ELLISON v NZ LAW SOCIETY HC HAM CIV-2011-419-000397

ELLISON v NZ LAW SOCIETY HC HAM CIV-2011-419-000397 15 February 2012IN THE HIGH COURT OF NEW ZEALANDHAMILTON REGISTRYCIV-2011-419-000397[2012] NZHC 161UNDER an application under s 30(3) of the Lawyersand Conveyancers Act 2006BETWEEN DANIEL RHYS ELLISONApplicantAND NEW ZEALAND LAW SOCIETYRespondentHearing: 3 August 2011 and 3 February 2012Counsel: A J Ryan for the ApplicantW C Pyke for the RespondentJudgment: 15 February 2012JUDGMENT OF DUFFY JThis judgment was delivered by Justice Duffyon 15 February 2012 at 3.45 pm, pursuant tor 11.5 of the High Court RulesRegistrar/Deputy RegistrarDate:Counsel: A J Ryan 388 Hautapu Road R D 1 Cambridge 3493 for the ApplicantW C Pyke P O Box 19271 Hamilton 3244 for the RespondentCopies To: K A Booth P O Box 345 (DX GB23003) Waikato Mail Centre Hamilton 3240New Zealand Law Society P O Box 5041 (DX SP20202) Lambton Quay Wellington 6145[1] The applicant, Daniel Ellison, is applying for leave to practise on his own account as a barrister and solicitor. The application is brought under s 30(3) of the Lawyers and Conveyancers Act 2006 (the Act). I understand that it is the first such application to come before this Court.[2] I am informed by counsel for the respondent, the New Zealand Law Society, that the application is seen as something of a test case under the new legislation. It is perhaps for this reason that the respondent has approached the application cautiously.[3] When the application was first called before me, it was opposed. This was an understandable stance for the respondent to take as, at that time, the applicant had not filed sufficient evidence to support the application. Under the Lawyers and Conveyancers Act (Lawyers: Practice Rules) Regulations 2008 (the Rules), the burden is on a practitioner to show that he or she is competent to practise on his or her own account. The hearing was adjourned to enable the applicant to file further evidence. He has now done so. Nonetheless, the respondent maintains its opposition to the application, but in circumstances where it now advises me that itdoes not ―press the opposition, and considers it is now a matter for the Court to determine whether leave should be granted. Thus, the respondent's stance is nowneutral, or something close to that.[4] The additional evidence that the applicant has filed means that the position now before me is quite different from when the application was first before me, and it is also different from the circumstances confronting the committee of the respondent, which earlier on rejected the application.[5] The relevant legislation is found in s 30 of the Act and rule 12 of the Rules.[6] Section 30(1) of the Act provides:No lawyer may commence practise on his or her own account, whether in partnership or otherwise, unless –(a) he or she –(i) meets the requirements with regard to both practical legal experience and suitability that are imposed by rules made under this Act; and(ii) meets any other criteria that are prescribed by rules made under this Act; or(b) he or she is granted by the High Court, on grounds set out in rules made under this Act, leave to practise on his or her own account.[7] Section 30(4) provides that the High Court, in deciding whether to grant an application for leave, must have regard to the matters that are specified in rules made under the Act in relation to such an application.[8] It is necessary, therefore, to turn to the material rule. Rule 12 sets out thecriteria for eligibility to practise on one's own account as a barrister and solicitor.The rule provides as follows:12(1) For the purposes of section 30(1)(a) of the Act, the requirements and other criteria that must be met before a lawyer may commence practice on his or her own account as a barrister and solicitor are –(a) that during the [five] years immediately before the date of commencing practice on his or her own account, the lawyer has had not less than three years legal experience in New Zealand; and(b) that the lawyer has received, during the three years immediately before the date of commencing practice on his or her own account, adequate (in the view of the Law Society) instruction and examination on the duties of lawyers under the Act, and any regulations and rules made under it, that relate to the receipt and handling of client money and the operation of lawyers' trust accounts; and(c) that the lawyer has satisfied the Law Society that he orshe is a suitable person to practise on his or her own account as a barrister and solicitor, having regard to –(i) the lawyer's legal experience; and(ii) how the lawyer intends to practise on his or her own account (for instance, in sole practice, as a partner in a law firm, or otherwise); and(iii) the fields of law in which the lawyer intends to practise; and(iv) any other matters that the Law Society considers are relevant.[9] The respondent accepts that the applicant meets the criteria of r 12(1)(a) and(b). In this regard, the applicant has approximately 14 years' experience of legalpractice in Ireland and New Zealand; about half of which has been in New Zealand.On 7 January 2009, he completed and passed the respondent's ―Flying Start examination, which covers the requirements for solicitors' receipt and handling ofclient funds and the maintenance of trust accounts, gaining a mark of 95 per cent. On 17 November 2009, he completed the respondent's Trust Account Supervisor course. On 2 February 2011, the respondent's Waikato-Bay of Plenty branch advised the respondent that the applicant had been interviewed and approved by a three person committee of that branch.