SISSON V CANTERBURY DISTRICT LAW SOCIETY AND ANOR HC CHCH CIV-2008-409-2950 [2009] NZHC 766 (7 July 2009)

IN THE HIGH COURT OF NEW ZEALAND
CHRISTCHURCH REGISTRY
                                                                   CIV-2008-409-2950

               UNDER                        the Judicature Amendment Act 1972
               AND UNDER                    part 7
of the High Court Rules

               IN THE MATTER OF             a decision of the Canterbury Law
                          
                 Practitioners Disciplinary Tribunal dated 15
                                            July 2008 made pursuant
to the Law
                                            Practitioners Act 1982

               BETWEEN                      THERESE
ANNE SISSON
                                            Applicant

               AND                          CANTERBURY DISTRICT
LAW
                                            SOCIETY
                                            First Respondent

          
    AND                          CANTERBURY LAW PRACTITIONERS
                                            DISCIPLINARY TRIBUNAL

                                           Second Respondent


Hearing:       26 June 2009

Appearances: Applicant in person (with
McKenzie friend D J Hampton)
             P M James for Respondents

Judgment:      7 July 2009


            RESERVED JUDGMENT OF
HON. JUSTICE FRENCH



[1]    Rule 6.07 of the New Zealand Law Society Rules of Professional Conduct
(7th ed.) provides that "every
practitioner has a professional duty to honour an
undertaking, written or oral, given... in the course of practice..."


[2]    The
applicant in this proceeding, Ms Sisson, is a legal practitioner. She seeks
judicial review of a decision of the Canterbury Law Practitioners
Disciplinary
Tribunal (the Tribunal) which upheld a charge of professional misconduct against
her for failing to honour an undertaking.
SISSON V CANTERBURY DISTRICT LAW SOCIETY AND ANOR HC CHCH CIV-2008-409-2950 7 July
2009

[3]    The disciplinary proceedings at
issue were initiated by the first respondent
and heard under the provisions of the Law Practitioners' Act 1982. It is common
ground
that the Tribunal, which is constituted under that Act, was exercising a
statutory power of decision (s106) and so is amenable to
review.


Factual background


[4]    In 2005, Ms Sisson was acting for a client Ms Shelly Travis on the latter's
purchase of a leasehold
interest in a property situated at Riverlea Drive.          The
property was part of a large area of land which was owned by an incorporated
society and which had been divided into sections, each section leased to a member of
the society pursuant to an unregistered lease.
Ms Travis was to take an assignment
of one of these leases.


[5]    Shortly after receiving instructions, Ms Sisson ascertained
that the
incorporated society was in the course of being wound up on the basis that all
leaseholders would surrender their leases
and obtain freehold titles to their respective
sections. Ms Sisson also ascertained that the winding up had been delayed due to
litigation
in the High Court, with a hearing set for 7 July 2005.


[6]    Ms Travis' contract became unconditional on 20 June 2005 and the
settlement date was brought forward to 27 June 2005.


[7]    Ms Travis had applied for a loan from the Southland Building Society
(SBS)
to enable her to complete the transaction.


[8]    On 21 and 22 June 2005, Ms Sisson told SBS there was an issue over the
freehold title. She followed this up with a letter to SBS dated 23 June 2005 advising
them of the pending High Court hearing.


[9]
   The detail of exactly what happened next is disputed.


[10]    The SBS manager who was handling Ms Travis' loan application was
a Mr
Hardley. At the hearing before the Tribunal, he testified that he was confused by
what Ms Sisson was saying about the freehold
title and accordingly telephoned her

for clarification. According to his testimony, he asked her whether SBS could take a
mortgage
over the property and she advised that it could. In reliance on that advice,
he then arranged for the head office of SBS to issue instructions for a mortgage
advance and the preparation of securities in the usual way.


[11]   SBS then sent Ms Sisson a loan facility agreement and its standard
mortgage
documents with a covering letter requesting her to act for SBS in attending to the
preparation and registration of a first
mortgage over the freehold title for the
property. The letter also advised that SBS was relying upon Ms Sisson to protect
SBS's interests
at all times so that it obtained the security it required.


[12]   Ms Sisson prepared the mortgage documents and arranged for Ms
Travis to
sign them. On 27 June 2005, she sent a fax to SBS confirming execution. She also
sent the standard solicitor's certificate
on the SBS form which contained an
undertaking that Ms Sisson was in a position to

       ...and shall immediately (on receipt of
the loan monies if applicable) register
       the mortgage with the ranking as specified in your instructions so that the
     
 society shall obtain the priority of security required by it.




