the Chairman of Bridgecorp was a man investors could trust and someone on whom they could rely.

[67]     While as the Tribunal recognises34 Mr Davidson was misled by others the fact is that he pleaded guilty to charges because he was unable to prove that he had reasonable

grounds to believe at the time of the distribution of the prospectuses that the statements

33 At [43].

34 At [45].

therein were true.  And the ASC3 drew attention to the observation of Andrews J in sentencing that:

As a result investors were led to believe that Bridgecorp was a prudent lender, when  it  was  not,  and  significant  funds  were  advanced  with  little  if  any adherence to proper, prudent commercial lending criteria.

[68]     As a consequence the offending affected a large number of members of the public who inevitably suffered serious financial hardship.

[69]     I consider that the criticism made of the Tribunal under this head really involves a complaint about perfection of expression.  However an appellate court should not treat a written decision as containing an error of principle simply because of its belief that the decision could have been better expressed.35   On my reading the majority’s route to its conclusion is plain enough.

[70]     The majority considered that Mr Davidson’s conduct involved a major departure from  the  standard  of  care  expected  when  a  director  performs  a  statutory  duty. Mr Davidson was sold to readers of the prospectuses as an experienced commercial lawyer and as someone that investors could trust and rely upon.  He failed in meeting the expectation which contributed in part to the disastrous financial consequences which followed.   In those circumstances, given the way in which he was held out in the relevant documentation, that failure would tend to detract from or lower the reputation of the New Zealand legal profession generally.

[71]     Indeed it might be said that the final sentence in the majority’s conclusion36 went further than the second limb of s 241(d) requires in as much that the Tribunal appears to have held that Mr Davidson’s failure had in fact lowered the reputation of the profession as a whole.  As noted earlier, while that is the requirement in relation to s 241(c), it is only necessary in the case of s 241(d) that the conviction “tends to bring” the profession into disrepute.   With that qualification I do not consider that there is any basis for

criticism of the majority’s final reasoning.

35     REEF Trade Mark [2003] RPC 5 para 29.

36 At [45].

This Court’s assessment

[72]     Thus far I have considered the particular grounds of challenge by Mr Davidson to the majority’s conclusion that his convictions tended to bring the profession into disrepute.   However under the Austin, Nichols approach to cases involving a general rehearing I am required to go further. As the Supreme Court there said:

[16]     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 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.

[73]     I have considered the material in the two volumes comprising the bundle of documents, in particular the summary of facts, with which Mr Davidson agreed, and the sentencing notes of Andrews J.  My conclusion on this issue coincides with that of the majority of the Tribunal.

[74] In addition to the various matters upon which the majority relied I note that the profile of the directors in the relevant documentation (noted at [25] above) specifically referred to the directors having a wide range of experience and skills including in the legal sector. From my reading of the qualifications of the five directors it was only Mr Davidson who fulfilled that qualification.

[75]     Secondly I consider that in assessing whether a conviction could tend to bring the profession into disrepute it is legitimate to take into account the consequences which were likely to flow from the offending which gave rise to the conviction.  In that regard I draw attention to the observation of the Court in Appeal in W v Auckland Standards Committee 3 of the New Zealand Law Society:37

There was some discussion during the hearing about the extent to which the consequences of a breach of undertaking could be taken into account in determining whether the negligence was of such a degree as to reflect on fitness to practise or to tend to bring the profession into disrepute.   Counsel were agreed that the consequences of a breach which are foreseeable either at the time it is given or at the time of the breach, may be relevant to that determination.

37 At [53].

We agree.  Where, for example, serious consequences are known or reasonably foreseeable at those times, that must bear on the determination of a charge under s 112(1)(c) or, indeed, on a charge of professional conduct.

[76]     I consider that  that  consideration  also  has  application  in  the context  of the foreseeable consequences of offending which results in a conviction the subject of a charge under s 241(d).

[77]     Consequently on the basis of my own consideration of the matter I consider that Mr Davidson’s conviction on the 10 charges in question, given the offending which gave rise to the charges, the likely and actual consequences of the offending and the prominence of his legal experience in his profile as director and Chairman, result in the convictions tending to bring the legal profession into disrepute.

[78]     Finally  it  is  appropriate  that  I  comment  on  the  reasoning  of  the  minority particularly in view of the submission made for Mr Davidson that the minority’s reasoning at [46]-[47] is clear, coherent and ought to be accepted by the Court.

[79]     In [46] the minority suggested that if the reputation of the profession as a whole can be damaged by the conviction of a lawyer on the basis of his naivety or overly trusting nature then that reputation must be a fragile creature indeed.  Putting to one side the  notion  of  fragility  of  reputation  I  consider  that  the  minority placed  too  much emphasis  on  that  feature  of  Mr  Davidson’s  nature  and  on  the  absence  of  what  it described as impairment of integrity.  In my assessment the minority failed to recognise or to sufficiently recognise both the fact that Mr Davidson accepted that he did not have reasonable grounds to believe that the statements were true and the reasonably foreseeable serious consequences which could follow if the statements were untrue.

[80]     In [47] the minority went on to make the point that the reputation of public company directors may well have been diminished but that this did not automatically translate to a tendency to bring the legal profession into disrepute merely because the director who had fallen short in that role was also a lawyer.  I agree that such a tendency is not an automatic consequence but nor did the majority so suggest.  I consider that the decision of the majority of the Tribunal was based squarely on their analysis of the particular facts and did not involve the automatic translation about which the minority

expressed concern in [47]. Likewise the assessment which I have reached is based on the particular circumstances of the present case.

