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New Zealand Legal Complaints Review Officer |
Last Updated: 30 October 2018
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LCRO 112/2017
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CONCERNING
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an application for review pursuant to section 193 of the Lawyers and
Conveyancers Act 2006
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AND
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CONCERNING
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a determination of the [Area] Standards Committee [X]
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BETWEEN
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NM
Applicant
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AND
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[Area] STANDARDS COMMITTEE [X]
Respondent
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The names and identifying details of the parties in this decision have been changed.
Introduction
[1] Mr NM has applied for a review of a decision by the [Area] Standards Committee [X] (the Committee) in which a finding of unsatisfactory conduct was made against him, together with a censure, a fine of $3,000 and costs of $1,000.
[2] The Committee’s finding of unsatisfactory conduct followed its conclusion that Mr NM had breached r 13.1 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2006 (the Rules) and that this was conduct that would be regarded by lawyers of good standing as being unacceptable as conduct unbecoming a lawyer. Rule
13.1 imposes on lawyers a duty of absolute honesty to the Court.
Background
[3] Mr NM has practised as a lawyer since approximately 1972; since 1992 on his own account. He was also a member of [Organisation] between
[4] Mr W was a member of [Organisation]. His relative in New Zealand, Mr D, was a member of [Organisation] and attended the same meetings as Mr NM. Mr W attended from time to time as Mr D’s guest. It was through Mr D that Mr NM met Mr W.
Mr W’s will
[5] In Mr NM prepared a will for Mr W. At that time, Mr NM was a partner in a large law firm.
[6] Mrs W was the sole beneficiary of Mr W’s will. Mr and Mrs W did not have any children, but Mr W had an adult child from a previous marriage. He instructed Mr NM that he was estranged from his son. He deliberately made no provision in his will for his son.
[7] Mr NM was appointed the sole executor and trustee of Mr W’s will.
The W trust
[8] At about this time, Mr W inherited a sum of money from his mother’s estate, being the proceeds of the sale of her house. He sought advice from Mr NM about this, as he did not want those funds to form part of his estate. He did not want his son to inherit them, nor any member of Mrs W’s family to eventually inherit the funds should he predecease her.
[9] Mr NM advised Mr W to set up a family trust with the funds (the W trust). He recommended that Mr and Mrs W be named as discretionary beneficiaries, able to receive income and capital, but with provision for a different final beneficiary.
[10] At a meeting with Mr NM, attended by both Mr D and Mr W in late , Mr W instructed Mr NM to set up the W trust. He appointed Mr NM and Mr D as the trustees. He instructed Mr NM that he would like the final beneficiary to be [Organisation].
[11] Mr W also instructed Mr NM not to inform Mrs W about the identity of the final beneficiary, as she was not happy about his membership of [Organisation].
[12] Mr NM advised Mr W that instead of naming a final beneficiary, the trust deed should give the Trustees the power of final vesting in any charity of their choice. Mr W accepted that advice.
[13] In early 1992, Mr NM set up practice on his own account. Mr W followed him to that practice as his client.
[14] Mr NM drafted a trust deed for Mr W to consider (the draft trust deed). He adopted and amended a deed that he had drafted for another client, but in error he omitted to delete
clauses in which children and grandchildren were identified as discretionary beneficiaries. He also omitted to delete the name of that other client from the draft deed.
[15] The W trust’s only asset was the sum of money that Mr W had inherited from his late mother’s estate. The terms of the draft W trust included a power on the part of the trustees to vest the capital in a charity of their choice.
[16] To complete the establishment of the W trust, Mr NM prepared a deed of acknowledgment of debt as between the W trust and Mr W in relation to the funds advanced.
[17] Mr NM forwarded those documents, together with others required by the IRD for the creation of a trust, to Mr W in [Country] for him to consider. It is likely that Mr W noted the various errors in the draft trust deed, as he was careful and thorough about his business affairs.
[18] Two counterparts of the W trust deed and deed of acknowledgment of debt were executed by Mr W in Mr NM’s Office during 1992 (the executed trust deed). Mr NM forwarded one counterpart of the executed trust deed to the IRD, who retained it. A tax number was allocated.
[19] It is not clear what happened to the other counterpart of the executed trust deed. Mr NM’s practice was to store original documents in a deeds packet. However, when the issues which concern this application for review arose, that counterpart of the executed trust deed could not be located. As well, the IRD could not locate the counterpart sent by Mr NM in 1992.
