KO v RT [2018] NZLCRO 34 (20 April 2018)

Last Updated: 17 May 2018

	LCRO 178/2016
CONCERNING	an application for review pursuant to section 193 of the Lawyers and Conveyancers Act 2006
AND
CONCERNING	a determination of the [City] Standards Committee [X]
BETWEEN	KO Applicant
AND	RT Respondent

DECISION

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

Introduction

[1] Mr KO, at the relevant time a partner of [Law Firm], Auckland (the firm), has applied for a review of a decision by the [City] Standards Committee [X] (the Committee) in respect of Mr Parsons’ complaint about him. The Committee made a finding of unsatisfactory conduct against Mr KO, and imposed a censure and a costs order.

[2] Mr RT, an accountant, was the liquidator of The [X] Limited (In Liquidation) (the company) which he states was placed into liquidation on June 2010. He complained that Mr KO failed to respond to his requests to provide information about the company.

[3] He says that he “regularly under[took] replacement liquidator appointments when asked to do so by the Commissioner of Inland Revenue” (the Commissioner). The Commissioner suspected that there may have been misappropriation of the company’s funds. For this reason, the first liquidator stepped aside, and from 17 October 2014 was replaced by Mr RT.

[4] The following month, at an examination under oath pursuant to s 261 of the Companies Act 1993 (CA), the company’s director stated that the firm had acted for the company.

[5] Mr RT sent a request dated 17 December 2014 to the firm to provide information held by the firm about the company. He sent a follow-up request on 5 February 2014, and a formal Notice to Deliver Documents on 5 March 2015. He arranged service of a Notice of Examination, dated 1 April 2015, requiring Mr KO to attend Mr RT’s office on 7 May 2015 to provide information about the company.

Complaint

[6] Mr RT lodged a complaint with the New Zealand Law Society Complaints Service (NZLS) on 23 November 2015.

[7] The substance of his complaint was that Mr KO and the firm failed:

• (a) To acknowledge his letters of 17 December 2014, and 5 February 2015, and the 5 March 2015 Notice to Deliver Documents requesting files, trust account records and any “knowledge of the location and status of any assets of [the company]”.
  
• (b) “[T]o attend the designated examination” as requested in the 1 April Notice of Examination.
  

[8] In doing so, Mr RT alleged that Mr KO had breached s 261 of the CA, and the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (the rules).

Standards Committee decision

[9] The Committee delivered its decision on 23 June 2016 and determined, pursuant to s 152(2)(b) of the Lawyers and Conveyancers Act 2006 (the Act), that in contravention of r 12 of the rules, Mr KO had failed to respond to Mr RT’s request for information about the company which constituted unsatisfactory conduct pursuant to s 12(c) of the Act.

[10] In reaching that decision the Committee found that Mr KO failed to:1

• (a) “respond to legitimate requests for information” from Mr RT; and
  

1 Standards Committee determination, 23 June 2016 at [8].

(b) “acknowledge correspondence in any way”.

[11] The Committee stated that it was “not persuaded that Mr KO had taken adequate steps to ensure that Mr RT was informed that [Mr KO and the firm] did not act for [the company]”. In the Committee’s view, the “prudent” step for Mr KO to take upon receipt of Mr RT’s first 17 December 2014 letter was to “respond ... in writing” in respect of which “an email would have been sufficient”.2

[12] The Committee added that Mr KO’s:3

failure to respond ... or to ensure that a response was received by Mr RT ... wasted [Mr RT’s] time and resources pursuing documents that Mr KO and [the firm] clearly did not have.

[13] The Committee similarly found that Mr KO did not acknowledge receipt of the 5 March 2015 Notice to Deliver Documents. However, because an adverse finding had been made in respect of Mr KO’s failure to respond to Mr RT’s earlier letters, the Committee considered that it was unnecessary to make another finding for “what was essentially the same conduct”.4

[14] Concerning the 1 April 2015 Notice of Examination which service agents took to Mr KO’s home for the purposes of serving that document on him, the Committee observed that:5

• (a) in refusing service Mr KO informed the service agent that “he had received communications from [Mr RT] previously and answered those communications [and that the firm] did not act for [the company] and had never acted for [the company]”;
  
• (b) because Mr KO had not informed Mr RT that neither the firm nor Mr KO had acted for the company, Mr RT had prepared the notice in the “mistaken belief” that Mr KO did; and
  
• (c) as with the previous issues, this also “stemmed from [Mr KO’s] belief that he had taken steps to ensure Mr RT knew that Mr KO did not act for the company”.
  

