MCGUIRE v NEW ZEALAND LAW SOCIETY [2018] NZCA 184

MCGUIRE v NEW ZEALAND LAW SOCIETY [2018] NZCA 184 [6 June 2018]IN THE COURT OF APPEAL OF NEW ZEALANDI TE KŌTI PĪRA O AOTEAROACA638/2017[2018] NZCA 184BETWEEN JEREMY JAMES MCGUIREAppellantAND NEW ZEALAND LAW SOCIETYRespondentHearing: 24 May 2018Court: French, Ellis and Woolford JJCounsel: Appellant in personP N Collins for RespondentJudgment: 6 June 2018 at 3.00 pmJUDGMENT OF THE COURTA The application for leave to adduce further evidence is declined.B The appeal is dismissed.C The appellant must pay the respondent costs for a standard appeal on aband A basis together with usual disbursements.____________________________________________________________________REASONS OF THE COURT(Given by French J)Introduction[1] Mr McGuire is a lawyer. A former client made a complaint against him to theNew Zealand Law Society. The complaint was considered by the Canterbury WestlandStandards Committee.1 It upheld the complaint and found Mr McGuire guilty of"unsatisfactory conduct" pursuant to s 152(b) of the Lawyers and Conveyancers Act2006. "Unsatisfactory conduct" is relevantly defined under that provision as "conductthat falls short of the standard of competence and diligence that a member of the publicis entitled to expect of a reasonably competent lawyer".2 The Committee also imposedvarious penalties including a reduction in the fees Mr McGuire had charged the client.[2] Mr McGuire sought judicial review of the Committee's decision in theHigh Court. Justice Courtney held that of the 20 grounds of challenge raised byMr McGuire, only one which she identified as relating to the reduction of the feescould succeed.3 She therefore allowed the judicial review application in part andremitted the matter of the fee reduction to the Committee for reconsideration.[3] Mr McGuire now appeals Courtney J's decision.Background[4] In 2013 Mr McGuire was instructed by a Mr Menear-Gist to act in a personalgrievance unjustifiable dismissal claim before the Employment Relations Authority.Mr Menear-Gist had been dismissed by his employer for alleged dishonesty.The Authority found the dismissal unjustified. It awarded Mr Menear-Gist lostearnings and compensation but declined his application for reinstatement due in partto unsatisfactory aspects of his own conduct and the breakdown of the workingrelationship.4[5] Prior to the investigation meeting before the Authority in November 2013,Mr McGuire had issued Mr Menear-Gist an invoice for fees of $1,065. That accountwas paid. Then, after the Authority released its decision in January 2014, Mr McGuirerendered Mr Menear-Gist a second invoice for his fees amounting in total to $25,005.1 The High Court had earlier set aside a determination of the complaint by the ManawatuStandards Committee for breaches of natural justice: McGuire v Manawatu Standards Committee[2015] NZHC 2100. The Court ordered the complaint be reconsidered by a Standards Committeefrom a branch other than the Manawatu.2 Lawyers and Conveyancers Act 2006, s 12(a).3 McGuire v New Zealand Law Society [2017] NZHC 2484.4 Menear-Gist v Foodstuffs North Island Ltd trading as Toops [2013] NZERA Wellington 4at [38]–[41].The legal costs were more than the amount awarded by the Authority which afterallowing for tax was $22,756.[6] Mr McGuire advised Mr Menear-Gist to appeal the decision to theEmployment Court and in the meantime to seek urgent interim reinstatement.5 Afterobtaining a second opinion, Mr Menear-Gist terminated Mr McGuire's retainer inFebruary 2014. Mr McGuire then rendered him a further account for $6,441.21 forthe work undertaken in relation to the proposed appeal.6[7] Mr Menear-Gist refused to pay the January and February 2014 invoices andcomplained to the Law Society about the quality of the advice he had received fromMr McGuire. The essence of the complaint was that Mr McGuire had given him anunrealistic assessment of the prospects of success.[8] As mentioned the Committee found Mr McGuire guilty of unsatisfactoryconduct. It did so on two grounds. First it found that he had failed to provideMr Menear-Gist with a competent appraisal and advice of the rewards and risks of theproceeding. Secondly it found the costs rendered to be unreasonable given theoutcomes achieved.[9] Having made a finding of unsatisfactory conduct, the Committee went on toconsider penalties. It held the appropriate sanctions were that:(a) Mr McGuire be censured.(b) The costs incurred in relation to the Authority proceedings were to bereduced to a figure of $10,000 plus GST and disbursements.