AA v SM [2018] NZLCRO 131 (19 December 2018)

Last Updated: 18 January 2019

	LCRO 36/2018
CONCERNING	an application for review pursuant to section 193 of the Lawyers and Conveyancers Act 2006
AND
CONCERNING	a determination of the [Area] Standards Committee [X]
BETWEEN	AA Applicant
AND	SM Respondent

DECISION

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

Introduction

[1] Mr AA has applied for a review of a decision by the [Area] Standards Committee

[X] (the Committee) which made a finding of unsatisfactory conduct against Mr SM, at the relevant times, a sole practitioner practising under the name [Firm], and later employed as a lawyer by [Firm 1].1

[2] In July 2008 Mr AA’ mother, Mrs RS owned two residential properties in [City]. First, in [Street 1], in her own name; and secondly, in [Street 2], with her daughter Ms LO as joint tenants.2

[3] The [Street 2] property had been purchased by Mrs RS and Ms LO in May 2008 with the assistance of a bank loan of $305,000. Ms FY, a legal executive employed by

1 Mr SM practised at [Firm 1] under the title of consultant.

2 Hinde, McMorland and Sim Land Law in New Zealand (online looseleaf ed, LexisNexis) at [13.004] — an important feature of a joint tenancy is that “on the death of one joint tenant his or her interest is extinguished and accrues to the surviving joint tenant[s] by virtue of the right of survivorship”. In contrast, “[a] tenancy in common exists whenever two or more persons hold undivided shares in the same parcel of land”.

[Firm], acted on the purchase. The loan was secured by mortgages registered against [Street 1], and [Street 2]. Mrs RS’ intention was to sell [Street 1] and apply the sale proceeds to reduce what she considered was her half share in the bank loan, $152,500.

[4] In her 25 July 2008 will Ms RS directed her trustees, Mr SM and Ms FY, to sell [Street 1] and “from the net proceeds of sale to pay $150,000 to ... [Ms] LO”. The residue of Mrs RS’ estate, assumed to be her notional half share of [Street 2] (or the sale proceeds of that share), was to be distributed among the remaining three children, Mr AA, Mr LE, and Ms GD.

[5] On 28 October 2009, Mrs RS, accompanied by Mr AA, saw Ms FY about making a new will which she signed on 15 December 2009. The main changes from her 25 July 2008 will were first, the removal of the bequest of $150,000 to Ms LO, and secondly, the residue to be divided into 15 equal shares, two shares for Mr LE, four shares for Ms GD, four shares for Mr AA, and five shares for Ms LO.3

[6] Concerning the five shares left to Ms LO, the trustees, again Mr SM and Ms FY, were directed to take into account the amount required to be repaid to the bank on the sale of [Street 1].

[7] Following Mrs RS’ death on 28 August 2015, [Street 1] was sold. Settlement took place on 4 December 2015. The sum of $174,000 from the sale proceeds was paid to the bank in reduction of the loan. By this time Mr SM, the surviving executor and trustee, had sold his practice to [Firm 2].4 Mr BN of that firm acted in the administration of Mrs RS’ will, and on that sale.5

[8] As well as acting as executor and trustee of Ms RS’ will, Mr SM assisted Ms LO on estate matters.

Complaint

[9] Mr AA lodged a complaint with the New Zealand Law Society Complaints Service (NZLS) on 28 March 2017. He asked that (a) Mr SM be made accountable for [Mr SM’s] actions, (b) [Firm 2]’s invoice in respect of the sale of Bell Road, and the administration of Mrs RS’ estate be refunded, and (c) compensation be paid to him.

3 Clause 9.3 of the will.

4 Mr SM says he sold his law practice to [Firm 2] early November 2011. Ms [FY] died during 2014.

5 Clause 9.3.4 of the will.

[10] Mr AA claimed that Mrs RS’ will had been “poorly drafted” and her wishes had “not been carried out”.

[11] He claimed that at the time Mrs RS’ will was prepared in October, November 2009, he, Mr AA, and Ms LO understood that Mrs RS’ half share of the sale proceeds of [Street 2] would be “paid as a bequest to [Ms LO] before the rest of [Mrs RS’] estate was distributed”.

[12] He alleged Mr SM did not “check ... as to the form of registration on the title of... [Street 2]”. He said cl 9.3.4 “had no effect” on Mrs RS’ wishes so he “receiv[ed] nothing from her estate” to repay his “debt to the estate”.

[13] Mr AA referred to Mr SM’s acknowledgement that cl 9.3.4 “was not clear and easily understood”. He said as a consequence there had been “major upset, hurt and animosity between [himself] and [his] siblings”.

[14] He said Mr SM had “made no attempt in trying to resolve this matter” and had “direct[ed] any correspondence” to [Firm 2] who were acting for Mr SM as executor and trustee in the estate administration.

Independence

[15] Mr AA claimed Mr SM was “also acting” for Ms LO, with whom Mr AA was “in dispute over the estate”, as well as performing his role as executor and trustee of Mrs RS’ will, and therefore had a conflict of interest.

Standards Committee decision

[16] The Committee delivered its decision on 12 February 2018 and determined, pursuant to s 152(2)(b) of the Lawyers and Conveyancers Act 2006 (the Act), that by acting for, or attempting to act for Ms LO on estate matters as well as performing his duties as executor and trustee of the estate, Mr SM was not independent, and had contravened r 5 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (the rules) which constituted unsatisfactory under s 12(c) of the Act.

