MF v [Area] Standards Committee [X] [2018] NZLCRO 104 (10 October 2018)

Last Updated: 13 November 2018

	LCRO 42/2018
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 [X]
BETWEEN	MF Applicant
AND	[AREA] STANDARDS COMMITTEE [X] Respondent

DECISION

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

Introduction

[1] Ms MF seeks a review of a decision by the [Area] Standards Committee [X] (the Committee) by which:

• (a) her conduct was found to have been unsatisfactory;
  
• (b) she was fined $2000 payable to the New Zealand Law Society (NZLS); and
  
• (c) she was ordered to pay $1000 to the NZLS towards the costs and expenses of the investigation.
  

[2] The Committee also directed the publication of an anonymised summary of the case in such form as the NZLS saw fit.

[3] That finding and those consequences flowed from an “own motion” inquiry by the Committee that led to a determination that Ms MF had breached undertakings that she had given to ASB Group Investments Limited (ASB) that KiwiSaver withdrawals by her clients Ms RV and Mr NB (the purchasers) would be paid to, or as instructed by, the vendors as part of the purchase price of a [XY suburb] house property (XY).

[4] The facts leading to that inquiry had come to light in the course of the consideration of a complaint by the purchasers related to (i) the costs incurred by them on the purchase of XY and (ii) to her treatment of them when her clients.

Background

[5] Ms MF acted for the purchasers on the purchase of XY pursuant to a sale and purchase agreement dated 17 September 2016. The agreement was conditional on the purchasers raising sufficient finance to complete the transaction. The purchasers engaged a mortgage broker to assist them in getting finance. Mortgage funds were sought from the DEF.

[6] The DEF bank conditionally approved a loan. The bank required the purchasers, who were first home buyers, to withdraw funds they respectively held in KiwiSaver accounts, and for those funds to be applied towards the purchase. Mr NB advised Ms MF of these conditions in a 29 September 2016 email.

[7] The next day, the mortgage broker emailed Ms MF to say that DEF had agreed

(i) to waive the requirement that the KiwiSaver funds be withdrawn and applied to settlement of the purchase and that (ii) this variation involved DEF agreeing to increase its overall lending.

[8] In his email the broker wrote as follows:1

I have had [DEF] waive the KiwiSaver requirement in the letter of offer, as such the lending amount has increased to $453,000.

So funds to purchase $700,000 [DEF] $453,000

[NB] (sic) savings inc gifting $247,000

If you could again provide [Mr NB] with your trust account details, he and his family members will arrange transfer of the $247,000 over the weekend. Once received by your firm you should be able to declare the agreement unconditional to the Vendors Solicitor

1 The agreed purchase price was $700,000.

Please continue to proceed with the K/S withdrawal and the clients will apply that balance to the principal of the loan on settlement.

[9] The purchasers’ KiwiSaver accounts were with the ASB. On 26 August 2016, they had completed first home withdrawal applications prepared by Ms MF which incorporated statutory declarations as described below. These were witnessed and taken by Ms MF. At that time, she had their instructions to act on an earlier sale and purchase agreement which did not proceed.

[10] The application forms made clear in the statutory declaration section that, if accepted, the funds in question would be deposited by ASB into the purchasers’ solicitor’s or conveyancing practitioner’s trust account.

[11] The declaration section stated that final approval of withdrawals was subject to prior receipt of:

... a certificate from my solicitor or conveyancing practitioner attaching a copy of the sale and purchase agreement which clearly shows me as the purchaser and contains undertakings ... relating to the status of that agreement and the application of the savings withdrawn...

[12] At that time Ms MF also completed and signed letters of certification headed up “solicitor’s or conveyancing practitioner’s letter – all savings to be paid at settlement”.

[13] These standard form letters to ASB were identified at their start as being “re legal undertaking for the purpose of using KiwiSaver savings at settlement”.

