XL v BF
| Jurisdiction | New Zealand |
| Judgment Date | 19 July 2013 |
| Neutral Citation | [2013] NZLCRO 38 |
| Date | 19 July 2013 |
| Docket Number | LCRO 04/2012 |
| Court | Legal Complaints Review Officer |
Concerning an application for review pursuant to section 193 of the Lawyers and Conveyancers Act 2006
Concerning a determination of Auckland Standards Committee
The names and indentifying details of the parties in this decision have been changed
[2013] NZLCRO 38
LCRO 04/2012
LEGAL COMPLAINTS REVIEW OFFICER
Application for review a Standards Committee decision to a transaction in a timely manner — applicant instructed practitioner toact in the sale of her cafe business — settlement delayed and extra time taken due to unexpected obstacles — practitioner charged one hour for dealing with complaint from applicant's husband over fees charged — did not keep contemporaneous time records notwithstanding letter of engagement had specified an hourly rate — whether applicant was made aware of the basis and rate on which she would be charged — whether practitioner was entitled to charge for time spend dealing with complaint over fees — whether Committee had placed undue reliance on time records in determining fee was reasonable — whether the practitioner was authorised to deduct his legal fees — whether or not the practitioner acted in a timely manner.
Ms XL seeks a review of a decision of the Auckland Standards Committee. The Committee considered a complaint by Ms XL in respect of Mr BF's conduct when she instructed him to assist her to sell her cafe business. While Ms XL complained in respect of a number of matters it appears that at the root of this complaint it is about the quantum of the fee charged by Mr BF in respect of the sale of Ms XL's cafe business. The business sold for $54,000.00 The fee Mr BF charged for effecting the sale was $5,462.50.
The facts surrounding the complaint are:
a.On 17 February 2011, Ms XL instructed Mr BF to help her to sell her cafe business, XYZ. Ms XL says that she instructed Mr BF to act for her after they had a telephone conversation in which he advised her that the legal fees would be $800.00 + GST and that the matter should be concluded within two weeks.
b.During the legal transaction, it appeared that a question arose as to whether Ms XL had fully paid a number of invoices. The invoices reflected rates, body corporate levies, an unpaid invoice from her previous solicitors and other outgoings. Investigation into, and resolution of, these issues led to a delay in settlement and a significant increase in the amount of time that Mr BF spent on the matter.
c.Two weeks after instructing Mr BF, Ms XL said that she was considering asking her previous solicitors to take over the file. She says that Mr BF advised that this would be more expensive and slower than allowing him to complete the settlement, and that the cost for him to do so would be approximately $1,000.00.
d.Following settlement, Mr BF sent Ms XL the proceeds of the sale of XYZ. She noticed that Mr BF had deducted $5,462.50 in legal fees.
Ms XL complained that Mr BF deducted legal fees far in excess of what she believed the legal work would cost and that Mr BF had not properly advised her how she would be billed. She also complained that Mr BF failed to undertake the legal work in a manner that was timely and also protected her interests, leading to her paying expenses that would otherwise have been avoided.
Mr BF stated that there were a number of difficulties that were faced in trying to complete the transaction. These included ongoing disputes between the various parties as to alleged unpaid sums by Ms XL, including rent, body corporate levies, outgoings relating to possession of the property, and legal fees due to a different law firm relating to an earlier matter involving XYZ. Furthermore, when settlement was made, there was a shortfall in the amount paid to Ms XL and Mr BF took steps to rectify this.
Mr BF, concerned at the amount of work that he was doing, contacted Ms XL and requested payment of $1,000.00 on account. Mr BF stated that on each occasion he raised concerns about the amount of legal work he was doing, and its associated cost. He says that Ms XL assured him that payment for legal fees was not going to be a problem and she just wanted the matter sorted. Mr BF said that this was the response even when he informed Ms XL “that the costs were escalating to a few thousand dollars due to matters which were not originally anticipated”. 1
In terms of the final deduction of legal fees, Mr BF said that he advised Ms XL that he would deduct the fees before releasing the remainder to her and also advised her as to what the costs would be.
Ms XL stated that she did not agree to legal fees on the basis of Mr BF's hourly rate and that the invoice presented by Mr BF does not reflect the number of times that she went to his office. She expected to pay no more than $1,600.00 for the legal services and was disappointed that Mr BF had not informed her of the amount of work he had done, what exactly he had done and how much each piece of work cost. She was concerned that she was charged on 19 April 2011 for a communication with Mr BF in which her husband queried the size of the invoice presented to her on 18 April 2011.
Ms XL also reiterated that Mr BF had not completed the necessary legal work within an acceptable timeframe.
The Committee decided that Mr BF had properly informed Ms XL of the basis of the legal fees, namely his hourly rate, when he gave her his Terms of Engagement. The Committee further noted that the Rules of Conduct and Client Care (specifically Rule 3.4) did not require Mr BF to obtain Ms XL's agreement to the specific details in the Letter of Engagement. The Committee also noted that the transaction had been complex, involving a considerable number of attendances above those that would normally be encountered in this type of transaction. In the circumstances, the Committee did not find Mr BF's costs to have been unreasonable.
The Committee resolved to take no further action.
On 30 December 2011, Ms XL submitted an application for review of the decision. She reiterated her dissatisfaction with Mr BF's invoice and stated that the first she knew about Mr BF's hourly rate of $300.00 was when it was mentioned in correspondence sent to her by the NZLS and that her understanding was that the cost of the transaction would be no more than $1000.00. Ms XL also did not understand why she had received two invoices that differed by $89.30.
Ms XL's complaint is twofold. Firstly that Mr BF presented her with an invoice for legal fees that was far in excess of what she believed she would be charged. Secondly, that Mr BF did not proceed with the transaction in a timely manner, thereby incurring further costs that could have otherwise been avoided.
In considering whether Mr BF's fees were reasonable, the first question is whether Ms XL was aware of how she was going to be charged for the legal services provided by Mr BF? Ms XL was sent a Letter of Engagement, dated 18 February 2011, in which Mr BF's hourly rate of $300.00 was clearly stipulated. The letter also stated “[y]ou will be bound by these terms if after receipt of this letter, you orally advise us of your acceptance or if you instruct us to proceed to act for you”. 2 The documents attached to the Letter of Engagement, titled “Information for Clients of [firm]' and “Standard Terms of Engagement” clearly note the basis on which legal fees are to be charged and when payment is to be made.
Whilst there is no evidence on file that Ms XL signed the Letter of Engagement, she clearly instructed Mr BF to do the necessary legal work in relation to the sale of XYZ and she had received clear information as to how that work would be charged by Mr BF. It is my view that Ms XL was given reasonable notice of the basis and rate on which she would be charged for the legal services.
Having concluded that Ms XL was aware of the basis for charging of legal fees, the next question is whether Mr BF's invoice was reasonable in the circumstances? Rule 9 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 provides:
A lawyer must not charge a client more than a fee that is fair and reasonable for the services provided, having regard to the interest of both the client and lawyer and having regard to the factors set...
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