AZ v ZT [2014] NZLCRO 15 (6 May 2014)

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	LCRO 100/2013
CONCERNING	an application for review pursuant to section 193 of the Lawyers and Conveyancers Act 2006
AND
CONCERNING	a determination of the [XYZ] Standards Committee
BETWEEN	MS AZ Applicant
AND	MS ZT _Respondent

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

[1] This review application was brought by Ms AZ. On 1 March 2013 the Standards Committee (the Committee) made orders against her under s 156 of the Lawyers and Conveyancers Act 2006 (the Act), after her conduct was found to have been unsatisfactory (the penalty decision). The s 156 orders were a reprimand, reduction of Ms AZ’s fee, and orders to pay compensation to Ms ZT and costs to the New Zealand Law Society (NZLS). Ms AZ asks that all of those orders be reversed on review.

[2] The Committee made a substantive decision on Ms AZ’s conduct dated 17 December

2012 (the substantive decision), which records the background to Ms ZT’s complaints. The

Committee found Ms AZ’s conduct to have been unsatisfactory in that she breached Rule

9.5 of the Lawyers Conduct and Client Care Rules (the Rules)1 by failing to advise Ms ZT on legal aid. The Committee reserved its decisions on whether Ms AZ’s fees were reasonable, and the orders it might make under s 156, and otherwise determined to take no further action on Ms ZT’s complaints (the substantive decision).2

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

[3] No application was made to review the substantive decision, so that is beyond challenge by way of Legal Complaints Review Officer (LCRO) review. The unsatisfactory conduct finding stands, as does the Committee’s decision to take no further action on the balance of Ms ZT’s complaints.

[4] The penalty decision has been reversed on review because the Committee did not determine the fees aspect of Ms ZT’s original complaint. It is not possible to discern from the Committee’s decision which facts would be relevant to it determining what a reasonable fee would be and which facts constituted the balance of the complaints on which the Committee decided to take no action. The question of whether Ms AZ’s fees were reasonable has therefore been referred back to the Committee for it to consider and determine.

[5] Once the Committee has determined the quantum of Ms AZ’s fees, it will be in a position to exercise its discretion and tailor the orders it makes under s 156 in response to its assessment of Ms AZ’s culpability, and by reference to other relevant circumstances such as the impact of her conduct on her client and fees.

[6] To some extent Ms AZ’s grounds for review3 are challenges to the Committee’s findings in the substantive decision, which, as mentioned above, are beyond the jurisdiction of this review and cannot be considered. However, this review has considered the orders made under s 156, and the fees issue that arises from the penalty decision.4

[7] 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 Committee, without good reason. That has been an important consideration in deciding how best to conclude this review.

[8] The LCRO has broad powers to conduct her own investigations, including the power to exercise for that purpose all the powers of a Standards Committee or an investigator, and seek and receive evidence. The statutory power of review is much broader than an appeal and gives the LCRO discretion as to the approach to be taken on any particular review and

the extent of the investigations necessary to conduct that review. However, the power of review does not extend to re-opening a decision that is beyond the statutory timeframe for review under the Act.

[9] I considered this review could be conducted on the basis of all the information available, and could be adequately determined in the absence of the parties pursuant to s 206 of the Act. Both parties gave their consent to this review being carried out and determined in their absence.

[10] The history of the complaint and its progress through the complaints process provide context for the penalty decision, and illuminate the issues on review, so a brief summary is set out below.

[11] The thrust of Ms ZT’s complaint was that Ms AZ should have advised her to apply for legal aid, and that the fees of over $20,000 Ms AZ charged her privately were excessive. Ms ZT said that Ms AZ’s failure to advise on legal aid combined with her excessive billing resulted in Ms ZT being unrepresented. That in turn resulted not only in her gaining nothing from her relationship property proceeding, but also being ordered to pay a contribution to her former partner’s costs. Ms ZT says the costs order would not have been made if she had been represented.

[12] When the complaint first came before the Committee it decided to enquire into it, and appointed a Costs Assessor to assess and report on Ms AZ’s fees.5

[13] The Committee sent two Notices of Hearing to the parties under s 141 of the Act. The first was dated 1 June 2012 and was sent before the Committee made the substantive decision. The second was dated 17 December 2012 and was sent before the Committee made the decision under review (the second notice of hearing). In both Notices of Hearing the Committee gave the parties notice that it would consider whether Ms AZ’s fee was fair and reasonable for the services she had provided.

