SCOOP: How Lawyer Nigel McFadden Wasn’t Full

Bob McFadden

Bob McFadden (Photo credit: Wikipedia)

Senior Nelson lawyer and former public office holder Nigel Alexander McFadden has been fined $2,400 and ordered to pay $16,700 costs after pleading guilty to two disciplinary charges relating to claims he deceived his long time client and former friend, Motueka businessman Michael Talley.

Mr McFadden is the senior partner in law firm McFadden McMeeken Phillips and is a former chairman of the Nelson Marlborough district health board and the Deportation Review Authority.

In July a Marlborough Nelson Westland district law practitioners’ disciplinary tribunal censured and fined Mr McFadden on his guilty pleas and ordered him to pay costs to the Nelson district law society.

This followed an investigation by the Canterbury district law society, which found a complaint by Michael and Lorraine Talley that Mr McFadden deceived them and breached their confidence and trust was justified.

In finding serious breaches of conflict and non-disclosure the district disciplinary tribunal said Mr McFadden’s conduct took place over an extended period of time, he had ample to disclose and remedy matters and there was also a serious effect on Mr and Mrs Talley.

Michael Talley declined to comment publicly on the outcome except to say the penalty was “grossly inadequate for the finding.”

Despite the Talleys first making their complaint in 1999 and Mr McFadden fighting aspects of it for seven years, the disciplinary tribunal gave him a lighter penalty for pleading guilty early. The maximum fine on each charge is $2,000.

The tribunal also gave Mr McFadden credit for being co-operative with the law society investigation. Tribunal chairman, Blenheim solicitor Michael Hardy-Jones, said Mr McFadden had endured a lengthy process and said there had been a serious effect on his him, his family and partners.

[Comment: As will be seen from this detailed report much of the “lengthy process” referred to by the disciplinary tribunal was caused by Mr McFadden himself.]

The complaint against Mr McFadden centred on his failure to lodge the Talley’s objection to a plan to rezone land near their home for rural residential subdivision coupled with his failure to tell them he was a trustee of the Kina Trust which owned the land and sought the rezoning.

Details of the private disciplinary tribunal hearing, Mr McFadden’s guilty pleas and the penalty imposed on him were previously secret.

They have only just come to light and are made known publicly for the first time today by CaseLoad.

At a behind closed doors hearing in Nelson in June Mr McFadden faced two charges of professional misconduct.

He was charged with misconduct in his professional capacity as follows:

“Accepting instructions from Mr M and Mrs L Talley in February, 1997, continuing to act for Mr and Mrs Talley during the period February 1997 to March 1999 (inclusive) in circumstances where there was an actual or potential conflict of interest between Mr and Mrs Talley and the trustees of the Kina Trust (including Mr McFadden) and failing to address with Mr and Mrs Talley the actual or potential conflict of interest and to advise them to take independent advice.”

That charge related to Mr McFadden’s failure to carry out the instructions of Mr and Mrs Talley.

He was further charged with misconduct in his professional capacity as follows:

“Failing to discharge his professional obligations to Mr and Mrs Talley during the period February 1997 to March 1999 (inclusive) by failing fully and frankly to disclose to them information, being information known to Mr McFadden which was, and which Mr McFadden knew, or ought to have known, to be material to the interests of Mr and Mrs Talley, and the nondisclosure of which was prejudicial to their interests because they did not take independent action to protect their interests until 16 March 1999.”

The second charge related Mr McFadden’s failure to tell the Talleys he was a trustee of the Kina Trust and his failure to tell them the Kina Trust owned the land opposite the Talley property for which rural residential zoning was sought.

Mr McFadden also failed to tell the Talleys he had asked a planner to prepare a submission for the Kina Trust which he approved and which was lodged through his law firm.

Mr McFadden also led the Talleys to believe that he had addressed their concerns by taking appropriate steps to oppose submissions seeking rural residential zoning, which were of concern to them.

The charges did not involve an allegation that Mr McFadden gained personally.

The complaint was dealt with under the disciplinary provisions of the Law Practitioners’ Act, part of whose function is to protect the public from the unprofessional behaviour of lawyers.

In seven years the Talley’s complaint and the handling of it  – which Mr McFadden fought tooth and nail and lost – has done the rounds of three district law societies, the New Zealand Law Society, a law society lay observer, the High Court and the Court of Appeal.

Throughout the saga the New Zealand Law Society, nor any of the district societies involved, have either confirmed or denied that Mr McFadden was complained about or was under investigation, despite news coverage in the National Business Review.

