LAGOLAGO v WELLINGTON STANDARDS COMMITTEE 2 [2017] NZHC 3038

LAGOLAGO v WELLINGTON STANDARDS COMMITTEE 2 [2017] NZHC 3038 [8 December 2017]IN THE HIGH COURT OF NEW ZEALANDWELLINGTON REGISTRYCIV-2015-485-635[2017] NZHC 3038IN THE MATTER of an appeal under s 253 of the Lawyersand Conveyancers Act 2006BETWEEN PAPALI'I TOTI LAGOLAGOAppellantAND WELLINGTON STANDARDSCOMMITTEE 2, A STANDARDSCOMMITTEE UNDER THE LAWYERSAND CONVEYANCERS ACT 2006RespondentHearing: On the papersCounsel: A C Beck for AppellantD R La Hood for RespondentJudgment: 8 December 2017JUDGMENT OF CLIFFORD J(Costs)Introduction[1] In November 2016 I upheld Ms Lagolago's appeal against adverse findings ofthe New Zealand Lawyers and Conveyancers Disciplinary Tribunal (the Tribunal) inproceedings brought by the Wellington Standards Committee 2 (the Committee) underthe Lawyers and Conveyancers Act 2006 (the Act).1 As regards penalties and costs Isaid:[133] In addition to being placed under supervision for a period of12 months, Ms Lagolago was censured, ordered to reduce her fee to the Fs by$14,000 and to pay costs. Mr Beck did not advance submissions on the orders1 Lagolago v Wellington Standards Committee 2 [2016] NZHC 2867.I should make as regards those penalties. Nor were any submissions made asregards costs in this hearing. Nor do I know whether Ms Lagolago has paidthe costs ordered to the Society, pending the outcome of this appeal.[134] In my view, the appropriate outcome now would be for the censure tobe quashed, for the costs orders to the Society (if they have not been paid) tobe quashed or for Ms Lagolago to be reimbursed those payments if she hasmade them. But, in the circumstances, I do not think it would be appropriatefor Ms Lagolago to now claim an entitlement to pursue her full bill of costsagainst the Fs.[135] Finally, I see no reason why costs in this proceeding should not followthe event.[136] But that is an indication of view only. I invite counsel to filememoranda as soon as possible. I would appreciate those by no later than9 December, if I can deal with the matter before the end of the year.[2] By subsequent agreement, those submissions were filed in time for my returnto Court on 21 February 2017. I regret the delay that has subsequently arisen in myfinalisation and the release of this judgment.[3] The parties agree:(a) Following Roberts v Professional Committee of the Nursing Council ofNew Zealand, Ms Lagolago is entitled to costs on her successful appealin this Court.2 There is a very minor difference as to quantum I am toresolve.(b) Costs on this costs application should follow the event.[4] Two issues require determination by me:(a) Costs before the Tribunal.(b) Costs in this Court on Ms Lagolago's unsuccessful interlocutoryapplication for a stay of enforcement of the Tribunal's decision pendingthe hearing of her appeal.32 Roberts v Professional Committee of the Nursing Council of New Zealand [2014] NZCA 141,(2014) 21 PRNZ 753.3 Lagolago v Wellington Standards Committee 2 [2015] NZHC 2187, (2015) 22 PRNZ 720.[5] By way of overview, I note that it is the first of those two issues that requiresthe most consideration. The parties take fundamentally different approaches to it.Questions of principle are raised. The parties also take different approaches to thesecond issue. That dispute can be resolved, however, by the application ofwell-established principles.Costs before the TribunalThe competing positions[6] Mr Beck (counsel for Ms Lagolago) initially argued that in Roberts the Courtof Appeal held costs in disciplinary proceedings are to be decided under the standardregime in the High Court Rules 2016. Accordingly, costs should follow the event.Moreover, here the award in Ms Lagolago's favour should reflect the withoutprejudice, save as to costs, settlement offer she had made at a relatively early stage inthe disciplinary proceedings against her. In that letter Mr Beck expressed the generalview there appeared to be very little foundation for a number of the charges.Ms Lagolago was, Mr Beck said, nevertheless willing as a gesture of goodwill towaive the balance of fees owing to her if the charges were withdrawn. Given theoutcome of Ms Lagolago's appeal, Mr Beck submitted the Calderbank rules applied,in effect entitling Ms Lagolago to increased costs on the steps taken in the proceedingsafter that offer was made — that is: costs before the Tribunal, her costs on herunsuccessful interlocutory application in this Court and her costs on this appeal.Ms Lagolago's actual costs in the Tribunal were $21,022: Mr Beck noted thatMs Lagolago had been charged at a reduced rate because of her financial position.Mr Beck therefore argued that an order should be made for costs of $20,000 in theTribunal.