McGuire v Manawatu Standards Committee

[2015] NZHC 2100

IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY

CIV-2015-454-13 [2015] NZHC 2100

UNDER

the Judicature Amendment Act 1972

AND

Part 30 of the High Court Rules

BETWEEN

JEREMY JAMES MCGUIRE Plaintiff

AND

MANAWATU STANDARDS COMMITTEE

Defendant

Hearing:	1 September 2015
Counsel:	Plaintiff in person P N Collins and M F Fogarty for Defendant
Judgment:	1 September 2015

ORAL JUDGMENT OF THE HON JUSTICE KÓS

[1]      A professional Standards Committee is convened to consider a complaint against a solicitor by a former client.   The complaint is upheld, a substantial proportion of the solicitor’s costs are cancelled, and he is censured.

[2]      Unfortunately, the Standards Committee erred.  It acknowledges the decision it made must be set aside for breach of natural justice.  First, because the President of the Manawatu  Branch  of the  Law Society (the Society)  had  participated in  the decision,  while  having  himself  made  a  current  complaint  about  the  solicitor. Secondly, because the Committee failed to convene a proper meeting to determine

the complaint (instead doing so by an exchange of emails between members).

MCGUIRE v MANAWATU STANDARDS COMMITTEE [2015] NZHC 2100 [1 September 2015]

[3]      So the decision of the Standards Committee must be set aside.  Should any other remedy should be granted?1

Background

[4]      The plaintiff, Mr McGuire, is a general practitioner practising in Palmerston North.  In August 2013 he was engaged by a Mr Menear-Gist to act for him on an employment  dispute.    Mr  Menear-Gist  had  been  dismissed  from  a  managerial position by his employer for alleged misappropriation of company property.

[5]      Mr McGuire acted for Mr Menear-Gist at two disciplinary meetings, in a subsequent personal grievance claim before the Employment Relations Authority (which was successful) and in an appeal to the Employment Court (which was however terminated by Mr Menear-Gist at an early stage before hearing).

[6]      The successful hearing before the Authority resulted in an order that his employer pay $15,575 in gross lost wages (albeit subject to income tax), $7,000 in general  compensation,  and  costs  of  $5,325.    A  total  of  $27,900.     However Mr McGuire’s fees for this totalled $32,510.  Something of a pyrrhic victory here.

[7]      On 27 February 2014 Mr Menear-Gist filed a complaint with the Society. Ostensibly the complaint was that the fees did not comply with a conditional fee arrangement.    But  the  substance  of  the  complaint  was  broader.    I  agree  with Mr Collins’ submission that the essence of the complaint was that Mr McGuire gave incompetent advice about the likely outcome of the personal grievance, wrongly advised that all Mr Menear-Gist’s costs would be recovered from the employer, wrongly advised about Mr Menear-Gist’s prospects of reinstatement to employment, delayed in providing medical advice to the Authority, failed adequately to advise Mr Menear-Gist of his prospects of a successful appeal to the Employment Court, and overcharged Mr Menear-Gist in respect of the personal grievance proceeding and the appeal.

[8]      That was the essence of the complaint.

1      This issue arises in part because Mr McGuire has at the last minute sought leave to file an amended statement of claim: see [21] below.

[9]      The complaint was notified to Mr McGuire by letter dated 4 March 2014. Mr McGuire responded in a series of letters, the first of which was dated the same day as the letter of complaint.

[10]     On 25 June 2014 a notice of hearing of the complaint was sent by the Society to Mr McGuire.  This made clear that no further action would be taken in relation to the complaint regarding a conditional fee arrangement.   That complaint was unsustainable given Mr McGuire’s engagement letter and annexed standard terms. However, the notice indicated the Standards Committee’s understanding that the essence of the complaint was that he failed to advise Mr Menear-Gist adequately regarding costs and the potential outcome in relation to both the Authority hearing and the appeal.  Specifically:

The failure to advise, or provide adequate advice about:

(a)       The   likely   outcome   if   the   complainant’s   application   to   the Employment  Authority  was   successful  including  the   quantum awards for lost wages, compensation for distress and hurt, and costs;

(b)       The Legal costs incurred in taking the personal grievance to the

Employment Authority;

(c)       The grounds of appealing the Authority’s decision, the prospects of success and the cost thereof including the necessity for the complainant using his home as security for seeking interim reinstatement.

[11]     On 26 June 2014 Mr McGuire sought further clarification from the Society. In response it wrote on 27 June 2014 stating:

For clarification the complaint is that Mr Menear-Gist was not advised that the costs of the litigation could exceed the amounts awarded or was given an inaccurate estimate of the amounts he would receive if he were successful. Mid litigation the Authority member indicated what quantum of award was likely and when Mr Menear-Gist expressed concern that the costs would exceed the award was reassured by you that the employer would be made to pay all his costs.

The Committee also understands the complaint to include inadequate or no advice about the likely prospects of success on appeal, the grounds and what the initial costs might be.

