GZ v TE
 NZLCRO 10
CONCERNING an application for review pursuant to section193 of the Lawyers and Conveyancers Act 2006
CONCERNING a determination of Canterbury-Westland Standards Committee 1
GZ as the Applicant
TE as the Respondent
The New Zealand Law Society
Canterbury-Westland Standards Committee 1
The names and identifying details of the parties in this decision have been changed.
Challenge to a decision of the Canterbury-Westland Standards Committee which held that the applicant had breached r2.3 (proper purpose) and r10.1 (respect and courtesy) Lawyers and Conveyancers Act (Lawyers Conduct and Client Care) Rules 2008 and had engaged in unsatisfactory conduct pursuant to s12 Lawyers and Conveyancers Act 2006 (unsatisfactory conduct defined) — parties were both lawyers representing clients in a relationship property dispute — respondents failed to comply with Family Court order to transfer property to applicant's client unencumbered — applicant said they had instructions to file contempt of court proceeding on respondent and his partners and sent copy of draft notice of committal — whether lawyers could utilise contempt proceedings against opposing counsel as a weapon when acting for their clients.
The issues were: whether GZ had acted for a purpose other than the promotion of his client's interests; and, whether the Standards Committee failed to recognise GZ's obligation to follow his client's instructions regardless of the merits of the contemplated proceedings.
Held: Committal of any of the parties would not have achieved performance of the court order. In addition, other parties alleged by GZ as being in contempt of Court, were not parties to the order. At the very least, the first step to have taken would have been to apply to the Court for orders requiring those parties to take steps required of them, rather than moving immediately to the position of proposing committal proceedings without any specific orders from the Court being obtained. Some other form of Court enforcement had been necessary to achieve compliance with the Family Court Order. The proposed committal proceedings had not constituted a proper use of a legal process to achieve that outcome.
It was clear that GZ had indicated his intention to pursue committal proceedings before he had met with HD QC. No formal opinion had been sought from HD QC and no record of the meeting was available. It was not a usual or ordinary step to issue committal proceedings against a solicitor and his partners, none of whom were parties to a Court order. It was not unexpected or unreasonable that TE and his partners viewed it as a threat designed to put pressure on the firm and its clients, rather than as a genuine attempt to promote GZ's client's interests. With knowledge of the husband's business being placed in receivership, it should have been apparent to GZ that there were matters beyond the control of the various parties preventing compliance with the Court order.
Although TA had received irrevocable instructions in respect of registering the mortgage, this became academic once the bank had withdrawn its offer of finance. In those circumstances, TA was acting for the Bank as well and was obliged to inform the bank of the change in husband's financial position. GZ should have accepted this as affecting TA's ability perform the orders, and advised his client accordingly, instead of accepting her view that her husband and his family were reneging on the agreement. This was not borne out by the facts of which GZ was aware.
Rule 13.3 Conduct Rules (informed instructions subject to a lawyer's overriding duty to the Court, a lawyer must follow a client's instructions taken after the client has been informed by the lawyer of the nature and decision to be made and the consequences of them) was important when considering GZ's claim that he was following his client's instructions. If the client had been informed that the proposed course of action placed GZ at risk of breaching the Conduct Rules and that he would thereby exposed to disciplinary proceedings, it was unlikely the client would have instructed GZ to proceed with the proposal. In addition r4.1 Conduct Rules (refusing instructions) enabled a solicitor to decline to follow instructions for good cause, which included instructions that could require a lawyer to breach any professional obligation.
GZ's conduct constituted unsatisfactory conduct under s12(b) LCA and s12(c) LCA. The decision of the Standards Committee was confirmed
Ms HB and Mr TD were engaged in a relationship property dispute which by 2009 had been ongoing for some years. The parties were legally represented:
a) Ms HB retained Mr GZ as her barrister.
b) Ms HB also retained HC, a firm of solicitors in [South Island], to attend to conveyancing matters.
c) Mr TD retained Mr TC as his barrister.
d) Mr TD retained the firm of TB (Mr TA) to attend to conveyancing matters on his behalf.
At the time of separation from Ms HB, TD was in control of substantial business assets while Ms HB was in occupation of the family home against which was registered a mortgage to Westpac bank.
Attempts to resolve relationship property matters through negotiation were unsuccessful and proceedings were issued. After further negotiations, an agreement was reached which resulted in Consent Orders being made by the Court. One of the Orders was that the family home would be transferred to Ms HB free of the Westpac mortgage (and any other encumbrances).
To enable that to occur, it was necessary to provide the bank with alternative security, and it was agreed that this alternative security would be provided over other property owned by Mr TD, his parents and his brother.
Prior to agreeing to the terms of the settlement recorded in the Orders, Mr GZ wanted to be satisfied that the settlement could be implemented. He obtained a copy of the discharge of the existing mortgage to Westpac bank over the family home, a copy of the new loan agreement referring to the replacement securities, and a copy of the Authority and Instruction form (the A&I) whereby TB were irrevocably instructed to register the mortgage over the replacement security.
In addition, he received a letter dated 17 October 2008 from Mr TA in which Mr TA advised that “we are therefore in a position to file a solicitor's certificate with the Westpac bank so that the discharge of mortgage on [the existing property] can be registered and the new mortgage over the [replacement security] put in place contemporaneously. As the transaction does not involve raising funds from the bank we are in a position to do this immediately we receive confirmation from Mr TC that a satisfactory agreement has been entered into between Mr TD and Ms HB.”
Further in that letter, Mr TA informed Mr GZ that he had advised the TD family, being Mr TD's parents and brother, that they should seek independent legal advice. He also noted that the agreement of the TD family was conditional on a property agreement acceptable to Mr TD being reached.
Relying on the information provided in this letter and the documents which Mr GZ had obtained copies of, Ms HB then agreed to the Orders being made by the Court which included the following terms:
“2 No later than 24 October 2008:
a. the property at [the family home] shall be transferred unencumbered to the sole name of [Ms HB] such transfer shall be of a “going concern” between two registered entities for GST purposes
3 [Mr TD and ACU Limited] will forthwith take such steps as are necessary to procure a registered easement in favour of the registered proprietor of [the family home] to secure the current supply of drinking water to the property. The costs of creating such easement (including legal fees and disbursements and survey costs) shall be met by ACU Limited.”
ACU Limited was a company controlled by Mr TD.
Ms HB adopted the view that without the water supply easement in place, the property was valueless, and therefore insisted that the easement be registered prior to accepting a transfer of the property. This involved the preparation of an easement plan, and agreement between HC and Mr TA as to the terms of the easement. It was not until April 2009 that these matters were concluded. In addition, registration of the easement required consent of SBS Bank, the mortgagee of the servant tenement.
In the intervening period, Mr TD's winery business had gone into receivership. In a letter dated 28 April 2009, Mr TA advised HC as follows:
“Last week our client's parents reversed their earlier decision in respect of their preparedness to provide security over the [alternative property] and [Mr TD Senior] has communicated this to your client directly. We understand Westpac also became concerned because of arrears which TD informs us have now been brought up to date. Westpac have also indicated they would require a new valuation due to the changing values of coastal properties”
As a result, Mr TA indicated that his client was unable to comply with the terms of the Orders, and proposed that Ms HB take an immediate transfer of the family home subject to the Westpac mortgage.
On 14 May 2009...
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