YJ v XW [2018] NZLCRO 76 (22 August 2018)

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	LCRO 7/2016
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	Mr and Mrs YJ Applicants
AND	XW _Respondent

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

[1] Mr and Mrs YJ (the YJs) 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 XW.

[2] Mr XW acted for vendor and purchaser in sale and purchase transactions. Mr and Mrs YJ’s family trust bought Mr YJ’s mother’s house from her, so that she could buy the house next door. The two properties were cross leased on a freehold title.

[3] The background and complaint are set out and addressed in the Committee’s decision. Except to the extent that Mr XW acknowledges he did not provide the YJs with up-to-date client information on the principal aspects of client service, in writing and in advance of doing work for them, then billed the YJs for the work he had done in December 2014 and January 2015, it is not necessary to repeat the background in any detail here.

(a) answer the “primary and fundamental question of how the three lump sum figures were calculated”;

(h) address the issue of them being charged for invoicing. [5] The outcomes sought by the YJs are:

(a) a ruling that the rates from the now accepted 2009 (dated 2008) be applied to Mr XW’s timesheet;

(e) an order made for cost incurred by the YJs due to Mr XW’s resignation as a Trustee (as Mr XW has consistently refused to supply a written explanation of his fees);

(f) an answer to the question of how the three lump sum figures in question were calculated;

(g) a ruling of unsatisfactory conduct made against Mr XW for a breach of r 3.4;

(i) for the Legal Complaints Review Officer (LCRO) to look deeper into Mr XW not acting correctly as trustee and in effect placing himself in a position of conflict of interest.

[6] Mr YJ attended a review hearing in Auckland on 15 August 2018. Mr XW was not required to attend and did not exercise his right to do so.

[7] 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.

[8] 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.

[9] The YJs say that their primary and fundamental question is how Mr XW calculated his fees. The YJs’ position is that that question has not been answered to their satisfaction either by Mr XW or the Committee.

[10] Mr XW’s position is that, albeit late, he provided the YJs with the information required by r 3.4, showing his hourly rate as $495. By that stage he had completed the work and rendered his invoice. I take it Mr XW considers that providing the information late and offering to meet with the YJs to explain it is a complete answer to this aspect of the YJs’ complaint.

[11] The absence of information in advance is at the heart of the YJs’ complaint. Without that information, their fee expectations were not set or managed and they had little or no idea what fees they might be exposed to. When the bill came, they could not work out how the fee had been calculated. When the timesheet came, it did not support the fee on a time and attendance basis. Mr YJ’s evidence clearly demonstrates he made repeated attempts to find some rational explanation for the fees Mr XW charged that met with his understanding of how fees should be calculated.

[12] As Mr XW declined to provide the YJs with anything in writing to explain his fees beyond his belated letter of engagement and timesheet, and Mr YJ declined to attend a meeting without first having an explanation in writing, lawyer and client reached deadlock. That was unfortunate.

September 2015. At paragraph 5 of his letter Mr XW says that the fees he charged the

...the usual fees that we would normally charge with a margin for the extra time and attendances (including settlement) which took place over our Christmas holiday period – a fact that Mr YJ appears to suggest is either unreasonable or irrelevant...

[14] That letter was copied to the YJs in the course of the complaints process, but it did not satisfy their curiosity. In fairness, while it may be strictly accurate, it was not particularly informative because Mr XW did not say what the usual fees were that his firm would normally charge. That would have been immensely helpful to the YJs. He did not say what the “extra” time and attendances were. They cannot have been settlements because those are an entirely routine aspect of conveyancing transactions.

Although it is accepted that not everyone at Mr XW’s firm was back to work after the holidays, he suggests, but does not explain, what the basis is for charging more in January, if indeed that is what he did. No special holiday rate is mentioned in the information Mr XW provided to the YJs.

[15] It is understood that Mr XW’s firm had two separate clients, not one. The firm was acting for two buyers: the YJs’ trust from Mr YJ’s mother, and Mr YJ’s mother from the vendor. The firm was also acting for Mr YJ’s mother in the sale of her property to the YJs’ trust. Further, Mr XW’s firm was instructed to prepare a Property Sharing Agreement between Mrs YJ and the trustees of the YJs’ family trust.

[16] Mr YJ says the work was not difficult. He had no concerns about any conflict between the interests of the trust and those of his mother. They all wanted the same thing.

[17] However, Mr XW was professionally obliged to provide a competent and diligent service in all respects to each of his clients in respect of all the related transactions.

[18] Although Mr YJ is critical of Mr XW for making a number of errors, the evidence does not support a finding that the service he provided was not competent or diligent.

