Standards Committee 3 of the Canterbury-Westland Branch of the New Zealand Law Society v Woulfe

• Jurisdiction: New Zealand
• Judge: D F Clarkson
• Judgment Date: 16 March 2017
• Neutral Citation: [2017] NZLCDT 5
• Docket Number: LCDT 015/16
• Court: Lawyers and Conveyancers’ Disciplinary Tribunal
• Date: 16 March 2017

In The Matter of the Lawyers and Conveyancers Act 2006

Between

Standards Committee 3 of the Canterburyiwestland Branch of the New Zealand Law Society

Applicant

and

Stephen Joseph Woulfe

Respondent

[2017] NZLCDT 5

CHAIR

Judge D F Clarkson

MEMBERS OF TRIBUNAL

Ms A Callinan

Mr W Chapman

Ms CRowe

Mr PShaw

LCDT 015/16

NEW ZEALAND LAWYERS AND CONVEYANCERS DISCIPLINARY TRIBUNAL

Penalty decision following admission by the practitioner, Woulfe (W) of a charge of negligence or incompetence in his professional capacity to such a degree as to reflect on his fitness to practice or as to bring his profession into disrepute — the practitioner gave certifications as to the discharge mortgages and registration of new mortgages over properties in circumstances where he did not witness the signing the Authority and Instruction form and had not sighted the original copy(s) of identification — one of the signatures was forged — the client and its shareholders suffered significant loss as a result of a fraudulent financing transaction — the Standards Committee supported the imposition of a censure and costs — whether suspension should be imposed rather than a censure and costs.

Counsel:

Mr D Webb for the Standards Committee

Ms P Fee and Mr J Cochrane for the Practitioner

PENALTY DECISION OF THE LAWYERS AND CONVEYANCERS DISCIPLINARY TRIBUNAL

Introduction

1 The practitioner, Mr Woulfe, has admitted the charge of negligence or incompetence in his professional capacity to such a degree as to reflect on his fitness to practice or as to bring his profession into disrepute.

2 This charge was admitted after discussions between the parties which resulted in the two alternatives originally pleaded, namely misconduct and unsatisfactory conduct, being withdrawn on the practitioner's indication of a plea. The Tribunal, having considered all the material before it, approved that amendment on the basis that we considered that negligence or incompetence was the appropriate level of liability to reflect this practitioner's conduct. On that basis the hearing proceeded as a penalty hearing only.

3 Counsel prepared an agreed statement of facts, however such did not fully accord with its description in that it contains phrases such as “the complainant alleges” and “the former practitioner says …”.

4 Thus, Mr Woulfe, who appeared by Skype connection because he now lives in Rarotonga, was sworn and answered questions from both counsel and members of the Tribunal. Submissions were then heard from counsel for the Standards Committee, Mr Webb, and Ms Fee and Mr Cochrane respectively for the practitioner.

Background and Context

5 We adopt the brief summary contained in submissions for the Standards Committee as follows:

• “3. The conduct related to certifications by Mr Woulfe of documents relating to the discharge of certain mortgages and registration of new mortgages over properties owned by Ballarat Limited ( Ballarat) in 2009. The complainants, M & R, were shareholders of Ballarat with a fraudster, Lindsay Smith. They had no knowledge of the secured finance lending which was arranged by Mr Smith and only became aware of this at a later date. The signature of M (as director/shareholder of Ballarat) on the Authority and Instruction form ( A & I) prepared and executed by Mr Woulfe is not that of M and is a forgery. Even so, Mr Woulfe provided the Signatory Identification by executing a certificate stating that he had:

  • (a) witnessed the signatory(s) sign the form;

  • (b) had sighted the original copy(s) of identification; (c) had attached a copy of the ID(s) used; and

• (d) the photos, names and signatures all match the identification provided.

• 4. Those documents were used in a financing transaction under which Mr Lindsay Smith (another director/shareholder of Ballarat) defrauded the company of funds for the benefit of a trust related to himself. The overall effect of the fraud was to deprive the other shareholders (the complainant and his wife — M — R) of the value of the shares in the company and cause them considerable loss. The company (which was a property development company) ultimately failed.”

6 The further context which is relevant is that Mr Woulfe had acted for Ballarat from its incorporation in 2005, that he had known Mr Smith, who was an accountant, since 2003. Mr Smith had been the primary point of contact for Ballarat throughout all of the transactions which Mr Woulfe had handled prior to the one which falls to be considered. Mr Woulfe trusted Mr Smith. Furthermore, the 2009 lending facility did not require guarantees from the complainants, as had occurred on at least one previous occasion.

7 Mr Woulfe's evidence is that he only intended to certify that he had witnessed Mr Smith's signature on the A & I form, and had sent the form, along with the certified copy of the copy of the driver's licence and other documents to Mr Smith to take away for M's signature, intending that another lawyer would witness those.

8 Mr Woulfe says his failure was in not noticing that M's signature had appeared on the document after it was returned to him but without independent certification so that the A & I document now read as if Mr Woulfe was certifying the document as having been witnessed himself as set out in the facts above. Mr Woulfe also accepts he was “sloppy” in how the certification on his standard form stamp on the driver's licence copy was worded.

9 As a result of the transaction proceeding, the lender advanced to Ballarat some $264,000, all of these funds were advanced to a trust associated with Mr Smith. The Trust then used those funds to repay loan advances made to it.

10 The complainants were 50% shareholders in Ballarat and effectively lost half of these funds, indeed the final outcome was that the property development failed as did the company and the complainants full loss was in excess of $700,000. Thus the consequences for the complainants, who are a retired couple, have been catastrophic.

Principles in Addressing Penalty

11 As recorded, in many previous decisions, the starting point for any penalty decision is the seriousness of the conduct in question.

12 Mr Woulfe accepts that the accuracy of certified copies of documents and particularly of A & I forms forming part of conveyancing transactions are “ central to the proper working of finance and conveyancing transactions, and that it is critical that participants in that industry can rely on the accuracy of statements and certifications made by lawyers”.

13 Counsel for Mr Woulfe submitted that the appropriate level of penalty to reflect the seriousness of this offending in all of the circumstances was a censure and costs.

14 Counsel for the Standards Committee supported this approach and submitted that such was also an appropriate penalty, having regard to the conduct, and in comparison with a number of earlier decisions of the Tribunal.

15 It is accepted that Mr Woulfe was no part of the scheme to defraud which had been devised by Mr Smith. It is noted that Mr Smith was subsequently convicted for this fraud.

16 We consider that this negligence, while not at the most serious level, is still of serious concern having regard to the crucial role that such certifications play in a...