[10] The applicant has regularly attended continuing legal education courses in the areas in which he practises, and will be practising, if he is permitted to practise on his own account.[11] In addition, after the hearing last year, in order to provide further support for his application and to advise the Court on how he proposes to practise, the applicantprepared a document headed ―Office Policies and Procedures Manual. This is animpressive document. Indeed, the respondent has accepted that a competent solicitor who carried out his or her practice in accordance with the manual could not be faulted. I concur with that view.[12] At the hearing this year, the respondent informed me that it accepts the applicant is of good character. In this regard, it is worthy of note that there have been no complaints against him to the respondent, or to the District Law Society, which under earlier legislation was responsible for carrying out the role presently undertaken by the respondent.[13] Given the applicant's years in practice, his good character, the steps he has taken to prepare himself for sole practice and the new evidence he has now provided, it might have been thought that this was enough for him to qualify under r 12. Nonetheless, the respondent remains concerned about the applicant's ability to meetthe requirements of r 12(1)(c), and so it has not formally withdrawn its opposition. However, it has not filed any evidence to oppose the additional evidence filed by theapplicant. Moreover, the respondent accepts that if a ―competent barrister and solicitor were to practise in accordance with the proposals set out in the applicant'snew evidence, there would be no issue regarding his or her suitability to practise on his or her own account.[14] From the respondent's perspective, however, there seems to be somethingabout the applicant which causes a lingering concern about his suitability to practise on his own account. When the respondent was pressed to identify the basis for this concern, the best it could do was to refer me to the earlier affidavits it had filed last year and to answers the applicant gave under cross-examination at the hearing last year. It is necessary, therefore, to examine this material closely in relation to all the evidence that is now available to me.[15] The affidavit evidence comprises evidence from two former employers of the applicant. Brian Braatvedt employed the applicant from 4 October to 23 December 2010 for a trial period of 90 days. Mr Braatvedt completed a reference for the applicant in which he accepted the applicant was a fit and proper person to practise on his own account. However, Mr Braatvedt has subsequently in his affidavitqualified this view by stating that he thinks the applicant's performance falls short ina few areas and that he would benefit from continuing legal education. The specific matters of concern that Mr Braatvedt identified were that:(i) The applicant failed to check and completely amend template documents so that in one case involving a will, he failed to ensure that the gender of the will-maker on the will was correct.(ii) The applicant was unable to prepare an accurate settlement statement on a conveyancing transaction, despite three attempts. It seems that his arithmetical calculations were in error, as Mr Braatvedt has continued on his affidavit to say:―When I raised this with him, he told me that he'd always relied on legal support staff to do the calculations.(iii) After the applicant left his practice, clients who were to undertake a property purchase in a related party transaction (to avoid a mortgagee sale) saw Mr Braatvedt about their instructions to the applicant. It is said that the applicant had not given adequate advice to the parties, in particular regarding the requirement for an independent valuation, which is said to be necessary for a number of reasons, such as that in the case of the vendor becoming insolvent, the transaction might be challenged by the Official Assignee. Nor had the applicantadvised the mortgagee that Mr Braatvedt's firm acted for both parties.(iv) After the applicant left Mr Braatvedt's practice, Mr Braatvedtnoted that the applicant had not kept adequate file notes of instructions and conferences with clients, and at times hadused other clients' discarded documents as notepaper,potentially compromising client confidentiality.[16] Joanna Watson employed the applicant for three years between October 2005 and October 2008. Ms Watson was of the view that on the basis of her experience as his employer when he left in 2008, he was not yet competent to work on his own and/or operate a trust account without support and supervision. Her affidavit goes on to say that the applicant had since worked for three firms over a period of more than two years and she was therefore unable to comment on his current competency as she no doubt envisaged that he would have gained considerable experience since leaving her employment. I consider this was a sensible reservation for Ms Watson to make. To it could be added the fact that when the applicant worked for her, he hadnot completed the ―Flying Start or ―Trust Account Supervisor courses run by therespondent.