Auckland Standards Committee No. 3 v Eion Malcolm James Castles

• Jurisdiction: New Zealand
• Judge: Judge D F Clarkson,Mr W Chapman,Ms C Rowe,Ms M Scholtens,Mr P Shaw
• Judgment Date: 04 November 2013
• Neutral Citation: [2013] NZLCDT 53
• Docket Number: LCDT 037/12
• Court: Lawyers and Conveyancers’ Disciplinary Tribunal
• Date: 04 November 2013

In the Matter of the Lawyers and Conveyancers Act 2006 and the Law Practitioners Act

BETWEEN

Auckland Standards Committee No. 3

and

Eion Malcolm James Castles of Auckland

Lawyer

[2013] NZLCDT 53

Court:

Judge D F Clarkson, Mr W Chapman, Ms C Rowe, Ms M Scholtens QC Mr P Shaw

LCDT 037/12

NEW ZEALAND LAWYERS AND CONVEYANCERS DISCIPLINARY TRIBUNAL

Practitioner faced charges under the Lawyers and Conveyancers Act 2006 (“LCA”) and Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 relating to allegations of gross overcharging and serious failures in professional standards — practitioner acted for client in leaky building case — client achieved a return of $665,000 but was charged over $1 million in fees — costs assessors found clients had been overcharged by $569,224 — practitioner had also charged to the client fees incurred in defending a claim for apportionment of liability after his firm was joined as a third party on a negligence claim against clients’ former solicitors — practitioner informed clients his firm's bank had requested immediate payment of outstanding invoices — charges crossed over between the Law Practitioners Act 1982, Rules of Professional Conduct for Barristers and Solicitors and LCA — whether the fees charged were so excessive they constituted gross overcharging — whether the level of fees constituted professional misconduct — whether practitioner had engaged in improper conduct by failing to advise the client the proceedings were uneconomic and by carrying out unnecessary and repetitive work — whether practitioner had engaged in unprofessional dealings and inappropriate or improper pressure on the clients.

Counsel:

Mr J Katz QC for the Standards Committee

Mr B Keene QC and Ms M Cole for the respondent

DECISION OF NEW ZEALAND LAWYERS AND CONVEYANCERS DISCIPLINARY TRIBUNAL

Introduction

1 The hearing of this matter occupied 10 days over four separate occasions. Prior to it beginning in July it had been set down on two earlier occasions and adjourned to accommodate either change of counsel by the practitioner or in another case his illness.

2 The practitioner faced eight charges one of which, Charge 4, was laid in the alternative to Charges 1, 2 and 3. The charges can be described as being in three categories. Charges 1 to 4 relate to allegations of gross overcharging, Charge 5 relates to the general conduct of the Court proceedings by the practitioner. Charges 6 to 8 allege serious failures in professional standards.

3 The Charges also cross over the periods between the legislation previously in force in relation to the regulation of legal practitioners, and the current legislation. Charges 1 to 6 relate to conduct prior to August 2008 therefore, pursuant to the transitional provisions of the Lawyers and Conveyancers Act 2006 (“ LCA”), (s 351) must amount to conduct which could have been subject to disciplinary action under the Law Practitioners Act 1982 (“ LPA”). Charges 7 and 8 relate to events after 1 August 2008 and thus will be determined under the LCA.

4 The Charges and Particulars are attached in full as Appendix I to this decision.

Background

5 The complainants, Mr and Mrs W, had purchased a home which turned out to be a leaky building. They issued proceedings in the High Court in an attempt to recover the losses which they had suffered as a result of the remedial work and other related heads of damages. The total figure claimed was $318,890.

6 At the time they were represented by McMahon Butterworth and subsequently, when he left that firm, by Mr Thornton. Unfortunately the proceedings were issued in the W's names personally as plaintiffs. This overlooked the fact that Mr and Mrs W had transferred their interest in their home to their family trust some years earlier. The proceedings ought properly to have been issued in the name of the trustees, (then being Mr and Mrs W and Mr B) as owners. When this error was pointed out by counsel for one of the multiple defendants, Mr Thornton very promptly and properly brought it to the attention of the W's and told them that he could no longer act for them and that they ought to seek further legal advice.

7 The serious feature of this error resided in the fact that it could not be easily remedied because in the meantime the limitation period for the bringing of such proceedings had expired, and thus the proceedings were fatally flawed. It was too late for fresh proceedings to be issued.

