IN THE HIGH COURT OF NEW ZEALAND WELLINGTON REGISTRY
I TE KŌTI MATUA O AOTEAROA TE WHANGANUI-A-TARA ROHE
CIV-2021-485-000398
[2022] NZHC 200
BETWEEN TAYLOR JADE SCHMIDT
Appellant
AND
THE LEGAL SERVICES COMMISSIONER
Respondent
Hearing: 2 December 2021 Appearances:
N Levy QC, A Jeremich and A Woodhouse (VMR) for the Appellant
L Hansen for the Respondent
Judgment:
17 February 2022
JUDGMENT OF GRICE J
(Appeal)
SCHMIDT v THE LEGAL SERVICES COMMISSIONER [2022] NZHC 200 [17 February 2022]
Contents
Background to civil claim [4]
Procedural history [6]
Appeal on question of law [13]
Appeals from the Legal Aid Tribunal [13]
The requirements of decision making by the Commissioner under the Act [17] The approach to review by the Tribunal [25]
Grounds of appeal [28]
High Court decision [33]
The Legal Aid Tribunal decision [84]
The Tribunal’s assessment [86]
Analysis [93]
Issue 1: The tainting of the Commissioner’s decision by the finding that the deed of trust had been fabricated [94]
Issue 2: Failure to engage in the detail of the appellant’s submission to the
Commissioner and the Tribunal [122]
Overall analysis [144]
Costs [148]
[1] This is an appeal from a decision of the Legal Aid Tribunal, dated 29 June 2021 (the Tribunal decision).1 The decision was a review by the Tribunal in which it upheld the refusal by the Commissioner to grant legal aid to the appellant to fund an appeal to the Court of Appeal against a decision of the High Court (the High Court decision).2
[2] The High Court had dismissed the claims of the appellant and Mr Schmidt (the Schmidts) that the defendants held various property for their interests on trust or subject to obligations formulated on a number of alternative bases.
[3] The civil proceedings had been issued by Ms Schmidt and her former partner (Mr Schmidt) against a Mr Garrity and his company, Ebada Property Investments Ltd (Ebada).
Background to civil claim
[4] Mr Schmidt and Mr Garrity were good friends. During difficult financial times between 2005 and 2006, trusts associated with the Schmidts transferred two properties (one on Kaiaua Road and one on Bell Road) to Ebada. Ultimately, Ebada sold Bell Road, and a mortgagee sold Kaiaua Road to third parties.
[5] The Schmidts said the properties were held on trust for their benefit by Mr Garrity’s company, Ebada, and Mr Garrity and Ebada dealt with them in breach of trust or other obligations. Mr Garrity and Ebada deny there was any trust or such obligations.
Procedural history
[6] An application for legal aid was first made in 2012. In 2017, legal aid was granted for the appellant to be represented at a seven-day hearing in the High Court, before Venning J.
[7]The Schmidts brought five claims:
(a)intentional breach of express trust;
(b)breach of institutional constructive trust;
(c)knowing assistance/knowing receipt of intentional breach of trust;
(d)breach of fiduciary duty; and
(e)undue influence.
[8] The Schmidts produced a deed of trust to support the first cause of action based on an express trust. The Judge found the deed to be “a fiction and a document created solely for the purposes of this hearing”.3
[9] On 20 December 2019, Venning J dismissed all causes of action.4 His Honour noted the following in relation to the evidence before him:
[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.
[10] In early 2020, the appellant filed an appeal against the High Court decision and sought a grant of legal aid.
[11] The Legal Aid Tribunal decision sets out the legal aid application process from that point:
[8] By letter dated 8 May 2020, the Commissioner requested information and advice on the grounds and merits of an appeal. On 17 August 2020, the applicant’s legal aid provider, Woodhouse Law, gave detailed prospects of success advice to the Commissioner.
[9] On 27 October 2020, the Commissioner declined to grant legal aid on the basis that the prospects of the appeal succeeding were insufficient to justify a grant.
[10] The applicant sought reconsideration of that decision on 24 November 2020. On 21 December 2020 the Commissioner again declined legal aid, citing the same grounds.
[11] On 27 January 2021, a second application for reconsideration was made, in reliance on a recent High Court decision, Morrison v Autumnal Investments Ltd.5 In that case, there was an agreement to buy back properties which had been transferred and held on trust and Wylie J held that an institutional constructive trust existed.
[12] On 17 February, the Commissioner declined the applicant’s second reconsideration. As noted, it is this decision which is at issue before me on this review application.
[12] On 29 June 2021, the Tribunal confirmed the decision of the Commissioner. The Tribunal decision is appealed to this Court.
Appeal on question of law
Appeals from the Legal Aid Tribunal
[13] Section 59 of the Legal Services Act 2011 restricts appeals from Tribunal decisions to questions of law:
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.
[14] The 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.6
[15] In Singh v Legal Aid Review Authority (decided under the Legal Services Act 1991 (LSA 1991)), Fisher J described the approach on an appeal on an error of law:7
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
5 Morrison v Autumnal Investments Ltd [2020] NZHC 3189.
6 High Court Rules 2016, r 20.19(1).
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. That includes the consideration pursuant to s 34(3)(e)(ii), “that having regard to the nature of the proceedings and the applicant’s interest in them (financial or otherwise) in relation to the likely cost of the proceedings, the grant of aid is not justified.” 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.
[16] The focus of the inquiry is on whether the Tribunal’s decision was wrong in law or manifestly unreasonable, not whether the Commissioner’s decision is correct.8 For example, in Gibson v Legal Services Agency, the Panel (now the Tribunal under the LSA 1999) failed to call for specialist advisor reports that had been provided to the Agency (now the Commissioner), which was held to be an error of law.9 The Review Panel had “failed to have regard to relevant considerations when making its decision to uphold the Agency’s decision.”10
The requirements of decision making by the Commissioner under the Act
[17]Section 10(4)(e) of the Legal Services Act 2011 says:
…
(4)The Commissioner may refuse to grant legal aid to an applicant in any of the following circumstances:
…
(e) in the case of an appeal (whether or not in respect of proceedings in which the applicant has received legal aid), the Commissioner considers that for any reason the grant of legal aid or further legal aid is not justified.
8 See Legal Services Agency v Sweeney (2005) 17 PRNZ 767 (HC) at [19]; and Legal Services Agency v Brown (2005) 17 PRNZ 523 (HC) at [30].
9 Gibson v Legal Services Agency HC Auckland CIV-2006-404-999, 28 November 2008.
10 At [38].
[18] Central to this consideration is the “prospects of success”. Wild J made the following comments about the meaning of “prospects of success” in Timmins v Legal Aid Review Panel.11 He said:
[33] “Prospects of success”, in my view, refers to the prospects of achieving a successful outcome. Those prospects need to be assessed in a pragmatic way and, somewhat obviously, in the circumstances of the particular case. After all, no two cases are the same. The assessment invited by the words in s 9(4)(d)(i), “sufficient to justify the grant of aid”, involves weighing the likely benefits against the likely costs. Whilst the benefits in some cases will be measurable mainly, and perhaps even wholly, in dollar terms, in other situations that will not be so. Examples might include obtaining an injunction restraining the destruction of an area of native bush, or the closing of a road or access track or some other facility, or a judgment upholding the reputation of a person or a product (even if unaccompanied by significant damages), or vindicating some important point of principle.
[34] Because assessing “prospects of success” may involve assessing non- pecuniary benefits, the assessment for a particular plaintiff or claimant can obviously be difficult.
[19] The Court of Appeal in JMM v Legal Services Agency (Meredith (JMM)) noted those comments and said:12
[53] Furthermore, we see force in Mr Cooke’s argument that Parliament provided for the Agency to make these decisions – and on an evaluative basis. This is clear from the use of the word “sufficient” in s 9(4)(d)(i). Legal aid may be withdrawn if the aided person’s “prospects of success are not sufficient to justify the grant of legal aid”. The word “sufficient” must be given some meaning in this context. We consider that it underscores the need for the Agency to make an overall assessment by standing back and looking at the litigation prospects in the round.
[54] Accordingly when the Panel (now the Tribunal) and the Courts are called upon to review decisions by the Agency, a formalistic approach must be avoided. We consider it would be wrong for the Agency to be required to meet a series of specific tests or respond to particular questions other than the statutory question as to whether the applicant’s prospects of success are not sufficient to justify the grant of legal aid. The considerations relevant to any particular case are likely to be highly fact-dependent.
[20]The Court of Appeal also said in relation to the continuation of aid:
[61] … the Agency must assess the sufficiency of the prospects of success in the light of the circumstances then pertaining and the stage the proceeding has reached. …
[62] When the merits of the claim are being considered, this would include an assessment of the then available evidence, the relevant state of the law, the proposed causes of action and any likely defences. There may have been developments in the law since the initial grant of aid that require consideration. This was a particularly relevant factor in the present cases where claims in similar circumstances had failed and significant legal issues had been determined at appellate level.
[63] We agree that there will be a range of relevant considerations to be considered when assessing the sufficiency of the prospects of success of a claimant for legal aid. This is not to suggest an exhaustive list of considerations must be identified and applied in every case. The statute deliberately avoids any listing of relevant factors. We consider that the Agency must treat each case on its merits. Each decision, be it to withdraw aid or continue the grant, is likely to turn on the particular facts of each case. The question is whether the aided person is no longer a person who would be entitled to the grant by virtue of any of the provisions of ss 9, 10 or 11.
[64] One consideration is likely to be the cost of bringing the claim compared with the potential benefits. Where damages and/or other financial benefits are sought, it will be necessary to assess the prospects of achieving a successful financial outcome in order to determine whether they are sufficient to justify proceeding. A re-assessment of the costs and benefits, including the costs incurred to date and those likely to be incurred in the future, will ordinarily be essential. Part of the analysis could include an assessment of the likelihood or otherwise of an out-of-court settlement rather than proceeding to trial. In that respect, any settlement offers will be relevant.