[7] Mr La Hood (counsel for the Committee) rejected those propositions. He saidthe Tribunal's approach to costs in hearings before it, reflecting the decision of theCourt of Appeal of England and Wales in Baxendale-Walker v Law Society and appliedin Ms Lagolago's case, was correct.4 There, Mr La Hood submitted, the Court heldthat costs in disciplinary proceedings do not generally follow the event. To take that4 Baxendale-Walker v Law Society [2007] EWCA Civ 233, [2008] 1 WLR 426.approach would overlook the public role of the Law Society when bringingdisciplinary proceedings against a solicitor. The Court of Appeal adopted thereasoning of the Divisional Court that "absent dishonesty or a lack of good faith, acosts order should not be made against such a regulator unless there is a good reasonto do so. That reason must be more than that the other party has succeeded."5[8] Mr La Hood pointed to a number of decisions in which the Tribunal had takenthat approach.6 That approach, he submitted further, had been approved in theappellate context in Roberts and by the High Court in Simes v Canterbury-WestlandStandards Committee 2 of the New Zealand Law Society.7[9] Inviting the Court to endorse that approach, Mr La Hood argued there was not,in the hearing before the Tribunal, any reason for awarding costs to Ms Lagolago. Inany event, the Calderbank principles should not apply in the disciplinary context as amatter of law, and the contents of the letter were not of the kind that would haveproperly warranted cessation of the proceedings.[10] In reply, Mr Beck refined his submissions somewhat. Mr Beck acknowledgedthat Roberts only applied directly to costs on an appeal in the High Court. But, heargued, there was no suggestion that a radically different costs scheme applied in theTribunal. The approach in Baxendale-Walker had not been endorsed by the Court ofAppeal in Roberts.[11] Mr Beck argued more generally that the Tribunal had, in some cases,approached costs as if the Law Society enjoyed an immunity from costs. That was notappropriate. Here, the significant feature was that the Tribunal had got its decisionsubstantially wrong. It had taken the view the case was of sufficient gravity to lay acharge before the Tribunal rather than a Standards Committee, and had consistentlyargued that Ms Lagolago should be suspended from practice. General principlestherefore required recognition of that in some award of costs in Ms Lagolago's favour.5 At [30].6 For example: NZ Law Society v Hall [2014] NZLCDT 17; and Auckland Standard Committee 4 vSmith [2015] NZLCDT 46.7 Simes v Canterbury-Westland Standards Committee 2 of the New Zealand Law Society [2013]NZHC 1501.The Committee's argument, that the without prejudice letter should have no impactwhatsoever, flew in the face of the general principles endorsed by the Court of Appealin Bluestar Print Group (NZ) Ltd v Mitchell.8 Those general principles wereapplicable within the disciplinary context.AnalysisContext[12] Courts and tribunals generally require a statutory basis if they are to have ajurisdiction to award costs.9 Section 249 of the Act gives the Tribunal a broaddiscretion to award costs:249 Order for payment of costs(1) The Disciplinary Tribunal may, after the hearing of any proceedings,make such order as to the payment of costs and expenses as it thinksfit.(2) In particular, the Disciplinary Tribunal may order that costs beawarded to any person to whom the proceedings relate, and that thosecosts be paid—(a) by the New Zealand Law Society (if that person is a lawyeror a former lawyer or an incorporated law firm or formerincorporated law firm or an employee or former employee ofa lawyer or incorporated law firm); or(b) by the New Zealand Society of Conveyancers (if that personis a conveyancing practitioner or a former conveyancingpractitioner or an incorporated conveyancing firm or formerincorporated conveyancing firm or an employee or formeremployee of a conveyancing practitioner or incorporatedconveyancing firm).