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IW v PP [2018] NZLCRO 22 (9 March 2018)

Last Updated: 30 March 2018


LCRO 57/2014

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

CONCERNING
a determination of the [Area] Standards Committee [X]
BETWEEN
IW

Applicant

AND
PP

Respondent

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


DECISION

Introduction


[1] Mr IW has applied to review a decision by the [Area] Standards Committee [X] (the Committee) dated 13 March 2014, in which the Committee made a finding of unsatisfactory conduct against Mr IW, and ordered him to reduce his legal fees to Mr PP by the sum of $30,861 plus GST and to refund any overpayment.
[2] Mr IW seeks to reverse the finding of unsatisfactory conduct only. He does not challenge the order to reduce his fees or make a refund.
[3] Unusually in these matters, Mr PP supports Mr IW’s application.

Background


[4] Mr IW is a partner in [Law Firm A]. He and his law firm specialise in legal cases involving buildings with weathertightness issues.
[5] The events giving rise to Mr PP’s complaint against Mr IW occurred in 2011. At that time, Mr S was a partner in [Law Firm A]. By the time that Mr PP made his complaint against Mr IW, Mr S had left that partnership.

[6] At the relevant time, Mr PP was the Chairman of a body corporate which administered 10 townhouses. In 2008, weathertightness issues with each of the townhouses became apparent.
[7] The body corporate instructed [Law Firm A] to act in a claim it wished to bring against the local Council and Mr S assumed responsibility for the file (the weathertight claim).
[8] Mr PP and Mr S exchanged emails during May 2011 about legal fees. Mr PP asked Mr S for “a firm quote”. In his email to Mr PP, dated 23 May 2011, Mr S said the following:

To the conclusion of the dispute in the [Weathertight Homes Tribunal] our fees will in total not exceed $100,000 plus GST and disbursements.


[9] Mr S confirmed those arrangements in a letter to the body corporate’s manager, dated 8 August 2011.
[10] The weathertight claim was settled in May 2012. The settlement involved the Council paying a sum of money to the body corporate (the settlement sum). The settlement sum was paid into [Law Firm A]’s trust account.
[11] In about July 2012, Mr S left the partnership of [Law Firm A]. Mr IW then took over the management of the file and dealt with the post-settlement attendances.
[12] Mr IW gave Mr PP a settlement statement on 22 August 2012, which showed total fees charged by [Law Firm A] of $130,861 plus GST. Those fees were debited from the settlement sum and the balance paid to the body corporate.
[13] Mr PP and Mr IW discussed the fees charged, reflected in the settlement statement, as compared to the figure provided by Mr S in May 2011 and confirmed by him in August of that year.
[14] Mr PP’s position was that Mr S had given a quote to which Mr IW, and [Law Firm A], were bound.
[15] Mr IW’s position was that time had been written off and that the final invoice represented only about 6% of the settlement sum which was a good outcome for the body corporate.
[16] Further, Mr IW argued that Mr S had provided an estimate and not a quote.

Complaint by Mr PP


[17] In a letter addressed to “The Secretary, New Zealand Law Society” dated 15 January 2013, and headed “Fees Complaint – [Law Firm A]”, on behalf of the body corporate Mr PP outlined the history of the weathertightness claim, his email exchanges with Mr S about legal fees, and his discussions with Mr IW on that topic after Mr S had left [Law Firm A].
[18] Mr PP attached copies of the relevant correspondence. He also noted that a letter of engagement had not been provided by Mr S.
[19] Mr PP concluded his letter by saying:

It is unfortunate that the situation has arisen. At a meeting of the body corporate

... I was instructed unanimously to pursue recovery of the excessive fees charged.


[20] The New Zealand Law Society Lawyers Complaints Service (Complaints Service) acknowledged receipt of Mr PP’s complaint in its letter to him dated 24 January 2013.

Response by Mr IW


[21] Mr IW responded to the complaint on 21 February 2013. His position was that Mr S “(like all other firms) provided the clients with an estimate of the fees”. He argued that Mr PP had only ever asked for an “estimate of fees” and a “realistic estimate of ... fees”, and this is what Mr S provided with his figure of $100,000 plus GST and disbursements.
[22] Mr IW indicated that he was “more than happy for the Law Society to review these fees to determine whether they are fair and reasonable”.

Initial Standards Committee processes


[23] There followed unsuccessful attempt to resolve the matter through the Complaints Service’s Early Resolution Process. The matter was subsequently referred to a Standards Committee “to be dealt with in the usual way”.

