J v Legal Complaints Review Officer
[2019] NZHC 2089
•23 August 2019
ORDER PROHIBITING PUBLICATION OF THE NAME OF THE APPLICANT, THE APPLICANT’S FIRM, THE NATURE OF THE APPLICANT’S PRACTICE AND THE CITY IN WHICH IT IS BASED, ANY OTHER INFORMATION WHICH MIGHT IDENTIFY THE APPLICANT, HIS FIRM OR THE NATURE OF HIS PRACTICE, THE NAME OF THE LEGAL INVESTIGATOR APPOINTED TO INVESTIGATE THE APPLICANT, THE NAME OF THE INVESTIGATOR’S LAW FIRM, OR THE NAME OF THE CLIENT WHO THE INVESTIGATOR AND HIS LAW FIRM REPRESENT AND THE NATURE OF THAT CLIENT’S BUSINESS. IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
I TE KŌTI MATUA O AOTEAROA TĀMAKI MAKAURAU ROHE
CIV-2018-404-1958
[2019] NZHC 2089
UNDER The Judicial Review Procedure Act 2016, the New Zealand Bill of Rights Act 1990 and Part 30 of the High Court Rules 2016 IN THE MATTER
Of an application for judicial review
BETWEEN
J
Applicant
AND
LEGAL COMPLAINTS REVIEW OFFICER
First Respondent
AND
THE NATIONAL STANDARDS COMMITTEE OF THE NEW ZEALAND LAW SOCIETY
Second Respondent
Hearing: 11 April 2019 Appearances:
G M Illingworth QC & J L Libbey for the Applicant
M J Hodge & M J Mortimer for the Second Respondent
Judgment:
23 August 2019
Reissued:
10 September 2019
[REDACTED] JUDGMENT OF PAUL DAVISON J
This judgment was delivered by me on 23 August 2019 at 12:00 pm pursuant to r. 11.5 of the High Court Rules
Registrar/Deputy Registrar
J v LEGAL COMPLAINTS REVIEW OFFICER [2019] NZHC 2089 [23 August 2019]
Introduction
[1] This is an application by a law practitioner, J (the applicant)1, for judicial review of decisions made by the National Standards Committee of the New Zealand Law Society (the NSC) and the Legal Complaints Review Officer (the LCRO) in the course of an investigation into whether systemic conduct issues exist in the applicant’s legal practice. Those decisions are:
(a)a decision of the NSC, on 22 December 2017, directing the applicant to produce four categories of information under s 147(2) of the Lawyers and Conveyancers Act 2006 (the Act) that the applicant had declined to produce voluntarily;
(b)a decision of the LCRO, on 8 August 2018, upholding the NSC’s directions;
(c)a decision of the NSC, on 10 August 2018 (communicated to the applicant on 24 August 2018), confirming the appointment of an investigator; and
(d)a decision of the NSC, on 10 August 2018, confirming its first set of directions, and requiring a further class of documents under s 147(2) of the Act.
Background
[2]The applicant is a barrister and solicitor in sole practice in [Redacted].
[3][Redacted].
[4][Redacted].
[5] In August 2017, the NSC commenced an own-motion investigation into matters connected with the applicant’s legal practice. The NSC says that it holds
1 The name of the applicant has been anonymised.
concerns about the applicant’s relationship with [Redacted], and how that relationship has impacted on the applicant’s relationship with his other clients and his compliance with the professional standards expected of him.
[6] On 5 October 2017, the NSC wrote to the applicant, advising that it had commenced an own-motion investigation pursuant to s 130(c) of the Act. The NSC advised:
The NSC’s resolution was made in light of a number of conduct and client care complaints raising similar issues arising from the carriage by your legal practice of [redacted] which is potentially suggestive of systematic issues with the manner in which such files are handled by your practice rather than the same being isolated incidents.
[7] The letter enclosed copies of the notices of appointment of [redacted] and [redacted] as investigators pursuant to s 144 of the Act. The notices of appointment, which are materially the same, were described in the letter as outlining the scope and focus of the NSC’s investigation. The notices of appointment each stated:
3.In particular, the NSC requires you, generally, to inquire into and report upon any conduct and/or client care issues related to or arising from the practice of sole practitioner [J] and, specifically, to inquire into and report upon any conduct and/or client care issues concerning:
…
[8] The investigation is wide ranging. The specific matters the investigators are required to inquire into pursuant to the notices of appointment, include the following:
(a)The carriage by J of [redacted] litigation files [redacted].
(b)The relationship between J and [redacted], including any financial, business, or other connection that may exist including what payments, if any, he receives from [redacted] and the financial interests, if any, he may have in [redacted].
(c)The extent to which any connection between J and [redacted] is disclosed to any relevant [redacted] client of J.
(d)The extent to which any connection between J and [redacted] may raise any potential or actual conflicts of interest, including:
(i)[Redacted].
(ii)[Redacted].
(iii)Whether J’s business and/or professional relationship with [redacted] is consistent with his professional duties under the Act and associated rules and regulations, including the obligations in the Act and the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 regarding a lawyer’s duty: to be independent; not to act or continue to act if there is a conflict of interest; not to offer or receive any reward or inducement in respect of advice given from a third party; to protect and promote the interests of the client to the exclusion of the interests of third parties; to pursue the best interests of the client; and whether J has been or is acting for two clients, one being [redacted].
(iv)Whether J provided client service information in writing to his clients including the basis on which the fees will be charged, when payment of his fees is to be made, and whether the fee may be deducted from funds held in trust on behalf of the client.
(e)Whether fee arrangements between J and clients amount to conditional fee arrangements under ss 333 to 335 of the Act.
(f)Whether J has complied with his duty to take reasonable steps to ensure that: clients understand the nature of the retainer; clients are kept informed about progress of the retainer; and clients are consulted about the steps to be taken to implement their instructions.
(g)Whether J has complied with his duty to complete the regulated legal services required by any given client under their retainer.
[9] The investigators thereafter commenced their investigation and initially required the applicant to provide the documents and information detailed in a schedule annexed to their letter to the applicant dated 16 October 2017 and subsequently requested additional information, including a request that [redacted] be given “read only” access to J’s legal practice Xero account. J responded by generally complying with the investigators’ requests for information other than as regards the following items, which he declined to provide (the information):
(a)income tax returns and financial statements for J and his legal practice for the financial years ending 31 March 2012 to 31 March 2017 (inclusive);
(b)details of J’s personal bank accounts held solely or jointly with others opened or active over the seven years prior to October 2017, and any bank accounts in respect of which he has or has had signing authority or internet access, including any accounts over which J held power of attorney;
(c)“read only” access to J’s firm’s Xero account; and
(d)the names of clients [redacted] and in respect of which J has made notifications to his firm’s professional indemnity insurer.
