Lagolago v Wellington Standards Committee 2

[2017] NZHC 3038

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2015-485-635 [2017] NZHC 3038

IN THE MATTER

of an appeal under s 253 of the Lawyers

and Conveyancers Act 2006

BETWEEN

PAPALI’I TOTI LAGOLAGO Appellant

AND

WELLINGTON STANDARDS COMMITTEE 2, A STANDARDS COMMITTEE UNDER THE LAWYERS AND CONVEYANCERS ACT 2006

Respondent

Hearing:	On the papers
Counsel:	A C Beck for Appellant D R La Hood for Respondent
Judgment:	8 December 2017

JUDGMENT OF CLIFFORD J (Costs)

Introduction

[1] In November 2016 I upheld Ms Lagolago’s appeal against adverse findings of the New Zealand Lawyers and Conveyancers Disciplinary Tribunal (the Tribunal) in proceedings brought by the Wellington Standards Committee 2 (the Committee) under the Lawyers and Conveyancers Act 2006 (the Act).1 As regards penalties and costs I said:

[133]   In  addition  to  being  placed  under  supervision  for  a  period  of

12 months, Ms Lagolago was censured, ordered to reduce her fee to the Fs by

$14,000 and to pay costs. Mr Beck did not advance submissions on the orders

1      Lagolago v Wellington Standards Committee 2 [2016] NZHC 2867.

I should make as regards those penalties. Nor were any submissions made as regards costs in this hearing.  Nor do I know whether Ms Lagolago has paid the costs ordered to the Society, pending the outcome of this appeal.

[134]    In my view, the appropriate outcome now would be for the censure to be quashed, for the costs orders to the Society (if they have not been paid) to be quashed or for Ms Lagolago to be reimbursed those payments if she has made them.  But, in the circumstances, I do not think it would be appropriate for Ms Lagolago to now claim an entitlement to pursue her full bill of costs against the Fs.

[135]    Finally, I see no reason why costs in this proceeding should not follow the event.

[136]    But  that  is  an  indication  of  view  only.    I invite  counsel  to  file memoranda as soon as possible.  I would appreciate those by no later than

9 December, if I can deal with the matter before the end of the year.

[2]      By subsequent agreement, those submissions were filed in time for my return to Court on 21 February 2017.  I regret the delay that has subsequently arisen in my finalisation and the release of this judgment.

[3]      The parties agree:

(a)      Following Roberts v Professional Committee of the Nursing Council of New Zealand, Ms Lagolago is entitled to costs on her successful appeal in this Court.2   There is a very minor difference as to quantum I am to resolve.

(b)      Costs on this costs application should follow the event.

[4]      Two issues require determination by me:

(a)      Costs before the Tribunal.

(b)Costs  in  this  Court  on  Ms Lagolago’s  unsuccessful  interlocutory application for a stay of enforcement of the Tribunal’s decision pending

the hearing of her appeal.3

2      Roberts v Professional Committee of the Nursing Council of New Zealand [2014] NZCA 141, (2014) 21 PRNZ 753.

3      Lagolago v Wellington Standards Committee 2 [2015] NZHC 2187, (2015) 22 PRNZ 720.

[5]      By way of overview, I note that it is the first of those two issues that requires the most consideration.  The parties take fundamentally different approaches to it. Questions of principle are raised.  The parties also take different approaches to the second  issue.    That  dispute  can  be  resolved,  however,  by  the  application  of well-established principles.

Costs before the Tribunal

The competing positions

[6]      Mr Beck (counsel for Ms Lagolago) initially argued that in Roberts the Court of Appeal held costs in disciplinary proceedings are to be decided under the standard regime in the High Court Rules 2016.  Accordingly, costs should follow the event. Moreover,  here  the  award  in  Ms Lagolago’s  favour  should  reflect  the  without prejudice, save as to costs, settlement offer she had made at a relatively early stage in the disciplinary proceedings against her.  In that letter Mr Beck expressed the general view  there  appeared  to  be  very  little  foundation  for  a  number  of  the  charges.

