G & P LN v Todd Whitcombe and RC
| Jurisdiction | New Zealand |
| Judgment Date | 22 June 2021 |
| Neutral Citation | [2021] NZLCRO 60 |
| Docket Number | Ref: LCRO 122/2020 |
| Court | Legal Complaints Review Officer |
CONCERNING an application for review pursuant to section 193 of the Lawyers and Conveyancers Act 2006
and
CONCERNING a determination of [Area] Standards Committee [X]
[2021] NZLCRO 60
Ref: LCRO 122/2020
LEGAL COMPLAINTS REVIEW OFFICER
ĀPIHA AROTAKE AMUAMU Ā-TURE
Law Practitioners — application to review a determination of an Area Standards Committee which determined that the conduct of the respondents constituted unsatisfactory conduct but declined to order compensation on the grounds that that the respondent's errors had not caused the applicant's loss — conflict of interest — discussion of “more than a negligible risk” — obligations when recommending clients take independent advice -compensation for stress and additional costs — name suppression — Lawyers and Conveyancers Act 2006 — Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008
In accordance with s 213 of the Lawyers and Conveyancers Act 2006 copies of this decision are to be provided to:
Mr and Mrs LN as the Applicants
Messrs Whitcombe and RC as the Respondents
Ms TK as Representative for the Respondents
Mr NV as a Related Person
[Area] Standards Committee [X]
New Zealand Law Society
The names and identifying details of the parties in this Decision have been anonymised except for Mr Whitcombe
Mr and Mrs LN have applied for a review of the determination of [Area] Standards Committee [X] in which the Committee determined that the conduct of both respondents constituted unsatisfactory conduct pursuant to s 12(c) of the Lawyers and Conveyancers Act 2006, and imposed penalties.
Ms TK [(ABC)] acts for both Mr Whitcombe and Mr RC.
In August 2017, Mr and Mrs LN viewed a property at [Street], [Suburb] which was being sold by tender.
Mr Whitcombe, a partner in the firm [NVJ], had previously acted for them.
On 28 August 2017 Mr LN telephoned Mr Whitcombe and advised that he and his wife wished to tender for the property. Mr LN described the property to Mr Whitcombe, who realized that he had been instructed to act for the vendors of the property. Mr Whitcombe therefore arranged for Mr RC, who was an Associate in the firm, to act for Mr and Mrs LN.
The LN's tender for the property was accepted on 8 September 2017. The resulting agreement was subject to the sale of their existing property by 3 November 2017. The settlement date was “1st December 2017 or by mutual agreement.”
The agreement also contained a clause, commonly known as an “escape, or ‘cash out’ clause”, whereby, if the vendors accepted an unconditional offer for the sale of the property to another party, they could issue a notice to the LNs, advising that if they did not declare their contract unconditional within 10 working days, the vendors would be able to cancel the agreement. If the agreement was cancelled, the LNs were “entitled to a refund of the deposit and any other sums paid, and neither party shall have any rights against the other”. 1
On 12 September Mr RC sent a letter to Mr & Mrs LN, part of which read:
We record that we also act for the vendor in this matter. We enclose a form whereby you acknowledge that this has been disclosed to you and our proposals should any conflict arise in our acting for both parties. We request that you sign the form and return this to us by fax, email or post.
The letter of consent read:
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• We have asked you to act for us as our lawyer in relation to this transaction.
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• You have informed us that the firm has also been asked to act for the other party in relation to this transaction.
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• We confirm that at present there is no conflict of interest that prevents the firm from acting for both the other party and for us.
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• You have explained to us that, if a conflict of interest arises, you will be unable to give us independent legal advice regarding the transaction and that you will refer both us and the other party to independent lawyers.
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• We consent to the firm acting for both the other party and us on the transaction on the terms as set out in this letter.
On 14 September 2017 (six days after the agreement had been signed), Mr and Mrs LN signed the letter of consent and returned it to Mr RC.