[17] The Committee noted that on 15 December 2009, when Mrs RS signed her will, Mr SM “was absent from his office for medical reasons” and his practice was “under the supervision of his attorney”.

[18] For those reasons, the Committee concluded that “any complaint regarding competency” in respect of the preparation of Mrs RS’ will “would lie against the attorney”.

[19] The Committee observed that the interpretation of cl 9.3.4 of the will was “a matter for an aggrieved beneficiary as desired to pursue” in Court.

Independence

[20] The conclusion reached by the Committee on this issue was that because Mr SM was an executor and trustee of Mrs RS’ will when at the same time he acted for Ms LO on estate matters, it followed he was not independent and free from compromising influences or loyalties.

[21] Although the Committee considered that “in all likelihood” Mr SM was “well- intentioned”, there was “a blurring of the lines” between those roles particularly where Ms LO, a beneficiary, was “in dispute with other beneficiaries”.

[22] In the Committee’s view, Mr SM first, “lost sight of the clear boundaries that lawyers are required to follow on matters pertaining to conflict of interest” and secondly, “failed to recognise it was time to refer Ms LO elsewhere for independent advice”.

[23] The Committee stated that in such circumstances Mr SM “should have identified the conflict of interest in acting for, or attempting to act for [Ms LO] and referred” her to a different lawyer.

Fees

[24] Because [Firm 2], not Mr SM, acted on the estate administration, the Committee declined jurisdiction to consider Mr AA complaint against Mr SM in respect of [Firm 2]’s fees for that legal work.

Application for review

[25] Mr AA filed an application for review on 5 March 2018.

[26] He refers to what he sees as a contradiction in Mr SM’s statements made in [Mr SM’s] 4 May 2017 memorandum to the Lawyers Complaints Service, namely:

• (a) Mr SM’s statement that he “did not act personally for [Mrs] RS or any of her family but knew that [Ms FY] acted for them”; and
  
• (b) Mr SM’s reference to Ms FY’s 29 October 2009 memorandum to him in which Ms FY explained that “if [Street 1] was sold, proceeds of sale would go to the Bank and [Ms LO] might expect sale proceeds to clear [her] half share of the [Street 2] mortgage”.
  

[27] He says he regards Ms FY’s memorandum as Mrs RS’ instructions to Mr SM to act on the preparation of the will, which he says Mr SM failed to carry out.

[28] He disagrees that Mr SM’s absence from [Mr SM’s] office on 15 December 2009 when Mrs RS signed her new will absolves [Mr SM] from responsibility for the preparation of the will. In particular, cl 9.3.4 which the Committee stated had been “poorly drafted”, and concerned [Street 2], Mrs RS’ “only real asset”.

[29] In Mr AA view, “upon ... return to work” Mr SM “would review any files ... his attorney [had] been involved with”.

Independence

[30] Mr AA agrees with the Committee’s conclusion that Mr SM “should have identified the conflict” in acting for Ms LO whilst he performed his duties as executor and trustee of Mrs RS’ estate.

Response

Preparation of will

[31] In his response to Mr AA’s review application, dated 8 March 2018, Mr SM did not restate or refer to his comments contained in his 4 May 2017 memorandum to the Lawyers Complaints Service to which I refer in my discussion of this issue.

[32] However, Mr SM did say that (a) as executor and trustee he “sought to interpret and follow the Will in actual circumstances”. He says (b) following Mrs RS’ death, the [Street 2] property, which was owned by Mrs RS and Ms LO as joint tenants, was transmitted to Ms LO by survivorship. He says that “appeared always to have been Mrs RS’ intention”.

Independence

[33] Mr SM denies he was acting as a lawyer providing regulated services in his capacity as executor and trustee of Mrs RS’ will. He says he wanted to resign from that role but was unable to. He says he “did not see or sign the agreement for sale” of [Street 1] before it was sold.

[34] He says he viewed his role as executor and trustee “to help the family resolve their issues”, and for that purpose “to work with the family and estate solicitors”. He says he “dealt mainly” with Ms LO who “took the initiative and sought resolution” and then with Mr AA who “had his own view of the process”.

[35] He explains that Ms LO sought his assistance “as trustee ... in dealing with” Mr AA and the estate lawyers. He says “as it turned out” he acted “only as trustee” for Ms LO “and others”.

Review on the papers

[36] 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.

[37] 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

[38] The nature and scope of a review have been discussed by the High Court, which said of the process of review under the Act:6

... 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.

[39] More recently, the High Court has described a review by this Office in the following way:7

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.

[40] 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 first, consider all of the available material afresh, including the Committee’s decision, and secondly, provide an independent opinion based on those materials.

Issues

[41] The issues I have identified for consideration on this review are:

Preparation of will

(a) What were Mrs RS’ will instructions, and did Mr SM carry out those instructions?

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

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

(b) In preparing Mrs RS’ will, did Mr SM protect and promote Mrs RS’ interests, and act competently?

Independence

(c) Did Mr SM act for Ms LO whilst performing his duties as executor and trustee of Mrs RS’ estate? If so, when acting for Ms LO was he independent and free from compromising influences or loyalties?

