St v Cbu


[2012] NZLCRO 102

LCRO 125/2011

Concerning an application for review pursuant to section 193 of the Lawyers and Conveyancers Act 2006


Concerning a determination of the Wellington Standards Committee 2


In accordance with s 213 of the Lawyers and Conveyancers Act 2006 copies of this decision are to be provided to:

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



ST has applied for a review of a determination by the Wellington Standards Committee 2 pursuant to section 152(2)(c) of the Lawyers and Conveyancers Act 2006 to take no further action in respect of his complaint against CBU Barristers and Solicitors Limited.



ST acted for SU who was a shareholder in, and a director of, CLL. SU died on 5 February 2010 and ST is one of the executors of his estate.


The other shareholder and director of the company was SV for whom CBU acted. SV is now represented by SW.


The company entered into a contract to purchase two floors in a building at [W Street], Wellington, following redevelopment of the building, and paid a deposit of $100,000. However, the development did not proceed as the developer defaulted in payments to its mortgagee, and the building was sold, either by way of a mortgagee sale or at the direction of the mortgagee.


SV issued instructions to CBU to take steps to arrange a mutual termination of the contract. This resulted in CBU receiving repayment of the deposit, together with the sum of $200,000 which MG described as being an ex gratia payment to settle all matters between the company and the developer.


Shortly after receiving the funds, CBU paid the sum of $50,000 to each of SU and SV and retained the sum of $200,000 in its trust account in the name of CLL.


SU and SV disagreed as to the disposition of those funds and there has been litigation and complaints to the Law Society in respect of that disagreement.


In March 2010, CBU applied to the court to put CLL into liquidation. The grounds specified in the notice of proceedings were the failure to comply with a statutory demand for payment of fees alleged to be due to CBU, that the company was dysfunctional and the relationship between its shareholders and directors had broken down to the extent that it was just and equitable to liquidate the company.

ST's complaint, the investigation and the Standards Committee determination


ST's letter of complaint to the New Zealand Law Society Complaints Service dated 3 June 2010 states that liability of the company for the bills of costs was disputed and that therefore CBU were in breach of Rule 2.3 of the Conduct and Client Care Rules 1 by issuing the statutory demand.


In documents provided with his complaint, he described how CBU came to be “instructed” to act for the company and disputes the legitimacy of the firm's instructions. He asserts that CBU acted unilaterally in negotiating the termination of the contract and advises that at the time, and consistently since, he has strenuously resisted all claims by CBU to be entitled to obtain and retain the funds, or that CBU had any instructions to act for the company in the matter.


He disputes the description of the payment of the sum of $200,000 by the developer as being an “ex gratia” payment and instead asserts that part of the sum was in repayment of funds due to SU personally.


In responding to ST's complaint, CBU referred to a complaint also lodged by SV, and both matters were dealt with together by the Complaints Service.


MH, for CBU, responded to the complaints by contending that neither ST nor SV had standing to challenge the firm's bills of costs as neither of them were the “person who is chargeable with a bill of costs” as required by section 132(2) of the Lawyers and Conveyancers Act.


He then traversed the history of events and disputed the allegation by ST that CBU did not have instructions to act. The firm's position was that it held the funds on behalf of CLL and that the firm “had to go to considerable lengths to discharge [its] obligations and to prevent the improper payment out of the funds without agreement being reached”. He asserted that all attendances in relation thereto were chargeable attendances.


MH considered that CBU had no choice but to defend SU's application to have the funds paid to him. He refers to the work carried out by CBU following settlement which included filing an interpleader application for directions as to the payment of the funds.


The Standards Committee sent an initial response to MH and invited him to consider whether the firm was acting on behalf of itself or the company. It suggested that if the firm was acting for itself, then a solution may have been to amend the invoices to reflect that and then attempt to address the point with the court.


MH responded by stating that the firm considered it was acting on continued instructions from CLL after the settlement in October 2006. He conceded that in respect of the interpleader application, they were, in effect, acting for themselves. He advised that the firm considered very early after settlement that the funds should properly be removed from the firm's trust account and held by a third party.


The Committee then determined to set the matter down for a hearing on the papers. ST repeated his contention that his complaint was not confined to the quantum of the costs charged but concerned the conduct which gave rise to the bills of costs. The essence of his position was that CBU were acting without instructions and therefore had no authority to take action on behalf of the company, or to render the bills of costs.


MH responded on 14 March 2011 and advised that the funds had been transferred to another firm and its fees in respect of the unsuccessful High Court appeal had been paid from the funds retained by written agreement between the parties. He also advised that the firm had written off the remaining accounts and withdrawn the winding-up application. On that basis, he considered the complaint should not proceed.


By an email of the same date, SW advised that as the firm had withdrawn its invoices and the winding-up application, SV withdrew his complaint.


ST responded and disputed that there was an “agreement”. He noted that the costs on the High Court appeal were paid by order of the Court and reiterated his complaint that

…the basic falsehood from [CBU] was their claim to be entitled to payment in circumstances where they had received no instructions, had no retainer and had not done any work. They filed application papers in the High Court in support of their false claims!


The Standards Committee determination was communicated to the parties on 30 May 2011. It determined that CBU had issued its invoices and winding-up application in error and not as a result of malfeasance. It considered that there was no deliberate misleading of the Committee and that by withdrawing its invoices and lodging the funds with another firm, CBU had remedied the situation. It described the firm's actions as “acting on an erroneous belief”. Finally, it noted that:

The primary forum for a merits assessment of a position taken by a lawyer is the courts. Standards Committees, applying the Rules of Conduct and Client Care, are not a substitute for courts. The Complainants have had a degree of success in relation to the merits assessment but have not established a breach of the Rules of Conduct and Client Care.



A review hearing took place in Wellington on 31 October 2012, attended by ST, MG and MH, and SW in support of CBU.



Although MH did not pursue his submission to the Standards Committee that neither SU nor SV had standing, it is important for that submission to be addressed. MH contends that neither SU nor SV was the party chargeable with the bills of costs as “neither complainant purports to be from or acting on behalf of [the] company.” His submission is therefore, that...

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