[13]   On receipt of the solicitor's undertaking, SBS advanced
$19,800 to Ms
Sisson's trust account. In evidence, Mr Hartley told the Tribunal that if he had been
advised the freehold title was
not available, SBS would have pulled back and not
advanced the money.


[14]   Ms Sisson disbursed the money on 5 July 2005 (two
days before the
scheduled High Court hearing) and settled the assignment of lease transaction.


[15]   It is common ground that
at the time Ms Sisson gave her solicitor's
certificate, she knew the freehold title was still in the name of the incorporated
society
and knew she would not be in a position to register a first mortgage security
immediately on receipt of the loan monies.


[16] 
 Ms Sisson's explanation is that the written undertaking was subject to a
mutual understanding between her and Mr Hardley that there
would be a delay and

that her only obligation was to register the SBS mortgage against the freehold title
when the title became
available.


[17]     Contrary to her expectations, that did not however occur for more than two
years. What happened was that although
the incorporated society won the High
Court litigation, there was an unexpected appeal to the Court of Appeal. The Court
of Appeal
decision dismissing the appeal was not delivered until August 2006. The
winding up took place the following year and title finally
registered in the name of
Ms Travis on 1 November 2007.


[18]     Meantime, never having received what it considered a satisfactory
response
to its repeated inquiries about the whereabouts of the security documents, SBS made
a formal complaint in or about August
2006 against Ms Sisson to the first respondent
the Canterbury District Law Society.


[19]     The Canterbury District Law Society
investigated the complaint and decided
to charge Ms Sisson.


[20]     The charge laid under the 1982 Law Practitioners Act was in
the following
terms:

         1.     With misconduct in her professional capacity within the terms of
                Section 106(3)(a)
of the Law Practitioners Act 1982 in that between
                the 27th June 2005 and the 10th July 2006 after receiving instructions
                from Southland Building Society and giving a Solicitor's Certificate
                to Southland Building Society
undertaking to:

                a)      Effect the transfer of the fee simple estate in a property
                        being
part of the Riverlea Estate, Kainga (Title Identifier
                        157775) to a Ms Travis;

                b)      Register
a mortgage from Ms Travis to Southland Building
                        Society as a first mortgage affecting the fee simple estate
in
                        the said property;

                failed to honour the said undertakings, such conduct constituting
                misconduct in her professional capacity contrary to Section
                106(3)(a) of the Law Practitioners Act 1982.

[21]     Ms Sisson defended
the charge and a hearing was duly held before the
Tribunal on 15 July 2008.

[22]   At the hearing, evidence was given by Mr Hartley
and by Ms Sisson. Ms
Sisson represented herself.


[23]    At the conclusion of the hearing, the Tribunal said it found the charge
established and imposed a penalty. It gave reasons for its finding in a written
decision dated 20 August 2008.


[24]   In its written
decision, the Tribunal said it accepted the evidence of Mr
Hartley. It went on to make the following statements:

       [29]   Ms
Sisson, in her defence of this charge, never faced the reality that
              she was in fact also acting for SBS in this transaction.
She was
              required to be entirely honest with SBS and up front as to what
              security was immediately available.
Mr Hardley's evidence and
              actions clearly establish Ms Sisson was not so honest and up front.

       [30]   Ms Sisson
may have been optimistic as to how quickly a freehold
              title could be available. That however does not excuse her actions
              and her requirement to fully acquaint her client, the SBS, of the
              position. In essence, Ms Sisson misled
SBS because she gave them
              a standard undertaking on the standard form when she was not in a
              position
to satisfy the undertaking and when she had failed to fully
              acquaint SBS of the position.

       [31]   It is fundamental
to the practice of conveyancing that banks can rely
              on the undertaking of solicitors. The legal profession has fought
              long and hard for retention of the conveyancing monopoly. Central
              to the profession's argument in that
regard has been the reliance
              banks can place on undertakings from the legal profession. Any
              breach of
an undertaking by a solicitor lessens the standing of the
              professional and its entitlement to a preferred position
in
              conveyancing transactions.

       ...

       [34]   So the usual rule that a breach of an undertaking by a Solicitor
              almost always amounts to a professional misconduct must prevail in
              the present case. The charge has therefore
been established.

[25]    By way of penalty, the Tribunal censured Ms Sisson. It further ordered that
she was to cease to accept
work or to hold herself out as competent to act in any
transaction involving the registration of instruments under the Land Transfer
Act
1952. Ms Sisson was also ordered to pay compensation to SBS in the sum of
$3,711.32 (being the amount of legal fees SBS had incurred
as a result of her breach)
and costs of $4,702.50 to the Canterbury District Law Society.

