MCGUIRE v THE MINISTRY OF JUSTICE HC WN CIV-2012-485-639

MCGUIRE v THE MINISTRY OF JUSTICE HC WN CIV-2012-485-639 [26 April 2013]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYCIV-2012-485-639[2013] NZHC 894BETWEEN JEREMY JAMES MCGUIREPlaintiffAND THE MINISTRY OF JUSTICEDefendantHearing: 26 March 2013Counsel: C J Hodson QC for plaintiffP Gunn and D Consedine for defendantJudgment: 26 April 2013RESERVED JUDGMENT OF DOBSON JContentsBackground ........................................................................................................................................ [2]Mr McGuire's civil proceedings ..................................................................................................... [7]LSA preliminary investigations ..................................................................................................... [11]LSA review process: Cancellation Consideration Panel .............................................................. [17]Cancellation Review Panel decision ............................................................................................ [20]Grounds for review ......................................................................................................................... [23]Legislative framework .................................................................................................................... [26]Errors of law .................................................................................................................................... [31]The relevance of findings of breach of s 66? ................................................................................ [33]Having cancelled Mr McGuire's listing approvals, did the LSA have the power to cancel the service provider contract? ............................................................................................................ [40]Unfairness ........................................................................................................................................ [49]Composition of CCP and CRP lacked requisite independence .................................................... [49]Lack of information provided ....................................................................................................... [61]Requests for adjournment ............................................................................................................. [65]Unreasonableness ............................................................................................................................ [74]Damages ........................................................................................................................................... [87]Costs ................................................................................................................................................. [90][1] The plaintiff (Mr McGuire) practices as a barrister and solicitor in Palmerston North. He had, since April 2003, been certified as a listed provider of legal aid services under the Legal Services Act 2000 (the Act). In September 2010, the Legal Services Agency (LSA)1 cancelled his approved listings and his provider contract. Mr McGuire sought review of the cancellation decision. An LSA review panel was appointed, which upheld the LSA's initial decision. Mr McGuire has subsequently sought to judicially review both decisions of the LSA, being the initial cancellation and the review of that decision. He sought an order quashing the cancellation of his approved listings, a finding that cancellation of his contract with LSA constituted a unilateral breach of it, and damages.Background[2] In April 2008, Mr McGuire was instructed by a client, Ms Sheridan, on a claim under the Family Protection Act 1955. He sought legal aid on behalf of his client, and the LSA approved a grant of $5,695, $4,929 of which was paid to Mr McGuire. After proceedings had been commenced, but prior to settlement, Mr McGuire proposed two contingency fee agreements. Both were signed by Ms Sheridan. These agreements provided that if the action was successful and Ms Sheridan was awarded more than $55,695, the recovery in excess of that amount was to be shared on a 1:2 ratio between Mr McGuire and Ms Sheridan. The first $50,000 was to go directly to Ms Sheridan and Mr McGuire took responsibility to pay back the legal aid grant of $5,695.[3] The second of the contingency fee agreements included a provision that if Ms Sheridan stopped using Mr McGuire and retained another lawyer before the claim was resolved, then she would be billed for the work done until that time on an hourly basis at some $1,125 per hour (expressed as $750 per hour plus GST, plus a premium of 50 per cent).1 The LSA carried out the statutory functions under the Legal Services Act 2000. Since the eventsrelevant to these proceedings, that Act has been repealed by s 145 of the Legal Services Act2011. The 2011 Act is administered in the Ministry of Justice and hence the Ministry being citedas defendant, to answer for the conduct of the former LSA.[4] The Family Protection Act claim was settled for $90,000 on 6 November 2008. Towards the end of settlement negotiations, Mr McGuire approached Ms Sheridan to discuss changing the fee arrangement to a fixed fee of $30,000, with Mr McGuire repaying the $5,695 legal aid grant to the LSA out of the net proceeds available to Ms Sheridan (ie a payment on her behalf). That fee was significantly more than he would have received under the contingency fee agreement, and reflects what Mr McGuire saw as fair remuneration for the result he had obtained. Ms Sheridan agreed to this variation.[5] After discussions with the LSA later that month, Ms Sheridan was informed that s 66 of the Act prevented the charging of additional legal fees when the client was in receipt of legal aid. On that basis, Ms Sheridan refused to pay Mr McGuire any legal fees.[6] Mr McGuire's conduct in acting for Ms Sheridan has been the source of three parallel proceedings: disciplinary procedures against Mr McGuire before the Lawyers and Conveyancers Disciplinary Tribunal, a civil claim he commenced against Ms Sheridan for recovery of the outstanding fees, and the LSA review into Mr McGuire's eligibility to continue as a provider of legal aid services.Mr McGuire's civil proceedings[7] Mr McGuire issued proceedings against Ms Sheridan to recover the fees which he claimed he was entitled to under the private fee agreement. He first applied for summary judgment in the District Court. Ms Sheridan's application tohave the proceedings stayed was granted, until her complaint before a Law Society Standards Committee was determined.2 On appeal, Wild J determined that Mr McGuire was entitled to continue his proceedings in respect of liability for the outstanding fee, but not quantum.3 Liability was then argued before Ronald Young J over two days in April 2010, with evidence and submissions from both parties.2 Lawyers and Conveyancers Act 2006, s 161.3 McGuire v Sheridan HC Wellington CIV-2009-485-1901, 4 March 2010.