[20] He did however have a copy of the draft trust deed.
[21] After the W trust had been formally set up, Mr NM began to act for and administer it.
[22] The work done by Mr NM included investing the capital through his nominee company, making distributions and preparing and filing tax returns.
[23] Between 1992 and 2001 Mr NM made quarterly payments from the W trust to Mr W’s bank account in [Country], being income earned by the sums invested by Mr NM.
Mr W passes away
[24] Mr W died in [Country] in .
[25] As part of administering Mr W’s estate, Mr NM realised a number of assets and obtained approximately $80,000 in cash. As Mrs W was the only beneficiary, this became part of her legacy under the will.
[26] Mr NM advised Mrs W to obtain legal advice in [Country] in connection with the cash legacy, and he recommended a lawyer for her to see. Mr NM’s view was that the money was better invested in New Zealand where interest rates were higher, than being sent to Mrs W in Country B.
[27] He received instructions to invest the $80,000 with the W trust.
[28] Mr NM did so, but maintained a separate trust account ledger in Mrs W’s name to show the treatment of the cash legacy.
Ongoing administration of the W Trust
[29] Mr NM continued to administer the W trust, and this included making quarterly payments to Mrs W, as he had done for approximately nine years to Mr W before he passed away.
[30] From time to time Mr NM also made capital distributions from the trust to Mrs W. Initially these were made from the estate funds.
[31] In a letter to Mrs W dated 5 November 2002, Mr NM implied that the W trust’s capital was hers.
[32] In , Mrs W instructed her lawyers to write to Mr NM and require the capital in the trust to be vested in her as the sole beneficiary under the W trust.
[33] Mr NM responded by saying that the executed trust deed had been lost, and that in any event Mrs W was a discretionary and not a final beneficiary of the W trust.
[34] The draft deed was subsequently discovered by Mrs W amongst Mr W’s personal effects, together with a copy of the signed deed of acknowledgment of debt. She forwarded these to Mr NM.
[35] It transpires that Mrs W was unaware of the W trust until she found the draft trust deed.
[36] The draft trust deed matched one that was, at that time, on Mr NM’s file.
[37] Mr NM next informed Mrs W’s lawyers that he and his co-trustee Mr D had conferred and their position was that Mr W’s intention was that the capital was to be
distributed amongst various charities. Mr W’s reasoning, according to Mr D, was that Mr W did not want any of Mrs W’s family to eventually receive the capital on her death.
[38] Mr NM then sought Counsel’s opinion as to distribution of the capital in the W trust. That opinion discussed distributing the whole of the capital to [Organisation]. This conclusion was apparently based upon a discussion that Mr D had with Mr W in the mid- 1980s.
[39] On , Mr NM forwarded the opinion to Mrs W’s lawyers in [Country] with an indication that the capital would be distributed to [Organisation].
The trust proceedings in the High Court
[40] On the advice of counsel, Mr NM and Mr D brought proceedings in the High Court seeking confirmation of their intention to pay the capital to [Organisation]. Mrs W opposed that application (the trust proceedings).1
[41] Counsel was instructed to appear on behalf of Mr NM and Mr D. Mr NM, through his firm, acted as instructing solicitor.
[42] The trust proceedings were heard in late
[43] By this time, Mrs W was aged .
[44] Mr NM and Mr D both gave evidence in the trust proceedings. In his evidence in chief, Mr NM was asked by his counsel if he was a member of [Organisation]. Mr NM replied that he was not.
[45] After Mr NM had completed his evidence, he left the court and returned to his office. Before the hearing concluded, the Judge asked whether Mr NM had ever previously been a member of [Organisation]. Mr NM’s counsel indicated that he would obtain instructions about that.
[46] At the conclusion of the hearing the Judge indicated that he would reserve his decision and deliver it on an unspecified date in the future.
[47] Before the judge delivered his decision, Mr NM’s counsel provided the Court and Mrs W’s lawyers with a Memorandum in which it was said that Mr NM had been a member of [Organisation] between .
[48] On [ ], the High Court delivered its decision in the trust proceedings.
1
[49] The Court found that the trust had failed. One of the reasons for this conclusion was that there was no certainty as to the identity of the beneficiaries under the trust. The trustees were ordered to transfer the funds to Mr W’s estate, and then to Mrs W as the only beneficiary of that estate.
