JM v EB
| Jurisdiction | New Zealand |
| Judgment Date | 04 October 2023 |
| Neutral Citation | [2023] NZLCRO 106 |
| Docket Number | Ref: LCRO 109/2023 |
| Court | Legal Complaints Review Officer |
[2023] NZLCRO 106
LEGAL COMPLAINTS REVIEW OFFICER
ĀPIHA AROTAKE AMUAMU Ā-TURE
Ref: LCRO 109/2023
CONCERNING an application for review pursuant to section 193 of the Lawyers and Conveyancers Act 2006
AND
CONCERNING a decision of the [Area] Standards Committee [X]
In accordance with s 213 of the Lawyers and Conveyancers Act 2006 copies of this decision are to be provided to:
Mr and Mrs JM as the Applicants
Mr EB and Miss MK as the Respondents
Mr LZ as a related person
[Area] Standards Committee [X]
New Zealand Law Society
Law Practitioners — application fort review of a determination to take no further action on a complaint — alleged lodging of caveat without reasonable cause — client instructions — using legal process for proper purpose — failure of Standards Committee to give reasons — Lawyers and Conveyancers Act 2006 — Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008
Mr and Mrs JM (the applicants) have applied for a review of a decision by the [Area] Standards Committee [X]. The respondents are Mr EB and Ms MK of the law firm, [Law firm A].
The applicants owned a [property]. The [property] was leased to Company B (Company B).
The applicants entered into an agreement to sell the [property], with settlement to occur on 31 May 2022. The agreement provided that the sale was to be subject to the lease to [Company B].
The lease provided expressly that the [property] could be marketed for sale during the term of the lease.
On [X] May 2022, [Company B] lodged a caveat against dealings on the title to the [property]. The estate or interest claimed was stated to be:
Purchaser of land pursuant to an oral agreement for sale and purchase of land between the registered owner as vendor and caveator as purchaser.
As a consequence of the lodging of the caveat, the applicants were unable to settle the sale of the [property] on the scheduled settlement date.
The applicants lodged an application for the caveat to lapse.
[Company B] lodged in Court an application to sustain the caveat.
The applicants filed a notice of opposition.
[Company B] withdrew the caveat.
The applicants were then able to settle the sale of the [property] on 8 July 2022.
The applicants incurred legal fees and expenses relating to the Court process in the sum of $50,142.26. They recouped $28,000 from [Company B], apparently by agreement.
The applicants say that the caveat was lodged without reasonable cause. They say that [Law firm A], in lodging the caveat as agent for [Company B], “aided and abetted the process of lodging a caveat on the basis of an alleged oral agreement without checking the vital facts”.
They say further that:
There was never any factual or legal basis for the caveat to have been lodged in the first instance. To do this was the decision of MK and EB. We are still amazed and distraught that [Company B]'s claim of an alleged oral agreement and caveat was able to be progressed so far through the legal system in an attempt to stop the sale of our [property].
Their complaint is that the actions of the respondents constituted a breach of r 2.3 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (the Rules), which provides that:
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, interests, or occupation.
As to outcomes, the applicants stated:
We do not want money. A claim has been settled with [Company B]. We want the Law Society to investigate this case of malpractice and lack of professionalism. In particular that MK and EB of [Company B] lacked any integrity in researching vital facts pertaining to the information relating to the caveat. Please investigate this thoroughly as to suitable sanctions, and or disciplinary actions that are necessary in our opinion, plus an apology.
The respondents elected not to respond to the complaint. I would normally express surprise at this decision on their part. I acknowledge, however, that the [Area] Standards Committee [X] is an Early Resolution Service committee. There is an email dated 11 April 2023 on the Committee's file from the NZLS to the respondents advising that the NZLS did not require a response from them at that point.
The Standards Committee delivered its decision on 4 July 2023.
The Committee summarised its understanding of the complaint as follows: 1
From the information you provided, we understand your complaint is that [Company B], and thereby the subjects of this complaint, used the legal process of placing a caveat on your property “solely on the unsupported and uncorroborated allegation” of their client. Therefore, you complain, using a legal process for an improper purpose.
