McGuire v Sheridan HC Wellington CIV 2009-485-1901
[2010] NZHC 215
•4 March 2010
IN THE HIGH COURT OF NEW ZEALAND
WELLINGTON REGISTRY
CIV 2009-485-001901
BETWEEN JEREMY JAMES MCGUIRE
Appellant
ANDLEE GRACE SHERIDAN Respondent
Hearing: 3 March 2010
Counsel: Appellant in Person
J D Evans for Respondent
Judgment: 4 March 2010
JUDGMENT OF WILD J
Introduction
[1] By notice filed on 23 September 2009, Mr McGuire appeals against a judgment delivered orally by Judge Thomas in the District Court at Wellington on 26 August 2009. Mr McGuire contends the Judge was wrong to hold that his application for summary judgment against the respondent was stayed, by operation
of s 161 Lawyers and Conveyancers Act 2006.
[2] I intend allowing this appeal in part, though not for the reasons argued by Mr
McGuire.
MCGUIRE V SHERIDAN HC WN CIV 2009-485-001901 4 March 2010
Background
[3] Mr McGuire is a solicitor. He formerly practised in Wellington, but has now moved his practice to Palmerston North. He acted for Ms Sheridan in pursuing a claim by her under the Family Protection Act 1955, for further provision out of her grandmother’s estate. On 10 June 2008 Ms Sheridan was granted legal aid for that claim. On 22 July 2008 Mr McGuire and Ms Sheridan entered into a written contingency fee agreement. The effect of that agreement was that Mr McGuire would become entitled to a fee over and above the grant of legal aid, if a specified result was obtained. There were some subsequent amendments to that contingency agreement, but its existence and terms are not in dispute.
[4] Ms Sheridan’s claim was settled at a judicial settlement conference in this Court on 6 November 2008. On 18 November 2008 Mr McGuire invoiced Ms Sheridan for a fee of $26,463.11 plus GST, a total of $29,771.
[5] On 3 December 2008 Ms Sheridan laid a complaint to the New Zealand Law Society against Mr McGuire. She completed the section of the complaint form headed “Your Complaint” as follows:
See email
2 aspects: 1. Amount of bill (including number of hours)
2.Solicitor’s conduct in forcing me to sign an agreement as to costs and not telling me that he was not entitled to change anything above granted legal aid.
On the day of settlement I believed from what Mr McGuire told me that I had to agree to the new fee arrangement or he would veto the proposed settlement of the proceedings (he had the right to do so under 1st contract) and I would get nothing and it would then go to a court hearing. He would charge me $750/hr if I discharged him. He said I would be risking getting nothing if I went to a hearing.
[6] On or about 12 December 2008 Mr McGuire commenced, in the District
Court at Wellington, a proceeding against Ms Sheridan claiming his fee of $29,771.
He felt obliged to claim, not only in contract, but also upon a quantum meruit, in
promissory estoppel, and for unjust enrichment. With his statement of claim he filed
an application for summary judgment.
[7] On 24 April 2009 the Wellington Standards Committee of the New Zealand
Law Society made the following determination:
Determination
Following the completion of its investigation and the hearing on 1 April
2009, the Standards Committee determined on 23 April 2009 in respect of the complaints by Ms Sheridan and by Standards Committee 1 that the complaints or matters or any issues involved in the complaints or matters be considered by the Disciplinary Tribunal pursuant to Section 152(2)(a) of the Lawyers and Conveyancers Act 2006.
[8] A charge against Mr McGuire was laid by the Committee in the Tribunal on
20 November 2009. The nub of the charge was that Mr McGuire misconducted himself in that:
... in breach of section 66 of the Legal Services Act 2008 he rendered an invoice to his client Lee Grace Sheridan for $29,771 for legal services in respect of which Ms Sheridan had received a grant of legal aid on 18 June 2008.
[9] In the meantime, on 20 February 2009, Ms Sheridan had filed a notice of opposition to Mr McGuire’s application for summary judgment. She detailed her grounds of opposition thus:
i) The debt is disputed;
ii) The Defendant was in receipt of legal aid and the Legal Services Agency has declined to authorise any additional payment to the Plaintiff;
iii) The Plaintiff’s actions in seeking to enforce the debt is oppressive as the commencement of proceedings is stayed under section 161(1) of the Lawyers & Conveyancers Act 2006.
[10] Mr McGuire’s proceeding, in particular his application for summary judgment, came before the District Court at callovers on 5 June and again on 3 July 2009. At the latter callover Judge Kelly directed that the issue of whether Mr
McGuire’s application for summary judgment as stayed by operation of s 161
Lawyers and Conveyancers Act 2006 was to be decided as a preliminary issue.
Judge Thomas dealt with that preliminary issue on 26 August 2009. She gave judgment straight away, orally. The gravamen of that judgment is:
[7] ... The words of (s 161 Lawyers and Conveyancers Act 2006) are unequivocal. There is no qualification as to whether there needs to be any validity of the complaint. A complaint is a complaint. The plaintiff is raising issues about the credibility and truthfulness of the defendant. That is not a matter that I can consider today. What it does, however, make clear is that the matter is not suitable for a summary judgment application. An application has been made to the Law Society, s 161 of the Lawyers and Conveyancers Act applies and the proceedings are stayed.
[11] It is against that judgment that Mr McGuire appeals.
Was the Judge correct?
