McFadden v Nelson District Law Society CA19/03

[2004] NZCA 419

IN THE COURT OF APPEAL OF NEW ZEALAND

CA19/03

BETWEEN  N A MCFADDEN

Appellant

AND  NELSON DISTRICT LAW SOCIETY

First Respondent

AND  M A TALLEY AND ANOTHER

Second Respondents

AND  NEW ZEALAND LAW SOCIETY

Third Respondent

Hearing:         24 November 2003 Coram:  Blanchard J

Tipping J McGrath J

Appearances: N R W Davidson QC and Z G Kennedy for Appellant A B Darroch for First Respondent

G P Malone for Second Respondents P N Collins for Third Respondent

Judgment:      26 February 2004

JUDGMENT OF THE COURT DELIVERED BY TIPPING J

Introduction

[1] This appeal is from a judgment of France J delivered in the High Court at Nelson and reported at [2003] 3 NZLR 34. In her judgment the Judge dismissed the application for judicial review brought by the appellant, Mr McFadden. The application concerned the decision of the Nelson District Law Society (the NDLS) to refer a complaint made against Mr McFadden to a Committee made up of members of the Canterbury District Law Society (the CDLS) for what was described as

N A MCFADDEN V NELSON DISTRICT LAW SOCIETY And Ors CA CA19/03 [26 February 2004]

“re-hearing de novo”. The central issue before the Judge was, as she put it, whether the NDLS had a sufficient basis in law for ordering the so-called re-hearing de novo. As the High Court judgment is reported, we will describe the background only to the extent necessary to consider the points raised on appeal. For that purpose we will substantially adopt the helpful summary provided by Mr Davidson QC in his submissions for the appellant.

Background

[2]    On 14 June 1999 a complaint was made against Mr McFadden, a Nelson practitioner, by his former close friends and clients, Mr and Mrs Talley. The complaint involved allegations that Mr McFadden had betrayed both the personal and professional relationship which had hitherto existed between them. At its heart the complaint was that, having accepted instructions from them to protect the Talleys’ interests in their coastal property under the Tasman District Council’s proposed plan, Mr McFadden failed to do so. He acted at the same time for what  was variously called the Kina or Wood Trust, which held a competing interest, namely an interest in securing rural/residential zoning which the Talleys did not want.

[3]    From the outset the Talleys alleged that Mr McFadden was motivated by personal self interest. Mr McFadden has consistently denied that he had any  personal interest in the matter but has never denied that there was a conflict of interest. Prior to the commencement of the complaint process he had acknowledged that he should have recognised the conflict at an earlier stage.

[4]    As things initially stood the Talleys had some measure of protection because, although no objection had been lodged on their behalf, there were able to ally themselves with another submitter whose interests coincided with theirs. However, that other party withdrew and this left the Talleys without the protection which they had looked to Mr McFadden to provide. To remedy the situation he purchased the Kina Trust land so as to be in a position to withdraw its submission which was contrary to the Talleys’ interests. He then sold the land back to the Kina Trust, incurring a loss of $150,000.00 in the process. By this means the Talleys’ position

was secured. The rural/residential zoning was not achieved and the land retained its rural 2 zoning, which is what the Talleys always wanted.

[5]    Initially the complaint was examined by the NDLS in a conventional way. However, on 21 September 1999 the lay observer for the district, Mr Michael Gibson, recommended that the matter be dealt with outside the Nelson district and that the Auckland or Wellington District Law Societies be approached in order to set up a Complaints Committee of practitioners from their district but as a Complaints Committee of the NDLS. In the result the NDLS appointed a Complaints  Committee comprising Wellington practitioners.

[6]    On 4 April 2000 that Committee, so constituted, advised Mr T J Castle, acting for the Talleys, that the Committee was of the view that their complaint was justified. They indicated that Mr McFadden had been advised to that effect and had been required to make a contribution towards the costs of the investigation. The Committee’s letter indicated that it considered that there “was a conflict of interest and that Mr McFadden should have recognised the conflict earlier than he did”. The letter went on, however, to say that the Committee would not be laying disciplinary charges against Mr McFadden. In coming to that decision the Committee indicated  it had taken into account the following factors:

1.Mr McFadden has accepted that he erred, has been fully cooperative and has apologised.

