XY v TQ [2018] NZLCRO 117 (16 November 2018)

Last Updated: 1 December 2018

	LCRO 119/2016
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	XY, ZW, QM, and ABC LAWYERS Applicants
AND	TQ Respondent

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

Table of Contents

DECISION

Introduction

[1] Mr XY and Mr ZW, at the relevant time partners (and directors) in ABC Lawyers (the firm), and Ms QM, at the relevant time a legal executive employed by the firm, and the firm itself have applied for a review of a decision by the [Area] Standards Committee

[X] (the Committee) which made findings of unsatisfactory conduct against them, and related orders.1

[2] Between June 2006 and August 2012, Mr TQ’s company, [Company A] Limited ([Company A]) was in the business of making second or third tier loans.2 The firm acted for [Company A] on the preparation of the loan and security documents and related matters.

[3] Mr TQ’s intention was that all loans made by [Company A] were business loans, not consumer loans. If the loans were consumer loans, then the disclosure and other requirements of the Credit Contracts and Consumer Finance Act 2003 (CCCFA) would apply. Mr TQ provided the firm with precedent “non-regulated” loan documents prepared by his previous lawyers for the firm to use.3

[4] Virtually all of the legal work preparing the loan documents was carried out by Ms QM who reported initially to Mr XY, and from late 2009 to late 2012 to Mr ZW.4

[5] On 15 August 2012, Mr TQ was informed by the Commerce Commission that one of the borrowers had complained that [Company A] had not complied with the CCCFA and the Fair Trading Act 1986 (FTA). By then the firm, in particular Ms QM, had documented and settled the advance of “over 100 different loan transactions” for [Company A].

[6] In October 2012, the firm conducted an internal review of [Company A]’s lending. [Company A] had ceased lending. The outcome of the review was that two of the loans - the IJ loan, and the GH loan - examined by the Commerce Commission, were “likely used for consumer purposes” in “a [major] way”.

1 Includes the firm's predecessor, [Law firm A], until [date] when the firm commenced practice.

2 And related companies.

3 The term loan agreement included among those documents was the then [Area] District Law Society non-regulated form REF:8009.

4 Mr ZW moved to the firm’s [suburb] office late 2009 and left the firm three years later towards the end of 2012.

[7] The Commission similarly concluded from its investigation that each of the four loans examined was a consumer loan, and laid charging documents against Mr TQ and [Company A].5

[8] On 13 July 2013, Mr TQ and [Company A] entered into a Settlement Agreement with the Commission in which they admitted contraventions of first, the CCCFA by failing to make disclosure, and by charging unreasonable loan establishment and default fees; and secondly, the FTA by misrepresenting that [Company A] had the right, as mortgagee, to sell a property when prohibited from doing so due to those contraventions, and by purporting to contract out of those Acts when similarly prohibited.

[9] Mr TQ and [Company A] also agreed to recompense the affected borrowers, and not to make consumer loans, or loans to natural persons.

Complaint

[10] Mr TQ subsequently lodged a complaint with the New Zealand Law Society Complaints Service on 23 December 2014 against Mr XY, Mr ZW and Ms QM. He later added the firm.

[11] The substance of his complaint was that in June 2006 when the firm agreed to act for him he “had little knowledge about the differences or significance of any differences” between commercial loans and consumer loans. He claimed Mr XY and Ms QM did not, at that time, explain to him that consumer loans required “a different set of documents, with initial disclosure”.

[12] Mr TQ claimed that Mr XY, Mr ZW and Ms QM when documenting the proposed loans, and related mortgage securities, did not advise him to inquire, and themselves did not inquire about the purpose of each loan, and therefore did not act competently and failed in their duty to take reasonable care.

[13] He sought an apology, and “a letter to the Commerce Commission taking some or appropriate responsibility” for their conduct.

Purpose of loans

[14] Mr TQ claimed that before each loan was advanced, the firm (a) failed to advise him and [Company A] to ascertain whether or not the loan money was to be used by the

5 Criminal Proceedings Act 2011, s 14.

borrower to repay existing loans previously borrowed for business purposes, and (b) similarly failed to make those inquiries.

[15] He alleged the firm documented loans for business purposes when in fact the borrower(s) intended to use the loan money “wholly or predominantly for personal, domestic, or household purposes”.6

[16] He claimed Ms QM and Mr ZW in at least one loan (the IJ loan), “would have known that a good portion of the loan would be discharging [an] existing [bank] mortgage, and that the borrower was a natural person”. He said when [Company A] proposed to refinance that loan, the IJs’ lawyer “had advised the firm that the loan was for consumer purposes, and [the firm] had prepared a set of consumer documents”.

[17] He claimed neither he nor [Company A] placed any restrictions or limitation on instructions to the firm which was “free to change the documents whenever [the firm] wanted” and Ms QM did so.

[5] Mr TQ stated that the consequences of the firm incorrectly documenting the loans as business loans led to [Company A] failing to comply with the disclosure requirements of the CCCFA, and being unable to enforce the loan agreement and related mortgage securities.7

Enforcement of loans

[6] Mr TQ claimed that notwithstanding the fact that the IJ loan and the GH loan, were consumer loans, Mr ZW nonetheless advised him to realise (or enforce) the mortgage securities. He claimed that Mr ZW did not make disclosure, as required by the CCCFA for consumer loans, before seeking recovery (or enforcement) of the loans.8

Witnessing signed unprepared (blank) Authority and Instruction (A&I) forms

[7] He said he placed “total trust” in the firm. For that reason, he agreed to Ms QM’s suggestion that he sign a number of unprepared “blank A&I forms” which she witnessed. He said he “left” the forms with the firm for future loan transactions.9

Standards Committee decision

6 Credit Contracts and Consumer Finance Act 2003, ss 11(1)(b), 13(i).

7 Credit Contracts and Consumer Finance Act, s 99, Fair Trading Act 1986, s 13(1).

8 Credit Contracts and Consumer Finance Act, ss 17, 99.

9 A&I form is a client’s authority and instruction to a law firm to effect registration of a land transaction by e-dealing, in Landonline — see later explanation.

[8] The Committee delivered its decision on 14 April 2016 and determined, pursuant to s 152(2)(b) of the Lawyers and Conveyancers Act 2006 (the Act), that:

• (a) Mr ZW and Ms QM, when they prepared the loan documents and provided related advice to [Company A], and Mr TQ, contravened r 3 (act competently, take reasonable care) of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (the rules) which constituted unsatisfactory conduct pursuant to s 12(c). Their conduct also fell short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent lawyer, and was unsatisfactory conduct pursuant to ss 12(a) and 14 (Ms QM) of the Act.10
  
• (b) By witnessing Mr TQ’s signature on the unprepared A&I forms, Ms QM’s conduct was unacceptable and fell short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent lawyer, and was unsatisfactory conduct pursuant to ss 12(a) and 14.
  
• (c) Mr XY failed to competently supervise and manage Ms QM’s legal work concerning her witnessing Mr TQ’s signature on the unprepared A&I forms, and by doing so contravened r 11.3 (supervision) which constituted unsatisfactory conduct under s 12(c), and also s 12(a).
  
• (d) The firm had similarly contravened rr 3 and 11.3, which constituted unsatisfactory conduct under s 12(c).
  

[9] The Committee found that there was “quite clear evidence” on the four files examined by the Commerce Commission that the loans were “not for business and investment purposes”, and “were generally used to discharge existing mortgages”.

[10] Although raised by Mr TQ in his complaint, the Committee confined its deliberations to the conduct of Mr XY, Mr ZW and Ms QM in respect of those four loans. It did not consider Mr XY’s and Ms QM’s conduct in June, July 2006 when they accepted Mr TQ’s instructions to act for him and [Company A] on the proposed lending business. The Committee made orders censuring Mr XY, Mr ZW and Ms QM, payment of substantial fines and payment of costs.

(1) Ms QM

10 Lawyers and Conveyancers Act 2006, s14 — unsatisfactory conduct by employees who are not lawyers.

(a) Advice — act competently, take reasonable care

[11] In the Committee’s view, notwithstanding that the mortgage broker, the borrower and the borrower’s lawyer “all either advised or certified that the lending was for business and investment purposes” it “must have been apparent to... Ms QM that the loans were not genuinely for business purposes”. It was Ms QM’s duty to advise [Company A] that “the CCCFA would be applied on a substantive basis regardless of the documentation”.

[12] The Committee stated that there was “clear indication on the file that the lending is for purposes inconsistent with those advanced by the parties”. It followed that there was “an obligation to at least flag the issue and provide appropriate advice”. Although Ms QM “was either aware or should have been aware that [Company A] was acting in clear breach of the CCCFA”, she “failed to give any advice” concerning “compliance” with the CCCFA for consumer loans.

(b) A&I forms — competence and diligence

[13] The Committee noted Ms QM’s statement that to assist Mr TQ, who “spent a great deal of time out of [City]”, from 23 February 2009 when e-dealing registration became compulsory, she had adopted the practice of having Mr TQ sign a number of unprepared A&I forms which she witnessed.

[14] The Committee considered that Ms QM’s signature on the incomplete forms implied that, at the time of signature, the form was complete. For that reason, the Committee concluded that by witnessing Mr TQ’s signature on unprepared A&I forms Ms QM falsely certified she “[had] witnessed the client(s) sign this form”.

[15] The Committee was not persuaded that Mr TQ’s “insistence” Ms QM adopt this practice, made the practice acceptable.

(2) Mr ZW

(a) Supervision

[16] The Committee noted that legal work of this type ought not be left to a legal executive of Ms QM’s experience. Although Mr ZW stated he was “only minimally involved in the lending phase”, in the Committee’s view, from the end of 2009, Mr ZW was “the partner responsible for supervising Ms QM’s work”.

[17] The Committee did not, however, make an adverse finding against Mr ZW on this issue.

(b) Advice — act competently, take reasonable care

[18] The Committee stated Mr ZW had a duty to ensure that [Company A] was advised of its legal obligations”. In particular, whether or not a loan was a consumer loan. If a consumer loan, and therefore subject to the requirements of the CCCFA, whether the loan documents were appropriate for that purpose.

