MARTIN JAMES MAILLEY AND THE NEW ZEALAND LAW SOCIETY
[2024] NZHC 2648
•13 September 2024
IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2024-485-44
[2024] NZHC 2648
UNDER the Judicial Review Procedure Act 2016 IN THE MATTER OF
an application for judicial review of the respondent’s decision to decline the applicant’s claim on the Lawyers Fidelity Fund
BETWEEN
MARTIN JAMES MAILLEY
Applicant
AND
THE NEW ZEALAND LAW SOCIETY
Respondent
Hearing: 2 July 2024 Appearances:
Applicant in Person
K M Hursthouse for Respondent
Judgment:
13 September 2024
JUDGMENT OF McQUEEN J
Introduction
[1] Mr Mailley has brought a judicial review proceeding against the New Zealand Law Society (the Law Society). Mr Mailley seeks review of a decision by the Law Society to decline his claim against the Lawyers’ Fidelity Fund (the Fund). The claim against the Fund arises from fees paid to a former lawyer of Mr Mailley’s.
[2] The Law Society has applied for security for costs in respect of the judicial review proceeding. In support of its application for security for costs, the Law Society filed affidavits that attach bankruptcy notices issued against Mr Mailley and his partner by another former lawyer of his, to whom they are said to owe judgment debts.
MAILLEY v THE NZ LAW SOCIETY [2024] NZHC 2648 [13 September 2024]
[3] Mr Mailley objected to the inclusion of these bankruptcy notices as evidence in relation to the application for security for costs. As a result, he has filed two interlocutory applications. The first is to exclude the evidence of the bankruptcy notices and to require the Law Society to file a new application for security for costs excluding references to the bankruptcy notices (the application to exclude evidence). The second is for leave to require the Law Society to answer interrogatories to explain how and when the Law Society obtained copies of those notices (the application for interrogatories).
[4] Mr Mailley sought that the fixture for hearing the application for security for costs on 2 July 2024 be vacated so that his applications could be considered first. This was opposed by the Law Society. This Court declined to vacate the fixture and directed that Mr Mailley’s applications be dealt with at the same time as the Law Society’s application for security for costs.1 Accordingly, it is these three applications that I deal with in this judgment.
Background events
[5] Mr Mailley has an extensive history of proceedings against the Law Society. Mr Mailley has been dissatisfied with its processes. It appears that the genesis of his claims against the Law Society are grievances about the conduct of several lawyers who assisted him in his attempts to resist efforts to extradite him to Queensland on fraud charges some years ago. For the purposes of this proceeding, it is not necessary to outline the details of that history, rather the summary that follows is sufficient.
[6] The Fund is established under pt 10 of the Lawyers and Conveyancers Act 2006. Broadly speaking, where pecuniary loss is suffered by reason of theft by a lawyer, the Fund may provide compensation. The maximum amount payable to an individual claimant is $100,000.2
1 Mr Mailley sought leave to appeal the decision of Grau J not to recall her minute declining to adjourn the fixture on 2 July 2024. Leave was declined in Mailley v The New Zealand Law Society [2024] NZHC 1766.
2 Lawyers and Conveyancers Act (Lawyer: Fidelity Fund) Regulations 2008, r 11.
[7] On 10 April 2022, Mr Mailley lodged a claim against the Fund. The claim was for an alleged theft of $132,000 by one of his former lawyers, Mr Barry Hart, where it is said Mr Hart defaulted on a fee refund agreement (the First Claim). On 23 December 2022, Mr Mailley was notified that the First Claim was declined.
[8] On 28 December 2022, Mr Mailley lodged a second claim against the Fund. The claim was for an alleged theft by Mr Hart for overcharging in the sum of $140,350 (the Second Claim). On 15 March 2023, the Fund notified Mr Mailley by letter that his partner Ms Nutarelli appeared to be the correct claimant as payments to Mr Hart had been made from her company’s bank account.
[9] On 27 March 2023, the Law Society received a claim by Ms Nutarelli against the Fund in respect of the same alleged theft as referred to in the Second Claim. Notably, Ms Nutarelli’s claim was sent by email from Mr Mailley to the Law Society.
