YM v SC [2018] NZLCRO 136 (18 December 2018)

Last Updated: 23 January 2019

LCRO 275/2015
9/2016

CONCERNING an application for review pursuant to section 193 of the Lawyers and Conveyancers Act 2006

_AND

CONCERNING a determination of the [City] Standards [X] Committee

BETWEEN YM

_{Applicant/Respondent}

AND

SC

_{Respondent/Applicant}

AND

JW

_{Respondent (LCRO 9/2016)}

_DECISION

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

_changed.

Introduction

[1] Mr YM has applied for a review of a decision by [City] Standards [X] Committee (the Committee) which made a finding of unsatisfactory conduct against Mr YM, following its inquiry into complaints made against Mr YM and Mr JW by Mr and Mrs SC.

[2] Mr SC has also applied for a review of the Committee’s decision; his review application proceeded under application number 9/2016.

[3] I propose to deal with both reviews in this single decision.

Background

[4] In early 2013 Mr and Mrs SC were facing serious difficulties with the IRD. Those problems culminated in the IRD prosecuting charges against Mr and Mrs SC in the District Court.

[5] Mr and Mrs SC approached [Firm 1], Mr YM’s then firm, for advice. They met with

Mr YM and Mr JW.

[6] Mr and Mrs SC instructed that they wished to defend the charges that had been brought by IRD.

[7] It was presented to Mr and Mrs SC that they would, in being represented by both Mr YM and Mr JW, receive the benefit of the expertise and experience of two practitioners who had a complementary set of skills, which ideally equipped them to manage what was seen to be a relatively complex IRD prosecution.

[8] Mr YM had substantial appellate experience. Mr JW had extensive experience in prosecuting tax cases before the court.

[9] On 30 January 2013 Mr and Mrs SC were provided with a letter of engagement which confirmed that both Mr YM and Mr JW would be working on their file.

[10] The first task facing the practitioners was to work through a voluminous amount of documentation.

[11] It fell to Mr JW to do the bulk of the initial work. He laboured his way through some

14 large “East light” ring binders, analysing and tabulating the documentation.

[12] [Firm 1] rendered four invoices to Mr and Mrs SC. The invoices were as follows: (a) 26 February 2013 — $4,356.80

(b) 28 March 2013 — $7,877.50 (c) 29 April 2013 — $22,354.46 (d) 28 June 2013 — $1,561.52

[13] The four invoices totalled $36,150.28, of which the fee component was

$30,826.00.

[14] Time recorded for the invoice rendered on 28 March 2013 was $3,705.00, to which an uplift in fee had been added, resulting in a total fee of $6,730.00.

[15] The accounts have been paid but are at the heart of the dispute. [16] Mr YM left [Firm 1] in June 2013 to join another firm.

[17] In July 2013, Mr JW also departed the firm. His notice of resignation appears to have been delivered at short notice and unexpected.

[18] With the departures of both Mr YM and Mr JW, [Firm 1] did not have partners or staff with the requisite experience to manage Mr and Mrs SC’s case. This was an unfortunate situation for [Firm 1], but a more concerning one for Mr and Mrs SC.

[19] A partner at [Firm 1] contacted Mrs SC to discuss the question of their ongoing representation. Mrs SC immediately raised concerns about the fees they had paid and expressed concern at the possibility of having to “pay again” for a new lawyer to come up to speed.

[20] [Firm 1] suggested that Mr and Mrs SC consider engaging Mr PP to act for them. Mr and Mrs SC agreed to this suggestion.

[21] Mr PP took over the file.

[22] Mr and Mrs SC continued to correspond with [Firm 1] concerning their fees, questioning whether they had received “value for money” and requesting a refund of a portion of the fees. It was their argument that they had been left exposed by the abrupt departures of both Mr YM and Mr JW, and that they had been put to the expense of having to engage another lawyer to complete work that they had already paid [Firm 1] for.

[23] [Firm 1] did not consider that they had an obligation to refund fees.

[24] Mr and Mrs SC advised that they were considering the possibility of making a complaint to the New Zealand Law Society Complaints Service (the NZLS). [Firm 1] advised Mr and Mrs SC that they were free to pursue a complaint if they wished to do so.

The complaint and the processing of the complaint

[25] Mr SC lodged a complaint with the NZLS on 12 August 2014. Whilst the complaint was filed by Mr SC, it is clear both Mr and Mrs SC were involved in progressing the complaint. For convenience, I will refer on occasions throughout this decision to the SC’s.

[26] The complaint lodged by Mr SC was not clearly articulated.

[27] In identifying the parties against whom complaint was being made, Mr SC named both Mr YM and Mr JW and also recorded that he was making complaint against [Firm 1].

[28] The law firm of [Firm 1] practises as a partnership, not as an incorporated firm. It was not open to the SC’s to particularise their complaint as being a complaint against [Firm

1].1 It would have been open to them to pursue complaint against individually named

partners in [Firm 1] (not just Mr YM) if they had wished to do so.

[29] In identifying the outcome sought, Mr SC said that he required a “large refund”.

[30] On 10 September 2014, NZLS emailed Mr SC advising that his issues of complaint “were not entirely clear” and seeking clarification as to whether the complaint was solely about fees, or whether he had other issues of concern.

[31] On 17 September 2014, Mrs SC emailed NZLS (having already spoken to them by telephone) to confirm that in substance:

(a) their complaint was “financial” as they did not receive any value for the fees paid;

(b) Mr PP had to start again from scratch;

(c) the fees paid to [Firm 1] were “exorbitant”, as compared to what Mr PP

charged; and

(d) [Firm 1] had failed to provide a level of service which met the standard set out in [Firm 1]’s letter of engagement.

[32] To the forefront of the SC’s complaint, was argument that a considerable sum of fees had been paid for little return and that Mr PP had to “start again”.

[33] Mr YM and Mr JW were invited to respond. Mr YM replied on 22 September 2014, Mr JW on 21 October 2014. Both practitioners provided further responses. [Firm 1] were

1 Lawyers and Conveyancers Act 2006, s 132(a).

aware of, and endorsed, the responses to the complaints that had been provided by their former employees.

[34] It is clear that when the complaint inquiry was proceeding, that the partners of [Firm 1] had expectation that they would be provided with copies of all the correspondence received by the Complaints service, that expectation being relayed to the Complaints Service by a [Firm 1] partner.

[35] Whilst attempts were being made to ensure that the SC’s complaint was properly understood and particularised, no steps were taken by the Complaints Service to clarify whether the SC’s had intended for their complaint to include the wider members of the [Firm 1] partnership despite the fact that their complaint signalled that they were complaining about [Firm 1].

[36] This was not, in my view, an issue of minor technicality. It could not reasonably be expected of Mr and Mrs SC that they would understand the relevance of the distinction between a law firm trading as a partnership, and a firm trading as an incorporated firm, and the consequences of that distinction for the advancing of conduct complaints.

[37] Following the departure of Mr YM and Mr JW, the SC’s took their concerns directly to the partners of [Firm 1]. In correspondence to MT of 1 May 2014, Mr and Mrs SC advised that they considered that they had been let down by the firm. They were concerned, that following the departure of the two practitioners, [Firm 1] was unable to complete the retainer. They put their position thus:

... in our view it comes down to we engaged your firm to defend us-when your firm was unable to represent us further, due to the fact you had nobody able to complete this matter for us, your firm recommended us to go to PP – files were forwarded with a covering letter and PP contacted JW by telephone to see if he could gain any further insight to what JW had come up with.

...

So in summary what did your firm do for us that we could utilise – initial advice – two court appearances and incidental matters but otherwise what do we have to show for paying in excess of $30,000 in fees.

[38] Mr and Mr SC considered that [Firm 1] (and by that they clearly intended the partners of the firm as opposed to simply Mr YM) had a responsibility to refund a portion of the fees paid.