[8] The key issue at the hearing was whether s 66 of the Act prohibited payment of a fee to Mr McGuire in addition to the legal aid grant.4 Section 66 provided as follows:66 Listed providers not to take unauthorised paymentsNo listed provider may take payments from or in respect of a person to whom services are provided under any scheme unless the payments are authorised by or under this Act, or by the Agency acting under the authority of this Act or any regulations made under it.[9] The issue turned on whether Ms Sheridan had agreed to abandon legal aid after she received her grant, as s 66 would not allow a listed provider to take payments from a legally aided person. Mr McGuire justified the additional private fee to Ms Sheridan by claiming that legal aid would not cover a proper fee for his work. Ronald Young J held that the legal aid grant had not been abandoned, nor did Ms Sheridan ever agree to pay Mr McGuire directly for his services as an alternative to legal aid. Rather, the terms of the contingency agreements envisaged legal aid continuing alongside a private fee.[10] Ronald Young J found Mr McGuire's evidence on the circumstances in which those agreements were entered into to be unreliable. He found that Mr McGuire'sreason for raising a contingency fee with Ms Sheridan was not credible in circumstances where the legal aid grant was not in danger, and that Mr McGuire'sconduct in the relevant period was inconsistent with a belief that Ms Sheridan had abandoned the grant of legal aid that had been made to her in July 2008. His Honour found that Ms Sheridan had signed the agreements for private fee arrangements with Mr McGuire because Mr McGuire had told her that legal aid would not cover a proper fee and that he should be paid an additional fee. His Honour determined that Ms Sheridan was not liable to pay any additional fee. Indemnity costs were awarded against Mr McGuire.4 McGuire v Sheridan HC Wellington CIV-2009-485-1901, 15 April 2010 at [4].LSA preliminary investigations[11] On 7 November 2008, the day following settlement of Ms Sheridan's familyprotection claim, the LSA received a complaint from Ms Sheridan regarding Mr McGuire's conduct in seeking the payment of a fee additional to the grant of legal aid. About a week later, Mr McGuire wrote to the LSA seeking approval to collect a fee from his client in addition to the legal aid grant. He explained the terms of his agreement in an email, and stated:That raises a possible issue under s 66 of the Legal Services Act 2000. Ipossibly need the Agency's authority to get payment from my client from the Settlement. I don't think this section applies but I suppose it pays to becareful.Will you authorise the arrangement made with my client about payment from the settlement on the basis that the debt owed to LSA will be fully repaid?[12] A minute of Associate Judge Gendall following a telephone conference held on 19 November 2008 recorded a concern by counsel for the opposing party in Ms Sheridan's litigation over the private fee arrangement. It directed Mr McGuire to seek approval from the LSA.[13] The LSA referred Ms Sheridan's complaints and Mr McGuire's requests forauthorisation to a specialist adviser, who recommended that the LSA should not authorise such a payment as it would be contrary to s 66 of the Act. On 18 December 2008, the LSA agreed with the recommendation and advised Mr McGuire of its decision. The LSA then recommended the matter be referred to Margaret Pearson, the manager of service contracts, for investigation into Mr McGuire's conduct as a provider of legal aid.[14] In January 2009, the LSA wrote to Mr McGuire outlining its concerns that his conduct may have breached his obligations under the Act and his service provider contract. Those concerns were:(a) failure to notify the Court when Ms Sheridan was granted legal aid, as required under s 21 of the Act;(b) failure to comply with professional obligations, in breach of the Rules of Conduct and Client Care, and cl 4.2 of the service provider contract;(c) failure to comply with statutory obligations under s 66 of the Act, in breach of the contract.[15] The letter sought Mr McGuire's response, and stated that the next step wouldbe to decide if any action was required. It referred to the "Investigating and Managing Provider Conduct Process" and listed the options that were available tothe LSA as:(a) taking no further action;(b) issuing a notice;(c) referring the matter to the District Law Society; or(d) considering suspension of the practitioner's listing approval unders 73 of the Act.[16] Mr McGuire responded to this letter on 27 January 2009. The LSA then decided to take no further action until the New Zealand Law Society had determined Ms Sheridan's complaint.LSA review process: Cancellation Consideration Panel[17] On 21 June 2010, the manager of service delivery at LSA, Ms Sally Babington, decided that the LSA should consider cancelling Mr McGuire's listingapprovals, pursuant to s 73(1)(d) of the Act on the grounds that Mr McGuire was not providing, or had not provided, the service for which he was approved, to a standard that was acceptable to the LSA. A Cancellation Consideration Panel (CCP) comprised of Ms Jan Matthews (chair) and Mr Graham Metcalfe was appointed to consider cancelling Mr McGuire's approved listings. At that time, they heldpositions respectively as Manager, Provider Services, and Northern Regional Manager of the LSA. An external lawyer, Peter Harrison, was appointed as a legal adviser to the CCP.[18] Mr McGuire was notified of the CCP composition and hearing date on 9 July 2010. The LSA claims it enclosed with this letter information that would be before the CCP at the hearing and CCP guidelines. However, Mr McGuire claims that the enclosures were never received. The CCP hearing was held on 31 August 2010, and it issued its decision to cancel all of Mr McGuire's listing approvals on13 September 2010.[19] The LSA then cancelled its service provider contract with Mr McGuire pursuant to cl 10.2 of that contract. Steps were taken to implement the cancellation, including advising Mr McGuire's clients that he was no longer to provide legal aidservices, and advising the Law Society of the cancellation.Cancellation Review Panel decision[20] On 15 September 2010, Mr McGuire requested a review of the CCP decision. A Cancellation Review Panel (CRP) was appointed consisting of Robin Turner and Trevor Prescott (the Service Delivery Support Manager, and the Debt Manager respectively, of the LSA) together with an external legal adviser, Ms Leigh Langridge. On 16 September 2010, Mr McGuire was informed of the CRP'scomposition and the date of hearing which had been set for 7 October 2010. Mr McGuire instructed John Rowan QC to act on his behalf. Mr Rowan requested an adjournment to allow him to prepare for the hearing. The LSA agreed to adjourn the hearing until 4 November 2010. Another adjournment was requested until after the Court of Appeal determined Mr McGuire's appeal of the High Court decision of Ronald Young J referred to at [9]-[10] above, but that request was denied by Ms Jan Matthews in an email dated 27 October 2010.[21] The CRP members were not aware that the further adjournment request had been denied, but at the hearing agreed not to release its decision until after the Court of Appeal had issued its decision. Ms Matthews then called Mr McGuire inDecember 2010 to advise him that the CRP was not prepared to defer its decision as it had agreed to do at the hearing. On 21 December 2010, Mr McGuire was sent theCRP's decision upholding the decision to cancel his listing approvals.