NS v LO [2018] NZLCRO 88 (28 September 2018)

Last Updated: 30 October 2018

	LCRO 238/2015
CONCERNING	an application for review pursuant to section 193 of the Lawyers and Conveyancers Act 2006
AND
CONCERNING	a determination of the [City] Standards Committee [X]
BETWEEN	NS Applicant
AND	LO Respondent

DECISION

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

Introduction

[1] Mr NS has applied for a review of a decision by the [City] Standards Committee

[X] (the Committee) to take no further action in respect of his complaint concerning conduct on the part of Mr LO.

Background

[2] Mr NS and his former wife, Mrs NS, operated as a partnership from the late 1980s after they separated. Over the years, Mr LO provided legal services to Mrs NS, Mr NS and both of them as partners.

[3] In 2012, Mr NS became concerned about the partnership accounts and drawings Mrs NS had made on partnership funds. He wanted the records checked. The partners agreed to an independent audit. Mr LO instructed accountants. An audit was undertaken and Mr NS commenced proceedings against Mrs NS and her partner Mr KP

to resolve accounting anomalies, and finalise a division of partnership assets and liabilities.

[4] Mrs NS and Mr KP instructed Mr LO as their solicitor and Mr IR as counsel. Mr NS objected to Mr LO’s involvement and filed an interlocutory application in the High Court seeking to have Mr LO disqualified from acting because he was conflicted and held information that was confidential or privileged to Mr NS. Mr NS also filed a complaint to the New Zealand Law Society (NZLS) on the same basis. Mr NS considers Mr LO’s independence was compromised.

[5] The High Court dismissed Mr NS’ application, saying there was no evidence Mr LO was in possession of confidential or privileged information of relevance to the proceeding and disqualification was not required to protect the integrity of the judicial system.

Standards Committee decision

[6] The Committee determined Mr NS’ complaint on the basis that the High Court had resolved the issues Mr NS had raised regarding Mr LO’s involvement.

[7] Mr NS disagrees and has applied for a review.

Application for review

[8] Mr NS’ application for review proceeds on the basis that Mr LO has breached various duties owed to him and to the partnership. He is suspicious of Mr LO and objects to Mr LO describing his concerns over Mrs NS’ drawings as fanciful or exaggerated, and allegations made by Mr NS as bizarre and untrue. He feels Mr LO has taken Mrs NS’ side and acted against his interests. It seems Mr NS holds Mr LO responsible, at least in part, for his inability to resolve matters without going to court.

[9] Mr NS wants this Office to find that Mr LO was conflicted and his conduct was unsatisfactory. Mr NS says Mr LO should be censured and directed to cease acting for Mrs NS and Mr KP, and for the partnership.

[10] Mr LO’s response is to the effect that as the High Court has already addressed the substance of Mr NS’ complaint, the complaint and application for review are an abuse of process. He considers the review application should be dismissed.

[11] Mr NS disagrees and refers to “4-5 key phone calls” between him and Mr LO around the time Mr NS agreed the partnership accounts should be looked into. Mr NS

confirms that Mr LO advised him to seek independent legal advice. However, he does not accept Mr LO was only acting for Mrs NS and not for him.

Review Hearing

[12] Mr NS attended a review hearing in Auckland on [Date] 2018. Mr LO was not required to attend and did not exercise his right to do so.

Nature and scope of review

[13] 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.

[14] 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.

Discussion

The Rules

[15] Although he remains affronted by Mr LO’s description of his concerns as fanciful, exaggerated, bizarre and untrue, Mr NS focuses his application for review on

1 Deliu v Hong [2012] NZHC 158, [2012] NZAR 209 at [39]–[41].

2 Deliu v Connell [2016] NZHC 361, [2016] NZAR 475 at [2].

rules that address conflict of interest and confidential information, rr 6.1 and 8.1 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (the Rules).

[16] Rule 6.1 says:

6.1 A lawyer must not act for more than 1 client on a matter in any circumstances where there is a more than negligible risk that the lawyer may be unable to discharge the obligations owed to 1 or more of the clients.

[17] Rule 6.1 applies when a lawyer acts for more than one client in a matter. The matter was the finalisation of partnership issues. Although Mr NS had made contact with Mr LO before agreeing to the independent audit, Mr NS was independently represented in the finalisation of the partnership issues. As Mr LO was not acting for Mr NS in the matter r 6.1 is not engaged on the facts.