[39] Following its request of Mr and Mrs SC to clarify the particulars of their complaint, the Committee proceeded its inquiry on the basis that the complaint was being advanced against Mr YM and Mr JW. I will return to this later in the decision.

[40] Mr YM, in responding to the complaint, submitted that;

(a) he was not an equity partner of [Firm 1] and all fees issued by him were approved by an equity partner;

(b) in respect to the invoice which included a fee uplift, it was his recommendation to [Firm 1] that Mr and Mrs SC be refunded a sum equivalent to the uplift charged;

(c) the clients were facing “some real prospect” of imprisonment;

(d) the clients wanted him and Mr JW to “do what they could to find any defence”;

(e) the clients were advised the chance of a successful defence was low [as compared to pleading guilty and raising mitigating factors];

(f) it was appropriate to review the disclosure before deciding on a strategy, and the clients were advised this would be an expensive exercise;

(g) pleading guilty was “anathema” to the clients;

(h) in relation to the disputed [Town] attendances, he offered to arrange a local agent for those matters however Mrs SC wanted Mr JW to appear;

(i) he had spoken with Mrs SC and said he could continue working on the case;

she was pleased, and happy with the arrangement;

(j) he subsequently found out that the clients had instructed Mr PP, as was their right;

(k) he denies any form of deliberate overcharging of the clients, or that the file was somehow used as a convenient fee-billing mechanism prior to him leaving the firm;

(l) Mrs SC at one point asked him to issue invoices addressed to [Firm 2], rather than the clients personally, and he assumed this was for GST purposes; and

(m) if the clients had pleaded guilty from the outset much of the legal fees would have been avoided in any case.

[41] Mr JW’s submissions echoed many of the matters highlighted by Mr YM. Mr JW

outlined the considerable work involved in perusing the documentation and tabulating

same. He also noted the various fee factors that were applicable to the work completed, including the seriousness of the matters in issue. He noted he had specific senior experience in tax law and that Mr YM held a Masters qualification in tax.

The Standards Committee decision

[42] The Committee identified the issue to be determined, as being whether Mr YM and Mr JW had breached r 9 of the Lawyers and Conveyancers (Lawyers: Conduct and Client Care) Rules 2008 (the RCCC) by charging an unfair and unreasonable fee.

[43] As part of that inquiry, the Committee distilled the pivotal issue for consideration as being whether “a firm that is unable to complete work for which it is retained is entitled to charge for the work done up to that point”.2

[44] To assist with its deliberations, the Committee appointed Mr CU as an investigator. [45] The terms of Mr CU’s appointment were to:

(a) consider whether the fees charged were fair and reasonable, taking into account the strategy employed by the firm; and

(b) to provide an opinion on the proper steps a firm should take when a lawyer who has had previous carriage of a matter leaves the firm.

[46] Mr CU’s brief then was broader than to simply examine the reasonableness of the fees charged. The Committee made request of Mr CU to provide an opinion on the proper steps a firm should take when a lawyer who has had the previous carriage of a matter leaves the firm.

[47] Mr CU delivered his report on 16 July 2015.

[48] It is clear from a careful perusal of Mr CU’s report, that he considered this appointment to be a challenging one, particularly to the extent that it called on him to proffer opinion on the steps a firm should take when a lawyer who has had previous carriage of a matter leaves a firm.

[49] A component of Mr CU’s report focused on the question as to whether Mr and Mrs SC had received competent advice. This aspect of complaint was precipitated by concerns that Mr and Mrs SC had raised on receipt of Mr PP’s assessment of their case. In short, Mr PP took a different view of the case from that of Mr JW and Mr YM. Mr PP’s rejection of

2 Standards Committee determination, 27 November 2015 at [12].

defences that had been suggested by Mr JW had led Mr and Mrs SC to question the value of the advice they had received from the [Firm 1] lawyers.

[50] On examining the accounts, Mr CU observed that an invoice rendered in March

2013 exceeded, in dollar terms, time recorded on the file for that month. Apart from that discrepancy however, Mr CU concluded, that it was:

... simply not possible to fix with any confidence a fee that accurately reflects time attendances properly chargeable as against those that have proved to be of little, or no value to Mr and Mrs SC.

[51] What emerges however from Mr CU’s report, is a strong sense of disquiet that Mr and Mrs SC were, through no fault of their own, placed in the predicament of having to engage fresh representation and incur further cost, but were apparently unable to challenge the total fee charged, because of an absence of legal authority to support argument for refund and the degree of uncertainty as to the extent of the loss they had suffered.

[52] In the absence of what he perceived to be a clear legal foundation, Mr CU resorts to an approach which he himself acknowledges could be perceived to be simplistic. He is unable to identify any fault or blame that he considered could be attributable to Mr JW or Mr YM, but is less sympathetic to the approach adopted by the [Firm 1] equity partners, noting that:

... if there is a fault, I believe that is attributable to the [Firm 1] equity partners who should not have sanctioned or imposed the $3000 (approximate) uplift and who were not prepared to acknowledge that the SC’s complaint was their problem, not the SC’s. They are focused on the (financial) interests of their firm with little, if any, regard to the financial implications (interests) of their clients. Their approach has fallen far short of what is required by rule 9.

[53] Mr CU recommended that the total fee be reduced to $10,000 plus GST.

[54] The parties were given opportunity to comment on the costs assessor’s report. Mr

YM’s brief response noted that he himself had recommended a fee reduction.

[55] The partners of [Firm 1], through Mr BY, provided a response in correspondence dated 4 September 2015. In providing a comprehensive response to Mr CU’s report, the partners of [Firm 1] continued to be closely involved with, and to have input into, the conduct inquiry. This degree of engagement clearly reflected a desire on the part of the equity partners to respond to complaints which directly engaged and involved policies followed, and decisions made, by the equity partners.

[56] Mr BY submitted that:

(a) it is not a solicitor’s job to be right, but to formulate arguments and

propositions that may assist the client, with due regard to risk;

(b) the clients realised it would be an expensive exercise to review the documents;

(c) the clients also acknowledged, or did not dispute, several other points made by Mr YM and Mr JW, and that the costs assessor did not have due regard to those points;

(d) the test of “what the assessor would do” as a test to underpin a decision is

not supported by authority;

(e) lawyers can for various reasons leave their employment and many of these

scenarios are not the “fault” of the practice concerned;

(f) the decision to apply a fee reduction is a commercial decision or a matter for individual conscience however there is no obligation to do this;

(g) Mr YM and Mr JW were both diligent practitioners;

(h) the costs assessor does not criticise Mr YM or Mr JW, yet says the fee should be reduced, and this approach is contradictory;

(i) Mr JW had provided advice to Mr PP about the relevance of the documents in the folders, and this was of value; and

(j) the research memorandum and other correspondence enclosed with their correspondence shows that work was detailed and done in good faith.

[57] Armed with Mr CU’s report, the Committee turned its attention to the issues.

[58] In considering the total fee that had been charged, and the inability of the lawyers to complete the retainer, the Committee considered that faced with similar circumstances, most firms would have provided a discount to the client. However, the Committee concluded that:3

... if a law firm has undertaken work and the fees charged in relation to that work are fair and reasonable, that firm would generally be entitled to charge for that work undertaken irrespective of the fact that they have not been able to complete the work.

3 At [17].

[59] Further, the Committee concluded that in circumstances where a lawyer or firm is unable to complete work, and the client incurs further fees to bring their new lawyer up to speed, “there is no obligation or any provision in the Rules of Conduct or Client Care (RCCC) that requires a law firm to reduce its fee”.

[60] In reaching conclusion that there was no basis to challenge the total fee (its intervention limited to a finding in respect to the March account) my sense of the Committee’s finding was that it considered the outcome (as had Mr CU) to be unpalatable, but saw no proper basis on which it could justify intervention in respect to the substantive fee.

