Lawn v Ward HC Hamilton CIV 2006-419-1456

[2007] NZHC 1578

IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY

CIV-2006-419-001456

BETWEEN  RUSSELL LAWN Appellant

ANDDONNA MARIE WARD Respondent

Hearing:         11 December 2006

Appearances: W P Strauss for the Appellant

H G MacColl for the Respondent

Judgment:      5 February 2007

JUDGMENT OF FRATER J

This judgment was delivered by Justice Frater on 5 February 2007 at 4.30 pm, pursuant to

r 540(4) of the High Court Rules

Registrar/Deputy Registrar
Date:

Solicitors:    Kumeu-Huapai Law Centre P O Box 122 Kumeu for the Appellant

Family Law Centre P O Box 19212 Hamilton for the Respondent

LAWN V WARD HC HAM CIV-2006-419-001456  5 February 2007

[1]      This is an appeal against the order of the District Court at Hamilton referring two bills of costs rendered by the  appellant  to  the  respondent  to  the  Auckland District Law Society for revision.  The order was made pursuant to rr 146 and 151 of the Law Practitioners Act 1982 which state:

146      Order of Court for reference of bill for revision

(1)       Subject to sections 150 and 151 of this Act, a Court may order that a bill of costs be referred to the appropriate District Law Society for revision by the District Council.

(2)      An order under this section may be made either on the application of the practitioner or on the application of the party chargeable.

(3)      Any such order may be made with such directions and subject to such conditions as the Court thinks fit.

(4)In this section the term Court means— (a) The High Court; or

(b)A District Court in any case where that Court would have jurisdiction if the application were a claim for the amount of the bill.

151      Where revision allowed only in special circumstances

(1)       In any case to which this section applies,—

(a)A bill of costs shall not be revised by a District Council of its own motion, or referred for revision except by order of a Court; and

(b)       The Court shall not make an order for the reference of a bill for revision except in special circumstances.

(2)       This section applies in every case (not being a case to which section

150 of this Act applies) where—

(a)       The bill has been previously revised under this Part of this Act or taxed before the commencement of this Act under Part 4 of the Law Practitioners Act 1955; or

(b)A verdict or judgment has been obtained in an action for the recovery of the amount of the bill; or

(c)The bill has been paid otherwise than by deduction or set- off; or

(d)One year has elapsed since the date of the delivery of the bill.

[2]      The appellant, Mr Lawn, is a barrister and solicitor practising in Auckland as principal of the practice known as the Kumeu-Huapai Law Centre.

[3]      In 1999 the respondent consulted him concerning the resolution of property issues  arising  following  the  breakdown  of  her  relationship  with  Paul  Knudsen. Mr Lawn,  in  turn,  instructed  Mr  E  J  Hudson  to  act  in  connection  with  the relationship property proceedings which Mr Knudsen issued.  Mr Hudson settled the necessary pleadings and affidavits and appeared at the preliminary hearings, but withdrew prior to the substantive hearing because of an anticipated clash of commitments.  His fee was $12,281.

[4]      Thereafter Mr Lawn resumed sole conduct of Ms Ward’s case, and appeared as her counsel at the three day hearing, notwithstanding that by then Mr Hudson had become available.

[5]      Ms Ward contends that at a meeting on 30 November 2004 she and Mr Lawn discussed fees.   He told her that his fee for the three day hearing commencing on

6 December 2004 would be between $16,000 and $20,000, inclusive of Mr Hudson’s costs.

[6]      In fact, the sum of the invoices rendered by Mr Lawn was $40,793.69, made up as follows:

Mr Hudson	14 December 2004	12,281.00
Mr Lawn	14 December 2004	24,173.00
23 December 2004	1,793.75
29 March      2005	2,316.94
31 March      2005	228.75

$40,793.69

[7]      In addition, Mr Lawn claimed penalty interest on the unpaid balance at the rate of 16% per annum.

[8]      The Family Court judgment, delivered on 4 March 2005, was not favourable to Ms Ward.

[9]      The judge held that her relationship with Mr Knudsen was one of short duration,   that   a   substantial   proportion   of   the   property   in   issue   remained Mr Knudsen’s separate property, and awarded 70% of the relationship property to him.

[10]     Ms Ward lodged an appeal against this judgment and sought a new trial. [11]           The High Court hearing took place on 20 March 2006.

[12]     In a judgment dated 4 April 2006, Simon France J dismissed Ms Ward’s application for a new trial on the basis that at the hearing Mr Lawn improperly conceded that the relationship began on a later date than she contended.   He also dismissed  Ms  Ward’s  appeal  against  the  classification  of  certain  property  as Mr Knudsen’s separate property.  However, he allowed that against the division of relationship property, which he determined should be held in equal shares.