Further comment by Mr PP


[24] In an email to the Complaints Service, dated 15 March 2013, Mr PP said:

My complaint is not against Mr IW personally. He did not act on the claim. His then partner [Mr S] did. He has since left the firm. The complaint is therefore against the firm [Law Firm A], being the partnership that received the fees that I maintain are excessive. Will you please acknowledge that the complaint will be dealt with on that basis.


[25] A Legal Standards Solicitor (LSO) employed by the Complaints Service replied to Mr PP’s email and said:

Section (132)(1) of the Lawyers and Conveyancers Act 2006 ... provides for complaints against individual practitioners, incorporated law firms, and their employees. [The Lawyers and Conveyancers Act] does not contemplate or provide for complaints against incorporated law firms such as [Law Firm A]. This is why, when a complaint names such a firm, we open the complaint in the individual name of the managing partner of the firm. If you wish to withdraw or modify your complaint(s) please let me know.


[26] Mr PP replied, also on 15 March 2013. He said:

No I don’t wish to make any modification. I just wanted to make it clear that the complaint was not against Mr IW personally. ... If the Act is so ill-conceived, we will just have to do our best with it.


[27] The LSO acknowledged Mr PP’s email on 18 March 2013 and said “we will proceed with your complaint”.
[28] Mr PP next wrote to the Complaints Service on 21 March 2013, responding to Mr IW’s letter dated 15 March 2013. He disagreed with Mr IW’s position that Mr S had only given an estimate of fees. Mr PP said that he had requested Mr S to provide a “firm quote” and that after some email exchanges, ultimately that is what Mr S provided when he said that “fees will not in total exceed $100,000 plus GST and disbursements”.
[29] Mr PP submitted that the issue of time being written off, and whether the fees actually invoiced were fair and reasonable, overlooks that a quoted fee was provided by Mr S.

Standards Committee process


[30] The Committee considered the parties’ submissions and at its meeting on 4 October 2013 resolved to set the matter down for a hearing on the papers.
[31] The Committee sent the parties a Notice of Hearing (the Notice) in which it identified the issues to be determined. In particular, the Notice said:

3) The appropriate orders that the Standards Committee may make under s 156 of the Act, in the event that there is a finding of unsatisfactory conduct.


[32] Further submissions from the parties were invited.

Mr PP’s submissions


[33] In submissions dated 31 October 2013, Mr PP argued that Mr S’s email dated 23 May 2011 is “unequivocal” and “constitutes an agreement as to fees”.
[34] Mr PP argued that Mr IW, as a partner of [Law Firm A], is bound by Mr S’s quote.

[35] Mr PP also made the point that the body corporate was not advised that “the alleged fee estimate was likely to be exceeded”. As to the question of whether the fees actually invoiced were fair and reasonable, Mr PP submitted that this point is overtaken by the fact that “there was an agreement to pay a fixed amount regardless of the time ultimately spent in achieving a conclusion”.
[36] As to outcome, Mr PP said that he “would prefer it if the matter could be settled by Mr IW agreeing to refund (fees in excess of $100,000 debited from the settlement sum)”.
[37] Mr PP made reference to various provisions in s 156 of the Lawyers and Conveyancers Act 2006 (the Act).

Mr IW’s submissions


[38] Mr IW set out his position in his letter to the Complaints Service dated 29 October 2013. He referred to Mr PP’s email, dated 15 March 2013, to the LSO in which Mr PP said that “[his] complaint is not against Mr IW personally” and to Mr PP’s further email to the LSO on the same date in which he said “I just want to make it clear that the complaint was not against Mr IW personally”.
[39] Mr IW argued that:

the firm ... rendered the fee, not me personally. Put another way, I cannot have personally breached professional standards by invoicing for legal fees as I personally did not approve or render invoices.


[40] Mr IW then argued that the body corporate was provided with estimates, and the fees rendered were “extremely reasonable”.
[41] An LSO emailed Mr IW on 31 October 2013 and said that his “comments are noted. They are issues for the Committee to consider”.
[42] The LSO also repeated a request on behalf of the Committee for Mr IW to provide various documents. These were provided by him through an employee of [Law Firm A], on 4 November 2013.

Further procedural steps


[43] The Committee met on 6 December 2013 and resolved to postpone final determination of Mr PP’s complaint.
[44] The Complaints Service accordingly wrote to Mr PP and Mr IW on 10 December 2013, and in its letter said the following:

The Committee wished to make clear that in this particular matter, the lawyer concerned as Mr IW. At the hearing on the papers the Committee will consider issues as to Mr IW’s conduct. If the Committee was to make any findings, and in turn if it was to make any orders, these would be against Mr IW. As the parties have previously been advised, the Complaints Service does not have jurisdiction to deal with complaints against unincorporated law firms.