[19] The Committee observed that even if a retainer is limited, “a lawyer still has a responsibility to give advice on matters incidental to the retainer”. As such, taking into account the borrower’s circumstances, [Company A] ought to have been advised whether each loan was nonetheless a consumer loan despite the borrower’s representations to the contrary.

[20] The Committee determined that Mr ZW also failed to provide advice when Mr TQ/[Company A] sought to enforce a loan, especially when a borrower’s lawyer raised the issue of compliance with the CCCFA. By not doing so, [Company A] and Mr TQ were exposed to the risk of action being taken against them under the CCCFA and the FTA.

(3) Mr XY — supervision

[21] The Committee observed that Mr XY’s duty to supervise and manage Ms QM’s legal work from June 2006 to 1 August 2008, the date of commencement of the Act, was subject to the transitional provisions of the Act.11

[22] Although declining jurisdiction to consider Mr TQ’s complaint about Mr XY’s supervision and management of Ms QM’s legal work during that period, the Committee considered that Mr XY (a) “remained responsible” from 1 August 2008 until the end of 2009 when Mr ZW moved to the firm’s [suburb] office, and (b) resumed that responsibility after Mr ZW left the firm in September 2012.

[23] In the Committee’s view, concerning Ms QM’s practice of witnessing unprepared (blank) A&I forms signed by Mr TQ during those periods, Mr XY failed to competently supervise and manage Ms QM’s work.

11 See later discussion.

(4) The firm

[24] Having made the finding that Mr XY, Mr ZW and Ms QM had contravened r 3, and Mr XY and Mr ZW had contravened r 11.3, the Committee stated that corresponding findings against the firm were warranted. The conclusion reached by the Committee was that Mr ZW, Mr XY and Ms QM “knew or should have known that [Company A] was improperly and effectively purporting to circumvent the CCCFA and FTA” and had not provided “appropriate advice”.

Application for review

[25] Mr XY, Mr ZW, Ms QM, and the firm, by their counsel, Ms KV, each filed an application for review on 30 May 2016. They seek a reversal of the Committee’s findings of unsatisfactory conduct against them and the setting aside of the penalties ordered by the Committee.

[26] Each application refers to and relies on each applicant’s statement made to the Committee.

(1) Mr XY

(a) Retainer — pre and post 1 August 2008

[27] Mr XY says, when he and Ms QM met with Mr TQ in June 2006, they explained to Mr TQ that the firm had “two partners and an associate who were very experienced” in lending.

[28] He says Mr TQ wanted the firm to “process the [loan] instructions, obtain the security required” and to use the precedent loan documents prepared by Mr TQ’s previous lawyers. He says Mr TQ did not require [Mr XY’s] advice in either the setting up or “the compliance aspects” of [Mr TQ’s] proposed lending business; only “legal assistance in the conveyancing aspects of [the] lending”.

[29] He says he informed Mr TQ at that meeting he would assume responsibility on issues concerning “security [for loans] and title”. Concerning issues outside his areas of expertise, he says Mr ZW, to whom [Mr XY] later (end 2009) passed responsibility for Mr TQ’s and [Company A]’s legal work, would take that role.

[30] He says until Mr ZW assumed responsibility for Mr TQ and [Company A], he was asked for advice “only a few times”. He says due to “the relatively straightforward

transactional nature” of Mr TQ’s instructions, Ms QM “generally did not require” [Mr XY’s] or other colleagues’ “assistance”.

[31] He states that “in the early stages” he reviewed files with [Ms QM] and “did not see anything ... which alerted [him] to the suggestion that the advances might have been other than non-consumer lending”.

[32] From his experience, he says a borrower’s residential home offered as security for a loan “was no different” to a borrower’s residential home mortgaged to a bank for a loan to “purchase a business”, “provide additional working capital”, or “refinance” either such loan. He refers to statements obtained from borrowers and certificates from their lawyers that the loans were for “business purposes”.

(b) A&I issue — post 1 August 2008

[33] Mr XY says from the end of 2009 when Mr ZW joined the firm’s [suburb] office, [Mr XY] was no longer responsible for supervising Ms QM’s work on Mr TQ’s/[Company A]’s lending.

• (c) Supervision — post 1 August 2008
  

[34] He states that Mr TQ’s allegation that [Mr XY] did not supervise Ms QM adequately is an “attempt” by Mr TQ “to avoid any responsibility” by some of the borrowers’ lawyers. He says as the partner responsible, at the relevant time, for distribution of the firm’s mail to members of the firm, he would have handed correspondence received from borrowers’ lawyers to Ms QM and Mr ZW.

(2) Ms QM

(a) Retainer — pre and post 1 August 2008

[35] Ms QM disputes that the firm was required to “provide [Mr TQ/ [Company A]] with advice on all aspects of [[Company A]’s] lending business including compliance with the CCCFA”.

(b) Loan documentation — act competently, take reasonable care — post 1 August 2008

[36] She says in framing the issues for the hearing, the Committee “presupposed” that the firm’s retainer extended beyond preparation of the loan and mortgage documents. She contends the Committee disregarded her evidence to the contrary,

including “the source documents appended” to her 29 January 2016 statement to the Committee, without stating reasons for doing so.

[37] She claims that by not giving her notice of the possibility of a finding that, by documenting the loans, she had played a part in “an attempt to circumvent the CCCFA”, the Committee had not adhered to the rules of natural justice.

• (c) A&I issue — post 1 August 2008
  

[38] Ms QM says she adopted this practice “at Mr TQ’s insistence”. She says she “acted on Mr TQ’s direct instructions” in each loan transaction. She refers to LINZ’s advice to the Committee that in the absence of fraud there was “no breach of any legislation or regulations”.

[39] She states that the Committee was wrong in finding that her practice of witnessing Mr TQ’s signature on unprepared A&I forms constituted unsatisfactory conduct. She contends that the fine ordered by the Committee is excessive and “unsubstantiated” by her conduct.

(3) Mr ZW — post 1 August 2008

(a) Retainer

[40] Mr ZW says he did not become involved in Mr TQ’s and [Company A]’s, lending work until [Mr ZW] moved to the firm’s [suburb] office towards the end of 2009. He says he assisted Ms QM on “discrete issues”, and was involved in only two of the four lending files examined by the Commission.

[41] He submits that the Committee:

presupposed that [he] (and Ms QM) were engaged by Mr TQ/[[Company A]] to draft loan documents ... [and] provide advice in relation to those documents (including fees charged) and ... on compliance with the CCCFA.

[42] He contends that the Committee therefore “predetermine[d] the extent of Mr ZW’s (and Ms QM’s) instructions/retainer”. He says the Committee did not describe the retainer and did not specify “the extent of [his] involvement nor the instructions and advice he was engaged to provide to Mr TQ”. He submits the Committee “should have referred to ... the detailed statements” from him, Mr XY and Ms QM.

[43] For that reason, he says “it was not open to the Committee to determine that [he] (and Ms QM) had breached their retainer”.

(b) IJ, GH loans — act competently, take reasonable care

[44] He says the Committee was wrong to conclude that when, during Ms QM’s absence at the beginning March 2010, he forwarded “the finalised [IJ] loan documentation to Mr TQ” that he owed a duty to Mr TQ “to advise [Mr TQ] on matters incidental to the retainer”.

[45] He says, when next involved on the IJ file six months later, on 7 September 2010, he advised Mr TQ about the risks of “proceeding with [a] mortgagee sale” and “advancing enforcement proceedings”. Contrary to that advice he says “Mr TQ wished to proceed with enforcement steps, which [Mr ZW] acted on”. He submits that this “did not raise issues surrounding the adequacy” of his conduct.

[46] He denies that later that month he “provided advice to Mr TQ to proceed with enforcement steps, in circumstances where [the borrower’s] lawyer was raising non- compliance with the CCCFA”. He submits the Committee was again wrong in finding he provided that advice. He says Mr TQ “nonetheless directed [him] to take further steps”.

[47] He says he did not become involved on the GH loan file until the loan repayment dated had expired and after the Commerce Commission “had commenced [it’s] investigation”.12

• (c) Supervision
  

[48] Mr ZW says from late 2009, when he joined the firm’s [suburb] office, until he left the firm and moved to [area] late 2012, because of his “lending experience” Ms QM referred any “complex issues” to him.

[49] Otherwise, he says he “had very little to do with [Mr TQ’s/[Company A]’s] matters and ... was certainly not responsible for supervising Ms QM’s day-to-day transactional work for [Mr TQ/[Company A]]”.

[50] For that reason, he submits there “is no factual basis” for the Committee’s conclusion” he had a duty “to ensure that Mr TQ/[Company A] were advised of [their] legal obligations”.

12 Mid-August 2011.

(d) Procedural

[51] He contends that the Committee did not inform him before the hearing “of the possibility [his] actions were considered to be knowingly complicit and[/]or wilfully blind to ‘attempts to circumvent the CCCFA’”.

[52] By not notifying him, he submits that the Committee failed to adhere to the statutory requirement to hear Mr TQ’s complaint “in a way that is consistent with the rules of natural justice”. He says the Committee was wrong to form the view that Mr TQ’s allegations against [Mr ZW] were as serious as the Committee made out which led to the Committee ordering a fine “reserved for conduct at the upper end of unsatisfactory”.

(4) The firm

(a) Advice — act competently, take reasonable care

[53] Ms KV submits that irrespective of the Commerce Commission’s investigation, the “unlawfulness of the loans under the [CCCFA] occurred from the moment Mr TQ made the loan advances” to the four borrowers whose loan files were examined by the Commission. She says those borrowers “would have had an entitlement to the return” of the loan money.

[54] She says the firm takes issue with the Committee’s statement, also disputed by Ms QM and Mr ZW, that the firm’s “senior lawyers knew or should have known that [Company A] was failing to comply with the CCCFA and failed to ensure that proper advice was given”.