…
[66] The Agency can be expected to approach its decision making with no predetermination either way. We do not consider it is appropriate to treat the aided person as having a presumptive right to the continuation of legal aid. While the withdrawal of the grant may affect the ability of an aided person to access justice in a particular case, the Agency must ask, and determine, the questions we have identified arising from the statutory scheme. Access to justice considerations are relevant but not determinative.
[21] The Court of Appeal went on to say that the assessment must not be on a “formulaic basis”.13 Each case must be assessed individually.
[22] The issue before the Court of Appeal in Meredith (JMM) was whether aid should have been withdrawn. The Court said:
(a)The aided person must be given a reasonable opportunity to make submissions.14
(b)The Agency must notify the parties of the determination and every determination “must be accompanied by a brief summary of reasons for it”.15
(c)The reasons should normally provide “sufficient information to show the aided person and the lead provider that the Agency has given individual consideration to the aided person’s case … On the other hand, provision of extensive amounts of information in minute reasoning would not be consistent with the function of the Agency to administer schemes that are inexpensive and efficient.”16
(d)The level of detail required in the decision is “informed by the fact that, if an aided person seeks a review by a Panel, the team assigned to conduct the review may call for and consider all information held by the Agency relating to the decision and to any reconsideration by the Agency of the decision.”17
(e)In relation to a withdrawal of aid, the Agency must provide reasons that spell out which of the relevant statutory circumstances apply and why the Agency has exercised its discretionary power to withdraw aid. It must explain in its reasons which of the applicable circumstances provided are relevant to the aided person’s claim.18
[23] The Court of Appeal summarised the extent of the reasons required in a decision withdrawing aid as follows:
[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
15 At [78], referring to s 57(3) of the then Legal Services Act 2000, now s 56 of the Legal Services Act 2011.
16 At [80], referring to s 92(a) of the Legal Services Act 2000. This is now reflected in the purpose of the Legal Services Act 2011, being to deliver legal services to “people of insufficient means” in “the most effective and efficient manner”: s 3.
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.
[24] The Court of Appeal noted that reconsideration of a decision was “plainly” a process of “lesser formality and complexity than review by a Panel”.19
The approach to review by the Tribunal
[25] The grounds for review by the Tribunal under s 52 of the present Legal Services Act 2011 are:20
52 Grounds for review
(1)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.
[26] In Meredith (JMM) the Court of Appeal agreed with the approach taken by O’Regan J in Legal Services Agency v Tana on the nature of the manifestly unreasonable test,21 as follows:22
[97]… Thus in Tana, O’Regan J stated:
[23] This is a different statutory formulation from the “plainly wrong” formation often used in relation to appeals from the exercise of a discretion, where the appeal body focuses on whether a decision is correct or incorrect, and has to form the view it is not only incorrect but plainly so. In this case the focus is not on whether the decision is incorrect, but whether it is unreasonable, and the legislature has stipulated that the Panel should intervene only where the decision is not only unreasonable, but is clearly and unmistakably unreasonable.
[24] That formulation rules out completely an approach on the part of the Panel that it considers matters afresh and substitutes its own view. It also rules out the approach taken by the Panel in this case, that “manifestly unreasonable” simply means unreasonable on the face of the papers presented to the Panel. As Mr Taylor said, that approach fails to recognise that the statutory test requires not only a finding that the Agency’s decision is unreasonable, but that it is manifestly so. It is only when the degree of unreasonableness has reached a clear and
19 At [89].
20 This corresponds to the right of review to the Panel under the Legal Services Act 1991.
21 Legal Services Agency v Tana HC Whangārei AP26/02, 9 December 2002.
unmistakable level (or to use the statutory term “manifest”), that the Panel is permitted to intervene.
[25] That means the Panel is required to exercise a considerable degree of restraint in determining review applications based on the “manifestly unreasonable” ground. It is clear from a review of the statutory history … that the legislature has deliberately imposed a high threshold for intervention by the Panel. That implies that the legislature intended there should be a degree of tolerance about decisions of the Agency which would not be appropriate where there was a full right of appeal, on the basis the Agency was exercising a discretion.
[98] …
Manifestly unreasonable – our views
[99] We agree with the approach of O’Regan J on the nature of the manifestly unreasonable test. We also agree with Mr Cooke’s submission that it is necessary for the Panel on an application for review to exercise restraint before intervening to reverse a decision of the Agency on this ground.
[27] The Court of Appeal said “wrong in law” corresponded reasonably closely with the established grounds of review.23 It said it was reluctant to endorse the development of “detailed rules or criteria” to be applied by the Panel on review.24 A degree of tolerance would be afforded to the decisions of the Agency, bearing in mind the role given to the Agency by Parliament in difficult matters of judgment.25 That approach was consistent with the statutory interpretation that the decision by the Panel must be conducted on the papers with all reasonable speed.26
Grounds of appeal
[28] The appeal was filed in the Court of Appeal in early 2020. Ms Schmidt did not appeal against the High Court’s “no express trust” finding but appeals the balance of the judgment.27
[29]Two matters raised in the grounds of appeal are not now pursued. They are:
23 At [111].
24 At [112].
25 At [112].
26 At [112] referring to s 56(5) of the Legal Services Act 2000, now s 55(4) of the 2011 Act.
27 Tribunal decision, above n 1, at [31].
(a)That the Tribunal made an error of law because an anonymous complaint was made to the Commissioner about the appellant’s grant of aid.28 Ms Levy QC, for the appellant, said the appellant accepted the Commissioner’s advice that the decision maker was unaware of the anonymised letter. The appellant is still pursuing a Privacy Act request for a copy of the anonymised letter in unredacted form.
(b)Ms Levy also did not pursue the ground based on new law applying as a result of the High Court decision in Morrison v Autumnal Investments Ltd. 29 That case was simply an example of the High Court recognising the application of an institutional constructive trust in circumstances where the evidence of its existence was credible and accepted.30
[30]The appeal grounds are in two main areas, namely that:
(a)The Tribunal erred in law by generally relying on the findings in that part of the judgment relating to the express trust that the deed had been fabricated beyond the express trust claim. The Commissioner’s reliance on the credibility findings undermining the applicant’s case tainted his decision.31 The Commissioner’s finding that the “credibility findings were so firm and widespread” overlooked the fact that there were also credibility findings against Mr Garrity.32 In submissions, Ms Schmidt emphasised that the Tribunal should have found the Commissioner had erred by placing weight on the finding that the plaintiff had fabricated the deed of trust.
(b)The Commissioner and the Tribunal failed to engage in the appellant’s detailed submissions and references to various pieces of evidence adduced during the trial which she said gave evidential support to her claims, particularly as to:
28 At [54].
29 Morrison, above n 5.
30 Tribunal decision, above n 1, at [46].
31 At [34].
32 At [34].
(i)Whether a fiduciary relationship had arisen;
(ii)Whether a constructive trust had arisen. In that regard, the appellant drew an analogy with the Lankow v Rose type of trust, which had been referred to in argument before the Judge but did not feature in the substantive decision.
[31] The appellant said there had been a failure by the Commissioner and, in turn, the Tribunal to engage with the appellant’s alternative version of the facts, which would have provided an arguable claim based on Morrison.33 There Wylie J chose a different “and more apposite” way of stating the test.34 The alternative version was based on a finding that there existed an understanding that the appellants’ interests agreed to “selling but to buy back later”. That would give rise, on the appellant’s argument, to the Garrity’s interests holding the relevant properties on trust for the plaintiffs.
[32] It is necessary to review the High Court decision against which the plaintiff is appealing.
High Court decision
[33] The High Court decision set out the background,35 noting the pleaded claims as above:36
(a)Intentional breach of an express trust arising out of the defendant’s dealing in relation to the Kaiaua Road and Bell Road properties. These have been transferred by the plaintiffs to Ebada, Mr Garrity’s company.
(b)In the alternative, breach of an institutional constructive trust.
(c)Claim against Mr Garrity personally, alleging knowing receipt of the funds from the intentional breach of trust by Ebada.
33 Morrison, above n 5.
34 Submissions for the appellant (4 November 2021) at [41].
35 High Court decision, above n 2, at [1]–[14].
(d)Breach of fiduciary duty by Mr Garrity.
(e)Undue influence against Mr Garrity.
[34]The Judge said in relation to the transaction on the Kaiaua Road property:
(a)The Schmidts had become under increasing financial pressure, due to their mortgage commitments on the property and the costs of defending criminal charges, on which they were ultimately convicted and served a two-year jail sentence.37 The Schmidts say they agreed that Mr Garrity should incorporate a corporate trustee to hold the properties on trust for the Schmidts’ trust. Ebada and Mr Garrity denied there was any such agreement, saying that Mr Schmidt raised the possibility of purchasing the Kaiaua Road property from the Schmidts as a means of resolving their financial difficulties in a way that would enable Mr Schmidt’s father, Mr Wanoa, to remain on the property paying rent. The Judge noted that was a principal factual issue for determination in the case.38
(b)Mr Garrity (or his nominee) purchased the Kaiaua Road property for
$290,000. The consideration was a deed of forgiveness of debt of
$130,000.39 This records that the Schmidts were indebted to the Garrity interests in that sum. It was accepted by all parties that the forgiveness of debt executed by them was a sham. Ebada (the Garrity company) paid the balance of the purchase price and Mr Garrity was a personal guarantor of the financed funds raised against Kaiaua Road of
$175,000.40
(c)Mr Taia, a solicitor from the legal firm Russell McVeagh, and a friend of Mr Garrity, acted for Mr and Mrs Schmidt on the sale. He visited
37 At [36]–[38].
38 At [40].
Mr and Mrs Schmidt, apparently in the company of Mr Garrity, in prison to have the transfer signed.41
(d)Mr Schmidt’s father, Mr Wanoa, remained in possession of Kaiaua Road and paid rent to Ebada from the date of settlement in December 2005 until July 2008. The rental payments were then made to the Schmidts’ Trust, rather than to Ebada or Mr Garrity, despite the provision in the agreement for sale and purchase for the rent to be paid to Mr Garrity’s interests.42 Mr Garrity borrowed an additional
$101,500 by way of mortgage on the security of the Kaiaua Road property.