[81]     For these several reasons Mr Davidson’s appeal is dismissed.

Cross-appeal against the dismissal of the charge that the convictions did not reflect

on Mr Davidson’s fitness to practise

[82]     The Tribunal were unanimous in their view that the convictions did not reflect upon Mr Davidson’s fitness to practise, a conclusion for which they found support in the Ziems decision.38

[83]     The grounds of cross-appeal in the notice dated 5 February 2013 are:

2.1The Tribunal failed to consider whether the convictions had a bearing on the issue of the appellant’s trustworthiness, which is an integral part of being a lawyer.

2.2The Tribunal was wrong to rely on Ziems v The Prothonotary of the Supreme Court of New South Wales [1957] CLR 279 and adopted the wrong test in deciding whether the convictions reflected on the appellant’s fitness to practise.

2.3The  tribunal  erred  in  concluding  that  the  appellant’s  conduct  as  a director as evidenced by the circumstances related to his convictions could be viewed separately from his fitness to practise as a lawyer.

2.4The Tribunal was wrong to rely on references submitted by the appellant at the hearing of the charge from people not called as witnesses.  The respondent objected to the admissibility of these references at the commencement of the hearing and they were received on the basis that the Tribunal would subsequently rule on them as to whether they were admissible  or  not.    The Tribunal  failed  to  address  the  issue  of  the admissibility of those documents in its decision and erred in relying on them.

2.5The Tribunal was wrong to conclude that the respondent accepted that the public did not require direct protection from Mr Davidson except in so far as it was acknowledged by the respondent that he is not currently practising as a lawyer.

Alleged failure to consider the issue of trustworthiness

[84]     The ASC3’s focus on “trustworthiness” stems from its reliance upon Bolton v

Law Society39 where Sir Thomas Bingham MR observed:40

38     At [9] and [37].

Any solicitor who is shown to have discharged his professional duties with anything less than complete integrity, probity and trustworthiness must expect sanctions  to  be  imposed  upon  him  by  the  Solicitors  Disciplinary  Tribunal. Lapses from the required high standard may, of course, take different forms and be of varying degrees.  .... If a solicitor is not shown to have acted dishonestly, but is shown to have fallen below the required standards of integrity, probity and trustworthiness, his lapse is less serious but remains very serious indeed in a member of a profession whose reputation depends upon trust.

[85]     It  argued  that  it  was  implicit  from  the  references  in  the  prospectuses  and investment  statements  to  Mr  Davidson’s  distinguished  legal  career  that  he  was  a member of the legal profession that the public could trust.  Its submission in summary was that Mr Davidson was no longer in a situation where his “trustworthiness is not, and never has been, seriously in question”.   The quoted words had their source in another passage in Bolton as follows:41

If a member of the public sells his house, very often his largest asset, and entrusts the proceeds to his solicitor, pending reinvestment in another house, he is ordinarily entitled to expect that the solicitor will be a person whose trustworthiness is not, and never has been, seriously in question.  Otherwise, the whole profession, and the public as a whole, is injured.  The profession’s most valuable asset is its collective reputation and the confidence which that inspires.

[86]     While it was accepted that reliance on Bolton for statements of principle was unsurprising, it was submitted for Mr Davidson that Bolton was very different involving as it did a case of misappropriation of funds to the benefit of persons closely associated with the practitioner, namely his wife and his wife’s brother.  It was submitted that it was an overstatement for the ASC3 to say that it was accepted that Mr Bolton was an honest man who acted naively and stupidly.  It was further argued that the ASC3 was attempting to draw a very long bow based on language used by Heath J in R v Moses where in the context of the Securities Act His Honour said that investors trust the directors to act in their best interests.  That was said to be a much broader notion of trust than that adopted in cases such as Bolton and other authorities where lack of trustworthiness had been considered to reflect on a practitioner’s fitness to practise.

[87]     I do not consider that it is correct to say that the Tribunal failed to consider this issue.   On the contrary at [12] the Tribunal refers to the fact of the citation to it of

39     Bolton v Law Society [1994] 2 All ER 486 (CA).

40     At 491-492.

41     At 492.

various dicta in support of the submission that the offending involved a breach of trust. To my mind the proposition that the convictions bore on Mr Davidson’s “trustworthiness” in a Bolton sense was resolved in his favour by the Tribunal’s acceptance at [9] that he was a competent lawyer about whom no complaint had ever been made and that his integrity as a person and a legal practitioner was unquestioned. Consequently I do not consider that the first criticism of the Tribunal’s decision on the first limb is made out.

Tribunal was wrong to rely on Ziems

[88]     As  noted  above  Ziems  was  a  case  which  concerned  the  test  of  fitness  to practise.42     However the ASC3’s point was that the test in Ziems was whether the practitioner was in fact unfit to practise as a barrister whereas the test in s 241(d) only requires that a conviction “reflects on” the practitioner’s fitness to practise.  Reference was made to the observation of the Court of Appeal in F v The Medical Practitioners Disciplinary Tribunal43  that it is not necessary to prove that the practitioner is unfit to practise.44

[89]     In response attention was drawn both to the further statement of the majority that they did not think that the rider could be said to be of minor importance only and to the observation  of William Young  J  in  a  separate  judgment  (but  concurring  as  to  the result):45

... However the rider must be given some effect and it seems to me that it requires the culpable conduct to be of a nature which fairly raises the question whether the doctor ought to be practising.

[90]     I do not consider that the support which the Tribunal found in Ziems46  for its unanimous view has the consequence that the Tribunal adopted the wrong test particularly having regard to the Tribunal’s explicit recognition of the relevant formula

of words in s 241(d) in both [9] and [37].