Analysis

(1) Preparation of will

(a) Relevant professional rules

(i) Receiving instructions, providing information and advice

[42] With limited exceptions, a lawyer risks a complaint from a client with a prospect of a disciplinary response if the lawyer not does carry out the client’s instructions.8 If the lawyer is unsure about the client’s instructions then “it is incumbent on the lawyer to obtain clarification of those instructions, and not proceed on an assumption the client agrees to a certain course of action”.9

[43] Importantly, lawyers’ duties are “governed by the scope of their retainer”. However, “[m]atters which fairly and reasonably arise in the course of carrying out those instructions must be regarded as coming within the scope of the retainer”.10

[44] A lawyer must 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.11

8 Duncan Webb, Kathryn Dalziel and Kerry Cook Ethics, Professional Responsibility and the Lawyer

(3rd ed, LexisNexis, Wellington, 2016) at [10.3].

9 At [10.3] — see r 1.6 as to the manner in which a lawyer must provide information to a client - see discussion in Sandy v Kahn LCRO 181/2009 (25 December 2009) at [38].

10 Gilbert v Shanahan [1998] 3 NZLR 528 (CA) per Tipping J at page 537.

11 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008, rr 7, 7.1; r 1.2

— a “retainer” is defined as “an agreement under which a lawyer undertakes to provide or does provide legal services to a client”.

(ii) Competence, duty of care

[45] When providing “regulated services” to a client, pursuant to r 3 a lawyer “must always act competently and in a timely manner consistent with the terms of the retainer and the duty to take reasonable care”.12

[46] 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”.13 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.14

[47] This does not, however, 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 standards of service”. The duty is concerned with “the outcome of lawyer’s work rather than the way in which they deal with clients”.15

• (iii) Protect and promote client interests
  

[48] Consistent with the consumer purposes of the Act, lawyers’ fundamental obligations include that “[e]very lawyer who provides regulated services must ...:

(d) ... protect, subject to his or her overriding duties as an officer of the High Court and to his or her duties under any enactment, the interests of his or her clients”.16

[49] The corresponding duty in r 6 requires that:

[i]n acting for a client, a lawyer must within the bounds of the law and [the] rules, protect and promote the interests of the client to the exclusion of the interests of third parties.

(iv) Supervision

• [50] 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.

12 Lawyers and Conveyancers Act 2006, s 6 “regulated services” is defined as including “legal services” and “conveyancing services”, which are also defined.

13 Webb, Dalziel and Cook, above n 8 at [11.1].

14 At [11.3].

15 At [11.3].

16 Lawyers and Conveyancers Act, ss 3(1), 4.

[51] 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”.17

[52] Illustrations of contraventions of the rule considered by this Office include where two lawyers, both partners in a firm were found not to have competently supervised and managed a legal executive employed by [Firm] who was acting for a client which had made consumer loans without complying with the Credit Contracts and Consumer Finance Act 2003.18

• (b) Parties’ positions
  

Mr AA

[53] Mr AA claims when Mrs RS made her will in December 2009, Mr SM, whose firm acted on the purchase of [Street 2], ought to have explained to her that [Street 2] was owned by her and Ms LO as joint tenants. He says it was not Mrs RS’ intention that [Street 2] be excluded from her estate so that ownership passed to Ms LO by survivorship on Mrs RS’ death.

[54] He says Mrs RS “was relying on [Mr SM’s] professional advice”. He claims Mr SM did not check the title to [Street 2] before Mrs RS signed her will. Consequently, he says, the law of survivorship had “overridden” Mrs RS’ wishes.

[55] He explains that in early 2007, with Mrs RS’ health “ailing”, Ms LO and Ms RS “planned to go halves” in the purchase of [Street 2] which was funded by a bank loan secured by mortgages against [Street 2], and against [Street 1] which Mrs RS owned. He says Mrs RS proposed to sell [Street 1] to repay her half of the bank loan, and Ms LO was responsible for her half share.

[56] He referred to Mr SM’s firm having acted on the purchase of [Street 1] by Mrs RS in 2005. He says three years later Mrs RS wanted to live on her own again and had moved back to [Street 1].

[57] He says at his and Mrs RS’ meeting with Ms FY on 28 October 2009 about Mrs RS’ new will, he asked Ms FY about the meaning of proposed cl 9.3.4.

[58] He claims if Mrs RS had “wished to leave her entire estate” to Ms LO [Mrs RS] would have said so and would not have distributed the residue of her estate “in portions of

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

18 XY, ZW, QM and ABC Lawyers v TQ LCRO 119/2016 (15 November 2018).

15 equal shares”. He says cl 9.3.4 is unclear and not to “a reasonable standard you would expect from a firm of solicitors”. He says it was not Mrs RS’ intention that her other children “receive nothing”. He refers to Ms LO and his other sister Ms GD agreeing with this position.

[59] He says Ms FY responded she “was unsure and ... would check with [Mr SM] and get back to [Ms RS] in the next few days” but that “never happened”.

[60] He says Mrs RS’ wishes, also known by Ms GD and Ms LO, were that Ms LO’s “proportion of the mortgage being half of the purchase price ($305,000) of [Street 2] should be paid before any other distribution is made”. Any borrowing by Ms LO had “nothing to do with [Mrs RS’] will or her Estate”.

• [61] Referring to Mr SM having acknowledged [Mr SM] did “not understand ... clause

9.3.4 that [Mr SM] had drafted”, he says Mr SM is “ultimately responsible for ... drafting of [Mrs RS’] will, in particular clause 9.3.4”.

Mr SM

[62] Mr SM says he “did not know or act personally for Mrs RS or any of her family but knew that [Ms FY] acted for them, particularly on [the] purchase” of [Street 2] in May 2008.

