Westpac New Zealand Limited v Fonua

[2010] NZCA 471

IN THE COURT OF APPEAL OF NEW ZEALAND

CA582/2009
[2010] NZCA 471

BETWEENWESTPAC NEW ZEALAND LIMITED

Appellant

ANDSIONE TUITAVAKE FONUA

Respondent

Hearing:28 July and 19 August 2010

Court:Chambers, Ellen France and Stevens JJ

Counsel:M V Robinson and G K Holm-Hansen for Appellant

T J Darby for Respondent

Judgment:15 October 2010 at 2 pm

JUDGMENT OF THE COURT

A            The appeal is dismissed.

BThe appellant must pay the respondent costs for a standard appeal on a band A basis together with the usual disbursements.

____________________________________________________________________

REASONS OF THE COURT

(Given by Stevens J)

Costs against a solicitor?

[1]        At issue in this appeal is the often vexed question of whether costs ought to be awarded against a solicitor for serious breach of duty to the Court as measured by the test in Harley v McDonald.[1]  The conduct in question arose in the course of litigation against an entity styled Nga Uri Whakatipurunga O Ngarae (Inc) (Nga Uri), although it was not incorporated under any statutory provision.  Its solicitor, Mr Sione Fonua, had lodged caveats against dealing on its behalf in respect of various freehold properties.  To enforce its security in each case, the lender Westpac was required to file proceedings for removal of the caveats under s 143 of the Land Transfer Act 1952.  Nga Uri opposed these removal applications.  When Nga Uri was unsuccessful, Westpac sought costs against Mr Fonua personally, principally on the basis that he had been the solicitor responsible for lodging the caveats and also, in the case of one of the removal applications, on the basis that he had acted as solicitor on the record.  The costs applications failed[2] and Westpac has appealed to this Court.

[1]      Harley v McDonald [2002] 1 NZLR 1 (PC) at [55]–[57].

[2]Westpac New Zealand Ltd (1763882) v Ngä Uri Whakatipurunga O Ngarae (Inc) HC Auckland CIV-2008-404-7298, 21 August 2009 (costs judgment).

[2]        The first caveat removal proceedings concerned a caveat lodged on behalf of Nga Uri in respect of a freehold property owned by Hapeta Te Hautehoro Hapeta.  The second related to caveats lodged on behalf of Nga Uri over three freehold properties owned by one John Dorbu.  In the case of all four properties, the appellant held a mortgage under which it was taking steps to enforce its mortgage security.  The four caveats were lodged on various dates between 1 and 14 July 2008.  Mr Fonua (the respondent) was then acting for Nga Uri whose name appeared in the attestation box of the caveat followed by the words “by their duly authorised agent Sione T Fonua”.  After the appellant had secured orders from the High Court removing the four caveats,[3] an application was filed by the appellant seeking costs against the respondent.  In the Hapeta proceeding, Associate Judge Robinson had left open the prospect of such an application as follows:

[18]  An issue has arisen as to costs.  Normally the applicants are entitled to costs.  I can see no reason why they should not receive costs in this case.  There will therefore be orders that the applicants are entitled to costs on a 2B basis with disbursements as fixed by the registrar.  I certify that there are separate counsel allowed for each application.  Leave however is reserved for the applicants to seek any further directions with regard to costs in the event of there being any problems on enforcement because the respondent is not currently a society incorporated under any statute of New Zealand.

[3]Westpac New Zealand Ltd (1763882) v Ngä Uri Whakatipurunga O Ngarae (Inc) HC Auckland CIV-2009-404-7298, 24 November 2008 (the Hapeta proceeding); and Westpac New Zealand Ltd (1763882) v Ngä Uri Whakatipurunga O Ngarae (Inc) HC Auckland CIV-2009-404-1172, 16 March 2009 (the Dorbu proceeding).

[3]        The appellant then filed a memorandum seeking costs orders against the respondent in each proceeding.  The respondent was not formally joined to the two proceedings at that stage.  Rather, he was given notice of the applications and thereafter was represented by counsel, Mr Darby, who appeared at the costs hearing with respect to the Hapeta proceeding before Associate Judge Christiansen.  Evidence and submissions were presented to oppose the applications for costs on behalf of the respondent.  At the hearings of the appeal, the respondent was again represented by Mr Darby.  He filed helpful written submissions and presented further oral submissions opposing the appeal and the making of any award of costs.  Following discussion with counsel, we decided that this was an appropriate case in which to substitute Mr Fonua for the previously named respondent Nga Uri.[4]

[4]      The Court made an order pursuant to r 48 of the Court of Appeal (Civil) Rules 2005.