[22] In the intervening period, the Legal Services Act 2011 (the 2011 Act) has come into force. On 19 August 2011, Mr McGuire sought formal reinstatement under the 2000 Act. On 14 September 2011, Mr McGuire was advised that he could not get reinstatement of the listings that were cancelled. On 8 March 2012, he was advised that he could still apply as a provider under the 2011 Act, but that there were no further review processes available for the decision to cancel his listings under the 2000 Act. Thus far, Mr McGuire has not pursued an application to be a provider under the 2011 Act.Grounds for review[23] Mr McGuire challenged the initial decision of the CCP to cancel, and theCRP's finding which upheld that decision on a significant number of substantive and procedural grounds.[24] The claimed grounds for review can be grouped under three main headings:(a) The decision to cancel the approvals was based on errors of fact and law:(i) the CCP wrongly found that Mr McGuire had breached s 66 of the Act when he had not taken any payment from Ms Sheridan;(ii) the LSA has no authority to cancel a provider's contractfollowing cancellation of approvals under s 71(1)(d) of the Act.(b) The processes by which the decisions were made were unfair to Mr McGuire, in breach of relevant obligations to comply with the rules of natural justice:(i) the CCP and CRP were biased and lacked the impartiality that is required by the Act, as they were comprised wholly of LSA staff or were dominated by such staff;(ii) Mr McGuire was not adequately informed of the issues before the CCP and CRP, or of the procedure to be adopted;(iii) the refusal to adjourn the CRP's hearing and decision was unfair.(c) The CCP's decision to cancel and the CRP's decision to uphold thosecancellations was manifestly unreasonable and an excessive response to his conduct.[25] The response for the LSA was that the CCP did not err in the manner alleged, and alternatively, if it did, those errors were rectified in the de novo hearing before the CRP.Legislative framework[26] Section 91 of the Act established the LSA, with one of its functions described in s 92 as being: to administer schemes in as consistent, accountable, inexpensive and efficient a manner as is consistent with the purpose of this Act.[27] Section 69(1) provided that a practitioner would need what is commonlyreferred to as an "approved listing" to provide legal aid services. A practitioner could hold one or more approved listings under the same contract to provide different kinds of services. Section 71 allowed the LSA to adopt criteria todetermine a practitioner's suitability for listing approval.[28] Section 73(1) set out the circumstances in which the LSA could cancel apractitioner's approvals:(1) The Agency may cancel 1 or more of the approvals in a person'slisting on any of the following grounds:(a) the person has been convicted of an offence under section 111 or section 112:(b) the Agency is satisfied that the approval was given by mistake:(c) the person, in relation to 1 or more approvals, does not meet the listing criteria for that approval, whether those criteria were adopted before or after the approval was given:(d) the person is not providing, or has not provided, the service for which he or she is approved to a standard that is acceptable to the Agency:(e) the person has filed for bankruptcy:(f) the person has failed to comply with 1 or more of the conditions of approval imposed under section 69(2):(g) the person has failed to comply with or fulfill requirements under any of sections 66, 67, 68, or 79:(h) the person is convicted of an offence, or subject to an order made under section 106 or section 112 of the Law Practitioners Act 1982[29] The effect of cancellation was that the person was no longer approved to provide legally aided services and the LSA was not obliged to pay for any services performed after cancellation took effect.[30] Section 73 of the Act also provided:(5) A person who receives a notice of cancellation may seek a review of that decision by the Agency, and is entitled to make submissions and be heard at any such review.(6) If a review is requested, the Agency must conduct the review as soon as practicable and make a final decision.Errors of law[31] The primary challenge under this heading was that the CCP and CRP misinterpreted s 66 of the Act. The CCP found that by entering into the fee agreements, Mr McGuire breached s 66, notwithstanding that he had not accepted payment under them. Mr McGuire argued that such a finding was incorrect as it is the act of accepting payment from a client that is prohibited, not an agreement that provides for such a payment. The CCP reasoned that the consequences of such a breach is an automatic breach of s 73(1)(g) of the Act, and justified cancellation. Mr McGuire argued that such a response is unlawful as no breach actually occurred.[32] Submissions were made on behalf of Mr McGuire to this effect to the CRP, arguing that the CCP erred in treating Mr McGuire as if he took payment from Ms Sheridan, on the basis of which he was found to have breached s 66. The CRP based its analysis primarily on s 73(1)(d) and whether the conduct of the practitioner was acceptable to the LSA. It did not rely on s 73(1)(g) as a ground for cancellation in the same way as the CCP had done.The relevance of findings of breach of s 66?[33] Ronald Young J did not find that there had been a breach of s 66 of the Act. Rather, he found that s 66 would provide an absolute defence to a claim by a lawyer for fees that, if paid out, would result in a breach of s 66. It followed that MrMcGuire's claim for such a payment could not be successful.[34] That decision seems to have been misinterpreted at the early stages of the LSA review process. The initial letter to Mr McGuire dated 14 January 2009 outlining the LSA's concerns raised the prospect that "the conditional fee agreementyou negotiated with Ms Sheridan may, without agency consent, constitute a breachof section 66 of the Act". However, the recommendation in June 2010 that a CCP beappointed states that the LSA should consider cancellation of Mr McGuire's listingapprovals under s 73(1)(d) only, although the relevant concerns appear to have been based on the mistaken assumption that "Mr McGuire has been found by the HighCourt to be in breach of section 66 of the Act".[35] The CCP did err in law in finding that Mr McGuire's conduct constituted abreach of s 66 of the Act. Its consequential finding that there had been an "automatic breach" of s 73(1)(g) of the Act is also unsupportable. Neither the CCP nor the CRPhad the benefit of the Court of Appeal's decision on appeal from Ronald Young J, which found that:5It is certainly true that the lawyer does not breach s 66 until he or she takes the unauthorised payment.