DO v EZ [2013] NZLCRO 64 (18 December 2013)

Last Updated: 18 September 2014

LCRO 206/2011

CONCERNING an application for review pursuant

to section 193 of the Lawyers and

Conveyancers Act 2006

_AND

CONCERNING a determination of the [Area] Standards Committee

BETWEEN MR DO

_Applicant

AND MR EZ

_Respondent

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

_DECISION

Introduction

[1] Mr DO instructed Mr EZ in November 2007 in respect of a relationship property dispute between Mr DO and his former partner, Ms ZV. Mr DO and Ms ZV signed a relationship property agreement on 19 August 2008, agreeing that settlement would proceed in stages from that date, and that Mr DO would pay penalty interest if he did not pay Ms ZV agreed sums on agreed dates (the Agreement).

[2] Mr DO then instructed Mr EZ to negotiate amendments to the Agreement, and on

11 June 2009 Mr DO and Ms ZV signed a variation to the Agreement (the Variation). The Variation altered the repayment dates and amounts, and retained the penalty interest provision. It is this obligation to pay penalty interest that sits at the heart of Mr DO’s complaints and his review application.

[3] Mr DO says that in his private conversations with Ms ZV she had told him she agreed to forego the payment of interest. Mr DO also says that his clear instruction to Mr EZ was that the penalty interest provision must be removed from the Agreement by the Variation.

[4] Ms ZV’s lawyer and Mr EZ documented the terms of the Variation. Mr DO says that, contrary to his express instructions to Mr EZ, the Variation did not relieve him of his obligation to pay penalty interest to Ms ZV, but that he signed the Variation on the understanding that the penalty interest provision had been removed. Mr DO says that

when he discovered that he remained obliged to pay penalty interest he complained first to

Mr EZ, and then to the New Zealand Law Society.

Standards Committee Decision

[5] Although Mr DO’s complaint covered a range of topics, the Standards Committee identified Mr DO’s key complaint as being that he had not received advice in respect of the penalty interest provisions in the Variation. The Committee found that Mr EZ’s file notes and correspondence indicated that Mr DO had been advised on the effects and implications of the penalty interest clause. The Committee considered that Mr EZ had communicated with Mr DO in an appropriate and timely manner throughout his conduct of the file. Furthermore, Mr DO had initialled each page of the Agreement and the Variation and signed it on the basis that he had received advice from Mr EZ as to the effects and implications of the Agreement and the Variation before he signed it. Mr EZ had also certified that he had given that advice.

[6] After holding a hearing, reviewing Mr EZ’s file and investigating Mr DO’s complaints, the Committee found it difficult to accept that Mr DO had not received adequate advice. In the circumstances the Standards Committee decided pursuant to s 152(2)(c) of the Lawyers and Conveyancers Act 2006 (the Act) to take no further action with regard to Mr DO’s complaint.

[7] Mr DO was dissatisfied with the Committee’s decision, and applied to the Legal

Complaints Review Officer (LCRO) for a review.

Review Application

[8] Mr DO’s application alleged that the Committee was biased in its decision-making and that Mr EZ did not represent him in an appropriate or professional manner, including failing to pass relevant correspondence on to him, not following his instructions in allowing the penalty interest clause to remain in the Variation, and not giving him proper advice.

Role of the LCRO on Review

[9] The role of the LCRO on review is to reach her own view of the evidence before her. Where the review is of an exercise of discretion, it is appropriate for the LCRO to exercise particular caution before substituting her own judgement for that of the Standards Committee, without good reason.

Review Hearing

[10] A review hearing was set down in [Area] on 19 April 2013. That hearing was adjourned on short notice, at Mr DO’s request because of a family emergency, with Mr EZ’s consent. This Office again endeavoured to set the matter down for a hearing in June 2013

but Mr DO indicated he was prevented from attending by work commitments. On

13 August 2013 the matter was again scheduled for hearing and the parties were advised that if they needed to, they could make an application for adjournment in writing, with reasons, if either were unable to attend on the hearing date, which was 23 September

2013.

[11] On 18 September this Office received a telephone message from Mr DO indicating that he could not attend the hearing on 23 September 2013, although no written adjournment application had been received. Attempts by this Office to contact Mr DO by telephone subsequent to his notification and in advance of the hearing failed.

