PA v NT [2018] NZLCRO 80 (31 August 2018)

	Home \| Databases \| WorldLII \| Search \| Feedback New Zealand Legal Complaints Review Officer

[date]	LCRO 272/2015
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	PA Applicant
AND	NT, RO and DS _Respondent

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

[1] Mrs PA has applied for a review of a decision by the [Area] Standards Committee [X] (the Committee) to take no further action in respect of her complaint concerning the conduct of Mr NT, Ms RO, and Mr DS, at the relevant time, partners of BQE Ltd (the firm).

[2] Mrs PA, and her sister Mrs GL, were the beneficiaries in the will of their late mother, Mrs FH, who died on 4 May 2012. Mrs FH appointed Mr NT, and another of his partners in the firm at that time, Mr XP, as executors and trustees of her will (the trustees).

[3] Mrs FH’s estate included a residential property (the property) which the trustees sold to Mrs GL for a price less than the valuation of the property obtained by them, and less than the sale price agreed between Mrs PA and Mrs GL.

[4] Before the trustees sold the property to Mrs GL, Mrs PA informed them that she did not agree to that sale. She told them she would be disadvantaged to Mrs GL’s

advantage. She asked the trustees to place the property on the open market for sale in accordance with Mrs FH’s instructions to the trustees.

[5] Mrs PA’s complaint about Mr NT largely concerns whether, when he carried out his trustee duties on the sale of the property, he was also acting as a lawyer.

[6] Mrs PA lodged a complaint, mainly directed at Mr NT as the surviving executor and trustee, with the Lawyers Complaints Service of the New Zealand Law Society on

[7] There were a number of aspects to Mrs PA’s complaint. However, as noted below, Mrs PA now wishes to confine her application for review to the trustees’ actions in selling the property to Mrs GL. For that reason, it is not necessary for me to consider the other aspects of Mrs PA’s complaint.

[8] Mrs PA claimed that the trustees did not follow Mrs FH’s instructions to sell the property on the open market, but instead initiated a sale by tender in which Mrs PA and Mrs GL were the only participants. She said this process led to the sale of the property to Mrs GL at a reduced price.

(a) to her disadvantage, negotiated the sale of the property to Mrs GL, both without [Mrs PA’s] approval and without providing [Mrs PA] with the same opportunity to purchase;

(b) sold the property at a sale price less than the valuation of the property obtained by the trustees, and less than the price agreed between Mrs PA and Mrs GL;

(c) did not, as they had indicated they would, promptly inform her of their decision to accept Mrs GL’s offer to purchase the property at the reduced price; and

(d) by selling the property to Mrs GL at a reduced price had not carried out first, Mrs FH’s request that the property be “put on the market”, and secondly, Mrs FH’s directions contained in her will that her estate be divided “into two equal shares”.

[10] Mrs PA sought compensation of $36,800 from Mr NT, which represented the cost of repairs to the property estimated by Mrs GL’s builder and architect, and was the difference between the sale price of the property agreed between Mrs PA and Mrs GL,

$725,000, and the sale price subsequently agreed between the trustees and Mrs GL,

[11] The Committee delivered its decision on 16 November 2015 and determined, pursuant to s 138(2) of the Lawyers and Conveyancers Act 2006 (the Act), that no further action on the complaint was necessary or appropriate.

[12] As a preliminary matter, the Committee stated that because, in the course of its investigation, it had not identified any conduct issues concerning Ms RO and Mr DS it therefore resolved to take no further action concerning Mrs PA’s complaints about them.

[13] In reaching its decision to take no further action in respect of Mr NT’s conduct,

(a) Concerning Mr NT’s role in the matter, whether his 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?

(b) Were the firm’s legal fees charged to Mrs FH’s estate fair and reasonable?

[14] Because, as noted, Mrs PA has requested that this Office consider only Mr NT’s role relative to the sale of the property, it is not necessary for me to consider the Committee’s reasons for its determination to take no further action in relation to the other aspects of Mrs PA’s complaint.