[10] On 20 September 2023, the Law Society notified Ms Nutarelli that her claim was accepted. Mr Mailley was also notified that the Second Claim was declined. The Law Society explained that this was because Ms Nutarelli had entrusted funds with Mr Hart, the loss of which was a “claim event” under s 306 of the Lawyers and Conveyancers Act, and she was the person entitled to compensation. On around 28 September 2023, Ms Nutarelli was then paid compensation of $100,000.
[11]On 12 October 2023, Mr Mailley lodged a third claim against the Fund for
$132,000 in relation to the same alleged theft that underpins the First Claim (the Third Claim). On 6 December 2023, the Law Society notified Mr Mailley that the Third Claim was declined. The Law Society advised Mr Mailley that default on a fee refund agreement of the kind Mr Mailley had with Mr Hart is not theft, indicating that it had explained this in an earlier letter dated 23 December 2022.
[12] On 19 December 2023, Mr Mailley applied for judicial review of the decision by the Law Society to decline the Third Claim.
[13] In April 2024, counsel for the Law Society wrote to Mr Mailley identifying the reasons why it said his application for judicial review could not succeed and requesting
that if he was to continue with the claim, that he make a proposal as to security for costs. Mr Mailley did not make such a proposal, indicating that he would abide the Court’s decision on any application made. In May 2024, the Law Society applied for security for costs from Mr Mailley. As already mentioned, in support of its application, the Law Society filed affidavits attaching bankruptcy notices issued against Mr Mailley and his partner by another former lawyer of his, to whom they are said to owe judgment debts.
[14] Mr Mailley then filed the application to exclude evidence and the application for interrogatories, together with an affidavit in support.
[15]I deal with each application in turn.
Application for interrogatories
[16] In his application for interrogatories, Mr Mailley says the Law Society improperly obtained the bankruptcy notices in pursuit of its defence in the judicial review proceeding. Mr Mailley is concerned that the Law Society obtained the bankruptcy notices from two lawyers, namely Mr Shaw and Mr Cowan, against whom he has complained to the Law Society. Mr Mailley contends that his right to a fair and impartial hearing of his complaint is affected as a result, in breach of his rights to natural justice under the New Zealand Bill of Rights Act 1990. He says that the Law Society cannot provide a fair and unbiased hearing of his complaint in the circumstances. Mr Mailley also says that he is actively challenging the cost awards that were the subject of those bankruptcy notices on the ground that they had been obtained by fraud, and that the Law Society is aware of this.
[17] Mr Mailley seeks an order that he may require the Law Society to answer the following interrogatories:
(a)How did the Law Society come into possession of the seven bankruptcy notices CIV-2023-404-2886, CIV-2023-404-2889, CIV-2023-404- 2891, CIV-2023-404-2893, CIV-2023-404-2894, CIV-2023-404-2895, CIV-2023-404-3075?
(b)If they were obtained from court records how did the Law Society come into possession of the court file references?
(c)When did the Law Society come into possession of the bankruptcy notices?
[18] The Law Society submits that interrogatories in judicial review proceedings are permitted only rarely. It says that the interrogatories concern matters that post-date any issue raised in the statement of claim and are irrelevant to the issues in the proceeding. The Law Society submits that the bankruptcy notices are relevant to its application for security for costs against Mr Mailley and it is entirely orthodox and proper for a party to seek and obtain evidence from open sources. The Law Society says that it is entitled to obtain evidence in support of its defence of Mr Mailley’s proceeding against it and this does not constitute a breach of Mr Mailley’s right to natural justice. It also says that its communications about the bankruptcy notices have no bearing on the consideration of Mr Mailley’s complaint about Mr Shaw and/or Mr Cowan, which will be dealt with by a separate and independent committee.
[19] In addition, the Law Society refers to its letter to Mr Mailley dated 21 May 2024, in which it both explained how it became aware of Mr Shaw’s bankruptcy proceedings against Mr Mailley and advised Mr Mailley that the notices were obtained from Mr Shaw’s lawyers.
Decision
[20] While s 14 of the Judicial Review Procedure Act 2016 allows the Court to make an order or direction permitting a party to administer interrogatories, such an order in judicial review is extremely rare.3 I am satisfied that the order sought by Mr Mailley should not be made because the interrogatories sought do not relate to a matter in issue between the parties in the proceeding and the order is unnecessary given the Law Society has already explained to Mr Mailley that it came into possession of the bankruptcy notices through Mr Shaw’s lawyers.