[12] Mr DO was advised that the hearing would not be adjourned. The review hearing therefore proceeded on 23 September 2013 in Mr DO’s absence, and was attended by Mr EZ, his counsel Mr FA, and Ms FB who was Mr EZ’s employer at the time the matters subject of the complaint occurred. Audio of the hearing was provided to Mr DO shortly after.

[13] Mr DO telephoned this Office on 7 October 2013, and a hearing proceeded with Mr DO by phone, and in the absence of Mr EZ, Mr FA and Ms FB. Audio of the telephone hearing was provided to Mr EZ and Mr FA.

[14] Further information was requested and provided. Both parties took the opportunity to lodge further written submissions.

Review Issues

[15] Although Mr DO was concerned that the Standards Committee had been biased in its decision-making, he did not provide any evidence, and I have found no evidence of bias at the Committee level on review. I will therefore not consider that aspect of Mr DO’s review application further.

[16] Mr DO alleges that Mr EZ failed to protect and promote Mr DO’s interests to the exclusion of Ms ZV’s interests. The evidence shows that Mr EZ went out of his way to protect and promote Mr DO’s interests, in circumstances where Mr DO repeatedly breached his obligation to make payments to Ms ZV on certain dates under the Agreement. The parties had entered into the Agreement as a means of settling a Family Court proceeding Ms ZV had brought against Mr DO. Mr EZ negotiated the Variation after Mr DO had defaulted under the Agreement, in circumstances where Ms ZV could have simply proceeded to enforce the Agreement against Mr DO.

[17] Once Mr DO had signed the Agreement, Ms ZV remained in a strong negotiating position and was under no obligation to concede her right to recover interest from Mr DO if he did not pay on time. It is apparent that, on advice from her lawyer, Ms ZV did not make

any concession on her right to interest secured under the Agreement and the Variation. There is no evidence that Mr EZ failed to protect or promote Mr DO’s interests in that sense, so there is no reason to consider that aspect of Mr DO’s application further on review.

[18] The next aspect of Mr DO’s application is his suggestion that, with no good reason, Mr EZ simply stopped acting for him as soon as he raised his concerns about having signed the Variation that still contained the penalty interest provision. In his letter to Mr EZ, Mr DO suggested that Mr EZ should take steps immediately to remedy the situation by renegotiating the Variation to get rid of the penalty interest provision as Mr DO had instructed, and at no cost to Mr DO. It is clear from that letter that Mr DO considered he had grounds on which to lay a complaint, and to make a claim against Mr EZ. In the circumstances, Mr EZ clearly had good reason not to accept any further instructions from Mr DO, so there is no reason to consider that aspect of Mr DO’s application further.

[19] This review focuses on the two remaining issues, which are whether Mr EZ:

a. promptly disclosed to Mr DO all information that Mr EZ had or acquired that was relevant to the matter in respect of which Mr EZ was engaged by Mr DO (Rule 7);1 and

b. certified that he had advised Mr DO on the effects and implications of the Agreement without having taken appropriate steps to ensure the accuracy of the certification (Rule 2.5).2

[20] Mr EZ may be in breach of his obligation to Mr DO under Rule 7, if the content of two letters relating to the Variation from Ms ZV’s lawyer to Mr EZ dated 24 and 30 April 2009 (the letters) was not promptly disclosed to Mr DO.

[21] Mr EZ’s professional obligation under Rule 2.5 was to certify he had complied with s 21F(5) of the Property (Relationships) Act 1976 (the PRA). As the lawyer who witnessed Mr DO’s signature, Mr EZ was obliged to also explain to Mr DO the effect and implications of the Variation before Mr DO signed it, and to truthfully certify that he had provided that explanation.

[22] By letter dated 9 October 2013 to this Office Mr EZ admitted he had not personally explained the effects and implications of the Variation to Mr DO in the form it was in after Ms ZV’s lawyers had sent the letters and amended it. This review has proceeded on the

_{basis of Mr EZ’s admission.}

1 _{Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008.}

2 _{Above n1.}

Background

[23] Mr DO’s 18 year relationship with Ms ZV broke down resulting in a dispute over their relationship property. Their main asset was the relationship home, which was registered in Mr DO’s sole name. Ms ZV had lodged a Notice of Claim to protect her interest in the home, and the parties tried to negotiate settlement. Negotiations stalled, and in April 2008

Ms ZV applied to the Family Court for Orders under the PRA.

[24] Mr DO instructed Mr EZ to act in his defence of Ms ZV’s application. A further period of negotiation followed, as a result of which agreement was reached on settlement terms, and Ms ZV agreed to discontinue her proceeding.