2 At [9].

3 At [11].

4 At [15].

5 At [18]–[19].

[15] The Committee stated that it was “unfortunate that Mr KO did not take adequate steps” to inform Mr RT that [Mr KO] did not act for the company insofar as:6

• (a) Mr KO did not hold any documents for the company, and “considered that he had already advised Mr RT”; and
  
• (b) there were “remedies available” to Mr RT under the CA.
  

Application for review

[16] Mr KO filed an application for review on 8 August 2016. In essence, he says that what he terms “an administrative error in [the firm] falls well short of a breach of rule 12”. He asks that the Committee’s decision be overturned.

Mr RT’ first letter

[17] In support of his application he states that having received Mr RT’s first 17 December 2014 letter:

• (a) That a:
  

check of [the firm’s] trust account records, and files was conducted which showed that the firm had not acted for [the company], did not hold any records whatsoever which indicated [the firm] had ever received instructions, monies or anything else in regard to [the company].

(b) He requested the firm’s “accounts administrator [to] call Mr RT’s office” and inform him accordingly. He is “satisfied that [this] was done”.

(c) The “administrator remembers being asked by [Mr KO] to ascertain whether [the firm] acted for the company” but did not “recall being requested to respond to [Mr RT]”. He described this as “a breakdown in the administration process in [the firm] given that [he is certain he] requested that the response be made”.

6 At [22]–[23].

Mr RT’s second letter

[18] Mr KO says he was surprised to receive Mr RT’s second 5 February 2015 letter. Because he “assumed” this letter “had been sent [prior] to [Mr RT’s] first letter being responded to” he says he “took no steps”.7

Process server

[19] Mr KO says that he informed the service agent that “there was no point in [Mr KO] attending a hearing as “the firm had never acted for [the company]”. At that time, he says he “was satisfied that [Mr RT] had been served with notice that [the firm] had never acted for [the company]”.

Conflict of evidence

[20] Mr KO states that he is adamant that the firm’s administrator responded by telephone to Mr RT’s first 17 December 2014 letter despite [Mr KO] not being able to produce a file note of that conversation. He explains that because the firm had not acted for the company there was no file and it would be “unusual for an administrator to make a file note” in those circumstances.

[21] He doubts the reliability of the company’s director as a witness. He submits that before Mr RT issued the 5 March 2015 Notice to Deliver Documents, and the 1 April 2015 Notice of Examination, [Mr RT] ought to have telephoned the firm “to ascertain whether the company’s director’s testimony ... was correct”.

[22] Whilst Mr KO agrees with the Committee’s statement that “it would have been prudent for [him] ... to respond to Mr RT in writing”, he submits that:

• (a) It did not follow that because a response was made by telephone, and not by letter, he had contravened professional standards.
  
• (b) The Committee did not question his statement that “the [firm’s] administrator had called Mr RT with the information that [the firm] had never acted for [the company]”.
  
• (c) The Committee was persuaded by Mr RT that [Mr KO] had “attempted to obstruct [Mr RT’s] investigation even though the [C]ommittee found that

7 Although Mr KO used the word “prior”, his later statements in his application for review and his statements in his letter (15 December 2015), and email (28 April 2016) to the Lawyers Complaints Service are that his firm’s administrator had responded by telephone to Mr RT’s first 17 December 2017 letter.

[Mr KO] hadn’t”. The Committee had “not properly addressed” Mr RT’s allegation that Mr KO “would seek to obstruct a liquidator’s investigation while being aware of the legal consequences”. That allegation had been made “without any basis of factual foundation”.

(d) The Committee failed to consider his exemplary professional record spanning “almost 30 years’ experience”.

Response

[23] In response, Mr RT states that he relies upon “the material [he] originally submitted” to the Committee.