The “official” existence of the complaint only surfaced when Mr McFadden chose to fight aspects of it unsuccessfully in the High Court and the Court of Appeal.

Even today the Nelson district law society refuses to acknowledge the disciplinary action against Mr McFadden, which until now, has remained a secret from the public.

Michael Talley still believes Mr McFadden has been let off too lightly and while reluctant to speak publicly, still wants the Wellington, Nelson and Marlborough district law societies’ lay observer Michael Gibson to delve further into the matter.

For his part lay observer Mr Gibson says he is extremely unhappy with the way the Talley complaint has been handled by various law societies.

At an expense to the taxpayer Mr Gibson attended Mr McFadden’s disciplinary hearing in Nelson to find out what was going on because the Nelson district law society refused to tell him what charges Mr McFadden faced.

As one of five lay observers appointed under warrant by Parliament, to whom they report, Mr Gibson was entitled to attend the disciplinary hearing, which was closed to the public.

But he says he did not know until last week the outcome – and only then when he was told by CaseLoad.

Mr Gibson says he will make a full report to Parliament with a strong recommendation that something be done to improve aspects of the handling of complaints that some people feel does little to foster public confidence in the law society’s obligation or willingness to discipline its members.

So the business may not yet be over.

Mr and Mrs Talley’s dispute with Mr McFadden, their long-time friend and trusted legal adviser, first emerged publicly in the National Business Review in July 2002.

In simple terms Mr and Mrs Talley claimed they were deceived by Mr McFadden over a property development plan.

It was considered a big story not just because of the nature of the allegations but because Mr Talley and Mr McFadden were well known in the business, legal and wider community.

Mr and Mrs Talley complained that Mr McFadden deceived them to avoid disclosing a conflict of interest in relation to a land rezoning and potential subdivision planned near their Motueka home.

Mr and Mrs Talley were deeply upset when they found out their friend and lawyer Mr McFadden was a trustee of the Kina Trust that was seeking a zoning change to allow rural residential subdivision of land across the road from their home.

They were particularly hurt because they had instructed Mr McFadden to object to the rezoning but he failed to tell them of his interest as a professional trustee of the Kina Trust, which owned the land planned for subdivision.

In a desperate effort to prevent any subdivision the Talleys bought the Kina Trust land for $652,000, a figure claimed in court documents to be $333,500 above its valuation and well above the $250,000 the Kina Trust paid for it.

At the end of the day the Tasman District Council did not change the land zoning.

The Talleys complained to the Nelson district law society that Mr McFadden deceived them, that he had a conflict of interest and that he hid his involvement in the Kina Trust.

Following an extensive investigation a Wellington district law society complaint assessment committee ruled in April 2000 that the Talley complaint was justified and found Mr McFadden had a conflict of interest.

The Wellington society dealt with the complaint because the Nelson Marlborough society felt it was too close to Mr McFadden to do its own digging.

But Mr McFadden always denied deceiving the Talleys. He denied it for nearly seven years.

In October 2002 Mr McFadden failed in a bid to convince the High Court to intervene to stop any further hearing of the conflict of interest and deception complaint.

Justice Ellen France heard how the Nelson society failed to tell the Wellington society of Mr McFadden’s other complaint history.

Mr Talley’s lawyers took the view that if Mr McFadden’s complaint history had been known to the Wellington society it could have changed the outcome of the investigation and could have resulted in Mr McFadden facing serious charges.

Inquiries by lay observer Michael Gibson and the New Zealand Law Society led to the law society deciding to convene a new complaints committee to rehear the Talley complaint, and this time to include and consider Mr McFadden’s complaint history.

It was that rehearing, to be done by the Canterbury district law society, Mr McFadden tried to stop.

In court Mr McFadden’s QC Nick Davidson attacked NBR for what he called the dramatic public disclosure of what was a confidential law society investigation.

Mr Davidson said allegations that Mr McFadden derived a personal interest from his involvement with the Kina Trust were wrong and defamation proceedings against NBR followed, which were settled.

The Talley’s QC Colin Carruthers countered by saying publicity had thrown up another complaint against Mr McFadden.

Mr Carruthers said Mr McFadden’s response to publicity and in particular his summary judgment for defamation was “open to censure for failing to fully set out and inform the court of all relevant matters concerning the Talleys’ complaint by dealing only with an issue of personal gain.”

In November 2002 it also emerged that three years earlier, following a complaint from an elderly female client, Mr McFadden was warned by the Nelson district law society that he risked disciplining if he was not more rigorous in his approach to conflict of interest.