[45] The refined issue of complaint to be determined was set out in the Complaints Service’s letter as follows:

Did [Law Firm A] provide the body corporate with a fixed quote for legal fees, in particular (but not limited to) by way of the email of 23 May 2011 from [Mr S]? If so, was Mr IW bound by such quote, and has he breached professional standards in demanding payment of fees in excess of the quote?


[46] Further submissions were invited from the parties.

Mr IW’s submissions


[47] On 11 December 2013 Mr IW wrote to the Complaints Service responding to its letter dated 10 December 2013. He submitted:

Mr PP’s submissions


[48] On 17 December 2013 Mr PP wrote to the Complaints Service and said:

[Y]es, there was a written quote. Yes, as a partner of the firm, Mr IW was bound by the quote. If there was a firm quote then the firm, including Mr IW was not entitled to deduct fees in excess of the quoted amount, from the settlement funds.

... [I]n my submission, that deduction had no valid basis and if the Committee determines that that amounts to a breach of professional standards, so be it.

I have previously made it clear that I do not believe Mr IW has any personal responsibility. If [Mr S] had remained a partner of the firm, my complaint would have been directed at him. It seems that because of the provisions of the Act, Mr IW, in his capacity as a partner of the firm, must accept responsibility.


Standards Committee hearing and decision


[49] After setting out the background, the Committee noted that “Mr PP’s complaint was that [Law Firm A] invoiced for legal fees exceeding an amount quoted”.1
[50] The Committee noted the exchanges of correspondence about whether Mr PP had made a complaint against Mr IW and whether Mr IW could have personally breached professional standards.
[51] The Standards Committee then identified the following issues to be considered:2

[52] The Committee dealt with each of those issues in turn.

Estimate or quote?


[53] The Committee noted that the relevant email was Mr S’s to Mr PP sent at 8.28 am on 23 May 2011. Mr S said:

To the conclusion of the dispute in the WHT our fees will not in total exceed

$100,000 plus GST and disbursements.


[54] The Committee also referred to Mr S’s letter to the body corporate’s manager dated 8 August 2011, in which he referred to a fee estimate, but used the words “a total not exceeding”.

1 Standards Committee determination, 13 March 2014, at [9].

2 At [12].


[55] The Committee noted that on two occasions there was reference to fees not exceeding a particular sum. The Committee said that “those statements, on their own, were unequivocal – there was a maximum that could be charged”.3
[56] The Committee referred to Mr IW’s reliance on the word “estimate” or “estimates” and agreed that there had been those references in correspondence from Mr S. The Committee considered however that:4

there was an element of carelessness in the correspondence from Mr S – there was a lack of clarity in his response to his clients request for a firm quote; he referred to an estimate while also explicitly stating that fees would not exceed a certain figure.


[57] The Committee concluded that the wording was "at best, unclear and inconsistent" and that in those circumstances “a lawyer should err in favour of the consumer’s, his client’s, view”.5

Mr IW’s conduct


[58] As a preliminary issue, the Committee dealt with the issue of whether or not a complaint had been made about Mr IW, having regard to Mr PP’s statement that “he did not wish to complain about Mr IW personally but about [Law Firm A]”.6
[59] The Committee observed:

Mr PP did not particularly help his own cause because he repeated his view that Mr IW had no personal liability. However, he also submitted that Mr IW was not entitled to make the deduction and that Mr IW, in his capacity as a partner of the firm, must accept responsibility. The Committee concluded that that was sufficient to deal with the matter as a complaint against Mr IW.


[60] The Committee next addressed Mr IW’s question as to how he could have personally breached professional standards, when he did not personally approve or render the invoices.
[61] The Committee acknowledged that Mr S had rendered the invoices. Nevertheless, the Committee considered that a professional standards issue arose in relation to Mr IW — specifically his conduct “in demanding payment as opposed to rendering the invoices”.7

3 At [15].

4 At [16].

5 At [16].

6 At [18].

7 At [19].


[62] The Committee acknowledged that because the fees had already been deducted from the settlement sum, Mr IW had in effect refused to refund the overpayment, rather than demand payment. The Committee described that as “semantics”.8
[63] The Committee concluded that:9

... Mr IW was bound by Mr S’s correspondence regarding the fees. The correspondence was sent on behalf of [Law Firm A]; Mr IW is a partner of the firm; he benefits from the fees paid.


