KF v WP

JurisdictionNew Zealand
JudgeLCRO Bouchier
Judgment Date12 April 2012
Neutral Citation[2012] NZLCRO 30
Docket NumberLCRO 103/2011
CourtLegal Complaints Review Officer
Date12 April 2012

Concerning An application for review pursuant to Section 193 of the Lawyers and Conveyancers Act 2006

Between
Kf
Applicant
and
Wp
Respondent

[2012] NZLCRO 30

LCRO Bouchier

LCRO 103/2011

Legal Complaints Review Officer

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.

DECISION
Introduction
1

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.

Background
2

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.

3

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).

4

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.”

5

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.

6

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.

7

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 Dunstable v Leighton (cited on the LCRO website as LCRO 73/2009).

8

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.

9

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.

10

The Committee had sought to persuade the parties to resolve their dispute by alternative dispute resolution but this was unsuccessful.

11

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.

Application for Review
12

The Applicant considered that the Standards Committee's reasoning was “flawed, which had resulted in it reaching the wrong decision”. He repeated a number of submissions made earlier to the Standards Committee; those most relevant to the central issue included that not only had he reduced his fees before issuing the invoices but he had tried to resolve the situation by negotiating without success.

13

He expressed concerns about the time (and therefore cost) involved in mediation and stated that it would not have been rational for him to enter into mediation when rule 12.2 is completely clear on its face that the lawyers were responsible for payment of my fee because they have instructed me and there is no other arrangement for payment of my fees.

14

He added that if the Practitioner had sought an estimate of his fees before confirming its instructions to him it would have better served its clients as well as the Applicant's business: “It was the lawyers conduct when they instructed me that was not in accordance with the lawyers obligations under rule 12.2”. He submitted that it was the lawyers' role to ensure his position as third party was protected, implying that the Practitioner was obliged to take steps to ensure that his position under the Rule was protected. He suggested this could be achieved by obtaining an up-front estimate, offering to...

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