XL v BF

 
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[2013] NZLCRO 38

LEGAL COMPLAINTS REVIEW OFFICER

LCRO 04/2012

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

Concerning a determination of Auckland Standards Committee

BETWEEN
Ms XL
Applicant
and
Mr BF
Respondent

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

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.

The issues were: whether the applicant was made aware of the basis and rate on which she would be charged; whether the practitioner was entitled to charge for time spend dealing with the complaint over fees; whether the Committee had placed undue reliance on time records in determining that the fee was reasonable; whether the practitioner was authorised to deduct his legal fees; and whether or not the practitioner acted in a timely manner.

Held: The letter of engagement clearly stated that the practitioner's hourly rate was $300.00 and that the applicant would be bound by the terms. The documents attached to the letter of engagement clearly noted the basis on which legal fees were to be charged and when payment was to be made. The applicant instructed the practitioner to do the necessary legal work in relation to the sale and received clear information as to how the work would be charged by the practitioner. The applicant was therefore, given reasonable notice of the basis and rate on which she would be charged for the legal services.

It was unreasonable of the practitioner to charge $300.00 for his conversation with the applicant's husband when he rang to express his dissatisfaction with the size of the invoice. That was part of the professional obligation of a lawyer to deal promptly and fairly with complaints and could not be properly charged for. Lawyers could charge for the delivery of professional services and matters ancillary to that, but not for meeting their professional obligations to respond to complaints.

The practitioner's time records were unhelpful. Time was recorded in blocks based on the time spent over the course of the transaction. This was not a satisfactory approach. The letter of engagement stated that fees would be calculated on a time and attendance basis at the rate of $300.00 per hour. If a lawyer chose to charge on such a basis it was implicit that they would keep records of the work done contemporaneously

There was no real time recording. The time record was a post-hoc reconstruction of the time the practitioner could have spent on the applicant's file. There was no real and reliable record of the time that the practitioner took to complete the work. The time records could not be relied on to assess whether the fee was reasonable. This question had to be returned to the Standards Committee for further consideration.

The authority to deduct fees could be found in the terms of engagement. It was clear from the client engagement documentation that by accepting the terms and conditions, the applicant authorised the practitioner to recoup the fees for legal services in the manner that he did. The applicant clearly agreed to it by her conduct in continuing with the retainer. The practitioner had satisfied s110 Lawyers and Conveyancers Act 2006 (Obligation to pay money received into trust account at bank) by obtaining an authority for the deduction in the terms of engagement and satisfied reg 9 Lawyers and Conveyancers (Trust Account) Regulations 2008 (restriction on debiting trust accounts with fees) by the provision of an invoice.

The settlement was delayed longer than originally anticipated as the practitioner encountered a series of unexpected obstacles which made the transaction more complex and led to an understandable delay in the transaction. The practitioner spent considerable time on the legal work and did not leave any matter unattended for an unreasonable length of time. Part of the delay in the process was due to the applicant failing to provide the practitioner with the necessary information. The practitioner acted competently and in a timely manner consistent with the terms of the retainer and the duty to take reasonable care.

While the Standards Committee was correct to conclude that the practitioner's conduct did not raise any professional standards issue, it had placed undue reliance on the practitioner's time records to conclude that the fee charged was reasonable. The Committee was directed to reconsider the specific issue of whether the fee was reasonable.

DECISION
Background
1

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.

2

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.

The complaint
3

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's response
4

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.

5

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

6

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's reply
7

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.

8

Ms XL also reiterated that Mr BF had not completed the necessary legal work within an acceptable timeframe.

Decision of the Standards Committee
9

The Committee decided...

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