To summarise, the cost to Mr Menear-Gist has been invoiced is $32,788.05 and he has received in net gain from the award approximately $22,000.  He has been put through considerable stress and anxiety of litigation which has been exacerbated because your fee exceeds the amount awarded to him.

Quite apart from whether the amounts charged were reasonable there is a complaint that the advice received about possible outcome both in relation to the Authority hearing and the Employment court relating to reinstatement, the award and costs was lacking or inadequate.

[12]     Mr  McGuire  then  responded  in  a  letter  ostensibly  dated  20  June  2014, although as it expressly replies to one dated 27 June 2014 the date is plainly wrong. In the penultimate paragraph he states that he intends mounting judicial proceedings.

[13]     On 11 July 2014 the Society wrote to Mr McGuire stating that it had met that day and considered the complaint.   Attached is a 50 paragraph decision of some thoroughness and sophistication.

[14]     The Standards Committee determined that in acting on the claim before the Authority, Mr McGuire had not given Mr Menear-Gist clear information and advice about the risks of litigation, likely remedies, quantum of award if successful and costs of representation.   The advice had created “an unrealistic expectation about what could be achieved”.   Failure to provide clear information and advice was unsatisfactory conduct under s 152(2)(c)(i) of the Act.  Mr McGuire was censured under s 156(1)(b) and ordered to reduce his costs for the Authority work by $13,642.

[15]     A similar finding was made in relation to Mr McGuire’s services on the appeal to the Employment Court.  Mr McGuire had failed to give clear information and advice about the appeal, prospects of success and risks of litigation.  That was found to be unsatisfactory conduct.  No further censure was expressed, but his entire costs of $6,441.25 were cancelled.

Admitted error

[16]     The Society accepts that the Standards Committee process miscarried.

[17]     First, because of the participation of the Deputy Convenor of the Standards Committee, who was also the President of the Manawatu Branch of the Society.  He had written to Mr McGuire on two occasions in January and May 2014 in his capacity as Branch President, concerning income tax default issues Mr McGuire was arguing with the Inland Revenue Department about.   In the course of the latter

communication, the President suggested Mr McGuire had misled the Society in relation to his tax affairs.  Then, on 27 May 2014 the President had made his own complaint about Mr McGuire on a different matter.  That concerned a Yellow Pages advertisement in which Mr McGuire held himself out as having legal aid eligibility. The President described that as “a wilful attempt to mislead an unsuspecting public”.

[18]     The  Society  accepts  that  a  fair  minded  lay  observer  might  reasonably apprehend that the Deputy Convenor might not have brought an impartial mind to the resolution of the complaint.2

[19]     Secondly, the Society accepts that the fact that the Standards Committee reached its determination by exchange of emails also amounted to a breach of natural justice. As Mr Collins put it:

It is accepted that the concept of a hearing, under s 153 of the Lawyers and Conveyancers Act, is intended to ensure debate and exchanges of views, between  Standards  Committee  lawyer  and  lay  members,  from which  an informed, well-considered and fair decision can emerge.

[20]     As Mr Collins also observed, a determination conducted in that manner was contrary to procedural guidelines published by the Society for standards committees. Those guidelines permit email exchange for routine standards committee business, but not for hearings convened under s 153.

Leave to amend statement of claim?

[21]     Before turning to the question of remedy, I need to deal with an application made by Mr McGuire on 26 August 2015, just a week ago, for leave to file an amended statement of claim.

[22]     Consent   directions   made   on   7   May   2015   recorded   that   no   further interlocutory applications would be filed and provided for an amended statement of

defence to be filed in May and submissions to be exchanged in June.

2      Contrary to the test for apparent bias in the Supreme Court decision in Saxmere Company Ltd v

Wool Board Disestablishment Company Ltd [2009] NZSC 72, [2010] 1 NZLR 35 at [3].

[23]     The position of the Society outlined at [15] to [19] above would have been apparent from at least the further amended statement of defence filed by the Society on 17 June 2015, when Mr Collins took charge of the matter.   That pleading specifically:

(a)       admits the conduct of the hearing with the participation of the deputy convenor/branch president was a reviewable error;

(b)admits that the determination by exchange of emails was a reviewable error;

(c)       admits  that  the  determination  must  be  quashed  and  referred  to  a different Standards Committee for reconsideration; and

(d)denies  that  the  plaintiff  is  entitled  to  damages  in  any  form  (or indemnity costs).

[24]     Further, in relation to remedy, the Society’s submissions (filed in June) said:3

The plaintiff seeks an order that there be “an inquiry into compensatory, general and exemplary damages against the defendant”.   The conclusive submission in response is that damages are not available as a remedy in a judicial review application.

[25]   Presumably realising that the Society stood on strong ground on that submission, Mr McGuire applied – some two months after receipt of the Society’s submissions and just a week before trial of his judicial review claim – for leave to file an amended statement of claim.  The substance of the proposed amendment is to introduce two new causes of action upon which a claim for damages might be founded.