Chapter 8 – Confidential Information

[18] Mr NS says Mr LO had known him for a long time. His concerns relate to information he contends is confidential to him or over which he claims privilege. Mr NS refers to a range of information, and specifically mentioned an encroachment on land that Mr LO had dealt with for him some years earlier.

[19] The High Court dealt with Mr NS’ concerns over confidential information on the basis that Mr LO had none that was relevant to the proceeding. Any information was of a generalised nature. No information had come into Mr LO’s possession over which privilege might be claimed by Mr NS.

[20] There is nothing before this Office on review that suggests those conclusions may have been wrong. Nonetheless, Mr NS feels betrayed. He submits that the Committee should not have relied on the High Court’s decision, and should instead have applied the Rules.

[21] Chapter 8 of the Rules sets out lawyers’ obligations in relation to confidential client information, how long the duty of confidence lasts, when disclosure is required and permitted, and when it is prohibited. Confidential information is described in the footnote to r 8 as:

Information acquired in the course of the professional relationship that may be widely known or a matter of public record (such as the address of the client, criminal convictions, or discharged bankruptcy) will nevertheless be confidential information.

[22] Given the breadth of information to which the rules apply, Mr NS’ sensitivity about Mr LO’s involvement in the proceeding as instructing solicitor is not surprising. It

is also supported to an extent by the commentary in Professional Responsibility in New Zealand which explains:3

The information to which ch 8 applies is not limited to confidential information...

[23] The rules in Chapter 8 relevantly say:

8 A lawyer has a duty to protect and to hold in strict confidence all information concerning a client, the retainer, and the client’s business and affairs acquired in the course of the professional relationship.

Duration of duty of confidence

8.1 A lawyer’s duty of confidence commences from the time a person makes a disclosure to the lawyer in relation to a proposed retainer (whether or not a retainer eventuates). The duty of confidence continues indefinitely after the person concerned has ceased to be the lawyer’s client.

...

Use of confidential information prohibited

8.7 A lawyer must not use information that is confidential to a client (including a former client) for the benefit of any other person...

8.7.1 A lawyer must not act for a client against a former client of the lawyer or of any other member of the lawyer’s practice where—

(a) the practice or a lawyer in the practice holds information confidential to the former client; and

(b) disclosure of the confidential information would be likely to affect the interests of the former client adversely; and

(c) there is a more than negligible risk of disclosure of the confidential information; and

• (d) the fiduciary obligation owed to the former client would be undermined...
  

[24] The commentary in Professional Responsibility in New Zealand describes the source of confidentiality obligations as an “equitable duty” and a “basic professional duty”. The duty of confidence is said to be:4

coloured by the policy concerns with ensuring clients have complete confidence that what is told to a lawyer will remain secret. Confidentiality is seen as inherent in the solicitor-client relationship and as being essential to the proper administration of justice. It encourages clients to disclose all relevant facts so that the lawyer’s advice will be given on the basis of full information. As a result a lawyer’s duty of confidence is likely to be more stringent than in other cases where a duty of confidence arises.

3 Matthew Palmer Professional Responsibility in New Zealand (online loose-leaf ed, LexisNexis)[350,015]

4 [350,010]

[25] The commentary also discusses the different but related concept of legal professional privilege, which shares a policy basis with confidential information. It is said that:5

...the lawyers’ duty of confidentiality extends beyond material which is properly the subject of legal professional privilege and applies to all confidential information that is provided by a client, whether or not it meets the requirements for legal professional privilege. Indeed the Conduct and Client Care Rules and some authorities extend the duty further, to all information provided regardless of its confidential nature.

[26] It is to be recalled that although Mr NS and his former wife had separated, they shared a great deal of information about their business and affairs. While some of the information Mr NS refers to might have been confidential outside their relationship, between them it probably was not. That does not relieve Mr LO of his obligations to protect the confidence of their information from outsiders, but that does not seem to be what Mr NS is claiming.

[27] The commentary refers to cases of injunctions being granted that prevent lawyers acting against former clients on the basis of a duty of loyalty. That course was open to Mr NS through an application to the High Court, based on his concern that Mr LO knew him well. The authors of the commentary relevantly say:

According to the “getting to know you” principle, there may be cases in which lawyers cannot act because they know a large amount about a client of an intangible nature (such as their strengths, weaknesses and general tactics) as a result of the lawyer and client relationship. This information would not otherwise be available and can provide an advantage to a client who instructs a lawyer to act against the former client. The nature of the subsequent client’s claim may be particularly relevant in this context. Knowledge of this sort may provide a distinct advantage to the other side in family law, criminal or fraud cases.