[26]   Under s107 of the Law Practitioners
Act 1982, Ms Sisson has a right of
appeal against the Tribunal's decision to the New Zealand Law Practitioners'
Disciplinary Tribunal.
Section 107 provides that the appeal shall be by way of
rehearing and that on hearing any such appeal the New Zealand Law Practitioners'
Disciplinary Tribunal may confirm, reverse or modify the order or decision appealed
against.


[27]       Ms Sisson told me she has
lodged an appeal but it has been stayed pending
the outcome of this proceeding.


[28]   The existence of a right of appeal is of
course not fatal to the availability of
judicial review: s4(1) Judicature Amendment Act 1972. It is however something to
which the
Court may have regard in the exercise of its discretion to grant relief.


Grounds of review


[29]   In seeking an order declaring
the Tribunal's decision invalid and quashing it,
Ms Sisson advanced a number of grounds for review. These can be conveniently
summarised
as follows:


                 (a) bias


                 (b) failure to take relevant matters into account, namely:


                    (i) modern principles of contract interpretation


                    (ii) evidence which tended to support Ms Sisson's
claim of a
                        mutual understanding between her and SBS


                 (c) procedural unfairness in that
the Tribunal made a finding of
                    dishonesty against her without having given any advance warning
             
      that she was in jeopardy of such a finding being made

                (d) lack of jurisdiction - the Tribunal had no jurisdiction
to hear the
                   charge given that SBS had not taken any steps to enforce the
                   undertaking in a court.




[30]   I turn now to consider each of these grounds.


Apparent bias


[31]   Ms Sisson submits that the Tribunal's decision
is vitiated for apparent bias
because one of its members Mr Brent Stanaway had a conflict of interest and should
have disqualified
himself.


[32]   Mr Stanaway is a Crown solicitor and a partner in a law firm which acts for
the Inland Revenue Department (IRD).
The conflict of interest is said to have arisen
because his firm represented IRD in a long running dispute between IRD and a
number
of other parties including Ms Sisson and also because in May 2008, the
entities in which she has an interest issued misfeasance proceedings
against one of
Mr Stanaway's law partners.


[33]   Ms Sisson submitted that in terms of the test for apparent bias laid down in
Muir v Commissioner of Inland Revenue  [2007] 3 NZLR 495, those circumstances
might lead a fair minded lay observer to reasonably apprehend Mr Stanaway might
not bring an impartial mind
to the resolution of the case against her.


[34]   Counsel for the respondents however argued that an allegation of bias had to
be seen in context. Mr James pointed out that the legal profession is self regulating
and that in a relatively small profession in
a city such as Christchurch, it is only to be
expected that those sitting in judgment on one of their own will have had past
dealings
with the person charged or their firm. He submitted the informed lay
observer would not lightly accept that Mr Stanaway would put
aside his professional
training and responsibilities, that Mr Stanaway was only one of a panel of six, that
there was no evidence
of actual bias and that the decision had been unanimous.

[35]   In my view, while context is certainly very relevant, the matter
is not quite so
clear cut as Mr James suggests. This was more than a situation of a Tribunal member
and the person charged having
acted for opposite sides in a court case. This was a
situation where Ms Sisson in her personal capacity was seeking to recover damages
from a partner in Mr Stanaway's law firm in relation to legal work undertaken for
one of the firm's clients.


[36]   That said,
I do not consider it is now open to Ms Sisson to raise the issue of
bias. That is because at the commencement of the hearing, the
Tribunal's chairman
introduced the individual members of the panel including Mr Stanaway and
specifically asked Ms Sisson if she
had any objection to any of them hearing the
case. Ms Sisson, who of course knew all about the proceedings which had been
issued
against Mr Stanaway's partner, replied no and then participated in the process.
In my view, she thereby waived any right she may
have had to judicial review on the
grounds of bias (Lewis v Wilson & Horton Limited  [2000] 3 NZLR 546 at [48]).


[37]   Ms Sisson's explanation is that she felt too "put on the spot" to object and did
not want to antagonise the Tribunal.
In support of her argument that she should not
be considered as having waived the right to argue bias, she referred me to the
Australian
decision of Goktas v Government Insurance Office of New South Wales
 (1993) 31 NSWLR 684 where Kirby P expressed the view that waiver of bias
through lack of protest should not normally be possible. Ms Sisson submitted
this
principle had been endorsed by our Court of Appeal in Auckland Casino Ltd v
Casino Control Authority  [1995] 1 NZLR 142. However, what the Court of Appeal
actually said at p152 was that they agreed with Kirby P's view " to the extent that
displays of
blatant bias likely to undermine public confidence in the justice system
should not normally be capable of private waiver; while
in criminal cases private
waiver would not normally be possible". It is clear there is no absolute proposition
such as that suggested
by Ms Sisson.


