Waikato/Bay of Plenty District Law Society v Harris CA86/05 [2006] NZCA 532; [2006] 3 NZLR 755 (12 April 2006)

	Home \| Databases \| WorldLII \| Search \| Feedback Court of Appeal of New Zealand

NOTE: HIGH COURT ORDER PROHIBITING PUBLICATION OF NAMES, ADDRESSES OR PARTICULARS IDENTIFYING MR AND MRS A AND MS B REMAINS IN FORCE

BETWEEN THE COMPLAINTS COMMITTEE OF THE WAIKATO/BAY OF PLENTY DISTRICT LAW SOCIETY

Court: Glazebrook, Chambers and O'Regan JJ Counsel: P N Collins and J H Olphert for Appellant

Disciplinary Tribunal that Mr Harris’ name be struck off the roll of barristers and solicitors is restored.

THE COMPLAINTS COMMITTEE OF THE WAIKATO/BOP DISTRICT LAW SOCIETY V HARRIS CA CA86/05 [12 April 2006]

Introduction [1] Facts [4] Background [5] Transactions involving Mr and Mrs A [12] Transactions involving Ms B [26]

The Tribunal’s decision [39] Findings relating to Mr and Mrs A [39] Findings relating to Ms B [45] General remarks [59] Penalty [61]

The High Court decision [62] Approach [63] Findings relating to Mr and Mrs A [67] Findings relating to Ms B [78] Penalty [87] Parties’ submissions [91] Discussion [95] Jurisdiction [95] Analysis of the transactions [96] Penalty [111] Result [134]

[1] Mr Harris was brought before the New Zealand Law Practitioners Disciplinary Tribunal on a number of charges. Most of these charges were found proved and to amount to misconduct. The Tribunal ordered that Mr Harris’ name be struck off the roll of barristers and solicitors.

[2] Mr Harris appealed to the High Court. The Court held that the order for striking off was disproportionately severe and instead suspended Mr Harris from practice for two and a half years from 26 November 2003, the date of the Tribunal’s

decision on penalty. It also prohibited him from practising on his own account in the future, unless authorised by the Tribunal to do so.

[3] The Society appeals against that decision and asks that the original penalty be reinstated.

[4] The parties did not provide us with a copy of the evidence that was before the Tribunal. Accordingly, this summary of the facts is based on the Tribunal’s findings as modified or expanded upon by the High Court.

[5] The charges that were found proved by the Tribunal related to two series of transactions, involving clients referred to in the High Court as Mr and Mrs A and Ms B – see the Appendix for the Tribunal’s summary of the charges and its decisions on those charges. Charges relating to a third client were found to be either not proved or proved but not to amount to misconduct.

[6] Mr and Mrs A and Ms B were referred to Mr Harris by Mr McKelvy who operated as a finance broker in Hamilton. Mr McKelvy had been convicted of various offences of dishonesty in the period from 1996 to 2001 and had served terms of imprisonment. The offences included forgery, altering a document and conspiracy to defraud.

[7] Mr McKelvy’s business consisted largely in dealing with people in financial difficulties or in assisting those with a lack of resources or poor credit history into achieving home ownership. The Tribunal set out two techniques used by Mr McKelvy in his business:

[15.1] A McKelvy entity buying houses at mortgagee sales at what may well have been undervalue, building, making improvements to and tidying up those houses and their surrounds and then selling them on to prospective home owners with those home owners being given assistance. Sometimes

the assistance would be in the form of a gift of part of the said value of the property.

[15.2] Persons who were facing imminent mortgagees sales selling their homes to a trustee. This trustee would borrow monies short term sufficient to repay the loan which was producing mortgagee sale pressure. The trustee would then hold the property in trust, leaving the former registered proprietors in possession as tenants. The intention was for the former registered proprietors to build up a credit history, whereupon the short term loan would be refinanced on long term and at a better interest rate, and the property would then be transferred back to the previous registered proprietors as beneficial owners. The trustee would receive a fee for his or her services.

[8] Both techniques were used in the series of transactions involving Ms B but Mr and Mrs A were only subjected to the second technique. In each case, Mr McKelvy used Provincial Finance, based in Christchurch, as the lender.

[9] Provincial lends having regard to the equity available in a property rather than being significantly concerned with loan servicing ability. It lends short term at a high rate of nominal interest and there are various fees which increase the real interest rate to very high levels. The Tribunal found that there was a close relationship between Provincial and Mr McKelvy resulting in brokerage fees and what the Tribunal called “other opportunities for financial advancement” being presented to Mr McKelvy. The close relationship between Mr McKelvy and Provincial was also, the Tribunal noted, “confirmed by the relative informality of dealings between Provincial Finance and Harris Law”.

[10] The Tribunal found that there was a close association also between Mr McKelvy and Mr Harris. Although Mr McKelvy used other solicitors, he “provided a very significant share of the annual revenue” of Mr Harris’ practice. In addition, for a period of nearly a year Mr Harris’ legal executive, Ms Hemmes, had, with Mr Harris’ knowledge and agreement, worked two days a week for Mr McKelvy. Payment for her services was effected through the firm trust account. The Tribunal concluded that Mr Harris and Ms Hemmes must have had a detailed knowledge of how Mr McKelvy operated. It also found that Mr Harris was generally aware of Mr McKelvy’s criminal background.

[11] Further, the Tribunal found that Mr Jecks, who was used by Mr Harris to give independent advice on aspects of the transactions at issue before it, acted on a significant number of McKelvy transactions.

[12] Mr and Mrs A are a mature couple who returned to Taranaki in about 1989. They bought a section from Mr A’s mother. The land had previously been Maori land and had been in the family for many generations. The As built a house on the land with money borrowed from the Housing Corporation. For reasons that were not explained, the privatisation of the Corporation led to Mr and Mrs A refinancing that loan with Advantage Ltd. Their mortgage payments fell into arrears as did their rates payments. Eventually, Advantage threatened a mortgagee sale.

[13] Mrs A, who takes responsibility for the family finances, contacted Mr McKelvy for help with refinancing the loan. He asked Mr Buckland, a Hawera mortgage broker, to contact Mrs A and to deal with the matter as Mr McKelvy’s agent. Mr Buckland was provided with a partially completed form of agreement for sale and purchase of property for the As to sign. He got them to sign the document but, not knowing the scope or nature of the proposed transaction, provided no explanation to them. In fact, it was Mr A alone who was the registered proprietor of the property.

[14] On 4 April 2001, Mr Buckland was asked to bring the As to Hamilton to complete the refinancing transaction, which was to involve the second of the McKelvy techniques set out at [7] above. On the way to Hamilton, Mr McKelvy instructed him to go instead to the offices of Harris Law in Cambridge. The party duly arrived and a meeting of the various parties took place. Mr Harris’ legal executive, Ms Hemmes, was present, as was Mr McKelvy, his business associate Mr Fatu and a Mr Adams, who was destined to be the trustee under Mr McKelvy’s refinancing scheme. Mr Adams, unknown to Mr Harris (but possibly not, it appears, to Mr McKelvy), was a serial fraudster with a number of aliases and some hundreds of previous convictions. He has since been imprisoned on some 600 further

convictions. Mr Harris was also present at various times during the meeting in an overseeing role.

[15] Ms Hemmes received and acted on e-mail instructions from Provincial to prepare mortgage security documents for a loan to Mr Adams of $56,000. The term of the loan was six months. She prepared in blank a memorandum of transfer from Mr A to Mr Adams and an authority by Mr A authorising “the surplus funds” from the sale to be paid to Harris Law “on behalf of Paul Chris Adams our trustee”. She also prepared, and had Mr Buckland sign, an acknowledgement that he was to be responsible for the “creation of a Family Trust and acknowledgement of debt to the trustee being Mr Paul Chris Adams for the benefit of [Mr A].”

[16] Mr and Mrs A were then taken to Mr Jecks, a solicitor who was, according to Ms Hemmes’ evidence, to act for them. Mr Jecks explained to Mr A the implications of giving up his interest in the property and advised Mr A of the nature of the trust arrangements, including his obligation to pay a monthly rental of $800 a month for the first two months and $400 for the subsequent months. (The contract documents provided in fact for interest payments of $840.68 per month). Mr Jecks explained that Mr A could repurchase the property from Mr Adams later, recorded that Mr A could caveat the title and noted that Mr Buckland was to create the Trust deed.

[17] Mr A duly signed the transfer to Mr Adams (which had been prepared by Harris Law) and Mr Jecks witnessed his signature. Mr Jecks also, it appears, had Mr A sign the authority for disbursements of the surplus funds. That was the end of Mr Jecks’ involvement. Mr Jecks’ evidence was that his retainer was limited to giving independent advice on signing the transfer. That he did not see himself as acting generally is reflected in the fact that the meeting lasted only some 20 minutes and involved a modest fee of $70 plus GST and photocopying charges, making a total of $80.

[18] While the loan from Provincial was for a principal sum of $56,000, the total sum for which Mr Adams became indebted was $71,044.09. As we understand the position, interest and fees were capitalised into the borrowings and only the cash

amount of $56,000 was paid by Provincial to Harris Law. The various fees took the nominal interest rate of 16% to a finance rate of 31.8761%. The charges were as

[19] The cash amount received was used in part to repay Mr and Mrs A’s existing mortgage to Advantage. The sum outstanding on that mortgage was $39,185.84 but Ms Hemmes negotiated a reduced repayment sum of $36,000. The balance of the

_{loan was (according to a letter sent by Mr Harris to the Society) used
as follows:}

Buckland – fee for preparation of deed of trust and acknowledgement of debt	$ 2,000.00
Adams – fee for “agreeing to mortgage the property”	$ 3,000.00
Harris – law fees (inclusive)	$ 1,500.00
Jecks & Co fee	$ 80.00
V Ratima – valuation fee	$ 293.00
Robertson Telfer – further valuation fee	$ 45.00
Real insurance on property	$ 341.21
A E Fatu – money for Buckland	$ 9,584.72
Waikato Trust	$ 3,156.07
_Total	$ 20,000.00

[20] The High Court said that $9,200 of the sum paid to Mr Fatu was to be used for payment of other debts of Mr and Mrs A and that it had not been established that the other debts had not been so paid.

[21] The consideration for the transfer from the As to Mr Adams recorded in Mr Harris’ statement to Mr Adams was $86,000. By contrast, the purchase price recorded in the agreement and the memorandum of transfer was $103,000. The difference of $17,000 between the $103,000 and the $86,000 was described in the settlement statement as “equity left in the property” by Mr A. There was no valuation in evidence (even though Mr Harris’ letter indicated that two had been paid for) so it is not clear how the purchase price was arrived at.

[22] As to the difference between the $56,000 principal amount of the loan and the $86,000 in the settlement statement, it appears that Provincial required the sum of $30,000 in cleared funds to be injected into the transaction by Mr Adams. This was achieved by an entity of Mr McKelvy’s (Waikato Trust) lending that sum plus a further $9,584.72 to Mr Adams to be used as partial settlement for the purchase of the property. The money was paid into the Harris Law trust account in his name.

[23] Mr Adams signed an authority (prepared by Harris Law and signed in the presence of Ms Hemmes) for Harris Law to pay any surplus funds left over from the Provincial advance after costs were deducted “being Brokerage, Solicitor, Trustee, Valuation, Insurance and other sundries” to Waikato Trust. We note that no specific authority from Mr and Mrs A was obtained as to this payment. The sum of

$42,740.79 was duly transferred by journal entry from the credit of Mr Adams to the credit of Waikato Trust in the Harris Law trust account. It is open to doubt whether Provincial had in mind this type of “money-go-round” with a third party that occurred when it specified that $30,000 had to be injected into the transaction by Mr Adams.

[24] The loan from Waikato Trust was secured by an agreement to mortgage, although, as indicated above, the loan was repaid and, indeed, overpaid out of the Provincial loan. The High Court noted the apparently sinister connotations of the agreement to mortgage as recording an apparent obligation which did not exist. It is, however, not clear from the judgment whether Mr Harris was aware of that agreement.

[25] In the event the trust documentation that Mr Buckland was supposedly to draft was never completed, a caveat was never lodged, and Mr Adams took advantage of having the title of the property in his name to borrow further funds using the property as security. The As are, however, now the registered proprietors of the property again as, because of the controversy surrounding the McKelvy “technique”, Provincial has elected to abandon its security.

[26] Ms B approached Mr McKelvy in January 2001 to arrange a loan of $700 to on-lend to her niece. She owned a property in Cambridge with a mortgage of some

[27] Ms B agreed to apply for a loan of $72,500 from Provincial as a joint borrower with a Mr Neville whom she did not know. The reason for the involvement of Mr Neville was not explained in either judgment. The security for the loan comprised a mortgage over Ms B’s property and an unregistered second mortgage over Mr Neville’s property. There was also security over a 1992 Honda Accord.

[28] Ms B was to repay the ANZ mortgage from the borrowed funds and make a number of other payments, including $3,000 to one Mr Simpson, $11,000 to Mr Fatu, Mr McKelvy’s business associate, and $8,000 to the Waikato Trust. A sum of $2,000 was to be paid to Ms B. The balance of the borrowed money was to be advanced to a company to be incorporated, Pennies from Heaven Ltd. Ms B, along with Mr McKelvy and Mr Fatu, were to be the shareholders and Mr Fatu and Ms B were to be the directors. Ms B’s description before the Tribunal of the proposed business of the new company was:

people would give stuff, like a stereo, tv, and if they didn’t pay it in a certain time money would go into Pennies from Heaven.

