Tc and Td v Nv

• Jurisdiction: New Zealand
• Judgment Date: 14 January 2013
• Neutral Citation: [2013] NZLCRO 1
• Date: 14 January 2013
• Docket Number: LCRO 255/2011
• 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 the Otago Standards Committee

BETWEEN

TC and TD

Applicant

and

NV

Respondent

[2013] NZLCRO 1

LCRO 255/2011

Legal Complaints Review Officer

Application for review of a Standards Committee determination that practitioner's conduct in relation to one complaint constituted unsatisfactory conduct — practitioner received letter from tenant of complainant's property owning company that noted tenant's financial difficulties and led to waiving of a rent increase (on rental review) — landlord entered into agreement to sell the property but letter was not disclosed to purchaser by practitioner — following settlement, practitioner deducted fees for work done over the past six years (Committee determined this was unsatisfactory conduct) — purchaser's share of ground rental payable was not apportioned and recovered on settlement — whether deducting fees for past work from settlement proceeds was unsatisfactory conduct — if so, whether a penalty should have been imposed — whether Committee erred in deciding to take no further action in respect of complaints regarding the failure to apportion ground rental and failure to disclose the tenant's letter to purchaser.

Introduction

1 TC and TD have applied for a review of the Standards Committee determination in which the Committee determined that NV's conduct constituted unsatisfactory conduct in respect of one of their complaints, but determined to impose no penalty in respect thereof, and took no further action in respect of the remainder of their complaints.

2 It is unfortunate that NV was not more pragmatic in accepting TC's settlement offer at the outset and/or engaging with TC prior to the complaint being made. Instead, much time has been expended throughout the process of the complaint and this review and the relationship between NV and his former clients has now been terminated.

Background

3 NV had acted for TC and TD since 1992.

4 In March 2008 he was instructed by them to institute a rent review of a commercial building owned by TC and TD's property owning company, CBW.

5 In the course of that process, the tenant of the building sent NV a letter in which it was stated that his business had been on a very steady decline in the previous few months and that the printing industry in which the tenant was engaged was not in a good position overall. The tenant further advised that he had been unable to pay his bills, had made staff redundant and was facing further redundancies, and both owners and staff had been obliged to accept reduced wages. In summary, the tenant advised that any rent increase would “be the last nail in the coffin” for his business.

6 As a result, TC and TD waived the rent review on the basis that the rent would be reviewed the following year.

7 In August 2008, CBW entered into an agreement to sell the property to CBX. NV was away at the time the agreement was entered into and during the due diligence period. Various matters were raised by the purchaser's solicitor in the course of conducting due diligence, and in response to a query from them, the solicitor handling the matter for TC and TD provided a copy of the letter from NV to the tenant in which the rent review was waived. He did not however provide the purchaser's solicitor with a copy of the letter from the tenant referred to above.

8 The agreement was declared unconditional and settlement proceeded on 29 August 2008. NV had returned by that time and resumed control of the file. He was responsible for signing and sending the settlement statement sent to the purchaser's solicitor although it was prepared by a member of his staff.

9 Following settlement, NV accounted to TC and TD. In his statement he included accounts for work which had been done over six years previously totalling

$2,812.50 and deducted those fees from the balance paid to TC and TD.

10 TC and TD were disappointed and angry with NV and TC wrote to him to object to these fees being deducted. There followed some correspondence between NV and TC during which time TC reviewed his files to try and ascertain whether the work which had been billed had been included in previous accounts. He was unable to verify exactly whether he had been billed for those matters but offered to pay $1,000 plus GST in settlement of the account.

11 NV responded; -

I am surprised that you do not have access to your accounting records from 2002 as you are required to retain these. You should be well aware that there was work done and not charged for. The invoice for the work involved represents excellent value. I have offered to show you the file so that you can see the time records involved and review the matters undertaken. I am not prepared to accept $1,000.00 plus GST in full settlement. I would accept $2,000.00 plus GST.

