KW v WB

 
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[2012] NZLCRO 33

LCRO 118/2010

Concerning An application for review pursuant to Section 193 of the Lawyers and Conveyancers Act 2006 and Concerning a determination of the Auckland Standards Committee 4

Between
KW

of Auckland

Applicant
and
WB

of Auckland

Respondent

Application for review of Standards Committee decision declining to uphold complaint against law practitioner for transferring funds held in the practitioner's trust account to client's new lawyers — practitioner relied on joint instructions from lawyers representing practitioner's client and his former wife in relationship property distribution matter — funds came from sale of their home — client complained he had been acting for himself in respect of sale and purchase transaction and that money was transferred without reference to himself — whether r10.2 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 prevented practitioner from contacting client directly — whether practitioner entitled to rely on instruction from lawyers advising in relation to relationship property matter.

The issue was: whether r10.2 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (“Conduct and Client Care Rules”) prevented the practitioner from contacting the client directly; and, whether the practitioner was entitled to rely on the joint instruction from the lawyers advising the client and his former wife in relation to the relationship property matter.

Held: After the conveyancing transaction was completed, WB's law firm held funds jointly for KW and his former wife. The funds were clearly owned by the parties jointly, and were still subject to an agreement by both parties as to distribution. It was likely that KW would have been unfamiliar with the practice of client funds being transferred between law firms' trust accounts on the instruction of new counsel. The issue was whether any disciplinary issues arose for WB in relying on instructions of the new counsel and not contacting the client direct.

Rule 10.2 Conduct and Client Care Rules would not have prevented WB from communicating with KW in relation to the transfer of the sale funds. The rule prohibited a lawyer from contacting another lawyer's client in relation to “a matter” that the other lawyer was acting on. WB had acted in relation to the house sale. In distributing any part of the proceeds of the sale and purchase transaction, there was no basis for any objection had WB made direct contact with either of his former clients.

This did not automatically mean that there was a disciplinary issue. WB was aware of the separation of KW and his wife and would not have been surprised to have received, from solicitors acting in the property relationship matter, an instruction concerning the transfer of funds. The instruction to transfer the funds was made jointly by the lawyers acting for each of the parties, each separately signing the direction. This would have provided additional confidence that there would be equal distribution to the parties. An unequal distribution may have led to some enquiry.

It was customary for lawyers to rely on advice or instructions conveyed by other lawyers on behalf of the client. A lawyer was not expected to “look behind” the instruction given by a client in every circumstance. There was nothing on the face of the joint instruction that would have alerted WB to any objections that KW could have in relation to the transfer. WB followed a well established practice in responding to a direction from a lawyer acting for the client whose funds were held in WB's trust account.

Section 12(6)(c) Lawyers and Conveyancers Act (Trust Account) Regulations 2008 (“LCAR”) (payments to a third party made in a form that permitted the crediting of the money only to the account of the intended payee) permitted the transfer of the funds on either the client's instruction or the client's authority. The authority for the transfer was given by the lawyer who acted for KW in the relationship property matter. WB acted on that authority to transfer the funds in a manner complying with s12(6)(c) LCAR.

WB fully complied with his professional obligations and his conduct did not give rise to any disciplinary concerns. Decision of the Standards Committee confirmed.

The names and indentifying details of the parties in this decision have been changed.

DECISION
Background
1

The Standards Committee declined to uphold a complaint made by KW (the Applicant) against law Practitioner, WB (the Pracitioner), and the Applicant seeks a review of that decision.

2

The Practitioner acted for the Applicant and the Applicant's wife (they were separated at the time) in relation to the sale of their home, and after the transaction was complete, the Practitioner's firm held in its Trust Account the balance of the proceeds on an interest bearing account. Settlement appears to have taken place in October 2009. The Practitioner was acting at the time on the joint instructions of the Applicant and his former wife.

3

The Applicant and his former wife engaged different lawyers in relation to their relationship property distribution. On 18 December 2009 the Practitioner received joint instructions from the solicitors acting for the Applicant and his former wife, instructing the Practitioner to pay the sum of $80,000 into the trust accounts of each of those lawyers, which the Practitioner did. The Practitioner relied on the instruction of the Applicant's lawyer in taking this action, but did not contact either the Applicant or his former wife personally prior to transferring the monies.

4

The Applicant complained that the Practitioner had transferred the money to his other lawyer without his (the Applicant's) consent. The complaint was that the transfer had been made, and without reference to himself.

5

In reply, the Practitioner explained that in transferring the sum of $80,000 to the trust accounts of the lawyers acting for the Applicant and his former wife respectively, he was acting on the joint instructions of their lawyers. He considered the direction of the Applicant's lawyer to be an appropriate authority. He explained, with reference to Rule 10.2 of the Conduct and Client Care Rules 2008 (the Rules), that the fact the Applicant was by that time represented by another lawyer prevented him from contacting the Applicant directly.

6

The Standards Committee canvassed these transactions and considered the responses of both parties, but considered it was unnecessary to take any further action in the circumstances and resolved pursuant to section 138(2) of the Lawyers and Conveyancers Act 2006 (the Act) to take no further action.

Review application
7

The Applicant sought a review citing the following grounds:

  • • He was acting for himself in relation to the sale and purchase and this did not involve his later lawyer. (He could see no barrier to the Practitioner contacting him over the sale proceeds).

  • • He did not authorise his relationship property lawyer to receive the $80,000 into their Trust Account.

  • • He expected the Practitioner to contact him before transferring any money.

  • • The Practitioner relied solely on the advice of another lawyer without any reference to himself which he...

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