[63] He says Mrs RS’ 25 July 2008 will left $150,000 to Ms LO from “the net proceeds of sale” of [Street 1]. He says there is “a handwritten note on the file, question by Mrs [RS], to effect that [Street 2] would go to the survivor”, namely:

Sale of [Street 1], to be paid off mortgage to ANZ for [Street 2]. [Ms LO] to refinance balance of [Street 2].

[64] He says there is a further note dated 14 July 2008 “[Ms] LO wants [Street 1] sold and to reduce her share of mortgage debt on [Street 2], [Mrs RS] wants $150,000 to LO”.19 I observe that this statement appears to contradict the previous statement.

[65] Whilst absent from his office “[d]uring November and December 2009 ... for medical reasons” he says Mr AA “assisted” Mrs RS “with [Ms] FY, to make the new Will on 15 December 2009”. During this time “the office was overseen by [his] attorney”.

[66] Concerning Mrs RS’ will instructions, he says “[f]rom October 2009, there are notes and instructions to amend the Will as [Ms FY] saw Mrs [RS] and [Mr AA] together on 28 October, and memorandum to [him] from [Ms FY] dated 29 October”. He says “the

19 He says there are also “notes and correspondence about loans and gifts by Mrs [RS’] children, and debt and gift documents in the Deeds packet”.

effect of it all was that, if [Street 1] was sold, proceeds will go to the bank and [Ms] LO might expect sale proceeds to clear Mrs [RS’] half share of the [Street 2] mortgage”.

[67] Whilst he acknowledges cl 9.3.4 of the will “is not well drafted”, he says the “intention appears that in calculating the residue of the estate (and hence [Ms] LO’s share) the trustees take into account the amount paid to [the bank] on sale of [Street 1]”.

[68] As “it happens”, he says “[Ms] LO has [Street 2] as survivor, and wants no more from the estate”, and “has proposed to [Mr AA] that he settle his loan account with [Mr] LE and [Ms] GD”.

[69] He says Mrs RS and Ms LO “owned [Street 2] jointly” and he has “no doubt” Mrs RS intended that Ms LO “have [Street 2] as survivor”. He says the “mortgage on both properties was significantly reduced as required by the Bank, on the sale of [Street 1]”, but Mrs LO had “taken [Street 2] with substantial debt to the Bank”.

• (c) Discussion
  
• (i) Preliminary
  

[70] The High Court has jurisdiction to determine the meaning of a will, not a Standards Committee, or this Office on review.20 The question on this aspect of Mr AA’s complaint is whether Mr SM was required to make further enquiry to clarify Mrs RS’ October 2009 will instructions and ascertain whether they could be given effect.

[71] In particular, to ascertain whether, as Mr AA claims, Mrs RS’ intention was to distribute her notional half share of [Street 2] to her four children as provided in cl 9.3 of her 15 December 2009 will. For that purpose, to check the ownership of [Street 2] to ascertain whether it was owned by Mrs RS and Ms LO jointly as tenants in common in shares, or as joint tenants.

[72] Mr AA claims, in effect, that Mrs RS’ ownership of [Street 2] with Ms LO as joint tenants prevented her from distributing her one-half share in [Street 2] among her four children. This is because on Mrs RS’ death her one half share in [Street 2] did not form part of her estate and instead passed to Ms LO by survivorship.

20 Senior Courts Act 2016, s 12 — Jurisdiction of High Court: “The High Court has – (a) the jurisdiction that it had on the commencement of this Act; and (b) the judicial jurisdiction that may be necessary to administer the laws of New Zealand; and (c) the jurisdiction conferred on it by any other Act". Before the commencement of that Act on 1 March 2017 s 16 of the Judicature Act 1908 applied see Nicky Richardson Nevill's Law of Trusts, Wills and Administration (10th ed, LexisNexis, Wellington, 2016) at [16.1].

[73] In support of his position that Mrs RS intended her half share in [Street 2] go to her four children Mr AA says (a) Mrs RS and Ms LO “planned to go halves” when they purchased [Street 2], (b) Ms LO was to be responsible for her half share of the bank loan raised to purchase [Street 2], and (c) Mrs RS intended selling [Street 1] to repay her half of the bank loan.

[74] Mr SM says Mrs RS was Ms FY’s client. He refers to Ms FY’s file notes on Mrs RS’ July 2008 will file, two months after the purchase of [Street 2] by Mrs RS and Ms LO which state that (a) the sale proceeds of [Street 1] were to be applied to reduce the bank loan on [Street 2] and Ms LO was to refinance the balance of that loan, and (b) Mrs RS wanted to leave $150,000 to Ms LO.

[75] Whilst that appears consistent with the approach taken by Mrs RS in her 25 July 2008 will, it does not in her 15 December 2009 will. As noted in her July 2008 will she directed the trustees, Mr SM and Ms FY, first, to sell [Street 1] and “from the net proceeds of sale to pay [$150,000] to ... [Ms] LO”, and secondly, to distribute specified shares of the residue to each of the other three children as noted earlier.

[76] However, in her 15 December 2009 will Mrs RS removed both the direction contained in the July 2008 will to sell [Street 1], and the bequest of $150,000 to Ms LO from those sale proceeds. Following the disposal of specific items of jewellery and personal effects to each of her four children, and grandchildren, Mrs RS provided in cl 9.3 for division of the residue into 15 equal shares with specific shares to be distributed to each of the four children.

[77] I observe that this went beyond the request Mr AA says he made to Mrs RS to change her will “to avoid any confusion and arguments” following Mrs RS’ death about her loan to him of $37,000.

