VZ v NK [2018] NZLCRO 134 (4 December 2018)

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	LCRO 008/2016
CONCERNING	an application for review pursuant to section 193 of the Lawyers and Conveyancers Act 2006
AND
CONCERNING	a determination of [Area] Standards Committee [X]
BETWEEN	VZ Applicant
AND	NK _Respondent

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

[1] Mr and Mrs VZ have applied for a review of the determination by [Area] Standards Committee [X] (the Committee) to take no further action in respect of their complaints about Ms NK. The Committee’s decision (and this decision) are significantly influenced by the fact that the major part of the conduct complained about occurred prior to the commencement of the Lawyers and Conveyancers Act 2006 (the Act) on

[2] On [date] June 2004, Mr and Mrs VZ (then Ms X) signed an Agreement to purchase a property at [Address 1]. The Agreement was sent by the agent to Ms NK on

[3] Ms NK received the Agreement on the following day, opened a file and searched the title to the property. Endorsed on the title was a memorial recording that the status of the property was Maori freehold land.

[4] In her response to the complaint, Ms NK does not advise what she reported to Mr and Mrs VZ who, in their letter of complaint, say that they did not want to purchase the property if it was Maori land.

[5] Mr and Mrs VZ assert that they consulted Ms NK “when [they] were interested in purchasing the property” implying that this was prior to signing the Agreement. This is not borne out by the facts, being the date of the Agreement and the date of the title search by Ms NK ([date] June 2004). In addition, in a letter to Ms NK prior to lodging the complaint Mr and Mrs VZ say:

it became apparent after signing the Agreement that the land was Maori land. Your firm advised us that the transfer could go through and that the property was acceptable because it was Maori freehold land.

[6] The Agreement was conditional on finance being approved which duly occurred. The Agreement then became unconditional and the deposit of $13,500 was released to the vendor.

[7] Settlement was scheduled to take place on [date] August 2004 and Ms NK contacted the vendor’s solicitor on [date] July and [date] August to ascertain what steps he had taken to obtain consent from the Maori Land Court to the transfer. This was a matter which the vendor’s solicitor needed to attend to, as without consent, the vendor was unable to transfer title to Mr and Mrs VZ.

[8] Ms NK advises “it became apparent that the vendor’s solicitor had not taken steps to facilitate the transfer of title in the Maori Land Court”.

[9] She then drafted a variation to the Agreement which provided Mr and Mrs VZ:2

(i) Rent free possession from the date of settlement, [date] August 2004 until such time as the vendor’s solicitor is able to provide to the purchasers’ solicitor a registrable transfer instrument duly approved and stamped by the Maori Land Court...”

_{2005, when they elected to vacate the property, after first cancelling
the Agreement.}

[11] Ms NK’s letter giving notice of the cancellation was subject to return of the deposit and confirmation of acceptance of the cancellation. Neither of these events occurred and Ms NK was able to refer to these conditions at a later date ([date] May

2006) when Mr and Mrs VZ advised that they wished to continue with the Agreement.

[12] In the meantime, the vendor, Mrs KB had died and no steps had been taken to administer her Estate. Ms NK took it upon herself to search for Mrs KB’s will and eventually located a will which named [Trust] as executor. However, [Trust] renounced Probate and despite extensive efforts by Ms NK no one could be persuaded to take on the role of administrator. This included members of Mrs KB’s family who Ms NK also located.

[13] Mr and Mrs VZ lodged a complaint with the [City] District Law Society in April 2006 and in a letter from the Society dated [date] April 2006, the Professional Standards Officer expressed the view that:

it appears Ms NK has done everything possible in your interests and the real problem is the unfortunate death of the vendor, Mrs KB which has delayed a refund of any deposit.

[14] It would seem that the complaint file was then closed in May 2006 when Mr and Mrs VZ elected to proceed with the Agreement. The Agreement could not be performed because no administrator of the vendor’s Estate had been appointed and there has been no progress towards resolving matters.

[15] Mr and Mrs VZ lodged their complaint on [date] September 2015. They consider they were given wrong advice in 2005 when (they say) “advice given from Ms NK was that it was not Maori land and yes it would be safe to purchase the property. So we went ahead with the purchase”. They consider they should never have been told they could purchase the property, pay the deposit or allow the deposit to be released.

[16] The second aspect of Mr and Mrs VZ’s complaints is they allege a lack of contact and communication from Ms NK after 2006 which they summarise in the following way:

From each period stated we have not had contact from Ms NK November 2006–April 2007

Then it jumps from 2010–2012 before we hear anything again. Then again it is yearly periods of no contact with Ms NK.

(i) Whether Ms NK failed to act competently and consistent with the duty to take reasonable care in relation to the advice provided about the nature of the property which was subject to consent from the Maori Land Court; and

(ii) Whether Ms NK failed to respond to inquiries from the clients in a timely manner.

