Kb v Wq and Lt
| Jurisdiction | New Zealand |
| Judgment Date | 22 January 2021 |
| Neutral Citation | [2021] NZLCRO 7 |
| Date | 22 January 2021 |
| Docket Number | Ref: LCRO 188/2018 |
| 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 the [Area] Standards Committee [X]
[2021] NZLCRO 7
Ref: LCRO 188/2018
LEGAL COMPLAINTS REVIEW OFFICER
ĀPIHA AROTAKE AMUAMU Ā-TURE
Law Practitioners — application for review of a decision by Standards Committee to take no further action against the respondent lawyers — the respondents had acted for a property development company which had gone into liquidation — whether the respondent's owed a duty to investors who paid deposits into their firm trust account — Lawyers and Conveyancers Act 2006
In accordance with s 213 of the Lawyers and Conveyancers Act 2006 copies of this decision are to be provided to:
Mr KB as the Applicant
Messrs WQ and LT as the Respondents
[Area] Standards Committee [X]
New Zealand Law Society
The names and identifying details of the parties in this decision have been changed .
Mr KB has applied for a review of a decision by the [Area] Standards Committee [X] to take no further action in respect of his complaint concerning the conduct of the respondents, Messrs WQ and LT. 1
XYZ Limited (XYZL) were developing a block of residential housing at [address] (the “development”).
The development offered investors an opportunity to purchase first right of refusal agreements (“FRR agreements”) in respect to units that were to be constructed.
The development was being marketed both within New Zealand and, it appears, extensively offshore.
Mr WQ and Mr LT were partners in the firm Q Law Limited (QLL).
In around April 2011, QLL was instructed to act for AHVL.
QLL was instructed to review the FRR agreements, and to receive payments into the Q Law Trust account.
Mr KB decided to invest in the development. Having entered into a FRR agreement, he then made, pursuant to the agreement, an initial payment to the agents who were marketing the property. This payment was deposited to the QLL Trust account.
XYZL went into liquidation on February of 2013.
In October 2013, the Serious Fraud Office advised that it was conducting an investigation into the [city 1] development.
In October 2014, Mr KB filed a complaint with the Lawyers Complaints Service about Q Law. In this complaint, Mr KB alleged that;
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(a) XYZL did not have resource consent for the development, nor was there evidence of XYZL having legal ownership of the property it was promoting for sale; and
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(b) QLL must have been aware of this when the FRR agreements were completed; and
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(c) QLL facilitated the money transfer to XYZL and thus became a willing participant in cross-border money laundering; and
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(d) QLL acted on the subsequent sale of the land to another developer, and knowingly participated in a scheme to defraud investors.
Mr KB's first complaint was considered by the [City] Standards Committee [X] (CSCX).
CSCX delivered its decision on 20 March 2014. The Committee determined to take no further action on the complaint, as it considered that Mr KB had an adequate remedy or right of appeal that would be reasonable for him to exercise.
In July 2017, Q Law merged its practice with [Law firm A]. Mr WQ continued as a director. Mr LT ceased being a director in December 2016. Mr WQ is now retired from practice.
Mr KB lodged a further complaint with the New Zealand Law Society Complaints Service (NZLS) on 18 July 2018.
In this complaint, Mr KB refers to having endeavoured to file a further complaint in late 2016 but reports that this complaint had been rejected by the Committee on grounds that the complaint simply reiterated the concerns that had been put to the Committee in the 2014 complaint. Mr KB's complaint of July 2018 is his third attempt to advance a professional conduct complaint against the directors of QLL.
Mr KB's 18 July 2018 complaint submits that it provides new evidence of what Mr KB describes as a “big fraud operation”, this in reliance on argument that he has conclusive proof that no resource consent had been granted to complete the subdivision for the [address] site during 2011 and 2012.
Mr KB notes, that a site plan for [address] records that the site first received consent for a subdivision on 17 December 2015. The site plan, says Mr KB, establishes that other site plans that had been produced were “fake”.
Mr KB followed up his notice of complaint, of 28 July 2018, with a report in which he set out his complaint in detail.
That report is comprehensive, running to some fifteen pages.
