McPHEDRAN v NEW ZEALAND INSTITUTE OF CHARTERED ACCOUNTANTS [2020] NZHC 1526 [1 July 2020]

McPHEDRAN v NEW ZEALAND INSTITUTE OF CHARTERED ACCOUNTANTS [2020] NZHC 1526[1 July 2020]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYI TE KŌTI MATUA O AOTEAROATE WHANGANUI-A-TARA ROHECIV-2019-485-240[2020] NZHC 1526IN THE MATTER OF a judicial review of decisions made by thedisciplinary bodies of the New ZealandInstitute of Chartered AccountantsBETWEEN DAVID WILLIAM McPHEDRANPlaintiffAND NEW ZEALAND INSTITUTE OFCHARTERED ACCOUNTANTSDefendantCIV-2019-485-779BETWEEN NEW ZEALAND INSTITUTE OFCHARTERED ACCOUNTANTSPlaintiffAND DAVID WILLIAM McPHEDRANDefendantHearing: 11 June 2020Appearances: Plaintiff in person, with M Laws, McKenzie friend (via VMR)S A Barker and O C Gascoigne for defendantJudgment: 1 July 2020Reissued: 30 July 2020RESERVED JUDGMENT OF DOBSON JContentsBackground [1]The facts [3]Scope of grounds of challenge [26]The position of the firm [32]The scope of the Appeals Council's jurisdiction [41]The surrogacy principle [54]Irremediable or in-compensable loss suffered? [62]Mr McPhedran's state of mental health in August 2018 [66]Summary of conclusions on pleaded grounds for judicial review [78]Jurisdiction of the Appeals Council [78]Unreasonableness [79]Relevant/irrelevant considerations [83]Surrogacy principle [87]NZICA summary judgment application [90]Costs [92]Background[1] This application for judicial review is brought by the plaintiff (Mr McPhedran)to challenge the outcome of an appeal pursued by him to the Appeals Council of thedefendant (NZICA) in which he unsuccessfully sought to reverse the impact ofdecisions by the NZICA Disciplinary Tribunal (the Tribunal). The orders made by theTribunal were for Mr McPhedran's name to be removed from the register of membersof NZICA, for publication of that outcome and for costs.[2] At the time of the relevant complaints against Mr McPhedran to NZICA, hewas running his chartered accountancy practice in Dunedin under the style of YourBusiness Team Limited (YBT). Mr McPhedran also operated an advisory andmentoring business, trading as 10X, with a business partner, Mr Carl Spruyt, who wasnot a chartered accountant. The two businesses were operated from the same premisesand used the same staff. Evidence was given to the Tribunal analysing the way thebusinesses operated. The Tribunal treated them as being insufficiently separate ordistinct to have the 10X business fall outside the practice of YBT, so that thesupervision and responsibility under NZICA's code of ethics extended to the conductof 10X's business.The facts[3] In February 2017, Mr McPhedran had a serious accident at his home and wassubsequently admitted to the Burwood spinal unit for treatment and recovery for somesix weeks. He was left with physical and mental health difficulties, some of whichhave persisted. Mr McPhedran returned to work in May 2017 but, by his own currentperception, he was not in a fit state to do so.[4] Between May and September 2017, a number of complaints were lodged withNZICA against Mr McPhedran by two of his clients, a Mr and Mrs Bell, and aMr Roper. In both cases, part of Mr McPhedran's businesses had taken shareholdinginterests in companies operated by those clients and had instigated steps in the conductof those clients' businesses that were the subject of the complaints againstMr McPhedran. The case against him was that the conduct complained of revealedstark conflicts of interest, and amounted to one or more of breaches of the NZICAcode of ethics, negligence or incompetence in a professional capacity to such a degreeand/or frequency as to bring the profession into disrepute, conduct unbecoming of anaccountant and ultimately misconduct in a professional capacity.[5] Mr McPhedran dealt with the initial investigative stage conducted by NZICA'sprofessional conduct committee (PCC) on his own behalf. However, when the PCCserved him with notice of charges, Mr McPhedran notified his insurers who appointeda firm of solicitors (the firm) to represent him in July 2018.1[6] The firm referred the details of the charges against Mr McPhedran to anindependent accounting expert, Mr Ruscoe, seeking advice as to the prospects fordefending the charges. On 14 August 2018, the firm advised Mr McPhedran thatMr Ruscoe's opinion was that he was guilty of some of the charges that had been madeand that he should accept that advice and plead guilty to them. On the same day,Mr McPhedran accepted that advice and indicated that he would indeed plead guilty.The following day, the firm made a formal response on Mr McPhedran's behalf,1 References to the name and location of the firm have been removed from this judgment pursuantto an order for name suppression made on 30 July 2020.pleading guilty to a number of the particulars of the charges and admitting the fourthand least serious charge, namely breach of the NZICA code of ethics.[7] On 20 August 2018, in anticipation of the hearing before the Tribunal set for22 and 23 August 2018, the firm advised counsel for the PCC that Mr McPhedran wasmedically unfit to travel, that an adjournment was not required to enable him to appearsubsequently and that giving evidence through a telephone or video conference wouldnot assist. The Tribunal was advised of this information the next day.[8] On 21 August 2018, the firm filed statutory declarations with the Tribunal thathad been completed by Mr McPhedran, his business partner, Mr Spruyt, and Mr ChrisBurke, a Dunedin solicitor who had acted for Mr Roper in relation to businesstransactions, some aspects of which were the subject of complaints made by Mr Roperto NZICA about Mr McPhedran's conduct.[9] At the hearing on 22 and 23 August 2018, the firm tendered an unsigned briefof evidence on behalf of Mr McPhedran, as well as the statutory declarationscompleted by him and Messrs Spruyt and Burke. Given Mr McPhedran's non-availability for cross-examination, the Tribunal declined to read the unsigned brief ofevidence. Counsel for the PCC objected to any reliance on the statutory declarationsbecause those providing them were unavailable for cross-examination. The objectionwas resolved by counsel agreeing to redact passages that were inconsistent with thestatements of evidence by complainants or other witnesses on their behalf. Theirversions of events were able to be tested because they were available for cross-examination. The firm accepted that what remained of the redacted statutorydeclarations would not be relied on to contest liability, but would be relied on insubmissions seeking to mitigate penalty.[10] On 23 August 2018, the Tribunal determined that the particulars that had beenadmitted on behalf of Mr McPhedran, and a number of disputed particulars, wereproven and that all charges were proven. The Tribunal reserved its decision onpenalties and issued its formal written determination on both liability and penalties on8 November 2018. The Tribunal found that Mr McPhedran had been dishonest, haddenigrated a client and showed little insight into the seriousness of the misconduct. Itrejected submissions that a lesser penalty than removal of his name from the Registerwould be sufficient.