[4]        We will first address three preliminary points relevant to the nature and scope of the appeal.  We will then provide an expanded factual outline before determining the key issue of whether the respondent committed a serious breach of duty in the course of acting for Nga Uri in the caveat removal litigation, such that a personal costs order should be made against him.

Preliminary points

Jurisdiction

[5]        First, the respondent challenged the jurisdiction of this Court to hear an appeal from a decision of an Associate Judge on costs.  Mr Darby argued that the decision under appeal was a chambers order as it arose from an interlocutory application.  Hence, the appellant was required to apply to have the order reviewed by a High Court Judge under s 26P of the Judicature Act 1908. 

[6]        We do not agree that this Court has no jurisdiction to hear and determine the appeal.  The starting point for analysis is the application filed by the appellant to remove the caveat.  In the Hapeta proceeding, the appellant applied for orders as follows:

1.THAT caveat 7876772.1 lodged against certificate of title SA 9B/1164 (South Auckland Registry) be removed pursuant to section 143 of the Land Transfer Act 1952; and

2.THAT the applicant’s costs relating to this application be fixed and paid by [Nga Uri].

[7]        There is no doubt that an Associate Judge has jurisdiction to hear and determine an application for removal of a caveat: s 26I(1)(c) of the Judicature Act.  The costs application is covered by s 26I(3) which provides as follows:

26I    Associate Judge may exercise certain powers of the Court

…

(3)An Associate Judge shall have and may exercise all the jurisdiction and powers of the Court to deal with costs and other matters incidental to the matters over which an Associate Judge has jurisdiction pursuant to subsection (1) or subsection (2) of this section.

[8]        Mr Darby accepted that an appeal would lie to the Court of Appeal under s 26P(2) of the Judicature Act from any decision of an Associate Judge on the application to remove the caveat.  But Mr Darby submitted that the same could not be said for the costs application.  He argued that that application had later changed character and was in reality an interlocutory application that was required to be heard by the Associate Judge in chambers.  In this context, Mr Darby referred to an article suggesting that an application for costs ought to be treated as an interlocutory application.[5]  Hence, he submitted that the only means of challenging the costs decision in this case was by means of a review to the High Court under s 26P(1) of the Judicature Act.

[5]      Andrew Beck “Litigation” [2008] NZLJ 449 at 452.

[9]        We disagree.  The costs order sought on the application for removal of the caveat fell within the provisions of s 26I(3).  The fact that it happened to have been

heard separately from the application to remove the caveat made no difference.  Nothing occurred whereby the costs application could be said to have later changed character to become an interlocutory application or a matter to be heard by an Associate Judge in chambers.  We consider that, where an Associate Judge is exercising jurisdiction under s 26I of the Judicature Act, such jurisdiction will be exercised in Court and not in chambers.  The same approach will apply to applications under s 26I(1) as to costs applications under s 26I(3).  The appropriate course then is to file an appeal under s 26P(2): see Talyancich v Index Developments Ltd.[6]Accordingly, the challenge by the respondent to the Court’s jurisdiction must fail.

The Dorbu proceeding

[6]      Talyancich v Index Developments Ltd [1992] 3 NZLR 28 (CA).

[10]       The Dorbu proceeding concerned an application to remove three caveats lodged by the respondent on behalf of Nga Uri over three properties owned by Mr Dorbu.  Incidentally, this is the same Mr Dorbu who as a barrister was instructed by the respondent to act as counsel for Nga Uri in the Hapeta proceeding.  It is apparent from the record in the Dorbu proceeding that, once the appellant issued the proceeding seeking removal of the three caveats, the respondent played no further part in the proceeding.  This is in sharp contradistinction to the role he played as solicitor in the Hapeta proceeding.