[29] The loan agreement dated 23 February 2001 recorded Ms B as a “beneficiary”, and the loan principal as $72,500. The agreement stipulated for monthly payments of $973.80 with the sum of $76,500 due in twelve months (or on earlier demand). The total cost of credit was $15,565.64 comprising interest of

$11,285.64, a $2,000 establishment fee, a brokerage fee of $1,500 and a security inspection fee of $500.

[30] Ms B was taken by Mr McKelvy and Mr Fatu to Mr Harris’ offices for the purpose of completing the documentation for the proposed transaction. Mr Harris advised Ms B that the funds advanced to the company should be protected by way of

a term loan agreement and debenture. However, the completion of the documentation was flawed in that the securities were signed and dated prior to the incorporation of the company.

[31] Some days after completing the loan documentation, Ms B was taken to see Mr Jecks. She executed a typed document recording that she had received advice from him regarding the borrowing and a signed authorisation for the payments to be made out of the funds, including the payments to Mr Fatu and Mr Simpson.

[32] Some three months later Ms B, without reference to Mr Harris, executed an agreement for the sale of the property to a Mr McCawe for $138,000. She also signed an authority to pay any surplus funds to Fast Money Limited, a company of which Mr Fatu was sole director and a Mr Millington the shareholder. Fast Money appears to have been another McKelvy entity. The High Court inferred that Ms B entered into the agreement at Mr McKelvy’s instigation and that it was an application of the second “McKelvy technique” – see at [7] above.

[33] The executed agreement was taken to Mr Harris and he processed it on the basis of the written documentation, without seeing Ms B or explaining the transaction to her. Mr Harris’ statement of 30 May 2001 records a receipt of

“gift” to Mr McCawe of $17,000 plus $2,500 for outstanding rates. The sum of

$63,500 was then transferred to Fast Money in accordance with the authority signed by Ms B. The High Court records that there is no evidence of any benefit to Ms B from the payment to Fast Money. An (undated) deed was entered into by which Mr McCawe, by Mr Harris as his attorney, declared that he held the property on trust for Ms B. No caveat was lodged against the title.

[34] The next phase of the transactions was the purchase of a Hamilton property in June 2001. It appears that the Cambridge property was to be let (to cover the payments to Provincial on the borrowings that were still outstanding) and the Hamilton property was supposed to provide alternative accommodation for Ms B. The Hamilton property had been purchased at mortgagee sale by a McKelvy entity and onsold to a Mr Johnson for $93,500, supposedly as trustee for Ms B.

[35] A valuation of the Hamilton property on 6 June 2001 set a value of $120,000, which we assume was the price set for the purchase by Mr Johnson. Mr Johnson was “gifted” the deposit and borrowed funds for the rest of the purchase price from Provincial, a loan later refinanced by ANZ. Ms B was supposedly to keep up the payments on the loan due and the property was to be transferred to Ms B when she could raise the funds. Ms B was allowed into possession of the property. Ms B of course did not have the means to make the payment on the loan.

[36] Mr Johnson was paid a fee of $4,000 for his services as trustee. He was, however, exposed to full liability on the Provincial and ANZ mortgages. With regard to the “gift” of the deposit to Mr Johnson, we remark that, barring motives of pure altruism, the “gift” must be seen as resulting from Mr McKelvy holding a different view of the valuation of the Hamilton property from that held by the valuer. We do not know if the “gift” was disclosed to Provincial or the ANZ.

[37] On 3 December 2001, Mr Harris wrote to Ms B enclosing deeds of trust relating to the Cambridge and Hamilton properties, some other documentation relating to Mr Neville and a deed of acknowledgement of debt, apparently related to some payments that had allegedly been made on Ms B’s behalf. Mr Harris said in the letter that payments with regard to the Hamilton property were in arrears and that, if Ms B did not pay the rent, the ANZ would exercise its rights under the mortgage which could include a mortgagee sale. He said that there may be payments from Pennies from Heaven Ltd due to her and that she should take this up with the other directors. He also recommended placing the Cambridge property on the market to reduce her overall liabilities.

[38] In the event, the ANZ sold the Hamilton property as mortgagee. Mr Johnson has been left with a residual debt of $30,000. Ms B has been left with nothing.

(a) acting when there was a conflict of interest and without the prior informed consent of Mr A (Charge 14);

(b) failing properly to protect Mr A’s interests when acting on the sale of his property (Charge 15);

[40] The third charge of misleading the Society was found not proved (although erroneously described in the summary of the Tribunal’s findings as having both been proved and to amount to misconduct). The charges in the other two categories were found to have been proved and to amount to misconduct. We now examine the Tribunal’s reasoning in more detail.

[41] Mr Harris had taken the position throughout the hearing that Mr and Mrs A had been represented by Mr Jecks and not by him. The Tribunal had no doubt there was a solicitor and client relationship between Mr Harris and the As, for the following reasons:

(b) Mrs A thought Harris Law was acting for them. Given the time the As spent at the offices of Harris Law as compared to those of Mr Jecks, the Tribunal considered that she was entitled to so believe;

(c) Mr Jecks gave independent advice rather than acting in a transactional sense, the transactional work being undertaken by Harris Law;

(d) Ms Hemmes, of Harris Law, had arranged the reduction of the As’ debt to Advantage from $39,000 to $36,000, a matter the Tribunal regarded as conclusive of a solicitor/client relationship between Harris Law and the As;

(e) Mr Jecks did not accept that he was acting for the As in a primary sense or that it had ever been intended that he would;

(f) A bill of costs for $1,500, inclusive of GST and disbursements, was issued by Harris Law for the overall transaction. The Tribunal concluded that this fee included reimbursement to Mr Harris for the work undertaken for the As.

[42] The Tribunal concluded that Mr Harris was in dereliction of his duty to the

(a) He should have gained a thorough understanding of the transaction and all facets of it;

(b) He should have advised Mr and Mrs A of the various conflicts of interest and either obtained their informed consent or ceased to act for them if not;

(d) The extent and detail of the borrowing by Mr Adams ought to have been carefully explained to Mr and Mrs A and the transaction ought not to have proceeded without their acceptance of those arrangements. The lending was on onerous terms by a lender of last resort;

(e) The trust arrangements ought to have been discussed and properly documented. The Tribunal said that the trust arrangement was a difficult one to document adequately and the responsibility for it was not able to be passed to Mr Buckland, to Mr Harris’ exclusion. The

Tribunal said that it was inconceivable that a lawyer could consider his client’s interests properly protected in these circumstances. Mr Buckland’s evidence was that he knew nothing about the technique of forming a trust and the Tribunal accepted that he had never accepted the responsibility to form the Trust. Mr Buckland acknowledged that there had been talk of his having the trust documents signed by Mr and Mrs A in Taranaki and the Tribunal considered that it would have been logical for him to consider that that was the extent of his responsibility;

(f) The sum of $17,000, which was unpaid purchase monies, ought to have been secured. In the absence of protection the Tribunal noted that that sum appears to have been absorbed by further borrowings by Mr Adams;

(g) The giving of control of ‘surplus funds’ to Mr Adams and the passing of those funds on to the Waikato Trust was a dereliction of Mr Harris’ duty to Mr and Mrs A. The Tribunal noted that, as the transaction unfolded, Mr A ended up repaying the loan which Mr Adams raised to pay the deposit on the purchase;

(h) The appropriateness of the various fees, to Mr McKelvy, Provincial, Mr Adams and Mr Buckland, ought to have been addressed. In aggregate those fees were substantial and, in the Tribunal’s view, excessive and unjustified;

(i) The necessary precautionary and back-up documentation, such as wills and power or powers of attorney, ought to have been covered.

[43] Assuming that the transaction was a trust transaction, the Tribunal described the financial effects of the transaction for Mr and Mrs A in the following terms:

[70] ... Mr Adams borrowed $71,044.09. The borrowing arrangements were never disclosed to Mr and Mrs [A] which of itself is a serious breach of propriety in a trustee situation. The cost of the borrowing was $15,044.09. The cash produced was $56,000. The cash produced went in part in

repayment of the Advantage loan ($36,000.00) and in further part in the payment of various fees and costs. What was left over of the cash was paid to Waikato Trust. The remaining equity in the property was not protected in any way. Subsequent to settlement it appeared that Mr Adams borrowed further monies against the [As’] property which he was supposed to have been holding in Trust and it appears that there is now little or no equity remaining. If there is any equity remaining then there is a question as to ownership of that equity.

[75] We have been driven to the conclusion that the transaction involving the [As] was unscrupulous, deliberately confusing in structure, inadequately explained and documented, doomed to failure and seemingly established by Mr McKelvy for his significant benefit. We have been driven to the conclusion that the role of Mr Harris was that of a dupe who turned a blind eye out of weakness and inability to cope with the pressure he was under. He was a person who had been inveigled into performing necessary functions in a wider scheme.

[45] Mr Harris faced 24 charges in relation to the series of transactions involving

Ms B. The charges were split into four categories – the Provincial loan (charges

22 - 28), the Pennies from Heaven arrangements (charges 29 – 33), the sale to Mr McCawe of the Cambridge property (charges 34 – 39) and the purchase of the Hamilton property (charges 40 - 45). Of the 24 charges, 18 were found proved and to amount to misconduct and one was found proved but not to amount to misconduct.

[46] The Tribunal held that Mr Harris was acting for Ms B and that his duties extended further than merely processing the transactions. It said that, given the nature of the transactions, the limited degree of understanding by Ms B and the persons with whom Ms B was entering into a business relationship, Mr Harris’ professional responsibility to Ms B was somewhat higher than it would have been had Ms B been a person with more commercial acumen.

[47] With regard to the Provincial loan, the Tribunal held that Mr Harris failed to ensure that Ms B understood the terms and effect of the Provincial mortgage and loan agreement. Although Mr Harris had deposed that he had explained the terms of

the Provincial loan and the mortgage documentation to Ms B, his explanation did not include a discussion as to the repayments required or an investigation as to Ms B’s current income, a cursory examination of which would have revealed that her income, as stated by her to the Tribunal, of $200 - $300 per fortnight, was insufficient to meet the mortgage outgoings of $973.80 per month. In the Tribunal’s view, the ability to meet mortgage outgoings amounts to one of the most basic terms for explanation to and understanding by a borrower.

[48] The Tribunal also found that, although Ms B had provided a signed authority for the payments to Mr Simpson, Mr Fatu and Waikato Trust, Mr Harris had failed to ensure she had a full understanding of the payments. Ms B had no knowledge of the purpose of the payments to Mr Fatu and Mr Simpson. Indeed, she did not even know who Mr Simpson was.

[49] Charge 28 was a charge of acting in a conflict of interest situation on the Provincial loan by acting for Ms B as well as Mr McKelvy, Mr Fatu and Mr Neville without informed consent. The Tribunal found that charge proved to the extent that Mr Harris was acting for the joint borrower, Mr Neville, but that it did not amount to misconduct. The Tribunal held that Mr Harris was not acting for Mr McKelvy or Mr Fatu on the Provincial loan.

[50] With regard to the Pennies from Heaven transaction, which encompassed charges 29 – 33, the Tribunal held that neither Mr Harris nor Mr Jecks enquired as to the nature of the business of the proposed company. Neither did they offer any advice as to the wisdom of entering into the arrangement. The Tribunal also held that Mr Harris was acting in a conflict of interest situation in acting for Ms B, Mr McKelvy and Pennies from Heaven without informed consent.

[51] In relation to the sale transaction to Mr McCawe, the Tribunal found that Mr Harris acted solely on the strength of documentation provided to him from Mr McKelvy’s office to effect the sale of the property and to disburse the “surplus funds” of $63,500 to Fast Money. In his evidence, Mr Harris admitted that he had not gone through the agreement for sale and purchase with Ms B or explained the transfer to her. He also admitted that he had not fully advised Ms B of the effect of

the transactions and that he had not acted competently on her behalf in respect of the sale.

[52] The Tribunal did not hear any evidence relating to the financing of the purchase by Mr McCawe, but it considered that the “trust” structure established by Mr McKelvy (see at [7] above) was once again to be utilised and that it was intended that Mr McCawe would hold the property in trust for Ms B with Ms B meeting the mortgage payments due by Mr McCawe. The Tribunal found that it was quite clear that Ms B had no knowledge of any payments required by her. Indeed, she had no knowledge that her property was sold whether in trust or otherwise.

[53] The Tribunal held that Mr Harris had failed to obtain Ms B’s instructions to act on the sale of the property and failed to advise her of the trust position. It found that, in all the circumstances of the transaction, including the fact that Mr Harris had not discussed the nature of the transaction with Ms B, he should not have acted merely on the basis of an authority already signed by her in disbursing the sale proceeds. As a consequence, a charge that Mr Harris had failed to obtain Ms B’s informed consent to the disbursement of funds was held proved, as was a charge of failing to advise Ms B that, of the $138,000 purchase price being paid by Mr McCawe, Mr McCawe would receive a gift back of $17,000. A charge of conflict of interest without informed consent in acting for Mr McCawe and Ms B was also found proved.