[78] In cl 9.3.4 of her 15 December 2009 will, Mrs RS left five shares of the residue of her estate to Ms LO and directed the trustees to “take into account the amount required to be repaid to the [bank] being the proportion of the mortgage ...in exchange for a discharge of mortgage over ... [Street 1]”.

[79] In his email to Mr AA on 10 February 2016, Mr SM states, referring to cl 9.3.4, “we wonder ...what it means”. He suggests “the effect of [cl 9.3.4] was that, if [Street 1] was sold proceeds would go to the bank and [Ms] LO might expect sale proceeds to clear Ms [RS’] half share of [Street 2] mortgage”. He added that Ms LO “would then have the equity in [Street 2], about $150,000”.

[80] Mr SM did not specifically address this issue in his response to Mr AA’s complaint, and does not in his review application to this Office.

[81] He acknowledges he received Ms FY’s 29 October 2009 memorandum, which contained Ms FY’s query about the meaning of proposed cl 9.3.4, to which Mr AA says Mrs RS did not receive an answer. However, he cites as his principal defence the fact that he was “away for medical reasons” during November, December 2009, including 15 December 2009, when Ms RS signed her will.

(ii) High Court authority

[82] The failure of the lawyer concerned to establish the ownership of a property before completing a client’s will has been considered by this Office and the High Court on judicial review. In that matter, the property was held by the client and her husband as tenants in common, not, as assumed by the lawyer, as joint tenants.21

[83] The result was that on the client’s death, instead of passing to the husband by survivorship, the property passed to the client’s son under the will. This Office found that the lawyer’s conduct in failing to check the title to the property “to enable full advice” to the client fell short of “best practice” which constituted unsatisfactory conduct under ss 12(a) and (b) of the Act.

[84] Although the key points decided by the High Court were noted by this Office in a recent decision, I refer to them again for the purposes of this review.22 The High Court:23

• (a) reaffirmed that “a lawyer instructed to prepare a will owes a duty of care beyond merely the [will maker]”;24
  
• (b) disagreed that “it [was] not open to a lawyer to take a stance opposite to a client’s views and instructions”;25
  
• (c) held that it was the lawyer’s “responsibility ...to advise [the client] in relation to entry into the will”, and the lawyer “should not have relied on the understanding of the client on that matter”.26
  

[85] The Court referred to the English Court of Appeal decision, Carr-Glynn where the issue was whether the lawyer was obliged to check the ownership of the property as part

21 AG v ZT LCRO 159/2010 (18 February 2011) at [26]–[27]. s 12 is referred to below.

22 ZK v XM LCRO 201/2017 (29 June 2018).

23 Woods v Legal Complaints Review Officer [2013] NZHC 674, [2013] NZAR 577.

24 At [54] — following Gartside v Sheffield, Young and Ellis [1983] NZCA 37; [1983] NZLR 37 (CA) at 43.

25 At [61] — following Gilbert v Shanahan above n 10 at 537.

26 At [62].

of the retainer to prepare the client’s will.27 Although provision was made for the client’s share in the property to be left to the client’s niece, the property was owned by the client and a nephew as joint tenants.

[86] In Carr-Glynn the Court described the lawyer’s retainer as “simply to give effect to [the client’s] wishes and to implement [the client’s] plan”.28 It followed the lawyer was required “to ensure” that the property was part of the client’s estate to enable the client’s “share in the property ... [to] pass to [the beneficiary] under her will”.29

[87] The High Court in Woods described the lawyer in Carr-Glynn having had the duty “to take care to ensure that effect was given to testamentary intentions”. The lawyer knew the property was jointly owned but did not know the type of ownership and therefore asked for the client’s instructions “to obtain the deeds and check the position”.30 Whilst the client made her own inquiries the lawyer did not, and prepared the will. The “intended gift to the [client’s] niece failed” because the property was held as joint tenants.31

• (iii) Consideration
  

[88] Although Mr SM says he personally did not act on the purchase of [Street 2], Ms FY, who was employed by his firm, did. Whether he did not know, or did not recall if Mrs RS and Ms LO owned [Street 2] as tenants in common, he (and Ms FY) appear to have relied on Mrs RS’ instructions without making further inquiry including checking the title.32

[89] Mrs RS was 73 when she made her December 2009 will. Importantly in the context of this review, the High Court in Woods observed the client was elderly. The Court concluded it was “impossible for [the lawyer] to advise adequately without knowing how the [property] was held” where, in such circumstances, “providing for [the property] was the reason for the will being made in the first place”.33

[90] Practical guidance available to lawyers recommends that where, as occurred in the facts on this review, “the property is owned as joint tenants then [the property] falls outside the will-maker’s estate and passes automatically by survivorship to the other owner”. The author warns that “drafting a clause to deal with a life interest in the will-

27 Carr-Glynn v Frearsons [1999] Ch 326 (CA).

28 At 339 per Thorpe LJ.

29 At 335 per Chadwick LJ.

30 Woods v Legal Complaints Review Officer above n 23 at [56]–[57] — and, on the facts of in Carr- Glynn, “[a] competent [lawyer] would have advised the testatrix of the need to sever the joint tenancy in order to give effect to the gift to the [niece]”.

31 At [57]. The High Court noted that “[a]lthough [Carr-Glynn] is the other way round from [Woods], the facts bear an uncanny resemblance” to those in Woods.