[36] The CCP's decision to cancel was based on two grounds in s 73(1). First, that a breach of s 66 had occurred, and secondly, that the conduct fell below acceptable standards. The errors in the CCP's interpretation of s 66 were not repeated by the CRP on review. It conducted a de novo hearing, and found that the CCP did not rely solely on the finding that there had been a breach of s 66. Instead, the CRP considered that the CCP decision focused on Mr McGuire's conduct as awhole and whether it was of a standard acceptable to the LSA for the purposes of s 73(1)(d). It found that even if the CCP was incorrect in relying in its decision on s 73(1)(g), that did not affect its findings on s 73(1)(d).[37] In conducting its own assessment, the CRP found that although payment was never accepted so there was no formal breach of s 66, Mr McGuire undermined that provision by pursuing an unauthorised payment. His actions were found to be contrary to the purpose of that provision which was intended to protect the public and, in particular, disadvantaged and vulnerable members of society. The CRP concluded that Mr McGuire's conduct showed that he was seeking personal financialadvantage which fell below expected LSA standards of service, warranting cancellation under s 73(1)(d) of the Act.[38] No error can be found in the CRP's decision in terms of s 66, as it accepted that Mr McGuire did not actually receive payment from Ms Sheridan and its decision was not based on the existence of a breach of that section. I agree with the CRP'sanalysis that the existence or absence of a breach of s 66 is not material to the decision to cancel under s 73(1)(d). If Mr McGuire's overall conduct is sufficiently5 McGuire v Sheridan [2011] NZCA 15 at [12].unacceptable to the LSA, then cancellation could be justified despite the fact that he did not breach s 66 of the Act.[39] Mr McGuire pressed for payment in circumstances that undermined the statutory provisions, and only avoided breaching the Act because his client refused to pay him and the Court refused him the relief he sought. The fact that he avoided a breach of the Act does not cure the inappropriate nature of his conduct. Despite the CCP being wrong in its finding that entry into the fee arrangements breached s 66, Mr McGuire's conduct as a whole was sufficiently unacceptable to warrantcancellation of his listings under s 73(1)(d), and no error can be found in the CRP decision confirming that outcome.Having cancelled Mr McGuire's listing approvals, did the LSA have the power to cancel the service provider contract?[40] Mr McGuire argued that the provider contract prescribed grounds for cancellation of the contract and a procedure for doing so, which was not followed in his case. Thus, there was no contractual basis for cancelling Mr McGuire's contractin the manner that the LSA did. The relevant components of the provider contract were varied on 1 April 2010, and at the time the contract was cancelled the relevant provisions were as follows:69 Compliance with Listing Criteria and Service Standards9.1 At any time during the currency of this Contract the Agency mayassess the Listed Provider's compliance with the Listing Criteria forthe approvals contained in Schedule A and/or his/her performance against the applicable Service Standards. The Agency will consult with the Listed Provider in the process of this assessment. Where the Agency amends or introduced new Listing Criteria, in an area of law in which the Listed Provider holds an approval to act as a Lead Provider, the Agency will consider the experience and competence of the Listed Provider and will advise whether he/she will be required to comply with the amended or new Listing Criteria.9.2 Upon completion of such assessment the Agency may:9.2.1 Amend the approvals contained in Schedule A and any conditions attaching to those approvals; and/or6 Clause 9 is as in the original terms. Clause 10 is in the terms operative from 1 April 2010,agreed to by Mr McGuire on 24 March 2010.9.2.2 Suspend any or all of the approvals contained in Schedule A; and/or9.2.3 Terminate this Contract in accordance with clause 10.2...9.3 If the Agency suspends any or all of the approvals contained in Schedule A the Listed Provider ceases to be approved to supply the relevant Legal Services, and the Agency is not obliged to pay for any such Legal Services supplied after the date on which the suspension takes effect10 Termination of Contract10.2 The Agency may terminate this Contract upon (1) calendar month'snotice in writing to the Listed Provider:10.2.1 where following new or amended listing criteria and completion of an assessment, all of the Listed Provider'sapprovals contained in Schedule A have been cancelled by the Agency under clause 9.2.2; or10.2.2 in accordance with any legislation in force during the term of this Contract.[41] Mr McGuire argued that these terms required the LSA to follow the procedure in cl 9.1 before it cancelled the contract for any reason. This wouldrequire the LSA to assess a provider's compliance with listed criteria contained inSchedule A and consult the provider as part of that process. Mr McGuire argued that the LSA's investigation did not comply with that contractual provision, as it failed toassess compliance with listing criteria determined under s 71 of the Act, but instead focused on compliance with ss 66 and 73 of the Act. Further, there was no consultation with the provider but an "adversarial consideration". It was argued forMr McGuire that the power to cancel under cl 10.2 could only be exercisedfollowing such an assessment, or where all the Listed Provider's approvals havebeen suspended under cl 9.2.2. As neither of those triggering circumstances occurred here, the LSA's purported cancellation of the contract was invalid.[42] It was submitted for the LSA that this interpretation of the contract was not correct, and rather that:(a) the contractual variation to cl 10.2 allowed cancellation of the contract in accordance with any legislation then in force, including s 73 of the Act;(b) in any event, where there has been a breach of the Act, the LSA didnot need a contractual basis to cancel the provider's contract.[43] As to the first proposition for the LSA, the words in cl 10.2.2 " inaccordance with any legislation in force" suggest that cancellation could occur wherethat is provided for in a relevant statutory provision. Section 73 of the Act empowered the LSA to cancel a listing if one of the grounds contained in (a)-(h) are made out. However, the section did not expressly authorise cancellation of aprovider's contract. The practical issue is whether any material distinction needs to be drawn between cancellation of a listed provider's approvals, and cancellation of a provider's contract with the LSA that is dependent on the existence of suchapprovals. Where the approvals have been cancelled by a process provided for in the legislation, is the consequential cancellation of a contract that depended on the continued existence of the approvals also undertaken in accordance with the Act? In the present context, it seems appropriate to treat the two steps as having the same character.