[19] As to the fees, logically, reference to “usual fees” is indicative of a standard fee, in this case a standard fee for work of the type he did for the YJs’ trust and Mr YJ’s mother. Many lawyers charge standard fees for straight forward transactional work in circumstances where there is little doubt about what will be required. What is usually required is routine and well understood by those like Mr XW who customarily do that type of work and who charge fees on that basis. However, it cannot be assumed that a lay client, even one with some history of buying and selling property, knows what the usual fee is, or what that should cover, without being told. That is one of the reasons why lawyers must provide that type of information in advance.

[20] Without having had any information about fees in advance, the YJs were understandably surprised at the margin Mr XW added to represent “extra time and attendances” over and above the usual fees Mr XW would normally charge. They did not know what the usual fee was and they did not know what was extra.

[21] Logically, time and attendance can only be “extra” if there is an existing baseline or standard fee.

[22] Although Mr YJ makes much of Mr XW supposedly adding a premium for coming back to work early, that seems to be something of a red herring. The point seems to be less that Mr XW came back to work early, and more that there were “extra” time and attendances over and above what was usual for those types of transaction. It seems largely coincidental that some of that extra time and some of those extra attendances occurred before the whole of Mr XW’s firm returned to work after the Christmas break. It is relevant to note, however, that most attendances generally happen before settlement.

[23] When the YJs raised concerns in late January, after the transactions were complete and they had been billed, Mr XW promptly provided information about his fees that accords with r 3.4 and attempted, without success, to engage the YJs in a discussion about fees.

[24] Mr XW has explained the basis on which he says his fees were calculated. His fees are based on the usual fees that his firm normally charges, with a margin added to cover the extra time and attendances involved. It just so happens those took place over our Christmas holiday period. It may well be that the timing is irrelevant, but charging extra for time and attendances that are not factored in to standard rates is not necessarily unreasonable.

[25] With some justification, the YJs want greater clarity from Mr XW. However, the explanation has been given and would probably have been given in greater detail if the parties had met.

[26] It is unfortunate that Mr XW did not take the opportunity in the complaint process to set out what the usual fees were that he would normally charge, to distinguish between those and the “extra” time and attendances, and whether he was charging more for working in January, and if so the basis on which that added charge would be.

[27] The Committee’s view was that the fees were fair and reasonable “considering the amount of work that would have been involved in these transactions”. To a significant extent, this Office must rely on the expertise of Committees because they are constituted of lay persons and practicing lawyers with expertise and current knowledge of market conditions. It is one thing for Mr XW and the Committee to say the fee is fair and reasonable, it is another to see how the three invoices were calculated. From their perspective as lay people, it would not be, and plainly was not, apparent to the YJs how the three invoices were calculated.

[28] Mr XW should have explained that, in advance, in his letter of engagement and information provided pursuant to r 3.4. As he acknowledges, he did not.

[29] The YJs say the Committee did not make a ruling on Mr XW’s costs. That is incorrect. The Committee determined that aspect of the complaint on the basis that further action was not necessary or appropriate. By doing so the Committee concluded that there was no basis on which to say the costs were unfair, unreasonable or should otherwise be modified in response to the concerns raised by the YJs, which brings me to the next point raised by the YJs on review.

The Committee did not apply the rates set out in Mr XW’s terms and conditions from

[30] The YJs say the Committee did not apply the rates set out in Mr XW’s terms and conditions from 2008/9. While that is literally correct, it is not a reason to reverse or modify the Committee’s decision because Mr XW did not charge the YJs a fee based on a multiplier of his hourly rates. It appears from the explanation he gave to the Committee that he charged his usual fee plus a margin for extra time and attendances.

[31] The YJs say the Committee did not penalise Mr XW for contravening r 3.4. That too is correct. However, the Committee did not make a determination that there had been unsatisfactory conduct on Mr XW’s part. Without such a determination, there is no statutory basis on which to impose any of the consequential orders provided for in s 156, including penalty orders.

[32] Section 12(c) of the Act includes the following in the definitions of unsatisfactory conduct for the purposes of the Act:

conduct consisting of a contravention of this Act, or of any regulations or practice rules made under this Act that apply to the lawyer ...

[33] It may appear from the wording of s 12(c) that a determination of unsatisfactory conduct is an inevitable consequence of a lawyer being found to have contravened a practice rule. Mr XW acknowledges conduct in contravention of r 3.4 which is a practice rule made under the Act. However, the High Court has, on a number of occasions, provided guidance that ameliorates the harshness of a strict

approach when considering whether a determination of unsatisfactory conduct should be made. In Wilson v LCRO Hinton J recently explained:3

The rules are to be applied as specifically as possible. In my view, they are also to be applied as sensibly and fairly as possible. These are practice rules not a legislative code.