[64] In looking at the correspondence between Mr S and Mr PP, the Committee described that as “at best, unclear and inconsistent”.10 It held that Mr PP’s interpretation, that there was a cap on fees, was reasonable. Significantly, the Committee said that “in the face of that, Mr IW should have agreed to refund the fees deducted in excess of that cap”.11
[65] The Committee addressed Mr IW’s argument that the fees were nevertheless fair and reasonable and held that “fees being fair and reasonable is not justification for breaching a fee agreement”. The Committee concluded by saying:12

Mr IW’s failure to reduce and refund the fees would, in the circumstances, be regarded by lawyers of good standing to be unacceptable on the basis that it was unprofessional.


[66] The Committee determined that this was unsatisfactory conduct on the part of Mr IW, pursuant to s (12)(b)(ii) of the Act.

Advice that estimate would be exceeded


[67] Because the Committee found that Mr S had explicitly told Mr PP that fees would not exceed a certain amount, it did not consider it necessary to deal with the issue of whether advice had ever been given that an estimate was likely to be exceeded.

Fees fair and reasonable?


[68] The Committee “acknowledged that Mr IW could not be criticised for the initial charging of the fees; he had not rendered any of the invoices”.13

8 At [19].

9 At [20].

10 At [16].

11 At [21].

12 At [21].

13 At [24].


[69] The Committee did not consider it necessary to deal with the issue of whether the fees were fair and reasonable given its earlier findings. It did note however that Mr PP had not submitted that the fees were not fair and reasonable.14

Outcome


[70] Having found Mr IW guilty of unsatisfactory conduct, the Committee ordered Mr IW to reduce [Law Firm A]’s fee by $30,861 plus GST and to refund any sum already paid by the body corporate over and above $100,000 plus GST and disbursements.
[71] The Committee concluded by determining that it was not necessary or appropriate to order the payment of a fine or costs.

Review Application


[72] Mr IW filed his application for review on 19 March 2014, together with a covering letter dated 17 March 2014. The grounds advanced may be summarised as follows:
[73] Mr IW argues that:

14 At [25].

this was a fees complaint – nothing more nothing less. If the Committee’s decision is correct in it means that every time a practitioner receives a fee complaint, they must immediately refund the fees (if deducted from settlement) or amend the account (if not deducted) to what the client decides is fair. Asking the Law Society to review a fee is surely part of the Law Society’s function.


[74] Mr IW notes that Mr PP was not complaining about his conduct and that the Committee appeared to unilaterally widen the scope of its enquiry.
[75] Finally, Mr IW refers to his unblemished 28-year practising history. He submits that he “acted entirely appropriately – a dispute existed as to whether the fees were capped”. Further, “the Law Society was asked to resolve the dispute. They have. The funds have been refunded. I see nothing ‘unprofessional’ in me following this process”.
[76] In further correspondence with this Office, dated 25 August 2014, Mr IW said that when the matter was referred to the Law Society by Mr PP, “this is a correct use of the Law Society – to resolve fees disputes between solicitors and clients”.
[77] Mr IW submitted that “it is not unprofessional conduct to seek the Law Society’s help in resolving a fees dispute”. He noted that Mr PP had not asked the Committee to rule on his conduct; in fact, Mr PP has said that there was no basis for a finding of unsatisfactory conduct.
[78] In his letter to this Office, dated 23 January 2018, Mr IW has repeated and emphasised the points he earlier made. He refers to paragraph [16] of the Committee’s determination, in which the Committee referred to a lack of clarity around the correspondence on fees, and to an “element of carelessness in the correspondence from Mr S”.

Responses by Mr PP


[79] On 14 July 2014, Mr PP advised of this Office that his position was that “there should be no finding of unsatisfactory conduct against Mr IW”. The work on behalf of the body corporate was done by Mr S.
[80] Mr PP referred to “the very badly drawn Lawyers and Conveyancers Act”, which does not recognise a partnership — only individuals and corporations. Mr PP’s view is that “there was no basis for the finding of unsatisfactory conduct against Mr IW”.
[81] Mr PP followed this up with a more detailed letter to this Office, dated 22 February 2018, in which he expressed his entire agreement with Mr IW “that there should be no finding against him of ‘unsatisfactory conduct’”. He repeats his argument that he had no

choice but to bring his complaint against Mr IW as Mr S had left [Law Firm A], and the Act did not allow for a complaint to be made against a partnership.