[14] Under the heading “undertaking” were these words, the most significant of which I italicise:

2. any funds received by me ... pursuant to the application ... will be paid to or as instructed by the Vendor as part of the purchase price; or
   

100. if settlement under the agreement is not completed by the due date in the agreement or any agreed extended date, the funds will be repaid to you as soon as practicable on account of the member with no deductions or disbursements.
     

[15] Because the original sale and purchase agreement did not proceed, fund withdrawal applications were not at that point made to ASB so they and the original letters of certification completed by Ms MF remained on her file.

[16] But when, on 19 September 2016, the purchasers produced a further sale and purchase agreement Ms MF sent their 26 August 2016 applications together with new letters of certification completed and signed by her to the ASB.

[17] Those letters were identical to the first letters, except for the date being altered to 3 October 2016.

[18] Ms MF then emailed ASB:2

Please find attached completed forms for KiwiSaver withdrawal to be actioned immediately for the above named members. Please note that settlement is scheduled for 31st of October 2016 and earlier if possible. Could we please have confirmation from you once the trustees have approved the release. Our firm’s trust account deposit slip is attached.

[19] The applications were subsequently approved. Ms MF was advised of that by ASB on 21 October 2016. She was advised that cleared funds should appear in her trust account within three business days. In fact the funds (in the amounts of $14,253.22 and

$13,764.53) show in her trust account ledger as having been received that day. They were then transferred into a separate ledger by journal entry identified as “ASB KiwiSaver Withdrawal”.

[20] Six days later on 27 October 2016, Ms MF emailed the DEF to say that the purchase of XY was to settle the next day. In providing the requisite documentation to gain the drawdown to settle the purchase, she wrote:

Please note that we require full drawdown of $453,000 to complete settlement tomorrow.

(emphasis added)

[21] Settlement was completed on 28 October 2016 and accounted for on 10 November 2016 when Ms MF sent the purchasers a statement which showed that the purchase price was satisfied by payment by the purchasers of a $50,000 deposit (which fell due when the agreement went unconditional), a further $200,000 from the purchasers and the bulk of the $453,000 from the DEF.

[22] The KiwiSaver funds that had been available from 21 October 2016 did not figure in this statement.

[23] The accompanying bill of costs made no reference to KiwiSaver in its extensive narrative covering the period 19 September to 31 October 2016.

[24] The KiwiSaver monies were accounted for in a separate but contemporaneous statement. That showed their receipt on 21 October 2016 and payment out (less deductions by Ms MF) to the purchasers on 2 November 2016 — see [25] below.

[25] As to the payment out to the purchasers, with this statement went a separate bill of costs the narrative of which read:

2 From the materials supplied to the Committee by Ms [MF] it is apparent that the forms referred to comprised the applications completed by the purchasers in late August and the fresh (identical save for their date) letters of certification from Ms [MF] dated 3 October 2016.

Our professional fee since taking instructions on 26 August 2016 to 31 October 2016 regarding withdrawal of ASB bank KiwiSaver, assisting you in the completion of the forms, discussing timeframe, requesting a signed a copy of the sale and purchase agreement, attending to certification and collating information required by the bank for the withdrawal, drafting email to ASB bank requesting withdrawal, subsequently receiving advice from you not proceeding with the sale and purchase agreement, attending the same, receiving further sale and purchase agreement, drafting email and collating information, forwarding same to ASB bank requesting urgency, following up on the same, liaising with the ASB bank, receiving forms and processing same, taking instructions from you to release to your bank account and all incidental correspondence and attendances...

(emphasis added)

[26] The statement issued with this bill of costs shows:3

• (a) trust account receipt on 21 October 2016 of a total of $28,017.75;
  
• (b) payment to the purchasers of $26,717.75 on 2 November 2016;
  
• (c) “Transfer to matter 2” of $479.47 on the same date; and
  
• (d) as of 10 November 2016 (the date of the KiwiSaver bill of costs) $820.53 (the GST inclusive amount of that bill of costs) as “amount due from you”.
  

[27] On 13 November 2016 Ms RV emailed Ms MF:

[NB] and I have received your bill on Friday, we ... believe you are excessively overcharging us for the service you have provided. We feel that the money we paid you as the retainer fee $750 together with the KiwiSaver money which you retained of ours $1300 should have been more than enough for your services...