[38]    The present case was not a criminal case nor was there any suggestion of
displays of blatant bias by Mr Stanaway.
Nor was it a situation of a litigant being
left in the awkward predicament of having to initiate an objection themselves. Ms

Sisson,
who is a trained lawyer and in full possession of all the relevant facts, was
specifically asked and given an opportunity to object
to Mr Stanaway.


[39]   My conclusion on this matter means it is not necessary for me to consider a
further point namely whether
the right to a de novo hearing on appeal before a
differently constituted Tribunal would in any event "cure" any bias (see the
discussion
in Joseph Constitutional and Administrative Law in New Zealand (2ed
2007) at 24.6). My provisional view, having regard to the factual
circumstances and
the nature of the appeal rights available to Ms Sisson, is that this would be another
reason to deny review.


Failure to have regard to modern principles of interpretation


[40]   Ms Sisson argues that in construing the terms of her undertaking,
the
Tribunal considered only its wording and failed to have regard to the surrounding
factual matrix as required by the modern law
of contract interpretation.             She
characterised this as a failure to take into account a relevant factor and/or an error
of
law.


[41]   There is no doubt that in recent years the Courts have shown a greater
willingness to look beyond the written word
of a contract in interpreting its
provisions. There has, for example, been a relaxation of the parol evidence rule, an
extension
of the doctrine of estoppel and a willingness to look at post-contract
conduct. Verbal understandings qualifying the otherwise absolute
terms of written
words may be enforced.


[42]   However, I am unable to see how this point can avail Ms Sisson.


[43]   The basis
of the Tribunal decision was a finding of fact that there was no
such mutual understanding as Ms Sisson claimed. Had there been,
then SBS would
not have been misled and as Mr James acknowledged, if SBS had not been misled
the charge would not have been established.

[44]   In other words, the Tribunal did turn their mind to whether or not there was a
mutual understanding but found on the facts
there was none.


[45]   I accept there is a passage in the decision which mentions that even on Ms
Sisson's version of events, she
neglected her professional responsibility in not
qualifying the written undertaking or properly recording its terms. However, that
is
not the basis of the Tribunal's decision. The basis of the decision is that there was no
mutual understanding and that SBS was
misled. The Tribunal specifically found Ms
Sisson had failed to fully acquaint SBS of the position.


The Tribunal failed to consider
evidence which supported the existence of a mutual
understanding


[46]   Ms Sisson referred me to various items of evidence including
correspondence
with SBS which she said supported her claim there was a mutual understanding.


[47]   One of the items of evidence
is an email sent by SBS to Ms Sisson's office
on 27 June 2005. This email was not considered by the Tribunal because it was
never
put in evidence. SBS had not retained its emails and although Ms Sisson still
had the email on her office computer, she only discovered
it after the Tribunal had
given its decision.


[48]   Putting the email to one side for the moment, I am satisfied there was
sufficient
evidence before the Tribunal to justify its findings.       There was the
evidence of Mr Hartley, the terms of the undertaking itself,
the fact Ms Sisson did
not disburse the loan monies immediately but waited until 5 July and the absence of
any written response to SBS's various
letters inquiring about the whereabouts of
their security documents.


[49]    Not all of the matters relied upon by Ms Sisson are
expressly traversed in the
decision but of itself that cannot mean the Tribunal did not take them into account.
Nor are they in my
assessment matters which are so compelling they would warrant
intervention on judicial review.

[50]   Correctly analysed, the arguments
raised by Ms Sisson are arguments about
the weight that was placed upon the evidence, something which subject to
requirements of
rationality and reasonableness, was a matter for the Tribunal. I
include in that her argument that because she is a solicitor and
officer of the Court,
the Tribunal should not have preferred Mr Hardley's version of events to her own
nor been prepared to accept
that she would have been willing to give an undertaking
with the intention to mislead.


[51]   I am satisfied the Tribunal's decision
was a reasoned and reasonable decision
based on the evidence before it.


[52]   As for the email, Mr James submits it is not inconsistent
with Mr Hartley's
evidence and does not detract from it.


[53]   What the email says is:

       Re: SJO Travis

       Hi Rosemary
       I am attching [sic] the documents for the $20,000 loan for the above. We
       have done this as a flexiloan (i.e. revolving
credit) as it will probably be best
       in the short term. We are happy to increase the mortgage by $50,000 after
       [sic]
the freehold title has been registered.
       I am sending the original documents, including the actual mortgage doc and
      
solicitors cert in the mail to PO Box 21-319 Christchurch, so they should be
       on your desk tomorrow morning. Provided you have
everything signed
       correctly etc, you can [sic] fax the necessary documents to us tomorrow and
       we can then settle.