[55] She says the Committee does not refer to the firm having “itself engaged in conduct, other than the conduct complained of against Ms QM, Mr ZW and Mr XY”.

(b) Procedural

[56] Ms KV says the Committee failed to provide “any particulars of the conduct that formed the basis for [its] finding of unsatisfactory conduct” by the firm, or name the firm’s lawyers who were “guilty of this conduct”.

[57] She submits that the Committee did not give notice before the hearing that the firm’s “actions were considered to be knowingly complicit and/or wilfully blind to ‘attempts to circumvent the CCCFA’”. She contends that the findings against the firm are a “duplication of the orders ... against Mr ZW, Ms QM and Mr XY”, were “contrary to the

... scheme” of the Act and “offends principles of double jeopardy, natural justice”.

Response

[58] Mr TQ refers to his “previous correspondence” to the Lawyers Complaints Services which, he says, “lays out [his] complaint as accurately as [he] can”.

(a) Advice — act competently, take reasonable care

[59] He explains that when [Company A] refinanced an existing loan, a necessary part of Ms QM’s instructions included obtaining a release of the existing mortgage.

[60] He states that in addition to “prepar[ing] the [loan] documents”, Ms QM also prepared “other documents” and “gave legal advice” on matters that “cropped up”. He refers to Ms QM’s invoices in which she records that she “perused documents”, and “liaise[d] with borrower’s mortgage brokers” and their lawyers.

(b) A&I issue

[61] Mr TQ denies he insisted Ms QM witness his signature on multiple unprepared A&I forms. He says Ms QM requested “out of the blue” that he “sign a small stack” of forms and, although “surprised”, he agreed “due to the trust that had been built up at that time”.

Review on the papers

[62] 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.

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

Nature and scope of review

[64] The nature and scope of a review have been discussed by the High Court, which said of the process of review under the Act:13

... the power of review conferred upon Review Officers is not appropriately equated with a general appeal. The obligations and powers of the Review Officer as described in the Act create a very particular statutory process.

The Review Officer has broad powers to conduct his or 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. These powers extend to “any review” ...

... the power of review is much broader than an appeal. It gives the Review Officer discretion as to the approach to be taken on any particular review as to the extent of the investigations necessary to conduct that review, and therefore clearly contemplates the Review Officer reaching his or her own view on the evidence before her. Nevertheless, as the Guidelines properly recognise, where the review is of the exercise of a discretion, it is appropriate for the Review Officer to exercise some particular caution before substituting his or her own judgment without good reason.

[65] More recently, the High Court has described a review by this Office in the following way:14

A review by the LCRO is neither a judicial review nor an appeal. Those seeking a review of a Committee determination are entitled to a review based on the LCRO’s own opinion rather than on deference to the view of the Committee. A review by the LCRO is informal, inquisitorial and robust. It involves the LCRO coming to his or her own view of the fairness of the substance and process of a Committee’s determination.

[66] Given those directions, the approach on this review, based on my own view of the fairness of the substance and process of the Committee’s determination, has been to consider all of the available material afresh, including the Committee’s decision; and to provide an independent opinion based on those materials.

Analysis

(1) Pre-1 August 2008 conduct — Mr XY, Ms QM

(a) Issues

[67] The issues I have identified that concern both Mr XY’s and Ms QM’s conduct in June/July 2006 when they accepted Mr TQ’s instructions to act for Mr TQ, [Company A] are:

13 Deliu v Hong [2012] NZHC 158, [2012] NZAR 209 at [39]–[41].

14 Deliu v Connell [2016] NZHC 361, [2016] NZAR 475 at [2].

(a) What were Mr TQ’s instructions?

(b) What was the scope of the retainer? In particular, did Mr XY and Ms QM owe Mr TQ a duty to advise him about the legal requirements and the consequences of [Company A]’s proposed lending business?

(c) If so, did they provide that advice?

(b) Transitional provisions of the Act

[68] Mr XY and Ms QM commenced acting for Mr TQ and [Company A] before 1 August 2008, the date the Act commenced. For that reason, the transitional provisions of the Act require consideration.

[69] Under s 351(1) of the Act, a Standards Committee may consider a complaint about a lawyer’s conduct that occurred before 1 August 2008 only if the conduct complained of could have led to disciplinary proceedings under the Law Practitioners Act 1982 (LPA).

[70] The categories of conduct in respect of which disciplinary consequences could arise under the LPA included “misconduct in [the lawyer’s] professional capacity” and “conduct unbecoming a barrister or a solicitor”.15

[71] In broad terms, whilst “the threshold for disciplinary intervention under the (LPA) was relatively high”, misconduct is regarded as conduct which is “reprehensible, inexcusable, disgraceful, deplorable or dishonourable”.16 Conduct unbecoming “is perhaps a slightly lower threshold”,17 namely, whether the conduct meets the standards of "competent, ethical, and responsible practitioners".18

[72] By comparison, the threshold for disciplinary response under the Act, namely, ss 7 (misconduct) and 12 (unsatisfactory conduct) “is somewhat lower” than existed under the LPA.19

[73] Concerning conduct that occurred before 1 August 2008, under s 352(1) a Standards Committee may only impose penalties which could have been imposed at that time. For that reason, for an adverse finding to be made in respect of the conduct of the

15 Law Practitioners Act 1982, s 106(3)(a), (b), (c); s 112(a), (b), (c).

16 Complaints Committee No 1 of the Auckland District Law Society v C [2008] NZHC 2284; [2008] 3 NZLR 105 (HC) at [28].

17 Workington v Sheffield LCRO 55/2009 (26 August 2009) at [47].

18 B v Medical Council [2005] 3 NZLR 810 (HC) per Elias J at 811.

19 Workington v Sheffield above n 17 at [48].

lawyer concerned, the conduct “would necessarily have to have been conduct which was either misconduct or unsatisfactory conduct in the nature of conduct unbecoming”.20

[74] The rules “are not an exhaustive statement of the conduct expected of lawyers”. It “is not necessary to tie a finding of unsatisfactory conduct or conduct unbecoming to a breach of a particular rule”.21 This is illustrated in the description of unsatisfactory conduct in s 12(b) of the Act, namely, “conduct that would be regarded by lawyers of good standing as being unacceptable, including – (i) conduct unbecoming...; or (ii) unprofessional conduct.”

[75] Once a Standards Committee, or this Office on review, is satisfied that the s 351(1) threshold is met, then if the standards set out in s 12 are breached, the Committee, or this Office, may consider whether a finding of unsatisfactory conduct ought to be made against the lawyer concerned.

• (c) Retainer
  

[76] The “retainer” between lawyer and client has also been described as being:22

... central to various aspects of the lawyer-client relationship. Fundamentally, it identifies the client and prescribes the services expected of the lawyer. In doing so it determines upon whose instructions the lawyer acts, the scope of the lawyer’s authority in carrying out those instructions and the scope of the lawyers’ duties.

[77] It is the term used in the rules to describe an agreement between a lawyer and the lawyer’s client whereby the lawyer is to provide legal services to the client. It appears in a number of rules and is defined in r 1.2 as an agreement which (a) may be express or implied, (b) may or may not be recorded in writing, and (c) may or may not provide for payment is to be made by the client.23

[78] The question whether a lawyer has been retained is to be “determined objectively”. The fact that the lawyer concerned “had personal reservations as to whether he was going to take the case are relevant only in so far as they were objectively ascertainable”. 24

20 AC v AAA LCRO 83/2010 (26 January 2011) at [42].

21 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008, Notes about the rules at 3; Wolverhampton v Shaftesbury LCRO 145/2009 (23 June 2010) at [57].

22 GE Dal Pont Lawyers’ Professional Responsibility (6th ed, Thomson Reuters, Sydney, 2017) at [3.05] and [5.25].

23 Although not defined in the Act or the rules, the term “client”, is included in this definition as the recipient of legal services.

24 Hartlepool v Basildon LCRO 79/2009 (3 September 2009) at [23]; see also Dal Pont, above n 22 at [3.20].

[79] The Courts have stated that lawyers’ duties are:25

governed by the scope of their retainer, but it would be unreasonable and artificial to define that scope by reference only to the client’s instructions. Matters which fairly and reasonably arise in the course of carrying out those instructions must be regarded as coming within the scope of the retainer.

(d) Discussion

• (i) Preliminary
  

[80] Mr XY and Ms QM contend that Mr TQ’s instructions to them in June/July 2006 did not extend to advising Mr TQ about the legal requirements and consequences of his proposed lending business. Although noted in its decision, the Committee did not consider this aspect of Mr TQ’s complaint.

[81] It is now nearly four years since Mr TQ made his complaint to the Lawyers Complaints Service. Whilst it is open to me to return this aspect of Mr TQ’s complaint to the Committee to consider, the further delay that would be encountered by doing so would be inconsistent with the requirement of the Act to hear and determine complaints expeditiously.26

[82] For these reasons, I have therefore decided it is appropriate to consider these issues on review.27

(ii) The parties’ positions

[83] Mr TQ, who relies on his statements and supporting documents provided to the Committee, claims that when he met with Mr XY and Ms QM in June 2006 he “had little knowledge” about “the differences or significant differences” between business loans and consumer loans. He claims Mr XY and Ms QM did not explain the legal consequences of that difference to him. He claims “he relied on [the firm] for all things legal on lending and its regulations”.

[84] Mr XY says Mr TQ’s June 2006 instructions were to document loans intended for business purposes and to use the precedent documents prepared by Mr TQ’s previous lawyers.

25 Gilbert v Shanahan [1998] 3 NZLR 528 (CA) at 537.

26 Lawyers and Conveyancers Act (Lawyers: Complaints Service and Standard Committees) Regulations 2008, reg 10(1).

27 Lawyers and Conveyancers Act 2006, ss 203, 209.

[85] Ms QM similarly denies that Mr TQ’s June 2006 instructions extended to advise “on all aspects” of Mr TQ’s and [Company A]’s proposed lending business “including compliance” with the CCCFA. She says Mr TQ spelt out that he “was not in the business of providing consumer finance” and his instructions were limited to “the conveyancing aspects” of [Company A]’s lending.

