KX v Area Standards Committee X [2018] NZLCRO 5 (25 January 2018)

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	LCRO 293/2014
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	KX Applicant
AND	[AREA] STANDARDS COMMITTEE [X] _Respondent

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

[1] Ms KX has applied for a review of the determination by the [Area] Standards Committee [X] (the Committee). As a result of a confidential report and own-motion inquiry commenced pursuant to s 130 of the Lawyers and Conveyancers Act 2006 (the Act), the Committee determined there had been unsatisfactory conduct on the part of Ms KX. Ms KX was censured, ordered to pay a fine of $12,000, costs of $2,500 and compensation.

[2] Ms KX and others at [Law firm] (the firm) had acted for Mrs JB and other members of her family for several years. Some of the trust’s work was handled by legal executives at the firm. Ms KX accepts she was responsible for their supervision at relevant times.

[3] The [Family Trust] (the Trust) had been established by Deed (the Trust Deed) in 2004. Mrs JB was a trustee, a preferred beneficiary, and had the power to appoint and remove trustees. The firm acted on the formation of the trust and the [Trustee Company Limited] (the trustee company) was appointed as the independent trustee. The Trust was in business with another trust as a farming partnership.

[4] In July 2013, Mrs JB contacted Ms KX saying she would like to appoint her aunt, Mrs GI, as an additional trustee. She also wanted to discuss how the trust operated and why the firm was a trustee. Ms KX and Mrs JB agree that they met, either in June or July 2013, and discussed the Trust. Ms KX provided advice, answered Mrs JB’s questions, and provided Mrs JB with a copy of the Trust Deed and some written information about trusts and Trustees’ obligations. For a number of reasons Ms KX advised against appointing Mrs GI.

[5] Nonetheless, on 19 July 2013 Mrs JB instructed Ms KX to proceed with the appointment, and to liaise with the Trust’s bank over changes to the land title arising from the appointment of the new trustee, and the bank’s requirements over the Trust’s loans and securities.

[6] Ms KX prepared a Deed of Appointment naming Mrs GI as an additional trustee (the Deed of Appointment) and sent that to her on 2 September 2013 with a covering letter inviting her to sign if she agreed to the appointment. Ms KX did not consider she was acting for Mrs GI and did not provide any further information. Ms KX accepts that she should have advised Mrs GI to seek legal advice before she signed the Deed of Appointment, and that her failure to do so constitutes a contravention of r 12.1.

[7] The Committee’s view, however, was that a retainer between Ms KX and Mrs GI could be implied. It was critical of Ms KX for failing to properly advise and provide relevant information about the Trust to Mrs GI, and to Mrs JB. If Mrs GI was Ms KX’s client, Ms KX failed in her obligations to provide information and advise her before she signed and had witnessed the Deed of Appointment. From Mrs JB’s evidence on review, it appears more likely than not that Ms KX did provide appropriate information and advice at relevant times. However, evidence directly from her was not before the Committee.

[8] By 9 September 2013, all parties had signed the Deed of Appointment, and the Trust’s bank was in the process of re-documenting the Trust’s loan, security and guarantee documents.

[9] Ms KX took parental leave from November 2013, and was away from the office, but remained in contact with her staff.

[10] The documents the bank eventually provided in early 2014 included a personal guarantee by the Trustees, including Mrs GI, but did not provide an indemnity for her as an independent trustee as it did for the trustee company.

[11] Mr and Mrs JB attended Ms KX’s office and, together with a director of the trustee company, signed the documents. However, the documents were not dated or witnessed at that time as they should have been, and there was no evidence of the necessary certifications having been given at the time Ms KX saw Mr and Mrs JB. Although the evidence was not before the Committee, Mrs JB’s evidence on review is that Ms KX did explain the documents to her and her husband before they signed them.

[12] A legal executive at the firm sent the partially completed documents to Mrs GI for execution. The covering letter, dated 11 March 2014, did not advise Mrs GI to seek independent legal advice before she signed them, and included the following:

Please sign the documentation where indicated and return same to us in the enclosed envelope. Please note we will complete dating and witnessing of the documents.

[13] By April 2014, Ms KX was aware that the 11 March 2014 letter had not advised Mrs GI to seek independent legal advice. She apologised to Mrs GI for the oversight and confirmed she should see her lawyer before signing the bank documents.