Mr KB's submissions provide a detailed background of the circumstances which prompted him to invest in the [suburb] development. To the extent that his submission identifies conduct complaints directly engaging Mr WQ and Mr LT, Mr KB submits that the lawyers:
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(a) had an obligation to ensure that their clients were conducting legal transactions; and
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(b) were obliged to check and verify that their client was in a position to proceed with the development proposal which was being marketed on a clear representation that the developers had title to land, and resource consents in place, to allow construction to proceed.
To the extent that Mr KB distinguishes his complaint from the earlier complaint filed, Mr KB submitted that he had new evidence available, this being documentation which established, conclusively in his view, that no resource consent had been granted for the [address] development during 2011/2012 — that consent only being secured in December 2015.
Mr WQ (on behalf of himself and Mr LT) responded to Mr KB's complaint on 4 February 2014.
In the introduction to this response, Mr WQ notes the following:
We refer to the numerous letters you have sent to us relating to complaints that have been filed by a number of parties against QLL and the writer, and in particular to the email from [NZLS staff] dated 21 January setting out the full list of those complaints. We do not propose in this letter to deal specifically with each individual complaint. This response is made in respect of all the complaints listed on [NZLS staff]'s email.
I take it from this, that a number of investors who had found themselves in a similar situation to Mr KB had filed complaints against Mr WQ and Mr LT with the New Zealand Law Society Complaints Service.
Mr WQ submits that:
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(a) his firm had acted for two companies, UVW Limited (UVWL) and XYZL (both in liquidation at the time of Mr WQ providing his response) that were involved in proposals to complete a residential housing development in [suburb] (the [city] development); and
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(b) the extent of his firm's involvement had been to assist with the documenting of option arrangements and providing advice in relation to first right of refusal agreements; and
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(c) in addition to reviewing option agreements and providing advice on the content and terms of those documents, QLL was engaged by UVWL and XYZL to receive and process option payments into its trust account, and to pay out those monies in accordance with its clients' instructions; and
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(d) from mid to late 2012, QLL began receiving a number of inquiries from investors, querying as to whether funds received from UVWL and XYZL had been released to the developers; and
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(e) in the face of those inquiries, QLL had made it clear that QLL had acted for XYZL (or UVWL) and not for the investors; and
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(f) option payments made under the option agreements were made to UVWL and XYZL by way of payment to the firm's trust account; and
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(g) payments received were recorded for the credit of UVWL and XYZL; and
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(h) funds were paid to UVWL and XYZL as requested by the client; and
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(i) QLL was not privy to, or had no knowledge of, any representations made by overseas agents to investors in relation to the option agreements; and
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(j) QLL was not involved in, nor instructed in respect of, the preparation or review of any documentation relating to the title of the land on which the developments were being built; and
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(k) UVWL and XYZL instructed separate solicitors in [City 2] in relation to land acquisition transactions, land financing, resource management applications and trust advice; and
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(l) QLL was aware that at the time the [address] Village development was being marketed to overseas clients, UVWL was not yet the legal owner of the development land, but understood, that an agreement was in place for the sale and purchase of the [address] land and for transfer of legal title to UVWL; and
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(m) QLL understood that a similar arrangement was in place in respect of XYZL; and
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(n) the standard option agreements do not contain any obligation for option payments made to be held on trust by QLL; and
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(o) those documents simply record that option payments are to be paid to UVWL or XYZL in cleared funds to the bank account nominated by UVWL or XYZL; and
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(p) the option agreements do not refer to option payments as “deposits” nor did they contain any representation to the effect that option payments are being held by QLL as a stakeholder; and
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(q) QLL was not involved in the resource consent process for the development; and
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(r) QLL did not consider that its involvement in any way provided assurances or representations to any purchasers; and
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(s) accusation that QLL had been engaged in “cross-border money laundering” or fraudulent activities of any nature was vehemently denied; and
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(t) allegation that QLL had some form of obligation to conduct due diligence in relation to the development is rejected on grounds that such obligation would extend well beyond the ambit of the instructions received.
The Standards Committee delivered its decision on 24 August 2018.
The Committee determined,...
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