[61] In responding to the complaint, Mr YM had emphasised that his role in the firm had been that of a salaried partner, the consequence of which was that fees were set in consultation with another partner and, importantly, he had no final say over decisions relating to fees that had been charged. He could not, for example, if he considered that the SC’s should be refunded a portion of their fees, direct that to happen if the equity partners did not agree.

[62] The Committee delivered its decision on 27 November 2015 and determined, pursuant to s 138(2) of the Lawyers and Conveyancers Act 2006 (the Act) that:

(a) no further action be taken against Mr JW;

(b) a finding of unsatisfactory conduct be made against Mr YM;

(c) Mr YM be ordered to reduce the fee charged on the 28 March 2013 invoice from $6,730 plus GST and disbursements to $3,705.00 plus GST and disbursements;

(d) Mr YM and the partners of [Firm 1] be ordered to refund the sum of

$3,025.00 to the complainant;4 and

(e) Mr YM pay $1,000.00 costs to NZLS

[63] In reaching that decision the Committee concluded that: (a) Mr YM was responsible for the fees;

(b) Mr YM’s status as a salaried partner did not obviate his responsibility for the

_{fees that had been charged;}

4 This appears to contradict the order in (c) and not accurately record the amount directed to be repaid.

(c) although the Committee understands Mr and Mrs SC may find this unfair, [Firm 1] did undertake a substantial amount of work for them at their instruction; and

(d) the fees charged appear to be fair and reasonable, aside from an identified uplift of $3,025 in time, on the 28 March 2013 invoice.

Applications for review

[64] Mr YM filed an application for review on 23 December 2015. [65] Mr YM submits that:

(a) he was not responsible for setting the fee and had suggested a fee reduction;

(b) if [Firm 1] had adopted his suggestion the matter may likely have been resolved and an unsatisfactory conduct finding would not have eventuated;

(c) the identity of the client is at issue as the fee could only be complained about by a director of the company and that particular invoice is in the name of the company — Mr SC is not a director of that company; and

(d) he cannot refund a fee he has not received.

[66] The outcome sought by Mr YM is a reversal of the Committee’s findings.

[67] Mr SC filed an application for review on 15 January 2016.

[68] It is important to closely examine Mr SC’s exposition of his position to ensure that it is fully understood.

[69] He submits that the Committee had miscalculated the refund due, following reduction of the March invoice.

[70] He makes what I perceive to be, although expressed in somewhat vague terms, allegation that [Firm 1] had failed to provide competent advice.

[71] It appears to be the case that Mr and Mrs SC thought that Mr CU’s report provided the final word on the fee issue, noting that they had not responded to [Firm 1]’s response to their complaint, as they had agreed with Mr CU’s recommendations, and were under the impression that Mr CU’s recommendations would be adopted by the Committee.

[72] In detailing the outcome sought, Mr SC seeks a refund of overpaid fees “as per

Mr CU’s investigation”.

[73] Neither applicant has provided substantive response to the other’s application for

review.

The 28 May 2018 hearing

[74] Mr SC, Mr YM and Mr JW attended a hearing on 28 May 2018.

[75] What became clear at that hearing was that Mr SC did not consider that either Mr YM or Mr JW should properly be the subject of a disciplinary inquiry. He considered the partners of [Firm 1] (the firm) should be responding to his complaints.

[76] Mr YM’s evidence was that:

(a) as a salaried partner, he had no authority to direct a refund of fees paid to

[Firm 1];

(b) he considered that the uplift fee charged on the 28 March 2013 invoice should be refunded to Mr and Mrs SC, as no record had been kept (as was the firm’s normal practice) of the factors that had been taken into account in the decision to increase the fee;

(c) he had, with respect to the refund of the uplift, made his position clear to his former partners; and

(d) he agreed with Mr JW that a significant amount of the initial work that Mr JW had completed would have had to be replicated by Mr PP when he took over the case.

[77] Mr JW advised that he had been responsible for completing a substantial amount of the initial work, including reviewing the substantial number of files, annotating and tabulating the files, and forming preliminary views as to the possible defences available.

[78] Mr JW confirmed that the work completed which had provided the basis for the invoice rendered on 29 April 2013 in the sum of $22,354.46, largely comprised the work he had carried out reviewing the clients’ files.

[79] Mr JW considered that a substantial amount of the preparatory work would have had to have been replicated by Mr PP when Mr PP took over the file. Mr YM agreed that would have been the case.

[80] At the conclusion of the first hearing, it was clear that:

(a) Mr SC did not consider that Mr JW or Mr YM should properly be the subject of a disciplinary inquiry;

(b) Mr SC considered that the remaining partners of [Firm 1] should be responsible for refunding fees for services provided that he felt he had not received value from;

(c) Mr YM, whilst supportive of the uplift element of the fee being refunded, was unable to facilitate that; and

(d) it was the practitioners’ view that a significant amount of the work that had been completed (particularly by Mr JW) would have had to be replicated by Mr PP, at additional cost to Mr and Mrs SC.

[81] After hearing from the parties, I determined that it would be appropriate to adjourn the hearing to allow a representative from [Firm 1] opportunity to provide response to matters raised at the hearing.

The 12 June 2018 hearing

[82] The matter was adjourned to a hearing on 12 June 2018. Present at that hearing were Mr SC, Mr YM, Mr JW and Mr BY, who represented the partners of [Firm 1].

[83] At the commencement of the adjourned hearing, I summarised for Mr BY the evidence adduced at the earlier hearing, to ensure that he was aware of the positions that had been advanced by Mr YM and Mr JW at the earlier hearing.

[84] Mr BY submitted that:

(a) a result had been achieved for Mr and Mrs SC for the work completed.

(b) there was no evidence available to confirm the extent of the work that had been completed by Mr PP;

(c) Mr and Mrs SC had been invoiced in good faith for the work that had been completed;

(d) there are inevitably occasions in legal practice (for a variety of reasons), where a lawyer is unable to complete a retainer, and fresh counsel have to be instructed;

(e) Mr CU’s recommendation that fees be reduced because the retainer couldn’t

be completed was wrong in principle;

(f) the relevant question was what was the result achieved at the date the invoice was rendered?

(g) the value of the work was properly assessed at the date the invoice was rendered;

(h) the uplift in fee was merited, when the fee was referenced to the time spent on the file;

(i) Mr YM, as one of the lawyers acting on the file, played a significant role in setting the fees;

(j) he did not consider that the conduct of either Mr JW or Mr YM was deserving of a disciplinary response; and

(k) appropriate steps were taken to ensure that Mr and Mrs SC were assisted in obtaining alternative representation.

[85] At the adjourned hearing, Mr YM reiterated that:

(a) his agreement to refunding the $3,000 uplift fee was not driven by pragmatism but by principle; and

(b) he did not consider the fee could be justified if there were no file notes recording the reasons for the uplift.

[86] By way of final comment, Mr SC reiterated his position that he had throughout considered that [Firm 1] (the partners) should be responsible for dealing with his fee complaint.

Nature and scope of review

[87] The nature and scope of a review have been discussed by the High Court, which said of the process of review under the Act:5

... 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.

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

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.

[88] More recently, the High Court has described a review by this Office in the following way:6

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.

[89] 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:

(a) consider all of the available material afresh, including the Committee’s

decision; and

(b) provide an independent opinion based on those materials.

Analysis

[90] The issues to be considered on review are:

(a) Did the Committee correctly identify the parties against whom Mr and Mrs

SC had made complaint?

(b) If the answer to (a) is no, what were the consequences of the Committee failing to correctly identify the parties against whom complaint had been made?

(c) Did the review applications raise any matters which materially affect the Committee’s decision to take no further action in respect to complaint made against Mr JW?

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

(d) Did Mr JW and Mr YM provide competent representation?

(e) Was the Committee correct in its decision to make an unsatisfactory conduct finding in respect to Mr YM?