[44] Mr Hodson analysed the manner in which the statutory and contractual provisions could work, suggesting a possible sequence under which the statutory process was used to suspend or cancel approvals, but that the contract remained on foot albeit with no practical purpose until the LSA later granted fresh approvals. I do not accept that that conceptual prospect provides any justification for treating the subsistence of the contract any differently from decisions to cancel approvals. Once fresh approvals are granted, there is no basis for concern that the provider would not be entitled to a new contract, but until that point, a contract with a person who does not have any approvals could not have any purpose or effect.[45] The LSA cited Legal Services Agency v Meyrick as authority for the proposition that there does not need to be a separate contractual mandate for validcancellation to occur.7 In that case, the practitioner had argued that suspension of his listings under s 73(1)(d) of the Act was invalid, when his contract did not provide for suspension on those grounds.8 Stevens J found that the service provider contract did not provide an exhaustive list of when the power of suspension could be exercised,as that would fetter the LSA's regulatory powers under s 71(1)(d).9 His Honour held that the power of suspension existed for the public interest and to protect the users of the services of legal aid providers. A public authority cannot disable itself by contract from exercising the statutory powers conferred upon it in the public interest.10[46] It was argued for the LSA that, by analogy, cancellation of either or both of a listing and a contract can occur when either is mandated by the Act, notwithstanding an inconsistent procedure provided for in the contract. Nothing in the Act explicitly authorised cancellation of service provider contracts, only listings. The argument for the LSA to meet that omission was that if Mr McGuire's listing approvals had beencancelled validly under s 73, then the LSA was entitled to cancel the contract as it was no longer capable of being performed.[47] Another argument on the basis of the reasoning in Meyrick is that the LSA'sstatutory obligations necessarily extend to regulating service provider contracts consistently with its statutory obligations, and that cls 9 and 10 of the contract do notconfine the LSA's powers to cancel a contract to only the circumstances provided for in those clauses. I consider that the power to cancel a contract where all listings have been cancelled pursuant to s 73 is implicit from the whole statutory and contractual framework, as such a contract is not capable of being performed. Allowing approved listings to be cancelled under s 73 with no subsequent power to cancel would lead to illogical and unwarranted results.[48] It is understandable that listed providers would want a contract to regulate the terms on which they provided services for which the LSA paid. However, within the7 Legal Services Agency v Meyrick [2007] 3 NZLR 518 (HC).8 The judgment considered the pre-2006 amendment to s 73(1), which did not include paras (e) to(h) as set out in [28] above, and provided for suspension rather than cancellation of approvals.9 At [64].10 At [66].statutory framework in which the system operated, it would be untenable for any provider to treat such a contract as affording procedural entitlements inconsistent with the Act. I respectfully agree with the adoption of the approach that had been taken in Meyrick in the first instance decision in Simes v Legal Services Agency(discussed below):11I accept that it would have been artificial, and inappropriate, for those"contractual issues" to have been pursued under the dispute clause, whileother issues were considered under s 73(1)(d). The Agency must administerlegal aid schemes in "as consistent, accountable, inexpensive and efficient amanner as is consistent with the purposes of" the Act. It would be inconsistent with the Agency's function to require it to deal separately with "contractual" and "standards" issues in this case.UnfairnessComposition of CCP and CRP lacked requisite independence[49] Mr McGuire claimed that the composition of the two Panels resulted in procedural unfairness to him. The two members of the CCP held positions as Manager, Provider Services and Northern Regional Manager of the LSA. The two members of the CRP were the Service Delivery Support Manager and Debt Manager of the LSA.[50] Mr McGuire claimed that because both Panels were comprised of officials from within the same body corporate as the original decision-makers, they lacked the impartiality required to meet his rights to natural justice. Mr McGuire claimed that members of the LSA cannot review a decision of members of the same entity without the appearance of bias, and that the addition of an external lawyer cannot remedy that as they have no part in the decision making process.[51] It was submitted for the LSA that the appointment of anyone other than employees to either panel would be contrary to the terms of the Act, and the processes for cancellation set out in it, which required the processes to be undertaken by the LSA. It also disclaimed allegations of bias. It claimed that the review of the11 Simes v Legal Services Agency HC Hamilton CIV-2010-419-6, 13 June 2011 at [89]. Thequotation in parentheses reflects the terms of s 92(a) of the Act.CRP's draft decision by Ms Matthews, a member of the CCP, did not substantively impact the decision so as to threaten the independence of the CRP.[52] The decision to cancel approvals was one which Parliament charged the LSA with making. There is no specific requirement that the LSA appoint a panel to make such decisions or review them: that is just the means by which the LSA chose to discharge its statutory responsibility. It is clear from the terms of s 73 that the LSA alone, through its employees, was empowered to make the initial decision to cancel, and to undertake a review of such decisions. There was no power to refer the decision to an external decision maker or otherwise delegate the power. That was in contrast to other powers of decision under the Act which were specifically reserved for external decision-makers. An instance was the Legal Aid Review Panel, which could not consist of LSA employees.12[53] A separate question is whether the way in which the decisions were made, including the composition of the panels, created the appearance of bias. Although the LSA was entitled to make the decision internally and in accordance with its own policy guidelines, and thereafter conduct a review of such decisions internally if requested to do so, the processes adopted still must adhere to usual standards of fairness as assessed in judicial review. In Secretary for Justice v Simes (a judicialreview of a similar decision to cancel a practitioner's listing approvals), the Court ofAppeal stated:13The Panels were considering issues that plainly had the potential to affect Ms Simes' ability to practise in future. A high standard of natural justice was required to ensure fairness and the integrity of the process.