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Zhao v Legal Complaints Review Officer [2021] NZCA 694 (16 December 2021)

Last Updated: 22 December 2021

JUDGMENT OF THE COURT

1. The appeal is dismissed.
2. Order pursuant to s 45(5) of the Legal Services Act 2011 specifying that an award of costs for a standard appeal on a band A basis and usual disbursements would have been made against the appellant had s 45 not affected her liability.

____________________________________________________________________

REASONS OF THE COURT

(Given by Gilbert J)

• [1] Ms Zhao appeals against a High Court judgment^[1] dismissing her application for judicial review of a decision of the first respondent, a Legal Complaints Review Officer (LCRO).^[2] The LCRO dismissed Ms Zhao’s application for a review of a decision by a Lawyers Standards Committee (Standards Committee)^[3] to take no further action on her complaint against the second respondent, Mr Duckworth, a legal practitioner.
• [2] Mr Duckworth had been retained by a body corporate to pursue bankruptcy proceedings against Ms Zhao following her failure to pay sums she was ordered by the Tenancy Tribunal (the Tribunal) to pay to the Body Corporate, being outstanding levies, interest and costs. Ms Zhao claimed that Mr Duckworth lied to the High Court about the amount remaining unpaid following the Tribunal’s order. This was obviously an extremely serious allegation that needed to be supported by cogent evidence. The Standards Committee found there was no evidence that Mr Duckworth misled the Court. The LCRO struck out the application for a review of the Standards Committee’s decision on the basis there was no evidential foundation for Ms Zhao’s complaint.^[4]

Background

Tenancy Tribunal decision

• [3] Ms Zhao and Jun Yin are the owners of an apartment in a multi-unit complex in Auckland. On 21 May 2018, the Body Corporate obtained an order from the Tenancy Tribunal against them for unpaid levies, interest and costs in the sum of $10,360.52 calculated as follows:^[5]

Unpaid levies to 20 April 2018 $ 6,164.04

Interest to 20 April 2018 $ 486.98

Costs $ 2,859.50

Filing fee $ 850.00
Total payable $10,360.52

• [4] Ms Zhao applied for a rehearing the next day, on 22 May 2018. This application was dismissed by the Tribunal on 1 August 2018.^[6]
• [5] Not satisfied with that outcome, Ms Zhao applied again for a rehearing on 7 August 2018. She claimed that the Body Corporate had treated her differently from other owners and the costs were unreasonable. This application was dismissed by the Tribunal on 21 August 2018.^[7]
• [6] On 22 August 2018, the Body Corporate manager wrote to Jun Yin seeking payment of the amount awarded by the Tribunal together with further levies that had fallen due from the date of filing that claim which, with interest calculated to 22 August 2018, amounted to $16,587.78. It was noted that interest would continue to accrue until payment was received in full.
• [7] Ms Zhao responded on 23 August 2018 asking for details of the cost component in the Tribunal’s order of $2,859.50. The Body Corporate manager replied that day explaining that this amount comprised costs of $1,181.50 invoiced prior to the hearing (a breakdown was provided) plus a further sum of $1,678. Ms Zhao then asked for evidence of this latter sum. The manager replied that this was the balance of the costs awarded by the Tribunal. She explained that this had not previously been invoiced because she was awaiting the outcome of Ms Zhao’s application for a rehearing. A further copy of the Tribunal’s order was attached. The Body Corporate manager encouraged Ms Zhao to seek legal advice if she was in any doubt about her liability.
• [8] In late October 2018, a certificate of judgment was issued by the District Court at Manukau for the balance outstanding of $3,385.82 (taking account of payments made of $6,924.70 plus $50 for the costs of the certificate). We note that there is a mathematical error in the calculation, which is favourable to Ms Zhao. The amount should have been $3,485.82, $100 higher than stated.

Bankruptcy proceedings

• [9] Upon receiving no further payment from Ms Zhao, Mr Duckworth was instructed by the Body Corporate to pursue bankruptcy proceedings in respect of the unpaid balance of the Tribunal’s order. A bankruptcy notice dated 21 February 2019 was issued by the High Court at Auckland claiming the sum of $3,385.82 plus costs in respect of the notice of $796. The costs included a court fee of $50 for obtaining a certificate of judgment. However, this figure had already been taken into account in the calculation of the amount of $3,385.82. Taking account of the mathematical error referred to, the net result was that the claim against Ms Zhao was understated by $50.
• [10] The bankruptcy notice was served on Ms Zhao on 1 March 2019. She applied to set the notice aside on the grounds that the only amount she had not paid was $2,859.50 (the costs component of the Tribunal’s order referred to at [3]). Ms Zhao claimed, notwithstanding the correspondence referred to at [7], that neither the Tribunal nor the Body Corporate had shown her the detail of “the $2850.50” (she presumably meant $2,859.50).
• [11] After taking instructions from the Body Corporate, Mr Duckworth filed a memorandum dated 2 April 2019 stating that “since the judgment was granted” (this was a reference to the Tribunal’s order), Ms Zhao had made payments totalling $6,904.20. He said that credit for that amount was given in the certificate of judgment (in fact the credit was $6,924.70 as is evident on the face of the certificate) leaving the costs component of the Tribunal order, being $2,859.50, and a balance of $526.32 to make up the sum of $3,385.52 shown on the certificate. This can be reconciled with the Tribunal order as follows:

Tribunal order $10,360.52

Payments $ 6,924.70

Balance $ 3,435.82

Add certificate fee $ 50.00

Deduct understatement error $ (100.00)

Balance $ 3,385.82 (.30c discrepancy)