42 At [52].

43     F v The Medical Practitioners Disciplinary Tribunal [2005] 3 NZLR 774 (CA) at [81].

44     The relevant provision was s 109(1)(c) of the Medical Practitioners Act 1995 which addressed the scenario of a practitioner being “guilty of conduct unbecoming a medical practitioner, and that conduct reflects adversely on the practitioner’s fitness to practise medicine.”

45 At [107].

46 At [37].

Alleged error in viewing conduct as a director separately from fitness to practise as a lawyer

[91]     It  was  common  ground  on  the appeal  that  while convictions  arising  out  of personal – as opposed to professional – misconduct can reflect on a practitioner’s fitness to practise, professional misconduct has a more direct bearing on the question: Ziems.47

[92]     However the thrust of the ASC3’s complaint under this heading was the last sentence of [9]:

In this respect we consider his conduct as a Director can be viewed separately from his conduct as a lawyer.

[93]     The ASC3 contended that the offending by Mr Davidson as a director of a company cannot be isolated from his status as a solicitor for it affects both his professional and  commercial  reputation.   Attention was drawn to the comments in Re A Practitioner48 a decision of the Supreme Court of Western Australia:

We are left in no doubt that such impropriety on the part of a solicitor spells his unfitness to remain on the roll.  The practitioner’s conduct as the director of a public company cannot simply be isolated from his status as a solicitor on the roll.   His conduct shows, in the words of Kitto J already cited, a defect of character incompatible with membership of a self-respecting profession.

[94]     For   Mr   Davidson   it   was   argued   that   Re   A   Practitioner   was   clearly distinguishable in that it not only involved conduct outside the practitioner’s practice but also the conduct involved the practitioner making improper use of his position as company   chairman   for   personal   gain.      The   comments   of   the   Tribunal   on Re A Practitioner49 were endorsed.

[95]     If the final sentence in [9] was intended to be a general proposition then I would not be able to accept it.  However I do not read the sentence in that way particularly in view of the Tribunal’s reasoning distinguishing the case before it from the facts of Re A Practitioner.50  As I read the Tribunal’s decision it was saying no more than that on the particular facts concerning Mr Davidson his conduct as a director which involved

the offending leading to the convictions did not as a matter of fact reflect on his fitness

47     Ziems v Prothonotary of New South Wales, above n 21, at 290.

48     Re A Practitioner (1997) 95 A Crim R 467, 477.

49 At [38].

50 At [38].

to practise.   Consequently I do not consider that the third criticism of the Tribunal’s

decision is sustained.

The Tribunal erred in relying on references from people not called as witnesses

[96]     The transcript of the hearing before the Tribunal records the objection on behalf of the ASC3 to the admission of various character references provided to the ASC3’s counsel only that morning.   The ASC3 had adopted the position that if the matter proceeded to a penalty hearing there would be no objection to the receipt of such references but that at that early stage of the matter objection was taken because the letters amounted either to expert evidence or to evidence on matters that were really the ultimate issue for the Tribunal to decide.

[97]     In responding to that objection counsel for Mr Davidson applied under s 239 of the Act to have the letters received as evidence.  He contended that the ultimate issue rule and the requirements of natural justice relied upon by the ASC3 really affected the weight rather than the admissibility of the material.  The Tribunal deferred the issue of admissibility at that stage having established that there would be no objection to the references being provided at the penalty stage.

[98]   It does appear that the Tribunal did not ultimately make a ruling on the admissibility of the references so far as the proof of the charge itself was concerned.  It is also clear that the Tribunal had regard to the references in the context of its consideration of the first limb of the charge.51     However in view of the preceding sentences in [9] concerning Mr Davidson’s competence and integrity I do not consider that consideration of the references could have made any material difference to the Tribunal’s unanimous conclusion on the first limb of the charge.

[99]     To the extent that the ground of cross-appeal is directed to the proposition that the Tribunal was wrong to allow references from people not called as witnesses I accept the submission for Mr Davidson that the argument is unrealistic.  Certainly there was

nothing in the submissions in support of the cross-appeal that indicated any basis upon

51 At [9].

which the ASC3 would have undertaken cross-examination of the people from whom references were received.

The Tribunal erred in concluding that the ASC3 accepted the public did not require direct protection from Mr Davidson

[100] This ground of cross-appeal is directed at the statement in the penultimate sentence of [9]. As I understood the ASC3’s argument it was that its acceptance that there was no need for protection was as a consequence of the fact that Mr Davidson no longer held a practising certificate but that its concession went no broader than that. For Mr Davidson it was submitted that the ASC3 was seeking to resile from its earlier acceptance that the public did not require direct protection from Mr Davidson.

[101]   I have read the transcript of submissions but I am unable to find a basis for resolution of the issue whether or not the concession was more broadly made such that the fifth ground of cross-appeal would involve ASC3’s resiling from its original stance. However I do not consider that there is anything in the record to support the contention (if in fact it is made) that the public requires direct protection from Mr Davidson.  I note in that regard the observation of Miller J in Davidson v Registrar of Companies quoted

by the Tribunal52  that the public has nothing to fear from Mr Davidson.   I reject this

ground of cross-appeal.

This Court’s assessment

[102]   As I did in [72] above in the context of Mr Davidson’s appeal, I have also undertaken my own assessment of the issue whether Mr Davidson’s convictions reflect on  his  fitness  to  practise as  a lawyer.    My view on  that  issue coincides  with  the unanimous view of the Tribunal. Accordingly the cross-appeal is dismissed.