[50] In his judgment, the Judge was critical of both trustees. Of Mr NM, he said:
[paragraph redacted]
Standards Committee investigation
[51] The Court’s judgment was referred to the New Zealand Law Society Complaints Service (Complaints Service), and on 4 November 2016, the Committee resolved to investigate the matter of its own motion.2
[52] The Committee wrote to Mr NM on 10 November 2016, informing him of the investigation and identifying several issues about which responses were sought.
[53] Ultimately in its decision, the Committee confined its consideration and determination to the issue of Mr NM’s evidence about his membership of [Organisation].
[54] In summarising Mr NM’s response to the Committee’s investigation, I will deal only with that issue.
Mr NM’s response
[55] Mr NM wrote to the Complaints Service on 24 November 2016. Of his evidence, he said:
6. I was asked “are you a [member] Mr NM?”. And truthfully, I answered, “No”.
In response to a request from [the Court] at the conclusion of the trial, counsel for the trust filed a Memorandum ... setting out details of my membership of the [Organisation], which ceased in .
Hearing on the papers
[56] Armed with Mr NM’s response, the Committee resolved to set all issues down for a hearing on the papers. In relation to his evidence, the Committee identified the following issue in its 13 February 2017 Notice of Hearing:
While your response to the question of whether you were a [member] may not have been untruthful, taking into account duties of lawyers as officers of the court,
2 Lawyers and Conveyancers Act 2006, s 130(c).
was your response misleading by omission? Did you have a duty to respond more fully?
Further comment by Mr NM
[57] Responding to that issue, in his letter to the Complaints Service dated 28 February 2017 Mr NM said:
(v) My response with respect to my membership of [Organisation] was in no way misleading. I do not believe that I have a duty as an Officer of the Court to respond to a question that has not been asked of me.
Standards Committee decision
[58] The Committee delivered its decision on 5 May 2017.
[59] Although the Committee had identified a number of issues, it regarded “the most problematic” as “what was said (or not said) by Mr NM in relation to his previous involvement with the [Organisation]”.3
[60] Of that issue, the Committee said the following:
- ... The Committee did not agree with Mr NM.
13.1 provides that a lawyer has an absolute duty of honesty to the court and must not mislead or deceive the court.
...
3 Standards Committee determination, 5 May 2017 at [15].
his conduct would be regarded by lawyers of good standing as being unacceptable as conduct unbecoming a lawyer.
[61] The Committee determined that there had been unsatisfactory conduct under ss 12(b)(i) and 12(c) of the Act.4
[62] By way of penalty, the Committee:5
- (a) censured Mr NM pursuant to s 156(1)(b) of the Act;
- (b) ordered Mr NM to pay a fine of $3,000 to the New Zealand Law Society, pursuant to s 156(1)(i) of the Act; and
- (c) ordered Mr NM to pay costs of $1,000 pursuant to s 156(1)(n) of the Act.
Application for review
[63] Mr NM filed his application for review on 14 June 2017. He submits:
The Committee’s determination at paras 24 and 25 imposes an unrealistic burden upon a legal practitioner when testifying in court, particularly as it was not part of Mrs W’s case that Mr NM was deliberately preferring the interests of [Organisation]
over her interests.
[64] The Committee advised this Office that it would not participate in the review and would abide the Review Officer’s decision.
Nature and scope of review
[65] The nature and scope of a review have been discussed by the High Court, which said of the process of review under the Act:6
... 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
4 At [25].
5 At [31].
6 Deliu v Hong [2012] NZHC 158, [2012] NZAR 209 at [39]–[41].
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.
[66] More recently, the High Court has described a review by this Office in the following way:7
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.
[67] 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:
- (a) consider all the available material afresh, including the Committee’s decision; and
- (b) provide an independent opinion based on those materials.
Statutory delegation and hearing in person
[68] As the Legal Complaints Review Officer (LCRO) with responsibility for deciding this application for review, I appointed Mr Robert Hesketh as my statutory delegate to assist me in that task.8 As part of that delegation, on 12 October 2017 at [City], Mr Hesketh conducted a hearing at which Mr NM appeared in person.
[69] The process by which a LCRO may delegate functions and powers to a duly appointed delegate was explained to Mr NM by Mr Hesketh. He indicated that he understood that process and took no issue with it.
[70] Mr Hesketh has reported to me about that hearing and we have conferred about the complaint, the application for review and my decision. There are no additional issues or questions in my mind that necessitate any further submissions from either party.