The Standards Committee “own motion” decision

[28] The Committee delivered its “own motion” decision on 2 February 2018.

[29] That decision concerned the issue previously identified by the Committee and foreshadowed to Ms MF, namely:

Whether Ms MF breached her undertakings dated 3 October 2016 to ASB Group Investments Limited as Manager of the ASB KiwiSaver Scheme, that any funds received by her pursuant to the Withdrawal Applications by [NB] and [RV] would be paid or as instructed by the vendor as part of the purchase price, when she did not apply the funds withdrawn from the respective KiwiSaver accounts towards the settlement on 28 October 2016 and instead released the funds to Mr [NB] and Ms [RV] on 2 November 2016.

[30] The Committee determined, pursuant to s 12(c) of the Lawyers and Conveyancers Act 2006 (the Act) that in breaching r 10.3 of the Lawyers and

3 (c) and (d) total $1300, the amount later referred to by Ms RV.

Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (LCCCR) Ms MF’s conduct had been unsatisfactory.4 The orders described in [1] above followed.

[31] In reaching that determination the Committee observed:

• (a) that the wording of the undertakings were unambiguous;
  
• (b) their purpose was to ensure compliance with the KiwiSaver Scheme;
  
• (c) if the provider could not rely on the lawyer’s undertaking, trust in the legal profession was undermined;
  
• (d) that Ms MF kept the funds in a separate ledger made it clear they had not been applied to the purchase price on settlement; and
  
• (e) instead they were released to the purchasers five days after settlement.
  

[32] The Committee also said that:

... it was not uncommon for there to be excess funds on settlement. If the excess fund were to be used to reduce the borrowing from [DEF], Ms MF ought to have returned (sic) the excess funds to the [DEF] herself. As it was, having instead paid the money to her clients, she had no control over what happened.

[33] Those last observations call for separate comment which I record at [59]–[60] below.

Application for review

[34] Ms MF filed an application for review on 21 March 2018. She seeks the reversal of the finding of unsatisfactory conduct and the setting aside of the fine and costs order.

[35] She submits that the Committee:

• (a) took a very “narrow” rather than a purposive approach to the undertakings “even though the clients had met the requirements as first home buyers”;
  
• (b) failed to take into consideration what was an arrangement made by the mortgage broker with the DEF to cover the contingency of the KiwiSaver funds not being available in time for settlement;
  

4 See [43] below.

(c) failed to take into consideration that it was an DEF loan offer requirement that the KiwiSaver funds be withdrawn and they were credited to the jointly held flexible facility account which was overdrawn at settlement:

that is [DEF] bank advanced the entire facility amount ($453,000) and subsequently when the surplus funds were paid, it reduced the facility overdraft ... in other words the funds were returned (sic) to the [DEF] bank not the clients directly ...as this was an overdrawn account ...the basic principles of banking law apply;

(d) “the DEF bank required these funds and this may have been the reason for the clients to request separate accounting for the KiwiSaver funds and hence a separate matter was created”; and

(e) “from banking law perspective, it was an overdraft advance from the DEF bank and therefore DEF bank’s money ... any funds paid back, even though held in clients’ name was (sic) essentially to pay back DEF bank; reducing the clients’ lending amount”.

[36] She added that:5

Also, ASB Wealth Operations Team had earlier confirmed provided the clients purchased the property and were first home buyers and met their criteria there can be no breach of an undertaking on the part of a practitioner. Post-registration title search is an (sic) evidence of the ownership of the title.

The Committee’s response

[37] The Committee indicated that it would abide the decision of this Office.

Review on the papers

[38] The parties have agreed to the review being dealt with on the papers. This review has been undertaken on the papers pursuant to s 206(2) of the Act, which allows a Legal Complaints Review Officer (LCRO) to conduct the review on the basis of all information available if the LCRO considers that the review can be adequately determined in the absence of the parties.

