Ac v Aaa

 
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[2011] NZLCRO 2

LCRO 83/2010

Concerning An application for review pursuant to Section 193 of the Lawyers and Conveyancers Act 2006

and

Concerning a determination of the Canterbury-Westland Standards Committee 2

Between
AC of X
Applicants
and
AAA of X (Mr B and Mr R)
Respondents

AC as the Applicants

Mr B as the Respondent

Mr R as the Respondent

The Canterbury-Westland Standards Committee 2

The New Zealand Law Society

Application for review of a Canterbury-Westland Standards Committee decision not to take any further action in regard to a complaint. The applicants had engaged the respondents for advice and assistance on their legal obligations after purchasing a motel business but were unhappy with the advice received, instructed an alternative law firm and sought compensation from the respondents on the grounds that the respondents had failed to recognise weathertightness issues with the motel and had failed to support the applicants in their challenge against the landlord — whether there was unsatisfactory conduct in the nature of conduct unbecoming.

The names and identifying details of the parties in this decision have been changed.

Held: As the relevant conduct occurred before the commencement of the LCA under s351 LCA (complaints about conduct before the commencement of section) it had to amount to conduct such that disciplinary proceedings could have been commenced under the Law Practitioners Act 1982 (“LPA”). By the same token any penalty was restricted to penalties under LPA. For disciplinary proceedings to be commenced, the conduct had to depart from acceptable professional standards ( B v Medical Council).

In terms of the costs charged by AAA the only question under the LCA was whether or not AAA had adopted practices which resulted in over-charging to the extent of conduct unbecoming. There were a couple of occasions when the applicants' file was being passed from one lawyer in the firm to a litigation specialist and there was perhaps a double up of charging but there were not sufficient instances where there had been inappropriate charging to support such a finding.

It was appropriate not to pursue a claim for breach of the right to quiet enjoyment since a more direct breach of the landlord would have been of the obligation to keep the premises watertight. Furthermore disruption caused by workmen was due to the landlord endeavouring to comply with the terms of the lease. The rent review process was also set out in the lease and any objection had to be determined by arbitration, which AAA pointed out to the applicants.

There was no correspondence or evidence of clear instructions to AAA to support the applicants' contention that AAA had acted contrary to their instructions promoting the idea the applicants should contribute the cost of painting the premises conventionally.

None of the conduct complained of would have warranted a disciplinary charge being brought against AAA. Standards Committee decision confirmed.

DECISION
Background
1

On 3 April 2007, the Applicants and SH purchased a motel business in X.

2

The business was under-performing but the purchasers formed the view that there was considerable potential to grow the business and paid a sum in excess of $400,000 for the goodwill of the business based on valuation advice received at the time.

3

Difficulties with the vendor and the state of the buildings at the time of possession meant that the purchasers commenced operations in difficult circumstances, and anticipated occupancy rates were not achieved. This naturally resulted in the purchasers' financial circumstances coming under pressure.

4

Subsequently, the purchasers became aware of what they considered to be significant defects within the complex including leaking buildings. A report commissioned by them as to the condition of the motel raised a number of matters of concern and the purchasers required legal assistance to determine the respective obligations of themselves and their landlord, in terms of the lease.

5

In addition, a rent review was scheduled for 11 October 2007, and became part of the matters on which advice was sought and provided by the Respondents.

6

In late August 2007, the purchasers approached the firm of AAA on the recommendation of the X Motel Association for advice and assistance. They were initially referred to Mr S within that firm. Mr S was a commercial lawyer and the purchasers were happy with the advice and service provided by him.

7

Mr S, however, soon involved Mr R (Mr R) in the conduct of the file and shortly thereafter the file was referred to Mr B (Mr B) a litigator in the firm.

8

Despite their desire to avoid litigation, this referral was accepted by the purchasers, but they became increasingly dissatisfied with the advice being received, resulting ultimately in their approaching other law firms in X to represent them. In March 2008 they instructed an alternative firm, although this was not apparently communicated to Mr B who continued to provide advice to the purchasers during April 2008.

9

The business was sold in July 2008, although AAA did not learn of this until steps were taken by AAA to recover outstanding costs.

Complaint
10

The complaint was lodged on 21 December 2008 by Mr AC (AC) against Messrs B and R of the firm AAA. This was treated by the Complaints Service as two complaints, but dealt with together. The complainants were recorded by the Complaints Service as AC and Mrs AC (AC) (collectively referred to as “the Applicants”). SH has not participated in the complaint.

11

In a letter to AAA dated 22 September 2009, the Applicants outlined their core concerns. These were:

  • • The fees and associated costs;

  • • The costs associated with the involvement of three lawyers;

  • • The advice and representation received.

12

At the time the complaint was lodged, the sum of $6,631.43 remained outstanding to AAA, the sum of $6,000 having been paid.

13

The compensation sought by the Applicants was to have the accounts rendered by AAA reduced by the balance outstanding. The Applicants considered that Messrs B and R (collectively referred to as “the Respondents”) had failed to recognise that there were watertightness issues with the buildings, and to satisfactorily support the Applicants in their challenge to the landlord. As a result of this failure the Applicants contend that they have been obliged to paint the exterior of the building at a cost of $12,000 plus GST, and to pay an increased rental of $7,072.16 plus GST.

Standards Committee Decision
14

Having carried out its investigation, the Standards Committee decided pursuant to Section 138(2) of the Lawyers and Conveyancers Act 2006 (the Act) not to take any further action with regard to the complaint because it concluded that in all the circumstances it was unnecessary for it to do so.

15

The Committee provided its reasons for the decision in respect of each of the aspects of the complaint raised by the Applicants.

Application for review
16

The Applicants have applied for a review of the Standards Committee decision and cite the following reasons why the decision should be overturned in their favour:-

1
    The Applicants consider that where there were different accounts of events, the Committee chose to believe the Respondents' version in every instance. 2. They consider that where there was a lack of documentary evidence, the Respondents' statements were consistently given preference over theirs. 3. They consider that documentary evidence supporting their statements had been ignored.
17

They then referred to the specific issues raised in their complaint and examined the Committee's decision in respect of each of these. The issues are:-

  • • Costs

  • • Loss of enjoyment

  • • External painting

  • • Review of market rental

18

In respect of each of these matters, the Applicants give examples where they consider the Committee has taken an approach consistent with points 1–3 in paragraph [16] above. This involved a detailed consideration of the Committee's decision.

19

The outcome sought by the Applicants is that the Committee's decision be overturned in their favour. I take this to mean that they desire that an order be made whereby they are relieved of payment of the balance of the accounts due to AAA.

20

Before any orders such as they seek may be made, the Committee or the LCRO must first make a finding of unsatisfactory conduct in the nature of conduct unbecoming (refer paragraphs 37–43).

21

Without first making such a finding there can be no outcome such as that sought by the Applicants. It is important for the Applicants to bear this in mind, so that they can understand both the Committee's decision and the outcome of this review.

Review
Overview
22

Before dealing with the detail of the complaint, the Standards Committee decision, and the application for review, it is appropriate to make some general observations with regard to this matter.

23

In the complaint to the Complaints Service, the Applicants set out two main...

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