[14] About the same time, Mrs GI requested trust documents, saw a lawyer and received advice. Prior to that, Mrs GI appears not to have appreciated the implications of agreeing to accept appointment as a trustee. Her lawyer communicated to Ms KX and her team that Mrs GI not willing to agree to the bank’s terms or sign the documents, nor was she willing to continue as a trustee. Ms KX prepared documentation accordingly, which gave effect to Mrs GI’s resignation when it was executed shortly after.

[15] A confidential report was made to the New Zealand Law Society expressing concern over the contents of the 11 March 2014 letter.

[16] The Committee commenced an own motion enquiry indicating the matters of concern to it included that the 11 March 2014 letter suggested Ms KX had retrospectively dated and witnessed a number of documents sent to Mrs GI.

[17] The enquiry process involved a review of Ms KX’s file, and consideration of a letter from a staff member and submissions filed on behalf of Ms KX. The Committee did not take up the offer put by counsel for Ms KX to provide the Committee with formal statements from those involved in support of the submissions made.

[18] Ms KX explained her involvement, and that the 11 March 2014 letter had been signed and sent out in her absence by a staff member. Ms KX said that although Mrs GI had signed the Deed of Appointment as Trustee in front of a Justice of the Peace who witnessed her signature, Ms KX had not signed any of the documents enclosed with the letter of 11 March 2014.

[19] Ms KX says she became aware of the contents of the letter after Mrs JB contacted her to say Mrs GI had not received the correspondence, which, it transpired, had been sent to Mrs GI’s previous address. Ms KX says she reviewed the file, and noticed the missing advice in the 11 March 2014 letter, as well as the comment that the dating and witnessing of the documents would be completed on their return. Ms KX says she immediately rang Mrs GI and explained that she needed to obtain independent advice before she signed the bank documents.

I cannot understand why any staff member would have thought it appropriate to send out the documentation on the basis set out in our letter of 11 March 2014, and have spoken to the staff member involved, reiterating that it is not appropriate to retrospectively date or witness documentation. We have discussed this as a partnership and have ensured that all staff are aware that action such as this is not only inappropriate but will lead to a formal warning.

I appreciate the potentially serious consequences to Mrs GI, and fully acknowledge that the letter dated 11 March should have directed Mrs GI to take the documentation to her solicitor for independent advice.

[21] The Committee requested information from Ms QT, the legal executive who had signed and sent the 11 March 2014 letter. Ms QT said that she had checked the documents and noticed that Ms KX had not witnessed Mr and Mrs JB’s signatures after she had met with them. She says:

With that in mind, I added the note in the letter in relation to completing dating and witnessing of the documents. In my haste, I did not include the usual paragraph advising Mrs GI to seek independent advice... I acknowledge this omission was significant and I appreciate the potential consequences to Mrs GI.

solicitor attestation on the Guarantee and witness her signature on the Client Authority

& Instruction Form”. She said it was not her usual practice to send out documentation which requires witnessing without appropriate instruction, expressed disappointment in herself for the omission, and confirmed she was now more conscious of the need to maintain higher standards.

[23] A review of the file resulted in the Committee identifying a number of issues which it listed on a Notice of Hearing, inviting submissions on Ms KX’s alleged:

(a) Failure to provide competent advice and services to [JB] on receipt of the instructions as to the obligations to be undertaken by a trustee who is not a beneficiary, how the trust worked and why [Trustee Co Ltd] was a trustee;

(b) Failure to provide competent advice and information on which [GI] could rely in accepting the obligations of being appointed a trustee with personal liability as a trustee;

(c) Failure to inform [GI] in breach of r 12.1 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (the Rules), if she was not providing legal services to [GI], of the right to take independent legal advice.

(d) Failure to provide competent advice and information to [JB] in November 2013 in response to her request to appoint her [aunt] as a trustee and requesting advice as to how the trust worked and why [Trustee Co Ltd] were Trustees;

(e) Failure to ensure that [GI], in being presented with loan agreements, deed of guarantee and A&I forms, received competent advice and protection of her interests, including by having Mrs GI’s personal liability as an independent trustee excluded in the loan agreement and in the guarantee, by making sure that she was told that she must have a solicitor advise her on signing the guarantee, witness her signature and the certification.

Further, there was a failure to ensure Mrs GI was told she must have the solicitor witness her signature on the A&I form in compliance with the identification requirements.