Three days prior to this, on 11 September, Mr Whitcombe had received instructions from [GBC] Bank to document, and arrange for, the LNs to refinance existing borrowing. This was to enable them to pay the deposit on the purchase. Mr Whitcombe proceeded to attend to this, and met with Mr and Mrs LN on 13 September to execute the documents. 2
The LNs had been unable to sell their property, and just prior to meeting with Mr Whitcombe to execute the loan documentation, he had served notice on Mr RC by way of fax, advising that the vendors had entered into an unconditional contract, and activated the escape clause. The notice specified that Mr and Mrs LN had until 5pm on 27 September 2017 to declare their agreement unconditional. 3
Mr and Mrs LN continued to experience difficulties selling their existing property but on several occasions in the intervening period, Mr and Mrs LN expressed an intention to waive the “sale” clause, as they were confident their property would sell in due course.
On 26 September 2017 Mr LN instructed Mr RC declare the agreement unconditional.
Mr RC made file notes of the various conversations. Selected extracts are reproduced below:
18 September 2017:
You know it's a gamble. You going to sell it.
Conf. You'll sell in time.
You think will be better after the election.
26 September 2017:
Waive sale clause.
Go unconditional.
Sale: not happening yet.
Indp legal advice discussed.
Mr RC prepared a letter in accordance with Mr and Mrs LN's instructions. In the covering letter with which Mr RC sent the letter for approval by the LNs, he said:
As our firm also acts for the vendor, we suggest that you consider obtaining independent legal advice with respect to the risks and implications of confirming the agreement as unconditional without having obtained an unconditional sale of your existing property.
Mr and Mrs LN approved the letter declaring the agreement unconditional, and Mr RC sent it by fax to Mr Whitcombe. As instructed by Mr and Mrs LN, Mr RC, requested the vendors to extend the settlement date to 15 December and reduce the amount of deposit payable from 10% of the purchase price to 5%.
Mr and Mrs LN remained unable to sell their property and further negotiations to extend the settlement date and vary the terms of the agreement, ensued.
In response to a request to extend the settlement date to 19 January 2018, Mr Whitcombe said: 4
We also advise that if our clients were to agree to any deferral of settlement, it would be on the basis that settlement remains as at 15 December, with our clients being entitled to serve a Settlement Notice on Monday, 18 December in the event that your clients default on settlement but with our clients holding off exercising their rights under the Settlement Notice until such time as Friday, 19 January 2017, [sic] so as to provide your clients with that further period of time in which to obtain a sale and achieve settlement, noting however that if your clients were not in a position to settle, our clients would be entitled to exercise their rights under the Settlement Notice on the basis that if your clients are not in a position to settle the purchase by 19 January 2018, that that would be a continuing default of the original settlement date of Friday, 15 December 2017.
In that letter, Mr Whitcombe also advised, that if this proposal was accepted by Mr and Mrs LN, his clients would ‘incur a number of out of pocket expenses”, and that his clients would only “commit to a deferral of settlement if [Mr RC's] clients were agreeable to meeting [his clients'] out of pocket expenses.”
On 28 November, Mr RC sent a copy of this letter to Mr and Mrs LN with an email in which he included details of what would happen if they were unable to settle on 15 December. This included:
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• The vendors proposed to serve a settlement notice on 18 December 2017.
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• The vendors would hold off exercising their right under the settlement notice to cancel the agreement until 19 January 2018.
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• Non-compliance with the settlement notice entitled the vendor to cancel the agreement and either sue for specific performance or cancel the agreement, retain the deposit, and sue for damages.
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• The vendors could claim as damages, loss on any resale within a year of the original settlement date, interest on the unpaid portion of the purchase price, costs and expenses reasonably incurred [on] any resale or attempted resale, and all outgoings and maintenance expenses from the settlement date to the settlement of any resale.
Mr RC noted that the consequences of not being able to comply with the settlement notice represented serious risk for, and expense to, Mr and Mrs LN, and suggested that they exhaust all other options 5 before agreeing to the vendors' proposal. Mr RC concluded his email with the following:
We recommend that you consider independent legal advice with respect to the vendors' proposal. Please advise whether or not you wish to agree to the vendors' proposal or if you require clarification, please telephone me at our offices to discuss.
The recommendation to take independent legal advice was repeated in most, if not all, of the correspondence from Mr RC to Mr and Mrs LN.
Further negotiations continued. 6 On 14 December, Mr RC sent Mr and Mrs LN a draft of a fax addressed to Mr Whitcombe. The draft fax advised Mr Whitcombe that the LNs accepted the vendors' offer set out in Mr Whitcombe's fax of 24 November but “subject to the following requests”:
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1. to defer settlement to Friday 16 February 2018; and
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2. the vendors agree to...
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