[13]     Ms Ward was represented on appeal by Mr Hudson and her current solicitor, Ms MacColl.

[14]     She first instructed Ms MacColl in May 2005, or thereabouts.   One of the matters they discussed at that time was the reasonableness of Mr Lawn’s fees.  On Ms MacColl’s advice she drafted a letter of complaint and request for revision to the Auckland District Law Society.  Subsequently she showed the draft to Ms MacColl, who suggested a number of amendments which she duly made.  She thought that she then emailed the letter to the Society.

[15]     The costs issue was next raised in March 2006, after the High Court hearing. When Ms MacColl enquired about progress on the issue Ms Ward told her that she had heard nothing from the Law Society.  However, on checking her computer, she discovered that her amended letter was still in the draft box and, in fact, had not been sent.

[16]     The omission was immediately rectified with Mr Lawn’s four bills of costs being referred to the Law Society for revision.

[17]     Some  time  before  the  end  of  July  2006  the  costs  administrator  of  the Auckland District Law Society told Ms Ward that the Society was unable to review the December bills, which were outside the 12 month period provided by the Law Practitioners Act, without a referral from the Court.

[18]     That  application,  which  was  made  by way of  an  originating  application, supported  by  an  affidavit  by  Ms  Ward,  was  filed  on  23  August  2006.    The documents were served on Mr Lawn on 4 September.   He responded by filing an appearance under protest to jurisdiction and a notice of application to strike out the proceeding.

[19]     The matter was listed for a first call on 21 September 2006.   In the event, however, Judge M L S F Burnett heard and determined both the preliminary and substantive applications on that day.

The judgment under appeal

[20]     Judge Burnett’s oral judgment was brief.  She said:

[1]       I am satisfied that the protest as to jurisdiction is simply not made out particularly given the provisions of S 151 of the Law Practitioners Act

1982.

[2]       The other grounds to strike out are that this application should be by way  of  statement  of  claim,  which  I  do  not  accept.    Counsel  for  the respondent says a statement of claim would provide the opportunity for the respondent to air their point of view.  But really their opportunity to air their view will be before the revisions committee.

[3]       The   other   ground   in   opposition   is   that   there   is   no   special circumstances made out by the applicant.   I am satisfied that the special circumstances  as  set  out  in  paragraph  15  of  the  applicant’s  affidavit  in support are sufficient to satisfy that provision as to special circumstances. Therefore  pursuant  to  section  151(1)(a)  Law  Practitioner’s  Act  1982 reference to the Auckland District Law Society is made in respect of bills of costs 14 and 23 December 2004 for revision.

[4]       The special circumstances are made out.   Protest as to jurisdiction and application to strike out are not made out.  Costs are to the applicant on (2)(b) basis on today’s application.

[21]     Paragraph 15 of Ms Ward’s affidavit, referred to by the judge, states:

15.      THE circumstances that I rely upon are:

15.1The representations made by Mr Lawn as to the fees which he would charge me for conducting the hearing.  There is a substantial difference between the representation made by [sic] me and the bills received from Mr Lawn.

15.2     Mr  Lawn’s failure  to  obtain  instructions  from me  at  the hearing of the District Court proceedings.

15.3The reasonableness of Mr Lawn’s fee, having regard to: (a) The work undertaken by Mr Lawn.

(b)      The standard of representation. (c) The hourly rate charged.

15.4The issues with my health at the time that I received the bills.

Grounds of appeal

[22]     Essentially, there are three grounds of appeal:

i)That as the respondent’s application was irregular, the judge erred in rejecting the application to strike out and, having done so, further erred by not allowing the appellant the opportunity to oppose the matter on the merits.

ii)That  the  judge  erred  in  finding  that  the  respondent  had established special circumstances;  and

iii)That, irrespective of the outcome, the judge erred in ordering the appellant to pay costs.

Alleged procedural errors

[23]     Mr Strauss submitted that the originating application procedure adopted by the respondent was unauthorised and therefore irregular.

[24]     Applications to the Court under ss 146 and 151 of the Law Practitioners Act

1982 are not among those which r 452(1)(a) of the District Court Rules 1992 stipulates should be commenced by way of an original application.   Nor was any leave sought or permission granted under r 452(1)(c) to adopt this procedure on the grounds that it was in the interests of justice to do so.