[11]       Given the absence of any participation by the respondent in the Dorbu proceeding, the question arose as to how, and on what basis, the respondent could be found liable for the costs of the appellant.  Mr Robinson, for the appellant, sought tentatively to submit that liability for costs could arise by virtue of the fact that the respondent had signed the three caveats lodged against the Dorbu properties as the agent of Nga Uri.  The difficulty with this argument is that it runs counter to the principle applicable to a claim for costs that it is impermissible for the Court to take

[12]        into account conduct prior to any proceeding being issued: see Paper Reclaim Ltd v Aotearoa International Ltd.[7]Thus any remedy for the solicitor’s action prior to the application for removal of the caveat, including his conduct in lodging the caveats on behalf of Nga Uri would sound in damages – possibly involving a claim under s 146 of the Land Transfer Act.

[7]Paper Reclaim Ltd v Aotearoa International Ltd [2007] NZSC 26, [2007] 3 NZLR 169 at [40].

[13]       Confronted with this obstacle, Mr Robinson responsibly did not press the appellant’s claim for costs in respect of the Dorbu proceeding.  For this reason, the judgment will deal only with the appeal against the decision of the Associate Judge to refuse an order for costs against the respondent in the Hapeta proceeding.

Further evidence

[14]       Following the first hearing, Mr Darby was concerned that more factual information was available relating to the role of the respondent in relation to the Hapeta proceeding.  He sought permission, and was granted leave, to file a further affidavit by Mr Fonua dealing with this aspect.  Briefly, the reason for doing so is as follows.  At the hearing on 28 July we suggested to the parties that the way in which the argument had been approached in the High Court was misguided.  There, all of the focus had been on Mr Fonua’s acts of lodging the caveats and as to the steps he should have taken to verify Nga Uri’s status before then.  We indicated to counsel that we thought that focus was wrong.  Rather, the focus had to be on Mr Fonua’s wrongdoing, if any, in the course of the legal proceeding to remove the caveats.  Counsel for Westpac adopted such change of focus and pursued it in oral argument.  Mr Darby indicated there was a potential unfairness in that, as Mr Fonua, in his affidavit to date, had not really focused on that aspect.  Therefore in order to address that potential unfairness, we granted leave to Mr Fonua to file a further affidavit as to his role in the Hapeta proceeding and then resumed the argument to hear further submissions from both sides in light of the altered focus of the appeal. 

[15]       The affidavit filed significantly expanded on the detail of circumstances in which Mr Fonua signed and filed the notice of opposition to the caveat removal application in the Hapeta proceeding.  The affidavit referred in particular to the role of Mr Dorbu, the barrister instructed for Nga Uri, the nature of certain of the points to be advanced in opposing the caveat removal application and the changing nature of the appellant’s claim for costs since the time when costs were originally sought.  There is no doubt that such material is directly relevant to the issues to be determined in the appeal. 

Some more facts

[16]       Mr Hapeta had mortgaged his land to Westpac on 21 June 2006.  He defaulted and Westpac served a Property Law Act 2007 notice on 25 February 2008.  Westpac then exercised its power of sale and entered into an unconditional sale and purchase agreement for $70,000, to be settled on 8 October 2008.  However, on 14 July 2008, Nga Uri, through the respondent, purported to caveat the title, having received instructions from a Mr Bluegum as “instructing officer”.  The caveat alleged that Nga Uri had entered into a sale and purchase agreement with Mr Hapeta on 30 June 2008.

[17]       Mr Fonua had not previously acted for Nga Uri.  He said that he was just presented with the agreement for sale and purchase that had already been executed by the parties.  Mr Fonua understood Mr Bluegum to be knowledgeable about Nga Uri’s affairs and merely assumed that Nga Uri was an incorporated society.  He carried out no checks to establish whether Nga Uri was an incorporated society under any applicable statute.  The assumption was made because the agreement for sale and purchase purported to be executed under seal showing Nga Uri to have been incorporated.

[18]       The state of Mr Fonua’s knowledge changed dramatically on 23 September 2008.  In a similar proceeding between another mortgagee Marac Finance Ltd and Nga Uri (again represented by Mr Fonua) Marac’s solicitor wrote as follows: [8]

I act for Marac Finance Ltd (Marac). As you are aware Marac is the first mortgagee of the property comprised and described in certificate of title 260721 (North Auckland Land Registration District) (“the Land”). For the reasons that follow, Marac puts you on notice that it intends to make an application for solicitor and client costs against you both personally in connection with the Applicant’s caveat 7865366.2 (“the Caveat”) and application made to sustain the Caveat being called in the High Court at Auckland on 24 September 2008 at 2.15pm.