[25] The Agreement bound Mr DO to pay an amount of money to Ms ZV that was equivalent to her share of the value in the relationship home, by several instalments, failing which Mr DO would pay penalty interest. Mr EZ signed and certified the Agreement confirming that he had given Mr DO advice on the effect and implications of the Agreement, including the penalty interest provision. The Agreement records that Mr DO signed it on the basis that he had received and understood Mr EZ’s advice.

[26] It is evident from Mr EZ’s file that Mr DO’s conduct after he signed the Agreement showed he was dissatisfied with the terms he had agreed to, and in particular the requirement that he pay penalty interest if he missed payment dates. Mr EZ’s file records several unsuccessful attempts by Mr DO to persuade Ms ZV to surrender her right to interest under the Agreement. Looking at the correspondence and file notes, it is difficult to escape the conclusion that Mr DO understood the effect of the penalty interest provision, and the implications of it, and it was that knowledge that motivated him to try to negotiate a variation that extinguished those obligations under the Agreement.

[27] Mr DO’s primary concerns relate to the advice on the Variation which he says was deficient, and his assertion that he did not receive copies of the letters from Mr EZ that related to the Variation. It is therefore necessary to consider the various interactions between Ms FB, Mr EZ and Mr DO over the Variation to ascertain whether Mr EZ or Ms FB provided the information in the letters to Mr DO, and whether Mr EZ properly certified the

Agreement under Rule 2.5.3

[28] On 20 April 2009 Mr EZ faxed a draft letter to Mr DO for his approval. The draft letter was addressed to Ms ZV, setting out the amendments Mr DO proposed making to the Agreement which included completely removing the penalty interest provision. The fax confirmation sheet dated the same day shows that the fax contained three other pages, and although there are no copies of those pages on the file before me, it is reasonable to

3 Above n1.

assume those were the three pages that recorded the terms of the draft variation to the

Agreement in accordance with Mr DO’s instructions.

[29] An undated handwritten note at the foot of Mr EZ’s fax cover sheet of 20 April 2009 indicates that Mr DO and Mr EZ had spoken on the phone, and that Mr DO had said he was away from home so he had not seen the fax. The note records that Mr DO had said he was not going home, but that he would phone Mr EZ’s office to discuss the contents of the fax. He also provided an alternative fax number, and Mr EZ re-sent the five page fax to that number the same afternoon. There is also a handwritten file note dated 20 April 2009 that refers to a phone call between Mr DO and Mr EZ which records their discussion of the amendment to Clause 5 which contains the interest provision.

[30] The next documents on the file are an email and a draft letter to Ms ZV. The email was sent to Ms ZV on 22 April 2009 from Ms FB’s email address and was signed off in Ms FB’s and Mr EZ’s names. The email indicates it enclosed a letter and an amended Relationship Property Agreement. The email said that Mr DO “instructs he has discussed this matter with you and you are waiting to hear from us”, and that two hardcopies of the amendment would be posted out that evening. The email made suggestions as to what Ms ZV might do on receiving it and the attached documents, and recommended that Ms ZV seek legal advice before responding.

[31] Although there is no copy of the draft variation on the file, the covering letter attached to the email of 22 April 2009 faithfully records Mr DO’s instructions at that stage, including Mr DO’s instruction that the:

...interest penalty clause in the existing 5.3 is to be removed. Therefore, no interest will accrue after 31 August 2009 if the debt owing to you is not paid off in full.

[32] Ms ZV’s lawyers set out two permutations of the terms on which Ms ZV would agree to vary the Agreement in the letters which responded to Mr DO’s proposal. Both of the letters include the requirement that Mr DO pay interest, implicitly rejecting his proposal that Ms ZV agree to waive penalty interest, but both confirming that Ms ZV was willing to extend the deadline for repayment to allow Mr DO to repay the full amount by 31 August 2010, some 12 months later than the parties had originally agreed under the Agreement.

[33] At the review hearing Mr EZ said that he had been away from the office at the time the letters had arrived, and that Ms FB had conduct of the file, which she confirmed. Although there is no record on Mr EZ’s file that copies of either of the letters were sent to Mr DO, Ms FB’s evidence was that she was certain she had discussed the letters and the

Variation with Mr DO over the phone, and that she had talked through with him the effect the Variation would have on him, and its implications for him.

