AJ v BJ

 
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[2013] NZLCRO 36

LCRO 258/2011

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

Between
Mr AJ
Practitioner
and
BJ
Respondent

Mr AJ as the Applicant

[Name removed] as a related person or entity

Mr BS & Ms BT as the Respondents

The Canterbury/Westland Standards Committee

The New Zealand Law Society

Review of a Standards Committee decision that the practitioner was guilty of unsatisfactory conduct for failing to provide a letter of engagement to the respondent prior to undertaking work — the practitioner acted for the respondent in relation to a bank loan for the purchase of a dairy farm — short time frame for settlement — after undertaking substantial work, practitioner raised an invoice for fees — respondent questioned fees charged — said was unaware practitioner charged $400 per hour — total charge of $8,400 — practitioner did not keep time records but estimated fee — whether or not the practitioner was guilty of unsatisfactory conduct.

Held: Rules 3.4, 3.5 and 3.6 of CCC Rules required that lawyers provide clients with Terms of Engagement in advance of any work being undertaken. The practitioner did not prepare the letter of engagement until the substantial part of the work had been done. The professional obligation required a lawyer to provide certain information including information about fees in advance of work undertaken; the practitioner did not provide the required information in advance. This resulted in the respondent losing the opportunity to explore other options. Had the respondent been given the information about the hourly rate charged by the practitioner in advance, he could have negotiated with the practitioner as to the amount of work that needed to be done by the practitioner and the amount of work likely to be undertaken by the legal executive or could have considered the option to engage another lawyer.

The words “in advance” were not defined in r3.4, nor did it define in advance of what, although this had been taken by this Standards Committee (and others before it) to mean in advance of the services being provided to the client. Rule 3.5 was more explicit in identifying what information had to be provided “prior to undertaking significant work under a retainer”, although it provides no assistance as to the meaning of “significant work”.

By the time that the necessary bank documents were received, the practitioner could have alerted the client as to the volume of the bank documents and requirements before starting work on the file. Whether this would have ultimately resulted in lower fees was speculative as it was by no means certain that the respondent could have obtained legal services for this kind of transaction for a materially lesser fee (this seemed to be a reasonable assumption given the costs assessor's observation about complexity and the somewhat large volume of documentation. However the overall affect was that the respondent did not have the opportunity to explore other options.

The Standards Committee misunderstood the application of the obligations in r7 CCC Rules (disclose information relevant to the matter in respect of which the lawyer was engaged) and r7.1 (ensure client understood the nature of the retainer and keep client informed about progress on the retainer). These obligations could not be confused with those imposed by Chapter 3 CCC Rules (Competence and client service). The practitioner's failures to communicate to the client the information required by the Chapter 3 Rules covered the practitioner's omissions. There was no failure on the part of the practitioner in relation to r7 and r7.1.

The costs assessor appointed by the Committee concluded that the fee was fair and reasonable as the work, which was a large facility with attendant complexities, could only be done by a senior experienced lawyer. The assessor noted that the absence of a time sheet was unusual but given his analysis of the file this was not a problem.

It was clear that the assessor's report took into account the r9.1 CCC Rules factors (factors to be taken into account in determining the reasonableness of a fee) and set out reasons for his conclusion including: the volume and complexity, the critical importance of the work to the client, the short time frame, and the fact that the client's directors were off shore at the time. The report was thorough and written after undertaking a full assessment of the practitioner's files and provided a reasoned basis for accepting that the practitioner's charges despite absence of time records. The assessor's report provided solid support for the practitioner's explanation that all of the work charged for was done by himself and that the legal executive's contribution had not been charged. There was therefore no sufficient basis for making negative assumptions about the Practitioner's honesty as to his charges.

Although the Committee regarded the fee as excessive and ordered reduction of the fee, the Committee did not make a finding that was a breach of r9 CCC Rules (lawyer not to charge a client more than a fair and reasonable fee having regard to the interests of both the client and lawyer and having regard also to the factors set out in r9.1). No part of the Standards Committee's reasoning, nor any part of its decision to reduce the practitioner's invoice, referred to the fee factors set out in r9.1 (factors to be taken into account in determining the reasonableness of a fee).

There was also no reference to s156(1)(e) Lawyers and Conveyancers Act 2006 (“LCA”) (power of Standards Committee to order the practitioner or firm to reduce fees for any work) which was the empowering section to reduce a fee. The Committee reduced the practitioner's fee despite no disciplinary finding made in relation to the fee and no apparent exercise by the Committee of its powers under s156(1)(e) LCA.

No orders could be made under s156 LCA unless there was a finding of unsatisfactory conduct. The Committee ‘s finding of unsatisfactory conduct was in relation to a breach of obligations found in Chapter 3 CCC Rules but was unrelated to overcharging. The Committee could not impose a remedial order that was unrelated to the stated breach. If a Standards Committee intended to impose a particular remedial order to address a perceived professional failing, there had to be a prior disciplinary finding that there was a breach of that professional obligation; and any resulting order ought to relate to that finding. The Committee should have made a disciplinary finding that the practitioner had breached r9 before reducing his fee or could not it make the order at all.

Professional reputation was a highly valued asset. Credibility could not be quickly challenged where a reasonable explanation was proffered in respect of a matter. The Committee's view that the practitioner's response to the complaint was not altogether honest did not have a solid basis; there was no evidence of excessive charging by the practitioner. The practitioner did not help matters by issuing an invoice that indicated the charges were based on a certain number of hours that he could not verify. However, the absence of such a record was not necessarily fatal to undertaking an assessment about whether the overall charge was fair and reasonable. Although the practitioner did not provide the necessary time records, the assessor's report provided solid support for the explanation offered by the practitioner in relation to fees charged.

An order of censure marked out a professional failure of a most serious kind. This was shown by the fact that a censure order had to be made before there could be publication of the lawyer's name following a disciplinary finding. There was no proper basis for the Committee's order that the practitioner be censured.

The Standards Committee's finding that there was a breach of r3.4 and r3.5 CCC Rules was confirmed. The Committee's finding that there was a breach of r7 and r7.1 was reversed; the Committee's order of censure pursuant to s156(1)(b) was reversed. The Committee's order reducing the Practitioner's fee, pursuant to s156(1)(e) was reversed.

DECISION
1

Mr AJ (the Practitioner) was found guilty of unsatisfactory conduct for failing to have provided a Letter of Engagement to his client, the Respondent company, in circumstances where the client eventually filed a complaint alleging overcharging by the Practitioner. The Committee also ordered the Practitioner to reduce his fees, imposed a censure, a fine and costs Order. The Practitioner sought a review of that decision.

Background
2

The Practitioner acted for the Respondent company in relation to a loan from the [BANK] to enable the purchase of a dairy farm. The initial approach to the Practitioner was made on or about 28 April 2010, the bank's loan offer needing to be accepted by 30 April, and the bank documents followed on 7 May, for a draw-down of the loan on 24 May. The directors of the company resided [overseas], and the documents needed to be couriered there for signing.

3

The Practitioner completed the documentation within the timeframe. The Practitioner's report to the client, which included his invoice, led to the Respondent raising questions with the Practitioner about his fee.

4

Both parties agree that there was no discussion about fees at the time of the commencement of the retainer. The Practitioner contended that he had sent the Letter of Engagement at the same time as the bank documents being couriered to [overseas] but the Respondent denied having received it until a much later date, after much (if not most) of the work had been completed. The Respondent...

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