WESTPAC NEW ZEALAND LIMITED (1763882) V NGA URI WHAKATIPURUNGA O NGARAE (INC.) HC AK CIV 2008-404-007298 21 August 2009

WESTPAC NEW ZEALAND LIMITED (1763882) V NGA URI WHAKATIPURUNGA O NGARAE (INC.) HC AK CIV 2008-404-007298 21 AUGUST 2009 21 August 2009IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY CIV 2008-404-007298 CIV 2009-404-001172IN THE MATTER OF Application to remove caveat number 7876772.1 pursuant to section 143 of the Land Transfer Act 1952 BETWEEN WESTPAC NEW ZEALAND LIMITED (1763882) Applicant AND UNDER Land Transfer Act 1952 IN THE MATTER OF Application to remove caveat numbers 7865366.1, 7865371.1 and 7865371.2 pursuant to section 143 of the Land Transfer Act 1952 AND NGA URI WHAKATIPURUNGA O NGARAE (INC.) Respondent Hearing: 19 August 2009 Appearances: E Gellert for the Applicant T Darby for Non Party (S Fonua) Judgment: 21 August 2009JUDGMENT OF ASSOCIATE JUDGE CHRISTIANSENThis judgment was delivered by me on 21.08.09 at 4:00pm, pursuant to Rule 11.5 of the High Court Rules. Registrar/Deputy Registrar Date[1] This hearing concerns an application by Westpac for an order that Mr Fonua pay its costs in the outcome of these two matters. Each was concerned with applications to remove caveats registered on behalf of the respondent (Ngä Uri). Mr Fonua acted for Ngä Uri when the caveats were registered. He signed the caveats as Ngä Uri's duly authorised agent. [2] The application under CIV 2008-404-7298 (the Hapeta proceeding) was heard by Associate Judge Robinson on 24 November 2008. In the outcome Ngä Uri's caveat over a property owned by Mr Hapeta was ordered to be removed. Westpac's costs were ordered to be paid on a category 2B basis but Associate Judge Robinson reserved leave for Westpac "to seek any further directions with regard to costs in the event of there being any problems on enforcement because Ngä Uri was not currently a society incorporated under any statute of New Zealand". [3] The application under CIV-2009-404-1172 (the Dorbu proceeding) was heard by me on 16 March 2009. I too made an order for the removal of Ngä Uri's caveats over three properties owned by a Mr John Dorbu. Concerning costs, I directed these be dealt with upon memoranda to be filed. [4] Mr Fonua is the principal of a general law practice in Auckland. He is not a litigation lawyer. On or shortly before 1 July 2008 Mr Kevin Bluegum attended Mr Fonua's offices. Mr Fonua had not previously acted for Mr Bluegum or for Ngä Uri. I infer Mr Bluegum brought with him a number of (not less than seven) agreements for sale and purchase completed by Ngä Uri as purchaser. A copy of one only has been exhibited in the material provided to the Court. That was for the purchase of Mr Hapeta's property in Rotorua. [5] There is no evidence that Mr Fonua had acted for any party in relation to negotiations leading to the execution of those agreements. Mr Fonua asserts he was asked to act for Ngä Uri on the purchases which provided for deferred settlements. He said that in accordance with usual practice he registered caveats in the standard form to protect the interests of the purchaser until settlement. Mr Darby asserts MrFonua would have charged between $100.00 - $200.00 for fees in connection with the registration of each caveat. [6] These caveats were registered by paper dealing (a term to be distinguished from eDealing, the significance of which difference will be explained when reviewing the expert evidence). [7] The caveats over the Dorbu properties were registered on 1 or 2 of July 2008. The caveat over the Hapeta property was registered on 14 July 2008. [8] It is concerning these events just described, but also in some part due to the role, if any, Mr Fonua played in the events leading to the disposal by litigation of the proceedings to remove those four caveats that, Westpac claims, justifies its application that Mr Fonua pay their costs. [9] In the outcome of the Hapeta proceeding (dealt with by Associate Judge Robinson) a costs order was made in the sum of $9,787.50 inclusive of disbursements. Likely a similar sum will be calculated to be payable on a category 2B basis in the outcome of the Dorbu proceeding. Ms Gellert advises Westpac is not seeking increased or indemnity costs from Mr Fonua, rather an order that he pay the costs which ordinarily would otherwise have been payable.The issues - overview[10] They appear plain enough:• By what standard or criteria could or should the Court assess whether these are proper cases for Mr Fonua to be ordered to pay the costs which otherwise would have been paid by Ngä Uri.• In the circumstances of the case, is it appropriate to order Mr Fonua to pay those costs.[11] Fundamental to the issues which arise is Westpac's claim that Ngä Uri was not an incorporated society, a fact which Westpac claims Mr Fonua should have ascertained prior to registering caveats on Ngä Uri's behalf. Westpac asserts that because Ngä Uri was not an incorporated society it was incapable of claiming an interest in land and, it follows, had no legal basis to lodge a caveat in support of such claim. [12] An issue raised on behalf of Mr Fonua in opposition, concerns whether an Associate Judge has jurisdiction to make an order for costs. Upon this Mr Darby's point is that whilst unquestionably an Associate Judge has an inherent jurisdiction to make costs orders an Associate Judge does not have power under s 146(1) of the Land Transfer Act 1952 to award compensation because s 26(I)(1)(c) of the Judicature Act 1908 does not extend an Associate Judge's jurisdiction to deal with s 146 Land Transfer Act matters. [13] Therefore Mr Darby says the test of "no reasonable cause" under s 146 cannot and ought not to be applied when reviewing Mr Fonua's actions in this case. Those actions he said ought to be judged by the standard of whether or not there has been a "serious dereliction of duty". [14] A further issue raised in opposition concerns Westpac's claim that Ngä Uri had no status to lodge a caveat. Mr Darby submits there is authority to show Ngä Uri may indeed possess that right. [15] I will now deal with the particular circumstances of the two proceedings in order to highlight Mr Fonua's degree of participation with each from that time Ngä Uri's caveats were lodged.CIV 2008-404-7298 - the Hapeta proceeding[16] This matter concerned a single property in Rotorua. Mr Hapeta was the registered owner. Westpac held a first registered mortgage over the property as security for advances made under a loan agreement dated 21 June 2006 and varied on 9 May 2007.