Appeal against penalty

[103]   Because both parties proceeded at the hearing on the basis that the appeal in relation  to  penalty  was  from  the  exercise  of  a  discretion  their  submissions  were structured by reference to the “wrong in principle” approach.  If I had been reviewing

the Tribunal’s decision on the basis that it was a discretionary one then I would not have

52 At [24].

been willing to interfere with the penalty of censure and costs which the Tribunal imposed.  On the basis of its conclusion that Mr Davidson’s convictions had tended to bring the profession into disrepute  I do not consider that the Tribunal  erred in its assessment of penalty in the particular manner recognised in Kacem v Bashir which would justify this Court reconsidering the issue of penalty.

[104]   However as explained in [9] above, I proceed on the basis not that the Tribunal’s decision was a discretionary one but rather that appeals from decisions on penalty, like the decisions on the charges themselves, require an appellate court to reach its own view.

The Tribunal’s penalty decision

[105]   Before the Tribunal the ASC3 sought a 12 month suspension together with a fine of $25,000 as well as orders as to costs.   The Tribunal regarded a number of the aggravating factors advanced in the ASC3’s submissions to be more pertinent to the criminal  offending  for  which  a  penalty had  already been  imposed.   As  mitigating circumstances the Tribunal considered Mr Davidson’s character and previous record, his previous contribution to the profession, his reputation and his remorse.   It concluded that the proper penalty to reflect the seriousness with which the profession regards the matter was a censure and a requirement that he meet a fair and proper proportion of the profession’s costs for his prosecution.

[106]   On appeal the ASC3 continued to submit that a period of suspension and/or a significant fine should have been imposed as a minimum in this case.

[107]   In his argument supporting the Tribunal’s decision on penalty Mr Davidson also

raised a jurisdictional issue concerning the availability of suspension as a penalty.

The issue of jurisdiction

[108]   The thrust of the argument that there was no jurisdiction to make a suspension order turned on the point that the charge against Mr Davidson arose from convictions entered on or about 2 September 2011 but the amendment to s 242(1)(e) of the Act

providing for suspension as a penalty for former practitioners did not take effect until

20 November 2012.53  The relevant background is as follows.

[109] Under the Law Practitioners Act 1982 the terms “barrister”, “practitioner” and “solicitor” were defined as meaning a person enrolled as a barrister and solicitor of the High Court. However the Lawyers and Conveyancers Act 2006 includes the term “lawyer” which is defined to mean a person who holds a current practising certificate as a barrister or as a barrister and solicitor. The term “practitioner” is then defined to mean a lawyer or a conveyancing practitioner as the case may be.

[110]   However there was inconsistency within a number of sections as to whether they applied to practitioners only or to both practitioners and former practitioners.  A case in point was s 242(1) which in paras (c)–(g) referred only to a lawyer, conveyancing practitioner or practitioner (as the case may be) but did not refer to a former lawyer, former conveyancing practitioner or former practitioner.  By contrast paras (i) and (j) refer to both current or former lawyers, conveyancing practitioners and employees.

[111]   A  series  of  amendments  were  made  by  the  Lawyers  and  Conveyancers Amendment Act 2012 including in particular to s 242(1)(e) to add references to among others former lawyers and former practitioners.54

[112]   Mr Davidson’s argument is that at all times until 20 November 2012 a penalty of suspension under s 242(1)(e) of the Act was able to be imposed only in relation to a “lawyer” being a person holding a current practising certificate. Mr Davidson ceased to hold a current practising certificate as at 30 June 2012.  Hence it was argued that the issue was whether that amendment, made after the convictions which are the basis of the charge, after the charge itself was laid, and after the hearing of the charge, can be applied to Mr Davidson.

[113] It was submitted that the position is covered by s 19 of the Interpretation Act

1999 which, reflecting long-standing common law principles against retrospectivity, provides:

53     Lawyers and Conveyancers Amendment Act 2012, s 2.

54     Sections 17, 18, 20 and 21.

19       Effect of repeal on prior offences and breaches of enactments

(1)      The repeal of an enactment does not affect a liability to a penalty for an offence or for a breach of an enactment committed before the repeal.

(2)      A repealed enactment continues to have effect as if it had not been repealed for the purpose of—

(a)      Investigating the offence or breach:

(b)      Commencing  or  completing  proceedings  for  the  offence  or breach:

(c)      Imposing a penalty for the offence or breach.

[114] Section 29 of the Interpretation Act defines “repeal” to include “expiry, revocation and replacement”. Consequently it was argued that s 242(1)(e) in its earlier form was revoked or replaced by the amendment with effect from 20 November 2012 and consequently it was therefore repealed within the meaning of the Interpretation Act as at that date.

Analysis

[115]   The proposition advanced for Mr Davidson is focused on the power to suspend a lawyer under s 242(1)(e).  Of course if sound it must also hold true for the power to suspend a conveyancing practitioner in s 242(1)(f).  Indeed the logical extension of the argument is that prior to the 2012 amendment in the case of a former practitioner the Tribunal would not have had the power to make striking off or cancellation of registration orders under s 242(1)(c) and (d).55   At first blush that appears a surprising state of affairs given that the orders authorised by s 242 are responsive to findings by the  Tribunal  under  s  241  in  relation  to  not  only  practitioners  but  also  former

practitioners and in relation to the entire spectrum of conduct captured by the four categories in s 241 (a)-(d).