[54] With regard to the purchase of the Hamilton house, a number of charges were found proved and to amount to misconduct. These included conflict of interest and a failure to inform Ms B of the details of the transaction, including that the Hamilton house was purchased in trust for her. The Tribunal said that it agreed with the findings of the Tenancy Tribunal adjudicator with regard to the state of knowledge of both Ms B and Mr Johnson. It said:

[138] ... Once again, from the evidence, Ms [B] had a limited knowledge if any, of these transactions. Indeed, the Tenancy Tribunal adjudicator was driven to the conclusion that both Ms [B] and Mr Johnson had been duped by what at best could be described as irregular and unusual practices by the mortgage broker. The adjudicator further commented that they appeared to have received no adequate independent legal advice, and that at best, the legal advice/assistance they did receive was inadequate. The Tribunal

accepts that Mr Harris did not give evidence to the Tenancy Tribunal, but having heard the evidence itself, is driven to conclusions largely similar to those of the Tenancy Tribunal.

[55] The Tribunal noted that Mr Harris’ defence to this charge was that he had no knowledge of Ms B’s involvement in this purchase or the trust arrangements and had assumed that Mr Johnson was an ordinary purchaser. At best, the Tribunal considered that Mr Harris had turned a blind eye to the realities of the situation. Mr Harris was aware of Mr McKelvy’s modus operandi and even the most cursory of discussions with Mr Johnson would have revealed that he was not intending to live in the property and that the proposed source of funding to meet the mortgage outgoings was to come from Ms B.

[56] At that stage, it would have been clear to Mr Harris that, if Mr Johnson were purportedly purchasing the property on trust for Ms B, then Ms B’s position needed to be protected. The Tribunal considered that some inkling of Mr Harris’ state of awareness could be drawn from his affidavit dated 22 October 2003 where he stated that he did not know “with certainty” that this was to be a trust arrangement. We note in any event that Mr Harris appears to have been aware of the trust arrangements by the time of his December 2001 letter – see at [37] above.

[57] In the first three phases of the transactions involving Ms B, charges of failing to render a statement of account were also found proved and, in the circumstances, to amount to misconduct.

[148] Mr Harris could not have failed to have been aware that Mr McKelvy operated on the fringe of legitimacy. His schemes in respect of Ms [B] have been described by Mr A J Gurnell, a Hamilton Solicitor called by the District Society, and Mr Jecks as “odd” and “unusual”. Mr Harris’ professional senses must have been heightened by his knowledge of Mr McKelvy’s modus operandi assisted by Mr Fatu. As put by Mr Radich, “his alarm bells should have been ringing.” Mr Harris stood between Ms [B] and Mr McKelvy. He had the ability to protect her from the schemes promoted by Mr McKelvy and the Tribunal does not accept the argument put forward by his Counsel, that his was a limited retainer to carry into operation the schemes as put forward by Mr McKelvy. The Tribunal has absolutely no doubt that Ms [B] had very little comprehension of the structure of the various transactions or instructed Mr Harris with any level of understanding. A solicitor’s responsibility increases as the level of a client’s understanding

and commercial acumen decreases, and their trust in their professional advisors increases.

[149] Without Mr Harris’ facilitation, Mr McKelvy’s schemes could not have proceeded, and the tribunal finds Mr Harris’ lack of protection afforded to his client, Ms [B], reprehensible.

[59] In its general remarks at the beginning of its judgment on the substantive charges, the Tribunal had noted the pressures involved in the practice of law. It stated, however, that a lawyer is always subject to the rules of professional conduct and no circumstances can justify an abrogation of basic duties of client care. It said:

[26] It is vital for lawyers to retain their independence. They are required to give advice free from influences which may compromise the acceptability or strength of that advice. Lawyers need to avoid being subject to improper or unacceptable pressures. They also need to avoid dependencies which can ultimately compromise their capacity to care for and protect the interests of their client without fear or favour.

[60] Later, in responding to a submission that responsibilities to clients were limited to the extent of the retainer and that, if the retainer were merely the implementation of an agreed transaction, the lawyer had no wider duty, the Tribunal had this to say:

[40] Lawyers live and practise in a world where transactions are becoming more complex, where moral standards have in some areas frayed, where there are predators in business and commerce and where there are vulnerable people liable to be disadvantaged. The duties of lawyers must be such as to respond to these circumstances and to ensure that where it is reasonable and appropriate for protective duties to arise they do so arise and are faced. In the context of the nature and extent of professional duties we do not feel ourselves to be tightly constrained by technical boundaries of retainer.

[41] It is within the experience of each and every member of this Tribunal that badly motivated or criminally motivated operators of one kind or another will seek out professionals (lawyers or others) whose participation is necessary to enable them to achieve their objectives. In the case of lawyers such operators may need the office of a lawyer to undertake transactional arrangements in relation to property or borrowing. Sometimes such operators may need the cover of respectability which a lawyer may be able to offer. Invariably the lawyers who are sought out in these situations are those who through weakness, inclination or vulnerability are likely to be receptive to participation. In the experience of this Tribunal a pattern usually follows once the initial relationship has been established. That

pattern often involves increasing pressure, increasing financial rewards, increasing complexity with increasing loss of independence, judgement and perspective on the part of the practitioner. Practitioners must recognise these situations, avoid them at all costs, or suffer the consequences if they do not. A situation where a lawyer becomes a servile agent of unscrupulous or criminal people is intolerable.

[61] In its subsequent oral penalty decision of 26 November 2003, the Tribunal, after summarising its findings in relation to the individual client transactions and setting out the legal principles relating to findings of professional misconduct and penalty, had this to say:

[30] ... While in this case there was no personal benefit to Mr Harris or active dishonesty or deceit by him there was such a high level of failure of duty to clients, one of whom was vulnerable and the other both vulnerable and desperate, that bearing in mind our primary duty is to act for the protection of the public, we have come to the clear, certain and unanimous view that striking off is the appropriate remedy.

[31] We consider that the appropriate remedy in respect of both sets of charges. We are not persuaded that there is any mitigation of culpability of conduct such as to warrant a penalty short of removal from the roll of barristers and solicitors. We therefore, pursuant to the powers we have under s 112(2)(a) of the Law Practitioners Act 1982, being of the opinion that Mr Harris has been guilty of misconduct in his professional capacity, order that the practitioner, Mr Harris’ name, be struck off the roll.

[62] We now summarise the High Court decision. In the course of this summary, we provide comment on some aspects of the decision.

[63] In considering Mr Harris’ appeal against the Tribunal’s decision, the High Court reviewed the primary facts itself rather than relying on the Tribunal’s findings. It considered this review necessary because the Tribunal, near the beginning of its judgment, had referred to a number of stark conflicts in the evidence where Mr Harris’ credibility was called into question. It had, however, given as the sole

example an instance which the High Court understood the Society had conceded could not be sustained. The example given by the Tribunal was that Mr Harris had advised the Society that he did not act for Mr Johnson when his trust account records showed that he had acted for him three days before.

[64] Mr Olphert, for the Society, submitted on this point that its concession in the High Court had been misunderstood. The advice that Mr Harris was not acting for Mr Johnson was given to another solicitor and not to the Society but this was only a minor error. Mr Hassall QC, on the other hand, submitted on behalf of Mr Harris, that the Tribunal wrongly drew the inference from the trust account records that Mr Harris was currently acting for Mr Johnson. There was no evidence that the trust account records related to a recent transaction and, indeed, the evidence suggested that this was not the case. The Tribunal’s finding that Mr Harris had been untruthful was therefore unjustified and thus the High Court’s review of the Tribunal’s findings was clearly necessary.

[65] We consider this issue to be a red herring. In our view, the findings in relation to the charges rested largely on documentary evidence (or the lack thereof) and, in many cases, on Mr Harris’ own account of his actions. Credibility findings played a very minor part in the Tribunal’s decision. On the other hand, there was nothing to stop the High Court from taking the course it did, even in the absence of an erroneous credibility finding. An appeal to the High Court proceeds by way of rehearing: s 118(2) Law Practitioners Act 1982.

[66] The High Court is thus not bound to accept the Tribunal’s findings of fact or its evaluation of those facts, although it will pay due deference to the findings of a specialist tribunal – see for example Sidney v Auckland District Law Society [1996] 1

560-561 and Re A (Barrister and Solicitor of Auckland) [2001] NZHC 1296; [2002] NZAR 452 at [23]- [24]. (We note in passing that there may be some differences in approach between Re A and the earlier cases but it is not necessary for these purposes to resolve those differences).

[67] On the question of whether Mr Harris was acting for Mr and Mrs A, the High Court said that the Society had not established that Mr Harris lacked honest and reasonable belief that Mr Jecks would provide competent and independent advice to Mr and Mrs A as to the nature of the transaction to the extent of the information with which he had been provided. On the other hand, the High Court held that there were matters which Mr Jecks could not have been expected to have attended to.

[68] In particular, the High Court held that Mr Harris cannot have expected Mr Jecks to reveal Mr McKelvy’s criminal past to Mr and Mrs A or to advise on the possible risk of relying on an unknown trustee, introduced by a known criminal. He also cannot have expected Mr Jecks to reveal that Mr McKelvy’s entity, Waikato Trust, was going to take some $3,000 from the proceeds of the transaction. The Court concluded:

[76] Mr Harris could have insulated himself from assuming a solicitor- client obligation by making full disclosure of these matters to Mr Jecks with instructions to communicate them to Mr and Mrs A. But he did not do so. We are satisfied that as a result Mr and Mrs A had good reason to believe, as they did, that Mr Harris’s introduction of them to, and his then carrying out, the application of the “technique” in relation to Mr Harris’s property gave rise to a professional responsibility to them as their solicitor to safeguard their interests, a responsibility which did not terminate with the temporary involvement of Mr Jecks. ...

[69] Although [76] of the High Court decision is couched in wide terms, it seems to us that the High Court must have meant that Mr Harris could have insulated himself from the obligation to give advice on the transaction. As Mr Jecks was not undertaking a transactional role, it is difficult to see how Mr Jecks’ involvement could have absolved Mr Harris of his duties with regard to documenting the transaction, including ensuring the preparation of the trust documentation.

[70] The High Court then went on to consider the extent of Mr Harris’ obligations as Mr and Mrs A’s solicitor. It said that there had been no attempt by Mr Harris to narrow his obligations by an expressly limited contract of retainer. This meant that Mr Harris’ principal duty was to explain to Mr and Mrs A the intended legal structure of the transaction, the essential cashflows involved and the risks in the

transaction. While Mr Harris was under the erroneous impression, fostered by Mr McKelvy, that the mortgagee sale was imminent, the High Court considered that the provision of such information was vital. The Court did not consider, however, there to have been a breach of duty in Mr Harris failing to advise that one option was to allow a mortgagee sale to proceed. In the High Court’s view, the only live option was an application of the McKelvy technique.

[71] We remark that we have some difficulty in understanding how Mr and Mrs A could have been given proper advice on the transaction without being advised to consider the alternative of allowing the mortgagee sale to proceed. They were proposing to enter into an unorthodox arrangement, involving a very high interest rate and fees the Tribunal classed as excessive. They were passing title to the property to an unknown trustee who was an associate of a known criminal with all the obvious risks of fraud. There must also have been a significant risk that Mr and Mrs A would lose their property in any event, given that the effect of the transaction was to double the current borrowings which they had been unable to service.

[72] The High Court went on to consider the Tribunal’s decision on the charges and associated particulars. It endorsed the Tribunal’s conclusions on each, albeit in some cases with slightly different reasoning. It considered that, although not necessarily unlawful if properly explained and performed, the transaction was unorthodox and attended by the very real risk of abuse by a fraudulent trustee. On the other hand, the High Court said that the forced sale would have presented considerable risk of significant abatement in price while entailing auctioneer’s and other costs.

[73] It calculated that, had the transaction worked as planned, the As’ equity in the property (assuming a sale price of $103,000) would have amounted to “some

$32,000 less the monthly payments”. It also calculated that, on a mortgagee sale, assuming a value of $103,000, the resulting figure would have been “a good deal less than $50,000”, given the abatement of price and other costs involved in a mortgagee sale. A mortgagee sale would also have meant the inevitable loss of a property which was of great significance to the As. The High Court thus calculated the differential between a mortgagee sale and the McKelvy technique as “well under

$18,000”. The use of the McKelvy technique, however, allowed the “opportunity of retaining the property”. This meant, in the High Court’s view, that the use of the McKelvy technique was “economically intelligible”.

[74] We are uncertain what is meant by this phrase. In our view, any differential at all would make the transaction unjustified in a strict financial sense. We recognise that the transaction may nevertheless have been justified in an emotional sense with the differential being the price of keeping a property of emotional significance. The High Court’s calculation was also obviously rough and ready, given that there was no valuation of the property in evidence. There were a number of other unknowns, such as the possible level of abatement of purchase price on a mortgagee sale. Further, the calculation is, in our view, of necessity somewhat simplistic. The Provincial loan to the As was on very onerous terms. That the transaction also involved high fees to third parties must be a factor to take into account in assessing the transaction’s “economic intelligibility”. Certainly, any comparison must be risk adjusted. The High Court recognised that there were two major risks involved in the McKelvy technique – the risk of Mr and Mrs A not being able to meet the Provincial mortgage and that revolving around the trustee arrangements. If either risk eventuated then the As would have paid very high fees and still lost their property in any event, with a greater detrimental impact on their equity than a mortgagee sale.