      If you have any questions, please call me on 982 5704.
       Regards
       Bruce Hardley
       SBS

[54]   I am not as convinced
as Mr James that the email adds nothing. However, its
full import and the weight to be attributed to it along with all the other
evidence is
surely something for the appeal hearing , not for judicial review. Through no fault of
its own, the Tribunal was unaware
of the existence of the email.


The Tribunal breached the rules of natural justice by failing to alert Ms Sisson to the
fact she
was in jeopardy of being found she was dishonest

[55]   In support of this ground, Ms Sisson referred me to authorities such as
Re
Erebus Royal Commission; Air NZ Ltd v Mahon [1983] NZLR 662 and Khalon v
Attorney-General  [1996] 1 NZLR 458 which have held there is a duty on a decision
maker to warn parties of an adverse finding the decision maker is proposing to make.


[56]   In my view, such an argument in the context of this case is not sustainable.


[57]   The findings which Ms Sisson says
breached the duty to warn are the
Tribunal's findings at [29] and [30]

       [29]    Ms Sisson, in her defence of this charge,
never faced the reality that
               she was in fact also acting for SBS in this transaction. She was
               required
to be entirely honest with SBS and up front as to what
               security was immediately available. Mr Hardley's evidence and
               actions clearly establish Ms Sisson was not so honest and up front.

       [30]    Ms Sisson may have been optimistic
as to how quickly a freehold
               title could be available. That however does not excuse her actions
               and
her requirement to fully acquaint her client, the SBS, of the
               position. In essence, Ms Sisson misled SBS because she
gave them
               a standard undertaking on the standard form when she was not in a
               position to satisfy the
undertaking and when she had failed to fully
               acquaint SBS of the position.

[58]   Those were findings which, in my
view, were clearly forseeable. It is not a
situation of Ms Sisson being ambushed. She had been charged with professional
misconduct
for failing to honour an undertaking. It was implicit in such a charge that
she might be in jeopardy of being found to have misled
the recipient of the
undertaking. She must also have been well aware that Mr Hardley was denying the
existence of any mutual understanding
and that there would be a conflict in the
evidence which the Tribunal was going to have to resolve.


Lack of jurisdiction


[59]
  Ms Sisson argued that because SBS had not taken steps to enforce the
undertaking in a court, it followed the Tribunal had no jurisdiction
to consider the
matter. The basis of the submission seemed to be that it was only the Court who had
the power to construe the terms
of a solicitor's undertaking.

[60]   Ms Sisson did not cite any authority for this proposition which I consider ill
founded. There
could be no principled reason for such a rule and it would undermine
the policy of both the Law Practitioners Act and the Rules of
Professional Conduct.


No meaningful opportunity to make submissions in mitigation of penalty


[61]   For completeness, I should
add that Ms Sisson made a further complaint
about unfair procedure relating to the way in which the Tribunal dealt with penalty.
She had been anticipating that matters relating to penalty would only be dealt with
after the Tribunal had determined whether the
charge was established. Instead what
happened was that she was asked at the conclusion of the evidence whether she
would like to
say anything as to penalty should the Tribunal have to consider
penalty. Ms Sisson did make some brief submissions but was taken
unawares and
says there was more she would have liked to tell the Tribunal including personal
family circumstances.


[62]   Mr James
told me that in his experience the procedure that was adopted in
this case is the Tribunal's standard practice.


[63]   The members
of the Tribunal are all busy people and I accept it may be more
convenient to deal with liability and penalty all at the one meeting.
What happened
is not grounds to quash the decision but of all the matters raised by Ms Sisson I
consider this one has some substance.
In many cases, there could be matters which
go to mitigation but which the person charged feels reluctant to disclose to the
Tribunal
for fear it may prejudice them. Unless there is some separation of the two,
the practice could operate unfairly. I am not sure how
many more hearings the
Tribunal is to conduct under the transitional provisions of the new Lawyers and
Conveyancers Act 2006 but
would invite them to reconsider their practice.


Outcome of hearing


[64]   For the reasons detailed above, none of the grounds of review invoked by Ms
Sisson are sustainable.
The application for judicial review is accordingly dismissed.

[65]    As regards costs, my provisional view is that costs should
follow the event.
Should the parties be unable to agree on costs and require me to make an award,
submissions of no more than five
pages in length are to be filed within 21 working
days.




Solicitors:
Edgeware Law Centre, Christchurch
Saunders & Co, Christchurch