AA v BB [2018] NZLCRO 93 (26 April 2018)

Last Updated: 30 October 2018

	LCRO 213/2017
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	AA Applicant
AND	BB and CC Respondents

DECISION

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

Introduction

[1] Ms AA has applied for a review of a decision by the [City] Standards Committee [X] (the Committee) which, having found that she charged Mr BB and Ms CC excessive fees:

• (a) made a finding of unsatisfactory conduct;
  
• (b) ordered a fee reduction and refund; and
  
• (c) imposed a fine and costs.
  

Background

[2] In 2016, Ms AA acted for Mr BB and Ms CC (the clients) when they purchased a house at [Town].

[3] In the course of the transaction, the clients (with the help of a family member involved in real estate) prepared two sale and purchase agreements.

[4] The first agreement came to naught when finance could not be obtained because of compliance issues with the home.

[5] The second agreement dated 17 September 2016, reduced the purchase price by $50,000. Bank finance was approved. The transaction then settled.

[6] Ms AA had rendered three invoices:

• (a) The first, dated 1 November 2016, was described as for attendances from 24 August 2016 to 19 September 2016 and was for $1886 plus disbursements and GST.
  
• (b) The second, dated 10 November 2016, was described as for attendances from 19 September 2016 to 31 October 2016 and was for

$1825 plus disbursements and GST.

(c) The third, also dated 10 November 2016, was described as for attendances from 26 August 2016 to 31 October 2016 concerning withdrawal of KiwiSaver funds that were to go towards the purchase price and was for $700 plus disbursements and GST.

[7] All three were issued after the purchase was concluded and (as can be seen above) within a 10 day timespan.

The complaint and the Standards Committee decision

[8] The clients lodged a complaint with the New Zealand Law Society Complaints Service (NZLS) on 10 March 2017. Their complaint raised three matters of concern to them.

[9] However, on review it is only necessary to refer to the complaint upheld by the Committee in unsatisfactory conduct terms, a determination contested by Ms AA.

[10] That complaint was that the fees charged by Ms AA were, in total, unfair and unreasonable.

[11] In their 10 March 2017 complaint, the clients submitted that:

• (a) they themselves had prepared both agreements;

• (b) the second invoice, relating to the second agreement, was excessive because in their view not much more time was necessitated by it than had been accounted for in the first invoice; and
  
  • (c) the third (KiwiSaver) invoice was unreasonable given they had done the bulk of the withdrawal work themselves.
    

[12] The Committee delivered its decision on 24 June 2016.

[13] The Committee began by noting that, taken individually, none of the invoices exceeded $2,000. Regulation 29 of the Lawyers and Conveyancers Act (Lawyers: Complaints Service and Standards Committees) Regulations 2008 provides that a Committee has no jurisdiction to make inquiry into a fee complaint, if the fee in dispute is less than $2,000. However, inquiry may proceed in respect to a fee that falls below the $2,000 threshold, if a Committee considers that there are special circumstances which merit an inquiry.

[14] The Committee correctly noted that it has been held by this office that “special circumstances” may include a case where all of the invoices relate to the one legal service.1

[15] The Committee formed the view that, since each of the invoices related to the one [Town] house purchase, it was appropriate to aggregate them with the result that the total fees charged ($4,411) was open to examination.

[16] Turning to r 9.1 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (LCCCR), the Committee noted its non-exclusive catalogue of factors that might warrant consideration for the purpose of determining whether fees of

$4,411 were fair and reasonable having regard to the interests of both the clients and the lawyer, and those factors.

[17] The Committee identified (b) and (f) of r 9.1 of the LCCCR factors, — being skill required, responsibility and complexity or novelty — as being particularly relevant.