(f) Failure to ensure that the documents presented to [GI] for signature had the signatures of the other parties who had already signed properly witnessed and the certifications completed;

(g) Failure in breach of r 11.3 to ensure that the conduct of the practice and the conduct of employees was competently supervised and managed by her.

(i) The possibility of publication of the name of the lawyer complained about and of the facts of the case; and

[24] Submissions dated 19 September 2014 were filed by Ms RH, counsel for Ms KX, responding to the issues raised. Ms RH says Ms KX (and others at the firm) had spoken to Mr and Mrs JB on a number of occasions over the years following the formation of the trust. She says that Ms KX had discussed the trust structure and arrangements with them in July 2013, as well as explaining the operations and functions of professional trustees to Mrs JB, and why professional trustees often are appointed. Ms RH said Ms KX provided Mrs JB with written information about trustees’ obligations and a copy of the trust deed. She conceded Ms QT did not always record all of her time in attendance on her timesheets.

[25] Ms QT’s role was mentioned and elaborated on. It was noted that Ms QT had been absent the previous week on bereavement leave having lost her father, and was trying to catch up with her work. In her haste, she did not include the usual paragraph advising Mrs GI to seek independent legal advice in relation to the Guarantee, and to have her signature witnessed by that solicitor on both the guarantee and the A&I form.

[26] Ms KX’s prompt response to realising the error in the 11 March 2014 letter is mentioned, as is the fact that she apologised to Mrs GI and advised her by phone that she should seek independent legal advice.

[27] Submissions were made with respect to the appropriate orders the Committee might make pursuant to s 156 of the Act if determinations of unsatisfactory conduct were made in relation to conduct on Ms KX’s part. Counsel submits the appropriate penalties are a reprimand and a fine. Ms KX expressed a willingness to apologise to Mrs GI (again) and Mrs JB, and to contribute to Mrs GI’s legal fees in obtaining independent advice. Ms KX was also willing to contribute to the Committee’s costs. Publication was said not to be in the public interest and a referral to the Disciplinary Tribunal not warranted.

[28] The Committee’s decision proceeds from the premise that Ms KX’s letter of

she sign the documents enclosed with the letter with the advice that the dating and witnessing of her signature would be completed when the documents were signed by Mrs GI and returned to her by Ms KX

[29] The Committee considered the file and the timesheets to establish who had done what on the file. It noted that there was no evidence on Ms KX’s file of her having sent Mrs JB or Mrs GI detailed information about the trust, its liabilities and those of its trustees, or of Mrs GI having been invited to obtain her own independent legal advice. It was noted that the bank’s Guarantee included a limitation of liability for the company, but not for Mrs GI, and that Ms KX’s file and time records did not contain any evidence of her having met with Mrs JB in response to Mrs JB’s request for information, and her instructions to appoint Mrs GI as a trustee.

[30] The Committee noted that on 17 February 2014, Mr and Mrs JB had signed various documents, including the bank’s Guarantee which limited the company’s liability, but did not protect Mrs GI, that signatures had not been witnessed and there was no evidence that advice had been certified as having been given.

[31] Reference is made to Ms QT’s involvement and to a separate determination affecting her. The Committee noted the request to sign and return the documents, and the indication that the firm would complete dating and witnessing of the documents in the 11 March 2014 letter.

[32] The provision of information in response to Mrs GI’s request when she sought independent legal advice, is noted, as is the fact that Ms KX “did not offer any information as to the responsibilities of trustees or the structure of the Trust”. Mrs GI’s

lawyer’s letter advising that Mrs GI intended to immediately resign as a trustee is mentioned.

[33] The Committee concluded a retainer between Ms KX and Mrs GI could be implied, and that Ms KX had failed to provide information and properly advise Mrs JB and Mrs GI.

[34] With respect to her advice to Mrs JB, paragraph 33 of the decision records what the Committee saw as inconsistencies between Ms KX’s evidence that she had provided Mrs JB with information before Mrs JB instructed her to appoint Mrs GI, and other aspects of the evidence. On that basis, the Committee did not consider Ms KX should have relied on Mrs JB having brought the information to Mrs GI’s attention.