[116]   The question then arises whether Parliament intended that scenario or whether the absence of references to former practitioners in s 242 (and in ss 244, 255 and 256)

was a simple drafting error.   If it was the latter, is there anything this Court can or

55     The same conclusion would follow in relation to the power under s 242(1)(g) to prohibit practice on

one’s own account.

should do about the matter?  The answer to that question is found in Inco Europe Ltd v

First Choice Distribution.56

[117]   Lord Nicholls of Birkenhead delivering the judgment of the House of Lords considered that in that case there had been an obvious drafting error.  He said:

In my view the decision of the Court of Appeal was correct.  Several features make it plain beyond a peradventure that on this occasion Homer, in the person of the draftsman of Schedule 3 to the Act of 1996, nodded.   Something went awry in the drafting of paragraph 37(2) of Schedule 3.  Paragraph 37(2) is the paragraph which set out the amendment made to section 18(1)(g) of the Act of

1981.   Moreover, what paragraph 37(2) was seeking to do, but on a literal reading of the language failed to achieve, is also abundantly plain.

[118]   He went on to explain the limited role of the courts in and the prerequisites to interpreting a statute in that fashion:

I  freely  acknowledge  that  this  interpretation  of  section  18(1)(g)  involves reading words into the paragraph.  It has long been established that the role of the courts in construing legislation is not confined to resolving ambiguities in statutory language. The court must be able to correct obvious drafting errors.  In suitable cases, in discharging its interpretative function the court will add words, or  omit  words  or  substitute  words.    Some  notable  instances  are  given  in Professor Sir Rupert Cross’s admirable opuscule, Statutory Interpretation, 3rd ed. (1995), pp. 93-105.  He comments, at p. 103:

“In omitting or inserting words the judge is not really engaged in a hypothetical reconstruction of the intentions of the drafter or the legislature, but is simply making as much sense as he can of the text of the statutory provision read in its appropriate context and within the limits of the judicial role.”

This power is confined to plain cases of drafting mistakes.  The courts are ever mindful that their constitutional role in this field is interpretative.  They must abstain from any course which might have the appearance of judicial legislation. A statute is expressed in language approved and enacted by the legislature.  So the   courts   exercise   considerable   caution   before   adding   or   omitting   or substituting words.  Before interpreting a statute in this way the court must be abundantly sure of three matters: (1) the intended purpose of the statute or provision in question; (2) that by inadvertence the draftsman and Parliament failed to give effect to that purpose in the provision in question; and (3) the substance  of  the  provision  Parliament  would  have   made,  although  not necessarily the precise words Parliament would have used, had the error in the Bill been noticed.   The third of these conditions is of crucial importance. Otherwise any attempt to determine the meaning of the enactment would cross the boundary between construction and legislation: see per Lord Diplock in Jones v Wrotham Park Settled Estates [1980] A.C. 74, 105-106. In the present case these three conditions are fulfilled.

56     Inco Europe Ltd v First Choice Distribution [2000] 1 WLR 586 (HL).

[119]   The power to remedy drafting errors has been recognised in New Zealand by, for example, Tipping J in Air New Zealand Ltd v McAlister:57

[96]      The question becomes what the Court can do to remedy this problem. The powers of the Court in the case of drafting errors are helpfully discussed in Burrows and Carter’s Statute Law in New Zealand. The Court can correct a drafting error by addition, omission or substitution of words if three conditions are satisfied: (i) the Court must be sure that there is a drafting error; (ii) the Court  must  also  be  sure  what  Parliament  was  trying  to  say;  and  (iii)  the necessary correction must not involve too great a re-writing of the defective language. This last consideration is obviously a matter of degree and will often depend on the Court’s assessment of whether, in the light of the overall interests of justice, when balanced against the proper role of the courts, the redrafting exercise should be left to Parliament. Indeed, the more elaborate the necessary redrafting,  the  less likely it  is  that the  first  two  conditions  will  have  been fulfilled.

[97]      This formulation is supported by the decision of the House of Lords, and in particular the speech of Lord Nicholls, in Inco Europe Ltd v First Choice Distribution. His Lordship said that the Court must be able to correct obvious drafting errors, and for that purpose, as part of its interpretative function, the Court may add, omit or substitute words. The conditions under which this may be  done  are  necessarily  strict  so  as  to  preserve  the  boundary  between interpreting and legislating. That is why the Court must be sure there is a drafting error and equally sure what Parliament was trying to achieve.

(citations omitted)

[120]   Both the purpose and scheme of the statute are critical to an analysis as to whether in the period 2006-2012 Parliament intended the scope of orders against former practitioners to be as confined as the argument advanced suggests or whether there was a simple drafting mistake in referring only to practitioners and omitting references to former practitioners.  As noted earlier the Law Practitioners Act 1982 provided for the full range of orders in relation to former practitioners by virtue of the then definition of “practitioner” referring to the state of enrolment as a barrister and solicitor and not by reference to whether a current practising certificate was held by the lawyer.

[121]   Two of the purposes of the Act stated in s 3 are to maintain public confidence in the provision of legal services and conveyancing services and to protect the consumers of legal services and conveyancing services.  To achieve those purposes the Act, among other things, reforms the law relating to lawyers and provides for a more responsive

regulatory regime in relation to lawyers and conveyancers.58

57     Air New Zealand Ltd v McAlister [2010] 1 NZLR 153 (SC) at [96]-[97].

58     Section 3(2)(a) and (b).

[122]   Part 7 of the Act, which addresses complaints and discipline, is stated in s 120 to have four purposes of which the first and fourth are as follows:

120     Purposes

(1)       The first purpose of this Part is to provide a framework in relation to complaints and discipline.