[15] The Committee described this aspect of Mrs PA’s complaint as concerning (a) “the length of time taken” to sell the property, and (b) the “lack of transparency” or secrecy to do so.

(a) stated that the process of selling the property took place within 2 years of

(i) the steps taken by the trustees in the lead up to the sale of the property to Mrs GL;

(ii) the trustees’ decision to sell the property to Mrs GL at a reduced price, having weighed up the time and cost of selling the property on the open market, and the interests of both Mrs PA and Mrs GL;

(iii) settlement of the sale of the property to Mrs GL having taken place within seven months of Mrs FH’s death.

[18] Although she contends that “several core ethical considerations contained in [her] complaint were not addressed” by the Committee, as noted, she has since informed this Office on 19 April 2018 that she now confines her application to a review of that part of the Committee’s determination concerning the sale of the property by the trustees.

[19] To the extent that Mrs PA adds to the information considered by the Committee, she submits that:

(a) the state of the Christchurch residential property market in the months following the February 2011 earthquake was not particularly relevant;

(b) Mrs FH had left clear instructions to Mr NT that she wished to have her estate administered by two partners of the firm, and the property sold on the open market;

(d) the trustees did not, as they said they would, revert to Mrs PA after they had “considered the position” and “without [her] knowledge”, first, resolved on 13 December 2012 to sell the property on these terms to Mrs GL, and secondly, did not inform [Mrs PA] about the sale until 17 December 2012;

$725,000, which from her enquiries was below market value, “was an act of goodwill” on her part to “allow the [e]state to be wrapped up quickly”; and

(f) because, in her view, that was a “discount” price she objected to a reduction in that figure when her approval was sought by the trustees to take account of the repairs recommended by Mrs GL’s builder and architect.

[20] In response to Mrs PA’s application for review, Mr LM, counsel representing Mr NT, expressed the view that Mrs PA’s application “raise[d] no genuine point that requires determination by [this] office”. He stated that he “was content to rely” upon his submissions to the Committee in answer to Mrs PA’s complaint.

[21] After Mrs PA had given notice that she wished to confine the review to the sale of the property issue, Mr LM agreed to the review proceeding on the papers without a hearing, but stated that Mr NT was considering whether to make further submissions. He has since confirmed that Mr NT relies on [Mr LM’s] submissions to the Committee.

[22] Mr LM contends that Mrs PA’s complaint concerned Mr NT’s position as an executor and trustee of Mrs FH’s will which was governed by the Trustee Act 1956 (the Trustee Act).

[23] In his submissions to the Committee dated 28 August 2015, Mr LM described the steps taken by the trustees in the lead up to and including the sale of the property to Mrs GL. In doing so, he explained that:

(a) Mrs PA and Mrs GL were each concerned to ensure that the other did not obtain an advantage in the distribution of Mrs FH’s estate;

$36,800 “reflect[ed]” the reduction in the sale price of the property by the trustees to Mrs GL to take account of the cost of repairs to the property recommended by Mrs GL’s builder and architect; and

[24] This review was initially set down for a hearing which both parties had indicated they would attend (by teleconference). However, because Mrs PA requested that only Mr NT’s role concerning the sale of the property issue be considered, both parties consented to the review being dealt with on the papers.

[25] The role of the Legal Complaints Review Officer (LCRO) on review is to reach his own view of the evidence before him. Where the review is of an exercise of discretion, it is appropriate for the LCRO to exercise particular caution before substituting his own judgement for that of the Committee, without good reason.

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

[27] 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.

(b) Did Ms RO and Mr DS provide legal services to the trustees concerning the sale of the property?

(ii) was he obliged to keep Mrs PA informed about progress with the sale, and if so did he do so?

[29] The central question on this review is whether Mr NT, when carrying out his duties as an executor and trustee, was also acting as a lawyer. If he was not acting as a lawyer, then it would not be appropriate for this Office to consider Mr NT’s conduct in his capacity as a trustee, because, as discussed below, the High Court has supervisory jurisdiction of trustees.