[17] As a consequence of mortgagor default Westpac served a Property Law Act notice on 25 February 2008. Exercising its power as mortgagee Westpac entered into an agreement to sell the property. Settlement was scheduled for 8 October 2008. [18] On 14 July 2008 Ngä Uri lodged a caveat against the title. It stated the following interest claimed in the property:"As purchaser pursuant to an agreement for sale and purchase dated 30 June 2008 between the caveator and [Mr] Hapeta, the registered proprietor, as vendor."[19] The property was due for mortgagee auction on 16 July 2008. Before then Ngä Uri sent a facsimile to Westpac, it asserted:"Firstly, there is no mortgage on the title to the property and you are not allowed by law to sell it. Secondly, the land is Maori Land and issued Maori Title. Your attention is drawn to s 343 of the Te Ture Whenua Maori Act 1993 which prohibits sale of Maori Land in an enforcement of debt. You are hereby notified to desist from doing anything by yourselves or your agents from selling the Land. Your failure to comply with this prohibition will constitute a statutory infraction in terms of the aforementioned provision of the Te Ture Whenua Maori Act with far reaching repercussions for Westpac and/or its agents."[20] The letter bore the signature of a Mr Wilhaus above the title "Chairman, Ngä Uri Whakatipurunga O Ngärae (Inc.)". The letter also bore a common seal resembling the New Zealand Coat of Arms encircled by Ngä Uri's full name. [21] In an exchange between Westpac's solicitors and Ngä Uri thereafter Ngä Uri made it clear that any attempt to sell the land would be resisted. The auction at that time did not proceed. The land was sold by Westpac subsequently. Settlement was delayed due to Ngä Uri's caveat, hence the application for removal of the caveat. That application was filed on 5 November 2008. It was served on Mr Fonua because his office had acted at the time the caveat was lodged. [22] A notice of opposition to that application was filed on 13 November 2008. The notice noted Mr Fonua's office as the address for service with Mr John Dorbu as instructed counsel.[23] The grounds for opposition included, inter alia: a) Westpac have provided no or no valuable consideration for its mortgage. In particular it did not provide any monies to Ngä Uri in the form of bank notes. Therefore the registered mortgage is invalid. b) The registered proprietor is Mäori and a member of Ngä Uri incorporation. The property was vested in Ngä Uri pursuant to part 13 of the Te Ture Whenua Maori Act 1993. c) It was in the interests of justice that the caveat remained in place. d) The Land is Mäori freehold land pursuant to s 129 of the Te Ture Whenua Maori Act and the Court with the proper jurisdiction over the matter is the Mäori Land Court. A transfer to the Mäori Land Court was requested. [24] Affidavits in opposition were sworn by a Mr Sadiq and a Mr Wright. Mr Sadiq stated he was a member of Ngä Uri and a "manager of the construction arm of the incorporation". He said Ngä Uri challenged the mortgage and said it was not supported by consideration because it does not show what in fact it had provided for its mortgage. He said as the Land was Mäori freehold land it could not be sold without special consent from the Mäori Land Court. [25] Mr Wright stated he was Chairman of Ngä Uri which he described as "a Mäori Tribal Entity based in Katikati, Bay of Plenty". He said his use of the reference "Mäori Tribal Entity" meant a "Mäori social organisation characterised by common decent and ancestral history, laws and institutions conforming to Tikanga Mäori". He too states dealings with the Land could only be made by order of the Mäori Land Court. He also stated:"I apprehend that many ordinary people in New Zealand do not understand Mäori Tribes nor their existence in New Zealand law. I state with confidence that Mäori Tribes are integral to the maintenance and enjoyment of Mäori culture, the right to which is recognised in the New Zealand Bill of Rights Act 1990 at section 20. [Ngä Uri] is a Mäori Tribal Entity with an official seal and is much more than a club that may be formed and unformed by an act of Parliament. We are a body politic that, because of history, historical association with our place and an accumulated social and cultural facilities we exist as a corporate entity in an inherent capacity."