[25]     The Registrar told him that the application was accepted for filing as an interlocutory application.  But that could not be right either, Mr Strauss said, because the proceeding itself had not been commenced by way of a statement of claim, as it should have been.

[26]     In his submission, given the areas of factual dispute between the parties and issues of honesty and reasonableness arising in this case, the originating application procedure was inappropriate:   Jones v H W Broe Limited (1989) 5 PRNZ 206; Distinction Realty Limited v Matarangi Beach Estates Limited (2000) 14 PRNZ 435.

[27]     Ms MacColl strongly disagreed.

[28]     She submitted that the application was more appropriately commenced by way of the originating application procedure, rather than a statement of claim under r

112 because all that was being sought was an order referring the disputed bills of costs to the Law Society for revision.   The Court was not required to hear and determine the substantive issues.  It did not have to decide whether the bills of costs were reasonable or just or whether Mr Lawn’s conduct in relation to either his representation  of  Ms  Ward  at  the  Family  Court  hearing  or  representations  he allegedly  made  as  to  costs,  was  appropriate.    Those  were  all  matters  for  the Law Society.   In the  circumstances, it was pragmatic and cost effective for the Law Society to determine all issues at the same time and consider a possible set-off against the level of costs, after determining the negligence/conduct issues raised by the complaint.

[29]     Traditionally, applications under the Law Practitioners Act 1982 in respect of costs were commenced by way of notice of motion:   see Parsons v Young Swan Morison McKay [1986] 2 NZLR 204. That changed with the amendments brought about by s 10 of the Judicature Amendment Act (No 2) 1985. Interestingly, r 458D

of the High Court Rules, which corresponds with r 452(1)(a) of the District Court Rules,  includes  in  the  list  of  applications  for  statutory  relief  which  can  be commenced  by  way  of   originating  application   ss   46,   55   and   149   of   the Law Practitioners Act 1982.  These cover applications for admission as a barrister and solicitor, for leave to practice on one’s own account and to review a Registrar’s decision about a bill of costs revision under s 149.  The District Court Rules, on the other hand, omit any reference whatsoever to the Law Practitioners Act.

[30]     In the absence of express authorisation under either r 452(1)(a) or (b), the respondent should have filed an ex parte application for leave under r 452(1)(c):  Re Howes Tindall & Associates Ltd [1990] 2 NZLR 323.

[31]     Leave is not lightly given.  In Jones v H W Broe Ltd (at 207), McGechan J

said, in relation to r 458D(1)(e) of the High Court Rules:

The r 458D originating application procedure was designed as a genuine exception,  and as an  expedient for  cases  where  there  was  in  reality  no opposing party avoiding the clumsy and unnecessary use of a full statement of claim and notice of proceeding.   It was not intended for routine use in cases where there was another likely party with contrary interests.

[32]     The issue in this case is whether the referral should be made.  In other words, whether special circumstances have been made out.  That issue is hotly contested. However, in my view it is one which can be resolved on the basis of affidavits and submissions.   It is not necessary for there to be either discovery of documents or cross-examination of witnesses.   Accordingly, I accept that the judge was right to dismiss the protest to jurisdiction and strike out applications and effectively grant leave to proceed under r 452(1)(c) so that the merits of the application could be focussed upon – albeit in a somewhat cursory manner.

[33]     I  turn  now  to  consider  whether  special  circumstances  were  properly established in this case.

Special circumstances

[34]     Because of his decision to protest the jurisdiction of the Court to deal with the application in the form presented, Mr Lawn did not file any affidavits in response

to Ms Ward’s affidavit.   Clearly he anticipated doing so prior to the substantive hearing, in the event that his strike out application was dismissed.

[35]     For reasons which counsel did not explain, Judge Burnett elected to proceed without the benefit of that evidence.

[36]     Heath J gave Mr Lawn the opportunity to apply for leave to file an affidavit prior to the hearing before me but he did not do so.  In the event, both counsel urged me to determine the appeal on the basis of the limited information before the Court, rather than remitting the matter to the District Court.

[37]     The onus is on the appellant to show that Judge Burnett acted on a wrong principle, or failed to take into account some relevant matter, or took into account some irrelevant matter, or was plainly wrong in finding that special circumstances existed to make the referral sought outside the time period:   Harris v McIntosh [2001] 3 NZLR 721.

[38]     The leading authority as to what is meant by special circumstances is the judgment of the Court of Appeal in Cortez Investments Limited v Olphert & Collins [1984] 2 NZLR 434.