1.  The Land is registered under the Land Transfer Act 1952 (“Land Transfer land”), not land registered under the Maori Land Act 1993 (“Maori land”).

2.  There is no such entity as the Applicant. Searches of incorporated entities under the Incorporated Societies Act 1908 or the Companies Act 1993 or the Charitable Trusts Act 1957 reveal there is no such entity as the Applicant.

3.  The Maori Land Court (Hamilton Registry) have checked the national data bases for Maori Incorporations under section 248 and 279 of the Maori Land Act 1993. They have confirmed there is no such entity registered in the national database bearing the Applicant’s name.

4.  No interest in land created by the mortgagor (legal or equitable) can prevail over that of the registered mortgagee’s interest in the Land. Marac has not consented to the agreement for sale and purchase giving rise to the alleged caveatable interest recorded in the Caveat. Accordingly, the Court is compelled to lapse the Caveat.

5.  Given the above, there is, firstly, no basis for the caveatable interest and, secondly, no basis on which it will be sustained.

If by 5.00pm this afternoon, you have provided Marac care of this office with an undertaking in writing to either consent to an order lapsing the Caveat to withdraw it, Marac will not seek costs against you, notwithstanding that it will have by then incurred substantial legal costs in preparing its notice and affidavits in opposition. If you do not do so, Marac will seek costs against you personally.

[8]Nga Uri Whakatipurunga O Ngarae (Inc) v Marac Finance Ltd HC Auckland CIV-2009-404-006180, 29 July 2009 at [6].

[19]       The respondent replied on 24 September 2008:[9]

We acknowledge receipt of your letter of 23 September 2008.

Your tactic of bullying and threat is unprofessional.

The Maoridom has customary rights which derive from the Treaty of Waitangi not from Act of Parliament. The Westminster model and the doctrine of Supremacy of Parliament are arguably subject to the Treaty of Waitangi. It is about time that this kind of legal argument should be presented in court. This is in accordance with the Maori jurisprudence which has been pushed aside for over hundred years.

Everyone is entitled to argue its case in the Court of Law and it should not be subject to the fear of legal costs.

Any application for a solicitor and client costs will be vigorously defended. We respectfully ask you not to use the bullying and threats tactics as you have done to any of your colleagues in the future.

[9] Ibid, at [7].

[20]       There is no dispute that the respondent received the letter from Marac’s solicitor.  In his first affidavit, Mr Fonua deposed that:

Once I was alerted to the fact that the society was not properly registered, I sought to have the problem remedied, but the client declined to do as I suggested.  I therefore ceased to act for the society and/or Mr Bluegum.

[21]       The affidavit did not provide any elaboration as to what steps Mr Fonua actually took to remedy the problem.  Neither was there any reference to the involvement of Mr Dorbu in his role as barrister.  In fairness to Mr Fonua, one of the reasons for the paucity of information provided to the Court was that those who instructed him have not waived their privilege.  He is accordingly not in a position to tell the Court what advice he gave to them.

[22]       Westpac’s solicitors wrote to the respondent on 1 October 2008 advising that the Hapeta property had sold with settlement due on 8 October 2008 and requiring the caveat to be withdrawn to enable settlement to be completed.  Mr Fonua replied on 7 October 2008 raising new matters as follows:

We have been advised by our client that he has never signed loan agreement and mortgage documents with your client bank.

We therefore require you to provide the following information to us:

1.           The loan agreement and the mortgage documents;

2.PLA notice together with relevant documentation such as default notice.

We draw your attention to the fact that this land is Maori Freehold land and it is not under the General Land.

We look forward to hearing from you.

[23]       Westpac applied for removal of the Hapeta caveat on 4 November 2008.  Nga Uri opposed the application.  Notwithstanding that he by then knew that Nga Uri was not incorporated, the respondent signed on 13 November in the High Court and filed the notice of opposition which referred to Nga Uri in the same manner as had been used in the attestation box of the caveat, including the suffix “(Inc)”.  A day later, the respondent filed two affidavits in support, sworn by Messrs Mohammed Sadiq and David Wright, each of which referred to Nga Uri as “the Incorporation”.  What these affidavits showed in summary was that Mr Fonua was acting on behalf of a group of Maori who asserted that they were “incorporated” in terms of tikanga Maori, even though Nga Uri was unincorporated in terms of the statutes of New Zealand.