[26] In response Westpac filed an affidavit evidencing the drawdown of the funds advanced to Mr Hapeta. In reply Mr Hapeta swore an affidavit in which he claimed that he had paid all the debts secured by the mortgage and had instructed his solicitors to discharge the mortgage. He believed the mortgage had been discharged and that Westpac was aware of that fact. As to a certificate from the Mäori Land Court confirming that Westpac's mortgage was an instrument of alienation and therefore was valid and registered over the title to Mr Hapeta's Mäori freehold land, Mr Hapeta responded that he had never seen that document previously. He stated he believed the Registrar of the Mäori Land Court had been misled by the bank to issue the certificate. [27] Following a defended hearing Associate Judge Robinson granted Westpac's application. Issues raised by Mr Hapeta were dismissed as unsupported by evidence. The Learned Judge's finding that the land in question was subject to the provisions of the Land Transfer Act, effectively disposed of Ngä Uri's other objections. [28] The issue of costs was dealt with in the manner I have described in paragraph 2 herein.CIV 2009-404-1172 – the Dorbu proceeding[29] This application concerned caveats registered by Ngä Uri over two properties in Tokoroa and one in Auckland. Westpac's first ranked mortgage was registered over the Tokoroa properties on 18 October 2008. Its first ranked mortgage was registered over the Auckland property on 13 June 2007. The mortgagor and registered proprietor of those properties was noted as Dorbu John Evans Yawo (also known as John Dorbu). [30] Ngä Uri's caveats were registered on 1 or 2 July 2008.[31] In consequence of the mortgagor's default of his loan obligations Westpac served Property Law Act notices on 15 October 2008. [32] On 12 February 2009 Westpac entered into sale and purchase agreements in relation to the Tokoroa properties. Settlement of those were scheduled to take place on 12 March 2009. [33] On 16 February 2009 Westpac entered into an unconditional sale and purchase agreement in respect of the Auckland property. Settlement of that agreement was scheduled to take place on 18 March 2009. [34] Each of the caveats claim the following interest in the three properties:"As purchaser to the agreement for sale and purchase dated 20 June 2008 between the caveator and John Evans Yawo Durbo, the registered proprietor, as vendor."[35] The application for removal of caveats was filed on 6 March 2009. I heard the applications on 16 March 2009. As my judgment noted Mr Bluegum appeared on behalf of Ngä Uri. He described himself as a native assessor and a shareholder of Ngä Uri. I summarily dismissed the opposition to Westpac's application. I noted the Land in question was general land registered pursuant to the Land Transfer Act 1952.The application that Mr Fonua pay the application costs[36] Westpac says it has been determined that notwithstanding the use of "Inc." in its name, Ngä Uri is not an incorporated society under any statute in New Zealand. Reference is made to the decision of Associate Judge Abbott in Ngä Uri Whakatipurunga O Ngärae (Inc.) v Marac Finance (High Court Auckland), CIV 2008-404-6180, 9 December 2008. It says two particular consequences arise from this: a) Ngä Uri was never capable of having an interest in land pursuant to a sale and purchase agreement.b) In the event the costs are awarded in favour of Westpac, it has no ability to enforce that costs order against Ngä Uri. [37] Concerning Mr Fonua's connection, Westpac asserts: a) Mr Fonua lodged the caveats in both the Hapeta and Dorbu proceedings as agent for Ngä Uri. b) Because Ngä Uri is not an incorporated society it cannot enter into a contract for the sale and purchase agreement of land, or possess any interest in the land. c) Mr Fonua acted as solicitor for Ngä Uri in both proceedings at the time the caveats were lodged. He must have (or should have) known that the caveats were never sustainable and so there was no reasonable basis for lodgment. d) The Court has an inherent jurisdiction to award costs against lawyers personally in the public interest of the administration of justice, intended either to compensate the applicant or sanction the lawyer, or both: see McGechan on Procedure, HRP 14.12(3). e) It is in the public interest to avoid solicitors lodging caveats in circumstances where there was no justification for the interest claimed and no practical ability to sanction a caveator by ordering costs. The consequences of such caveats are: i) Unnecessary attendances and costs in dealing with the lodging and removal. ii) Unnecessary Court resources spent on removal of the caveats. iii) Prejudice to the registered proprietors in relation to the property sale of the caveated property, and the increase incosts secured by the mortgage security arising from removal of the caveats. iv) Delay to purchases on settlement while caveats are removed. v) Increased losses to mortgagees if shortfalls are not recoverable from the mortgagor. vi) Reduced confidence in the legal profession. [38] Ms Gellert for Westpac submits:• An award of costs is at the discretion of a Court where it relates to the costs of the proceeding, incidental to a proceeding, or of a step in a proceeding – High Court Rule 14.1. A starting point is that costs should follow the event – High Court Rule 14.2 (a).• It is clear from the decision of the Court of Appeal in Gordon v Treadwell Stacey Smith [1996] 3 NZLR 281 that the phrase "any person lodging any caveat" is not restricted to the caveator and may include solicitors executing caveats as "duly authorised solicitor and agent".• That the foundation for reasonable cause must be an honest belief based on reasonable grounds that the caveator has a sufficient interest to justify lodgment.• A twofold enquiry should be undertaken:- a subjective enquiry as to whether an honest belief was held by the party that lodged the caveat and that there were reasonable grounds for an interest being claimed.- an objective enquiry as to reasonableness, to be judged by the standards of a reasonable conveyancing practitioner possessed of the factual material available to the solicitor whose action in lodging a caveat is under scrutiny and advising and acting in the same circumstances. [39] Ms Gellert submits that if a solicitor has doubt as to whether a caveat can be properly lodged he/she should: a) Record the advice in writing and seek an indemnity from the client; or b) Arrange for the caveat to be personally signed and lodged by the client caveator. c) Where a solicitor lodges a caveat without knowing whether, or enquiring whether there is a caveatable interest to be protected, that failure may constitute a breach of Rule 2.3 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008. Further, s 146(1) of the Land Transfer Act provides:"Any person lodging any caveat without reasonable cause is liable to make any person who may have sustained damage thereby such compensation as may be just."