32 Carr-Glynn v Frearsons above n 27 at 329 per Chadwick LJ.

33 Woods v Legal Complaints Review Officer above n 23 at [62].

maker’s home to a spouse, if the property will pass automatically to the survivor through joint tenancy” is a pointless exercise.34

[91] From the information produced to this Office, by directing her trustees to divide the residue of her estate into 15 equal shares to be distributed, in the shares specified, to her four children Mrs RS proceeded on the assumption that she and Ms LO owned [Street 2] as tenants in common in equal shares.

[92] Although Mr SM says that Ms FY attended to Mrs RS’ will instructions, as the principal of his firm, it was his responsibility to provide competent supervision and management of Ms FY’s legal work. In particular, to ensure that the draft will, the subject matter of Ms FY’s query, would give effect to Ms RS’ intentions.

[93] The standard of proof to be applied in disciplinary hearings, is the civil standard of a balance of probabilities applied flexibly to the seriousness of the matter’’.35

[94] Applying that standard, I am satisfied that in October, November, December 2009 Mr SM did not make sufficient enquiry, including checking the ownership of [Street 2] to ascertain whether Mrs RS’ intentions, as expressed in her 15 December 2009 will, could be put into effect. Moreover, he has not produced any evidence that he requested Ms FY to do so. By not making those enquiries, I consider that Mr SM contravened rr 3, 6, 7.1 and 11.3, which constitutes unsatisfactory conduct under s 12(c) of the Act, and under s 12(a) of the Act referred to below.

• (2) Independence
  
• (a) Provision of regulated services
  

[95] Should a determination be made that conduct warrants a disciplinary sanction there are two findings that can be made, unsatisfactory conduct pursuant to s 12 of the Act and misconduct pursuant to s 7. A misconduct finding can only be made by the New Zealand Lawyers and Conveyancers Disciplinary Tribunal.

[96] Both sections make reference to conduct that occurs at a time a practitioner is providing “regulated services”. Sections 12(a), (b) and (d) refer to conduct, which is

34 LexisNexis Practical Guidance — Wills — Issues to Consider when Taking Instructions; and New Zealand Law Society “Making a Will and Estate Administration” (March 2013) at 5

<www.lawsociety.org.nz>. In the context of a lawyer acting for the vendor of a property see New Zealand Law Society “Property Transactions and E-dealing Practice Guidelines” (April 2015)

<www.lawsociety.org.nz> at [2.7]–[2.8].

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

unsatisfactory conduct, that occurs at a time when a lawyer is providing regulated services.36

[97] There are limited circumstances in which a lawyer who is not providing regulated services may still be subject to a misconduct finding under the Act.37

[98] The term “regulated services” is comprehensively defined in the Act and refers to “legal services”.38 “Legal services” is defined as services that a person provides by carrying out legal work for another person. “Legal work” includes work in connection with proceedings or anticipated proceedings, giving legal advice in other matters, preparing legal documents and things incidental to the above.39

[99] A common theme to the provision of regulated services by a lawyer is the giving of legal advice to a client. Circumstances in practice where the lawyer concerned has been held to have been providing regulated services include:

• (a) A lawyer who complained to an organisation about a course which the lawyer’s wife, who was also the lawyer’s employee, had attended held himself out as acting as a lawyer.40
  
• (b) A lawyer had met with a client to discuss legal issues and not socially.41
  
• (c) A lawyer who acted for a client as an immigration consultant, and a lawyer, and had met the client socially had breached the client’s confidence to a third party.42
  

(a) Independence

[100] The fundamental obligations of lawyers include the obligation in section 4(b) of the Act “to be independent in providing regulated services to clients”.

[101] Rule 5 of the rules similarly provides that “[a] lawyer must be independent and free from compromising influences or loyalties when providing services to his or her clients”.

36 Lawyers and Conveyancers Act 2006, s 12(c) — unsatisfactory conduct may nevertheless arise when a lawyer who is not providing regulated services at the time contravenes the Act, or any regulations or practice rules made under the Act.

37 Section 7(1)(b)(ii) — includes “conduct of the lawyer or incorporated law firm which is unconnected with the provision of regulated services by the lawyer or incorporated law firm but which would justify a finding that the lawyer or incorporated law firm is not a fit and proper person or is otherwise unsuited to engage in practice as a lawyer or an incorporated law firm”.

38 Section 6.

39 Section 6.

40 EA v BO LCRO 237/2010 (19 September 2011).

41 CX v WZ LCRO 251/2010 (20 June 2011) at [31] to [34].

42 Morpeth v Ramsey LCRO 110/2009 (12 November 2009) at [2].

Independent judgement and advice

[102] The rules describe “[t]he relationship between lawyer and client is one of confidence and trust that must never be abused,”43 and require that a lawyer’s “professional judgement ... must at all times be exercised within the bounds of the law and the professional obligations of the lawyer solely for the benefit of the client”.44

[103] Lawyers must also “at all times exercise independent professional judgement on a client’s behalf” qualified only by providing that “[a] lawyer must give objective advice to the client based on the lawyer’s understanding of the law”.45

[104] A lawyer must not act or continue to act for a client “if there is a conflict or a risk of a conflict between the interests of a client for whom the lawyer is acting or proposing to act”.46

[105] Any lawyer who has an interest in the client’s matter must disclose “the existence of that interest ... to the client or prospective client irrespective of whether a conflict exists”.47

[106] Further constraints on a lawyer having an interest in a client’s matter are “in any transaction in which the lawyer has an interest unless the matter is not contentious and the interests of the lawyer and the client correspond in all respects”;48 and against “enter[ing] into any financial, business, or property transaction or relationship ...if there is a possibility of the relationship of confidence and trust between lawyer and client being compromised”.49

[107] Lawyers are warned to “be aware that indirect interests such as shareholdings, directorships, trusteeships, the relationship of debtor or creditor, or the like might give rise to conflict of interest between them and their clients ...”. Where there is an “overlap” of “professional and business affairs of lawyers” it is recommended that lawyers cease acting for the client. 50

43 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008, r 5.1.