(3) In particular, without finding the person charged to be guilty, theDisciplinary Tribunal may, if it considers that the proceedings werejustified and that it is just to do so, order that person to pay to the NewZealand Law Society or the New Zealand Society of Conveyancerssuch sums as the Disciplinary Tribunal thinks fit in respect of theexpenses of and incidental to the proceedings and any investigation ofthat person's conduct or of that person's affairs or trust account carriedout by, or on behalf of, a Standards Committee or the LegalComplaints Review Officer.8 Bluestar Print Group (NZ) Ltd v Mitchell [2010] NZCA 385, (2010) 7 NZELR 494.9 GE Dal Pont Law of Costs (3rd ed, LexisNexis Butterworths, Chatswood, 2013) at 139. Courtsof Chancery, however, always claimed power to deal with costs.(4) In this section, expenses includes not only out-of-pocket expenses butalso such amounts in respect of salaries of staff and overhead expensesincurred by either the New Zealand Law Society or the New ZealandSociety of Conveyancers as the Disciplinary Tribunal considersproperly attributable to an investigation.[13] In distinction to most disciplinary tribunals, the Tribunal's power to awardcosts is not restricted to an award, generally as part of penalty, against a disciplinedpractitioner. Rather, the Tribunal may also require a Standards Committee to pay coststo a practitioner, and a practitioner who has successfully defended charges tonevertheless pay expenses.[14] In Re Simes the Tribunal commented on that jurisdiction in the followingway:10[13] So far as the statutory costs discretion in s 249 is concerned, thelegislature clearly envisaged that there would be circumstances where theLaw Society may have costs ordered against it, to be paid to the chargedpractitioner. That is mandated by power in s 249(2)(a) of the Act.[14] Similarly, the legislature has recognised that despite a finding that acharge has not been proven, there will be circumstances where a legalpractitioner may still be required to pay costs to the Law Society, as set out ins 249(3) of the Act.[15] The question is, of course, in each situation, what are thosecircumstances? We need only deal with the former situation in this case(ie whether there are circumstances that would justify an order of costs againstthe Law Society in favour of the practitioner), as the Standards Committee hasconceded that it seeks no costs from Ms Simes. In the circumstances of thiscase that is an appropriate concession.[15] On appeal, the High Court observed:11[27] Section 249 of the Act confers a broad discretion on the Tribunal toaward costs in any given case. The Tribunal must not disable itself fromexercising its discretion is a particular case by rigidly adopting and applyingfixed rules or procedures or policies. To do so would be to improperly fetterits discretion and preclude meaningful participation in the decision-makingprocess.[16] The question for me is whether that jurisdiction should be exercised in thiscase.10 Re Simes [2012] NZLCDT 28.11 Simes v Canterbury-Westland Standards Committee 2 of the New Zealand Law Society [2013]NZHC 1501.[17] I first consider the decision of the Court of Appeal in Roberts, including howit can be seen to comment indirectly on Baxendale-Walker. Although I do not endorseall aspects of Mr Beck's submissions, I conclude that the Tribunal has, in the way ithas exercised its costs jurisdiction on the basis of Baxendale-Walker, set the bar toohigh as regard costs orders in favour of practitioners who successfully defenddisciplinary proceedings.[18] For reasons which I express fairly briefly, I conclude the Calderbank principlesdo not apply in disciplinary proceedings as they do pursuant to the High Court Rules.On that basis, I decline what was in effect Ms Lagolago's application for indemnitycosts.