[40] Concerning the Court's ability to award costs against a solicitor Ms Gellert cites the authority of the Privy Council in Harley v McDonald [2002] 1 NZLR 1 where it was stated:"The undoubted inherent jurisdiction of the Courts in New Zealand to make a costs order against a client's solicitor rests upon the principle that, as officers of the Court, solicitors owe a duty to the Court, while the Court for its part has a duty to ensure that its officers achieve and maintain an appropriate level of competence and do not abuse the Court's process."[41] Westpac's case is supported by an affidavit from Mr T Jones solicitor of Auckland. He has been a partner of his law firm since 1980 and he heads the firm's land development and property team. He has been a member of the executive of the New Zealand Law Society, Property Law Section. As a member of the AucklandDistrict Law Society's Forms Committee for many years he has been involved with the drafting of the standard agreement for sale and purchase. [42] He deposes that a competent solicitor taking instructions from a new client purchasing a property and receiving instructions to lodge a caveat would: a) Receive and review the agreement for sale and purchase. b) Search the register to ensure the vendor named on the agreement is in fact the registered proprietor of the land. c) In the case of an individual, the named purchaser should be asked to present themselves and to provide photo identification. In the case of companies or similar entities e.g. incorporated societies, the solicitor should check the register to ensure that the name is the same as that on the agreement for sale and purchase and to ensure the company/entity is in fact a registered entity. d) With LandOnline providing virtual instance access to the land register and with the Companies Office website providing instance access to the Companies Register and the Incorporate Societies Register, searching is quick and simple in the matter of general conveyancing practice. e) Client identification has become an important cornerstone of conveyancing practice, in part because of the frequency of fraud on lenders that has occurred over the last several years. f) The agreement for sale and purchase should be analysed to determine whether it is valid and binding and would sustain a caveatable interest. Although an agreement for sale and purchase per se will sustain a caveatable interest, if there is some irregularity in the nature of the agreement on the face of it there may be need for further enquiry.g) This enquiry would require discussions with the client, if concerns arose about the sustainability of the caveat. [43] Mr Jones expresses the view that a competent solicitor now has a duty in the context of a conveyancing practice to identify the client by whatever means possible. By July 2008 all mortgages and transfers had to be registered by eDealing which required the transferee and the mortgagor to be formally identified for the purposes of the authority and instruction necessary for the solicitor to certify and sign those documents. Whilst in July 2008 caveats could only be registered by paper dealing from September 2008 there was an option to register caveats electronically through eDealing. From February 2009 eDealing was mandatory for caveats. In the registration of caveats by eDealing there is a certificate to be signed by the solicitor that states:"(a) I certify that I have authority to act for the caveator and that the party has a legal capacity to authorise me to lodge this instrument. (b) I certify that I have taken reasonable steps to confirm the identity of the person who gave me authority to lodge this instrument."[44] Mr Jones says that by July 2008 client identification had become common practice. He said the role of the solicitor in the processing of lodging a caveat is central and the responsibility that comes with this role is significant. Therefore "a heavy onus is placed upon solicitors to ensure that both signing a caveat on behalf of a client and lodging a caveat for registration on behalf a client are done after due consideration and is not done without cause." [45] Mr Jones says that Mr Fonua appears to have forgotten to carry out what he considers were a series of primary standard checks to discharge his responsibilities as a solicitor to ensure that the caveat was sustainable. He said Mr Fonua should have asked himself whether the agreement created a caveatable interest. He said this would require more than just a cursory review of the agreement – it required analysis of the agreement and in-depth discussion with the client before the solicitor can be seen to be discharging his duty to ensure that he is not lodging a caveat "without reasonable cause". Upon his review of the Hapeta agreement some irregularities were evident.• The agreement for sale and purchase was the standard ADLS/REINZ Agreement 8th Edition 2006 and it is unusual for it to be presented by a client without either being drafted by a lawyer or real estate agent because the form is not generally otherwise available.• The agreement for sale and purchase was in fact an out of date edition of that form.• The agreement was hand-written which is unheard of for solicitors drafting agreements and there was no agent referred to in the agreement. That is itself is somewhat unusual.• The form was signed by the purchaser under a seal which on the face of it looks official "but the most obvious thing about the seal is that what appears to be the New Zealand Coat of Arms or a very close resemblance to that Coat of Arms".