(2)      The framework is, in relation to complaints, to be—

(a)      one that relates to complaints about—

(i)       lawyers and former lawyers; and

(ii)      incorporated  law  firms  and  former  incorporated  law firms; and

(iii)      persons   who   are   not   practitioners   but   who   are employees or former employees of lawyers and incorporated law firms; and

(iv)     conveyancing practitioners and former conveyancing practitioners; and

(v)       incorporated     conveyancing     firms     and     former incorporated conveyancing firms; and

(vi)      persons   who   are   not   practitioners   but   who   are employees or former employees of conveyancing practitioners and incorporated conveyancing firms; and

(b)       one  within  which  complaints  of  the  kind  referred  to  in paragraph (a) may be processed and resolved expeditiously and, in appropriate cases, by negotiation, conciliation, or mediation.

(3)       The framework is, in relation to discipline, to be one within which disciplinary charges against persons of the kinds described in subparagraphs   (i) to (vi)  of   subsection   (2)(a)   may   be   heard   and determined expeditiously.

...

(6)       The fourth purpose of this Part is to preserve the inherent jurisdiction of the High Court to strike off the roll and discipline lawyers in their capacity as officers of the High Court.

[123]   Section 121 imposes an obligation on the New Zealand Law Society and on the New Zealand Society of Conveyancers to establish complaints services to receive complaints  about  lawyers  and  former  lawyers  and  conveyancing  practitioners  and

former conveyancing practitioners respectively.59   Section 132 provides that any person may complain to the appropriate complaints service about, among other things, the conduct of a practitioner or former practitioner or the standard of the service provided in relation to the delivery of regulated services by a practitioner or former practitioner.

[124]   The  powers  of  a  Standards  Committee  under  s  152  after  inquiring  into  a complaint  received  by  it  include  the  power  to  determine  that  the  complaint  be considered by the Disciplinary Tribunal in which event the Committee is required to frame an appropriate charge to the Tribunal under s 154.

[125]   The functions of the Disciplinary Tribunal include hearing and determining any charge against a practitioner or former practitioner or an incorporated firm or former incorporated  firm  or  an  employee  or  former  employee  of  a  practitioner  or  an incorporated firm that is made to it by a Standards Committee or the Legal Complaints Review Officer.60     Recognition of the fact that proceedings before the Tribunal may relate not only to a lawyer but also to a former lawyer etc is reflected in the provision concerning the constitution of the Tribunal in s 234(4).

[126]   That sequence of provisions in Part 7 culminates in the Disciplinary Tribunal’s

jurisdiction in s 241 to contemplate the orders authorised by s 242.  Section 241 states:

241      Charges that may be brought before Disciplinary Tribunal

If the Disciplinary Tribunal, after hearing any charge against a person who is a practitioner or former practitioner or an employee or former employee of a practitioner or incorporated firm, is satisfied that it has been proved on the balance of probabilities that the person—

(a)       has been guilty of misconduct; or

(b)       has been guilty of unsatisfactory conduct that is not so gross, wilful, or reckless as to amount to misconduct; or

(c)       has been guilty of negligence or incompetence in his or her professional capacity, and that the negligence or incompetence has been of such a degree or so frequent as to reflect on his or her fitness to practise or as to bring his or her profession into disrepute; or

59     The establishment of Lawyers Standards Committees and Conveyancing Practitioners Standards

Committees is provided for in ss 126 and 127 respectively.

60     Section 227(b).

(d)       has been convicted of an offence punishable by imprisonment and the conviction reflects on his or her fitness to practise, or tends to bring his or her profession into disrepute,—

it may, if it thinks fit, make any 1 or more of the orders authorised by section

242.

[127]   It appears clear that until this point in the complaints and disciplinary process both practitioners and former practitioners are being addressed on the same footing. However on the argument made for Mr Davidson at s 242 there is a fork in the road so far as concerns the “orders authorised by section 242” referred to in the final lines of s 241.

[128]   In my view it would be a very odd result if, for example in the case of a finding of misconduct in terms of s 241(a), a practitioner would be vulnerable to the full range of orders in s 242 but a former practitioner would only be susceptible to a financial penalty under s 242(1)(i) or to the orders in 242(1)(a) and (b).  It is not apparent to me how such an outcome would be seen to promote the purposes in ss 3 and 120 of the Act.61

[129]   In my view there was a plain drafting mistake in the omission from s 242 of references to a former lawyer or former conveyancing practitioner as the case may be and likewise in the omission of a reference to former practitioners in ss 244, 255 and

256.62    I do not consider that there is any sound basis for concluding that Parliament

intended to change the law with reference to the striking off or suspension of former practitioners from that which prevailed under the Law Practitioners Act 1955.

[130]  There is a further feature of the legislation which I consider supports my conclusion.  Section 242(1)(b) provides that the Tribunal may make an order declaring that in its opinion any of the circumstances specified in s 163 exist in respect of a practitioner or former practitioner.   The circumstances listed in s 163, which is itself

explicit in referring to both practitioners and former practitioners, include:

61 Indeed, there is nothing in Hansard on the Lawyers and Conveyancers Act 2006 bearing on this issue.

62     I do not suggest that there was any mistake in the fact of references to only a practitioner in ss 155,

212(2) and (3), and 227(a) which concern the interim period pending hearing and determination of a charge.

