KC v MZ [2018] NZLCRO 79 (24 August 2018)

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	LCRO 212/2015
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	KC Applicant
AND	MZ _Respondent

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

[1] Mr KC has applied for a review of a decision by the [Area] Standards Committee [X] (the Committee) to take no further action in respect of his complaint concerning conduct on the part of Mr MZ.

[2] Mr KC instructed Mr MZ to represent his interests in a Family Court proceeding that resulted in a division of property between Mr KC and his former partner, Ms UV in July 2014. Mr KC was disappointed in the result. He says he lost too much and didn’t gain enough. Mr KC does not accept that Mr MZ conducted his matter competently and carefully. He made a complaint to the New Zealand Law Society (NZLS) accordingly.

[3] Mr KC refers in his complaint to comments in the Family Court decision regarding a lack of evidence, expertise and readiness. He says Mr MZ did not tell him

to “supply forensic accounting” and take other steps which might have better advanced his interests. Mr KC, who feels he spent a number of years financing Ms UV’s lifestyle before the relationship came to an end, is left with a long list of unanswered questions. He says the judge’s comment that he was well represented is contradicted by the outcome and he feels he was short-changed on the time spent at the defended hearing.

[4] Mr KC says the outcome of the Family Court proceeding has caused him “financial, physical and emotional trauma” and he considers an investigation into Mr MZ’s conduct is warranted.

[5] Mr KC is critical of Mr MZ’s communication with him, advice, performance at the hearing, including cross-examination of Ms UV, and the fact that he ended up with costs orders made against him. Mr KC accepts that at what appears to have been a pivotal time in his relationship with Ms UV he considered “no agreement seemed necessary” between them. Mr KC says Mr MZ gave him conflicting advice at different times, was just not interested in his case and did not want to discuss the outcome with him. Mr KC said his home and business were under threat.

[6] Mr KC attached an explanation of what he considered fair as between him and Ms UV, and a copy of the reserved Family Court decision of Judge Y dated [date], which dealt with the various issues raised in the proceeding, including preserving a property at [Address A] as Ms UV’s separate property. His Honour ordered Mr KC to pay Ms UV

$16,000 in costs, calculated according to the scale and a judgment sum of $204,057, representing her interest in their relationship property. Mr KC retained assets to a similar value.

[7] Mr MZ’s response covers the issues raised and denies any wrongdoing in relation to three key issues. First, that he wrongly categorised separate property as relationship property. Second, that he should have obtained expert forensic accounting evidence. Third, that any deficiency in his representation of Mr KC affected the outcome. Mr MZ says Mr KC did not instruct him to obtain forensic accounting evidence, he denies any deficiency in his advice or representation and says although he was unable to undertake appeal work at the time, he advised Mr KC about his right to challenge the Family Court decision on appeal.

[8] Mr KC responded to Mr MZ’s reply point by point, identifying areas of difference over the facts that were before the Family Court and his finances with Ms UV. He says that Mr MZ misled him as to the likely prospects of success and compares Mr MZ’s costs of $11,000 unfavourably with the $16,000 of costs he was ordered to pay Ms UV. Mr KC says he would have paid more to generate “stronger evidence” and get a better result.

[9] The Committee considered the materials and decided there was no basis on which to uphold Mr KC’s complaints about Mr MZ’s conduct or the service he had provided. The Committee determined Mr KC’s complaint pursuant to s 138(2) of the Lawyers and Conveyancers Act 2006 (the Act) on the basis that further action was not necessary or appropriate.

[11] In his application for review Mr KC says Mr MZ’s poor performance and crucial mistakes cost him his life savings and business. Mr KC wants compensation, justice and a refund of all the fees he paid to Mr MZ.

[12] Mr KC is critical of Mr MZ’s responses after the hearing, which he considers demonstrate a lack of interest in his proceeding. He says Mr MZ did not advise him before the hearing that “the die was cast”, or that Mr KC had no chance of winning or obtaining a favourable fair outcome. Mr KC says he would have taken a different path if he had known those things and feels misled by Mr MZ’s comment immediately before the hearing: “well put it this way [Mr KC], your case is stronger than hers”. Mr KC is unable to reconcile Mr MZ’s responses with his understanding of events.