• The signature of the person signing the seal of the purchaser is indecipherable and does not contain the authority or status of the person signing.• It is unusual for an incorporated society to only have one signatory on a common seal.• Mr Fonua was apparently instructed to lodge a caveat, not something that the average lay person is inclined to do. [46] Although Mr Fonua's instructions were to search the title and lodge the caveats, in Mr Jones' view Mr Fonua had a primary duty to discharge first before registering the caveat and that was to make due inquiry about the client and the nature of the transaction, which he believed Mr Fonua failed to do.Opposition to the application for costs[47] Mr Fonua says he has practised as a solicitor for more than 20 years during which time he has handled many property transfers and conveyancing transactions. He is aware that in the circumstances as presented to him, it is the normal and prudent practice to register caveats and those caveats are commonly signed by the solicitor on behalf of the client. He said this is the practice he adopted and throughout he acted in good faith. [48] Mr Fonua states he was surprised to learn (in late September 2008) that Ngä Uri was not a properly incorporated society. He had not previously acted for it or for its instructing officer Mr Bluegum. He had not been instructed to carry out any searches of Ngä Uri (as distinct from searches of the titles to the properties) nor did anything occur which made it necessary for such searches to be carried out. He understood Mr Bluegum to be knowledgeable about Ngä Uri's affairs and had no reason to suspect it was not a properly registered incorporated society. The agreements for sale and purchase had been executed before he was instructed. They had been executed under seal which clearly indicated that Ngä Uri was incorporated. The name of the purchasers in the agreements is exactly the same as on the seal. [49] Mr Fonua notes that whilst a solicitor may sign and file a caveat on behalf of a caveator, only the caveator can complete a withdrawal of caveat. He says that under the comparatively new system for registering land transfer documents electronically an A&I (Authority and Instruction) form is not required for a caveat although it is required for other documents including transfers and mortgages. Had an A&I form been required for caveats, or if it was standard practice to obtain them for caveats then the status of Ngä Uri would no doubt have been discovered before registration of the caveats was effected. [50] Once he was alerted to the fact that the society was not properly registered he sought to have the problem remedied but the client declined to do as he suggested. Therefore he ceased to act for Ngä Uri and/or Mr Bluegum.[51] Mr Fonua denies any wrongdoing which should justify him having to pay costs. He believes that in the circumstances he acted as most conveyancing practitioners would have. [52] Mr Fonua's case is supported by the affidavit of Mr R V Eades who has practised as a lawyer since 1956. He says a substantial part of his practice relates to property transactions. Mr Eades was a member of the Council of the Auckland District Law Society from 1978 to 1988 and was its President in 1987/88. He was a member of the Council of the New Zealand Law Society from 1984 to 1989 and in 1988/89 was Vice President of that Society. As a member of the New Zealand Law Society he was actively involved in the preparation of the former Rules of Professional Conduct. He has on occasions lectured in ethics at the University of Auckland. His experience includes being a member for nine years from 1993 of the Management Committee of the Solicitors Fidelity Guarantee Fund. Since 1999 he has been a presenter and assessor of the ethics component of the New Zealand Law Society's Trust Account partner (now supervisor) training course. [53] Although Mr Eades has read all relevant documents relating to both matters he says he is at somewhat of a disadvantage as Mr Fonua is, by having no full knowledge of the events between January 2009, when he understood Mr Fonua ceased acting for Ngä Uri or its representatives, and the filing of Westpac's counsel's memorandum dated 12 March 2009. [54] He says from the papers he has seen it appears: a) Mr Fonua received instructions from Mr Bluegum to act on the contracts for purchase from Mr Dorbu. b) Mr Bluegum stipulated the name Ngä Uri to Mr Fonua. c) The contracts concerned have been prepared in the name of Ngä Uri, and appeared to have been properly drawn and executed.d) In particular they were executed under a seal giving a name of Ngä Uri which matched the purchaser's details. e) Settlement was not to be effected until much later – on 12 December 2008 in the case of the Auckland purchase and 27 February 2009 in the case of the two Tokoroa properties. [55] Nothing that Mr Fonua's instructions were to search the titles and lodge the caveats, Mr Eades states he does not believe that a lawyer in Mr Fonua's position needed at that stage to make a further enquiry about the status or identity of purchaser. The vendor had been prepared to contract with Ngä Uri. The caveat was to be lodged in the name of Ngä Uri. While, when title was to be taken at settlement, a lawyer might well have searched the Incorporated Societies' register, that was not necessary at the time of lodging the caveats. He said a lawyer searching the register would be impelled probably by doubt about the correct name of the purchaser rather than any reason to doubt that the purchaser actually existed as a legal entity. He or she might well have assumed that the vendor had ensured that the purchaser had legal status. [56] Noting that a lawyer needs to have reasonable cause to lodge a caveat and certainly to sign it on behalf of the caveator, in his view a lawyer of