Withers v Standards Committee no.3 of the Canterbury Westland Branch of the New Zealand Law Society [2014] NZHC 611 (28 March 2014)

Last Updated: 28 March 2014

IN THE HIGH COURT OF NEW ZEALAND CHRISTCHURCH REGISTRY

CIV-2014-409-000017 [2014] NZHC 611

BETWEEN MURRAY IAN WITHERS Appellant

AND STANDARDS COMMITTEEE NO. 3 OF THE CANTERBURY WESTLAND BRANCH OF THE NEW ZEALAND LAW SOCIETY

Respondent

_{Hearing: 11 March 2014}

Court:

Appearances:

Panckhurst J Mander J

A C Hughes-Johnson QC and C E Bibbey for the Appellant
_{D A Webb for the Respondent}

Judgment: 28 March 2014

_{JUDGMENT OF THE COURT}

The appeal

[1] Following a disciplinary hearing on 8-9 July 2013 three charges of professional misconduct were upheld. On 2 December 2013 the New Zealand Disciplinary Tribunal (the Tribunal) imposed penalty, making orders that Mr Withers’ name be struck off the roll of barristers and solicitors and that he pay costs of $65,642.

[2] Mr Withers appealed to this Court against the striking off order. His grounds of appeal are that while the misconduct placed him on the cusp of a striking off, the appropriate penalty was a suspension from practise coupled with directions that he

_{participate in proposed rehabilitative processes utilising the services of several senior}

WITHERS v STANDARDS COMMITTEEE NO. 3 OF THE CANTERBURY WESTLAND BRANCH OF THE NEW ZEALAND LAW SOCIETY [2014] NZHC 611 [28 March 2014]

practitioners. This lesser penalty was said to address the causes of the misconduct, meet the public interest and was, therefore, appropriate. Mr Withers also maintained that the Tribunal placed undue weight on his disciplinary history and gave insufficient weight to personal mitigating factors in reaching the decision that a striking off order was the necessary sanction.

[3] The Standards Committee (the Committee) supported the Tribunal’s decision. It maintained that the case involved serious dishonesty requiring a striking off order, particularly given Mr Withers’ past disciplinary record. The misconduct was indicative of a flaw of character and showed that Mr Withers was unfit to practise law because he could not be trusted to meet the professional duties he owed to clients. The rehabilitative programme, whilst well intentioned, did not meet this fundamental problem and did not, therefore, permit the imposition of a lesser sanction.

Leave to admit further evidence

[4] The day prior to the hearing in this Court the Committee sought leave to file new evidence. A further complaint against Mr Withers has been made to the Law Society, and on 25 February 2014 a Standards Committee resolved to commence an own motion complaint. The matter is at the investigative stage and will not be resolved for some time.

[5] Mr Hughes-Johnston QC opposed the leave application, by which it was proposed that an affidavit from the legal standards officer of the New Zealand Law Society be read. Counsel took the obvious point that neither the fact, nor the substance, of an unresolved complaint established anything materially relevant to the issues raised by this appeal.

[6] Section 239 of the Lawyers and Conveyancers Act 2006 governs what evidence the Tribunal may receive. It may receive evidence which in a Court of law would be inadmissible.¹ Otherwise, the Evidence Act 2006 applies.² We assume for

_{present purposes that the proposed evidence is relevant, given the comparatively low}

¹ _{S 239(1).}

² S 239(4).

relevancy threshold.³ However, we are satisfied that any probative value of the proposed evidence is clearly outweighed by its potential prejudicial effect.⁴ We have, therefore, disregarded the evidence.

The charges

[7] The Committee preferred three charges against Mr Withers. The first charge alleged that between March 2007 and July 2008 he acted for both the vendor and the purchaser in a land transaction, when he had a conflict of interest arising on account of his personal interest in the purchasing company. The personal interest was not disclosed when the sale and purchase agreement was executed in March 2007, nor subsequently when the purchaser negotiated a variation to the contract whereby

$350,000 of the $1.4 m purchase price was left in at settlement and not adequately secured. The Committee alleged that Mr Withers’ actions amounted to misconduct in his professional capacity, or conduct unbecoming a solicitor, or that such conduct was negligent and/or incompetent such as to reflect on his fitness to practise or as to tend to bring the profession into disrepute. This charge was laid under the Law Practitioners Act 1982.