[11] On 22 November 2018, the firm filed a notice of appeal on behalf ofMr McPhedran. The notice sought to appeal the orders that had been imposed by theTribunal, but did not challenge findings as to liability. An application was then madeto the Appeals Council to allow Mr McPhedran to adduce new evidence on the appeal.The proposed evidence would address two topics: first, email correspondence relatingto the removal of Mr Roper as a director of a company previously operated by him inwhich Mr McPhedran's interests had become involved, and secondly, a psychiatricreport addressing Mr McPhedran's state of mental health.[12] The Appeals Council ruled that it would allow evidence relating to the removalof Mr Roper as a director, but declined leave to adduce the evidence relating to thestate of Mr McPhedran's mental health. The Appeals Council determined that suchevidence was not "fresh" in the requisite sense under the Evidence Act 2006 and inany event the pressures on Mr McPhedran's mental health appeared to be attributableto concerns about the possible effect of publication of the determination.[13] At the end of February or in early March 2019, the firm ceased to act forMr McPhedran. He was briefly represented by another lawyer until 1 April 2019when that lawyer also ceased to act. Mr McPhedran then appointed a lay advocate,Mr Michael Laws, to represent him in the Appeals Council proceedings.[14] On 9 April 2019, Mr Laws applied to add seven further grounds to thosepreviously advanced on the appeal. Four of the proposed grounds raised additionalcriticisms of the procedure that had been followed by the Tribunal and three raisedalleged inadequacies in the firm's representation of Mr McPhedran before theTribunal.[15] On 11 April 2019, the Appeals Council allowed the four new proceduralgrounds, but declined to allow the three grounds raising alleged inadequacies in legalrepresentation before the Tribunal.[16] The Appeals Council hearing was due to start on 16 April 2019, but givenMr Laws' recent involvement, the Appeals Council adjourned its hearing to allow himfurther time.[17] On 1 May 2019, the Appeals Council was warned by Mr Laws that judicialreview proceedings were to be commenced, including an application for interim ordersto stay the appeal proceeding. NZICA advised Mr Laws that the appeal scheduled for7 and 8 May 2019 would proceed in the absence of any orders from the Courtpreventing it doing so.[18] On 6 May 2019, Mr McPhedran commenced the present proceedings,including filing a without notice application for interim injunction to stop the AppealsCouncil's hearing proceeding the following day. The application was dismissed byGrice J, who provided her reasons in a judgment issued on 7 May 2019.2[19] At 4.51 pm on 6 May 2019, Mr Laws advised the Appeals Council by emailthat, given the commencement of this proceeding "Mr McPhedran will not beattending the appeal hearing tomorrow, nor his counsel". At 8.05 am the followingmorning, Mr Laws confirmed that the application for an interim order had beendeclined and submitted that it would be inappropriate to proceed except on theprocedural issues that had been raised. The hearing was in Auckland, requiringMr Laws to fly from Dunedin. The Appeals Council agreed to his request to defer thestart time to 1.00 pm that day.[20] The Appeals Council hearing proceeded on 7 and 8 May 2019. Mr McPhedrandid not attend but was represented by Mr Laws. Having been given leave to adducefurther evidence, the Appeals Council advised Mr Laws that witnesses producingfurther evidence would need to be present, and be available for cross-examination.Mr Laws confirmed that Mr McPhedran had decided not to call those witnesses, sothe arguments that would have depended on the further evidence were not pursued.[21] At the conclusion of the hearing, the chair of the Appeals Council,Mr Taylor QC, sought to clarify with Mr Laws why Mr McPhedran and his proposed2 McPhedran v New Zealand Institute of Chartered Accountants [2019] NZHC 976.witnesses had not attended at the hearing, and specifically whether their non-appearance was because they had anticipated the High Court making interim orderson the application that had been pursued on 6 May 2019. Mr Laws advised theAppeals Council:3My instructions were that were Mr McPhedran in particular to turn up herewith the judgments that had already been made by the Appeals Council as tothe kind of evidence that he might be able to offer, he would not receive a fairopportunity to answer the charges or to advance his submissions.[22] In advancing submissions for Mr McPhedran, Mr Laws sought to advancecriticisms of the firm's handling of Mr McPhedran's case before the Tribunal. TheAppeals Council refused to hear argument on that matter.[23] On 5 July 2019, the Appeals Council dismissed the majority of matters that hadbeen argued for Mr McPhedran. It did make a finding in his favour that the Tribunalhad made an unjustified finding of dishonesty on Mr McPhedran's part in his dealingswith Mr Roper and overruled that aspect of the Tribunal's findings. Havingundertaken a thorough review of all the evidence, including the further evidence andcross-examination of Mr Roper, the Appeals Council upheld the findings as to liabilityfor the disciplinary charges. When considering the appropriate penalty, itcharacterised the conduct in Mr McPhedran's dealings with both complainants in thefollowing terms:4201. In both cases, the member and his associates proposed taking anequity interest in the businesses of the clients and had agreed to payfor that interest. In both instances invoices appear to have been issuedfor which there was no written authority or agreement, for amountswhich covered at least the proposed purchase price of the shares to beoffered. In both cases, payment was never made for the shares buttransfers of the shares to Mr McPhedran or related interests wasachieved at the instigation of Mr McPhedran or Mr Spruyt (for whomMr McPhedran was responsible). Similarly both Mr McPhedran andMr Spruyt were appointed as directors of their client companies.202. In both cases, when Mr McPhedran and his clients fell out,Mr McPhedran used his/YBT's purported ownership of shares in thebusiness to further his own interests and to deliberately act against theinterests of his clients.3 Transcript of Appeals Council hearing at 177.4 Decision of Appeals Council, 5 July 2019.