CR v EM [2019] NZLCRO 7 (24 January 2019)

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	LCRO 161/2017
CONCERNING	an application for review pursuant to section 193 of the Lawyers and Conveyancers Act 2006
AND
CONCERNING	a determination of the [Area] Standards Committee
BETWEEN	CR Applicant
AND	EM, DN AND BN _Respondent

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

[1] Mr CR has applied for a review of a decision by the [Area] Standards Committee (the Committee) which concluded there had been unsatisfactory conduct on his part arising from his involvement in the sale of a property in the exercise of his powers under a power of attorney made by Mr TN (the EPOA) pursuant to Protection of Personal and Property Rights Act 1988 (PPPR Act).

[2] The respondents are the complainants, Mr TN’s grandson EM, and Mr TN’s children BN and DN (the respondents). Mr TN appointed his son BN as property attorney jointly with Mr CR under the EPOA (the attorneys), and his daughter DN as attorney for his personal care and welfare. EM is DN’s son.

[3] The parties have agreed to the review being dealt with on the papers pursuant to s 206(2) of the Lawyers and Conveyancers Act 2006 (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, as I do.

[4] 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.

[5] 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.

[6] The complaint arises from EM’s disenfranchisement when the attorneys exercised (or purported to exercise) powers of sale over Mr TN’s home shortly before he passed away on [Date 1].

[7] In short, EM thought he might purchase his grandfather’s vacant home, discussed it with someone (probably his mother), but did not make a written offer. Months passed. The house needed maintenance and was falling (further) into

disrepair. Rates needed paying. Mr TN’s property interests were going backwards, his

[8] The attorneys received a written offer from Ms QC (the first offer), an employee of Mr CR’s firm. BN countersigned the first offer. Mr CR conveyed to DN the attorneys’ decision that they would hold off confirming their acceptance of the first offer if EM were to indicate he would promptly match it.

[9] Having received no response from EM or DN by the deadline, the attorneys, through DN, offered EM two weeks in which come up with a written offer. As the attorneys appear to have accepted the first offer, it is assumed that the attorneys were proceeding on the basis that if the first offer did not result in a concluded purchase, and EM did not come up with a written offer by the deadline, the property would have to be marketed through an agent.

[11] EM presented a written offer within the two weeks. The attorneys treated EM’s offer as a backup offer and Mr CR communicated that decision to the lawyers EM had instructed.

[12] Mr TN passed away. The EPOA ended. Conduct of Mr TN’s affairs passed from the attorneys (BN and Mr CR) to the executors of his estate (BN and DN). As executor, DN is said to have refused to ratify the first offer. EM took issue with the decisions the attorneys had made and bolstered that with the threat of complaint about Mr CR’s professional conduct.

[13] EM’s lawyer, Mr CS, wrote to Mr CR pressing for information that EM was missing, seeking clarification of Mr CR’s position in relation to materials EM had, putting Mr CR on notice of a potential claim against him for his part in events as attorney and raising the prospect of a complaint from EM about Mr CR’s conduct as a lawyer. Much was made of the two weeks the attorneys had allowed EM to come up with a written offer, and the relationship between Mr CR and Ms QC as employer and employee in professional conduct aspect of the foreshadowed complaint.

[14] Within six months of Mr TN’s death, the divided family reached settlement between themselves without further reference to Mr CR. The respondents then joined together to formalise the complaint against Mr CR to the New Zealand Law Society (NZLS) with a view to convincing him that he should contribute to EM’s costs.

[15] Mr CR says he acted pursuant to the EPOA at all material times, met his professional obligations to Mr TN and his firm did not represent Ms QC or make information that was confidential to Mr TN available to her.

[16] The Committee considered the issues raised in the complaint, and concluded that Mr CR had misled and deceived EM by offering him two weeks to come up with a written offer without appraising him fully in respect of the first offer and its status. The Committee decided Mr CR’s conduct in that regard was unsatisfactory within the definitions in s 12 of the Act, and imposed consequential orders on Mr CR pursuant to s 156 of the Act. He was censured, fined $2,000, ordered to pay compensation of

[17] Mr CR objected to the finding that he had misled and deceived, whereas the respondents support the decision.

[18] In conducting this review, it is relevant to note that Committees and this Office lack jurisdiction pursuant to the PPPR Act. If unchallenged to a Court of competent jurisdiction, there would need to be persuasive evidence of some serious defect in a decision taken by an attorney who is also a lawyer to raise a professional standards issue. The same applies to decisions made by joint attorneys where, as here, one is a lawyer. If joint attorneys are unable to agree, their differences can be settled by application to the Family Court.

[19] It is contended for EM that although the attorneys acted pursuant to the EPOA, which means BN and Mr CR must both have been satisfied that Mr TN lacked capacity, Mr TN had sufficient capacity to make a testamentary disposition. That is a fine point for a Court to determine on an assessment of relevant evidence. It cannot be determined on review. Mr CR relied on what Mr TN’s GP told him about Mr TN’s capacity, which is sufficient to justify his part in the attorneys’ exercise of the EPOA for the purposes of this review.

[20] There is no evidence that the attorneys’ decisions to accept the first offer, which said on its face that it was from an employee of Mr CR’s firm, to allow EM a further two weeks in which to present a written offer and to treat his offer as a backup offer, have been formally challenged in a court of competent jurisdiction.

[21] It is fundamental to the complaint that it was the fact that the attorneys had made those decisions, rather than Mr CR’s conduct in communicating the decisions to EM through DN, that is criticised.

[22] That is the logical flaw in the Committee’s reasoning. It attributes a professional conduct failing to Mr CR (misleading and deceiving) that was in fact an alleged deficit in decisions made by the attorneys. All Mr CR was doing as a lawyer was communicating decisions the attorneys had already made.