[13] Mr KC refers to details of the structure of his businesses, maintains his objections to the categorisation of property as relationship rather than his separate property, remains unsettled about the absence of forensic accounting evidence, which he believes was vital to his case, and remains convinced that Ms UV did better than she should have out of their relationship. He says he was forced to go to a hearing by Ms UV, who not only refused to attend mediation, but got the better end of the deal as a result of going to the hearing.

[14] Mr KC remains critical of Mr MZ’s strategy and advice, and says Mr MZ wrongly relinquished his assets into the pool of relationship property. He attributes blame to M MZ for a result he describes as one-sided, disadvantageous to him, unfair and unjust. Mr KC says Mr MZ has disadvantaged him by surrendering his life savings and his life’s work to the relationship property pool.

[15] Mr KC feels he was so poorly served by Mr MZ, and the legal system in general, that the only way he can get some justice is to go to the media and his local MP. Mr KC believes others should not have to go through what he’s been through, and should be forewarned about how the system operates in New Zealand.

[16] Mr MZ responded in detail to the issues set out in Mr KC’s application for review. He acknowledges a minor error in his reply to the complaint, and says he consistently advised Mr KC that he was unlikely to succeed in his claim for an interest in [Address A]. He says Mr KC’s understanding of the companies is incorrect. There were two separate companies and the Companies Office register discloses information that is contrary to the instructions he received from Mr KC.

[17] Mr MZ repeated his explanation of the arrangements Mr KC and Ms UV had made with respect to their separate and relationship property. A significant aspect of those arrangements is reflected at paragraph 5 which says:

unfortunately for Mr KC, apparently without legal advice, he put the funds from his former property into the [Address B] property, which was to be used as a family home, without entering into an appropriate section 21 agreement. It is that decision which has meant that he has contributed more to the relationship property pool than Ms UV, while at the same time Ms UV kept the [Address A] property separate.

[18] Mr MZ says that although he understands why Mr KC considers he has grounds for complaint over the lack of forensic accounting evidence, he does not accept that such evidence would have assisted Mr KC’s case because no forensic accounting issue arose from the joint account in question. Mr MZ says that as both parties accepted the position over the drawing/wages and rental income payments to that account and the amounts, forensic accounting would have been a pointless exercise. As there was no contest between the parties over the joint account, Mr MZ did not need expert evidence to be able to put the argument that Ms UV could not have afforded to cover all of her living expenses and pay her mortgage from the rental income alone. Mr MZ says he advanced that argument and the Court addressed it.

[19] Mr KC attended a review hearing in Auckland on 22 August 2018 with a support person, Ms DG. Mr MZ was not required to attend and did not exercise his right to do so.

[20] 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.

[21] 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.

[22] 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:

[23] The crux of Mr KC’s complaint is that Mr MZ did not advise or represent him competently and carefully. That allegation translates into the contention that Mr MZ contravened r 3 of the Lawyers and Conveyancers (Lawyers: Conduct and Client Care) Rules 2008 (the Rules) which says:

In providing regulated services to a client, a lawyer must always act competently... consistent with the terms of the retainer and the duty to take reasonable care.

[24] The key issue that continues to occupy Mr KC’s mind is his concern that Mr MZ miscategorised $100,000, conceding it into the relationship property pool when Mr KC wanted to argue it was his separate property. In attempting to argue that as a professional standards issue, Mr KC was suggesting that Mr MZ had acted counter to

his instructions and surrendered leverage that he should have retained, so he could force

[25] There are a number of difficulties with that proposition. One is that it was not clearly articulated in Mr KC’s complaint. It is fundamentally a complaint that Mr MZ did not act in accordance with Mr KC’s instructions. Mr KC says he instructed Mr MZ to categorise the $100,000 as his separate property by way of a diagram and notes. He is unable to concede that the couple’s finances could be seen in any other way.