[24] The Appeals Council endorsed the finding of the Tribunal as toMr McPhedran's dealings with the Bell complainants as being "unjustified, self-serving and totally unprofessional". The Appeals Council found Mr McPhedran'sconduct in relation to Mr Roper to be "disgraceful".5[25] The Appeals Council decided that overturning the dishonesty finding did notwarrant revisiting the penalties that had been decided upon by the Tribunal. Itconcluded that removal as a member of the Institute was the only appropriate penalty.6Scope of grounds of challenge[26] Mr McPhedran's initial statement of claim filed on 6 May 2019 provided adiscursive recitation of his dealings with NZICA through the various stages up to thatpoint. The complaint in respect of the Appeals Council was its April 2019 refusal toallow additional grounds of appeal that would traverse the alleged errors by the firm.[27] An amended statement of claim was filed on 23 July 2019, which updated thenarrative to include claims relating to the hearing before, and decision of, the AppealsCouncil. The relief sought was an order setting aside the Tribunal's and AppealsCouncil's decisions and for Mr McPhedran to be afforded a fresh opportunity todefend himself against the charges alleged by the PCC. He also sought orders that thecosts awards against him by the Tribunal and the Appeals Council be set aside.[28] For a period in early 2020, Mr McPhedran was represented in the proceedingby Alistair Logan, solicitor of Dunedin. He filed a second amended statement of claimon Mr McPhedran's behalf on 8 April 2020, which focused the issues more narrowlythan the previous pleadings. It alleged the Appeals Council had made an error of lawin not recognising and allowing counsel incompetence as a ground of appeal, and thatthe decisions were flawed because of the failure to have regard to relevantconsiderations, and taking irrelevant considerations into account. The relief soughtwas a setting aside of the various decisions of the Appeals Council and an orderdirecting a re-hearing before the Appeals Council on terms that would allow, as a5 Decision of Appeals Council, above n 4, at [203], [204].6 Decision of Appeals Council, above n 4, at [220].ground of appeal, the issue of inadequacies in legal representation that allegedlyresulted in a miscarriage of justice.[29] Shortly after the filing of the second amended statement of claim,Mr McPhedran dispensed with Mr Logan's services and sought leave for his case tobe argued on his behalf by Mr Laws as a McKenzie friend. The affidavits in supportof the application for judicial review included one completed by Mr Laws, whichcontained a relatively detailed narrative of his presentation of Mr McPhedran's appealbefore the Appeals Council. Mr McPhedran was declined leave for Mr Laws toparticipate in the hearing beyond the conventional level of support provided by aMcKenzie friend.7[30] A synopsis filed by Mr McPhedran in advance of the hearing focused hiscriticisms on the inadequacies of legal representation before the Tribunal by the firm.He invited analogy with the ground of counsel incompetence raised in criminalappeals, submitting that the same ground should be available in judicial review ofdisciplinary proceedings. Mr McPhedran submitted that he had not had a fair hearingbecause of the firm's inadequacies and because of the exceptional pressure on him toaccept their advice in pleading guilty to some charges, caused in material part by themental health difficulties he was encountering at the time.[31] Understandably, Mr Barker submitted for NZICA before me that it should notbe required to answer wider criticisms of it that arose outside the pleaded grounds forthe relief sought in the second amended statement of claim.The position of the firm[32] The primary basis for Mr McPhedran's complaints that he has not been givena fair hearing arises out of his criticisms of the conduct of the firm. Those complaints(referred to as the counsel incompetence complaints) include:7 After other judges had issued minutes defining the conventional limits on involvement by aMcKenzie friend and declining leave for a wider role for Mr Laws, I raised the prospect ofMr Logan participating as court-appointed counsel. Mr McPhedran signalled his preference to berepresented by Mr Laws.• they obtained an opinion from an independent accountant (Mr Ruscoe) onthe prospects of defending the charges, having given Mr Ruscoe only thecomplainants' version of events, when Mr McPhedran contemplated theanswers on factual matters reflected in statutory declarations by him andsupporters would also have been taken into account;• Mr McPhedran was put under extreme time pressure to consider and agreeto the firm's advice that he should plead guilty to the majority of theparticulars in the charges;• the firm should have appreciated the limitations on his mental health at thetime, which meant that he was not fit to make a fully informed decision;• the firm failed to tell him of the prospect of having the Tribunal hearingadjourned and misrepresented to him that there was no feasible means ofhis appearing from a distance;• the firm failed to advise him of the risk of adverse consequences that mightarise from his not appearing;• the firm agreed to material redactions from the statutory declarationscompleted by Messrs McPhedran, Spruyt and Burke, without his approvaland without telling him it had been done.[33] More generally, Mr McPhedran criticised the context in which his relationshipwith the firm was maintained, with the firm purporting to represent his interests butbeing paid by, and ultimately responsible to, his professional indemnifiers.[34] During what turned out to be a preliminary hearing on 16 April 2019, Mr Lawshad made a further attempt to persuade the Appeals Council to allow counselincompetence as an issue within the appeal. During Mr Laws' exchanges with thechair of the Appeals Council about this prospect, Mr Taylor indicated that anyconsideration of the firm's conduct would necessarily involve Mr McPhedranproviding a waiver of the legal privilege attaching to all communications betweenthem, including the prospect of the firm having dialogue with NZICA's lawyers andpotentially giving evidence for them.[35] Two days later, on 18 April 2019, the Appeals Council issued a decisionexplaining the reasons for declining to allow counsel incompetence as a ground ofappeal . It included the following:8(a) We accept that conduct of counsel can in criminal cases sometimesgive rise to a miscarriage of justice. Miscarriage of justice is astatutorily recognised ground of appeal in such cases. This appeal,however, arises in a disciplinary context and must be conducted inaccordance with the rules of the Institute. The appeal is by way ofrehearing including, where leave is granted, further evidence.(b) We do not need to decide in this decision whether there is jurisdictionto allow such a ground of appeal but we have reservations as towhether such a ground of appeal is properly allowable in an appealfrom the Disciplinary Tribunal. We have found no cases where sucha ground of appeal has been permitted in respect of appeals in adisciplinary context.