[10] On 22 December 2017, the NSC purported to exercise a power under s 147(2) of the Act to direct the applicant to provide the information. The NSC said that it considered the information to be reasonably necessary for the purposes of the investigation. In relation to the first three items of information, the NSC said:
[It] considers that the accounts/records are reasonably necessary for the purposes of the inquiry/investigation in relation to the issue of the relationship between [J] and [redacted], including any financial, business or other connection that may exist.
And, in relation to the final item of information, being the copies of client files for [redacted] in respect of which the applicant has made insurance notifications, the NSC said:
[It] considers that the information … is reasonably necessary for the purposes of the inquiry/investigation in relation to the issue of any conduct and/or client care issues concerning the carriage by [J] of insurance litigation files, [redacted] where [J] has acted for, or is acting for [redacted] and/or related entities [redacted].
[11]The applicant did not comply with those directions.
[12] On 26 January 2018, the applicant applied to the LCRO for a review of the NSC’s decision to issue the directions to provide those items of information. The LCRO, in a decision of 08 August 2018, upheld the NSCs decision to issue directions.
[13] On 14 June 2018, the applicant received an email from a [redacted] based in the firm’s [redacted], on behalf of [redacted] client. In their email [redacted] sought initial disclosure from the applicant in relation to a civil claim which J had commenced on behalf of a [redacted]. As J was acting, and had acted, for a number of clients who have sued or are suing [redacted], and as one of the investigators [redacted], his solicitors wrote to [redacted] on 20 June 2018 alleging that he had a conflict of interest, and requested that he resign his position as an independent investigator for the NSC investigation. A copy of the letter was also sent to the New Zealand Law Society via the Lawyers Complaint Service.
[14] An email response to the letter of 20 June 2018 was received from the NSC Legal Standards’ solicitor on 21 June 2018 advising that the potential conflict of [redacted] would be considered by the NSC at a meeting to be held the following week. [Redacted] did not respond to the letter.
[15] On 3 July 2018, the applicant’s solicitors wrote to the Lawyers Complaint Service to make a formal complaint that [redacted] was in a position of conflict in investigating the applicant while his law firm was representing [redacted] in [redacted] litigation. The applicant’s solicitors requested that [redacted] be removed as an investigator and that all documents and information provided to him by the applicant be immediately returned by [redacted] to the applicant. The applicant’s solicitors
requested confirmation that [redacted] would no longer be acting as an investigator in respect of the applicant’s investigation.
[16] On 9 July 2018, the Legal Standards’ solicitor of the NSC responded by letter, saying that the NSC had considered the issue of a potential conflict on 28 June 2018, and that it had written to [redacted] to request his response. Annexed to the letter was a copy of the letter the NSC had sent to [redacted] regarding the issue, requesting him to confirm that he was aware of his statutory obligations under s 188 of the Act, and to outline the means by which he would ensure compliance with his confidentiality obligations.
[17] On 30 July 2018, [redacted] responded by email to the NSC. He advised that he understood his obligations, and that the electronic files relating to his investigation of the applicant were secure and only able to be accessed by himself, his junior and his secretary. [Redacted] explained:
…
I am not involved in any litigation files for [Redacted], nor do I expect to be asked to be involved. I would decline, in the unlikely event that I were asked. I have provided advice to [Redacted] recently. The details are confidential. Nevertheless, I can assure the committee and [J] that this had nothing to do with any issues associated with [J] or any proceeding in which he is representing a party suing [Redacted].
I remain willing to continue with the investigation.
[18] A copy of [Redacted] response was sent via email to the applicant by the NSC on 31 July 2018. That email also stated that if the applicant wished to comment on [Redacted] letter, he should do so by 7 August 2018, after which the NSC would decide whether [Redacted] should continue in his role as investigator.
[19] On 7 August 2018, the applicant’s solicitors wrote to the NSC and advised that J’s concerns regarding [Redacted] conflict of interest had been heightened by his disclosure that he had recently provided advice to [Redacted] on an undisclosed matter.
[20] On 10 August 2018, the NSC met and affirmed its previous decision to proceed with [Redacted] as an investigator (together with [Redacted]) for NSC. The NSC did
not consider there to be any grounds to disqualify [Redacted] from continuing to act as an investigator in relation to the applicant. The NSC noted that [Redacted] was carrying out a statutory function as an independent investigator on behalf of the NSC, and that he was aware of his statutory duties of confidentiality to the applicant and was complying with those duties. The NSC determined that the matters raised by the applicant via email on 7 August 2018 did not warrant [Redacted] disqualification. Despite the applicant’s solicitors having requested an update on 21 August 2018, the decision made by the NSC at its meeting on 10 August 2018 was not communicated to the applicant’s solicitors until 24 August 2018.
[21] On 20 August 2018, [Redacted] wrote to the Legal Standards Officer of the Central National Standards Committee 3 (Committee 3) of the New Zealand Law Society, setting out his response to the complaint made by the applicant’s solicitors regarding his firm’s engagement as solicitors for [Redacted]. As regards the further complaint that he had personally acted for [Redacted], [Redacted] said:
…
As regards my having advised [Redacted], this was a discrete, one-off issue that did not pertain to any litigation file involving [J’s] clients who have proceedings against [Redacted]. My involvement was over a period of days during June 2018 and the matter was concluded shortly after my involvement was complete. The matter was confidential and obviously subject to legal professional privilege. [J] and the committee will therefore have to accept my assurance set out above. I felt it important to disclose it to the National Standards Committee even though it is irrelevant to the investigation that I am conducting jointly with [Redacted].
[22] On 22 August 2018, the New Zealand Law Society’s Lawyers Complaint Service (Lawyers Complaint Service) wrote to the applicant’s solicitor concerning the applicant’s complaint about [Redacted], and annexing [Redacted] letter of 20 August 2018, setting out his response to the complaint. The applicant was invited to respond by 3 September 2018, before Committee 3 met to consider whether to inquire into the complaint or take no further action.
[23] On 24 August 2018, in the same letter in which the NSC informed the applicant of its decision of 10 August 2018 affirming its appointment of [Redacted] as investigator, the applicant was also informed that on 10 August 2018, the NSC had
confirmed its previous decision made at its meeting on 22 December 2017 that J was to provide the investigators by 7 September 2018, with:
The accounts, records, and information as directed by the NSC on 22 December 2017 and as notified to the applicant’s solicitors by the NSC in its letter dated 22 December 2017.
And pursuant to a further s 147 direction, J was also to provide to the NSC and its investigators electronic copies of the contents of all of the client files specified in the investigators’ interim reports dated 14 December 2017 and 16 February 2018
[24]In its letter of 24 August 2018, the NSC said that the information was:
…necessary for the purposes of the NSC’s investigation (in particular, in relation to the issue of any conduct and/or client care issues concerning the carriage by [J] of [redacted] where [J] has acted for, or is acting for, [redacted].
Subject to the possible exception noted below, [J] is to include all confidential and privileged material. As the LCRO noted, there is a distinction between confidential material and privileged material, and not all confidential material will be privileged.