[8] The second charge concerned the same course of conduct. It related to events from 1 August 2008 (when the Lawyers and Conveyancers Act 2006 came into force) until 2012, when the vendor effected recovery of the unpaid portion of the purchase price. The gist of the allegations were that Mr Withers continued to act without the informed consent of the vendor, successfully concealed his personal interest in the purchasing company for a period of years and throughout preferred the interests of the purchaser at the expense of the vendor. The Committee alleged that these actions constituted misconduct, or unsatisfactory conduct, or demonstrated negligence and/or incompetence reflective on his fitness to practise or sufficient to bring his profession into disrepute.

[9] Although preferred as two charges, it is common ground that the allegations arose from a single continuing course of conduct. One charge would have covered

³ _{Evidence Act 2006 s 7.}

⁴ Evidence Act 2006 s 8.

the entire course of conduct, but the coming into force of the new Act occasioned the need for a separate charge.

[10] The third charge arose from the same sale and purchase transaction, but related to another complainant. The land was acquired for subdivision. A development contribution of $117,916 was payable to the Christchurch City Council (the Council). In August 2010 Mr Withers gave a personal undertaking that the contribution would be paid following settlement of the sale of lot 6 in the subdivision, rather than at an earlier point of time at which contributions were generally paid. The gist of the charge was that the undertaking was not honoured when the section was sold in October 2010, and the Council did not receive payment until August 2012, despite its making a demand for payment and a complaint to the Law Society. The same three alternative allegations of misconduct as for charge two were advanced in relation to this charge.

[11] In upholding the charges the Tribunal found that professional misconduct was established, as opposed to the lesser alternatives.

The factual background

An agreement for sale and purchase

[12] Mrs Shirley Marshall owned land on Taylors Mistake Road, Scarborough. Upon her separation from her former husband it was agreed that she hold the land on a bare trust for their three sons. In June 2006 Mr Withers acted in relation to the formation of the SCK Trust of which Mrs Marshall was the settlor and her sons the Trustees and discretionary beneficiaries, together with wider issue. The land was to be transferred to the Trust, but this was not attended to prior to its sale in 2007.

[13] Mr Withers also acted for Mr James Hickey, including in relation to joint business ventures. The two were directors and shareholders of Clifden Holdings Limited (Clifden), a development company. In early 2007 the Trustees decided that they wished to sell the land. Their mother held powers of attorney, in part because two of the sons were working overseas. Mr Withers indicated that Jim Hickey may

be interested in purchasing the land. Mrs Marshall knew of Mr Hickey and that he was a client of Mr Withers.

[14] The land comprised 8249 square metres in a residential hill zone. It had been variously valued on the basis of a hypothetical subdivision into three or eight lots, including an informal valuation in March 2007 of $1.6 m.

[15] On 30 March 2007 an agreement for sale and purchase was concluded between Shannon, Clayton and Kane Marshall as Trustees of the SCK Trust and Mr Hickey or nominee. In fact, Mr Withers signed the contract on behalf of Mr Hickey. The purchase price was $1.4 m, payable by way of a $200,000 deposit upon confirmation of the contract, with the balance payable at settlement 14 days later. The agreement contained special due diligence conditions. These allowed 10 working days for the purchaser to investigate and be “entirely satisfied” that the land was a suitable property investment at the agreed price.

[16] Mr Hickey nominated Clifden as the purchaser under the agreement. Despite his interest in that company, held for the benefit of a family trust, Mr Withers did not expressly disclose that interest to Mrs Marshall, nor therefore obtain her informed consent to his acting for both vendor and purchaser.

[17] The contract was not confirmed within 10 working days, and the $200,000 deposit was not paid. Instead, on 3 April 2007 Mr Withers conveyed the first of a number of proposals to Mrs Marshall to vary the terms of the agreement. The letter said that Mr Hickey would be in a position to confirm the contract if the SCK Trust took a 2356 square metre section in the subdivision for $800,000 in part satisfaction of the purchase price. The letter referred throughout to “Jim” performing various obligations and began with the line, “I have had further discussions with Jim Hickey.” This proposal was rejected, resulting in a further proposal on 10 May

2007 that the Trust take a different section for $400,000, and finally on 16 May 2007 that it leave in the sum of $375,000. These letters identified Clifden as the purchaser but contained only reference to “Jim” as the person behind the company. The vendors agreed to the proposal to leave in $375,000 which was to be secured “in an appropriate fashion”.

[18] In late May 2007 Clifden entered into a loan agreement with a building society whereby it was to borrow $1 m upon the security of a first mortgage, with a priority sum of $2 m, over the land. Messrs Hickey and Withers agreed to guarantee the advance.