(c) The bill rendered in relation to the appeal proceedings was to beremitted in full, the costs incurred in relation to the appeal beingunwarranted.5 The appeal in the Employment Court would have been by way of a rehearing and is technicallyknown as a de novo challenge.6 This work included filing an application for urgent interim reinstatement pending appeal,researching the law in relation to the application, and preparing affidavits in support.The High Court decision[10] In the High Court, Mr McGuire raised multiple and overlapping grounds ofreview. These were usefully summarised by the Judge:[5] The grounds of challenge of the substantive determination can besummarised as being that the determination was:(a) erroneous in law and fact because:(i) Mr Menear-Gist never asked Mr McGuire for anestimate of legal fees meaning Mr McGuire was notrequired to provide him one;(ii) Mr Menear-Gist breached the retainer when heunilaterally and suddenly terminated it;(iii) the Committee wrongly held that an experiencedemployment lawyer or advocate is aware that awardsfrom the ERA and Employment Court are "generallyreasonably modest".(b) unfair and unreasonable because the Committee failed to takeinto account that:(i) Mr Menear-Gist succeeded in his personal grievanceclaim and was awarded costs;(ii) reinstatement is a discretionary remedy;(iii) the [Authority's] decision could have been successfullyappealed;(iv) Mr McGuire represented Mr Menear-Gist competentlyand in accordance with his instructions.(c) unfair and unreasonable on process grounds becausethe Committee:(i) misstated the nature of the complaint againstMr McGuire;(ii) did not raise aspects of the complaint with Mr McGuirein breach of natural justice;(iii) failed to conduct a proper rehearing as directed by theHigh Court.[6] The grounds of challenge to the costs determination can besummarised as being that the decision was:(a) erroneous in law and fact because the Committee has nopower to "remit" a bill;(b) unfair and unreasonable because:(i) the reduction of the [Authority] fee to $10,000 plusGST was arbitrary and unsupported by reasoning;(ii) the remittance of fees rendered for attendances in theEnvironment Court was arbitrary and unsupported byreasoning.[11] The Judge rejected most of these arguments. For the purposes of the issuesadvanced on appeal, the relevant key findings were as follows:(a) Even if Mr Menear-Gist did not ask for an estimate of the costs, thatdid not relieve Mr McGuire of his obligation to advise him of the likelycost.7(b) The fact the personal grievance claim was successful did not in itselfaddress the issues at the heart of the complaint, namely that due toinadequate advice about the probable size of the award in comparisonwith the likely costs, Mr Menear-Gist was not in a position to make aninformed decision whether to proceed.8(c) Mr Menear-Gist had a weak claim to reinstatement which made thecost–benefit analysis on the personal grievance claim all the moreimportant.9(d) There was an evidential basis for Mr McGuire's assertion thatMr Menear-Gist's primary concern was reinstatement. The evidence inquestion, a letter from Mr McGuire, should have been addressed bythe Committee.10(e) The process by which the Committee reached its decision to reduce theJanuary 2014 account to $10,000 was flawed for two reasons. First, thefigure of $10,000 was not explained and secondly the Committee failed7 McGuire, above n 3, at [39]–[45].8 At [58].9 At [58].10 At [56].to take into account the possibility that even if Mr Menear-Gist hadbeen properly advised reinstatement was so important to him he maynevertheless have chosen to proceed in any event.11[12] The Judge set aside the Committee's order reducing the fee to $10,000 andremitted it to the Committee for further consideration of Mr McGuire's assertion thathis client's primary concern was reinstatement and, if that was or was likely to havebeen the case, the effect of it on the decision as to Mr McGuire's fee.12Grounds of appeal[13] Mr McGuire said he advanced three main grounds of appeal, namely that thejudgment was made in error of law, the judgment was made in error of fact and thejudgment was wrong for reasons relating to Courtney J's finding that all but one of thegrounds of challenge failed.