[17] In her affidavit, Ms Watson says that when the applicant left her employment in October 2008, for the most part his work was satisfactory. Her qualified view that he would not have the competence to practise on his own account without supervision was based on the following:(i) She described his drafting skills as poor. She said she worked with precedent letters for standard transactions but those letters needed to be modified to meet the exact circumstances of each transaction and, on occasion, precedent letters were set out with the incorrect details.(ii) She said he did not follow procedures. As an example, she said he failed on occasions to obtain photographic identification for Land Transfer Office registrations, and was audited by Landonline for that. She said he often forgot to do a trust account reporting statement to clients and that general office procedures were regularly ignored.(iii) She described him as being disorganised in his file management. She said on many occasions when he saw clients, he put no attendance notes on the file and there was norecord of the clients' instructions or the advice given.Sometimes copies of letters were filed but, on closer inspection, it was shown that the original letter had not been sent out. Thus, it was unclear from looking at the file exactly what had been done and what communications there had actually been with the client.(iv) She described the applicant's attention to detail as lacking, and said sometimes it appeared that very little thought went into what he was doing. She gave an example in June 2008 when he received instructions from a bank to prepare a guarantee for company directors to guarantee borrowing by the client company. She said it was only a matter of filling in the blankson the guarantee document to show the company as the bank'scustomer, and the directors as the guarantors. However, the applicant completed the company name as both customer and guarantor. He acknowledged the mistake, but two weeks later he did exactly the same thing in respect of another guarantee.(v) Another example she gave was that just before he left her employment, prior to settling a residential transaction, he obtained a guaranteed title search. The search was three pages long and this was indicated on each page, but he omitted tocheck page three, which revealed a ―pending dealingdeclaring the land to be Mäori land.(vi) She also said she received several complaints from clients who refused to work with the applicant; some, because they felt he was rude to them, and others, because they thought he did not seem to know what he was doing.[18] The applicant responded to Ms Watson's evidence by providing a bettercontext for some of the errors and by noting that on more than one occasion, Ms Watson went on holiday and left him with the day to day control of her practice, which suggests that she had sufficient confidence in his abilities to handle this responsibility.[19] Furthermore, whilst Ms Watson had the identified concerns about the applicant, she made him an associate of the firm, which again demonstrates that she had some confidence in his ability to perform in this role. Ms Watson said she did this to give him a feeling of belonging and to encourage him to stay, as she could not offer him the salary increase that he was seeking, and to give clients confidence in his ability. Despite her attempts to play down the importance of the appointment in terms of how it reflected on the applicant's competency, I consider that had the applicant posed a risk to Ms Watson's practice and the clients it serviced, she wouldnot have appointed him an associate. The advantages that she has outlined for this appointment could not outweigh any serious risk that the applicant might have posed had he lacked the competency to perform at this level.[20] Ms Watson also confirmed that she took holidays whilst the applicant was employed by her. She qualified the importance of this by saying there was another local practitioner who held her power of attorney and at the time she employed a competent and very experienced legal secretary. Whilst that may be so, once again Ihave difficulty accepting that a responsible competent practitioner like Ms Watson would be prepared to leave the day to day control of her practice in the hands of someone who posed a risk to clients.[21] Ms Watson went on to say that when the applicant came to work for her in 2005, his experience in relation to the areas in which she practised was limited; but that during the time he worked for her, he was mainly engaged in straightforward residential conveyancing, at which he was relatively competent by the end of three years. She qualified that concession, however, by saying he did have the support from a secretary, and there were still the issues that I have already outlined.[22] The evidence from Mr Braatvedt and from Ms Watson shows that the applicant has in the course of his years of practice made mistakes. Regarding the mistakes identified by Ms Watson, it seems to me that she has sensibly recognised that those mistakes happened some time ago. I consider they need to be placed, therefore, in their historical context. It is likely that most practitioners in the course of working in a new job in a new area of law will from time to time make mistakes. There are few practitioners who could truly say their performance has always been without error.