[35]In relation to the Bell Road property the Judge said:43
(a)Transit New Zealand acquired land from the Bell Road property in January 2006. Interim compensation of $235,046.05 was paid. The ANZ Bank as mortgagee was putting pressure on the Schmidts for payment. Mr Garrity negotiated with the bank to allow 10 per cent of that compensation to be retained by the Schmidts with the balance going to the ANZ. A further payment by Transit New Zealand, of approximately $20,000, also went to the benefit of the Schmidts. Further compensation paid later was paid to the Schmidts’ interests.
(b)In June 2006, various notices demanding payment of unpaid rates and other bills in relation to Bell Road were received by the Schmidts.
(c)The Schmidts were released from jail on 30 August 2006 and returned to the Bell Road property. A mortgage sale notice was issued in relation to the Bell Road property.44
41 At [51].
42 At [54] and [70].
(d)Between August and November 2006, Mr Schmidt and Mr Garrity had further discussions regarding the possible sale of Bell Road to Ebada and there was an exchange of agreements for sale and purchase.45
(e)On 22 November 2006, an agreement for sale and purchase of the Bell Road property to Mr Garrity or his nominee was completed. It recorded a purchase price of $495,000 and stated a deposit of $295,000 was paid as remuneration.
(f)The parties again accept that the $295,000 had not been paid, so the effective consideration for the purchase was $200,000.46 Again this was to persuade the bank to finance the purchase. This was borrowed from Westpac, with Mr Garrity personally guaranteeing the borrowing. The settlement took place on 24 November 2006. Mr Taia again acted for the Schmidts.
[36]Subsequent events were described in the judgment as follows:47
(a)Ebada and Mr Garrity came under financial pressure in late 2007 and into 2008.
(b)During 2008, there were discussions instigated by Mr Schmidt about the prospect of buying Kaiaua Road and Bell Road back. He said he had been seeking finance to purchase the properties back and intended to subdivide Bell Road.48
(c)In July 2008, the Schmidts stopped paying rent on Bell Road. At the same time, the rental payments by Mr Wanoa for Kaiaua Road were being directed to the Schmidts’ interests, rather than to Mr Garrity. This increased financial pressure on Ebada and Mr Garrity.49
45 At [62].
46 At [63].
47 At [67]–[77].
48 At [69].
(d)In September and October 2008, Mr Schmidt continued to pursue the transfer of the properties back to him. He wanted to use the properties as security to borrow money and invest in new business ventures.
(e)Mr Garrity did not accept the deals Mr Schmidt proposed and, in response, demanded payment of the outstanding rent on Kaiaua Road.50
(f)By October 2008, the parties had fallen out, although Mr Garrity continued to ask for the rent to be paid and they continued to discuss the figures required to discharge the mortgages over Kaiaua Road and Bell Road.
(g)In late November 2008, Mr Garrity sold the Bell Road property to a neighbour, Mr Hair, without telling Mr Schmidt.
(h)The parties continued to deal with each other. Mr Schmidt pursued the transfer of the Kaiaua Road property to a company owned by him, Alumuni Trustees Services Ltd.
(i)By July 2009, Mr Garrity advised Mr Schmidt that if the matter could not be resolved, he would list the property for sale.51
(j)Without the rental income on Kaiaua Road, Ebada was unable to meet its mortgage repayments. The Kaiaua Road property was sold at mortgagee sale in August 2011. The initial statement of claim was issued about that time.
[37] The Judge recorded the principal evidential contest was between Mr Schmidt (and Ms Schmidt to a lesser degree) on the one hand, and Mr Garrity on the other.52 He said that the direct conflict between the evidence of the Schmidts and Mr Garrity
50 At [71].
51 At [74].
was on the central issue in this case, which was “the nature of the transactions in issue, the transfer of the Kaiaua Road and Bell Road properties to Ebada”.53
[38]The Judge contrasted the cases:
(a)The Schmidts’ case was that Mr Garrity agreed to hold the properties on trust for the Schmidt interests and incorporated Ebada to do so on the basis of an express agreement that Ebada was a trustee for the Schmidt interests.54
(b)Ebada and the Garrity interests’ case was that the transactions were outright sales with agreements (because of the friendship between Mr Garrity and Mr Schmidt) to rent back by the Schmidts, in the case of Bell Road, and by Mr Schmidt’s father, Mr Wanoa, of the Kaiaua Road property as well as the Schmidts sharing in the Transit New Zealand compensation.55 Mr Garrity said that he had agreed that, if in the future the Schmidts were in a position to do so, Ebada and Mr Garrity would deal with them in relation to the purchase although there was no commitment to do so, nor to do so at any particular price.56
[39] In order to support their case, the Schmidts had produced a declaration of trust document purporting to be between Ebada and Excel Trust which they say Mr Garrity prepared and the parties signed on 12 December 2005. This expressly recorded that Ebada was to hold the properties on trust for the Schmidt interests. Mr Garrity denied that the document was created either by him or the Schmidts and said that it was fabricated. He said the unexecuted copy of the declaration of trust document that the Schmidts had produced in Court was created by them for the purposes of bolstering their claims.57 The Judge then went on to make credibility findings that the Schmidts
53 At [80].
54 At [81].
55 At [82].
56 At [82].
and Mr Garrity were all “unsatisfactory and unreliable witnesses to a greater or lesser degree.”58
[40]The Judge found that Mr Schmidt:59
(a)was evasive under cross-examination;
(b)struggled to answer simple questions directly, and in fact was incapable of answering direct questions; and
(c)sought to deny the obvious, even the simplest things such as whether he had received an email.
The Judge also found that Mr Schmidt had:60
(a)denied he used names which were recorded on his birth certificate;
(b)refused to accept at the time of the transactions he was in financial difficulties which it was clear that he was; and
(c)insisted on being taken to documents rather than answer questions which he must have good personal knowledge of.
[42] His Honour did not accept that Mr Schmidt had no knowledge of the effect of the trust documents.61 The Judge said he was an “intelligent and relatively sophisticated man, at least in terms of general business experience.”62 The Judge referred to a number of investment properties which the Schmidts had owned. He said Mr Schmidt had a good grasp of court processes and documentation, referring to a number of previous legal proceedings in which he had been involved. In particular, in one proceeding a Judge had observed that Mr Schmidt’s written submissions and oral
argument revealed “a confidence, a familiarity with the law and an ability to focus on relevant matters which are unusual in a lay person”.63
[43] His Honour said Mr Schmidt had used a number of different names or aliases and was prepared to falsify records and create new identities for different purposes whenever it suited him.64 Mr Schmidt was also prepared to say what he considered necessary to answer the banks’ and IRD’s enquiries or to put them off.65
[44] The Judge also noted that Mr Schmidt was repaired to create false documents and sign them when it suited his purposes (as was Mr Garrity). The Judge gave instances of Mr Schmidt doing this, including creating: a false agreement for sale and purchase of a boat; a false tenancy agreement to be sent to the IRD to meet a query; a false statement with a bill to increase the compensation from Transit New Zealand; and a false tenancy agreement with his former partner.66
[45] The Judge said of more concern was that Mr Schmidt was prepared to doctor or create documents to advance his case in these proceedings. For instance, he had omitted relevant paragraphs from emails produced in affidavits sworn by the Schmidts which the Schmidts “apparently” considered would not assist their case.67 Mr Schmidt’s explanation for the omitted paragraphs was not convincing.68
[46] In relation to Ms Schmidt, the Judge found her more direct in her answers but said they were obviously influenced by self-interest and she had limited personal knowledge of the events in issue.69
[47] The Judge also noted that aspects of Mr Garrity’s evidence were unsatisfactory.70 In particular, he had misled the Tenancy Tribunal on matters relating to the tenancy at Kaiaua Road; acknowledged that he had not provided the full picture to Mr Taia (the Schmidts’ lawyer) when outlining the terms of the sale and purchase
63 At [86], referring to Schmidt v Hair HC Auckland CIV-2010-404-6804, 3 May 2011 at [54].
64 At [87].
65 At [88].
agreement of Kaiaua Road; claimed privilege against self-incrimination when being cross-examined about his dealings with the IRD and information he had given to the broker and Westpac Bank when seeking a loan; misled the Department of Corrections in relation to registering himself as a lawyer to facilitate visiting Mr and Ms Schmidt; and did not inform his own lawyer, Mr Hansen, of the correct details of the Kaiaua Road transaction.71
[48] However, the Judge said the issue in relation to the IRD was relatively minor and that registering as a lawyer with the Department of Corrections was for Mr Garrity’s convenience so he could see Mr Schmidt more readily.72 The Judge found of more moment that Mr Garrity was a party to the creation and execution of documents which did not disclose the correct position, for instance the agreements for sale and purchase of Kaiaua Road and Bell Road, which gave misleading impressions as to the price actually paid for the properties.73
[49] The Judge said Mr Garrity was prepared to have documents witnessed at a date after they had been executed.74 However, he concluded:
[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. I also prefer Mr Garrity’s evidence to both Mr and Ms Schmidt on the issue of whether he uplifted a box with the trust documents and records from the Schmidts in October 2005. I accept that did not happen.
[50] The Judge went on to dismiss the first cause of action, breach of express trust. He found the Schmidts’ evidence as to how Mr Garrity came to create the express trust document to be “incredible”.75 He did not accept the Schmidts’ version of events and found:76
… There is no reliable or credible evidence that such a document ever existed or that Ebada executed a document recording that it agreed to be a corporate trustee for the Schmidt family interests.
