YM v RD [2019] NZLCRO 2 (7 January 2019)

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	LCRO 246/2013
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	YM Applicant
AND	RD _Respondent

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

[1] Mr YM has applied to review a decision of the [City] Standards Committee [X] (the Committee), in which the Committee decided to take no further action on Mr YM’s complaint against his lawyer, Mr RD.

[2] The Committee’s decision was based upon ss 138(1)(f) and 138(2) of the Lawyers and Conveyancers Act 2006 (the Act). The Committee considered that Mr YM had an adequate alternative remedy against Mr RD and that any further action on the complaint was therefore neither necessary nor appropriate.

[3] In September 2012, Mr YM signed an agreement to purchase a property at [Street Address], [Town] (the [Town] property) (the agreement). The agreement was subject to satisfaction of two key conditions, namely that Mr YM:

[5] Having signed the agreement, Mr YM instructed Mr RD to act on the purchase. [6] Mr YM was to arrange for a builder to provide a report.

[7] On 25 September 2012, the day before the builder’s report condition was to be satisfied, Mr RD’s secretary, Ms HN, phoned Mr YM and enquired about his progress with obtaining a report from a builder.

Sorry I haven’t gotten back to you Re the building report. The report found a few minor issues but structurally was fine and no evidence of weathertightness issues were found.

As I told you we may have a problem with another party now taking an interest in [Street Address] and, from what I am told, in a position to put forward an unconditional offer.

[9] This correspondence is recorded on the firm’s time sheet as Mr YM “instructing he is satisfied with the building report”.

[10] Four minutes later the vendor’s lawyer sent a fax to Mr RD’s office in which the vendor’s lawyer advised that the vendor had received an unconditional offer on the [Town] property and was invoking the cash out clause. The vendor’s lawyer’s position was that Mr YM had until 4 pm on 3 October 2012 to “confirm that all conditions have been fulfilled or waived” [emphasis added] and that the agreement was unconditional. That fax is stamped as having been received by Mr RD’s office at 1.01 pm, ten minutes after Mr RD’s office received Mr YM’s email about the builder’s report.

[11] No one from Mr RD’s office had notified the vendor’s lawyer that the builder’s report condition was satisfied during those ten minutes. When Ms HN read the vendor’s lawyer’s fax she understood, not unnaturally, that Mr YM was to confirm that

all conditions had been fulfilled or waived by 4 pm on 3 October 2012, ie. the vendor had allowed Mr YM an extension of the deadline for satisfaction of the builder’s report condition and had brought forward the deadline for satisfaction of the sale condition. That is consistent with the email Ms HN sent to Mr YM at 1.47 pm, attaching a copy of the vendor’s lawyer’s fax and saying:

Please find attached copy of fax from the vendor’s lawyer advising that the vendor has obtained another offer and accordingly has invoked further term of sale clause

You have until Wednesday 3 October 2012 to confirm that your agreement with the vendor is unconditional or otherwise if you are not able to confirm an unconditional agreement then the agreement is at an end.

[12] On 2 October 2012, the vendor’s solicitors issued a notice purporting to cancel the agreement. The basis for the purported cancellation was that the builder’s report condition was due to be satisfied on 27 September 2012 and had not been. Mr YM became aware of the purported cancellation at about 8.30 pm that day, when the vendor’s agent told him the vendor had cancelled the agreement. He was dismayed that he had not heard about it earlier from Mr RD.

[13] 3 October 2012 was also an eventful day, starting with Mr YM contacting Mr RD’s office to find out what his contractual position was. Not surprisingly, he seems to have had some difficulty accepting the purported cancellation. Although the vendor’s lawyer had given Mr YM until 4 pm on 3 October 2012 to confirm that all the conditions had been fulfilled or waived, Mr YM repeatedly referred to Mr RD having failed to notify the vendor’s lawyers that the builder’s report condition had already been satisfied, effectively in the 10 minutes between his email to Ms HN and the Mr RD’s office receiving notice of the vendor invoking the cash out clause.

[14] With no buyer for his own home and no certainty about whether he could successfully challenge the purported cancellation, Mr YM seems to have resigned himself to abandoning the agreement to purchase, leaving a message with Mr RD’s office at around 11.26 am saying “everything is off – not proceeding”.