(f) Was the Committee:

(i) correct to conclude that if the law firm has undertaken work, and the fees charged in relation to that work are fair and reasonable, the firm would generally be entitled to charge for work undertaken irrespective of the fact that the firm was unable to complete the work; and

(ii) correct to conclude that in circumstances where a law firm is unable to complete a retainer, there is no obligation or any provision in the RCCC that require a law firm to provide such a reduction?

(g) Were the fees charged fair and reasonable?

Did the Committee correctly identify the parties against whom Mr and Mrs SC had made complaint?

[91] No. I am satisfied after considering the written submissions, the exchanges of correspondence between Mr and Mrs SC and the [Firm 1] partners, and having had opportunity to hear from the parties, that Mr and Mrs SC intended, when they filed their complaint, that their complaints should be addressed to, and answered by, not only Mr JW and Mr YM but also the partners of [Firm 1].

[92] It was understandable that Mr and Mrs SC would identify the practitioners who had been carrying out the work as targets for their complaints, but it is clear that when the complaints were filed, Mr and Mrs SC also intended that the [Firm 1] partners be included in their complaint.

[93] Mr and Mrs SC initiated their complaints by completing the complaint form, which the Complaints Service provides for parties who wish to make complaint against the lawyer. The completion of this standard form commences the conduct inquiry process.

[94] Section 2 of the complaint form is the section where complainants are required to identify the lawyer(s) against whom they are making complaint.

[95] The first part of that section is expressed in terms that are unambiguous. Complainants are asked to provide the name of the lawyer or employee of the lawyer they wish to complain about.

[96] The second part of the section advises complainants that “if you are complaining about an incorporated law firm please provide the name of the firm”.

[97] The second part of the form is not intended to identify lawyers who practice in a firm which operates as a partnership. The section, in its reference to an incorporated firm, is intended to identify those circumstances where complaint is brought against a law firm which practices under the banner of an incorporated company.

[98] In my view, the standard form lends itself to possibility of being misunderstood by lay complainants when it fails to sufficiently alert potential complainants to the fact that if it is their intention to pursue complaint against the partners of a firm practising as a partnership, the names of the relevant partners should be identified.

[99] Mr and Mrs SC completed the second section by recording “[Firm 1]”. In doing so, I am satisfied that it was Mr and Mrs SC’s understanding that the [Firm 1] partners would be required to respond to their complaint that [Firm 1]’s inability to complete the retainer had resulted in work having to be replicated for which they had incurred additional costs. It was to the partners of [Firm 1] that Mr and Mrs SC looked for remedy, that remedy to be achieved by a refund of fees paid.

[100] That view is consistent with the approach adopted by Mr and Mrs SC when first raising their concerns.

[101] It was from the [Firm 1] partners (not the departed Mr JW and Mr YM) that Mr and

Mrs SC sought redress.

[102] It was the partners from the firm, not Mr JW or Mr YM, that responded to the concerns raised by Mr and Mrs SC.

[103] The extensive exchange of correspondence between Mr and Mrs SC and the [Firm

1] partners would have continued to encourage Mr and Mrs SC in their view, that it was to the partners of [Firm 1] that they needed to address their concerns, and from whom they should seek remedy.

[104] Mr KI responded on behalf of the partners in correspondence to Mr and Mrs SC

of 17 September 2013. In that correspondence, Mr KI noted that:

... we repeat our earlier comments that while the events that have occurred are unfortunate, we take the view that the work undertaken was of value at the time and it is not this firm’s fault that Mr JW elected to give up practising law at short notice. It was a lifestyle decision for him and was not something that could be foreseen by us.

[105] In correspondence to [Firm 1] of 20 November 2013, Mr and Mrs SC made it clear that they considered that [Firm 1] should compensate them for costs they had incurred as a consequence of the [Firm 1] lawyers being unable to complete the retainer.

[106] Responding to further complaint that the firm had failed to provide the services it had contracted to provide, another partner, Mr MT, wrote to Mr and Mrs SC on 26 February

2014. In that correspondence, Mr MT addressed concerns raised concerning the competency of the representation provided and provided explanation as to the circumstances surrounding Mr JW’s departure from the firm.

[107] Mr MT concluded his account by noting that:

... the writer also notes that on a number of occasions during his career things have happened to professionals which have meant that they needed to leave the job part way through it. Our dealing with this matter is consistent in what we have observed as proper practice.

[108] That did not satisfy the SC’s. In further correspondence to [Firm 1] of 1 May 2014, they noted that:

... there are a number of points we disagree with but notwithstanding that, in our view it comes down to we engaged your firm to defend this – when your firm was unable to represent us further, due to the fact you had nobody able to complete this matter for us, your firm recommended us to go to PP – so in summary what did your firm do for us that we could utilise....

[109] If there was any uncertainty as to whom the SC’s considered was the target for their complaints, (and I see little potential for any) that would have been put to rest by Mrs SC’s correspondence to the Complaints Service of 22 August 2014, in which she concluded her account of her concerns by noting that:

... ideally we see that it is [Firm 1]’s problem that they could not continue representing us because one of their partners and a staff member left – they had a responsibility to us that they just put aside and passed us on.

[110] Mr YM, when responding to the complaint on 22 September 2014, noted that he had signalled to the [Firm 1] partners that they should give consideration to discounting the largest invoice that had been rendered.

[111] On 28 July 2015, Mr MT wrote to the Complaints Service, seeking an extension of time for filing a response to Mr CU’s report. Mr MT notes in that correspondence:

I was the partner who undertook a review of this complaint per [Firm 1]’s procedures. I made a decision based on my investigation findings. I note Mr CU does not agree with my findings and I wish to consider what steps, if any, I should take having regard to his findings. I ask for two weeks from 31 July to have time to consider this. This is done without prejudice to any jurisdictional points or otherwise I may seek to put forward.

[112] On 21 August 2015, Mr BY wrote further to the Complaints Service, advising that he would be responding to Mr CU’s report. He observes that the investigator’s report was critical of [Firm 1], and expresses a view that the focus on the role of [Firm 1], as opposed to the persons originally complained of, presented as an “unanticipated change of direction for us”. Further, he signals that he has a number of concerns about the report and understandably, wishes to ensure that he has sufficient time to properly respond.

[113] Mr BY provided a comprehensive response to the Complaints Service on 4

September 2015. Mr BY commences that response by expressing concern that the cost assessor had formed a view that if disciplinary action was to be taken, it should appropriately be directed towards the [Firm 1] partners (Mr KI, Mr MT) rather than the subjects of the original complaints (Mr JW, Mr YM).

[114] Mr BY accepts that the assessor was correct to take the view that there was no basis to take disciplinary action against Mr YM and Mr JW but submits that the assessor erred in criticisms made of the [Firm 1] partners.

[115] As the complaint inquiry proceeded, it became clear that the question as to which of the parties engaged should properly be the subject of the complaint was being contested. Mr YM, in correspondence to the Complaints Service on 18 November 2014, reiterated his position that the fees had been set by a partner of the firm and he had recommended that the firm consider refunding part of the fees charged.

[116] This was argument that Mr YM could not materially influence the process (including providing the remedies sought) as he had no control over decisions that could only be made by the [Firm 1] partners.

[117] A member of the Committee inquiring into the complaint made inquiry of the Complaints Service as to whether the Law Society was able to provide guidance on the process that should be followed when a firm is unable to complete a retainer. The Complaints Service responded by advising that it was unable to source any specific directions on the issue, hence its decision to make request of Mr CU to provide an opinion.

[118] This was met with response from the Committee member that there was uncertainty as whether the complaints were appropriately addressed by a conduct inquiry, or whether the issue fell under the umbrella of a contractual dispute between the SC and the firm.

[119] As the complaint wended its way through the inquiry process, the parties understandably adopted positions which reflected the Committee’s decision to identify Mr JW and Mr YM as the parties complained of.