Ms Lagolago was, Mr Beck said, nevertheless willing as a gesture of goodwill to waive the balance of fees owing to her if the charges were withdrawn.  Given the outcome of Ms Lagolago’s appeal, Mr Beck submitted the Calderbank rules applied, in effect entitling Ms Lagolago to increased costs on the steps taken in the proceedings after that offer was made — that is: costs before the Tribunal, her costs on her unsuccessful interlocutory application in this Court and her costs on this appeal.

Ms Lagolago’s  actual  costs  in  the  Tribunal  were  $21,022:  Mr Beck  noted  that

Ms Lagolago had been charged at a reduced rate because of her financial position.

Mr Beck therefore argued that an order should be made for costs of $20,000 in the

Tribunal.

[7]      Mr La Hood (counsel for the Committee) rejected those propositions. He said the Tribunal’s approach to costs in hearings before it, reflecting the decision of the Court of Appeal of England and Wales in Baxendale-Walker v Law Society and applied in Ms Lagolago’s case, was correct.4   There, Mr La Hood submitted, the Court held

that costs in disciplinary proceedings do not generally follow the event.  To take that

4      Baxendale-Walker v Law Society [2007] EWCA Civ 233, [2008] 1 WLR 426.

approach would overlook the public role of the Law Society when bringing disciplinary  proceedings  against  a  solicitor.    The  Court  of Appeal  adopted  the reasoning of the Divisional Court that “absent dishonesty or a lack of good faith, a costs order should not be made against such a regulator unless there is a good reason to do so. That reason must be more than that the other party has succeeded.”5

[8]      Mr La Hood pointed to a number of decisions in which the Tribunal had taken that approach.6     That approach, he submitted further, had been  approved in the appellate context in Roberts and by the High Court in Simes v Canterbury-Westland Standards Committee 2 of the New Zealand Law Society.7

[9]      Inviting the Court to endorse that approach, Mr La Hood argued there was not, in the hearing before the Tribunal, any reason for awarding costs to Ms Lagolago.  In any event, the Calderbank principles should not apply in the disciplinary context as a matter of law, and the contents of the letter were not of the kind that would have properly warranted cessation of the proceedings.

[10]     In reply, Mr Beck refined his submissions somewhat. Mr Beck acknowledged that Roberts only applied directly to costs on an appeal in the High Court.  But, he argued, there was no suggestion that a radically different costs scheme applied in the Tribunal.  The approach in Baxendale-Walker had not been endorsed by the Court of Appeal in Roberts.

[11]     Mr  Beck  argued  more  generally  that  the  Tribunal  had,  in  some  cases, approached costs as if the Law Society enjoyed an immunity from costs. That was not appropriate.  Here, the significant feature was that the Tribunal had got its decision substantially wrong.  It had taken the view the case was of sufficient gravity to lay a charge before the Tribunal rather than a Standards Committee, and had consistently argued that Ms Lagolago should be suspended from practice.   General principles

therefore required recognition of that in some award of costs in Ms Lagolago’s favour.

5 At [30].

6      For example: NZ Law Society v Hall [2014] NZLCDT 17; and Auckland Standard Committee 4 v

Smith [2015] NZLCDT 46.

The Committee’s argument, that the without prejudice letter should have no impact whatsoever, flew in the face of the general principles endorsed by the Court of Appeal in Bluestar Print Group (NZ) Ltd v Mitchell.8    Those general principles were applicable within the disciplinary context.

Analysis

C ontex t

[12]     Courts and tribunals generally require a statutory basis if they are to have a jurisdiction to award costs.9     Section 249 of the Act gives the Tribunal a broad discretion to award costs:

249     Order for payment of costs

(1)       The Disciplinary Tribunal may, after the hearing of any proceedings, make such order as to the payment of costs and expenses as it thinks fit.

