SL v DN
| Jurisdiction | New Zealand |
| Judgment Date | 30 September 2021 |
| Neutral Citation | [2021] NZLCRO 154 |
| Docket Number | Ref: LCRO 43/2020 |
| 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 [Area] Standards Committee [X]
[2021] NZLCRO 154
Ref: LCRO 43/2020
LEGAL COMPLAINTS REVIEW OFFICER
ĀPIHA AROTAKE AMUAMU Ā-TURE
Law Practitioners — application for a review of the determination by an Area Standards Committee that the applicant had breached the obligation under the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 relating to conflicting duties — whether there was a real risk of an actual conflict of interest — previous disciplinary history — natural justice — right of the lawyer to make submissions — Lawyers and Conveyancers Act 2006
In accordance with s 213 of the Lawyers and Conveyancers Act 2006 copies of this decision are to be provided to:
Mr SL as the Applicant
Mr DN as the Respondent
Ms MT as a Related Person
Ms QY as a Related Person
[Area] Standards Committee [X]
New Zealand Law Society
The names and identifying details of the parties in this decision have been anonymised
Mr SL has applied for a review of the determination by [Area] Standards Committee [X] that he had breached rr 6.1, 6.1.2 and 6.1.3 of the Conduct and Client Care Rules. 1 The Committee made a finding of unsatisfactory conduct against Mr SL pursuant to s 12(c) of the Lawyers and Conveyancers Act 2006.
Mr DN was the owner of the rear unit of a three-unit development. Title to the unit was held by way of cross lease.
In August 2021, Mr DN “sought and [was] granted the written consent of the other two property owners to extend” 3 the unit.
Mrs BJ was the owner of the middle unit. The “consent” that Mr DN refers to was provided by way of a handwritten document which Mr SL had prepared.
The circumstances surrounding the preparation of that document are set out in paragraphs 16 ff.
The document read:
Mr DN will have to prepare a new flats' plan to be registered at Land Information New Zealand.
Mrs BJ will agree to the addition, and the preparation of a new flats' plan + the obtaining of new certificates of title provided.
(i) All costs for the same are payable by Mr DN; and
(ii) Mr DN agrees to pay the reasonable legal costs of Mrs BJ in relation to the new flats' plan + new certificates of title.
I, [DN], agree to the terms above.
Mr DN agreed to those terms and signed the document on 25 August 2012. He then proceeded with the extension to his unit.
In March 2016, the “documents relating to the amendment were forwarded to [law firm] … for lodgement with LINZ”.
In November 2017, Mr DN decided to sell the unit and was advised by the real estate agent that the title to the property had not been updated.
At that time (November 2017), Mr CM was in the course of leaving the firm and handed the file to Ms KG, a legal executive in the firm. Ms KG then proceeded with the necessary work to obtain the new titles.
When Mrs BJ was asked to sign the new plan, she “resiled from [the] former agreement and demanded compensation for her share of the common land occupied by the extension. The question of compensation was not recognised by either party at the time of the agreement (August 2012) and apparently not by Mr SL of [law firm]. either”.
The sale of the unit was delayed by the fact that title was not available.
Mr DN's complaints, insofar as they relate to Mr SL, are: 4
– Mr. SL of [law firm].'s work with both ourselves and Mrs. BJ concurrently, when clearly a conflict of interest existed, and the delay in advising us of a conflict of interest.
– Mr. SL of [law firm].'s lack of urgency in responding to matters relating to the dispute, causing us unnecessary delays in getting the property on the market.
Mr DN assesses the financial costs to him as being:
| 1. | 16 weeks @ $48,000 per annum | $14,769 |
| 2. | Difference in land value calculations | 18,943 |
| 3. | Lawn mowing and maintenance (Mrs. BJ's share) | 478 |
| 4. | Value of Rates paid 16 weeks at $49.84 per week | 797 |
| Total | $34,987 |
Mr SL acknowledges that the handwritten document produced by Mr DN was prepared by him. He describes the circumstances which led to him preparing this document for Mrs BJ.
In August 2012, Mr SL was working in the office formerly occupied by Mr HU, whose practice [law firm] had taken over. Mr SL recalls Mrs BJ coming “into the office unannounced wanting [Mr SL] to urgently prepare something for her to take to Mr DN (her neighbour) that day to get the matter moving”.