[14] In her report,6 the Costs Assessor explained she had considered the fees Ms AZ had rendered for work done before 1 August 2008 separately from her fees for work done after

that date. The date is significant because on 1 August 2008 the Law Practitioners Act 1982 was repealed, and the Lawyers and Conveyancers Act 2006 came into effect. As a consequence, the Costs Assessor’s approach was to apply different legislative provisions to bills rendered before and after that date.

[15] On the basis of the transitional provisions of the Act, the Costs Assessor formed the view that she could not consider the fees Ms AZ had charged for work done before 1 August

[16] The Costs Assessor considered that the fees for work done after 1 August 2008, which she said totalled $15,667.79, fell outside the range of what she considered reasonable, partly on the basis of “the way in which the litigation ended for the client”.7 After considering the reasonable fee factors, she concluded those fees should fall in a range between $9,800 and $11,000.

[17] The Committee set out the background to the complaint, identified five issues that arose from the complaint, and examined those. The first two issues were jurisdictional and related to conduct before 1 August 2008. The other three issues, which related to Ms AZ’s conduct and fees after 1 August 2008, were whether she had provided adequate advice on legal aid, rendered fees that were fair and reasonable in accordance with Rule 9, or breached her obligations when she terminated the retainer.

[18] The Committee considered the Costs Assessor’s report and Ms AZ’s conduct and fees before 1 August 2008, and made a determination under s 152(2)(c) of the Act that it would take no further action on those parts of Ms ZT’s complaint.

[19] The Committee then considered Ms AZ ’s conduct and fees after 1 August 2008. As to conduct, it concluded she had not provided adequate advice on legal aid, and made a finding of unsatisfactory conduct under s 12(c) of the Act. The Committee decided she had not breached her obligations under Rules 4.2.3 and 4.2.48 when she terminated the retainer in July 2009. It adjourned its consideration of fees Ms AZ had rendered for work done after

1 August 2008, and what orders it might make under s 156, to a penalty hearing, and

[20] The Committee then sent out the second notice of hearing inviting the parties to provide submissions for its second hearing when it would consider:

a. Whether Ms ZT was in fact entitled to legal aid after 1 August 2008. b. Whether Ms AZ’s fee after 1 August 2008 was fair and reasonable.

c. The orders the Committee may make under s 156, including orders for compensation under s 156(1)(d) and reduction or cancellation of Ms AZ’s fee under s 156(1)(e), (f) and (g) of the Act.

[21] The Committee also provided Ms ZT with a legal aid form and invited her to provide details of her financial position, proof of earnings and a statement of her assets and liabilities for the period 1 August 2008 to 31 July 2009.

[22] Ms ZT provided the financial information the Committee had requested, and Ms AZ filed written submissions. Ms AZ expressed her view that the Committee was considering questions of legal aid in the context of the wrong regulations, and highlighted other matters and findings the Committee had made in the substantive decision that she considered relevant.

[23] The Committee considered whether Ms ZT was eligible for legal aid for the relevant period, analysed her financial position in the context of the legal aid regulations it considered applied, and decided she “would, in fact, have been eligible for legal aid, and would have been required to make a $10,000 contribution towards her legal aid grant”.9

Having found that Ms ZT was in fact eligible for legal aid in the relevant period, it is not necessary for the Committee to consider whether the fee rendered by Mrs AZ after

1 August 2008 was fair and reasonable. This is because with a grant of legal aid, Ms ZT’s maximum personal liability was the sum of $10,000. A fee of that amount was clearly justified.

...having legal aid would have been a significant advantage to Ms ZT. Almost certainly Ms ZT would have been represented at the 9 October 2009 hearing, and the Committee considers that the consequent outcome could have been quite different. A lawyer as experienced as Mrs AZ would not have continued to act for Ms ZT if she had no prospects of success. A different property division may well have been arrived at, and Ms ZT would have had the immunity to any cost award given by the Legal Services Act. Instead, Ms ZT was not present or represented in Court to argue her case, and was ordered to contribute to [her former partner’s] costs in the sum of $6,784.

[26] The Committee then imposed reprimand and financial orders on Ms AZ under s 156 of the Act on the basis of the finding that her failure to advise Ms ZT on legal aid was unsatisfactory conduct under s 12(c) of the Act.

[28] As mentioned above, the issues on review are limited to matters arising from the penalty decision.

[29] The key issue that arises from the penalty decision stems from the Committee’s comment that “it is not necessary for the Committee to consider whether the fee rendered by Mrs AZ after 1 August 2008 was fair and reasonable”.

