Ms Mansfield v Mr Southwell

 
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[2010] NZLCRO 29

Legal Complaints Review Officer, Christchurch

court:

LCRO Bouchier

LCRO 199/2009

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

Concerning a determination of the Canterbury Westland Standards Committee

Between
Ms Mansfield Of South Island
Applicant
and
Mr Southwell Of South Island
Respondent

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

Application for a review of a Standards Committee decision declining to uphold the applicant's complaints against the respondent lawyer — the respondent acted for the applicant's former business partner in respect of a business restructuring and enforcement of personal securities which led to the applicant declaring bankruptcy — the respondent had previously acted for the applicant on several matters — the settlement agreement between the applicant and her former partner involved an agreement for the applicant's daughter to withdraw allegations of sexual abuse made to the Police — whether the respondent had a conflict of interest — whether the respondent was in possession of confidential information pertaining to the applicant and thus prohibited him from acting against her — whether the respondent had perverted the course of justice by assisting his current client to escape criminal charges — whether the respondent was guilty of unbecoming conduct under the Law Practitioners Act 1982 or had breached the Rules of Professional Conduct for Barristers and Solicitors.

The issues were: whether S had a conflict of interest and had breached r1.07 of the Rules; whether S was in possession of confidential information pertaining to the applicant and thus had prohibited from S acting against M under r1.04 of the Rules; whether S had perverted the course of justice by assisting his current client to escape criminal charges under r7.04 of the Rules; and whether S was guilty of misconduct or conduct unbecoming of a barrister and solicitor under the Law Practitioners Act 1982 (“LPA”).

Held: selatively high and misconduct was considered to be conduct of sufficient gravity to be termed reprehensible or disgraceful or if the default arose from negligence.

A conflict of interest arose when a practitioner acted for two or more individuals in relation to the same transaction whose interests conflicted or could conflict. The rule governing a lawyer's responsibilities for such circumstances was set out in R1.07 of the former Rules which provided that a lawyer had to inform the clients of the conflict, recommend that they sought independent advice and decline to act if one party was or could be disadvantaged.

S had made it clear on a number of occasions that he acted only for T and that he did not act for M. M had been independently represented by another law firm and accountant in the transaction. She had signed the documents without her lawyer present and had signed a waiver of independent advice form. S had taken all reasonable steps to make it clear to M that he was not acting for her. If M had decided not to keep in contact with her lawyers at the time of signing the documents, there was no basis for transferring to S any responsibility for protecting her interests.

Rule 1.07 of the Rules stated that a lawyer was prohibited from acting against a former client where they had gained knowledge though prior actions that could be detrimental to the former client. While there was no ongoing duty of loyalty of a lawyer to a former client, there was an ongoing duty of confidentiality. No evidence was provided about what confidential information S had used or that could have been used and none of S's former services to M involved the business operations of the partnership now being dissolved.

Rule 7.04 of the Rules required a practitioner to make all reasonable efforts to ensure that legal processes were used for their proper purposes only. With regards to the settlement being based on the withdrawal of allegations of sexual abuse by M's daughter against T, S had not merely recorded the terms of a settlement agreement between the parties. S's correspondence (by conveying T's threat to bankrupt M if she did not agree) clearly demonstrated his involvement in assisting T to avoid a serious criminal complaint. S had contravened his professional obligation by assisting T to pervert the course of justice and this was a further violation of his obligation under r7.04 of the Rules.

The complaint that S breached r7.04 of the Rules of unbecoming conduct was upheld. The complaints concerning breaches of r1.07 (conflict of interest) and r1.04 (possession of confidential information) of the Rules were not upheld.

The range of penalties under the LPA was limited to a $2000 fine. S was fined $1,700 which took into account the seriousness of the breach. S was censured pursuant to s106(4)(b) LPA (powers of District Disciplinary Tribunal — censure). Where a finding of unsatisfactory conduct was made or upheld on review it was usual that costs were imposed; costs awarded against S.

DECISION
1

Ms Mansfield (the Applicant) applied for a review of a Standards Committee's decision declining to uphold her complaints against Mr Southwell (the Practitioner). The Practitioner acted for her former business partner, T, in respect of a business restructuring, and subsequently enforcing personal securities given by the Applicant for advances given by T. The Practitioner had previously acted for the Applicant is several matters. The Applicant and T had been former partners in the business and personal sense. The complaints mainly involved allegations by the Applicant against the Practitioner of conflict of interest and perverting the course of justice.

2

After filing the complaints the Applicant and the Practitioner agreed to participate in mediation but this proved unsuccessful and the Standards Committee resolved to conduct an investigation pursuant to section 152(2) of the Lawyers and Conveyancers Act (the Act), and in respect of all 8 complaints. At the conclusion of its investigation the Committee determined to take no further action.

Reasons for review.
3

The Applicant sought a review because she believed that the Standards Committee had not investigated the allegations of conflict of interest. She also alleged that the Practitioner had assisted in perverting the course of justice which she considered had led to her being made bankrupt.

4

Review hearing took place on 30 April 2010, and was attended by the Applicant and her counsel and also other persons in support. Also attending were the Practitioner and his counsel.

Review
5

It is not necessary to set out in full detail the somewhat complex background to the complaints. Given that the Applicant considered that her complaints had not been fully considered, this review has examined the principle issues that underpinned the complaints. The following timelines provides a framework in which these matters may be considered.

1999

LACL incorporated. Engaged in the business of breeding animals on a rural property (Callender property). Practitioner was not involved in these transactions.

2000

Partnership formed between the Applicant and T, (equal shares). Partnership purchased the Callender property. (Above lease to LACL continued). Practitioner acted in the formation of the partnership and purchase of the property.

2000

Practitioner draws a will for the Applicant. Amends the Will in 2003.

2003

Practitioner provides employment-related advice (to the Applicant) concerning an LACL employee.

2000

-2004 The Applicant managed the business. T contributed money to pay for improvements – to both the business and to the property. Except in one instance where employment advice given, no evidence of the Practitioner's involvement in relation to the business operations by the Applicant or the financial advances made by T to either the partnership property or to LACL.

2004

-2005 Ongoing financial losses of LACL led T to take steps to separate the business interests owed by himself and the Applicant. This resulted in a restructuring agreement that was considered (at that time at any rate) to be favourable to the Applicant, and involved the creation of a new company (LASL) owned solely by the Applicant, which took over the LACL business and related assets, and also the lease. The Applicant provided personal guarantees in respect of loans made by T, and she continued to operate the business. Practitioner acted for T in the restructuring and prepared documents recording agreement. Practitioner also formed the Applicant's company, LASL, on the instructions of T.

2006

The business failed to succeed. T enforced the securities against the Applicant. Practitioner assisted T with enforcement, including seizure of goods and chattels.

Complaints
6

Out of the above background arose a number of complaints against the Practitioner. These may be considered in two main categories. The first category is based on the Applicant's contention that the Practitioner was disqualified from acting for T and against her in any capacity. She cited conflict of interest on his part, and that he possessed confidential information about her (arising from having previously acted for her) that prohibited him from acting against her.

Applicable standards
7

I observe that all aspects of the conduct complained of pre-date the commencement of the Lawyers and Conveyancers Act 2006, which came into force on 1 August 2008. As such the applicable rules are those which applied under the Law...

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