[34] Although Ms FB was confident she had a conversation with Mr DO, there is no note of that conversation on the file. Ms FB said that she could not remember the detail of her conversation or the detail of the amended clauses so long after the events. She was certain, however, that she had discussed the letters and the Variation with Mr DO. Ms FB said she could not remember what advice she had given to Mr DO, but she said she was certain she discussed the effects and implications of the amended clauses with him, and

that the purpose of her discussion would have been to discuss the amended clauses and:4

...to be able to get some idea of where [Mr DO] was coming from in response to those clauses coming through, whether he agreed with them or not before a response could be written to the other solicitors.

[35] Mr EZ’s file then contains a file note dated 5 May 2009 which records a phone conversation he says he had with Mr DO in the following terms:

I spoke to [Mr DO] this morning by phone. He confirmed he’d paid [Ms ZV]

$10,000.

[Mr DO] said [Ms FB] had read over the amended clauses to him by telephone.

We agreed [Mr EZ] to have agreement typed up as amended by [Ms ZV’s lawyers]

and agreed to by [Ms ZV] and her lawyer.

[Mr DO] to come into our office to sign agreement next week.

[36] Mr DO signed the Variation over a month later. Mr EZ said at that stage he believed that Mr DO and Ms FB had discussed the letters and the Variation in some detail, because Mr DO had told Mr EZ about his phone conversation with Ms FB in which Mr DO said they discussed the letters and the Variation.

[37] Ms FB said that she had written to Mr DO when he had complained about not being properly advised about the penalty interest provision in the Variation he had signed. Referring to her letter to Mr DO dated 30 September 2010, Ms FB said that at the time she wrote that letter she recalled that she had read through the amended clauses with Mr DO word by word.

[38] In contrast to Ms FB’s evidence, Mr DO says he had no conversation with Ms FB and no discussion with her about his file in Mr EZ’s absence. Mr DO says he was not provided

4 At the review hearing (23 September 2013).

with copies of the letters, and that as far as he was concerned the interest provision had been removed from the Variation in accordance with his instructions.

[39] Mr EZ says that after he returned to work he took instructions from Mr DO over the phone on 5 May 2009. At that stage he says he believed Mr DO was aware of the amended terms Ms ZV had proposed because he recorded Mr DO’s reference to his phone conversation with Ms FB. Mr EZ says that when Mr DO signed the Variation, Mr EZ honestly believed Mr DO’s instructions were to vary the Agreement in accordance with the proposal set out by Ms ZV’s lawyer in the letters, including retaining the interest provision and extending the deadline for the final repayment.

[40] It is important to remember that at this stage Mr DO was in breach of the Agreement, so it was open to Ms ZV to take steps to enforce the Agreement against him at any time before they had both signed the Variation and the lawyers had certified it. Mr EZ says that he recognised Mr DO was in breach of the Agreement, and therefore at risk, and that he tried several times to contact Mr DO without success. In order to progress the Variation, and give Mr DO some protection, Mr EZ says he sent the Variation to Ms ZV’s lawyers, and she signed it first. That would at least have ensured Ms ZV was committed to the Variation, even though it reduced the imminent benefit of the Agreement to her.

[41] Mr EZ said that when Mr DO came in to countersign the Variation, Mr EZ was “working on the assumption that [Mr DO] had gone over [the Variation] in more detail with Ms FB over the phone”. Mr EZ said he had full confidence that Ms FB would have been “extremely thorough in reading through with [Mr DO], and he would have had every opportunity to raise concerns or objections at that time”.5

[42] Mr EZ says that he had other appointments, and was short of time when Mr DO came in to sign the Variation without a scheduled appointment and he was conscious that Mr DO may be in “danger of not acting in good faith”. Mr EZ says he “did not personally explain to Mr DO the effect of the interest provision in the amended agreement on the actual day he signed it”, because he knew Ms FB “had recently gone over the clauses one

by one with him over the phone”6 at a time when Mr EZ had been away overseas.

[43] Mr EZ said that his other reasons for believing Mr DO knew about the penalty interest clauses and their meaning included direct communications between the parties to the Agreement, a payment to Ms ZV by Mr DO and a statement from the other lawyer in his letter that the parties had reached agreement between themselves over the amended

_{clauses he had drafted (included in which was the penalty interest provision). Mr EZ said}

5 _{Above n4.}

6 _{Above n4.}

he assumed that Mr DO had seen a hard copy of the amended clause via Ms ZV, with whom he was still in touch.