[30] The question on review is whether it was necessary for the Committee to consider and determine Ms ZT’s complaint about Ms AZ’s fees. For the reasons discussed below, the short answer to that question is “yes”.

[31] As that aspect of Ms ZT’s complaint has yet to be determined, the supplementary issues are:

[32] As mentioned above, the Committee sent two notices of hearing to the parties indicating it would consider whether Ms AZ’s fee was fair and reasonable for the services she had provided. It held two hearings: the first to deal with the legal aid issue, and the second to deal with the fees complaint and penalty.

[33] Having seized jurisdiction over the fee complaint, s 152 of the Act provides for the

(a) after both inquiring into a complaint and conducting a hearing with regard to that complaint; ...

(a) a determination that the complaint... be considered by the Disciplinary Tribunal: (b) a determination that there has been unsatisfactory conduct on the part of—

(c) a determination that the Standards Committee take no further action with regard to the complaint or matter or any issue involved in the complaint or matter.

(3) Nothing in this section limits the power of a Standards Committee to make, at any time, a decision under section 138 with regard to a complaint.

It was common ground in this case that although s 152 says the Standards Committee “may” do one or more of three things, there are no other options open to the Standards Committee. Accordingly, the “may” should for all practical purposes be read as “must”.

[35] The Court’s focus in Orlov was on whether the power to refer a matter to the Disciplinary Tribunal under s 152(2)(a) was subject to a threshold test, so no consideration was given to s 152(3) which confirms that Committees retain the option of making a decision under s 138 throughout the complaint process. The decision in Orlov does not diminish the statutory power of s 138, which gives Committees broad discretion to decide to take no action or, no further action, on complaints in certain circumstances, and on the basis that the Committee considers that further action is unnecessary or inappropriate.

[36] Once a Committee is seized of a complaint, s 152 empowers the Committee to determine or decide it. Although s 152(4) of the Act makes no reference to a decision the Committee can make at any time under s 138, it says that a Committee’s determination and any orders it makes under ss 156 or 157 are final (subject to the right of review and another

[37] A Committee only has the power to make orders under s 156 if it has first made a determination of unsatisfactory conduct under s 152(2)(b).

[38] In the present situation the Committee did not exercise its power to determine the fees complaint under s 152(2), nor did it make a decision under s 138. The fee complaint therefore remains extant. Although the Committee said that a fee of $10,000 “was clearly justified”, that is not the same as determining whether Ms AZ ’s fees were fair and reasonable when measured against the factors set out in Rules 9 and 9.1,13 which is what the Committee had told the parties it would do in the notices of hearing.

[39] On review, it has been necessary to consider the Committee’s findings in the substantive decision as well as the decision under review to ascertain how the review should proceed. That has resulted in a number of difficulties with the Committee’s approach becoming apparent, although those difficulties cannot be resolved because of the jurisdictional prohibition on review of the substantive decision, which leaves s 156 orders and fees as the only matters that can be addressed on review.

[40] One difficulty is that while the Costs Assessor considered Ms AZ’s files and fees for work done after 1 August 2008 in the context of Rules 9 and 9.1, there is no evidence of the Committee having carried out any independent analysis, or determining whether the fees were fair or reasonable.

[41] The figure of $10,000 adopted by the Committee is problematic because it was based on the Committee’s assessment of Ms ZT’s maximum exposure on a grant of legal aid.14 In Ms AZ’s submission, the Committee was relying on the wrong law. That is not a matter that can be resolved on review, although clearly the Committee had no power to make a decision on whether “in fact” Ms ZT was entitled to a grant of legal aid.

[42] Decisions on legal aid are made within a particular legislative and regulatory framework, and involve exercises of statutory discretion. There is no logical connection on one hand between Ms ZT’s possible exposure to pay a hypothetical contribution under a grant of legal aid that was never applied for, considered or determined by the proper statutory authority; and on the other hand, an assessment by a Standards Committee under the Act as to whether Ms AZ’s fees were fair and reasonable when considered in the context of Rule 9 and 9.1.15 The Committee has not identified factors that it might consider relevant

[43] It is also not clear whether the Committee’s view that $10,000 was an appropriate number was affected by the way in which the retainer ended, as mentioned by the Costs Assessor. Ms AZ appears to have given notice of her intention to terminate her retainer after she sent her final bill, and some weeks before she obtained orders from the Family Court under Rule 88.

