TL RH Holdings Limited v QG [2018] NZLCRO 59 (6 July 2018)

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	LCRO 186/2015
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	TL RH LTD & TL HOLDINGS LTD Applicant
AND	QG _Respondent

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

[1] TL RH Ltd & TL Holdings Ltd (TL) have applied for a review of a decision by the [Area] Standards Committee [X] (the Committee) to take no further action in respect of their complaint concerning conduct on the part of Mr QG.

[3] TL initiated High Court proceedings against the VMs personally and as trustees of their family trust. Mr and Mrs VM had been directors of TL but had ceased as directors after a rift formed between them and other directors. Mr QG’s involvement in that litigation on behalf of the VMs gave rise to TL’s complaint against Mr QG.

[4] TL’s position was that Mr and Mrs VM did not comply with their obligations in the process of discovery. TL applied to strike out the VM’s defences. Mr VM

attended a hearing before [Judge A] without representation. Mr VM’s comments to the Court resulted in Mr QG being called to give evidence about, among other things, the status of their retainer. Mr QG applied successfully to the Court for leave to cease acting, leaving the VMs unrepresented.

[5] In addition to the direct losses TL attributed to the VMs, the strike out application was costly to TL and resulted in the trial date being vacated because the VMs had been unable to complete discovery in accordance with the Court’s timetabling directions.

[6] TL considers Mr QG should contribute towards its costs because of his involvement in the proceeding on instructions from the VMs. The underlying premise of TL’s argument is that it would have been in TL’s economic interests for Mr QG to have terminated his retainer with the VMs sooner rather than later, and to have told the Court and TL that the VMs were without representation.

We are involved in High Court litigation with clients formerly represented by Mr QG. We believe that Mr QG’s conduct caused an adjournment of a trial and his actions have caused additional expense to our case.

[8] TL attached what it described as “full details” of its complaint which included a decision by [Judge A], dated [date], determining the unsuccessful strike out application and noted that the complaint was not about its lawyer.1 TL said it had sustained “considerable financial loss and undue delay because of Mr QG’s failings”. TL sought “compensation and disciplinary actions as determined by the Law Society to maintain professional standards”.

[9] TL’s complaint relies heavily on [Judge A]’s decision, which refers back to orders made by [Judge B] timetabling particular discovery. TL reads that decision as saying that His Honour “found that Mr QG had effectively ceased to represent the VMs from 28 April 2014”, although Mr QG entered appearances after that for his clients. TL says it would have made different decisions if it had known what the arrangement was between the VMs and Mr QG. TL says Mr QG’s claim to have acted appropriately is entirely at odds with [Judge A]’s findings. TL says that:

unrepresented from 28 April 2014, despite Mr QG holding himself out as acting for them. This must warrant action being taken surely.

[10] TL is critical of Mr QG for not telling the court, effectively doing nothing because he was not being paid, and his failure to advise anyone that he was doing nothing, because he did not want to be out of pocket. It says that in effect, the entire strikeout hearing was consumed with an examination of Mr QG’s conduct and the substantive fixture was adjourned as a result. TL considered the Committee should have requested a copy of the transcript of the hearing before [Judge A].

[11] TL is also critical of Mr QG’s firm having registered a caveat against the VMs’ property, which appears to have occurred on or about the date that the strike out application was heard. TL speculates that Mr QG’s motivations for not having disclosed he had ceased acting were to advance his own economic interests, ensuring he preserved the right to caveat ahead of any other creditor.

[12] The Committee summarised TL’s complaint at paragraph [12] of its decision in the following way:

(a) That Mr QG should have withdrawn from acting for the VMs at an earlier stage and in any event immediately after the hearing on 6 May 2014 (regarding interlocutory application for discovery) given that he had previously advised VMs that he was unable to represent them at the substantive hearing

(d) that Mr QG was responsible (or partly responsible) for causing the Companies to make the Strike Out Application and for the resulting costs and delays.

[13] The Committee considered the materials that were before it, which included the complaint and supporting materials, Mr QG’s response (which included an indication that the VMs had not generally waived privilege), and other correspondence between the parties and NZLS. The reasons set out in the decision include findings that Mr QG was not obliged to withdraw in May 2014, had not misled the Court or TL, had not conducted himself in a manner that impacted on TL’s costs and was not responsible for TL’s costs or delays in the proceeding. Overall, the Committee decided further action was not necessary or appropriate pursuant to s 138(2) of the Lawyers and Conveyancers Act 2006 (the Act) in relation to the complaint.