The NSC considers that material can only be withheld if a claim to privilege is asserted by the client (as the privilege-holder) with notice that the material is the subject of a Standards Committee requirement pursuant to section 147 of the Lawyers and Conveyancers Act 2006 and that disclosure under s 147 does not result in a loss of privilege…..
[25] On 31 August 2018, the applicant’s solicitors responded to the Lawyers Complaints Service by email advising that they were not satisfied with the response of [Redacted] on a number of grounds and reiterated the applicant’s request that an investigator be appointed to consider this matter properly.
[26] On 18 September 2018, the Lawyers Complaints Service sent a letter to the applicant’s solicitor saying that on 4 September 2018 Committee 3 had considered the applicant’s complaint against [Redacted]. The letter stated that the matter remained before Committee 3 and that any outcome of the meeting would be communicated to the parties in writing at the earliest opportunity.
[27] On 16 October 2018, Committee 3 issued a written decision regarding the applicant’s complaint against [Redacted]. It resolved to take no further action in respect of the complaint. Committee 3 noted, however, that it had not purported to
resolve the issue of whether [Redacted] is conflicted in his appointment as investigator. Committee 3 explained that it considered the complaint to be a collateral attack on the ongoing investigation into the applicant, as it constituted a challenge to the appointment of an investigator. Committee 3 considered that if the applicant wished to challenge the appointment of [Redacted], then the proper avenue was through the NSC in charge of the investigation, and if the applicant was not satisfied with their decision then by way of review to the LCRO or the High Court. Committee 3 also stated that as the complaint related to [Redacted] conduct in his role as investigator, the conduct the applicant sought to impugn was not connected to the provision of regulated services, and that in order for a lawyer to fall within the disciplinary reach of the Committee, that lawyer must have been providing regulated services.
Law
Own motion investigations
[28] The power to commence an own-motion investigation is contained in the Act, which relevantly provides:
130 Functions of Standards Committees
The functions of each Standards Committee are (subject to any limitations imposed on the committee by or under this Act or the rules that govern the operation of the committee)—
…
(c) to investigate of its own motion any act, omission, allegation, practice, or other matter that appears to indicate that there may have been misconduct or unsatisfactory conduct on the part of a practitioner or any other person who belongs to any of the classes of persons described in section 121:
…
[29] Upon commencing such an inquiry, the Act requires the NSC to provide the practitioner with notice of the complaint:
141 Notice to person to whom complaint or inquiry relates
The Standards Committee—
(a)must send particulars of the complaint or matter to the person to whom the complaint or inquiry relates, and invite that person to make a written explanation in relation to the complaint or matter:
…
Powers of investigation
[30] The power to require a practitioner (defined as a “source of information”) to comply with the directions of the NSC or its investigators to provide information is found in s 147 of the Act. That section relevantly provides:
147 Powers of investigation
(1)In this section, source of information means—
(a)a practitioner or former practitioner:
…
(2)For the purposes of any inquiry or investigation being conducted under this Act, a Standards Committee or an investigator—
(a)may, at any time, require a source of information to do any of the following:
(i)produce for inspection by the Standards Committee or investigator all books, documents, papers, accounts, or records which are in the possession or under the control of the source of information and which are reasonably necessary for the purposes of the inquiry or investigation:
(ii)allow copies of, or extracts from, any such books, documents, papers, accounts, or records to be made:
(iii)furnish, in a form approved by, or acceptable to, the Standards Committee or investigator, any information or particulars that may be required by the Standards Committee or investigator, and any copies of, or extracts from, any such books, documents, papers, accounts, or records:
(iv)give to the Standards Committee or investigator such information in relation to any such books, documents, papers, accounts, or records as may reasonably be required by the Standards Committee or investigator:
(v)produce to the Standards Committee or investigator any trust account records required under this Act or any regulations or rules to be kept by a practitioner or
former practitioner or an incorporated firm or former incorporated firm, whether or not those trust accounts are held by the practitioner or former practitioner or a related person or entity or the incorporated firm or former incorporated firm:
(vi)allow, to such extent as may reasonably be required in relation to the matters under inquiry or investigation, inspection of all records and documents relating to money received by the person to whom the complaint or inquiry relates or any related person or entity or any agent or banker of the related person or entity, whether the money has been paid into a private account or a trust account at a bank or has not been paid to the credit of any such account:
(vii)assist the Standards Committee or investigator by requiring the person or entity who is producing the record or document or trust account records to reproduce, in usable form, any information recorded or stored in the document or record or trust account records:
…
The application for judicial review
[31] As I have noted, the applicant challenges and seeks judicial review of three decisions of the NSC and one decision of the LCRO.
[32] In respect of directions issued by the NSC on 22 December 2017, pursuant to s 147 of the Act, the applicant says that decision was flawed, and he relies on the following grounds of judicial review:
(a)breach of natural justice;
(b)error of law;
(c)failure to give reasons;
(d)the decision took account of irrelevant considerations and failed to take account of relevant considerations; and
(e)unreasonableness.
[33] In respect of the decision of the LCRO, on 8 August 2018, to uphold the NSC’s directions, the applicant also says that decision was flawed. In doing so, he relies on the following grounds of judicial review:
(a)error of law;
(b)mistake of fact;
(c)flawed reasoning;
(d)the decision took account of irrelevant considerations and failed to take account of relevant considerations; and
(e)unreasonableness.
[34] In respect of the decision of the NSC, on 10 August 2018, confirming [Redacted] appointment as an investigator, the applicant says that decision was also flawed. He says that:
(a)it is a requirement of the Act that the power to appoint an investigator is exercised so as to uphold the impartiality and integrity of the investigation process; and
(b)the confirmation of [Redacted] appointment was inconsistent with that requirement having regard to [Redacted] conflict of interest.
[35] In respect of the further decision of the NSC, on 10 August 2018, confirming its first set of directions, and requiring a further class of documents under s 147 of the Act, the applicant says that decision was also flawed. He says that:
(a)the decision to confirm and issue further directions was based on an incorrect premise that the previous directions were valid; and
(b)the decision is also reviewable on any of the bases that the first directions of 22 December 2017 are reviewable.
Resolved issues
[36] At the hearing, the parties indicated that discussions between them had resulted in the reduction of the scope of the argument. Mr Hodge, for the NSC, said that in defending the application for judicial review, the NSC was not relying on having furnished the investigators, by way of the notices of appointment, with a general power of investigation. Instead, the NSC accepted that the proper scope of the investigation was limited to the specific matters referred to in the notices of appointment. Mr Hodge conceded that the notices of appointment were framed in rather loose language that appeared to suggest that a general power of investigation was proposed. Mr Illingworth QC, in his written submissions, had strongly denied the ability of the NSC to undertake a general investigation into a practitioner’s affairs. As a result of the clarification and Mr Hodge’s concession, Mr Illingworth no longer pursues his submission that the NSC directions of 22 December 2017 breached the applicant’s right to natural justice.