[23] The concerns expressed by Mr Braatvedt are more of a problem for the applicant because these relate to the quality of the applicant's performance in thelatter part of 2010. The mistakes Mr Braatvedt has identified are of concern, but whilst they reflect a lack of attention to detail, they do not seem to me to be so serious that they would preclude someone in the applicant's circumstances fromapproval to practise on his own account. Against these concerns, there is other evidence that favours a grant of approval under r 12. I refer here to the matters generally referred to in [11] above. Moreover, I consider that the proceduresprovided in the applicant's ―Office Policies and Procedures Manual will go a longway for him to avoid making the type of errors identified by Mr Braatvedt. Giventhe applicant's good character (which is not in doubt), I have no reason to doubt his willingness to follow the directions contained in this manual. His legal qualifications and years of experience lead me to conclude that if he is open tofollowing the procedures set out in this manual, he will perform competently in sole practice.[24] The applicant has the support of Mark Milroy, a barrister and solicitor of Hamilton, who has been in practice for over 25 years. He is prepared to make himself available to the applicant as a mentor and to offer him advice as regards establishing himself as a sole practitioner. Mr Milroy deposes that the applicant practises in the areas of property, estates and commercial law, and that Mr Milroy has found the applicant to be professional, able and competent in these areas of practice. The applicant is also described as honest, showing integrity and being hard working. Mr Milroy has filed a second affidavit in which he refers to the applicant working for his firm. This has given Mr Milroy the opportunity to oversee the applicant, and caused Mr Milroy to find the applicant to be professional in his dealing with clients and other practitioners. He is said to have produced work that is proficient for a solicitor of his experience and he has the requisite legal skills to operate as a sole practitioner.[25] Mr Milroy says he has read the applicant's ―Office Policies and Procedures Manual. It is apparent to Mr Milroy, as it is to me, that the applicant has put a lot ofthought into establishing the systems and procedures he needs in order to create a viable functional practice. Mr Milroy affirms his earlier indication that he is prepared to assist the applicant in an advisory capacity, should he need consultation.[26] The applicant also now advises that he intends to operate a trust account using the Auckland District Law Society's Trust Accounting Bureau to manage thetrust account. He says the bureau has offered him sensible advice and they have provided him with an information pack on how they can help his office run efficiently and profitably by supporting him and keeping his trust account balancedin accordance with the Law Society's auditing requirements. This is a further step that should alleviate the respondent's concerns about how the applicant might run histrust account if permitted to practise as a sole practitioner.[27] At the hearing last year, one of the concerns of the respondent that emergedduring the course of the hearing was the applicant's intention to practise without theassistance of a secretary. There was some argument about whether a solicitor could competently function without a secretary. The applicant has now filed affidavits from two solicitors practising as sole practitioners. They do not know and are independent of the applicant. One of them, Ms Christine Masters, advises that she has been able to run her practice since 1 April 2004 without any support staff. She says she has access to the advice and expertise of a number of experienced practitioners, and has employed part-time help when required. Her work is in the area of property sales, purchases, wills, trusts, estates, powers of attorney, some commercial conveyancing and some relationship property matters. She said when the practice generated sufficient funds to employ a full-time staff member, she would employ another solicitor, rather than an administrative support person. This was said to be a conscious choice at the time because it enabled her to be able to take time off, while knowing that clients were being taken care of. She sets out in her affidavit how she is able to function as a sole practitioner without support staff. The absence of any challenge to this evidence causes me to form the view that with the availability of current technology, it is now quite possible for solicitors to practise on their own account as sole practitioners without the need for support staff.[28] Whilst another solicitor, James Burkett, has from time to time used support staff, he is a sole practitioner who has commented on how impressed he is by thescope of the applicant's ―Office Policies and Procedures Manual and notes thatmany of the procedures are future-focused and aimed at growth in his practice overtime. Mr Burkett has concluded that from what he has seen of the applicant'sintentions for running a practice, the applicant should be able to competently operate a practice in the manner set out in his manual.[29] When I weigh the additional, uncontradicted, evidence of the applicant and his original evidence against the evidence of the respondent, I find there is enough in the evidence supporting the applicant to satisfy me that he should be permitted to practise on his own account. My impression is that the applicant has made reasonable, sound and well intentioned efforts to address the shortcomings that his former employers have identified.