ABP Ltd v VW
 NZLCRO 60
Concerning An application for review pursuant to Section 193 of the Lawyers and Conveyancers Act 2006
Concerning a determination of the Waikato Bay of Plenty Standards Committee 2
EC as the Applicant's Counsel
VW as the Respondent
The Waikato Bay of Plenty Standards Committee 2
The New Zealand Law Society
The names and identifying details of the parties in this decision have been changed.
Review of Standards Committee decision to take no further action — applicant contracted with developer (respondent's client) to remove soil from development site — dispute arose and developer withheld payment — Settlement Deed recorded and executed — Deed drafted by respondent and provided for retention of certain monies in law firm's Trust Account — payment authorised to developer without reference to applicant in contravention of provisions of Deed — whether there had been a breach of professional conduct such that an adverse finding should be made under the Lawyers and Conveyancers Act 2006.
Held: The payment from the trust account was made prior to the commencement of the LCA 2006. The threshold for disciplinary intervention under the LCA 1982 was relatively high and could include a finding of misconduct or conduct unbecoming. In the deed the developer “irrevocably” authorised VW's firm to hold the money on the contained terms and stated that the developer could only call for repayment on the terms contained in the deed. The retained money was to be paid out to the developer if any defect appeared that was caused by ABP Ltd and ABP Ltd refused to remedy it.
VW drafted the Deed and was aware of the terms. The fact that VW took advice from a senior colleague did not absolve him from being accountable for his own professional conduct. As upheld on appeal to the High Court, the payment ought not to have been made because the process contained in the deed was not followed. There was a duty on VW to ensure that money was not paid out in contravention of the purpose for which it was held ( ).
VW was in breach of his professional obligations but the conduct did not reach a threshold that would support a finding of misconduct. The test for “conduct unbecoming” was the less strict standard of whether conduct was acceptable according to the standards of “competent, ethical, and responsible practitioners” ( ). VW's conduct did meet this threshold and so reached the threshold in s351 LCA 2006 (complaints about conduct before commencement of section).
P fined $600 and ordered to contribute $1,000 towards costs. Further enquiry was needed in order to address what loss was suffered by ABP Ltd and who should bear responsibility.
• Pursuant to Section 156(1)(i) of the Lawyers and Conveyancers Act the Practitioner is ordered to pay a fine in the sum of $600. This sum is to be paid to the New Zealand Law Society within 30 days of the date of this decision.
• Pursuant to section 210 of the Lawyers and Conveyancers Act the Practitioner is ordered to pay $1000 towards the cost of the review. This sum is to be paid to the New Zealand Law Society within 30 days of the date of this decision.
Pursuant to section 209 of the Lawyers and Conveyancers Act 2006, the Standards Committee is directed to reconsider the following issues in the light of the above finding:-
• Whether loss has been suffered by the Applicant such as to support a compensatory order, and if so what the quantum of that order should be
• Whether there should be an investigation into the conduct of any other lawyer or lawyers in relation to the wrongful payment.
• The responsibility of any person, whether the Practitioner, other lawyers in the Practitioner's former law firm, or the partnership as a whole, in relation to any loss suffered by the Applicant. (It is open to the Standards Committee to take such steps as may be considered to be appropriate to assist the parties to resolve the matter of compensation).
• To issue a new decision in relation to these matters which shall be subject to review by this office.
After considering a complaint made by ABP Ltd (the Applicant) against Mr VW (the Practitioner), the Waikato Bay of Plenty Standards Committee 2 decided that Section 138(1)(f) of the Lawyers and Conveyancers Act 2006 applied and that no further action should be taken. This section confers a discretionary power on the Standards Committee to take no further action on a complaint if, in the opinion of the Standards Committee —
there is in all the circumstances an adequate remedy or right of appeal, other than the right to petition the House of Representatives or to make a complaint to an Ombudsman, and it would be reasonable for the person aggrieved to exercise.
The Applicant sought a review of that decision, contending that the Standards Committee had erred and that it had been wrong as to fact and the law.
The Applicant is a contracting company which had contracted with the Practitioner's client (the developer) to remove soil from a development site. At a particular point in time a dispute arose between the Applicant and the developer concerning some of the work; the developer had withheld payment. The two contracting parties reached an agreement concerning these matters, which was recorded in a Settlement Deed and executed by the parties in May 2005.
The Practitioner was a staff solicitor in the law firm, and was the solicitor acting for the developer. This Deed was drafted by the Practitioner.
The Settlement Deed set out the background to the Deed, identifying the basis of the dispute between the parties by reference to the “possibility” of building materials having been left in-situ, noting that the Applicants claimed that certain payments were due and the developer's concern about the possibility of unwanted material having been buried in the development site. The Settlement Deed provided that a certain sum of money would be retained for a period of three years, and set out the terms and conditions on which that money was to be applied.
The Deed provided that the retention money was to be held in the Trust Account of the solicitors acting for the developer, and in the name of the developer. All interest accrued was for the benefit of the Applicant who was liable for the tax on the interest.
The Deed clearly set out the steps to be taken in applying the funds. Clause 6 of the Deed was as follows:
[The developer] irrevocably authorises [the law firm] to hold the monies referred to in this Deed and to invest them on interest hearing deposit and to pay such funds to the person entitled in terms of this Deed. [The developer] shall not be entitled to call for repayment of such monies except in accordance with the terms of this Deed.
The Practitioner subsequently authorised a payment from that fund to the developer without reference to the Applicant and therefore in contravention of the provisions of the Deed. In making this payment the Practitioner was acting on the instruction of his client.
The Applicant filed proceedings in the District Court against the developer. The action was successful, and led to the developer being ordered by the Court to refund to the law firm's trust account the money that had been paid out. A subsequent appeal upheld that decision. The money was not refunded to the firm's trust account, and the developer company was subsequently liquidated.
The Applicant then filed a complaint against the Practitioner, seeking compensation. The letter of complaint had alleged that the payment may have been in breach of the Trust Account Regulations both as to the manner in which –
(a) the funds were held and the way they were disbursed; and
(b) without consideration of the Practitioner's obligations pursuant to the Settlement Deed which the Practitioner had signed.
The Standards Committee did not uphold the complaint, having noted that the Practitioner was not a party to the agreement between the Applicant and the Practitioner's client (the developer). The Committee referred to “other issues of concern were more properly determined by a Court”, but did not explain what these were. The Committee noted that the Practitioner had acted on the instructions of his client in authorising payment and took the view that he was obliged to act on that instruction.
A review hearing was held on 7 July 2011, attended by the Practitioner and also by the Directors of the Applicant Company and their counsel.
The Practitioner explained his understanding of the background to the Deed and the basis of the payment having been made to the developer. He said that part of the developer's land had been sold to a third party who had allegedly discovered some building remnants in the soil and had taken his own remedial action to have this removed, and then presented the bill to the developer for reimbursement.
The Practitioner had perceived that the fund was intended to protect the developer rather than as a comfort fund for the Applicant. He said that being aware of the terms of the Deed, prior to authorising the payment he discussed the developer's...
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