The Committee gave its reasons for its conclusion and decision as follows: 2
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12. Subject to any overriding duties to the court, a lawyer's duty is to his or her client not a person on the other side of a dispute. The principle that a lawyer's duty is owed to his or her client alone was expressed by Cooke J in Allied Finance and Investments Ltd v Haddow & Co [1983] NZLR 22, 24 (CA). That said, rule 2.3 does apply to cases where some limited duties are owed to the opposing parties in a dispute. The Standards Committee considered if this rule could apply in this instance.
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13. The Standards Committee considered that Mr EB and Miss MK were following their clients' instructions in reliance on the information of a verbal agreement provided to them. They discharged their duties to their client and acted in their interest in pursuing a caveat over your property. There was no evidence this was done to cause you any unnecessary inconvenience to your interests, even if this was the effect to you, but rather it was done in pursuit of their client's arguments where there was a legal and factual dispute.
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14. Whether those arguments were erroneous or not does not directly impact on this issue so long as they were pursued sufficiently respectfully in
reliance on a client's view and for their interest rather than to inconvenience or otherwise distress you. The correct place to evaluate the merit of these arguments was in court, or alternative settlement, which is what you have done.
The Committee decided, pursuant to s 138(1)(c) of the Lawyers and Conveyancers Act 2006 (the Act), to take no action on the complaint. Section 138(1)(c) empowers a Committee to decide to take no action if, in its opinion, the complaint is frivolous or vexatious or is not made in good faith.
The applicants filed an application for review dated 25 July 2023. The outcome they sought is simply stated:
We are asking Mr EB and Miss MK provide a formal response to the Law Society and account for their actions. We believe they owe us an explanation.
The applicants state that the respondents being “allowed to not provide a formal response regarding a caveat, supported by an unsubstantiated alleged oral agreement, is unsatisfactory”. The applicants also referred to factual errors made in the Standards Committee's decision.
They disputed the Committee's finding that the respondents “discharged their duties to their client and acted in their interest in pursuing a caveat over your property” and asserted that the caveat was lodged to cause embarrassment, distress and inconvenience to the applicants' reputations, interests and occupation.
They cited particulars as follows:
Our affidavits record CF shouting, “he would blacken our name”.
It cost us a lot of money [we employed a lawyer (QA) and a QC now KC (VR) who prepared the necessary affidavits (all sent previously to you).
Two [business] families doing a legitimate documented [property] sale were threatened by the caveat process [lodged on [X] May 2022]. We could have lost our [property] sale to the true buyers and we would have missed buying our chosen retirement home. We are aged [redacted] years [W] and [redacted] years [F].
Our legitimate documented buyers were already in the process of selling their [location] [property]. They could have been in the precarious position of being “out on the side of the road with nowhere to go”.
The applicants proceeded to argue that:
It became obvious to us that Mr EB and Miss MK were enabling CF to use the caveat as a weapon to stop the legitimate sale of the [property]. They ignored facts which had been presented to them. …
We believe that they knew full well the time frame for completion of the [property sale is usually June 1 st. We certainly believe that an attempt to cause embarrassment, distress and inconvenience to our reputations, interests and occupations by the actions of Mr EB and Miss MK was to stop the sale of the [property]. This was encouraged and enabled by them to not only place a caveat on but also sustain the caveat through the court process for a substantiated hearing, then suddenly lifting it for unknown reasons on 28 th June 2022. At the time of putting on the caveat, [X] May 2022 Mr EB and Miss MK had no evidence whatsoever of any agreement. Therefore they were negligent in the discovery and procedures of normal law practices.
The respondents were invited to comment on the applicants' review application. They initially declined to do so other than to rely on the Standards Committee decision.
Section 206(2) of the Act allows a Legal Complaints Review Officer (LCRO) to conduct the review on the basis of all information available if the...
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