(i)        the name of the practitioner or former practitioner has been struck off the roll; or

(j)       the practitioner or former practitioner has been suspended from practice;

or

(k)       the  practitioner  or  former  practitioner  has  been  ordered  by  the Disciplinary Tribunal not to practise as a solicitor on his or her own account;

[131]   If the Disciplinary Tribunal did not have the power (until the 2012 amendment) to make orders under s 242(1)(c), (d) or (e), then the question might fairly be posed: how could the various sets of circumstances referred to in s 163(i), (j) and (k) subsist? In my view the recognition of those circumstances in s 163 is a further indicator that even prior to the 2012 amendment the Disciplinary Tribunal must have been intended by Parliament to have the power to make orders under s 242(1)(c), (d) and (e) in respect of former practitioners.

[132]   That analysis of the scheme and stated purposes of the Act leads me to conclude that the intended purpose of the Act was that both practitioners and former practitioners should be subject to the full spectrum of penalties proportionate to the various charges provided for in s 241 and that by inadvertence the draftsman and Parliament failed to give effect to that purpose in s 242 and relatedly in ss 244, 255 and 256.   The third question, to adopt Tipping J’s words, is whether I can be sure what Parliament was trying to say.  In the present case there is no difficulty in that regard.  The formula of words necessary to give effect to that inferred intention is apparent from so many other provisions in the Act.

[133]   Consequently I reject the submission that the Tribunal did not have jurisdiction to make an order under s 242(1)(e) suspending Mr Davidson from practice as a barrister and solicitor for a period not exceeding 36 months.

[134]   In coming to my conclusion on the three  Inco Europe matters  I have been mindful of the injunction in several cases that subsequent statutory amendments should not be used to interpret the pre-amendment legislation.63   Consequently I have striven to

avoid taking into account the fact and content of the amendments to s 242 and to other

63     For example, Databank Systems Ltd v Commissioner of Inland Revenue [1990] 3 NZLR 385 (PC);

Agnew v Pardington [2006] 2 NZLR 520 (CA).

sections in the 2012 amendment.  Plainly however that amending legislation cannot be banished from my subconscious particularly when the wording of the amendment coincides precisely with the way in which I consider the pre-amendment sections are required to be read in order to give effect to Parliament’s intention in 2006.

This Court’s assessment of an appropriate penalty

[135]   In approaching the issue of suspension the observations of the Full Court in Daniels v Complaints Committee 2 of the Wellington District Law Society are informative:64

[22]      It is well known that the Disciplinary Tribunal’s penalty function does not have as its primary purpose punishment, although orders inevitably will have some such effect. The predominant purposes are to advance the public interest (which include “protection of the public”), to maintain professional standards, to impose sanctions on a practitioner for breach of his/her duties, and to provide scope for rehabilitation in appropriate cases. Tribunals are required to carefully consider alternatives to striking off a practitioner. If the purposes of imposing disciplinary sanctions can be achieved short of striking off then it is the lesser alternative that should be adopted as the proportionate response. That is “the least restrictive outcome” principle applicable in criminal sentencing. In the end, however, the test is whether a practitioner is a fit and proper person to continue in practice. If not, striking off should follow. If striking off is not required but the misconduct is serious, then it may be that suspension from practising for a fixed period will be required.

...

[24]     A suspension is clearly punitive, but its purpose is more than simply punishment. Its primary purpose is to advance the public interest. That includes that  of  the  community  and  the  profession,  by  recognising  that  proper professional standards must be upheld, and ensuring there is deterrence, both specific for the practitioner, and in general for all practitioners. It is to ensure that  only  those  who  are  fit,  in  the  wider  sense,  to  practise  are  given  that privilege. Members of the public who entrust their personal affairs to legal practitioners are entitled to know that a professional disciplinary body will not treat lightly serious breaches of expected standards by a member of the profession.

...

[34]     In considering sanctions to be imposed upon an errant practitioner, a Disciplinary Tribunal is required to view in total the fitness of a practitioner to practise, whether in the short or long term. Criminal proceedings of course reflect badly upon the individual offender, whereas breaches of professional standards may reflect upon the wider group of the whole profession, and will arise if the public should see a sanction as inadequate to reflect the gravity of the

64     Daniels v Complaints Committee 2 of the Wellington District Law Society [2011] 3 NZLR 850.

proven conduct. The public are entitled to scrutinise the manner in which a profession disciplines its members, because it is the profession with which the public must have confidence if it is to properly provide the necessary service. To maintain public confidence in the profession members of the public need to have  a  general  understanding  that  the  legal  profession,  and  the  Tribunal members  that  are  set  up  to  govern  conduct,  will  not,  treat  lightly  serious breaches of standards.

[35]     The Tribunal recognised this important dimension of “public interest” when referring to the well known dicta of Sir Thomas Bingham MR in Bolton v Law Society:16

In most cases the order of the tribunal will be primarily directed to one or other or both of two other purposes. One is to be sure that the offender does not have the opportunity to repeat the offence. This purpose is achieved for a limited period by an order for suspension; plainly it is hoped that the experience of suspension will make the offender meticulous in his future compliance with the required standards. The purpose is achieved for a longer period, and quite possibly be indefinitely by an order of striking off. The second purpose is the most fundamental of all; to maintain the reputation of the solicitors’ profession as one in which every member, of whatever standing, may be trusted to the ends of the earth.

[136]   That  passage  from  Bolton  was  preceded  by  the  following  observation  by

Sir Thomas Bingham MR:

If a solicitor is not shown to have acted dishonestly, but is shown to have fallen below the required standards of integrity, probity and trustworthiness, his lapse is less serious but it remains very serious indeed in a member of a profession whose reputation depends upon trust.  A striking off order will not necessarily follow in such a case, but it may well.  The decision whether to strike off or to suspend will often involve a fine and difficult exercise of judgment, to be made by the tribunal as an informed and expert body on all the facts of the case.  Only in a very unusual and venial case of this kind would the tribunal be likely to regard as appropriate any order less severe than one of suspension.