(c) Mr Laws, in his submissions before us, referred to extracts of the legaladvice which gave rise to Mr McPhedran's decision to admitparticulars of the charges against him and not to give evidence himselfexcept by way of a statutory declaration. It is clear from the extractsof legal advice provided that the reasons for that advice relatedprimarily to concerns as to whether Mr McPhedran giving evidencewould be in his best interests.(d) The legal advice was of a kind that a solicitor could reasonably givewhen advising on defence of disciplinary charges. Mr Laws assertedthat, although Mr McPhedran assented to the course recommended byhis solicitors, he was suffering from mental illness at the time and hisdecision was not therefore a properly informed one. Whilst that may,or may not be the case, we are not persuaded that it is either necessaryor desirable to embark on an enquiry as to whether Mr McPhedran'smental state was so severe that he was unable to understand the legaladvice or make a decision based on it.(e) Negligent or inadequate advice by counsel is not a ground, in itself,for rehearing of a criminal prosecution. The question in such cases iswhether the inadequacies of the legal representation, if established,has given rise to a miscarriage of justice. It is not enough that, havingmade a decision based on legal advice to admit the particulars of thecharges against him and not to give evidence in person (and subjecthimself to cross-examination), that the member subsequently regretshis decision and wishes to, effectively, rerun his defence. If theground of appeal in a criminal context is available in this jurisdictionthe member would still have to prove that the decisions made haveresulted in a miscarriage of justice.(f) Decisions made which are objectively reasonable in the circumstanceswill rarely enable the client to succeed in asserting a miscarriage ofjustice in criminal cases. Normally an appeal would not be allowedsimply because of a judgment made by trial counsel which could wellbe made by another trial counsel in the course of a new trial.8 Decision of Appeals Council, 18 April 2019 at [15] (citations omitted).(g) Finally, as is clear from the cases in the criminal jurisdiction, allowingsuch a ground of appeal would necessarily involve a lengthy anddetailed procedure and enquiry which would significantly delay thehearing of the appeal. Such an enquiry would relate to events leadingup to and including the hearing before the Disciplinary Tribunal inAugust 2018 and would include detailed evidence as to the advicegiven (or not given) by Mr McPhedran's legal representatives and,according to Mr Laws, Mr McPhedran's mental condition at the time.Those events and circumstances have been known to Mr McPhedransince that time but have only be [sic] raised by him in April of thisyear some 10 days out from the date for hearing of the appeal.[36] Mr McPhedran now treats comments in the Appeals Council's decision of18 April 2019 as inappropriately and incorrectly upholding the competence of thefirm's conduct on his behalf.[37] In a memorandum for a case management conference that was pending in thisproceeding on 11 October 2019, Mr McPhedran recognised that an issue still to bedetermined was whether the firm should be joined to the proceedings. No initiativesto pursue their joinder have been taken.[38] Mr McPhedran confirmed during his oral submissions that he had not pursuedany complaint against the firm with the New Zealand Law Society, nor has he giventhem notice of the extensive criticisms he is making of them.[39] In his oral submissions, Mr McPhedran accepted that the Court could not makeany findings adverse to the firm's interests without their being afforded an adequateopportunity to be heard. Mr McPhedran's approach was that the relief sought couldbe granted without the need to uphold any of his criticisms of their conduct. Thatapproach substantially limits the prospects for relief, if grounds for the challenge aremade out.[40] To succeed on his primary issue that the Appeals Council erred in not hearinghis complaint that the firm's conduct prevented him getting a fair hearing,Mr McPhedran must make out positive responses to the following two questions:(a) did the Appeals Council have jurisdiction to consider counselincompetence before the Tribunal as a ground of appeal; and(b) if it did have jurisdiction, should the Appeals Council have entertainedthat ground in this case?The scope of the Appeals Council's jurisdiction[41] Mr McPhedran submitted that the Appeals Council had a legal responsibilityto hear him on the issue of counsel incompetence, and that it committed an error oflaw in not doing so.[42] NZICA is a statutory body provided for in the New Zealand Institute ofChartered Accountants Act 1996 (the Act). The functions of NZICA include, in s 5Aof the Act, a duty to control and regulate the profession of accountancy as conductedby its members in New Zealand. The Act provides for the PCC to investigatecomplaints against members (including former members) and for the powers andprocedures of the PCC. Its functions include the laying of charges against memberswhich may then be heard by the Tribunal that is also provided for in the Act. Section 6of the Act requires that NZICA must have rules that provide, inter alia, for the PCC,the Tribunal and an Appeals Council, which is to hear appeals from decisions of theTribunal, and such rules are to provide the powers and procedure of the AppealsCouncil.9[43] Section 9 of the Act requires the PCC and NZICA's disciplinary bodies toobserve the rules of natural justice. The Act also empowers the disciplinary bodies toreceive evidence on oath and provides for a District Court judge to authorise adisciplinary body to issue a summons under s 11 of the Act. The rules of NZICAinclude various machinery provisions as to the conduct of proceedings by the PCC,the Tribunal and the Appeals Council. In the case of the Appeals Council, the rulesprovide that it is to regulate its procedure as it thinks fit, subject to the content of therules. Where an appeal is lodged with the Appeals Council, the decision of theTribunal is not to take effect until the determination of the appeal.109 New Zealand Institute of Chartered Accountants Act 1996, s 6(1)(h).10 Rules of NZICA, effective 26 June 2017, at 13.55, 13.47(a).[44] Every appeal is to proceed by way of re-hearing, with the Appeals Councilempowered to direct that witnesses be recalled where they gave evidence before theTribunal, or to introduce new evidence.11 In determining appeals, the Appeals Councilmay confirm or vary or reverse the Tribunal's decision and make any order as to thepayment of costs of the appeal as it thinks fit.12[45] For NZICA, Mr Barker submitted that the rules did not contemplate theAppeals Council having jurisdiction to consider a complaint of counsel incompetencebefore the Tribunal as a ground of appeal. Mr Barker cited the lack of any precedentfor that to occur in disciplinary proceedings either for NZICA members, or in thecomparable disciplinary procedures for other professions.