[37] Following the hearing, the parties filed a joint memorandum dated 18 April 2018. In that memorandum they advise that they have reached an agreement whereby the investigators may contact the applicant’s current and former clients to enquire of them whether they are willing to waive their privilege in respect of files held by the applicant on their behalf. Notwithstanding that agreement, two similar issues remain:
(a)the applicant’s challenge to the NSC’s direction on 22 December 2017 that he provide the names of any [redacted], in relation to which the applicant has made an insurance notification; and
(b)the applicant’s challenge to the NSC’s direction on 10 August 2018 that the applicant provide electronic copies of the contents of all non- privileged client files specified in the investigator’s interim reports of 14 December 2017 and 16 February 2018.
22 December 2017 NSC directions
[38] On 22 December 2017, the NSC decided to issue directions to the applicant obliging him to provide four categories of information that he had previously refused
to provide to the investigators. He now challenges that decision on a number of grounds.
Error of law
[39] The applicant’s first challenge to the decision of the NSC, on 22 December 2017, to issue directions to the applicant, is that those directions constitute an error of law. Whether that decision constitutes an error of law turns on s 147 of the Act. In particular, the question for this Court is whether the information the applicant was directed to provide to the NSC was “reasonably necessary” for the purposes of the investigation the NSC was undertaking into the applicant’s affairs.
Submissions for the Applicant
[40] Mr Illingworth submits that it is clear from s 147 of the Act that any directions must be reasonably necessary for the purposes of the investigation. This means that a test of reasonable necessity needs to be applied in relation to each direction given under s 147.
[41] Mr Illingworth submits that, at a minimum, a test of reasonable necessity will only be met where performance of the required conduct (in this case compliance with the NSC’s directions) is clearly and genuinely needed to enable the decision maker to carry out their statutory function in a proper manner. Mr Illingworth submits that, in order to meet this test:
(a)there must be a rational connection demonstrated between the matter under investigation and the conduct required of the “source of information” pursuant to the relevant direction; and
(b)it must also be shown that the required conduct is genuinely necessary for the proper performance of the statutory functions of investigation or inquiry.
[42] Mr Illingworth submits that in order for the NSC to satisfy the requirement of reasonable necessity, it must be shownn that the required conduct was “essential for the purposes in question when judged by sensible standards”.
[43] In support of his submission that “necessity” connotes “essentiality”, Mr Illingworth relies on Kelsey v Minister of Trade,2 in which Collins J said:
[141] The requirement in s 9(2) of the Act that withholding information must be “necessary” to protect or avoid the interests identified in paras (a)–(k) of s 9(1) and (2) of the Act involves a higher threshold than the “would be likely” requirement found in s 6 of the Act. When the adjective “necessary” in s 9(2) is given its natural and ordinary meaning, a decision-maker would have to be satisfied withholding the information requested is “essential” to protect or avoid the consequences enumerated in s 9(2)(a)–(k) of the Act.
[44] He says that the ordinary meaning of reasonable is defined in the Oxford Dictionary to mean “in a sensible way” or “by sensible standards of judgment; justifiably”.
[45] Mr Illingworth also refers to s 21 of the New Zealand Bill of Rights Act 1990, and submits that the protection against unreasonable search and seizure provided by that provision, militates against any reading down of s 147 so as to require nothing more than possible relevance between the conduct required of a “source of information” and the investigation being conducted by the NSC.
[46] Mr Illingworth notes that the applicant has already provided extensive information and documentation to the investigators, including:
(a)a complete client list;
(b)a list of his firm’s bank accounts;
(c)bank statements for the firm’s bank accounts from 2012;
(d)a list of his personal bank accounts;
2 Kelsey v Minister of Trade [2015] NZHC 2497, [2016] 2 NZLR 218.
(e)bank statements for his personal bank accounts from 2012;
(f)monthly billing, work in progress, and debtors’ reports for the period 1 April 2017 to 31 October 2017;
(g)a transaction report listing payments made from 1 April 2010 to 31 March 2017 from the firm’s trust account;
(h)a transaction report listing of receipts into the firm’s trust account from 1 April 2010 to 31 March 2017;
(i)a transaction report listing of journals for the firm’s trust account from 1 April 2010 to 31 March 2017;
(j)details of all accounts in his name, or in relation to which he has access or operating authority, through which betting, gambling or wagering is or may be conducted, whether online or otherwise, and whether located in New Zealand or offshore;
(k)specifically requested client files;
(l)submissions filed in the Court of Appeal in connection with an appeal on behalf of a specified client; and
(m)the metadata for all electronic documents created or copied into the firm’s electronic document management system in relation to a specified client file.
[47] Having produced all that information, the applicant objects to producing the materials or information comprised within the four categories upon the grounds that the information contained in them is beyond the scope of what could objectively be considered to be reasonably necessary.
Submissions for the respondent
[48] Mr Hodge for the NSC agrees that the power of the NSC to direct a “source of information” to provide documents only extends to those documents which are reasonably necessary.
[49] Mr Hodge submits that the more fundamental question is reasonably necessary for what? He says that the answer is the documents directed to be disclosed must be reasonably necessary for the purposes of the inquiry or investigation. He says that an investigation requires examination of a wide range of information. By its nature an investigation is the gathering of information that may be of relevance, with information that allays concern being just as relevant as information that may provide a basis for the concerns.
[50] Mr Hodge submits that without having seen the information, an investigator cannot say whether or not a particular document will in fact be relevant; all the investigator can say is that it may be relevant, and demonstrate how. Mr Hodge says that all that is required of the NSC is to show that a particular document will be reasonably necessary for the purposes of the investigation. Mr Hodge further submits that it is clear Parliament intended that s 147 would confer a power to require any information, bona fide and reasonably considered by an investigator as necessary, to be examined for the purposes of carrying out their investigation.
[51] Mr Hodge says that the submission for the applicant seeks to place a gloss on the requirement of “reasonable necessity” in a way that cuts across the intention of Parliament in enacting s 147 and unduly limits what is intended to be a broad information-gathering power.
Analysis
[52] The information or materials required to be produced by the directions must be reasonably necessary for the purposes of the investigation being conducted into the applicant. That much is clear. The meaning of the phrase “reasonably necessary” and its proper scope is a more difficult issue.
[53] When considering how the phrase “reasonably necessary for the purposes of the inquiry or investigation” is to be interpreted and applied, the court will look to the apparent legislative purpose of s 147, which is contained in Part 7 of the Act dealing with complaints and discipline as applicable to lawyers and such other persons as defined in s 120(2)(a)(i)-(vi). That purpose is to provide a framework in relation to complaints which provides for their expeditious resolution.3 Complaints must also be dealt with in a fair, efficient and effective manner.4
[54] In my view the word “necessary”, as it appears in s 147(2), should be given its ordinary and natural meaning as referring to something which is required in order to achieve a certain desired or intended result. I agree with Mr Illingworth that in this context, “necessary” is synonymous with “essential.” Necessary, means that the requested items or records of information, are needed or essential to enable a Standards Committee to undertake a thorough and informed investigation of the matter or issues it has been directed to inquire into or investigate.
