Raylee Patricia Harley (Appellant) Robert McDonald (Respondent) Glasgow Harley (Appellant) Robert McDonald (Respondent)
| Jurisdiction | UK Non-devolved |
| Judge | Lord Hope of Craighead |
| Judgment Date | 10 April 2001 |
| Neutral Citation | [2001] UKPC 18 |
| Court | Privy Council |
| Docket Number | Appeal No. 9 of 2000 and 50 of 2000 |
| Date | 10 April 2001 |
[2001] UKPC 18
Present at the hearing:-
Lord Hope of Craighead
Lord Clyde
Lord Hobhouse of Woodborough
Lord Scott of Foscote
Dame Sian Elias
Appeal No. 9 of 2000 and 50 of 2000
Appeal No. 50 of 2000
Privy Council
Delivered by Lord Hope of Craighead]
This is an appeal from an order made by the Court of Appeal of New Zealand (Gault, Henry, Thomas, Keith and Tipping JJ) on 11 August 1999 ( [1999] 3 NZLR 545) dismissing the appellants' appeals against an order for costs which was made against them jointly and severally in the High Court by Giles J on 24 September 1998 ( [1999] 1 NZLR 583). The respondent has applied for special leave to cross-appeal against an order of the Court of Appeal which was made in same proceedings dismissing his cross-appeal against the order made by Giles J on quantum.
The first appellant, Raylee Patricia Harley (Mrs Harley), was admitted to the bar in 1985. She worked in private practice as a solicitor until 1 January 1992, since when she has been in practice as a barrister sole. These proceedings arise from the fact that she acted as counsel for the respondent, Robert McDonald (otherwise known as Robert John Erwood), in proceedings by Mr McDonald in the High Court. They had been brought against FAI (NZ) General Insurance Co Ltd (FAI) and the New Zealand Law Society to recover money which Mr McDonald had lost following the collapse of Renshaw Edwards, a New Zealand law firm, in January 1992. The second appellant, Glasgow Harley, is a firm of solicitors practising in Nelson. Glasgow Harley acted in those proceedings as Mr McDonald's solicitors.
In May 1992, following the collapse of Renshaw Edwards, Mr McDonald obtained summary judgment against the former partners of the firm for NZ$423,488.26 with interest at 21% compounded monthly to the date of payment. But all the former partners were declared bankrupt and the sum for which he had obtained judgment was not paid. Mr McDonald then sued FAI, the professional indemnity insurer of Renshaw Edwards, under section 9 of the Law Reform Act 1936. That section enables a plaintiff in certain circumstances to claim against a defendant's insurer, with the leave of the Court under section 9(4) of that Act. In February 1993 he also made a claim against the Solicitors' Fidelity Guarantee Fund which is administered by the Law Society. Section 169 of the Law Practitioners Act 1982 provides that the Fund is to be held and applied for the purpose of reimbursing clients of a solicitor who have suffered pecuniary loss by reason of theft by the solicitor or his employee or agent. In May 1993 the Law Society informed Mr McDonald that his claim against the Fund was admitted to the extent only of $34,710.59 as he had not established that the money which made up the balance of his claim had been stolen. Mr McDonald then filed a claim against the Law Society which he added to the proceedings which he had brought against FAI.
The case came before Giles J for trial in October 1997. At the end of the trial, for the reasons given in a judgment which he delivered on 11 December 1997, the judge dismissed Mr McDonald's claim against FAI. But he held that he was entitled to succeed against the Law Society and he awarded him the sum of $212,843.67 with interest at 10% from 6 May 1995 until the date of judgment. Mr McDonald did not appeal against the judge's dismissal of the claim against FAI, but he appealed against the amount of the award in his favour against the Law Society. On 7 December 1999 the amount which Giles J awarded to him was increased on appeal. The Court of Appeal ordered interest to be paid at the rate of 9% on a quarterly compounding basis from 1 November 1992 to the date of judgment: McDonald v New Zealand Law Society (unreported) (CA 33/98, 7 December 1999). The judgment sum has yet to be agreed, but it is likely to exceed $388,000.
In a judgment which he delivered on 19 February 1998 Giles J awarded FAI costs of $115,606.46 against Mr McDonald. As the amount which Mr McDonald had recovered from the Law Society including interest and costs was less than an amount which the Law Society had offered to him before the trial by way of settlement, he awarded the Law Society costs against Mr McDonald of $30,000. In his judgment of 24 September 1998 he ordered the appellants jointly and severally to pay personally to Mr McDonald the sum of $65,000 as a contribution to the costs which Mr McDonald had to pay to FAI. It is that order, which was upheld by the Court of Appeal on 11 August 1999, that is the subject of this appeal.