[51] His Honour also said that there was no reason for the creation of an independent corporate trustee in the form of Ebada when the Schmidts already had a corporate trustee holding the property.77
[52] The Judge found, on the balance of probabilities, he preferred Mr Garrity’s evidence that the express trust document was “a fiction and a document created solely for the purpose of this hearing”.78 As Mr Garrity said in cross-examination, in response to the proposition that there was no reason for the Schmidts to make up the trust document:79
If you are trying to construct a case after the fact there’s plenty of reason to do so.
[53] The Judge found there was no express trust established quite apart from the fact that the trust document was fabricated. He said:80
… the transactions themselves do not support the Schmidts’ case. The sales in both cases were described in the agreements for sale and purchase as sales to Mr Garrity (or his nominee). There is no reference to a trust in any of the relevant accompanying documentation …
[54] The Judge went on to note Ebada’s name, Ebada Property Investments Ltd, while a minor point, did not suggest it was formed as a corporate trustee company. That it was a property investment company was consistent with Mr Garrity’s evidence that he had purchased the properties as investments.81
[55] Venning J rejected evidence of an express trust based on an agreement.82 He dismissed Mr Schmidt’s version of the background to the transactions. In particular, the Judge noted that there was no need for agreements for sale and purchase to be prepared if the transaction was to enable an independent corporate trustee to hold the
77 At [129].
78 At [135].
79 At [135].
80 At [136].
81 At [137].
property. He said there was no reason for the replacement borrowing, nor would Mr Garrity have had to make himself personally liable for the financed borrowing.83 The transactions, being the sales of Kaiaua Road and Bell Road, were a year apart, which was consistent with Mr Schmidt reluctantly selling the properties in response to particular financial pressures on his interests at the relevant times.84
[56] The Judge acknowledged that the major factor in favour of the Schmidts’ case was that the agreements for sale and purchase were at less than market value.85 There was no $130,000 debt to be written off in relation to Kaiaua Road and there had been no deposit of $295,000 actually paid, nor any work performed by Mr Garrity to that value in relation to Bell Road.86 However, the Judge said there were a number of other benefits to the Schmidts in the sales to the Garrity interests. These included that Mr Garrity allowed Mr Schmidt’s father to stay at the Kaiaua road property, and subsequently on the transfer of the Bell Road property, he agreed to the Schmidts retaining possession of that property. He also agreed that any future compensation from Transit New Zealand for Bell Road would go to the Schmidts and they would keep the benefit of lease income from the neighbour of the Bell Road property.87
[57] A further factor the Judge found relevant was that Mr Garrity was himself financially stretched and needed the rental income to keep the mortgage repayments up.88 In addition, the Judge said there was good reason for Mr Schmidt, who was being investigated by the IRD, to want the sale price recorded in the agreements for sale and purchase to be at market value, which is why a fictional forgiveness of debt and the “payment for fees” fiction were employed in relation to the Kaiaua Road and the Bell Road purchase prices respectively.89
[58] In conclusion, the Judge accepted Mr Garrity’s evidence that he was “prepared to purchase Kaiaua Road (and later Bell Road) but only at the right price.”90 He might
83 At [144].
84 At [145].
85 At [150].
86 At [150].
87 At [151].
88 At [152].
89 At [153].
have taken advantage of the financial pressure on the Schmidts to obtain a significant discount but that did not change the nature of the transactions, which he concluded were outright sales.91
[59] In summary the Judge therefore found the evidence did not support the existence of an express trust as the Schmidts had claimed so the first cause of action was not made out.92
[60] On the second cause of action, a breach of institutional constructive trust, the Judge noted the plaintiff’s claim was “effectively that Mr Garrity has committed a fraud on the Schmidts, so that Ebada obtained the properties by fraud.”93 Citing Equity and Trusts in New Zealand, he noted that an institutional constructive trust would arise in circumstances including where:94
–a fiduciary makes an improper profit;
–an intended transfer of property is invalid because of defective formalities;
–a person makes an unconscientious assertion of ownership in respect of property to which another has contributed;
–there is an agreement for mutual wills but after the death of one party the other revokes their will or acts inconsistently with the agreement;
–a vendor enters a contract to sell land;
–a property has been obtained by fraud;
[61] The Judge noted that if an institutional constructive trust had been established, it arose at the moment of transfer:95
… but as noted, the plaintiffs failed to establish that the transfers were anything but outright sales. There was no fraud. The plaintiffs cannot establish that Mr Garrity agreed Ebada would hold the properties on trust.
[62]The Judge went on to say, having reviewed a number of the authorities:
91 At [154].
92 At [155].
93 At [159].
94 At [158], citing Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington, 2009) at [13.2.1].
[163] The difficulty for the plaintiffs with the argument for an institutional constructive trust is that, for the reasons given, above the plaintiffs fail to satisfy the Court that the general discussion and understanding relied on by the plaintiffs to support the institutional constructive trust ever occurred.
[164] There was no agreement as there was in Holt. At its highest point it could be said there was a general understanding, but no more than that, if, in the future, Mr Schmidt was in a position to repurchase the properties Mr Garrity would deal with him. There was nothing more detailed than the possibility of Mr Schmidt being able to purchase it back.
[165] Mr Schmidt agreed to transfer the properties to Mr Garrity (Ebada). He knew the properties were to be transferred for less than their market price. He agreed to do so because of the other benefits to him from the transaction.
[63] His Honour found the arrangement between the parties was well short of acknowledging a trust96 and noted that the loose arrangement regarding the possibility of the Schmidts repurchasing the properties was not definite and it was “an unenforceable understanding between two people who at that stage were friends.”97
[64] The Judge referred to the “high point” for the plaintiffs as an email containing a draft communication to Transit New Zealand’s property group referring to the “property” being “under a new corporate trustee, Ebada Property Investments Limited (Ebada)”.98 Mr Garrity said he wasn’t sure that the email was ever finally settled and sent.99 The Judge found that passing reference to Ebada was not particularly significant given the overwhelming balance of the other evidence against it.100 The Judge said if Ebada was holding the properties as trustee, he would have expected it would have been raised in the numerous communications between the parties in 2008, a time when the relationship was deteriorating.101 Neither was it sought to terminate what was alleged — that Ebada was trustee.102
[65]The Judge concluded that:
[175] Taking the evidence overall, and despite the unsatisfactory nature of the documents and the way all parties acted, the plaintiffs fail to satisfy the Court that there was an agreement between the vendor of the property represented by Mr and Ms Schmidt and Mr Garrity, that Ebada would hold the
96 At [168].
97 At [170].
98 At [171].
99 At [171].
100 At [172].
101 At [172].
properties on trust. Rather, the agreement was that Kaiaua Road and Bell Road would be sold to Ebada. In both cases that enabled the mortgages to be cleared, Mr Schmidt’s father, Mr Wanoa, (and the Schmidts) to remain in possession of the properties and, in the future, for the Schmidts to potentially have an opportunity to purchase the properties back.
[176] The evidence does not support a declaration that an institutional constructive trust arose.
[66] In relation to the third cause of action, knowing assistance/knowing receipt of intentional breach of trust, given the failure to make out a breach of trust, that cause of action could not succeed.103
[67] As to the fourth cause of action, a breach of fiduciary duty, the Judge found that no fiduciary duty existed. The claim was that Mr Garrity was in a relationship of special trust and confidence with Mr and Ms Schmidt. This was pleaded as being on the basis of the relationship as:104
(a)Mr Garrity was their long-term friend;
(b)Mr Garrity provided legal services to them and acted as their lawyer; and
(c)the plaintiffs were in a vulnerable position facing criminal prosecution and under financial pressure.
[68] The Judge noted the two principal situations in which a fiduciary duty would arise. The first was whether the relationship was of a kind which, by its very nature, was recognised as being inherently fiduciary, such as a solicitor/client relationship.105 The other was where, on an examination of the particular aspects of the relationship, the relationship should be classed as fiduciary. The Judge also noted that not every breach of duty by a fiduciary would be a breach of fiduciary duty.106
103 At [177].
104 At [178].
105 At [179].
[69] The Judge noted that while Mr Garrity was a lawyer, he was not acting as Mr and Ms Schmidts’ lawyer. He was an in-house counsel for ASB and unable to provide legal services for anyone other than his employer.107 While he told the prison authorities he was the Schmidts’ lawyer, he had no role in the defence of their criminal charge or in relation to the sale of Kaiaua Road other than as purchaser.108 Nor did he act as the Schmidts’ lawyer in relation to the agreements for sale and purchase. They were independently represented by Mr Taia and Mr Garrity took advice from a separate lawyer.109
[70] The only legal advice that the Schmidts said that Mr Garrity provided was that they should transfer Kaiaua Road and Bell Road to an independent trustee. The Judge had already also rejected the Schmidts’ contention that Mr Garrity had given them such advice.110 The Judge rejected that Mr Garrity was acting as such in the assistance he gave the Schmidts in making payments on their behalf. He did not render any fees. The Judge contrasted that with a bill that the Schmidts’ lawyer, Mr Darby, had rendered for approximately $20,000 which included services in relation to Transit New Zealand.111
[71] The Judge therefore rejected any lawyer/client relationship between Mr Garrity and the Schmidts.112 He also found there was no other basis for classifying the relationship between Mr Garrity and the Schmidts as fiduciary. There was no agreement, express or implied, to the effect that the fiduciary would act on behalf of the other party and put their interests before his own.113
[72] The Judge also noted that caution was necessary before imposing a fiduciary duty on parties to a contract. He referred to the Supreme Court comments to this effect in Paper Reclaim Ltd v Aotearoa International Ltd.114
