KAYE v THE NEW ZEALAND LAW SOCIETY [2019] NZHC 2135

KAYE v THE NEW ZEALAND LAW SOCIETY [2019] NZHC 2135 [29 August 2019]IN THE HIGH COURT OF NEW ZEALANDHAMILTON REGISTRYI TE KŌTI MATUA O AOTEAROAKIRIKIRIROA ROHECIV 2018-419-259[2019] NZHC 2135IN THE MATTER OF The Lawyers and Conveyancers Act 2006BETWEEN ANTHONY PRATT KAYEApplicantAND THE NEW ZEALAND LAW SOCIETYRespondentHearing: 10 April 2019Appearances: Mr Kaye Applicant in personP Davidson for RespondentJudgment: 29 August 2019JUDGMENT OF DUFFY JThis judgment was delivered by me on 29 August 2019 at 12:00pm pursuant toRule 11.5 of the High Court Rules.Registrar/ Deputy RegistrarSolicitors:Pamela Davidson, Barrister, WellingtonNew Zealand Law Society, WellingtonAnd to:The Applicant[1] Mr Anthony Kaye seeks judicial review of decisions by NZLS LawyersComplaints Service.[2] The judicial review is the latest act in a series of actions that Mr Kaye hastaken. These actions all arise from his displeasure in response to the legal services heand his wife received. It is helpful to have some understanding of the circumstanceswhich led to the delivery of those services and Mr Kaye's previous responses thereto.BackgroundCircumstances leading to conflict with Norris Ward McKinnon[3] In 2005, the law firm Tanner Fitzgerald Getty ('TFG') acted for Mr Kaye andhis wife (the Kayes) in respect of the purchase of a business (consisting of twoadjoined properties, Lot 1 and Lot 3, and the business itself). TFG negligently paidthe purchase price for Lot 3 to the vendor without obtaining her undertaking to transferthe title on receipt of payment. As a result, the Kayes could not obtain the title. TheKayes had borrowed money from a bank for this purchase, and the bank's mortgagesecurity could not be registered. The mortgagee bank suggested that the law firmNorris Ward McKinnon ('NWM') could help the Kayes and in 2006 they engaged theservices of a senior partner Mr Barris. This was two weeks before they were to settlethe purchase on Lot 1 and the business. The Kayes had not yet valued Lot 1, whichmeant they were technically in default of their purchase agreement.[4] Mr Barris advised the Kayes to take all possible steps to settle their obligations,including registering the mortgage. They negotiated with the vendor over the price ofthe business. In Mr Barris' view, they pursued unmeritorious arguments with thevendor, against his advice. The Kayes settled the purchase of the business, the transferof the title of Lot 3 and the register of the bank's mortgage in November 2006. Theysettled the purchase of Lot 1 six months late in March 2007. The Kayes also had torepay the loan they had taken from the vendor for the purchase price for the business,including penalty interest for their late repayment.[5] In April 2009, the Kayes sold the business and Lot 1 and 3 at a substantial lossin a mortgagee sale. They terminated their instructions to NWM.High Court and Court of Appeal Decisions[6] NWM commenced proceedings against the Kayes in the High Court for$70,000 in legal fees.1 The Kayes counterclaimed for breach of contract andalternatively in negligence alleging that NWM caused them losses of approximately$2,500,000.2 They were self-represented, and Mr Kaye was their sole witness.3Peters J dismissed the Kayes' claim. It was held that NWM negligently delayedcommencing proceedings against TFG, but that the delay did not cause the Kayes anyloss.4 Also, the scope of the Kayes' instructions to NWM was to settle the contractsof sale, not to advise them generally.5[7] At the Court of Appeal, the Kayes argued that NWM had acted in breach oftheir retainer, especially for failing to take effective steps in the two weeks betweenaccepting the Kayes' instructions and the settlement date of Lot 1 and the business.6The Court held that: NWM did not owe a duty to the extent alleged by the Kayes; theKayes' losses were attributable solely to their own failures; and even if the Kayes hadproven breaches, any damages they would be entitled to would be minimal comparedto their $5,581,228 claim.7 The Court found that the Kayes took two weeks toauthorise NWM taking their files from TFG, which prevented Mr Barris from gainingan understanding of their financial obligations and properly advising them of theiroptions.8 The delays to the settlement of Lot 1 were found to be the result of theKayes' failure to secure financing.9 The Court found that NWM discharged itsprofessional obligations with care and skill in difficult circumstances.10[8] The Kayes' application to the Supreme Court for leave to appeal wasdismissed.111 Norris Ward McKinnon v Kaye [2015] NZHC 1025 at [9].2 At [8].3 At [11].4 At [63].5 At [33]-[34].6 Kaye v Norris Ward McKinnon [2016] NZCA 32.7 At [38] - [41].8 At [29] - [30].9 At [31].10 At [42].11 Kaye v McKinnon [2016] NZSC 66.Complaints laid with NZLS[9] In October 2016, the Kayes filed a complaint with the Lawyers ComplaintsService of the Law Society. It was described as a complaint against NWM. Becauses 132 of the Lawyers and Conveyancers Act 2006 (LCA) does not allow complaintsto be made against partnerships, the complaint was accepted as a complaint againstMr Barris and two separate complaint files were opened in respect of two otherpractitioners from NWM involved in the matter. The Kayes later had this division oftheir complaint explained to them by NZLS.