[44] For these reasons, Mr EZ said, he was working on the assumption that Mr DO was

“fully briefed at the point where we were in a position to sign the document” on 11 June

2009. He noted also that “a similar penalty interest rate provision was part and parcel of the original agreement”, he pointed out that “the clause is very clear” and said “there is no doubt in my mind that Mr DO knew about it and understood what it meant”.7

[45] Mr DO signed the Variation agreeing to pay interest to Ms ZV if he failed to make full repayment by 31 August 2010, and in terms that were otherwise consistent with the second of the letters. Mr EZ’s evidence was that he certified the Variation honestly believing that Mr DO was well aware of, and well briefed about, what he was doing.

[46] Mr EZ sent Ms ZV’s copy of the Variation to her lawyers, and they returned it to Mr EZ in late June 2009 because he had not signed the s 21F certificate. Mr EZ noted on his file that he signed the certificate in the Variation on 22 June 2009, and returned a copy to Ms ZV’s lawyer.

[47] After the Variation was finalised Mr DO again instructed Mr EZ to attempt further negotiations to extinguish the interest provision and reduce the amounts Mr DO was required to pay to Ms ZV. When those attempts failed Mr DO wrote to Mr EZ saying:8

When I finally called into your office to sign the agreement, I believed it was amended as I had been previously advised by you. I received no advice from you at the time I signed the agreement and had no reason to believe that what I was signing was anything other than the amended agreement as per the letter you had sent [Ms ZV].

[48] Mr DO invited Mr EZ to accept that the Variation had been drafted and signed by the

parties by “mistake”, and asked for Mr EZ’s response within 10 days.

[49] Instead of replying within the 10 day timeframe specified, Mr EZ wrote to Ms ZV’s lawyer advising that he was no longer acting for Mr DO and sent a copy of that letter to Mr DO. Mr DO says Mr EZ’s reaction only amplified his concerns.

[50] Ms FB responded to Mr DO’s letter on 30 September 2010 disputing Mr DO’s

recollection of events, and advising that in the circumstances the firm could no longer act for him.

7 _{Letter from Mr EZ to LCRO (9 October 2013).}

8 _{Letter from Mr DO to Mr EZ (17 September 2010).}

[51] Mr DO then wrote to the Law Society on 16 November 2010 complaining about

Mr EZ’s conduct.

Discussion

Prompt Disclosure of Relevant Information (Rule 7)

[52] The first issue on this review is whether Mr EZ failed to promptly disclose all information that he had or acquired to Mr DO that was relevant to the matter in respect of which Mr EZ was engaged by Mr DO. The relevant Rule is Rule 7 which provides:9

A lawyer must promptly disclose to a client all information that the lawyer has or acquires that is relevant to the matter in respect of which the lawyer is engaged by the client.

[53] Mr DO’s position is that he was not provided with hardcopies of the letters from Ms ZV’s lawyers containing the terms on which she proposed to vary the Agreement; nor was he provided with a draft of the amended clauses that were in the Variation before he signed it on 11 June 2009. He says that he should have been provided with those documents, and he wants to know why they were not provided.

[54] Mr EZ’s evidence is that under usual circumstances he would have sent hardcopies of the letters and draft variation to Mr DO. However, on this occasion Mr EZ says he was away on leave at the relevant time, and he left the file with his employer and trusted colleague, Ms FB. When he came back to the file Mr EZ says he made some assumptions about what steps had been taken in his absence. As there is no record on the file that those documents were sent to Mr DO, and Ms FB has no recollection of sending him copies of the letters, it appears Mr EZ’s assumptions in that regard were incorrect.

[55] The question is whether, in the circumstances, Mr EZ’s failure to provide copies of

the correspondence and a draft of the amended variation is a breach of Rule 7.

[56] The Rule does not say how a lawyer is to disclose relevant information to a client, or that it must be provided in any particular form, although as Mr EZ indicated, it is best practice to have a written record of everything that occurs on a file.

[57] Mr EZ should have checked whether or not Mr DO had been sent a copy of the letters with a draft variation in his absence. Instead Mr EZ’s evidence, which is supported by his file note of 5 May 2009 and evidence from Ms FB, is that Mr EZ believed Ms FB had a detailed discussion with Mr DO. It appears from that file note that Mr DO’s own instructions to Mr EZ at the time were that Ms FB had gone over with him the amended

9 Above n1.

clauses, which included the interest provision and the varied repayment dates that are recorded in the Variation.