[19] On 20 June 2007 the sale was settled. Mrs Marshall and her sons were not aware that settlement had occurred until their receipt of a letter dated 19 July 2007 with which was enclosed a statement. It confirmed the repayment of two mortgages previously held by Mrs Marshall and secured against the land, and the transfer of

$377,500 to the Trust being the balance available after the mortgage repayments, deduction of Mr Withers’ costs and allowance for the sum left owing. Mrs Marshall understood that the $350,000 left in was to be interest free for six months, when repayment was due, failing which interest at 14 per cent per annum would accrue.

[20] The mortgage prepared and signed by Mr Withers as a director of Clifden was in fact for a principal of $350,000 repayable on 21 June 2008 (a 12 month term), from when default interest of 14 per cent was payable. The mortgage was unwitnessed and unregistered, but remained on file. There was no accompanying loan agreement, nor personal guarantees from the directors/shareholders in relation to Clifden’s advance.

Repayment of the $350,000 sum

[21] The $350,000 was not repaid after six months on 21 December 2007. Clifden, however, made a partial repayment of $20,000 in January 2008, and subsequently agreed to meet interest payments on a mortgage which Mrs Marshall and her sons were struggling to service. Between June 2008 and February 2009

Clifden paid a total of $16,112.59 by way of interest payments.

[22] At the same time Mrs Marshall was pressing Mr Withers to arrange repayment of the balance of $330,000 due from Clifden. Emailed responses from Mr Withers included this on 9 September 2008: “ ... still do not have money here. It’s a battle”; “It’s hard going, money market is crap” (19 September 2008); “Do they want to sue him, if so we need to sort something” (25 February 2009); “Talked to Jim and he is genuinely struggling and not happy. Was wondering about other

options. He may be able to raise money on his property, but has to prove income and nobody is lending to property developers. ... ” (23 March 2009), and “I will sort a meeting for early next week and you can battle it out with him, or sue him or whatever”. (17 April 2009).

[23] By the end of 2009 Clayton Marshall, as well as his mother, were pressing for repayment. On 8 November Mr Withers sent an email to “Shirley/Clayton” which included, “This has been long-winded and difficult and I am also uncomfortable about being the middle person.” Then followed reference to “Jim’s gripe”, namely that he had paid top dollar for the land, its valuation had changed dramatically, subdivisional costs had increased and the market for sections had dropped. Mr Withers added, “So he is saying he doesn’t want to pay anything more. I'm saying he must. He wants finality. The suggestions are as follows.” The suggestions were repayment by transfer of a section plus $50,000, or a lump sum payment of $280,000.

[24] Neither suggestion was acceptable and later in the month Clayton Marshall emailed Mr Withers that full repayment of the amount owing, $330,000 plus interest, was required. On 27 November 2009 Mr Withers responded, “Not going to happen like this, you need to get more commercial in your thinking. ... I can convince Jim to transfer a section”. Further emails were exchanged prior to Christmas 2009, but without result.

[25] In early 2010 an accountant retained by Mrs Marshall and the Trust undertook a company search in relation to Clifden and ascertained that Mr Withers was a director and held a 50 per cent shareholding in the company. He advised the Marshalls of this.

[26] In May 2010 the Trustees instructed other solicitors in relation to the Clifden dispute. Caveats were registered against the remaining sections in the subdivision. A statutory demand for payment of the debt was served upon Clifden.

[27] In October 2010 the company applied to set aside the statutory demand. Mr Withers swore an affidavit in which he asserted that Mrs Marshall had “generally

agreed that the outstanding sum would be paid as soon as practical from the proceeds of the sale of sections”. The affidavit then detailed difficulties encountered in relation to completion of the subdivision and said that Clifden had honoured its arrangement with Mrs Marshall.

[28] Clifden also applied to this Court to remove the caveats lodged by the SCK Trust. A judicial settlement conference was convened on 6 April 2011 relating to both the caveat and the statutory demand applications. A settlement was agreed to on the following terms:

(a) The Trust would remove the caveats as required to facilitate section sales, and Clifden would pay $130,000 to the Trust.

(b) Following such payment Clifden would provide an unregistered second mortgage to the Trust securing the sum of $313,944 and pay interest at 14 per cent until repayment occurred one year after execution of the mortgage.

(c) The applications before the Court would stand adjourned until the settlement was implemented, at which point the two proceedings would be discontinued without orders as to costs.