2.There is no evidence that the conflict of interest has resulted in any personal gain for Mr McFadden.

3.Mr McFadden has done his best to put matters right for Mr and    Mrs Talley.

4.Mr McFadden has suffered personally and incurred considerable loss and expense in his attempt to put matters right, including a loss of professional and personal relationships.

The Committee’s letter ended with the statement that if the Talleys were dissatisfied with the decision they could, under s97 of the Law Practitioners Act 1982 (the Act) request the lay observer to examine the matter.

[7]    On 19 June 2000 the Talleys complained to the lay observer that the Complaints Committee had not answered the complaint of deceit which they had made and that the Committee had not made reference to the losses which they alleged they had suffered as a result of Mr McFadden’s conduct. Further matters of complaint were raised on their behalf by Mr Castle in a letter of 28 June 2000. On  30 June 2000 the lay observer wrote to the Professional Standards Director of the Wellington District Law Society, who had written the letter on the Complaints Committee’s behalf, requesting that the Committee’s determination be referred to the New Zealand Law Society (the NZLS) pursuant to s97A(1)(c) of the Act, on the grounds that he was not satisfied with the actions taken. The reasons for the lay observer’s lack of satisfaction were said  to  be spelt  out  in  Mr Castle’s letter  of  28 June 2000.

[8]    On 6 November 2000 the NZLS sought confirmation from the lay observer that the s97A review was sought solely on the basis that the NDLS had not given the Complaints Committee, comprising as it did solely Wellington practitioners, information about one or more other recent  complaints regarding the conduct of   Mr McFadden. The NZLS ended its letter of 6 November 2000 to the lay observer  in these terms:

In particular, you are not satisfied that the NDLS gave the Complaints Committee information about one or more other recent complaints about the conduct of the same practitioner. You believe that such information should routinely be provided either at the outset of the investigation or at the point where a committee has concluded that a complaint is justified and before it decides whether the matter is of sufficient gravity to warrant a charge being laid.

The effect of the omission in this case was, you believe, to deprive the Complaints Committee of the opportunity to consider whether there was a pattern of conduct warranting the laying of a charge under the third limb of s.106(3) of the Act ie “that the practitioner has been guilty of negligence or incompetence in his professional capacity, and that the negligence or the incompetence has been of such a degree or so frequent as to reflect on his fitness to practise as a barrister or solicitor or as to tend to bring the profession into disrepute”.

It is on that point, and that point alone, which you are not satisfied, and on which you sought the s.97A review.

[9]    The letter was written on behalf of what was described and can conveniently be referred to as the s97A Review Committee of the NZLS. There was no response

from the lay observer suggesting that the s97A Review Committee had misinterpreted the extent of his concern.

[10]   The benefit of the Complaints Committee’s decision from Mr McFadden’s point of view was that, while the Committee had held that the complaint was justified, it had decided that the laying of charges was not warranted. Obviously the intervention of the lay observer, following this determination, can reasonably be regarded as demonstrating that he was not satisfied with the Committee’s determination, and particularly with its determination that the case was not of sufficient gravity to warrant the making of a charge, as the matter is put in s101(2) of the Act.

[11]   Having confirmed that the lay observer’s concern was confined in the way just noted, the s97A Committee examined the matter on that basis. Its decision was released on 8 March 2001. After setting out the background to the matter and  various relevant statutory provisions, the Committee continued:

The practitioner’s recent past complaints history becomes relevant at the point that a Council or committee has found that a complaint is justified and is considering whether, in its opinion, the case is of sufficient gravity to warrant the making of a charge. A series of incidents or  separate  complaints, none individually of sufficient gravity to warrant the making of  a charge, may amount to a pattern of conduct suggesting “negligence or incompetence … so frequent as to reflect on … fitness to practise or … [tending] to bring the profession into disrepute.” (see (c) above). There is precedent for the Tribunals considering a series of charges arising from separate complaint matters and complainants in order to reach a view on (c).

In this case the NDLS did not pass on Mr McFadden’s previous complaint history to the Complaints Committee. The Complaints Committee  found that Mr and Mrs Talley’s complaint was justified. It had no opportunity to consider whether that complaint history disclosed a pattern of conduct that would lead it to form the opinion that the case was of sufficient gravity to warrant the making of a charge. It decided not to make disciplinary charges against Mr McFadden.