[86] She says Mr TQ “was very familiar with the regulatory requirements of his [lending] business”. She says the precedent loan documents provided by Mr TQ contained statements that the loan was for business purposes, not for consumer purposes.28

(iii) Consideration

[87] The central question is whether the June/July 2006 retainer, whereby Mr XY and Ms QM accepted Mr TQ’s instructions to document loans intended for business purposes, and settle the advance and ultimate repayment of those loans, included the duty to advise Mr TQ about the regulatory requirements for making such loans.

[88] If so, whether such advice ought to have included an explanation of the requirements of the CCCFA that apply to consumer loans.

[89] Mr TQ claims that Mr XY and Ms QM owed him that duty which they did not discharge. He says by not having received that advice he was unaware of the strict requirements of the CCCFA, and the provision for offences and fines for non-compliance should a loan be found to be a consumer loan, as occurred between 2010 and 2012 in respect of the loans examined by the Commerce Commission.

[90] Mr XY and Ms QM, whilst acknowledging they did not provide Mr TQ with such advice, claim they were not required to do so. They contend the retainer was limited to preparation of the loan documents for each loan.

[91] Neither Mr TQ, nor Mr XY and Ms QM, have produced any letter of engagement which might have assisted consideration of this issue. Since 1 August 2008, lawyers have been required to provide client care and service information to their clients before commencing work on a retainer. Provision of that information to a client is usually accompanied by a letter of engagement which, among other things, describes the proposed legal work.29 Before that date, whilst some firms regularly sent letters of

28 The term loan agreement included among those documents was the then [Area] District Law Society non-regulated form REF:8009.

29 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules, rr 3.4, 3.4A, 3.5, 3.5A.

engagement to clients at the commencement of a retainer, it would be fair to say the practice was not widespread.

[92] Without the scope and extent of a retainer being recorded in that way:30

[i]n the absence of clear indications that the contrary was intended, it [was] presumed that the parties intended a general retainer under which the lawyer [was] expected to advise on all legal aspects of the client’s affairs with which [the lawyer] is dealing.

[93] As noted above, the Courts have stated that “it would be unreasonable and artificial” to define the scope of a retainer by “reference only to the client’s instructions”. Matters which “fairly and reasonably arise in the course of carrying out those instructions” are included.31

[94] Importantly, in the context of Mr TQ’s instructions, the requirement for a lawyer “to advise generally will be determined in part by the client’s knowledge and sophistication”.32 For example, if a client is unsophisticated, the lawyer’s obligation to “discuss the merits of the transaction, and to explain commercial matters (which to business people may seem straightforward) will exist”.33 This is illustrated in Gilbert v Shanahan where the lawyer acted for a client concerning a lease and a guarantee. It was held that the lawyer’s duties included “to identify [the] client’s legal position and to advise him accordingly”.34

[95] Mr TQ explains that the extent of his knowledge of lending at that time was gained “from being a borrower in property investment”. Mr XY and Ms QM describe Mr TQ as a businessman experienced in property investment and development. Ms QM refers to him holding a licence from Land Information New Zealand to carry out land title searching. She says he carried out his own Personal Property Securities Register searching and registration and Companies Office filing.

[96] From June, July 2006, Mr XY was the partner responsible for Mr TQ as a new client and for supervising Ms QM’s legal work at that time. Despite his business experience, Mr TQ was not a lawyer. He sought Mr XY’s and Ms QM’s legal knowledge and experience to assist him with his new lending business in a very regulated area of

30 Duncan Webb, Kathryn Dalziel and Kerry Cook Ethics, Professional Responsibility and the Lawyer (3rd ed, LexisNexis, Wellington, 2016) at [5.4.1].

31 Gilbert v Shanahan, above n 25 at 537.

32 Webb, Dalziel and Cook, above n 30 at [5.4.1].

33 At [5.4.1].

34 Gilbert v Shanahan, above n 25 at 537.

business where a careful lawyer should presume his or her client is unaware of the regulatory requirements and pitfalls.

[97] Mr XY says his areas of legal practice included lending secured on a borrower’s residential home. He would therefore have been familiar with the disclosure, reasonable fee and other requirements that apply to consumer loans under the CCCFA. He would have known that failure to comply would lead to the loan being unenforceable.35.

[98] That experience and knowledge would have enabled him to explain to Mr TQ the different legal requirements for consumer loans and the risks if a loan, thought to have been a commercial loan, was made as a non-compliant consumer loan.

(iv) Conclusion

[99] In my view, as well as documenting the proposed loan transactions requested by Mr TQ, it was incumbent on Mr XY to provide Mr TQ with an explanation of the regulatory requirements for both business loans and consumer loans and the consequences for non-compliance. As a partner in the firm, it was Mr XY’s responsibility to provide that advice, or arrange for another partner (or lawyer) in the firm experienced to do so.

[100] I do not consider that responsibility fell to Ms QM whose role was to attend to the mechanical aspects of documenting the loans and settling the advance and ultimate repayment of the loans.

[101] As noted earlier, a Standards Committee, or this Office on review, has jurisdiction to consider the conduct of a lawyer that occurred before 1 August 2008 only if that conduct could have led to disciplinary proceedings under the LPA. This includes “conduct unbecoming” carried forward into the definition of unsatisfactory conduct in s 12(b) of the Act.

[102] I have already made mention of the term “conduct unbecoming” which has been described as conduct that “is perhaps a slightly lower threshold” than misconduct
(a) where the conduct is regarded as “more than a mere error or negligence”, and

35 Credit Contracts and Consumer Finance Act 2003, Part 2, subpart 2, ss 17 (initial disclosure), 18 (continuing disclosure), 24 (request disclosure); subpart 5, interest charges; subpart 6, fees; s 99 (enforcement of consumer credit contract prohibited).

(b) whether the conduct “is acceptable according to the standards of ‘competent, ethical, and responsible practitioners’".36

[103] The observation has been made that “an element of wrongdoing will need to exist” having some “moral colour” yet less than required for misconduct. It is “probably appropriate to reserve findings of conduct unbecoming for actions which can properly be set apart as an unacceptable professional breach”.37

[104] Examples of findings of conduct unbecoming where the conduct of the lawyer concerned occurred before 1 August 2008 include:

• (a) a lawyer who acted for a client as an immigration consultant and a lawyer, and had met with the client socially, breached confidence to a third party;38
  
• (b) a lawyer, who acted for purchasers of a property, and had provided an undertaking to retain funds in trust as a stakeholder for a particular purpose, refused to honour the undertaking and instead wrote to the clients about their overdue fees;39 and
  
• (c) a lawyer who acted for a client on a contracting out agreement lost or mislaid the agreement.40
  

[105] I consider that Mr XY’s failure or omission in June/July 2006 to provide Mr TQ with advice on the legal requirements and consequences of Mr TQ’s proposed lending business is at least as serious as the conduct of the lawyers referred to in those decisions.

[106] In my view, Mr XY’s failure or omission to provide this advice to Mr TQ was “more than a mere error” and is not “acceptable according to the standards of ‘competent, ethical, and responsible practitioners’”. The conclusion I have reached is that Mr XY’s conduct was conduct unbecoming which, under s 12(b), constitutes unsatisfactory conduct.

36 At [71] above. See also Webb, Dalziel and Cook above n 30 at [4.3.2]; and s 12(b) referred to earlier at [74].

37 Webb, Dalziel and Cook at [4.3.2].

38 Morpeth v Ramsey LCRO 110/2009 (12 November 2009).

39 Workington v Sheffield above n 17.

40 Wolverhampton v Shaftesbury above n 21.

(2) Post 1 August 2008 conduct - Mr XY, Mr ZW, Ms QM

(a) Issues

[107] When acting for Mr TQ and [Company A] on the preparation of the loan documents, in respect of the loans examined by the Commerce Commission, and the advance and repayment (including enforcement of two) of those loans:

• (a) Did Mr ZW and Ms QM owe Mr TQ, [Company A] a duty to be on the look- out for any signs or circumstances that a loan may not be intended for use by a borrower as a business loan, but as a consumer loan? (r 3: act competently, take reasonable care; r 7.1: explain the nature of the retainer, keep informed, consult; s 12(a): competence and diligence).
  
• (b) If so, did they owe Mr TQ, [Company A] a duty to advise them of the requirements for consumer loans under the CCCFA, and the consequences of non-compliance? Did Mr ZW, and Ms QM provide such advice concerning recovery (enforcement) of the IJ and GH loans? (s 4(a), r 2: uphold the rule of law; r 5.2: exercise professional judgment within the bounds of the law; r 3: act competently, take reasonable care; r 7.1: explain the nature of the retainer, keep informed, consult; s 12(a): competence and diligence)
  
• (c) Did any one or more of Ms QM, Mr XY and Mr ZW contravene any professional standards or rules when Ms QM witnessed Mr TQ’s signature on unprepared A&I forms? (r 2.5: providing certificates; r 3; s 12(a); s 4(d), r 6: protect clients’ interests; r 11.3: supervision.)
  
• (d) Were Mr XY and Mr ZW required to supervise Ms QM’s work carried out for Mr TQ, [Company A]? If so, did they, or either one of them, discharge that duty? (r 11.3)

(b) Loans examined by the Commerce Commission - issues (a), (b) - Mr ZW, Ms QM

(i) Professional rules

Act competently, take reasonable care

[108] Should a determination be made that a lawyer’s conduct warrants a disciplinary response there are two findings that can be made. Either unsatisfactory conduct pursuant to s 12 of the Act; or misconduct pursuant to s 7. A misconduct finding can only be made by the New Zealand Lawyers and Conveyancers Disciplinary Tribunal.