[44] Ms AZ’s professional obligations extended beyond the date of her final bill. However, it is difficult to see how anything Ms ZT did or did not achieve after the date of her final bill can be relevant to whether her fees were fair and reasonable for the work she did before issuing her final bill.

[45] Putting to one side the absence of any evidence of Ms AZ ever having served the orders on Ms ZT to render them effective under Rule 88 thereby bringing her professional obligations to an end, it appears from the Costs Assessor’s comments that her assessment of a reasonable range for fees may have been affected by conduct after the final bill was issued. That approach is puzzling, and as the Committee has not yet determined Ms ZT’s complaint about Ms AZ’s fees, the puzzle is unresolved.

[47] Either the LCRO or the Committee will have to determine or decide the fee complaint. Section 209 of the Act provides the LCRO with a discretion to direct a Committee to reconsider a complaint, and says:

(a) direct a Standards Committee to reconsider and determine, either generally or in respect of any specified matters, the whole or any part of the complaint, matter, or decision to which any application for review relates:

(ii) such other directions as he or she thinks just as to the reconsideration or otherwise of the whole or any part of the complaint, matter, or decision that is referred back for reconsideration:

(c) request, in giving a direction under paragraph (a), that the Standards Committee supply a follow-up report to him or her when it has complied with the direction.

(2) A Standards Committee, in reconsidering any complaint, matter, or decision referred back to it under subsection (1)(a), must have regard to the direction given by the Legal Complaints Review Officer and to his or her reasons for giving the direction.

[48] In deciding whether to refer the fees part of Ms ZT’s complaint back to the Committee, it is important to consider the Act’s general purposes of maintaining public confidence in the provision of legal services and protecting consumers of legal services. In addition, Part 7 of the Act envisages that providing for a more responsive regulatory regime in relation to lawyers contributes to achieving the purposes set out in s 3(1). The regulatory regime includes the complaints and disciplinary provisions set out in Part 7 of the Act, which establishes the framework for complaints and disciplinary processes. The framework is to be one that processes and resolves complaints against lawyers expeditiously.16

[49] The single most persuasive factor in favour of determining the fee complaint on review is to expedite resolution.

[50] The earliest of Ms AZ’s invoices that can be considered was issued 15 September

2008, so is over five years old at the time of this review. Ms ZT’s complaint had been in the complaints system for over three years. Until the amount of the fee is determined, neither Ms AZ nor Ms ZT can finalise their accounting positions, and Ms AZ’s disciplinary position also remains unresolved.

[51] Delay does not help to maintain public confidence or protect consumers, so there are good reasons why the fees part of the complaint should be determined on review.

[52] However, it is also relevant that this is not a situation where a Committee has made a determination or decision that should be revisited. In this case, although the Committee appears to have had concerns about the level of Ms AZ’s fees to the extent an inquiry was warranted, no determination or decision on fees has yet been made.

[53] I am mindful of the Court of Appeals comments, again in NZLS v B, when the Court of Appeal discussed the need to balance the competing interests of fairness, efficiency and effectiveness in the Act, and said:17

While the purposes of the Act and the new regime are designed in the public interest to achieve the expeditious resolution of complaints in “a fair, efficient, and effective manner”, it is clear that the interests of complainants and practitioners about whom

_{complaints are made are recognised and balanced through the express
requirements for}

fairness and compliance with the rules of natural justice. The processes under the Act require care and are potentially time consuming.

[54] The Court of Appeal therefore acknowledges delay as one of several factors to be recognised and balanced. Delay, in this case, however, is outweighed by the fact that the Committee has not yet made a determination or decision on fees. Although it is arguably not efficient or effective for the Committee to reconsider the complaint about fees, as a further finding of unsatisfactory conduct could result, it is important for the Committee to determine the complaint in the first instance, so that the parties’ right to the process of review is preserved.

[55] Another compelling reason in favour of referral back is that Committees are constituted of both lay members and experienced practitioners with expertise that is relevant in assessing whether a fee is fair and reasonable. Committee members as a group are well placed to balance the competing considerations of what is fair and reasonable to a client against what is fair and reasonable to a lawyer, when making assessments of fees in the context of Rules 9 and 9.1.18

[56] On balance, the advantages of the Committee deciding or determining the fee complaint outweigh the disadvantages. In the circumstances this is an appropriate case in which to make a direction under 209(1)(a).

[57] The Committee is therefore directed to reconsider the part of Ms ZT’s complaint that refers to the reasonableness of Ms AZ’s fees. As no decision or determination has yet been made, all of the options under s 152 remain open to the Committee, and it will be for the Committee to make whatever consequential orders it considers appropriate, if any.