[12] I do not think so. Although the Judge was correct to hold that Mr McGuire’s application for summary judgment could not proceed, she was not correct to hold that “the proceedings are stayed”. It is clear, from ground (b) in Ms Sheridan’s notice of opposition, that she defends the claim on the ground that her contingency fee agreement with Mr McGuire is illegal, in that it breaches s 66 Legal Services Act 2000. In short, she denies liability for any fee. The day after Judge Thomas delivered her judgment, Stevens J gave judgment in Simpson Grierson v Gilmore HC Auckland CIV 2008-404-008674 27 August 2009. Stevens J held that s 161 operated as a stay in relation to quantum but not liability. He followed Erwood v Glasgow Harley [2002] 1 NZLR 251 where the Court of Appeal ruled to similar effect in respect of the predecessor provision, s 155(2) of the (then applicable) Law Practitioners Act 1982.
[13] Thus, Mr McGuire is entitled to have a Court determine whether his contingency fee agreement with Ms Sheridan is caught by s 66, and is thus an illegal contract. He is not entitled to pursue his proceeding so as to seek “the recovery of the amount of the bill” while s 161 continues to apply to the proceeding.
[14] To that extent, I allow this appeal.
Where to from here?
[15] Mr Evans contended strongly that the Courts should decline to deal further with Mr McGuire’s proceeding until Ms Sheridan’s complaint against Mr McGuire “has been finally disposed of”, in terms of s 161.
[16] Mr McGuire informed me that he must file his defence to the charge against him before the Disciplinary Tribunal this week, and that a teleconference with the Tribunal is scheduled for Monday next, 8 March.
[17] I suggested to Mr Evans that the Tribunal was likely to find it difficult indeed
to determine the charge against Mr McGuire unless and until it knows whether the contingency fee agreement was or was not an illegal one. I suggested to Mr Evans that that was a legal question for the Court, and that indeed that the District Court was already seized of that question, because Mr McGuire’s claim against Ms Sheridan raises it directly. After consideration, Mr Evans accepted that, and conceded that the best course was to determine that question before any disciplinary hearing before the Tribunal takes place.
[18] To that end, I suggested to Mr McGuire and to Mr Evans that Mr McGuire’s proceeding in the District Court be transferred to this Court, which was in a position
to hear it promptly. Mr McGuire initially opposed that, because he considered that the Court will need to hear evidence in order to determine whether the contingency fee agreement is caught by s 66. When I assured him the High Court could hear any necessary evidence, he joined Mr Evans in agreeing that Mr McGuire’s proceeding be transferred to this Court.
[19] Consequently, by consent, and pursuant to s 43 District Courts Act 1947 I
transfer the proceeding Jeremy James McGuire v Lee Grace Sheridan CIV 2008-
085-001498 from the District Court at Wellington to this Court. I give the following directions for the prompt determination of the liability issues in that proceeding:
a) Statement of defence: The defendant, Ms Sheridan is to file and serve a statement of defence by 13 March 2010.
b)Bundle of documents: By 19 March 2010, Mr McGuire is to file and serve a supplementary bundle of documents, containing any documents relevant to the hearing fixed by f) below, which are not contained in the appellant’s casebook filed for yesterday’s hearing.
c) Plaintiff’s evidence: Also by 19 March, Mr McGuire is to provide to the defendant a statement of any evidence he intends adducing at the hearing.
d)Defendant’s evidence: By 31 March (ie before the Easter vacation) the defendant is to provide to Mr McGuire a statement of any evidence she proposes adducing at the hearing.
e) Statement of issues: By 9 April 2010 Mr McGuire (or his counsel), and counsel for the defendant, are to agree and file with the Court a statement of the liability issues for determination at the hearing fixed
in f) below.
Note:
I suggest the liability issues are at least these:
1)Does the contingency fee agreement entered into between the plaintiff and defendant, and the invoice rendered by the plaintiff to the defendant on 18 November 2008 pursuant to it, breach s 66 Legal Services Act 2000?
2)If yes to 1), what is the consequence in law of that breach? In particular, does s 66 prevent the plaintiff from recovering the fee he invoiced to the plaintiff in full, or in part?
At yesterday’s hearing, Mr McGuire suggested that a further liability issue is whether Ms Sheridan was entitled to a grant of legal aid in the first place. He contended that, if she was not, then s 66 does not apply because she would not have been granted legal aid. Tentatively, I do
not consider this proposed issue has any relevance to Mr McGuire’s claim against Ms Sheridan. If there is anything in this point, it is a matter as between the Legal Services Agency and Ms Sheridan. But I leave it to the parties to decide whether this is an issue for determination on 12 April.
f) Fixture: Liability issues in the proceeding will be determined at a hearing in this Court commencing 10 am on Monday 12 April 2010
(two days set aside if required).
Result
[20] To the extent outlined in [13]-[14], the appeal is allowed.
[21] Pursuant to s 43 District Courts Act 1947, and by consent, I transfer the proceeding Jeremy James McGuire v Lee Grace Sheridan CIV 2008-085-001498 from the District Court at Wellington to this Court.
[22] I make a fixture for the determination of the liability issues in that proceeding, and give directions toward that fixture, as detailed in [19].
Costs
[23] I reserve the costs of the appeal. Both Mr McGuire and Mr Evans favoured that course, and I think it best that those costs be dealt with at the same time as this Court deals with costs following its determination of the liability issues in proceeding Jeremy James McGuire v Lee Grace Sheridan CIV 2008-085-001498.
Solicitors:
Cooper & Co, Wellington for Respondent
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