Schmidt v Legal Services Commissioner

IN THE COURT OF APPEAL OF NEW ZEALAND

I TE KŌTI PĪRA O AOTEAROA

CA129/2022
[2022] NZCA 363

BETWEEN	TAYLOR JADE SCHMIDT Applicant
AND	LEGAL SERVICES COMMISSIONER Respondent

Court:	Clifford and Katz JJ
Counsel:	A J Woodhouse for Applicant L M Hansen for Respondent
Judgment: (On the papers)	8 August 2022 at 11.30 am

JUDGMENT OF THE COURT

AThe application for leave to appeal is declined.
BThere is no order as to costs.

____________________________________________________________________

REASONS OF THE COURT

(Given by Clifford J)

Introduction

This is an application by Taylor Schmidt for leave to appeal a decision of Grice J in the High Court at Wellington.[1]

Background

[1]Schmidt v The Legal Services Commissioner [2022] NZHC 200 [Grice J decision].

There is an extensive background to this application but, for our purposes, the following summary is sufficient.
Ms Schmidt and her former partner Anthony Schmidt commenced proceedings in 2011 in the High Court against Ebada Property Investments Ltd and Brian Garrity. In general terms they alleged breach of equitable obligations in connection with the sale of properties said by the Schmidts to be held by Ebada and Mr Garrity on trust for them. The events in question dated back to 2005 and 2006. An application for legal aid was made by the Schmidts in 2012. In 2017 legal aid was granted and a hearing before Venning J then took place. The Schmidts based their claim on five causes of action: breach of express trust; breach of institutional constructive trust; knowing assistance/knowing receipt; breach of fiduciary duty; and undue influence. After a seven-day hearing, Venning J dismissed all the claims the Schmidts had made.
In doing so Venning J described the core of the dispute in the following way:[2]
[1] Anthony Schmidt and Brian Garrity were formerly good friends. In 2005 and 2006 trusts associated with Mr Schmidt and his partner, Taylor Schmidt, transferred properties at Kaiaua Road and Bell Road to Ebada Property Investments Limited (Ebada), a company owned and controlled by Mr Garrity. The properties were subsequently sold to third parties. Ebada sold Bell Road and the mortgagee sold Kaiaua Road.
[2] Mr and Ms Schmidt say that Ebada held the properties on trust and dealt with them in breach of trust. Ebada and Mr Garrity deny there was any trust.
[2]Schmidt v Ebada Property Investments Ltd [2019] NZHC 3548 [Venning J decision].
Central to the Judge’s decision were his credibility findings. These may be found at [84] to [111] of the decision. The following two paragraphs summarise the Judge’s assessment:
[84] Unfortunately, I found Mr Schmidt, Ms Schmidt, and Mr Garrity all to be unsatisfactory and unreliable witnesses to a greater or lesser degree.
…
[110] While not a ringing endorsement of Mr Garrity, I did not find him to be as evasive and untruthful when giving evidence on the major issues in the case as Mr and Ms Schmidt. On the important issues where there is a direct conflict, namely the basis upon which the properties were transferred to Ebada, I prefer Mr Garrity’s evidence to that of Mr and Ms Schmidt, primarily on the logic of the case and the contemporaneous documents which support his evidence. …
Ms Schmidt filed an appeal in this Court against that decision and applied for legal aid in early 2020. On 27 October 2020 the respondent, the Legal Services Commissioner, declined that application on the basis Ms Schmidt’s prospects of success were not sufficient to justify the grant of civil legal aid. That decision was confirmed following reconsideration on 21 December 2020 and 17 February 2021. Ms Schmidt then applied to the Legal Aid Tribunal for a review of those decisions. The Tribunal dismissed that application, confirming the earlier assessments that Ms Schmidt’s prospects of success in this Court were not sufficient to justify a grant of legal aid.[3]
[3]Schmidt v Legal Services Commissioner [2021] NZLAT 010 [Tribunal decision].
Ms Schmidt then unsuccessfully appealed that decision of the Tribunal to the High Court. In the High Court she said the Tribunal erred:
(a)in not finding the Commissioner had erred in relying on the Judge’s finding that an alleged deed of trust had been fabricated in reaching his conclusions as to the prospects of success on appeal; and
(b)in failing to engage in the detail of Ms Schmidt’s arguments to the Commissioner and the Tribunal.
Ms Schmidt requires leave to bring an appeal against Grice J’s decision as it would be a second appeal on a question of law. As such, this Court must not give leave to bring this second appeal unless we are satisfied that:[4]
(a)the appeal involves a matter of general or public importance; or
(b)a miscarriage of justice may have occurred, or may occur unless the appeal is heard.

