Auckland Standards Committee No. 3 v Eion Malcolm James Castles
 NZLCDT 53
NEW ZEALAND LAWYERS AND CONVEYANCERS DISCIPLINARY TRIBUNAL
Judge D F Clarkson, Mr W Chapman, Ms C Rowe, Ms M Scholtens QC Mr P Shaw
In the Matter of the Lawyers and Conveyancers Act 2006 and the Law Practitioners Act
Mr J Katz QC for the Standards Committee
Mr B Keene QC and Ms M Cole for the respondent
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.
The issues were: whether there had been gross overcharging; whether the level of charging represented professional misconduct; whether C had engaged in improper conduct by failing to advise the client the proceedings were uneconomic and by carrying out unnecessary and repetitive work, whether C had engaged in unprofessional dealings and inappropriate or improper pressure on the W's; whether C had breached r1.01 Rules of Professional Conduct for Barristers and Solicitors (“Rules of Professional Conduct”) (obligations of trust and confidence); whether C had breached r1.06 Rules of Professional Conduct (the practitioner failed to act as an independent adviser in the client's best interests) in using the firm's overdraft facilities for the benefit of the client; and whether meeting with Mrs W's brother-in-law to secure funding was a breach of privilege.
Held: Under the LPA 1982 the threshold for disciplinary intervention was relatively high. “Misconduct” would require the overcharging to be reprehensible, disgraceful, deplorable or repugnant in the eyes of a fair and reasonably minded lawyer.
Each invoice stated the total time recorded at a higher amount than the fee charged — for example, “total time recorded, $14,406, our fee $11,500.” To the client that would have appeared to represent a discount of almost $3,000 in the amount charged to them. However when the non-chargeable time was taken account of the discount appeared to be closer to $400. That pattern was repeated throughout the invoicing to the W's. To represent it as part of a discount offered to them was utterly misleading.
There was no magic in the “fair and reasonable fee” approach — there were no fixed or immutable rules. It was no more than the view of a reasonable competent practitioner as to what in all the circumstances would be fair and reasonable. Time records should only be used as a guide to ascertaining a proper fee. It would be wrong to apply a rigid policy of time costing ( & ).
Time recording had to pay regard to ( :
1. the value of the task done and to the steps available to achieve the task in a reasonably economical fashion;
2. attempts to manage the costs, and failure to manage the costs;
3. the importance of not exploiting the client, and in particular the need to assist the client to ensure that funds remain for the ultimate defence campaign;
While there was authority for the proposition that it was not necessary to fix a fair and reasonable fee before determining whether there has been grossly excessive charging, it was a useful starting point. There was reliable evidence to support a proper fee in the region of $462,000 all inclusive. Grossly excessive overcharging had been made out.
There was little if any regard to the other factors relevant to charging, as set out in r3.01 Rules of Professional Conduct (practitioner shall charge a client no more than a fee which is fair and reasonable for the work done, having regard to the interests of both client and practitioner.) Furthermore, it seemed every person in the firm was charged for, even to the extent that clerical services appeared to be charged and a regular, but random “bureau” fee imposed, which overall amounted to some hundreds of dollars.
Charging for the third party proceedings against C's firm, Jamieson Castles, notwithstanding that it might have been recovered as part of the settlement, was an aggravating feature. Had C simply notified his indemnifiers, there would have been no question of those costs being met by the W's.
Misconduct had been made out. The level of charging was not only unjustifiable by any standards, the effect of the charging on the clients rendering them virtually destitute, even after the full proceeds of their claims were paid, was also be relevant.
The poor conduct of the proceedings was demonstrated by:
• the failure to abandon the Shoreham proceedings, or at least do minimal work until the strike-out was tested;
• 70.9 hours (almost two weeks) were spent drafting a fifth statement of claim of which only one third was different from the fourth statement of claim. C's hourly rate ($350 to $390) carried with it an expectation of a reasonably competent and experienced litigator who could draft documents efficiently and promptly. The expenditure of time was completely unacceptable;
• C failed to stand up to opposing counsel and therefore incurred enormous additional costs;
• in relation to the third party proceedings, there had been a clear conflict of interest which was not handled adequately by C;
• C failed to advise the new trustee of the W's Trust of his potential liability;
• the costs proceedings were brought as a summary judgment application which was wasteful. Further, it was wasteful researching (and charging for this research) bringing the lost opportunity proceeding as a summary judgment claim, was as it was never an option.
C was guilty of negligence or incompetence in his professional capacity, and the negligence or incompetence had been of such a degree or so frequent as to reflect on his fitness to practice as a barrister and solicitor or so as to tend to bring the profession into disrepute.
C had been well aware of the W's financial predicament, and of the W's continuing endeavours to meet their liabilities. There had been no “demand” by the bank that the W's pay outstanding fees immediately. The email sent to them misrepresented the position. C was expected to work with the client to first, and clearly set out preferably agreed terms for both charging and payment (which might have included deferral of some payments until conclusion of the matter, or possibly a conditional fee agreement) in the event that the W's were unable to comply, then to assist them in transitioning to alternative arrangements. Those were the sort of obligations now spelt out in Chapter 4 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (“CCC Rules”) (duties in respect of third parties).
Most relevantly, the W's eligibility for legal aid should have been discussed. C was not a legal aid provider and had waited an unacceptable amount of time to raise the subject. Moreover, if it was C's intention to use the firm's overdraft facility as a form of litigation funding, at a cost to the firm, and therefore implicitly at a cost to the clients, C did not make that clear to the W's.
C had not complied with r1.06 Rules of Professional Conduct requiring a practitioner who advised a client on borrowing to act as an independent adviser, in the client's best interests. There was no evidence to show that the W's understood and agreed to the alleged arrangement.
However C's conduct in this instance was not a serious failure of his professional obligations sufficient to warrant a finding of professional misconduct. The amount owed was very significant. It was possible the firm's overdraft position was affected. Nevertheless the email misrepresented the position to the W's and as such was unacceptable when measured against the standards of competent, ethical and responsible practitioners.
Accordingly the lesser charge of conduct unbecoming was proved
C's meeting with Mrs W's brother-in-law had been arranged and took place without the W's instructions or consent. The unauthorised disclosure of personal and sensitive information was more likely than not to have been part of C's attempt to persuade him to extend his loan to the W's, in circumstances where C was likely to benefit. C was guilty of misconduct.
C had applied inappropriate pressure on Mrs W's brother-in-law, more likely than not to obtain further funding for his legal fees. This was in breach of r10 (Respect and courtesy) and r12 CCC Rules (Third parties) and not in...
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