[46] He argued that the so-called surrogacy principle, discussed below, militatedagainst an appellant before the Appeals Council disavowing the conduct of themember's case before the Tribunal on the ground of counsel incompetence. Further,that if there was scope to apply an analogous ground of appeal to the counselincompetence ground that applies in criminal appeals, then it was not open toMr McPhedran to run such an argument without initiating the proceduralpre-requisites required in the criminal appellate context. These would include waivingprivilege in all the advice and communications between Mr McPhedran and counselwhose conduct is impugned, to permit full and frank inquiries to be undertaken of thatcounsel, and for them to be afforded an opportunity of explaining the conduct that isnow criticised. Mr Barker noted that the firm has not been put on notice of the natureand extent of criticisms advanced by Mr McPhedran and accordingly had noopportunity to put their version of events.[47] In this case, having considered it unnecessary to decide whether it hadjurisdiction to entertain the point, the Appeals Council was influenced in its decisionagainst allowing counsel incompetence to be raised by the substantial extent of furtherwork that would be involved. A mechanism would be needed to have the criticismsof the firm put to them, and to allow a response from them. Further, the AppealsCouncil would need to form a view on whether the errors on their part made a material11 Rule 13.54.12 Rule 13.57(a).difference, by an analogy with the criminal appellate analysis of whether counselincompetence led to a miscarriage of justice.[48] An appellate disciplinary body such as the Appeals Council could justifiablybe wary of making a judgement as to whether counsel representing a member facingdisciplinary charges had failed to carry out instructions competently, and whether anysuch errors caused or contributed to a different outcome from that which the membermight reasonably have achieved if competently represented. Those matters would becore issues in any civil proceedings brought by the member for professionalnegligence against the allegedly incompetent counsel.13[49] A further consideration for the Appeals Council was the further time and costinevitably incurred for all involved, if disciplinary appeal proceedings were to beexpanded in this way. The Appeals Council was concerned to discharge its obligationsto achieve a prompt and efficient outcome. Further adjournments would have beennecessary plus preliminary hearings to provide directions on the manner in which thefirm participated. A substantial expansion of the evidence and arguments in dealingwith the appeal would almost certainly arise.[50] Maintaining public confidence in disciplinary processes operated byprofessional bodies is in the public interest,14 and an important aspect of that is inoperating processes that produce expeditious outcomes.15 The additional time andcost, and the prospect of denting the confidence of the profession and the public in thedisciplinary process, are likely to be material considerations against allowing issues ina disciplinary appeal to include claims of counsel incompetence before the Tribunal.[51] However, whilst these considerations are likely to limit the cases in which theAppeals Council agrees to hear a ground of counsel incompetence, I do not accept thatthey are sufficient to exclude that prospect entirely.13 Cause of action recognised since Lai v Chamberlains [2006] NZSC 70, [2007] 2 NZLR 7. Anexample of professional negligence as a result of incompetent counsel is Gillibrand v Swanepoel[2017] NZHC 1209; Gillibrand v Swanepoel [2018] NZCA 467.14 Institute of Chartered Accountants of New Zealand v Bevan [2003] 1 NZLR 154 (CA) at [68].15 Deliu v New Zealand Law Society [2015] NZCA 12 at [22], [23] and footnote 20.[52] I am not persuaded that the lack of recognition of counsel incompetence as aground of appeal in the rules prevents the Appeals Council from entertaining such aground on appropriate terms in appropriate appeals. The overriding statutoryobligation of the prosecuting authority and the adjudicative bodies in their respectivecontributions to the disciplinary process is to comply with the rules of natural justice.16That does not create any responsibility for the conduct of a member's case before themas that is beyond their control. However, the appellate body's responsibilities shouldextend to correcting a patently unjust outcome where a miscarriage of justice becomesapparent arising from the manner in which the member's case was conducted beforethe Tribunal.[53] For example, circumstances may arise in which a member intending to defenddisciplinary charges before the Tribunal has the conduct of his or her defence takenout of their hands and misconducted to an extent that an unjustified finding against themember results, when there are real prospects that a competently conducted case onthe member's behalf would have succeeded. Mr McPhedran cited criminal decisionson counsel incompetence including the Supreme Court decision in R v Sungsuwan.17An analogy can be drawn, taking account of the very different context in which theconcern arises, from the judgment of Gault J in that appeal:18 whatever approach is taken, it must remain open for an appellate court toensure justice where there is real concern for the safety of a verdict as a resultof the conduct of counsel even though, in the circumstances at the time, thatconduct may have met the objectively reasonable standard of competence.The surrogacy principle[54] To invoke the so-called surrogacy principle, Mr Barker relied principally onthe speech of Lord Bridge in the House of Lords' decision in Al-Mehdawi v Secretaryof State for the Home Department.19 That litigation involved an Iraqi national studyingin England who had sought to appeal a deportation order. The solicitors who filed thenotice of appeal with the administrative tribunal on his behalf received notice of the16 As reflected in the analysis of the House of Lords in Al-Mehdawi v Secretary of State for the HomeDepartment [1989] UKHL 7, [1990] 1 AC 876, discussed at [54]–[61] below.17 R v Sungsuwan [2005] NZSC 57, [2006] 1 NZLR 730.18 At [70].19 Al-Mehdawi v Secretary of State for the Home Department, above n 16.date of hearing but forwarded it to an out of date address for the appellant. As a result,there was no appearance by him or on his behalf and the appeal was accordinglydismissed. On an application for judicial review, both the High Court and the Courtof Appeal held that the decision dismissing the appeal should be quashed, and theappeal re-heard with Mr Al-Mehdawi being afforded an opportunity to be heard.