Mr UJ v Mr OO

• Jurisdiction: New Zealand
• Judgment Date: 09 April 2013
• Neutral Citation: [2013] NZLCRO 14
• Date: 09 April 2013
• Docket Number: LCRO 143/2012
• 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 a [South Island] Standards Committee

BETWEEN

Mr UJ

Applicant

and

Mr OO

Respondent

[2013] NZLCRO 14

LCRO 143/2012

Review of decision to take no further action in respect of complaint that applicant's counsel (the respondent) had acted in a conflict of interest situation by signing a notice of claim in favour of the applicant's wife (pursuant to loan refinancing agreement) while acting for the applicant in a relationship property dispute — respondent signed notice as “solicitor for claimant” — notice of claim registered in return for transferring ownership into applicant's sole name so that applicant could obtain mortgage refinancing — applicant alleged a conflict of interest in breach of r6 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (client interests) — Standards Committee had already dismissed another complaint by applicant against the respondent involving the same course of dealing — whether signing notice of claim resulted in a more than negligible risk — whether issue estoppel applied to disciplinary hearings.

Counsel:

Mr UJ as the Applicant

Mr OO as the Respondent

Mr ON as a related person or entity

A [South Island] Standards Committee The New Zealand Law Society

DECISION

Background

1 This review relates to the conduct of Mr OO when he acted for Mr UJ. The assertion of Mr UJ is that Mr OO acted in breach of his professional obligations when he signed as ‘correct’ a Notice of Claim by Mr UJ's wife against property of which Mr UJ was the registered proprietor. Under his signature on that document Mr OO is noted as “solicitor for the claimant”. The claimant was Ms UK. It was alleged by Mr UJ that this was in essence a conflict of interest.

2 It is important to note that this review relates to the second complaint that Mr UJ has made in respect of Mr OO. The first complaint was made in January 2010 and was wide ranging. It was dismissed by the Standards Committee and the Standards Committee decision was upheld on review by this office in March 2012.

3 The facts surrounding both complaints are that in early 2008, Mr UJ instructed Mr OO to act on his behalf in relation to a property relationship matter involving Mr UJ and his ex-wife (Ms UK). Mr UJ and Ms UK had been married for approximately one year when a dispute arose over the matrimonial property, [Dot]. [Dot] is a small locality in the [South Island]. The property was subject to a mortgage with Bank A.

4 By the time Mr UJ instructed Mr OO, Mr UJ had represented himself in:

• a. A Family Court hearing in [date in 2007], relating to division of relationship property, in which the Court decided that the property was to be split 65:35 in favour of Ms UK; and

• b. An appeal to the High Court, in [date in 2007], of the Family Court's decision on apportionment of the relationship property. Mr UJ initially acted for himself, but a Barrister, Mr UL, appeared at the hearing. The appeal was only allowed in part, with the matter being remitted back to the Family Court for reconsideration of the shares to be awarded to Mr UJ and Ms UK.

5 After the second Family Court hearing, the relationship property was ordered to be split 62:38 in favour of Ms UK. Mr UJ instructed Mr OO to appeal that decision and in a decision issued in 2008, the appeal was disallowed.

6 Mr UJ then instructed Mr OO to lodge proceedings for leave to appeal the earlier High Court decision. Leave to appeal to the Court of Appeal was granted.

7 By now, Bank A had issued a default notice after Mr UJ failed to make the necessary payments. Mr UJ proposed refinancing and obtained a loan offer from Bank B. In order to obtain the loan to discharge the loan, secured by the Bank A Mortgage, Mr UJ needed [Dot] to be in his sole name. Mr UJ and Ms UK therefore agreed that Ms UK would transfer her ownership of [Dot] to Mr UJ, but the transfer would not be a complete transfer of Ms UK's interest in the property. Mr UJ was to hold the property in trust for himself and Ms UK, pending finalisation of monies due by one party to the other in terms of the Family Court judgment or the outcome of the appeal in the High Court in [date in 2008].