[14] TL applied for a review. It wants Mr QG to take responsibility for his conduct and a decision from this Office that “properly deals with the issues” TL has raised. TL set out a detailed chronology of events that it considers relevant and contends that as Mr QG had failed to carry out his duties as a lawyer, he was primarily at fault for the situation that had arisen between TL and the VMs as parties to the litigation.

[15] TL considers the Committee was wrong to find that Mr QG did not need to alert the court and TL to issues over his representation of the VMs any earlier than he did; that Mr QG had not misled TL and the court by continuing to correspond on the basis that he was still counsel for the VMs, and that it was not Mr QG’s conduct that caused the hearing date to be vacated.

[16] TL says Mr QG was derelict in his duties, the situation is wholly Mr QG’s fault, he knew all about the VMs’ position, left them “in the lurch” and they should not be held responsible.

[17] TL contends that Mr QG had made it clear to the VMs that he would not be acting for them, but had concealed that fact from TL and the court. It says [Judge A] confirmed that associate [Judge B] would not have made the orders that were made on 3 May 2014 if the court had known about a letter Mr QG had written to Mr VM on 28 April 2014 and that for all practical purposes Mr QG’s firm had left the VMs to deal with discovery themselves. TL considers the Committee’s decision is irreconcilable with the VMs being lay litigants only from September 2014, not April

if Mr QG had advised that he was withdrawing at an appropriate time, the VMs would have to have attended at court themselves and would have had to comply with the further discovery obligations.

[19] Instead, TL says “everyone was labouring under the false impression that Mr QG was still conducting the proceedings and dealing with discovery issues”. TL says that the VMs “cannot be blamed for Mr QG’s failures”. TL says it has found the situation extremely frustrating and describes the Committee’s decision as “lame” saying that “if this type of conduct is permissible, the court system would be in disarray”.

[20] TL sought to raise further matters in a letter to this Office dated 19 April

2016 which were not traversed in the complaint process. Those issues have been disregarded on review because they were not before the Committee and it defeats the purpose of the review application to introduce materials were not before the Committee. It is not possible to review materials that have not been viewed.

[21] Mr QG confirmed he was willing for this Office to deal with the matter on the papers and objected to TL providing materials that should have been provided to the Committee,- but were not. Mr QG considers that the Committee’s decision should be confirmed. He says he had recorded his reservations about his ability to act beyond 6 May 2014 in his letter of 28 April 2014, not that he took no active steps after 6 May 2014. Mr QG confirms that he advised the VM’s of timetabled directions, dates for compliance and other obligations. Mr QG refers to a supplementary affidavit of documents that would have been prepared if the VMs had been able to obtain the documents to list, which they were not. Mr QG says he had no indication the VM’s were refusing to comply with their discovery obligations. He understood they needed more time to do so.

[22] Mr QG emphasises that it was the VMs’ inability to physically obtain documents to be listed in a supplementary affidavit of documents that affected the proceeding, not any representation issues involving him. Mr QG says the VMs would have been unable to comply with their discovery obligations any earlier even if he had sought leave to withdraw earlier because they simply had been unable to get the documents.

[23] A review hearing was scheduled for 8 July 2018. Mr SG and Mr ZW attended as directors of the company, with Mr ZW’s wife attending as his support person. Mr QG also attended. Mr QG objected to Mrs ZW’s attendance as support person. While his objection was understood and accepted, there was no good reason to require Mrs ZW to leave. The review hearing proceeded on the basis that all present understood the hearing was a private process and not for public discussion.

[24] The nature and scope of a review have been discussed by the High Court, which said of the process of review under the Act:2

... 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.

[25] More recently, the High Court has described a review by this Office in the following way:3

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.

[26] For the purposes of the rules TL is a third party to the relationship between Mr QG as a lawyer and the VMs as his client. As such, the obligations Mr QG owed to TL were very limited. Rule 12 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (the Rules) generally encapsulates those obligations saying:

A lawyer must, when acting in a professional capacity, conduct dealings with others, with integrity, respect and courtesy.

[27] There is no evidence of any conduct on the part of Mr QG that was lacking in respect and courtesy. At their heart, the allegations by TL are that Mr QG was

[28] However, it is relevant to note that what TL experienced is the result of Mr QG complying with obligations that he owed to his client, the VMs. It is apparent from the materials available on review that the VMs had run out of money to fund their defence of TL’s proceeding against them.