Analysis

This application

[4]Legal Services Act 2011, s 60; and Criminal Procedure Act 2011, s 303(2).

In his decision of 27 October 2020 declining legal aid the Commissioner relied, not only on Venning J’s unchallenged adverse credibility findings as regards Mr Schmidt, but also on a focused analysis of the Judge’s reasoning of the other factors which led to his conclusions in each of the causes of actions.
In challenging the decisions of the Commissioner and the Tribunal, and in now seeking leave to appeal that of Grice J, Ms Schmidt in essence says the error all have made is to place too much emphasis on those unchallenged findings, and in particular, that the alleged deed of trust was a fabrication. That is particularly so as Ms Schmidt in her substantive appeal against Venning J’s decision does not challenge the Judge’s dismissal of the breach of express trust claim. That proposition of over-reliance has therefore been considered and rejected by the Commissioner in its reconsiderations of 21 December 2020 and 17 February 2021, by the Tribunal in its determination of 29 June 2021 and again by Grice J in her decision of 17 February 2022.
In these circumstances, the following observations of Fisher J, as referred to by Grice J, merit repetition. Commenting on the approach to error of law appeals under the Legal Services Act 1991 the Judge observed: [5]
The difficulty as I see it is that it is so easy for appeals of this sort ostensibly brought on a question of law to slide into what is in substance an appeal on the merits. Expressions for example such as “excessive weight” being given to some particular considerations are in my view a clear indication that one is here talking about value judgments rather than questions of law. Further, it cannot be denied that it is open to a Legal Services Subcommittee to withdraw aid on various grounds, including the view that “the aided person no longer has reasonable grounds for taking … or being a party to the proceedings.” Further in applying that broad criterion the subcommittee can of course refer back to the primary criteria for granting aid in the first place pursuant to s 34. … These are very broad grounds and, in what was admittedly a very brief set of reasons for decision, I do not think it possible to convert what seems to me to have been a value judgment open to the Authority into some error of law. It is not essential for a decision maker to articulate every possible legal consideration in reasons for decisions. Conversely, the fact that a decision maker has not set out every possible legal consideration does not mean or even hint at an error of law on the part of the Authority.
[5]Singh v Legal Aid Review Authority [1997] NZAR 414 (HC) at 416–417.
That noted, we proceed on the basis Ms Schmidt’s challenge to the decision of Grice J may properly be characterised as raising questions of law.