[24]       On 24 November 2008, Associate Judge Robinson granted Westpac’s application to remove the caveat lodged by Nga Uri on the Hapeta property.  The Judge held that the only basis on which Nga Uri was able to oppose the application was that stated in the caveat, i.e. that Nga Uri was the purchaser under a sale and purchase agreement with the registered proprietor.  But Nga Uri could not succeed on this ground as Westpac’s mortgage was registered before the caveat was lodged by the respondent.  Westpac not having consented to the sale to Nga Uri, its mortgage took priority.  The Judge was satisfied that the other grounds raised in the notice of opposition were unarguable.  He ordered costs on a 2B basis and reserved leave to the applicant to apply for directions in the event that there were any problems with enforcement “because [Nga Uri] is not currently a society incorporated under any statute of New Zealand”.

[25]       Westpac subsequently sought costs against the respondent personally in respect of both the Hapeta and Dorbu proceedings.  Associate Judge Christiansen refused the application on 21 August 2009.  His judgment focused largely on the respondent’s conduct in lodging the caveats in July 2008 and whether that conduct breached the respondent’s professional obligations.  The Judge held that that conduct did not meet the standard for misconduct in litigation stated in Harley v McDonald of “serious breach of duty”.  

The appeal

Submissions for the appellant

[26]       Mr Robinson for Westpac submitted that Associate Judge Christiansen was incorrect to decline costs against the respondent in the Hapeta proceeding.  He submitted that the respondent’s conduct in signing and filing the notice of opposition after he knew that Nga Uri was unincorporated met the test stated in Harley v McDonald.  The fact that Nga Uri was unincorporated was material to the identity of the party or parties seeking to sustain the caveat, as were the names and details of the party or parties opposing the appellant’s application to remove the caveat.  On this basis, Mr Robinson submitted that the respondent had a duty to put this information before the Court.  Any failure to comply with this duty involved a serious breach of obligation to the Court and to other parties to the proceeding including breach of warranty of authority.

[27]       As the source of such duty, Mr Robinson relied on r 41B of the former High Court Rules, now stated in identical terms in r 5.37 of the Rules currently in force:

Solicitor's warranty as to authorisation to file documents

Every solicitor by whom, or on whose behalf, a document is filed in the Court shall be deemed to warrant to the Court and to all parties to the proceeding that he or she is authorised, by the party on whose behalf the document purports to be filed, to file the document.

Submissions for the respondent

[28]       Mr Darby submitted that the respondent’s conduct was not such as to breach the standard of conduct required by Harley v McDonald.  Any error or omission in filing the notice of opposition and the two affidavits in support referring to the client “Incorporation” did not amount to a serious breach of duty to the Court.  In the same context, Mr Darby emphasised that the respondent’s role in the litigation was solely as a solicitor and he had engaged the services of a barrister, Mr Dorbu, to deal with litigation issues.

[29]       Mr Darby also advanced an argument that Westpac had exacerbated its own costs by applying to the High Court for removal of the caveat under s 143 of the Land Transfer Act.  An alternative, cheaper remedy was available under s 145A.  However, this argument has no relevance to whether the conduct of Mr Fonua in the Hapeta litigation involved a serious breach of duty to the Court.

[30]       In the end, the main thrust of the opposition to the making of a costs order was that, while Mr Fonua omitted to inform the Court that Nga Uri was not incorporated under any statute, nevertheless the affidavits of Messrs Sadiq and Wright did disclose in sufficient detail that Nga Uri was a group of Maori individuals who claimed to be incorporated in terms of tikanga Maori.

[31]       Mr Robinson responded by referring to the broader context in which the respondent’s conduct occurred.  He noted that there were a considerable number of cases, including the Marac Finance case,[10] in which Nga Uri had lodged caveats through the agency of the respondent.  Mr Robinson submitted that the appellant had only become aware of the position concerning the status of Nga Uri shortly before the hearing of the caveat removal application.  Even then the respondent had failed to set out the full picture and had never disclosed the true identities of those involved in the unincorporated entity that referred to itself as Nga Uri.

Discussion

The applicable test

[10]      Footnote 8 above.

