MR VG v MS AB

 
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[2013] NZLCRO 17

LCRO 263/2011

Concerning An Application For Review Pursuant To Section 193 Of The Lawyers And Conveyancers Act 2006

And

Concerning A Determination Of A [North Island] Standards Committee

BETWEEN
Mr Vg
Applicant
and
Ms Ab
Respondent

Ms AB as the Applicant

Mr VG as the Respondent

Mr VF as a related person or entity

[A North Island] Standards Committee

The New Zealand Law Society

Application to review a Standards Committee determination that the applicant's bill was too high — bill was for less than .2000 — applicant acted as a solicitor for the respondent's mother's estate — applicant's law firm was under investigation by the Standards Committee and assets were moved to the Committee's account — applicant's bill included work related to distribution of assets while under Committee's control — respondent said that work covered by bill would not have been done if the applicant's firm had not been investigated — issues also relating to taxation of monies — whether the Standards Committee had jurisdiction to review the bill as fee did not exceed .2,000 — whether the fee was appropriate — whether the determination indicated prejudgment and a lack of impartiality.

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

The issues were: whether the Standards Committee had jurisdiction to review the bill under r29 Lawyers and Conveyancers Act (Lawyers: Complaints Service and Standards Committees) Regulations 2008 (“the Regulations”) (unless there special circumstances Committee must not deal with … a fee that did not exceed .2,000); whether the fee was appropriate under r9 CCC Rules; and, whether the determination indicated prejudgment and a lack of impartiality.

Held: The term ‘special circumstances’ was not defined. The leading authority on what constituted special circumstances was Cortez Investments v Olphert and Collins which produced three different tests:

  • •if the issue was to be related to perceived injustice then the simple risk of injustice should be sufficient;

  • •it was a question of where the interests of justice lay in all the circumstances;

  • •special circumstances must be abnormal, uncommon, or out of the ordinary.

Here, there were special circumstances that were abnormal, uncommon or out of the ordinary and that there was a perceived risk of injustice.

Consideration of the basis for VG's legal fees of .975 was appropriate because, before AB attained the age of 25 years and became eligible for her inheritance, VG's firm had been investigated and the assets in the firm's trust fund were transferred to a Standards Committee's account (including those of AB). AB had liaised directly with the NZLS in relation to her assets, and received final payment from them rather than from VG.

There was clearly a complex set of facts where it was not immediately clear what work was necessary due to the intervention of NZLS and what related to the normal incidents of the administration of the estate. Given the fact that assets of the firm had been frozen due to concerns about improper conduct, there was a strong public interest in NZLS stepping in and ensuring that all matters in relation to the affairs of the firm were properly conducted including billing practices. The Standards Committee had not conducted an inquiry on its own motion. The inquiry had been prompted by AB's complaint under s132 LCA (complaints about practitioners, incorporated firms, and their employees). It might be that as the matter progressed the Standards Committee had expanded its enquiries to take into account additional issues that arose. That was entirely appropriate.

The holding of a preliminary view was a natural consequence of having read the relevant material submitted by the parties and was unobjectionable. Even where judicial officers had expressed a view about the possible final outcome of a case, a number of decisions had held that did not amount to bias. The Standards Committee had an inquisitorial role and as such it was proper for it to follow lines of inquiry and to seek comment from the parties on the inquiries it was making. There was no indication from the correspondence provided by VG or AB (or on the file of the Standards Committee) that the Standards Committee had prejudged the issues, or been impartial about them. Replies were sought from both parties, and considered carefully by the Standards Committee with an open mind. Regulation 29(b) provided the Standards Committee with the power to investigate VG's bill, should special circumstances exist. Such circumstances had existed, therefore the decision to exercise its discretion had not indicate any predetermination of the matter, or lack of impartiality on its part.