[39]     That case concerned an application for an order referring a bill, which had previously been revised by the Law Society, for a second revision.  The Society’s original decision was received on 23 December, the last day before law offices closed for the Christmas vacation.  The appellant immediately instructed its solicitor to give notice of appeal to the Registrar under s 148 of the Law Practitioners Act.  To be effective this should have been given by 5 January.  In fact, the appeal was not filed until 27 January.  As a result the company lost not only its right of appeal to the Registrar but the subsequent right of review under s 149.   The High Court judge refused the application, holding that there were no special circumstances as it had not been shown that there was a serious risk of injustice to the company if the bill was not referred for revision and it was not a legitimate purpose to invoke the reference provision in order to obtain renewed access to the right of appeal.

[40]    In their separate judgments, the three judges on the Court of Appeal – Woodhouse P, Richardson J and McMullin J – each took a much broader approach.

[41]     Woodhouse P said (at 437):

A liberal enactment of this kind deserves and is intended to be given an appropriately liberal interpretation and one which reflects contemporary attitudes to such matters.  In no way would it be wise to lay down principles or embark on definitions which could only fetter the discretion of the Court but simply as one way of looking at the test of special circumstances in the present statutory context I think it would be met where aspects of the facts seemed to indicate a problem which had relatively unusual features while reasonably deserving at the same time relief of the kind provided by the provision.  And when those various considerations are applied to the present case in order to ask what is the ambit of the reference in s 151(1)(b) to "special circumstances" it would be wrong I think to exclude as irrelevant either the reasons for the situation which has arisen or the possible merits of the substantive issue.

[42]     Factors which influenced the judge in allowing the appeal were that the delay was short, there was no possible prejudice to the respondent and that the company had paid the amount settled by the society to its solicitors.  It was also relevant that, as a result of the delay, the company lost its right to challenge the Law Society ruling which it remained dissatisfied with, and that the bill in issue was substantial and had already been shown, by the Law Society’s first ruling reducing it by about a fifth, to have involved a significant degree of error.

[43]     Richardson J commented (at 439):

In its context in this legislation, which is directed to the assessment of the fairness and reasonableness of bills of costs in the public interest, the expression "special circumstances" should not be construed narrowly and it would be contrary to the social policies underlying these statutory provisions to  impose  on  an  applicant  the  burden  of  establishing  a  serious  risk  of injustice. Rather, it is a question of where the interests of justice lie in all the circumstances ...

Synonyms such as "unusual", "out of the ordinary run", "uncommon", "abnormal",  "striking"  convey  the  same  flavour  but  really  add  nothing except to emphasise that "special" is something less than extraordinary or unique.   A factor or combination of factors which may properly be characterised as not ordinary or common or usual may constitute a "special circumstance" justifying the revision of the bill under s 151.  And whether a circumstance is sufficient warrant for the exercise of that jurisdiction under s

151 may well depend into which of the four categories of s 151(2) the case falls.  But the inquiry never calls for the mechanical application of a rigid set

of criteria.

[44]     In  determining  the  appeal,  the  judge  held  that  the  combination  of  the company’s clearly stated dissatisfaction of the committee’s decision and the fact that it was a mistake by its solicitor which precluded its objections to the decision being ventilated on appeal constituted special circumstances warranting re-opening the appeal by the District Council.

[45]     Finally, McMullin J said (at 441):

What are "special circumstances" must be considered against the statutory background in which they are used.

... because the circumstances are special to each case, a judgment on whether or not they exist will often be a value judgment on the facts, and not one of general application. It would be as unwise as it would be impossible to endeavour to identify the situations and circumstances which may be held to be special under this or any other statutory provision, and indeed even where circumstances have common characteristics such as a solicitor’s mistake, what are special in one case may not be special in another. All that can be said is that to be special circumstances must be abnormal, uncommon, or out of the ordinary. They may be extraordinary but they do not require to be given the extra emphasis which that word sometimes carries. The words are ". . . wide, comprehensive and flexible words" and ". . . no Court can or ought to lay down any exhaustive definition of them", per Lopes LJ in Re Norman (1886) 16 QBD 673, 677.

[46]     The four factors identified by Ms Ward as constituting special circumstances

(recorded in her affidavit set out in [21] above) are:

i)the substantial difference between the fee which Mr Lawn said he would charge her and the fee actually rendered;

ii)Mr Lawn’s conduct in allegedly failing to obtain instructions from her in the Family Court proceedings;

iii)      the reasonableness of the fee;

iv)      her health when she received the bills.