Costs component in Tribunal order $ 2,859.50

Balance $ 526.32

• [12] Ms Zhao responded by email referring to her application to the Tribunal for a rehearing and accusing the Body Corporate and Mr Duckworth of telling lies to the High Court about the amount she owed. We have not been provided with a copy of this email, but it was apparently sent to the High Court and to Mr Duckworth. Its general content can be inferred from Mr Duckworth’s memorandum filed in response dated 3 April 2019. Mr Duckworth confirmed in this memorandum that Ms Zhao had twice applied for a rehearing and he attached copies of the Tribunal decisions declining those applications. He advised that clarification of the correct amount outstanding had been sought from the Body Corporate. He attached copies of the correspondence between Ms Zhao and the Body Corporate manager (referred to at [7] above) and a full breakdown of the costs. Mr Duckworth stated that further amounts had become due by way of further levies, interest and costs. On checking the Body Corporate ledger records, he confirmed that payments of $850 and $486.98 had been made on 14 September 2018, being the amounts awarded by the Tribunal for the filing fee and interest (as shown at [3] above).^[8] Mr Duckworth noted that, on Ms Zhao’s own admission, the costs ordered by the Tribunal of $2,859.50 remained outstanding. Mr Duckworth submitted that Ms Zhao’s application to set aside the bankruptcy notice should therefore be dismissed.
• [13] The application to set aside the bankruptcy notice was heard by Associate Judge Smith the following day, on 4 April 2019. The Associate Judge dismissed the application but amended the amount stated in the bankruptcy notice from $3,385.82 to $2,859.50, being the undisputed balance outstanding of the Tribunal’s order.^[9] The Associate Judge recorded his understanding of the position in his oral judgment given at the conclusion of the hearing:

[5] Since the unsuccessful rehearing applications were made, Ms Zhao has made a number of payments in reduction of the amounts ordered by the Tenancy Tribunal. She says that she has paid a total of $7,501.02, leaving only the amount awarded for costs in the Tenancy Tribunal ($2,859.50). Until today, the Body Corporate has taken the view that Ms Zhao has only paid the sum of $6,924.70 in reduction of the amounts awarded by the Tenancy Tribunal. However, in the course of the hearing today Mr Duckworth advised that he has located a further interest payment made by Ms Zhao (approximately $486.00) which had not previously been taken into account. He advised that, for the purposes of the application to set aside the bankruptcy notice, the Court may work on the basis that the bankruptcy notice is to be amended to claim only the sum of $2,859.50, together with the costs of $796.00 claimed in the bankruptcy notice.

• [14] Costs were awarded to the Body Corporate on the application on a category 1, band A basis with disbursements to be fixed by the Registrar.^[10]
• [15] Ms Zhao filed a notice of appeal in this Court on 24 April 2019 seeking various orders including an order setting aside the bankruptcy notice, reversing the order for costs made by the High Court and an order requiring “the body corp and their lawyer” to pay $100,000, comprising $30,000 for mental distress, $50,000 as “their punishment/penalties for telling lies” and $20,000 for her “time and costs to point out their faults and lies”. Ms Zhao did not pursue this appeal.

Ms Zhao’s complaint to the New Zealand Law Society

• [16] Almost a year later, on 2 March 2020, Ms Zhao sent an email to the New Zealand Law Society complaining about Mr Duckworth and the firm he was employed by. She complained about alleged lies to the High Court and lies in their invoice statement:

I want to make a complaint to the lawyer [Mr Duckworth] and his law firm Jennifer G Connell & Associates Lawyers as [Mr Duckworth] told lies and handed in mendacious documents to the High Court to misleading the Judge. [Mr Duckworth’s] Law firm Jennifer G Connell & Associates Lawyers told lies in their invoice statement.

I hope this time the righteous can defeat the lies. They will get the punishment for their fault.

• [17] On the accompanying complaint form, Ms Zhao answered the question “What outcome do you want to achieve by making this complaint?” by stating “[t]hey need [to] pay me $20,000 for their lies and for my mental hurts sickness”. The detail of Ms Zhao’s complaint was set out in an attachment. Five lies were alleged — two in Mr Duckworth’s memorandum dated 2 April 2019, one in his advice to the High Court on 4 April 2019 and two in an invoice sent by the Body Corporate on 29 October 2019:

Alleged lie number 1 — 2 April 2019 memorandum

• [18] In the first paragraph of this memorandum, Mr Duckworth stated:

1. The bankruptcy notice was issued on 21 February 2019. It was served on [Ms Zhao] on 1 March 2019 at 5.03 pm. Prior to that, various attempts had been made at service all of which had resulted in [Ms Zhao] going to the door but refusing to accept service.

• [19] In her complaint, Ms Zhao stated, referring to this paragraph:

[T]hat’s lie. The truth is they sent me a email on 28/2/2019, and arranged a person to deliver the document to me.

Alleged lie number 2 — 2 April 2019 memorandum

• [20] In paragraph 5 of this memorandum, Mr Duckworth stated:

5. It is accepted that since the judgment was granted [Ms Zhao] has made payments totalling $6,904.20.

• [21] Ms Zhao complained that this was also a lie:

[Mr Duckworth] said I only paid $6904.2, that’s lie, the truth is I’ve paid $7501.02. Here also can consider [Mr Duckworth] handed in mendacious document to the High Court to misleading the Judge.

Alleged lie number 3 — 4 April 2019 hearing in the High Court

• [22] Ms Zhao complained that Mr Duckworth told lies to the High Court during the hearing of Ms Zhao’s application to set aside the bankruptcy notice:

[Mr Duckworth] told lies at high court about the reason why they calculated the number wrong to misleading the High Court Judge again. [Mr Duckworth] said they forgot to remove the interest fees, that’s lie, he knew I’ve already paid the interest fees since 17/09/2018, and what’s [Mr Duckworth] said on 4/4/2019 at high court is also contradiction with what he write on his memorandum on 2/4/2019, which is 2 days ago.