[30] For this reason, it is helpful to briefly note the approach, in the context of a complaint made against a lawyer, in identifying the dividing line between the two roles.

[31] In summary, where it is considered that a lawyer’s conduct warrants disciplinary sanction there are two findings that can be made. First, misconduct, the more serious type of conduct, pursuant to s 7 of the Act, and secondly, unsatisfactory conduct pursuant to s 12. Both sections refer to conduct that occurs at a time a lawyer is providing “regulated services”.

[32] The term “regulated services” is comprehensively defined in the Act and refers to “legal services” which in turn is defined as services that a person provides by carrying

out legal work for another person. “Legal work” includes work in connection with proceedings or anticipated proceedings, giving legal advice in other matters, preparing legal documents and matters incidental to the above.4

[33] Sections 12(a), (b) and (d) refer to conduct which occurs at a time when a lawyer is providing regulated services. Under s 12(c), unsatisfactory conduct may also arise when a lawyer who is not providing regulated services at the time contravenes the Act, or any regulations or practice rules made under the Act.

[34] Present in the related definitions concerning “regulated services” is the provision of legal advice to a client. In a previous decision from this Office the observation was made that a finding of unsatisfactory conduct “most often arises in connection with the provision of legal services.”5 It follows that the qualification in ss 12(a) and (b) that the conduct of the lawyer concerned must be:6

conduct ... that occurs at a time when [the lawyer] is providing regulated services” must be construed broadly and consistently with the wider purposes of the legislation to include any conduct which occurs in connection with the practice of law.

[35] In a practical sense “it is necessary to consider objectively whether a reasonable person in the shoes of the client would consider that he [or she] was obtaining legal services”.7

[36] For example, where a lawyer has a dual role as a lawyer acting in an estate administration of which he or she is a trustee, there is:8

a heavy onus ... on [the lawyer concerned] to show that the conduct complained of did not have a connection with [his or her] status as a lawyer and the client could not reasonably have thought he was acting as a lawyer.

[37] It can often be a difficult exercise to differentiate legal work from trustee work. A helpful point of differentiation referred to by the Court of Appeal is that it is for a lawyer

_{to advise whether a proposal is lawful or not, but not to make a
decision on the matter.}9

9 Hansen v Young [2004] 1 NZLR 37 (CA) at [33]–[36]; the principle in Hansen is cited in AW v

[38] This necessarily requires an examination of the nature of the work carried out in each role. For example, in the context of an estate administration, this Office has held that:10

... where the services provided by a lawyer are services of a type that it is usual for a lawyer to provide, and they are provided in conjunction with legal work (as defined in paragraphs (a) to (c) of the definition of that term) they are properly considered to be incidental to that work and also ‘legal work. In light of this the work of an executor/trustee who also acts as a solicitor will be regulated services.

[39] In his submissions to the Committee, Mr LM points to Mrs PA’s complaints being directed at Mr NT in his role as a trustee of Mrs FH’s estate. He contends that the fact Mr NT and Mr XP were partners in the firm at the relevant time “does not by that association mean that Mr NT must now answer for complaints that would more properly be directed to Mr XP (as lawyer) were he still alive”.

[40] Mr LM submits that “it is inappropriate to make complaints against Mr NT” in his capacity as a lawyer “which are essentially claims that the trustees have failed to discharge that office” where those complaints “are more properly the subject of scrutiny in proceedings under the [Trustee Act], the common law and equity”.

[41] In its consideration of this issue, the Committee, made no differentiation between Mr NT’s position as a trustee on the one hand, and as a partner in the firm on the other hand, but appears to have proceeded on the assumption that both Mr XP and Mr NT acted in both capacities.

[42] The context for Mrs FH’s appointment of Mr XP and Mr NT as executors and trustees of her will is that she wanted two lawyers, independent of her family, to administer her estate. Mrs FH referred to “the difficult family situation” and her desire for “transparency and to avoid misunderstanding”.