Review on the papers

[24] The parties have agreed to the review being dealt with on the papers. This review has been undertaken on the papers pursuant to s 206(2) of the Act, which allows a Legal Complaints Review Officer (LCRO) to conduct the review on the basis of all information available if the LCRO considers that the review can be adequately determined in the absence of the parties.

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

Nature and scope of review

[26] The nature and scope of a review have been discussed by the High Court, which said of the process of review under the Act:8

... 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” ...

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

... 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.

[27] More recently, the High Court has described a review by this Office in the following way:9

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.

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

Issues

[29] The issues for consideration on this review are:

• (a) Whether Mr KO responded to Mr RT’s request for information about the company contained in Mr RT’s letter of 17 December 2014, in his follow- up letter of 5 February 2015, and the 5 March 2015 Notice to Deliver Documents?
  

If not, did Mr KO contravene any professional rule?

(b) Whether Mr KO refused to accept service of the 1 April 2015 Notice of Examination?

If so, did he contravene any professional rule?

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

Analysis

(1) Rule 12

[30] Rule 12 requires that “[a] lawyer must, when acting in a professional capacity, conduct dealings with others, including self-represented persons, with integrity, respect, and courtesy”.

[31] Concerning the qualification in the rule “acting in a professional capacity”, this Office has observed that the rule “clearly contemplates the lawyer providing regulated services”. Also, it is “doubtful that the rule could apply ... where the Practitioner’s behaviour was connected to his personal involvement as a party to litigation”.10

[32] By stating that the rule concerns a lawyer’s “dealings with others”, the rule can be contrasted with other rules which contain lawyers’ duties and obligations towards their clients and other lawyers.

[33] As such, the duty in the rule of “integrity, respect, and courtesy” which is owed to “others” could, as with this matter on review, extend to persons to or from whom the lawyer has made or received enquiries, or has requested or received a request for information in relation to a client matter. In this context “integrity” suggests “[s]oundness of moral principle; the character of uncorrupted virtue; uprightness; honesty; sincerity”.11

[34] Illustrations of the application of the rule where an adverse finding has been made against the lawyer concerned include a lawyer’s manner of communications, and not responding to letters from another lawyer engaged by the complainants.12

(2) Discussion

[35] Because both issues interrelate, I will consider them together.

10 JQ v QM LCRO 97/2011 (28 August 2012) at [23] — a lawyer had telephoned a former client of the firm who had brought proceedings against the firm which concerned one of the lawyer’s partners who was ill.

11 Oxford English Dictionary “integrity” <www.oed.com> — see also lawyers’ duties of “respect and courtesy” owed to clients (r 3.1), and other lawyers (r 10.1).

12 EO and EP v VO LCRO 240/2010 (3 August 2011) at [7], [49] — the lawyer had not responded to another lawyer’s correspondence — r 10.1 which requires that “[a] lawyer must treat other lawyers with respect and courtesy” — see also IO v SJ LCRO 84/2010 (1 February 2012).

(a) Mr RT’s first 17 December 2014 letter

[36] Central to this review is whether Mr KO, or a member of the firm, responded to Mr RT’s request for information about the company. Mr KO says that his firm’s administrator did respond. Mr RT says that he did not receive a response.

[37] As noted earlier, Mr RT claims that by not responding to his letters and to the Notice of Delivery of Documents, Mr KO had “deliberately chosen to obstruct” the liquidation of the company which, as a consequence, had been delayed.

[38] Mr KO describes this allegation as “scurrilous” and being “without any basis of factual foundation”. He says that upon receipt of Mr RT’s first 17 December 2014 letter a “check” was made of the firm’s trust account and records which showed that the firm did not act, and had not acted for the company, and therefore did not hold any information about, or records for the company.

[39] He says that whilst the firm’s administrator “remembers” being asked to make this enquiry, “she didn’t recall being requested to respond to [Mr RT]”. Mr KO attributes this to “a breakdown in the administration process” in the firm “given” as he says, he is “certain [he] requested that the response be made”. In such circumstances, he contends that an adverse finding ought not be made against him.