• [23] This refers to the interest component of the Tribunal order of $486.98. As we have set out at [12] above, Mr Duckworth confirmed in his second memorandum dated 3 April 2019 his instructions that this amount was paid on 14 September 2018. It is the same amount referred to by the Associate Judge in his judgment (quoted at [13] above).

Alleged lies numbers 4 and 5 — 29 October 2019 email from the Body Corporate

• [24] Ms Zhao complained that there were two lies in the invoice sent by the Body Corporate on 29 October 2019:

[O]n 29/10/2019, I’ve received a email from the body corp asked me to pay the invoice of their lawyer fees. I found [Mr Duckworth’s] law firm told lies twice at their statement.

First, they said “[Ms Zhao] failing to [either amend her appeal or pay the necessary security] for costs” That’s lie [lie number 4], For the security costs, is because we were dealing with the amount with [Mr Duckworth] and my lawyer advised me to wait for [Mr Duckworth’s] response and withdraw the case, that’s why I didn’t pay the security costs. And they did nothing about these, why they charge here.

Second, they said “making clear the position of the body corp [that it required payment in full to include all costs and interest as well as levies as and when they fell due]”. That’s lie [lie number 5], the truth is they never make any clear position of the body corp, we’re keep waiting for their response until now.

Standards Committee decision

• [25] The Standards Committee notified the parties on 15 May 2020 of its decision pursuant to s 138(2) of the Lawyers and Conveyancers Act 2006 (the Act) to take no further action on Ms Zhao’s complaint. In particular, the Standards Committee found there was no evidence that Mr Duckworth misled the High Court, given he had openly acknowledged the further payment of $486.96 had not been taken into account.

Application for review

• [26] Later that day, Ms Zhao applied for a review of the Standards Committee’s decision, focusing on alleged lie 3 (lying to the High Court) and alleged overcharging:

I’ve made the complaint for 2 things, one is Duckworth told lies at the high court and other one is Duckworth asked me to pay the over charged amount to against the High Court Judge Order and asked me to pay him unreasonable huge lawyers fees.

... my evidence it’s clearly shows that Duckworth knew well I’ve paid interest fees since 17 September 2018, there is not further interest payment they forgot to locate, but Duckworth still told lies at High Court (on 4 April 2019) said that they forgot to remove the interest. The lie Duckworth did is he said “there is further interest payment they forgot to locate”. The TRUTH is There is no further interest payment they forgot to locate, they intend to over charge me, as both the body corp and the Duckworth knew that I’ve paid the interest since 17 September 2018, THAT’S WHY I SAID Duckworth TOLD LIES AT HIGH COURT. ...

The standard committee have ignored my second complaint. Duckworth still asked me to pay the over charged amount $3335.81 even after the High Court Judge correct the amount to $2859.5, and asked me to pay him unreasonable huge lawyers fees $6681.51.

The High Court order is change the amount $3335.81 to $2859.5 and pay Duckworth lawyer fee $796 +1A basis as he asked. Duckworth didn’t follow the High Court order, he didn’t change the amount to $2859.5, he asked me to pay him $845.9 +$2432.9+$3402.71 totally $6681.51 lawyer fees, and he can’t give the details of what’s this huge amount for ...

I’m now really angry with the decision that the standard committee made, they never read my complaint carefully, never view my evidence carefully and ignore my second complaint, as if they did do their job a little bit carefully, they won’t think Duckworth didn’t tell lies at High Court to misleading the Judge, and they won’t ignore my second complaint.

LCRO decision

• [27] On 11 June 2020 the LCRO released its review decision.^[11] Having reviewed the material provided by Ms Zhao and Mr Duckworth’s response, the LCRO concluded as follows:

[17] The evidence does not demonstrate that Mr Duckworth was anything but absolutely honest with the Court. It also does not demonstrate that the costs sought on behalf of the Body Corporate were in any way improper. It is not dishonest to discover a mistake in court documents and attempt to correct it.

[18] None of the comments Ms Zhao makes about Mr Duckworth’s conduct constitute evidence that his professional conduct towards her fell below a proper standard. Mr Duckworth was obliged to treat Ms Zhao with integrity, respect and courtesy. It is clear from his exchanges of emails with her that he did. There is no other evidence that demonstrates any professional failing towards Ms Zhao on the part of Mr Duckworth.

[19] Having carefully considered the materials, I agree with the Committee that further action is not necessary or appropriate. I would go further, and say that Ms Zhao’s application for review discloses no reasonable cause of action against Mr Duckworth because any reasonable cause of action should have some evidential basis. Ms Zhao’s application for review, much like her complaint, lacks that essential element.

• [28] The LCRO decided that the appropriate course was to strike out the application for review pursuant to s 205(1)(a) of the Act, being satisfied that the application disclosed no reasonable cause of action.^[12]

Application to the High Court for judicial review

• [29] Ms Zhao filed an application for judicial review in the High Court seeking orders quashing the decision of the LCRO, substituting a new decision of the High Court, directing publication of an apology by the LCRO and requiring Mr Duckworth to clear her statement of account and pay her $20,000 for her time, costs and mental distress. The statement of claim has four numbered paragraphs or sections. The first recounts that her complaint to the LCRO concerned two matters:

-One is [Mr Duckworth] told lies at High Court about the REASON why they over charged me,

-The other one is [Mr Duckworth] against the High Court order and charge me unreasonable lawyer fees.

