AJ v BJ
| Jurisdiction | New Zealand |
| Judgment Date | 18 July 2013 |
| Neutral Citation | [2013] NZLCRO 36 |
| Date | 18 July 2013 |
| Docket Number | LCRO 258/2011 |
| 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
[2013] NZLCRO 36
LCRO 258/2011
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.
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
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.
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.
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.
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 was thus unaware of the Practitioner's hourly charge out rate of $400.
The complaint arose because the Respondent had budgeted a sum of between $2,000 and $3,000 for the legal work. It was said for the Respondent that the enquiries he made (from family, friends and other people around his neighbourhood) indicated that the legal costs for the work should be in the order of $500 to $1,200 and the Respondent had assumed that the budgeted amount should be enough to cover the Practitioner's fees.
The Practitioner charged a fee of $8,400 plus GST and disbursements, calculated on the basis of 21 hours at an hourly rate of $400. The Letter of Engagement had indicated that the work would be undertaken by both the Practitioner and a Legal Executive (whose rate was not mentioned). The Practitioner had not, however, kept any time records, but his final invoice has calculated the fee on the basis of 21 hours, based only on the Practitioner's time.
The Respondent queried the invoice. In the course of discussion the Practitioner offered to reduce the fee by $1,500 but this was rejected by the Respondent. Thereafter a formal complaint was made to the New Zealand Law Society.
The complaint was essentially about the quantum of fees, with a related complaint that the Respondent had not been informed of the likely cost of the legal services. The Respondent also questioned whether the Practitioner had personally spent 21 hours on the file, having also noted that all work had been charged at the Practitioner's rate, and none of the work had been charged at the rate for the Legal Executive.
The Committee mainly focused on the Practitioner's obligation to provide a Letter of Engagement prior to work being undertaken, and the basis upon which fees were charged in the absence of any time records. The Committee concluded that the Practitioner had failed to comply with his obligations under Rule 3, which sets out the extent of information that must be given to the client in advance of services being provided, and also provides for further information to be given to a client when there are any changes in the work as originally anticipated. Having concluded that there had been a breach of Rules 3.4, 3.5, and 3.6 1 the Committee found the Practitioner guilty of unsatisfactory conduct as defined in s 12(a) of the Lawyers and Conveyancers Act 2006 (the Act).
The Committee also found that the Practitioner had breached Rule 7 and 7.1. The obligations covered by Rule 7 requires a lawyer to disclose to a client all information that the lawyer acquires and which is relevant to the retainer, and also to take all reasonable steps to ensure that a client understands the nature of the retainer and is kept informed of progress. The Committee's decision was based on the view that the Practitioner had failed to inform the client of the extent of the bank documentation that the instruction had generated. The Committee noted that the Practitioner appeared to have recognised his obligation to inform the client about the extensive nature of the work but had made a deliberate decision not to inform the client because he did not want to jeopardise the transaction. The Committee was critical of the Practitioner's approach to his obligation to keep the client informed.
The Standards Committee also regarded the Practitioner's fee as being “excessive given the value of the nature of the instructions.” 2 The Committee had appointed a Costs Assessor who, after examining the Practitioner's files, concluded the fee of $8,400 was fair and reasonable. However, the Committee cast doubt on the Practitioner's explanations concerning the fee. Despite making no disciplinary finding, the Committee reduced the fee to $6000.
The Practitioner was censured, and ordered to pay a fine of $750 and costs of $500 to the New Zealand Law Society.
The Practitioner sought a review of the Committee's decision, his main reason being his concern about the Committee's adverse findings against him in relation to his credibility. He wrote that the Committee had not heard from him personally before reaching its conclusions, which he viewed as a breach of natural justice. He contended that the Committee had made significant errors of both law and fact, resulting in a determination that was untenable as a matter of law.
The Practitioner wrote that he had provided a full explanation to the Committee to specific questions that had been asked of him, and that the Committee had not addressed any part of the evidence he had provided. In particular, he contended that the Committee ought to have taken into account his explanation that he, and not his Legal Executive, had done the (charged) work on the file. He also noted the Committee's reliance on advice from the [bank] that documentation was “nothing out of the ordinary” for transactions of this type, and submitted that the Costs Assessor's report had not been appropriately assessed by the Committee.
With regard to the Committee's findings in relation to the timing of the Letter of Engagement, the Practitioner questioned whether the Committee had erroneously interpreted the meaning of “in advance”, 3 as he could not have provided costs information until he knew the nature and extent of the work involved.
The Practitioner further stated that the Committee had also failed to provide reasons for the penalties that were imposed. The outcome sought was removal of the findings of unsatisfactory conduct and the penalties.
On the matter of the Committee having reduced his fee, the Practitioner confirmed that the Respondent had in fact paid the lower fee, adding that although he did not resile from the view that the fee was fair and reasonable, commercial reality dictated that no further time or resources ought to be spent on that matter.
A review hearing was held on 23 August 2012, attended by the Practitioner and by the Respondent. I explained to the parties that the review process offered the opportunity for all aspects of the complaint to be revisited, and that any perceived procedural defects by the Standards Committee could be cured on review. It was particularly explained that the review process is not confined only to matters raised by the review applicant, but that the LCRO has the power, and indeed the responsibility, to review the manner in which the Standards Committee dealt with the complaint.
Although the Practitioner's concerns mainly relate to the Standards Committee's comments about his credibility (which he took as questioning his honesty), I have not confined this review to only those matters and have considered more widely the manner in which the Standards Committee dealt with the complaint.
The Practitioner was found guilty of unsatisfactory conduct by reason of a breach of Rules 3.4, 3.5 and 3.6 of the Conduct and Client Care Rules 2008 (RCCC). Together these rules require that lawyers provide clients with Terms of Engagement in advance of any work being undertaken, which must include information about the principle aspects of the service to be provided, the nature of the work, and the basis upon which fees will be...
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