[75] The High Court concluded that it saw “the undoubted misconduct in less absolute terms than did the Tribunal”. While clumsy and expensive, and with two obvious risks, each component of the transaction, apart from the payment of

$3,156.06 to Waikato Trust, could be justified as part of a lawful transaction providing an alternative to immediate mortgagee sale. If Mr Harris had prepared the trust documentation and registered a caveat immediately following the transaction, this would have ensured that the property was available for repurchase notwithstanding the diminution of the equity by the costs of the “technique” and also the financial burden of the mortgage payments and repayments.

[76] The High Court went on to say that a solicitor “with single-minded concern” for Mr and Mrs A would have placed an explanation of the cashflows at the forefront of his responsibility. Nevertheless, Mr and Mrs A sought and obtained time, which

necessarily entailed financial consequences. In the absence of any suggestion from the Society that Mr Jecks would not discharge his role professionally, the Court also considered Mr Harris’ breaches of duty mitigated by both the circumstances of urgency and Mr Jecks’ assumption of the responsibility to explain the transaction to Mr and Mrs A.

[77] We do not understand the High Court to be suggesting that Mr Harris, given he was acting for the As, was not, as in any normal solicitor/client relationship, required to have “single-minded concern” for his client. Indeed, in another part of the judgment, single-minded concern for a client free from compromising influences and loyalties was recognised as vital. We also do not take this passage as suggesting that Mr Harris was not obliged to explain the transaction to Mr and Mrs A, given that they were his clients. The High Court recognised there was such an obligation – see at [70] above. We take the Court as saying merely that Mr Harris’ failures in this regard are mitigated by what the High Court held to be his reasonable reliance on Mr Jecks and the urgency of the situation.

[78] With regard to the transactions involving Ms B, the High Court agreed with the Tribunal’s findings on those charges, apart from charge 32 which they considered duplicitous of charge 31. The High Court said that it viewed these transactions much more seriously than that involving Mr and Mrs A. It accepted that, in agreeing to see through the transactions and in making the relevant entries in his trust account, Mr Harris was acting under the influence of Mr McKelvy. It also considered there to be ample evidence to justify the Tribunal’s conclusion that Mr Harris had failed to ensure that Ms B understood the components of the transactions.

[79] The Court considered that some degree of mitigation with regard to the loan part of the transaction was available because of the reference to Mr Jecks but it recognised that this did not apply to the balance of the transaction. It also said that it must have been glaringly obvious to Mr Harris that the proposed loan was improvident and that Mr Jecks had done nothing to educate Ms B about the risks.

The Court considered that no practitioner acting independently of Mr McKelvy would have countenanced it.

[80] In relation to the Pennies from Heaven transaction, the Court considered that it was the plain duty of Mr Harris to point out to Ms B, in language that she could comprehend, the risks of committing herself to a guaranteed loss of equity in her property in exchange for the shareholding in a start up company with no evidence whatever as to its substance or prospects. The Court considered that Mr Harris’ knowledge of Mr McKelvy’s criminal record was germane and ought to have been disclosed. Mr Jecks’ apparent failure to perform an analysis of the consequences of the legal transactions did not relieve Mr Harris of this responsibility.

[81] With regard to the McCawe transaction, the Court rejected a submission that at the stage of the “sale” to Mr McCawe, the transaction was a fait accompli. Given it was ostensibly a trust situation, Ms B had the right as sole beneficiary to bring the trust to an end and thus could have, with proper advice, decided not to proceed with the “technique”. Further, the Court noted that this was not the case of a pre-existing liquidity crisis (as in the case of the As) but a direct result of the Pennies from Heaven transaction.

[82] With regard to the final leg of the transaction, the Court held that, having lost her equity in the Cambridge property, Ms B was never going to secure any effective interest in the Hamilton property as she did not have the means to fund even the interest payments. The Court said that this “deplorable result” was a direct consequence of Mr Harris’s failure at the outset to give effective advice to Ms B. In its view, the subsequent McCawe and Hamilton property transactions afforded further examples of Mr Harris’s preparedness to subordinate himself to Mr McKelvy.

[83] The High Court considered, however, that there were a number of mitigating features, although the Court reminded itself of Sir Thomas Bingham MR’s remarks in Bolton v The Law Society [1993] EWCA Civ 32; [1994] 1 WLR 512 (CA) at 519, endorsed by the Court in Wellington District Law Society v Cummins [1998] 3 NZLR 363 at 370, where he said:

Because orders made by the tribunal are not primarily punitive, it follows that considerations which would ordinarily weigh in mitigation of punishment have less effect on the exercise of this jurisdiction than on the ordinary run of sentences imposed in criminal cases ...

[84] The mitigating features identified were Mr Jecks’ involvement and Ms B’s confident demeanour (her evidence was that she had been persuaded by Mr McKelvy to pretend to Mr Harris that she understood the transaction).

[85] The High Court also expressed the view that the Tribunal, in assessing penalty, had endorsed as applicable to Ms B’s transactions some part of its conclusions as to Mr Harris’ failings with regard to the As as set out at [42] above. The Court went on to say that the difficulty with such an approach is that there was no conviction on the elements of charges 28 and 35 “containing that allegation”. As a result, the Court considered that convictions in relation to the dealings with Mr McKelvy were confined to omissions, not commissions. The High Court was not saying that breach of duty by omission cannot ever justify striking-off. Its point was rather one of fairness. While there was a powerful evidentiary base for the Tribunal’s conclusions, the Court did not consider it just following findings of breach on charges of omission to impose a penalty based on a commission “which was not squarely alleged”.

[86] Charges 28 and 35 were charges of conflict of interest in acting for other parties (including Mr McKelvy) without the informed consent of Ms B. As indicated at [49] above, the Tribunal did not uphold the charges relating to a conflict of interest regarding Mr McKelvy as it held that Mr Harris was not acting for Mr McKelvy on those transactions. We note that the High Court had earlier said that, given the business relationship between Mr Harris and Mr McKelvy and the fact that the loan was raised to invest in a McKelvy company, the Tribunal took too narrow a view of the conflict of interest question.

[87] With regard to penalty, the High Court said that, as it saw the facts in relation to Mr and Mrs A rather differently than did the Tribunal, it was necessary for the

Court to make its own decision on penalty. On its assessment of the transaction involving Mr and Mrs A, Mr Harris’ conduct did not of itself justify the striking off order. With regard to Ms B, the Court considered that the Tribunal erred in principle in imposing penalty on the basis of commission when the charges and the convictions were of omission.

[88] Secondly, it said that the circumstances in which the breaches occurred did not warrant the ultimate penalty of striking off. It saw the breaches involving Mr and Mrs A as being mitigated by the perceived need to act urgently and Mr Harris’ reliance on Mr Jecks to explain the transactions to his clients. In relation to the charges involving Ms B, the Court pointed to the confident and knowledgeable demeanour Ms B presented to Mr Harris and, in respect of the loan part of the transaction, Mr Harris’ reliance on the advice to be given by Mr Jecks

[89] An important feature for the High Court was that there is no evidence of dishonesty in any aspect of Mr Harris’s dealings with the complainants. Rather, the Court accepted the Tribunal’s finding that Mr Harris was a dupe who allowed himself to be pressured into playing a necessary function in a wider scheme.

[90] In the circumstances, the Court considered that an order for striking off was disproportionately severe. Orders of suspension and a prohibition against Mr Harris practising on his own account were a sufficiently stern response to the gravity of the misconduct.

[91] Mr Collins’ main submission for the Society was that the High Court should not have overturned the specialist Tribunal’s decision on penalty. In his submission, the High Court did not disturb the decision of the Tribunal on the various charges, with the exception of one duplicitous charge. The main reasons that led the Tribunal to striking off Mr Harris were also upheld by the High Court, namely that Mr Harris was prepared to subordinate himself to Mr McKelvy and that he was a dupe who allowed himself to be pressured into playing a necessary function in Mr McKelvy’s wider schemes.

[92] In Mr Collins’ submission, there is no place in the legal profession for a practitioner who lacks the strength of character and purpose to protect the interests of a vulnerable and unsophisticated client, and who allows his independent judgment to be subverted by a known criminal. Striking off was, in his submission, the only proper response.

[93] Apart from the jurisdictional point dealt with at [141]-[153] by Chambers J, Mr Hassall’s main submission for Mr Harris was that, because of a flawed credibility finding against Mr Harris by the Tribunal and its failure to guard against hindsight, the High Court was required to make its own assessment of the situation. In Mr Hassall’s submission, unless it can be shown that the High Court itself made erroneous findings of fact, it is not open to the Society to question the penalty imposed.

[94] Mr Hassall also pointed out that the High Court held that the misconduct in relation to the As was less absolute than found by the Tribunal. Further, it found that there were mitigating factors not recognised by the Tribunal. This, in Mr Hassall’s submission, entitled it to come to a different view on penalty.

[95] We agree with Chambers J, for the reasons he gives, that the Court has jurisdiction to hear this appeal – see discussion at [141]-[153] below.

[96] We begin with the series of transactions involving Ms B. In our view, any competent solicitor being presented with the Pennies from Heaven transaction should have had major concerns. Ms B was increasing her borrowings from $16,500 to over

$70,000 for the immediate cash benefit of a mere $2,000. A large portion of the borrowed funds was being paid to associates of Mr McKelvy, a person known by

Mr Harris to be a convicted fraudster. The remainder was being lent to a start up company with which Mr McKelvy was associated.

[97] Ms B was described as a beneficiary in the loan documentation which should, on the face of the documentation, have indicated her probable lack of means to Mr Harris. It would have been obvious therefore that Ms B was relying on immediate income being available from the start up company (which had not even been incorporated) to service the increased borrowing. Even if the levels of income promised from the company had been achievable in the long term, the expectation of immediate income was clearly unrealistic. Ms B was therefore doomed to be in default on her increased borrowings at the least in the short term and very probably in the long term. It was also unrealistic, as pointed out by the High Court, to count on the company yielding enough to pay the $78,500 due at the end of a year together with income to service the loan in the meantime.

[98] In our view, the transaction was so obviously highly imprudent (at the least) that a competent solicitor should have strongly advised Ms B not to enter into it. If Ms B had insisted on entering into the transaction despite this advice, then the risks should have been clearly explained in a manner that she could understand. This was not done. Indeed Mr Harris, unaccountably in our view, did not consider it his role to do so.

[99] The next phase of the transaction involving Mr McCawe falls to be judged against the background of the highly imprudent transaction already entered into. Despite this background, Mr Harris proceeded to document the transfer of the Cambridge property and the disbursement of the proceeds to a McKelvy entity on the basis of written documentation provided to him by Mr McKelvy without taking instructions from Ms B directly or making any attempt to explain the transaction to her.

[100] The payment of $63,500 made to Mr McKelvy’s entity, Fast Money, was of no obvious benefit to Ms B and was made to an entity associated with a known fraudster. These facts alone should have led Mr Harris not to act merely on the basis of written instructions. Further, there was an unexplained gift involved to

Mr McCawe of $17,000. In our view, this sale coming so soon after the highly imprudent Pennies from Heaven transaction should have raised suspicions as to this being part of a pre-conceived plan on the part of Mr McKelvy involving (at the least) sharp dealing.

[101] There were no significant differences between the analysis of these transactions conducted by the High Court and the Tribunal. Both found that the very significant dereliction of duty by Mr Harris over the course of the transactions involving Ms B was as a result of Mr Harris being the dupe of a convicted fraudster, turning a blind eye to the obvious dangers for Ms B in the transactions.

[102] Moving now to the transaction involving Mr and Mrs A, there were differences between the decision of the Tribunal and the High Court, although the decision on the charges themselves was upheld. The main difference between the analysis of the High Court and that of the Tribunal centres on the Tribunal’s finding at [75] of its judgment (quoted at [44] above) that the transaction was “doomed to failure”. If, as we think more likely, the Tribunal considered that to be the case because of the failings outlined at [42] above, then we do not understand the High Court to take issue with that. Nor could it properly have done so in our view. Absent proper trust documentation and proper inquiries as to the appropriateness of Mr Adams (who was after all introduced by a known fraudster) as trustee, the transaction carried such a high risk that it is not straining language unduly to dub it doomed to failure.

[103] The High Court, however, appears to have read the Tribunal’s comment as meaning that the Tribunal considered the transaction would have been doomed to failure even had there not been the breaches of duty set out at [42] above. As indicated above, the High Court considered that, absent the breaches of duty, while clumsy and expensive, the transaction could have been “economically intelligible” as the alternative was a mortgagee sale which would have entailed its own costs, including a lowered sale price. We have already commented briefly on this finding at [73] - [74] above.

[104] The Court did recognise that there were two major risks in the transaction; the risks revolving around the trustee arrangements and the risk of Mr and Mrs A not meeting the Provincial mortgage. Taking the second of these risks first, the High Court provided no analysis of the extent of this risk and thus made no explicit findings on this issue. We are obviously hampered in our assessment by not having been provided with a copy of the evidence but some comments can be made on the basis of the material contained in the judgments of the Tribunal and the High Court.

