ABP Ltd v VW
| Jurisdiction | New Zealand |
| Judgment Date | 03 August 2011 |
| Neutral Citation | [2011] NZLCRO 60 |
| Date | 03 August 2011 |
| Docket Number | LCRO 133/2010 |
| Court | Legal Complaints Review Officer |
Concerning An application for review pursuant to Section 193 of the Lawyers and Conveyancers Act 2006
and
Concerning a determination of the Waikato Bay of Plenty Standards Committee 2
[2011] NZLCRO 60
LCRO 133/2010
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.
EC as the Applicant's Counsel
VW as the Respondent
The Waikato Bay of Plenty Standards Committee 2
The New Zealand Law Society
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 request with a senior lawyer in the firm, and notwithstanding their awareness of the terms and conditions of the Deed, it was perceived by them that the payment requested by their client in the particular circumstances that the request had been made was in line with the spirit of the agreement, even if not the exact words. The Practitioner said there had been an engineer's report provided which concluded that there were defective materials left in the land that the Applicants had worked on, which had persuaded him and his colleague that the payment should be made.
The Applicant claims that a large sum is still owed to it by the developer, and no satisfaction has been obtained from the court proceedings. The Applicant has now pursued the Practitioner for having wrongfully authorised the payment to the developer. This review deals only with that portion of the money that was paid from the firm's Trust Account referred to above.
The payment from the Trust Account was made in January 2008. This predated the Lawyers and Conveyancers Act 2006 which commenced on 1 August 2008. The complaint was made in December 2009. In these circumstances the complaint falls to be considered under the transitional provisions of section 351 of the Lawyers and Conveyancers Act. Under this section the jurisdiction of a Standards Committee arises only if the conduct complained of could have led to disciplinary proceedings being commenced against the Practitioner under the Law Practitioners Act 1982.
The applicable standards are those that were in force at the time of the conduct. There are found in the Law Practitioners Act and the Rules of Professional Conduct for Barristers and Solicitors, both of which have since been replaced. The standards are found in ss 106 and 112 of the Law Practitioners Act. The threshold for disciplinary intervention under the Law Practitioners Act was relatively high and could include findings of misconduct or conduct unbecoming.
Misconduct was generally considered to be conduct of sufficient gravity to be termed ‘reprehensible’ (or ‘inexcusable’, ‘disgraceful’ or ‘deplorable’ or ‘dishonourable’) or if negligent, such negligence must be either reprehensible or be of such a degree or so frequent as to reflect on his fitness to practise. ( Atkinson v Auckland District Law Society NZLPDT, 15 August 1990; Complaints Committee No 1 of the Auckland District Law Society v C [2008] 3 NZLR 105). I do not see the Practitioner's conduct reaching this level of wrongdoing.
The test for ‘conduct unbecoming’ (which could relate to conduct both in the capacity as a lawyer, and also as a private citizen) is the less strict standard of whether the conduct is acceptable according to the standards of “competent, ethical, and responsible practitioners” ( B v Medical Council [2005] 3 NZLR 810 per Elias J at p 811). I have considered the Practitioner's conduct in terms of this standard.
For reasons that will become clear, this decision is written in two parts. The first part deals with the substantive complaint. The second part deals with remedial issues and identifies areas where further enquiry is yet to be undertaken.
The Practitioner was an employee of a law firm in which capacity he acted for a property developer company who was a client of the firm. Since the above events the Practitioner has left the firm and set up his own...
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