[43] As noted above, Mrs PA explained that Mrs FH, mindful of the “fractured family dynamic” appointed two partners at the firm. In her submissions to this Office, dated 14

August 2018, Mrs PA described the role of Mr XP and Mr NT as “external executors,

_{thereby eliminating any impossible impediment from [Mrs FH’s]
daughters”.}

[44] The lead up to settlement of the sale of the property to Mrs GL covered the period from June 2012, when the trustees arranged to have the property prepared for sale, to [date], the settlement date of that sale.

[45] From the information produced to this Office, it is apparent that most of the communications exchanged during that period were largely between Mr XP, and his assistant Mr QC, on the one hand, and Mrs PA on the other hand.

[46] I observe from these communications that apart from Mr NT first, being a recipient of several of Mrs PA’s communications to Mr XP, and secondly, responding to Mrs PA’s issues of concern raised with [Mr NT] about Mr XP’ carriage of the legal work required to administer Mrs FH’s estate, [Mr NT] was not involved in the day-to-day administration of Mrs FH’s estate.

[47] However, as noted above, whether a lawyer who is acting in a non-lawyer role was or is also acting as a lawyer requires a consideration of the work carried out by that lawyer.

[48] The nature of the work undertaken by the trustees is described in Mr XP’ communications to Mrs PA, namely, his explanation how the “closed tender” process would proceed; his response to Mrs PA that he and Mr NT would consider her concerns; the “review” by the trustees of “the correspondence and estate documents” including the “assessment [Mrs PA] received from [property agent]” which led the trustees to proceed with the closed tender; notification of the trustees’ intention to place the property on the market; report that the trustees had received notification from Mrs GL’s lawyer of Mrs GL’s desire to purchase the property.

[49] In a practical sense, it might be considered that because Mr NT was not providing the day-to-day legal work on the administration of Mrs FH’s estate he was not performing a legal role. However, the High Court has stated that the words “providing regulated services” do “not require there to be a subsisting lawyer/client relationship with a particular client” and that it “will be sufficient if at the material time the lawyer is engaged in the provision of legal services and if the conduct complained of is connected to those services”.11

[50] In these particular circumstances, it is my view that insufficient evidence has been produced to displace the presumption that Mr NT’s attendances as a trustee “did

11 A v Canterbury Westland Standards Committee No. 2 of the New Zealand Law Society [2015] NZHC 1896 at [60] — referring to the meaning of misconduct in s 7(1)(a) of the Act.

not have a connection with [his] status as a lawyer” such that Mrs PA “could not reasonably have thought” he was not performing a dual role as both a trustee and a lawyer. This is illustrated in Mrs PA’s statement to Mr NT, when she raised her concerns about Mr XP, that it was “prudent for [him] to take a more active interest” in the matter.

[51] Following the objective assessment approach referred to by the High Court, on balance, I consider it is more probable than not that when acting in his role as an executor and trustee of Mrs FH’s will Mr NT was, at the same time, also acting in his capacity as a lawyer.

[52] In reply to the firm’s response to her complaint, Mrs PA referred to the role of Mr DS and Ms RO, also partners in the firm at the relevant time, having been to respond to Mrs PA’s complaint on behalf of the firm.

[53] The Committee, having observed that no conduct issues had “been identified on the part of Ms RO and Mr DS ... resolved to take no further action” in relation to Mrs PA’s complaints against them.

[54] In her application for review Mrs PA contends that because partners in a firm are jointly and severally liable for the firm’s obligations, if one or more partners are found to have contravened professional standards then other partners ought similarly be held accountable for those contraventions.

[55] However, that is not the scheme of the complaints process under the Act which provides that a complaint may be brought by “any person” in respect of the conduct of “a [lawyer] or former [lawyer]”.12 Each lawyer is personally responsible for his or her own conduct and “needs to be guided by his or her own sense of professional responsibility”.13

[56] It follows that neither Mr DS nor Ms RO can be held responsible for Mr NT’s conduct, which is subject to regulation under the Act, concerning the administration of Mrs FH’s estate. For completeness, I observe that no evidence has been produced that either Mr DS or Ms RO had any involvement in events concerning the sale of the property by the trustees.