[109] Unsatisfactory conduct is defined in s 12 of the Act. When a lawyer is providing regulated services then ss 12(a), (b) and (d) mostly apply.41

[110] Section 12(a) includes: “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”.42 I have already referred to s 12(b).43

[111] The category of unsatisfactory conduct in s 12(c), includes conduct relating to the provision of regulated services and conduct “consisting of a contravention of [the] Act, or of any regulations or practice rules made under [the] Act”.

[112] When a lawyer is providing “regulated services” to a client, r 3 requires that the lawyer “must always act competently and in a timely manner consistent with the terms of the retainer and the duty to take reasonable care”.44

[113] The duty to be competent has been described as “the most fundamental of a lawyer’s duties” in the absence of which “a lawyer’s work might be more hindrance than help”.45 The observation has been made that in the practice of law competence “entails an ability to complete the work required by finding the relevant law and applying the relevant skills”. Whether the lawyer concerned meets this standard is to be determined objectively.46

[114] However, this does not impose the duty “to provide a high level of service to clients” and “is, in reality, a duty not to be incompetent ... aimed at ensuring minimum

41 Lawyers and Conveyancers Act 2006, s 12(d) — concerns conditions or restrictions on practising certificates.

42 Section 12(a). See also Duncan Webb “Unsatisfactory Conduct” (2008) 717 Lawtalk 18.

43 At [74] and [101] above.

44 Lawyers and Conveyancers Act, s 6 “regulated services” is defined as including “legal services” and “conveyancing services”, which are themselves defined.

45 Webb, Dalziel and Cook above n 30 at [11.1].

46 At [11.3].

standards of service”. The duty is concerned with “the outcome of lawyer’s work rather than the way in which they deal with clients”.47

Clients’ instructions, respond to inquiries, provide information and advice, consult

[115] A lawyer must respond to a client’s inquiries in a timely manner, disclose to his or her client information that is relevant to the retainer, take reasonable steps to ensure that the client understands the nature of the retainer, keep the client informed about progress and consult the client about steps to be taken to implement the client’s instructions.48

[116] With limited exceptions, a lawyer risks a complaint from a client with a prospect of a disciplinary response if the lawyer does carry not out the client’s instructions.49 However, where the lawyer is unsure about the client’s instructions then “it is incumbent on the lawyer to obtain clarification of those instructions. The lawyer may not proceed on an assumption the client agrees to a certain course of action”.50

(ii) Discussion

Parties’ positions

[117] Concerning the IJ loan made by [Company A] in March/April 2010, Mr TQ claims Ms QM “would have known that a good portion of the loan would be discharging [an] existing [bank] mortgage, and that the borrower was a natural person”. 51

[118] Mr TQ refers to [Company A]’s offer in July 2010 to refinance that loan. He says the IJs’ lawyer “had advised the firm that the loan was for consumer purposes” which Ms QM documented as a consumer loan. He claims Mr ZW nonetheless advised him to proceed with a mortgagee sale of the IJs’ residence.

[119] As noted earlier, Mr XY says whilst he informed Mr TQ in June 2006 that [Mr XY] would be responsible for “security for [loans] and title”, he was only asked for advice “a few times”. He explains this was due to the “relatively straightforward transactional nature” of [Company A]’s loan work.

47 At [11.3].

48 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules, rr 7, 7.1.

49 Webb, Dalziel and Cook above n 30 at [10.3].

50 At [10.3] — see also r 1.6 as to the manner in which a lawyer must provide information to a client and discussion in Sandy v Kahn LCRO 181/2009 (9 December 2009) at [38].

51 See also Credit Contracts and Consumer Finance Act 2003, s11(1)(a) — the features of consumer credit contract include “the debtor is a natural person”.

[120] He says when he reviewed loan files with Ms QM “in the early stages” he “did not see anything” that put him on enquiry that a particular loan was a consumer loan. He says from the end of 2009, Mr ZW assumed responsibility for [Company A]’s lending work.

[121] Mr ZW says his involvement in Ms QM’s work for [Company A] was confined to the IJ and GH loan files referred to above. He says he advised Mr TQ on both files of the risks of realising the mortgage securities (enforcement). Also, in respect of the IJ loan, the risk of having to refund processing fees and interest. He describes his involvement on the IJ file in March, April 2010, while Ms QM was on holiday and before the loan was advanced, as a “discrete step”.

[122] Ms QM says in July, June 2006, Mr TQ “made it very clear” he was not “in the business of consumer finance”. She denies she was “aware of the true purpose of the four loans” examined by the Commission.

[123] She says [Company A]’s "lending was rescue/bridging finance”. She says “it was quite common for business lending to be secured against a residential dwelling” to refinance an existing loan.

[124] She states that [Company A]’s letter of offer, acceptance, term loan agreement and the borrower’s lawyer’s certificate all contained statements that the loan “is for business purposes and is not consumer finance”. She says Mr TQ, and his mortgage broker vetted prospective borrowers. This included ascertaining the reasons for the loan.

Consideration

[125] Mr XY, Mr ZW and Ms QM refer to only four out of 100 loans made by [Company A] having been examined by the Commerce Commission. The firm nevertheless took the precaution of sending “consumer style disclosure packs to all borrowers in case [[Company A]] was mistaken about the business/investment purpose of the borrowing”. [Company A] also “offered [the borrowers] an opportunity to repay the loans without penalty”.

[126] The firm undertook an internal review of four of the loan files, two of which were examined by the Commission. The review memorandum explained the CCCFA requirements for consumer loans, and the adverse consequences of not meeting those requirements. The memorandum described the provision for offences, and significant fines in the CCCFA and the FTA for non-compliance. The conclusion reached was that each of those four “loans were likely used for consumer purposes”.

[127] The memorandum noted the Court’s “narrow definition of commercial loan purposes”. Loans to “individuals” to “refinance” house loans would “unlikely” be treated as loans for commercial purposes. The memorandum referred to the disclosure and reasonable fee requirements of the CCCFA,52 the ability for a credit consumer contract which contained oppressive terms, or enforced when prohibited from doing so, to be reopened.53 The memorandum referred to the possibility of unexplained fees for the establishment or processing of loans, and default fees constituting an offence for misleading or deceptive conduct under the FTA, which on conviction could lead to a fine.54

[128] This serves to further illustrate that this is a very regulated and technical area of legal practice requiring the utmost care and attention to detail at every step.

[129] As I noted concerning the June, July 2006 retainer issue, Mr TQ could reasonably have expected to receive advice of this type before he commenced his lending business. Such advice would have assisted him to evaluate whether or not a particular loan was a consumer loan and therefore subject to the requirements of the CCCFA.

[130] That advice would also have assisted Ms QM to look out for circumstances, such as those referred to in the memorandum, that suggested the loan was for consumer purposes.

IJ loan

[131] In March 2010, when standing in for Ms QM in the few days before the loan was advanced to the IJs, Mr ZW received the signed loan documents from the IJs’ lawyer.

[132] In reviewing the file, before he sent the loan documents to Mr TQ, he would have seen the repayment statement, forwarded to him by the IJs’ lawyer, for the IJs’ existing bank mortgage which [Company A]’s loan was to replace. He would have seen Mr TQ’s email to Ms QM which included the statement that “rates are badly in arrears, so this loan includes funds to that”.

[133] Ms QM appears to have remained unaware of the CCCFA requirements for consumer loans until July, August 2010 when she documented, as a consumer loan, the refinancing of the loan made to the IJs in March, April 2010.

52 Credit Contacts and Consumer Finance Act, Part 2, subpart 2 — Required disclosure.

53 Section 120.

54 Fair Trading Act 1986, s 13(I) — up to $200,000.

[134] On 7 September 2010, Ms QM received a letter from the IJs’ lawyer claiming that [Company A], by having charged unreasonable processing fees and oppressive interest rates, had not complied with the CCCFA.

[135] The IJs’ lawyer explained that the IJs had purchased their residence, mortgaged to [Company A] as security for the loan, 20 years earlier; Mr IJ had lost his job late 2009; and the loan had been applied to refinance a bank mortgage, the payments for which were in arrears. He proposed that [Company A] refinance the loan on reasonable terms; otherwise the IJs would seek a refund of those fees, and interest, failing which they would apply to the Court to have the term loan agreement re-opened.55

[136] Mr TQ provided a draft response to Ms QM who sought Mr ZW’s assistance. In her response to the IJs’ lawyer, Ms QM referred to the IJs’ statements in the loan documents that the loan was for business purposes. She stated that the mortgagee sale auction date set for 29 September 2010 would stand failing receipt, by 17 September 2010, of evidence for repayment of the loan (required by 14 October 2010) and payment of legal fees and expenses.

[137] Mr ZW says he advised Mr TQ about “the risks”, or “at least the potential risk of having to refund some or all of the loan processing fees and interest payments”. He says Mr TQ was “adamant” the firm attempt to settle the matter before the scheduled auction. However, unable to reach agreement, [Company A], as mortgagee, proceeded to sell the property by tender.

[138] Later that month, having received a request from the IJs’ lawyer for [Company A]’s consent, as mortgagee, to the sale of the property, Ms QM again sought Mr ZW’s advice. In November 2010, the IJs’ new lawyers also alleged that the loan did not comply with the CCCFA.

GH loan

[139] In mid-August 2012 Mr ZW responded to Mrs GH’s lawyer who similarly claimed that [Company A] had not complied with the CCCFA. The due date for repayment of the loan had expired. Mrs GH had already complained to the Commerce Commission.

[140] Again, referring to Mrs GH’s statements in the loan documents that the loan was for business purposes, Mr ZW contended that the loan, which was required to “refinance

... [an] existing house finance”, was not a consumer loan. Having been threatened with injunction proceedings in September 2011, [Company A] refinanced that loan as a

55 Credit Contacts and Consumer Finance Act, Part 5.

consumer regulated loan for a term of 17 months without both a document fee and default interest rate.

[141] As with the IJ loan, Mr ZW says he advised Mr TQ about the risks of enforcement.