[15] Mr RD did not advise the vendor’s lawyer, which was fortunate, because that afternoon Mr YM’s hopes of proceeding with the purchase of the [Town] property were revived by a prospective buyer expressing an interest in purchasing his home, albeit without having signed a sale and purchase agreement, and in the face of the purported cancellation.

contacted Mr RD’s office at 2.43 pm to discuss how he might now progress his purchase of the [Town] property. They discussed options and risks including the prospect that Mr YM may be left without a home at all if the vendor was correct and the agreement was validly cancelled, and the prospective purchasers of Mr YM’s home came through with a signed agreement by 4 pm. The costs of resolving whether the purported cancellation was valid were discussed.

[17] Mr RD describes the situation as “fraught”, with Mr YM insisting that if he could not purchase the [Town] property he did not want to sell. Their discussion the option of Mr YM disputing the purported cancellation although Mr RD was unable to predict the outcome of a challenge with any certainty. Mr RD’s advice was to “get out of the contractual commitments if in doubt, rather than to commit”.

[18] Mr YM decided to accept Mr RD’s advice. He abandoned the purchase of the [Town] property and he advised Mr RD accordingly, after 4 pm on 3 October 2012, instructing him not to challenge the purported cancellation. Mr RD sent an email to the vendor’s lawyer confirming Mr YM had elected not to proceed with the agreement.

[19] Mr RD sent Mr YM a copy of the email he had sent to the vendor’s lawyer on 4

October 2012, with a written report of events and a summary of the advice he had provided to Mr YM which included the possibility of Mr YM attempting to hold the vendor to the agreement, and Mr RD’s warning that he could not have guaranteed an outcome satisfactory to Mr YM. Mr RD repeated his opinion that the vendor’s letter of

26 September 2012 shifted the date for satisfaction of both conditions to 3 October

2012, although he anticipated the vendor would argue it had lawfully cancelled the agreement because Mr YM had not satisfied the builder’s report condition by 27

[20] There followed an exchange of emails in which Mr YM adhered to the view that Mr RD should have immediately advised the vendor’s lawyer that the builder’s report condition was satisfied when he received Mr YM’s email of 26 September 2012 at

12.51 pm, and Mr RD adhered to the position that the vendor’s lawyer had extended the date for satisfaction of the builder’s report condition and the sale condition to 3

October 2012, had then recognised that as an error, but nonetheless purported to cancel the agreement, arguably without proper grounds.

[21] On 16 October 2012, Mr YM lodged a complaint with the New Zealand Law Society Lawyers Complaints Service (Complaints Service) which can be summarised as Mr RD failed to advise the vendor’s lawyer that the builder’s report condition was satisfied thereby frustrating the agreement.

(a) Mr YM did not instruct him to notify the vendor’s lawyer that the builder’s

(b) in any event, the vendor invoking the cash-out clause effectively extended the time for Mr YM to satisfy both conditions;

(c) it was not Mr RD’s failure to notify satisfaction of the builder’s report condition, but Mr YM’s inability to sell his home, that frustrated the agreement;

(d) the dispute over whether the vendor’s fax of 2 October 2012 had legitimately cancelled the agreement remained unresolved; and

(e) Mr YM elected not to challenge the vendor’s cancellation of the agreement having received prudent advice on the potential costs and risks of litigation.

[24] In its decision on 19 July 2013 the Committee considered that a different outcome may have been achieved if Mr RD and Ms HN had taken different steps, but noted that these matters were:1

[n]ot really an issue of conduct, but rather of possible negligence. Negligence is a matter to be properly determined by the Courts and not the Standards Committee. In the event that the Committee is wrong on this, and it is a matter of conduct, then the Committee expressed the view that Mr RD’s conduct (and that of Ms HN) would not meet the threshold for an unsatisfactory conduct finding.

[25] The Committee also noted that an error or mistake made by a practitioner does not automatically amount to unsatisfactory conduct as defined by ss 12(a) and (b) of the Act, and that the standard of a “reasonably competent lawyer” does not require perfection. The Committee concluded that in the particular circumstances, any mistake that may have been made would not have met the threshold for an unsatisfactory conduct finding.2

2013. His application repeats the complaint and says Mr RD did not tell him he needed a specific instruction to notify the vendor’s lawyer that the builder’s report condition was satisfied. Mr YM’s application raises no new issues.