• [30] In her second paragraph, Ms Zhao stated that the LCRO misinterpreted her complaint as being “about the bankruptcy [amount]” being wrong. She said that was not her complaint at all. She continued:

We all knew the bankruptcy [amount] is wrong after I gave the evidence to the High Court Judge. [Mr Duckworth] has already admitted that they calculated wrong and High Court Judge is already correct it.

My complaint is [Mr Duckworth] told lies at the High Court about the REASON why they Calculated wrong to over charged me.

[Mr Duckworth] said they forgot to remove interest fees, that’s lie, as there is no interest fees they forgot to remove!! I didn’t pay any further interest fees. [Mr Duckworth] intend to over charge me by design at the beginning!! I have gave lots of evidence to prove that. However [the LCRO] choose to ignore them.

• [31] The third numbered paragraph in the statement of claim alleged that the LCRO ignored her second complaint which she elaborated as follows:

My second complaint is [Mr Duckworth] against the High Court order to over charged me again after the High Court Judge changed the amount to $2859.5. [Mr Duckworth] still asked me to pay $3335.82 to against the High Court Order $2859.5.

And [Mr Duckworth] against High Court Order to ask me to pay him unreasonable lawyer fees. About [Mr Duckworth’s] lawyers fees, the High Court Order is $796 plus 1A basis, that’s all. [Mr Duckworth] has agreed in his email before. However [Mr Duckworth] still against the High Court Order and ask me to pay him $6681.51!! That’s absurdity and unreasonable!!

After the High Court, I’ve applied for the Court of Appeal, [Mr Duckworth] had written 2 responses and talked with my lawyer through the phone and email and [Mr Duckworth] had admitted all his lawyers fees is $796 plus 1A basis in his email!! After my lawyer gave a offer back, [Mr Duckworth] never reply until now. I believe $6681.51 is against the High Court Order ($796 plus 1A basis) is unreasonable!!

• [32] The concluding paragraph in the statement of claim alleges that the LCRO ignored all Ms Zhao’s complaints and “made a wrong decision”. She added that the decision was “not based on [her] complaints at all, therefore the decision Must be wrong!!”.

High Court judgment

• [33] Following two case management conferences to clarify the basis of Ms Zhao’s claim and explain to her the nature of an application for judicial review, the first convened by Fitzgerald J^[13] and the second by Palmer J,^[14] the application was heard by Campbell J on 9 December 2020. The Judge again sought clarification at the outset of the hearing from Ms Zhao as to her underlying complaints about Mr Duckworth’s conduct. She confirmed the correctness of the following summary set out by the Judge in his reserved judgment:^[15]

[27] At the hearing I sought clarification from Ms Zhao as to her underlying complaints about Mr Duckworth’s conduct. From the material that she had filed, my understanding was that she had two complaints. I explained my understanding to Ms Zhao. She confirmed it was correct. The two complaints were:

(a) Ms Zhao alleged that Mr Duckworth had always known about the interest payment of $486 that Ms Zhao had made, and which had not been taken into account in calculating the amount in the bankruptcy notice. Ms Zhao alleged, therefore, that Mr Duckworth had lied to the High Court when he told that Court that he had forgotten or overlooked that payment.

(b) That, even after the High Court amended the amount of the bankruptcy notice, Mr Duckworth continued to ask Ms Zhao to pay the unamended amount, and then asked Ms Zhao to pay unreasonable lawyer’s fees.

• [34] The Judge then attempted to identify the grounds for judicial review. Ms Zhao responded that the LCRO’s decision was “absurd and absolutely wrong”.^[16] The Judge interpreted this to mean she was relying on the unreasonableness ground of review. He recorded that Ms Zhao did not suggest that the LCRO had misconstrued any statutory power, nor did she advance any other basis for judicial review.^[17] The Judge noted that because Ms Zhao’s challenge was based on unreasonableness, her submissions addressed the merits of the LCRO’s decision and her underlying complaints about Mr Duckworth.^[18] He therefore decided to approach the review by engaging with the merits of Ms Zhao’s complaints.^[19]
• [35] The Judge summarised Ms Zhao’s first complaint — that Mr Duckworth lied to the Court — as being based on the following:

[34] Ms Zhao’s case is based on the following matters. In September 2018 she made an interest payment of $486.98 to the Body Corporate. The Body Corporate acknowledged her payment in an email dated 17 September 2018. Mr Duckworth was copied in on that email. Ms Zhao says that Mr Duckworth therefore cannot possibly have “forgotten” about that payment when preparing the bankruptcy notice in February 2019.