8 Not surprisingly Mr and Mrs W were distressed to learn this news because they had for almost two years been pursuing these proceedings and of course at the same time enduring the unpleasant experience of the remedial work to their home. Mr W spoke with a golfing companion of his, Mr Castles, whom he knew to be an experienced lawyer. Our impression is that initially Mr W was simply asking for advice about a referral or how best to handle the situation. Mr Castles immediately responded by telling Mr W to put all his files into his car and bring them to his home that evening. On the very next day, 17 November 2005, Mr and Mrs W met with Mr Castles at his office to speak with him about the possible options which they faced. The flawed proceedings have been referred to as the Shoreham proceedings and these proceedings were taken over by Mr Castles on the basis of some urgency because there was a scheduled judicial settlement conference on 22 November.

9 Mr and Mrs W's recollection of the meeting was that Mr Castles expressed the preliminary view that the defendants, in advancing the wrong plaintiff issue, were probably on very strong ground and the Shoreham proceedings were unlikely to be saved. However he did offer them the hope that because of that, there appeared to have been a clear case of negligence on the part of their former solicitors so that the W's would be able to recover their losses in a claim against them.

10 There is no file note of this meeting, despite the fact that at almost every other point Mr Castles appears to be an extremely conscientious note taker. Thus the first record of advice given to the W's appears in a letter to them of 6 December 2005, accompanying the first invoices. There is a dispute in the evidence between the W's as to what they were told at that meeting and Mr Castles. He says they were told that they would be charged on the basis of the time expended on their behalf, at particular hourly rates and that he went on to indicate that there was no real means of estimating costs. He says he explained the litigation risk. The W's do not recall any discussion about fees at this meeting.

11 In the first of two letters to the W's of 6 December, Mr Castles reported on progress to date in the Shoreham proceedings, noting the instructions were urgent and involved “urgent and extensive attendances”. He advised that the bill of costs had been rendered on a time and attendance basis, reflecting time expended of 62.2 hours for Mr Castles, 26.4 hours by Mr Tapsell and 12.1 hours by Ms Tracy. The letter enclosed the bill of costs for November attendances. A similar letter was sent to the W's as trustees in relation to proposed proceedings by the trust against McMahon Butterworth for loss of opportunity to claim damages against the responsible parties in relation to the leaky home (the M proceedings). That bill was also said to be rendered on a time and attendance basis, taking account of 14.5 hours for Mr Castles and 3.8 hours for Tapsell.

12 As can be seen, Mr Castles and Mr Tapsell (who was an employee, and then a partner in the firm of Jamieson Castles) put a considerable amount of work into preparing for the settlement conference and researching the issue of whether the claim could be salvaged. One focus of their research was to establish whether the Court was likely to accept the wrongly named plaintiffs was merely a misnomer rather than a misdescription. This issue was one which had been previously researched by Mr Tapsell and he immediately knew that there was a recent case ( Farr v Shrimski 1) on the very point. Another was amending the claim to plead a transferred loss to the W's. At the same time Mr Castles promptly wrote to the previous solicitors, McMahon Butterworth to put them on notice that the W's would be claiming against them in negligence for the wrongly issued proceedings. Properly Mr Castles invited

them to contact their indemnifier and he expected that he would hear from the solicitor for the indemnifier fairly quickly

13 Mr Thornton had already prepared the file for the judicial settlement conference in a manner which Mr Tapsell described in his evidence as “meticulous”.

14 In the event because the defendants advanced the view that the proceedings were fatally flawed by the wrongly named plaintiffs, the judicial settlement conference did not proceed as such and further directions were simply made by consent. One of these directions was for a fifth amended statement of claim to be filed prior to Christmas. The preparation of this document came to be one of the more contentious pieces of evidence before us.

15 While McMahon Butterworth replied, indicating that they had referred the matter to their indemnifiers, solicitor for the indemnifiers Mr R, did not make contact until February 2006. When contact was made it was to deny liability. One of the bases on which liability was denied was that the defect in the proceedings could be cured by either amendment or by persuading the Court that the W's had issued their proceedings in their role as trustees rather than in their personal capacity. In relation to this latter approach, Mr Castles quite properly took the view that to do such would be tantamount to encouraging the W's to give false evidence and thus was not a viable approach.

16 However, somewhat confusingly Mr Castles also made an application to amend the Shoreham proceedings to add a third plaintiff who was...