The Canterbury Standards Committee (No 1) v A Practitioner

 
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[2015] NZLCDT 44

NEW ZEALAND LAWYERS AND CONVEYANCERS DISCIPLINARY TRIBUNAL

Court:

CHAIR

Judge B J Kendall (retired)

MEMBERS OF TRIBUNAL

Mr J Bishop

Mr W Chapman

Ms P Walker

Mr S Walker

LCDT 003/15

BETWEEN

In The Matter of the Lawyers and Conveyancers Act 2006

The Canterbury Standards Committee (No 1)
Applicant
and
A Practitioner
Practitioner
Counsel:

Mr T J Mackenzie for the Standards Committee

Ms H Cull QC for the Practitioner

REASONS FOR THE DECISION OF THE NEW ZEALAND LAWYERS AND CONVEYANCERS DISCIPLINARY TRIBUNAL CONCERNING CHARGES AND PENALTY
Introduction
1

The practitioner faced a charge of misconduct in his professional capacity pursuant to s 241(a) of the Lawyers and Conveyancers Act 2006 (the “Act”). He was charged in the alternative with unsatisfactory conduct pursuant to s 241(b) of the Act and with a further alternative charge of negligence or incompetence in his professional capacity pursuant to s 241(c) of the Act. The essence of the charge is that the practitioner acted in circumstances where he was conflicted and unable to discharge his obligations owed to each of three clients. It is alleged that he acted contrary to the fundamental obligations of lawyers at s 4 of the Act and contrary to Rules 2. 4 and 6.1 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (the “Rules”).

2

The full particulars of the charge are discussed in the reasons for the Tribunal's decision which follow commencing at para [7].

3

The practitioner has denied the charge.

4

The Tribunal heard the charge on 18 and 19 November 2015. At the conclusion of the hearing and after hearing submissions from counsel for the applicant and the practitioner, the Tribunal retired to consider the matter. It returned and informed the parties that it had found the practitioner guilty of the alternative charge of unsatisfactory conduct in that he had been in breach of r 6.1.2 of the Rules for acting for three clients in conflict of interest. The Tribunal found that the practitioner had not acted in breach of r 2.4 of the Rules in that he had not assisted in the concealment of fraud or crime.

5

The Tribunal then heard submissions in respect of penalty and then imposed a penalty on the practitioner whereby he was censured; fined $3,000; ordered to pay costs of $7,500 and required to refund to the Law Society the Tribunal's costs to be fixed under s 257 of the Act.

6

This decision contains the reasons for finding the practitioner guilty of unsatisfactory conduct and for the penalty imposed.

Background
7

The practitioner had acted for D for a number of years regarding purchases of properties and sales and in respect of his business. He also acted for him and his wife in relation to property purchases and sales.

8

D is the executor and trustee of the estate of his uncle who died on 5 June 2010.

9

By his will dated 8 August 2005, the uncle gave his partner the right to occupy his property. On the expiry of that right, the property or any property bought in substitution for it was to fall into residue. The residue of the estate was gifted to the natural daughter of the uncle and the uncle's partner (the child having been adopted out shortly after birth).

10

The estate owned a property at K. It was sold in 2012 and a property at C was purchased in substitution for it. The practitioner acted for the estate on the sale of the K property and on the purchase of the C property which was registered in the name of D.

11

Subsequently in November 2012, D and his wife entered into an agreement to purchase a property for themselves at J. The practitioner acted for the respective trusts of D and his wife on the purchase of that property. The practitioner was the sole director and shareholder of an independent trustee company which was a trustee of each of the family trusts of D and his wife.

12

The Bank was providing mortgage finance to the trusts to enable them to complete the purchase of the J property. The practitioner acted for the Bank in that respect.

13

The Bank's initial instructions to the practitioner were to take a mortgage security over the J property. On the day prior to the settlement of the purchase of the J property the Bank gave the practitioner additional instructions that it required a mortgage over the C property which it initially said was owned by D and his trust (one of the trusts originally referred to in para [11]) as security for that guarantee. The Bank modified those instructions on the morning of the day of settlement to record that the C property was ‘owned’ by D alone.

14

The practitioner considered there was a conflict of interest in that D was the registered proprietor of the C property in his capacity as trustee of the estate of his uncle. He referred D to another solicitor for independent advice. That solicitor advised D not to proceed with providing the requested security over the C property. D declined to accept the advice given. The independent solicitor then attended to the completion of the securities. He also attended to the registration of the mortgage documents over the C property.

15

The practitioner attended to the settlement of the J property and provided a solicitor's certificate to the Bank in which he undertook that the Bank had valid and enforceable securities.

16

Neither the independent solicitor nor the practitioner advised the Bank at any time that the C property was not owned by D in his personal capacity but rather as the trustee of his uncle's estate.

The Charge
17

There was a finding by the Standards Committee that the practitioner, knowing that the C property was owned by D as trustee of his uncle's estate, assisted him to act in breach of trust thereby committing a fraud upon a power (r 2.4 of the Rules). It also found that by continuing to act for the estate, the purchasers of the J property and the Bank, the practitioner was conflicted and unable to discharge the obligations he owed to each client (r 6.1 of the Rules).

18

As a consequence the Standards Committee has charged the practitioner with Misconduct in that he acted contrary to the obligations imposed on him by s 4 of the Act and by rr 2. 4 and 6.1 of the Rules.

19

The facts giving rise to this matter are not disputed. The practitioner has strongly disputed that his actions amount to misconduct or the alternatives of unsatisfactory conduct or negligence or incompetence.

20

The thrust of the practitioner's defence is that he identified a conflict of interest and sent D in his capacity as trustee of his uncle's estate to an independent lawyer. It was therefore wrong for the Standards Committee to find against the practitioner when the trustee, D, had strong independent legal advice which he rejected. The independent lawyer then acted upon the completion of guarantee; signed the solicitor's attestation to it; acted upon the execution of the mortgage over the C property owned by the estate; completed and signed the client authority which D had signed and dated. He then proceeded to register the mortgage over the estate property. He then sent the documents back to the practitioner rather than sending them to the Bank which is what the practitioner expected him to do.

21

The practitioner had attended upon the completion of the mortgage documents over the J property. The practitioner sent the documents relating to the J property to the Bank and also the documents relating to the C property which the independent lawyer had sent back to him.

22

It was urged on his behalf that, with the benefit of hindsight, the practitioner could have reissued the letter which he sent with the documents,...

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