Analysis
[71] At the hearing before Mr Hesketh, Mr NM explained that in approximately he was urged to join [Organisation] because his father was a then member.
.
7 Deliu v Connell [2016] NZHC 361, [2016] NZAR 475 at [2].
8 Lawyers and Conveyancers Act, sch 3, cl 6.
At their urging, Mr NM became a member of [Organisation].
.
[73] Mr NM said that he attended meetings with his father until his father passed away in 1995. At that point Mr NM resigned from [Organisation] and has not had any personal connection since then.
[74] Mr W was [nationality], although Mrs W was a New Zealander. However, when they married the couple lived permanently in [Country].
[75] When Mr W died in 2001, as the sole executor administering the estate, Mr NM referred Mrs W to a lawyer in [city]. One of the reasons for doing so was so that she could obtain advice about how to deal with the estate funds. In addition, there were various administrative steps which required Mrs W’s authorisation and signature.
[76] Mr NM and the lawyer in [city] exchanged correspondence about Mr W’s estate. In that correspondence Mr NM referred to the W trust and said that the trust’s capital was approximately [amount], and that in addition Mr W’s estate was valued at approximately
$71,000. Mr NM indicated that the combined income from the W trust and Mr W’s estate would be approximately $20,775 per annum before tax, which meant that Mrs W would receive approximately $12,000 per annum from the trust.
[77] On 5 November 2002, Mr NM wrote directly to Mrs W. He reported on the administration of Mr W’s estate and advised her that he would be depositing quarterly interest earned by the trust and estate funds, into her [Nationality] bank account. In that letter, he said the following:9
As [the lawyer in [city]] has explained to you all of the assets in the trust and the estate are effectively yours. You should give some consideration as to what you wish to happen to those assets on your death by making a will and could I suggest that you either contact me or [the lawyer in [city]] in that regard.
[78] Mr NM submitted that he wrote that letter at the urging of the lawyer in [city], who wanted Mr NM to give Mrs W comfort that she had access to funds when she needed them.
[79] Mr NM acknowledged that he could have phrased the letter more accurately. However, he submitted that “effectively” did not mean “absolutely”.
[80] Mr NM further acknowledged that his suggestion to Mrs W that she should make a will, coming as it did hard on the heels of his reference to the trust assets being effectively hers, was unhelpful.
9 above n 1, at [26].
[81] Mr NM transferred various sums of money to Mrs W when requested by her. For example, he sent her funds to purchase a new car and to have some alterations done to her home. Those advances came from the estate funds rather than the trust funds, albeit that they had been amalgamated. In order to show the distinction, Mr NM maintained a separate ledger for the estate funds in his trust account, in Mrs W’s name.
[82] By approximately 2003, Mrs W’s ledger in Mr NM’s trust account showed that there was approximately $6000 remaining of the estate funds. At that point, there had been no advances made to Mrs W from the original capital of the W trust.
[83] However, Mrs W was receiving quarterly payments of the interest earned on the invested trust capital from Mr NM, consistent with what had taken place since the W trust was set up and the funds invested in 1992. The only difference was that after Mr W’s death in , the interest payments went directly to Mrs W.
[84] Mr NM said that during 2012, Mrs W telephoned him asking for an advance for an overseas trip that she wished to take. Because Mr NM was aware that Mrs W had very poor eyesight, he asked who was to accompany her on that trip. Mrs W indicated that her niece would be accompanying her and she anticipated that the trust would pay for her niece’s trip as well.
[85] Mr NM concluded that Mr W would not have approved of an advance to cover the niece’s trip, given his comments to Mr NM in 1991 about protecting the W trust funds from his son and Mrs W’s relatives.
[86] Mr NM spoke about the issue to his co-trustee Mr D, who agreed with Mr NM’s views. In Mr NM’s words, they both felt that Mr W would “turn in his grave” if he knew that money was going to a member of Mrs W’s family. For that reason, Mr NM told Mrs W that he would not advance funds to cover the overseas trip.
[87] During 2013, Mrs W telephoned Mr NM and asked for an advance to cover a cataract operation that she required. Mr NM asked for evidence of how much that would cost and upon receipt of that, in approximately June of that year, he advanced her various amounts to cover the cost of the surgery.
[88] In 2014, Mr NM received correspondence from Mrs W’s new lawyer in [Country], demanding payment to her of the whole of the trust fund.
[89] At that point Mr NM sought counsel’s opinion.