3 Jessica Gorman and others McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [JR14.08] and [HR8.34.06].
[21] I decline Mr Mailley’s application for an order permitting him to administer interrogatories.
Application by Mr Mailley to exclude evidence
[22] Mr Mailley also applies for an order to exclude that part of the affidavit evidence of Ms Rebecca Jacobs and Ms Kayleigh Devane that refers to and attaches the bankruptcy notices, and if that application is successful, an order that the Law Society file a new interlocutory application for security for costs excluding references to the bankruptcy notices.
[23] Mr Mailley repeats the grounds that he relies on in support of his application for interrogatories. He adds that in improperly obtaining and using the bankruptcy notices, the Law Society has acted in bad faith and intending to have an unfairly prejudicial effect on him in the judicial review proceeding. Mr Mailley therefore submits that an appropriate response would be for the Court to exclude the bankruptcy notices as evidence in support of the Law Society’s application for security for costs.4
[24] In response, the Law Society reiterates its submissions on the application for interrogatories. It submits that Mr Mailley has had the opportunity to address the evidence filed by it (including the bankruptcy notices) in relation to the application for security for costs in the usual way.
Decision
[25] I do not accept that the Law Society obtained the bankruptcy notices improperly. I am satisfied that the bankruptcy notices may be relevant evidence in support of the security for costs application as they may show Mr Mailley’s impecuniosity. I am also satisfied that the evidence is not unfairly prejudicial, nor will it needlessly prolong the hearing of the application.
[26] Nor do I consider that the Law Society obtaining the bankruptcy notices will affect Mr Mailley’s rights to natural justice in relation to his complaint about Mr Shaw
4 Mr Mailley relies on ss 6, 7, 8, 11, 12 and 30 of the Evidence Act 2006 and Marwood v Commissioner of Police [2016] NZSC 139 in making this submission.
and/or Mr Cowan, given the complaints service process provided for under pt 7 of the Lawyers and Conveyancers Act. In particular, it will not affect his ability to have a fair and impartial hearing given that independent committees hear any complaints.
[27] I therefore decline Mr Mailley’s application to exclude evidence of the bankruptcy notices and for an order requiring the Law Society to file a new security for costs application.
Application by the Law Society for security for costs
[28]Rule 5.45(1) and (2) of the High Court Rules 2016 provides:
5.45 Order for security of costs
(1)Subclause (2) applies if a Judge is satisfied, on the application of a defendant,—
(a)that a plaintiff—
(i)is resident out of New Zealand; or
(ii)is a corporation incorporated outside New Zealand; or
(iii)is a subsidiary (within the meaning of section 5 of the Companies Act 1993) of a corporation incorporated outside New Zealand; or
(b)that there is reason to believe that a plaintiff will be unable to pay the costs of the defendant if the plaintiff is unsuccessful in the plaintiff’s proceeding.
(2)A Judge may, if the Judge thinks it is just in all the circumstances, order the giving of security for costs.
…
[29]Applications for security for costs are to be approached in three stages:5
(a)the first question is whether the threshold test in r 5.45(1) is met, or in other words, whether the applicant can establish that the rule applies;
5 Jindal v Kamal [2023] NZHC 2820 at [9], citing Busch v Zion Wildlife Gardens Ltd (in rec andliq) [2012] NZHC 17; and Jessica Gorman and others McGechan on Procedure (online looseleaf ed, Thomson Reuters) at [HR5.45.01]–[HR5.45.04], [HR5.45.07], [HR5.45.09] and [HR5.45.11].
(b)if the threshold test is met, then the second question is whether it just in all the circumstances to make an order for security for costs;6 and
(c)if the Court so concludes, then the third question is the nature of the order that should be made.
Is the threshold requirement under r 5.45(1) met?
[30] The first issue is whether the threshold test in r 5.45(1) applies, that being there is reason to believe that Mr Mailley will be unable to pay the costs of the Law Society if he is unsuccessful in the judicial review proceeding.