[55] I consider that in the context of s 147, the adverb “reasonably” qualifies the meaning of necessary, by importing an objective standard to the determination of what might otherwise be subjectively considered to be necessary by a Standards Committee or investigator acting under the section. An objective assessment of what is considered necessary will be the product of sound, informed and balanced judgment. It will take into account a wider range of considerations than simply an investigator’s interest in the material or information, and will include consideration of the importance or significance of the information to the investigation and the personal and professional interests of the practitioner to whom the direction is to be given in maintaining his or her professional obligations of confidentiality or personal privacy.
[56] This interpretation of the phrase “reasonably necessary” in s 147 of the Act, is reinforced by s 21 of the New Zealand Bill of Rights Act 1990, which protects individuals from unreasonable search and seizure. The Court of Appeal in R v Jeffries described the s 21 right as “…protecting those values or interests which make up the
3 Lawyers and Conveyancers Act 2006, s 120(2).
4 Lawyers and Conveyancers Act 2006, s 123(b).
concept of privacy” all of which “are placed in jeopardy by a search”.5 An objective analysis of what is reasonably necessary will certainly take into account the right recognised in s 21 of the New Zealand Bill of Rights Act 1990.
[57] As submitted by Mr Hodge, the more fundamental question is “reasonably necessary for what?” Clearly the items of information that the “source of information” has been directed to provide must be reasonably necessary for the purposes of the particular investigation being undertaken. An investigation under the Act, by its very nature, involves an initial and possibly ongoing gathering of information in relation to concerns surrounding a practitioner. Information and materials gathered during that process may be of relevance to any future prosecution, or may alternatively satisfy the investigator’s concerns and exonerate the practitioner.
[58] Kelsey v Minister of Trade, which is relied on by Mr Illingworth, concerned a decision of the Minister refusing to release eight categories of documents to Professor Kelsey concerning the negotiation of the Trans-Pacific Partnership Agreement, which had been requested pursuant to the Official Information Act 1982. One of the grounds advanced by the Minister for refusing to release that information was that retention was necessary to enable the government to carry on negotiating without prejudice or disadvantage.
[59] By reference to the plain text of s 9(2) of the Official Information Act 1982, Collins J held that it was incumbent upon the Minister to be satisfied that withholding the information was essential to avoid the consequence complained of.
[60] As noted above, I agree that necessity connotes essentiality. However, the context in which it is determined whether withholding disclosure is essential to avoid a proscribed consequence, such as causing prejudice to ongoing negotiations,6 is quite different to determining whether directing a practitioner to disclose items of information to an investigator is essential for advancing the purposes of an investigation.
5 R v Jeffries [1994] 1 NZLR 290 (CA) at 319.
6 Official Information Act 1982, s 9(2)(d).
[61] When a public authority determines that it is necessary to refuse to provide certain documents to an individual to avoid a proscribed consequence, the decision maker has the relevant and actual information available for their consideration, and is thereby in a position to determine whether the standard is met by reference to that information.
[62] However, when a Standards Committee or investigator directs an individual to provide documents on the basis that they are considered reasonably necessary for the purposes of an investigation, the Standards Committee does not necessarily know what information is contained within those documents. All a Standards Committee or investigator can do is consider the scope and purpose of its investigation and make a decision informed by such information as they possess at the time, as to what documents or categories of documents are reasonably necessary for it to undertake an investigation into the matters or issues which are the subject of their investigation.
[63] The documents that are provided may or may not prove to be of any relevance or assistance to the investigation. However, until the investigator has possession of or access to the requested material they can do no more than consider whether or not the information to be requested is reasonably necessary for the purposes of their investigation. The perceived relevance of the kinds of information requested will therefore be of the utmost importance in determining whether directing a “source of information” to make available their provision is reasonably necessary for the purposes of the investigation.
[64] The relevance of the documents clearly has a role to play in the test. Mr Illingworth submitted that there must be a rational connection between the matter under investigation and the conduct, such as the production of documents or the provision of access to documents or records required from the “source of information”.
[65] However, that does not mean that relevance is the sole criterion for determining whether the provision of information is “reasonably necessary”. There may be a wide range of documents, or other forms of information, that may be of possible relevance to the carrying out of an investigation, but which are not reasonably necessary for the
purposes of determining whether the investigation should proceed to a prosecution, or be discontinued.
[66] In Tauber v Commissioner of Inland Revenue, the appellant issued judicial review proceedings challenging the issue and execution of a search warrant, pursuant to s 16 of the Tax Administration Act 1994,7 to enter private dwellings and to remove and retain documents relevant to an investigation into the tax affairs of the appellant.8 The Court of Appeal observed that judicial review of the issue or exercise of a search warrant will not usually be appropriate because the most suitable remedy for any errors occurring in the process of obtaining and exercising a search warrant is the exclusion of wrongly seized evidence.9 However, the Court of Appeal also noted that judicial review may nevertheless be appropriate where the defect in the search warrant is of a fundamental nature, and where the alleged defect could be said to go to the jurisdiction of the issuing officer or where some other ground of true unlawfulness is established.10
[67] The Court of Appeal held that s 16 was required to be read consistently with s 21 of the New Zealand Bill of Rights Act 1990, and a search warrant should not be granted unless it can be shown that a search is “reasonably required” in the circumstances.11 I consider that phrase is substantially similar to the test of reasonable necessity in s 147 of the Act. While the issuing of a search warrant involving entry of officials into a private dwelling, as was the case in Tauber, is a quite different situation to that of a requirement for the production of materials and documents under s 147 of the Act, the Court of Appeal’s identification of the relevant considerations to be taken into account where a search warrant pursuant to s 16 of the Tax Administration Act is sought, is nevertheless in my view, instructive in the present context. The Court said:12
[39] …The following matters are likely, amongst others, to be relevant when considering warrant applications under s 16(4):
(a)the Commissioner’s “tax interest”; that is, the nature of the investigation;
7 Replaced on 18 March 2019, by s 10 of the Taxation (Annual Rates for 2018-19, Modernising Tax Administration, and Remedial Matters) Act 2019. See s 17 of the Taxation Administration Act 1994 for the successor to s 16.
8 Tauber v Commissioner of Inland Revenue [2012] NZCA 411, [2012] 3 NZLR 549.
9 At [20].
10 At [20].
11 At [26].
12 At [39].
(b)what, if any, steps to obtain information have already been taken and with what results;
(c)why the Commissioner considers it is appropriate to use s 16 powers;
(d)the proposed search locations;
(e)why relevant information is likely to be found in those locations;
(f)the nature of the information likely to be found;
(g)why other mechanisms are not suitable; and
(h)whether there is any element of urgency.