[82] Mr PP also emphasised that Mr IW did not undertake any of the work involved in the weathertightness claim, nor was he involved in the May 2011 negotiations with Mr S about fees.
[83] Mr PP concludes by describing Mr IW as having “acted honourably throughout, in accepting the Committee’s decision and in immediately refunding the amount assessed as exceedingly agreed amount” and that this is not unsatisfactory conduct.

Nature and Scope of Review


[84] The nature and scope of a review have been discussed by the High Court, which said of the process of review under the Act:15

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

The Review Officer has broad powers to conduct his or her own investigations including the power to exercise for that purpose all the powers of a Standards Committee or an investigator and seek and receive evidence. These powers extend to “any review” ...

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


[85] More recently, the High Court has described a review by this Office in the following way:16

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.


[1] Given those directions, the approach on review will be to:

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

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


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

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

Review on the papers


[86] The parties have consented to this review being conducted on the papers pursuant to s 206 of the Act. Section 206 allows a Legal Complaints Review Officer (LCRO) to conduct the review on the basis of all the information available if the LCRO considers the review can be adequately determined in the absence of the parties.

[87] I record that having carefully read the complaint, the response to the complaint, the Committee’s decision and the submissions filed in support of and in opposition to the application for review, there are no additional issues or questions in my mind that necessitate any further submissions from either party. On the basis of the information available I have concluded that the review can be adequately determined in the absence of the parties.

Analysis


[88] As a result of the Committee’s determination, Mr IW has refunded to the body corporate fees deducted from the settlement sum that were in excess of $100,000. It was open to, and would have been perfectly proper for, him to have challenged that aspect of the Committee’s determination, and to have deferred the issue of refund until the outcome of his application for review was known.
[89] Mr IW and Mr PP have both argued that this should end the matter and that the unsatisfactory conduct finding that has been made against Mr IW, should be reversed. This Office does not usually find itself dealing with an application for review where both parties to it seek to reverse a finding of unsatisfactory conduct.
[90] The parties were both critical of the Complaints Service’s process, and in Mr PP’s case, aspects of the Act. I propose to deal with those criticisms first.

Law Society process


[91] Both Mr IW and Mr PP have submitted that they had understood the Law Society process to have been one of resolving the fees dispute, without any consequential conduct finding. It would seem that both parties assumed that the matter could be dealt with as a cost revision without more, as was the position under the former Law Practitioners Act 1982.

[92] On that account, both Mr IW and Mr PP were mistaken.

[93] Earlier in this decision I set out in some detail the advancement of Mr PP’s complaint through the Complaints Service. I have done so to demonstrate that it is clear from the way in which the Complaints Service and the Committee respectively responded to correspondence and managed the hearing process, that there should have been no doubt in either Mr IW’s or Mr PP’s minds that the process was a disciplinary process and not a cost revision process, and that one of the outcomes included a finding of unsatisfactory conduct. The Committee’s Notice of Hearing makes the position abundantly clear.
[94] Moreover, earlier in the process and through an LSO the Complaints Service had gone to some lengths to explain the Committee’s function to Mr PP and to point out to him that an individual respondent was required for the matter to be pursued. Mr PP was given opportunity to modify his position, but he elected to continue. He was, of course, entitled to do so and indeed had little other option given the impasse between the two men.
[95] Had either of them referred to the Act, they would have seen that a Standards Committee may either take no further action on a complaint, or make a finding of unsatisfactory conduct (or refer a complaint to the Disciplinary Tribunal).17 A decision to take no further action on a complaint does not include a power to make incidental or consequential orders, such as a direction to a lawyer to reduce or refund fees.
[96] The power vested in a Standards Committee to order a refund or reduction of fees, may only be exercised once a finding of unsatisfactory conduct has been made.18
[97] In agreeing with Mr PP’s interpretation of the emails that had passed between himself and Mr S, which was that a fixed cap quote had been given, the Committee was obliged to make a finding of unsatisfactory conduct against Mr IW. It could not otherwise order a refund.
[98] Mr PP has been at pains to submit, both to the Committee and to this Office, that he did not, and does not, seek a conduct finding against Mr IW. He does not regard Mr IW as having committed any conduct breach. Mr IW was identified by Mr PP as the other party simply because Mr S was no longer a partner in [Law Firm A], and the Act did not provide for complaints to be made against a partnership.

17 Lawyers and Conveyancers Act 2006, s 152(2).

18 Section 156(1)(e) and (g).


[99] I do not agree with Mr PP’s criticisms of the Act and its limitations as to complaints against a lawyers’ partnership. A partnership is not a legal entity. It is made up of individuals, each of whom is jointly and severally liable for the actions of their fellow partners.
[100] A conduct finding may only be made against an individual or a legally recognisable entity.

