Mr OM v Mr PR

• Jurisdiction: New Zealand
• Judgment Date: 14 August 2012
• Neutral Citation: [2012] NZLCRO 70
• Date: 14 August 2012
• Docket Number: LCRO 118/2011
• Court: Legal Complaints Review Officer

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

and

Concerning a determination of the Otago Standards Committee

BETWEEN

Mr OM

Applicant

and

Mr PR

Respondent

[2012] NZLCRO 70

LCRO 118/2011

Review of Standards Committee decision refusing to uphold a complaint of breach of fiduciary duty and/or trust — paymentmade from solicitor's trust account without written agreement of the applicant, contrary to what was specified in handwriting in an agreement between the applicant and the firm's client — complaint made against law firm but firm was not incorporated — whether a complaint could be made against an unincorporated firm — whether law firm's knowledge of the hand written amendment relating to payment of trust money should have been considered.

Counsel:

Mr OM as the Applicant

Mr FA as Counsel for the Applicant

Mr PR as the Respondent

Mr HK as Counsel for the Respondent

The Otago Standards Committee

The New Zealand Law Society

DECISION

Introduction

1 The background to Mr OM's complaint concerned a dispute that he had with BAI. The complaint was made against the law firm of YZA which acted for BAI, but since that firm is not incorporated, the Standards Committee took the complaint to be against Mr PR (the Practitioner) whose business card was attached to information that Mr OM had sent with his complaint.

2 The complaint was not upheld by the Standards Committee. This review application was made by Mr OM who is referred to as the Applicant.

3 The background is that BAI claimed the Applicant owed it money, and when the Applicant wanted certain repairs done to machinery on his farm, BAI agreed to undertake the repair work providing that an amount of money representing its claim was paid into the trust account of YZA. The Applicant agreed.

4 It appears that Mr QD, a director of BAI, drafted an Agreement between his company and the Applicant. It was dated 19 August 2009 and it contained two specific clauses that are material to the complaint, and this review.

5 Clause 1 provided that the amount of $11,930.00 would be paid by the Applicant into YZA trust account and held by that firm pending a resolution between the Applicant and BAI over disputed accounts, also providing for any monetary adjustments to be made. Materially, clause 1 provided that the “ money needs to be agreed by both parties”.

6 Clause 2 recorded that BAI would start (the repair) work as soon as possible. Clause 3 was a little unclear, but appeared to record the Applicant's agreement to pay for the proposed repair work without disputing BAI's account.

7 The evidence indicates that the Practitioner had perused this agreement at some time and advised that a portion of Clause 3 should be deleted, which Mr QD did before he brought the agreement to the Applicant for signing.

8 The Applicant took the agreement to his own lawyer, Mr FA, who in his own handwriting inserted at the end of Clause 1, the following: “[n]o payment shall be made from [YZA] Trust account without the written agreement of both parties.”

9 The Applicant then took the Agreement and a cheque for $11,930.00 to YZA and obtained a receipt. There was no evidence that the Practitioner saw the Agreement in its final form.

10 BAI undertook the repair work and at some stage afterwards Mr QD contacted YZA law firm to say that the money in the firms trust account could now be released. Payment was then made to BAI.

11 Several months later the Applicant discovered that the payment had been made to BAI from the YZA trust account. He had not given his written authority that the money could be released, and disputed that he had agreed to the payout, and also disagreed that he and Mr QD had discussed the disputed invoices. In the Applicant's view the law firm should not have released the money to BAI without his written consent in accordance with the Agreement.

12 Eventually the Applicant made a complaint to the New Zealand Law Society, alleging breach of trust and/or breach of fiduciary obligation to hold the money in trust for both him (the Applicant) as well as BAI.

13 The Standards Committee did not uphold the complaint because it was not persuaded that the Practitioner was aware of the hand written amendment to Clause 1 of the agreement. The added difficulty was that Mr PR, through serious ill health, was no longer practicing as a lawyer, and was unable to respond to the complaint himself or participate in the enquiry.

14 It appears that the Standards Committee focused its consideration on the alleged breach of fiduciary duty and/or trust, when it concluded that in the absence of evidence that Mr PR knew of the amendment, there was no basis for a finding that there had been a breach of any duty when the firm paid out what appeared to be the client's funds. The Committee decided to take no further action, pursuant to Section 138(2) of the Lawyers and Conveyancers Act.

Review Application

15 The Applicant sought a review on a number of grounds. A review hearing was held on 19 June, attended by the Applicant and his counsel (Mr FA), and for the law firm, Mr HK appeared.

16 Also present was the Practitioner's brother who was able to give evidence as to the Practitioner health. I record at this point that there was no dispute that the Practitioner himself was not able to participate in this proceeding due to ill health. No objection was raised to the Practitioner's brother remaining at the hearing so as to be able to report back to the Practitioner.

17 The first ground of review was that the complaint was not against the Practitioner, but against the law firm of YZA. The Applicant was of the view that the Standards Committee should have considered the firm's knowledge at the relevant time.

18 It was explained to him that the law firm is not incorporated, and as a matter of jurisdiction the Standards Committee could not consider a complaint against the firm. It appears that the Applicant had pinned one of Mr PR's business cards to the Agreement when he took it to YZA, and this together with the fact that Mr PR had acted for BAI led the Committee to identify Mr PR as the lawyer against whom the complaint had been made. In any event, the first ground of review, namely that the complaint is against the law firm, cannot progress as there is no jurisdiction to do so.

19 The second ground of review was based on the Applicant's view that there could be no doubt that the law firm of YZA was aware of the hand written amendment to Clause 1 of the agreement. The Applicant contended that there had been an admission by the firm that the need for the Applicant's consent to the payment was known prior to paying out the money, and that this appeared to have been ignored by the Standards Committee.

20 The Applicant explained the circumstances in which he had left the Agreement and the cheque with the law firm. He submitted that the law firm had the original copy of the Agreement which contained the hand written amendment. The Applicant places some...