12 Lawyers and Conveyancers Act, s 132(1)(a)(i) – and “the conduct – “(ii) of an incorporated [law] firm, or former incorporated [law] firm; or (iii) of ... an employee or former employee [who is not a lawyer] of a [lawyer] or an incorporated [law] firm”.

13 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008, Preface, Notes about the rules, Schedule.

[57] The Trustee Act confers on trustees, including executors or administrators, the power to sell any property vested in the trustees.14 So long as a trustee who exercises that power has had the property valued before effecting a sale, and the sale price is not less than that value, then the trustee cannot be held liable for breach of trust.15

[58] In circumstances where trustees require guidance in their administration of an estate or trust, they may apply to the High Court for directions.16 In more difficult matters the trustees may initiate proceedings.17

who is aggrieved by any act or omission or decision of a trustee ..., or who has reasonable grounds to anticipate any such act or omission or decision of a trustee by which he will be aggrieved, may apply to the court to review the act or omission or decision or to give directions in respect of the anticipated act or omission or decision.

[60] Mrs PA claims that by having conducted a “closed tender”, which led to the sale of the property to Mrs GL, the trustees did not carry out Mrs FH’s request to them to “put [the property] on the market” for sale.

[61] She refers to Mrs FH’s letter to the trustees three weeks before [Mrs FH’s] death, which [Mrs PA] says she personally delivered to Mr XP. She points to Mrs FH’s request in that letter that the trustees, following [Mrs FH’s] death, arrange to meet with Mrs GL “in the interests of transparency and to avoid any misunderstanding”. Also, that “the house should be cleared within approximately a week so that it can be prepared for sale and put on the market”.

[62] I observe that Mrs FH’s request that the property be “put on the market” may not necessarily have had the effect of constraining the trustees in their consideration of the appropriate method of sale to the extent that Mrs PA contends.

[63] For example, appointing a sole agent, a multiple listing, sale by auction, or sale by tender.19 Relevant considerations to the method of sale decided upon by the trustees

14 Trustee Act 1956, s 14(1). See discussion in Nicky Richardson Neville’s Law of Trusts, Wills and Administration (10th ed, LexisNexis, Wellington, 2010 at [11.3], and practical guidance in Laws of New Zealand Wills and Succession (online ed) at [14] “Estates in Practice”.

15 Section 14(6) — valued in accordance with s 28. See also s 15, miscellaneous powers in respect of property; s 16, power of trustee for sale to sell by auction, etc, or before date specified.

would include the valuation of the property concerned obtained by the trustees, as well as market conditions, and family interests and considerations.

[64] However, as I noted earlier, the way in which the trustees arrived at their decision, including matters taken into account or not taken into account as the case may be, is properly to be considered, not by a Standards Committee or this Office on review, but by the High Court in its supervisory jurisdiction of trustees.

[65] A lawyer must disclose to his or her client information that is relevant to the retainer, take reasonable steps to ensure that the client understands the nature of the retainer, keep the client informed about progress, and consult the client about steps to be taken to implement the client’s instructions.20 With limited exceptions, a lawyer risks a complaint from a client with a prospect of a disciplinary response if the lawyer does carry not out the client’s instructions.21

[66] Trustees are required to “keep full and clear accounts” and must provide them

[67] The High Court has observed that a beneficiary with a vested interest may have “a prima facie right to access trust documents”.23 That decision applied the statement made in another High Court decision that:24

Beneficiaries are entitled to receive information which will enable them to ensure the accountability of the trustees in terms of the trust deeds ... these are fundamental rights of beneficiaries. They are not absolute rights ... they will be subject to the discretion of the court in its supervisory jurisdiction when the trustee seeks directions, or beneficiaries seek relief against refusal by the trustees to disclose.