• [36] The Judge observed that any claim that a person, let alone a lawyer, has lied to the court is a serious allegation and any decision-maker addressing such an allegation will require cogent evidence to support it.^[20] He noted that the only evidence Ms Zhao had provided was that set out in the passage quoted above. The Judge gave four reasons why he was not surprised the Standards Committee and the LCRO were not prepared to infer from this evidence that Mr Duckworth lied.^[21] First, in preparing the bankruptcy notice, Mr Duckworth relied on information provided by the Body Corporate as to the state of the account between Ms Zhao and the Body Corporate. There were many transactions on that account. Secondly, a lawyer in Mr Duckworth’s position would normally rely on that information rather than independently check the correctness of the client’s instructions. Thirdly, the most likely inference was that Mr Duckworth had overlooked the 17 September 2018 email he was copied in on (referred to by the Judge in the passage quoted above). Finally, the Associate Judge had made no criticism of Mr Duckworth, having heard his explanation.^[22]
• [37] For these reasons, the Judge was not persuaded the LCRO’s decision was unreasonable. The Judge went further and recorded his view that both the Standards Committee and the LCRO were correct to dismiss this complaint.^[23]
• [38] The Judge then turned to the second complaint — that after the bankruptcy notice was amended, Mr Duckworth continued to demand that Ms Zhao pay the unamended amount and asked her to pay unreasonable legal fees. The Judge observed that this did not form part of her initial complaint to the New Zealand Law Society and that is why it was not addressed by the Standards Committee in its decision. The matter was first raised by Ms Zhao when she applied to the LCRO for a review of the Committee’s decision.^[24]
• [39] The Judge considered this complaint reflected a misunderstanding by Ms Zhao about Mr Duckworth’s role, which was to act for the Body Corporate in accordance with its instructions.^[25] The Judge pointed out that any dispute about the amount owing was between her and the Body Corporate, not with Mr Duckworth.^[26] The Judge also pointed out that the costs claimed by the Body Corporate amounting to $6,681.51 did not relate solely to work carried out in successfully opposing the application to set aside the bankruptcy notice but extended to other work. In any event, the Judge noted there is a difference between party costs awarded by the Court and indemnity costs that may be recoverable by the Body Corporate.^[27]
• [40] The Judge stated that the only possible basis on which Ms Zhao could complain about Mr Duckworth’s requests would be if he had failed to treat her with respect, integrity and courtesy and that was how the LCRO addressed this complaint. The Judge found the LCRO made no error in concluding there was no basis for any such complaint. In conclusion, the Judge said Ms Zhao had fallen well short of persuading him that the LCRO’s decision was unreasonable or otherwise reviewable.^[28]

Appeal

Grounds of appeal

• [41] In her notice of appeal, Ms Zhao contended that the High Court erred in six respects:

  (a) in recording that Ms Zhao had not suggested that the LCRO had overlooked relevant considerations or had taken into account irrelevant considerations;
  (b) in taking into account irrelevant matters not supported by the evidence;
  (c) in forming the view that there was inadequate evidence before the LCRO to establish misconduct;
  (d) in not being surprised as to the lack of preparedness of the Standards Committee and the LCRO to draw inferences, based on irrelevant considerations or matters not supported by the evidence.
  (e) in taking into account irrelevant matters and failing to take account of relevant matters as to the circumstances of the amendment of the bankruptcy notice by the High Court; and
  (f) in failing to find that the LCRO failed to take into account relevant matters (six matters were then listed).

Agreed issues

• [42] Counsel helpfully refined the issues in an agreed list of issues dated 4 November 2021 as follows:

Primary issue

1.2.1 In dismissing [Ms Zhao’s] application for review pursuant to s 205(1)(a) of [the Act], was the decision to strike out one that no reasonable decision-maker could have reached?

The following sub-issues arise;

1.3.1 Did the [LCRO] err at law by applying an incorrect or no test in determining that there was no reasonable cause of action?

1.3.2 Did the [LCRO] commit an error of law by failing to consider all the relevant evidence available?

1.3.3 Was [Ms Zhao’s] complaint (relevant to this appeal) before the LCRO limited to an allegation that because [Mr Duckworth] had received an email on 17 September 2018 identifying payment of the interest, therefore he knowingly misled the High Court on 4 April 2019 when he advised the Court of having located a further interest payment?

• [43] Mr Ahern, who had no prior involvement, was instructed by Ms Zhao to represent her on this appeal. It will be observed that none of the sub-issues listed above were raised by Ms Zhao before Campbell J.

Did the LCRO apply the correct test in determining there was no reasonable cause of action?

