Body Corporate Av v Zc Solicitor;

JurisdictionNew Zealand
Judgment Date08 March 2011
Neutral Citation[2011] NZLCRO 12
Date08 March 2011
Docket NumberLCRO 157/2010
CourtLegal Complaints Review Officer

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

[2011] NZLCRO 12

LCRO 157/2010

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.

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 Body Corporate did not instruct AAO but that is a consequence that AAO would have needed to face up to, and would have been preferable to the situation which developed.

16

I have some sympathy with the view of the Applicant, that there was some measure of obligation on the Respondents to point out to the Body Corporate that the personnel available to AAO and the use of ZB, was not going to be a cost effective way to deal with a leaky building claim.

17

It may very well be, that both parties proceeded on the basis that matters would be reviewed once the “holding” proceedings were issued, but even in that regard, the Respondents' estimate of costs proved to be so inaccurate, that questions must be raised as to how carefully the Respondents considered the matter before providing the estimate, and whether duties which they owed to their client were breached in this regard.

18

The retention of ZB appears to have only been addressed in a somewhat oblique manner. The Respondents point to the Body Corporate minutes of 16 March 2007 as evidence that the Body Corporate knew that AAO needed to retain the services of ZB as a pre-requisite to the firm accepting the retainer. The minutes state that “[XX] (one of the partners in the firm) will meet with [XX] (the building consultant) and [ZB] in terms of discussion of issuing proceedings …” This gives no indication at all as to the extent of ZB's involvement required.

19

The other evidence that the Respondents point to is a letter on the same day confirming that ZB had accepted the retainer. Once again, there was no mention of the hourly rates of either Respondent, 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 the Respondents, 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.

20

There is no indication that the Body Corporate members were aware the result of the “team” approach espoused by ZC was potentially going to result in a charge-out rate of $850 per hour.

21

All of this lies at the heart of the complaint.

22

Overall, I have some concerns that ZC was not being realistic in accepting this brief, both in terms of his experience and the firm's capacity.

23

The commentary to rule 1.02 of the Rules of Professional Conduct for Barristers and Solicitors current at the time, notes that “it would be improper for a practitioner to accept instructions unless the matter could be handled with due competence and without undue interference by the pressure of work or other obligations. Instructions for work which is outside the competence of a practitioner should be either declined or, with the consent of the client, referred to another practitioner”.

24

If, to comply with these obligations, ZC needed to involve ZB to the extent that the cost was going to be $850 per hour, then the Body Corporate members had the right to know that. Again, if that had been explained to them at the outset, and they had chosen to continue to instruct the Respondents, then it is highly likely that this complaint would not have arisen.

The complaint
25

The conduct complained of, and the bills rendered, all took place before 1 August 2008. That was the date on which the Lawyers and Conveyancers Act 2006 came into force. By that date, all but $73,211.86 of the bills had been paid. Those bills had been referred by the Body Corporate to the Auckland District Law Society for revision.

26

On 13 October 2008, the Complaints Service of the New Zealand Law Society received a complaint from the Body Corporate in respect of the paid bills which totalled $109,534.16.

27

The complaint was presented by the Body Corporate as a “costs complaint”. In the letter accompanying the complaint, the Body Corporate identified six issues which it considered led to unacceptable costs. These were:–

  • [i] An unauthorised building site inspection by the Respondents

  • [ii] The unauthorised request for opinions.

  • [iii] The quantum of the total legal costs when referred to the services rendered.

  • [iv] A perceived duplication of services between the Respondents.

  • [v] Tasks performed by the Respondents which should have been performed by lower level staff.

  • [vi] That ZC lacked the requisite skill and competence.

28

Subsequently, two further issues were raised, alleging negligence on behalf of the Respondents. These were:

  • [i] The possibility of including owners as second plaintiffs had never been raised by the Respondents, and the Body Corporate had only become aware of the...

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