An v ZL

JurisdictionNew Zealand
Judgment Date17 February 2011
Neutral Citation[2011] NZLCRO 9
Date17 February 2011
Docket NumberLCRO 111/2010
CourtLegal Complaints Review Officer

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


CONCERNING: a determination of the Auckland Standards Committee 3


on behalf of AAK of Auckland


of Auckland


[2011] NZLCRO 9

LCRO 111/2010

Application for review under s193 Lawyers and Conveyancers Act 2006(right of review) - Standards Committee declined to uphold a complaint against respondent concerning alleged conflict of interest - applicant was brother of existing client of respondent - brother engaged respondent to act in preparing supply agreement on behalf of his company and the purchaser of the applicant's business - respondent concerned that applicant's instructions conflicted with brother's interests - whether respondent was acting for the applicant or his brother - whether fact that applicant was paying respondent's invoice meanthe was the client' whether respondent should have disclosed he was acting for the brother.


AN on behalf of AAK as the Applicant

ZL as the Respondent

The Auckland Standards Committee 3

The New Zealand Law Society


The Applicant is one of five shareholders in, and directors of, AAL (AAL).


He is also one of four shareholders in, and directors of, AAK (AAK).


The Managing Director of AAL is AO(AO) the Applicant's brother.


AO was neither a shareholder in, or director of, AAK. That company was regarded as the Applicant's company.


The other shareholders and directors of the two companies were the parents of the Applicant and AO, and their uncle. These persons did not play a large part in the management of the two companies.


The Respondent was introduced to AO some time in 2008, by the accountant for AAL. He was subsequently visited by AO who introduced himself as the Managing Director of AAL.


Up until the events giving rise to this complaint, the Respondent had only ever communicated with, and been instructed by, AO, on behalf of AAL. His client in each case had been AAL.


In January 2010, the Respondent was contacted by AO, who advised him that his brother, the Applicant, wished to sell the supermarket operated by AAK, and wanted to have a supply agreement between AAL and the purchaser put in place.


At the request of AO, the Respondent arranged for a copy of an existing supply agreement that had previously been prepared by the Respondent for AAL in respect of another outlet, to be forwarded to the Applicant.


On 18 January 2010, the Respondent received further instructions from AO as to the terms of the proposed agreement.


These amendments were made by the Respondent and emailed to AO.


On 20 January 2010, the Respondent received a telephone call from the Applicant requesting him to make some amendments to the draft agreement.


The Respondent's time sheets show further attendances on AO with regard to the proposed agreement, on 26 and 27 January.


On 27 January, AO advised the Respondent that he was going to be overseas for the next week, and instructed him to deal directly with the Applicant. He also instructed that if there were to be major changes to the document, then the costs relating to those should be borne by AAK as any attendances relating to those changes were for the benefit of AAK.


The Respondent met with the Applicant on 28 January. The business card provided by the Applicant at that meeting referred to the Applicant as a director of AAL.


At that meeting the terms of the agreement were reviewed in detail. Although the Respondent was shown a copy of the Agreement for the sale of the business, he was not provided with a copy, nor instructed to act generally in respect of the sale. He noted that another firm was recorded as being the vendor's solicitor.


The Applicant states that he was unaware of the previous communications between the Respondent and AO in respect of this matter, and that on 28 January, he met with the Respondent for the purpose of introducing himself and instructing the Respondent to act for AAK to complete the supply agreement.


He states that the Respondent was happy to assist in the matter and at no time advised the Applicant that he was actingfor AAL. He says he left the meeting under the impression that the Respondent was acting for AAK and would act in the company's best interests.


In the week that followed the Applicant requested a number of material changes to the form of the agreement, which the Respondent knew were in conflict with what was required by AO. He was concerned that concessions were being made to the form of the agreement which were not in the interests of AAL. He copied AO into the various emails between the Applicant and himself, in which he recorded his view to this effect.


AO shared the Respondent's concerns and instructed the Respondent to cease action pending his return from overseas.


The Applicant objected to the steps taken by the Respondent and insisted that the Respondent should act on his instructions.


Ultimately, the Respondent advised the Applicant that he needed an appropriate resolution to be passed by the company to authorise him to act on the instructions of the Applicant alone.


The Applicant then produced a letter signed by three directors of AAL(which did not include AO) by which the Applicant was authorised to provide instructions on behalf of AAL in respect of the proposed supply agreement.


The Respondent formed the view, that although this was not strictly in accordance with the requirements of the company's constitution, he would nevertheless proceed on this basis, but continued to keep AO advised of his instructions.


The precautionary steps taken by the Respondent in the face of the conflicting instructions from AO and the Applicant, inevitably caused some delays to the completion of the agreement, to the extent that the Applicant alleges that such delays presented the purchaser with an opportunity to terminate the agreement.


It is not evident from the material in my possession whether the agreement proceeded to settlement or was indeed terminated. Nevertheless, I do note that as at


January 2010, the agreement remained conditional on matters other than finalisation of the supply agreement.


On 28 February 2010 the Respondent rendered his account to AAK for

$6,120.00. The Applicant has requested this account to be reviewed.


The Applicant lodged his complaint with the Complaints Service of the New Zealand Law Society on 22 February 2010. The matters complained of are summarised in the submissions from the Respondent as follows:–

  • (a) The Applicant alleges that the Respondent failed to disclose that he was acting for [AAL] when undertaking work for [AAK].

  • (b) He alleges that the Respondent acted in a conflict of interest situation.

  • (c) He alleges that the conflict of interest caused delay in the finalisation of the supply agreement to the detriment of AAK.

  • (d) He alleges that the sale of the business was jeopardised by the conduct of the Respondent.

  • (e) The alleged conflict of interest resulted in additional cost to AAK.

Standards Committee Decision

In its decision of 16 June 2010, the Committee resolved, pursuant to s152(2)(c) of the Lawyers and Conveyancers Act 2006(the Act) to take no further action in connection with the complaint.


The Committee formed the view that at all times the Respondent was acting for AAL, and that consequently no conflict of interest arose.


Although there had been some delays, these were caused by the fact that the Respondent was receiving conflicting instructions from the Applicant and AO, and that the delays that did occur arose out of the need for the Respondent to satisfy himself as to what course of action he should take.


Other than the delays which arose for this reason, the Committee considered that the Applicant had acted promptly and reasonably in attempting to find a solution.


The Committee also considered that the fees charged by the Respondent were neither unfair or unreasonable.

Application for Review

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


He reiterates the argument he put before the Committee, and takes issue with the Committee's determination that the Respondent was acting for AAL. He remains of the view that the Respondent was acting for AAK


He repeats the complaint that the Respondent did not advise him that he was acting for AAL and would continue to take instructions from AO.


As a result, he asserts that the Respondent misrepresented the position to him, and has a conflict of interest in that he acted for the two companies.


The outcome of the review that he seeks, is a reduction of the fees charged by the Respondent.


In conducting this review I have considered the Standards Committee file and the correspondence and material provided by the parties to this Office.


The view was formed that the review could be carried out without an appearance from either party and each party consented to the matter proceeding on that basis pursuant to s206(2)(b) of the Act.

Who was the Respondent acting for?

Essential to this review is a determination as to who the Respondent was acting for.


The Applicant states that from his point of view the Respondent was instructed by him on behalf of AAK to complete the terms of the supply agreement and that all instructions were to come from him.


The Agreement for the sale of the business had been entered i nto by AAK on 17 December 2009.


A condition of that agreement had been inserted in handwriting and reads:

“Conditional upon the purchaser executing a...

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