(2)       In  particular,  the  Disciplinary  Tribunal  may  order  that  costs  be awarded to any person to whom the proceedings relate, and that those costs be paid—

(a)       by the New Zealand Law Society (if that person is a lawyer or a former lawyer or an incorporated law firm or former incorporated law firm or an employee or former employee of a lawyer or incorporated law firm); or

(b)       by the New Zealand Society of Conveyancers (if that person is a conveyancing practitioner or a former conveyancing practitioner or an incorporated conveyancing firm or former incorporated conveyancing firm or an employee or former employee of a conveyancing practitioner or incorporated conveyancing firm).

(3)       In particular, without finding the person charged to be guilty, the Disciplinary Tribunal may, if it considers that the proceedings were justified and that it is just to do so, order that person to pay to the New Zealand Law Society or the New Zealand Society of Conveyancers such sums as the Disciplinary Tribunal thinks fit in respect of the expenses of and incidental to the proceedings and any investigation of that person’s conduct or of that person’s affairs or trust account carried out by, or on behalf of, a Standards Committee or the Legal Complaints Review Officer.

8      Bluestar Print Group (NZ) Ltd v Mitchell [2010] NZCA 385, (2010) 7 NZELR 494.

9      GE Dal Pont Law of Costs (3rd ed, LexisNexis Butterworths, Chatswood, 2013) at 139. Courts of Chancery, however, always claimed power to deal with costs.

(4)       In this section, expenses includes not only out-of-pocket expenses but also such amounts in respect of salaries of staff and overhead expenses incurred by either the New Zealand Law Society or the New Zealand Society of Conveyancers as the Disciplinary Tribunal considers properly attributable to an investigation.

[13]     In distinction to most disciplinary tribunals, the Tribunal’s power to award costs is not restricted to an award, generally as part of penalty, against a disciplined practitioner. Rather, the Tribunal may also require a Standards Committee to pay costs to a practitioner, and a practitioner who has successfully defended charges to nevertheless pay expenses.

[14]     In Re Simes the Tribunal commented on that jurisdiction in the following way:10

[13]      So far as the statutory costs discretion in s 249 is concerned, the legislature clearly envisaged that there would be circumstances where the Law Society may have costs ordered against it, to be paid to the charged practitioner. That is mandated by power in s 249(2)(a) of the Act.

[14]      Similarly, the legislature has recognised that despite a finding that a charge has not been proven, there will be circumstances where a legal practitioner may still be required to pay costs to the Law Society, as set out in s 249(3) of the Act.

[15]    The question is, of course, in each situation, what are those circumstances?   We need only deal with the former situation in this case

(ie whether there are circumstances that would justify an order of costs against the Law Society in favour of the practitioner), as the Standards Committee has conceded that it seeks no costs from Ms Simes.  In the circumstances of this

case that is an appropriate concession.

[15]     On appeal, the High Court observed:11

[27]      Section 249 of the Act confers a broad discretion on the Tribunal to award costs in any given case.   The Tribunal must not disable itself from exercising its discretion is a particular case by rigidly adopting and applying fixed rules or procedures or policies.  To do so would be to improperly fetter its discretion and preclude meaningful participation in the decision-making process.

[16]     The question for me is whether that jurisdiction should be exercised in this case.

10     Re Simes [2012] NZLCDT 28.

[17]     I first consider the decision of the Court of Appeal in Roberts, including how

it can be seen to comment indirectly on Baxendale-Walker. Although I do not endorse all aspects of Mr Beck’s submissions, I conclude that the Tribunal has, in the way it has exercised its costs jurisdiction on the basis of Baxendale-Walker, set the bar too high as regard costs orders in favour of practitioners who successfully defend disciplinary proceedings.

[18]     For reasons which I express fairly briefly, I conclude the Calderbank principles do not apply in disciplinary proceedings as they do pursuant to the High Court Rules. On that basis, I decline what was in effect Ms Lagolago’s application for indemnity costs.