[14] We address each of these in turn. Before doing so, we also record thatMr McGuire applied to have further evidence adduced on appeal. For reasons whichwill become apparent, we consider the proposed further evidence to be irrelevant andtherefore decline the application.AnalysisAlleged errors of law and fact[15] Mr McGuire submitted that Courtney J failed to take into account severalrelevant considerations, namely: the absence of any challenge to his itemised scheduleof attendances and the absence of any costs revision, the complaint being essentiallyan application for a costs revision; the fact he was instructed to take all the actions hedid; and that he had an ethical obligation to do so, there being no proper reason torefuse to take the case nor to question Mr Menear-Gist's denials of wrongdoing.11 At [74].12 At [76].[16] In our view, these submissions miss the point. It was never suggested forexample that Mr McGuire did not do the work for which he charged or that he wasacting unilaterally. That was not the issue. The issue was whether he properly advisedhis client about litigation risk and the financial implications of the intendedproceeding. The evidence before the Committee clearly established he had not. Tohave given such advice would not have been inconsistent with his ethical duties toaccept the instructions. Nor would it have meant he disbelieved his client. The pointis simply that Mr Menear-Gist was entitled to be giving his instructions on an informedbasis, fully aware of all the risks.[17] It follows that we also reject a further contention made by Mr McGuire thatthe Judge's reliance on cost–benefit analysis was an error of law. It is correct assubmitted by Mr McGuire that the phrase "cost–benefit analysis" does not appearanywhere in the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care)Rules 2008. But of itself that does not mean the Judge erred. The Rules do require alawyer to act competently, to protect the interests of their client and to advise theirclient about any matter which would be important to the client in the context of theretainer.13 There can be no doubt that in order to discharge those duties a practitioneris required to advise a client of any litigation risk and the possibility that litigationmight result in disproportionate costs exceeding or substantially consuming anyfinancial recoveries.14 We agree with the Judge that the chances of Mr Menear-Gistobtaining reinstatement on appeal were slim.[18] A further argument raised by Mr McGuire was that both the Committee andthe High Court failed to appreciate and take into account that representation in theAuthority and the Employment Court had different retainers. In particular there wasa failure to appreciate that Mr McGuire represented Mr Menear-Gist in theEmployment Court under a conditional fee (no win, no fee) agreement, therebyrendering a cost–benefit analysis unnecessary.[19] Mr McGuire characterised the Judge's failure as both an error of law — failureto take into account a relevant consideration — and an error of fact. A related13 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008, rr 3, 6, and 7.14 In this we agree with Courtney J's reasoning in McGuire, above n 3, at [42].submission was that it was Mr Menear-Gist who was himself responsible for theoutcome in the Employment Court by unilaterally discontinuing the application for aninterim reinstatement order.[20] According to the Law Society, this is the first time in these judicial reviewproceedings that Mr McGuire has raised an argument that his February invoice wasunobjectionable because it was consistent with a conditional fee agreement. It is alsoclaimed that at least in the early stages of the complaint proceedings Mr McGuireexpressly eschewed any suggestion of a conditional fee agreement. This was disputedby Mr McGuire.[21] It is not necessary for us to resolve that matter for the following reason. Thefee agreement relied upon by Mr McGuire does not comply with all the requirementsof a valid conditional fee agreement under r 9.10 of the Rules. Those requirementsincluded an obligation to advise Mr Menear-Gist there was a significant risk he wouldlose the appeal and although he would not be required to pay any legal fees of his ownshould that happen, he would very likely be required to make a significant contributionto the costs of his employer. There was no evidence of any such advice being given.[22] As regards Mr Menear-Gist being responsible for the appeal failing, we assumethat Mr McGuire has raised this argument in response to the Committee's finding thatthe costs rendered by Mr McGuire were unreasonable given the outcomes achieved.However, the reason Mr Menear-Gist withdrew the appeal was because of a secondopinion which, it is reasonable to infer, provided the advice that Mr McGuire shouldhave given. In those circumstances, we consider the Committee was entitled to makethe finding it did.