[10] The three complaints were considered by the Standards Committee.12 Thejudicial review concentrates on the Standard Committee's decision in relation toMr Barris (the Barris decision).13[11] The Barris decision referred to the Kayes' proceedings in the High Courtagainst NWM, noted that the Court of Appeal had gone so far as to commendMr Barris, and that the Supreme Court did not grant the Kayes leave to appeal.Mr Barris' potential conflict of interest had been traversed in the High Court.Accordingly, the Standards Committee decided to take no further action pursuant to s138(2) LCA because they 'lacked jurisdiction' to proceed with a matter that hadalready been ruled on by the Courts.[12] In 2017, Mr Kaye applied to the Legal Complaints Review Officer (LCRO) forreview. The LCRO issued a minute identifying jurisdictional issues and convened atelephone conference for the parties to address them. He then convened an in-personhearing, attended by Mr Kaye. The LCRO issued a decision on 30 April 2018confirming the Standards Committee's decision. His reasons focus on the applicationof s 132 of the LCA and the fact the LCA makes no provision for complaints againstan incorporated law firm. He also relied on the judicial dispositions of the civilproceedings as having effectively cured and disposed of any legal issues the Kayesmight raise.1412 Notice of Decision by the Central Standards Committee 2, No 15119, No 15232, No 15233,18 November 2016.13 Decision No 15119.14 Kaye v Barris LCRO 14/2017, 30 April 2018 at [101] – [102].[13] In July 2018, Mr Kayes wrote to the Law Society. The Complaints Servicereplied that it has no power to review decisions made by the Standards Committee andthat it could only be reviewed by the LCRO or a court.The judicial review grounds[14] Mr Kaye seeks judicial review of the Standards Committee's determination inrelation to Mr Barris. In summary, the claim is based on whether, by declining to takethe complaint further, the Standards Committee:(a) Unlawfully 'manipulated' the LCA to decline to consider theircomplaint;(b) Breached natural justice;(c) Acted in a bias manner.[15] Additionally, Mr Kaye claims that the NZLS decision to split his complaintinto three separate complaints under s 132 of the LCA created jurisdictional problemswhen he applied to the LCRO for review:I do not accept the LCRO's view that the NZLS decision was innocuous or"motivated by good intention" for the reason that it was always one complaint,not three – and was how NZLS treated it for all intents and purposes.Parties' arguments[16] When the judicial review was before me for hearing, the parties' argumentsfocussed on the merits of the decisions under review. During the hearing I becameconcerned about the jurisdictional basis underlying the decisions under challenge. Myconcerns related to whether it was appropriate for the NZLS, the Standards Committeeand the LCRO to view the complaints under the LCA. This was because it seemed tome the conduct that had given rise to the complaint about Mr Barris had occurredbefore the LCA came into force.[17] At the end of the hearing I directed counsel for the respondent to file furthersubmissions setting out how the LCA might be applied to professional conduct thathad occurred before the legislation came into force. Mr Kaye was given theopportunity to respond to those submissions. Both parties filed further submissions.Jurisdiction[18] In its original form the Kayes' complaint was ultra vires. The complaint wasmade against NWM rather than the lawyer in that firm who had acted for the Kayes.The LCA does not provide for complaints to be made against an unincorporated lawfirm, as opposed to the lawyers engaged in that firm. Accordingly, the StandardsCommittee could have rejected the compliant on that ground. Rather than do that,however, the Standards Committee divided the complaint into three complaints againstthe three lawyers who had been involved in the legal matter that had generated theKayes' complaint.[19] When the Standards Committee proceeded to deal with the Kayes' complaintrelating to Mr Barris the Committee did so as if the LCA fully applied to thedisposition. This was an error. The amended complaint for which judicial review isnow sought relates to conduct of Mr Barris, that was performed before the LCA cameinto force. The LCA came into force on 1 August 2008 by which time Mr Barris hadcompleted the conduct that is now the subject of the Kayes' complaint. 15 Accordingly,the LCA can only apply to this conduct insofar as there are transitional provisionsauthorising a Standards Committee to adjudicate on conduct that pre-dated the LCA.[20] The LCA has transitional provisions to enable complaints to be brought aboutconduct the pre-dates the LCA.16 However, those provisions recognise that under theformer legislation the grounds for complaint against a lawyer were more limited.Understandably, lawyers cannot be held to performance standards that were not inexistence at the time they provided their services.[21] Section 350 of the LCA prohibits complaints and investigations being madeunder the Law Practitioners Act 1982 (LPA) after the commencement of s 350.15 Lawyers and Conveyancers Act 2006, s 2.16 Section 350.Section 351 relevantly provides when complaints may be made under the LCA aboutconduct before the commencement of s 351:(1) If a lawyer or former lawyer or employee or former employee of alawyer is alleged to have been guilty, before the commencement ofthis section, of conduct in respect of which proceedings of adisciplinary nature could have been commenced under the LawPractitioners Act 1982, a complaint about that conduct may bemade, after the commencement of this section, to the complaintsservice established under section 121(1) by the New ZealandLaw Society.