It is not the role of the s.97A Committee to express any opinion on whether the Complaints Committee would or should have come to a different conclusion had it had the previous complaint history. We would add that the NDLS’s omission to provide information about Mr McFadden’s previous complaint history to the Complaints Committee was an understandable oversight in the circumstances. Nonetheless, the s.97A Committee has come to the view that the NDLS should have provided that information to the Complaints Committee, and that it may have affected the decision that Committee reached.

6.        THE COMMITTEE’S DECISION

For the reasons set out above, the s.97A Committee, acting under delegated authority from the NZLS Board, refers the Lay Observer’s recommendation back to the NDLS for further consideration.

That referral is the extent of the Committee’s power. However, the Committee ventures to suggest that, in order to consider the matter further, it would be appropriate for the NDLS to:

•     establish another Complaints Committee, comprising practitioners from outside the Nelson or Wellington districts (perhaps Canterbury practitioners)

•     provide that Complaints Committee with relevant background information, including information about Mr McFadden’s recent complaint history

•     request the Complaints Committee to investigate Mr and Mrs Talley’s complaint de novo.

[12]   The NDLS duly reconsidered the matter. Its decision on how to proceed was communicated by letter of 30 May 2001. After a full review of the background and the submissions which had been made to it, the NDLS first addressed whether it had jurisdiction to “rehear” the complaint and decided it had. Mr McFadden does not challenge that conclusion. His sole contention in this Court is that it was unreasonable for the NDLS to exercise its power to “rehear the matter” in the circumstances of his case. After the jurisdictional discussion and decision the Society’s letter of 30 May proceeded in the following terms. It is upon the reasoning here set out that the case ultimately turns.

Natural Justice

The Society is not aware of any principle of natural justice that equates with the concept of double jeopardy. There are good reasons for that principle to be confined to criminal prosecutions. Unless it were carefully  circumscribed, it could be invoked to prevent any re-hearing taking place. The Society’s investigation is in the nature of a preliminary inquiry, with  any “jeopardy” being somewhat further down the track.

It is possible that a second inquiry into the same complaint could be oppressive or vexatious, but that terminology is not appropriate to a case where a Society is responding to a recommendation from the Lay Observer, or a Section 97A Committee.

The Society does not believe there is any breach of natural justice in having the complaint against Mr McFadden considered de novo by a new committee.

What Action Should be Taken on the Recommendation

Having satisfied itself that the Society has the jurisdiction to act upon the recommendation from the Lay Observer, and the suggestions from the Section 97A Committee, the question remains whether it should do so.

Contrary to Mr Malone’s submission, the Section 97A Committee does not have the power to direct the Nelson District Law Society to do anything in particular in respect of the Lay Observer’s recommendation, other than to reconsider it.

The Society does not consider itself bound to implement the recommendations of the Section 97A Committee and has proceeded on the basis that it may choose not to.

The Society’s principal concern is the appearance of bias or pre- determination. Bias does not require much substance in order to cast a shadow over the proceedings.

Public confidence in the legal profession is underpinned by the involvement of the Lay Observer. The Lay Observer has exercised his power to refer a matter to the New Zealand Law Society’s Section 97A Committee, and that Committee must have seen something in the material before it to lead it to suggest that a re-hearing should take place in front of a differently constituted Committee.

When the profession’s own disciplinary processes are under scrutiny, that observation by a  committee  comprising  senior  office  holders  in  the  New Zealand Law Society has persuasive value.

Unless there were compelling reasons to depart from this observation, the Society considers it appropriate to follow it.

Mr Kennedy is quite right when he points to the burden that a second hearing  imposes  on  Mr McFadden.  His  point   that   none   of   this  is   Mr McFadden’s fault is also well made.

That is a relevant consideration, but it is outweighed by the need for the Society to ensure that the complaint is appropriately investigated and that due regard is paid to the recommendations of the Lay Observer.