[30] There remains the respondent's reliance on the cross-examination of theapplicant at last year's hearing. Much of the focus of that cross-examination was on how the applicant would run his practice. The difficulty with this evidence is that atlast year's hearing, the applicant had not, in his own evidence, given a clear outlineof how he intended to practise. This resulted in the respondent cross-examining him on the various steps he would take to run his practice. I gained the impression fromhearing the applicant's evidence that his answers were often being formulated on the spot to deal with the respondent's questions. This is not to suggest that I thought theapplicant was thinking about these issues for the first time, or to be critical of the applicant in any way. But I did have the impression that it was the first time that he had needed to express what he intended to do. I think many people, who when under cross-examination found themselves subjected to a series of specific questions about how they would run a legal practice, might have difficulty in clearly expressing the various steps they intended to take. Any omissions in that regard that were revealed by the cross-examination have now been clarified by the additional evidence theapplicant has provided, including his ―Office Policies and Procedures Manual.[31] Whilst the respondent said it relied on the cross-examination of the applicant, it did not specifically direct me to any particular passage of the cross-examination which it considered fully supported its opposition to the application. My overall reading of the cross-examination has caused me to conclude that any concerns about the applicant that might arise from it have been overtaken by the new evidence he has filed. Indeed, looking at the various steps the applicant has now taken, it is hard to see what else he might have done to satisfy the requirements of r 12(1)(c). To find that, as matters stand, the applicant still fell short of r 12(1)(c) would be to impose, in my view, so high a threshold that many competent practitioners would find it hard to cross.[32] There is a new issue that has arisen this year, which relates to the circumstances in which the applicant is currently working. As matters stand, he is working for a Tauranga firm, Jackson Reeves. They have opened a branch office in Hamilton, which is being operated by the applicant. The respondent contends that the applicant is not, in fact, working as an employee of Jackson Reeves, but is operating as an independent contractor engaged by that firm and, consequently, hiscurrent working arrangements offend the requirements of the Act. I pursued with the respondent whether it relied on this alleged state of affairs as further evidencing incompetency on the applicant's part, or even an intentional design to circumvent therequirements of the Act. The respondent does not see the present work circumstances of the applicant as evidencing any dishonest intent to avoid the employment strictures the Act now places on him. When it came to consideringwhat insight the present employment circumstances might give on the applicant'sunderstanding of the relevant law and in that way his competency as a lawyer, the respondent accepted that the area of employment law covering whether someone is an employee or an independent contractor is complicated. The respondent did not attempt to advance an argument that insofar as the present working arrangementsmight reveal an error of law on the applicant's part, this could be taken into account when considering his competency to act as a sole practitioner. Nor did the respondent provide full argument to support its concerns that the presentemployment arrangements offend against the Act's requirements. I propose,therefore, to put any issue regarding the present employment circumstances and whether they offend against the Act to the side.[33] In support of its opposition, the respondent drew my attention to a number of cases, including Re Maguire M161/1000 HC Wellington M161/1000, 28 August 2000. The respondent submitted that there were similarities between the previous provision in s 55(6) of the Law Practitioners Act 1982 and r 12(1)(c). Section 55(6) provided:55 Restriction on right of practitioner to commence private practice(6) The matters to which the District Council or the Court shall have regard for the purposes of subsection (2)(b) or subsection (5) of this section are—(a) The applicant's age;(b) His experience;(c) Whether or not he intends to commence practice as a member of a firm;(d) The fields in which he intends to practise;(e) Such other matters as the District Council or the Court thinks fit.[34] Mr Maguire wanted to practise on his own account. The Wellington District Law Society (WDLS) objected to him practising on his own account, but did not object to him practising in partnership or as an employee.[35] Whilst the respondent sought to advance the argument that there were similarities between the present case and that of Maguire, I consider there are clear distinctions.[36] In the case of Mr Maguire, he had not passed his trust account exams. Mr Maguire opposed his former employers in Taupo from releasing their file on his employment to the WDLS or the Court. It seems that there were a number of issues between Mr Maguire and his former employer, which suggested that Mr Maguire had not given a completely candid account of events. Aspects of Mr Maguire'sunsatisfactory performance as an employee included him creating an emergency situation regarding a client of his employers, who was subject to deportation proceedings. The Judge, who had the benefit of reading Mr Maguire's employment file, concluded that his employers' dissatisfaction with him and the details of their employment dispute demonstrated to the Judge (at [13]): ―An almost obsessiveearnestness and a somewhat strong headed excitable individual.