[105] First, we observe that, as the interest and fees were capitalised into the principal sum advanced and appear to have been pre-paid, there was no risk of default during the six month mortgage term. The risk was rather that Mr and Mrs A would not be able to refinance at the end of the term. As we understand the position, refinancing would depend upon the As re-establishing a good credit history. We are uncertain that the transaction, as outlined, could have achieved this for the following reasons:

(b) It was for six months only, hardly a lengthy period to re-establish a credit history;

(c) The interest and costs were, in any event, capitalised and it appears, pre-paid, although the As were to pay “rent” under the arrangement. (We note in passing that it was never explained in the judgments what was to be done with the “rent” given that the interest and fees had been pre-paid);

(d) Mr and Mrs A had defaulted on a loan which amounted to $39,000 including default interest. A new loan of over $70,000 was required to refinance the Provincial loan. Absent a change of circumstances (none were mentioned by the High Court) or outside assistance (and the High Court said that there was no evidence of this), it might be

inferred that Mr and Mrs A could face difficulty in meeting a substantially increased commitment;

(e) The increased loan would have decreased the As’ equity in the property making refinancing more difficult, lenders being more inclined to lend the greater the equity available in a property.

[106] If the As were unable to refinance the Provincial loan or were unable to do so in a manner that involved manageable interest payments then there must have been a major risk that the As would lose their house in any event (making the very significant costs of the transaction totally unjustified).

[107] Moving to the second of the risks identified by the High Court, that the trustee may be put in a position to abuse his power, we comment first that it is not clear to us why the trustee arrangement was necessary. Provincial is said to be an “equity” lender – ie it will lend based on the amount of equity in the property rather than the servicing capacity of the borrower. In this case, no cash servicing was needed over the term of the loan as the interest and fees had been capitalised. Neither the Tribunal nor the High Court explained why Provincial would not have lent to Mr and Mrs A on similar terms to those offered to Mr Adams. The terms were after all very onerous, presumably meaning that Provincial had factored in a high risk of default. A loan directly to Mr and Mrs A would have eliminated one of the major risks of the transaction as identified by the High Court. It is possible, however, that there was some explanation given in the evidence and so we make no further comment on this point.

[108] It is, however, clear, as the High Court recognised, that Mr Harris’ failure to caveat the title and ensure the preparation of the Trust documentation had led to the risk of abuse by a trustee being realised. We do not consider that taking account of what happened in the case of Mr and Mrs A shows the illegitimate use of hindsight. The actions of Mr Adams were clearly foreseeable at the time the transaction was entered into. Mr Adams was introduced by a known fraudster, no inquiries were recommended or made into his antecedents and no proper precautions (including a caveat and trust documentation) were taken to protect the As’ position.

[109] Given the risks involved in the transaction, while dubbing it as doomed to failure may be too strong, there was nonetheless, in our view, a very high risk of failure. The difference therefore between the Tribunal’s analysis (even assuming it meant that the transaction was doomed from inception, even properly implemented and explained) and that of the High Court, does not appear to us to be great.

[110] In any event, we observe that the fact that the transaction may have been “economically intelligible”, albeit with major risks, is to a degree beside the point. The High Court accepted that Mr Harris had failed to spell out (to the extent feasible given the urgency involved) the elements of the McKelvy technique and its risks. This meant that the As had never had the chance to decide, in a fully informed manner, whether to enter the transaction. The decision whether or not it was “economically intelligible” and whether the risks were justified was one for the As to make and they were not given the opportunity to do so.

[111] The approach to penalties that should be adopted by an appellate court was discussed by this Court in Institute of Chartered Accountants of New Zealand v Bevan [2002] NZCA 270; [2003] 1 NZLR 154 at 173 in the following

[60] We begin with the matter of the approach to the review of penalties. In Bolton v Law Society [1993] EWCA Civ 32; [1994] 2 All ER 486 Sir Thomas Bingham MR recognised as authoritative this statement from a judgment of the Privy Council in McCoan v General Medical Council [1964] 1 WLR 1107 at p 1113:

“Their Lordships are of opinion that Lord Parker CJ may have gone too far in In re a Solicitor [ [1960] 2 QB 212 at p 221], when he said that the appellate court would never differ from sentence in cases of professional misconduct, but their Lordships agree with Lord Goddard CJ in In re a Solicitor [[1956] 1 WLR 1312 at p 1314] when he said that it would require a very strong case to interfere with sentence in such a case, because the Disciplinary Committee are the best possible people for weighing the seriousness of the professional misconduct.”

[61] That deferential approach was not challenged in the hearing before us, in particular by Mr Strauss, for Mr Bevan. The approach arises directly from the nature of the issues involved in the fixing of penalties and from the character of the disciplinary body that imposes them. There is a further

factor supporting a deferential approach in the present case which is brought by way of an application for judicial review. Bolton, McCoan and the cases quoted are all appeals (and all but McCoan are appeals to Courts from bodies made up of lawyers). Greater deference is to be expected in judicial review cases. (In the United Kingdom the difference may recently have become larger, given the wider view of its appellate powers adopted by the Privy Council in hearing health professional discipline appeals in response to the European Convention on Human Rights; see, for example, Ghosh v General Medical Council [2001] UKPC 29; [2001] 1 WLR 1915.)

[112] In Ghosh, Lord Millett, who delivered the judgment, stated that the Board was fully entitled to substitute its own decision for that of the committee (of the General Medical Council) if the appellant had demonstrated some error in the proceedings or the decision. He recognised, however, that the Board’s powers of intervention may be circumscribed by the circumstances in which they are invoked, particularly in appeals against sentence. The Board would account an appropriate measure of respect to the judgment of the committee but will not defer more than is necessary in the circumstances. Lord Millett referred (at 1923) to the reasons for deference set out in Evans v General Medical Council (unreported) 19 November

The principles upon which this Board acts in reviewing sentences passed by the Professional Conduct Committee are well settled. It has been said time and again that a disciplinary committee are the best possible people for weighing the seriousness of professional misconduct, and that the Board will be very slow to interfere with the exercise of the discretion of such a committee ... The committee are familiar with the whole gradation of seriousness of the cases of various types which come before them, and are peculiarly well qualified to say at what point on that gradation erasure becomes the appropriate sentence. This Board does not have that advantage nor can it have the same capacity for judging what measures are from time to time required for the purpose of maintaining professional standards.

[113] The question, therefore, for this Court is whether, in terms of the principles set out above, there were in this case circumstances which would justify the High Court departing from the specialist Tribunal’s decision on penalty.

[114] We agree with Chambers J at [180] that the re-evaluation of the factual basis upon which a decision as to penalty arises will often require the High Court, on appeal, to re-assess penalty. This, however, depends on the significance of the different factual findings. In this case the High Court upheld the Tribunal’s findings of misconduct in relation to all but one duplicitous charge and, by and large, for the

same reasons. Indeed, the fundamental reason for the Tribunal’s decision to strike off Mr Harris (that he succumbed to pressure and allowed himself to be used by a fraudster) was endorsed. This is, therefore, a case not of disagreement on the facts or the charges but on the evaluation of those facts.

[115] We accept that a different evaluation of the facts (if significant enough) could lead to a penalty being revised. There were no significant differences with regard to the analysis of the transactions involving Ms B. We consider that any difference between the approach of the Tribunal and that of the High Court to the transaction involving Mr and Mrs A is minimal, as is clear from our analysis above at [101] - [109]. We do not consider this difference sufficient to have justified the High Court considering penalty afresh.

[116] The High Court considered that the transaction could have been “economically intelligible” had the breaches of duty by Mr Harris not occurred. With respect, it seems to us odd to treat the breaches as if they had not happened when coming to a decision on a suitable penalty. This seems to have led the Court to the conclusion that the Tribunal was wrong to describe the transaction as one which was “doomed to fail”. But the Tribunal’s characterisation of the transaction was the transaction as documented by Mr Harris (ie with the shortcomings resulting from his breach of his obligations to his client) not an abstract transaction of the same kind appropriately documented with all necessary safeguards. Whether an appropriate documented transaction of this kind would be “economically intelligible” seems doubtful to us, but there is no need to reach a conclusion on that point. The important point is that we do not think that the High Court intended to say that the transaction as documented was not doomed to fail, and so that this apparent difference between the High Court’s and the Tribunal’s positions may have been more apparent than real.

[117] More importantly, the High Court did not differ from the Tribunal’s assessment that the reasons for Mr Harris’ serious breaches of duty were that he succumbed to pressure from a known fraudster, Mr McKelvy, and turned a blind eye out of weakness to the risks of a scheme that the Tribunal dubbed unscrupulous and seemingly established for Mr McKelvy’s significant benefit. The benefit took the

form of what the Tribunal called excessive fees (a finding not overruled by the High Court) and an unauthorised (and unjustifiable) payment of at least $3,000 to a McKelvy entity, Waikato Trust.

[118] In any event, on one reading of the Tribunal’s penalty decision (see at [61] above), the charges relating to Ms B alone justified the striking off order. This depends on whether the phrase “both sets of charges” in [31] of its decision (quoted at [61] above) means both sets of charges separately or whether it means both sets of charges cumulatively. Given the seriousness of Mr Harris’ failings with regard to Ms B, the fact the lapses continued over a series of transactions and the reason for those lapses (Mr Harris, as a dupe of Mr McKelvy, turning a blind eye to the obvious dangers of the transactions), a striking off order would, in our view, have been well justified on the basis of the transactions involving Ms B alone. If the Tribunal would have imposed a striking off order on the basis of the B transactions alone, the High Court, on the principles discussed at [111] – [113] above, would not have been justified in disturbing that penalty.

[119] The High Court also identified what it saw as an error of principle in the Tribunal’s decision on the transactions involving Ms B – the fact that the Tribunal did not distinguish between omissions and commissions. If there was an error of principle, this would have required a re-evaluation of penalty and, if significant enough, would have justified the High Court imposing a different penalty.

[120] Although it is not entirely clear (see discussion at [85] and [86] above), the High Court’s concern appears to have been that the Tribunal’s penalty decision rested on the conflict of interest in acting for Mr McKelvy and Ms B while the specific charges to that effect (charges 28 and 35) were found not proved insofar as Mr McKelvy was concerned, although the High Court considered, and we agree, that the Tribunal took too narrow a view in the circumstances. The Court said that, despite this, Mr Harris should not be penalised with regard to a matter found not proved. The High Court, however, seems to have overlooked the fact that charge 29 (relating to a conflict of interest on the Pennies from Heaven transaction in acting for Ms B and Mr McKelvy) was found proved and to amount to misconduct.

[121] In any event, it must be legitimate for the Tribunal, in assessing the level of culpability for penalty purposes, to examine the reason for any breaches. Clearly breaches that arise through inexperience, illness or because of a family crisis, for example, are in quite a different category from the breaches in this case resulting, so the Tribunal found, from succumbing to pressure from a known fraudster.

[122] We accept the Society’s submission that the distinction between omission and commission is unhelpful. Most breaches of duty by solicitors will result from what can be classed as omissions and some of these may be worse than commissions. Omissions can be knowing omissions (in this case “turning a blind eye”) and there can be “inadvertent” commissions. The distinction is, in any event, illusory (as is shown by the example given in Chambers J’s judgment at [194]).

[123] The High Court identified a number of “mitigating factors” in relation to the transactions which it considered relevant to a decision on penalty. We observe that the factors identified relate rather to an assessment of the seriousness of the misconduct rather than being mitigating factors personal to Mr Harris. The Tribunal was clearly aware of all of these factors and took them into account in assessing the breaches of duty alleged. Any differences between the approach of the High Court and that of the Tribunal again therefore relate to differences in evaluation.

[124] The High Court, with regard to the As, said that Mr Harris’ breaches of duty were mitigated by the circumstances of urgency and Mr Jecks’ assumption of responsibility to explain the transaction. The High Court recognised that neither factor relieved Mr Harris of his obligation to explain the transaction to Mr and Mrs A. Equally, neither factor relieved Mr Harris of his obligation to ensure the trust arrangements were properly documented. Mr Jecks was never responsible for the documentary aspects of the transaction and there was clearly time after the transaction to make sure the trust documentation was in place. There is no doubt that Mr Harris’ actions would have been worse had it not been for the urgency and Mr Jecks’ involvement but this is not the same as saying that they are mitigating factors. Indeed, the fact that Mr Harris erroneously thought that Mr Jecks’ very limited involvement relieved him of any responsibility to Mr and Mrs A is in itself of

concern. We thus do not consider these mitigating factors justified a departure from the penalty set by the Tribunal.

[125] The High Court also identified two mitigating factors in relation to the transactions involving Ms B – her confident demeanour and the involvement of Mr Jecks. The extent to which either can be seen as reducing the seriousness of the misconduct is doubtful in our view.