[58] In her letter to Mr DO of 30 September 2010 Ms FB says she spoke to Mr DO on the phone on 30 April 2009, which was the same day that she received the second of the two letters from Ms ZV’s lawyer. The fax record indicates the second letter arrived two days after the first. The first letter dated 24 April 2009 bears the date stamp 28 April 2009 indicating that was the date the first letter was received at Ms FB’s office. The next contact from Mr DO occurred on 5 May 2009 when he phoned Mr EZ.

[59] There is no indication from Mr DO that anything turned on the delay of two days at that stage. In the circumstances I do not consider a delay of two days to be unacceptable.

[60] Ms FB’s reference to her discussion with Mr DO about the amended clauses can only relate to the proposed changes set out in the letters from Ms ZV’s lawyers. As Mr EZ’s note records, it was Mr DO who raised the subject of his conversation with Ms FB. In the circumstances it is reasonable to conclude that Ms FB relayed the information contained in the two letters to Mr DO.

[61] Rule 7 does not require a lawyer to send a copy of correspondence to clients, although that will generally be a sensible precaution. The Rule only requires that information be promptly disclosed. As Mr EZ was absent, it was appropriate for Ms FB to pass on the information to Mr DO. My view, therefore, is that the relevant information was promptly provided to Mr DO by Ms FB. The apparent failure to provide Mr DO with hardcopies of the two letters, and the terms of the draft Variation in writing, does not breach the requirements of Rule 7. In the circumstances it was reasonable for the Standards Committee to decide to take no further action on that aspect of Mr DO’s complaint.

Certification (Rule 2.5)

[62] The second review issue relates to Mr EZ’s certification of the Variation to the Agreement. Mr EZ’s duty was to truthfully certify the statutory certificate in the Variation, in accordance with Rule 2.5. Rule 2.5 imposes a professional duty on lawyers, when they certify matters, and provides:10

A lawyer must not certify the truth of any matter to any person unless he or she believes on reasonable grounds that the matter certified is true after having taken appropriate steps to ensure the accuracy of the certification.

[63] In the present circumstances, Mr EZ was called upon to give a certification using the statutory wording of s 21F of the PRA set out in the Agreement which says:

10 Above n1.

I [Mr EZ] of [town], Solicitor, certify that before [Mr DO] signed the Agreement I

explained the effect and implications of the Agreement to him.

[64] Mr EZ accepts that he did not personally explain to Mr DO the effects and implications of the Variation after it was modified by Ms ZV’s lawyer but before Mr DO signed it. A lawyer who certifies cannot delegate the duty to explain the effect and implications of a Relationship Property Agreement to another person. Section 21F(5) of the PRA requires the lawyer who witnesses the person signing an agreement to also have personally explained the effect and implications of it and to certify that is what the lawyer has done.

[65] Although Mr EZ admits that he did not personally explain the implications of the interest provision to Mr DO when Mr DO signed the Variation, that would not necessarily be a breach of Rule 2.5 if Mr EZ could have said he had previously explained to Mr DO the effect and implications of the Variation in the form in which Mr DO signed it.

[66] It appears that although Ms FB may well have advised Mr DO, Mr EZ did not. Mr EZ was away from the office when the letters arrived, both of which retained the interest provision. The Variation was not in the same form it had been in when Mr EZ had taken Mr DO’s instructions before his absence from the office, and the evidence is that Mr EZ did not personally give Mr DO appropriate advice on the effect and implications of the Variation after Ms ZV’s lawyers had amended it.

[67] The Committee’s finding that “[a]ppropriate advice was given at the time”11 Mr DO signed the Variation is therefore not correct. That in turn undermines reasons 2 and 3 of the Committee’s reasons for deciding to take no further action, which are:12

2. There is some file noted discussion and correspondence regarding the penalty clause in the amended relationship property agreement which was executed on 11 June 2009.

3. An Independent Advice Certificate was signed by Mr EZ and Mr DO clearly signed the agreement and initialled each page of that agreement.

[68] While there is some file noted discussion and correspondence regarding the penalty clause in the Variation, that documentation does not support a decision to take no further

_{action on Mr DO’s complaint. Likewise, the reasons that Mr EZ signed an Independent}

11 _{Standards Committee Determination (18 August 2011).}

12 _{Above n11.}

Advice Certificate and that Mr DO “...clearly signed the agreement and initialled each page of that agreement...”13 are insufficient.