[35] The Committee recorded five separate determinations of unsatisfactory conduct pursuant to 12(a) of the Act, on the basis that Ms KX’s conduct fell short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent lawyer, in relation to the issues identified above as (a), (b), (d), (e) and (f) combined, and (g). As the Committee had decided there was a retainer between Ms KX and Mrs GI, it did not pursue the alleged contravention of r 12.1 mentioned at (c) above.

$12,000 and costs of $2,500, and deferred consideration of publication and compensation so that Ms KX and Mrs GI could make submissions.

[37] Submissions and statements from colleagues, some of whom are family members, were provided on behalf Ms KX. It was submitted that compensation was not appropriate because none of the parties had suffered any monetary loss, although Mrs GI did incur the cost of obtaining independent legal advice and Ms KX was willing to contribute to that cost. Publication was opposed.

[38] The Committee listed seven failures on Ms KX’s part, remained convinced that Ms KX had been acting for Mrs GI and considered Ms KX’s explanations were implausible. In particular, the Committee noted Ms KX’s email record of her conversation with Mrs GI demonstrated that Ms KX had not volunteered to Mrs GI that she obtain independent advice, because by then Mrs GI had already retained her own lawyer. The Committee was not satisfied that Ms KX should be exonerated for failings in relation to the information and advice she should have provided to Mr and Mrs JB but did not.

[39] The Committee decided, by a narrow margin, not to publish Ms KX’s identity, noting she had no previous disciplinary history and that the public interest and education of the profession can be achieved by publishing a redacted summary of the decision, excluding identifying details.

[40] Ms KX was directed to pay compensation to Mrs GI for the full amount of her legal fees in obtaining advice on the Deed of Appointment and bank documents.

[41] Ms KX applied for a review seeking to have the determinations of unsatisfactory conduct based on the existence of a retainer between Ms KX and Mrs GI reversed. Ms KX’s position is that the censure was too harsh and should be replaced by a reprimand, and the fine was too high and should be reduced to $5,000.

(b) Ms KX’s explanations have been disbelieved because she may not have either a documentary record of advice given and/or a time record of relevant events. This is an insufficient basis to make the conclusions set out in the determination, and contrary to natural justice;

(c) statements from other individuals were offered to support submissions made on Ms KX’s behalf, but the Committee did not ask for these as part of its investigation;

(d) although aspects of her conduct were unsatisfactory, the Committee erred in having found that Ms KX’s conduct fell below the standard of competence and diligence that a member of the public is entitled to expect of a reasonably qualified lawyer on every issue addressed in the determination;

(e) censure was not justified, with a reprimand the more appropriate order to make; and

[43] It is submitted that the Committee failed to acknowledge Ms KX’s acceptance that she had made certain errors, including not having told Mrs GI that she had the right to take legal advice about accepting the appointment as a trustee. It is submitted that omission should justifiably be criticised.

[44] Ms KX is said to have believed that she was acting for the trustees, and settlor, and not Mrs GI. Ms KX says if she had believed she was acting for Mrs GI she would have provided her with terms of engagement, and quite different advice, which would have included the information identified by the Committee as omitted. It is submitted that the proper finding is that Ms KX contravened r 12.1 by failing to advise Mrs GI to get independent legal advice.

[45] In respect of Mrs JB, it is submitted that the Committee disregarded and disbelieved Ms KX without sufficient justification for a number of reasons, including that until mid-July 2013 Ms KX did not consider herself instructed to take any steps and therefore had not opened a file or provided written advice to Mr JB. Ms KX strenuously denies having fabricated events or information to supplement her previous answers to the Committee, and indicated an intention to file further evidence to corroborate the responses she had made to the Committee.

[46] Issue is taken with the Committee’s analysis of Ms KX’s file records, and the Committee’s decision not to obtain further information to verify matters of concern to it, for example by seeking evidence from Mrs JB and others. It is said that disbelieving Ms KX without clear evidence is a breach of natural justice.

[47] Ms KX accepts that the documents should not have been sent to Mrs GI in the form they were, without proper witnessing and without a recommendation to take legal advice. This Office is asked to note that Ms KX was not aware the documents were being sent to Mrs GI at the time, other than documents to be completed by a member of the trustee company, only the guarantee signed by the JBs needed to be witnessed; the fact that it was not witnessed was an administrative oversight, not a deliberate attempt to mislead Mrs GI into thinking that the guarantee could be signed without a witness present and without any explanation.

