Ac v Aaa
| Jurisdiction | New Zealand |
| Judgment Date | 26 January 2011 |
| Neutral Citation | [2011] NZLCRO 2 |
| Date | 26 January 2011 |
| Docket Number | LCRO 83/2010 |
| 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 Canterbury-Westland Standards Committee 2
[2011] NZLCRO 2
LCRO 83/2010
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.
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
On 3 April 2007, the Applicants and SH purchased a motel business in X.
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.
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.
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.
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.
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.
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.
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.
The business was sold in July 2008, although AAA did not learn of this until steps were taken by AAA to recover outstanding costs.
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.
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.
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.
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.
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.
The Committee provided its reasons for the decision in respect of each of the aspects of the complaint raised by the Applicants.
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.
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
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.
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.
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).
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.
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.
In the complaint to the Complaints Service, the Applicants set out two main reasons for dissatisfaction with the conduct of the Respondents.
In summary, these related to a perceived failure on the Respondent's behalf to successfully promote the Applicant's position with regard to the water—tightness/external painting issues, and secondly, a failure to resist an increase in rental pursuant to a rent review.
The obligation to paint the premises was a term of the lease. Non-compliance with the provisions of the lease constitutes a ground for cancellation of the lease. The landlord took the step of issuing a Notice of Intention to cancel the lease on 15 February 2008 pursuant to section 246 of the Property Law Act 2007.
Reference is made in a letter from the Applicants to Mr B dated 22 September 2008, to this notice not being issued by “the bailiff” and that therefore the Applicants mistakenly believed that the notice was a “genuine” notice.
A Notice of Intention to cancel is issued by the landlord of the premises. It is not either filed with, or served by, the Court. The notice in question was signed by P, as solicitor and duly authorised agent of the lessors, and is a valid notice in terms of the Act. Consequently, it is unsurprising that Mr B did not make any mention of the validity of the notices when forwarding copies under cover of his letter dated 18 February 2008.
The Applicants complied with the notice by painting the premises with a conventional 100% acrylic paint. It is difficult to see how the Applicants' costs in complying with their obligations in terms of the lease translates into shortcomings by the Respondents.
A review of the correspondence from the landlord and their solicitors reveals that the landlord did not accept that there were water-tightness problems with the buildings. It is likely that the only way that the landlord was going to accept the Applicants' contentions, would be for proceedings were to be issued against the landlord and Orders made requiring them to comply with their obligations in terms of the lease. The Respondents cannot be held responsible for the landlord's lack of acceptance of the state of the building as outlined in the Richardson report.
A second point raised by the Applicants relates to the rent review. The issue in this regard, is that the first valuer engaged by the landlord indicated to the Applicants that no rent increase was justified.
A second valuer was engaged by the landlord, and on the basis of this valuation, the landlord sought an increase in rental.
The Applicants consider that the Respondents should have prevented, or not agreed to, the landlord using this second valuation to support the increase.
The rent review provisions of the lease are...
To continue reading
Request your trial