[69] Although Mr EZ may be correct in his honest belief that Mr DO was “fully briefed at the point where we were in a position to sign”14 the Variation, Mr EZ’s honest belief is not sufficient for him to discharge his duty when faced with the combined effects of Rule 2.5 and s 21F(5) of the PRA.

[70] Rule 2.5 is of broad application, it does not place any constraints on when or where a certification must occur. The Rule does not impose a requirement that certification must be given at the same time as the signatory signs. The Rule only requires that the lawyer must give any certification truthfully. Certifications should be given on the basis of a high degree of certainty, after taking appropriate steps to check and ensure the certification will be accurate. Certification under the combined force of Rule 2.5 and s 21F(5) of the PRA should not be based on an assumption that someone else has given proper advice.

[71] Mr EZ did not take appropriate steps to ensure the accuracy of the certification he gave that Mr DO had been properly advised before he signed the Variation. Mr EZ did not truthfully certify that before Mr DO signed the Agreement he personally explained the effect and implications of the Variation to Mr DO. In the circumstances Mr EZ is in breach of Rule

2.5.

[72] Breach of a Rule is one of two ways in which Mr EZ’s conduct in providing regulated services could be unsatisfactory pursuant to s 12 of the Act, which defines unsatisfactory conduct in relation to lawyers as meaning:15

(a) conduct of the lawyer... that occurs at a time when he... is providing regulated services and is conduct that falls short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent lawyer; or

(b) conduct of the lawyer...that occurs at a time when he...is providing regulated services and is conduct that would be regarded by lawyers of good standing as being unacceptable, including—

(i) conduct unbecoming a lawyer or an incorporated law firm; or

_{(ii) unprofessional conduct; or...}

13 _{Above n11.}

14 _{Above n4.}

15 _{Lawyers and Conveyancers Act 2006, s 12.}

[73] Members of the public are entitled to expect that their lawyer will comply with their statutory obligations when they provide regulated services, particularly where the lawyer’s failure could expose the client to significant risk. Mr EZ assumed, but did not diligently check to find out what advice Mr DO had received before Mr DO signed the Variation. Mr EZ also missed a second opportunity to give the advice after Mr DO had signed the Variation, when Ms ZV’s lawyer noticed that Mr EZ’s signature was missing and returned the Variation to him to sign after all other signatures had been added. Mr EZ could have advised Mr DO at that stage, before he signed certifying that he had given the necessary advice.

[74] In all the circumstances Mr EZ’s conduct is unsatisfactory pursuant to s 12(a) of the Act in that it falls short of the standard of diligence that a member of the public is entitled to expect of a reasonably competent lawyer.

[75] There are also good reasons for finding that Mr EZ’s conduct would be regarded by lawyers of good standing as being unprofessional and unacceptable pursuant to s 12(b) of the Act. The interpretation section of the Act singles out advice under s 21F of the PRA for special reference in the meaning of “reserved areas of work” being:16

...work carried out by a person...in giving legal advice or in carrying out any other action that, by section 21F of the Property (Relationships) Act 1976 or by any provision of any other enactment, is required to be carried out by a lawyer.

[76] Although there are other statutes that reserve certain areas of work to lawyers, the PRA is the only Act that is mentioned by name. Reserving areas of work is a method by which the purpose of recognising the status of the legal profession is achieved. Professor Webb discusses the lawyer’s duty to explain under legislative provisions, and to ensure the advice given complies with the statutory requirements for the agreement to be enforceable. Professor Webb says that the “advice must be substantial and not treated as a mere formality”,17 and refers to the requirement for advice on the transaction’s effect and implications that is specific to a Relationship Property Agreement and is referred to in the

Court of Appeal decision in Coxhead v Coxhead where Hardie Boys J says:18

...independent legal advice is no mere formalism. Each party must receive professional opinion as to the fairness and appropriateness of the agreement at least as it affects that party's interests. The touchstone will be the entitlement that the Act gives, and the requisite advice will involve an assessment of that

_{entitlement, and a weighing of it against any other considerations that are said to}

16 _{Above n15, s 6.}

17 _{Duncan Webb Ethics, Professional Responsibility and the Lawyer (2}nd _{ed, Butterworths, New}

_{Zealand 2000) at 174.}

18 _{Coxhead v Coxhead [1993] 2 NZLR 397 (CA).}

justify a departure from it. Advice is thus more than an explanation of the meaning of the terms of the agreement. Their implications must be explained as well. In other words the party concerned is entitled to an informed professional opinion as to the wisdom of entering into an agreement in those terms.