Rule 9 CCC Rules required the practitioner to take into account when determining the reasonableness of the fee “the urgency and circumstances in which the matter was undertaken”. The bill presented to AB stated that part of it arose in relation to VG's management of the trust fund on interest bearing deposit. It was unarguable that AB's funds had been incorrectly taxed. For eight years, the funds were subject to a default tax rate of 39%. A diligent lawyer would not allow tax to be deducted at this rate for many years without ascertaining that this was the proper rate

VG had concluded that it was not financially viable to assist AB to apply for a rebate of the incorrectly paid tax; that argument was, presumably, based upon the fact that further legal fees would have been charged. As those fees would not have arisen if the funds had been correctly taxed, it seemed unfair for VG to argue those potential fees as a reason to not seek repayment of the over-payment of tax. The Standards Committee had been correct to conclude it had been unreasonable for VG to charge his full legal fees for the work that he had done in relation to the taxation issue.

Much of the work VG had done on the distribution of the assets was the result of AB's assets being in the control NZLS. That was not AB's fault but related to matters internal to the practice of VG. VG's bill also referred to attendances with NZLS to preserve AB's funds. Those attendances would have been unnecessary were it not for the intervention of NZLS in the operation of the law firm in which VG was a partner.

The Standards Committee had been correct to conclude that AB should not be expected to pay increased fees due to NZLS, as regulator, intervening in the practice of VG. The fact that the decision of the Standards Committee did not accord with VG's view of what the outcome should have been did not mean that the Standards Committee had misinterpreted or misunderstood the information provided. It was clear that the conclusions reached were well-considered, rational and reasonable.

Pursuant to s211(1)(a) LCA (confirm, modify, or reverse any decision), the decision of the Standards Committee was confirmed.

DECISION
Background
1

Mr VG seeks a review of [a North Island] Standards Committee. The Committee considered a complaint by Ms AB in respect of a bill rendered by Mr VG. The Committee found the bill to be too high and ordered that it be reduced.

2

Mr VG acted as solicitor to Ms AB's mother's estate. Ms AB was the main beneficiary of the estate (and therefore any costs charged by Mr VG reduced the share of the estate to which she was entitled).The facts surrounding the complaint are that:

  • a. On reaching [a certain age], Ms AB would be entitled to receive assets from her deceased mother's estate. Mr VG was one of two trustees of the estate, the other being his business partner, Mr VH.

  • b. On 17 June 2010, Ms AB was advised by the Law Society that [Law Firm 1], for whom Mr VG and Mr VH worked, was being investigated by the Hawkes Bay Standards Committee. By that time, the funds that were becoming due to Ms AB had been in the firm's trust account for eight years. As part of the intervention by the Committee the funds were taken into the control of the New Zealand Law Society (NZLS).

  • c. Some time later Ms AB received her funds in September 2010, directly from the NZLS.

  • d. In February 2011, Ms AB received a bill from Mr VG for the sum of .1148.75, for legal services provided by Mr VG in relation to the final administration of the trust fund.

The Complaint
3

Ms AB believes that if [Law Firm 1] had not been investigated, the work covered by the bill would not have been carried out. Ms AB sought waiver of the bill, on the basis that [Law Firm 1]'s alleged misconduct had caused her stress. She also commented in later correspondence that for the duration that [Law Firm 1] held the estate funds, they were taxed at the incorrect rate of 39%. Ms AB maintained that Mr VG had previously been given her IRD details and she sought a rebate of the sum taxed in error.

Mr VG's response
4

Mr VG denied the grounds of Ms AB's complaints, stating that all work done by him was done after the intervention of the NZLS, and was appropriate and necessary. Mr VG stated that he had reduced the bill by 20 % in light of Ms AB voicing concerns about delay in her obtaining her funds.

5

Mr VG said that the file showed attendances necessary to preserve the funds for distribution and also to ensure their safe distribution to Ms AB, and in particular that as Ms AB was confused by her communication with the NZLS it was his attendances with the NZLS that cleared the way for her to receive her funds.

6

Mr VG denied that he had ever...

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