(iii) Conclusion

IJ loan — March, April 2010

[142] It is to be expected that in March 2010, when Mr ZW stood in for Ms QM on this file before the loan was advanced, having noted the loan was to refinance an existing bank loan and to pay rates arrears, he would have (a) informed Mr TQ, and (b) advised him of the risks of proceeding with what appeared likely to be a consumer loan without complying with the CCCFA requirements.

[143] None of the communications exchanged between Mr ZW and Mr TQ at this time, that have been produced, evidence that he did. Mr TQ does not refer to any advice received from Mr ZW. By describing his involvement as a “discrete step”, Mr ZW appears to downplay his role on the file before the loan was made.

[144] No evidence has been produced that he passed on this information to Ms QM who, the following month, April 2010, documented another loan to the IJs “for renovation purposes”.

Enforcement — IJ (September 2010) and GH (August 2012) loans

[145] Mr TQ claims that although the evidence (referred to above) suggested that the IJ and GH loans were consumer loans, Mr ZW advised him to go ahead to recover the loans by mortgagee sale. He says Mr ZW did not make disclosure, as required by the CCCFA for consumer loans, before proceeding with enforcement.56

[146] Mr ZW says, faced with the claims from the IJs (September 2010) and Mrs GH (August 2012) that the loans were non-compliant consumer loans, he advised Mr TQ of the risks of enforcing the loans. He says, contrary to that advice, Mr TQ instructed him to “take further [enforcement] steps” against the IJs.

[147] Apart from Mr ZW’s response to Mrs GH’s lawyer, and Ms QM’s response to the IJs’ lawyer, neither have produced written advice they may have provided to Mr TQ

56 Sections 17, 99.

on these matters. Equally, no evidence has been produced of any written instructions from Mr TQ.

[148] Mr ZW again became involved on the IJ file at the end of September 2010 during Ms QM’s absence. Before going on leave, Ms QM had asked Mr ZW for advice whether [Company A], as mortgagee, should agree to the IJs’ request to extend the condition date in the IJs’ sale agreement for the secured property.

[149] As noted above, Mr ZW, having obtained Mr TQ’s instructions, informed the IJs’ lawyer that [Company A]’s invitations for tenders for the sale of the property closed on 30 September 2010 for settlement two weeks later.

[150] Assuming, for the purposes of this discussion, that Mr ZW knew Mr TQ and [Company A] may be committing an offence with the possibility of significant fines on conviction, it would be troubling had he advised Mr TQ, as Mr TQ claims, to enforce a loan without disclosure having been made.

[151] However, whether Mr ZW acted on Mr TQ’s instructions to enforce the loan, either contrary to or in accordance with [Mr ZW’s] advice, the fact is that, in respect of the IJ loan, the firm acted for [Company A] in the exercise of [Company A]’s power of sale.

[152] I observe there was still the opportunity at this stage for Mr ZW to advise Mr TQ to withdraw the property from sale until compliance with the CCCFA. Had Mr TQ insisted that the firm proceed to enforce the loan, Mr ZW could have considered terminating the retainer.

[153] The consequences for Mr ZW acting on the enforcement of a loan in such circumstances could be serious for him. Lawyers have an obligation and a duty to uphold the rule of law and facilitate the administration of justice.57 The “professional judgement of a lawyer must at all times be exercised within the bounds of the law”.58 The observation has been made that “it is obvious that a lawyer should not assist in an illegal purpose”.59 Faced with a prospect of breaching a professional obligation, a lawyer may terminate a retainer.60

57 Lawyers and Conveyancers Act, s 4(a), Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008, r 2.

58 Rule 5.2.

59 Webb, Dalziel and Cook above n 30 at [13.5].

60 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules, rr 4.2(c), 4.2.1(a).

[154] The standard of proof in disciplinary proceedings under the Act is the standard of proof in civil proceedings, namely, “the civil standard of a balance of probabilities applied flexibly to the seriousness of the matter”.61

[155] The conclusion I have reached from the information produced to this Office is that it is more probable than not that when acting on the IJ and GH loan files Mr ZW did not take reasonable steps to ensure Mr TQ understood that enforcing a non-compliant consumer loan would constitute an offence and could lead to a charging document being laid by the Commerce Commission.

[156] By not doing so, I consider that Mr ZW contravened rr 3 and 7.1, discussed above, which constitutes unsatisfactory conduct under s 12(c). In my view, this conduct also fell short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent lawyer and was therefore unsatisfactory conduct under s 12(a).

[157] Because of Ms QM’s limited experience and knowledge in this area of the legal practice, and her role being limited to documenting the loans, and the fact that she referred to Mr XY and Mr ZW for advice, I do not consider that her conduct on this aspect of Mr TQ’s complaint warrants an adverse disciplinary finding against her.

(b) A& I issue — Mr XY, Mr ZW, Ms QM

• (i) Electronic land registration (e-dealing)
  

[158] In the context of the electronic registration of land instruments (e-dealing),62 the Property Law Section (PLS) of the New Zealand Law Society Guidelines (Guidelines) explains that the “specified” A&I form “is the lawyer’s proof of authority to implement the e-dealing and provides protection against later challenges to the transaction”.63
[159] For that reason, “[i]t is ...imperative that the appropriate A&I form be completed in its entirety with all dates and names in full and details of documents properly recorded

61 Z v Dental Complaints Assessment Committee [2008] NZSC 55, [2009] 1 NZLR 1 at [26].

62 Introduced by the Land Transfer (Computer Registers and Electronic Lodgement) Amendment Act 2002, s 57. Ms QM’s conduct occurred when the Land Transfer Act 1952 was in force. The Land Transfer Act 2017 did not commence until 12 November 2018.

63 New Zealand Law Society, “Property Transactions and E-dealing Practice Guidelines” July 2012; July 2012 (updated April 2015) at “Transfers and other instruments, commentary”

<www.lawsociety.org.nz> at [8.24].

before execution by the clients”. The client “should indicate that they have read and understood every aspect of the A&I”.64

[160] Whilst the A&I does not create any contractual relationship, once registered, the instrument has the effect of a deed.65 The A&I forms, which are contained in the LINZ e-dealing User Guide (User Guide), can be generated within Landonline.66 They are reproduced in the PLS Guidelines.67

(ii) Certifications — rule 2.5

[161] Rule 2.5 prohibits lawyers from certifying:

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.

[162] The rule requires that the lawyer concerned take positive steps to ensure that the matter, in respect of which the lawyer has been requested, or proposes to provide a certificate as to the truth of a matter, is accurate.68

[163] Only if the lawyer then “believes on reasonable grounds” that “the matter certified is true” may the lawyer provide the certificate concerned.

[164] As well as (a) providing certificates as a conveyancing professional, for e- dealings, other examples of circumstances in which lawyers provide certificates in daily practice include (b) certificates to banks that (i) securities for loans are in place, (ii) professional indemnity insurance is held,69 and (iii) an existing mortgage has been discharged to make way for the bank’s replacement mortgage;70 and (c) certificates

64 At [8.21], [8.24].

65 Land Transfer Act 1952, s 164E(1).

66 Land Information New Zealand "e-dealing User Guide" <www.linz.govt.nz> at [5.4].

67 n 63 [New Zealand Law Society, “Property Transactions and E-dealing Practice Guidelines” (April 2015)] at [8.42]–[8.45], appendices 1 (private individual); 2 (private corporate); 3 (public corporate).

68 As such, this rule broadens r 3.03 of the New Zealand Law Society’s Rules of Professional Conduct for Barristers and Solicitors (7th ed, New Zealand Law Society, Wellington, 2008) which required that “a practitioner must take reasonable steps to ensure that any certificate given by that practitioner under section 164A of the Land Transfer Act 1952 (LTA and the Land Transfer Regulations 2002 as amended by the Land Transfer Amendment Regulations (No.2) 2007) is correct and complies with the statutory requirements”.

69 Auckland Standards Committee v Pollard [2012] NZLCDT 21; Auckland Standards Committee v ABC [2012] NZLCDT 14.

70 Auckland Standards Committee v Sharma [ 2015] NZLCDT 12.

provided by trust account supervisors to the Law Society in the context of trust account management.71

[165] If a lawyer subsequently discovers that a certificate given by the lawyer “was or has become inaccurate or incomplete to a material extent, the lawyer must immediately take reasonable steps to correct the certificate”.72

(iii) Discussion

[166] Mr TQ claims Ms QM suggested to him that, because he was often away from [City], to assist him, she would witness his signature on a number of A&I forms not yet prepared. These forms would be completed at a later date in respect of the mortgage security required from a borrower in respect of a particular loan. He says he “trusted” Ms QM to do this.

[167] Conversely, Ms QM says Mr TQ “insisted” that she adopt this practice which she says she did “so very reluctantly”. She says the signed, unprepared A&I forms were kept in the firm’s deeds room for safe keeping. She says she notified Mr TQ when an A&I form was completed for the mortgage security required from a borrower in respect of a particular loan.

[168] Ms QM says she was “not comfortable” with the practice. She says she “discussed” with Mr TQ “on more than one occasion” having Mr TQ/[Company A] appoint her, or a partner in the firm, as attorney to sign the A&I forms on behalf of Mr TQ/[Company A]. However, Mr TQ declined the offer expressing his concerns about a power of attorney being used for other purposes.

[169] Both Mr XY and Mr ZW deny knowledge of the practice.

[170] To assist in its deliberations on this issue the Committee requested advice from the Registrar-General of Land whose Office advised on 17 December 2015 that “[a]rranging for a client to sign blank [A&I] forms” whilst “not, in itself, ... a breach of legislation or regulations” could, at a later date, pose problems for the lawyer concerned if “the client later denies authorising an electronic instrument the lawyer has certified on the basis of that A&I”. This is because “the lawyer’s certifications will potentially be materially incorrect, or worse, fraudulent for the purposes of section 164B” of the Land Transfer Act 1952 (LTA).

71 Lawyers and Conveyancers Act (Trust Account) Regulations 2008; New Zealand Law Society v YJ LCRO 201/2010 (11 April 2011); New Zealand Law Society v ZJ LCRO 200/2010(4 April 2011).

72 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules, r 2.6.

