[2013] NZLCRO 7

LCRO 109/2011

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

Concerning a determination of Auckland Standards Committee 3


Managing Partner of CCM

TT as the Managing Partner of CCJ

The Auckland Standards Committee 3

The New Zealand Law Society

Application for review of a determination by Auckland Standards Committee to take no further action in respect of a complaint that the practitioner should not have encouraged the applicant (the complainant) to pursue proceedings, and the complainant would not have done so had he been properly advised as to the merits of claim at the practitioner — outset did nothing to dissuade complainant from pursuing action and did not provide any form of report or opinion in which causes of action and potential remedies were critically examined — when shortcomings in pleadings and evidence were exposed, practitioner persuaded complainant to settle for a sum substantially less than applicant believed he could expect — whether Standards Committee erred in considering practitioner's conduct was not negligent or incompetent to such a degree as to reflect on practitioner's fitness to practice and did not give rise to professional shortcomings under Lawyers and Conveyancers Act 2008.

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

At issue was whether the Standards Committee erred in not considering that the practitioner's conduct prior to August 2008 was negligent, or incompetent, to such a degree, or so frequent as to reflect on the practitioner's fitness to practice under the Law Practitioners Act 1982 and in not considering that the practitioner's conduct from August 2008 onwards amounted to any issues that gave rise to professional shortcomings under the Lawyers and Conveyancers Act 2008 (“LCA”).

Held: In addressing the practitioner's conduct in the context of the various Conduct and Client Care Rules, the Standards Committee examined the conduct in terms of a potential finding of unsatisfactory conduct by reason of s12(c) LCA (unsatisfactory conduct defined in relation to lawyers and incorporated law firms). The definition of unsatisfactory conduct in s12(a) LCA was in fact more relevant, and the practitioner's conduct fell to be considered with reference to this definition. Although the proceedings were drafted and filed prior to August 2008, the practitioner's conduct after that date included pursuing the proceedings and failing to provide the complainant with a proper assessment of the merits of the case. Consequently the LCA was applicable to much of the conduct complained of.

The practitioner's advice to and representation of the complainant failed to reach a standard of competence and diligence that a member of the public was entitled to expect of a reasonably competent lawyer in the following way:

  • (a) the strategy recorded by the practitioner in a 2007 memorandum exhibited a somewhat naïve expectation that CCI Ltd would seek to settle any proceedings issued by the complainant;

  • (b) the pleadings pleaded breach of contract, but the terms of the contract were not established prior to proceedings being issued;

  • (c) the contract between CCI Ltd and the complainant contained a mandatory mediation provision prior to the issue of proceedings which was not recognised by the practitioner;

  • (d) there was no research undertaken until close to trial date (and then such research was minimal) as to the enforceability of the limitation of liability clause;

  • (e) there was inadequate exploration of the evidence on which the negligence claim was founded until close to trial;

  • (f) the contention by CCI Ltd's counsel that the courts would not award general damages was readily accepted with no evidence of any research;

  • (g) no valuation evidence was sought to validate the claim for loss of profits and the indications were that the practitioner did not fully understand this claim or have evidence to support it in settlement negotiations.

The practitioner's conduct as set out above therefore constituted unsatisfactory conduct by reason of s12(a) LCA.

In the circumstances, an appropriate remedy included a reimbursement of the costs incurred by the complainant in the aborted litigation. A claim for the $7,000 recovered could have been pursued through Disputes Tribunal proceedings. It was appropriate to order that the practitioner reduce his fees to $7,000 inclusive of GST and disbursements. The effect of this order was that the monies taken by CCJ as fees would need to be refunded to the complainant by that firm (the practitioner was no longer employed by CCJ). In addition it was evident that the complainant had suffered a great deal of personal stress and anguish for which compensation could be provided pursuant to s156(1)(d) LCA (power of Standards Committee to make orders). In general terms there had to be something more than the stress associated with the complaint itself ( Sandy v Khan and Wandsworth v Ddinbych & Keith). The complainant should not have been encouraged to commence litigation and deserved some acknowledgement of the stress encountered. The appropriate award under s156(1)(d) was $5,000.

Standards Committee determination reversed and orders as set out above.


TR has applied for a review of a determination by Auckland Standards Committee 3 in respect of a complaint by him and his wife (although the Standards Committee determination referred to TR only as the complainant) about NI.


The decision of the Standards Committee was to take no further action in respect of the complaint about NI's conduct in pursuing a claim on their behalf against CCI Limited (CCI).


The core of TR and TS's complaint against NI is that they should not have been encouraged or advised to pursue the proceedings against CCI, and would not have done so if they had been properly advised as to the merits of their claim from the outset.


I have set out in the following paragraphs the background facts to TR and TS's complaint in some detail. This is necessary to ensure that the relevant facts which I have taken into account in completing this review are recorded.


TR and TS, through their family trust, were engaged in the development of a property which involved the extension and renovation of an existing house and a subdivision of the site. They then intended to construct a new house on the subdivided site. Property development was the sole activity in which TR and TS were engaged at the time.


To obtain the relevant resource consents from the Council, it was necessary to submit a report from a soil consultant to establish whether or not the site was contaminated by pesticides, as the property was in an area of Henderson where large scale horticultural activity had occurred in the past.


TR and TS engaged CCI to carry out soil sampling and to provide that report. The reports provided by the firm were that there was a level of contamination which would not be accepted by Council, and that remediation was necessary. This would clearly increase the costs of the development project.


TR and TS were concerned at the methodology utilised by the firm in its testing program and had doubts as to the correctness of the recommendations in the reports. They therefore sought a review of the report from another firm of consultants whose opinion was that CCI had been negligent in their methodology and in the advice provided.


In September 2007 TR and TS approached CCJ for advice as to their remedies against CCI. They spoke to TT by phone and then delivered all of the documentation relevant to the matter.


At the same time they engaged in correspondence with CCI who in a letter dated 19 October 2007 rejected the review of their report as incomplete, biased, factually incorrect and false in its conclusions. They stood by their report and recommendations but nevertheless waived a portion of their fee in response to the complaints. In addition, they suggested that one option available to TR and TS was to engage other consultants in connection with the development.


TT referred the matter to NI who reviewed the material and in a file note dated 5 October 2007 stated in the first paragraph “[t]his is a breach of contract and professional negligence claim.”


In the same file note, NI identified the likely claims to be for: -

  • a) Recovery of CCI's fees ($2,382.54)

  • b) Loss of profits arising from the delay in completion of the development calculated at 9% per day on $500,000.00 for the period from 8 February 2007 to 14 July 2007 ($19,23288); and

  • c) General damages for the period 5 May 2007 to 11 June 2007 ($7,800.00).

It would seem that these figures had been calculated and provided by TR and TS.


The file note then included a heading: “Do our clients have a claim?” and continued:

It appears they do. In the in-house Counsel letter dated 14.06.07, they deny all responsibility and the “failure to take in [sic] due care and perform due diligence”. Ironically, this is what they failed to do by my two hour review of the paperwork.


He then recorded the proposed strategy in respect of the...

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