Committee’s finding of unsatisfactory conduct


[101] The Committee accepted that Mr IW had not rendered the various invoices to the body corporate. It is clear also that Mr IW only became involved in this file after Mr S had left [Law Firm A]. By that time, the weathertightness claim had been settled and the settlement sum had been paid into the trust account of [Law Firm A]. Mr IW’s involvement was as to post-settlement housekeeping matters, the most important of which was accounting to his client for fees paid, fees owing, disbursements incurred and funds deposited into his trust account.
[102] This Mr IW did by providing his settlement statement to Mr PP on 22 August 2012.

[103] It is possible, even excusable, that in attending to those largely administrative tasks Mr IW might not have looked at his firm’s letter of engagement or the exchanges of email between Mr S and Mr PP during May 2011.
[104] It would seem that Mr IW’s approach was to look at time that had been billed, tally-up the invoices (in the course of which some time was written off), account for GST and disbursements, and offset that total against the settlement sum. This produced the invoiced fees total of approximately $130,000.
[105] As indicated this is largely an administrative task, though no less critical for both lawyer and client. It requires care and accuracy and compliance with any agreement that may have been reached as to fees.
[106] On receipt of the 22 August 2012 statement, Mr PP raised the issue of legal fees that had been charged in the sum of $130,000, drew to Mr IW’s attention the email exchanges between himself and Mr S and made the point that legal fees had been promised to not exceed $100,000.
[107] Mr IW’s response was to insist:

[108] The second and third items above may well have merit. They overlook, however, what was obviously the core issue between the parties, which was: estimate or quote?
[109] It is clear that prior to Mr S’s critical email to Mr PP on 23 May 2011, there had been an exchange of emails between the two men on the subject of legal fees in relation to the weathertightness claim.
[110] Mr PP asked Mr S for “a firm quote for your fees to take this matter to a conclusion in the [WHT]”, in an email dated 4 May 2011.
[111] Mr S replied the following day and provided an “estimate” of fees (excluding GST and disbursements) for, separately, preparing a claim in the WHT ($7500), and attendances to the conclusion of mediation in that jurisdiction ($65,000-$70,000).
[112] Mr PP replied on 19 May 2011 and said “please let me have your realistic estimate of your fees to take the matter to a concluded hearing before the [WHT]”.
[113] There followed what I have referred to as Mr S’s critical email on 23 May 2011. It bears setting out once again what Mr S said in that email:

To the conclusion of the dispute in the WHT our fees will in total not exceed

$100,000 plus GST and disbursements.


[114] Mr PP, then a practising barrister of some seniority, interpreted Mr S’s email to mean that the body corporate would not be paying more than $100,000 for legal fees to conclude the weathertightness claim in the WHT. The words “our fees will in total not exceed” are relied on by Mr PP in coming to that conclusion.
[115] On the other hand, Mr IW — also, it must be said, a senior practitioner — had laid emphasis on Mr PP’s use of the word “estimate” in two of his emails to Mr S. Mr IW argues that Mr S’s response on 23 May 2011 must be seen in that context. Mr PP asked for an estimate, and this is what Mr S provided.
[116] Further, Mr IW refers to Mr S’s letter to the body corporate manager dated 8 August 2011 and argues that this letter makes it clear that Mr S was providing an estimate. Mr IW refers to Mr S’s use of the word estimate in that letter together with him saying that he was providing “a very rough indication of ... monthly fees”.

[117] With respect to Mr IW, as did the Committee I have difficulty accepting his argument.
[118] I deal first with Mr S’s letter to the body corporate manager on 8 August 2011. At paragraph 2 Mr S said:

We have provided the following fee estimate...


(a) $7500 to prepare, file and serve a claim in the [WHT];

(b) A further $65,000 to $70,000 to the end of a mediation;

(c) A total not exceeding $100,000 to the conclusion of the dispute in the [WHT] (this includes the fee estimate set out in (a) and (b) above).

[119] It is clear that Mr S was approaching this retainer in three steps:

[120] I do not accept Mr IW’s argument that Mr S’s 8 August 2012 letter to the body corporate manager introduced an element of ambiguity or otherwise changed the fee arrangement from one of capped fees to one of estimate.
[121] I do not consider that there is any ambiguity in Mr S’s letter to the body corporate manager. From start (drafting and filing pleadings) to finish (a completed claim hearing in the WHT), the weathertight claim was not going to cost the body corporate any more than $100,000 plus GST and disbursements.
[122] As it happened, the matter proceeded beyond mediation and was settled on the very eve of the scheduled five-day hearing in the WHT. Arguably, legal fees should have been less than $100,000 given that the matter was concluded before the hearing began. However, Mr PP, although noting that, has not taken that point.