[90] Mr NM’s problem was that he did not have a copy of the original trust deed that Mr W had executed. Counsel’s opinion included advice that the Trustees should make an application to the High Court for directions as to distribution of the W trust funds.
[91] Mr NM told Mr Hesketh that he was conscious of his former membership of [Organisation] and its potential relevance to the proceedings before the High Court. He said that the issue “troubled him slightly”.
[92] Although slightly troubled, Mr NM’s personal view was that it was an immaterial fact, because it did not impinge on the interpretation of the document that was before the court.
[93] Because of his concerns, on the first morning of the hearing, but before it began, Mr NM had a discussion with his counsel in which he said that he was not a , but that he had been in the past. Mr NM said that this was the first time he had discussed this issue with his counsel.
[94] He said to his counsel “what if I’m asked about that?”. Although it is not clear whether Mr NM and his counsel discussed whether the issue might arise in cross- examination, in Mr NM’s mind he anticipated that he might be asked questions about membership of [Organisation] in cross-examination by Mrs W’s lawyer.
[95] Counsel advised Mr NM to tell the truth.
[96] Mr NM began his evidence in chief on the morning of . After his counsel asked Mr NM to confirm the contents of a brief of evidence that had been filed, he then asked Mr NM whether he was a member of [Organisation]. Mr NM was not expecting his counsel to ask that question. He had anticipated that he might be asked that question in cross-examination.
[97] Mr NM’s answer to the question “are you a member of [Organisation]” was to answer that he was not. His counsel did not ask any further questions. The issue was not taken further in cross-examination by counsel for Mrs W.
[98] Mr NM submitted to Mr Hesketh that his answer was truthful: at the time he was asked the question, he was not a member of [Organisation].
[99] For that reason, Mr NM submitted that he was not misleading the court.
[100] Mr NM submitted that whether he had ever been a member of [Organisation], had nothing to do with where the trust funds would go. The purpose of the proceedings according to Mr NM, was not to advocate a particular position, but to responsibly place
before the court Mr W’s instructions and then leave it for the court to determine the destination of the trust funds.
[101] Mr NM said that it was not his personal position that the trust funds should go to [Organisation]. However, his instructions from Mr W in were that the trust funds were to be available to look after Mrs W whilst she was alive and thereafter they would vest in [Organisation].
[102] Mr NM said that he did not consider that his evidence deliberately favoured one position or another; rather, he was protecting the instructions that he had been given in 1991.
[103] He nevertheless acknowledged that his former membership of [Organisation] in the context of the proceedings, troubled him and this is why he raised it with his counsel on the first morning of the hearing.
[104] It was those proceedings which led to the adverse comments by the judge, which in turn led to the Committee’s own motion inquiry.
Discussion
[105] Mr NM’s consistent position throughout the Committee’s investigation and the current review process, is that he correctly and honestly answered “no” to the question that was put to him “are you a member of [Organisation]?”. He was not asked whether he had previously been a member and so he could not answer a question that he had not been asked.
[106] Mr NM’s submission — that he honestly answered a direct question — is undoubtedly correct. As a matter of semantics, the question “are you a member of [Organisation]?” means “are you currently a member ...”. It is a question asked in the present tense. Mr NM was not at that time a member of [Organisation] and that is the answer that he gave.
[107] There were no follow-up questions about membership of [Organisation]. The issue was next raised by the judge, after Mr NM had completed his evidence and, in fact, had left the hearing altogether.
[108] It is important to re-state the well-known, well-understood and well-documented principle that a lawyer’s duty is first and foremost, to the Court as an Officer of the Court.
[109] The principle is captured in both the Lawyers and Conveyancers Act 2006 (the Act), and the Rules. The relevant provisions bear setting out:10
The Act:
4. Fundamental obligations of lawyers
Every lawyer who provides regulated services must, in the course of his or her practice, comply with the following fundamental obligations:
...
(d) the obligation to protect, subject to his or her overriding duties as an officer of the High Court and to his or her duties under any enactment, the interests of his or her clients.
The Rules:
2.1 The overriding duty of a lawyer is as an officer of the court.
...
13.1 A lawyer has an absolute duty of honesty to the court and must not mislead or deceive the court.
[110] The duty of honesty and candour required of lawyers as officers of the court, is neither technical nor difficult to understand.
[111] The relationship between Court and lawyer involves, at its heart, the Court’s expectation that it may rely without demur on every word that a lawyer utters or writes. Were it unable to do so, the administration of justice would crumble for uncertainty.