8 In consideration for the transfer of title to Mr UJ:

• a. Law Firm A were to hold in their trust account $36,250, in an interest-bearing deposit pending the outcome of the appeal to the High Court;

• b. At the conclusion of that appeal, the sum of $36,250 and interest was to be paid to Ms UK, unless the outcome was that a lesser amount should be paid;

• c. Mr UJ was to execute an agreement to mortgage the property to Law Firm A, and a caveat was to be lodged to protect the agreement to mortgage. The purpose of this was to enable Law Firm A to use the undrawn portion of the Bank B loan to enable $9000 costs and any further costs to be paid to Ms UK at the conclusion of the High court appeal;

• d. Ms UK was also entitled to lodge a Notice of Claim against [Dot], pending payment of this sum; and

• e. When all of Ms UK's interest in [Dot] was satisfied by payment of monies due, and all awards of costs, she would withdraw the Notice of Claim.

9 The terms of the agreement were recorded in a memorandum, which was sent by Mr OO to Mr UJ. Mr UJ made some comments about the memorandum, which was then signed by Mr OO on Mr UJ's behalf.

10 Although the memorandum was not filed with the court due to an oversight on the part of legal representatives on both sides, title of [Dot] was transferred to Mr UJ, the refinancing occurred, the mortgagee sale was avoided and Ms UK's Notice of Claim was registered, along with the caveat in favour of Law Firm A.

11 Despite the successful transfer of legal ownership of [Dot] to Mr UJ, a mortgagee sale was later completed by Bank B. This sale resulted in a loss, and Ms UK's Notice of Claim being discharged.

The Complaint

12 On [date in 2012] Mr UJ made a complaint alleging that:

• a. Mr OO continued to act for him despite the existence of a conflict of interest. Mr UJ claimed that the conflict of interest arose because Mr OO acted at the same time for him and his ex-wife, Ms UK, when lodging a caveat and Notice of Claim under's 42 of the Property (Relationships) Act 1976 with the Registrar of Lands;

• b. As a result of that agreement, mortgage funds deposited in the trust account of Law Firm A were used by Law Firm A and that when the $36,250 was transferred to Ms UK's lawyers, the funds were not given to her but were “applied to her benefit”; 1

• c. The caveat lodged by Mr OO, on behalf of Law Firm A, was contrary to Mr UJ' interests; and

• d. Mr OO concealed his role in the Notice of Claim, thereby perverting the course of justice before the courts and in relation to the Law Society complaint by Mr UJ.

13 In the same complaint, Mr UJ also referred to:

• a. The Supreme Court's ruling that there was no evidence to support Ms UK's claim; and

• b. The firm had “refused to account for or return the missing sum transferred from the Trust Account at Law Firm A.” 2

The Response

14 In his response to the complaint, Mr OO provided a brief summary of the complex and lengthy relationship property dispute between Mr UJ and Ms UK. Mr OO noted that the document complained of by Mr UJ was prepared by Ms UK's legal representatives and not him, or any other lawyer at Law Firm A. Mr OO pointed out that the legal representatives for Ms UK were specified on the document as the address for service.

15 Mr OO stated that his certification of the Notice of Claim pursuant to s 42 of the Property (Relationships) Act 1976 was at the specific request of Ms UK's legal counsel and for LINZ purposes only. Mr OO stated that this certification is an everyday occurrence where express authorisation is given prior to charges and discharges and other documentation; where a number of documents are being registered at the same time.

16 Mr OO's view is that Law Firm A never acted for Ms UK, and that the certification by him of the document was a procedural step that was necessary to protect Mr UJ's desire to have [Dot] transferred to his own name.

17 Mr OO referred to the High Court judgment of Justice French, in which French J noted that there was no dispute that Mr OO conducted the negotiations and signed with

the full authority of Mr UJ. French J also commented that, on the facts, there was no evidence of a causal nexus between the decision that the notice should remain, and the loss that Mr UJ says he suffered when [Dot] was sold by the mortgagee

Reply by Mr UJ

18 Mr UJ provided a very lengthy reply to the response, much of which was not focussed on the specific complaint he had made of Mr OO reportedly acting for both him and Ms UK when the document was signed by Mr OO. A significant part of Mr UJ's reply detailed what he saw to be deficiencies in the approach of the courts whose judgments did not favour him.

19 He acknowledged that the document complained of was prepared by Ms UK's counsel. However, Mr UJ reiterated his view that Mr OO was not entitled to sign the document on his behalf, as to do so undermined Mr OO's loyalty to Mr UJ. Mr UJ maintained that Mr OO was, in effect, acting for Ms UK.

Standards Committee Decision

20 The Standards Committee considered the complaint and the response of Mr OO and the reply of...