NS v RG [2018] NZLCRO 106 (12 October 2018)

Last Updated: 29 November 2018

	LCRO 141/2017
CONCERNING	an application for review pursuant to section 193 of the Lawyers and Conveyancers Act 2006
AND
CONCERNING	a determination of [Area] Standards Committee [X]
BETWEEN	NS Applicant
AND	RG and SM Respondents

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

Introduction

[1] Ms NS has applied for a review of the determination by [Area] Standards Committee [X] (the Committee) to take no further action in respect of her complaints about Messrs RG and SM.

[2] The complaint was processed through the Lawyers’ Complaints Service Early Intervention Process, as a result of which neither lawyer responded to Ms NS’ complaints.

Background

[3] Mr RG, supervised by Mr SM, acted for Ms NS in the purchase of a property, the title to which was a Unit Title under the Unit Titles Act 2010.

[4] Ms NS consulted Mr RG at an early stage in the process and requested him to draft the Agreement for Sale and Purchase to enable her to present her offer. In her letter of complaint Ms NS says:

I advised Mr RG from the outset that I was very concerned to ensure that in this purchase there was to be no repetition of the bad experience I had had in my last purchase of property with unconsented and inadequate building work having been done, leaving me with unexpected expenses and inability to rent out the property concerned.

[5] Mr RG added three clauses to the standard form Agreement:

19.0 LIM Report

This Agreement is conditional upon the Purchaser obtaining a Land Information Memorandum (“LIM Report”) from the [Town] City Council entirely satisfactory to the Purchaser in all respects within fifteen (15) working days of the date of this agreement.

20.0 Specialist Reports

This Agreement is subject to and conditional upon the Purchasers obtaining at their own expense such specialist reports as they deem fit which may include but is not limited to a Builders Report and Engineer’s report, all of which are entirely satisfactory to themselves in all respects within ten (10) working days from the date of this agreement.

21.0 Insurance

This Agreement is conditional upon the Purchaser arranging property insurance on terms and conditions entirely satisfactory to the Purchaser in all respects within ten (10) working days of the date of this agreement.

[6] On the front page of the Agreement relating to the conditions of the sale and purchase, Mr RG deleted the word ‘Yes’ which would have activated the standard form LIM and building report conditions.

[7] At [4] of its determination, the Committee summarised the problems which arose:

Ms NS complains about the level of care and attention given to her transaction by Mr RG, who works under the supervision of Mr SM, which she says resulted in her purchasing a property without a code...compliance certificate and with funds having to be retained on settlement.

[8] In her letter of complaint, Ms NS says:

I of course did not know what I did not know and one of the thing[s] I do not understand is why was Mr RG treating me as an experienced purchaser who would know how the processes worked and for whom he would not have to do anything more than act on instruction.

[9] Ms NS was in need of more assistance and advice than she received.

Delegation

[10] This review has been conducted by Mr Vaughan acting as a delegate appointed pursuant to cl 6 of sch 3 of the Lawyers and Conveyancers Act 2006. Mr Vaughan has been delegated to report to me and the final determination of this review as set out in this decision is made following a full consideration of all matters by me after receipt of Mr Vaughan’s report and discussion.

The review process

[11] The parties were initially requested by this Office to consent to the review proceeding on the material to hand. Both lawyers provided their consent but Ms NS requested a hearing.

[12] As this review has progressed, it has become apparent that it would not have been appropriate to complete the review on the material to hand. This would have exacerbated the shortcomings in the investigation by the Committee.

[13] A hearing was held with Ms NS in [Town] on 6 July 2018. Neither Mr RG nor Mr SM were required to attend and did not exercise their right to do so.1

[14] Following the review hearing Mr Vaughan reported to the lawyers and suggested a means of resolving Ms NS’ complaints by agreement. No agreement resulted from that suggestion.

[15] As often occurs, questions about professional standards issues arise when events that have occurred are scrutinised by independent lawyers.