19 In essence this meant that fees from the end of mediation to the end of any hearing would be no more than $22,500 plus GST and disbursements: $100,000 – (say) $70,000 - $7,500 =

$22,500.


[123] It is difficult to quibble with the Committee’s interpretation of the critical email that Mr S sent Mr PP on 23 May 2011. The words “our fees will not in total exceed”, in my view, are capable of no meaning other than legal fees will be capped at $100,000. Mr PP’s earlier request for an estimate becomes irrelevant in the face of what Mr S set out in plain language in his critical email.
[124] It was Mr IW’s insistence that Mr S only gave an estimate in the face of the plain language of what he actually said, that led to the Committee determining that “Mr IW should have agreed to refund the fees deducted in excess of that” and that his “failure to

... refund the fees would, in the circumstances, be regarded by lawyers of good standing to be unacceptable on the basis that it was unprofessional”.20

[125] The issue for the Committee was not whether the fees invoiced by Mr IW were fair and reasonable, but whether his conduct in insisting that an estimate had been given in the face of plain evidence otherwise, was unacceptable and unprofessional.
[126] I do not overlook that earlier in its determination the Committee referred to “an element of carelessness in the correspondence from Mr S”.21 It said that the wording was “at best, unclear and inconsistent”. Mr IW has relied heavily on this passage of the Committee’s determination to support his argument that there was genuine ambiguity about how legal fees were to be charged.
[127] I do not agree with Mr IW’s argument that this part of the Committee’s decision was, effectively, the ratio decidendi of the determination.
[128] In that part of its determination the Committee was referring to Mr S’s initial responses to Mr PP’s request for a “firm quote”. Those initial responses by Mr S provided estimates. To that extent, Mr PP and Mr S were talking at cross purposes with the former asking for a quote and the latter referring to an estimate. I accept that the combination of those pieces of correspondence contain elements of wording that is “at best, unclear and inconsistent”.
[129] However, such inconsistency as may have existed then, was clarified. It was when Mr PP challenged the extent of those estimates that Mr S replied with his critical email and a reference to legal fees not exceeding the fixed amount of $100,000.
[130] It bears repeating that in its determination the Committee said that the combination of Mr S’s 23 May 2011 email to Mr PP and his 8 August 2011 letter to the

20 Standards Committee determination, 13 March 2014, at [21].

21 At [16].

body corporate manager made the issue of fees “unequivocal – there was a maximum fee that could be charged”.22

[131] I agree with the Committee’s criticisms of Mr IW’s conduct in insisting upon payment of the full amount of the invoiced fees in the face of unanswerable argument otherwise.

Description of unsatisfactory conduct


[132] The Committee regarded Mr IW’s conduct as being both unacceptable and unprofessional.

[133] Mr IW has particular anxiety about the Committee’s characterisation of his conduct as “unprofessional”. The Committee’s overall finding of unsatisfactory conduct was based on s 12(b)(ii) of the Act.

[134] In addressing Mr IW’s concern about the committee’s finding that his conduct was both unacceptable and unprofessional, it is helpful to set out the relevant provisions of s 12 of the Act:

In this Act, unsatisfactory conduct, in relation to a lawyer ... means –


(b) conduct of the lawyer ... that occurs at a time when [he] is providing regulated services and is conduct that would be regarded by lawyers of good standing as being unacceptable, including –

[135] In Ethics, Professional Responsibility and the Lawyer the learned authors said the following:23

Unprofessional conduct is not a term familiar to the regulation of the legal profession, and appears on our statute book only in the Lawyers and Conveyancers Act. ... It may be that the words add little other than colour to the concept of unsatisfactory conduct as a whole and indicates simply that a failure of professional standards and adhered to by lawyers of good standing will be unprofessional and therefore unsatisfactory conduct. (Citation omitted)


[136] The learned authors’ view that the words unprofessional conduct “add little other than colour to the concept of unsatisfactory conduct as a whole” is contestable.

22 At [15].

23 Duncan Webb, Kathryn Dalziel and Kerry Cook Ethics, Professional Responsibility and the Lawyer (3rd ed, LexisNexis, Wellington, 2016) at 103.

I consider that the words add more than mere colour to a finding of unsatisfactory conduct based on conduct that has been found to be unacceptable.