[29] In April 2012 Mr Withers wrote to the Trustees’ solicitors seeking an extension in relation to repayment of the unregistered second mortgage. Sections in the subdivision had not sold as quickly as anticipated. In the alternative his letter proposed that the Trust take a house property in the subdivision, including the liabilities secured against it, in final settlement. The Trustees declined the alternative proposal and required repayment of the principal and interest. Counsel confirmed at the appeal hearing that the full amount owing was subsequently paid, but the record does not include the date and details of this payment.

The undertaking to the Council

[30] In April 2010 the Council assessed the development contribution for

Clifden’s subdivision at $117,916. This sum was payable when the Council certified

that all Resource Management Act requirements had been met to its satisfaction so that a plan of subdivision could be deposited with Land Information New Zealand. However, Mr Withers sought and obtained a deferral of payment until settlement of the sale of lot 6 in the subdivision.

[31] His letter dated 5 August 2010 included this:

Our client has an unconditional contract for the sale of Lot 6 with settlement to be completed 15 working days from the issue of the new title.

We personally undertake to pay the Development Contribution fee of

$117,916.10 to the Council following completion of settlement of the sale of lot 6.

The Council was unaware of Mr Withers’ interest in Clifden. In reliance on the undertaking the Council released the certificate so that new titles for the subdivision could be issued.

[32] Lot 6 was sold by Clifden on 19 August 2011. The Council was unaware of the sale and Mr Withers did not pay the contribution in terms of his undertaking.

[33] However, on 18 October 2011 the Council wrote to Mr Withers indicating it had been informed that lot 6 had been sold and that payment was due. Mr Withers replied on 31 October 2011 confirming that lot 6 had been sold, but in what he termed rather exceptional and unique circumstances. The letter referred to problems with the subdivision including the need to replace retaining walls and resultant delay, the distraction of High Court proceedings issued by the SCK Trust, the impact of a High Court “order” whereby the sale proceeds from lot 6 were payable to Clifden’s mortgagee, the mortgagee’s decision to allow no further draw downs of funds to meet expenses and the deterioration in market conditions for hillside subdivisions following the earthquakes. As a result Clifden was described as “in a difficult position”. Mr Withers sought a deferment so that the contribution was paid upon the sale of lot 4, or alternatively that it be paid incrementally as remaining sections were sold. The letter offered security by way of a bond in the meantime.

[34] On 8 November 2011 the Council declined the request for deferred payment. The letter gave five working days for payment to be made. On 17 November 2011

Mr Withers replied to the effect that he was about to undergo surgery and could not respond immediately.

[35] The next letter was one dated 23 November 2011 written by solicitors instructed by the Council. It required payment forthwith, failing which enforcement proceedings would be issued. Mr Withers responded on 6 December 2011. This letter detailed much the same matters as were advanced in Mr Withers’ first letter to the Council. He asserted that the “Court orders” made in the context of the SCK Trust proceedings precluded Clifden from making payment to the Council, when otherwise there would have been sufficient equity in lot 6 to enable the undertaking to have been met. The letter concluded on the note that Clifden faced truly exceptional circumstances, and the undertaking could not be honoured because of both the High Court order and the Christchurch earthquakes. Mr Withers sought the Council’s indulgence in allowing further time for payment, given that there would be ample equity to pay the contribution once the remaining sections in the subdivision were sold.

[36] Again the Council did not accept the explanations provided by Mr Withers. It registered a statutory land charge over the three unsold sections in the subdivision. It also filed a complaint with the Law Society concerning Mr Withers’ breach of the undertaking. At some point (exactly when is unclear) officers of the Council became aware of Mr Withers’ interest in Clifden.

The approach to an appeal

[37] Appeals are by way of rehearing.⁵ This means that it is for this Court to consider the merits of the case afresh.⁶ The reasoning and conclusions of the Tribunal are not to be ignored. Where the Tribunal has made credibility findings in relation to conflicting evidence it has enjoyed a unique advantage, and such findings

are to be viewed with respect. So too are matters involving technical expertise where the Tribunal, constituted largely of practising lawyers, enjoys a distinct advantage. But, subject to recognising such advantages it is for this Court to reach

_{its own view on the merits. Of course, regard may be had to the Tribunal’s decision,}

⁵ _{Lawyers and Conveyancers Act 2006, s 253(3)(a).}

⁶ Austin, Nichols & Co Inc v Stichting Lodestar [2007] NZSC 103, [2008] 2 NZLR 141.

but the weight to be accorded its reasoning is ultimately for this Court’s assessment.⁷

Here proof of the charges is not challenged, but regardless we have found it necessary to review the facts in some detail, given their importance in reaching a decision on penalty. The penalty decision falls to be considered afresh.