12 Following some further correspondence NV wrote again to TC on 24 February: -

Thank you for your email dated 16 January 2009 and letter dated 17 February 2009. The correspondence between us seems to have reached a stalemate. We now propose that:

NV had earlier refunded the fees deducted following TC's objections.

• • We write off the outstanding bill of costs

• • That you accept that you have no claims against us either personally through your company or your family trust

• • That you will be entitled to pursue a claim against [CBX] for the apportionment of ground rent amounting to $1,537.50 through the Disputes Tribunal if you wish

• • That you arrange to uplift your files

13 In addition to TC's complaint about deduction of fees, he had also realised that the purchaser's share of ground rental payable by the registered proprietor of the property they had sold had not been apportioned and recovered on settlement from the purchaser. In an email of 15 September 2008 NV had acknowledged his mistake in not attending to this and sought details of the amount paid by TC and TD.

14 TC provided this information on the following day but heard nothing further from NV. He followed the matter up in late October at which time NV responded. He advised that he had not noted TC's email of 16 September and then requested further information as to the date to which ground rental was paid. Finally, on 31 October, he sent a letter to the purchaser's solicitor requesting payment of the amount due by the purchaser being $1,537.50.

15 The purchaser's solicitor responded advising that the tenant of the property was in financial difficulties and had not paid rental and outgoings for the month of November. The solicitor advised that if TC and TD pursued recovery of the ground rent then their client intended to investigate what TC and TD knew about the financial state of the tenant at the time of sale. In this regard, the solicitor questioned whether TC and TD had failed to disclose information in terms of the warranties in the agreement for sale and purchase. Subsequently the tenant went into liquidation and the purchaser incurred losses through non payment of rental and other payments due in terms of the lease.

16 On instructions from TC, NV advised the purchaser's solicitor that TC and TD intended to pursue recovery of the ground rental. That ultimately resulted in the purchaser of the property instituting proceedings in the Disputes Tribunal against CBW for breach of the terms of the agreement for sale and purchase. That claim was based on the fact that the company had not disclosed the letter from the tenant referred to in [5] above and that this constituted a breach of clause 6.1 of the agreement.

17 That clause reads as follows:

The vendor warrants and undertakes that at the date of this agreement the vendor has not

• (1) received any notice or demand and has no knowledge of any requisition or outstanding requirement:

• …

• (c) from any tenant of the property:

• (2) given any consent or waiver which directly or indirectly affects the property and which has not been disclosed in writing to the purchaser.

18 TC and TD counterclaimed for the outstanding ground rental.

19 On 9 December 2009 the Disputes Tribunal issued its decision in which it found that CBW was in breach of clause 6.1 of the agreement by not disclosing the letter from the tenant on the basis that the letter constituted a “notice” in terms of that clause. The Tribunal ordered the company to pay the sum of $15,000 to the purchaser, being the maximum amount that the Tribunal could order. It also ordered that the claim by the company for $1,537.50 for the unpaid ground rental be off set against that payment, thereby effectively upholding the counterclaim by CBW.

20 TC lodged an appeal against the decision of the Disputes Tribunal in the District Court in September 2010 which was beyond the statutory period for appeal. He then compiled his complaint against NV and forwarded this to the firm with a request that the firm engage in discussions to resolve his complaints, failing which the complaint would be lodged. No response was received from NV and the complaint was lodged with the New Zealand Law Society Complaints Service on 15 November 2010.

The complaints and the Standards Committee determination

21 TC and TD's complaints related to the following matters: —

• • The deduction of the fees for the “historical unbilled work;

• • The error in not apportioning the ground rent;

• • Failing to advise that the tenant's letter needed to be disclosed to the purchaser; and

• • NV's “intimidating and bullish” attitude towards TC and TD and failing to engage in meaningful discussions to endeavour to resolve the complaints.

22 Having investigated the complaints the Standards Committee issued its determination:

• 1. With regard to the deduction of fees, the Committee considered that the letter of engagement issued by the firm was only in respect of the sale process and that it...