[26]     The first is an allegation of breach of statutory duty based on the admitted failure to hold a meeting (said to be a breach of ss 152 and 153 of the Act) and:

3      Citing Swaab v Medical Council of New Zealand HC Wellington CP149/99, 23 June 2000 at

[57] and Templeton v Kapiti Coast District Council HC Wellington CIV-2004-485-1686, 28 June
2005 at [20].

The  defendant’s  failure  to  delegate  any  of  its  functions  and  powers  to

Mr Robertson [the deputy convenor/president] was a breach of ss 183 and

184 of the Act.

Remedies sought are compensatory damages of $20,011 (being the amount still unpaid by Mr Menear-Gist upon the original fee notes), general damages of $15,000 and exemplary damages of $50,000.

[27]     The second new cause of action is for abuse of process.  This relates to the manner of the determination by the Standards Committee, including the underlying conflict of interest and conduct of the determination by email exchange.  The same damages are sought.

[28]     Mr McGuire says that the amendment is a natural extension of the existing judicial review pleading and simply provides private law underpinning for the damages claim already stated and expected.

[29]     Mr  Collins  submits  that  he  should  be  entitled  to  respond  properly  by pleading, including by reliance on the statutory immunity for standards committee members provided in s 185 of the Act.  That is subject to a good faith exception, and in turn will require the provision of evidence.

[30]     In Attorney-General v Dotcom the Court of Appeal made clear that caution is necessary before permitting expansion of a judicial review claim by the addition of a claim for damages.4    The primary focus must be on expedited determination of the

judicial review application itself.5

[31]     In this case it is clear that the last minute expansion of the statement of claim to include a private law damages claim, which cannot properly be dealt with at short notice or on affidavit evidence alone, means that this is not the most convenient and

expeditious way of determining the entire dispute.6

4      Attorney-General v Dotcom [2013] NZCA 43, [2013] 2 NZLR 213.

5      At [47]–[48].

6      See also Orlov v New Zealand Law Society [2012] NZCA 12 at [22].

[32]     This litigation is not merely a private contest between Mr McGuire and the Society.  The complainant’s interests also require consideration.  His complaint has been upheld, and now is about to be quashed.  It is right that it be resolved swiftly and properly.  It should not have to await determination of this afterthought private law claim Mr McGuire seeks to tack on in order to satisfy a desire for vindication by damages.

[33]     In addition the private law aspect requires to be properly pleaded to by the Society and I would expect evidence in the usual way would be needed, including on the question of whether the Standards Committee members acted in good faith.

[34]     The  application  for  leave  to  amend  the  statement  of  claim  is  therefore dismissed, without prejudice to such claim being advanced in separate proceedings.

Remedy

[35]     I return to the question of remedy, based on the judicial review pleadings as at June 2015 and the submissions received by this Court accordingly.

[36]     The  appropriate  remedy  is,  as  the  Society  accepts,  quashing  of  the determination and remittance of the complaint for reconsideration by a newly constituted standards committee from a branch other than the Manawatu.

[37]     Mr McGuire opposed remittance on the basis of a need for finality, the extent of delay since the filing of the original complaint and on the basis that Mr Menear- Gist had essentially abandoned his complaint.   I do not however accept these submissions.   It is not apparent to me on the evidence that Mr Menear-Gist has abandoned his complaint.  On the contrary, the position appears to be that he opposes judicial review being granted, a stance that cannot now be sustained.

[38]     The normal  course absent  egregious  delay or  multiple tribunal  failure  is remittance.  It is not part of my function to grant absolution.  Or, thereby, to revive Mr Menear-Gist’s liability for Mr McGuire’s fees.

[39]     Finally, the two breaches of natural justice by the Standards Committee are maladministration.  They do not give rise to a right of damages apart from a private law or Bill of Rights Act claim, neither of which presently are before me.7

Result

[40]     The  determination  of  the  Standards  Committee  dated  11  July  2014  is quashed.

[41]     The complaint by Mr Menear-Gist is remitted for reconsideration by a new standards committee from a branch other than the Manawatu.  That committee will be  required  to  issue  a  new  notice  of  hearing  specifying  the  substance  of  the complaint as it perceives it.

[42]     Mr McGuire is entitled to costs on a category 2 band B basis.  If these cannot be agreed, brief memoranda may be submitted.  I note, however, that Mr McGuire’s expectation as to costs must reflect the fact that from at least the time of filing of the further amended statement of defence on 17 June 2015, the defendant was offering no contest to the judicial review claim (other than as to liability for damages).

Stephen Kós J

Solicitor:

New Zealand Law Society, Wellington for Defendant

And to: Plaintiff

7      See for example, Combined Beneficiaries Union Inc v Auckland City Council COGS Committee

[2008] NZCA 423, [2009] 2 NZLR 56 at [61].