[68] I consider that some of the criteria identified by the Court of Appeal will also be relevant matters for a Standards Committee to address and consider when deciding whether it is reasonably necessary to direct a “source of information” to provide documents and information to it for the purposes of an investigation. In both instances the statutory powers are directed towards the obtaining of information for the purposes of an investigation and both engage s 21 of the New Zealand Bill of Rights Act 1990.
[69] The following matters are likely, amongst others, to be relevant considerations for a Standards Committee or investigator as to whether to exercise the statutory power to require a practitioner to do any of the things listed in s 147(2)(a)(i) - (vii), including the production of materials and information that are considered reasonably necessary for the purposes of an investigation:
(a)the nature of the investigation and the matter under investigation;
(b)what information is likely to be found pursuant to the proposed directions;
(c)the relevance of that information to the particular investigation;
(d)any information already obtained by the Standards Committee or investigator relevant to the investigation;
(e)why any other means or mechanisms for obtaining the materials and information are not suitable;
(f)the degree of intrusion into the “source of information’s” legitimate interest in maintaining privacy or confidentiality.
[70] That list is not intended to be prescriptive or exhaustive. There may be other considerations that will be relevant both generally and in relation to specific investigations a Standards Committee may undertake. In my view however, these considerations are consistent with the purposes of the Act, and with the terms of s 147. They are also consistent with the right of the individual, recognised in s 21 of the New Zealand Bill of Rights Act 1990, to be protected against unreasonable search and seizure.
[71] Where it is determined that certain materials or information are reasonably necessary for the purposes of the investigation, the Standards Committee or investigator is required to define and limit the ambit of the scope of the direction to ensure it does not encompass material or information that is of only marginal relevance to the investigation.
[72] What should be clear from the foregoing is that when a Standards Committee or investigator is considering whether to exercise the statutory powers contained in s 147 of the Act, they are required to do more than simply assess whether the material or information possesses some potential or possible relevance to the matter under investigation. In short, it will not be sufficient for a Standards Committee or investigator to say that something is reasonably necessary, simply because they say it is. For the material or information sought by a direction under s 147 to be reasonably necessary it will have to be objectively justifiable having regard to the investigator’s purpose for obtaining access to it, and any relevant interests of the practitioner or their clients in relation to the maintenance of confidential information and privacy.
Section 147 and information held subject to obligations of confidentiality and privilege
[73] In their submissions the parties also disagreed on whether s 147 of the Act allows a Standards Committee to direct a “source of information” to provide information that is held subject to an obligation requiring it to be kept confidential. This issue primarily arose in relation to the direction to the applicant to provide copies of all files requested by the investigators, though excluding information that is privileged.
[74] Mr Illingworth submits that although rule 8.2(d) of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 provides that a law practitioner must disclose confidential information where disclosure is required by law, there is no express provision in the Act which provides for a lawyer to disclose confidential information.
[75] The NSC submits that disclosure of information is necessary where it is required by law.13 The NSC accepts that unless the client has waived their privilege, the applicant is bound to uphold it, but says that rule 8.2(d) provides that a lawyer must disclose confidential information where disclosure is required by law, or by order of a court, or by virtue of the lawyer’s duty to the court.
Analysis
[76] Section 147 is a statutory power given to a Standards Committee and its investigators to require the provision of documents and other information from practitioners. In my view a Standards Committee is empowered to direct a “source of information” to provide confidential information which is reasonably necessary for the purposes of its investigation. The common law obligation of a legal practitioner to make disclosure of confidential information was considered by the English Court of Appeal in Parry-Jones v Law Society in which the Law Society had issued a notice to a solicitor requiring him to produce his practice books of account to the Society’s investigating accountant.14
13 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008, r 8.2(d).
14 Parry-Jones v Law Society [1969] 1 Ch 1 (CA).
[77] As regards confidential information held by a legal practitioner on behalf of a client, Denning M.R. said:15
The law implies a term into the contract whereby a professional man is to keep his client’s affairs secret and not to disclose them to anyone without just cause.
…
In my opinion the contract between solicitor and client must be taken to contain this implication: the solicitor must obey the law, and, in particular, he must comply with the rules made under the authority of statute for the conduct of the profession. If the rules require him to disclose his client’s affairs, then he must do so.
[78] Section 271 of the Act specifically provides that nothing in Part 7 of the Act “limits or affects legal professional privilege.” Accordingly, while communications with legal advisers as defined by s 54 of the Evidence Act remain protected by privilege, a legal practitioner (“source of information”) who is required to produce client materials or information by a direction issued pursuant to s 147, must produce any other specified materials and information held on their clients’ behalf, notwithstanding the duty of confidentiality owed to their client.
[79] I agree with the NSC submission that the applicant’s client files will include documents which are not privileged, such as the terms of the client engagement letter and records of communications between the applicant and his clients on administrative matters and communications on behalf of the client with other parties, including insurance notifications.
[80] Section 188(2) of the Act prohibits a person who obtains information by means of the powers conferred on them by the Act from communicating that information or knowledge otherwise than in specified circumstances including: for the purposes of the investigation; a report to a Standards Committee; or in evidence in proceedings before a Standards Committee, Legal Complaints Review Officer, or Disciplinary Tribunal. Section 188(2) provides:
…
(2)No person to whom this section applies may communicate any matter that came to the knowledge of that person or the employer of that
15 At 7.
person in the course of the exercise by that person, or the employer of that person, of powers conferred by this Act on that person, or the employer of that person, in relation to any complaint made, or inquiry or investigation conducted, under this Act except—
(a)for the purposes of the inquiry or investigation; or
...
[81] Accordingly, s 188(2) protects the confidentiality of any information obtained by a Standards Committee or investigator in the course of an investigation conducted under and pursuant to s 146 and 147 of the Act. A valid direction by a Standards Committee or investigator pursuant to s 147(2) is a disclosure required by law pursuant to rule 8.2(d), and except for any materials or information containing communications which are subject to privilege pursuant to s 54 Evidence Act 2006, a practitioner in receipt of such a direction must disclose the required information.
Was the s 147(2) power correctly exercised?
[82] Ultimately, the question for this Court is whether the NSC and its investigators applied the correct legal test when exercising the statutory power under s 147 of the Act to direct the applicant to produce certain documents and files for their inspection.
[83] Mr Hodge submits that the items of information that are required to be produced all have a “causal nexus to the scope of the investigation”. He submits that at a comparatively early stage of the investigation, all an investigator or Standards Committee can say is that the required material or information may be relevant, and demonstrate how it could be relevant. Mr Hodge submits that doing so will be sufficient to show that the material or information is reasonably necessary for the purposes of the investigation, and that such a direction will be accordance with what he submits is, the extremely broad scope of s 147.
[84] I do not accept that submission. As I have explained, in order to satisfy the requirement that only material or information “reasonably necessary for the purposes of the investigation” may be required to be produced for inspection pursuant to s 147, the Standards Committee or investigator must consider more than just the mere relevance of the information or materials which are sought.