[120] Mr JW, as an employee of the firm, had no control or influence over decisions made in respect to the fees, and his role in the inquiry was relatively insignificant.

[121] Mr YM submitted that argument that he was responsible for the fees charged, was inherently unfair, as he agreed that consideration should be given to refunding part of the fee charged, but he had no power to make his former partners facilitate a refund.

[122] [Firm 1], when responding to Mr CU’s report, correctly noted that, as they were not the subject of the complaint, bringing them into the arena was “an unanticipated change of direction”. That said, the [Firm 1] partners had throughout, as noted, taken an active interest in the complaints being advanced against their former employees, and the comprehensive response they provided to Mr CU’s report was a robust and vigorous defence to suggestion that they had, in any way, let the SC’s down.

[123] The [Firm 1] partners did not consider that Mr YM or Mr JW’s conduct merited a disciplinary response. Nor did Mr CU. Nor, as it transpired by the time of the review hearing, did Mr and Mrs SC.

[124] But in failing to recognise, despite the evidence that Mr and Mrs SC had intended from commencement, that the partners of [Firm 1] be included, along with Mr JW and Mr YM, as the subjects of their complaint, the Complaints Service advanced the inquiry in a manner which failed to provide opportunity for Mr and Mrs SC’s concerns to be fully addressed.

[125] Section 132(2) of the Act provides that any person who is chargeable with a bill of costs, whether it has been paid or not, may complain to the appropriate complaints service about the amount of any bill of costs rendered by a practitioner or former practitioner or an incorporated firm or former incorporated firm (being a bill of costs that meets the criteria specified in the rules governing the operation of the Standards Committee that has the function of dealing with the complaint.

[126] Parties complaining about an account, may direct their complaint to the practitioner who has rendered the account, or in the case of an incorporated firm, make complaint about the firm.

[127] The accounts were rendered in Mr YM’s name, but for reasons which will become apparent, I do not consider that directing the complaint against Mr YM in his personal capacity, presents on the circumstances of this case, as either fair or reasonable, or a sensible approach to addressing the issue which was at the heart of Mr and Mrs SC’s complaint.

[128] Mr and Mrs SC considered that the partners of [Firm 1] had a responsibility to discount the fees charged, because the firm, with whom it had its contract of retainer, had been unable to complete the retainer. They considered that the partners had an obligation to at least remit a portion of the fees paid, and it was to the partners they looked to for redress.

[129] Whilst the question as to whether fees charged were fair and reasonable is pivotal to the complaint, the inquiry is broader than that conventionally posed by challenge to the reasonableness of a fee rendered. The challenge to reasonableness encompasses not just the practitioners who were engaged in doing the work, but the partners responsible for making the decision as to whether some accommodation should be made to Mr and Mrs SC, in recognition of the fact that the firm was unable to complete the retainer.

[130] And, as is compellingly clear from the exchanges between Mr and Mrs SC and the partners, it was the partners (not Mr JW or Mr YM) who were making the decisions.

[131] A Standards Committee (and this office) can only make an order for a fee to be reduced, consequential upon the making of a finding of unsatisfactory conduct.

[132] It would present as a perverse outcome, if the SC’s complaint was addressed by a narrow consideration of inquiry as to whether Mr YM or Mr JW had breached their professional obligations.

[133] The Complaints service erred when it failed to ensure that the complaints advanced by Mr and Mrs SC required the partners of [Firm 1] to be identified as subjects of the complaint. I hasten to emphasise that I make this criticism reluctantly, as the Service can correctly point to the fact that it was Mr and Mrs SC who completed the initial documentation. But it should have been manifestly apparent from the exchanges of correspondence, and the response to the Complaints Service request of Mr and Mrs SC to provide further clarification of their complaint, that it was the [Firm 1] partners whom Mr and Mrs SC were looking to for redress.

What were the consequences of the Committee failing to correctly identify the parties against whom complaint had been made?

[134] The failure of the Complaints Service to identify that the [Firm 1] partners were intended by Mr and Mrs SC to be the subject of their complaint along with Mr YM and Mr JW resulted in the conduct inquiry, in my view, being fundamentally misdirected.

Do the review applications raise any matters which materially affect the Committee’s

decision to take no further action in respect to complaint made against Mr JW?

[135] No. As an employee of the firm, Mr JW played no role in the setting of the fees.

[136] No issues were raised on review which provided challenge to the Committee’s decision to take no further action against Mr JW. Indeed, as has been noted, by the time the matters got to review, Mr and Mrs SC’s position was that they did not wish to pursue their complaint against Mr JW.

Did Mr JW and Mr YM provide competent representation?

[137] Yes. Whilst Mr and Mrs SC initially had advanced argument that the strategy recommended by Mr YM and Mr JW was defective, this argument was not pursued on review.

[138] Mr PP, after reviewing the files and discussing the litigation strategy with Mr JW, concluded that he would take a different approach to defending the charges than had been recommended by Mr YM and Mr JW. This, understandably, prompted Mr and Mrs SC to question whether they had received competent advice from the [Firm 1] lawyers.

[139] Ultimately, neither the efficacy of the [Firm 1] strategy, nor that of Mr PP was put to the test, as an agreement was negotiated with IRD which resulted in Mr and Mrs SC pleading guilty to a number of the charges.

[140] Mr PP is an experienced and senior counsel, described by Mr CU as a lawyer who is widely acknowledged as one of New Zealand’s best and most experienced criminal lawyers. Mr PP’s opinion would inevitably carry considerable weight. But his indication that he would take a different approach to that proposed by Mr JW does not in itself diminish the advice provided by Mr JW. In planning a litigation strategy, lawyers will frequently have differing views.

[141] Nor is it the case that the opinions of Mr JW and Mr YM should be subverted to that of Mr PP, simply because of Mr PP’s status as a respected and senior counsel. Mr JW had considerable experience in prosecuting IRD cases. Mr YM brought a considerable experience in appellate law to the case. Mr and Mrs SC were advised that their case was difficult and that no guarantee of success could be provided. When Mr JW advised the Complaints Service that “if anybody could have undertaken the SC instructions successfully I consider the combination of Mr YM and myself were as good a chance as they had”, I consider that he was providing an opinion not based simply on a desire to extol

the qualities of the representation he and Mr YM were able to provide, but a view arrived at by a realistic assessment of the value to Mr and Mrs SC of the combination of skills and experience he and Mr YM brought to their case.

[142] Nor was it the case that Mr PP gave indication that he considered the advice provided to have been fundamentally flawed. I do not consider that a lawyer of Mr PP’s experience would have been fettered from providing honest account of the [Firm 1] strategy by concern at possibility of offending Mr YM and Mr JW. Without question, Mr PP’s advice was in stark contrast to that provided by the [Firm 1] lawyers, but there is insufficient evidence to support conclusion that the advice provided by Mr JW and Mr YM was so deficient or misdirected, as to merit consideration of imposition of a disciplinary sanction.

[143] Mr JW and Mr YM’s departure from the firm meant that they did not have opportunity to have their litigation strategy tested in Court. It was in that arena that the efficacy or otherwise of the proposed approach would have been best measured. Even if their strategy had been rejected by the Court, it does not necessarily follow that the advice was professionally culpable. Lawyers’ arguments are often rejected by judges; this is the nature of an adversarial system. Arguments are made, tested by the Court and either accepted, rejected or modified.

Was the Committee correct in its decision to make an unsatisfactory conduct finding in respect to Mr YM?

[144] No.

[145] The finding of unsatisfactory conduct was based on conclusion that the uplift in fee applied to the 28 March 2013 invoice was not justified. The Committee considered that there did not appear to be any justification for such a significant uplift.

[146] When the concerns regarding the uplift were put to Mr YM, he immediately conceded that it did not appear to have been the case that the firm’s normal practices had been followed when the decision was made to apply an uplift to the account.