[19]     Applying what I consider to be the correct approach to the Tribunal’s costs jurisdiction, I conclude that in these circumstances Ms Lagolago is not entitled to costs.

The cas es

[20]     In Roberts, Mr Roberts appealed a High Court decision12  which declined to grant him costs in relation to his successful appeal against a Health Practitioner’s Disciplinary Tribunal decision in proceedings brought by a Conduct Committee.  In doing so, the Judge held that costs should only be awarded against a conduct committee in the High Court if the successful applicant could establish a “compelling reason” for it to do so.13

[21]     In allowing the appeal, the Court of Appeal reasoned the fact Professional Conduct Committees perform a public function was not a sufficient reason to displace the usual presumption under the High Court Rules that costs follow the event.14   The Judge’s approach was not justified on policy grounds, and was not supported by

existing authorities.15  But that was not to say that costs should always follow the event

12     Roberts v Professional Conduct Committee of the Nursing Council of New Zealand [2-13] NZHC

442.

13 At [18].

14     Roberts, above n 2, at [24].

in those types of appeals.16    The fact that Professional Conduct Committees were performing a public function, and had an immunity at Tribunal level, were factors that could properly be taken into account in determining whether a costs award should be made and, if so, in what amount.17    Taking the public function into account would effectively mean that “something else” in addition to success might sometimes be required before costs could be awarded to a successful applicant.18   Ultimately, that was a question of degree or emphasis.

[22]     Applying that approach to the case at hand, the Court concluded the fact the Conduct Committee was performing a public function was not a matter of any particular significance.19   The appeal was a fairly routine one in which the appellant had succeeded, and in fact had obtained the precise reduction in sentence that he had sought in his notice of appeal.20    Costs were awarded against the Law Society on a standard basis in both the High Court and the Court of Appeal.21

[23]     Baxendale-Walker was not referred to in Roberts, no doubt reflecting the fact that Health Practitioners Disciplinary Tribunal has no jurisdiction to award costs against a Conduct Committee in favour of a successful practitioner.22

[24]     Before considering the differing propositions Mr Beck and Mr La Hood drew from the decision in Roberts as regards the relevance of Baxendale-Walker, it is necessary to understand what that case is authority for.

[25]     Mr Baxendale-Walker was a solicitor who faced two allegations of conduct unbefitting a solicitor.  The first was dismissed, and he admitted the second.  The Solicitors Disciplinary Tribunal ordered that the Law Society should pay 30 per cent of Mr Baxendale-Walker’s costs.  The Law Society appealed.  The Divisional Court approached the issue on the basis that, absent dishonesty or a lack of good faith, a costs

order should not be made against a regulator unless there was a good reason to do so.23

16 At [27].

17 At [27].

18 At [28].

19 At [31].

20 At [31].

21     At [34] and [35].

22     See Health Practitioners Competence Assurance Act 2003, s 101(1)(f).

23     Baxendale-Walker v Law Society [2006] EWHC 643 (Admin).

That reason must be more than that the other party had succeeded.  The Court was required to consider the financial prejudice to the particular complainant, weighed against the need to encourage public bodies to exercise their public functions without fear of exposure to undue financial prejudice.  Taking that approach, the Divisional Court allowed the appeal. In the Court of Appeal, Mr Baxendale-Walker relied on the broad terms of the costs jurisdiction of the Solicitors Disciplinary Tribunal.   That jurisdiction is similar to that of the Tribunal under the Act. The general principle, that a regulatory body should not be required to pay costs in the absence of some improper motive, or where the prosecution was wholly misconceived, was challenged as wrong. The Court of Appeal rejected that challenge.  It reasoned:24

… [its] regulatory function places the Law Society in a wholly different position to that of a party to ordinary civil litigation. The normal approach to costs decisions in such litigation — dealing with it very broadly, the properly incurred costs should follow the “event” and be paid by the unsuccessful party

— would appear to have no direct application to disciplinary proceedings against a solicitor.