Mr Fonua's position did have reasonable cause to lodge the caveats without searching the register unless there was some circumstance which should have caused him or her to reflect and then to search the register. [57] Mr Eades adds that the vendor was content to enter into the contracts with Ngä Uri, and having been served with notice of the caveats, the vendor did not question them. [58] Mr Eades hypothesises what might have occurred had Mr Fonua become aware that Ngä Uri was not an incorporated body before lodging the caveats. A number of possibilities occurred to him:a) Mr Bluegum might have approached the vendor to have himself or other members of his group substituted as purchaser. He could have informed Mr Fonua that "Ngä Uri" was a reference to the unincorporated group, named its members and instructed him to act on their behalf. He might have asserted that, as signatory to the contract, he held some representative or trustee status. b) A lawyer in Mr Fonua's position would have seen the need to protect the interest of whoever the purchaser might be and have lodged the caveats in the names of the members of the unincorporated group or in the name of Mr Bluegum himself as representative of or trustee for the true contracting party or parties. c) The lodging of the caveats was an event which could well have occurred had a "real person" been the purchaser or had Mr Bluegum or his associates asserted that they were in fact Ngä Uri. d) The need for Westpac to remove the caveats resulted from its mortgagor entering into contracts for sale and would likely have come about irrespective of the fact that Ngä Uri was not an incorporated body. [59] Mr Eades states that Westpac must have realised, as soon as it decided to exercise its power of sale, that any caveats would need to be removed before any sale could be settled. Its solicitors knew at least by 28 January 2009 that he was no longer acting for Ngä Uri. They would be aware particularly that he did not have written authority to withdraw the caveat for which section 147 of the Land Transfer Act provides. A lawyer in their position should have seen the need to consider in good time the steps which would be necessary to remove the caveats. Westpac had available to it the procedure set out in section 145A of the Act of applying to the registrar for the caveat to lapse in consequence of which the registrar would deliver the appropriate to the caveator. That procedure would put the onus on the caveator of sustaining the caveat as opposed to the s 143 procedure where the applicant has the initial burden. He notes that the s 145A procedure is simpler and less expensive.He says that the costs that were incurred in these two matters largely resulted from the course taken and appearances made by Mr Bluegum and others. Mr Fonua could not control what they did. Nor does Mr Eades think that a lawyer in Mr Fonua's position could have foreseen when he lodged the caveats that any attempt to sustain them would rest on other than accepted caveat principles. He notes that while Westpac's counsel attributes all of the claims of costs to Mr Fonua, he comments that those same costs and delays would have resulted had the caveats been lodged in the name of Mr Bluegum or any other contracting party. [60] Mr Eades does not accept Mr Fonua acted without cause, far less recklessly. He believes "it must draw a long bow to assert that he has reduced confidence in his profession".Considerations[61] I earlier highlighted that Westpac's claims focus upon Mr Fonua's activities in lodging the caveat, but also by his subsequent conduct. That subsequent conduct includes assisting Mr Hapeta in responding to Westpac's request to remove the caveat. It also includes the fact that Mr Fonua was to an extent connected to the opposition of Westpac's application to this Court to remove the caveat over the Hapeta property (the Hapeta proceeding). There is no suggestion or evidence that Mr Fonua acted for Ngä Uri in the Dorbu proceeding. [62] The issue has significance in this case because of the considerations that ought to apply when reviewing Mr Fonua's actions as a conveyancing practitioner as opposed to reviewing his conduct in connection with allegations that he was connected to the conduct of the defence of the Hapeta proceeding. In that latter respect Mr Fonua may be liable to rules and considerations affecting lawyers who misconduct litigation. Such would focus upon a lawyer's duty to the Court and considerations of a public interest. The former would invite a comparison of the professional services provided with those which reasonably should have been. [63] Of the latter, that concerning litigation misconduct, case law authority refers to a relatively high threshold level. In Myers v Elman [1940] AC 282 ViscountMaughan "indicated that the test was whether the conduct amounted to a serious dereliction of duty, and that negligence could be so described if it was at a sufficiently high level". Lord Atkin described the kind of negligence that could lead to an exercise of the jurisdiction as gross negligence. Lord Wright said that "while a mere mistake or error of judgment is not generally sufficient, a gross neglect or an inaccuracy in the matter which was a solicitor's duty to ascertain with accuracy, such as whether he had a retainer to act, might suffice". [64] Ms Gellert submits that there can be no clearer example of a serious dereliction of duty or gross negligence or inaccuracy than apparent from a lawyer who purports to act for someone/body that does not exist. [65] I ascribe their Lordship's references to "solicitor" actions undertaken in New Zealand as a reference to services provided in litigation. It is in litigation or in relation to the process that involves that concepts of duty, obligation, public interest, and abuse of Court process are identified. It is different, I