[27] In his letter to this Office dated 30 August 2013, responding to Mr YM’s application for review, Mr RD submits that Mr YM’s application “contains nothing new and simply invites [a Review Officer] to revisit the decision in the hope that he can obtain a reversal”.

[28] Mr RD notes the Committee’s determination that the standard of a reasonably competent lawyer does not require perfection and that his conduct did not meet the threshold of unsatisfactory conduct.

Mr YM appears to miss the point in pursuing the point about the condition date of 27 September 2012 when he was advised by us that the condition had been extended to 3 October 2012 by the cash out notice from the vendor’s lawyer on

[30] With the consent of both parties, this review has been conducted on the papers pursuant to s 206 of the Act, which allows a Legal Complaints Review Officer (LCRO) to conduct the review on the basis of all the information available if the LCRO considers that the review can be adequately determined in the absence of the parties.

[31] The nature and scope of a review have been discussed by the High Court, which said of the process of review under the Act:3

... 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.

[32] More recently, the High Court has described a review by this Office in the following way:4

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.

[33] 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;

[34] There has been a regrettable delay in issuing this decision for which apology is due and given.

[35] The review issue is whether Mr RD’s failure to notify the vendor’s lawyer that the builder’s report condition was satisfied on receipt of Mr YM’s email of 26 September

2012 is unsatisfactory conduct pursuant to any of the meanings set out in s 12 of the

(a) conduct of the lawyer... that occurs at a time when he... is providing regulated services and is conduct that falls short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent lawyer; or

(b) conduct of the lawyer... that occurs at a time when he... is providing regulated services and is conduct that would be regarded by lawyers of good standing as being unacceptable, including—

(c) conduct consisting of a contravention of this Act, or of any regulations or practice rules made under this Act that apply to the lawyer... or of any other Act relating to the provision of regulated services...

[36] The essence of Mr YM’s complaint is that it was Mr RD’s failure to notify the vendor’s lawyer that the builder’s report condition was satisfied that opened the door to the contract being cancelled (purportedly).

[37] Lawyers are obliged by r 3 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (the Rules) to provide regulated services to their

clients “in a timely manner consistent with the terms of the retainer and the duty to take reasonable care”.

[38] It is accepted that Mr RD could have notified the vendor’s lawyer that the builder’s report condition was satisfied immediately upon receiving Mr YM’s email and receiving the vendor’s notice that it was invoking the cash-out clause. In considering whether his failure to do so during those ten minutes is conduct that falls within any of the definitions of unsatisfactory conduct in s 12 of the Act it is helpful to refer to Hinton J’s comment in Wilson v Legal Complaints Review Officer that “the question... has to be looked at in context, and in a way that is not unduly technical, literal or absolute”.5

[39] It is also helpful to have in mind the law as it relates to the satisfaction or fulfilment of contractual conditions, as to which the learned authors of the Laws of New Zealand say:6

As a general rule a condition will be fulfilled on the actual occurrence of the event which is required for fulfilment rather than at such later time as notice of the event's occurrence is given to the other party. Where one party seeks to ensure that notice is given of the fulfilment of the condition, an express term will be needed as the Courts will be slow to imply a term that notice of the fulfilment is to be given.

[40] The builder’s report condition was for Mr YM’s benefit. As it happens he was satisfied with the builder’s report he obtained. If he had not been, Mr YM had a number of alternatives open to him, from waiving the builder’s report condition, renegotiating the purchase price, seeking a retention, through perhaps to cancelling the agreement altogether.

[41] Although no copy of the agreement has been provided, it seems from the correspondence and the commentary referred to above that it may not have been necessary for Mr RD to notify the vendor’s lawyer that the builder’s report condition was satisfied immediately upon receiving Mr YM’s email. Satisfaction, and notice of satisfaction, are not the same. It is not always in the client’s best interests to give early notice of satisfaction of conditions.