The courts are only likely to apply this principle in extreme cases, if it can be established that the lawyer and the client have had a long course of dealing that is of a nature that the lawyer has acquired information about the client that could provide an advantage to someone acting against the client. As Heerey J put it in Mintel:

Insofar as reliance is placed on the “getting to know you” principle, a moment’s consideration of the way that litigation is conducted in Australia shows that this cannot be accepted too literally, especially in relation to counsel. There are many bodies such as Commonwealth and State government entities, banks, insurers, media companies and many others which are constantly engaged in litigation. Counsel retained to act on behalf of such bodies inevitably acquire information, not confidential information in the strict sense, but experience as to the corporate culture of the clients, their internal policies, the way they deal with litigation, tactics, the personalities of important decision-makers and so forth. I do not accept that general experience of that kind would impose what presumably on the respondent’s argument would be lifetime restraints on counsel from acting against such a body. Indeed it is a feature of an independent Bar

5 [350,010]

that counsel might appear one day on behalf of such a body and the next day against it. While perhaps strange to observers from countries where the legal profession is organised differently, this freedom enhances the independence of counsel and their capacity to give objective and sometimes unwelcome advice. The cab rank rule works both ways. The driver is obliged to accept the fare, but the fare does not buy the service of the driver beyond the stipulated journey.

[28] The authors argue that:6

...the better view is that the fiduciary relationship which subsists between solicitor and client comes to an end with the termination of the retainer. There does however continue to be some confusion on this point, which is reflected in r 8.7.1(d) which requires that a lawyer must not act against a former client in certain circumstances including where the fiduciary duty owed to that former client would be undermined.

[29] As Mr NS is aware from the application he unsuccessfully made to the High Court seeking to exclude Mr LO from acting in the proceeding:

Where an application is made to prevent a lawyer acting against a former client, the Court will ask whether the lawyer actually holds confidential information. So Lord Millett in Bolkiah v KPMG considered that there was no cause to impute or attribute the knowledge of one partner to his or her fellow partners but treated the question of whether a particular individual is in possession of confidential information as a question of fact which must be proved or inferred from the circumstances of the case.

[30] One of Mr NS’ key concerns was that he had disclosed his concerns about the partnership accounts to Mr LO before the litigation got under way. It is not accepted that those disclosures were of a confidential nature, because they formed the substance of the dispute that was litigated primarily between Mr NS and his former wife before the High Court. By putting those concerns before the High Court, subject to any claims of privilege, Mr NS must be taken to have expressly consented to the disclosure of information that might otherwise have been confidential.

[31] As to Mr NS’ concerns over a breach of fiduciary duty, the commentary explains:

The fiduciary relationship between solicitor and client comes to an end when the retainer is terminated. The only duty which survives termination is the duty of confidentiality. This duty does not however prevent a lawyer acting against a former client in all circumstances.

[32] It is unlikely that in considering whether Mr LO had information that was confidential to Mr NS, the High Court considered the wider fiduciary duties Mr LO owed to Mr NS by virtue of their lengthy professional relationship. It is those duties that still occupy Mr NS’ mind even after the partnership proceeding has been finalised.

6 [350,010]

[33] After considering all of the materials available on review and listening carefully to Mr NS at the review hearing, it seems the only basis on which Mr NS can challenge the Committee’s decision is by drawing a technical distinction between confidential information and any other information Mr LO acquired in the course of the professional relationship, as the basis of a claim that Mr LO has breached his fiduciary obligations to Mr NS.

[34] It is not accepted that a technical distinction should be drawn between confidential information the High Court said Mr LO did not have, and confidential information for the purposes of the rules. Such a technicality is not a proper basis on which to reverse or modify the Committee’s decision.

[35] As there is no persuasive reason to reverse or modify the decision, it is confirmed.

Decision

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

DATED this 28th day of September 2018

D THRESHER

Legal Complaints Review Officer

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

NS as the Applicant LO as the Respondent

JQ as counsel for the Applicant [City] Standards Committee [X] New Zealand Law Society