Ms Mansfield v Mr Southwell
| Jurisdiction | New Zealand |
| Judge | LCRO Bouchier |
| Judgment Date | 08 September 2010 |
| Neutral Citation | [2010] NZLCRO 29 |
| Docket Number | LCRO 199/2009 |
| Court | Legal Complaints Review Officer |
| Date | 08 September 2010 |
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
[2010] NZLCRO 29
LCRO Bouchier
LCRO 199/2009
Legal Complaints Review Officer, Christchurch
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.
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.
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.
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.
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.
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.
LACL incorporated. Engaged in the business of breeding animals on a rural property (Callender property). Practitioner was not involved in these transactions.
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.
Practitioner draws a will for the Applicant. Amends the Will in 2003.
Practitioner provides employment-related advice (to the Applicant) concerning an LACL employee.
-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.
-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.
The business failed to succeed. T enforced the securities against the Applicant. Practitioner assisted T with enforcement, including seizure of goods and chattels.
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.
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 Practitioners Act 1982 (now repealed). By virtue of section 351(1) of the Act such complaints may be considered by a Standards Committee only where the conduct complained of could have led to proceedings of a disciplinary nature against the Practitioner under the former Law Practitioners Act.
The applicable standards are those contained in the Law Practitioners Act 1982 and the Rules of Professional Conduct for Barristers and Solicitors, both of which have since been replaced. The pre 1 August 2008 standards are found in ss 106 and 112 of the Law Practitioners Act 1982. The threshold for disciplinary intervention under the Law Practitioners Act 1982 was relatively high and may include findings of misconduct or conduct unbecoming. Misconduct was generally considered to be conduct:
of sufficient gravity to be termed “reprehensible” (or “inexcusable”, “disgraceful” or “deplorable” or “dishonourable”) or if the default can be said to arise from negligence such negligence must be either reprehensible or be of such a degree or so frequent as to reflect on his fitness to practise.
( Atkinson v Auckland District Law Society NZLPDT, 15 August 1990; Complaints Committee No 1 of the Auckland District Law Society v C [2008] 3 NZLR 105). Conduct unbecoming could relate to conduct both in the capacity as a lawyer, and also as a private citizen. The test will be whether the conduct is acceptable according to the standards of “competent, ethical, and responsible practitioners” ( B v Medical Council [2005] 3 NZLR 810 per Elias J at p 811). For negligence to amount to a professional breach the standard found in s 106 and 112 of the Law Practitioners Act 1982 must be breached. That standard is that:
the negligence or incompetence has been of such a degree or so frequent as to reflect on his fitness to practise as a barrister or solicitor or as to tend to bring the profession into disrepute.
The Standards Committee concluded that the conduct complained was not of such a nature as to justify disciplinary action and therefore declined to consider the matter further.
A “conflict of interest” arises when a Practitioner is acting for two or more individuals in relation to the same transaction whose interests conflict or may conflict. This recognises that a lawyer cannot discharge his professional duty to two clients whose interests conflicted. The rule governing a lawyer's responsibilities in such circumstances was set out in Rule 1.07 of the former Rules of Professional Conduct for Barristers and Solicitors (now replaced by Chapter 5 of the Lawyers: Rules of Conduct and Client Care 2008). The rules clearly sets out the actions that a lawyer is required to take, which involves informing the clients of the conflict, recommending that they seek independent legal advice and declining to act if in doing so one party is or could be disadvantaged.
The Applicant alleged that the Practitioner pressed her into signing agreements and that he was aware that she had received no independent legal advice prior to signing documents that he knew were against her interests, and that as her former lawyer he had a conflict in acting for his client T and against her in relation to the restructuring agreements.
The Practitioner denied that he owed any duty to the Applicant in relation to the transaction, stating that she was represented by another law firm which had possession of all of the information concerning the restructuring proposal and had advised the Applicant.
The evidence shows that the Practitioner acted for T in the restructuring. On the file were copies of his correspondence with lawyers acting for the Applicant. However, I noted that the Practitioner had acted in the formation of LASL, a company solely owned by the Applicant and which was formed as part of the restructuring. The evidence shows that...
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