[40] On the other hand, Mr RT is equally sure that Mr KO did not respond to his two letters to the firm dated 17 December 2014 and 5 February 2015 respectively. He says that “at no time did any party contact [his] office” to “advise that the firm had not acted” for the company. Mr RT says this is evidenced by the fact that he “continued with [his] efforts to obtain some sort of response” from the firm.

[41] I accept Mr RT’s statements that he did not get a response from the firm to his first 17 December 2014 letter, and that if he had been advised that the firm did not act for the company he “would have referred back to [the company’s director] for [the director’s] comment and made further enquiries”.

[42] Equally, I accept Mr KO’s statement that first, he delegated to an employee the task of checking whether the firm acted, or had acted for the company, and of responding to Mr RT, and secondly, believed a member of the firm did respond by telephone to Mr RT’s 17 December 2014 request.

[43] In such circumstances, it is not possible for me to conclude that in contravention of r 12 Mr KO failed to treat Mr RT with respect and courtesy. Therefore, that part of the Committee’s decision in which the Committee found that in contravention of that rule Mr

KO did not respond to Mr RT’s 17 December 2014 letter, or failed to take adequate steps to do so which constituted unsatisfactory conduct under s 12(c), will be reversed.13

(b) Mr RT’s second 5 February 2015 letter, and 5 March 2015, 1 April 2015 Notices

[44] However, Mr RT also claims that Mr KO did not respond to Mr RT’s second 5 February 2015 letter, his 5 March 2015 Notice to Deliver Documents and his 1 April 2015 Notice of Examination.14

[45] Whilst Mr KO acknowledges that he did not respond to these communications, he says he did not do so because he believed his firm’s administrator had responded by telephone to Mr RT’s first 17 December 2014 letter.

[46] In response to Mr RT’s claim that his second 5 February 2015 letter ought to have drawn a response, Mr KO contends that he “assumed” that a response to Mr RT’s first letter had been made.

[47] As noted earlier, when carrying out a review, I am required to reach my own view following a consideration of the evidence before me and form my own opinion of “the fairness of the substance and process of a Committee’s determination”.15 Furthermore, where, as on this review, the application of a professional rule is at issue, the High Court has stated that whilst the rules are to be “applied as specifically as possible”,16 they “are also to be applied as sensibly and fairly as possible”.17

[48] In applying these approaches, I am assisted by two decisions of this Office concerning r 10.1 which, similar to the duty in r 12 in respect of “others”, requires that “[a] lawyer must treat other lawyers with respect and courtesy”. In the first matter, the lawyer concerned had not replied to two letters from another lawyer and “responded only after having been notified of a complaint against him. In total, the delay in providing any response was around 4 months”.18 In finding that the lawyer had contravened rule 10.1 the LCRO stated that:

.... professional courtesy would reasonably envisage that a colleague would have, within a reasonable time, responded to a letter, even if only to acknowledge receipt and to explain any delay in addressing substantive matters. It is not necessary to define a reasonable time in order to reach a decision that the delay in this case was unreasonable.

13 See [58].

14Concerning the Notice of Examination except via the service agent — see [49] below. 15 Deliu v Hong, per Winkelmann J, above n 8; Deliu v Connell, per Palmer J, above n 9. 16 Q v Legal Complaints Review Officer [2012] NZHC 3082, [2013] NZAR 69 at [59].

17 Stewart v Legal Complaints Review Officer [2016] NZHC 916, [2016] NZAR 900 at [62].

18 R v D LCRO 56/2009 (19 June 2009) at [18].

[49] In the second decision, it was observed that whilst there were occasions when the lawyer did not respond with the degree of diligence that might have been expected, the delays in responding to matters must be “excessive, repetitive and unjustifiable ... to amount to a breach of rule 10.1”.19

[50] Mr RT, as the liquidator of the company, was charged with the statutory duty under s 261 of the CA to obtain information about the company. Following his inquiries of the company’s director he believed that the firm had acted for the company. He therefore requested the firm to provide him with information about the company.

[51] It is not infrequent for lawyers to receive enquiries from persons or bodies having statutory authority to require information. Whilst Mr KO did not act, and had not acted, for the company, he nonetheless owed a professional duty to respond to Mr RT’s requests for information about the company.