[55] In earlier decisions that had been followed in the High Court and the Court ofAppeal, such deficiencies in the process had been characterised as breaches of theobligations of natural justice, even although those making the impugned decisions hadnot been responsible for any relevant error. Lord Bridge cited the classic definition ofgrounds on which administrative action is subject to judicial review as defined byLord Diplock in Council of Civil Service Unions v Minister for the Civil Service,namely illegality, irrationality and procedural impropriety.20 Lord Bridge made thepoint that none of those grounds for claiming judicial review can arise if the relevantfailure has been by a legal adviser or other agent of the challenging party where thefailure arose beyond the knowledge and control of the decision-maker.21[56] Having reviewed cases in which such complaints had been addressed asbreaches of natural justice, Lord Bridge concluded:22 a party to a dispute who has lost the opportunity to have his case heardthrough the default of his own advisers to whom he has entrusted the conductof the dispute on his behalf cannot complain that he has been the victim of aprocedural impropriety or that natural justice has been denied to him, at allevents when the subject matter of the dispute raises issues of private lawbetween citizens.[57] Mr Barker submitted that the reasoning in Al-Mehdawi applied and was acomplete answer to any challenge that depended on alleged inadequacies in theperformance of the firm. He argued that Mr McPhedran could not allege a breach ofobligations of natural justice when neither the Tribunal nor the Appeals Council hadmade any relevant error. However, the full force of that reasoning has been moderatedsince Al-Mehdawi, both in England and in New Zealand.20 Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374 at 410.21 Al-Mehdawi v Secretary of State for the Home Department, above n 16, at 894H.22 At 898E-F.[58] In FP (Iran) v Secretary of State for the Home Department,23 the Court ofAppeal of England and Wales distinguished the circumstances of the foreign studentwhose visa had expired in Al-Mehdawi from proceedings involving asylum seekerswhere the possibility arose of their being returned to jurisdictions in which they mightface persecution, torture or death. Lord Justice Sedley distinguished the latter as atype of case in which "irretrievable and in-compensable" loss could arise.24 LadyJustice Arden characterised asylum applications as requiring the highest standards offairness.25 In such cases, the surrogacy principle could not prevent a re-opening ofwhat had been an inadequate hearing.[59] That distinction has been recognised in two proceedings by Muir J asqualifying the scope of the surrogacy principle. In Ratzapper Australasia Ltd v Noe,the relevant issue was the enforceability of an arbitral award where the unsuccessfulparty in the arbitration had been barred from defending the proceedings on the groundsof persistent and deliberate failures to comply with discovery requirements.26 Anaward had been made against the party in his absence, and the absence of his beingheard before liability was determined was raised as a ground for opposing an order forenforcement of the award that was sought from the High Court. Muir J did not treatthe case as one justifying a relaxation of the surrogacy principle. The defendant hadthe opportunity to establish error or breach of duty on the part of legal advisersrepresenting him in the arbitration so that a civil remedy against them was available,taking it outside the scope of the exception for "irretrievable and incompensible loss".[60] In Kaur v Minister of Immigration, Muir J had to consider omissions on thepart of legal advisers who delayed beyond the expiry of a time limit for an applicationfor review to challenge a decision in respect of immigration status.27 The Judgereferred to his earlier analysis in Ratzapper and observed:28[26] I note further that this is not a situation where there is any effectiveremedy by the applicants against counsel. The so called 'surrogacy principle',whereby the errors or omissions of counsel are visited on their client, applies23 FP (Iran) v Secretary of State for the Home Department [2007] EWCA Civ 13.24 At [41].25 At [58].26 Ratzapper Australasia Ltd v Noe [2017] NZHC 2931.27 Kaur v Minister of Immigration [2018] NZHC 138.28 Footnote omitted.with less rigour in cases where the loss is effectively incompensible. TheCourt should, in my view, be hesitant to penalise an applicant for the honestmistake of counsel in circumstances where the error is unable to be adequatelycompensated in damages.[61] I respectfully adopt Muir J's approach to the surrogacy principle. Itsapplication should not extend to cases in which the loss or damage arising fromcounsel incompetence is irretrievable and in-compensable.Irremediable or in-compensable loss suffered?[62] At no stage has Mr McPhedran indicated an intention to challenge theTribunal's determination that he was guilty of the disciplinary charges brought againsthim. This point was reiterated both in NZICA's written submissions, and inMr Barker's oral submissions, and that brought no rejoinder from Mr McPhedran. Thescope of the appeal he sought to pursue was in essence to have the conduct complainedof seen in a less serious light so as not to justify the removal of his name from theNZICA register, and that the additional adverse consequences of publication were notwarranted. In addition, Mr McPhedran sought reversal of the orders as to costs madeagainst him.[63] The Appeals Council saw Mr McPhedran's complaints about the firm asmatters that he should pursue "in another jurisdiction". That was implicitly on thebasis that if he could make out his allegations against them, then he would have acause of action for damages against the firm for the loss suffered as a result of theirerrors and omissions.[64] Any such claim would require Mr McPhedran to establish on the balance ofprobabilities that the firm failed to follow instructions, or provided negligent adviceand representation on his behalf, or both. He would also have to establish that thefirm's negligence was causative of loss,29 and make out the quantum of such loss. Iobviously deal with these prospects in an entirely hypothetical way without expressing29 Mr McPhedran would have to establish that the allegedly negligent counsel failed to follow hisinstructions, and that if his preferred defence was advanced it would, on the balance ofprobabilities, have resulted in a materially more favourable outcome.any view about the merits of such criticisms, given that the firm has had no opportunityto respond to them.