[37] The Judge considered that one of the material errors of judgment that Mr Maguire had demonstrated was the contest he had put up over whether his employment file should be revealed to the WDLS. In the present case, the applicant has been open; he has accepted some of the criticism of his past performance. He has sought to put other aspects of it in context. Most importantly, he has responded positively to criticisms of his work by developing means to reduce the further occurrence of poor performance. His readiness to accept criticism and the need for improvement gives me confidence that he is willing to take the steps necessary to improve his performance. In this regard, his attitude is markedly different from that of Mr Maguire.[38] Mr Maguire had also not helped his case by bringing an interlocutory application before the court for orders that the WDLS be denied the right to appear. The ground advanced was that the notice of objection failed to comply with therequirements of the High Court Rules. The application was brought by Mr Maguire. His acting for himself did not help advance his application. The view the Judge ultimately formed of Mr Maguire is best expressed at [17] of the judgment:After some discussion with him at the bar, I suggested he reflect on that and he had the good sense to take advice of an experienced solicitor in Wellington, and withdrew his objection and did not pursue his interlocutory application which was apparently to deprive the Society of the right to be heard, or in any event limiting the evidence which could be placed before the Court. How a solicitor imagined that his professional employment file would be excluded by the Court in an assessment as to whether he was a fit and proper person to practice on his own account, is beyond me. It shows a marked degree of lack of judgment. So did his attempt to obtain orders that the Council not be heard. See s 55(4) of the Law Practitioners Act 1982.This provision expressly required that a copy of any application to the Court was to be served on the Secretary of the District Law Society for the district in which the application to the Court is made and that Society (emphasis) shall be entitled to be heard on the application.[39] There is a marked difference between the way in which Mr Maguire conducted himself, and the conduct of the applicant in this case. When it comes to the omission to file all the essential evidence to support the application last year, I consider that since the applicant has always been represented, the omission is not something that can be held against him. In recognising this, I do not intend any criticism of his legal advisors.[40] The respondent contends that the application must be assessed in the context of the purposes of the Act, these being particularly:(i) To maintain public confidence in the provision of legal services and conveyancing services; and(ii) To protect the consumers of legal services and conveyancing services.[41] The respondent has referred to these purposes in its affidavit evidence and impermissibly offered opinion evidence on how the inclusion of these purposes inthe Act set it apart from the previous legislation. I propose to treat this inadmissible opinion evidence as a submission.[42] I consider that the purposes that are now expressed in the Act were earlier treated as implied relevant considerations for applications brought under the earlier legislation. Rather than lift the standard of consumer protection, I consider that the present Act expressly provides for what, in relation to provision of legal services, was implicitly contained in the former legislation.[43] When I take these purposes into account, I am left with the view that any errors the applicant has demonstrated in the past are not likely to be repeated. His whole approach to the application has been markedly different from that of Mr Maguire to his. The applicant has gone to great trouble to provide as much detail as he can regarding how he intends to practise. He has provided me with evidence to show that it is possible to practise as a sole practitioner without support staff, and he has provided me with evidence from practitioners who know him that they consider him to be competent to practise on his own behalf. I am satisfied that the applicant is now at a stage where he is a suitable and competent person to practise on his own account.[44] Despite the arguments of the respondent, I am not satisfied that this is a test case. The outcome turns very much on the facts. The problem for the applicant initially was that his application did not set out in any great detail how he proposed to practise; thus, he had trouble meeting the requirements of r 12(1)(c). When the hearing resumed, the applicant had provided the required information. Had the full extent of his supporting material been available before the first hearing, or even at an earlier stage, to the respondent when its approval was first sought, I doubt that he would have encountered the opposition that the respondent has displayed. Therespondent's change of stance by no longer ―pressing the opposition supports thisview.Duffy J