44 Rule 5.2.

45 Rule 5.3. The description of “independent advice” in r 1.2, referred to in other rules where in the circumstances described in those rules a lawyer must refer his or her client for independent advice, assists by spelling out the steps a lawyer must take to provide independent advice: e.g., rr 5.11(a), 6.1.3, 13.6.2.

46 Rule 5.4.

47 Rule 5.4.1.

48 Rule 5.4.2.

49 Rules 5.4.3, and r. 5.4.4 — see discussion in Webb, Dalziel, Cook, above n 8 at [6.5].

50 At [6.5].

(a) Parties’ positions

Mr AA

[108] Mr AA contends Mr SM ought to have identified that his role as executor and trustee of Mrs RS’ will deprived [Mr SM] of his independence as a lawyer when acting for Ms LO on estate related matters.

Mr SM

[109] Mr SM submits that in his “non-professional role as trustee” his duty was “to consider the will and deal with” and work with “the whole family ... to resolve any conflicts or differences”.

[110] Although he acknowledges he “carelessly expressed [his] position as acting or wishing (but unable) to act” for Ms LO, he says he was “concerned only to do [his] job as trustee”.

• (b) Discussion
  

[111] Mr SM’s communications with Ms LO, Mr BN, and Mr AA contain a number of instances of Mr SM acting for and providing legal services to Ms LO.

[112] Mr SM says that on 30 November 2015, three months after Mrs RS’ death, Ms LO approached him. He says Mr BN (of [Firm 2] who were acting on the estate administration) informed him of Mr AA’s and Ms LO’s differences. He says when he met with Mr AA, Ms LO and Ms GD at his office “later in the day” he recalled that Ms FY “acted for Mrs [RS] and [Ms LO] on purchase of a property”.

[113] He says when he next met Ms LO on 8 December 2015 he “made notes of family history and understanding of [Mrs RS’] intentions ... there were complex loan accounts with Mrs [RS] and with Mr AA and [Ms] LO, and particularly that [Mr AA] still owed a debt to the estate”. He says “apart from that debt all that was left was the equity in [Street 2]”.

[114] Mr SM says he acknowledged to Mr BN on 8 December 2015 that [Mr BN] was “acting in the administration of the estate – albeit for [Mr SM] as Executor”. He stated to Mr BN “[c]learly, [Ms LO] needs advice and we will be glad to act for her”. He expressed his wish to resign whilst observing that “there may be no conflict of interest” and asked Mr BN if he saw “a problem”.

[115] The same day, he informed Ms LO “[y]ou have [Street 2] and we have told [Mr AA] that you don’t claim more”. He told her how much was owing to the bank and noted that [Mr AA] “should be paying for the smaller loan” which “according to [Mr] BN letter of 14 June ... is [Mr AA] debt”.

[116] Six weeks later on 18 January 2016, in response to Mr BN’ update to him a month earlier on the estate administration, he requested Mrs RS’ death certificate “to register survivorship” and “a copy of the signed document about sale of [Street 1]” stating “we would continue to act for [Ms] LO”.

[117] He questioned the legality of that document with Mr AA. He stated it was signed “under duress” imposed by Mr AA “to stop the sale of [Street 1]” which was “none of [Mr AA’s] business”. He stated he had “advised” Ms LO “she and we should ignore the document”.

[118] Two months later, on 1 April 2016 he informed Mr AA that [Mr SM] remained “in touch” with Ms LO and still wanted to resign as trustee in favour of [Firm 2].

[119] On 2 December 2016, when he informed Mr AA that ownership of [Street 2] had passed to Ms LO by survivorship, he asked Mr AA if he would pay his share of an outstanding loan, and repay an outstanding debt to the estate. He re-affirmed Ms LO did “not want any more” from Ms RS’ estate, “but whatever is left can go to LE and GD in the proportions according to [Mrs RS’] will”. Four days later on 6 December, he again informed Mr AA he was acting for Ms LO.

[120] In his 4 May 2017 memorandum to the Lawyers Complaints Service Mr SM similarly stated that he “continued to advise and act for [Ms] Lynette”.

[121] It was not until his 23 November 2017 submissions to the Committee that, for the first time, he took the opposite position stating although he “wanted to assist [Ms] LO, [he] could not go beyond [his] obvious limitations as trustee”. He stated it was “not truly so” he “continued to advise and act for [Ms] LO”. He said whilst he “tried to help her, which was [his] wish, and obligation as a lawyer ... and also as a way to do [his] job as trustee”, he “never acted for [Ms LO] professionally”.

[122] He elaborated further on his changed position stating he “dealt with [Ms LO] and other members of the family, as executor and trustee” adding he “assisted [Ms] LO particularly and was willing to act for her if [he] could, and if [he] had been able to resign”. He stated he “could not [resign] in the circumstances, and did not”.51

51 ... presumably act for Ms LO.

[123] In my view, Mr SM’s late change of position fails to rebut the evidence I have referred to that supports Mr SM having acted for Ms LO from, at the earliest, 30 November 2015, at least until his 6 December 2016 email response to Mr AA principally about ownership of [Street 2].