[23] Similarly, we reject Mr McGuire's argument that because Mr Menear-Gist wasthe successful party in the Authority, the outcome there was a good one and incapableof justifying a finding of unsatisfactory conduct. Again this is, in our view, to overlookthe fundamental point. The costs were not proportionate to the "win" andMr Menear-Gist was never alerted to that possibility before embarking on the claim.Miscellaneous ground of appeal — [76] of the High Court judgment[24] Under the heading of miscellaneous ground of appeal, Mr McGuire took issuewith [76] of the judgment where Courtney J stated:All but one of the grounds of challenge fail. The challenge to the orderreducing the fee to $10,000 succeeds and that order only is set aside. Thataspect is remitted to the Committee for further consideration of Mr McGuire'sassertion that Mr Menear-Gist's primary concern was reinstatement and, ifthat was or was likely to have been the case, the effect of it on the decision asto Mr McGuire's fee.[25] Mr McGuire submitted the Judge was wrong to say he had succeeded in onlyone of the grounds of challenge. In fact he had succeeded in two. The Judge foundthat the Committee had failed to consider or consider sufficiently carefullyMr McGuire's assertions that Mr Menear-Gist was desperate to be reinstated. She alsofound that the Committee had failed to give adequate reasons for reducing the costs tothe figure of $10,000. Accordingly, in Mr McGuire's submission, the fact of therebeing two breaches of natural justice should have been sufficient in itself for thecensure order to be set aside.[26] We do not accept that necessarily follows at all. Both errors on the part of theCommittee were found to bear on the same specific issue, namely the amount of thereduction. The Judge considered that the figure of $10,000 needed explanation andthat a factor to be taken into account was the possibility Mr Menear-Gist was sodesperate about reinstatement, he would have proceeded anyway even if he hadreceived the proper advice.[27] We were unsure whether Mr McGuire was also raising a more fundamentalargument, namely that the Judge erred in treating the issue of Mr Menear-Gist's desirefor reinstatement as bearing solely on penalty. That is to say, we were unsure whetherit was being argued that, correctly analysed, the issue also bore on the question ofwhether Mr McGuire could be guilty of unsatisfactory conduct in the first place. Thiswas not the way Mr McGuire had put it in his written submissions, but he confirmedbefore us that was part of his argument.[28] Justice Courtney however dealt with that point. She held it was insufficient tochallenge the finding of unsatisfactory conduct to say Mr Menear-Gist would haveproceeded anyway with the claim and the appeal. The issue was the quality of theadvice he received about the risks and his right to be able to make an informeddecision.15 We agree and would add that his conduct in withdrawing the appeal afterobtaining a second opinion tends to suggest he was not hell bent on reinstatementwhatever the risks.Application to adduce further evidence[29] The further evidence which Mr McGuire wishes to adduce consists first ofaffidavit evidence from the hearing in the Authority. This evidence he contendssupports his submission that all Mr Menear-Gist wanted was reinstatement andtherefore there was no duty to undertake a cost–benefit analysis. However, not onlyis this not fresh evidence but for the reasons traversed above it is irrelevant. A seconditem of further evidence consists of correspondence with counsel for the Law Societyregarding an exchange in court. In response to a question from the Judge, Mr Collinsreportedly said that if Mr McGuire had only charged $5,000 then they would not bethere. That does not however assist us with the issues on appeal. Two further items,an email to the Committee from Mr McGuire dated 14 October 2017, and an emailfrom the Committee to Mr McGuire and Mr Menear-Gist dated 15 November 2017,are similarly irrelevant.Outcome[30] The application for leave to adduce further evidence is declined.[31] The appeal is dismissed.[32] As regards costs, Mr McGuire told us that if he lost the appeal and costs wereawarded against him, he would be "finished" financially. However, that is not asufficient reason to displace the ordinary rule that costs should follow the event.15 McGuire, above n 3, at [51].[33] The appellant is therefore ordered to pay the respondent costs for a standardappeal on a band A basis together with usual disbursementsSolicitors:New Zealand Law Society, Wellington for Respondent