[85] When it came to the issue of whether or not the particular items of information the NSC had directed the applicant to provide were reasonably necessary for the purposes of the investigation, counsel for the NSC did not suggest that it and the investigators had done more than make a bona fide assessment of the potential relevance of the required information to the investigation. It was not suggested that the NSC or investigators had given any consideration to the wider range of other factors which I have identified, and which in my view, are also required to be taken into account.
The disputed directions
[86] When requested by the NSC to do so the applicant refused to provide the following items of information:
(a)income tax returns and financial statements for J and his firm;
(b)the names of insurance files, [redacted] in relation to which J has made insurance notifications;
(c)access to J’s firm’s Xero account;
(d)copies of client files, including the files of clients who had neither complained about the applicant, nor issued proceedings against him.
[87] The NSC then issued directions pursuant to s 147 of the Act on 22 December, requiring the applicant to provide those items of information. He refused to comply, and having referred to the volume of information already produced pursuant to the direction of the NSC and investigators, he challenged the assertion that the requested information was reasonably necessary for the investigation.
Tax returns and financial statements
[88] The applicant contends that the provision of the first item of information, the income tax returns and financial statements for himself and his firm, is not reasonably necessary for the purposes of the NSC’s investigation. The applicant says that:
I had already provided detailed financial information including all detailed transaction reports for my trust account and copies of all of my firm and personal bank accounts and reports showing all receipts into my trust account. Given the detailed information I have already provided I cannot see how my financial statements and tax returns are reasonably necessary for the investigation, particularly given that these documents simply show my income as “sales”.
[89] Mr Hodge accepted that these items of information will be “fairly high level,” but says that they are nevertheless reasonably necessary for the investigation in order to complete the picture of the way in which the applicant’s law firm functions financially, and to show the relationship between the applicant’s firm and the applicant personally to [Redacted] as another relevant entity. Mr Hodge submits that the income tax returns and financial statements are the finalised and notified financial information for J and his firm for each financial year, and will enable the investigators to cross- check other financial information provided by the applicant in order to ensure that key information has not been omitted, and will enable the investigators to see whether the applicant has declared income that did not come from his law firm. Mr Hodge submits that there is therefore a link between the material sought and the specific areas of inquiry identified in the scope of the investigation.
Insurance notification files
[90] The second category of required information is the client names for files relating to [redacted] in respect of which J has made insurance notifications. Any insurance notifications made by J to his professional indemnity insurer would either have been made following client complaints, or following his recognition of circumstances relating to his provision of legal services which could potentially give rise to a claim being made against him.
[91] The applicant says that he objected to providing this material as it is privileged. Mr Illingworth submits that the NSC does not have any right to access privileged information, and he says that the NSC’s limited request to the client names of the files, is an acknowledgement of this limitation on its powers of direction. Mr Illingworth says, however, that the direction is not limited to files in relation to which [redacted]. He submits that this raises questions concerning the breadth of the NSC’s investigation, and whether in fact it is being conducted as a broad and general
investigation into the applicant and his practice and effectively unfettered in its scope. In any event, says Mr Illingworth, it is difficult to see how providing a client name could be considered reasonably necessary for the purposes of the investigation.
[92] The NSC says that the scope of the investigation involves the conduct and carriage by the applicant of [redacted]. The NSC says that reviewing the names of files the applicant has himself recognised as having the potential to raise issues of failings on his part, and which may involve or lead to claims being made against him by his clients or former clients, will enable it to narrow the scope of the investigation into the applicant’s [redacted] litigation practice. As the applicant’s [redacted] litigation practice has involved a large number of files, this will enable the identification of specific files relevant to the key areas of concern which prompted the NSC to initiate the investigation.
[93] The NSC submits that is a sufficient basis to establish why this category of information is reasonably necessary to the investigation.
[94] Although the NSC explained in its letter of 22 December 2017 that it considered the information to be reasonably necessary for the purposes of its investigation into client-care issues relating to the applicant’s carriage of [Redacted], the scope of the direction was not restricted to files in respect of which [Redacted]. The s 147 direction issued by the NSC in its letter of 22 December 2017 requires the applicant to produce:
The names of any [redacted] in relation to which [J] has made insurance notifications.
[95] It is therefore clear that the terms and scope of the direction require the production of files in respect of which there is no apparent connection with or relevance to the matters or issues under investigation. Such a direction would, prima facie, appear to be much wider in scope than is reasonably necessary for the purposes of the investigation.
Read-only access to Xero accounting
[96] As to access to the applicant’s Xero account, by providing the investigators with “read only” access to the software, Mr Illingworth says it is hard to conceive of a better example of an unreasonable search. He says there is simply no adequate reason to authorise a search of such extraordinary breadth. This would enable the investigators to conduct ongoing surveillance of the firm’s finances on an unlimited basis. It would enable them to see transactions as they are happening, as well as enabling them to conduct searches for historical information, and extract whatever historical data they wish without having to make or justify a specific request for the information.
Submissions for the respondent
[131] Mr Hodge accepts that the decision of the NSC to confirm the appointment of [Redacted] is amenable to judicial review. He submits that the question for this Court is whether the fair minded lay observer might reasonably apprehend that [Redacted] might not bring an impartial mind to the matter.20
[132] Mr Hodge says that the test is not made out. He submits that [Redacted] is acting as an investigator and not an adjudicator. As an investigator he is not required to make any substantive determination as to the applicant’s liability. Mr Hodge says that at most [Redacted] will prepare reports for consideration by the NSC, and which the applicant will have a right of response to.
[133] Mr Hodge also notes that [Redacted] is prohibited from disclosing any information to [Redacted] that he has acquired in the course of the investigation of the applicant. He says that s 188(2) of the Act, which prevents the disclosure of information beyond processes undertaken in accordance with the Act, is a sufficient
20 Woods v Kapiti Coast District Council [2014] NZHC 1661 at [20]; Saxmere Co Ltd v Wool Board Disestablishment Co Ltd [2009] NZSC 122, [2010] 1 NZLR 76 at [4].
answer to any concerns that [Redacted] could reveal information about the applicant to anyone, including his partners at [Redacted].
Analysis
[134] The decision challenged and being reviewed is the NSC’s decision to confirm the appointment of [Redacted] as an investigator. There is no allegation of bias made against [Redacted] and the applicant is not challenging the decision to confirm [Redacted] appointment on the grounds of apparent bias on the NSC’s part. The applicant’s challenge is based on whether the NSC as decision-maker has discharged its obligation to uphold the integrity and impartiality of the investigation process when it appointed [Redacted].
[135] In my view there is an obligation on the NSC when it acts to appoint and confirm the appointment of investigators to ensure and uphold the impartiality and integrity of the investigation process. Section 123(b) of the Act provides that a complaint service:
…
(b)must deal, in a fair, efficient, and effective manner, with all complaints received by the complaints service (whether they are about service, costs, conduct, or any other matter).