[54] In Simes, an adviser within the LSA with the title "Adviser Service Contracts" had conducted the investigation into the practitioner's conduct, and wasasked for comment on the practitioner's submissions to a CCP. She annotated the copy of Ms Simes' submissions being used by one of the Panel members before the hearing with her comments and observations such as "Simes being stubborn" and "Simes improperly attributing malicious intent". The Court of Appeal recognised a material risk that the Panel member would be influenced by the notations of12 See s 62(5) of the Act.13 Secretary for Justice v Simes [2012] NZCA 459 at [108].someone that had been "deeply involved" in the case to date, had taken a view on thematter, and had an interest in the outcome of proceedings. The Court held that it was a breach of natural justice that the negative comments were not disclosed to Ms Simes, and that she had no opportunity to make submissions on them. The Court observed that the investigating adviser should not have been involved in the process at all, and the adverse comments should at least have been disclosed to the practitioner to give her an opportunity to respond.[55] Bias or lack of independence is claimed in the present case, on the basis of Mr McGuire's objection to LSA officials with previous involvement in the case taking part and influencing the CRP decision, compromising its impartiality. He claimed that the members of the CCP had an interest in defending its decision and ensuring it was subsequently upheld on review. The risk of this occurring at the CRPlevel was dealt with in the LSA's "Suspension Consideration and Review" policyguidelines, which stated:Neither members of the suspension review panel nor the external lawyer will have been involved in the suspension consideration panel or any previous consideration or decision making relating to the suspension.[56] However, this does not cover the situation in Simes, where a "deeply involved" adviser had the chance to influence the CCP, or the allegation in thepresent case that the members of the Panels were influenced by someone that had been involved in previous consideration of the case.[57] The history of the LSA review process showed the involvement of key officials at various stages. First, an investigation was undertaken by Ms Margaret Pearson, which appears to have been cut short due to disciplinary proceedings before the Lawyers and Conveyancers Disciplinary Tribunal. LSA investigations recommenced with Mr Grant Smith providing a summary of the investigation, and a recommendation to commence the suspension consideration process. On 21 June 2010, Sally Babington largely approved Mr Smith's recommendations to convene aPanel. Neither of those parties sat on the Panel, nor is there any evidence that they provided advice to the Panel or expressed their view on the case to Panel members.[58] However, Mr Grant Smith was note taker at the CCP hearing, which Mr McGuire claims gave him an opportunity to influence the Panel in the same way as occurred in Simes. There is some dispute over the existence of notes taken of the CCP hearing, and whether Mr McGuire was entitled to a copy of those notes, given that they are the only record of what went on during the CCP hearing. It seems that the purpose of appointing an LSA staff member to take notes of the hearing is to assist the Panel in drafting its decision. Mr Priti Patel was, at the time, the Manager, Provider Services at the LSA. His role included managing complex investigations and monitoring and auditing providers of legal aid services. He has deposed that notes were made to record the structure of the hearing and after the decision was finalised, they were destroyed.[59] There is no evidence of what such notes contained or whether the note taker expressed any view on the substantive merits of the case which could have influenced the Panel. Although Mr Smith had an interest in the outcome of the process, there is not sufficient in the context to draw an adverse inference that he used his note taking opportunity to influence the ultimate decision and compromise the independence of the Panel. It seems far removed from the Simes situation wherea "deeply involved" individual within the LSA provided notes on submissions inorder to influence the outcome of the hearing. There is no indication that Mr Smith'snotes contained something that should have been disclosed to Mr McGuire. The importance of providing notes in Simes was based on the negative tone of those comments (which was proven in evidence) and their relevance to the ultimate decision. I do not consider there was a breach of natural justice in not disclosing the notes to Mr McGuire.[60] The next stage of the process was the review of the CCP decision, and in this regard Mr McGuire challenges Ms Matthew's involvement in the CRP's decision ascompromising its independence. The first issue arises in respect of her involvement in the decision not to adjourn proceedings, which I deal with at [65]. The second issue is Ms Matthews' peer review of the CRP draft decision. Mr Patel deposed that this was a standard internal process within the LSA that would ordinarily be undertaken by Grant Smith, who was away at the relevant time, and instead Ms Matthews took his place. In an email dated 8 December 2010, she attached adraft of the decision with "quite a few changes and comments" of her own. It isunclear whether these changes and comments go to the substantive reasoning andoutcome of the CRP's decision, or are limited to stylistic and formatting points (as most of the other changes seem to be). There is at least the appearance of bias that a decision-maker on the CCP is providing relatively extensive feedback on the review of a decision that she had contributed to. The cautious approach in the absence of full details of what the notes covered is to assume that some component of them was intended to affect the substantive decision being made by the CRP. That participation in the second decision by one of those responsible for the first one deprived Mr McGuire of the open-minded review to which he was entitled.Lack of information provided[61] Mr McGuire also claimed that the non-supply of essential documents before the CCP hearing breached his rights to natural justice. In a letter sent to him on 9 July 2010 notifying him of the CCP's composition and the hearing date, the LSApurportedly enclosed Panel guidelines, which referred to a schedule of documents that would be before the Panel, together with copies of those documents. Mr McGuire says this information was not in fact enclosed. This is consistent with the phone call he made to Ms Matthews after receipt of the letter, asking her what the meeting was about. He was told it was about the High Court decision, and claims that he did not ask about the missing documentation during this discussion becausehe "was not concerned about the information and guidelines said to have been included" because he "knew what the hearing was about". The LSA submitted thatif they had been alerted to their inadvertent omission of the enclosed documents at that stage, they could have sent them out. It claimed there was no breach of natural justice as Mr McGuire elected to proceed with the information he had been sent for the hearing and did not seek further information.[62] Even if Mr McGuire did not receive documentation to which he was entitled, this error was rectified before the CRP decision. This was approached on a de novo basis. Mr McGuire would have been well aware of the issues on which he would be expected to submit, and he or his counsel could have sought more information from the LSA before that hearing if they considered it to be sufficiently important.