...the rules should not be applied in an unduly technical manner. The conduct alleged should clearly offend. A finding of unsatisfactory conduct is a serious matter.

...there is a difference between unsatisfactory conduct ...and excusable slippage.

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.

[35] So, it is clear from Hinton J’s comments that a Committee has a discretion to exercise in deciding whether to make a finding of unsatisfactory conduct. That is the Committee’s discretion to exercise at first instance, and I would have to exercise particular caution before substituting my own judgment on review, and have good reason to do so.

[36] Mr XW acknowledges he overlooked providing the requisite information to the YJs in writing in advance of commencing work. Mr XW says that was overlooked in the busy run up to the annual Christmas holidays.

[37] It is accepted that December can be a busy month for lawyers. However, Mr XW’s timesheets show a first attendance recorded on 3 December 2014, further attendances on four other days, and record the fact that Mr XW was still working on the YJs’ matter almost three weeks later, on 22 December 2014.

[38] It could be argued that the busy run up to the annual Christmas holidays is not sufficient excuse for Mr XW having failed for three weeks to send out the requisite information to comply with r 3.4. Mr XW had the file in mind on not less than five occasions before the Christmas break. Letters of engagement are reasonably standard documents, but they do take some effort to prepare well, particularly where there is some uncertainty about what the retainer will involve. However, as the complaint and review processes clearly demonstrate in this case, leaving them aside is

_{a false economy. Lawyers are often busy. Annual holidays follow a
predictable cycle.}

It could be argued that December busyness is not a good enough excuse to justify non-compliance with the rule.

[39] It can reasonably be assumed that when he returned to work the day before settlement Mr XW’s focus would have been on getting the matters ready for settlement rather than on checking off the administrative matters that should already have been attended to.

[40] The Committee had all that information. There is nothing in the information before me on review that adds to or detracts from the fact that Mr XW overlooked sending the information and admitted that. It is accepted that what followed aggravated the YJs, but beyond the fact that arguments could be made to justify a different exercise of discretion, nothing emerges from the materials available on review, including Mr YJs’ comments at the review hearing, that constitutes good reason to substitute my own judgment for that of the Committee.

[41] While the YJs’ were disgruntled by Mr XW’s failure to provide terms of engagement, the conduct alleged does not clearly offend. There is room for the view that the contravention of r 3.4 in this case is more in the nature of excusable slippage than unsatisfactory conduct.

[42] On that basis, there is no sufficiently good reason to reverse or modify the

The Committee did not “rule (either way) on the unenforceable Property Sharing

[43] The YJs say the Property Sharing Agreement is unenforceable. They may well be right. The YJs believe the Committee should have made a ruling that confirms or denies that proposition. That is not correct. The agreement that Mr XW provided to the YJs is a draft. It is apparent from the email Mr XW sent attaching the draft that it was intended the draft would be amended to reflect the parties’ situations.

[45] The YJs say the Committee did not see or understand that Mr XW had charged them double. Mr XW says he was not aware of any fees having been duplicated. It became apparent at the review hearing that Mr YJ’s position on double charging is a product of a methodology that applies a formula involving hourly rates.

He says that, based on the time Mr XW spent on the file, the bill effectively represents a doubling of his hourly rate, whatever that was.

[46] Mr YJ’s proposition only stands up if Mr XW’s charges were rendered strictly on the basis of time and attendance. As that is not the only basis on which Mr XW calculated his fee, there is no basis on which the double charging argument can be advanced.

[47] The YJs say the Committee failed to understand that Mr XW was not acting as a trustee. That is not correct. He was acting as a trustee, at least until he resigned. Mr YJ’s complaint is that Mr XW created a situation of conflict then opted out of his role of trustee. In fairness, it is difficult to see what else he could have done. It seems the YJs’ complaint is that Mr XW was not acting as a trustee should. As that is an allegation of breach of duty as a trustee, the Committee, like this Office, lacks jurisdiction to determine the point.

[48] The YJs say the Committee did not address the issue of Mr XW charging them for preparing invoices. That is correct. However, it would only be relevant to the quantum of Mr XW’s fees if he had charged strictly on the basis of time and attendance, which he did not.

[49] The bulk of the concerns raised by the YJs arise from the admitted fact that Mr XW did not provide them with information about his fees in advance of doing the work. The rest flows from that. Although it cannot be said that the YJs’ concerns are baseless, after giving careful consideration to all of the materials available on review including Mr YJs’ comments at the review hearing, there is no good reason to reverse or modify the decision. The decision is therefore confirmed.

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

Mr and Mrs YJ as the Applicant Mr XW as the Respondent [Area] Standards Committee [X] The New Zealand Law Society

New Zealand Legal Complaints Review Officer

YJ v XW [2018] NZLCRO 76 (22 August 2018)