[136] Given the nature and functions of a complaints service under the Act, a requirement of fairness would in any event be implied in the absence of any provision to that effect. It is clear that having regard to the functions of the NSC in receiving complaints against practitioners, investigating complaints, and taking disciplinary action against practitioners for their failure to comply with their professional and ethical obligations, the entire process is to be conducted in a manner that is consistent with substantive and apparent fairness.
[137] Two issues arise. The first is whether [Redacted] could potentially misuse his position by disclosing any information gained regarding the applicant in the course of the investigation to [Redacted]. The second issue is whether apparent bias on the part of [Redacted] might influence the conduct of the investigation and therefore the ultimate decision of the NSC to issue disciplinary proceedings or not at its conclusion.
[138] I consider those two issues can largely be addressed by reference to the same question. That is whether by confirming [Redacted] appointment as an investigator, the NSC has created a situation whereby a fair-minded lay observer might reasonably apprehend that [Redacted] might not bring an impartial mind to the performance of the role he has been tasked with.
[139] I do not consider it to be a sufficient answer to say that [Redacted] is prohibited by the Act from disclosing confidential information. As Mr Illingworth points out, even where there is a risk of “leakage” of information, the Court should intervene.21 The issue here is not whether he has or will, but whether a fair minded lay observer might reasonably apprehend that [Redacted] might not bring an impartial mind, uninfluenced by conflict and extraneous considerations, to his investigation and report.
[140] I consider that having regard to [Redacted] having provided legal advice to [Redacted] and his law firm’s engagement in litigation against the applicant a fair minded lay observer would be concerned by what appeared to be a clear conflict between his and his firm’s professional obligations to [Redacted], and his duty of impartiality in his role as an investigator looking into the applicant’s practice and particularly in relation to his conduct of legal proceedings involving [Redacted] client. A fair minded lay observer would also be concerned that having accepted the role and responsibilities of conducting an investigation into the applicant, [Redacted] then chose to provide legal advice to [Redacted] when the investigation he was undertaking into the applicant’s affairs clearly involved [redacted]. The fact that [Redacted] had previously laid a complaint against the applicant, thereby indicating that it was critical of the applicant’s professional conduct, serves to emphasise the existence of the conflict.
Conclusion
[141] While there is no suggestion here of [Redacted] carrying out his role as an investigator other than entirely properly, the NSC decision to confirm his appointment when it knew he had provided legal advice to [Redacted], and his firm was acting on a number of matters for [Redacted] in which the applicant was engaged, placed
21 McDonald Estate v Martin [1990] 3 SCR 1235.
[Redacted] into a situation of apparent conflicting duties and obligations. The Act provides that a Standards Committee must exercise and perform its duties, powers and functions in a manner that is consistent with the rules of natural justice.22 Having regard to the significance of the investigation under s 147 to the applicant, and the central role of [Redacted] as an investigator who is required to produce a report to the NSC pursuant to s 146(1)(b), which is likely to involve him expressing his opinion on the question of whether there are reasonable grounds to suspect that a breach of the provisions of the Act or practice rules has been committed by the applicant, the maintenance of the integrity of that process by compliance with the rules of natural justice is fundamental. An investigation by the NSC carried out under the powers conferred by the Act must be conducted in a manner that is fair both in substance and appearance. The appointment of an investigator who has connections with and owes professional duties to a party which is directly involved in litigation against the practitioner who is the subject of the investigation places that investigator in an untenable position in which it would appear to a fair-minded lay observer that they may not bring an impartial mind to their role as investigator.
[142] This is the situation that the NSC’s decision to confirm [Redacted] appointment as an investigator has placed him in, and in my view a fair-minded lay observer would consider that by reason of his conflicting duties there is an appearance that [Redacted] might not bring an impartial mind to his role as investigator. [Redacted] position inevitably leads to concern that information he has or may receive from one of his areas of responsibility, will inform his decisions or actions in the other, notwithstanding any steps he may take to ensure that he keeps his responsibilities and any information he has or may receive separate from his other role and responsibilities.
[143] In my view the NSC decision to confirm [Redacted] appointment was inconsistent with the requirements of natural justice and has led to a situation in which there are reasonable grounds to conclude that, by reason of the conflicts, he now has the appearance of being unable to discharge his responsibilities as an investigator in an entirely fair and impartial manner. That being the case, the decision of the NSC was
22 Lawyers and Conveyancers Act 2006, s 142(1).
contrary to the requirements of the Act and contrary to the common law requirements of natural justice.
[144] I accordingly find that the NSC erred when it confirmed the appointment of [Redacted] on 10 August 2018. That decision is set aside.
2018 NSC directions
[145] On 10 August 2018, the NSC confirmed its previous decision to issue directions on 22 December 2017, and issued a new set of directions obliging the applicant to provide electronic copies of the contents of all the client files specified in the investigator’s interim reports of 14 December 2017 and 16 February 2018.
[146] The applicant says those directions are invalid because the previous directions were also invalid.23 Such a conclusion is inevitable. The decision to confirm the previous directions constitutes an error of law, because the NSC had failed to apply the correct legal test when making the decision to issue those directions.
[147] The applicant also says that the direction to produce electronic copies of all client files specified in the investigator’s interim reports, is invalid as an error of law. When issuing those directions, the NSC relied on what I have found to be a misunderstanding of its power under s 147 of the Act, to the effect that the information sought need only be relevant to the investigation underway. Mr Hodge did not seek to argue otherwise.
[148] For that reason, the decision to issue new directions must also constitute an error of law.
[149] Accordingly, that decision will be set aside and remitted back to the NSC for reconsideration in accordance with the correct legal test.
23 The NSC relied on its same submissions in support of the validity of the 22 December 2017 directions to argue that these directions were also valid.
Result
[150] The decision of the NSC on 22 December 2017 to issue directions to the applicant is set aside, and the matter is remitted back to the NSC to reconsider its decision.
[151] The decision of the LCRO on 8 August 2018 to uphold the decision of the NSC is set aside.
[152] The decision of the NSC on 10 August 2018 to confirm the appointment of [Redacted] as an investigator is set aside.
[153] The decision of the NSC on 10 August 2018 to confirm the directions it had issued to the applicant on 22 December 2017 and to issue new directions is set aside. The matter concerning the issuing of the new directions is also set aside and remitted back to the NSC to reconsider its decision.
Costs
[154] The applicant has been successful and is entitled to costs. I confirm costs should be on a 2B basis. The parties are invited to determine the issue of costs amongst themselves. If they are unable to do so, the applicant is to file and serve a costs memorandum within 15 working days following the date of delivery of this judgment. The respondent is thereafter to file a costs memorandum in reply within 10 working days following receipt of service of the applicant’s costs memorandum.
[155] The costs memoranda are not to exceed three pages in length excluding any schedules or annexures.
[156]Costs will thereafter be determined on the papers.
Paul Davison J
Solicitors:
Cook Morris Quinn, Auckland Meredith Connell, Auckland
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