[112] The duty of honesty and candour arises when a lawyer a drafts and files any document for a judge to consider as part of a case. The duty arises when a lawyer is appearing before the Court, whether as counsel or as a witness giving evidence in their capacity as a lawyer.
[113] Rule 13.7 deals precisely with the position of a lawyer appearing as a witness in a matter in which they have acted. It provides:
Where a lawyer is approached to give evidence in a court proceeding that relates to a matter in which the lawyer acted, the lawyer must not be obstructive and must, subject to the rules of privilege and the duty of confidence, provide all information relevant to the matter in issue to any party to the proceeding and to the court that the lawyer would be obliged to provide if subpoenaed as a witness.
10 Rule 13 deals with a lawyer's obligation when acting in litigation. In the present matter, Mr NM, as instructing solicitor, is bound by the provisions of r 13.
[114] Relevant to the current matter are the words “provide all information relevant to the matter in issue ... to the court”.
[115] The matter in issue before the court was Mr NM’s and Mr D’s intention to vest the trust capital in [Organisation], but without a trust deed which made that express provision, and in the face of earlier correspondence to Mrs White asserting that the trust capital was “effectively” hers. Information relevant to that matter must include any association that Mr NM has had with [Organisation].
[116] In Lawyers’ Professional Responsibility the learned author said the following:11
Half-truths
Lawyers must eschew statements or conduct that are half-truths, or otherwise leave the court with an incorrect impression. The observations of Cullen CJ in Re Thom are instructive in this context:
it is perhaps easy by casuistical reasoning to reconcile one’s mind to a statement that is in fact misleading by considering that the deponent is not under any obligation to make a complete disclosure. By this means a practitioner may be led into presenting a statement of fact which, although it may not be capable of being pronounced directly untrue in one particular or another, still presents a body of information that is misleading, and conceals from the mind of the tribunal the true state of facts which the deponent is professing to place before it. For that reason it is proper on such an occasion as this to express condemnation of any such casuistical paltering with the exact truth of the case.
(citation omitted)
[117] Mr NM was appearing before the court in a dual capacity. First, he was the instructing solicitor on behalf of the Trustees, who were seeking directions from the court. Secondly, he was giving evidence in his capacity as Mr W’s former lawyer, the W trust’s lawyer and as a trustee in the W trust. This was not a situation where Mr NM was giving evidence about a matter incidental to his profession as a lawyer.
[118] I have reservations about Mr NM acting as instructing solicitor in the trust proceedings. Counsel and their instructing solicitor owe their duties first and foremost to the court.
[119] It is recognised that, generally, counsel in a proceeding may not also appear as a witness in that same proceeding. Appearing in that dual capacity compromises a lawyer’s ability to exercise independent professional judgement on their client’s behalf, as is required by r 5.3. There is no principled reason why this should not apply to an instructing solicitor.
11 GE Dal Pont Lawyers’ Professional Responsibility (6th ed, Thomson Reuters, [city], 2017) at [17.115].
[120] Although speculative, the position that Mr NM found himself in – raising with his counsel on the morning of the first day of the hearing the “slightly troubling” issue of his prior involvement with [Organisation] – may not have arisen if Mr NM was not also the instructing solicitor in the trust proceedings. An independent instructing solicitor might have concluded that the issue of Mr NM’s prior membership of [Organisation] ought to be included in his brief of evidence.
[121] Exercising independent professional judgment on a client’s behalf may involve a lawyer asking their client difficult questions, if only to ensure that no surprises emerge. An independent instructing solicitor may have thought it relevant to explore the issue of Mr NM’s insistence on vesting the trust capital with [Organisation], given that his co-trustee Mr D had been a member of [Organisation].
[122] I accept that the above is speculative and to some extent also straying into the area of trial strategy, about which lawyers are allowed a degree of latitude. But as instructing solicitor and key witness in the trust proceedings, Mr NM’s ability to exercise independent professional judgement about the issue of his past membership of [Organisation], became compromised. The fact that he sought his counsel’s advice about it underscores this.
[123] The difficulty that I have with Mr NM’s position, which is that he truthfully answered that he was not a current member of [Organisation], is that it ignores the wider context of the case before the court. He referred only to part of the relevant story.