[16] Ms NS feels let down by Mr RG and Mr SM and considers that the fees she paid should be refunded as she has incurred substantial additional legal fees in attempting to remedy the issues which arose.

Review

[17] Although Ms NS has no complaint about the clauses as drafted by Mr RG, it must be noted that the standard form clauses providing for the Agreement to be conditional on a building report and LIM were deleted. The standard form Agreement for Sale and Purchase is a form drafted by senior conveyancing lawyers and took many years of detailed discussions to finalise. It is therefore somewhat odd that the clauses would be deleted and substituted with clauses drafted by Mr RG.

1 Mr SM was out of the office.

[18] In addition, the standard form Agreement has comprehensive clauses relating to insurance which a Body Corporate is required to keep current.2

[19] Ms NS has no complaint about the terms of the Agreement as drafted by Mr RG. That is understandable as she would not be familiar with the differences between the standard form clauses and the clauses drafted by Mr RG. An issue that should be considered by the Committee is whether or not the clauses as drafted by Mr RG contributed to the difficulties which subsequently arose.

[20] Another issue that arises out of this review is to establish what discussions took place before the Agreement was declared unconditional. Ms NS refers to a “miscommunication” on the day the Agreement was confirmed and this issue also needs to be investigated.

[21] A sum of $20,000 was retained by Mr RG on settlement. Ms NS says there was no discussion with her about this or the terms on which it was retained. This presents as another matter to be investigated.

[22] Prior to the review hearing Mr Vaughan requested the firm’s files. These comprise two substantial Coda files and they should be reviewed in depth to establish what occurred and why.

Summary

[23] Ms NS’ complaint should not have been dealt with by the Complaints Service Early Intervention Process. There are a number of issues that require further investigation and it is not the role of this Office to undertake that process in the first instance.

[24] It is not apparent from the Committee’s file that a copy of the complaint was forwarded to the lawyers. The lawyers have not responded to the complaints made by Ms NS and Mr SM has remarked that “the process has been somewhat unusual”.

[25] In a recent decision of this Office it was said:

Paragraph 6 of the Guidelines for Parties to Review issued by this Office provides:

The primary function of the LCRO is to review decisions of Standards Committees whether in relation to substantive decisions or orders. While wide powers to obtain information, conduct inquiries, and investigate exist, it is expected that in most cases all relevant information will have been placed before the Standards Committee and be available to the LCRO.

2 Clauses 8.2 and 8.3.

[26] In this instance, this Office has received substantially more information and material relevant to the complaint than was before the Committee. Both parties, and the lawyers in particular, have indicated a desire to put further information before the Committee.

[27] It is not the function of this Office to reactivate a Standards Committee file and determine a complaint with reference to substantially more information and material than was before the Committee.

[28] In a letter to the parties from this Office, Mr Vaughan indicated that the likely outcome of this Review was that the complaint would be returned to the Complaints Service to reconsider. In his response, dated 10 August 2018, Mr SM said in the closing paragraph:

... we are comfortable with the matter being returned to the Committee at which time we will make full submissions in respect of the matter.

[29] Ms NS’ complaint must be returned to the Committee to process in the usual manner which will include giving the lawyers an opportunity to present full submissions and for further comment from Ms NS.

Decision

[30] Pursuant to s 211(1)(a) of the Lawyers and Conveyancers Act 2006 the determination of the Standards Committee is reversed.

[31] Pursuant to s 209 of the Act the Standards Committee is directed to reconsider Ms NS’ complaint. In this regard, all material received on review is to be provided to the Committee. This includes the two Coda files. Unless otherwise directed by Ms NS these files are to be returned to the firm of [Law Firm A] following the expiry of the 30 working day review period that will follow the issue of the Standards Committee determination, unless either applies for a review of that determination, in which case the files will need to be returned to this Office.

DATED this 12th day of October 2018

D 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:

Ms NS as the Applicant

Mr RG and Mr SM as the Respondents [Area] Standards Committee [X]

The New Zealand Law Society