• [44] Mr Ahern submits that the LCRO erred in law by failing to identify the test to be applied under s 205(1)(a) of the Act. He argues that this provision creates effectively the same test for strike out as under r 15.1 of the High Court Rules 2016. He says the LCRO should not have struck out the application for review on the basis there was no evidence to support the complaint. He argues that no evidence is required. Rather, he says the LCRO was obliged to assume that the allegations in the complaint can be proved when considering whether to strike out an application for a review under s 205(1)(a) of the Act.
• [45] There are two answers to this submission. First, it was not raised by Ms Zhao: (1) in her statement of claim, (2) before Fitzgerald J when the basis of her claim was clarified, (3) before Palmer J when her claim was again reviewed, or (4) before Campbell J when he confirmed the grounds of her application for judicial review at the commencement of the substantive hearing. It is too late to raise the matter for the first time on appeal. The Judge cannot be said to have erred in failing to address a ground of review that was not pleaded or argued before him.
• [46] The second answer is that we do not accept the underlying premise of the submission in any event. While the wording is similar, the test to be applied under s 205(1)(a) of the Act is not necessarily the same as that under r 15.1 of the High Court Rules. These provisions need to be construed in their respective and quite disparate contexts, not simply by comparing the precise words used. As we will attempt to demonstrate, an application for a review by a LCRO of a decision of the Standards Committee is not comparable to a cause of action pleaded in a statement of claim in the High Court. A decision of a Standards Committee is made after a complaint has been assessed and the supporting evidence considered. An application for a review of that decision comes later in the process and will necessarily take account of what has gone before. By contrast, a pleading in a statement of claim filed in the High Court in a civil proceeding is the first step. Whether a reasonable cause of action has been pleaded for the purposes of a strike out application will generally be considered well before the adequacy of the evidence to support the pleaded allegations can be assessed. This is reflected in the slight variation of the wording of the two provisions: s 205(1)(a) requires no “reasonable” cause of action, whereas r 15.1 sets the bar for strike out higher, requiring no “reasonably arguable” cause of action to be disclosed.
• [47] The purposes of the Act relevantly include to maintain public confidence in the provision of legal services and to protect the consumers of legal services.^[29] To achieve these purposes, the Act provides for what was intended to be a more responsive regulatory regime in relation to lawyers and conveyancers.^[30] Part 7 of the Act makes provision for complaints and discipline. The first purpose of this Part is to provide a framework in relation to complaints and discipline.^[31] The framework is intended to enable complaints against lawyers to be processed and resolved expeditiously and, in appropriate cases, by negotiation, conciliation, or mediation.^[32] To this end, on receipt of a complaint, a Standards Committee may inquire into the complaint, direct the parties to explore the possibility of resolving it by negotiation, conciliation or mediation or decide to take no action on the complaint.^[33]
• [48] A decision to take no action on the complaint may be made in the discretion of the Standards Committee if it is of the opinion that this is appropriate such as where an investigation is no longer practicable or desirable given the lapse of time, where the complaint is trivial, frivolous, vexatious or not made in good faith or where it would be reasonable for the person aggrieved to exercise some other adequate remedy.^[34] If a Standards Committee decides to inquire into a complaint, it must do so as soon as practicable.^[35] The Standards Committee is given the power to obtain information from various sources for the purposes of any inquiry.^[36] It may receive in evidence any statement, document, information or matter that it considers would assist it to deal effectively with the matters before it, whether or not such material would be admissible in a court of law.^[37]
• [49] It can be seen that the statutory processes for dealing with complaints against lawyers do not, and are not intended to, replicate High Court procedures for dealing with civil disputes. The same is true in respect of an application for a review of a Standards Committee decision by a LCRO.
• [50] The functions of a LCRO include to exercise the powers of review conferred under the Act and to promote, where appropriate, the resolution, by negotiation, conciliation, or mediation, of complaints.^[38] A LCRO is responsible for making such arrangements as are practicable to ensure that his or her functions are performed in an orderly and efficient manner and in a way that achieves the purposes of the Act.^[39] A LCRO is required to conduct any review with as little formality and technicality, and as much expedition, as is permitted by the requirements of the Act, a proper consideration of the review, and the rules of natural justice.^[40] A LCRO may review any aspect of any inquiry or investigation carried out by the Standards Committee.^[41] He or she may also make his or her own inquiries or investigations.^[42]
• [51] In summary, as Winkelmann J observed in Deliu v Hong, a review by a LCRO is not the equivalent of a general appeal — the Act “creates a very particular statutory process”.^[43] The powers and procedures provided for under the Act are not directly comparable to those applicable to the High Court Rules governing the conduct of civil proceedings in that Court. The different context must be kept in mind when interpreting provisions that might appear similar on their face.
• [52] Section 205(1) of the Act reads:

205 Legal Complaints Review Officer may strike out, determine, or adjourn application for review

(1) The Legal Complaints Review Officer may strike out, in whole or in part, an application for review if satisfied that it—

(a) discloses no reasonable cause of action; or

(b) is likely to cause prejudice or delay; or

(c) is frivolous or vexatious; or

(d) is otherwise an abuse of process.

• [53] Rule 15.1 of the High Court Rules provides:

15.1 Dismissing or staying all or part of proceeding

(1) The court may strike out all or part of a pleading if it—

(a) discloses no reasonably arguable cause of action, defence, or case appropriate to the nature of the pleading; or

(b) is likely to cause prejudice or delay; or

(c) is frivolous or vexatious; or

(d) is otherwise an abuse of the process of the court.

• [54] The first point to note is that r 15.1 empowers the court to strike out a pleading, whereas s 205 is concerned with the power to strike out an application for review of a decision made on a complaint. In exercising the power under r 15.1, the court is generally required to assume that the pleaded allegations can be proved. Matters of proof do not usually arise until the trial (following discovery, interrogatories and any other interlocutory processes), and are not normally capable of being assessed at the time the pleadings are being settled. A complaint to the Law Society is broadly the functional equivalent of the pleading of a cause of action. Both are intended to frame the dispute at the start of the process. However, a complaint to the Law Society will generally be supported by evidence.
• [55] An application for a review of a Standards Committee decision cannot appropriately be compared to a pleading. Such an application is made at a later stage of the process, after the evidence has been assessed and a decision made. A review is the functional equivalent of an appeal, although they are not directly comparable for the reasons given. Where a Standards Committee has decided to take no further action on a complaint because of a lack of evidence, such that any further action would be unnecessary or inappropriate, it would make no sense (and would not further the purposes of the Act) to require a LCRO to disregard this lack of evidence in determining whether to strike out an application for review. To treat s 205 of the Act as imposing the same test as would be applied by the High Court under r 15.1 of the High Court Rules overlooks that these provisions serve different purposes and apply at different stages of the process.
• [56] In any event, subject to Mr Ahern’s next submission (that there was adequate evidence), the same outcome is likely to be reached in this case irrespective of which provision applied. This is because an allegation of serious misconduct — here, a lawyer lying to a judge in court — cannot be pleaded under the High Court Rules without there being a proper evidential foundation.^[44] The facts relied on to support the allegation must be pleaded and any practitioner formulating such a claim must independently satisfy him or herself that there is adequate evidence to support it. Absent such particularised facts and adequate supporting evidence, the allegation may not be pleaded. While these strict professional ethical obligations do not apply to lay people formulating complaints to the Law Society, a Standards Committee or LCRO can be expected to apply the same discipline and standard when determining whether further action should be taken on the complaint (in the case of the Committee which has no express strike out power) or whether the review should be struck out (in the case of the LCRO which does). The lack of evidence to justify a complaint of this nature is equally relevant under the Act as it is under the High Court Rules and should produce the same result — the allegation is either not pleaded at all or it is struck out on the basis it should not have been pleaded.
• [57] For these reasons we reject Mr Ahern’s submission that the LCRO erred in law in striking out the application on the basis there was no evidence to support the complaint.

Did the LCRO fail to consider the relevant evidence?