(2) Despite subsection (1), no person is entitled to make under this Act—(a) a complaint that has been disposed of under the LawPractitioners Act 1982; or(b) a complaint in respect of—(i) conduct that occurred more than 6 years before thecommencement of this section; or(ii) regulated services that were delivered more than6 years before the commencement of this section; or(iii) a bill of costs that was rendered more than 6 yearsbefore the commencement of this section.(3) For the purposes of subsection (2), a complaint is treated as havingbeen disposed Of under the Law Practitioners Act 1982—(a) if a District Law Society, after considering the complaint,decided that the Society would not take any further steps oraction on it and the complainant did not, within 3 months afterthe date on which the complainant was notified of thedecision, refer to a Lay Observer, for examination, a writtenallegation concerning the District Law Society's treatment ofthe complaint; or(b) if a Lay Observer, after examining a written allegation madeby the complainant concerning the District Law Society'streatment of the complaint, has not indicated in his or herreport that he or she would be taking further steps or makingfurther inquiries with regard to the allegation; or(c) if the New Zealand Law Society, after reviewing—(i) the consideration given by the District Law Society tothe report or recommendation of the Lay Observer;and(ii) the action (if any) taken by the District Law Societyin consequence of the report or recommendation ofthe Lay Observer,—decided not to refer the report or recommendation back to theDistrict Law Society for further consideration; or(d) if any charge laid against a barrister and solicitor before eithera District Law Practitioners Disciplinary Tribunal or the NewZealand Law Practitioners Disciplinary Tribunal as a result ofthe complaint has been finally determined.[22] Accordingly, the Standards Committee and the LCRO needed to assess theKayes complaint against Mr Barris by first determining whether the conductcomplained of could have supported proceedings of a disciplinary nature that couldhave been commenced under the LPA. If satisfied there was such conduct only thencould the Standards Commission and the LCRO proceed to deal with the complaint.Had they found there was a proper basis to determine the complaint in terms of theLPA, it would then have been open to them, if so satisfied, to decide instead, pursuantto s 138 of the LCA, to take no action on the complaint.[23] Section 138 of the LCA permits a Standards Committee to take no action on acomplaint:(1) A Standards Committee may, in its discretion, decide to take no actionor, as the case may require, no further action, on any complaint if, inthe opinion of the Standards Committee,—(a) the length of time that has elapsed between the date when thesubject matter of the complaint arose and the date when thecomplaint was made is such that an investigation of thecomplaint is no longer practicable or desirable; or(b) the subject matter of the complaint is trivial; or(c) the complaint is frivolous or vexatious or is not made in goodfaith; or(d) the person alleged to be aggrieved does not desire that actionbe taken or, as the case may be, continued; or(e) the complainant does not have sufficient personal interest inthe subject matter of the complaint; or(f) there is in all the circumstances an adequate remedy or rightof appeal, other than the right to petition the House ofRepresentatives or to make a complaint to an Ombudsman,that it would be reasonable for the person aggrieved toexercise.(2) Despite anything in subsection (1), a Standards Committee may, in itsdiscretion, decide not to take any further action on a complaint if, inthe course of the investigation of the complaint, it appears to theStandards Committee that, having regard to all the circumstances ofthe case, any further action is unnecessary or inappropriate.Discussion[24] It is clear to me the decision-making process of the Standards Committee andthe LCRO did not proceed as it should have done.[25] Section 98 of the LPA provided for members of the public to make complaintsagainst practitioners. Under s 112 of the LPA if, after inquiring into a charge againsta practitioner, the New Zealand Disciplinary Tribunal was of the opinion thepractitioner:(a) has been guilty of misconduct in his professional capacity;(b) has been guilty of conduct unbecoming a barrister or solicitor; or(c) has been guilty of negligence or incompetence in his professionalcapacity, and the negligence or incompetence has been of such degreeor so frequent as to reflect on his fitness to practise as a barrister andsolicitor or as to tend to bring the profession into disrepute; or(d) the Tribunal could then make an order under s 112 imposing a disciplinarysanction on the practitioner.