KF v WP
 NZLCRO 30
Legal Complaints Review Officer
Concerning An application for review pursuant to Section 193 of the Lawyers and Conveyancers Act 2006
Application for review of Standards Committee determination declining to uphold complaint of unsatisfactory conduct against law practitioner for non payment of disputed third party fees under r12.2 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (personal responsibility of the lawyer to pay third party fees in the absence of arrangement to the contrary) — applicant engaged as expert witness by law firm on behalf of clients — dispute as to quantum of fees charged by applicant — applicant resisted all attempts by practitioner to resolve dispute — Standards Committee held resolution of dispute failed due to applicant's conduct — whether the obligation to pay under r12.2 Conduct and Client Care Rules precluded the right to challenge fees considered to be excessive or unreasonable.
The issue was: whether the obligation to pay under r12.2 Conduct and Client Care Rules precluded the right to challenge fees that were considered to be excessive or unreasonable.
Held: It was immaterial that no estimate or quote in advance was obtained from KF. When KF was engaged as an expert witness, there was no arrangement that could relieve WP from liability under r12.2 Conduct and Client Care Rules. Nor did WP dispute that liability. The rule undoubtedly created a right for KF to look to WP for payment.
However, there was nothing in the rule or in any other part of the Lawyers and Conveyancers Act 2006 or its rules and regulations, which extinguished other legal rights available to an affected party and pertinent to the transaction. Particularly relevant were the rights guaranteed under the Consumer Guarantees Act 1993 (“CGA”), which contained a guarantee that a consumer was not liable to pay more than a reasonable price for a service where that price had not been determined. The consumer in this case was WP's client, on whose behalf KF had been engaged.
The remedy for a consumer who considered a fee to be excessive and who sought the protection of the CGA, was to refuse to pay more than what was fair and reasonable. What was eventually determined as a fair and reasonable fee was what would be payable by WP under r12.2 CCC Rules.
The Standards Committee properly noted that WP tried to reach an agreement with KF about the quantum of fees, but was unsuccessful. The Standards Committee and the LCRO also provided opportunity to the parties to resolve the dispute through mediation. All these attempts were unsuccessful largely due to KF's unwillingness to engage in a dialogue on the matter. The case was not about refusal to pay the fees for no reason. It was about the reasonableness of the fees charged and it remained unresolved due to the resistance of KF to attempts to resolve the matter. No part of WP's conduct raised any disciplinary concerns.
Standards Committee decision confirmed
The Auckland Standards Committee declined to uphold a complaint by William KF (the Applicant) against WP (the Practitioner). The Applicant seeks a review of that decision.
The Practitioner's firm acted for certain clients in a proceeding in the Environment Court. The Applicant was engaged by the firm to act as an expert witness in relation to that proceeding. The Practitioner was the supervising partner for the file.
The Applicant's invoices were rendered to the Practitioner's firm and payment was arranged through the firm. At the conclusion of the Applicant's professional services five invoices had been rendered, totalling $53,542.41. It appears that no estimate or quotation for the likely cost had been sought from the Applicant. The clients had paid the first four invoices but towards the end of the matter the size of the total charges rendered by the Applicant became an issue. (The outstanding unpaid balance appears to be $19,791.41).
In the course of discussions between the parties regarding the final account the Applicant raised Rule 12.2 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (the Rules). This Rule is headed, “Third party fees” and states:
“Where a lawyer instructs a third party on behalf of a client to render services in the absence of an arrangement to the contrary, the lawyer is personally responsible for payment of the third party's fees, costs, and expenses.”
The Practitioner acknowledged responsibility for payment, but considered this to be subject to resolving the dispute as to the size of the fee. When the Practitioner's efforts to facilitate a resolution were unsuccessful, the Applicant filed a complaint with the New Zealand Law Society Complaints Service, claiming he had done the work he had been engaged to do, that there was no ‘contrary agreement’ with respect to his fees, and that Rule 12.2 obliged the Practitioner to meet the balance of fees.
In reply the Practitioner agreed that his firm had facilitated the instructions given to the Applicant, and that the firm did not dispute that it was ultimately responsible for payments under Rule 12.2, but considered this to be subject to resolving the dispute about the quantum of the fees.
In the course of the Standards Committee investigation both parties were able to make formal submissions. The Applicant's detailed submission clarified that he was seeking the balance of his fee, interest on the outstanding balance and reimbursement of his legal fees (a total of $28,020.04). He enclosed a copy of (cited on the LCRO website as LCRO 73/2009).
The Practitioner confirmed that the balance of the disputed fee had been paid into the firm's trust account pending resolution of the dispute, but he submitted that Rule 12.2 did not preclude the rights to challenge a fee that was considered to be excessive.
The question for the Standards Committee was whether or not Rule 12.2 establishes a principle of absolute liability, or whether a lawyer facing personal responsibility for payment of a third party's fees, costs and expenses is entitled to challenge the reasonableness of such a bill. In the course of its considerations the Standards Committee noted that the Practitioner had previously raised the issue of costs with the Applicant prior to the issuing of the third invoice.
The Committee had sought to persuade the parties to resolve their dispute by alternative dispute resolution but this was unsuccessful.
After consideration of the submissions from the parties, the Committee decided that the Practitioner's conduct was not unsatisfactory. The Committee concluded that the Rules did not require the Practitioner to pay fees the quantum of which had been disputed by his clients since before they were invoiced, especially in the current context where (the Applicant) had resisted all attempts to resolve the matter to date. The Committee considered that reasonable attempts had been made by (the Practitioner) to resolve the dispute as to quantum.
The Applicant considered that the...
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