Issue on appeal

[13]   Mr McFadden’s argument throughout has essentially been that he should not be investigated de novo because this has the effect of his being “tried” twice after prolonged and detailed inquiry. The attack on the NDLS’s decision to reconsider the matter de novo has been put on various bases during the course of these proceedings but in this Court Mr Davidson accepted that the matter came down to whether the NDLS had exercised its power to reconsider or re-investigate the complaint in an

unreasonable manner. He argued that it was irrational of the NDLS to have chosen  to refer the complaint to a Committee of Canterbury practitioners as against asking the same Committee of Wellington practitioners to re-examine the matter with a view to deciding whether the new dimension justified the laying of a charge. It was common ground that these were the two possibilities open to the NDLS, if  it decided, as it was entitled, to reopen the matter.

[14]   In assessing the force of this argument, the Court must of course bear in mind the Society’s reasons for taking the course it did. The Court is not, however, bound by those reasons in the sense of being unable to take into account any other features of the case now said to be relevant, even though they may not have been mentioned in the Society’s letter of 30 May 2001.

[15]   Three points underpin Mr McFadden’s unreasonableness argument. First, he contends that the NDLS essentially abrogated its decision-making function to the s97A Committee. Second, he says that the Society’s observation that the Committee “must have seen something in the material before it” to justify its recommendation meant it was acting on nothing more than a speculative basis. Third, he argues that the Society’s reliance on the appearance of bias and pre-determination was misconceived. Hence Mr McFadden’s argument is that, in the light of these three points, it was unreasonable of the NDLS to order a de novo “rehearing” by a new Committee comprising Canterbury practitioners.

[16]   In assessing the force of Mr McFadden’s argument, and the arguments presented by the respondents to the contrary, it is appropriate to put the point in issue in its statutory context. Section 101 of the Law Practitioners Act 1982 concerns inquiries by District Councils or Complaints Committees into complaints made about the conduct of practitioners. Section 101(3) specifies the procedures which apply to such inquiries. The subsection comprises five lettered paragraphs. The first is mandatory and the remaining four are discretionary. The Council or Committee must send particulars of the complaint to the person complained against and invite that person to make a written explanation. Then follow a number of procedures of a discretionary kind which do not need express mention. Section 101(4) importantly

says that subject to the terms of the section as a whole, the Council or Committee may follow such procedure in inquiring into the complaint as it thinks fit.

[17]   Section 101(5) specifies what the Council or Committee must do on completion of the inquiry. This reference to completion clearly indicates that an inquiry under s101 will ordinarily be viewed as coming to an end when the Council or Committee, in terms of ss5(a) notifies the complainant and the person complained against of its conclusions and of any action which it has taken or proposes to take. That apparent finality must, however, be read in the light of all other relevant provisions in the Act.

[18]   Foremost among these are the sections dealing with the lay observer and prescribing that person’s powers. Section 97(1) describes the principal function of lay observers as being to examine any written allegation made by or on behalf of a member of the public concerning the way a District Law Society has treated a complaint made by that person about the conduct of a practitioner.

[19]   In terms of s97(6), when a lay observer has examined such an allegation he  or she must send a written report of the results of the examination to the complainant, the District Law Society and the person about whom the complaint was made. The lay observer may include in the report any recommendation considered appropriate: s97(8).

[20]   Clearly such a recommendation can be that the District Law Society re- examine the matter. Hence the apparent finality deriving from s101(5) must accommodate the ability of a District Law Society to accept and act on a lay observer’s recommendation that it reconsider its treatment of a complaint. The same consequence flows from s97A to which reference has already been made.  Under  that section, if a District Law Society refuses to act on a lay observer’s recommendation, or the lay observer is not satisfied with the District Law Society’s action, the lay observer may request the District Law Society to refer their report or recommendation to the New Zealand Law Society for review. If the New Zealand Law Society does not agree with what the District Law Society has done, or with its failure to act, the New Zealand Law Society must refer the lay observer’s report or

recommendation back to the District Law Society for further consideration. All of this clearly indicates that, by this process also, a complaint can be reopened after the original “completion of the inquiry” by the District Law Society, as s101(5) puts it. How and to what extent the District Law Society reopens the matter is very much a matter for the Society to determine in the light of all the relevant circumstances.