• [58] Mr Ahern submits there was sufficient evidence before the LCRO to show that the complaint raised a reasonable cause of action. However, he emphasises (quite properly) that this is not to say there was clear evidence or proof of misconduct. To understand Mr Ahern’s submission, it is necessary to descend once more into the detail.
• [59] As already noted, the bankruptcy notice was issued for the sum of $3,385.82, which corresponds to the amount outstanding according to the Body Corporate records as at 26 October 2018 ($3,335.82) plus the filing fee for the certificate of judgment of $50. That total figure corresponded to the amount shown in the certificate of judgment issued by the District Court in late October 2018 and took account of payments on 14 September 2018 of the interest component of the Tribunal’s order ($486.98) and filing fees ($850).
• [60] No payments were made by Ms Zhao between 26 October 2018 and 4 April 2019, the date of the hearing of the application to set aside the bankruptcy notice. Despite that, Ms Zhao contended that the only amount outstanding was $2,859.50 whereas the Body Corporate records showed $3,335.81 (plus costs).
• [61] Mr Duckworth’s memorandum to the Court dated 2 April 2019 was correct (subject to one obvious and trifling error):

5. It is accepted that since the judgment [referring to the Tribunal’s order] was granted [Ms Zhao] has made payments totalling $6,904.20 [the correct amount was $6,924.70 as shown on the certificate of judgment].

6. Credit was given for that amount in the Certificate of Judgment and the sum remaining due is $3,385.52. [Ms Zhao] appears to acknowledge she owes a sum of money in the judgment but does not understand how and why that arose. Of that $3,385.52 there is a sum of $2,859.50 being the costs and a further sum of $526.32 is owing over and above that.

• [62] Mr Duckworth’s memorandum to the Court dated 3 April 2019 was also correct:

1. We refer to the Memorandum of the [Body Corporate] dated 2 April 2019.

2. We have received the email in response in which [Ms Zhao] accuses the Body Corporate and their solicitor of telling lies.

3. We would advise the Court that [Ms Zhao] did apply to the Tenancy Tribunal for re-hearing. She did that twice with re‑hearings on 1 August 2018, and 21 August 2018. The judgments made are attached and marked “A”. Those refuse the right to a re‑hearing.

4. Clarification has been sought from the Body Corporate Secretary. A copy of the e-mails that have passed between [her] and [Ms Zhao] dated 29 August 2018 (and prior) are attached and marked “B”. In those emails a full breakdown of costs is provided for the avoidance of any doubt marked “C”.

5. We would further add that as a consequence of those re-hearings, further levies becoming due and additional interest together with the costs of taking these proceedings the amount owed by [Ms Zhao] has increased.

6. The bankruptcy notice has been based on the original judgment made by the Tenancy Tribunal on 21 May 2018. That refers to costs, interest and filing fee being awarded.

7. On checking the ledger records from the Body Corporate there is a record of payments being made by [Ms Zhao]. On 14 September 2018, payments of $850 and $486.98 were made. It would appear that those represent the filing fee and the interest ordered.

8. On her own admission, the costs ordered remain due and owing. Those need to be paid in full. The emails produced show that further breakdowns of those were provided. She has tried to have matters re‑heard twice, neither of which were successful.

9. In those circumstances, we are satisfied that subject to the above, the costs are owing and due together with additional charges that have properly arisen since the judgment was made.

10. We invite the Court to dismiss the application accordingly.

• [63] Mr Ahern then focuses attention on what the Associate Judge said in his oral judgment at the end of the hearing the following day. We have already quoted the relevant passage but, for ease of reference, we set it out again with the critical sentence emphasised in italics:^[45]

[5] Since the unsuccessful rehearing applications were made, Ms Zhao has made a number of payments in reduction of the amounts ordered by the Tenancy Tribunal. She says that she has paid a total of $7,501.02, leaving only the amount awarded for costs in the Tenancy Tribunal ($2,859.50). Until today, the Body Corporate has taken the view that Ms Zhao has only paid the sum of $6,924.70 in reduction of the amounts awarded by the Tenancy Tribunal. However, in the course of the hearing today Mr Duckworth advised that he has located a further interest payment made by Ms Zhao (approximately $486.00) which had not previously been taken into account. He advised that, for the purposes of the application to set aside the bankruptcy notice, the Court may work on the basis that the bankruptcy notice is to be amended to claim only the sum of $2,859.50, together with the costs of $796.00 claimed in the bankruptcy notice.

• [64] The italicised statement is plainly not strictly accurate. There was only one interest payment — $486.98 paid on 14 September 2018 — as was confirmed by Mr Duckworth in his memorandum dated 3 April 2019, the day before the hearing. It is common ground there was no other interest payment of “approximately $486.00”. It is perfectly obvious what payment was being referred to. It is also not strictly correct to say that this payment had not previously been taken into account. Mr Duckworth may have overlooked that it was included in the $6,924.70 credit against the Tribunal’s order or it may be that the Associate Judge misapprehended the precise position. Either way, any double credit for this sum was in Ms Zhao’s favour. It was ultimately immaterial because Mr Duckworth advised the Court that the bankruptcy notice could be amended to reflect the undisputed amount of $2,859.50 plus costs and Ms Zhao’s application to set aside the notice should be dismissed. To claim that these minor errors in this single sentence of the Associate Judge’s oral judgment show (or even indicate) that Mr Duckworth lied to the Court is, in our view, utterly fanciful.
• [65] Mr Ahern says that, having alerted the Court to an allegedly unaccounted payment of $486, Mr Duckworth “most surprisingly” sought amendment to the bankruptcy notice, not by $486, but by $526.32. However, this merely underscores that the supposed further interest payment of approximately $486 was not the reason for the amendment. Rather, the notice was amended to reflect the undisputed balance outstanding and thereby dispose of Ms Zhao’s application to set it aside.
• [66] Mr Ahern says that prior to making its decision, Ms Zhao requested the LCRO to ask Mr Duckworth to identify the unaccounted for payment. Mr Ahern submits that the LCRO should have clarified this before forming a view. He says, “the concern lies in the facts themselves - advice to the Court of a payment of $486, then amendment by $523” (he presumably means $526.32). He says the reason for the discrepancy has never been explained. We disagree. There was no need to ask Mr Duckworth to identify the unaccounted for payment of approximately $486. The Body Corporate records show there was only one such payment. The amendment by “$523” is self‑evidently the balance between the amount acknowledged by Ms Zhao as being unpaid and the amount shown on the Body Corporate records as being owed. The allegation that Mr Duckworth lied to the Court was entirely without substance and should never have been made. The Standards Committee, the LCRO and the High Court were all plainly right to reject it outright.

