[2011] NZLCRO 4

LCRO 134/2010

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


Concerning a determination of the Auckland Standards Committee 2

Mr AJ of Auckland
Ms ZQ of Australia

Mr AJ as the Applicant

Ms ZQ as the Respondent

The Auckland Standards Committee 2

The New Zealand Law Society

Application for review of Standards Committee decision finding applicant's conduct constituted unsatisfactory conduct (s12(a) Lawyers and Conveyancers Act 2008 (unsatisfactory conduct defined in relation to lawyers)) — applicant acted for brother and sister (who was the respondent) in connection with the sale of a property, of which the brother and sister were tenants in common — applicant had previously been acquainted with the brother — applicant retained funds post settlement due to a dispute over an amount the brother claimed his sister owed him — respondent complained to NZLS that applicant's friendship with her brother led to the retaining of funds — whether the applicant had acted appropriately in regards to the sale of property and subsequent retention of funds.

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


At the beginning of July 2009, the Applicant was instructed by Mr VC to act for VC and his sister (the Respondent) in connection with the sale of a property in B, Auckland.


The property was owned by the Respondent as to two-thirds, and VC as to one-third, as tenants in common. The background as to how the property came to be owned by them in this manner does have some relevance in explaining the differences between the Respondent and VC, but has no relevance to the complaint or this review.


The Applicant practised in P between 1974 and 1986, and became acquainted with VC during that time. However, as described by the Applicant at the hearing, their acquaintance could not be termed a “friendship”.


The Applicant cannot recall whether he acted for VC during the time he was in P.


He also disputes the statements attributed to him by the Respondent as to the extent of the friendship between VC and himself, that she says were made by him in the initial telephone conversation between them,


Inasmuch as it is necessary to do so, I accept the Applicant's portrayal of this relationship. In any event, whatever the extent of the relationship between him and VC was, his obligation to act for both VC and the Respondent impartially did not change.


The Applicant was alerted at some stage to the fact that VC claimed money which was owed to him by the Respondent, as well as the fact that VC had made payments to clear rates arrears on the property.


The Respondent alleges that these sums were referred to in the initial telephone conversation that she had with the Applicant concerning the sale. She alleges that she made it clear at that time that she disputed that she owed anything at all to her brother. Whether or not the claim by VC, and the denial of liability by the Respondent, was known and referred to at those initial stages, remains in dispute.


What is not in dispute, however, is that the Applicant sought instructions from both parties formally in writing on at least four occasions – 31 July, 18 August, 24 August, and 26 August. In each case, the Applicant referred to the disputed amount and sought instructions from both parties as to the disbursement of the sale proceeds.


These requests were sent to the Respondent by email, as directed by her. The Respondent was only able to access these emails when she visited an internet cafe. She did not at any time respond in writing, whether by email or otherwise. However, the Respondent states that she contacted the Applicant by way of telephone on numerous occasions, and advised him that she disputed that she owed anything to VC. The Applicant disputes this assertion.


By 10 September, the day before settlement, the Respondent had not returned the Authority and Instruction form (A & I) nor, as far as the Applicant was concerned, provided instructions to enable him to settle with the purchaser.


The instructions from VC as understood by the Applicant, were that he was not to use the A & I unless sufficient funds to pay the disputed amount were retained by the Applicant in his firm's trust account.


On the day of settlement, namely 11 September, the Applicant requested Ms W, a senior solicitor in his office, to communicate with the Respondent to endeavour to get instructions. There was some disagreement between the parties as to the sequence of events, and who telephoned who, but as a result of a telephone conversation between Ms W and the Respondent, during which time the Applicant was in the room, Ms W and the Applicant formed the view that the Respondent had instructed them to settle knowing that they had instructions from VC to retain the disputed amounts.


Settlement took place, as required, on 11 September 2009.


The Applicant then prepared statements recording the various receipts and payments, and also recording the retentions to be made, and again sought instructions from the parties as to the disbursement of the funds.


The Respondent objected to the retentions and asserted her right to be paid two-thirds of the net sale proceeds. This objection was formally provided in writing by her by letter dated 11 September. It is not clear how that letter was forwarded to the Applicant, but in subsequent correspondence he refers to receiving “her letter dated 11 September” by which I take it that it was forwarded by way of post.

The complaint

On 11 November 2009, the Respondent complained to the New Zealand Law Society. In her letter of complaint, she advised that she considered that the Applicant had been influenced by his friendship with VC, and had retained funds from her share of the sale proceeds on instructions from him.


There is also reference by her to the fees charged by the Applicant in connection with the sale, but her complaint essentially in this regard relates to the fact that he retained the sum of $5,000 against potential costs that may be incurred by his firm (WM) to subsequently resolve the matter.


The Respondent also complained that the Applicant had charged for attendances in connection with the dispute, which she states should not be her cost.

The Standards Committee's decision

The Standards Committee issued its decision on 23 June 2010.


The Committee found that the Applicant's conduct constituted unsatisfactory conduct as defined in Section 12(a) of the Lawyers and Conveyancers Act 2006 (“the Act”).


Following that finding, the Standards Committee made the following orders:-

    That [the Applicant] rectify his errors pursuant to Section 156(1)(h) of the Act by: (a) Refunding [the Respondent] the sum of $32,248.56 currently held in his Trust Account; (b) Releasing the $5,000 retained on account of future costs to the parties in accordance with their respective shares in the property. 2. That [the Applicant] cancel all fees charged by WM after the date of settlement pursuant to Section 156(1)(f) of the Act; 3. That [the Applicant] pay costs of $750 to the New Zealand Law Society pursuant to Section 156(1)(n) of the Act.
The application for review

The Applicant has applied for a review of the Standards Committee decision.


He submits that the decision is incorrect for the following reasons:-

    The Committee has erred in viewing the sale process as if it was two separate transactions producing separate sums of money available for independent distribution. 2. The Committee has erred in its finding that [he] accepted VC's instructions. 3. The Committee has erred in its assumption that he knew the disputed amount did not relate to the property at the time he received VC's instructions. 4. The Committee has had no regard to the evidence before it relating to the changed instructions given to him by the Respondent on 11 September 2009. 5. The Committee has erred in failing to have regard to the commercial factors that influenced the Respondent in her decisions. 6. The Committee has erred in ignoring the importance of the delay in the Respondent communicating her concerns to him.

In addition, in a subsequent letter of 7 October 2010, the Applicant raises the issue of the standard of proof. He notes that the determination of the complaint required the Committee to decide whether it preferred the evidence of the Respondent, or his evidence in relation to the interests of the decisions made.


He notes that the Committee is bound by the provisions of the Lawyers and Conveyancers Act 2006 which requires the Committee to apply the rules of natural justice (section 142), and the conventional rules of the Court (section 151).

The standard of proof

The Applicant submits that the Committee should require factual matters to be proven to a standard...

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