[19] Applying what I consider to be the correct approach to the Tribunal's costsjurisdiction, I conclude that in these circumstances Ms Lagolago is not entitled tocosts.The cases[20] In Roberts, Mr Roberts appealed a High Court decision12 which declined togrant him costs in relation to his successful appeal against a Health Practitioner'sDisciplinary Tribunal decision in proceedings brought by a Conduct Committee. Indoing so, the Judge held that costs should only be awarded against a conductcommittee in the High Court if the successful applicant could establish a "compellingreason" for it to do so.13[21] In allowing the appeal, the Court of Appeal reasoned the fact ProfessionalConduct Committees perform a public function was not a sufficient reason to displacethe usual presumption under the High Court Rules that costs follow the event.14 TheJudge's approach was not justified on policy grounds, and was not supported byexisting authorities.15 But that was not to say that costs should always follow the event12 Roberts v Professional Conduct Committee of the Nursing Council of New Zealand [2-13] NZHC442.13 At [18].14 Roberts, above n 2, at [24].15 At [25].in those types of appeals.16 The fact that Professional Conduct Committees wereperforming a public function, and had an immunity at Tribunal level, were factors thatcould properly be taken into account in determining whether a costs award should bemade and, if so, in what amount.17 Taking the public function into account wouldeffectively mean that "something else" in addition to success might sometimes berequired before costs could be awarded to a successful applicant.18 Ultimately, thatwas a question of degree or emphasis.[22] Applying that approach to the case at hand, the Court concluded the fact theConduct Committee was performing a public function was not a matter of anyparticular significance.19 The appeal was a fairly routine one in which the appellanthad succeeded, and in fact had obtained the precise reduction in sentence that he hadsought in his notice of appeal.20 Costs were awarded against the Law Society on astandard basis in both the High Court and the Court of Appeal.21[23] Baxendale-Walker was not referred to in Roberts, no doubt reflecting the factthat Health Practitioners Disciplinary Tribunal has no jurisdiction to award costsagainst a Conduct Committee in favour of a successful practitioner.22[24] Before considering the differing propositions Mr Beck and Mr La Hood drewfrom the decision in Roberts as regards the relevance of Baxendale-Walker, it isnecessary to understand what that case is authority for.[25] Mr Baxendale-Walker was a solicitor who faced two allegations of conductunbefitting a solicitor. The first was dismissed, and he admitted the second. TheSolicitors Disciplinary Tribunal ordered that the Law Society should pay 30 per centof Mr Baxendale-Walker's costs. The Law Society appealed. The Divisional Courtapproached the issue on the basis that, absent dishonesty or a lack of good faith, a costsorder should not be made against a regulator unless there was a good reason to do so.2316 At [27].17 At [27].18 At [28].19 At [31].20 At [31].21 At [34] and [35].22 See Health Practitioners Competence Assurance Act 2003, s 101(1)(f).23 Baxendale-Walker v Law Society [2006] EWHC 643 (Admin).That reason must be more than that the other party had succeeded. The Court wasrequired to consider the financial prejudice to the particular complainant, weighedagainst the need to encourage public bodies to exercise their public functions withoutfear of exposure to undue financial prejudice. Taking that approach, the DivisionalCourt allowed the appeal. In the Court of Appeal, Mr Baxendale-Walker relied on thebroad terms of the costs jurisdiction of the Solicitors Disciplinary Tribunal. Thatjurisdiction is similar to that of the Tribunal under the Act. The general principle, thata regulatory body should not be required to pay costs in the absence of some impropermotive, or where the prosecution was wholly misconceived, was challenged as wrong.The Court of Appeal rejected that challenge. It reasoned:24 [its] regulatory function places the Law Society in a wholly differentposition to that of a party to ordinary civil litigation. The normal approach tocosts decisions in such litigation — dealing with it very broadly, the properlyincurred costs should follow the "event" and be paid by the unsuccessful party— would appear to have no direct application to disciplinary proceedingsagainst a solicitor.[26] Thus:25Unless the complaint is improperly brought, or, for example, proceeds as a"shambles from start to finish", when the Law Society is discharging itsresponsibilities as a regulator of the profession, an order for costs should notordinarily be made against it on the basis that costs follow the event. The"event" is simply one factor for consideration. It is not a starting point.(Footnotes omitted.)