107 At [182].
108 At [183].
109 At [184].
110 At [185].
111 At [186].
112 At [194]–[195].
113 At [196].
114 At [197], citing Paper Reclaim Ltd v Aotearoa International Ltd [2007] NZSC 26, [2007] 3 NZLR 169.
[73] His Honour further noted that while the Schmidts had argued they were vulnerable at the time of the transactions, which could be an important factor in a fiduciary relationship, this of itself was not sufficient to create the relationship.115 Generally, it must co-exist with elements of reliance, confidence or trust where one party had undertaken to act in the interests of another. Venning J found at the time Mr Garrity entered the agreements for sale and purchase, he had not undertaken to act in the interests of the Schmidts.116 Therefore, the cause of action for breach of fiduciary duty failed.117
[74] The Judge determined that the undue influence claim also failed. Firstly, he had rejected the proposition that Mr Garrity had provided legal advice or legal services to Mr and Ms Schmidt.118 Neither was the fact that he was qualified as a lawyer relevant to Mr Garrity’s purchase of Kaiaua Road and Bell Road. He was not in legal practice and he was pursuing his own interests as a property investor when he purchased those properties.119
[75] Secondly, the Judge found that the Schmidts had not established any actual undue influence in relation to the two transactions. In particular:
(a)Mr Garrity was not acting as their solicitor.120
(b)The particular vulnerability they claimed, namely that they faced a criminal prosecution and their financial position made them vulnerable to advantage being taken of them, was not established. By the time of the Bell Road sale, Mr and Ms Schmidt had been released from prison and would have been under financial pressure.121
(c)As to the sale at an undervalue due to the sham $130,000 deed of forgiveness in the case of Kaiaua Road, and the write-off of $295,000
115 At [198].
116 At [198].
117 At [199].
118 At [203].
119 At [204].
120 At [207].
for services in the case of Bell Road, the Judge accepted that though the price actually paid for the properties was an unusual feature nevertheless the Court would not enquire into the adequacy of consideration.122 In any event, even if there was an inequality of bargaining power, that was not of itself sufficient to establish undue influence.123
(d)The fact that Mr Garrity was a friend and a qualified lawyer did not give him any particular position of dominance or ascendency over the Schmidts.124
(e)Mr Schmidt was an experienced property owner and businessman and was “intelligent and canny and able to achieve or get what he wanted.
He well understood legal processes”.125
(f)The Judge also noted Mr Schmidt was a strong character and would have backed himself to ultimately solve his financial issues to get himself into a position where he would have been able to buy the properties back from Mr Garrity on advantageous terms.126
[76] The Judge said that Mr Garrity undoubtedly took advantage of the fact the Schmidts were under financial pressure to strike the deal for the purchase of the properties at reduced rates.127 However, Mr Garrity was only prepared to buy at a significant discount and he was financially stressed as well. The Judge found the sales also suited the Schmidts because of the financial pressure they were under, the fact Mr Schmidt wanted his father to remain in the Kaiaua Road property paying rent and that the Schmidts could occupy Bell Road. The Judge noted Mr Schmidt’s character was such that he would want to be seen as in control and looking after the family. He would not want to lose his father’s respect, which would have been the result if the property had been sold and his father had to move out. The loose understanding was
122 At [209].
123 At [209]–[210].
124 At [211].
125 At [213].
126 At [214].
that if the Schmidts were to find their financial position improved in the future, Mr Garrity would deal with them and consider transferring the properties back.128
[77] Finally, the Judge noted that it was relevant that the Schmidts were represented by Mr Taia in relation to both sales, an independent solicitor in a recognised firm, who had obligations to the Schmidts.129 This was regardless of the point made by the Schmidts that Mr Garrity would have been with Mr Taia at the prison when the Schmidts signed the documents relating to the sale of Kaiaua Road. He noted the Schmidts attended Mr Taia on their own in relation to the sale of Bell Road. As the Judge said, “[t]hey had the opportunity to discuss their situation in full with him then.
Nothing changed”.130
[78] The Judge concluded that while the Schmidts were undoubtedly under pressure to sell, when considered in context, including Mr Schmidt’s role in the agreements and the benefits to him and his family, it could not be said the transaction could only be explained on the basis Mr Garrity exercised undue influence.131
[79]Therefore, all causes of action failed.
[80]In a costs judgment which followed, the Judge noted that:132
(a)The starting point was that the defendants were successful, and they were entitled to costs against both plaintiffs.133
(b)The proceedings were “not hopeless. The proceedings failed as the plaintiffs were unable to prove their case but as the Court observed there were arguments that could be made for the plaintiffs.”134
[81]The Judge also noted:
128 At [212].
129 At [215].
130 At [215].
131 At [216].
132 Schmidt v Ebada Property Investments Ltd [2020] NZHC 757 [Costs judgment].
133 At [4].
134 At [14].
[18] Standing back and looking at the matter overall, the principal factor which supports an award of increased costs, if not indemnity costs, is the fact the plaintiffs created a false document for the purpose of advancing their claim. I do not consider the other factors to be sufficient in this case. However, against that factor is the fact that the Court also found Mr Garrity’s evidence to be unsatisfactory in a number of respects, and that he also was criticised for creating documents which did not correctly record the position. I consider Mr Garrity’s own conduct amounts to a good reason which justifies the Court refusing an order for increased or indemnity costs in this case.
[82] I have gone through the High Court decision in some detail because it was the “prospects of success” on appeal of that judgment that the Commissioner was considering. Therefore the likely merits are relevant to the Tribunal’s review, if indirectly.
[83] As Wylie J said in Legal Services Agency v A, it is appropriate to consider whether the arguments to be advanced on appeal are “technical and devoid of substantive merit”.135
The Legal Aid Tribunal decision
[84] The Legal Aid Tribunal (the Tribunal) characterised the appellant’s case as follows: that the Commissioner usurped the role of the Court of Appeal, because the appellant “need not prove she will win the appeal but must simply demonstrate the appeal has sufficient merit to justify funding”.136 In particular, the appellant said that the Commissioner erred by relying on strong adverse credibility findings against the Schmidts.
[85]I now turn to consider the Tribunal decision.
The Tribunal’s assessment
[86] The Tribunal considered the credibility findings. It found that the Commissioner did not err when considering Venning J’s adverse credibility findings in relation to Mr Schmidt in the first cause of action. The first cause of action (express trust) was not the subject of the substantive appeal. However, the Tribunal took the
135 Legal Services Agency v A (2008) 19 PRNZ 1 (HC) at [42], quoted by the Tribunal in the Tribunal decision, above n 1, at [27].
136 Tribunal decision, above n 1, at [13].
view that the Judge’s findings were “so firm (and so widespread)”, including that Mr Schmidt omitted key email evidence and fabricated a deed that was central to the claim that the two properties were held on trust by Ebada, that the credibility finding “undermines the thrust of the applicant’s case, that the properties were transferred to be held on trust for her, whether express or otherwise”.137
[87] Secondly, as to the institutional trust and knowing assistance/receipt claim, the Tribunal found that the Commissioner did not err in his consideration. The Judge had found that passages of emails had been deliberately omitted by the appellant. He said had there been a trustee relationship, this would either have been raised or there would have been appropriate “contemporaneous comment in any of the various email communications”.138The Commissioner had considered Venning J’s finding there was no evidence that Mr Garrity and Ebada agreed to hold the properties on trust, but found that the transfers of properties were “outright sales”.139 The Tribunal said it did not consider the prospects of the Court of Appeal reaching a different view to Venning J as “particularly strong”.140
[88] The Tribunal said that the appellant on review before the Tribunal sought “to dissect the text of many individual emails”, which, given the preponderance of evidence, was “not conducive to good prospects sufficient for an appellate grant of legal aid”.141
[89] Thirdly, in relation to the claim for breach of fiduciary duty, the Tribunal reiterated the reasons why there was no basis to argue Mr Garrity acted as the appellant’s and Mr Schmidt’s lawyer. To the extent the appellant intended to submit on appeal that fiduciary duties can arise in a variety of circumstances, and that given the special trust and confidence bestowed on Mr Garrity such as access to their bank account and privity to information such as property valuations, the Tribunal noted Venning J had considered in general terms whether the relationship had been a
137 At [34]. The Tribunal referred to the causes of action at [5].
138 At [38].
139 At [37].
140 At [38].
fiduciary one. In any event, the Tribunal said the new submissions on this point did not modify the position “in any material way”. 142
[90] Fourthly, in relation to the new High Court decision of Morrison, the Tribunal said it did not provide a material change in circumstances and was insufficient to justify a further reconsideration.143 The case recognised an institutional constructive trust where the evidence in support of that was credible.144 The Commissioner did not rely on s 51(6), which entitles the Commissioner to decline reconsidering a decision “if the Commissioner has already reconsidered that decision or a decision relating to substantially the same issue.” In the Tribunal’s opinion, the Commissioner had been entitled to do so.145
[91] The Tribunal said that the appellant’s arguments on appeal were mainly “rooted in the minutiae of emails and documents”, which was “not synonymous with them having any particular prospects of success”.146 The Tribunal concluded that there were not sufficient prospects of success to justify a grant of legal aid for the appeal, and the Commissioner did not err in law nor was his decision manifestly unreasonable.147
[92] In its final remarks, the Tribunal found the comments of Venning J in the costs judgment (such as that the appellant’s case was “not hopeless”) did not support there being sufficient prospects of appellate success.148 The specific comments that the appellant says the Commissioner made without a proper evidential basis were reasonable comments to make and he was entitled to draw such inferences.149
Analysis
[93]I now turn to the two main issues on appeal identified earlier.
142 At [44].
143 At [49].
144 At [46].
145 At [48]–[49], citing principles related to s 51(6) from the Legal Aid Tribunal decision in DY (Historic Abuse) [2012] NZLAT 089 at [43].