[63] A component of Mr McGuire's criticisms of the process before the CRP wasthat he was not given warning before the hearing that it would be conducted on a de novo basis. It was argued for him that had he been given warning of the nature of the hearing, he would have undertaken additional preparation and put further matters to the hearing. It was not clear that there were any additional matters that might have been raised in a de novo hearing that were not, in any event, and Mr McGuire had the assistance of senior counsel at the hearing.[64] At all stages, matters were within a narrow compass. The issue was his fitness to continue as a provider, and the context was concerns at the manner of his dealings with Ms Sheridan.Requests for adjournment[65] Mr McGuire also criticised the procedural steps taken when an adjournment of the CRP hearing was requested. The LSA's internal processes were complicatedsomewhat by the concurrent proceedings before the High Court and Court of Appeal, and the overlap of issues being decided in those fora. Mr McGuire sought adjournment of the CRP hearing until after the Court of Appeal decision had been released. Mr McGuire was anticipating that the Court of Appeal would rule definitively that he had not breached s 66 of the Act, and that issue was central to the decision under review. Understandably, Mr McGuire sought to challenge the CCP'sfindings that a breach of s 66 had occurred, and wanted to rely on a Court of Appeal decision to that effect. However, the adjournment was denied and the CRP hearing took place before the Court of Appeal released its decision.[66] The first issue Mr McGuire raised was that the refusal to adjourn came from Ms Matthews, who had chaired the CCP. He argued that it was improper for any member of the CCP to be involved with any decisions of the CRP, including a pre- hearing decision, in order to avoid the appearance of bias. It was argued for the LSA that the decision had been made by the Panel but communicated by Ms Matthews, and that she had no role in the substantive decision-making process.[67] It is unclear from the evidence who in fact made this decision. The email conveying the decision was addressed to counsel for Mr McGuire, and was from Ms Matthews. It advised that the hearing would go ahead as planned on 4 November 2010, and there was nothing in that which suggested that she was communicating a decision that had been made by the CRP. Rather, it appears that Ms Matthews was expressing her own view that:The fact that Mr McGuire has filed that appeal is irrelevant, the Agency'scancellation review is an administrative function separate from the Court process.[68] Mr Patel's affidavit stated that, at the time of the hearing, the CRP memberswere not aware that Ms Matthews had denied the request for adjournment. It follows that the decision made prior to the hearing must have been made without input from the CRP members.[69] Ms Matthews claimed in her affidavit that she was relaying a decision of the Panel not to adjourn or delay its determination, and that it was not a decision that she had made. It seems likely that this recollection refers to the telephone call that Ms Matthews made to Mr McGuire in December 2010 after the hearing, communicating the altered view of the CRP that it would not await the Court of Appeal outcome before releasing its own decision. If so, her affidavit does not refute the inference that it was Ms Matthews who denied the earlier request to adjourn the hearing itself by the email dated 27 October 2010. I find it is more likely than not that Ms Matthews made the decision to decline the pre-hearing application for adjournment of the CRP's hearing.[70] That conduct would have breached the LSA's guidelines that members of the CCP not be involved in proceedings before a CRP. More generally, it is also undesirable that a material procedural matter that could affect the outcome of the review by the CRP should be made other than by those that would make the CRP'sdetermination.[71] A separate criticism is made of the CRP's decision not to defer the release of its decision until after the Court of Appeal's judgment had issued. The CRP'schange in position on the release of the decision was contrary to the arrangementmade with Mr McGuire at the hearing that it would wait and accept further submissions once the Court of Appeal released its judgment. Mr McGuire claims that he should have been entitled to comment on the Court of Appeal's findings thats 66 had not been breached, and that pre-empting the Court of Appeal's decisionbreached his right to natural justice to respond to it, and make submissions on the relevance of that decision to the review.[72] Mr Turner, a member of the CRP, filed an affidavit setting out the CRP's reasons for departing from its previous "undertaking". He noted the LSA's statutoryresponsibility to conduct the review as soon as practicable and make a final decision. In light of that provision, he deposed that the CRP decided they did not have the discretion to await the outcome of parallel legal proceedings, and to proceed with the decision on what they had seen and heard to date. Mr Turner was also of the view that the ultimate outcome of the Court of Appeal decision, which would determine whether the payment of contingency fees was in breach of s 66, was subtly different to the issue that the CRP had to decide, being whether Mr McGuire was still a suitable provider of legal aid services. The ultimate legal implications of Mr McGuire's conduct in terms of s 66 did not change the fact that he had pursued an additional fee without consent from the LSA, to the extent that might fall below acceptable standards in terms of s 73(1)(d).[73] I do not consider that Mr McGuire was prejudiced by the CRP's decision notto await the Court of Appeal decision. The ultimate determination of the Court ofAppeal had little bearing on the CRP's assessment of Mr McGuire's suitability tocontinue with his previous approvals. I do not accept that Mr McGuire was deprived of any material opportunity to improve his case by making additional submissions supporting his argument that no formal breach of s 66 had occurred, by citing [12] of the Court of Appeal's decision. The CRP decided that was the case, without thebenefit of the Court of Appeal decision. I note that in other respects the Court of Appeal characterised Mr McGuire's case as "hopeless" and "completely lacking in merit".1414 McGuire v Sheridan [2011] NZCA 15 at [17], [18].Unreasonableness[74] Mr McGuire's final argument was that the penalty of cancellation of hisapproved listings and contract was a disproportionate or excessive response to his conduct, and thus the decision is unreasonable.[75] It was submitted for the LSA that Mr McGuire's actions in seeking an additional fee to a grant of legal aid went to the very heart of his relationship with the LSA. Therefore, it had valid concerns as to his relationships with future clients, and its response was not disproportionate. It points to the number of complaintsmade (by the client, counsel and the Court) and Mr McGuire's own apparent ignorance of the law governing legal aid providers as additional factors aggravating the seriousness of his conduct.