[171] The Registrar-General’s Office referred to the potential adverse consequences for a lawyer in such a position and to the courses of action open to the Registrar-General, including supervision of the lawyer’s e-dealings, or revocation of the lawyer’s license to access the Landonline e-dealing system. The lawyer’s action could constitute an offence under the LTA. The lawyer may be required to reimburse the Crown for any compensation the Crown is required to pay to a landowner as a consequence of the lawyer’s actions.73

[172] I have already provided a brief explanation, drawn from the Guidelines, of the important part the A&I plays in e-dealings.

[173] The statements required by a non-publicly listed company in the private corporate client A&I form, approved by the Law Society and the Registrar-General, illustrate that, by adopting the practice of witnessing Mr TQ’s signature on unprepared A&I forms, Ms QM exposed her client, the firm and herself to the risks described by the Registrar-General. Those statements include:

• (a) “(c) this form is for the transaction noted” in the form. No transaction would have been described in the unprepared forms signed by Mr TQ.
  
• (b) “(f) the Client has passed the necessary resolutions ... to authorise the transaction noted” in the form. Unless a transaction has been described in the A&I form, the statement is meaningless.
  
• (c) “(g) as required by s 164A [LTA]” the law firm acting for the client is “irrevocably authorise[d] and instruct[ed] ... to register the instruments” described in the form “as an e-dealing”. The same comment applies.
  
• (d) “(h) ... By signing this form the Client is legally bound by the electronic instruments certified and registered on its behalf pursuant to this [A&I]”. The same comment applies.
  
• (e) “(i) ... the authorised transaction will become a matter of public record upon registration”. The same comment applies. There would have been no transaction to register.
  

[174] Importantly, for the conveyancing professional (lawyer) who is required to certify “the identity, and legal capacity of the client concerned, and compliance with statutory

73 Land Transfer Act, s 225(1)(ab)(i).

requirements”,74 the witness to the client’s signature on the A&I must certify that he or she “(a) ...[has] witnessed the signatory(s) sign this form”.75

[175] The Committee’s view was that by witnessing an unprepared blank A&I form signed by Mr TQ, Ms QM had provided a false certificate. This is because her signature as witness implied that she witnessed Mr TQ sign the A&I before she later completed the form for a mortgage security from a particular borrower.

[176] For the reasons set out in the Guidelines, the A&I must be completed before signature by the client. Until completion, the A&I will be meaningless, yet may place the client at risk should the A&I fall into the wrong hands. In that regard, it could be argued that Ms QM had not protected Mr TQ’s and [Company A]’s interests, not acted competently, or adopted an “unacceptable” practice as described by the Committee.76

[177] Whilst Ms QM may not have contravened any rules or regulations, for the reasons stated by the Registrar-General Office, I consider that it was most unwise for her to adopt this practice. By doing so, Ms QM overlooks the collective responsibility that rests on the primary contact, and the conveyancing professional to protect the integrity of the Land Transfer register.

[178] A conveyancing professional, who has “full responsibility and is accountable for any update” to the computer register, relies on the primary contact to prepare and have the client sign the fully completed appropriate A&I form for the proposed e-dealing, and to create the proposed e-dealing.

[179] It is to not to be expected that a legal executive of Ms QM’s experience in “transactional property work” would overlook the explanations and guidelines designed to protect the Land Transfer Registry, the client, and the lawyer alike.

(iv) Conclusion

[180] In my view, by witnessing Mr TQ’s signature on a number of unprepared A&I forms, Ms QM failed to act competently and to take reasonable care (r 3), potentially placed her client’s interests at risk (r 6), and failed to exercise the standard of competence and diligence that the public is entitled to expect of a reasonably competent lawyer (s 12(a)).

74 Adams’ Land Transfer (online looseleaf ed, LexisNexis) at [S164.9].

75 The other statements in the witness' certificate concern the identity of the client.

76 Lawyers and Conveyancers Act, s 4(d); Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules, r 6.

[181] It is only for the reasons that (a) no adverse consequences did arise, (b) Ms QM’s acknowledgement that she was not “comfortable about the situation”, (c) her precaution of keeping the signed and witnessed unprepared A&I forms in the firm’s deeds room, (d) obtaining Mr TQ’s “direct instructions” for each transaction, and (e) the fact that Ms QM had minimal supervision, that by a very fine margin, I have decided not to take further action on this issue.

• (c) Supervision — Mr XY, Mr ZW
  
• (i) Professional rules
  

[182] Rule 11.3 requires that a lawyer:

in practice on his or her own account must ensure that the conduct of the practice (including separate places of business) and the conduct of employees is at all times competently supervised and managed by a lawyer who is qualified to practise on his or her own account.

[183] This rule has been described as “represent(ing) a more basic requirement” whereby “the practice and its employees must always be competently supervised by a lawyer qualified to practise on own account”.77

[184] An illustration of a contravention of the rule considered by this Office includes where the lawyer, a partner in a firm, failed to respond to a client’s repeated inquiries over a period of seven months about an employed lawyer. The matter concerned litigation which the partner acknowledged was outside his area of practice. In concluding that the lawyer had contravened the rule this Office stated that to “ensure” a response was sent required supervision of “a very basic nature”, and did not require “any specific knowledge on a particular area of law”.78

(ii) Discussion

[185] Both Mr XY, and Mr ZW claim that they had limited involvement with Ms QM’s work for Mr TQ and [Company A]. Neither of them refer to regular meetings with Ms QM to review her work as would be expected with this type of legal work requiring the application of both legal knowledge and transactional skill.

[186] Mr XY accepts he was responsible for supervising Ms QM’s legal work carried out for Mr TQ and [Company A] from June 2006 to the end of 2009 when he says Mr ZW assumed that responsibility. However, apart from reviewing Ms QM’s loan files in the

77 Canterbury Westland Standards Committee v Simes [2012] NZLCDT 4 at [60].

78 JV v QG LCRO 65/2011 (13 September 2012) at [12], [34].

“early stages” of the firm’s relationship with Mr TQ, [Mr XY] says thereafter he was asked for assistance “only a few times”.

[187] Mr ZW denies he was responsible for supervising Ms QM’s “day-to-day transactional work” for Mr TQ/[Company A]. He says after he joined the firm’s [suburb] office at the end of 2009 he had input on only the IJ and GH loan files which were included in the Commerce Commission’s investigation.

[188] However, despite Mr ZW disclaiming that responsibility, communications from Mr XY and the firm support Mr ZW having been responsible for supervising Ms QM’s lending work from end 2009 when he moved to the firm’s [suburb] office.

[189] Mr XY says Mr TQ “was the first of [Mr XY’s] clients [Mr XY] passed on to [Mr ZW]” which he says is “partly illustrated by [Mr ZW’s] involvement in the GH and IJ matters”. As noted earlier, he refers to handing correspondence received from borrowers’ lawyers to Ms QM and Mr ZW. This, and the fact that Ms QM looked to Mr ZW for assistance on those two files suggests he was responsible for her work during that time.

[190] From the time Mr ZW moved to the firm’s [suburb] office at the end of 2009 Ms QM continued documenting loans for [Company A]. With Mr ZW’s arrival it does not appear that the opportunity was taken by him to review the approach to the legal work carried out for Mr TQ and [Company A] during the past 3 and a half to 4 years.

[191] In particular, to consider, as Mr RF did for the firm in his review memorandum after the Commerce Commission informed Mr TQ of Mrs GH’s complaint in August 2012, the possibility of a proposed loan being a consumer loan and the recommended approach for Mr TQ to take in such circumstances.

[192] That question was perhaps answered in July 2010 when the IJs’ lawyer advised Ms QM that a refinancing of the loan made by [Company A] in March, April 2010 would be a consumer loan. Mr TQ declined to proceed with the refinancing on that basis despite Ms QM having already prepared documents for a consumer loan.

[193] Ms QM says it did not occur to her that the original loan, made in March, April 2010, was a consumer loan because of the assurances provided by the IJs that it was not. She says the IJs’ lawyer had certified that the IJs stated the original loan was not for consumer purposes. She says she did not consider that the proposed new loan, which included the refinancing of the original loan, was therefore a consumer loan. I find

this difficult to accept especially when the IJs’ lawyer had told Ms QM that the new loan was for consumer purposes.

[194] Ms QM appears not to have brought this to Mr ZW’s attention at the time. It was not until a month later when the IJs’ lawyer alleged [Company A] had not complied with the CCCFA that Ms QM sought Mr ZW’s advice.

(iii) Conclusion

[195] Because, as it appears, neither Mr XY (June/July 2006 to end 2009) nor Mr ZW (end 2009 to end 2012) were alive to the possibility that a loan might be a consumer loan, supervision by them of Ms QM’s work was initiated by Ms QM on particular issues as illustrated with the IJ and GH loans.

[196] To my mind, the fact that both Mr XY and Mr ZW deny knowledge of Ms QM’s practice of witnessing Mr TQ’s signature on unprepared A&I forms adds weight to their respective positions, referred to above, that Ms QM worked largely unsupervised.

[197] I make the observation that had Mr XY and Mr ZW placed supervision of Ms QM’s work on a structured footing, say weekly, fortnightly or even monthly meetings, then the problems encountered with the four loans examined by the Commerce Commission may have been averted.

[198] The conclusion I have reached is that, on the balance of probabilities, neither Mr XY, in respect of the period from 1 August 2008 until the end of 2009, nor Mr ZW, in respect of the period from the end of 2009 until August 2012, competently supervised and managed Ms QM’s work carried out for Mr TQ and [Company A] and as such contravened r 11.3.

(d) The firm

[199] Having made findings against Mr XY and Mr ZW, I do not consider it necessary or appropriate to make corresponding findings against the firm.

Decision

(1) Pre-1 August 2008 - Mr XY

[200] For the above reasons, pursuant to s 211(1)(a) of the Lawyers and Conveyancers Act 2006, Mr XY’s conduct in June, July 2006 of failing or omitting to

advise Mr TQ about the legal requirements and consequences of Mr TQ’s proposed lending business was conduct unbecoming which constituted unsatisfactory conduct under s 12(b) of the Lawyers and Conveyancers Act 2006.