[147] Mr YM explained that it was common practice in the firm for fees to be discussed with an equity partner, in this case, Mr KI. Mr YM said that if a decision was made to impose an uplift, a file note was made which recorded the reasons for the uplift. Sensibly, if the firm was intending to increase a fee which had been calculated by reference to time spent and hourly rates, it was considered important to both identify and record the factors which provided a rationale for the increase.

[148] In this case, no record could be found of any file note recording reasons as to why the fee had been increased.

[149] It was Mr YM’s position that if the firm could not provide evidence, Mr and Mrs SC should be refunded a sum equivalent to the uplift imposed. However, he explained that he was not in a position to make that happen. Firstly, as a salaried partner he had no authority to compel the equity partners to direct the refund. Secondly, he had left the firm and could consequently assert little influence over decisions affecting the firm.

[150] Mr BY, in responding to the assessor’s report, noted that Mr YM was “an experienced and capable lawyer who had been a partner for 15 years, and that his lead on the setting of the fee would have been given much weight”.

[151] Any concerns that Mr BY and Mr YM, in providing their differing views as to where responsibility ultimately lay for the setting of a fee were being drawn into a conflict of recollections, is allayed by the comprehensive account Mr BY provides to the Complaints Service of the process his firm adopts when setting fees.

[152] Mr BY explains that it is the practice of his firm to:

(a) have a partner (including a second partner if a partner is the author) sign any pre-billing report which is over $5,000; and

(b) ensure a discussion takes place on the reasonableness of a bill or fee where a fee is set based on anything other than time (say a discount or an uplift).

[153] With respect to the invoice of 28 March 2013, Mr BY notes that: (a) Mr YM discussed the bill with Mr KI;

(b) it was Mr KI’s recollection that the decision to impose an uplift was made because:

(i) time recorded did not accurately record the time that had been spent on the file.

(ii) the degree of responsibility involved. (iii) the value to the client.

(iv) the level of importance to the client.

(c) the firm’s usual practice of ensuring that reasons for the uplift were recorded had not been followed; and

(d) Mr KI had endorsed the uplift.

[154] Mr BY noted that Mr KI would not be expected to have the understanding of the file that Mr YM would have had. In advancing this submission he emphasised that his intention was not to distance Mr KI from the process, but to provide explanation of the process.

[155] I accept that Mr YM would be expected to have a more detailed knowledge of the file than Mr KI, but it is clear that the prudent and careful process adopted by the firm to monitor their accounts, particularly in circumstances such as these where consideration was being given to imposing an uplift, was designed to ensure that there was a degree of collective responsibility brought to the process of setting the fee.

[156] There is little point or merit in argument that one or other of the practitioners involved assumed a greater or lesser degree of responsibility than the other. Understandably Mr YM had the more intimate knowledge of the factors that went into setting the fee. Mr KI became involved because the firm’s processes required the oversight of a partner other than the author, if consideration was being given to imposing an uplift on the fee. Once he became involved in the process of approving the uplift, Mr KI in my view became, along with Mr YM, responsible for it.

[157] If Mr KI’s involvement carried no element of responsibility for the fee, there could be no relevance to him being engaged in the process of providing oversight.

[158] The Committee determined that the imposition of the uplift merited a disciplinary response.

[159] The brunt of that decision was borne by Mr YM, this despite the fact that:

(a) on being alerted to the issue, Mr YM immediately suggested that Mr and Mrs

SC be refunded the sum charged by way of uplift;

(b) despite that recommendation, Mr YM was unable, as a salaried partner who had departed the firm, to assert influence over any decision by the [Firm 1] partners, as to whether a refund should be made;

(c) Mr YM was not the only partner engaged in the setting of the fee;

(d) there is no justifiable reason as to why Mr YM should carry the burden of an adverse disciplinary finding, whilst another partner who bore a degree of responsibility for the setting of the fee, escapes sanction;

(e) the partners of [Firm 1] did not consider that the Committee’s finding merited

a disciplinary response; and

(f) by the time the matter had advanced to review, Mr SC did not consider that

Mr YM’s conduct required a disciplinary response.

[160] I accept that the Committee focused on the uplift issue after it had given consideration to the question that was of most significance for Mr and Mrs SC, being complaint that they had paid for work that had to be replicated, but in reaching conclusion that [Firm 1] was entitled to charge for the work that had been undertaken and that fees charged were reasonable, that finding inevitably impacted on the decision taken in respect to the uplift factor.

[161] The unsatisfactory conduct finding entered against Mr YM was also influenced by the decision to advance the complaints against Mr JW and Mr YM, without including, as I am satisfied had been intended by Mr and Mrs SC, the partners of [Firm 1].

[162] If the complaint had correctly identified all the partners, it is difficult to see how a single unsatisfactory conduct finding could have been entered against Mr YM.

[163] For these reasons, the Committee’s finding of unsatisfactory conduct against Mr

YM is unsound. That finding is reversed.

Was the Committee (a) correct to conclude that if a law firm has undertaken work, and the fees charged in relation to that work are fair and reasonable, the firm would generally be entitled to charge for work undertaken irrespective of the fact that the firm was unable to complete the work? and (b) correct to conclude that in circumstances where a law firm is unable to complete a retainer, there is no obligation or any provision in the RCCC that require a law firm provide such a reduction.

[164] Both the Committee and the cost assessor were troubled by the notion that a firm would charge a fee for work that could not be completed.

[165] In considering the question it had directed its investigator to address, the Committee had the benefit of not only Mr CU’s report, but also Mr BY’s comprehensive response to the report.

[166] The opposing arguments have been articulately traversed for the Committee.

[167] Approaching the issue from the perspective of fairness, resulted in Mr CU forming a critical view of the approach adopted by the [Firm 1] partners. Bluntly put, he considered that the firm had preferred their own interests over the interests of their clients.

[168] Whilst Mr CU was firm in his conviction that the partners of [Firm 1] should have adopted, as he saw it, a more considerate approach to the position the SC’s had been left in, his assessment is couched in terms that suggest that he is a little uncertain as to the legal basis for his position.

[169] He expresses concern that his conclusion may appear “simplistic, and unsupported by any clear authority and, from the lawyer’s point of view, financially disappointing”.

[170] This discomfort occasioned by what Mr CU perceives to be a lack of clear authority, clearly influenced Mr CU in his analysis, and to have prompted him to place considerable focus on the desirability of the practitioners “doing the right thing”.

[171] In considering what was the right thing, Mr CU draws on his own extensive experience as a practitioner and reflects on the approach he has adopted when faced with similar circumstances in his own partnership.

[172] In his response to Mr CU’s report, Mr BY contends that Mr CU had taken “an inherently contradictory position which undermines the validity of the report in its entirety”.

[173] Underpinning Mr BY’s criticism of Mr CU’s report, is suggestion that Mr CU had provided no legal authority to support the conclusions reached. Mr BY is critical of Mr CU’s approach, particularly Mr CU’s indication of the steps that he would himself have considered appropriate to take in similar circumstances.

[174] Mr BY argues that Mr CU:

(a) was unable to refer to a rule or authority on what a firm is required to do regarding fees when an employee leaves a firm or even what a retiring practitioner should do on a part completed file;

(b) applies a test which is erroneous in principle, namely what he would do; (c) applies a test which is unsupportable and without authority;

(d) slips into the trap of abandoning rule of law and replacing it with arbitrariness;

(e) argues that his commercial decision or conscience ought to be a professional commercial outlook or conscience; and

(f) adopted a contradictory position, when he contended that the work done was of value, but then concludes that the work had no value.

[175] Mr BY advanced further arguments in opposition to Mr CU’s argument that the partners of [Firm 1] should have given consideration to reducing the fee charged. I do not propose to address those arguments in the course of this review, but rather to confine my consideration of the arguments advanced by Mr BY to the question pivotal to the complaint, being the argument as to whether a firm had an obligation to reduce its fee if unable to complete a retainer.