[31] This issue can be readily dealt with because of Mr Mailley’s statement to me at the hearing that, as a superannuitant, he is not in a position to pay any costs to the Law Society, should he be unsuccessful in this proceeding. The consequence of this concession is also that Mr Mailley’s applications in relation to the bankruptcy notices were largely pointless. The main purpose for his concern about the bankruptcy notices was to oppose the application for security for costs, particularly the threshold test. Despite Mr Mailley’s earlier indication to the Law Society that he would abide the decision of the Court on security, his memoranda and other documents make it clear that he opposed the application, in part on the basis there was no evidence of his impecuniosity. Conceding that he has no ability to pay any costs that may be ordered against him is an acceptance that the threshold test is met—this concession has come late in the piece.
[32] Should I have needed any further reassurance on the threshold requirement, I accept the Law Society submission that there are other reasons to believe that Mr Mailley will be unable to pay its costs if he is unsuccessful in this proceeding. These include that Mr Mailley owes in excess of $85,000 to the Law Society in unpaid costs awards and that he has previously represented that he is impecunious in other court proceedings. I note that I do not need to rely on the bankruptcy notices that have been in contention.
6 Balancing the interests of plaintiff and defendant is the overriding consideration: see Highgate onBroadway Ltd v Devine [2012] NZHC 2288, [2013] NZAR 1017 at [24].
[33] I record Mr Mailley’s submission that if costs in this proceeding were ordered against him, he would, as a person of integrity, do his best to pay them (including by way of seeking financial assistance from his family). However, Mr Mailley could not explain to me why he has not then paid the existing costs awards due to the Law Society.
[34] I am satisfied that the threshold requirement under r 5.45(1) of the Rules is met.
Is an order for security for costs just in the circumstances?
[35] The next question is whether it is just in all the circumstances to make an order for security for costs.7 Balancing the interests of Mr Mailley and the Law Society is the overriding consideration.8 The Court of Appeal in McLachlan v MEL Network Ltd summarised this in the following terms:9
[15] The rule itself contemplates an order for security where the plaintiff will be unable to meet an adverse award of costs. That must be taken as contemplating also that an order for substantial security may, in effect, prevent the plaintiff from pursuing the claim. An order having that effect should be made only after careful consideration and in a case in which the claim has little chance of success. Access to the courts for a genuine plaintiff is not lightly to be denied.
[16] Of course, the interests of defendants must also be weighed. They must be protected against being drawn into unjustified litigation, particularly where it is over-complicated and unnecessarily protracted.
[36] The discretion is a broad one and may be exercised to require security even if that may prevent a plaintiff from pursuing a claim.10 But access to the Court for a genuine plaintiff is not lightly to be denied.11
[37]Section 324 of the Lawyers and Conveyancers Act relevantly provides:
(1)A regulatory society may receive and settle any claim against a fidelity fund held by that regulatory society under this Part.
7 High Court Rules 2016, r 5.45(2).
8 Highgate on Broadway Ltd v Devine, above n 6, at [24].
9 McLachlan v MEL Network Ltd (2002) 16 PRNZ 747 (CA).10 Lee v Lee [2019] NZCA 345 at [20].
11 At [20].
(2)Such a claim may be received and settled at any time after the commission of the claim event in respect of which the claim arose.
[38] Regulation 13 of the Lawyers and Conveyancers Act (Lawyers: Fidelity Fund) Regulations 2008 (the Regulations) requires that a claim must be considered and dealt with all reasonable expedition consistent with the nature of the claim and the surrounding circumstances.
[39] The statement of claim is difficult to understand in terms of its references to the claims under challenge. The factual aspect of the pleading seems to relate to the Third Claim but as there is also a complaint about the payment to Ms Nutarelli, the Second Claim may also be at issue.
[40] The application for review, as pleaded in the statement of claim, alleges that the Law Society has:
(a)erred in law and failed to comply with its statutory obligation under the Lawyers and Conveyancers Act and the Regulations to reimburse/compensate Mr Mailley in relation to his claim against the Fund; and
(b)erred in law in not recognising and accepting Mr Mailley’s valid legal claim against the Fund when it has a statutory duty to do so.
[41] Despite this pleading (and the lack of clarity about the underlying claim or claims in issue), Mr Mailley was unable to identify for me what statutory duty or obligation the Law Society had breached. Nor could he identify any error of law or procedural impropriety on the part of the Law Society.