20 Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008, rr 7, 7.1.

21 Duncan Webb, Kathryn Dalziel and Kerry Cook Ethics, Professional Responsibility and the

24 Foreman v Kingstone [2004] 1 NZLR 841 (HC) at 861 referred in Richardson, above n 22, at

supply full information about the trust to a beneficiary when requested to do so

[69] However, “if a decision taken by trustees is directly attacked in proceedings,

they may be compelled to disclose the substance of the reasons for their decisions”.26

[70] Mrs PA maintains that the trustees did not, as they said they would, revert to her before they sold the property to Mrs GL. She says her agreement reached with Mrs GL to the trustees selling the property to Mrs GL for $725,000 was an “act of goodwill” by [Mrs PA] to enable the estate “to be wrapped up quickly”.

[71] She says she did not agree to the reduced sale price, and the trustees ought to have offered her the opportunity to purchase the property at the reduced price.

[72] I observe that on 11 December 2012, when Mrs PA informed the trustees that she did not agree to the sale of the property to Mrs GL at the reduced sale price, she also requested them to “put [the property] on the open market as [Mr XP] had agreed to do with [Mrs FH]”.

[73] Two days later, on 13 December 2012, the trustees resolved to sell the property to Mrs GL at the reduced price. Their reasons for doing, as recorded in their written resolution, were:

(b) the defects identified by Mrs GL would be apparent to a prospective purchaser;

(d) estate agents’ commission would be payable on any sale on the open market;

(e) an allowance for the cost of the repairs identified by Mrs GL “would further reduce the net value received for the property”; and

(f) the unknown factors and possible problems obtaining insurance due to the post-earthquake zoning of the property.

[74] Mr QC informed Mrs PA on 17 December 2012 that the trustees first, had met to consider Mrs GL’s offer to purchase the property and Mrs PA’s “response”, and secondly, had resolved to sell the property to Mrs GL at the reduced price. He said settlement would take place on [date]. He concluded with the statement that “the decision is [Mr XP’ and Mr NT’s] as trustees” and he was “merely passing this information on” to Mrs PA.

[75] Mrs PA’s email response that day was addressed to Mr NT. Mrs PA requested further explanation for the price reduction. She questioned the absence of consultation with her by the trustees. She stated that the trustees had not marketed the property “as agreed” and had “secretly conducted negotiations” with Mrs GL. She referred to her agreement to the trustees selling the property to Mrs GL as a consequence of them not having marketed the property. She stated that she had not received a copy of the trustees’ resolution from them but from “an authorised person”.

[76] However, despite stating that in her view the trustees’ decision “could easily be challenged” Mrs PA acknowledged “that would be costly” and result in “further delay and distress”. She concluded by requesting confirmation that her share of the sale proceeds of the property had been deposited to her bank account. She requested advice “when [the trustees] expect all matters to be wound up”.

[77] It appears from Mr XP’ and Mr QC’s communications with Mrs GL’s lawyer, and Mr XP’ communications with Mrs PA, that Mr NT was not involved in the day-to-day advancement of the sale of the property which was undertaken by Mr XP, assisted by Mr QC. Neither Mr NT nor Mr XP acted for Mrs PA.

[78] Overall, in my observation, it is more probable than not that Mr NT’s role was confined to his position as an executor and trustee. As such, any professional duty or obligation Mr NT owed Mrs PA to report to her, except when she raised concerns about Mr XP’ carriage of the legal work on the administration of Mrs FH’s estate, concerned his duties as a trustee in respect of which the High Court has supervisory jurisdiction.

[80] In conclusion, I also observe that if on any review of the trustees’ conduct concerning the sale of the property any issues arise concerning Mr NT’s conduct as a lawyer in that matter then it may be open to Mrs PA to make a complaint at that time.

[81] Pursuant to s206(4) this decision is to be made available to the public with the names and identifying details of the parties removed.

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

PA v NT [2018] NZLCRO 80 (31 August 2018)