[18] The Committee, as I summarise:

• (a) noted that, although a small discount had been applied by the practitioner, the fact remained that a significant portion of the work had been done by Ms AA herself and charged at her hourly rate;
  

1 Maidenhead v Margate LCRO 108/2010 (28 October 2010).

(b) related that observation to fact that her practice’s charge out rates as represented to her clients at the outset, and recorded in her terms of engagement, ranged from $90 to $320 an hour;

(c) found that information to have been misleading when related to the actual manner of charging (see (a) above);

(d) considered it to have been confusing to the clients and advantageous to the lawyer to split the accounting for the work done into three when in fact her instructions simply related to the one house purchase;

(e) concluded when taking a global approach to the fees charged, that a total fee of $4411 plus GST and disbursements — as had been charged

— was unreasonable; and

(f) concluded that a fee of $2,500–$3000 would be within the range of what could be considered a reasonable fee.

[19] The Committee:

• (a) determined pursuant to s 152(2)(b) of the Act that there was unsatisfactory conduct on Ms AA’s part as defined in s 12(c) — that on the basis that she had breached r 9 of the LCCCR;
  
• (b) ordered Ms AA to reduce her fees to $3000 (the top of the reasonable range identified by the Committee) plus GST and disbursements pursuant to s 156(1)(e) of the Act;
  
• (c) to give effect to that reduction ordered her to refund such of the fees already paid that exceeded the $3000 pursuant to s 156(1)(g) of the Act;2
  
• (d) fined Ms AA $1000 pursuant to s 156(1)(i) of the Act; and
  
• (e) ordered her to pay costs of $1000 pursuant to s 156(1)(n) of the Act.
  

Application for review

[20] Ms AA filed an application for review on 9 November 2017. The outcome sought is a setting aside of the Committee’s decision on grounds that the Committee

2 Although the Committee did not say as much, that order required an adjustment of the GST charged to give it full effect.

lacked jurisdiction to reduce the fees, as there were in fact no “special circumstances” to justify an aggregation of fees.

[21] Although she made some references to the fees as such, the main thrust and focus of her case was on the jurisdictional issue: as she herself put it, “this is the subject to review”.

[22] Ms AA’s submissions include that:

• (a) It was fundamentally wrong for the Committee to hold that a single legal service had been provided.
  
• (b) That was not the case. The first agreement fell through and the second was in different terms (including as to purchase price), different lawyers were acting for the vendor, separate and distinctive work was performed.
  
• (c) She relied on a Court of Appeal view of what was meant by “special circumstances”, relying on that decision as authority for the proposition that the circumstances had to be “abnormal, uncommon, or out of the ordinary”.3
  
• (d) The “rendering (of) invoices which the respondents were expected to receive, and paid for the services they did receive could hardly amount to ‘special circumstances’ or ‘single legal service’”.
  
• (e) The finding of “special circumstances” was based only on the Committee’s “view”, rather than an expression of satisfaction that that was the case.
  

[23] Insofar as she made submissions about the amount of fees, a point of emphasis was that the respondents had known that she herself was doing all the work.

Ms CC and Mr BB reply

[24] The respondents were invited to comment on the review application.

[25] They submit that:

• (a) Ms AA’s services had been retained for a single house purchase;
  
• (b) they themselves (with family help) had prepared both agreements;
  

3 Cortez investments Ltd v Olphert and Collins [1984] 2 [NZLR] 434 (CA).

(c) they had been obliged to attend to much of the KiwiSaver work themselves; and

(d) delay by Ms AA had in fact resulted in the KiwiSaver monies only becoming available after purchase completion, which they had to cover by other means.

Review on the papers

[26] The parties have agreed to the review being dealt with on the papers. This review has been undertaken on the papers pursuant to s 206(2) of the Act, which allows a Legal Complaints Review Officer (LCRO) to conduct the review on the basis of all information available if the LCRO considers that the review can be adequately determined in the absence of the parties.

[27] I record that having carefully read the complaint, the response to the complaint, the Committee’s decision and the submissions filed in support of and in opposition to the application for review, there are no additional issues or questions in my mind that necessitate any further submission from either party. On the basis of the information available I have concluded that the review can be adequately determined in the absence of the parties.