[77] The significance of a failure to comply with Rule 2.5 in providing advice under the PRA should not be understated. Providing advice on the effects and implications of agreements under the PRA is an everyday occurrence for some lawyers, but may be a once in a lifetime experience for a client. Setting and maintaining a proper professional standard for advice under the PRA goes to the core of all three purposes of the Act. It is essential that public confidence is maintained, and consumers of legal services relating to PRA advice are protected. The status of the legal profession is recognised by lawyers’ unique ability to do work in the reserved areas under the PRA.

[78] In the circumstances Mr EZ’s conduct would be regarded by lawyers of good standing as being unprofessional, unacceptable and therefore in breach of s 12(b) of the Act.

[79] In summary Mr EZ’s breach of Rule 2.5 in respect of certification of the Variation is unsatisfactory conduct as defined by s 12(a) and (b) of the Act. In the circumstances it was not reasonable for the Committee to decide to take no further action on this aspect of Mr DO’s complaint.

Penalties

[80] The following matters are of particular relevance when considering what penalty, if any, is appropriate. Mr EZ’s evidence was that he generally provides his clients with a copy of correspondence and ensures his clients also receive a copy of any document they might consider signing in advance, so they can consider documents in a measured and timely way. Had Mr EZ been in the office there is no reason to believe Mr EZ would not have done the same for Mr DO, so a penalty that acts as an individual deterrent is unwarranted.

[81] Mr EZ’s conduct was generally acceptable, diligent and competent in respect of the work he did for Mr DO. If the Variation had not come into existence, Mr DO would have been in an even worse position, being already late paying the sums due to Ms ZV, and therefore liable to pay interest under the Deed. I accept that Mr EZ had grounds for his assumption that Mr DO had received advice on the Variation based on the conversation Mr DO had with Ms FB. I also accept that Mr EZ acted on his honest belief that Ms FB had explained the Variation to Mr DO after she had seen the two letters from Ms ZV’s lawyer

and the amended Variation. It therefore follows that Mr EZ’s breach of Rule 2.5 was not deliberate.

[82] Whether the outcome of this review makes any actual difference to Mr DO’s position rests on Mr DO. The review process is confidential and as the decision will not be published Ms ZV will only find out the Variation may be voidable if Mr DO tells her. Mr DO would be wise to seek legal advice before he makes a decision about that.

[83] In all the circumstances I consider that having made a finding that Mr EZ’s conduct

was unsatisfactory, it is appropriate to make no Orders as to penalty.

Costs

[84] Pursuant to s 210 of the Act, Orders for payment of costs and expenses are discretionary.

[85] The primary purpose for which costs Orders are made in favour of the New Zealand Law Society is to help defray the costs to the profession overall of funding complaints and discipline, including reviews. Where a finding of unsatisfactory conduct has been made against a practitioner, costs Orders will usually be made against the practitioner in favour of the Law Society. Those Orders may relate to the costs of the inquiry before the Standards Committee and the costs of review in accordance with s 210(3) of the Act.

[86] I have considered whether this is a case in which Mr EZ should be ordered to pay costs on review. The review application was brought by Mr DO, and to some extent he has been vindicated on review. On the basis of Mr EZ’s admission he had breached Rule 2.5.

[87] The Standards Committee did not Order costs because the outcome was not adverse to Mr EZ.

[88] In the circumstances it is appropriate that Mr EZ should make a contribution to the costs of this review which, once his admission was recorded, has been relatively straight forward. The costs of a straight forward review would generally be $1,200. Moderating that downwards to recognise Mr EZ’s admission, it is appropriate that he pays costs of

$900.

Decision

Pursuant to s 211(1)(a) of the Lawyers and Conveyancers Act 2006 the part of the decision that relates to Mr EZ’s breach of Rule 2.5 is reversed, and replaced with the finding that Mr EZ breached Rule 2.5 which constitutes unsatisfactory conduct pursuant to ss 12(a) and (b) of the Act.

Pursuant to s 210 of the Act, Mr EZ is ordered to pay costs of $900.

_{DATED this 18}th _{day of December 2013}

Dorothy Thresher

Legal Complaints Review Officer

In accordance with s 213 of the Lawyers and Conveyancers Act 2006 copies of this decision are to be provided to:

Mr DO as the Applicant

Mr EZ as the Respondent

Mr FA as the Representative for the Respondent

Ms FB as a related person or entity The [Area] Standards Committee The New Zealand Law Society Secretary for Justice