[58] For completeness, I mention that I do not consider it necessary to request a report from the Committee when it has complied with the direction.

[59] Once the Committee has completed its reconsideration, and exercised its powers under s 152 it may be necessary for it to consider what orders it should properly make under s 156. Ms AZ’s application invited reconsideration of the orders made, and in the context of this review, that is a proper outcome.

[60] The Committee’s reconsideration of the fee part of the complaint may result in the

Committee making a second finding of unsatisfactory conduct against Ms AZ , in which case it should be in a position to exercise its discretion without the constraint imposed by its

earlier decision. In discussing s 156 orders, the Court of Appeal and the High Court are in agreement that:19

The range of orders available to a Committee under s 156(1)(a)-(o) allow the Committee to tailor its response according to its assessment of the culpability of the practitioner and by reference also to other relevant circumstances such as the impact of the conduct on a client or the risk of repeat offending. It can make orders without punishing the practitioner in any way. Only subparas (b) and (i) specify orders with a punitive effect. The Committee may mark a finding of unsatisfactory conduct by censure or reprimand and/or by imposing a fine of up to $15,000. The other powers provided for in s 156(1) are of a remedial nature, including payment of compensation for loss (subpara (d)); a fee reduction or cancellation (subparas (e) and (f)); and, in subparas (j)-(m), a range of orders for the inspection of a practitioner’s practice and for management advice and training or education.

[61] In the circumstances it should be left open to the Committee to make an overall assessment of Ms AZ’s conduct and fees, so it is in a position to consider how to tailor the orders it makes under s 156 in response to it’s assessment of Ms AZ’s conduct and her fees.

[62] The Committee has imposed a reprimand on Ms AZ , but it has the power to impose a reprimand, censure or fine, or a combination. A second unsatisfactory conduct finding could result in the Committee adopting a different view on which orders, or what combination of orders, constitutes appropriate punishment. The existing order for reprimand made under s 156(1)(b) is therefore reversed to ensure the Committee has a free hand.

[63] The Committee may also consider it is appropriate to impose different remedial orders, taking into account the comments that follow.

[64] The Committee ordered Ms AZ to pay Ms ZT compensation under s 156(1)(d) for the amount of the costs the Family Court ordered her to pay to her former partner. Section

156(1)(d) provides for compensation to be ordered for a loss a person has suffered. On its face, s 156(1)(d) makes no provision for a contingent loss, where the plain wording of

(1) If a Standards Committee makes a determination under section 152(2)(b), that Standards

(d) where it appears to the Standards Committee that any person has suffered loss by reason of any act or omission of a practitioner... order the practitioner...to pay to that person such sum by way of compensation as is specified in the order, being a sum not exceeding [$25,000]...

[65] It is not clear from the decision whether the Committee considered it relevant that the existence of a costs order does not mean Ms ZT has paid the costs, or that her former partner will enforce payment of the costs order. Ms ZT does not appear to have provided any evidence that she has paid the costs thereby suffering actual loss. The extent to which the Committee considered Ms ZT’s ability to apply to have the costs order set aside is also not clear.

[66] Having read the foregoing comments, the Committee may adopt a different approach to the question of compensation. It is therefore appropriate to reverse the compensation order made under s 156(1)(d) so the Committee can reconsider whether an order for compensation is an appropriate response under s 156.

[67] For the reasons discussed above, the Committee’s grounds for making an order under s 156(1)(e) reducing Ms AZ’s fee to mimic her maximum legal aid contribution were not sound. If the Committee determines that Ms AZ’s fee is not fair and reasonable, it may consider it appropriate to order her to reduce her fee to a particular level, once it has determined what a fair and reasonable fee is. To enable the Committee to do that, the order under s 156(1)(e) requiring Ms AZ to reduce her fee is reversed.

[68] The Committee ordered Ms AZ to pay costs of $750 to NZLS. Having reconsidered the question of fees the Committee should be free to consider whether to order costs, and if so the proper amount in total. It is therefore appropriate to reverse the costs order made under s 156(1)(n).

Pursuant to s 211(1)(a) of the Lawyers & Conveyancers Act 2006, the decision is reversed. Pursuant to s 209(1)(a) of the Lawyers & Conveyancers Act 2006, the Committee is directed

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

New Zealand Legal Complaints Review Officer

AZ v ZT [2014] NZLCRO 15 (6 May 2014)