[126] Mr Jecks was not involved in the McCawe transfer or the purchase of the Hamilton property at all. He was used only to provide advice on the Provincial loan and that was some three days after the documentation had been completed. There is no suggestion that Mr Jecks made any inquiries as to Ms B’s ability to service the loan or that Mr Harris thought he had done so. Mr Harris made no such inquiries and did not, in clear dereliction of duty, strongly advise Ms B not to enter into what was, at the least, an unusual and highly imprudent transaction. All this because he was the knowing dupe of a convicted fraudster who provided a substantial portion of the fees for his practice and with whom he had a very close relationship, including sharing a legal executive.

[127] With regard to Ms B’s confident demeanour, we have difficulty in seeing this as a mitigating factor at all. A confident demeanour cannot excuse the total failure to make even the most elementary inquiries as to the servicing of the loan in what was on its face a highly unusual transaction entered into by a person described as a beneficiary or the failure to advise on the obvious risks involved in such an imprudent transaction. Nor can it excuse a total failure to explain the McCawe or Johnson transactions, especially as there was no meeting at all during the McCawe transaction where Mr Harris could have observed Ms B’s demeanour, confident or otherwise.

[128] A confident demeanour may have gone some way to exercising an inadequate explanation of the transactions and the risks involved but not total failure to do so. It could even be argued that, given the highly unusual and obviously imprudent (at the least) nature of the Pennies from Heaven transaction, a confident demeanour should

have raised fears as to Ms B’s proper understanding of the transaction rather than alleviated them.

[129] Even if those factors can properly be seen as mitigating factors, the Tribunal was clearly aware of both of them and took them into account in assessing the level of breach of duty. As this was the case, this did not provide a proper basis for the High Court to depart from the Tribunal’s decision on penalty.

[130] The final element highlighted by the High Court was the lack of dishonesty. It is true that dishonesty will almost inevitably lead to a strike off order. The converse is not true. Whether lack of dishonesty may lead to a lesser penalty depends on all the circumstances. As was said by Sir Thomas Bingham MR in Bolton (at 518):

Any solicitor who is shown to have discharged his professional duties with anything less than complete integrity, probity and trustworthiness must expect severe sanctions to be imposed upon him by the Solicitors Disciplinary Tribunal. Lapses from the required high standard may, of course, take different forms and be of varying degrees. The most serious involves proven dishonesty, whether or not leading to criminal proceedings and criminal penalties. In such cases the tribunal has almost invariably, no matter how strong the mitigation advanced for the solicitor, ordered that he be struck off the Roll of Solicitors. ... If a solicitor is not shown to have acted dishonestly, but is shown to have fallen below the required standards of integrity, probity and trustworthiness, his lapse is less serious but it remains very serious indeed in a member of a profession whose reputation depends upon trust. A striking off order will not necessarily follow in such a case, but it may well. The decision whether to strike off or to suspend will often involve a fine and difficult exercise of judgment, to be made by the tribunal as an informed and expert body on all the facts of the case.

[131] The Tribunal clearly took into account the lack of dishonesty in coming to its view – see at [61] above. In addition, there can be no doubt that Mr Harris, in succumbing to pressure from a known fraudster through weakness and inability to withstand pressure, fell well below the required standards of “integrity, probity and trustworthiness”, even though he was not dishonest in the sense of receiving a personal benefit from Mr McKelvy’s schemes (apart from normal and reasonable legal fees). We accept the Society’s submission, however, that it cannot be said that Mr Harris’ serious failure to protect the interests of his clients in this case was without financial motive or influence. Mr McKelvy was clearly an important and lucrative client of the practice.

[132] Mr Harris turned a blind eye in the case of Mr and Mrs A to the clear dangers of trustee fraud, the unjustifiable payment of some $3,000 to Waikato Trust and the obvious dangers of Mr and Mrs A not being able to refinance and thus paying exorbitant fees and a high interest rate to lose their property in any event. In Ms B’s case, Mr Harris turned a blind eye to the obviously highly imprudent nature of the Pennies from Heaven transaction, the strange features of the McCawe transaction (including a large and unexplained payment to a McKelvy entity), and, on his own admission, processed on the basis of written documentation without even seeing his client. Further, Mr Harris’ breaches of duty in both cases were gross.

[133] Mr Harris, the Tribunal found, knew of Mr McKelvy’s criminal convictions and had a good understanding of how Mr McKelvy operated in his broking business. It also found that Mr Harris must have been fully aware that Mr McKelvy operated at the “fringe of legitimacy”. In our view, the Tribunal was fully entitled to take the position that there is no room in the legal profession for those who allow themselves to be inveigled into playing a necessary part in schemes that are (at the least) sharp dealing and obviously so – see the Tribunal’s general remarks at [60] above.

[134] For the reasons given above, we do not consider that the High Court was justified in differing from the Tribunal’s penalty decision. We therefore allow the appeal. The order made by the High Court is set aside and the penalty imposed by the Tribunal striking Mr Harris’ name off the roll of barristers and solicitors is restored.

[135] The parties have leave to file memoranda on costs. The Society must file and serve any such memorandum on or before 3 May 2006. Mr Harris must file and serve his memorandum on or before 17 May 2006. Any memorandum in reply must be filed and served on or before 24 May 2006.

Should Mr Harris have been struck off? [136] Is this a s 66 or s 67 appeal? [141] Mr Harris’s misconduct [154] The charges relating to Ms B [156]

The essential issue: was the High Court justified in interfering with the tribunal’s assessment

[136] The essential issue on this appeal is whether William Raymond Harris, a Cambridge solicitor, should, for his misconduct, have been struck off the roll of barristers and solicitors, as ordered by the New Zealand Law Practitioners Disciplinary Tribunal (the tribunal), or merely suspended from practice as a barrister and solicitor for two and a half years, as ordered by the High Court on appeal: Harris v The Complaints Committee of the Waikato/Bay of Plenty District Law Society HC AK CIV2003-419-1691 22 April 2005 (Baragwanath, Randerson, and Rodney Hansen JJ). The essential complaint of the Complaints Committee of the Waikato/Bay of Plenty District Law Society (the society) is that the High Court was unjustified in interfering with the specialist tribunal’s sentencing decision.

[137] The society developed subsidiary arguments, mainly concerned with the weight which the High Court placed on various relevant components:

(b) too much weight on the prospect of Mr Harris’s rehabilitation; (c) too much weight on the absence of dishonesty; and

(d) a wrongful emphasis on whether Mr Harris’s misconduct arose from omissions or commissions.

[138] But the essence of the case developed by Messrs Collins and Olphert, for the society, was that the High Court had failed to apply the principles of Bolton v Law Society [1993] EWCA Civ 32; [1994] 1 WLR 512 (CA), which were said to be that it is only in “a very strong case” that an appellate court will be justified in interfering with a disciplinary tribunal’s sentence, “because the disciplinary committee are the best possible people for weighing the seriousness of the professional misconduct”: at 516. This was not, Mr Collins submitted, such “a very strong case”.

[139] Mr Hassall QC, for Mr Harris, raised one point by way of reply to the appeal. He questioned whether this court had jurisdiction to hear the appeal. He submitted that the tribunal was an “inferior Court” for the purposes of s 67 of the Judicature Act 1908, with the consequence that any appeal from the High Court’s decision could be brought only by leave. Such leave had never been sought. Mr Collins disputed that submission. He submitted that the tribunal was not an “inferior Court”. Accordingly, the society had a right of appeal under s 66. No leave was required.

[140] I shall deal with the jurisdictional point first. Then I shall deal with Mr Harris’s misconduct as found by the tribunal and the High Court, Mr Collins’s primary submission, and finally his four subsidiary points on appeal.

66. Court may hear appeals from judgments and orders of the High Court – The Court of Appeal shall have jurisdiction and power to hear and determine appeals from any judgment, decree, or order save as hereinafter mentioned, of [the High Court], subject to the provisions of this Act and to such rules and orders for regulating the terms and conditions on which such appeals shall be allowed as may be made pursuant to this Act.

67. No appeal on appeals from inferior Courts without leave – The determination of [the High Court] on appeals from inferior Courts shall be final unless leave to appeal from the same to the Court of

Appeal is given [by the High Court or, where such leave is refused by that Court, then by the Court of Appeal].

[142] The term “inferior Court” is defined in s 2 of the Judicature Act. It means “any Court of judicature within New Zealand of inferior jurisdiction to the High Court”. The question is whether the tribunal comes within that definition, and in particular whether it is a “Court of judicature”.

[143] In addressing whether the tribunal was a court of judicature, both Mr Collins and Mr Hassall relied primarily on the test propounded in Lord Scarman’s speech in Attorney-General v British Broadcasting Corporation [1981] AC 303 at 359 (HL):

I would identify a court in (or ‘of’) law, i.e. a court of judicature, as a body established by law to exercise, either generally or subject to defined limits, the judicial power of the state. In this context judicial power is to be contrasted with legislative and executive (i.e. administrative) power. If the body under review is established for a purely legislative or administrative purpose, it is part of the legislative or administrative system of the state, even though it has to perform duties which are judicial in character. Though the ubiquitous presence of the state makes itself felt in all sorts of situations never envisaged when our law was in its formative stage, the judicial power of the state exercised through judges appointed by the state remains an independent, and recognisably separate, function of government. Unless a body exercising judicial functions can be demonstrated to be part of this judicial system, it is not, in my judgment, a court of law.

But, in my judgment, not every court is a court of judicature, i.e. a court in law. Nor am I prepared to assume that Parliament intends to establish a court as part of the country’s judicial system whenever it constitutes a court. The word ‘court’ does, in modern English usage, emphasise that the body so described has judicial functions to exercise; but it is frequently used to describe bodies which, though they exercise judicial functions, are not part of the judicial system of the kingdom. Fry LJ made the point in the passage I have quoted, and there is an abundance of modern instances of this usage of the word. When, therefore, Parliament entrusts a body with a judicial function, it is necessary to examine the legislation to discover its purpose. The mere application of the ‘court’ label does not determine the question; nor, I would add, does the absence of the label conclude the question the other way.

[145] So there was no dispute about the principles to be applied. But counsel differed in their application to the provisions of the Law Practitioners Act and the tribunal. Mr Collins submitted that the tribunal was a body established for an administrative purpose, even though it had to perform duties which were judicial in

character; it was not therefore a court of judicature. Mr Collins compared the New Zealand Law Practitioners Disciplinary Tribunal with the Employment Tribunal, a tribunal established under the Employment Contracts Act 1991. The status of the Employment Tribunal had been examined in Attorney-General v Reid [2000] 2 NZLR 377. Doogue and Gendall JJ had found it, under the BBC test, to be “a court of judicature”. Mr Collins noted that the features which led the High Court to that conclusion with respect to the Employment Tribunal were all absent from Law Practitioners Disciplinary Tribunal.

[146] Mr Hassall submitted to the contrary, citing various provisions of the Act which he said showed that the tribunal was exercising the judicial power of the state.

[147] There is no doubt that the tribunal must act judicially, and Mr Hassall correctly identified sections of the Act so providing. But the overall structure of the Act leads me to the view that the tribunal is not a court of judicature in terms of Lord Scarman’s analysis. I refer to the following factors, taken cumulatively.

[148] First, the members of the tribunal (other than the minority lay members) are appointed by the council of the New Zealand Law Society, not by the state. One of the chief characteristics of a court of judicature is the exercise of judicial power of the state through judges appointed by the state. Contrast the position, say, of the Employment Tribunal, all the members of which were appointed by the Governor- General on the recommendation of the Minister of Labour: Employment Contracts Act, s 82.

[149] Secondly, the tribunal does not fulfil any public function as such, unlike, say, the Employment Tribunal which determined disputes between parties to employment contracts, disputes which would otherwise be dealt with by the ordinary courts: Reid at [17]. The tribunal’s responsibility is to maintain standards within the legal profession, which is of fundamental benefit to the profession. Of course, there is an important public benefit as well from the maintenance of standards, but there can be little doubt that discipline within any profession primarily benefits the profession itself, which is why most professions and service industries in the first instance developed their own disciplinary regimes. Statutory disciplinary provisions were

usually introduced at the request of the professions themselves to further the professions’ desire to self-regulate.

[150] Thirdly, the tribunal has no power to enforce any orders it makes. Orders must be filed in the High Court and only then take effect as if they were orders of the court: Law Practitioners Act, ss 117 and 132. Compare the position of the Employment Tribunal, which possessed the power to enforce its own orders and to punish for contempt: Reid at [19], referring to the Employment Contracts Act, ss 79 and 107.

[151] Fourthly, Parliament did not include in the Law Practitioners Act a provision similar to that in the Employment Contracts Act (s 92(2)) declaring proceedings before the tribunal to be “judicial proceedings”. On the contrary, in s 127 of the Law Practitioners Act, Parliament conferred immunity on witnesses and counsel in relation to disciplinary proceedings “as if they were proceedings in a Court of law”. The implication is that disciplinary proceedings are not in fact “proceedings in a Court of law”.

[152] Mr Hassall in his submissions emphasised the far-reaching powers of the tribunal so far as members of the legal profession are concerned. That may be so, but that is scarcely an argument for limiting appeal rights, as Mr Hassall seeks to do. Further, the extent of a disciplinary body’s powers on its members is not a strong indicator of that body’s status as a court of judicature.