146 Tribunal decision, above n 1, at [50].
147 At [50].
148 At [51].
Issue 1: The tainting of the Commissioner’s decision by the finding that the deed of trust had been fabricated
[94] Ms Levy submitted that the Tribunal had wrongly “approved the reality” of the Commissioner’s view that the findings were a fabrication in respect of the deed of trust and so tainted the remaining causes of action”.150
[95] The appellant says this was not a finding made by Venning J who had, after rejecting the deed as a contemporary document, chosen to follow “the logic of the case and the contemporaneous documents” approach.151 The appellant argued that the Schmidts by their attempt to boost genuine claims with fabricated evidence do not forgo the right to a consideration of the remaining evidence when the falsity is uncovered. Given the Judge’s reluctance to accept Mr Garrity’s evidence, except to the extent that his evidence was consistent with the documents, the “tainting finding” and its adoption by the Tribunal was wrong in law.
[96] On the other hand, Ms Hansen for the respondent said that the case must be looked at as a whole. The trial Judge made clear credibility findings, which were unlikely to be upset on appeal. What was required was to look at the substance of the matter and the substantive decision overall.
[97] There is no doubt that the Judge made clear credibility findings. That is not disputed by the appellant. However, the appellant pointed out that the Judge also made credibility findings against Mr Garrity. In the circumstances, the contemporaneous documentation becomes a touchstone. The appellant says the Judge recognised that but did not take proper account of the contemporaneous evidence, which would support the appellant’s appeal.
[98] If the Judge had taken that into account, the appellant says, it would support a constructive trust being established rather than a transfer of ownership outright. In the submissions to the Commissioner, Mr Woodhouse, acting for Ms Schmidt, pointed to a number of emails. For instance, in reference to an email dated 13 March 2008,
Mr Woodhouse says “[t]here are several passages to be analysed, in particular, the use of language” by Mr Garrity, who said: 152
I will hold the properties for another couple of months until the end of May
… sorry to put this pressure on you bro, but holding these properties has done nothing for me.
[99] As is apparent, that passage is not inconsistent with the Judge’s findings as to Mr Garrity’s giving the Schmidts the opportunity to make an offer to purchase the properties.
[100] Ms Levy in her submissions pointed to the admission by Mr Garrity that it was not “fair” that he retained all the proceeds when the properties were sold. She relied on an exchange in the cross-examination of Mr Garrity as follows:153
Q. And the sale price was 700,000 wasn’t it?
A.I think you’re looking at this comment in isolation. I think there’s a lot that’s going on around the periphery of this.
Q.Well, we’re not worried about the comment anymore, Mr Garrity. The point I’m going to make to you is that you did sell Bell Road to Mr Hair for 700,000, didn’t you?
A. Yes.
Q. And you had bought it off the Schmidts or from the Schmidt Trustee Limited or Ebada had for 200,000?
A. Yes.
Q. And the difference between those two figures, Mr Garrity, is 500,000, isn’t it?
A. Yes.
Q. And the fair share that you have given back to the Schmidts to date is nothing, isn’t it?
A. Nothing.
Q. Nothing.
A. Yes.
Q. That’s correct, isn’t it?
A. Yes.
Q.It doesn’t sound like a very fair share to me, Mr Garrity, does that sound like a fair share to you?
A. Is that your question?
Q. Yes, it is.
A.Well, when you look, when you isolate it down to that issue, it doesn’t seem fair, no.
[101] In the context of the questions being asked in cross-examination, Mr Garrity’s response in cross-examination to the question of whether it was fair that he sold property for $700,000 when he had bought it for $200,000 was qualified by the fact that Mr Garrity pointed out that this was only on the basis of the dollar purchase price. He was not saying that the sale of the property by the Schmidts to Mr Garrity was not fair per se because there were other factors which influenced the deal. Venning J referred to those factors in his judgment. They included that Mr Garrity had only been prepared to buy the property at a significant discount, as he was financially stressed due to his other investments and his matrimonial split. The sale also benefitted the Schmidts by addressing the immediate financial pressure they were under from the mortgagee, the BNZ. In addition, “importantly” the deed enabled Mr Schmidt’s father to remain on the Kaiaua property.154 The Schmidts were also able to remain in possession of the Bell Road property. The Judge noted that the price paid for the property was “an unusual feature of sale”;155 that the Kaiaua Road property was worth
$290,000 and Mr Garrity purchased it for $160,000; and that Bell Road was worth
$495,000 and Mr Garrity purchased it for $200,000.156 Nevertheless, his Honour said that it was for the parties to determine the appropriateness or otherwise of the consideration for it in the circumstances. That is not an error.
[102] Ms Levy indicated that while there were some credibility findings the Judge had made which were open to challenge, the appeal was not a credibility challenge but rather a challenge based on the fact the Judge purported to make his findings (other than the express trust finding) on the “logic of the case” and “contemporaneous”
154 High Court decision, above n 2, at [212].
155 At [209].
documents.157 The appellant argued that this was not a case of the Judge being in a better position to make factual findings because he had seen and heard the witnesses but, rather, it was open to the appellate court to examine the documents which supported the appellants’ constructive trust argument.
[103] While the Judge did rely on contemporaneous documents and the “logic of the case”, he also made firm credibility findings against, in particular, Mr Schmidt, which supported the Judge’s findings on all the causes of action. In particular:
(a)The credibility findings made at the beginning of the judgment were not limited to the express trust argument. Having made a finding of such a serious nature — the fabrication of a document to support the claim before the Court — the credibility of the appellants on all claims was compromised. It is unrealistic to say that finding could only have an effect on the first cause of action.
(b)On the “important issues” where there was a direct conflict, namely the basis upon which the properties were transferred to Ebada, Mr Garrity’s evidence was preferred over that of Mr and Ms Schmidt “primarily on the logic of the case and the contemporaneous documents which support his evidence.”158 However, that comment confirms that the Schmidts’ credibility was lacking on the important issues, which was confirmed by his analysis of the documentary evidence. The Judge acknowledged that there was evidence which could support the Schmidts’ arguments. However, as the Judge said, it was the evidence as a whole which determined the case.159
[104] The second cause of action (breach of institutional constructive trust) did not rely upon the declaration of trust as the first cause of action did.160 Nevertheless, the
157 At [110].
158 At [110].
159 At [175].
160 At [156] on breach of institutional constructive trust, as being in reliance on the express trust declaration. However, counsel advised that during the hearing in the High Court, the pleading had been amended (if only in a de facto manner) to delete the reference in the second cause of action to reliance on the declaration of trust document, and this was accepted by the Judge.
Judge concluded that the Schmidts had failed to satisfy the Court that the “general discussion and understanding relied on by [them] to support the institutional constructive trust ever occurred.”161 His Honour was referring to his credibility findings, which must have included consideration of the fabricated document as well as his analysis of the logic and his evaluation of the documents and explanations of the parties.
[105] The Judge was aware of the unsatisfactory nature of the documents but, as he said, he took “the evidence overall” into account when he concluded that the Schmidts had failed to satisfy the Court that there was an agreement or understanding that Ebada would hold the properties on trust.162 He expressly found that Mr Schmidt had agreed to transfer the properties to Mr Garrity, even though he knew they would be at less than their market value and agreed to do so because of the other benefits to him from the transaction.163 This was a finding based on the Judge’s assessment of evidence and the weight he placed on the various documents. But that is not to say that there were not contemporaneous documents and emails that might be interpreted to support the appellant’s version.
[106] Regardless of how the appellants now formulate their constructive trust argument, the findings as to fact of the Court must first be overcome before the constructive trust argument can succeed.
[107] In reformulating the constructive trust argument, the appellant pointed to the recent judgment of Wylie J in Morrison.164 In the submissions to the Commissioner in the second reconsideration application,165 Mr Woodhouse cited comments of Wylie J from Morrison as follows:
[141] While Autumnal is the registered proprietor, its title remains susceptible to an in personam claim if there has been unconscionable conduct.166 A registered proprietor can be subject to claims arising out of his or her personal conduct (in personam claims) and whether the conduct
161 At [163].
162 At [175].
163 At [165].
164 Morrison, above n 5.
165 Letter from Woodhouse Law to Ministry of Justice, Legal Aid, regarding second reconsideration application (27 January 2021) at [13].
166 Regal Castings Ltd v Lightbody [2008] NZSC 87, [2009] 2 NZLR 433.
occurred before or after registration. Registered proprietors can be required to hold their estate or interest and to deal with it, so as to give effect to obligations with which they have burdened themselves at law or in equity so long as enforcement of those claims is not inconsistent with the objective of the Torrens land registration system.167 A constructive trust will be recognised where it would be a fraud for the legal owner to assert beneficial ownership.168 Where property is conveyed in consideration of an oral promise by the transferee that the transferor will retain a beneficial interest in the property, and where retraction of the promise amounts to a fraud upon the transferor, then the transferee will be held a constructive trustee for the benefit of the transferor of either the whole property or of the relevant interest. The key to such cases lies in the question whether the transferor would have parted with the property but for the oral undertaking of the transferee. If that question is answered in the negative, then renunciation of the promise or disavowal of the common intention will operate in equity as a fraud on the transferor and entitle the transferor to the appropriate remedy. The circumstances must show that reliance on the legal title in situations of this kind amounts to a fraud upon the plaintiff.169 The constructive trust arises because of the fraudulent denial of the common intention or oral promise, even where there was no perfected agreement or declaration of trust.170
[142] The three key elements to establish an institutional constructive trust, in the circumstances which have arisen in this case, are first, an oral undertaking or promise, secondly, that Mr Morrison as trustee of the Trust, was induced by the oral undertaking or promise given by Mr O’Reilly to part with the properties, and thirdly, that Mr Morrison, as trustee of the Trust, would not have so acted, but for the oral undertaking or promise.