[48] The 11 March 2014 letter regarding witnessing and signing is accepted as being ambiguous, but that ambiguity is explained with reference to Ms QT’s explanation. It is noted that the firm asked the bank for a replacement guarantee containing a limitation of liability for Mrs GI before any signed documents were returned

to the bank and that Ms KX contacted Mrs GI immediately when she became aware the

[49] As to Ms KX’s supervision of staff, it is repeated that the incident was an isolated one. Counsel submits there was no basis for the Committee’s finding post- dating and signing of documents was a standard practice in the firm, and in particular could not draw the necessary inference from Ms KX having described what had occurred as a “disaster”.

[50] 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.

[51] I record that having carefully read the complaint, the response to the complaint, the Committee’s decision and the materials filed in the course of this 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.

[52] The nature and scope of a review have been discussed by the High Court, which said of the process of review under the Act:1

... 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.

[53] More recently, the High Court has described a review by this Office in the following way:2

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.

[54] The Committee considered Ms KX’s conduct was at the more serious end of the scale of unsatisfactory conduct. If that characterisation of the conduct as seriously unsatisfactory is accurate, then the evidential burden is more difficult to meet. The more serious the allegation, the more compelling the evidence should be that proves it.3

(a) evidence from Mrs JB and others that the Committee did not have before it, but which is available on review;

[56] There was no contradictor in the Committee’s own motion inquiry, in the sense that there was no direct evidence from Mrs JB or Mrs GI, both of whom were directly affected by Ms KX’s conduct. Counsel could have provided the statements. It is not clear why the Committee did not seek out that information, particularly given counsel’s indication that she would provide it if the Committee considered it would be of assistance. Most of the significant evidential inconsistencies identified by the Committee are resolved by the statement Mrs JB provided on review.

[57] Although evidence should ideally be before a Committee, and not introduced for the first time on review, it seems unfair at this stage to deprive Ms KX of the evidence Ms JB has provided. Given the passage of time, there is nothing to be

gained by referring matters back to the Committee,4 so fresh evidence has been accepted and considered on review.

[58] In her evidence, Mrs JB says she had been provided with information, in writing and otherwise, on a number of occasions, including at her meeting with Ms KX in June/July 2013 when Ms KX provided her with a copy of the trust deed and related information, and asked her to go away and think about the implications of the proposed appointment, discuss those with her aunt and get back to her.

[59] It is relevant to note, given the consumer focus of the Act, and the standards of competence and diligence that the Committee applied is the standard a member of the public can expect, that Mrs JB has no reservations about the service and advice she received from Ms KX. She expresses no concern over Ms KX’s competence or diligence.

[60] Committees are entitled to express their views of what reasonably experienced lawyers practising in particular areas can be expected to know, as the Committee did here.5 Ms KX says it is her practice to provide the type of advice and information identified by the Committee as missing. Ms KX says she provided relevant advice and information, although regrettably she did not maintain a written record to support her having done that. However, as Mrs JB has confirmed she received advice and information, her evidence effectively deprives the Committee’s determination of its evidential basis.

[61] In the circumstances, the determinations that relate to failings on the part of

Ms KX to provide information and advice to Mrs JB at various times are reversed.

[62] Ms KX did not think Mrs GI was her client. She did not provide her with a letter of engagement, and did not consider she had undertaken to provide legal services to Mrs GI, or had in fact provided legal services to her.

[64] With no evidence of an agreement between the two of them, the Committee implied the existence of a retainer from dealings between Ms KX and Mrs GI.

[65] At the heart of that question is whether sending the Deed of Appointment to Mrs GI, and asking her to sign and return it if she agreed to the appointment is a legal service. If it was not, it cannot be said that there was a retainer, which would mean that Mrs GI was not Ms KX’s client. The issue would then be that Ms KX failed to comply with r 12.1 by advising Mrs GI of her right to take legal advice (not necessarily independent as the Committee said), which Ms KX admits she did not do.

[66] One way of looking at the situation is whether Ms KX may have been prohibited from acting for Mrs GI. If, for example, there was a more than negligible risk that Ms KX may be unable to discharge the obligations owed to the Trust and Mrs GI, then she could not have acted for Mrs GI in relation to her appointment as an additional trustee.