[42] Rather, Mr Mailley says that the Law Society made a mistake in paying Ms Nutarelli instead of him, because he says the payment she made to Mr Hart was on his behalf. Mr Mailley also refers to the order of an Auckland Standards Committee in 2012 that Mr Hart repay him around $150,000. Mr Mailley says this obligation arises from an agreement between him and Mr Hart that fees would be refunded (of which Mr Mailley says he only received $18,000 before Mr Hart was declared
bankrupt). Mr Mailley says he is not seeking double recovery and has not specified a sum in the relief sought in his claim. He says that $32,000 may be an appropriate sum in the circumstances.
[43] The Law Society submits that these are matters going to the merits of its decisions on Mr Mailley’s claims and Mr Mailley is simply dissatisfied with those decisions. It says there is no obligation on the Law Society under the Lawyers and Conveyancers Act or the Regulations to accept an applicant’s claim. The Law Society emphasises that it has “received and settled” the claims under review in accordance with s 324 of the Lawyers and Conveyancers Act and “considered and dealt with” them in accordance with reg 13 of the Regulations. The Law Society further says it is difficult to see how such discretionary decisions are amenable to review given the statutory framework. It submits that such decisions do not involve the exercise of statutory powers of decision or the performance of a public function.
[44] To the extent that the merits of the decisions are relevant, the Law Society says that Ms Nutarelli was appropriately compensated for her claim, and it is a matter for Mr Mailley and Ms Nutarelli to resolve any other question as to who, between them, is entitled to the $100,000 already paid to Ms Nutarelli. It also appears that the Third Claim was declined because it did not relate to a theft and therefore did not meet the requirements for a valid claim against the Fund.
[45] In the circumstances, my preliminary assessment is that Mr Mailley’s application for judicial review is unlikely to succeed.
[46] I accept the submission by the Law Society that having regard to Mr Mailley’s conduct in prior litigation and this proceeding, it is likely the Law Society will be put to significant cost in defending the proceeding. It is also relevant that Mr Mailley currently has costs awards outstanding to the Law Society. This unwillingness and/or ability to pay previous judgment debts weighs in favour of an order for security.12
12 Taylor v Adair [2018] NZHC 1975 at [30]–[31], citing Burden v Dixie Cummings New Zealand
[2016] NZHC 729 at [22] and Mawhinney v Auckland Council [2014] NZHC 3207.
[47] Perhaps because, until the hearing, Mr Mailley maintained the position that there was no evidence of his impecuniosity, he did not suggest that he would not be able to pursue the application for judicial review if security for costs was ordered against him. In light of this, and Mr Mailley’s reference to possible assistance from his family, I regard the question of whether an order for security for costs would prevent him being able to advance his claim as a neutral factor.
[48] Overall, I am satisfied that it is just in all the circumstances to make an order for security for costs.
Amount of security
[49] The last matter is what the amount of the security should be. To determine the amount of security justified requires the exercise of discretion rather than a strict mathematical approach.13 The amount of security does not necessarily need to be fixed by reference to likely costs awards but rather what the Court thinks fit in all the circumstances.14 The circumstances to be taken into account include the following:15
(a)the amount or nature of the relief claimed;
(b)the nature of the proceeding, including the complexity and novelty of the issues, and therefore the likely extent of interlocutories;
(c)the estimated duration of the trial; and
(d)the probable costs payable if the plaintiff is unsuccessful and/or the defendant’s estimated actual (i.e. solicitor and client) costs.
[50] The Law Society initially sought security in the sum of $32,000, being approximately 2B costs on steps estimated as necessary, set out in a schedule to its application. It submits that this is conservative and assumes, as Mr Mailley is
13 Sharp v Pillay [2017] NZHC 647 at [17].
14 McLachlan v MEL Network Ltd, above n 9, at [27].
15 This summary was adopted by the Court of Appeal in McNaughton v Miller [2022] NZCA 273 at [17].
self-represented and given the manner in which he has conducted previous proceedings, that:
(a)two days ought to be allocated for a hearing to ensure it is not part heard;
(b)there will be at least one amendment to the statement of claim; and
(c)the Law Society will prepare the common bundle to ensure that it complies with the relevant protocols.