[65] Although claims of this type requiring the claimant to run "a trial within a trial"are notoriously difficult, there is conceptually at least an available remedy.Mr McPhedran could claim that the damage to his reputation from an unwarrantedexclusion from NZICA is irremediable, but that is a form of damage that the courts areprepared to quantify. I therefore agree with the Appeals Council that Mr McPhedranhad the prospect of claiming for damage allegedly caused by the firm "in anotherjurisdiction". It follows that his circumstances are within those to which the surrogacyprinciple applies.Mr McPhedran's state of mental health in August 2018[66] A significant feature of Mr McPhedran's criticisms of the firm in the periodleading up to the Tribunal hearing is that he alleges they knew he was suffering fromwhat he describes in his affidavit in the current proceeding as "a major depressiondisorder". On Mr McPhedran's argument, the firm should not have pressed him forinstructions, particularly to allow them to admit the disciplinary charges on his behalf.Further, they should not have made arrangements for the hearing to proceed withoutexploring the prospects of an adjournment or Mr McPhedran's remote appearance viaAVL. Mr McPhedran claims that he became aware that both of those prospects mayhave been available only after the Tribunal's decision.[67] Mr McPhedran contends that awareness of his lack of full mental capacityheightened the duty of care owed to him by the firm, and ought to have required themto pursue a different course on his behalf.[68] Immediately prior to the hearing before the Tribunal in August 2018,Mr McPhedran had provided a short note from a general practitioner in the Dunedinpractice of which Mr McPhedran was a patient. The note stated:Dave is currently being treated for escalating anxiety and is currently notmedically fit to attend his hearing. I feel attendance would cause increasedsymptoms and cause hardship. Please contact me if further details are needed.[69] At an early stage of the proceedings before the Appeals Council, an applicationwas made on Mr McPhedran's behalf to adduce a November 2018 report from aconsultant psychiatrist, in addition to the note from the general practitioner. Thatreport was completed on behalf of the Accident Compensation Corporation (ACC) asto whether Mr McPhedran's mental health condition resulted from the physicalinjuries previously suffered by him. Apparently the same consultant psychiatrist had,shortly after completing the report for ACC, completed a further letter addressingMr McPhedran's mental state of health. Neither the report for ACC nor the separateletter are in evidence, but the essence of their content is described in the AppealsCouncil's 15 February 2019 decision rejecting the application to adduce thosedocuments as evidence before it.[70] The Appeals Council's February 2019 decision describes the consultantpsychiatrist's November 2018 report as attributing Mr McPhedran's mental healthcondition to the disciplinary complaint and anxiety in respect of the outcome. Theconsultant psychiatrist had not found any evidence of any thought disorder, psychosisor cognitive impairment. Not inconsistently, the consultant psychiatrist's separateletter stated that whilst carrying out the ACC assessment, Mr McPhedran "had all thesymptoms of a major depressive episode".[71] The Appeals Council declined leave to adduce the evidence onMr McPhedran's state of mental health so the mental health opinions were not tested.The Appeals Council considered Mr McPhedran's complaints that no adequate weighthad been given to his mental health impairment at the time of the Tribunal hearing byanalogy with the test applying in criminal proceedings of a defendant's fitness to pleadand mount a defence. Mr Taylor indicated in exchanges with Mr Laws that there didnot appear to be any scope for contending that Mr McPhedran had been impaired inrespects that could possibly have rendered him "unfit to plead".[72] In defending NZICA's treatment of Mr McPhedran throughout the disciplinaryprocesses, Mr Barker submitted that there was no credible admissible evidence that hesuffered any sufficient measure of mental impairment at any stage. The shortstatement from the general practitioner tendered to the Tribunal described onlyescalating levels of anxiety to an extent that he was not medically fit at the time toattend the hearing. Mr Barker submitted that the general practitioner's note wasadvanced to explain his non-attendance at the Tribunal hearing and could not provideany justification for a plea that Mr McPhedran was mentally unfit to instruct counselto respond to the disciplinary charges on his behalf. Similarly, the conclusions of theconsultant psychiatrist who assessed Mr McPhedran some months after the Tribunalhearing could not form any basis for a retrospective claim that Mr McPhedran wassuffering from any thought disorder or psychosis or cognitive impairment to an extentthat precluded his responding to the disciplinary charges.[73] Mr McPhedran was left with his retrospective self-assessment, and thelayperson's observations of Mr Spruyt, as conveyed to the firm in the week before thehearing, to the effect that Mr McPhedran was not coping.[74] Mr Barker also submitted that claims of a mental health impairment should tobe seen in light of what he characterised as Mr McPhedran's own cynical view aboutthat matter in an email exchange he had with the firm on 16 August 2018.Mr McPhedran asked in that email:Would you prefer me to attend or would it perhaps be better to play theMedical Card.[75] Mr Barker invited the inference from that communication that Mr McPhedranwas quite well enough to attend, but if for tactical reasons it was considered preferablefor him to stay away, his medical condition could be cited as an excuse for notappearing.[76] To the extent that Mr McPhedran now seeks to add to his challenge the conductof the Appeals Council and the outcome before it, I am not persuaded that the AppealsCouncil erred in rejecting the application to adduce additional evidence going toMr McPhedran's state of mental health. Nor am I persuaded that the approach itadopted contributed to any error in the procedure subsequently followed, or thesubstantive outcome.[77] It is understandable that in reconstructing the events leading to the adverseoutcome for him before the Tribunal, Mr McPhedran would readily believe that hewas "not himself" to the extent of having less than his normal level of mental facultiesto bring to bear on the important issues confronting him. However, without evidencethat a material mental health impairment, diagnosed by an appropriately qualifiedmental health professional, had existed at the time, Mr McPhedran cannot rely on thisfactor in advancing his judicial review challenge of the processes adopted in thedisciplinary proceedings.Summary of conclusions on pleaded grounds for judicial reviewJurisdiction of the Appeals Council[78] I am not persuaded that the Appeals Council lacked jurisdiction to entertain, asa ground of appeal, a relevant complaint of counsel incompetence in the presentationof Mr McPhedran's defence before the Tribunal. However, there are numerousmaterial considerations counting against any obligation for the Appeals Council toaccept such a ground of appeal. Those include the need to provide for a procedurepursuant