[38] Section 241 of the new Act prescribes the powers of the Tribunal in imposing penalty. If the Tribunal is satisfied on the balance of probabilities that the practitioner has been guilty of misconduct, it may make any one or more of the orders specified in s 242(1). Most relevant is the power to make an order that the name of the practitioner be struck off the roll.⁸ The upper echelon of penalties, striking off, deregistration and suspension from practise, are subject to the limits imposed by s 244. In particular, a practitioner may not be struck off, or deregistered, unless the Tribunal is of the opinion that he or she “is, by reason of his or her conduct, not a fit and proper person to be a practitioner.”⁹

[39] In addition, orders for striking off, deregistration and suspension may only be made where at least five members of the Tribunal vote in favour of the order and comprise the only members of the Tribunal, or comprise a majority of the membership where there are more than five members on the Tribunal.¹⁰ In this case there were five members who were unanimous in relation to the penalty imposed.

[40] For completeness we note that although the standard of proof is the civil standard (the balance of probabilities), that standard is to be flexibly applied with due regard to the seriousness of the allegations under consideration and the seriousness of the possible consequences. Where, for example, dishonest conduct or deception is alleged, as in this case, the natural tendency is to require stronger

_{evidence than would otherwise be the case.}¹¹

⁷ _{Kacem v Bashir [2010] NZSC 112, [2011] 2 NZLR 1 at [32].}

⁸ _{S 242(1)(c).}

⁹ _{S 244(1).}

¹⁰ _{S 244(2).}

¹¹ Z v Dental Complaints Assessment Committee [2009] 1 NZLR 1 at [102] and [112].

The decision of the Tribunal

[41] In finding the charges established the Tribunal assessed the gravity of the misconduct. This was fundamental to the determination of the appropriate penalty, as it is to the determination of the appeal. Accordingly, we shall need to make our own assessment concerning gravity, but first we shall refer to the Tribunal’s findings.

[42] Mr Withers contended that Mrs Marshall was aware from the outset of his business association with Mr Hickey, because he had signed the agreement for sale and purchase as purchaser, and the Clifden mortgage in favour of the Trust, in front of her; and further, because Mr Hickey informed Mrs Marshall that the subdivision was a joint venture. The Tribunal rejected this argument.¹² It accepted Mrs Marshall’s evidence that her knowledge of the association between Mr Withers and Mr Hickey was limited, such that “not for one moment [did she] think that association would prejudice her”,¹³ rather she expected Mr Withers to safeguard the Trust’s interests.

[43] The Tribunal’s conclusion concerning Mrs Marshall’s knowledge of

Mr Withers’ connection with Clifden was described in this way:¹⁴

We note that while we accept that Mrs Marshall was probably not aware of Mr Withers’ interest in Clifden, her knowledge is not the key issue. The real issue is Mr Withers’ conflict and lack of independence, something that Mr Withers was well aware of and about which he did nothing to ensure the trust was not adversely affected.

[44] The Tribunal expressly referred to Mr Withers’ evidence that he had advised Mrs Marshall he could not act for the Trust and that she should seek independent advice on the commercial merits of the transaction,¹⁵ but the decision read as a whole seems to reject this contention. That was not surprising, given the finding that Mr Withers’ association with Clifden was not known to Mrs Marshall until early

2010. Absent knowledge of the association, advice concerning the need for

_{independent legal advice would have made little sense.}

¹² _{Re Withers [2013] NZLCDT 39 at [97].}

¹³ _{At [107].}

¹⁴ _{At [101].}

¹⁵ At [102].