[29] In general, a lawyer who has been retained by a client must complete the regulated services required by the client under the retainer. However, a lawyer is relieved of that obligation if the client discharges the lawyer from the engagement, or the lawyer and client agree that the lawyer is no longer going to act, or the lawyer terminates the retainer for good cause. If the latter, the lawyer is obliged to give reasonable notice to the client specifying the grounds for termination. Even then, the lawyer’s obligations to the client may not be at an end.

[30] It is abundantly clear from the decision of [Judge A] that Mr QG’s retainer had not come to an end when TL says it did. The VMs were responsible for collecting discoverable documents. Mr QG remained on the Court record as the VMs’ lawyer until the High Court discharged him from that position. At that point Mr QG’s obligations to VM were at an end.

[31] Mr QG’s conduct was entirely consistent with his obligations under r 4.2.3, which constrains a lawyer from terminating a retainer or withdrawing from proceedings only because the client has failed to make arrangements satisfactory to the lawyer for payment of the lawyer’s costs. If a client is unable to pay or make suitable arrangements, the lawyer is still obliged to have due regard to his or her fiduciary duties to the client concerned and give the client reasonable notice to enable the client to make alternative arrangements for representation. Lawyers cannot just abandon clients who are struggling to pay.

[32] It is abundantly clear from the information available on review that Mr QG was giving the VMs such assistance as he could to find another lawyer, preferably funded by Legal Aid because their funds were limited. It is apparent the VMs were having difficulties extracting discoverable documents from third parties.

[33] Mr QG managed the fiduciary obligations he owed to the VMs by limiting the damage that their inability to pay might have on the prospects of their defence succeeding. What Mr QG appears to have done is to continue acting for the VMs on the basis that he would assist with Court appearances. As this is not a complaint by the VMs, it is assumed for the purposes of this review that Mr QG dealt with his clients in accordance with their instructions to him (which are privileged for the

purposes of this review because the VMs have not waived privilege for the purposes of this process) and with the obligations he owed to them.

[34] It is noted that TL considers its interests would have been far better served by Mr QG telling everyone that he had terminated his retainer with the VMs in May. That would not have been in his clients’ interests, nor would it have been correct. It is also not consistent with [Judge A]’s decision. Clearly Mr QG owed fiduciary obligations to the VMs as solicitor on the court record. Even if he had wanted to, he could not simply step aside when it became apparent the VMs were unable to pay him. It is also noted that Mr QG had concerns over his firm’s internal resources and doubts about whether the firm had the capacity to deal with TL’s proceedings against the VMs.

[35] There was no direct criticism of Mr QG in [Judge A]’s decision. As I read that decision, it captures the essence of the retainer that continued in effect between the VMs and Mr QG well beyond May 2014. It acknowledges that Mr QG was not involved in physically locating documents in the discovery process.

[36] Mr QG’s appearance before [Judge A] to be examined by Mr VM, was essentially a product of Mr VM either not understanding or not accepting the realities of his retainer with Mr QG. If this complaint had been made by the VMs, they would be deemed to have waived privilege, and it would be possible to independently enquire into the relationship between lawyer and client.

[37] It would be inappropriate to explore those events more fully in this review process, or in the Committee’s complaint process, because the VMs have not waived privilege beyond that specified for the purposes of the hearing before [Judge A]. Although TL’s position is that Mr QG left his clients in the lurch, it would be improper to allow the processes of complaint and review to be used by a third party to drive a wedge between lawyer and a client, even if, from the outside, that relationship does appear to have fractured at some point in some way.

[38] The question then is, whether viewed from the perspective of the very limited obligations Mr QG owed to TL, whether his conduct fell below any of the relevant standards. The evidence does not support a finding that Mr QG failed in his obligation to treat TL with integrity.

[39] After considering all of the materials available on review and hearing from the parties, this decision reaches the same conclusion that the Committee, but by a slightly different route.

[40] Further action is not necessary or appropriate in relation to Mr QG’s conduct. For the reasons set out above, which are not inconsistent with the Committee’s reasons, the Committee’s decision is confirmed.

Pursuant to s 211(1)(a) of the Lawyers and Conveyancers Act 2006 the decision of the Standards Committee is confirmed.

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

New Zealand Legal Complaints Review Officer

TL RH Holdings Limited v QG [2018] NZLCRO 59 (6 July 2018)