[42] As purchaser, Mr YM’s position was that the builder’s report condition was in fact satisfied on 26 September 2012. Based on the commentary referred to above, that fact, had Mr YM chosen to rely on it, would have been sufficient to demonstrate that the

builder’s report condition was satisfied in law on 26 September 2012, ten minutes before Mr RD received the vendor’s fax giving notice that it was invoking the cash-out clause.

[43] Mr YM said later that his expectation was that Mr RD’s office would advise the vendor’s lawyer that builder’s report condition was satisfied when it received his email confirming he had obtained a builder’s report. He does not explain how or when he came to have that expectation but it does not align well with what can be seen of the terms of the agreement on review, which gave Mr YM another day in which to give the vendor notice that the builder’s report condition was satisfied.

[44] Mr YM’s expectation also does not resonate with the lack of urgency in his correspondence at the time. Mr YM was aware another purchaser was showing interest in the [Town] property and had been told an unconditional cash offer might follow. Even so, he told Mr RD’s office in the same email that referred to the building report he had obtained that, with respect to the other potential offer, he “will know more over the next day or two”. That phrase carries no hint of urgency on Mr YM’s part.

[45] A shared sense of urgency is pivotal to upholding Mr YM’s complaint. On balance, and assuming that Mr YM had an expectation of urgency at the time, I am not persuaded that Mr YM conveyed that sense of urgency to Mr RD at the time.

[46] While it is accepted that Mr YM felt he was under pressure from the agent, there is no evidence, and no other reason to believe, that the vendor’s agent was in touch with Mr RD such that he would have been aware of progress with an offer from another potential purchaser beyond what Mr YM had conveyed. All Mr RD had was the agreement and what he was being told by Mr YM and the vendor’s lawyer. It appears from Mr YM’s correspondence with Mr RD that the vendor’s agent was in touch with him directly and trying to push him to commit unconditionally to the purchase early, presumably so the vendor did not lose the opportunity the other prospective purchaser seems to have presented. Although Mr RD knew the agreement provided for a cash- out clause, there is no reason to believe he knew the vendor was on the verge of invoking that option.

[47] The vendor invoked the cash out clause within ten minutes of Mr YM’s email confirming he had received the builder’s report and that did not raise any issues of significance to him. There were ten available minutes in which Mr RD could have notified the vendor’s lawyer that Mr YM had satisfied the builder’s report condition before the vendor changed the terms of the agreement and gave Mr YM until 4 pm on

3 October 2012 to confirm satisfaction of all conditions. That relieved any pressure to commit to satisfaction of either condition.

[48] While there is always a risk that a Court could take a different view in litigation, on its face the vendor’s correspondence confirms that the vendor no longer required Mr YM to satisfy the builder’s report condition by 27 September 2012. While arguable, on the materials available on review, the vendor’s position seems to have been somewhat tenuous because all indications were that until 4 pm on 3 October 2012, the timing of confirming satisfaction was entirely in Mr YM’s hands.

[49] Mr RD could not have known in advance that the vendor would purport to cancel the agreement on the basis of an argument that overlooks the vendor’s concession that satisfaction of all conditions was to be confirmed not by 27 September 2012, but by 3

[50] In that context, and without adopting an unduly technical, literal or absolute view, I am not satisfied that Mr RD’s failure to notify satisfaction of the builder’s report condition lacked timeliness, given his instructions from Mr YM at the time and his duty to take reasonable care in carrying out those instructions.

[51] The evidence available on review does not demonstrate that Mr RD’s conduct fell short of the standard of competence or diligence that a member of the public is entitled to expect of a reasonably competent lawyer. There is no basis on which to contend that Mr RD’s conduct would be regarded by lawyers of good standing as being unacceptable. It is not accepted that Mr RD’s conduct contravened the Act, or any regulations or practice rules made under it. Mr RD’s conduct is not unsatisfactory conduct pursuant to any of the definitions in s 12 of the Act.

[52] Further action in relation to Mr YM’s complaint is not necessary or appropriate. That is not to say that Mr YM was precluded from availing himself of other remedies if he considered it reasonable to exercise those. On that basis, the Committee’s decision is confirmed. In the absence of a determination of unsatisfactory conduct, there is no statutory basis on which to order the remedies Mr YM seeks.

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

YM v RD [2019] NZLCRO 2 (7 January 2019)