[137] In my view, conduct which falls foul of s 12(b) can be either unacceptable, unbecoming or unprofessional. It can also be a combination of being unacceptable and either unbecoming or unprofessional. Section 12(b) provides for a scale of unsatisfactory conduct beginning with unacceptable. A finding that a lawyer’s conduct was simply unacceptable is sufficient to meet the definition of unsatisfactory conduct in s 12(b) of the Act.
[138] I have some sympathy with Mr IW’s concern that the Committee described his conduct as being both unacceptable and unprofessional. Although I consider that he had no reasonable basis for asserting that Mr S had only ever provided an estimate to Mr PP, I do acknowledge that the dispute was managed courteously and professionally, and that there was a joint agreement to refer the matter to the Law Society; albeit that the parties were mistaken as to the consequences of that.
[139] For myself, I would only have considered the conduct to have been unacceptable.

Should the finding of unsatisfactory be reversed?


[140] I agree (in part) with the Committee’s description of Mr IW’s conduct. I note again that in order to give effect to its conclusion that Mr S had provided a fixed cap quote, and to direct a refund of overpaid fees, it had to make a finding of unsatisfactory conduct against Mr IW.
[141] However, on review I am able to take a robust approach to the matter, and to come to a conclusion based upon my own view of the evidence that is before me.
[142] The evidence that is before me differs in a material respect to the evidence that was before the Committee. After the Committee’s determination was delivered to the parties, Mr IW immediately made the required refund to Mr PP who passed it on to the body corporate members.
[143] Although speculative, if Mr IW had made the refund during the Committee’s inquiry process, the Committee may have concluded that further action on Mr PP’s complaint was unnecessary.

[144] A breach of the Act, if established, does not automatically attract a disciplinary sanction. In Burgess v Tait the Court observed that:24

The ability to take no further action on a complaint can be exercised legitimately in a wide range of circumstances, including those which would justify taking no action under s 138(1) and (2). It is not confined to circumstances where there is no basis for the complaint at all.


[145] That position was affirmed in Chapman v Legal Complaints Review Officer where the Court noted that:25

... it appears to me that the LCRO may have assumed that her finding of unsatisfactory conduct inevitably led to the setting aside of the Committee’s decision to take no further action under s 138. No point has been taken on this but any such assumption would be incorrect. The discretion which s 138 confers subsists throughout.


[146] In conducting a review, the LCRO may exercise any of the powers that could have been exercised by the Standards Committee in the proceedings in which the decision was made or the powers were exercised or could have been exercised.26

[147] Included in those powers, is the ability to exercise a discretion to take no action, or no further action on the complaint.27 That discretion may be exercised in circumstances where the LCRO, having regard to all the circumstances of the case, determines that any further action is unnecessary or inappropriate.28

[148] I propose to reverse the Committee’s finding of unsatisfactory conduct. I do so because of the unusual features of this case. In doing so, I wish to make it plain that the Committee’s decision was correct and appropriate on the basis of the material that was before it. In particular, that Mr IW had taken an untenable position with regard to fees. However, the circumstances are now different.

[149] My reasons for not making an adverse finding against Mr IW are:

24 Burgess v Tait [2014] NZHC 2408 at [82].

25 Chapman v Legal Complaints Review Officer [2015] NZHC 1500 at [47].

26 Lawyers and Conveyancers Act, s 211(1)(b).

27 Section 138.

28 Section 138(2).


(c) Although misguided as to the complaints process, Mr PP consistently maintained the position that he did not seek a finding against Mr IW. In Maguire v Manawatu Standards Committee, Gendall J observed that the views of a complainant when they have “no further gripe with the actions of their lawyer” are a relevant consideration for a Review Officer to take into account.29 It is relevant in this regard that Mr PP was a colleague of Mr IW as well as a client.

(d) Mr IW’s involvement in this matter was limited to post-settlement administration, following Mr S’s departure from [Law Firm A].

(e) Mr IW were experienced practitioners. Their dispute about fees was initially managed by them in a courteous and professional way.

(f) No broader issues of consumer protection or public welfare have been raised by this review other than the public interest in lawyers maintaining professional standards and ensuring compliance with the rules.

Decision


[150] For the above reasons, pursuant to s 211(1)(a) of the Lawyers and Conveyancers Act 2006, the decision of the Standards Committee is reversed.

DATED this 9th day of March 2018


Rex 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 IW as the Applicant Mr PP as the Respondent

Mr C as the Related Person

The Auckland Standards Committee 3 The New Zealand Law Society

29 Maguire v Manawatu Standards Committee [2016] NZHC 1052 at [35].

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