[39] I record that having carefully read the complaint, the response to the complaint, the Committee’s decision and the submissions filed in support of and in opposition to the application for review, there are no additional issues or questions in my mind that necessitate any further submission from either party. On the basis of the information

5 Ms [MF] does not produce any documentation in support of her “confirmation” contention. However, the rules relating to first home purchase withdrawals are statutory so are not open to individual interpretation or to any scheme manager variation. See [45] below.

available I have concluded that the review can be adequately determined in the absence of the parties.

The proper approach on review

[40] Consistent with the advice of the High Court as to how the LCRO should approach a review, I have reached my own view of the merits of this one by:6

• (a) considering all of the available materials afresh, the Committee’s decision included; before
  
• (b) providing an independent opinion based on those materials.
  

Analysis

Lawyers’ undertakings

[41] The LCCCR provides that:

• 10.3.1 A lawyer must honour all undertakings, whether written or oral, that he or she gives to any person in the course of practice.
  
• 10.3.2 This rule applies whether the undertaking is given by the lawyer personally or by any other member of the lawyer’s practice. This rule applies unless the lawyer giving the undertaking makes it clear that the undertaking is given on behalf of a client and that the lawyer is not personally responsible for its performance.
  
• 10.3.3 A lawyer who receives funds on terms requiring the lawyer to hold the funds in a trust account as a stakeholder must adhere strictly to those terms and disburse the funds only in accordance with them.
  

[42] In W v Auckland Standards Committee 3 of the New Zealand Law Society the Court of Appeal said:7

• [47] As Mr [WJ] rightly accepted, the law has always regarded it as important that practitioners honour their undertakings. This is reflected in r 6.07 of the Code of Professional Conduct then in force. Practitioners and their clients depend upon such undertakings in the everyday conduct of legal and business affairs. It is vital that any such undertakings are scrupulously adhered to. The Judge was entitled to take the breach of the undertaking into account as a significant factor in the assessment of whether W’s conduct was such as to bring the profession into disrepute.
  
• [48] There may be cases where a breach of an undertaking may not warrant some form of disciplinary action, but such cases are likely to be rare. Usually,
  

6 Deliu v Hong [2012] NZHC 158, [2012] NZAR 209 at [39]–[41]; Deliu v Connell [2016] NZHC 361, [2016] NZAR 475 at [2].

7 W v Auckland Standards Committee 3 of the New Zealand Law Society [2012] NZCA 401, [2012] NZAR 1071.

disciplinary action will be justified at a level appropriate to the circumstances. A deliberate breach or one involving gross carelessness may justify a charge of professional misconduct under s 112(1)(a) of the 1982 Act or its equivalent under s 241(a) of the 2006 Act. Bhanabai v Auckland District Law Society was such a case. Other cases involving negligence to a lesser degree of seriousness may warrant a different charge such as that under s 112(1)(c) or its equivalent under s 241(c) of the 2006 Act. We emphasise, however, that there are no hard and fast rules and that the discretion vested in the Standards Committee to decide what action (if any) to take is to be exercised flexibly as appropriate to the circumstances.

(emphasis added)

The undertakings in this case

[43] The terms of the 3 October 2016 undertakings that Ms MF gave in each case were that:

2. any funds received by me ... pursuant to the application ... will be paid to or as instructed by the Vendor as part of the purchase price; or
   

100. if settlement under the agreement is not completed by the due date in the agreement or any agreed extended date, the funds will be repaid to you as soon as practicable on account of the member with no deductions or disbursements.
     

[44] As can be seen, the literal contemplation of the undertakings was of either completion or non-completion of the purchase to which the applications related. They do not in so many words encompass what is to happen if the purchase is completed but (if it be the case) the funds are not applied (as Ms MF submits they effectively were) as part of the purchase price in question.

[45] But plainly if the purchase were to be completed without recourse to the funds the only proper course would be for the lawyer to return them to whence they came.

[46] Such an approach (the one I take) is truly purposive and has concurrent regard to the individual facts as found here and how they should be related to the scheme of the rules.8

[47] The undertakings required the funds to be paid as contribution to the purchase price. If the funds were not so applied, they were to be returned. It is as simple as that.