[45] Mr Withers argued that he had a limited retainer when acting for the Trust. The Tribunal disagreed. It found that he had played “a full role” in providing advice on the sale transaction,¹⁶ and that the assertion of a “limited mandate” was “unrealistic,”¹⁷ if not “implausible”.¹⁸

[46] The Tribunal concluded that if there was only “a potential for conflict” at the outset,¹⁹ the position changed once variations to the contractual terms were sought and “the conflict that developed was insurmountable” when repayment of the mortgage became overdue. In the result Mr Withers “delayed and obfuscated regarding who was responsible for repaying the overdue mortgage” and also falsely created the impression “that it was Mr Hickey who was driving the decision-making

in the matter, and that it was Mr Hickey who had financial issues delaying repayment of the mortgage”.²⁰ Hence the Tribunal was satisfied “that as the trust’s concern about overdue payment grew, Mr Withers took inadequate steps to recover or protect the overdue funds and misled the trust”.²¹

[47] With regard to the breach of undertaking the Tribunal noted that the failure undermined the integrity of solicitors’ undertakings and was “adverse to the interests of the profession as a whole and the public it serves”.²² It regarded the failure as “deliberate, and [involving] an additional element of self interest arising from Mr Withers’ directorship and shareholding in Clifden”.²³ It rejected the contention that the deed of settlement signed in April 2011 in any way precluded Mr Withers from meeting his undertaking.²⁴ The Tribunal considered there had been “deliberate avoidance”, “a failure to communicate” with the Council and “continuing delay” in making payment even when payment was pursued.²⁵ This prompted a finding that “the breach of undertaking was a calculated and serious departure from accepted

_{standards”.}²⁶

¹⁶ _{At [93].}

¹⁷ _{At [103].}

¹⁸ _{At [109].}

¹⁹ _{At [106].}

²⁰ _{At [129].}

²¹ _{At [134].}

²² _{At [62].}

²³ _{At [63].}

²⁴ _{At [69].}

²⁵ _{At [71].}

²⁶ At [74].

Was a striking off order the appropriate penalty?

Introduction

[48] There were three aspects to the appellant’s appeal against penalty. The first was that a suspension from practice, coupled with requirements that Mr Withers undertake rehabilitative steps, was the appropriate sanction. Counsel also submitted that the Tribunal gave undue weight to Mr Withers’ disciplinary history, and insufficient weight to some positive personal factors. It is convenient to consider each aspect separately and then revisit the question of penalty, including the seriousness of the misconduct.

The suspension proposal

[49] The rehabilitative proposal is substantial. Mr Withers has committed to participate in a four month programme focused upon practitioners’ obligations and practice management. The programme will involve two hours per week under the tutelage of a senior practitioner with a specialist interest in practice management, and the attainment of standards and ethics. It has three parts: professional conduct (including conflicts of interest and undertakings), self management (including effective communication, mental wellbeing and risk management) and practice management (including avoidance of conduct pitfalls). Should the programme not be completed to the provider’s satisfaction, he will advise the branch manager of the Law Society of this.

[50] Three practitioners, two Queen’s Counsel and a senior commercial lawyer, have agreed to be available to Mr Withers as mentors into the future.

[51] Before the penalty hearing Mr Withers commenced implementing practice changes and this initiative is to be continued. He has ceased acting for any person or entity in which he has a personal interest, including Clifden. He has resigned from directorships, including Clifden and two other companies in which Mr Hickey was also involved. Before acting for two parties in a transaction Mr Withers will obtain the approval of a mentor. He will also provide an undertaking to the Court not to act for any person or entity in which he has an interest of any kind, including a familial

interest. Mr Withers will maintain a log of all undertakings provided by his firm and make the log available for inspection by the Law Society. Finally, should any complaints be made against him Mr Withers will copy them to a mentor and accept advice concerning the steps to be taken.

[52] Before this Court Mr Hughes-Johnson submitted that these safeguards, together with a suspension from practice for 12 months, would meet the concerns and ensure the protection of the public and the profession. In the meantime Mr Withers’ practice would continue to be managed by an attorney.

The disciplinary history

[53] In 2003 Mr Withers pleaded guilty to charges related to providing a false undertaking. His client was borrowing $715,000 on first mortgage. On the day of settlement Mr Withers gave an undertaking that a guaranteed search had been obtained, and no interests adverse to the lender were disclosed. Unbeknown to both parties a caveat had been lodged relating to the relevant title, but was still unregistered. A guaranteed search would have revealed this, but one was not obtained. There was delay before the situation was retrieved, but ultimately no loss resulted. The Tribunal in imposing penalty for professional misconduct accepted that Mr Withers gave the false undertaking in ignorance of the caveat, not knowingly. It attributed the breach to “loose practice”. The Tribunal noted two previous complaints which had been upheld, but no charges preferred, and imposed a censure and a fine.

[54] In March 2012 a Standards Committee censured and fined Mr Withers in relation to a complaint concerning difficulties in releasing files to a former employee solicitor who had set up practice on his own account. However, no reliance was placed on the resulting finding of unsatisfactory conduct at the hearing of the present matters.