[67] Mrs GI was to be a new trustee, coming on board after several years of the Trust having operated in a farming partnership with another trust. It is noted that the Trust Deed precluded related family members from being independent trustees, and that in turn would dramatically reduce the prospects of the trust indemnifying that trustee, with no commensurate benefit to the trustee, in this case Mrs GI. Mrs JB had been advised that it would be doing Mrs GI no favours to appoint her as a trustee. The above tends to suggest that Ms KX’s view was that Mrs GI agreeing to be appointed as an additional trustee was probably not in Mrs GI’s best interests. That view would tend to discourage Ms KX from acting for Mrs GI because of the risk of potential conflict between Mrs GI’s interests and those of the Trust, and be consistent with the need identified by the Committee, for Mrs GI’s legal advice to be provided by an independent lawyer.

[68] Mrs JB, as appointer, had instructed Ms KX to arrange for Mrs GI to be appointed. On Mr JB’s instructions, Ms KX had drafted the Deed of Appointment and obviously it had to be conveyed to Mrs GI. There are no indications that suggest Mrs GI had a lawyer until after the bank documents were sent to her. It seems reasonable for Ms KX to assume Mrs GI was self-represented, which obliged her to advise Mrs GI that she had the right to take legal advice, which in the circumstances should probably have been given by someone other than Ms KX.

[69] On that basis, sending the Deed of Appointment to Mrs GI, and asking her to sign and return it if she agreed to the appointment is not consistent with Ms KX providing legal services, in the sense of doing legal work, for Mrs GI. Ms KX did not offer to provide Mrs GI with advice in relation to any legal or equitable rights or

obligations, she simply provided the Deed of Appointment for her to sign, and should have told Mrs GI to go and get advice on it from a lawyer.

[70] In my view, by preparing the Deed of Appointment Ms KX was providing legal services to Mrs JB as the appointer of the Trust. There is insufficient evidence to safely form the view that Ms KX was also providing legal services to Mrs GI, and good reasons to believe she should not have so acted.

[71] In the circumstances, the determinations that rely on Ms KX’s failures to

[72] This aspect of the review is determined on the basis that Ms KX contravened r

12.1, and that was unsatisfactory conduct on her part pursuant to s 12(c) of the Act.

A lawyer in practice on ... her own account must ensure that the ... conduct of employees is at all times competently supervised and managed by a lawyer who is qualified to practise on his or her own account.

[74] This concern arises from the letter Ms QT sent on 11 March 2014. The contention in this regard is that Ms KX’s conduct fell below a proper standard because she and her partners were not supervising or managing the firm’s employees.

[75] While to some extent self-serving, the evidence of Ms KX and the evidence provided by the firm on review is that it had adequate systems in place at all times to supervise and manage employees’ conduct. Ms QT says she would not routinely have written a letter like that, and Ms KX would normally have checked correspondence before it went out. Her conduct was out of character and contrary to the firm’s usual policy.

[76] There is no evidence that contradicts any of that evidence, and no compelling reason to disbelieve Ms QT or her employers. Evidence can be self-serving and true at the same time.

[77] Not every error must result in a finding of unsatisfactory conduct. The circumstances were out of the ordinary, with Ms KX’s recent break on parental leave and Ms QT having lost her father, taken bereavement leave and being under pressure to catch up. Ideally systems should be robust enough to cope with unusual circumstances, and firms should be sensitive to the pressures that may affect

performance. Births, deaths and marriages, for example, can be very distracting, even for the most professional of people.

[78] It would be unfortunate to elevate a single error in circumstances that are unlikely to be repeated, to the level of unsatisfactory conduct for Ms KX within the definition of the Act. It is not correct to say that there is compelling evidence of routine systemic failures on Ms KX’s part, or on the part of the firm more broadly. It is clear from the evidence that the firm has taken a professional attitude in its response to the Committee’s concerns.

[79] In the circumstances, the determination that Ms KX’s conduct fell below a

[80] The determinations that there was unsatisfactory conduct on the part of Ms KX pursuant to s 12(a) of the Act are reversed. As a result, there is no statutory basis for the fine, costs and compensation orders the Committee made pursuant to s 156.

[81] The decision is modified to record a single determination that there has been unsatisfactory conduct on the part of Ms KX pursuant to s 12(c) of the Act for her failure to advise Mrs GI to obtain legal advice in breach of r 12.1.