[48] That is also clear when the KiwiSaver Scheme Rules themselves are considered.

8 Interpretation Act 1999, s 5. I rely on the considered observation of Cathy Nijman in her paper “Ascertaining the Meaning of Legislation – A Question of Context” (2007) 38 VUWLR 629 that “section 6 of the Interpretation Act also allows the courts to have regard to the individual facts of a case when interpreting legislation. As the Hon Justice Gallen has noted, Parliament's intention is general whereas judges are obliged to consider a particular situation”.

KiwiSaver Scheme Rules — KiwiSaver Act 2006, sch 1

[49] Rule 8 in the first schedule to the KiwiSaver Act 2006, with which any reasonably competent conveyancing lawyer would need to be familiar, provides:

8 Withdrawal for purpose of purchase of first home

(1) This clause applies to a member if the member has not made a withdrawal under this clause before ...

(3) A member to whom this clause applies may make a withdrawal from the KiwiSaver scheme of which the member is currently a member for the purchase of an estate in land located in New Zealand (whether alone or as a joint tenant or tenant in common) if—

• (a) the purchase is made in the prescribed circumstances; or
  
• (b) both of the following apply:
  
  • (i) the land is, or is intended to be, the principal place of residence for the member or for the member and members of the member’s family; and
    
  • (ii) the member has not, at any time before applying to make a withdrawal under this clause ... held an estate in land ...; or
    
• (c) both of the following apply:
  
  • (i) the land is, or is intended to be, the principal place of residence for the member or for the member and members of the member’s family; and
    
  • (ii) the member is a qualifying person under the regulations.
    

(3B) ...

(7) It is a condition of subclause ... (3) ... that—

(b) any withdrawal made under the relevant provision must be paid to a practitioner (within the meaning of section 6 of the Lawyers and Conveyancers Act 2006) acting on behalf of the member;9 and

(c) the manager must require from that practitioner, before payment of the withdrawal,—

• (i) a copy of an agreement for the sale and purchase ... of the estate in land ... showing the member as purchaser; and ...
  
• (iii) an undertaking that the agreement is unconditional at the time the manager makes the request or, if the agreement is conditional, an undertaking that—
  
  • (A) payment of any amount of the withdrawal will be held by a stakeholder; and
    

9 That refers to “a lawyer or a conveyancing practitioner, as the case may be”. The reason no doubt being that such practitioners can be expected to be able to provide effective undertakings are open to discipline if an undertaking is breached.

(B) the stakeholder is obliged to hold the amount while the agreement is conditional; and

(iv) if the agreement is unconditional at the time the manager makes the request, an undertaking that the amount will be paid to the vendors as part of the purchase price or will be repaid to the manager on account of the member if settlement of the agreement is not completed in accordance with the agreement by the due date or any extended date; and

(v) if the agreement is conditional at the time the manager makes the request, an undertaking that—

• (A) the stakeholder is obliged to repay the amount to the practitioner if settlement of the agreement is not completed in accordance with the agreement by the due date or any extended date ..., but excepting non- completion due to the purchaser’s default; and
  
• (B) the practitioner will repay the amount that the practitioner receives from the stakeholder to the manager on account of the member.
  

...

(emphasis added)

[50] The just italicised words literally relate to a transaction that does not go to completion but what they serve to underscore is that funds released for a purchase have but two legitimate destinations: the vendor or as instructed by the vendor as part of the purchase price or if not so applied, whatever the reason, the scheme manager who or which released them in the first place.

IRD Commentary

[51] IRD commentary referred to by Ms MF in her next-mentioned 6 November 2016 letter includes:10

... When the purchase agreement is conditional, the Government interprets the Act to require the solicitor to undertake no more than what the solicitor can control:

• The solicitor is being asked to undertake that the stakeholder is under an obligation to hold the payment while the agreement is conditional, not that the stakeholder will actually do so in practice.
  