Conclusion

[52] As in the first of the decisions referred to above, it is my view that upon receipt of Mr RT’s second 5 February 2015 letter, Mr KO ought to have followed up with his firm’s administrator to ascertain whether the firm had responded to Mr RT’s first letter and if not, do so immediately.

[53] This applies equally to Mr RT’s 5 March 2015 Notice to Deliver documents and to the attempt by the service agents to serve Mr KO with the Notice of Examination on 14 April 2015. Mr KO informed the service agent, who reported to Mr RT, that the firm “had never acted for the company”. However, in such circumstances, I do not regard that alternative as a courteous way for a lawyer to respond to the sender of the communication.

[54] The conclusion I have reached is that by not responding, as Mr KO acknowledges, to these communications, Mr KO contravened r 12 which constitutes unsatisfactory conduct under s 12(c) of the Act.

[55] In giving consideration as to whether it is appropriate to order a penalty, I refer to the guidance provided by the Disciplinary Tribunal which has stated that the:20

“predominant purposes [of orders] are to advance the public interest (which include ‘protection of the public’), to maintain professional standards, to impose

19 IO v SJ LCRO 84/2010 (1 February 2012) at [44], [47].

20 Daniels v Standards Committee (2) of the Canterbury-Westland Branch of the New Zealand Law Society [2013] NZHC 349, [2013] NZAR 416. See also s 3 of the Act — the consumer protection purposes.

sanctions on a practitioner for breach of his/her duties and to provide scope for rehabilitation in appropriate cases.

[56] For the following reasons, I have concluded that in these particular circumstances a finding of a contravention of the rules which constitutes unsatisfactory conduct is sufficient in itself without additional penalty:

• (a) Mr KO has maintained that upon receipt of Mr RT’s first 17 December 2015 letter that a “check” of the firm’s trust account and records was made which revealed that the firm did not act, and had not acted for the company.
  
• (b) Because Mr KO believed that his firm’s administrator had responded to Mr RT’s first 17 December 2014 letter, he did not respond to Mr RT’s second 5 February 2015 letter, and to the 1 April 2015 Notice to Deliver Documents.
  
• (c) Mr KO’s unblemished professional record.
  
• (d) Because Mr KO has now retired from practice the imposition of a censure is not in my view required “in the public interest” including “protection of the public”.21
  
• (e) The fact that the Committee did not see fit to back up its censure order “with a fine” suggests that Mr KO’s conduct is not so serious as to warrant such a “strongly express[ed] condemnation”.22
  

[57] Pursuant to s 211(1)(a) of the Act the decision of the Committee is:

• (a) Reversed as to the finding of unsatisfactory conduct under s 12(c) of the Act in respect of Mr RT’s allegation that Mr KO failed to respond to Mr RT’s first 17 December 2014 letter.
  
• (b) Confirmed as to the finding that Mr KO’s failure to respond to Mr RT’s second 5 February 2015 letter contravened r 12 which constitutes unsatisfactory conduct under s 12(c) of the Act.
  
• (c) Reversed as to the finding to take no further action in respect of the finding that Mr KO had failed to respond to the 5 March 2015 Notice to Deliver Documents, and the 1 April 2015 Notice of Examination, and substituted

21 s 3(1) – purposes of the Act.

22 B v Auckland Standards Committee 1 of the New Zealand Law Society HC Auckland CIV-2010- 404-8451, 9 September 2011 at [38].

with a finding that Mr KO’s failure to respond to Mr RT in respect of those communications contravened r 12 which constitutes unsatisfactory conduct under s 12(c) of the Act.

Costs

(d) Reversed as to the order made pursuant to s 156(1)(b) of the Act that Mr KO be censured.

[58] Where an adverse finding is made, costs will be awarded in accordance with the Legal Complaints Review Officer (LCRO) Costs Orders Guidelines. It follows that Mr KO is ordered to pay costs in the sum of $900.00 to the New Zealand Law Society by 24 May 2018 pursuant to s 210(1) of the Act. Pursuant to s 215(3)(a) of the Act, the costs order may be enforced in the District Court.

Anonymised publication

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

DATED this 20th day of April 2018

B A Galloway

Legal Complaints Review Officer

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

Mr KO as the Applicant Mr RT as the Respondent

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