[82] In view of the above, it is necessary consider what orders, if any, should properly flow from the contravention of r 12.1. Section 156 provides for a range of orders to be made in response to a determination of unsatisfactory conduct, only some of which are in the nature of penalty. Orders in s 156 serve a range of purposes, some are compensatory, others restorative or punitive.

[83] The functions of penalty in the disciplinary context are referred to in Wislang v

[84] Given those purposes, it is appropriate to impose a penalty on Ms KX for her failure to advise Mrs GI to obtain legal advice. Consideration has been given to a censure and a fine. It was a relatively minor error, albeit with potentially serious consequences which fortunately did not materialise.

[85] A censure marks out conduct that is unacceptable to the profession and the public. It is important that members of the public know they have the right to seek legal advice. It is all the more important that a person who is about to assume significant duties and obligations as a trustee should be told to seek advice. In the circumstances, Ms KX’s conduct warrants the imposition of a censure rather than the reprimand counsel suggested might be appropriate.

[86] I have considered whether imposing a censure and a fine would be disproportionate, and on balance conclude the combination is proper, and a modest fine is appropriate.

[87] It seems highly unlikely that Ms KX would err in a similar way again. Mrs GI obtained independent legal advice and extracted herself from her obligations to the Trust reasonably promptly and apparently without having incurred any personal obligations as a trustee. Quite rightly, Ms KX did not charge the Trust.

[89] In all the circumstances, a fine of $2,000 is imposed as a punishment to Ms KX, to deter other practitioners from overlooking the obligation to advise, and to reflect the public’s and the profession’s condemnation or opprobrium of the practitioner’s conduct.

[90] I have also considered ordering Ms KX to pay compensation to Mrs GI to cover her costs in obtaining legal advice. For compensation to have a statutory basis under s 156(1)(d), there must be a causative link between Ms KX’s conduct and Mrs GI’s loss.

[91] Logically, there is no such causative link. From the available facts, it can be inferred that Mrs GI had agreed with Mrs JB that she would be a trustee. If Ms KX had complied with r 12.2 Mrs GI would either have taken her advice or rejected it. If Mrs GI

had decided not to obtain legal advice, she would not have incurred legal costs. If she had decided to take legal advice, she would have incurred legal costs. The cause of the costs would have been Mrs GI’s decision to accept the appointment, subject to any legal advice she might take.

[92] Ms KX only followed Mrs JB’s instructions, as she was obliged to do. In the circumstances, there is no basis for a compensatory order.

[93] Pursuant to s 156(1)(n) the Committee imposed an order of $2,500 in relation to its costs and expenses. Based on the admitted ambiguity in the 11 March 2014 letter, the Committees’ inquiry was justified. It is just that Ms KX contribute to the costs and expenses of the Committee in investigating her conduct which must otherwise be met by all lawyers practising in New Zealand. On review, Ms KX is ordered to pay costs of $2,500 to the NZLS in respect of the Committee’s costs and expenses.

[95] Section 210 and the LCRO’s Costs Orders Guidelines provide a LCRO with a wide discretion to make costs orders on review. In a sense Ms KX’s application for review has been successful. She accepted she had contravened r 12.1 and that is the outcome of this review. The other orders were reversed. In the circumstances, no order for costs is made against Ms KX pursuant to s 210.

[96] Pursuant to s 211(1)(a) of the Act, the determinations that there has been unsatisfactory conduct on the part of Ms KX pursuant to s 12(a) of the Lawyers and Conveyancers Act 2006 and consequential orders are reversed.

[97] Pursuant to s 211(1)(b), 152(2)(b)(i) and 12(c) of the Lawyers and Conveyancers Act 2006, a determination is made that there has been unsatisfactory conduct on the part of Ms KX for her failure to advise Mrs GI to obtain legal advice in breach of r 12.1.

[98] Pursuant to s 211(1)(a) and 156(1)(i) and (n) of the Lawyers and Conveyancers Act 2006, Ms KX is ordered to pay a fine of $2,000 and costs and expenses of $2,500 to the New Zealand Law Society within 28 days of the date of this decision.

[99] Pursuant to s 215 of the Lawyers and Conveyancers Act 2006 the order for costs and expenses may be enforced in the District Court.

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

Mr AB as the Related Person [Area] Standards Committee [X] New Zealand Law Society

New Zealand Legal Complaints Review Officer

KX v Area Standards Committee X [2018] NZLCRO 5 (25 January 2018)