[32]       The starting point is the standard of conduct required of solicitors involved in the conduct of litigation.  The test for what conduct constituted a serious breach of duty to the Court is outlined in Harley v McDonald as follows:

[55] Then there is the question as to the kind of conduct that can be regarded as involving a serious breach of duty to the court. Their Lordships agree with the Court of Appeal that the test for the exercise of the common law jurisdiction in New Zealand is that which was applied in England before the wasted costs jurisdiction under section 51 of the Supreme Courts Act 1981 came into effect: [1999] 3 NZLR 545 at para [55]. A simple mistake or oversight or a mere error of judgment will not, of itself, be sufficiently serious to fall into that category. Something more is required. In Myers v. Elman [1940] AC 282 at pp 291-292 Viscount Maugham indicated that the test was whether the conduct amounted to a serious dereliction of duty, and that negligence could be so described if it was at a sufficiently high level. At p 340 Lord Atkin described the kind of negligence that could lead to an exercise of the jurisdiction as gross negligence. At p 319 Lord Wright said that, while a mere mistake or error of judgment is not generally sufficient, a gross neglect or inaccuracy in a matter which it was a solicitor’s duty to ascertain with accuracy, such as whether he had a retainer to act, might suffice. A more precise definition of the level of seriousness is not appropriate. But where negligence or incompetence is alleged the conduct must be put into its proper context.

[33]       The Privy Council also referred to the dual purpose of a sanction for such a breach of duty.  On the one hand it provides compensation for a disadvantaged litigant, but on the other it has a punitive element.  Accordingly, the decision stated that “although it may be expressed in terms which are compensatory, its purpose is to punish the offending practitioner for a failure to fulfil his duty to the Court.”[11]  As to the circumstances that might give rise to a costs order, the Privy Council added:[12]

As a general rule allegations of breach of duty relating to the conduct of the case by a barrister or solicitor with a view to the making of a costs order should be confined strictly to questions which are apt for summary disposal by the court.  Failures to appear, conduct which leads to an otherwise avoidable step in the proceedings or the prolongation of a hearing by gross repetition or extreme slowness in the presentation of evidence or argument are typical examples.  The factual basis for the exercise of the jurisdiction in such circumstances is likely to be found in facts which are within judicial knowledge because the relevant events took place in court or are facts that can easily be verified.  Wasting the time of the court or an abuse of its processes which results in excessive or unnecessary cost to litigants can thus be dealt with summarily on agreed facts or after a brief inquiry if the facts are not all agreed. 

[11]      At [49], citing Myers v Elman [1940] AC 282 (HL).

[12] At [50].

The respondent’s conduct

[34]       The first aspect concerning the respondent’s conduct is the relevance of other cases in which he lodged caveats on behalf of Nga Uri.  From one such case, it emerged that the respondent had been clearly informed on 24 September 2008 that Nga Uri was not registered as an incorporated entity under any relevant legislation.[13]  Although the relevant correspondence was not produced as exhibits in this appeal, the content of it was as set out at [16] and [17] above.  Its accuracy was not disputed.  The respondent claimed to be “very surprised to learn ... that the purchaser was not a properly incorporated society”.  Without explaining how, the respondent says he sought to have the problem remedied and added that “I therefore ceased to act for the society [Nga Uri] and/or Mr Bluegum”.

[13]      Nga Uri Whakatipurunga O Ngarae (Inc) v Marac Finance Ltd.

[35]       With respect to the notice of opposition filed by the respondent in the Hapeta proceeding, we consider that such conduct most likely involved a breach of the respondent’s warranty of authority contained in r 41B of the former High Court Rules (which were in force at the time).  We are satisfied that the respondent’s obligations as a solicitor required him to satisfy himself that the client in fact existed in the form of a duly incorporated entity.  He said in his affidavit that he knew there was a problem.  But it is not made clear what he did about it.  We accept that the failure to explain the detail of what occurred might have been due to issues of legal professional privilege and a need to obtain a waiver from whoever the clients were.  This issue is undoubtedly an area of real difficulty in cases such as this, a point touched on implicitly by the Privy Council in Harley v McDonald in the reference to cases “apt for summary disposal”.[14]  We observe that it will normally be only when serious wrongdoing appears on the face of the record or where the client chooses to waive privilege that the Court can investigate whether a costs order against a solicitor is practicable.