[23] As EM was not Mr CR’s client he was not professionally obliged to keep EM informed, or to act in EM’s interests, particularly if those interests did not align with Mr TN’s, which in at least some respects they did not. Mr CR was not professionally obliged to preserve EM’s opportunity to make a written offer at the risk of losing out on a firm written offer to purchase Mr TN’s home from someone else.

[24] The only basis on which it could be said that Mr CR misled or deceived BN is if he made decisions as attorney without him. There is no evidence of Mr CR having done that in the contemporaneous documents that were available to the Committee and on review, and clear evidence of BN’s involvement in decision-making with Mr CR at the time, most notably the fact that BN countersigned the first offer.

[25] If there had been differences between attorneys over the proper course with respect to the first offer, which is not apparent from the contemporaneous documents, either attorney could have applied to the Family Court at the time to resolve those.

[26] It is accepted that it may have been difficult for BN to challenge his own part in the attorneys’ decisions, but that is the effect of him joining in EM’s complaint about Mr CR’s conduct as joint attorney. In the absence of evidence of Court action having been taken against the attorneys, BN’s involvement in the complaint, from which all the allegations aimed at him have been removed, deprives it of much of its force.

[27] Evidence of unsatisfactory conduct to a satisfactory standard was not available to the Committee and is not available on review. In fact, Mr CR’s conduct both as attorney and lawyer appears unremarkable.

[28] Whatever deal EM may have thought he had made over his grandfather’s home, Mr CR’s evidence is that he was unaware of it until months later. About the time Mr CR discovered EM thought he might pay $140,000 for his grandfather’s home, the attorneys reached the view that it was worth well over that. The attorneys’ view that it would be worth closer to $180,000 was later vindicated by an independent valuation of

[29] Deciding to sell for $40,000 under value would have been inconsistent with the attorneys’ obligations to Mr TN while he was alive, which he was when they accepted the first offer. It would also not have been in Mr TN’s financial interests, which Mr CR was obliged to advance as his lawyer. Mr CR was not convinced that Mr TN had expressed a wish that EM purchase his home, or that, if he had expressed such a wish, he had capacity at the time. Mr CR’s reservations were consistent with protecting and promoting what he knew of Mr TN’s interests.

[30] An advantage of $40,000 to EM’s interests represented a disadvantage of the same amount to Mr TN’s interests. That disadvantage would have flowed on to Mr TN’s estate when he passed away shortly after. As equal beneficiaries under their father’s will BN and DN are likely to have lost out to the tune of $20,000 each. Although DN appears to have been unsettled about the impacts on EM of the attorneys’ decision to sell to Ms QC, while her father was alive, she had no control over that.

[31] When Mr TN died the EPOA ended, along with Mr CR’s instructions to act as Mr TN’s lawyer. As Mr CR did not act for Mr TN’s estate, there is no further conduct on his part as a lawyer to be considered.

[32] Moving to the complaints about Mr CR’s professional conduct, the thrust of those complaints is that Mr CR preferred his employee’s interests over EM’s and failed to protect unspecified information that is said to have been confidential to Mr TN.

[33] The first point is that EM was not Mr CR’s client. As he appears to have had no direct contact with EM, the only evidence of contact being through DN or EM’s lawyers, Mr CR owed him only very limited obligations, none of which he breached. Mr CR was not professionally obliged to prefer EM’s interests if he considered they did not align with Mr TN’s.

[34] The second point relates to Ms QC. The attorneys were aware of the relationship between Ms QC and Mr CR’s firm at or about the time BN countersigned the first offer, because that relationship was referred to in the agreement that set out the first offer and the conditions thereon. The attorneys must be taken to have been satisfied that any concerns were adequately addressed by the conditions imposed. Further, at the time BN countersigned the first offer on [Date 2], EM had not presented a written offer to the attorneys. The attorneys therefore did not know if he would present a written offer, and if he did, what the conditions might be. EM accepts that for months he had been in no rush to commit to purchasing his grandfather’s home, which

makes it difficult to accept his objection to the attorneys preferring certainty for Mr TN

[35] As to the suspicion that Ms QC was privy to information that was confidential to Mr TN, the allegation lacks specificity and a proper evidential basis. With neither, it cannot be resolved.

[36] All of the materials available on review have been carefully considered. There is no proper basis on which to find that Mr CR misled or deceived anyone on any aspect of his practice. Given the link between r 11.1 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 and the Fair Trading Act 1986, I doubt the rule was engaged on the facts. There is no other tenable basis on which to contend that Mr CR’s conduct as a lawyer fell below a proper professional standard. In particular, there is no tenable basis on which to advance complaint that Mr CR failed to meet his professional obligations to his client, Mr TN, which is the nub of the contraventions alleged in Mr CS’s letters of [Date 3] and [Date 4], and echoed in the respondents’ complaint.

[37] The Committee’s decision that Mr CR’s conduct was unsatisfactory within the meanings set out in s 12 is therefore reversed. There is no reason to take further action. Further action in all the circumstances is unnecessary and inappropriate.

[38] In the absence of a determination of unsatisfactory conduct, there is no statutory basis on which to make orders pursuant to s 156. With the reversal of the unsatisfactory conduct finding, the Committee’s orders fall away.

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

[40] In the exercise of discretion pursuant to s 211(1)(b) and 138(2) of the Lawyers and Conveyancers Act 2006, having regard to all the circumstances of the case, any further action is unnecessary and inappropriate.

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

EM, DN and BN as the Respondents CS as the Respondents’ representative TR as the Related Person

New Zealand Legal Complaints Review Officer

CR v EM [2019] NZLCRO 7 (24 January 2019)