[55] In September 2012 a Standards Committee considered a complaint concerning allegations of excessive charging, non-reimbursement of fees owed to the firm in which Mr Withers was previously a partner and payment of house cleaning expenses in breach of instructions. All three allegations were upheld, resulting in

unsatisfactory conduct findings. The facts of the third allegation were relied upon in the present proceeding. Mr Withers administered a deceased estate. He received an instruction to engage commercial cleaners to clean a house property. The cleaners provided an estimate of $1500 to $2000. Contrary to the instruction, Mr Withers engaged his son’s touch rugby team to undertake, and paid $2500 for, the work. His conduct was held to be unbecoming and unprofessional; resulting in a censure, a fine and a direction to reimburse the estate the sum of $1500.

[56] In June 2013 the Standards Committee had to revisit the previous complaint because orders to reimburse the estate sums on account of excessive fees and the cleaning costs were not complied with until after a District Court judgment was entered against Mr Withers. The Committee made a further unsatisfactory conduct finding and imposed a censure and a fine.

[57] In this proceeding counsel submitted to the Tribunal that Mr Withers’

misconduct was compounded by his:²⁷

“Approach to the disciplinary proceedings ... , that he had a professional disciplinary history which demonstrated a pattern which was of grave concern, that he failed to appreciate the gravity of his offending which had involved elements of deception and dishonesty, and that he had little awareness of his professional obligations.

The Tribunal accepted the submission, commenting:²⁸

Mr Withers did not respond well to the charges, causing many delays in the various processes that he was required to follow prior to the charges being heard. He has an unsatisfactory professional disciplinary history. These factors support a view that Mr Withers tends to ignore his responsibilities, and also suggests that he is unlikely to change ...

Personal mitigating factors

[58] Mr Withers enjoyed the support of two practitioners who had dealt with him extensively in practice and considered he had acted in an entirely professional

_{manner. A legal executive who had worked with Mr Withers for 29 years also}

²⁷ _{Re Withers [2013] NZLCDT 54 at [6].}

²⁸ At [46].

provided support and a commitment to assist in relation to the proposed practice changes and mentoring programme.

[59] There were also supportive affidavits from the chair of the Canterbury Rugby Football Union, the chief executive of New Zealand Squash, the president of a Christchurch Rotary club and a clinical counsellor/chair of Lifeline Christchurch. The affidavits confirmed that Mr Withers had held offices in each of these organisations and provided service over a long period, almost 30 years in one case.

[60] His partner had also sworn an affidavit concerning burdens shouldered by Mr Withers and the extent to which he was called upon to support others, both within and beyond his family circle. Mr Withers’ medical practitioner provided a certificate confirming that in September 2013 Mr Withers was suffering from depression, for which anti-depressive medication was prescribed. The doctor considered that the onset of depression may have occurred over a significant period.

[61] In its penalty decision the Tribunal simply referred to Mr Withers’ “involvement in community service” and to “some medical evidence which was said to provide background to the offending”.²⁹

The penalty decision

[62] The Tribunal found:³⁰

Mr Withers’ conduct in respect of the charges raises serious issues of integrity. He has deliberately ignored his professional obligations to his client, he has been deceptive, and his client has suffered as a consequence.

The Tribunal accepted a submission that Mr Withers’ conduct was “egregious”.³¹

[63] Its essential conclusion was expressed in these terms:³²

The lack of integrity and probity involved in any one of these charges is itself serious, and may on its own have justified removal from practice. Taken together, the three misconduct charges, involving a continuing course

²⁹ _{At [17].}

³⁰ _{Re Withers [2013] NZLCDT 54 at [22].}

³¹ _{At [28].}

³² At [37].

of serious misconduct in each case, put it beyond any doubt that Mr Withers is not a fit and proper person to be a practitioner.

This was the unanimous view of the four practitioners and one lay person who comprised the Tribunal.

The Court’s evaluation of penalty

[64] The Tribunal’s factual findings were not challenged. Indeed, Mr Hughes-Johnston accepted that the misconduct placed Mr Withers on the cusp of an order that he be struck off. The seriousness of the misconduct provides the starting point for determining the appropriate penalty. Here, once the facts are understood they largely speak for themselves.

[65] Mr Withers’ conduct comprised an egregious breach of the fiduciary obligations owed to his clients. Solicitors and their clients are in a fiduciary relationship. A solicitor is subject to fiduciary duties to act in the best interests of his clients; and to act with fairness and openness. Fundamental obligations of the relationship are that the solicitor must not have a personal interest in the transaction, act for two parties in the same transaction without informed consent or fail to

disclose information which materially relates to the client’s affairs.³³ Here,

Mr Withers breached each of these obligations.