[153] I am satisfied that the tribunal is not a court of judicature for the purposes of s

67 of the Judicature Act. As a consequence, the standard appeal right conferred by s

[154] Having determined the jurisdiction issue, I now turn to considering Mr Harris’s misconduct. The facts of the case are fully set out in the majority’s reasons and in the High Court decision. It is not necessary here to give other than a very brief outline of them, as the society made no attempt to relitigate the High

Court’s findings relating to the misconduct proved and the underlying factual matrix on which such findings were based.

[155] The committee charged Mr Harris with a number of counts of misconduct. The charges related to three separate transactions, each involving a different client of Mr Harris’s. The first set of charges related to the affairs of Mr and Mrs A, a couple the tribunal described as “mature ... with four adult children”. The second set of charges related to the affairs of Ms B. Essentially the tribunal found nearly all the counts relating to these clients proved and held that they amounted to misconduct. There were two further charges relating to a third client, but these failed. No more need be said about that client or those charges.

[156] I shall deal with Ms B’s case first, as there was no essential difference between the tribunal’s view of Mr Harris’s conduct in relation to Ms B and the High Court’s. The High Court agreed with the tribunal’s assessment of misconduct, and before us Mr Hassall did not seek to dispute these concurrent findings. Ms B, a middle-aged woman with limited education, owned a house in Sargeson Place, Cambridge. It is not clear what it was worth at the relevant time, but it may have been worth about $70,000. She owed about $31,500, some of it secured by mortgage registered against the title. In early 2001, a niece of Ms B’s asked to borrow $700 so that she could go to Australia. Ms B was told that a Mr McKelvy, a Hamilton finance broker, property dealer, and money lender might be able to assist. Ms B was not aware that Miles McKelvy since 1996 had been convicted of various offences of dishonesty and had served terms of imprisonment. Mr McKelvy was able to assist, but in a most unusual way. Not for him a simple loan, perhaps secured by a further mortgage on the Cambridge property. Rather he devised a very complex series of transactions, the details of which the tribunal found Ms B did not begin to understand. So complex was the transaction that it takes from [115] to [135] of the High Court judgment for its details to be described. The upshot of the transactions was that Ms B within a matter of months had lost all the equity in her Cambridge property and had ended up with a debt of some $17,000 to Provincial Finance Ltd, a

lender with which Mr McKelvy had “a close relationship” (so the tribunal found). And all this from wanting to borrow $700 to assist a niece.

[157] The principle behind Mr McKelvy’s scheme, so the tribunal and the High Court found, was apparently this. (This quotation is taken from the High Court judgment at [25], but it is a quotation they took from the tribunal’s decision.)

This trustee would borrow monies short term sufficient to repay the loan which was producing mortgagee sale pressure. The trustee would then hold the property in trust, leaving the former registered proprietors in possession as tenants. The intention was for the former registered proprietors to build up a credit history, whereupon the short term loan would be refinanced on long term and at a better interest rate, and the property would then be transferred back to the previous registered proprietors as beneficial owners. The trustee would receive a fee for his or her services.

[158] As we shall see, the McKelvy technique, as both the tribunal and the High Court termed it, may have had some relevance in the case of Mr and Mrs A (to which I shall come), but it had no relevance to Ms B, as she did not have a bad credit history. She was not in default on her mortgage.

[159] Mr Harris became involved in the implementation of Mr McKelvy’s scheme at his instigation: Mr Harris had not previously known or acted for Ms B. Mr Harris knew Mr McKelvy well, and was generally aware of his criminal background, although he never disclosed that to Ms B. Mr McKelvy had been, for Mr Harris, the source of “frequent and substantial fees on a regular basis”, according to the High Court: at [28].

[160] The tribunal found most of the charges against Mr Harris with respect to the Maxwell transaction proved. The High Court agreed with its findings (save in respect of one charge, which it considered “duplicitous”) and also agreed with the tribunal’s assessment that the conduct proved was misconduct.

[161] There can be no doubt that Mr Harris’s performance was, in the tribunal’s terminology, “reprehensible”. The tribunal acknowledged that the disastrous scheme was Mr McKelvy’s, not Mr Harris’s. But the scheme could not have proceeded without Mr Harris’s facilitation. Mr Harris clearly failed to protect the interests of Ms B, whom Mr Harris acknowledged to have been his client.

[162] The High Court agreed with the tribunal’s overall assessment on the Maxwell matters. The court described the result as “deplorable” (at [177]).

[163] Mr and Mrs A owned a house in Taranaki, worth about $100,000. They got behind on their housing loan: outstanding principal and interest came to about

$39,000. A mortgagee sale threatened. In April 2001, Mrs A found out about Mr McKelvy and his services through a listing in The Yellow Pages. Mr McKelvy arranged for an associate of his, Stephen Buckland, to see Mr and Mrs A and to bring them up to Hamilton. Mr McKelvy then devised a scheme, using his “technique”, under which the existing secured loan would be repaid and replaced by a new loan for over $70,000. The property would be transferred to a trustee, a colleague of Mr McKelvy’s, Paul Adams. Mr and Mrs A were to be responsible for paying the interest on the new loan, which had a six months’ term. They were told that the amount required would be $800 for the first two months and $400 thereafter. (In fact, as the High Court noted, the contract documentation provided for interest payments of $840.68 a month: at [47].) The idea was that, after six months, Mr and Mrs A would have re-established a good credit rating and would then be able to refinance on a more appropriate, long-term basis. In the meantime, they would stave off the mortgagee sale and would, as beneficiaries, be able to continue living in their home.

[164] Mr McKelvy took Mr and Mrs A to Mr Harris’s office in Cambridge. The outline of what Mr McKelvy proposed was explained to Mr Harris. Mr Harris then undertook some of the steps required to put the scheme into practice. Mr Harris asserted that he did not act for Mr and Mrs A in this transaction; rather, he said, he had sent them to another Cambridge solicitor, Stuart Jecks, for independent advice. Mr Harris said that his client was Mr Adams. But the tribunal and the High Court did not accept those assertions: they found that he was acting for both parties on the sale and purchase of the Taranaki property, and that his referring Mr and Mrs A to Mr Jecks was an attempt to comply with “independent advice” requirements in those

situations where the profession’s rules permit a solicitor to act for more than one party to a transaction.

[165] The property was transferred to Mr Adams. For some reason, Mr Buckland, who was not a lawyer, was given the task of drawing up an appropriate trust document to protect the Adamses’ interest as beneficiaries; he never did, and Mr Harris took no steps ever to check that he did. So Mr and Mrs A were left in a position of their property being in the hands of a man they had never met, with no record of the supposed trust arrangement and of the basis on which they would be able eventually to recover legal title. The position was worse than they could have possibly imagined, as Mr Adams was, as the High Court recorded, “a fraudster with a long criminal list” (at [11]), and in due course he was to add another fraud to that list at Mr and Mrs A’s expense. Indeed, the tribunal noted that, since the A transaction, Mr Adams had again returned to prison, having been convicted on some

[166] At the date of the tribunal hearing (November 2003), Mr and Mrs A were still living in their home, but the tribunal considered they had lost all their equity (about

[167] I now turn to the charges which the tribunal found proved. In each case, the tribunal considered that the proved conduct amounted to misconduct. The High Court agreed with all the tribunal’s findings. The tribunal said the charges against Mr Harris fell into three broad categories:

(a) acting for Mr A when there was a conflict of interest and without the prior informed consent of Mr A having been obtained;

(b) failing properly to protect the interests of Mr A when acting on the sale of his property;

[168] The tribunal found the charges in the first two categories proved, but not the third. The society did not appeal against the finding with respect to the third category, with the consequence it was not in issue before the High Court. Mr Harris did challenge the finding that he had acted for Mr and Mrs A, but his appeal in that regard was unsuccessful. The High Court considered that Mr Harris had assumed the obligations of a solicitor to Mr and Mrs A and that Mr Harris had not passed responsibility to Mr Jecks by Mr and Mrs A’s visit across the road to see him during the middle of their meeting with Mr Harris. The High Court’s reasoning is fully explained in their judgment at [58]-[76]. I do not need to go into the reasoning, as Mr Hassall did not dispute it before us.

[169] Once again, I have presented a simplified account of what happened, but it is sufficient for the purposes of the issues before us.

The essential issue: was the High Court justified in interfering with the tribunal’s assessment of the appropriate penalty?

[170] With that background as to Mr Harris’s misconduct, as found by the tribunal and the High Court, I now turn to examine Mr Collins’s submission that the High Court erred in substituting a different penalty from that which found favour with the tribunal. Mr Collins submitted that the High Court’s decision infringed the principles in Bolton, which has become the authoritative decision in this country: Wellington District Law Society v Cummins [1998] 3 NZLR 363; Sidney v Auckland District Law Society [1996] 1 NZLR 431; Ellis v Auckland District Law Society [1998] 1 NZLR 750. Mr Collins submitted that the High Court’s decision was wrong because:

(b) Bolton established that an appellate court should interfere with the sentencing decision of a professional disciplinary tribunal only where there was a very strong case to do so, of which this was not one.

[171] I do not consider Mr Collins has established that the High Court erred in its application of Bolton. The High Court specifically referred to Bolton and its endorsement in New Zealand in Cummins, and indeed described it as providing “the leading statement of principle” (at [165]). But Bolton did not in terms lead to a finding that striking off was inevitable in the present case. First, the facts in Bolton were quite different from the facts here. Secondly, a key passage in Bolton on which Mr Collins relied, cited by the majority at [130], shows that this was a case where a tribunal could legitimately conclude that either suspension or striking off was appropriate.

[172] Both the tribunal and the High Court agreed that Mr Harris had not been dishonest with respect to either transaction; rather, this was a case where he had “fallen below the required standards of integrity, probity and trustworthiness”. In this category, a striking off order will not necessarily follow. The decision whether to strike off or suspend, I agree, involves “a fine and difficult exercise of judgment”, as the English Court of Appeal said. But the point is that this case did not fall into the category where striking off was the only principled response to the misconduct which had been found.

[173] As for Mr Collins’s second Bolton point, I think the society’s argument overlooks a very important factor, namely the differing assessments of the efficacy of Mr McKelvy’s scheme so far as Mr and Mrs A were concerned. That was the true point of difference between the tribunal and the High Court; it was that difference that then led to a different sentencing response. The tribunal proceeded on the basis that “the transaction involving Mr and Mrs A was unscrupulous, deliberately confusing in structure, inadequately explained and documented, doomed to failure and seemingly established by Mr McKelvy for his significant benefit”. (Emphasis added.) The tribunal considered Mr and Mrs A, by “the end of the transaction ... had lost everything”.

[174] The High Court, however, analysed the transaction differently. That court assessed Mr and Mrs A’s loss arising from the transaction as “well under $18,000”, and even that assessment was “with the benefit of hindsight”: at [104]. The court concluded that, given that the McKelvy technique gave Mr and Mrs A the

opportunity of retaining their home, recourse to that technique was “economically intelligible when compared with submitting to mortgagee sale”: at [104]. Thus, the High Court concluded that, far from this scheme being doomed to failure and of no benefit to Mr and Mrs A, it was economically intelligible and potentially in their interests.

(a) Mr Adams would be the registered proprietor and safeguards were needed to ensure that he would not abuse that status; and

[176] The first could have been guarded against by Mr Harris’s preparation of a suitable trust document – clearly, that should not have been left to Mr Buckland – and by the lodgement of a caveat. Had those steps been done, then, according to the High Court, “the transaction would have ensured that the property was available for repurchase notwithstanding the diminution of the equity by the costs of the

‘technique’ and also the financial burden of the mortgage payments and repayments”: at [108].

[177] The second risk was obvious. But the High Court noted that, in the absence of outside assistance, of which there was no evidence, Mr and Mrs A “appeared doomed to lose their property in any event”: at [105]. The High Court also emphasised the urgency under which Mr Harris was acting with respect to this transaction (unlike the position with respect to Ms B): Mr Harris believed on the basis of what he had been told that the mortgagee sale was to take place the following day. (In fact, that was a mistake: the threatened sale was still some 16 days away.) The McKelvy scheme, while it carried risk, at least bought Mr and Mrs A “time”, and buying time “necessarily entailed financial consequences”: at [108].

[178] The High Court also noted that, as it turned out, Mr and Mrs A have not lost their home. Because of the controversy that arose, Provincial Finance elected to

abandon its security and Mr and Mrs A are once again registered proprietors of the property. But the court acknowledged that that was “a fortuity”: at [105].

[179] So while the High Court agreed that Mr Harris had been guilty of misconduct with respect to the A transaction, they saw that misconduct “in less absolute terms” than had the tribunal: [108]. There can be no criticism of the High Court embarking on its own assessment of the mechanics of the McKelvy technique and its economic intelligibility. Bolton is not intended to render appeals nugatory; it is concerned with preventing needless second-guessing of appropriate sentences. It does not prevent re-assessment of the efficacy of the underlying transaction and the degree of the solicitor’s culpability with respect to it. Clearly a solicitor who permits a client to enter into a transaction doomed to failure is to be judged more harshly than one who permits the client to enter into an economically intelligible transaction, albeit one with risks which need to be warned against and which need to be mitigated by appropriate legal strategies.