Mr Farmer QC for Mrs Harley advanced three grounds in support of her appeal. These were: that there had been a breach of natural justice by the trial judge; that the High Court had no power to order a barrister sole to pay or contribute to her client's costs personally; and that in any event Mrs Harley's conduct was not such as to amount to a serious dereliction of her duty to the Court. Mr Wilson QC and Mr Findlayson for the New Zealand Bar Association, interveners, made submissions in support of Mr Farmer's argument on the second ground. Mr Taylor for Glasgow Harley did not dispute the jurisdiction of the High Court to make an order for payment of costs against a solicitor. But he submitted on their behalf that in their case too there had been a breach of natural justice, and that their conduct also was not such as to amount to a serious dereliction of duty to the Court. Mr McDonald did not enter appearance to oppose the appeal and he was not represented. But their Lordships heard submissions from Mr McCoy, who had appeared briefly on Mr McDonald's behalf at an earlier stage in these proceedings and had been appointed by the Solicitor General to appear before the Board as amicus curiae. The appellants opposed Mr McDonald's application for special leave to cross-appeal against the judgment of the Court of Appeal on quantum.
Factual background
The arguments which were presented to the Board raise important points of principle with regard to the jurisdiction of the High Court to order counsel and solicitors to pay the costs of a litigation personally. But it is first necessary, in order to put these arguments into their proper context, to describe the complex history of these proceedings in more detail. The appellant's first argument, which is directed to the issue of natural justice, cannot be fully understood without a complete understanding of the facts.
The history can be divided up into two distinct chapters. The first relates to the substantive proceedings in the High Court in the action which Mr McDonald brought against FAI and the Law Society. The second relates to the subsequent proceedings as to costs which led to the order by Giles J that the appellants pay part of Mr McDonald's costs personally. Part of this narrative is based on an affidavit by Mrs Harley sworn on 29 March 1999 which was before the Court of Appeal when it heard the appeal against Giles J's order. For reasons that will be mentioned later, Giles J made his order without having had the benefit of the account of events which is contained in that affidavit.
Mr McDonald had invested various sums of money with Renshaw Edwards between June 1988 and October 1989. He lost all his money when the firm collapsed in January 1992. His proceedings for summary judgment were based upon pleadings which alleged a breach of a personal guarantee by Mr Renshaw and a failure by the firm to account as trustees. The summary judgment which he obtained against the firm on 5 May 1992 awarded him compound interest at the rate of 21% as provided for in the guarantee. The appellants did not act for him in those proceedings. By February 1993 it had become clear that the judgment would not be paid as all the former partners of the firm had been declared bankrupt. So Mr McDonald lodged a claim against the Solicitors' Fidelity Guarantee Fund alleging that his money had been misappropriated by theft and that he was entitled to be reimbursed by the fund under section 169 of the 1982 Act.
On 6 May 1993 he was advised by the Law Society that, while his claim was admitted in part, he would have to prove that the money which made up the balance of his claim had been stolen and that in any event it was not accepted that the Fund was liable to meet loss by theft of interest. The total amount of capitalised interest was therefore deducted from his claim. The Law Society also told him that the Fund was insolvent and that it would be four years or more before any payment of his claim could be made. In McDonald v. New Zealand Law Society (7 December 1999) Blanchard J. observed at paras [35] – [37] that the position of the Law Society when a claim was made on the Fund was that of a trustee and not that of an ordinary defendant who could simply leave the progress of the claim to the plaintiff. He said that in this case a proper assessment by the Society should have led it towards a substantially greater admission. But no further admission was made, and section 171(2) of the 1982 Act provides that no person shall be entitled, without leave of the Council of the Law Society, to commence any action in relation to the Fund until he has exhausted all relevant rights of action and other legal remedies against the defaulting solicitor or any other person in respect of the loss suffered by him. So Mr McDonald, relying on section 9 of the 1936 Act, turned his attention to the possibility of making a claim against FAI.
FAI had undertaken to provide professional indemnity insurance to Renshaw Edwards under two policies. These differed in their wording and exceptions, as there were different partnership arrangements between two...
To continue reading
Request your trial
-
Anthony Douglas King v Barry Stiefel
...urged courts to be astute to control costly satellite litigation. 98 Lord Bingham also cited the Privy Council case of Harley v McDonald [2001] 2 AC 678 at p 703, para 50: “As a general rule allegations of breach of duty relating to the conduct of the case by a barrister or solicitor with ......
-
Siemer v The Solicitor-General
... ... Vincent Ross Siemer Appellant and The Solicitor-General ... M F Laracy and A R van Echten for Respondent ... A The appeal is dismissed ... 140 See Harley v McDonald [2002] 1 NZLR 1 (PC) at [45]; and ... ...
-
Peter Willers v Elena Joyce
...the benefit of any doubt arising as to what is likely to have occurred: see Ridehalgh v Horsefield [1994] Ch 205 and Medcalf v Mardell [2001] 2 AC 678. Given their inability to reveal what advice they gave, I should assume that they gave honest advice unaffected by their financial interes......
-
Medcalf v Mardell (Wasted Costs Order)
...urged the courts to be astute to control what threatened to become a new and costly form of satellite litigation. In Harley v McDonald [2001] 2 AC 678, reviewing the exercise by the New Zealand courts of the inherent jurisdiction to order barristers and solicitors to pay costs unnecessarily......
-
Should advocates' immunity continue?
...J held that where such conduct was unreasonable, the jurisdiction to award costs against a practitioner would be enlivened. (223) [2001] 2 AC 678. (224) Harley invested money with a firm of solicitors. Upon the liquidation of the firm, he successfully sued but was not paid because the partn......