[66] His personal interest in Clifden was not disclosed in a fair and open manner. The contention that Mrs Marshall should have appreciated the existence of the interest, because she knew of the association between Mr Withers and Mr Hickey and that Mr Withers had signed the agreement on behalf of Mr Hickey and the mortgage on behalf of Clifden, was spurious. The email replies sent in 2008-2009 containing references to Jim, to Mr Withers being the middle person and to suing Jim, put the existence of a deliberate deception beyond doubt. This was the antithesis of what was required on the part of a solicitor.

[67] The finding of a deliberate deception led naturally to acceptance of

_{Mrs Marshall’s evidence that she was not advised to obtain independent legal advice.}

³³ Andrew Butler (ed) Equity and Trusts in New Zealand (2nd ed, Thomson Reuters, Wellington,

2009) at 17.3.2 or page 502-3.

The interest in Clifden having been successfully concealed, an explanation of the need to obtain independent advice would have made no sense. In any event, as the Tribunal found, the transactional situation quickly became such that even with informed consent Mr Withers could not justify acting for both parties. Mr Withers’ position became and remained untenable.

[68] Yet, for over two years Mr Withers continued to act for both parties in a deteriorating situation. It was not until early 2010 that the Marshall family learned of the true position, and received independent advice. Even then there was significant delay before liability to pay the outstanding portion of the purchase price was admitted and payment made.

[69] This is a particular aggravating feature of the misconduct. It persisted over a long period. There were twists and turns, time for reflection and time to seek advice

– had there been an inclination to do so. We see this as highly relevant to the penalty decision.

[70] The breach of the undertaking was also serious misconduct. In one respect we differ from the assessment reached by the Tribunal. We doubt that the failure to honour the undertaking was deliberate, at least in the sense that Mr Withers had no intention to honour the undertaking when it was given. The probability is that the financial circumstances in which Clifden found itself a short time later gave rise to the breach. This, of course, does not excuse the breach. Solicitors must ensure that they are and will remain in a position to meet an undertaking when it is given.

[71] Here, the breach was aggravated by Mr Withers’ failure to contact the Council when payment fell due, and also by the subsequent prevarication and delay. In commerce it is essential that people can have total confidence in the worth of solicitors’ undertakings. Any failure erodes that confidence, and is detrimental to the legal profession as a whole.

[72] Viewed in the round the seriousness of the misconduct is decisive. The Act provides a hierarchy of penalties. It has long been recognised that offences of dishonesty will almost invariably result in an order for striking off. This case does

not involve dishonesty in the classic sense, but is little removed from that when the depth and duration of the deception is taken into account. There is a need to treat like cases alike. This is not to ignore the principle that the least restrictive, but appropriate, outcome is to be preferred. But assessment of the gravity of the misconduct is a prior consideration.

[73] The Tribunal considered that the likely success of the rehabilitative proposals hinged on Mr Withers’ willingness to seek and accept the advice of others. It was not satisfied he would do this and concluded that protection of the public interest required that a order for striking off be made. We are driven to a similar conclusion. Mr Withers’ disciplinary history and this further misconduct reflect a lack of integrity, and judgment. These are essential qualities of any practitioner. The point has been reached where protection must prevail at the expense of the possibility of rehabilitation.

[74] We do not accept that Mr Withers’ disciplinary history was accorded undue weight. He is a mature practitioner and has been in practice for 38 years. His disciplinary record is of significant concern, particularly the previous breaches of an undertaking and an instruction in favour of a familial interest. This history, when added to the serious misconduct, rendered the outcome inevitable.

[75] Nor do we accept that the Tribunal’s passing reference to the professional and community support received by Mr Withers means that these aspects were given insufficient weight. Regrettably, in some cases misconduct will trump positive personal considerations, particularly where the misconduct is of a nature to indicate a flaw of character. Sadly, that was the situation in this instance.

Conclusion

[76] The appeal against the order for striking off is dismissed. Costs are reserved. Memoranda may be filed within 15 working days by the Standards Committee and a further 10 working days by the appellant.

Panckhurst J

Mander J Solicitors:

A Hughes-Johnston, Queen’s Counsel, Christchurch; C Bibbey, Barrister, Christchurch

Lane Neave, Christchurch