[27] Hence:26In our judgment, in agreement with Moses LJ, the Tribunal misdirected itselfwhen it ordered the Law Society to pay part of the solicitor's costs on the basisthat the first allegation against him had failed and that costs should follow theevent. This overlooked not only the public obligation of the Law Society, aswe have analysed it, but the additional fact that the solicitor brought theproceedings in relation to both allegations on himself. [28] As the Court of Appeal did in Roberts, in Baxendale-Walker theCourt of Appeal of England and Wales was emphasising that, in a regulatoryproceeding, the principle that costs would follow the event did not apply as it did in24 Baxendale-Walker, above n 4, at [34].25 At [39].26 At [40].ordinary civil proceedings. In effect, that principle would only apply where acomplaint was improperly brought, or a shambles from start to finish. Absent thoseor similar circumstances, a "good reason" would be required to awards costs. InRe Simes, however, the Tribunal summarised the principles that could be drawn fromBaxendale-Walker in the following way:27(a) a costs order should only be made against a regulator if there is a goodreason for doing so (e.g. the prosecution was misconceived, withoutfoundation, or borne of malice or some other improper motive);(b) success by the practitioner in defending a matter is not on its own agood reason for ordering costs against a regulator. In the context ofwhether costs should follow the event, the "event" is only one of anumber of factors to be considered; and(c) a regulator should not be unduly exposed to the risk of financialprejudice if unsuccessful, when exercising its public function.[29] In Re Simes, the Tribunal said the issue for it was whether there was"something extraordinary" about the proceedings against Ms Simes so as to call for anorder against the Standards Committee.28[30] This is not a correct summary of the Baxendale-Walker decision. What theTribunal appears to have done is to take the examples of circumstances where, ineffect, costs will follow the event, and make those circumstances examples of the"good reason" which will be required where those types of circumstances do not exist.In my view, in so doing the Tribunal has set the bar for an award of costs against theLaw Society too high. Where circumstances do not exist which, in effect, call for anaward following the event, the Tribunal is required to exercise its evaluative,discretionary, jurisdiction.[31] There, the "event", like the regulator's role, is only one of a number of factorsto be taken into account.[32] In my view, moreover, the Court of Appeal's decision in Roberts shows that inNew Zealand the fact the application is for costs against a regulator is not as telling a27 Re Simes, above n 10, at [38].28 At [47].consideration in the regulator's favour as would appear to be the case in the UnitedKingdom.29[33] In my view, therefore, the correct approach in New Zealand in disciplinaryproceedings where the relevant Tribunal does have a broad jurisdiction to award costsis that costs do not simply follow the event. The fact that a regulatory function is beingdischarged in the public interest is a relevant consideration, but is not determinative.Moreover, it sets the bar too high to (as the Tribunal would appear to have done todate) approach the matter on the basis that "something extraordinary" (for example, afinding of dishonesty, a lack of good faith, or that proceedings were improperlybrought or were a shambles from start to finish) must have occurred before a costsorder may properly be made against a Standards Committee. What is required is anevaluative exercise of the discretion provided by the Act.[34] In weighing the disincentive that an award of costs might be considered to giverise to, the Tribunal should also bear in mind that the Law Society, and hence StandardsCommittees, are funded by practitioners themselves through the levies the LawSociety as regulator imposes on the profession. Where an award of costs is properlymade against a Standards Committee, it falls to be paid by the profession. Over time,the acceptance or otherwise of the profession of the appropriateness of thosecompulsory levies will, in my view, act as a proper check on the way the Law Societydischarges its regulatory functions.The Calderbank rules[35] I am satisfied that, as Mr Beck submits, my judgment on Ms