[18] Mr and Mrs VZ’s complaints relating to the time when the Agreement was entered into and problems arose, refer to events that took place prior to the commencement of the Act. The Committee addressed that issue in the following way:3

32. Section 35(1) of the LCA precludes complaints about conduct that occurred before [date] August 2008, unless the alleged conduct is such that proceedings of a disciplinary nature could have been commenced under the Law Practitioners Act 1982 (“LPA”).

33. The threshold for disciplinary intervention under the LPA was relatively high and could include findings of misconduct or conduct unbecoming. Misconduct was generally considered to be conduct of sufficient gravity to be termed “reprehensible” (or “inexcusable”, “disgraceful”, “deplorable” or “dishonourable”).

34. In respect of allegations of negligence and/or incompetence, disciplinary proceedings would only have resulted if the alleged allegations of negligence and/or incompetence were of such a degree or so frequent as to impact on a practitioner’s fitness to practice or would tend to bring the profession into disrepute.

[19] The Committee made the following comments about Ms NK’s conduct following

28. The Committee had due regard to all of the material before it and notes that when Ms NK was presented with the Agreement in 2004, the Agreement clearly stated that the property was fee simple but that the title stated that the property was Maori freehold land. In the Committee’s view, Ms NK should have immediately advised her clients of this anomaly as soon as the title search was completed as at that time, the clients may still have had the opportunity to cancel the Agreement.

29. The Committee considers that this was a basic mistake on Ms NK’s part as firstly, she failed to recognise the inconsistencies in the Agreement and the title and secondly, she failed to properly advise her clients about these inconsistencies.

[20] Having considered the issues and the fact that the conduct took place prior to

35. Taking all of these factors into account, the Committee does not consider that the mistake made by Ms NK would have met the threshold for disciplinary intervention at the time and accordingly, the Committee does not consider that there is jurisdiction to consider this issue pursuant to section 351 of the LCA.

39. Having considered the matter, the Committee notes that some of the conduct occurred prior to [date] August 2008, which was prior to the Lawyers and Conveyancers Act 2006 coming into force. In relation to the conduct that occurred prior to [date] August 2008 and considering that the threshold for disciplinary intervention was relatively high, the Committee does not consider that Ms NK’s conduct would have met the threshold for disciplinary intervention at that time. Accordingly, in relation to the conduct that occurred prior to [date] August 2008, the Committee does not consider that there is jurisdiction to consider the matter.

40. In relation to the conduct that occurred after [date] August 2008, the Committee acknowledges that there may have been delays or a lack of response on the part of Ms NK. The Committee accepts, however, that Ms NK had made extensive efforts to try and resolve the matter and during those periods, which extended over several years, she had nothing new to report to the clients. Ms NK had exhausted all avenues and she had done everything she could in order to resolve the issues, although this was not successful.

41. The Committee does not consider that Ms NK was obstructive in any way by at times failing to respond to Mr and Mrs VZ’s inquiries and the delays were understandable in the circumstances. Accordingly, the Committee does not consider that there was any breach of professional standards on the part of Ms NK and decides to take no further action on this issue pursuant to section 138(2) of the LCA.

[22] Overall, the Committee determined to take no further action in respect of Mr and

[23] In their application for review, Mr and Mrs VZ refer to comments made by the Committee with regard to what the Committee perceived to be ‘inconsistencies’ in the Agreement (refer [19] above).

We feel Ms NK should be made accountable for our loss of money on the grounds that she did not advise us correctly about the inconsistencies in the agreement to purchase the property...In retrospect if she had looked over the agreement properly we would not be out of pocket $13,500 + lawyers fees.

[25] The review proceeded by way of a hearing in the Whangarei Maori Land Court on [date] October 2018 attended by Mr and Mrs VZ, and Ms NK, accompanied by a support person.

[26] The hearing was conducted by Mr Vaughan acting as a delegate duly appointed by the Legal Complaints Review Officer (LCRO) pursuant to cl 6 of sch 3 of 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.

[27] The striking feature of this matter is the number of events that have occurred to result in the unfortunate outcome for Mr and Mrs VZ. A significant issue was that the vendor’s lawyer was clearly not alert to the fact that an Order from the Maori Land Court was required to enable the transaction to proceed. To obtain that, it was necessary for

the Vendor to take steps to ensure that persons with prior claims to the property did not wish to exercise their right of first refusal.

[28] It could be argued that Ms NK did not take steps soon enough to ensure that the vendor’s solicitor was aware of what was required and had taken the appropriate steps. Ms NK’s advice to Mr and Mrs VZ was that the sale was able to proceed and that advice was based on her knowledge that sales of Maori freehold land to third parties is not prohibited by the Te Ture Whenua Maori Act 1993 and can proceed providing that the appropriate consent orders are obtained.