[26] The complaint the Kayes made was unhelpful because it did not identify s 112of the LPA as providing the grounds for the complaint. Indeed, it referred to currentbreaches of the Conduct and Client Care Rules under the LCA. Nevertheless, theStandards Committee should have realised it was facing a complaint that engageds 352 of the LCA, and from there reverted to s 112 of the LPA. The failure to takethis action means that the Kayes' complaint has never been considered in terms of thebases for upholding a charge under s 112 of the LPA.[27] The Kayes' complaint seems to me to go beyond the allegations of breach ofcontract and negligence that were made in the civil proceedings. The complaintinvolves allegations of Mr Barris acting in conflict of interest both for them and forthe mortgagee and otherwise breaching his ethical duties to them.[28] Although it dealt with the separate topic of witness immunity in the context ofdisciplinary proceeding I note that in Dentice v Valuers Registration Board17Eichelbaum CJ approved of the definition of disciplinary proceedings applied inMardon v Disciplinary Committee of the Pharmaceutical Society of New Zealand thatthey are proceedings sui generis rather than civil in nature.18[29] The judicial findings in the various civil proceedings have created an issueestoppel in relation to the various causes of action raised in those proceedings. Whatis not clear to me, however, is whether there remains other aspects of Mr Barris'conduct that requires scrutiny in terms of s 112 of the LPA.[30] The rule in Henderson v Henderson may not necessarily bar a complainthearing because it does not always follow that conduct that may support disciplinaryenquiry and action under s 112 of the LPA will also support a cause of action for suitin a court. 19 Thus, there may remain some aspect of Mr Barris' conduct that sits outsidethe civil proceedings and which would merit enquiry by the Standards Committee interms of s 112 of the LPA. Accordingly, it would be wrong to assume the findings andobiter comments in the various civil proceedings will bar a disciplinary proceeding.[31] I had considered whether it might be appropriate to deny relief, given relief injudicial review is discretionary. One basis for refusing to grant discretionary relief is17 Dentice v Valuers Registration Board [1992] 1 NZLR 720 (HC) at 724.18 Mardon v Disciplinary Committee of the Pharmaceutical Society of New Zealand HC WellingtonCP911/88, 29 March 1989.19 Henderson v Henderson (1843) 3 Hare 100, 67 ER 313. The rule in Henderson v Hendersonpermits parties from raising claims and defences in subsequent proceedings when they could andshould have been pursued in earlier proceedings but were not so pursued.that the outcome would be inevitable.20 In general, the issues the Kayes raise againstMr Barris seem to have already been ventilated in the civil proceedings. However,those proceedings were determined in the light of the legal principles applicable to thecauses of action raised therein. It cannot be assumed that a view through those lenseswould necessarily exclude findings of culpability under s 112 of the LPA. Untilassessment under s 112 of the LPA is undertaken this question must remain open.Further, in Chiu v Minister of Immigration the Court of Appeal held that Courts shouldbe slow to deny a remedy on the basis of perceived inevitability of outcome.21[32] For this sole reason I have decided to allow the judicial review. I do so on thebasis the Standards Committee and the LCRO have each failed to ask themselves thecorrect legal question, also they have acted in excess of jurisdiction by their failure toact in accordance with the transitional provisions provided in the LCA. Those failureshave also breached the Kayes' right to natural justice because their complaint againstMr Barris has not been adequately heard. Indeed, in law there has been no more thana purported hearing in which the decision-makers have failed to address the properlegal question.[33] I realise the power the Standards Committee has under s 138 of the LCA isbroad and that not all complaints will warrant investigation. However, I consider thatbefore the discretion in s 138 can be properly exercised the Standards Committee mustfirst have identified the relevant legislative regime applicable to a complaint and givensome thought to whether the complaint warrants engaging that regime. That did nothappen here. Nor can the subsequent review by LCRO cure the StandardsCommittee's error because that review focussed on whether the Standards Committeewas right to treat the complaint as made against Mr Barris and the other practitionersrather than as against the firm, NWM. The Committee's error regarding thejurisdictional basis of the complaints was never mentioned by the LCRO.20 See Wislang v Medical Practitioners Disciplinary Committee [1974] 1 NZLR 29 (SC).21 Chiu v Minister of Immigration [1994] 2 NZLR 541 (CA).Result[34] The decisions of the Standards Committee and the LCRO are set aside. Thecomplaints made to the Standards Committee are referred back to it for reconsiderationin light of the law as I have found it to be.[35] Mr Kaye was self-represented. Ordinarily this would lead to no award of costsdespite his success in this proceeding. I see no reason to depart from general principlein this respect. Accordingly, I consider costs should lie where they fall. However,Mr Kaye has 10 working days to file submissions on costs should he consider there tobe proper grounds to depart from general principle.Duffy J