[176] Armed with opinions which expressed diverging views as to whether a firm was required to provide a refund of fees in circumstances where the firm was unable to complete the retainer, the Committee, as noted, concluded that if a law firm has undertaken work and the fees charged in relation to that work are fair and reasonable, that firm would generally be entitled to charge for that work undertaken irrespective of the fact that they have not been able to complete the work. Further, the Committee could identify no provision in the conduct rules, which would require a firm to discount its fees in such circumstances.

[177] That then led the Committee to an assessment as to whether they considered the fees charged to have been fair and reasonable, that by reference to the relevant fee factors set out in r 9.1 of the RCCC, and to its conclusion that the fees were in significant part fair and reasonable, excepting for the account to which an uplift had been added.

[178] In my view the Committee misdirected itself in the approach it adopted to determining the reasonableness of the fee charged.

[179] The basis of that misdirection was:

(a) error in adopting an unnecessarily narrow interpretation of the relevant Conduct Rules, when concluding that there is no obligation or any provision in the RCCC that require a law firm to provide to reduce a fee, when the firm is unable, through no fault of the client, to complete the retainer;

(b) a failure to sufficiently consider whether work completed was diminished in value as a consequence of the lawyers engaged being unable to complete the retainer;

(c) a failure to adequately consider the question as to whether all the work completed had value for Mr and Mrs SC;

(d) in concluding that the work completed had value (this by assumption that if the work itself had merit, value for the client automatically followed) failed to properly address the question as to the extent to which work that had been completed, had to be replicated by fresh counsel;

(e) to adopt a narrowly restrictive approach to the application of r 9, and in focusing on the r 9.1 factors, to pay insufficient attention to the requirement for a fee to be “fair”; and

(f) to pay insufficient attention to the requirement for a fee to be fair and

reasonable “having regard to the interests of both client and lawyer”.

[180] The Committee’s conclusion that a firm would “generally” be entitled to charge for work completed in circumstances where the firm was unable to complete the work, and the fee charged was fair and reasonable failed to pay sufficient regard, in my view, to the question as to whether the work that had been completed, whilst having value if the file remained with the practitioner who commenced the work, diminished in value, if some of the work that had been completed, had to be replicated by newly instructed counsel.

[181] In this case, it had been represented to Mr and Mrs SC, that the combination of Mr YM’s academic approach, and the practical experience of Mr JW, would provide them with a formidable litigation team from beginning to end.

[182] But having completed a substantial amount of work, neither Mr YM nor Mr JW were able to continue with the work. Nor were [Firm 1] able to fill the void from within the firm.

[183] What then was the value to Mr and Mrs SC of the work that had been done?

[184] The Committee addressed the issue by focusing on the fact that the lawyers had been instructed to provide advice on possible defences, and had done so. Mr YM and Mr JW had provided advice on possible defences that could be argued, therefore they had fulfilled their part of the bargain and the firm was entitled to be paid for the work they had done.

[185] With every respect to the Committee, I considered their approach to be unduly narrow.

[186] Because the Committee had concluded that Mr JW and Mr YM had completed necessary work, and that the fee charged was appropriate for the work undertaken, it considered that there was no basis for interfering with the fee. In adopting this approach, the Committee failed, in my view, to sufficiently direct its attention to the question as to whether the work completed had, either partly or in full, continuing value for Mr and Mrs SC in circumstances where neither Mr JW nor Mr YM were able to continue to represent them.

[187] Mr JW, who was best positioned to assess the value of the work that had been done, considered that a significant amount of the work he had undertaken would have had to have to been replicated by new counsel. In making that admission, he conceded that much of the work he had completed for Mr and Mrs SC, had little enduring value for them. The knowledge and information he had gleaned from his review of the files had not, at the time the retainer was terminated, taken on fully the characteristics of a surviving body of work of demonstrable value to the clients. Whilst Mr JW had formulated a view as to how matters should proceed, the value of this information to the client was substantially diminished, when Mr JW was unable to continue with the case.

[188] It is against that admission, that the question as to whether the fees charged were fair and reasonable must be measured, not against a yardstick which focuses on the work charged being fair and reasonable in itself, without having regard to the question as to whether the practitioner’s inability to continue with the work, significantly diminished the ongoing value to the clients of the work that had been done.

[189] In approaching the fee issue from this stance, two objections are raised. First, is suggestion that it is difficult to assess the value of work done, and second, that it is difficult to assess the cost consequences of a newly engaged practitioner having to bring themselves up to speed on the file.

[190] I accept that the exercise of calculating value and assessing the component of work involved in coming up to speed may not be easy, but the difficulty of the task should not act as an impediment to doing so.

[191] In many cases where a practitioner has departed a firm and has been unable to complete the retainer, it will not be difficult to accurately assess the value of the work done for the client at the time of the practitioner’s departure. For example, in commercial transactions, there will commonly be demonstrable evidence of the transactional work that has been completed, and whilst there inevitably will be a degree of “catch up” involved when another lawyer takes over the file, that lawyer will be able to build on an established foundation of work. In the litigation arena, the lawyer initially may after having taken initial instructions, engaged in negotiations, drafted a statement of claim, drafted affidavits,

attended to any interlocutory matters and completed discovery. It would be perverse to suggest that this is of little value simply because the lawyer is unable to complete the brief. This is all work which is quantifiable and of value to the client, despite the inability of the initially instructed lawyer to continue the case. It is completed work which has transferable value for the client.

[192] At risk of repetition, it must be further emphasised, that Mr and Mrs SC were put in the position they were because [Firm 1] was unable to complete the retainer.

[193] It presents as fundamentally objectionable if a lawyer’s clients who are forced to instruct fresh counsel as a consequence of the lawyer instructed being unable to complete the retainer, have to cover costs incurred by newly instructed counsel, for work completed by their previous counsel which they have been charged for.

[194] I accept that the exercise of calculating work completed, and assessing the extent to work may have been doubled up on, is an analysis that must inevitably proceed on a case by case basis.

[195] But in this case, that exercise has been made less difficult because of the nature of the work involved, and the evidence of Mr JW and Mr YM.

[196] This was a criminal prosecution. Any barrister taking over the carriage of a file of this nature, would have had to review the material that provided the background to, and laid the foundation for, the charges. There would be no way around that. In order to ensure that he had satisfied himself that he was in a position to marshal all defences that he considered were available to Mr and Mrs SC, Mr PP was duty bound to review all the material. A failure on his part to do so, could have had serious consequences for Mr PP.

[197] This is not to suggest that there was no value in the work that had been done (and the focus is on the review of the files completed by Mr JW) and it is not for me, in light of the directions made that will become apparent, to attempt to quantify the value of the work completed by Mr JW that would have had to be replicated by Mr PP.

[198] But the evidence of Mr JW (and it was evidence that was not before the

Committee) was clear and compelling.

[199] Mr JW confirmed that the work that made up the 29 April 2013 account of

$22,354.36, was largely work spent in reviewing the files. Mr YM agreed with that assessment.

[200] Both practitioners agreed that Mr PP would have had to spend a significant amount of time reviewing the files (as Mr JW had done) and that this inevitably would have required him to replicate a substantial amount of the work that had been completed by Mr JW.

[201] It would be speculative to calculate the time Mr PP spent on reviewing the files by reference to the time spent by Mr JW. Mr PP may have adopted a different approach to that of Mr JW. The extent to which he may have been assisted by the work that Mr JW had done is unknown. But simple inquiry of Mr PP, an accomplished and senior practitioner, would assist in establishing the extent of the work that had been replicated.

[202] In submissions filed, the cost assessor’s report, and in the Committee decision, the circumstances in which Mr and Mrs SC found themselves are characterised as being unfortunate.

[203] If a lawyer is unable to complete a retainer the lawyer has contracted to complete, that failure, irrespective of the reasons for the failure, should properly focus the lawyer’s mind on how to ensure that there is minimal disruption to the client.

