AQ v ZI
 NZLCRO 15
CONCERNING an application for review pursuant to Section 193 of the Lawyers and Conveyancers Act 2006
CONCERNING a determination of the Auckland Standards Committee Number 2
AQ as the Applicant
ZI as the Respondent
ZH as an Interested Party
The Auckland Standards Committee Number 2
The New Zealand Law Society
Application for review of Standards Committee decision declining to take further action in respect of applicant's complaint regarding fees billed — law firm instructed for Family Protection Act claim — invoiced on a monthly basis — costs exceeded estimate provided — practitioner delayed providing an estimate of remaining costs when requested under Rule 9.4 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 — whether practitioner engaged in unsatisfactory conduct and if so whether final bill should be reduced.
Held: It was apparent from the time sheets (which had not been available to AQ) that there had not been any duplication of time; it was merely a mistake in the narration of the bills. It had been unnecessary the practitioner to attend the settlement conference as a more junior lawyer had attended and the practitioner had made little contribution. However the final bill had been discounted, partly in acknowledgement that her attendance had not been entirely beneficial to AQ.
Rule 9.4 did not include the word “promptly” with regard to the request for an estimate, but when considered in conjunction with Rule 7.2 (“a lawyer must promptly answer requests for information”), it was clear that such a request must be responded to in a timely manner. Although an estimate was not a quote, lawyers had an obligation to be careful when providing estimates. Rule 9.4 did impose an obligation that a lawyer must inform a client promptly if it became apparent that the fee estimate was likely to be exceeded. There had not been any note taken of the estimate when the final account had been rendered, nor had AQ been informed at any time that the costs were going to exceed the estimate. The practitioner had breached Rule 9.4 by failing to provide an estimate of costs when requested and failing to advise AQ that the estimate would be exceeded.
A breach of the Client Care Rules automatically resulted in a finding of unsatisfactory conduct pursuant to s12 Lawyers and Conveyancers Act 2006 (unsatisfactory conduct). The matter was one of strict liability; there was no mental element required. The practitioner's explanation of simply and mistakenly overlooking the emails requesting the estimates was of little or no relevance. However the mental element was relevant to the question of penalty. The facts highlighted the importance of the need to pay close attention to the provisions of Rule 9.4. If there had been no findings of a breach of that Rule, there would have been no opportunity or reason to consider orders pursuant to section 156(1) of the Act. Without such breach, it was unlikely that there would have been a finding of unsatisfactory conduct. The issue may not have arisen at all, as there would have been a discussion between the parties at an early stage with regard to fees, in which the way forward would have been agreed after due consideration of the impact of the costs to be incurred.
The consequence of providing a wrong work in progress figure fell on the firm, which should have had this figure readily available to give to AQ. This resulted in an automatic deduction of $3,500. A 20% variation of the estimate was reasonable. AQ's final bill was reduced to $16,500 + GST.
The breach of Rule 9.4 had been unintentional so there was no order for costs for the Standards Committee costs. This was not to be considered to set a precedent for the Standards Committees in future. Costs of $1,200 were appropriate for the review.
In July 2008, the firm of AAM (AAM) was instructed by the Applicant on behalf of himself, one of his sisters, and the husband and family of a deceased sister, in connection with a family protection claim against his late father's estate.
The file was assigned to the Respondent, a senior solicitor in the firm, with Mr ZH (ZH) as her supervising partner.
As required by the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (Client Care Rules), AAM provided certain information relating to its services to the Applicant at the commencement of its retainer, including its terms of engagement. Included in these was the firm's billing policy, which was to send monthly accounts on an interim basis where there was an ongoing matter.
Bills were sent regularly and paid by the Applicant as the matter progressed, and the Applicant has no issue with bills rendered up to 22 October 2008.
However, by that time, even with a considerable “discount” on the time recorded, the Applicant and other members of the family whom he represented, were becoming concerned that the costs incurred were going to exceed the anticipated overall costs of $50,000.00.
In addition, the Applicant noted inconsistencies in subsequent bills received by him in January and March 2009.
On 2 April 2009, the Applicant made his concerns about these inconsistencies known to the Respondent, and also requested an indication of all possible costs from that point onwards.
On 3 May 2009, he sent a follow-up email requesting a response to his request.
Having received no response to either of these emails, he then sent an email to ZH on 19 May 2009 in which he requested a response to his emails, and withdrew his credit card authorisation for payment of accounts until the matters were satisfactory addressed.
This produced a response from ZH on 25 May 2009 in which he enclosed a detailed estimate of costs to conclude the matter, together with advice as to the best way forward.
The matter proceeded from there to a Judicial Settlement Conference (JSC) on 26 August 2009, at which a settlement was reached.
After the letter from ZH on 25 May 2009, the Applicant had received one bill for
$3,744.00 on 23 July 2009, and following settlement, a final bill on 9 December 2009. On receipt of this final bill, the Applicant raised the various issues relating to costs that are the subject matter of his complaint and this review.
As part of an attempt to resolve the matter, AAM agreed to reduce its bill from
$20,000.00 to $17,800.00 plus GST plus disbursements.
The Applicant remained dissatisfied with the explanations provided by the Respondent to his queries and lodged a complaint with the Complaints Service of the New Zealand Law Society on 18 February 2010.
The matters raised with the Complaints Service were the matters that had previously been raised with the Respondent and AAM and related to:
• The inconsistencies in the bills of account including apparent duplication of time records,
• The cost overrun,
• The costs incurred in having two lawyers from AAM attend the JSC.
The Standards Committee proceeded with a consideration of the matters raised but did not appoint a Costs Assessor to consider the overall fees charged by AAM.
It issued its decision on 21 May 2010 in which it advised that following a consideration of the matter, no further action was to be taken in respect of the complaint.
This decision was issued pursuant to section 138(2) of the Lawyers and Conveyancers Act 2006 (the Act) which provides the Standards Committee with a discretion not to take any further action on a complaint if it appears to the Committee that, having regard to all of the circumstances of the case, any further action is unnecessary or inappropriate.
This decision was arrived at on the basis that the Committee accepted the explanations from the Respondent and noted in particular, that practitioners did not only charge fees based on a time in attendance, but were entitled to take into account all factors as set out in Rule 9.1 of the Client Care Rules. These factors were listed in the Standards Committee's decision.
The Committee also noted that some confusion appeared to have arisen over amounts discussed between AAM and the Applicant in that AAM referred to GST exclusive figures, whereas the Applicant thought they were GST inclusive figures.
The Committee also noted the apology from the Respondent for any distress her mistake may have caused the Applicant when she had simply and mistakenly failed to note his incoming emails requesting an estimate of the costs to conclude the matter.
The Applicant has applied for a review of the Standards Committee's decision.
He considers that the Standards Committee appears to have accepted nearly all of the statements from the Respondent on face value without question.
He also expresses concern as to the Committee's acceptance of the Respondent's explanation for not replying to his request for an estimate and refers to the...
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