YH v NS [2018] NZLCRO 123 (27 November 2018)

Last Updated: 2 December 2018

	LCRO 208/2016
CONCERNING	an application for review pursuant to section 193 of the Lawyers and Conveyancers Act 2006
AND
CONCERNING	a determination of [City] Standards Committee [X]
BETWEEN	YH Applicant
AND	NS Respondent

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

DECISION

Introduction

[1] Mrs YH has applied for a review of the determination by [City] Standards Committee [X] (the Committee) to take no further action in respect of her complaints about Mr NS.

[2] A hearing took place by telephone on 14 November 2018 at which Mrs YH was represented by Mr DW. Mrs YH was also in attendance. Mr NS elected not to attend the teleconference.

Background

[3] Mrs YH separated from her husband in [date] 2003 and instructed Mr NS to act for her with regard to issues arising. On [date] 2003 Mr and Mrs YH entered into a separation agreement in which the parties agreed that the Child Support Act 1991 applied and Mr YH accepted “that the current agreement is that his income is assessed at the ceiling level pursuant to the Child Support Act 1991”.

[4] The Committee noted:1

At the date of separation, Mr YH was a sole trader builder who had incurred a substantial tax liability prior to separation and that tax liability was unknown at the date of separation. In the Agreement, Mr and Mrs YH agreed that they would each share equally in the tax liability.

[5] Mr YH calculated that Mrs YH was indebted to him in the sum of $164,875 plus interest and costs pursuant to this clause and issued proceedings in 2011 against her for this amount.

[6] In the meantime, Mr YH had defaulted in payments of child support and the amount due by him was included in Mrs YH’s defence which was filed by Mr NS.

[7] A settlement conference was scheduled for [date] 2013 and another partner in Mr NS’s firm (Mr LZ) instructed a barrister, Mr SM, to attend on behalf of Mrs YH.

[8] That was effectively the end of Mr NS’s involvement with the file.

[9] The settlement conference was adjourned and Mr SM advised Mrs YH that she should issue proceedings to recover the arrears of child support, the main reason being to “put pressure on Mr YH”.

[10] A Notice of Claim for the arrears of child support was issued in [date] 2013. Mr SM then agreed with Mr YH’s counsel that:

Mr YH’s claim would be placed on hold while Mrs YH’s claim went through the various procedural stages to reach the point where the two proceedings could be consolidated and set down for a further judicial settlement conference.

[11] A second settlement conference for both sets of proceedings was held on [date] 2014 and settlement was reached.

Mrs YH’s complaints

[12] In [date] 2015, Mr NS’s former firm ([Firm 1]) issued proceedings for recovery of outstanding fees owed to it by Mrs YH.2 Mrs YH’s complaints were received by the Lawyers Complaints Service on [date] 2015. The Committee identified two issues raised by Mrs YH’s complaints:3

1 Standards Committee determination, [date] 2016 at [4].

2 Mr NS is now a partner in a different firm.

3 Standards Committee determination, above n 1 at [12].

Issue 1:

Did Mr NS provide incorrect advice to Mrs YH relating to her maintenance claim (including the backdating of any child support payments) in litigation with Mr YH and if so, did his conduct constitute either unsatisfactory conduct or misconduct?

Issue 2:

Did Mr NS provide incorrect advice to Mrs YH in respect of the Limitation Act 1950 in respect of her claim against Mr YH for maintenance payments or in respect of Mr YH’s claim against her for payment of tax and if so, did his conduct constitute either unsatisfactory conduct or misconduct?

[13] On [date] 2015, Mr LZ responded to the complaints on behalf of Mr NS and observed that Mrs YH:

made no allegations of negligence against the firm other than a suggestion just prior to issuing our proceedings that she felt she did not get correct advice from Mr NS some seven years ago as part of the strategy of her case.

[14] Although Mr DW argued that “no allegations of negligence simply means that Mrs YH was not aware, and had no reason to believe, that the advice she was consistently receiving was wrong”, Mr LZ’s observation has some merit.