to which counsel whose conduct is in issue can be given notice of the detailof the complaint against him or her, and be afforded an opportunity to provide anexplanation for his or her conduct. That procedure would include a requirement forthe member complaining of counsel's conduct to give timely notice waiving privilegeof all communications between them, thereby facilitating dialogue between thoseacting for NZICA and the counsel whose conduct is criticised.Unreasonableness[79] Mr McPhedran pleaded that the decision to exclude counsel incompetence asa ground of appeal was unreasonable. His submissions did not advance the claim, byreference to the tests in administrative law for unreasonableness, that it was a decisionthat no decision-maker, correctly directed as to the law, could have arrived at on thefacts. For the reasons I have set out, I am satisfied that the Appeals Council did notmisdirect itself as to the law, and the decision to dismiss the application to add counselincompetence as a ground of appeal was one reasonably open to it.[80] Mr McPhedran's submissions tended to use the concepts of a breach of theobligations of natural justice and a miscarriage of justice interchangeably, or at leastthat the existence of the former inevitably led to the latter. That approach overlooksmaterial distinctions between the two concepts. As demonstrated by Lord Bridge'sspeech in Al-Mehdawi, the obligation of a decision-maker to comply with therequirements of natural justice extends only to the procedure adopted by decision-makers for matters that are under their control.30[81] In contrast, the spectre of a miscarriage of justice will generally arise out ofmistakes in the presentation of a party's case caused by matters beyond the control ofthe decision-maker. Relevantly here, the alleged cause of a potential miscarriage ofjustice was counsel incompetence. To make out a case for any relief on the ground ofa miscarriage of justice, the Court would need to be satisfied that competentpresentation of Mr McPhedran's case would be likely, at least on the balance ofprobabilities, to have led to a materially different outcome.[82] In the present case, Mr McPhedran has not provided a forum in which hisclaims of incompetence by the firm could reasonably be tested, but importantly he hasalso not attempted to establish with any credible detail how competent counsel runninghis case differently would have procured a more favourable outcome.Relevant/irrelevant considerations[83] Mr McPhedran has argued that Appeals Council decisions took into accountirrelevant considerations, namely the extent of delay that would be caused if counselincompetence was included as a ground of challenge, and that the public interest inhaving the appeal resolved expeditiously was a factor to be taken into account. Forthe reasons I have set out, I am satisfied that it was open to the Appeals Council totake both those factors into account in reaching its conclusion to exclude counselincompetence as a ground of appeal.[84] Mr McPhedran also claimed that the Appeals Council wrongly took intoaccount the reasonableness of the advice he had received from the firm, when thatarguably should have been irrelevant. I am not satisfied that the Appeals Council'sdecisions turned to any material extent on their projection as to what adviceMr McPhedran had been given. There is no more than an acknowledgement that one30 See [55] above.form of advice that may have been given would have been open to the firm. I am notpersuaded that the acknowledgement of that point constitutes the taking into accountof an irrelevant consideration.[85] Mr McPhedran also characterised the Appeals Council's reasoning asincluding a projection on the likelihood of success in proving a miscarriage of justicewhen he contends that consideration should be irrelevant when determining his appeal.Again, I am not persuaded that a view on such a projection was determinative in theAppeals Council's decisions and, to the extent that it featured in the reasoning, I amsatisfied it was a relevant aspect of the review of the issues raised by the novel pointthat Mr McPhedran sought to pursue.[86] Mr McPhedran also argued that the Appeals Council failed to take into accounta relevant consideration, namely that his appeal before the Appeals Council was thesole prospect of his obtaining a remedy for the wrong caused by the firm in thepenalties decision delivered by the Tribunal. I do not accept that the factual premiseon which that contention relies can be made out.Surrogacy principle[87] The surrogacy principle would not be available as an answer to a member'scomplaint about counsel incompetence in the hearing before the Tribunal if the loss ordamage claimed to flow from counsel incompetence is irremediable orin-compensable. In this case, Mr McPhedran arguably has a possible cause of actionagainst the firm, so the surrogacy principle can apply as an answer to claims ofdeficiencies in the process caused by counsel incompetence.[88] No claim of counsel incompetence has been notified to the firm, and no stepstaken to afford them an opportunity to explain their conduct. The analysis of a possiblecause of action against them is therefore on an entirely hypothetical basis and no viewis expressed about the merits or lack of merit in any such claim.[89] Mr McPhedran cannot make out the grounds he has pleaded for any relief inhis claim for judicial review.NZICA summary judgment application[90] In December 2019, NZICA commenced proceedings for judgment for theextent of costs orders made against Mr McPhedran, none of which have been paid.NZICA made an application in that proceeding for summary judgment of theliquidated sum of those unpaid costs. The proceeding was called at the outset of thehearing of Mr McPhedran's judicial review. He has taken no steps to oppose theapplication for summary judgment and confirmed that his defence of it was limited tothe arguments he raised in his judicial review proceeding. It followed that if hisjudicial review proceeding is unsuccessful, then he accepts he has no defence toNZICA's claim for judgment for the extent of outstanding costs orders previouslymade against him.[91] Given the dismissal of his application for judicial review, it follows thatNZICA is entitled to summary judgment for the amounts sought in its separateproceeding. I accordingly enter judgment in terms of the summary judgmentapplication, but direct that no steps can be taken to enforce that judgment for a periodof 60 days from delivery of this judgment.Costs[92] NZICA is entitled to costs on its successful defence of the application forjudicial review, on a 2B basis. Quantum is to be settled by the Registrar. NZICA isalso entitled to costs on its summary judgment application, except that no amountshould be ordered for a separate appearance in support of that application.Dobson JSolicitors:Buddle Findlay, Wellington for defendantCopy to:The plaintiff