think to the way in which obligations of professional responsibility are assessed by reference to the rules of the Lawyer and Conveyancers Act, or indeed breaches of the standard created by s 146 of the Land Transfer Act. [66] The case of Harley concerned a claim regarding actions of a barrister during a Court trial. In that case the Court held that the test for the kind of conduct which constituted a serious breach of duty to the Court involved more than a simple mistake or oversight. Rather, it required gross neglect or inaccuracy in a matter which a lawyer had to ascertain with accuracy, or incompetence which led to a waste of the Court's time or some other abuse resulting in avoidable costs. And, when negligence or incompetence was alleged care had to be taken not to assume that because a case appeared hopeless there had been a failure by a barrister or solicitor to achieve the appropriate level of competence or care. [67] By contrast in Gordon, the Court of Appeal when considering a claim against a solicitor under s 146 for compensation for a lodgement of a caveat without reasonable cause, it held that a solicitor's potential liability ought to be judged by the standards of a reasonable conveyancing practitioner possessed of the factual materialavailable to the solicitor whose action in lodging a caveat was under scrutiny and advising and acting in the same circumstances (p 287 – 289). The Court stated:"Where the solicitor acts on the basis of incomplete information and it cannot be said that in the circumstances the solicitor ought to have taken enquiries further, there would be no liability." And further: "The liability of each person who participates in the lodgement of a caveat as an agent (solicitor, solicitor's client or registration agent) is to be examined separately and will depend upon what they knew or ought to have known of the facts and whether from their viewpoint the lodgement was done honestly and with reasonable cause." (p288)[68] Obviously in matters not connected to litigation a solicitor can act in a manner where principles of public interest and the administration of justice may be affected. In the present case I make a distinction between principles of those kinds and the actions complained of by Mr Fonua's lodgements of caveats as a duly authorised agent of the caveator. Mr Darby says I do not have jurisdiction with s 146 matters – therefore I should ignore considerations of "without reasonable cause". He says I should only apply a standard of "serious dereliction of duty". Regardless, I am of the view that complaints concerning Mr Fonua's actions do not breach the standards of either test. [69] To the extent there was any fault at all when the caveats were lodged it relates to Mr Fonua's failure to check Ngä Uri's status by reference to a number of registers available online. An affidavit from Westpac's solicitors reports of an enquiry with the Mäori Land Court. It disclosed some 13 references to an entity registered with the Court under the name of Ngä Uri Whakatipurunga, but none with the identification of "O Ngärae". [70] The fact that two eminent practitioners of law in Auckland should expound upon but nonetheless disagree concerning Mr Fonua's actions, is I think significant. If I have an observation about the opinion of Mr Jones it is, I believe, a hindsight viewpoint. But, his assessment of "irregularities with the agreement on the face of it" concern me. He assumes:• The printed form of the sale and purchase agreement was not obtained from regular sources – but there is no evidence of that.• Because the agreement for sale and purchase was an out of date edition – but would a conveyancing lawyer be aware of that when handed it as in the circumstances Mr Fonua received his?• Because it was hand-written it was drafted by the parties – but agreements from land agents are regularly hand-written; and there should be nothing irregular about a document which has not been drafted by a solicitor.• That the purchaser's seal resembled the New Zealand Coat of Arms – but why should a solicitor be suspicious about that?• That the signature of the person signing the seal is indecipherable and does not contain reference to the person's authority or status – but there is no evidence that this should be cause for alarm.• It is unusual for an incorporated society to have only one signatory on a common seal – but that it is unusual should not of itself cause concern for suspicion.• Because Mr Fonua was instructed by the client to lodge a caveat – but that should indicate only that Mr Fonua was not asked to provide advice regarding whether he should do so or not. [71] Rule 2.3 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 provides that a lawyer must use legal processes only for proper purposes. A footnote to that rule records that examples of the breaches of the rule might include:"Registering a caveat on a title to land knowing that (or failing to enquire whether) there is a "caveatable interest" on the part of the client to be protected."