The Standards Committee determination

[15] The Committee “carefully considered all aspects of the IRD issue” but was not satisfied that “Mr NS provided incorrect advice as to [Mrs YH’s] statutory rights under the Child Support Act”.4 It reached the same view in respect of Mr NS’s advice with regard to the Limitation Act 1950.5

[16] The reasoning of the Committee is not considered in depth in this decision, as the reasons for confirming the determination to take no further action on the complaints, differ from those of the Committee.

Review

Delegate

[17] The review hearing was conducted by Mr Vaughan acting as a delegate duly appointed by the Legal Complaints Review Officer (LCRO) pursuant to cl 6 sch 3 of the Lawyers and Conveyancers Act 2006 (the Act). The LCRO has delegated Mr Vaughan 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.

4 At [18].

5 At [22].

Unsatisfactory conduct

[18] Unsatisfactory conduct is defined in s 12(a) of the Act as being:

conduct of the lawyer or incorporated law firm that occurs at a time when he or she or it is providing regulated services and is conduct that falls short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent lawyer.

[19] Both Mr LZ and Mr DW conflate “unsatisfactory conduct” with the tort of negligence. It is important to note there is a difference and allegations of negligence must be brought and decided on in Court. It is not a claim that a Standards Committee or this Office will rule on. The only question to be answered is whether or not Mr NS’s advice met the standard required by s 12(a) of the Act, or could possibly have amounted to misconduct, in which case a charge would need to be brought before the Lawyers and Conveyancers Disciplinary Tribunal.

[20] That alternative is readily discounted by reference to the definition of misconduct in s 7 of the Act which centres on the concept of a lawyer not being a “fit and proper” person to practice as a lawyer. In an article in the New Zealand Law Journal, Dr Duncan Webb notes that ‘misconduct’ has “connotations of a serious failure of professional standards”.6 Mr NS’s advice did not approach that level.

[21] In the same article Dr Webb notes that:7

the term “unsatisfactory conduct” covers a range of conduct from the mere slip or oversight which is less than satisfactory to conduct on the border of misconduct which is deserving of serious sanction.

[22] However, lawyers are not expected to comply with a standard of perfection, and the degree of care and diligence varies according to the nature of the matter in hand.

[23] Mr NS advised Mrs YH that she should go to the Inland Revenue Department to have the Department assess Mr YH’s liability for child support. That was not the same, as submitted by Mr DW, as advising her that “recovery was certain either from IRD or as an offset to the claim against her for tax”.

[24] That allegation is answered by Mr NS is his response to Mrs YH’s application for review:

Pursuant to the separation agreement dated [date] 2003 between Mr and Mrs YH, Mr YH agreed that the Child Support Act 1991 would apply and that his income would be assessed at the ceiling level pursuant to that Act. This meant that Mrs YH was entitled to receive child support at the maximum amount and

6 Duncan Webb “The Legal Complaints Review Officer” [2008] NZLJ 405. Dr Webb is a former Professor of Law at Canterbury University and the first LCRO.

7 At 407.

should Mr YH not comply, Mrs YH would have a civil claim against him for recovery of the unpaid child support. Mr YH could, however, have applied for a re-assessment if he had arranged his business affairs whereby the business was running as a loss. His assessed liability could have reduced significantly.

[25] At the first judicial conference the Judge accepted that Mrs YH had a valid claim against Mr YH which could be set off against any order made in his favour. That indication supported Mr NS’s advice which cannot be considered to be “unsatisfactory conduct”.

Limitation Act 1950

[26] In [22] of its determination, the Committee said:

The Committee is not satisfied that, on the information provided, Mr NS provided incorrect advice to Mrs YH in respect of the Limitation Act 1950 or that he was in breach of the Rule.

[27] In his notes for the hearing Mr DW interpreted this double negative as meaning that the inverse was correct, namely, that the Committee was satisfied Mr NS’s advice was correct. That is not necessarily the case.