Nature and scope of review

[28] The nature and scope of a review have been discussed by the High Court, which said of the process of review under the Act:4

... 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.

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

[29] More recently, the High Court has described a review by this Office in the following way:5

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.

[30] 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 of the available material afresh, including the Committee’s decision; and
  
• (b) provide an independent opinion based on those materials.
  

Analysis

“Special circumstances”

[31] In relying as she does, on the decision in Cortez, Ms AA focuses on the aspect of that decision which emphasises the requirement for there to be something “abnormal, uncommon, or out of the ordinary”, to merit a finding of special circumstances. That focus appears to set a particularly high threshold.

[32] However, when the approach of the three judges in Cortez is considered as a whole, it is my view that the test advanced is not as restrictive or as circumscribed as the terms “abnormal”, “uncommon” or “out of the ordinary” may suggest.

[33] The three members of the court produced three different tests. Woodhouse P said that “if the issue is to be related to perceived injustice then the simple risk of injustice should be sufficient”.6 Richardson J considered that “it is a question of where the interests of justice lie in all the circumstances”.7 McMullin J’s view was that “All that can be said is that to be special circumstances must be abnormal, uncommon, or out of the ordinary” and “if there is a perceived risk of injustice I do not think that anything more is required”.8

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

6 Cortez investments Ltd v Olphert and Collins, above n 3, at 437.

7 At 439.

8 At 441.

[34] Common to the approach of all three judges, is the view that if the enquiry discloses possibility of potential injustice, that becomes a factor to consider.

[35] I find this more recent judgment from the Court of Appeal particularly helpful:9

The term “special circumstances” is a commonly used phrase in the New Zealand statute book. It requires circumstances that are uncommon, not commonplace, out of the ordinary, abnormal – see Cortez Investments Ltd v Olphert & Collins [1984] 2 NZLR 434, in which this Court considered the meaning of special circumstances in the context of s 151 of the Law Practitioners Act 1972. Whether there are special circumstances justifying an extension of time must be assessed in the context of the legislation involved...

[36] The point I pick up on is the importance of the legislative context.

[37] As to the present legislative context:

• (a) The Lawyers and Conveyancers Act 2006, and its attendant regulations and rules, reflect a particular concern for the protection of consumers of legal services and the public interest inherent in the maintenance of confidence in the provision of legal services.10
  
• (b) Those objectives surely demand, just as does other consumer-oriented legislation, a focus on substance over form and simplicity over unwarranted complexity — a focus on what really was involved.
  
• (c) A common-sense and objective assessment of whether the work should be charged on a one bill for all basis, or whether instead it comprises truly distinct elements that justify individual charging, is required.
  

Ms AA’s case

[38] I do not accept Ms AA’s argument that the Committee was wrong to find “special circumstances”.

[39] On what is before me, her submission that such as the fact of the two agreements (with some effect on the work required) supported a bifurcated approach to costing, makes more of that circumstance than is justified.

9 Rajan v Minister of Immigration [2004] NZAR 615 (CA) at [24].

10 Lawyers and Conveyancers Act 2006, s 3.

[40] The first agreement apparently fell over because it was conditional on bank finance which could not be secured.

[41] The second agreement appears to have been devised to remove the impediments to finance and that worked.

[42] Neither agreement was drafted by Ms AA.

[43] It is not as though there was any significant gap between the two agreements as might have justified separate costing. In fact, there was no costing at all until after settlement.

[44] Separate costings at that point carried the risk of the overall end result being as I find it was — a plainly excessive total sum for a house purchase transaction that, while not entirely straight forward, was not especially complicated.

[45] That was also the view of a Committee comprising a number of experienced legal practitioners and a lay member.

[46] The sum of the fees charged (KiwiSaver costs included) was not much short of half as much again of the amount the Committee saw to be at the top of the range of reasonableness. And that figure ($3000) might be counted generous.