Lagolago's appealreflected the "offer" Ms Lagolago made in her settlement letter. But that is not to saythat the Calderbank rules apply accordingly. Those rules are a response to thepresumption in the High Court Rules that costs follow the event and, in effect, allowa defendant to redefine the event for that purpose. It follows that the outcomesprovided for by those principles do not, as a matter of course, apply when the Tribunal29 This is evident in later cases considering the decision in Roberts. See McCaig v A ProfessionalConduct Committee (No 2) [2016] NZHC 306 at [11] — "the mere performance of its statutoryfunction by a Professional Conduct Committee cannot, without more, be sufficient to disturb thefundamental principle that costs follow the event".exercises its costs discretion under the Act. Rather, such a letter, and indeed lessformal exchanges between a practitioner and the Law Society relating to the progressof disciplinary proceedings, may be relevant when the question of costs falls to beassessed.Outcome[36] Taking that approach there are, in my assessment, three principal factorsrelevant to the question of the proper award of costs in the proceedings before theTribunal:(a) First, and although she had recently successfully completed the LawSociety's litigation skills course, Ms Lagolago was clearly out of herdepth in the proceeding she took for the Fs. Judge Toohey's firmlyexpressed frustrations in the District Court reflect that fact. So therewere reasons for the Law Society, exercising its disciplinary functions,to be concerned.(b) By the same token, the Tribunal's own assessment of the reliability ofMrs F as a witness, and the reasonably obvious dynamic that existedbetween Ms Lagolago and Mrs F, should in my view have given theTribunal considerable cause to pause before reaching the decision itdid: that much is clear from my judgment in the substantive appeal.Moreover, that Mr Beck had in effect pointed that out in the settlementoffer letter he wrote is relevant.(c) Ms Lagolago's lack of experience as a litigator complicated theTribunal's task: the factual narrative she put before the Tribunal wasconfused and complicated, as was much of the evidence that had beenadduced on behalf of the Fs in the District Court. The time it took meto deliver my substantive judgment reflected the difficulties I had incoming to grips with that narrative. I was not greatly helped by the waythe facts were dealt with before me. In those circumstances,Ms Lagolago can be seen to have contributed to the unfavourabledecision of the Tribunal in a material way.[37] Taking all those factors into account, in my view it is therefore sufficient thatI quashed the costs order made against Ms Lagolago by the Tribunal. No awardagainst the Law Society in the Tribunal is called for.Costs on the stay application[38] That Ms Lagolago succeeded on appeal against the decision she soughtunsuccessfully to stay does not, in these circumstances, call for the costs order againsther on that stay application to be reversed. Rather, that order reflects the applicationof the principle that, in the High Court, costs follow the event.Costs on the High Court appeal[39] There is a small difference between Mr Beck and the Committee on the propercalculation of 2B costs on this appeal. That arises because Mr Beck claims .75 of aday for the hearing of the appeal. The appeal was set down for half a day. Mr Beckclaims the increased allowance on the basis that the hearing began at 9.30 am. I haveno recollection of that, but have no reason to doubt Mr Beck's account of matters. Onthe other hand, I do not think an early start is sufficient justification for anything morethan the half day the appeal was set down for, and which it took.[40] On that basis, the Committee is to pay costs to Ms Lagolago on her successfulappeal in this Court of $14,049.Costs on this cost application[41] As matters have transpired, I am not persuaded that costs on this costapplication should "follow the event". In effect, success is evenly divided betweenthe parties. Ms Lagolago has succeeded as a matter of principle, albeit not to theextent of disturbing the Tribunal's particular decision. In these circumstances, I amsatisfied that costs on this costs application should lie where they fall.________________________Clifford JSolicitors:Luke Cunningham Clere, Wellington for Respondent