[72] My assessment of Mr Fonua's actions by reference to his obligation pursuant to the Lawyers and Conveyancers Act Rules 2008 is judged by the following: a) He received instructions from a Mr Bluegum bearing documents that at face value certainly indicate authenticity. b) Mr Bluegum directed caveats be filed to protect his society's purchaser's interest. c) The documents appeared authentic and described a caveatable interest which more than any other was less likely to give cause for question or concern. d) Mr Bluegum was a real name. The contact details he gave, which were provided to the Court by the documents lodged in the Dorbu proceeding, were real. e) If the antics of Ngä Uri, Mr Bluegum, Mr Wright and others can now be labelled as improper, illegal or nefarious (for reasons described in a warning notice from the Commerce Commission dated 23 June 2009), there can be no reason at all to associate Mr Fonua with knowledge of that or of the intentions of the persons/bodies he dealt with. Regardless, there can be no doubt but that by the services provided before me by Mr Bluegum, and before Associate Judge Robinson by Ngä Uri's barrister Mr Dorbu, that Ngä Uri and its followers appeared sincere although misguided in the virtue of their cause. [73] On 23 September 2008 solicitors acting for another mortgagor, Marac, wrote to Mr Fonua and to counsel Mr Dorbu with advice that Ngä Uri had no recognisable legal entity. Mr Fonua responded:"Your tactic of bullying and threat is unprofessional. The Maoridom has customary rights which derive from the Treaty of Waitangi not from Act of Parliament. The Westminster model and the doctrine of Supremacy of Parliament are arguably subject to the Treaty of Waitangi. It is about time that this kind of legal argument should bepresented in court. This is in accordance with the Mäori jurisprudence which has been pushed aside for over 100 years. Everyone is entitled to argue its case in a Court of Law and it should not be subject to the fear of legal costs. "[74] Mr Fonua took not part in the Dorbu proceeding. By his own evidence he refused to act. Mr Bluegum appeared, having earlier filed his own form of opposition to Westpac's application for removal of caveat. Although documents were filed in opposition to the Hapeta proceeding which bore Mr Fonua's address for service, it appears clear Mr Fonua's services were confined to providing an address for service because the active control of the case in opposition was with Mr John Dorbu, Barrister. [75] In the circumstances described I do not accept there has been a failure for reasonable cause to file the caveats that Mr Fonua did as Ngä Uri's duly authorised agent. It was an event in the time of paper dealing rather than in eDealing and before eDealing certifications and undertakings were prescribed. Mr Jones considers the advent of eDealing had not imposed anything other than what was before then considered proper practice. But, proper practice needs to be considered in the context of actual fact. In that context, presented with signed agreements for sale and purchase which on their face undoubtedly appeared genuine, Mr Fonua was instructed and did accept an obligation to register caveats to protect a purchaser's interest. [76] It would be unfortunate if in that assessment Mr Fonua should be required to indemnify a mortgagee for the consequences of the events which followed, which were not expected, and which were not within his control. [77] By any standard I do not consider Mr Fonua has breached his professional obligations to an extent he should be accountable by an award of costs against him. In that outcome it is not necessary for me to decide whether an Associate Judge has authority under s 146 of the Land Transfer Act to make an award. Probably, Mr Darby is correct in his submission. That would not have prevented me frominvoking the High Court's inherent jurisdiction to award such costs as I considered appropriate. [78] I am inclined to the view of Mr Eades that in the circumstances there was no need to make further inquiry at the initial stage about the status or identity of Ngä Uri. Rather that Mr Fonua did have reasonable cause to lodge the caveats without searching the register in the absence of some circumstances that should have given him cause for reflection. [79] The case of Gordon concerns a law firm's activities in a deliberate cause for improper purpose. There can be no complaint of that here. If there was some improper or fraudulent purpose regarding Ngä Uri's activities then such was not apparent when Mr Fonua's services were engaged nor, by my perception, in the purpose (however misguided) of Ngä Uri's representatives before this Court. [80] In his submissions Mr Darby propounded the view that unincorporated societies could indeed claim an interest in land and be entitled thereby to lodge a caveat to protect same. My view is firmly against that. By its description Ngä Uri purports to be an incorporated society. It is not. As such, it cannot own an interest in land much less profess to claim an interest in such. In some instances statutory provisions make exceptions e.g. the Partnership Act 1908 and statutes providing for the prosecution of unincorporated societies. [81] The fact is that Ngä Uri's actions can only be accountable through the persons who purport to represent them including Mr Bluegum and Mr Wright. There appears no reason why claims concerning Ngä Uri's activities and the costs occurred thereby cannot be pursued against those representatives.Summary[82] Whether on a basis of "without reasonable cause" or "serious dereliction of duty", I cannot conclude that in circumstances whereby, for apparent good reason, Mr Fonua accepted instructions to act for a client on the purchase of properties involving deferred settlement and did file appropriate caveats that he should be heldaccountable because he did not immediately obtain a register search to verify that his client was, as it appeared, an incorporated society. The person he received his instructions from was a real person who provided proper contact details. That person's representations regarding the identity of his entity appeared authentic, in circumstances not giving reason to consider otherwise. If Ngä Uri's purpose has been improper then it lacks nothing from the vigour of the people who it supported. Mr Fonua was not one of those but rather, for limited purposes, its servant.ResultThe applications for an award of costs against Mr Fonua are dismissed.Associate Judge ChristiansenSolicitors/Counsel: E Gellert, Simpson Grierson, Auckland - Fax: (09) 307 0331 liz.gellert@simpsongrierson.com T Darby, Auckland - Fax: (09) 377 1551 tjdarby@xtra.co.nz