[26] The diagram reflects the flow of funds into and out of various property interests. All it really does is show how Mr KC wants the facts, which are not really in dispute, interpreted. It is not inconsistent with the decision or the tracing exercise carried out by the Family Court judge, who made a decision that has not been appealed.

[27] Mr MZ says the $100,000 was inarguably relationship property and is of the view that Mr KC missed the opportunity to reserve it to himself as separate property some years ago. If he had wanted to intermingle it and keep it for himself, Mr KC would have had to reach and document agreement to that effect with Ms UV and they would both have had to have that agreement witnessed and certified by lawyers pursuant to s 21 of the Property (Relationships) Act 1976 (the PRA). They did not. The Family Court considered the arguments and found no such agreement had, in fact, been reached.

[28] This Office cannot answer the fundamental question of whether the agreement or the Family Court decision was fair to both parties because it has no jurisdiction to determine matters pursuant to the PRA. The Family Court having dealt with the relationship and separate property issues, the only place that issues of unfairness could have been resolved was on appeal. It is understood from Mr KC that opportunity is long gone.

[29] Given the facts, the single biggest obstacle for Mr KC seems to be that he intermingled funds without entering into an agreement pursuant to s 21 of the PRA. Without being able to reach such an agreement with Ms UV, she never formally committed to the proposition advanced by Mr KC that he should be entitled to share in property that she managed to keep separate. As with Mr KC’s other regrets, that situation cannot be laid at Mr MZ’s door.

[30] I have carefully considered all of the concerns Mr KC raised in his complaint and on review. I have been unable to identify evidence of any conduct on the part of Mr MZ that falls below a proper professional standard. While there is always more than one way to advance a case, the evidence does not support the proposition that the case

[31] Mr MZ has explained why he did not consider it necessary to call evidence from a forensic accountant. The lawyer Mr KC spoke to about his appeal also did not make that suggestion. That lawyer simply offered a different way to put forward the same facts and suggested grounds, like saying the Family Court hearing was too brief, on which an application for leave to appeal might be advanced.

[32] It is accepted that the outcome of the Family Court proceeding was traumatic for Mr KC. It is not accepted that is a product of Mr MZ’s involvement.

[33] The evidence does not support Mr KC’s criticisms of Mr MZ’s communication with him, or his advice, or his performance at the hearing. It is simply not possible for this Office to form a view about whether Mr MZ’s cross-examination of Ms UV was adequate.

[34] I observe that if Mr KC had argued the inarguable, for example that property was separate property when it was plainly relationship property, he could well have ended up with increased costs orders being made against him. The law is reasonably well settled on the basis of the facts of Mr KC’s case.

[35] Mr KC acknowledges that he did not consider it necessary to enter into an agreement with Ms UV at what appears to have been a pivotal time in their relationship. Retrospectively, Mr MZ could not fix that.

[36] It is not accepted, if Mr MZ did give Mr KC conflicting advice at different times, that that necessarily raises a professional standards issue. Advice is often amended on the basis of new information and a clearer understanding of details as a retainer progresses.

[37] The evidence does not support the proposition that Mr MZ was not interested in his case, or did not want to discuss the outcome with Mr KC. The outcome was set out in the Family Court decision. Mr MZ told Mr KC he could appeal and told him at that time he could not do that work. Insufficient time to attend to a brief is a valid reason to refuse to accept instructions. No professional standards issue arises.

[38] It is accepted that Mr KC’s home and business were under threat. It is not accepted that is a result of anything Mr MZ did or did not do including performing poorly or making crucial mistakes. Mr KC’s case may have been stronger than Ms UV’s, but that was not what the Family Court decided and this Office has no power to intervene.

[39] The evidence does not support the contention that Mr MZ’s strategy or advice

[40] In short, there is no evidential basis on which to make a determination that there has been unsatisfactory conduct on the part of Mr MZ.

[41] Without such a determination having been made there is no statutory basis on which to order Mr MZ to pay the compensation sought by Mr KC, or to order Mr MZ to refund fees to Mr KC.

[42] There is no basis on which to reverse or modify the Committee’s decision. That

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

KC v MZ [2018] NZLCRO 79 (24 August 2018)