Mr SL had “no previous knowledge of the matter. Further, it was the first time [he] had met BJ”. He saw Mrs BJ “very briefly”.
“In August 2012, [the] firm was not acting for Mr DN. [He] heard nothing more of the matter until November /December 2017”.
With regard to Mr DN's complaint that Mr SL was conflicted, he says: 6
… I do not believe that I, or this firm, acted on the matter in circumstances when there was more than a negligible risk that we would be unable to discharge the obligations owed to Mr and Mrs DN, in breach of rule 6.1. I identified the conflict as soon as possible and advised Mr and Mrs DN to seek independent legal advice only a matter of 4 weeks, or so, after even knowing the conflict existed. I also have to make the point that the period leading up to Christmas in any law firm is, at best, chaotic. There are huge demands both within the firm to get matters attended to by the Christmas break, and also the extensive demands from clients to have work finished off by that time.
Mr SL notes that he did not become aware of the fact that Mrs BJ was requiring payment of compensation until mid-December 2017.
In addressing Mr DN's complaints about delays in responding, Mr SL refers to personal circumstances in his life occurring at the time which, he says, accounted for a large part of the delay.
The Standards Committee identified the following issues to be addressed: 7
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(a) Whether Mr SL acted for more than 1 client on a matter in circumstances where there was more than a negligible risk that he may be unable to discharge the obligations owed to 1 or more of the clients (rule 6.1 and 6.2 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (RCCC));
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(b) Whether Mr SL should have identified sooner that he would no longer be able to discharge his obligations owed to all of the clients and advised the parties of the same;
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(c) Alternatively, whether Mr SL continued to act for BJ and may have breached rules 6.1.2 and 6.1.3 of the RCCC; and
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(d) Whether Mr SL responded to matters relating to the dispute between the parties in a timely manner[.]
The Committee addressed the first three issues together, and said:
The Committee considered the documents that were prepared by Mr SL in 2012. In the Committee's opinion, those documents were grossly inadequate. In the Committee's view, it is not surprising that 5 years later when Mrs BJ was contacted to re-do the documentation that she sought to negotiate compensation and concessions in relation to lawn maintenance. Correspondence from Ms KG to Mr DN on 5 December 2017 confirms that the firm was aware that it acted for both Mr DN and Mrs BJ. Ms KG specifically refers to Mr SL acting for Mrs BJ and that he could contact her regarding the mortgage over her title.
In the Committee's view, the dispute between the clients arose in mid December 2017. It was at this stage that the conflict regarding the obligations owed to the
clients was clear. That is because when Mrs BJ was contacted, she had changed her position and was now seeking compensation from Mr DN. Once Mrs BJ sought to renegotiate the terms of the agreement with Mr DN, the interests of the clients involved were no longer aligned. … there is no evidence that the parties gave informed consent to the firm acting for both of them prior to the conflict being identified. … Once the conflict was identified, both clients should have been informed of the conflict and the retainer terminated with each of them. Instead Mr SL appeared to terminate the firm's retainer with Mr DN and continued to act for Mrs BJ. Mr SL continued to act for Mrs BJ against Mr DN without obtaining his informed consent to do so. This is despite the rules clearly requiring him to obtain informed consent from Mr DN. In the Committee's view, this was unacceptable. 8…
The Committee considered that Mr SL had breached rule 6.1 of the RCCC by acting for Mrs BJ once the dispute between Mrs BJ and Mr DN arose. It also determined that Mr SL had breached rules 6.1.2 and 6.1.3 of the Conduct and Client Care Rules by failing to immediately inform each of the clients of the conflict and continuing to act for Mrs BJ without obtaining informed consent from Mr DN.
The Committee determined that these breaches of the rules constituted unsatisfactory conduct.
The Standards Committee says that “Mr [DN] appears to be complaining about Mr SL's delay in responding to his new lawyer. Mr EP wrote to Mr SL on 1 February 2018 and Mr SL responded on 20 March 2018”. 9
The Committee then referred to the events affecting Mr SL's personal life and said: 10
… While Mr SL should have taken steps to ensure that someone else at the firm could respond to Mr DN's concerns while he was away, the Committee did not consider that his failure to do so could be said to amount to unsatisfactory conduct. …
The Committee determined to take no further action on this complaint.
The Committee considered that Mr SL's lack of insight into his conduct and previous disciplinary history warranted an uplift in the fine, and imposed a fine of $5,000.
The Committee also...
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