MR JG v MS RS

 
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[2012] NZLCRO 22

Legal Complaints Review Officer

court:

LCRO Vaughan

LCRO 245/2010

Concerning An Application For Review Pursuant To Section193 Of The Lawyers And Conveyancers Act 2006

Concerning A Determination Of Auckland Standards Committee 2

Between
Mr Jg
Applicant
and
Ms Rs
Respondent

Application for review of Standards Committee determination that applicant had breached r2.3 (a lawyer to use legal processes only for proper purposes) and r13.4 (lawyer to advise client of reasonable alternatives to litigation) Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 — applicant was instructed by Body Corporate to recover outstanding levies due from respondent — had strict instructions to recover all associated costs (including legal fees) — costs to respondent were significant when compared to amount of original debt — whether respondent could complain about applicant's fees — whether applicant had a duty to respondent—whether applicant should have advised his client as to alternatives to litigation and had failed to do so

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

The issues were: whether RS could complain about JG's fees; and whether JG had a duty to RS to advise his client as to alternatives to litigation and had failed to do so.

Held: The finding of a breach of r2.3 disregarded JG's instructions from his client. JG had no duty to RS. His duty was to his client and his instructions were to recover the outstanding levies and all costs associated with that recovery. This was therefore incompatible with the Standard Committee's finding that JG pursued RS relentlessly, with complete disregard to the costs involved. The Standards Committee proceeded on the basis that RS was in effect JG's client and did not take note of the fact that RS became a party chargeable with JG's costs by reason of the litigation.

The breach of r13.4 was attributed to JG on ground that JG did not advise his client of alternatives to litigation when he was obliged to do so. L, from whom JG received instructions, was aware of the extensive litigation and was no stranger to negotiation and mediation himself. His strict instruction to JG was to proceed to collect the outstanding levies and to avoid any costs being imposed on the other body corporate owners. Imposing a duty on JG to encourage settlement by mediation or other means would have resulted in an impost on the other body corporate owners which was directly contrary to L's instructions.

JG was complying with his client's instructions when he pursued the litigation against RS, although the costs were out of proportion to the debt involved. However there was merit in RS's complaint that the substituted service procedure was unnecessary and inappropriate. A careful scrutiny of this and other process matters had to be undertaken.

Standards Committee decision reversed. Standards Committee directed to appoint costs assessor to review JG's bills of costs.

DECISION
Background
1

Mr JG was instructed by ADJ the secretary for the Body Corporate in which Ms RS owned an apartment, to recover outstanding levies due by her.

2

In September 2008, summary judgment proceedings were issued for $1,736.48, being outstanding levies, interest, debt collection and search charges. In addition, the Body Corporate claimed Body Corporate secretarial costs of $500.00 plus legal fees on a solicitor/client basis.

3

The service agents were unable to serve Ms RS at the address provided to Mr JG by ADJ and he applied for substituted service by way of newspaper advertisement.

4

When these proceedings were brought to her notice, Ms RS paid (on 30 December 2008) the sum of $2,294.66 to ADJ. This amount was in payment of the outstanding levy ($1,100.95) plus a further levy which had been raised in September 2008. She declined to pay any other costs as she stated that although she had notified ADJ of a change of address, the invoices for the outstanding levies were sent by ADJ to a previous address in Wellington.

5

The proceedings were scheduled for call over on 24 February 2009. On 18 February, Mr JG received a letter from ADK who Ms RS had instructed. ADK sought discontinuance of the proceedings with no costs orders.

6

Mr JG sought instructions from ADJ. Mr L, the owner and director of ADJ replied by advising that his firm had not received any notification of a change of address, they had not received any returned mail from the Wellington address, and that as Ms RS had owned the apartment for some time, she would have been aware that levies were to be invoiced. He contended that Ms RS had a duty to communicate with the Body Corporate secretary if she did not receive the expected invoices. Even though he did not say so, Mr L's instructions were essentially that Ms RS should be obliged to pay the costs involved.