[204] That examination should properly include a fair and objective appraisal of the work that has been done for the client, and a fair and objective appraisal as to whether work that has been completed for the client has been diminished in value because of the lawyer’s inability to complete the work.

[205] Such an approach does not require recourse to vague notions of fairness or doing the right thing, it is an approach demanded by a proper application of the relevant conduct rules.

[206] The Committee concluded that there was no obligation or any provision in the RCCC that required a firm to reduce its fees when the firm was unable to complete a retainer, or indication that the rules gave guidance as to how they might be applied in circumstances such as these. Having so concluded, the Committee turned its attention to whether the fees charged were fair and reasonable by reference to the fee factors set out in r 9.1.

[207] In doing so, it neglected, in my view, to pay sufficient attention to r 9.

[208] Rule 9 provides the backdrop against which each of the r 9.1 factors is to be considered.

[209] The guiding directive in r 9 that a fee charged must be fair and reasonable, underpins any appraisal of the specific fee factors that follow.

[210] It is unnecessary to provide exhaustive analysis of what constitutes “fair” but the definition provided in Black’s Law Dictionary, emphasises the elements of “just and equitable”.7

[211] Importantly, the fairness of fees is to be measured, having regard to the interests

of “both lawyer and client”.

[212] Argument that work was done and a reasonable fee charged which fails to take into account the future value to the client of the work done, may be an approach that satisfies the immediate commercial interests of the lawyer, but it cannot be an approach which can be seen to pay sufficient consideration, as the rule requires, to the interests of both (emphasis added) client and lawyer.

[213] In circumstances where a lawyer is unable to complete a retainer and the client, through no fault of their own, is required to expend fees replicating work that has been done by the first lawyer, a proper balancing of interests of both client and lawyer, must allow scope for a client to recover costs of work done that has to be done again.

[214] Mr CU’s report is criticised for arriving at conclusions that are said to be lacking statutory authority, a rule-based foundation, or principle.

[215] In my view, that does a disservice to Mr CU. In concluding that the fee should be significantly reduced, Mr CU specifically identified r 9 as providing the foundation for his conclusion that the fee should be reduced.

[216] That said, whilst it is proper that the approach to determining the reasonableness of a fee be as principled and consistent as possible, that process of determination, despite the helpful assistance provided by authority and the RCCC, ultimately reduces to a process of judgement, which commonly calls for a balancing of a number of considerations.

[217] The comments of Priestly J in Chean v Kenginston Swan, have been frequently cited as reinforcing the wisdom for practitioners, when setting a fee, to step back and assess the fees “in the round”:8

... a practitioner who is using time and attendance records to construct a bill (must) take a step back and look at the fee in the round having regard to the importance of the matter to the client, in some cases the client’s means, the value to the client of

7 Bryan A Garner Black’s Law Dictionary (9th ed, Thomson Reuters, St Paul, 2009) at 674.

8 Chean v Kensington Swan HC Auckland CIV-2006-404-1047, 7 June 2006 at [23].

the amount of work done, and proportionality between the fee and the interim or final result of the legal work being carried out.

[218] Whilst the learned Judge’s comment was focussed on issue as to the extent to which time records should be relied on when setting a fee, the comment alerts practitioners of the need to consider, when calculating a fee, the value of the work done for the client, together with an assessment of the proportionality between the fee and the interim or final result.

[219] In circumstances such as these, where, as the evidence of both Mr YM and Mr JW established, a significant amount of work completed had little carry over value, an assessment of the proportionality of the fee by reference to the interim result, becomes particularly relevant.

[220] The Committee noted that it had addressed the r 9.1 factors, but makes no reference to r 9.1(c), the importance of the matter to the client and the results achieved.

[221] Rule 9.1(c) provides that the importance of the matter to the client and the results achieved are to be taken into account when considering the reasonableness of the fee charged.

[222] I do not consider that “results achieved”, is narrowly confined to a consideration of ultimate outcome.

[223] The [Firm 1] fee is properly assessed by reference to the results achieved for the clients at the time the retainer was terminated.

[224] A proper assessment of outcome achieved for work completed, inevitably returns to a focus on the issue as to the extent to which the work completed by Mr JW had value for the clients. In examining this issue, I was better placed than the Committee, as I had an opportunity to hear first-hand from Mr JW.

[225] The Committee neglected in my view, to pay sufficient regard to the results achieved for the client, particularly by failing to consider the ongoing value to the clients of the work that had been completed. It also failed to pay sufficient regard to the requirement for fairness and reasonableness in a fee to lawyer and client.

[226] In this case, there was no room for doubt that a significant amount of work had to be replicated by Mr PP. Mr JW, who was best placed of all to make the assessment, was emphatic that a substantial amount of the work that had been charged in the most substantial of the invoices rendered, would have been of little value to Mr and Mrs SC,

because Mr PP would have had to replicate much of the work that had been completed by

Mr JW.

Conclusion

[227] In summary:

(a) The Complaints Service failed to identify at commencement that Mr and Mrs

SC were wanting to pursue complaint against all of the partners of [Firm 1].

(b) Whilst the partners of [Firm 1] were fully involved in responding to the concerns raised by Mr and Mrs SC, and provided comprehensive reply to the complaint brought against the two practitioners, their responses understandably have not been advanced from the perspective of a party against whom complaint has been made.

(c) The unsatisfactory conduct finding entered against Mr YM is unsound and is set aside.

(d) The Committee’s consideration as to whether fees charged were fair and reasonable, failed to sufficiently consider the ongoing value of the work for the clients, and the extent to which that work had to be replicated.

(e) The Committee’s decision failed to pay sufficient regard to the requirement for a fee to be fair and reasonable having regard to the interests of both client and lawyer.

[228] I have given careful consideration as to the appropriate orders to be made.

[229] With respect to application 275/2016, the Committee’s finding of unsatisfactory conduct entered against Mr YM is reversed, together with the orders that accompanied the unsatisfactory conduct finding.

[230] With respect to application 009/2016, the Committee’s finding of unsatisfactory conduct entered against Mr YM is reversed, together with the orders that accompanied the unsatisfactory conduct finding.

[231] This decision will no doubt present as an unsatisfactory outcome for Mr and Mrs SC, as their pivotal concern that the partners of [Firm 1], with whom their retainer was negotiated, has not been able to be addressed, except to the extent that I have, as I consider I was required to do, considered the issue as to whether, in circumstances where a firm is unable to complete a retainer, a firm may be required to adjust its fee.

[232] No fault attaches to the [Firm 1] partners for the oversight in identifying that Mr and Mrs SC intended for them to be included as the subjects of the complaint. The partners indicated a willingness from the outset to be engaged in the process, but they were not (Mr YM aside) identified as the subjects of complaint.

[233] It is for Mr and Mrs SC to consider what further steps, if any, they wish to take.

[234] One issue can easily be resolved. There appears to be agreement that the ““uplift” component of the 28 March 2013, should properly be refunded to Mr and Mrs SC. As I have reversed the unsatisfactory conduct finding, I have no jurisdiction to make a specific direction for that to happen, but I would expect that the [Firm 1] partners and Mr and Mrs SC will be able to resolve that issue.

ORDERS

(a) The unsatisfactory conduct finding entered against Mr YM is reversed together with the accompanying orders, (Lawyers and Conveyancers Act

2006 s 211(a)).

(b) Pursuant to s 206(4) of the Act I direct that this decision be published so as to be accessible to the wider profession in a form anonymising the parties names and identifying details and bereft of anything that might lead to their identification.

_{DATED this 18th day of December 2018}

R Maidment

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 YM as the Applicant/Respondent

Mr SC as the Respondent/Applicant

Mr JW as the Respondent LCRO 9/2016

Mr Wilson as the Related Party

[City] Standards Committee [X] The New Zealand Law Society