[51] The Law Society now seeks a further $8,000 as an approximation of costs for any further interlocutory applications that Mr Mailley may file, given his conduct in the proceeding so far in bringing the two interlocutory applications already discussed. The total amount sought as security for costs is therefore $40,000.
[52] I have considered the estimated costs set out in the Law Society’s schedule. I agree costs on a 2B basis are appropriate in this proceeding. However, I consider that given the limited grounds of the application for judicial review, one hearing day would likely be sufficient and this should be reflected in the calculation of estimated costs.
[53] It is generally inappropriate to make an order for security for costs that have been incurred prior to the application.16 I consider that here, however, where counsel for the Law Society wrote to Mr Mailley at a very early stage explaining why his claim could not succeed and asking for a proposal for security for costs, that the initial costs incurred by the Law Society in commencing its defence are properly included in the calculation.
[54] On this basis, and anticipating only one hearing day, the estimated costs on a 2B basis as set out in the Law Society’s schedule would be reduced by approximately
$7,000 to $25,000.
16 Pickard v Ambrose HC Wellington CIV-2003-091-143, 13 August 2009 accepted on appeal Ambrose v Pickard [2009] NZCA 502 at [42]; and adopted in Sisson v IAG New Zealand Ltd [2014] NZHC 616 at [71]–[72] and Oxygen Air Ltd v Electronics Australia Pty Ltd [2018] NZHC 2504, [2018] NZAR 1699 at [74].
[55] Given Mr Mailley’s conduct leading to this security for costs hearing, where he filed two further interlocutory applications which are fairly regarded as unnecessary given his ultimate position on his impecuniosity, and his conduct in other proceedings involving the Law Society, the Law Society’s desire to increase the amount of costs sought in anticipation of further interlocutory applications being filed by Mr Mailley is understandable. However, I am not prepared to include such an increase given its speculative element. Nor do I take account at this stage that an application for increased or indemnity costs may ultimately be warranted, should the Law Society successfully defend the application for judicial review.
[56] I invited Mr Mailley to comment on an appropriate amount if I was minded to order security for costs, but he did not offer any view.
[57] The Law Society proposes that Mr Mailley should be ordered to give security in two equal instalments: the first immediately and the second within five working days of the close of the pleadings. The Law Society seeks leave to apply for further security in the event of Mr Mailley amending his claim, making further interlocutory applications or if circumstances otherwise change.
[58] In the circumstances, I am satisfied that security for costs in the sum of $25,000 is appropriate in this case. I conclude that it is appropriate for Mr Mailley to give this security in two instalments: the first of $15,000 to be paid immediately and the second of $10,000 to be paid within five working days of the close of the pleadings.
[59] I conclude that a stay of proceedings should be ordered until the first instalment of $15,000 of security for costs is paid to the Court.17
[60] For the avoidance of doubt, I also reserve leave to the Law Society to make a further application for security for costs should that be necessary, although it appears that such leave may not strictly be required.18
17 High Court Rules 2016, r 5.45(3)(b).
18 Monnery v Parsons [2023] NZHC 1595 at [18].
Result
[61] Mr Mailley’s application for an order permitting him to require the Law Society to answer interrogatories is declined.
[62]Mr Mailley’s application to exclude part of the evidence is declined.
[63] The Law Society’s application for security for costs is granted. Mr Mailley is required to pay security for costs in the sum of $25,000 as follows:
(a)the first instalment of $15,000 must be paid immediately to the Court; and
(b)the second instalment of $10,000 must be paid to the Court within five working days of the close of pleadings.
[64] Pursuant to r 5.45(3)(b) of the High Court Rules 2016, I order that the proceeding is stayed until the first instalment of $15,000 for security for costs is paid to the Court.
[65] Leave is reserved to the Law Society to seek further security for costs should circumstances change.
Costs
[66] In the ordinary course, the Law Society, having succeeded in relation to its application for costs and in its opposition to Mr Mailley’s two applications, would be entitled to costs.
[67] If the parties are unable to agree costs, memoranda may be filed. Memoranda are to be no longer than five pages, together with a schedule. The Law Society is to file any memorandum within 15 working days of this judgment. Mr Mailley is to file any memorandum in response within a further 10 working days.
[68]Costs will then be determined on the papers.
McQueen J
Solicitors:
Lee Salmon Long, Auckland for Respondent
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