7

Mr JG responded to ADK accordingly. On 23 February, whilst continuing to dispute liability, ADK made an offer on their client's behalf to pay the sum of $1,000.00, which they described as “one half of the costs outstanding”. The intent was that the payment represented the portion of the costs attributable to the summary judgment proceedings, but not the substituted service which Ms RS contended was unnecessary.

8

This offer was not seen by Mr JG before he appeared in Court on the following day. Having been notified of it, he sought an adjournment of the matter. The hearing was then adjourned to 10 March and Mr JG reported to Mr L.

9

With his report, Mr JG enclosed a memorandum of the costs outstanding. Including his costs of $2,636.88, the total amount required was $5,297.91.

10

Mr JG sought instructions again. He pointed out to Mr L what could develop and the consequential increase in costs. He also recorded the basis on which he considered Ms RS was liable for costs on a solicitor/client basis, although he recognised that ultimately it would be the Court which would make that decision.

11

Mr L responded directly to Ms RS on 3 March. Having received Mr JG's up to date costs, Mr L observed to Ms RS that:–

“to accept your offer will involve the Body Corporate and your fellow owners carrying nearly $3,000.00 of costs which would, we suggest, be inappropriate. Clearly for this issue to settle there will need to be some compromise by all parties but we are not in a position to recommend acceptance by the Body Corporate as clearly the Body Corporate has not done anything wrong.”

12

On 4 March, ADK wrote to Mr JG seeking a response to their letter of 23 February in which the settlement offer was made. They also sought details of the grounds on which Mr JG considered his client was entitled to solicitor/client costs. Mr JG replied on 5 March noting that their respective clients had been liaising directly.

13

ADK wrote again on 9 March, noting that they did not consider their client would be liable for the costs of the substituted service or formal proof, given that in their view, both were unnecessary.

14

On 10 March, being the date of the next hearing, a Notice of Opposition and affidavit were served by fax at Mr JG's office. This resulted in a further adjournment of the matter to 21 April for a defended hearing.

15

With a Notice of Opposition having been filed, it was necessary for the Body Corporate to prepare and file a reply affidavit. Mr JG sought instructions from Mr L who responded on 16 March. He canvassed the facts as he saw them with regard to the non receipt by Ms RS of the levy notices, and concluded that his office was not at fault. He finished his email in the following way: –

“Something is not adding up in this whole situation; however I have no wish to incur the Body Corporate any further costs. I can however confirm that I cannot locate the correspondence of 1 December 2007 which Ms [RS] indicates was sent to us and if it had been received it would as noted, be included in the minutes of the December meeting.”

16

Mr JG then drafted the Body Corporate reply affidavit and forwarded it to Mr L for comment. Mr JG also prepared comprehensive submissions and completed and filed Mr L's affidavit.

17

The matter did not proceed on 21 April and a new date was set for 11 June. At 6.51pm on the evening before the hearing, ADK filed a memorandum in the Court. This resulted in the Court staff removing the file from the list as they understood there was to be an adjournment by consent. This was incorrect, and Mr JG appeared. Upon finding that the matter had been taken out of the list, he arranged for it to be reinstated and appeared before Judge Hubble. That incurred further costs. Notwithstanding the issues raised by Ms RS's solicitor in the memorandum, the matter was set down for hearing scheduled for 2 September.

18

It subsequently became apparent, that Ms RS had on 9 June, paid the sum of $4,955.56 to ADJ, on the basis that it was in full and final settlement of the matter of costs. Mr L responded to Ms RS directly by email in which he advised:

“unfortunately there are considerable costs which the solicitors have incurred as a result of the Notice of Opposition and these will need to be met by you.

Please confirm your agreement failing which the B[ody] C[orporate] will need to continue with the proceedings to resolve this matter”.

19

The payment made by Mr RS had not taken...

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