• If the agreement fails to settle other than by reason of the purchaser's default, the solicitor is being asked to undertake that the stakeholder is under an obligation to repay the amount owed, not that the stakeholder will actually repay that amount.
  

10 Inland Revenue Department “KiwiSaver Withdrawals for First Home Buyers” (14 August 2015)

<www.ird.govt.nz>.

• Consequently, the following form of undertaking is considered to satisfy the Act:
  

"We undertake to you that:

1. as at the date of this undertaking, the purchase agreement is conditional;
   
2. payment of any funds that we receive on behalf of the Member (Funds) will be held by a stakeholder who is obliged -
   
   1. to hold the Funds while the agreement is conditional; and
      
   2. to repay the Funds to us if settlement of the agreement is not completed in accordance with the agreement by the due date or any extended due date, except where settlement is not completed due to the Member's default; and
      
3. we will repay to you as soon as practicable on account of the Member any Funds that the stakeholder repays to us.
   

The relevant undertakings above are restricted to confirming that the stakeholder is under an obligation to hold the funds while the agreement is conditional and to confirming that the stakeholder is under an obligation to repay funds to us in the event that settlement of the agreement is not completed. We make no undertaking that the stakeholder will actually do so in either case and accept no liability in the event that the stakeholder acts in breach of their obligations."

[52] Again the intent is clear: either withdrawals are to be applied for their intended purpose or, when that is not possible or becomes unnecessary, repaid to the scheme manager. The emphasis on the matter of the lawyer’s control of the money will particularly be noticed.

Fate of funds here

[53] When the “own motion” inquiry was underway, and the Committee gave Ms MF due notice of the issue it intended to consider,11 she responded on 6 November 2016 in terms including:

• (3) it is fairly obvious that Mr [NB] and Ms [RV] would not have been in a position to purchase the property without the KiwiSaver funds which they relied upon for finance approval by the [DEF] bank ...
  
• (4) it is not a refund to Mr [NB] and Ms [RV] per se; but to repay the bank for the temporary increase of the principal borrowing. In any case, the bank or mortgage broker will not divulge any further information to us that Mr [NB] and Ms [RV]’s consent which has been confirmed by (the mortgage broker).12
  
• (5) the crux of the matter is that ultimately Mr [NB] and Ms [RV] did purchase their first home and that was the reason for the withdrawal, funds for which were
  

11 See [29] above.

12 Given the overall context the only logical way to read this ambiguous statement is that Ms [MF] is saying that the broker confirmed that the purchasers would not consent to the divulging of the actual fate of the funds paid out on their instructions.

raised from various sources including the KiwiSaver ... the property was duly registered in Mr [NB] and Miss [RV]’s names ... and not in any other entity ...

(6) taking into consideration the global approach, the objective of the KiwiSaver withdrawal has been met as set out on the IRD website and also according to ASB bank KiwiSaver scheme.13

[54] What emerges from these submissions is that Ms MF:

• (a) in paying the funds as she has said the purchasers directed, lost control of them — this when, as has been seen, the KiwiSaver Scheme Rules place real store on retention of control;
  
• (b) in so paying them into an DEF account of the purchasers she, contrary to the injunction of the Court of Appeal in W v Auckland Standards Committee 3, failed to adhere “scrupulously” to the undertakings she had given;
  
• (c) in the result she cannot say (that because, so she says, the purchasers will not reveal) whether or not the funds went to defray the transaction- related mortgage obligation — and, even if they did, that could not be equated to payment to or as directed by the vendor as part of the purchase price; and in any event; and
  
• (d) in terms of the undertaking and with the purchase going to completion, the vendor was the only authorised recipient, or at least director of the fate, of the funds as part of the purchase price.
  

[55] I do not overlook that Ms MF pleads for a “global” approach, that as if to say that the funds somehow defrayed the purchase price. However, there is no room at all for any such approach. The only legitimate approach to her undertaking obligations was to adhere to them scrupulously.