Discussion of appellant’s submissions

[21]   Against  that  background  we  return  to  examine  the  basis  upon  which  Mr McFadden contends that the NDLS acted irrationally in referring the matter to a new Committee consisting of Canterbury practitioners rather than asking the original Committee of Wellington practitioners to re-examine the matter in the light of the material with which it was not earlier supplied. We can deal with the first point  quite briefly.

[22]   We do not consider that the NDLS simply adopted the s97A Committee’s recommendation without bringing an independent mind to bear on the issues arising. The whole tenor of the NDLS’s letter of 30 May 2001 indicates that the Society independently considered what course it should take. Indeed, on the specific point at issue, the Society clearly recorded that it did not “consider itself bound” to implement the s97A Committee’s recommendations. The Society said it was proceeding on the basis that it could choose not to do so.  We do not consider there  is any basis upon which it would be appropriate to treat that statement at other than face value. Indeed, the Society’s statement that its “principal concern” related to the appearance of bias or pre-determination demonstrates quite clearly that it had that concern independently of the s97A Committee. This was not a matter which that Committee expressly referred to; although, as the next point demonstrates,  the NDLS may well have inferred that the s97A Committee was influenced by it.

[23]   Mr McFadden’s second point is that the NDLS was proceeding on a speculative basis when it said that the s97A Committee must have seen something in the material before it to justify its recommendation that the rehearing should take place before a differently constituted committee. We do not regard this statement as amounting in substance to more than the NDLS saying that there must have been

good grounds for the s97A Committee’s recommendation. Those grounds must have arisen either directly or indirectly from that Committee’s examination of the matter, and in the light of the views and experience of the practitioners who constituted the Committee. Understood in that way we consider the NDLS was not indulging in unreasonable speculation; rather it was coming to a conclusion which, in our view, was reasonably open to it in the light of the purpose and purport of the s97A Committee’s statutory role. The NDLS was entitled to take the view that the s97A Committee would not have made its recommendation for re-examination before a new Committee unless there were good grounds, at least in the minds of the members of that Committee, for that course being adopted. The NDLS was, in short, entitled to be influenced by the s97A Committee’s views, provided it came to its own conclusion after hearing and considering the submissions made to it. This it undoubtedly did. Indeed, in its letter, the Committee indicated that it regarded the views of the s97A Committee as having “persuasive value”. Although the language employed by the NDLS in its letter carries connotations of a degree of speculation, we do not consider the approach it took made its decision unreasonable.

[24]   That brings us to the third specific point raised. This was that it was unreasonable for the NDLS to have had as its “principal concern” the appearance of bias or pre-determination. Here the Society was clearly focussing on the perception which might arise if it referred the matter back to the same Committee of Wellington practitioners. The Society was asking itself how matters might look if that Committee, after considering the new material, maintained its original stance. We agree that in such circumstances there could have been at least a real risk that concerns might have arisen in relation to bias or pre-determination. Equally, if the matter had gone the other way, Mr McFadden might have been left with the feeling that the original Committee had made its determination in order to avoid any allegation of bias or pre-determination. Of course the members of the original Committee would no doubt have done their conscientious best to re-examine the matter dispassionately. But we are satisfied that it was by no means unreasonable  for the NDLS to be significantly influenced in the course it took by concerns about bias or pre-determination. The Society would no doubt have understandably and reasonably been very conscious of the need for individual and public confidence to

be maintained in the processes by which the Law Society investigates the conduct of its members.

Conclusion – formal orders

[25]   Having given this and all Mr Davidson’s submissions careful consideration, we are not persuaded that there is anything that can be characterised as unreasonable in the decision which the NDLS made and conveyed in its letter of 30 May 2001. As the argument in this Court was confined to this point, there is no need to examine any other aspect of the matter.

[26]   For these reasons we dismiss the appeal and order Mr McFadden to pay costs:

a)to the NDLS in the sum of $3,000.00;

b)to Mr and Mrs Talley in the sum of $2,000.00; and

c)to the NZLS in the sum of $1,000.00.

In each case payment must be made of all reasonable disbursements, including the reasonable travel and accommodation expenses of counsel, to be fixed if necessary by the Registrar.

Solicitors:

Minter Ellison Rudd Watts, Auckland for Appellant Duncan Cotterill, Nelson for First Respondent

Fletcher Vautier Moore, Richmond for Second Respondents Glaister Ennor, Auckland for Third Respondent