[124] The court was being asked to give directions as to the vesting of trust funds in circumstances where the original W trust deed was unavailable. The draft trust deed upon which Mr NM and Mr D were relying, and which contained errors, described the final beneficiaries as being “various charities” to be selected by the Trustees.
[125] On the other hand the Trustees’ position, advanced to the court, was that when he gave instructions in 1991 Mr W identified [Organisation] as the final beneficiary.
[126] Mr NM said that despite his historic association with [Organisation], in identifying that organisation as the final beneficiary he was not favouring it because of that association; he was endeavouring to carry out his client’s instructions.
[127] However, the court was faced with the following disparate evidence, including:
- (a) the draft trust deed which contained errors, but which referred to “various charities” as the final beneficiary;
[128] The above evidence was known to and available to the parties prior to the hearing.
[129] A reasonable line of enquiry arising from the above evidence was why [Organisation] was now being promoted by Mr NM and Mr D as the final beneficiary.
[130] This line of enquiry occurred to Mr NM. His former connection with [Organisation] in the context of the case, troubled him. Accordingly, on the morning on which the hearing began he raised it with his counsel.
[131] I accept Mr NM’s evidence that he did not suddenly and consciously promote [Organisation] as the final beneficiary because of a favourable bias towards them, given his historic family connections. I accept that Mr NM was endeavouring to give effect to what he understood to have been his client’s instructions, given in .
[132] However, in my view, having concluded that his membership of [Organisation] might be relevant to the issue he was bringing before the Court, it was incumbent upon him to provide a complete picture of his membership.
[133] The focus of the trust proceedings was on [Organisation] and whether it was the final beneficiary in the W trust. The evidence revealed that prior to , when Mr NM
suggested “various charities” as the final beneficiary, from Mrs W’s perspective following her husband’s death in , all the indications were that she was the final beneficiary.
[134] Mr NM’s letter to Mrs W, dated , states that “all of the assets in the trust and the estate are effectively yours”. I do not accept Mr NM’s submission that “effectively” in that context does not mean “absolutely”. Semantically, the words may be capable of slightly differing meanings. But in the context of a letter being sent directly by a lawyer to an elderly layperson, in my view the word “effectively” carries with it the idea that the assets of both the trust and the estate belong to her.
[135] I agree with the Committee’s conclusion that Mr NM “had a broader duty to be frank with the court”. My view is that Mr NM had an obligation to inform the court of his prior membership of [Organisation]. He knew it was relevant; it “troubled him slightly”.
[136] That being said, I do not agree with the Committee’s conclusion that Mr NM “knowingly misled the court by omission”. That expression carries with it the taint of perjury.
[137] I accept Mr NM’s submission, which was that the question he was asked by his counsel at the beginning of his evidence in chief, came as a surprise to him. He had raised the issue with his counsel because he anticipated that there might be cross-examination about membership of [Organisation].
[138] It seems that his counsel made a tactical decision, without first consulting Mr NM, to ask the question about current membership at the beginning of Mr NM’s evidence.
[139] Given that he was taken by surprise, and probably rattled by the question coming from his counsel, it is reasonable to suppose that Mr NM did not have an opportunity to think through, on the spot and in the witness box, the consequences of his one-word partial answer in the overall context of the case.
[140] I have no doubt that if Mr NM had been asked a follow-up question by his counsel along the lines of “have you ever been a member of [Organisation]?”, he would have answered fully and truthfully about his past membership.
[141] Similarly, had the question been put in cross-examination, I am sure that Mr NM would have answered with equal candour. That being said, it is likely that the judge would have expressed concern about the matter being revealed in cross-examination and not as part of Mr NM’s evidence in chief.
[142] Nevertheless, Mr NM had opportunity to put the full picture before the Court, and could have done so at the conclusion of his evidence or even after he had left the witness
box, and before the hearing concluded. No doubt he remained troubled by the possible relevance his prior membership, as that relevant issue was still not before the Court.
[143] In that regard, I am compelled to make an observation about counsel’s role in these events. In so doing, I acknowledge that this review is concerned with Mr NM’s conduct and not the conduct of another lawyer. Furthermore, I acknowledge that the following observations are based upon what Mr NM has said. His counsel’s position is unknown.
[144] Counsel for Mr NM was aware that Mr NM had formerly been a member of [Organisation]. They had discussed it immediately prior to the commencement of the hearing.
[145] Counsel also knew that the case centred on the Trustees’ assertion that [Organisation] was the final beneficiary in the W trust.