(2) Post 1 August 2008

Ms QM

[201] For the above reasons, pursuant to s 211(1)(a) of the Lawyers and Conveyancers Act 2006, the decision of the Committee that:

• (a) Ms QM, by not providing adequate advice to Mr TQ, failed to act competently and in a manner consistent with the terms of the retainer and the duty to take reasonable care in contravention of r 3 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008, which constituted unsatisfactory conduct under s 12(c) (and s 14); and
  
• (b) Ms QM’s conduct in doing so also fell short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent [legal executive] which constituted unsatisfactory conduct under s 12(a) (and s 14); and
  
• (c) Ms QM’s conduct of witnessing Mr TQ’s signature on unprepared A&I forms fell short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent [legal executive] which constituted unsatisfactory conduct under s 12(a) (and s 14),
  

is reversed.

Mr XY

[202] For the above reasons, pursuant to s 211(1)(a) of the Lawyers and Conveyancers Act 2006, the decision of the Committee that:

• (a) Mr XY, by not competently supervising and managing Ms QM’s work for the period 1 August 2008 until the end of 2009, when Mr ZW joined the firm’s [suburb] office, contravened r 11.3 which constituted unsatisfactory conduct under s 12(c); and

• (b) Mr XY’s conduct in doing so also fell short of the standard of competence and diligence that a member of the public is entitled to expect a reasonably competent lawyer which constituted unsatisfactory conduct under s 12(a),
  

is confirmed.

Mr ZW

[203] For the above reasons, pursuant to s 211(1)(a) of the Lawyers and Conveyancers Act 2006, the decision of the Committee that:

• (a) Mr ZW, by not providing adequate advice to Mr TQ concerning the enforcement of the IJ and GH loans, failed to act competently and in a manner consistent with the terms of the retainer and the duty to take reasonable care which contravened r 3 is confirmed, but modified by adding that he also contravened r 7.1 which constituted unsatisfactory conduct under s 12(c); and
  
• (b) Mr ZW’s conduct in doing so also fell short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent lawyer which constituted unsatisfactory conduct under s 12(a) is confirmed; and
  
• (c) Mr ZW, by not competently supervising and managing Ms QM’s work for the period from the end of 2009, when he joined the firm’s [suburb] office, until August 2012, contravened r 11.3 which constituted unsatisfactory conduct under s 12(c).
  

The firm

[204] For the above reasons, pursuant to s 211(1)(a) of the Lawyers and Conveyancers Act 2006, the decision of the Committee that the firm similarly contravened rr 3 and 11.3, which constituted unsatisfactory conduct under s 12(c), is reversed.

Orders

(1) Penalty

• [205] In giving consideration as to whether it is appropriate to order a penalty, I refer to the guidance provided by the Disciplinary Tribunal which has stated that the:79

predominant purposes [of orders] are to advance the public interest (which include ‘protection of the public’), to maintain professional standards, to impose sanctions on a practitioner for breach of his/her duties and to provide scope for rehabilitation in appropriate cases.

[206] Concerning Mr ZW, the Committee found that by not providing adequate advice to Mr TQ he had contravened rule 3 which constituted unsatisfactory conduct under s12(c), and also constituted unsatisfactory conduct under a12(a). Although the Committee stated that Mr ZW was, at the relevant time, “the partner responsible for supervising Ms QM’s work”, it did not make an adverse finding against him in respect of that issue.

[207] It follows that it is reasonable to assume that the penalties ordered by the Committee against Mr ZW related to the Committee’s adverse finding only.

[208] The conclusion I have reached in considering this matter afresh on review is that Mr ZW failed to competently supervise and manage Ms QM. It is therefore appropriate to consider separate penalties in respect of each adverse finding.

(2) Censure

[209] An order censuring or reprimanding a lawyer is one of the orders a Standards Committee, or this Office on review, can make.80 The Court of Appeal has described “censure” and “reprimand” as “synonymous”. Both are “likely to be of particular significance” in the context of the Act.81 This is:82

because it will be taken into account in the event of a further complaint against the practitioner in respect of his or her ongoing conduct ... and will inevitably be taken seriously.

[210] In making orders of censure against Mr XY and Mr ZW, because of the seriousness with which the Committee regarded their conduct, the Committee considered referring Mr TQ’s complaint to the Disciplinary Tribunal, but decided that “penalties on the upper end of the scale” would be appropriate.

79 Daniels v Standards Committee (2) of the Canterbury-Westland Branch of the New Zealand Law Society [2013] NZHC 349, [2013] NZAR 416. See also s 3 of the Lawyers and Conveyancers Act 2006 — the consumer protection purposes.

80 Lawyers and Conveyancers Act, s 156(1)(b).

81 New Zealand Law Society v B [2013] NZCA 156, [2013] NZAR 970 at [39].

82 At [39].

[211] For the following reasons, I consider that censure of Mr XY’s and Mr ZW’s conduct, and the imposition of a fine is warranted because:

Mr XY, Mr ZW

(a) Mr TQ’s and [Company A]’s acknowledgement in the settlement agreement with the Commerce Commission that they had contravened the CCCFA and the FTA.

(b) The fact that Ms QM, despite her experience in transactional work, was left largely unsupervised without adequate instruction concerning the circumstances that may suggest a loan was non-compliant.

Mr XY

(c) The nature of Mr TQ’s instructions to Mr XY in June, July 2006 required that [Mr TQ] be advised of the legal consequences and risks of his proposed lending business as Mr RF later did for the firm in his review memorandum.

(d) Without such advice, which would have included the legal consequences of a consumer loan not complying with the CCCFA, and the FTA, Mr TQ was at best unsure, or at worst unaware of the nature of the enquiry needed of each borrower’s circumstances before documenting and making a loan.

Mr ZW

(e) Mr ZW’s failure to identify that the IJ and GH loans were likely to have been consumer loans, as later noted by Mr RF in his review memorandum.

(3) Fine

[212] The maximum fine that can be imposed is $15,000.83 This Office has stated that in cases where unsatisfactory conduct is found as a result of a breach of applicable rules (whether the Rules of Conduct and Client Care, regulations or the Act) and a fine

83 Lawyers and Conveyancers Act, s 156(1((i).

is appropriate, a fine of $1,000 would be a proper starting place in the absence of other factors.84

(4) Orders Mr XY
[213] Pursuant to s 211(1)(a) of the Lawyers and Conveyancers Act 2006 the Committee’s orders that:

• (a) Mr XY be censured is confirmed (s 156(1)(b)).
  
• (b) Mr XY pay to the New Zealand Law Society a fine of $10,000 is reversed and substituted with the orders that in respect of my findings that:
  
  • (i) his pre-1 August 2008 conduct was conduct unbecoming, Mr XY is to pay to the New Zealand Law Society a fine of $1,500 (s 351(1), s 156(1)(i) of the Act and s 106(4)(a) of the LPA);85
    
  • (ii) he did not competently manage and supervise Ms QM’s work, Mr XY is to pay to the New Zealand Law Society a fine of $3,500 (s 156(1)(i)).
    
• (c) Mr XY pay to the New Zealand Law Society the sum of $1,000.00 by way of costs is confirmed (s 156(1)(n)).
  

Mr ZW

[214] Pursuant to s 211(1)(a) of the Lawyers and Conveyancers Act 2006 the Committee’s orders that:

• (a) Mr ZW be censured is confirmed (s 156(1)(b)).
  
• (b) Mr ZW pay to the New Zealand Law Society the sum of $10,000.00 by way of a fine is reversed and substituted with the orders that in respect of my findings that:
  
  • (i) by not providing competent advice to Mr TQ in March, April 2010, and September 2010 (IJ loan), and in August 2012 (GH loan) and by not taking reasonable steps to ensure Mr TQ understood that

84 Workington v Sheffield LCRO 55/2009 (26 August 2009) at [68].

85 Law Practitioners Act 1982, s106(4)(a) — the maximum fine was $2,000.00.

advice, Mr ZW is pay to the New Zealand Law Society a fine of

$7,500 (s 156(1)(i)); and

(ii) by not competently managing and supervising Ms QM’s work Mr ZW is pay to the New Zealand Law Society a fine of $3,500 (s 156(1)(i)).

(c) Mr ZW pay to the New Zealand Law Society the sum of $1,000.00 by way of costs is confirmed (s 156(1)(n)).

Ms QM

[215] Pursuant to s 211(1)(a) of the Lawyers and Conveyancers Act 2006 the Committee’s orders that Ms QM be censured, and pay a fine, and costs to the New Zealand Law Society are reversed (s 156(1)(b)).

The firm

[216] Pursuant to s 211(1)(a) of the Lawyers and Conveyancers Act 2006 the Committee’s orders that the firm pay a fine, and costs to the New Zealand Law Society are reversed (s 156(1)(b)).

(5) Costs

[217] Where an adverse finding is made, costs will be awarded in accordance with the Legal Complaints Review Officer (LCRO) Costs Orders Guidelines. It follows that pursuant to s 210(1) of the Act Mr XY, and Mr ZW are ordered to pay costs in the sum of $1,800.00 ($900.00 each) to the New Zealand Law Society.

[218] Mr XY, and Mr ZW are to pay their respective fines, and costs ordered by the Committee and this Office to the New Zealand Law Society by the 20th of December 2018. Pursuant to s 215(3)(a) of the Act, the costs orders may be enforced in the District Court.

(6) Anonymised publication

[219] Pursuant to s206(4) this decision is to be made available to the public with the names and identifying details of the parties removed

DATED this 16th day of November 2018

B A Galloway

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 QM, Mr XY, Mr ZW and ABC Lawyers Ltd (Attention: Mr VW, Director) as the Applicants

Mr TQ as the Respondent

Ms KV as the Representative for the Applicants Mr TB as the Related Person

[Area] Standards Committee [X] New Zealand Law Society