[76] Mr McGuire made a similar proportionality argument before the CRP. He contended in that forum that misconduct in relation to a civil matter could not justify cancellation of all of his listing approvals, and that he had provided legally aided services on a wide range of matters over a number of years without previous complaints. The CRP found that Mr McGuire had a complaint upheld against him by the New Zealand Law Society in 2007 but, in any event, the modest extent of prior complaints did not mitigate the seriousness of the present issues being considered.[77] Specifically addressing the proportionality of the adverse outcome, the CRP stated that Mr McGuire's conduct seriously impacted on the LSA's confidence in thequality of service delivered as a legal aid provider across all listings. It also cited the public interest in all clients receiving a similar standard and quality of service regardless of the area of law in which they seek advice or representation. It stated in its conclusion that the departure from the required standard of service was so serious that cancellation of all listing approvals was justified.[78] Penalty decisions in a variety of professional disciplinary contexts have for some time been amenable to review on proportionality grounds.15 The sequence of decisions made in those contexts lends itself to a proportionality assessment. The decision-maker would generally make a finding on liability before determining the most appropriate penalty from a range of options available. That final component requires a response that is proportionate to the seriousness of the conduct at issue, and is amenable to review on the grounds that the option selected was not the most proportionate.[79] I am reluctant to recognise the LSA's decision as comparable to penaltydecisions in other contexts. A decision to cancel a listing is not a punitive measure against malpractice of a practitioner. It is simply a reflection of the practitioner no longer meeting the standards required to practice as a legal aid provider.[80] Moreover, the context of the LSA's decision was different in that once afinding was made under s 73 there was not a range of optional "penalties" fromwhich the LSA could select the most appropriate or proportionate. Section 73 statedthat the LSA "may" cancel if one of the grounds in subs (1) had been made out, which suggests a binary choice: either the LSA would cancel or it would allow the practitioner to continue under his or her current listings. The option of a temporary suspension of listings, contained in s 72A, only applied where the provider was charged with an offence or subject to disciplinary proceedings.[81] Therefore, the context in which this decision was made does not lend itself to proportionality review, and the substantive merits of the decision to cancel cannot be challenged on this basis. Even if I were to treat it as amenable to review on thisground, I am satisfied that the LSA's response was a proportionate one.[82] The LSA's responsibilities in administering the scheme required it to haveconfidence in the integrity of providers in the dealings that providers had with legally aided clients. The manner in which Mr McGuire had dealt with Ms Sheridan would inevitably cause an administrator in the position of the LSA to have grave15 See, for example, Institute of Chartered Accounts of New Zealand v Bevan [2003] 1 NZLR 154(CA) at [55]; Geary v Professional Conduct Committee HC Wellington CIV-2009-485-2641,22 July 2010.misgivings as to the integrity of such dealings. Cancellation was inarguably within the limited range of responses open to it.[83] The impact of the cancellations was less than permanent. On the coming into effect of the 2011 Act, all previously approved providers were required to apply again under that new Act. Although he is in a different category to others with approved listings under the 2000 Act, Mr McGuire would have had to do so, and has had confirmation that he remains able to do so.[84] Mr McGuire's misconception that he was entitled to charge fees additional to legal aid is something that would impair his ability to provide legally aided services to the expected standard across his entire practice, not just in civil matters or in this particular civil matter. Such conduct takes advantage of vulnerable clients of the type that the legal aid system is designed to protect. If he was allowed to continue asan approved provider, the public's confidence in the legal aid system, and those authorised under it, would likely be undermined. The conduct is exacerbated by MrMcGuire's concerted attempts through legal proceedings to enforce a payment whichwould have been contrary to the entire legal aid scheme.[85] In summary, Mr McGuire has not made out any material criticisms of the decisions he has challenged, or the processes by which they were arrived at. The CCP did commit an error of law in finding that Mr McGuire's arrangement withMs Sheridan constituted a breach of s 66 of the Act. That error was corrected by the reasoning of the CRP, and that is a sufficient answer meaning that there can be no material consequences that would entitle Mr McGuire to relief. Ms Matthews'participation in the decision made before the CRP hearing to not grant a request for adjournment was undesirable, but that step cannot impugn the lawfulness of the subsequent decision. When separated from the allied complaint that the CRP should have awaited the outcome of the Court of Appeal decision (which I have found not to be a material criticism), the criticism does not have any impact. In the same way, the use of Ms Matthews to peer review a draft of the CRP's decision was unwise.However, in the absence of any basis for reasonable inference that she influenced the outcome, this constitutes a similar deficiency that cannot have material consequences in terms of relief in the present judicial review.[86] In essence, Mr McGuire has failed to show that the procedural deficiencies had any impact on the operative decision. Without raising the prospect of a different outcome, identification of those errors does not entitle Mr McGuire to any relief. The essence of this case is the challenge to the reasonableness of the substantive outcome. That outcome is inarguably justified.Damages[87] Mr McGuire's pleading sought an inquiry into damages, without attributing in detail the basis on which damages might be awarded in judicial review. Any entitlement could only follow from a finding that the LSA had wrongly cancelled his listings. As no such error is made out, the prospect of damages is academic.[88] Submissions on behalf of the LSA traversed reasons why breach of a public law right by itself gives rise to no claim for damages, and that damages must be based on a private law cause of action.16[89] It is unnecessary to address the issue.Costs[90] The defendant is entitled to costs. I invite counsel to file memoranda in sequence, if the matter of costs cannot be settled.Dobson JSolicitors:Jeremy McGuire, WellingtonCrown Law, Wellington for defendantCounsel:C J Hodson QC, Wellington for plaintiff16 Citing, for example, X (minors) v Bedfordshire CC [1995] 2 AC 633 (HL) at 730.