[124] Throughout that period, as he acknowledges, until his 23 November 2017 submissions to the Committee, he provided advice to Ms LO on her position as a beneficiary, particularly concerning the issues of ownership of [Street 2] (including the bank loan secured against that property) and the family loans.

[125] In doing so he appears to have overlooked that his duties and obligations as an executor and trustee were owed to all the beneficiaries of Mrs RS’ will, not just to Ms LO, in apparent opposition to the interests of another beneficiary, Mr AA.

[126] In my view Mr SM’s professional duty of independence owed to Ms LO was compromised by and brought into direct conflict with his duties and obligations as executor and trustee of Mrs RS’ will. By simultaneously acting for and advising Ms LO on estate matters Mr SM contravened r 5 which constitutes unsatisfactory conduct under s 12(c) of the Act, and under s 12(a) of the Act referred to below.

Decision

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

• (a) Reversed as to the finding to take no further action concerning Mr AA’s allegation that Mr SM “did not provide competent advice, and satisfy his duty of care” when he prepared Mrs RS’ December 2009 will, and substituted with a finding that Mr SM contravened rr 3, 6, 7.1 and 11.3 which constitutes unsatisfactory conduct under s 12(c) of the Act; and was also conduct that 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 constitutes unsatisfactory conduct under s 12(a) of the Act.
  
• (b) Confirmed as the finding that when acting for Ms LO, by not being independent, Mr SM contravened r 5 which constitutes unsatisfactory conduct under s 12(c) of the Act; and was conduct that 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 constitutes unsatisfactory conduct under section 12(a) of the Act.52

Orders

(a) Considerations

[128] The Committee invited submissions from the parties “in relation to the appropriate orders, if any” under section 156 of the Act. No application for review of the Committee’s orders decision has been provided to this Office.

[129] For that reason, and because the Committee will have addressed the appropriateness or otherwise of any penalty in respect of its finding that Mr SM contravened r 5, I confine my consideration of any orders to my finding that Mr SM also contravened rr 3, 6, 7.1 and 11.3.

[130] 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:53

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.

[131] The starting points for penalty are the seriousness of the conduct and culpability of the lawyer concerned. Mitigating and aggravating features, as applicable, are also taken into account. Acknowledgement by the lawyer of error and acceptance of responsibility are matters to be considered in mitigation.

[132] As noted earlier, Mr AA says he asked Mrs RS to change her will to record the loan she had made to him. He says if Mrs RS had wanted her entire estate (apart from her jewellery and personal effects) to be left to Ms LO, then [Mrs RS] would have told the family about that.

[133] However, as also discussed, the fact that Mrs RS’ and Ms LO’s respective interests in [Street 2] were held by them as joint tenants prevented effect being given to Mrs RS’ wills both 25 July 2008, and 15 December 2009. Mr AA refers to the “split” in family relationships over this issue.

52 Lawyers and Conveyancers Act, s 12(c) includes “a contravention of [the] Act”.

53 Daniels v Complaints Committee 2 of the Wellington District Law Society [2011] NZHC 1359; [2011] 3 NZLR 850 (HC) at [22]. See also s 3 of the Act — the consumer protection purposes.

(b) Compensation

[134] Mr AA seeks compensation from Mr SM in respect of [Mr SM’s] conduct in not acting competently for Mrs RS when she made her 15 December 2009 will under which Mr AA claims that, contrary to Mrs RS’ wishes as expressed in her will, he received nothing.

• [135] Section 156(1)(d) of the Act provides:54
  

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

[136] The section provides that the person who seeks compensation must have “suffered loss by reason of any act or omission of [the lawyer]”. In other words, there must be a clear “causative link” between the lawyer’s conduct and the loss claimed. Such matters are preferably determined by the Courts in respect of any claim in negligence brought by a client against his or her lawyer where witnesses can be tested by cross examination.

[137] However, it does not necessarily follow that Mr SM’s failure or omission to make further inquiries, including checking the ownership of [Street 2], led to Mr AA suffering the loss he claims. For example, Mrs RS, subsequently having had Mr SM or another lawyer explain to her the difference between a joint tenancy and a tenancy in common, may have decided not to change either the ownership of [Street 2], or her will, or both. Ms LO may not have agreed to change the ownership to a tenancy in common.

[138] In other words, there is not a clear “causative link” between Mr SM’s conduct and the loss claimed by Mr AA. For these reasons, I do not consider that Mr AA is entitled to be compensated for the loss he claims, namely, not having received anything from Mrs RS’ estate.

• (c) Fine
  

[139] In my view, a fine is appropriate. Pursuant to s 211(1)(a) of the Lawyers and Conveyancers Act 2006 Mr SM is ordered to pay the New Zealand Law Society the sum of

$1,500 by way of a fine by the 22nd day of February 2019 — (s 156(1)(i)).

54 The maximum sum for compensation is set by the Lawyers and Conveyancers Act (Lawyers: Complaints Service and Standards Committees) Regulations 2008, reg 32.

(d) Costs

[140] 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 Mr SM is ordered to pay costs in the sum of $1,200 to the New Zealand Law Society by the 22nd day of February 2019 pursuant to s 210(1) of the Act. Pursuant to s 215(3)(a) of the Act, the costs order may be enforced in the District Court.

• (e) Anonymised publication
  

[141] Pursuant to s 206(4) of the Act, this decision is to be made available to the public with the names and identifying details of the parties removed.

DATED this 19th day of December 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:

Mr AA, as the Applicant

Mr SM, as the Respondent [Area] Standards Committee [X] New Zealand Law Society