[56] In advancing this argument, Ms MF argues for the proposition that the purchase was completed, and would not have been completed, but for the securing of the Kiwisaver funds. Underpinning this argument is the supposition that DEF would not have advanced funds if they were not anticipating receiving (in some way) the Kiwisaver monies.

13 Ms [MF] had earlier referred to IRD commentary (above n 10) on the 2015 introduction of the ability to withdraw KiwiSaver funds for a first home purchase prior to the transaction becoming unconditional. Ms [MF] has quoted this passage from the commentary: Wherever possible, the objective is for KiwiSaver savings that are withdrawn under this rule to be used to purchase a home or returned to the KiwiSaver funds manager. The passage is found in the context of commentary on the conditional purchase regime. Of more relevance is that part of the commentary replicated in [49] above.

[57] When the mortgage broker advises Ms MF that DEF bank had agreed to advance sufficient funds to cover the purchase price, his instructions to continue with the withdrawal of the KiwiSaver funds is purportedly on the basis that the “clients will apply that balance to the principal of the loan on settlement”.

[58] If there was agreement from the DEF bank that KiwiSaver funds would be apportioned to offset other indebtedness her clients had with the bank, it would be expected that those instructions would be recorded in revised loan instructions from the bank, and it would be expected that the funds would have been paid directly to the bank on settlement day.

[59] It could have been expected of Ms MF that she would have taken steps to immediately clarify what this arrangement was.

[60] But importantly for the issues engaged by this review, it was ASB who directed the terms of the release of the KiwiSaver, and to ASB that Ms MF had provided the undertakings which she was required to scrupulously adhere to.

[61] There was no option for the degree of flexibility with the KiwiSaver funds which ultimately resulted in the funds being paid into the client’s account.

[62] The KiwiSaver funds, in terms of the undertaking provided by Ms MF, were required to be paid to the vendor in satisfaction of the purchase price, or returned to the fund manager.

Observation

[63] I noted earlier that the Committee had said that:

... it was not uncommon for there to be excess funds on settlement. If the excess fund were to be used to reduce the borrowing from [DEF], Ms MF ought to have returned (sic) the excess funds to the [DEF] herself. As it was, having instead paid the money to her clients, she had no control over what happened.

[64] I recognise that those remarks are not part of its decision-producing reasoning but they do call for comment. The Committee says that “Ms MF ought to have returned (sic) the excess funds to the DEF herself”.

[65] If in so saying the Committee meant by “excess funds” the KiwiSaver funds (because they had not been applied to the purchase) then that was to overlook that:

• (a) the KiwiSaver funds did not come from the DEF so could not be “returned” there;

• (b) in the circumstances of this case and for the reasons already given, it was both explicit and implicit that they had to be returned whence they came

— to the KiwiSaver fund manager; and

(c) no legitimate alternative was open.

Result

[66] I see no grounds which could persuade me to depart from the Committee’s decision.

Costs

[67] Where a finding of unsatisfactory conduct is made or upheld against a practitioner on review it is usual that a costs order will be imposed. I see no reason to depart from that principle in this case.

[68] Taking into account the Costs Guidelines of this Office, the practitioner is ordered to contribute the sum of $1,200 to the costs of the review, that sum to be paid to the New Zealand Law Society within 30 days of the date of this decision.

[69] The order for costs is made pursuant to s 210(1) of the Lawyers and Conveyancers Act 2006

Enforcement of costs order

[70] Pursuant to s 215 of the Lawyers and Conveyancers Act 2006 I confirm that the order for costs may be enforced in the civil jurisdiction of the District Court.

Publication

[71] Pursuant to s 206(4) of the Act I direct that this decision be published so as to be accessible to the wider profession in a form anonymising the parties and bereft of anything as might lead to their identification.

Decision

[72] Pursuant to s 211(1)(a) of the Lawyers and Conveyancers Act 2006 the decision of the Standards Committee is confirmed.

DATED this 10th day of October 2018

R Maidment

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:

Ms MF as the Applicant

[Area] Standards Committee [X] as the Respondent [Area] Standards Committee [X]

New Zealand Law Society