The Tribunal’s decision

Ms Schmidt’s challenge to the Commissioner’s decision proceeded, as the Tribunal itself correctly recorded, on the basis of the following principles:[6]
[17]      The grounds for reviewing a decision of the Commissioner are set out in s 52(1) of the Legal Services Act 2011 (Act):
An aided person or an applicant for legal aid may apply to the Tribunal for a review of the Commissioner’s reconsideration of a decision referred to in subsection (2) on the grounds that it is—
(a)      manifestly unreasonable; or
(b)      wrong in law.
[18]      A decision is manifestly unreasonable where “it is shown, clearly and unmistakably, that the decision made by the [Commissioner] went beyond what was reasonable or was irrational or logically flawed”. … The threshold for intervention by the Tribunal is a high one and it is necessary for the Tribunal to exercise restraint.
[19]      A decision may be wrong in law “if it derives from an incorrect application or interpretation of the statute; or if it is wrong in principle; or if the decision-maker has failed to take into account some relevant matter; or has taken account of an irrelevant matter; or if it depends upon findings which are unsupported by the evidence”.
[6]Tribunal decision, above n 3 (footnotes omitted).
On the question of the “prospects of success” the Tribunal noted it was axiomatic that where an applicant seeks legal aid for an appeal, a judicial determination will already exist. So that determination was relevant when considering whether legal aid for an appeal is justified. As Wylie J said in Legal Services Agency v A, “some account [may] be taken of the merits of the decision” under appeal.[7] At the same time the Tribunal recognised legal aid was being sought for an appeal against that decision, so the outcome of the decision under appeal was not necessarily determinative of the appeal’s merits. What was required was an assessment of the appeal’s prospects as best as possible on the evidence available.[8]
[7]Legal Services Agency v A (2008) 19 PRNZ 1 (HC) at [42].
[8]Tribunal decision, above n 3, at [29].
The Tribunal dismissed the challenge to the Commissioner’s reliance on Venning J’s credibility findings. The Tribunal reasoned the fabricated deed of trust was a central document. Whilst Ms Schmidt sought to compartmentalise the credibility findings, and argue they were irrelevant to the remaining causes of action, that was not tenable given the credibility findings were so firm and so widespread. The fabrication of this central document would “taint” the remaining causes of action. The Commissioner had not erred in recognising that reality.[9]
[9]At [34].
The Tribunal then analysed the Commissioner’s decision as regards prospects of success for the challenges to the Judge’s adverse findings on the remaining causes of action. Having done so the Tribunal concluded:
[50] My impression from the detailed submissions put forward on behalf of the applicant is that although she could put forward arguments on appeal, many are rooted in the minutiae of emails and documents. It was submitted on numerous occasions that Venning J overlooked (or failed to give sufficient weight to) particular words or phrases in emails. Of course, the fact the applicant can put forward arguments is not synonymous with them having any particular prospects of success. For the reasons I have given, I do not consider there is sufficient prospects of success to justify a grant of legal aid for the appeal. The Commissioner did not err in law in so concluding. Nor was his decision manifestly unreasonable.

Appeal to the High Court

Ms Schmidt’s as of right appeal against the Tribunal’s decision to the High Court proceeded under s 59 of the Legal Services Act 2011, which provides:
59 Appeal on question of law
If the Commissioner or an applicant considers that the Tribunal’s determination is wrong in law, the Commissioner or the applicant (as the case may be) may appeal to the High Court on the question of law, and the appeal must be dealt with in accordance with the rules of court.

Such an appeal is by way of rehearing, and the Court may make any decision it thinks should have been made or direct a rehearing, a reconsideration or determination of any matters the Court directs, or enter judgment for any party, or make any order the Court thinks just.[10]

[10]High Court Rules 2016, rr 20.18–20.19.