[14] At [50].

[36]       We consider that the respondent, knowing that Nga Uri as a statutory incorporation did not exist, could have protected himself by ascertaining precisely who were the persons involved in the unincorporated entity and then taking appropriate steps once their true identities and details were known.  But as noted above, we were not informed what occurred once the respondent was aware of the “problem”.

[37]       In his second affidavit, the respondent deposed that the notice of opposition was drafted and prepared by Mr Dorbu.  The mere fact that the respondent relied on advice of counsel is not necessarily a complete answer.[15]  It is still necessary for us to consider the conduct of the respondent in question and determine whether such conduct constituted a serious breach of duty to the Court and justified the exercise of the punitive costs jurisdiction.

[15]See Harley v McDonald at [56]–[57] citing Davy-Chiesman v Davy-Chiesman [1984] Fam 48 (CA).

[38]       It is clear that the respondent filed the notice of opposition in response to the appellant’s caveat removal application.  The notice continued to refer to Nga Uri as being “incorporated”.  The grounds advanced allege that:

(b)The Registered proprietor is Maori and a member of the respondent Incorporation.  The property in question is vested in the respondent pursuant to Part 13 of the Te Ture Whenua Maori Act 1994. [sic]

[39]       The notice of opposition does not expressly claim that Nga Uri is incorporated by order made under Part XIII of the Te Ture Whenua Maori Act 1993.  Rather, the nature of the arguments to be advanced in opposition emerge in the affidavits filed in support from Messrs Sadiq and Wright.

Was there a serious breach of duty?

[40]       We consider that the circumstances of this case required the respondent as solicitor in the litigation to make known the nature of the argument to be advanced in opposition, so that the other party could react appropriately and also so that the Court was informed as to the nature of the argument and the status of the group he was representing.  Had the matter rested solely on the notice of opposition, we consider the respondent would have been at serious risk of a costs order on Harley principles.  But we are satisfied that the position is saved by the content of the two affidavits from Messrs Sadiq and Wright.

[41]       Once the appellant received those affidavits, it learned that Nga Uri was viewing itself as a Maori body, whose status, if any, derived from tikanga Maori.  So far as New Zealand law was concerned, they were clearly no more than an unincorporated group of people.  What Westpac also learned, however, was that two of the principals were:

(a)Mr Sadiq, who asserted he was a member of Nga Uri, the manager of its construction arm, and authorised to make the affidavit on the group’s behalf.

(b)Mr Wright, who was chairman of Nga Uri, “a Maori tribal entity based in Katikati”.  He too was authorised to make the affidavit.

[42]       Westpac could immediately have given notice that, in the event the Court rejected the entitlement of Nga Uri to lodge a caveat, it would be seeking costs against Messrs Sadiq and Wright, as two of those responsible for the decision to oppose Westpac’s application.  While we cannot decide what would have happened had such an application been made, we consider it is likely the two deponents for Nga Uri would have had a costs order made against them.

[43]       Therefore viewing the conduct of the respondent and in the light of the facts summarised above, we consider that the conduct was far from satisfactory.  It undoubtedly involved more than a simple mistake or oversight.  But on balance we cannot conclude that it reached the level of seriousness required to justify a costs order against the respondent.  In this respect we agree with the conclusion of the Associate Judge, but for different reasons.  In summary, we consider that the appellant has not established that the conduct of the respondent involved gross neglect or the type of incompetence necessary to warrant a personal costs order.  The appellant has failed, by a narrow margin, to establish a serious breach of the respondent’s duty to the Court. 

Result

[44]       It follows that the appeal must be dismissed.

[45]       We would only add that nothing we have said in this judgment would preclude the appellant from making an application for damages pursuant to s 146 of the Land Transfer Act.  Nor does the judgment preclude Westpac from seeking to make a claim for costs against Messrs Sadiq and Wright, pursuant to the leave reserved by Associate Judge Robinson.

[46]       In relation to the question of costs, we consider that costs must follow the event.  There is an order that the appellant must pay the respondent’s costs.  We note that the time taken for hearing the appeal over the two days amounted to approximately one day.  The costs payable are for a standard appeal on a band A basis, together with usual disbursements. 

Solicitors:

Simpson Grierson, Auckland for Appellant