Bab v Mr Pw


[2012] NZLCRO 68

LCRO 4/2011

Concerning an application for review pursuant to section 193 of the Lawyers and Conveyancers Act 2006


Concerning a determination of Waikato Bay of Plenty Standards Committee


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


BAB has lodged an application for review of a determination by Waikato Bay of Plenty Standards Committee to take no further action in respect of a complaint against Mr PW for registering a caveat in breach of Rule 2.3 of the Conduct and Client Care Rules. 1


On 20 August 2009 Mr PW received instructions from Mr PV to register a caveat against a farm property in [location]. Mr PW had not previously acted for Mr PV, who had until then been represented by BAD in [location].


He advised Mr PW that the property was about to be sold to a third party but was adamant that he had an interest in the property by virtue of the terms of his late

mother's will.

On 21 August 2009 BAD sent by fax to Mr PW a copy of the will of Mr PV's late mother on which it was noted in handwriting that Mrs PR had died in July 2007. In addition, BAD forwarded to Mr PW a copy of an Agreement for Sale and Purchase of the property to Mr PV and his partner dated 19 June 2009. That Agreement contained the following clause:–

The purchaser agrees that if the agreement is not declared unconditional by 10th July 2009 the vendor is free to place the property for sale on the open market.


Clause 5 of Mrs PR's will provided as follows:Without imposing any trust or binding obligation on my trustee, I suggest that in carrying out the trusts and directions of my will my trustees:

(c) transfer to my son PV, subject to sub clauses (a) and (b) above, all my interest in the [location] farm property (excluding the separate title comprising the BAF).


It would seem that search copies of the titles to the property in [location] were faxed to Mr PW by BAD at the same time. Those titles recorded that the registered proprietors of the properties were BAC and Mr PT as to a 1/2 share as executors and Mr PT and PS as to a 1/2 share as executors. The searches also recorded a caveat registered by BAB on 28 July 2009.


Mr PW prepared a caveat which recorded the interest claimed by Mr PV in the following terms: -

As capital beneficiary of trusts created pursuant to the wills of Mr PR and Mrs PR respectively dated 2 September 1978 and 8 September 1998 with the registered proprietors BAC and Mr PT ( 1/2 share) and Mr PT and PS ( 1/2 share) being the respective executors of the said wills.


The caveat and relevant A&I form were signed by Mr PV on 24 August and the caveat was lodged for registration.


Although it seems from Mr PW's file notes that his client was aware that settlement of the sale was due to take place on Wednesday 26 August he did not directly advise the solicitors acting for the estate (BAE) that the caveat had been lodged. He nevertheless included the firm's name as the address for service of the registered proprietors. He also assumed that the purchaser's solicitor (Mr OD) would obtain a guaranteed search of the title immediately prior to settlement and note the existence of the caveat.


It became apparent that the solicitor for the purchaser did not note that a caveat had been lodged and proceeded to settle. Registration of the transfer was however prevented by the caveat and BAE undertook to hold the proceeds of sale until the issue of the caveat could be resolved.


On 1 September 2009 Mr PW wrote to Mr OD advising that the caveat had been lodged and that he acted for Mr PV. He enquired as to the basis for the assertion by the purchaser to Mr PV that settlement had occurred.


On 4 September, Mr PW received correspondence from BAE challenging Mr PV's claimed interest in the property and taking issue with the description of Mr PV in the caveat as a capital beneficiary.


Mr PW responded to BAE on 7 September noting “that due process provides ample opportunity for legal review.” On the same day he forwarded a copy of his file to Mr PU whom he had telephoned earlier and sought advice as to the sustainability of the caveat, anticipating that BAE would lodge a notice to lapse the caveat pursuant to the provisions of the Land Transfer Act.


The Notice to Lapse was issued by LINZ on 15 September and received by Mr PW on 16 September. The notice provided that the caveat would lapse unless notice was received within 14 days that an application to prevent it lapsing had been made to the relevant Court.


On 18 September Mr OD sent a letter to Mr PW by way of facsimile. He referred to research carried out by him and noted that he could not find any authority to support the lodgement of a caveat by a residuary beneficiary. He put Mr PW on notice that his client would be seeking costs against Mr PW personally and his client.


On 25 September Mr PU provided his formal opinion to Mr PW. In that letter he advised that “[s]imply put Mr PV does not have a legal interest in the land owned by the estate. His legal interest is in the nominated share of the residue of the estate. In the absence of any direct interest in the land owned by the estate he has no caveatable interest.”


From a file note made by Mr PW, it would appear that Mr PV still wished to advance his claim in the Courts but Mr PU was unwilling to do so. Consequently, the caveat lapsed and the transfer to the purchaser, BAB, was registered.


Possession of the property continued to be interfered with by Mr PV resulting in Mr PV being served with a Trespass Notice. On 11 December 2009 Mr OD wrote to Mr PW and sought compensation on his client's behalf from Mr PW and Mr PV and referred to a possible complaint to the New Zealand Law Society. Mr PW declined to enter into any discussions with regard to compensation and a complaint was lodged on 1 April 2010 by Mr OD on his client's behalf.


The outcome sought in the complaint was reimbursement of legal expenses incurred by BAB being: -

Counsel costs -$4,655.25 (GST inclusive); and

Costs to the date of lodging the complaint incurred with Mr OD being$13,065.00 (GST inclusive).

The company also sought maximum compensation but no details of the losses were provided.


As noted in the introduction to this decision, the Standards Committee determined to take no further action in respect of the complaint and BAB has applied for a review of that determination.

The review

The application for review was lodged on 5 January 2011. BAB was not satisfied that Mr PW had exercised proper care in coming to a decision to lodge the caveat and noted that he had not provided any explanation as to what steps he took in this regard. Overall, the company considered that the Committee's response to the complaint was perfunctory.


After conducting a preliminary review of the file, I determined that the review could be completed on the material available to me on the file and in a letter dated 23 May 2011 sought consent from the parties pursuant to section 206(2)(b) of the Lawyers and Conveyancers Act 2006 for the review to be conducted on the papers.


Mr PW consented promptly and consent from Mr OD on behalf of BAB was received on 30 March 2012.


I then commenced a detailed consideration of the file as a result of which I determined that further inquiry was necessary.


On 17 May 2012 I wrote to Mr PW and requested answers to a number of queries. On receipt of his response, it was apparent that the review would be best completed by way of a hearing with both parties.


That hearing took place in Rotorua on 20 July 2012 attended by Mr OD accompanied by Mr BAB, and Mr PW accompanied by Mr PU.

The issue

The issue to be addressed in this review is whether, in lodging the caveat, Mr PW had breached the provisions of Rule 2.3 of the Conduct and Client Care Rules. That Rule provides as follows: -

A lawyer must use legal processes only for proper purposes. A lawyer must not use or knowingly assist in using, the law or legal processes for the purpose of causing unnecessary embarrassment, distress, or inconvenience to another person's reputation, interest, or occupation.


The commentary to this Rule notes that “registration of a caveat on a title to land knowing that (or failing to inquire whether) there is a caveatable interest on the part of the client to be protected-will constitute a breach of the Rule. The commentary should of course refer to registering a caveat on a title to land knowing that there is no caveatable interest to be protected.


The combined effect of the Rule and the commentary is that a solicitor must not lodge a caveat knowing that there is no caveatable interest, or fail to make inquiries as to whether there is a caveatable interest. In addition, the lodgement of the caveat must also not have been done for the purposes of causing unnecessary inconvenience to the interests of another person.


Mr PV's immediate purpose was to delay the sale. That in itself would constitute an “inconvenience”...

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