Grice J accurately summarised the significance of the assessment of “prospects of success” for a grant of legal aid on appeal, the process to be followed and the nature of the assessment involved.[11] In doing so she referred to the following relevant observations of this Court in JMM v Legal Services Agency:[12]
[84] In summary, the reasons may be broadly stated, but the level of detail is likely to turn on the basis relied upon by the Agency to ground withdrawal of legal aid in a particular case. The reasons for the withdrawal should be set out in sufficient detail to enable the litigant to decide whether to exercise either reconsideration or review rights as a means of challenging the decision. Standard format notifications or common form letters may be appropriate in cases such as the present where many of the relevant considerations are likely to be common. But it is critical nevertheless that the Agency addresses itself to the individual case and demonstrates that it has done so in its reasons.
[11]Grice J decision, above n 1, at [17]–[24].
[12]JMM v Legal Services Agency [2012] NZCA 573, [2013] 1 NZLR 517.
As noted, the points of law Ms Schmidt argued in the High Court were similar, if not in effect the same, as those she had argued before the Tribunal. That is:
(a)the Tribunal had erred in law in the way it relied on the credibility findings, as regards the express trust claim to assess prospects of success as regards the appealed elements of the decision; and
(b)the Tribunal failed to engage sufficiently on those matters with the actual arguments Ms Schmidt wished to make on appeal.
The Judge carefully assessed those assertions, including in a detailed analysis of the assertion of the “failure to engage” challenge as regards each challenged ruling, before concluding:
(a)As regards the primary challenge:[13]
[117] The appellant applies an artificial and unduly narrow interpretation on the Judge’s words referring to his conclusions being based “primarily on the logic of the case and the contemporaneous documents”. As the Court of Appeal has noted, when looking at the “prospects of success”, the approach is to make an overall assessment by standing back and looking at the litigation prospects in the round. The factual findings in the High Court in this case are dependent on findings of credibility, value judgments and evaluation of the evidence overall. This is a case where the trial Judge had the benefit of seeing and hearing the witnesses and was in a better position to make an overall assessment of the evidence as a whole than an appellate Court. The Tribunal made no error in its consideration of the credibility comments made by the Commissioner.
(b)As regards the Tribunal’s alleged failure to engage with Ms Schmidt’s arguments:
[125] The Tribunal was not required to engage with every point raised by [counsel for Ms Schmidt] in his submissions to the Commissioner and the Tribunal. The Tribunal grasped the essence of the submissions. The Judge had made an assessment based on the credibility findings and the documents which he said supported the logic of the transactions as a whole. That is the point made by the Tribunal. [Those] submissions might have been detailed; however, they were matters that had been before the Judge and considered. There was no requirement for the Tribunal to engage in the detail. In fact to do so would not have been in keeping with its function.

Our assessment

[13]Grice J decision, above n 1 (footnotes omitted).

Against that background, we are, by a considerable margin, satisfied the test for leave is not met in this case.
The appeal itself involves no matter of general or public importance. What is involved is an intensely fact-specific dispute relating to circumstances and transactions that occurred many years ago.
Nor do we consider a miscarriage of justice may have occurred or may occur if Ms Schmidt’s appeal against Venning J’s judgment is not — in the absence of legal aid funding — heard. The proceeding before Venning J was itself funded by legal aid. The original assessment of Ms Schmidt’s prospects of success in the appeal of Venning J’s decision made by the Commissioner was confirmed by the Tribunal as being neither manifestly unreasonable, nor wrong in law. In that context Ms Schmidt’s “failure to engage” challenge was fundamentally misplaced.
The Tribunal’s decision was itself upheld by Grice J as not involving those — in effect — same errors of law. It is those errors of law on which Ms Schmidt now, in effect, seeks to base an appeal to this Court.
As for the form of that decision, s 55(4) of the Legal Services Act requires the Tribunal to conduct its review on the papers, with all reasonable speed. Section 56(2) requires the Tribunal’s determination to be accompanied by “a brief summary of the reasons for it”.
More generally, and not surprisingly, the arguments made on Ms Schmidt’s behalf before Grice J were similar to those which had been made before the Tribunal. Added emphasis was, however, placed on Venning J’s observation that he had preferred Mr Garrity’s evidence “primarily on the logic of the case and the contemporaneous documents which support his evidence”.[14] That, it was submitted, reinforced Ms Schmidt’s point as to the limited relevance of the finding of the forgery of the alleged trust deed. We note, however, that observation was with reference to “the basis upon which the properties were transferred to Ebada”.[15] That “basis” was the core of the dispute. Therefore the Judge’s observation is of significance not only to the finding of forgery, but directly or indirectly to all the causes of action.
[14]Venning J decision, above n 2, at [110].
[15]At [110].
On that basis, we see no error in Grice J’s decision and the conclusions that she reached, in particular as regards the two errors of law asserted by Ms Schmidt.

Result

The application for leave to appeal is declined.
There is no order as to costs.

Solicitors:
Woodhouse Law, Auckland for Applicant
Ministry of Justice, Wellington for Respondent

CaseChat Overview and Summary

Orders of the court

Background to the litigation

Evidence Before The Court

Reasons for decision

Legal Principle Established