[108] Wylie J found that there had been an oral undertaking or promise made by the defendants which induced the plaintiffs to part with the properties, and that the plaintiffs would not have so acted but for the oral undertaking or promise.171
[109] Ms Levy also indicated that it was open to the Court to formulate the case using a Lankow v Rose argument.172 That is a constructive trust based on an “intention”. This follows a four-step inquiry requiring contribution and assessing whether there was a “reasonable expectation” of a beneficial interest. Ms Levy said this was raised in submissions following the hearing, although it does not appear to have been expressly pleaded, nor was it separately dealt with in the High Court decision.
167 Duncan v McDonald [1997] 3 NZLR 669 (CA) at 683.
168 Avondale Printers & Stationers Ltd v Haggie [1979] 2 NZLR 124 (SC) at 145.
169 At 163; and see Bannister v Bannister [1948] 2 All ER 133 (CA); and Mahon v The Station at Waitiri Ltd [2017] NZCA 387, (2017) 18 NZCPR 760 at [47].
170 Laboyrie (as trustees of the Galway Trust) v Mills (as executor of the estate of Mills) [2020] NZHC 700.
171 Morrison, above n 5, at [142].
172 Lankow v Rose [1995] 1 NZLR 277 (CA).
[110] Ms Levy forwarded to the Court copies of those submissions (which were not before the Tribunal, so were not included in the Case on Appeal). Ms Levy indicated that the Schmidts had not addressed that argument in their written submissions, but Mr Woodhouse indicated that he had on behalf of the Schmidts addressed it in oral submissions in closing at the trial.
[111] As summarised by Tipping J, the four requirements of such a trust are that the claimant must show:173
(a)Some contributions, direct or indirect, to the property in question.
(b)They had an expectation of an interest in the asset.
(c)Their expectation was reasonable in the circumstances.
(d)The defendant should reasonably expect to allow the claimant an interest. The question is not whether the defendant was willing to allow an interest or expected to have done so, but whether they should reasonably expect to do so.
[112] The thrust of the Lankow v Rose submissions made on behalf of Mr Garrity in the High Court was that the contribution must “manifestly exceed” the benefits the contributor has received and, in this case, there was no such contribution, either by the reduction of the purchase price of the properties, nor by the plaintiffs paying rent and outgoings on the properties.
[113] The Judge expressly considered that the sales were at a significant price discount, but he also found there were benefits that accrued to the Schmidts in order for that to occur. In any event, the findings of the Judge that there was an outright sale undermine any argument that the Schmidts could have had an expectation of an interest. Any expectation of an interest would not be reasonable.
173 At 295.
[114] Therefore, the factual findings at trial could not support any argument of a constructive trust, whether by virtue of an understanding or agreement that the property be held on trust or an undertaking to hold the property on trust or a contribution giving rise to a reasonable expectation as in the Lankow v Rose formulation.
[115] A substantial difficulty for the appellant on appeal is that the findings as to credibility permeate the decision. In addition, the Judge reviewed the contemporaneous documentary evidence and he found on his analysis it supported the credibility findings against the Schmidts. It was for the Judge to accept or reject the relevant evidence, evaluate it and place such weight on it as he considered appropriate.
[116] The Tribunal did not err in its rejection of the submission that the credibility findings made by the Commissioner were flawed because the Commissioner had placed weight on the credibility effect of the fabricated declaration of trust documents. The Tribunal made no error in stating:174
… Whilst the applicant seeks to compartmentalise these findings and argue they are irrelevant to the remaining causes of action, I do not consider that is tenable on an appeal given the credibility findings are so firm (and so widespread). The fabrication of this central document will taint the remaining causes of action. The finding undermines the thrust of the applicant’s case, that the properties were transferred to be held on trust for her, whether express or otherwise. The Commissioner did not err in recognising this reality.
[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”.175 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.176 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
174 Tribunal decision, above n 1, at [34].
175 High Court decision, above n 2, at [110].
176 (Meredith) JMM, above n 12, at [53].
made no error in its consideration of the credibility comments made by the Commissioner.
[118] Nor did the Tribunal make any error in its conclusions on the constructive trust argument. In order to succeed in any formulation of the constructive trust argument, the appellant had to establish either an agreement to hold the relevant property on trust, an undertaking to hold the property in trust or a contribution giving rise to a Lankow v Rose type trust (even if this was before the Court). None of those were established on the facts.
[119] The Tribunal made a realistic assessment when it said the appellant on review was seeking to “dissect the text of many individual emails” but that doing so was “not conducive to establishing good prospects sufficient for an appellant grant of legal aid. As the Judge noted, it is the preponderance of the evidence, as well as the thrust and logic of the case that are important.”177
[120] The Tribunal also pointed out, the Judge had made his findings “after seeing and hearing the protagonist”, and that “at its ‘highest point’ it could be said there was a general understanding, but no more than that, if, in the future, [Mr S] was in a position to repurchase the properties, [Mr G] would deal with him”.178 Overall, there is nothing that has been pointed to which cogently suggests Mr G misrepresented to the applicant that he would hold the properties on trust, followed by a later denial.”179 The Tribunal also noted that Morrison was merely an illustration of an institutional constructive trust in circumstances where evidence of its existence was credible and accepted.180 The appellant has not pursued this appeal on the basis of the Tribunal’s rejection of a reconsideration based on Morrison.
[121] The Tribunal did not specifically consider the Lankow v Rose argument that was made before this Court. However, based on the factual findings of the High Court a Lankow v Rose argument would not have any chance of success. In any event, it is not clear whether that argument was pursued by the appellant as a standalone claim at
177 Tribunal decision, above n 1, at [39].
178 At [40].
179 At [40].
180 At [46].
trial. Although referred to by Mr Garrity’s lawyer in his High Court submissions, it was not mentioned by Venning J in the judgment. It does not appear to have been part of the submissions made to the Commissioner or the Tribunal, nor was it mentioned in the notice of appeal.181
Issue 2: Failure to engage in the detail of the appellant’s submission to the Commissioner and the Tribunal
[122] Ms Levy pointed out that, compared to the voluminous submissions of Ms Schmidt provided by Mr Woodhouse to the Commissioner and the Tribunal, both the Commissioner’s decisions and that of the Tribunal were short. For instance, Mr Woodhouse’s submissions providing further information to the Tribunal in support of the first application for legal aid182 on appeal amounted to 31 pages. The second reconsideration application amounted to 18 pages183 and the submissions in support of the application for review were 30 pages long.184
[123] Ms Levy points out that the Commissioner’s first decision, dated 27 October 2020, was only a page and a half long.185 Ms Hansen explained that its brevity was because the full reasons were not included in that decision for some reason. However, the decision of 21 December 2020 was eight pages and the second reconsideration decision, which referred to the Morrison judgment was three pages long.
[124] The Tribunal decision was succinct; however, it covered all the relevant points. It said the applicant sought to compartmentalise fine points. In particular, it noted that Venning J concluded that no constructive trust existed because the transfers of the properties were “outright sales” and there was no agreement that the properties were to be held on trust.186 The Tribunal recorded the challenge to the Judge’s assessment was based on emails, when it said:
[38] The appeal seeks to challenge the Judge’s assessment of the wording of an email on 13 March 2018 in which Mr G referred to “holding” the properties. The applicant submits the use of this word is consistent with the
181 Notice of appeal (27 July 2021).
182 Letter from Woodhouse Legal to Ministry of Justice, Legal Aid (17 August 2020).
183 Letter from Woodhouse Legal to Ministry of Justice, Legal Aid (24 October 2020).
184 Submissions in support of application for review (17 March 2021).
185 Letter from Ministry of Justice, Legal Aid to Woodhouse Legal (27 October 2020).
186 Tribunal decision, above n 1, at [37].
properties being “held on trust” (rather than ownership). However, I do not consider the prospects of the Court of Appeal reaching a different view to Venning J are particularly strong. The Judge found passages of the email had been deliberately omitted by the applicant, and the omissions supported Mr G and E Ltd’s case. Perhaps more importantly, there was other correspondence which was consistent with Mr G owning the properties, such as him referring to the applicant and Mr S being in a position to “purchase [them] back” from him. Further, as the Judge commented, if Mr S believed E Ltd was holding the properties as trustee, he would have expected him to have raised it in 2008 when Mr S’s relationship with Mr G was deteriorating. There was, however, no contemporaneous comment in any of the various email communications that E Ltd held the properties on trust, nor did Mr S seek to terminate E Ltd as trustee at any time.
[39] Although the applicant on review seeks to dissect the text of many individual emails in a similar fashion, doing so is not conducive to establishing good prospects sufficient for an appellant grant of legal aid. As the Judge noted, it is the preponderance of the evidence, as well as the thrust and logic of the case that is important.
[125] The Tribunal was not required to engage with every point raised by Mr Woodhouse 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. The Woodhouse 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.
[126] The arguments that the appellant sought to raise in support of the fiduciary relationship were, as the Tribunal noted, the same that had been pursued at trial. In the Tribunal’s assessment they did not modify the position in any material way. It made no error of law in that conclusion.
[127]The Tribunal correctly 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.
[128] The Tribunal went on to note the comments in the subsequent costs decision about the fact the case “could have gone either way” and that Mr Schmidt’s case “was not hopeless” did not support there being sufficient prospects of appellate success.187
[129] The Tribunal also dealt with the other criticisms made by the appellant about the Commissioner’s comments as follows:188
[52] Second, the applicant submits the Commissioner on two occasions drew conclusions without any evidential basis, demonstrated by these comments:
(a)“We believe the reason [the applicant and Mr S] created the deed was because they recognised their claim could not succeed without a pivotal document, and so they forged one”; and
(b)“We believe, given [Mr S’s] property and investor experience, he would have ensured there would be formal documents in place which clearly showed the transfer of the properties to [E Ltd] was on the basis they were being held on trust by [E Ltd]. No such documents exist”.
