MR IP of Auckland v SI of Auckland v SH of Auckland


[2012] NZLCRO 12

Hanneke Bouchier

LCRO 179/2010 and 180/2010

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


CONCERNING a determination of the National Standards Committee


of Auckland

Respondent (LCRO 179/10)

of Auckland


Respondent (LCRO 180/10)

of Auckland

In accordance with s 213 of the Lawyers and Conveyancers Act 2006 copies of this decision are to be provided to:

IP as the Applicant

SI as the Respondent

SH as the Respondent

The National Standards Committee

The New Zealand Law Society

Law Practitioners — Application for review of determination of National Standards Committee with regard to issuing of costs warning – complainant and respondents both lawyers – respondent lawyer issued an indemnity costs warning to the applicant lawyer personally – context involved a claim against respondents’ client which respondent lawyer believed to be completely groundless – whether issuing of warning was in breach of r10 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (“Client Care Rules”) (professional dealings by a lawyer).

Held: The Privy Council in Harley considered the proposition that a barrister who pursued a hopeless case - not appreciating it to be hopeless amounted to a serious dereliction of duty to the court was an unsound proposition and it would be unwise to treat the pursuit of a hopeless case as a demonstration of incompetence. No precise definition of what amounted to ‘serious dereliction of duty’ was given by the Privy Council, but it suggested that it was open to courts to penalise incompetence which led to a waste of the Court's time, or some other abuse of its process resulting in inevitable cost to litigants.

On this view, Harley could not be considered as authority for the Applicant's submission that wasting the Court's time in the pursuit of a hopeless case could never amount to a breach of a lawyer's duty to the court. Harley did not exclude the possibility that circumstances surrounding such a proceeding could give rise to enquiry into counsel's professional obligations to the court and whether an indemnity costs order could be made against counsel.

However the issue was not whether there was a breach of duty to the court as no proceedings had been filed and no costs had been sought by the practitioners. The question was whether the practitioners’ conduct was a breach of the rules governing the professional conduct of lawyers. Rule 10 Conduct and Client Care Rules required a lawyer to promote and maintain proper standards of professionalism in the lawyer's dealings and to treat other lawyers with respect and courtesy.

Where it was perceived that there is no sound legal basis for a legal claim, there was no objection to a lawyer putting a prospective claimant on notice, via his solicitor, that costs would be sought if the claim was pursued. It was a different matter when costs were threatened against counsel personally. This could not be described as “a natural incident to the justice system”. Law practitioners were advocates for their clients and any costs warning would be expected to be directed at the client. Warnings or threats that costs would be sought against counsel personally were not appropriate as a general deterrent to proceedings being issued and it would be of concern if such warnings became commonplace.

It was incorrect to say that the merits or otherwise of a claim could never be assessed by a prospective defendant where proceedings were threatened. Preliminary exchanges between the parties usually set out the basis of a claim, and making an assessment could be fundamental to the way that a matter proceeded, and was often the foundation for a settlement.

When considered in a disciplinary context, the circumstances surrounding such a warning would determine whether a lawyer had crossed the line of acceptable conduct in any given case. The question of whether there was a breach of professional standard was linked to whether there was a reasonable basis for a warning of this kind to have been given. The costs warning directed at both the prospective plaintiff (H) and his counsel (the applicant) was given in circumstances where the practitioners’ client company vigorously denied any wrongdoing after having undertaken extensive investigations into the matter. It could not be said that the warning was conveyed by the practitioners in bad faith or that there was no reasonable basis for it. The letter stated that indemnity costs warnings were not routinely made by their firm.

If a costs warning was issued without any reasonable basis and where it could reasonably be concluded that the warning was given to apply improper pressure to stop a would-be claimant from issuing proceedings, it could amount to a breach of r10. This would be so notwithstanding that the practitioner was acting under client instructions.

The warning was conveyed in circumstances where the possibility of an indemnity costs claim against counsel (applicant) could reasonably be entertained. This did not give rise to disciplinary concerns for the practitioners when alerting the applicant to the prospect of such a claim. It was open to the applicant and his client to assess the significance of the warning, and to respond accordingly.

Decision of the Standards Committee confirmed.


This decision covers a review of two decisions of the National Standards Committee on complaints made by Mr IP(the Applicant), against Mr SI and Mr SH (the Practitioners). The same complaint was made against both Practitioners in relation to the same item of correspondence, and it is appropriate that this review cover the Standards Committee decisions in relation to both of the Practitioners.


The parties to this review are all lawyers. The Applicant acted for H who claimed to have been injured by a product made by the company that was represented by the Practitioners. The company's extensive enquiries had concluded that the incident was not the result of its product, but due to the way the product had been stored. The Practitioners denied any wrongdoing or liability on the part of their client company.


There were exchanges of correspondence between the Applicant and the Practitioners in relation to this matter. A particular letter written by the Applicant to the Practitioners' firm on 16 September 2009 led the Practitioners to lodge a complaint against the Applicant with the New Zealand Law Society (NZLS). The Applicant was notified of the complaint and invited to respond.


In his reply (of 6 October 2009) the Applicant not only responded to the Practitioners' complaint, but raised complaints of his own against the Practitioners. His complaints concerned a letter sent to him by the Practitioners on 9 September, the week before his reply to them (which became the subject of their complaint). The Applicant asked the Standards Committee to accept this as a separate complaint of his own against the Practitioners.


The parts of the Practitioners' letter that the Applicant objected to were paragraphs 8 and 9 which were as follows:

    “In the event that your client brings a claim against our client, it will be opposed and our client will seek indemnity costs in opposing any application. This letter and earlier correspondence, will be produced to the Court in support of any application. In view of the lack of any merit in any claims against our client, which could only be viewed as an abuse of process, our client has confirmed that it will instruct us to file an application against you and co-counsel for bringing any such claim. 9. We note that whilst many firms make indemnity costs warnings as a matter of course, this firm does not do so. However, in the clear circumstances of this case we have been instructed to do so. We note this so that you and your client are fully aware of the matters.”

All of the complaints were considered by the National Standards Committee which determined, pursuant to s 138(2) of the Lawyers and Conveyancers Act 2006, that no further action was necessary or appropriate having regard to all the circumstances. The Committee expressed the view that the Applicant's complaint lacked merit and support.

Review application-procedure

The Applicant applied for a review of the decisions and asked to be personally heard in respect of his applications. An Applicant-only hearing was arranged and attended by the Applicant and one of his staff in support. He objected to the Applicant-only hearing, which he considered denial of his rights to proper process.


By virtue of s 206 of the Lawyers and Conveyancers Act 2006 the LCRO may regulate his or her own procedures as considered fit, subject to complying with the rules of natural justice. While the LCRO Guidelines set out the usual pathways for the review process, they are not exhaustive and cannot address all circumstances in which review applications are made.


The nature of an Applicant-only hearing is explained in the LCRO Guidelines, a copy of which was sent to the Applicant....

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