[28] Mrs YH’s complaint relating to Mr NS’s advice about the effect of the Limitation Act on the proceedings is addressed in issue 2 set out by the Committee in its determination:

Did Mr NS provide incorrect advice to Mrs YH in respect of the Limitation Act 1950 in respect of her claim against Mr YH for maintenance payments or in respect of Mr YH’s claim against her for payment of tax and if so, did his conduct constitute either unsatisfactory conduct or misconduct?

[29] Her complaint was that Mr NS had:

from early 2008 onwards...consistently advised me that recovery of the underpaid child support was assured, either as an offset against my liability to MR YH for tax, or from Inland Revenue by way of an application for the arrears.

[30] Mrs YH refers to a file note prepared by Mr NS dated [date] 2013:

8. For the purpose of the counterclaim, Mrs YH is not statute barred on her claim for maintenance because she was misled by the incorrect tax accounts filed by Mr YH which purported to confirm that he had no liability to her for maintenance under the contract. Accordingly, the date for the commencement of the limitation period would have been the date at which she discovered that the taxation accounts appeared to have been incorrectly calculated. This discovery was only made within the last 12 months and accordingly a counterclaim would be well within the limitation period.
   
9. If we adopt this approach, we put Mr YH in the position that potentially his claim is statu[t]e barred with respect to the tax but her claim with respect to maintenance is not. He could therefore face a provable claim on Mrs YH’s account for an amount possibility in the vicinity of $50,000.

[31] In the complaint, and subsequently, Mr DW has advised that he and Mrs YH inferred that the Limitation Act issue was “looming” and not a current issue. The second settlement conference took place on [date] 2014, at which Mr SM conceded that the claim for unpaid child support was reduced by $14,608 because of the impact of the Limitation Act, which, in turn, affected the amount of the settlement.

[32] Mrs YH says she was taken by surprise by this concession and had relied on the advice of her legal team. By this she means that she was not aware that any part of her claim against Mr YH would be statute barred.

[33] In response to a question from Mr Vaughan during the hearing, Mr DW asserted that neither Mr NS or Mr SM had told them that part of Mrs YH’s claim could be out of time. However, following the hearing, Mr DW corrected his response and provided copies of email correspondence between himself and Mr SM dated [date] 2013, in which Mr SM said:

Our biggest problem is Limitation Act issues. It follows that I strongly recommend to Mrs YH that she issues these proceedings forthwith as every month and year she waits significantly weakens her position.

[34] That is a significant correction by Mr DW and he is to be commended for acknowledging this correspondence. It is evidence that the effect of the Limitation Act on Mrs YH’s claim was referred to by the lawyers, and although neither Mrs YH or Mr DW may have noted the significance of the issue, their complaints that they were not alerted to the issue prior to the settlement conference, cannot be sustained.

[35] In settlement negotiations a party must take all factors into account, and the Limitation Act implications was one of the factors to be taken into account by both Mr and Mrs YH. Having done that, a settlement was reached and litigation brought to an end.

[36] It is relevant at this point to refer to the definition of unsatisfactory conduct in

[19] above. Mr NS’s view (set out in [30] above) may well have been arguable in Court and it is not for a Standards Committee or this Office to consider, and in effect “adjudicate”, the issue. Mr NS’s view was expressed as part of the overall advice to Mrs YH and the concession by Mr SM was one factor to be considered in reaching a settlement. That does not elevate Mr NS’s conduct to that of unsatisfactory conduct in terms of the Act.

Conclusion

[37] The advice provided by Mr NS cannot be considered to have lacked competence or diligence. The reasoning of the Committee has not been addressed in detail in this decision, but it is not considered that the Committee’s reasons are incorrect

in any respect. The outcome of the review remains the same as the decision arrived at by the Committee.

Decision

[38] Pursuant to s 211(1)(a) of the Lawyers and Conveyancers Act 2006 the determination of the Standards Committee to take no further action in respect of the complaints about Mr NS is confirmed. The reasons for this confirmation include those provided in this decision as well as those of the Standards Committee.

DATED this 27th day of November 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:

Mrs YH as the Applicant Mr NS as the Respondent

Mr X as the Related Person [City] Standards Committee [X] New Zealand Law Society