[180] Once the High Court had re-evaluated the A transaction, it was encumbent on it to re-assess the appropriate penalty. Such re-assessment does not engage the principle in Bolton against interfering with sentencing decisions only in very strong cases. Of course, it would have been open to the High Court, notwithstanding its re- assessment of the A transaction, still to find that the combined effect of Mr Harris’s misconduct warranted striking off. But equally it was open to the High Court to find that suspension was, in the altered circumstances, the appropriate response.

[181] Mr Collins’s submission proceeded, therefore, on a wrong premise. It assumed that the High Court had viewed the factual matrix in exactly the same way the tribunal had, but had then, in its discretion, selected a different penalty. But that is not what happened.

[182] Mr Collins did not attempt to challenge the High Court’s re-assessment of the A transaction. I have doubts about some aspects of that re-assessment and do not even now fully understand how the scheme was to work overall. In particular, I have some difficulty with the money flows referred to in the High Court’s decision. I am not convinced that the tribunal was necessarily wrong to find the scheme doomed

from the start. But this court has no way of clarifying its concerns because the society chose not to put the transcript of evidence or the exhibits before us. We asked Mr Collins about this, but he was content that we should determine the appeal on the basis of what was contained in the case, which was essentially the charges and Mr Harris’s response, the tribunal’s decisions on liability and penalty, and the High Court judgment. In these circumstances, I am unable to say that the High Court’s re-evaluation of the McKelvy scheme was wrong. And, if that re-evaluation is accepted, as I think it must be in the absence of the evidence, then in my view this court cannot say that the penalty of suspension was wrong. The principle of Bolton applies as between the High Court and us: that court having carefully scrutinised the evidence and evaluated the overall transactions, we should not now interfere with the sentence unless a very strong case is made out. In my view, it has not been.

[183] The majority in this court has formulated a view of the facts different from the High Court’s. I do not consider they are entitled to do that when we have none of the evidence – no transcript, no exhibits – before us. It is just not possible to be confident that the High Court’s assessment of the facts was incorrect; setting aside that court’s decision in those circumstances is, in my respectful view, unjustified and significantly increasing the penalty on Mr Harris is unfair.

[184] I come now to the four subsidiary grounds of appeal (summarised above at [137]). Three of them question the weight which the High Court gave to various matters. Given that the High Court was exercising a discretion as to penalty, it is never easy on appeal to challenge the weight accorded to specific matters, all of which the society accepted were relevant. But it was Mr Collins’s submission, of course, that the High Court should not have been indulging in first instance decision- making at all. It was for the tribunal to exercise its decision, with its weighting of relevant factors being accorded the utmost respect.

[185] But this brings us back to the point I have been discussing in the previous section of these reasons. If the High Court had accepted the tribunal’s assessment of Mr Harris’s conduct with respect to the A transaction and the total lack of merit of

the McKelvy proposal as an answer to Mr and Mrs A’s problem, but had nonetheless tinkered with the penalty, then Mr Collins would have been on strong grounds in his challenge. It would not have been for the High Court to substitute its opinion for the tribunal’s, unless the penalty imposed by the tribunal was plainly wrong. But the High Court did not accept the tribunal’s assessment in that regard. That necessarily involved a re-evaluation of penalty.

[186] It cannot fairly be said that the High Court gave insufficient weight to the need for public and client protection. They quoted from that part of Bolton where Sir Thomas Bingham MR was explaining why the Solicitors Disciplinary Tribunal “makes orders which might otherwise seem harsh”. One purpose was “to maintain the reputation of the solicitors’ profession as one in which each member, of whatever standing, can be trusted to the ends of the earth”. The High Court emphasised “the need for total reliability”: at [167]. But the need for public and client protection needed to be weighed up against other relevant considerations. These included the absence of dishonesty. All Mr Harris got from the transactions was fees. (They were

$1500 in the case of Mr and Mrs A; neither the tribunal’s decision nor the High Court’s reveals the sum charged to Ms B.) Mr Harris did at least ensure that both Mr and Mrs A and Ms B saw Mr Jecks for independent advice, inadequate though that was in the circumstances. In Mr and Mrs A’s case, the High Court saw Mr Harris’s breaches as “mitigated by the perceived need to act urgently”: at [184]. In Ms B’s case, the High Court considered relevant “the confident and knowledgeable demeanour she presented to Mr Harris”: at [184].

[187] In the overall circumstances, the High Court considered that public and client protection could be achieved by a lengthy suspension from practice and by an order that, following suspension, he was not to practise on his own account, whether in partnership or otherwise, unless authorised by the tribunal to do so. I am unable to conclude that the High Court was plainly wrong in reaching that balance.

[188] Mr Collins’s second “weight” point was that the High Court gave too much weight to the desirability of Mr Harris’s rehabilitation. I cannot accept that. The sole reference to rehabilitation was in [181]:

Mr Hassall’s argument is for the option of a substantial term of suspension, which does not receive mention in the Tribunal’s decision, and that a man who has exhibited symptoms of weakness can be controlled or rehabilitated by being permitted to practise as an employee under supervision and without access to a trust account.

[189] But the court did not indicate acceptance of that argument. Indeed, the court in the next paragraph said:

There is much force in the [society’s] argument. Even as an employee Mr Harris would be subject to pressure and temptation; we have emphasised in the citation from Bolton the phrase “of whatever standing”.

[190] Rehabilitation did not figure as a reason for the court’s conclusion that the penalty of striking out could not stand: see [183] – [185].

[191] Mr Collins’s third “weight” point related to the emphasis on Mr Harris’s lack of dishonesty. I do not accept the High Court gave undue weight to this matter. The society after all accepts that a finding of dishonesty is “highly relevant to a decision on penalty”; surely, therefore, it follows that an absence of dishonesty will similarly be weighty. As the Court of Appeal said in Bolton, where the solicitor is not shown to have acted dishonestly, the “lapse is less serious” and suspension comes into the frame as a possible outcome. The lack of dishonesty was relevant here and was not given undue weight by the High Court.

[192] That leaves Mr Collins’s last point, the High Court’s emphasis on the fact that the charges proved against Mr Harris involved omissions on his part, not commissions: at [183]. Mr Collins submitted that, in its later decision on penalty, the tribunal showed that it “was mindful of the nature of the misconduct, being failings of omission, when it elected nevertheless to impose a penalty of striking off”. In any event, the commission/omission distinction “is a distraction from the essential meaning of misconduct”.

[193] Mr Collins also noted that the High Court appeared to have overlooked the finding of misconduct on charge 37, relating to Mr Harris’s disbursement of sale proceeds without discussing that with Ms B, acting instead “purely upon the strength of an authority received by him, already signed by [her]”. Mr Collins said the charge

the High Court ignored was in fact a wrongful commission. Accordingly, it was not correct to say that all the findings related to omissions.

[194] I do not accept this criticism of the High Court judgment. The court specifically said they were not saying that breach of duty by omission could never justify striking off: at [179]. But it is obvious that a solicitor who commits wrongs, particularly if done knowingly, is generally more culpable and more of a risk to clients and the public than a solicitor who merely omits to do that which a reasonably competent solicitor would do. That is all the High Court was saying, and it is unexceptionable. It is the case that Mr Harris’s misconduct, reprehensible though it was, was on the whole a failing to question sufficiently the overall scheme Mr McKelvy was propounding and to warn his clients about the risks of the McKelvy proposals. The position would have been quite different had Mr Harris devised the proposals and persuaded his clients to enter into them: striking off in those circumstances may have been the only reasonable outcome. But, in saying that, I in effect endorse the High Court’s essential proposition, namely that there is a difference, but only of degree, between commissions and omissions.

[195] The High Court’s error in overlooking the finding on charge 37 does not detract from its ultimate conclusion. That charge was in one sense an “omission” charge in any event: Mr Harris’s error was in failing to confirm with Ms B that he should rely on her authority to disburse the funds. And the reference in [178] to charge 35 not having been proved was clearly an oversight, as earlier in the judgment the High Court had referred to the tribunal’s finding of misconduct on that charge and had endorsed it: at [147] and [154].

[196] I am not persuaded that the High Court made any of the four errors Mr Collins developed as subsidiary points of appeal. I would have dismissed the appeal.

Charge No	Client	Brief particulars	Facts proved/ not proved	Misconduct or not misconduct
14	[Mr & Mrs A]	Failing to obtain prior informed consent	Proved	Misconduct
15	[Mr & Mrs A]	Failing to protect interests when acting on sale Particulars: 1. Settled sale & purchase on agreement which he knew was executed incorrectly as vendor [Mrs A] not a registered proprietor of said property 2 Failed to account to [Mr A] for proceeds of sale 3. Failed to ensure before settling sale and purchase of [Cambridge] property a Family trust for benefit of [Mr and Mrs A] had been properly established 4. Failed to advise [Mr A] about effect of authority to pay surplus proceeds from sale to purchaser, Mr Adams 5. Failed to ensure surplus funds from sale of $47,627 were secured, by Trust or otherwise, for benefit of [Mr A] 6. Failed to ensure further $17,000 (representing monies payable to [Mr A] on sale) left in property were secured or protected for benefit of [Mr A] 7. In paying $3,000 to Mr Adams (of no benefit to [Mr A]) failed to protect [Mr A’s] interests	Proved Proved Proved Proved Proved Proved No finding required	Not misconduct Misconduct Misconduct Misconduct Misconduct Misconduct

THE COMPLAINTS COMMITTEE OF THE WAIKATO/BOP DISTRICT LAW SOCIETY V HARRIS CA CA86/05 [12 April 2006]

Charge No	Client	Brief particulars	Facts proved/ not proved	Misconduct or not misconduct
		8. Knew and was aware [Mr A] had not given an informed authority to transfer funds from sale to purchaser Adams 9. Failed to advise [Mr A] surplus proceeds from sale would eventually be paid to an entity known as Waikato Trust 10. Failed to act properly and adequately for [Mr A] to protect his interests on sale of property at [Cambridge]	Proved Proved No finding required	Misconduct Misconduct
16	[Mr & Mrs A]	In asserting W/BOP DLS on 26.8.02 [Mr A] was not a client, when practitioner had acted for [Mr A], misled the Law Society	[Not] Proved	[Not] Misconduct
22	[Ms B]	Failing to ensure client understood terms and effect of mortgage	Proved	Misconduct
23	[Ms B]	Failing to act in best interests and explain loan agreement	Proved	Misconduct
24	[Ms B]	Fails to advise in Solicitor’s Certificate that client had independent legal advice	Not proved
25	[Ms B]	Failing to ensure client was informed of payments from loan	Not proved
26	[Ms B]	Failing to ensure that client had full understanding of payments from Trustees of loan	Proved	Misconduct
27	[Ms B]	Failed to promptly render statements of account	Proved	Misconduct
28	[Ms B]	In relation to loan from Provincial Finance acted in conflict of interest situation	Proved	Not misconduct

Charge No	Client	Brief particulars	Facts proved/ not proved	Misconduct or not misconduct
29	[Ms B]	Acted for McKelvy as covenantor and other parties in transaction in conflict of interest situation	Proved	Misconduct
30	[Ms B]	Failed to ensure client fully understood meaning of transaction involving debenture and term loan to Pennies from Heaven Ltd	Proved	Misconduct
31	[Ms B]	Failed to obtain informed consent or authority before transferring by journal entries monies to Pennies from Heaven Ltd	Proved	Misconduct
32	[Ms B]	Failing to ensure client fully understood transaction before transferring by journal entry $31,956.13 to Pennies from Heaven Ltd	Proved	Misconduct
33	[Ms B]	Failing to promptly render statement of account after above transaction	Proved	Misconduct
34	[Ms B]	Failing to obtain instructions from client to act on sale of property at [Cambridge]	Proved	Misconduct
35	[Ms B]	Acting for [Ms B] as vendor and McCawe as purchaser in conflict of interest situation	Proved	Misconduct
36	[Ms B]	Failing to inform client property was to be held in Trust	Proved	Misconduct
37	[Ms B]	Failing to obtain consent of client to disbursement of proceeds of sale	Proved	Misconduct
38	[Ms B]	Failing to advise that purchaser would receive a gift back of $17,000	Proved	Misconduct
39	[Ms B]	Failing to promptly render statement of account for above transaction	Proved	Misconduct

Charge No	Client	Brief particulars	Facts proved/ not proved	Misconduct or not misconduct
40	[Ms B]	Acted in conflict of interest situation and failing to advise [Ms B] when acting for her as purported beneficiary of Trust as purchaser, vendor and purchaser of [Hamilton property]	Proved	Misconduct
41	[Ms B]	Failing to inform of details of above purchase	Proved	Misconduct
42	[Ms B]	Failing to advise that the property was being purchased in trust for her	Proved	Misconduct
43	[Ms B]	Misapplying proceeds of ANZ Bank loan by transferring $15,000 to vendor when funds should have been held in Trust	Not proved
44	[Ms B]	When acting for purchaser Johnson failing to inform that purchase was being financed with a certain loan	Not proved
45	[Ms B]	Failing to promptly render statement of account after transaction to Johnson	Not proved

Brokerage	$ 4,000.00
Security inspection fee	$ 1,000.00
Loan establishment fee	$ 5,000.00
_Interest	_{$ 5,044.09}

Court of Appeal of New Zealand

Waikato/Bay of Plenty District Law Society v Harris CA86/05 [2006] NZCA 532; [2006] 3 NZLR 755 (12 April 2006)