[29] However, it is somewhat surprising that Ms NK did not make earlier contact with

[30] Nevertheless, Ms NK did arrange for a Variation of the Agreement to be agreed by the parties which gave Mr and Mrs VZ the right to terminate the Agreement if a “registrable transfer instrument” had not been provided by the vendor six months from the date of the variation.5

[31] Mr and Mrs VZ argue they did not take the step of cancelling the Agreement because they were advised by Ms NK that the sale could proceed in due course. This is somewhat at odds with their statements at the review hearing that they were adamant they did not want to buy Maori land. If this was their conviction, and instructions, then it would be expected they would have taken the first opportunity to cancel the Agreement.

[32] The other significant event which arose in the course of this matter was the death of Mrs KB and the fact that no person applied for Letters of Administration of her Estate. Nobody assumed responsibility on behalf of Mrs KB’s Estate to enable title to pass to Mr and Mrs VZ and this was a matter beyond Ms NK’s control.

[33] Similarly, nobody assumed the responsibility to account to Mr and Mrs VZ for their deposit.

[34] The question as to when Mr and Mrs VZ consulted Ms NK is of some significance. Mr VZ say they went to see Ms NK prior to signing the Agreement and she

4 At the review hearing Ms NK advised she had written to the vendor’s lawyer on [date] July 2004 enquiring what steps had been taken.

assured them it was in order for them to contract to buy the property. Ms NK disputes this and says the file was activated when the signed Agreement was received.

[35] As noted at [5] above, Mr and Mrs VZ themselves accept that they first made contact with Ms NK after the Agreement had been signed.

[36] The standard of proof that applies in disciplinary matters is that of the balance of probabilities.6 On a balance of probabilities, the evidence is that Mr and Mrs VZ’s first contact with Ms NK was after the Agreement had been signed. That necessarily meant that there were no, or limited, options for Mr and Mrs VZ to cancel the Agreement even if they had been made aware of the status of the property as Maori freehold land.

... the agreement clearly stated that the property was fee simple but that the title stated that the property was Maori freehold land. In the Committee’s view, Ms NK should have immediately advised her clients of this anomaly as soon as the title was search was completed as at that time, the clients may still have had the opportunity to cancel the agreement.

[38] In the next paragraph, the Committee refers to this as a “basic mistake” by

Ms NK in failing to recognise “the inconsistencies in the agreement and the title”.

[39] The title to the property was issued on [date] February 1987. The ‘Estate’

encompassed within the title is recorded as ‘fee simple’. On [date] August 1993, a

[40] It is not proposed to embark here on a treatise about the concept of a ‘fee simple’ estate and the subsequent Status Order registered against the title. However, it is not accepted that the two estates could be described as ‘inconsistencies’ and the Committee’s reference to them as such has provided Mr and Mrs VZ with a view that Ms NK’s advice was deficient. That is not necessarily accepted, but in addition, it would not necessarily have provided Mr and Mrs VZ with an option of cancelling the Agreement.

[41] However, it does not seem that Ms NK reported at all to Mr and Mrs VZ as to the nature of the title to the property that had contracted to purchase and that is

[42] The Committee determined that what it perceived to be a ‘basic mistake’ should not result in an adverse finding against Ms NK as it was conduct that occurred prior August 2008.7 The Committee’s comments on the effect of this are recorded in paragraphs [32]–[34] of its determination and those comments are endorsed here.

[43] For the same reason, the apparent failure to report on the detail of the title does not result in an adverse finding against Ms NK.

... Mr and Mrs VZ have been frustrated by the[ir in]ability to recover their deposit funds and they consider I have not responded as promptly or as often as they would have liked.

[45] She then refers to 16 exacerbating factors, all of which have a bearing on the relationship between her and Mr and Ms VZ, which she describes as “difficult”.

While I sympathise with Mr and Mrs VZ for the strange circumstances they have faced, for the amount involved in the transaction, my firm has applied an inordinate amount of time and resources, regrettably without success. In short, since August 2004 the firm has worked for Mr and Mrs VZ without charging any fees for the time spent attempting to recover their deposit funds or to progress the contract.

[47] The Committee determined there could be no finding against Ms NK for the unusual and difficult circumstances which arose and noted that Ms NK had endeavoured to achieve a result for Mr and Mrs VZ at no cost to them. It noted that some of the conduct complained about occurred prior August 2008 and for the reasons referred to, there could not be an adverse finding against Ms NK. Ultimately the Committee determined that any delay in responding to Mr and Mrs VZ’s inquiries was

_{[48] Little more can be added to those comments and they are
confirmed on review.}

[49] Pursuant to s 211(1)(a) of the Lawyers and Conveyancers Act 2006 the determination of the Standards Committee to take no further action with regard to Mr and Mrs VZ’s complaints, is confirmed.

In accordance with s 213 of the Lawyers and Conveyancers Act 2006 copies of this decision are to be provided to:

Mr and Mrs VZ as the Applicant Ms NK as the Respondent [Area] Standards Committee [X] New Zealand Law Society

New Zealand Legal Complaints Review Officer

VZ v NK [2018] NZLCRO 134 (4 December 2018)