[146] Given the nature of the evidence available before the hearing began, outlined by me above at [120], the question of the legitimate final beneficiary was contestable and the Trustees’ position that it was [Organisation] was being challenged by Mrs W.
[147] The question that arises in my mind is whether counsel’s duty to the court in these circumstances in terms of r 13.1, included asking Mr NM a follow-up question of whether he had ever been a member of [Organisation].
[148] It may have been the case that Mr NM’s position could have been avoided if he had received more comprehensive guidance from his counsel, and, for that matter, if Mr NM had not also been the instructing solicitor in the trust proceedings.
[149] I stress that the above observation is not intended as some sort of conduct finding against counsel, but a reflection on the practicalities of dealing with the issues that were before the court.
[150] However, my observation about counsel’s duty arises because I have upheld the Committee’s finding against Mr NM. This is on the basis that Mr NM was aware of the relevance of his former membership of [Organisation] to the issue before the court, as his counsel must also have been. As the instructing solicitor in the proceedings, Mr NM was subject to r 13.1, as was his counsel.
[151] I also stress that it does not follow that as a trustee of the W trust, Mr NM was in some way predisposed towards [Organisation] because of his previous membership. But by not raising that issue directly the judge was left with the impression that a relevant fact had been deliberately kept from him and he thus drew an adverse inference against Mr NM.
[152] The Committee found that Mr NM had breached r 13.1. It held that “his conduct would be regarded by lawyers of good standing as being unacceptable as conduct unbecoming a lawyer”.12 It made a finding of unsatisfactory conduct under ss 12(b)(i) and 12(c) of the Act.
[153] I agree with the Committee’s conclusions, although I accept that these were slightly unusual circumstances.
[154] Mr NM had not anticipated being asked a question about his [Organisation] membership by his counsel. However, he knew, because he was slightly troubled by it, that the question of his prior membership was relevant to the issue before the court.
[155] As an Officer of the Court, it was Mr NM’s duty to ensure that the judge was in possession of all facts relevant to that membership and not simply whether he was (then) currently a member.
[156] I see no grounds which could persuade me to depart from the Committee’s determination that there has been unsatisfactory conduct by Mr NM.
[157] The Committee imposed a fine of $3000 on Mr NM. Given the fundamental importance which attaches to a lawyer’s duty of candour and honesty to the court as an Officer of the Court, in my view a fine of $3000 appropriately reflects the seriousness of Mr NM’s conduct.
[158] In addition, the Committee “was of the view that the conduct was sufficiently serious to warrant censure”.
[159] I agree with the imposition of a censure. In LCRO 248/2012 this Office held that:13
A censure would amount to an indication from the profession that regardless of the circumstances, a lawyer must adhere to the standards of conduct required of him or her and is to be taken seriously. It is not a nominal penalty to be imposed. As noted by the High Court in B v Auckland Standards Committee No 1, “a rebuke of a professional person will inevitably be taken seriously.”
[160] For the reasons, I have given in this decision, in my view Mr NM’s conduct warrants the additional mark of a censure.
[161] The Committee’s order for the payment of its costs, stands.
Costs
12 Standards Committee determination, above n 3, at [25].
13 LCRO 248/2012 at 11, citing B v Auckland Standards Committee No 1 of the New Zealand Law Society [2013] NZCA 156 at [39].
[162] Mr NM’s application for review has been unsuccessful. Where a finding of unsatisfactory conduct is upheld against a practitioner on review it is usual that a costs order will be imposed. I see no reason to depart from that principle in this case.
[163] Taking into account the Costs Guidelines of this Office, Mr NM is ordered to contribute the sum of $1,200 to the costs of the review, that sum to be paid to the New Zealand Law Society within 30 days of the date of this decision.
[164] The order for costs is made pursuant to s 210(1) of the Lawyers and Conveyancers Act 2006
Enforcement of costs order
[165] Pursuant to s 215 of the Lawyers and Conveyancers Act 2006 I confirm that the order for costs made by me may be enforced in the civil jurisdiction of the District Court.
Decision
[166] Pursuant to s 211(1)(a) of the Lawyers and Conveyancers Act 2006 the decision of the Standards Committee is confirmed.
DATED this 26th day of February 2018
R Maidment
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:
Mr NM as the Applicant
[Area] Standards Committee X as the Respondent The New Zealand Law Society
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URL: http://www.nzlii.org/nz/cases/NZLCRO/2018/92.html