[Comment: The misconduct complained of in that case happened during late 1996 and throughout 1997, with a decision and warning given to Mr McFadden in December 1999.

The misconduct in the Talley complaint happened between February 1997 and March 1999 so the disciplinary tribunal figured that at the time of the Talley complaint Mr McFadden was not yet the subject of a conflict of interest decision.

While it might appear in some eyes that technically no decision had been made on the earlier complaint there was an element of crossover that might have caused Mr McFadden to exercise better judgment.]

Just on Christmas 2002 Justice France, in a detailed judgment, rejected Mr McFadden’s case and opened the way the complaints to be reopened.

But in February 2003 and putting his professional reputation right on the line, Nigel McFadden lodged an appeal against Justice France’s ruling with the Court of Appeal.

The Court of Appeal heard the case in November 2003 and in a decision released in February 2004 dismissed Mr McFadden’s appeal, allowing the rehearing of the complaints to go ahead.

Meanwhile Wellington, Nelson and Marlborough district law societies’ lay observer Michael Gibson – while being careful not to mention anyone by name – wrote about what was obviously the Talley/McFadden affair in his annual report to Parliament.

Mr Gibson, who traversed in detail the history of the handling of the complaint, was clearly concerned that after more than four years [at that point] the complaint had yet to be fully considered as to whether disciplinary charges should be laid, “let along any hearing of a disciplinary tribunal scheduled.”

At the time Parliament was considering reforms of the legal profession contained in the Lawyers and Conveyancers Bill.

All five lay observers strongly supported proposed law changes aimed at tightening up complaints procedures within the legal profession.

But now it was the turn of the Canterbury district law society to conduct yet another  confidential investigation –  something its executive director Malcolm Ellis would neither confirm nor deny existed.

Later in 2004 the Canterbury society found the Talley complaint that Mr McFadden deceived them was justified and was of sufficient gravity to warrant the making of a charge against Mr McFadden.

It handed everything back to the Nelson society to deal with, which it finally did this year.

The original NBR story I wrote in July 2002 detailed the Talley’s complaint.

However it also stated that Mr McFadden had a personal interest in the Kina Trust, which owned land close to the Talley’s residential property in Motueka.

The July 2002 story reported further allegations against Mr McFadden based on that statement.

Mr McFadden took issue with those statements and his lawyers moved fast to seek summary judgment against the newspaper for defamation.

In a sworn statement supporting his claim against the newspaper Mr McFadden said: “…allegations of deception, concealment, personal interest, and that I owned the land through the Kina Trust are false.”

Mr McFadden said that since the NBR story appeared he had to take steps to provide evidence that the allegations were untrue, and to try to restore his reputation with clients and with the wider public.

He said he had to provide correcting information to members of the Nelson district health board, the ministers of health, immigration and officials, the Tribunals Division, local and national media and many clients in order to reduce the effect of the publication.

Facing pressure from its insurance lawyers and experienced defamation advisers NBR published a prompt retraction and apology to Mr McFadden in which the newspaper accepted that he held no personal or beneficial interest in the Kina Trust.

Both the paper and I accepted that Mr McFadden’s involvement with the Kina Trust was as a professional trustee and as its solicitor and we unreservedly withdrew the offending statements.

I do not know exactly, because I was never party to a financial settlement, but I was led to believe NBR may have also paid Mr McFadden $50,000.

[Comment: The original retraction and apology was apparently wrong and a correction to it was published a week later. The “correction” was exactly the same as the original.]

One of the interesting matters now arising from Mr McFadden’s guilty plea and punishment in the Talley affair is whether or not it opens the door for the National Business Review to possibly get its $50,000 back.

Perhaps NBR owner Barry Colman – who wasn’t at all happy about paying out – might have grounds for a judicial examination of Mr McFadden’s defamation claim or even a complaint to the law society.

If those paths were open to Mr Colman he might have to chose his own lawyers carefully.

NBR’s long-time senior legal brief, Julian Miles QC – who initially told NBR it did not have a leg to stand on over Mr McFadden’s defamation complaint – might have to disqualify himself from anything to do with Michael Talley.

Mr Miles acts in long-running litigation for Maruha Corporation, a Japanese fishing company effectively alleging multi million dollar legerdemain against its former joint venture partner Amaltal Corporation, a New Zealand fishing company in which Mr Talley has a big stake.

Watch this space.

Feedback on this story to jockanderson@ihug.co.nz

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