[137]   In  the  memorandum  of  22  August  2013  filed  subsequent  to  the  hearing Mr Davidson submitted that on the facts of this case, whether one applied the May v May or Austin, Nichols approaches, the result should be the same, namely the Tribunal’s analysis cannot be impugned.

[138]   With reference to the issue of deterrence it was submitted that the place of deterrence in the context of convictions for strict liability offences committed by a man whom all accept acted honestly and honourably throughout might legitimately be questioned.  Noting the requirement in sentencing in criminal matters that the Court is

to impose the least restrictive outcome, it was submitted that the further penalties sought by  the ASC3  (suspension  and  a  substantial  fine)  were  far  in  excess  of  the  least restrictive  outcome  appropriate.    Indeed  it  was  said  that  in  a  number  of  respects Mr Davidson  might  justifiably  have  complained  about  the  terms  of  the  censure. However he accepted that that penalty was one within the range of penalties which the Tribunal could legitimately impose having concluded that the second limb of the charge was proved.  It was emphasised however that Mr Davidson’s acceptance should not be allowed  to  obscure  the  further  and  devastating  blow  which  the Tribunal’s  censure represented for Mr Davidson.

[139]   In advocating for additional orders the ASC3 drew attention again to the several matters addressed in the context of the consideration of the charges, namely:

(a)      the convictions involved misrepresentations being made to the public in prospectuses and investment statements which were the cornerstone documents for issuing securities to the public;

(b)the offending involved a breach of trust to investors as referred to in Moses and Mr Davidson’s conduct fell grossly below the standard expected of him;

(c)      Mr  Davidson  was  in  a  leadership  role  as  Chairman  of  the  board  of directors and that role was to ensure that the board received appropriate information for the directors to perform their legal obligations;

(d)Mr  Davidson’s  distinguished  career  as  a  lawyer  was  promoted  to investors in the prospectuses and investment statements presumably as he being someone whom they could trust with their funds;

(e)      Bridgecorp  had  approximately 14,500  investors,  most  of whom  were individuals rather than institutional investors, and there were significant losses suffered by a large number of members of the public as a result of the offending.

[140]   The ASC3 submitted that if there had been any evidence of dishonesty then there was little doubt that an order striking off the roll would have been made by the Tribunal. The ASC3 explained that an order imposing a period of suspension for 12 months was sought for the purposes of the public interest and as a deterrence to other practitioners. A fine in the region of $25,000 was sought as recognition of the need to maintain the reputation of the legal profession, to sustain public confidence in it and to act as a deterrence to others.

[141]   In considering what is a proper order in all the circumstances I am cognisant of the mitigating factors discussed by Andrews J that caused Her Honour to adjust a starting point of three years and three months imprisonment to one year and eight months which in turn made home detention an available sentence.  In noting that home detention is not to be regarded as a soft option but is a real alternative to imprisonment, Her Honour said in the sentencing notes:

[38]     Having  considered  the  matter  carefully,  I  cannot  accept  that  the purposes of accountability, deterrence and denunciation, and the principles of assessing culpability and maintaining consistency in sentencing, would be met by a sentence that is less restrictive than home detention.  Specifically, I do not accept community detention, or indeed community work, would be an appropriate sentence.   However, I accept that in your case, a sentence of imprisonment is not appropriate.

[142]   In all the circumstances of this case I do not consider that a censure was a sufficient penalty so as to maintain the public’s confidence in the profession’s discharge of its obligation to discipline its members.  While with respect I do not consider that in New Zealand an order less severe than one of suspension is only appropriate in a very

unusual and venial case,65 I do not view the present case as one where an order less than

suspension should be entertained.

[143]   However I do not consider that a period of suspension of 12 months as sought by the ASC3 is appropriate.   In my view an order for suspension for nine months will suffice to indicate the profession’s concerns and will provide a degree of confidence for the public as to the integrity of the disciplinary process while at the same time also reflecting the several mitigating factors which are summarised in the sentencing notes of

Andrews J.

65     See Bolton at [136] above.

[144]   For the avoidance of doubt I record that the period of suspension imposed is not intended to be a temporal reflection of what happens to be the same period of home detention in the sentence imposed by Her Honour.  Given that the charge proved before the Tribunal was in respect of the second and not the first limb of s 242(d), I do not consider that the incongruity proposition adopted in Ziems has any application in the present matter.

[145]   In my assessment an order for suspension of nine months duration is sufficient in all the circumstances.   It is unnecessary and inappropriate to also impose a fine, particularly having regard to the financial implications for Mr Davidson of both the reparation order made by Andrews J and the costs and reimbursement orders made by the Tribunal.

Disposition

[146]   Mr Davidson’s appeal is dismissed. The ASC3’s cross-appeal is also dismissed.

[147]   The ASC3’s appeal against the Tribunal’s decision on penalty is allowed.  This Court orders that the Tribunal’s penalty decision is modified by including an order under s 242(1)(e) that Mr Davidson be suspended from practice as a barrister and a solicitor for a period of nine months.  If it is necessary for the Court to specify a date of commencement, that date shall be 1 October 2013.

[148]   There are no orders for costs on the appeal and cross-appeal.   The ASC3 is

entitled to costs on the appeal against the Tribunal’s decision on penalty on a category

2B basis.  I certify for second counsel.

Brown J