[26]	Thus:25 Unless the complaint is improperly brought, or, for example, proceeds … as a
“shambles from start to finish”, when the Law Society is discharging its responsibilities as a regulator of the profession, an order for costs should not ordinarily be made against it on the basis that costs follow the event.  The “event” is simply one factor for consideration.  It is not a starting point.
(Footnotes omitted.)
[27]	Hence:26
In our judgment, in agreement with Moses LJ, the Tribunal misdirected itself when it ordered the Law Society to pay part of the solicitor’s costs on the basis that the first allegation against him had failed and that costs should follow the event.  This overlooked not only the public obligation of the Law Society, as we have analysed it, but the additional fact that the solicitor brought the proceedings in relation to both allegations on himself. …
[28]	As    the    Court of Appeal    did    in    Roberts,    in    Baxendale-Walker	the

Court of Appeal  of  England  and  Wales  was  emphasising  that,  in  a  regulatory

proceeding, the principle that costs would follow the event did not apply as it did in

24     Baxendale-Walker, above n 4, at [34].

25 At [39].

ordinary civil  proceedings.    In  effect,  that  principle  would  only  apply  where  a complaint was improperly brought, or a shambles from start to finish.  Absent those or similar circumstances, a “good reason” would be required to awards costs.   In Re Simes, however, the Tribunal summarised the principles that could be drawn from Baxendale-Walker in the following way:27

(a)       a costs order should only be made against a regulator if there is a good reason for doing so (e.g. the prosecution was misconceived, without foundation, or borne of malice or some other improper motive);

(b)       success by the practitioner in defending a matter is not on its own a good reason for ordering costs against a regulator.  In the context of whether costs should follow the event, the “event” is only one of a number of factors to be considered; and

(c)       a regulator should not be unduly exposed to the risk of financial prejudice if unsuccessful, when exercising its public function.

[29]     In  Re  Simes,  the  Tribunal  said  the  issue  for  it  was  whether  there  was “something extraordinary” about the proceedings against Ms Simes so as to call for an order against the Standards Committee.28

[30]     This is not a correct summary of the Baxendale-Walker decision.  What the Tribunal appears to have done is to take the examples of circumstances where, in effect, costs will follow the event, and make those circumstances examples of the “good reason” which will be required where those types of circumstances do not exist. In my view, in so doing the Tribunal has set the bar for an award of costs against the Law Society too high.  Where circumstances do not exist which, in effect, call for an award following the event, the Tribunal is required to exercise its evaluative, discretionary, jurisdiction.

[31]     There, the “event”, like the regulator’s role, is only one of a number of factors to be taken into account.

[32]     In my view, moreover, the Court of Appeal’s decision in Roberts shows that in

New Zealand the fact the application is for costs against a regulator is not as telling a

27     Re Simes, above n 10, at [38].

consideration in the regulator’s favour as would appear to be the case in the United

Kingdom.29

[33]     In my view, therefore, the correct approach in New Zealand in disciplinary proceedings where the relevant Tribunal does have a broad jurisdiction to award costs is that costs do not simply follow the event. The fact that a regulatory function is being discharged in the public interest is a relevant consideration, but is not determinative. Moreover, it sets the bar too high to (as the Tribunal would appear to have done to date) approach the matter on the basis that “something extraordinary” (for example, a finding of dishonesty, a lack of good faith, or that proceedings were improperly brought or were a shambles from start to finish) must have occurred before a costs order may properly be made against a Standards Committee.  What is required is an evaluative exercise of the discretion provided by the Act.

[34]     In weighing the disincentive that an award of costs might be considered to give rise to, the Tribunal should also bear in mind that the Law Society, and hence Standards Committees,  are funded  by practitioners themselves  through  the levies  the  Law Society as regulator imposes on the profession.  Where an award of costs is properly made against a Standards Committee, it falls to be paid by the profession.  Over time, the acceptance or otherwise of the profession of the appropriateness of those compulsory levies will, in my view, act as a proper check on the way the Law Society discharges its regulatory functions.

