Body Corporate Av v Zc Solicitor;

 
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[2011] NZLCRO 12

LCRO 157/2010

Concerning an application for review pursuantto Section 193 of the Lawyers and Conveyancers Act 2006

and

Concerning a determination of Auckland Standards Committee 3

Between
Body Corporate Av
Applicant
and
Zc Solicitor; and Zb Qc
both of Auckland

Application for review of a decision of the Standards Committee declining to investigate a complaint regarding excessive overcharging due to lack of jurisdiction under s351 Lawyers and Conveyancers Act 2006 (complaints about conduct before commencement of section) — Law Practitioners Act 1982 applied — only allegations of gross overcharging that would have resulted in proceedings of a disciplinary nature of the 1982 Act could be considered — whether law firm engaged in gross or dishonest charging — law firm comprised of partners only and worked in a team approach with barrister — fees double the estimate provided — whether respondent had been careless in preparation of estimate to warrant disciplinary sanctions.

The issues were: whether the Standards Committee was correct that its jurisdiction was limited to considering costs in terms of gross overcharging or dishonest charging; whether the firm's charging constituted gross overcharging or dishonest over charging so that complaints could be considered under the LCA; whether the firm had been careless in the estimate provided.

Held: As preliminary comments, insufficient care was taken by the respondents at the commencement of their instructions to map out and communicate to the Body Corporate an overall strategy that would meet the objectives of the Body Corporate, and to establish and communicate the role that each person was going to play. There was no mention of the hourly rates of either, or what roles each of them were going to play. It could be said with some justification that this represented a complete disregard on the part of ZC and ZB of the rights of the people who were going to be paying the bills to know what they were letting themselves in for, and their right to be given the necessary information to enable them to make an informed decision. ZC was not being realistic in accepting this brief, both in terms of his experience and the firm's capacity.

The LCRO in Client Z and Client Za v Lawyer D LCRO 04/2008 had identified what it called a “perverse lacuna” in the fact that bills rendered before 1 August 2008 but not complained of until after 1 August 2008 were not subject to a reasonableness assessment. However the reference to “proceedings of a disciplinary nature” in s351 did not include the investigation stage”. The phrase meant the passing of a resolution to lay charges, or the actual laying of charges. Consequently, the position as the same as in Client Z and Client ZA v Lawyer D, namely that a resolution to lay charges, or the actual laying of charges must have occurred before the threshold was reached, and with regard to costs, grossly excessive bills would need to be present before this threshold was reached.

The starting point as to whether a fee was grossly excessive was to consider what a fair and reasonable fee would be. The Standards Committee had not taken that step. An alternative was to consider what the fees would have been for the fees charged to be 4 or 5 times a fair and reasonable fee and therefore grossly excessive. The fee complained of amounted to $109,534.16, so fees in the range of $21,900 to $27,375 would be considered a fair and reasonable fee. That range was far below of even the most optimistic expectations of the Body Corporate.

On that basis the fees charged were not grossly excessive. The Legal Complaints Review Office lacked jurisdiction to consider the complaint in respect of the bills.

There was no evidence the firm had addressed the cost blow out to the Body Corporate. Paragraph 7.2(b) of the previous New Zealand Law Society Property Transactions Guidelines 2003 states that it was generally inappropriate to charge a fee in excess of an estimate and the client should be informed immediately if the estimate was to be exceeded. Under the LPA the shortcomings of the respondent were not enough to warrant disciplinary sanctions. That may have been different if the conduct had been considered under the LCA.

The behaviour of the law firm did not meet the threshold set out in s351 LCA. This case highlighted the shortcomings of the LPA 1982 as the firm's behaviour would have offended the consumer protection provisions under the LCA.

Allegations of negligence or incompetence were matters that should be addressed by a court. Section138(1)(f) Lawyers and Conveyancers Act provided that “a Standards Committee may, in its discretion, decide to take no action on any complaint, if, in the opinion of the Standards Committee there is in all the circumstances an adequate remedy.…that it would be reasonable for the person aggrieved to exercise.” If, as a result of court proceedings, the allegations were proven, it would be appropriate to refer the matter back to the Complaints Service, at which time the frequency or the degree of the negligence or incompetence would be considered in determining what sanctions should follow.

Pursuant to s211(1)(a) LCA (powers exercisable on review), the decision of the Standards Committee was confirmed.

DECISION

Background

1

In early to mid 2007 certain problems with the building known as the XX began to manifest themselves which needed to be addressed. Legal representation was required so that the Body Corporate could ensure that its rights were protected against the various parties that may have been responsible for the building's defects.

2

Since approximately 2004, AAO, the firm in which the Respondent ZC (ZC) was a partner, had acted as the solicitors for a large number of the Body Corporate members in relation to litigation unrelated to the Body Corporate and the building defects. As a result AAO became aware of the requirement for the Body Corporate to have legal representation in respect of the building defects, and put itself forward as having the required skill and expertise to represent the Body Corporate.

3

At an Extraordinary General Meeting on 25 June 2007, AAO were instructed to proceed to prepare what was described by Mr AW (the Body Corporate representative in this complaint) as a “holding” statement of claim to be filed by 12 July 2007. The purpose of this was to stop time running and protect the Body Corporate's position vis a vis the defendants, while the specific building issues were investigated.

4

In the process, and subsequently, members of the Body Corporate became concerned at the billing practices adopted by ZC and the Respondent ZB QC (ZB), and the ability of AAO to effectively prosecute the proceedings.

5

By mid August 2007, the Body Corporate had become sufficiently concerned as to the quantum of bills received from AAO that it instructed ZC not to take any further steps without specific instructions from the Body Corporate, and ultimately, the firm's instructions were terminated.

Preliminary Comments
6

This complaint arises because insufficient care was taken by the Respondents at the commencement of their instructions to map out and communicate to the Body Corporate an overall strategy which would meet the objectives of the Body Corporate, and to establish and communicate the role that each person was going to play.

7

This would have been achieved, or at least the Respondents would have been required to give some thought to the matter, if they had provided the Body Corporate with a letter of engagement, which, although not mandatory at the time, was considered to be best practice.

8

That this was going to be a significant case was clear from the outset. The building comprised some 250 units and was estimated to be worth $80,000,000. The estimated cost of repairs was $10,000,000.

9

ZC was a litigator of some 30 years' experience and had been involved in a wide range of commercial work and litigation over that period. This included a number of construction disputes, some of which involved national and international corporations.

10

However, he acknowledged to the Cost Reviser appointed by the Auckland District Law Society to revise the unpaid pre Lawyers and Conveyancers Act bills, that he did not have any experience in relation to multi leaky building claims.

11

Cognisant of this, he proposed from the outset to form a team comprising of himself, ZB and the building consultants, to conduct the case.

12

The need to retain ZB reflected his need for support in what has become a specialised area of the law, to the extent that a number of firms have founded their entire business on it. Even then, it was considered necessary to obtain opinions from other persons.

13

AAO was described by the Costs Reviser as being somewhat unique. It had [XX] fee earners, all being partners, with no associates or junior solicitors to assist.

14

The question has to be asked, regardless of cost issues, is whether the Respondents were going to be able to provide the level of service that was needed in respect of this claim as it progressed.

15

I raise this, to query whether the Respondents, and particularly ZC, had themselves addressed the logistics of how this case was going to be managed, much less discussed it with their client. If some time had been taken at the outset to consider these matters, and discuss them with the client, this complaint may very well have not arisen. It may have meant that the...

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