[47] I found the submissions of Ms AA as noted at [21](d) and (e) above hard to follow:

• (a) It is true to say that there was nothing intrinsically special about the rendering of costs for work that had been done in the expectation that they would be paid, but that does not make any relevant point that I can discern.
  
• (b) What is relevant is what in fact comprised the work that gave rise to the rendering of the costs.
  
• (c) Complaining that the Committee described its conclusion on special circumstances as a “view”, that it did not say it was “satisfied” on that account, is not argument that advances Ms AA’s case in a relevant way.

• (d) In any event, as I read the Committee’s determination, it covers the requirements of the relevant rule.11
  

[48] Ms AA was handling a transaction relating to one house. In the way matters developed, it involved two sequential agreements but in circumstances rendering artificial the rendering of two separate bills.

[49] That artificiality was compounded by the inclusion of a third bill relating to KiwiSaver which, leaving aside the complaints from the respondents of some degree of incompetent performance, was in any event for work that was but a part of the overall task undertaken by the lawyer, rather than somehow a quite separate matter.

[50] The conclusions I independently reach turn out to mirror those of the Committee, namely that:

• (a) in substance there was but the one transaction and all of the services provided related to that; so that
  
• (b) the only correct — fair and reasonable for all concerned — way to treat the fees charged is to lump them together;
  
• (c) that has the result that the total sum involved well exceeds the $2000 ceiling; and
  
• (d) that result renders the overall total of the fees open to examination under r 9 of the LCCCR.
  

[51] Having myself considered the fairness and reasonableness question (including in the light of all that Ms AA has put forward, whether specifically mentioned in this decision or not), nothing that has been offered persuades me that there is any good reason to justify a conclusion differing from the Committee’s determination.

[52] I particularly note here that Ms AA’s submission that the clients knew that she was doing all the work does not, even if correct, ameliorate her position.

[53] It was her obligation as the professional to ensure that the various tasks involved were allocated according to level of skill need. Discharge by a practitioner of that obligation can in itself contribute to keeping costs within reasonable bounds.

11 Lawyers and Conveyancers Act (Lawyers: Complaints Service and Standards Committees) Regulations 2008, reg 29.

[54] Whilst the focus of Ms AA’s review application has been on challenging the Committee’s decision to find special circumstances, I have also carefully scrutinised the fees charged by reference to the relevant fee factors, and in doing so have concluded, as did the Committee, that the overall fees charged were not fair and reasonable.

Result

[55] I see no grounds which could persuade me to depart from the Committee’s decision.

[56] That is because:

• (a) I too find “special circumstances”.
  
• (b) I find $4411 to be an excessive fee.
  

[57] I find the charging of that to have been unsatisfactory conduct by Ms AA in terms of the same provisions of the Act as did the Committee. I see no reason to interfere with the Committee’s determination of what was a reasonable fee nor with any of its consequential orders, except to note that, when making the requisite refund to the clients, Ms AA must ensure that the GST component is adjusted to match.

Costs

[58] Ms AA’s application for review has been unsuccessful. Consistent with the costs guidelines applied by this office, it is appropriate to order her to pay costs. Pursuant to s 210 of the Act, she is ordered to pay the sum of $900 by way of costs, to the New Zealand Law Society. That sum must be paid by her within 30 days of the date of this decision.

Enforcement of Costs Order

[59] Pursuant to s 215 of the Lawyers and Conveyancers Act 2006 I confirm that the order for costs may be enforced in the civil jurisdiction of the District Court.

Decision

[60] Pursuant to s 211(1)(a) of the Lawyers and Conveyancers Act 2006 the decision of the Standards Committee is in all respects confirmed

DATED this 26th day of April 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:

Ms AA as the Applicant

Mr BB and Ms CC as the Respondents [City] Standards Committee [X]

The New Zealand Law Society