[53] I consider these were reasonable comments to make, and the Commissioner was entitled to draw these inferences, consistent with this task in assessing the appeal’s prospects of success. In any event, when read as a whole, I do not consider the Commissioner placed any degree of weight on these matters.
[130] The Tribunal made no error of law in reaching that conclusion. The comments complained of were justified in terms of the High Court decision findings and in any event they were not matters significant to the overall conclusion of the Commissioner.
[131] A further matter raised by the appellant was that the Commissioner failed to engage with the legal opinions provided by Professor Peart and Ms Levy and that the Commissioner failed to provide funds for a second legal opinion.
[132] There was no need for either the Commissioner or the Tribunal to specifically deal with the opinions of Professor Peart and Ms Levy.
187 At [51].
188 At [52]–[53].
[133] Professor Peart’s opinion was provided to Mr Woodhouse over the phone, based on the facts provided to her. According to Mr Woodhouse, Professor Peart:
… considered that it is conceivable that another Judge (or Judges of the Court of Appeal) will come to the opposite conclusion to that of Venning J, and that the properties were not sold outright to Mr Garrity but instead were transferred in circumstances where there is an arrangement of trust between the parties.
Professor Peart’s opinion appears to have been based on an understanding of the facts put forward by Mr Woodhouse which were also put forward to the Tribunal. Apart from being in very general terms the legal analysis was dependent on the Judge’s factual findings being set aside. Similarly, Ms Levy’s opinion was brief.
[134] The views in the two opinions were dealt with by the Tribunal, although not by reference to the respective legal opinions.189
[135] In relation to the complaint that the Commissioner failed to fund a second legal opinion, Ms Hansen indicated that it was exceptional for the Commissioner to fund such an opinion. There was no detailed argument before me about why this was an exceptional case, nor was there any detailed argument based on that ground. The notice of appeal formulation of that ground is:
[14] That the Tribunal erred in law in failing to consider the Appellant’s submissions that the Respondent was manifestly unreasonable in failing to take advantage of the offer made by Queen’s Counsel, Nicolette Levy QC, to review the Appellant’s case and provide an opinion to the Respondent on the Appellant’s prospects of success …
[136] Without evidence, or at least detailed submissions on this point, this cannot be taken further.
[137] The applicant, in its submissions in reply, characterised the failure of the Commissioner to accept the offer of “a QC to review a complex case such as this” as “again giv[ing] rise to concerns of pre-determination.”190 It went on to say that the
189 Given the brevity of the comments in relation to Professor Peart’s views, conveyed to Mr Woodhouse by phone, I do not consider it can be characterised as a legal opinion in the circumstances.
190 Submissions on behalf of the applicant in reply (4 May 2021) at [23].
approach flew in the face of “standard procedure” and must be regarded as manifestly unreasonable or wrong at law.191
[138] If the issue was one of predetermination by the Commissioner it was not argued as such before me. There is no basis for such an argument. I dismiss that ground of appeal.
[139] I have analysed the appeal around the two main issues. However, under these issues the appellant ran numerous grounds of appeal which I now deal with. Turning to the detailed grounds of appeal:
(a)Ground 1 that the decision is wrong in law: I have concluded that the Tribunal decision is not wrong in law.
(b)Ground 2 that the Tribunal erred when framing the essential question was to assess the appellant’s prospects of success in her appeal, when its role is to determine whether the Commissioner’s decision was either manifestly or unreasonable or wrong in law: Both the Commissioner and the Tribunal are required to assess the appellant’s prospects of success at some level. They both did so. The Tribunal made no error in that regard.
(c)Ground 3, relating to the credibility findings: The Tribunal made no error in its finding that the Commissioner properly took into account the credibility findings, including the effect of the fabrication of the declaration of trust deed, in his assessment of all the causes of action. This did not amount to taking into account an irrelevant matter. The Tribunal made no error.
(d)Grounds 4, 5, 7 and 12: Failure to consider evidence.
(i)The fourth ground was that the Tribunal erred in law when determining that the Commissioner had not erred, by holding
that “there was no evidence that Mr G and E Ltd agreed to hold the properties on trust”.192 To this, the appellant says that her submissions on review showed detailed evidence supporting the proposition that the properties were held on trust.
(ii)The fifth ground is that the Tribunal erred in stating there was no contemporaneous email correspondence that “E Ltd held the properties on trust”,193 when the appellant’s submissions filed on the review application referred to such communications.
(iii)The seventh ground is that the Tribunal erred in stating nothing that had been pointed to had suggested that “Mr G misrepresented to the applicant that he would hold the properties on trust followed by a later denial”.194 The appellant says the Tribunal misstated a test that was “definitive and too narrow” for when an institutional constructive trust may arise, and that the appellant had referred to the supporting evidence.
(iv)The twelfth ground is that the Tribunal erred in accepting that the Commissioner was entitled to draw inferences relating to why the deed was forged and that Mr Schmidt would have ensured there were formal documents. The appellant said this was without an evidential basis and that the Tribunal was in error to say that the Commissioner had placed no weight on such matters, when in the Commissioner’s first consideration, the reason as to why the deed was forged, he said it was a “fundamental problem”.
(v)These are all matters of detailed evidence. I have specifically dealt with some of these grounds. However, in general terms the Judge made findings based on what evidence (including the
192 Tribunal decision, above n 1, at [37].
parties’ testimony) he accepted and had placed on the evidence such weight as he considered appropriate. The real thrust of the appeal challenges that evaluation and analysis by that Judge.
(vi)The Tribunal was not in error in accepting the Commissioner’s determination that the Commissioner had properly considered the prospects of success and that the fact the applicant could put forward arguments was “not synonymous with them having any particular prospects of success”.195 The challenge is to the factual findings in the judgment. The Tribunal made no error in finding that the Commissioner did not err in law in that conclusion, nor was his decision manifestly unreasonable.196
(e)Grounds 6, 10, & 11: Misconstruing/failing to consider counsel’s submissions.
(i)The sixth ground is that the Tribunal misconstrued the appellant’s submissions by stating the appellant sought to dissect emails rather than focus on the submission that the preponderance of the evidence, which was in fact the appellant’s point. By “dissecting” the emails, the appellant was demonstrating an alternative “thrust and logic” of the case to that adopted by Venning J. The appellant submits that the appeal to the Court of Appeal will be by way of rehearing, where that Court will come to its own views of the facts, and therefore that Court will be in exactly the same position as Venning J to make findings.
(ii)The tenth ground is that the Tribunal misconstrued the appellant’s submission that it was “rooted in the minutiae of emails and documents” and that the appellant having arguments was not synonymous with any particular prospects of success.
Additionally, that the Tribunal failed to determine that the Commissioner’s decision was wrong at law by failing to consider those arguments.
(iii)The eleventh ground is that the Tribunal erred in failing to consider that the Commissioner erred when he selectively chose aspects of the costs decision to support the decision to decline legal aid, and when categorically stating that “[Mr S being unable prove their case] will not change in the Court of Appeal”. The appellant says the Tribunal is substituting its decision as to how the Court of Appeal would determine the appeal:
(iv)As is apparent the findings of the trial Judge were largely based on credibility supported by an evaluation and analysis of the documentary evidence. The appellate Court in this case will have a disadvantage in not seeing and hearing the evidence. This is not a case where the determinations can be based on an analysis of the documents alone.
[140] It is correct that assessing what the Court of Appeal might decide is not the role of the Tribunal. However, the Tribunal’s function is to review the Commissioner’s decision, which is directly related to the “prospects of success” of the appeal. In the costs judgment Venning J made comments that the proceedings were not hopeless and the claims were arguable.197 However, that adds nothing to the arguments on appeal. The costs comments were made in the context of an application by the defendants for increased or indemnity costs. The Judge’s view that the case was arguable at first instance so would not attract a costs uplift does not add anything to the likely prospects on appeal.
[141] The eighth ground is that the Tribunal failed to consider the appellant’s submission that the Commissioner was wrong in law by failing to consider that Venning J had misapplied the legal test for when a fiduciary relationship would arise. The appellant submits that a fiduciary duty can arise where trust and confidence is
197 Costs judgment, above n 132, at [14].
reposed in a person — in this case, by the Schmidts in Mr Garrity. The ninth ground is that the Tribunal erred when determining that Mr Garrity’s handling of sums of money and having access to the Schmidt’s bank account was immaterial to the fiduciary relationship. The respondent points out in submissions that this ground is entirely dependent on whether evidence supports the claim. The evidence is not available as the viva voce evidence of the Schmidts undermined this argument. The Tribunal made no error in not engaging with these grounds in detail.
[142] Ground 15 related to unfair process but is now abandoned as a ground for appeal.
[143] The thirteenth ground relates to failing to consider the appellant’s submission that the Commissioner had no regard to the views conveyed by Professor Peart and Ms Levy on the prospects of success. The fourteenth ground is that the Tribunal failed to find it manifestly unreasonable that the Commissioner failed to take advantage of Ms Levy’s offer to review the appellant’s case and provide an opinion. I have dealt with those grounds above.
Overall analysis
[144] The Tribunal did engage with the appellant’s alternative view, although not in the detail that the appellant considered was appropriate. The Tribunal was not required to do so. It gave succinct but sufficient reasons for its determination on review. Nothing more was required.
[145] As is apparent, despite the numerous grounds of appeal and detail over the claimed errors of law they broadly fell into the two areas that I have analysed above.
[146]The appellant has not established any error of law made by the Tribunal.
[147]All grounds of appeal are dismissed.
Costs
[148] Counsel advised me that no orders as to costs were sought as Ms Schmidt is legally aided and the Commissioner is funding this appeal in any event.
Grice J
Solicitors:
Nicolette Levy Queens Counsel, Wellington Lisa Hansen Barrister, Wellington
- AGLC
- Schmidt v Legal Services Commissioner [2022] NZHC 200
- Case
- [2022] NZHC 200
- Decision Date
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