The C alderbank  rules

[35]     I am satisfied that, as Mr Beck submits, my judgment on Ms Lagolago’s appeal reflected the “offer” Ms Lagolago made in her settlement letter.  But that is not to say that the Calderbank rules apply accordingly.   Those rules are a response to the presumption in the High Court Rules that costs follow the event and, in effect, allow a defendant to redefine the event for that purpose.   It follows that the outcomes

provided for by those principles do not, as a matter of course, apply when the Tribunal

29     This is evident in later cases considering the decision in Roberts.  See McCaig v A Professional Conduct Committee (No 2) [2016] NZHC 306 at [11] — “the mere performance of its statutory function by a Professional Conduct Committee cannot, without more, be sufficient to disturb the fundamental principle that costs follow the event”.

exercises its costs discretion under the Act.   Rather, such a letter, and indeed less formal exchanges between a practitioner and the Law Society relating to the progress of disciplinary proceedings, may be relevant when the question of costs falls to be assessed.

Outcome

[36]     Taking that approach there are, in my assessment, three principal factors relevant to the question of the proper award of costs in the proceedings before the Tribunal:

(a)      First, and although she had recently successfully completed the Law Society’s litigation skills course, Ms Lagolago was clearly out of her depth in the proceeding she took for the Fs.   Judge Toohey’s firmly expressed frustrations in the District Court reflect that fact.  So there were reasons for the Law Society, exercising its disciplinary functions, to be concerned.

(b)By the same token, the Tribunal’s own assessment of the reliability of Mrs F as a witness, and the reasonably obvious dynamic that existed between Ms Lagolago and Mrs F, should in my view have given the Tribunal considerable cause to pause before reaching the decision it did: that much is clear from my judgment in the substantive appeal. Moreover, that Mr Beck had in effect pointed that out in the settlement offer letter he wrote is relevant.

(c)      Ms  Lagolago’s  lack  of  experience  as  a  litigator  complicated  the Tribunal’s task: the factual narrative she put before the Tribunal was confused and complicated, as was much of the evidence that had been adduced on behalf of the Fs in the District Court.  The time it took me to deliver my substantive judgment reflected the difficulties I had in coming to grips with that narrative. I was not greatly helped by the way the  facts  were  dealt  with  before  me.     In  those  circumstances,

Ms Lagolago can be seen to have contributed to the unfavourable decision of the Tribunal in a material way.

[37]     Taking all those factors into account, in my view it is therefore sufficient that I quashed the costs order made against Ms Lagolago by the Tribunal.   No award against the Law Society in the Tribunal is called for.

Costs on the stay application

[38]     That  Ms Lagolago  succeeded  on  appeal  against  the  decision  she  sought unsuccessfully to stay does not, in these circumstances, call for the costs order against her on that stay application to be reversed.  Rather, that order reflects the application of the principle that, in the High Court, costs follow the event.

Costs on the High Court appeal

[39]     There is a small difference between Mr Beck and the Committee on the proper calculation of 2B costs on this appeal.  That arises because Mr Beck claims .75 of a day for the hearing of the appeal.  The appeal was set down for half a day.  Mr Beck claims the increased allowance on the basis that the hearing began at 9.30 am.  I have no recollection of that, but have no reason to doubt Mr Beck’s account of matters. On the other hand, I do not think an early start is sufficient justification for anything more than the half day the appeal was set down for, and which it took.

[40]     On that basis, the Committee is to pay costs to Ms Lagolago on her successful appeal in this Court of $14,049.

Costs on this cost application

[41]     As  matters  have  transpired,  I  am  not  persuaded  that  costs  on  this  cost application should “follow the event”.  In effect, success is evenly divided between the parties.   Ms Lagolago has succeeded as a matter of principle, albeit not to the

extent of disturbing the Tribunal’s particular decision.  In these circumstances, I am

satisfied that costs on this costs application should lie where they fall.

Solicitors:

Luke Cunningham Clere, Wellington for Respondent

Clifford J