Conclusion

• [67] We summarise our response to the agreed issues as follows:

  (a) The LCRO did not apply the incorrect test in determining there was no reasonable cause of action. On an application for review, a LCRO is entitled to consider whether there is any evidence to support the complaint. This will be particularly appropriate if the allegation is of serious misconduct, as was the case here. Given the LCRO’s view, in agreement with the Standards Committee, that there was no evidence to substantiate the allegation, it was appropriate to strike out the application.
  (b) The LCRO did not err in law by failing to consider the available evidence.
  (c) The LCRO did not misconstrue the complaint. Further, the High Court addressed the complaint as articulated by Ms Zhao on its merits even though this was an application for judicial review.

• [68] In summary, the LCRO’s decision was not one that no reasonable decision‑maker could have reached on the evidence. In agreement with Campbell J, we consider the decision was correct and the claim for judicial review appropriately dismissed.
• [69] No error in the High Court judgment having been demonstrated, the appeal must be dismissed.

Costs

• [70] Ms Zhao is legally aided. However, Mr Carey, for Mr Duckworth, seeks costs against Ms Zhao under s 45(2) of the Legal Services Act 2011 on the basis there are exceptional circumstances justifying that course. In particular, he submits that Ms Zhao’s pursuit of this appeal was unreasonable. Alternatively, an order is sought under s 45(5) specifying the costs order that would have been made had Ms Zhao’s liability for costs not been affected by s 45.
• [71] Ms Zhao opposes any costs order.
• [72] Ms Zhao has failed on her appeal. However, it was advanced on her behalf by experienced counsel. We are not persuaded there are exceptional circumstances justifying an award of costs under s 45(2). Instead, we will make an order pursuant to s 45(5) specifying what order for costs would have been made against Ms Zhao with respect to the appeal if s 45 had not affected her liability.

Result

• [73] The appeal is dismissed.
• [74] We make an order pursuant to s 45(5) of the Legal Services Act 2011 specifying that an award of costs to the second respondent for a standard appeal on a band A basis and usual disbursements would have been made against the appellant had s 45 not affected her liability.

Solicitors:
Morrison Kent, Auckland for Appellant
Crown Law Office, Wellington for First Respondent
Jennifer G Connell & Associates, Auckland for Second Respondent

^[1] Zhao v Legal Complaints Review Officer [2021] NZHC 666 [High Court judgment].

^[2] Zhao v Duckworth [2020] NZLCRO 97 [LCRO decision].

^[3] Central Standards Committee 1, a Lawyers Standards Committee established by the New Zealand Law Society pursuant to s 126 of the Lawyers and Conveyancers Act 2006.

^[4] LCRO decision, above n 2, at [19].

^[5] Body Corporate 362260 v Zhao [2018] NZTT Manukau 9005781, 21 May 2018.

^[6] Body Corporate 362260 v Zhao [2018] NZTT Manukau 9005781, 1 August 2018.

^[7] Body Corporate 362260 v Zhao [2018] NZTT Manukau 9005781, 21 August 2018.

^[8] We note that these payments predated the certificate of judgment and were included in the credit of $6,924.70 given for amounts paid to October 2018, when the certificate issued.

^[9] Body Corporate 362260 v Zhao [2019] NZHC 702.

^[10] At [16].

^[11] LCRO decision, above n 2.

^[12] At [20].

^[13] Zhao v Legal Complaints Review Officer HC Auckland CIV-2020-404-1268, 10 September 2020 (Minute of Fitzgerald J).

^[14] Zhao v Legal Complaints Review Officer HC Auckland CIV-2020-404-1268, 16 October 2020 (Minute of Palmer J).

^[15] High Court judgment, above n 1.

^[16] At [30].

^[17] At [30].

^[18] At [31].

^[19] At [32].

^[20] At [35].

^[21] At [36].

^[22] At [36].

^[23] At [37].

^[24] At [39].

^[25] At [40].

^[26] At [41].

^[27] At [42].

^[28] At [45].

^[29] Lawyers and Conveyancers Act, s 3(1)(a) and (b).

^[30] Section 3(2)(b).

^[31] Section 120(1).

^[32] Section 120(2)(b).

^[33] Section 137.

^[34] Section 138.

^[35]  Section 140. 

^[36] Section 147.

^[37] Section 151.

^[38] Section 192.

^[39] Section 192A.

^[40] Section 200.

^[41] Section 203.

^[42] Section 204.

^[43] Deliu v Hong [2012] NZHC 158 at [39].

^[44] High Court Rules 2016, r 5.17(2). See also Andrew Beck and others McGechan on Procedure (online ed, Thompson Reuters) at [HR5.26.08] for a discussion on this point.

^[45] Body Corp 362260 v Zhao, above n 9.