[47]     Mr Strauss was critical of Ms Ward’s failure to give details of these grounds

–  for  example,  of  the  extent  to  which  she  claimed  the  appellant’s  fee  was unreasonable or concerning the depression she suffered or the stress she was under and  how  this  affected  her  ability  to  file  the  revision  applications  with  the

Law Society  within   the   required   period.     Nor   did   she   mention   any  other representations as to fees made by Mr Lawn, apart from those claimed to have been made on 30 November 2004.  But most importantly, he said, she gave no reasonable explanation whatsoever why she waited some eight months after the expiry of the one year period before she filed her application in Court.  In particular, she failed to explain the delay between the time she lodged the application with the Law Society and August 2006 when the application to Court was eventually made.

[48]     In response, Ms MacColl submitted that the application and reasons for it needed to be considered in its entirety.  It was inappropriate to single out one factor such as delay or depression, and focus on that alone.  Her client has valid complaints against Mr Lawn, both about his conduct as her solicitor and about the quantum of his bills.  He was aware of the complaints about his conduct as one of her grounds for appeal against the Family Court decision concerned his alleged failure to follow her instructions in relation to the date on which her relationship with Mr Knudsen commenced.    There  is  ample  material  in  the  documents  from  the  Family  and High Court files annexed to her affidavit of 23 August to explain her request for costs revision.

Decision

[49]     I accept that the delay in this case was considerable.  First of all there was a delay of some 15 months from the date the bills in issue were rendered until the application was made to the Law Society.   Then there was a further five months before the application was made to the Court.   I am cognisant of the fact that in Nicoll and Gay v Roche and Roche HC AK CIV-2004-404-6552 27 June 2005

Winkelmann J held that an unexplained delay of that magnitude was fatal.  However, given the background to these particular proceedings and especially the fact that the substantive proceedings were not resolved until 4 April 2006, more than 15 months after the disputed bills were delivered, I accept that during the period that time was running for applying for revision, Ms Ward’s focus was elsewhere.   Whether that was because she  was stressed or depressed  and if depressed, the extent of that depression, is but one factor to be taken into account.

[50]     Unlike the Nicoll and Gay case, the primary factors upon which Ms Ward relies in objecting to the quantum of the bills have been known to Mr Lawn for some time.

[51]     Ms Ward’s concerns about the quality of Mr Lawn’s representation of her are set out in detail in the affidavit she filed in support of her interlocutory application to produce further evidence in advance of her appeal to the High Court against the Family Court judgment.

[52]     Mr Strauss objected to any reliance being placed upon this document or the Family or High Court judgments in the relationship property proceedings on the grounds  that  their  use  in  these  proceedings  constituted  a  “publication”  of  a Family Court   proceeding   and   report,   in   breach   of   s   35A   of   the   Property (Relationships) Act 1976, and that they should therefore be ignored.

[53]     I do not agree.   Subsequent use of information emanating from one Court cannot amount to “publication” to others:   Hero Sportswear Ltd v Underground Fashions Ltd (1997) 10 PRNZ 655, 656.

[54]     Ms Ward’s other complaints, such as that concerning the reasonableness of the hourly rate charged given she was not on legal aid, despite receiving a domestic purposes benefit and Mr Lawn’s alleged representations about the quantum of his bill, are further aspects of the conduct issue.

[55]     I understand that Mr Lawn has already had the opportunity of answering all these allegations in the continuing proceedings before the Law Society.   He has chosen not to put that material before this Court.  Nor has he given any indication that he is prejudiced by the delay.

[56]     The Law Society have accepted the March 2005 bills for revision.  They are also considering the complaints about Mr Lawn’s conduct.  In the circumstances, the comment by Judge R Joyce QC in Maxwell v Vallant Hooker & Partners [2004] DCR 590 at [59] that:

this  is  plainly  one  of  those  cases  where  the  whole  picture  will  be  of fundamental importance to the reviser

is apposite.

[57]     I am therefore satisfied that Ms Ward has established not only that special circumstances do exist in her case warranting the late referral of the December bills to the Law Society for revision but also that, notwithstanding the paucity of reasoning, Judge Burnett was not plainly wrong in reaching the decision that she did.

Costs

[58]     Finally there is the issue of costs.   On this I agree with Mr Strauss.   He submitted  that  in  an  application  under  s  151  of  the  Law  Practitioners  Act  the applicant was seeking a special indulgence of the Court.  Accordingly, whether or not it was opposed, the appellant should not be penalised by way of a costs order.

Result

[59]     For the foregoing reasons the appeal is dismissed except in relation to the order made by the District Court as to costs.  That order is set aside.  Instead I direct that each party bear their own costs, not only of the District Court hearing, but also the appeal.

M A Frater J