ZI v WS [2019] NZLCRO 70 (30 May 2019)

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	LCRO 82/2018
CONCERNING	an application for review pursuant to section 193 of the Lawyers and Conveyancers Act 2006
AND
CONCERNING	a determination of [Area] Standards Committee [X]
BETWEEN	ZI Applicant
AND	WS Respondent

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

Mr ZI has applied for a review of the determination by Auckland Standards Committee 5 (the Committee) in which the Committee made a finding of unsatisfactory conduct against Mr WS pursuant to s 12(a) of the Lawyers and Conveyancers Act 2006 (the Act), imposed a fine of $5,000 and ordered Mr WS to pay costs in the sum of $1,000.

Mr ZI has applied for a review of the determination primarily to seek compensation for the fact that a Notice of Claim by him against a property owned by his former de facto partner lapsed and he has incurred legal costs to pursue his claim against her.

In December 2011, Mr ZI instructed Mr WS to register a Notice of Claim pursuant to the Property (Relationships) Act 1976 (the PRA) against a property owned by his former de facto partner (the Notice). Mr WS prepared the Notice recording his

office and postal address as the address for service of any notices that related to the Notice and lodged it with Land Information New Zealand (LINZ) for registration.

Mr ZI did not instruct Mr WS to act for him on any other matters and there was no further contact between them for several years.

In May 2017, a notice from LINZ dated 9 May 2017 was delivered to Mr WS’ postal address (the LINZ notice). The LINZ notice advised that a process had been initiated to lapse the Notice, and said that unless, within 14 days, LINZ received notice that Mr ZI challenged the lapse, the Notice would lapse.

At that stage, Mr WS, who ceased practice in [month] 2017, was in the process of closing down his office and disposing of his files. He was unable to locate his file for Mr ZI, did not take steps to locate him and did not advise him that the LINZ notice had been served.

Mr ZI says that only happened because Mr WS did not make him aware the LINZ notice had been served.

Mr ZI lodged a complaint to the New Zealand Law Society (NZLS) saying Mr WS had failed to advise him he had received the LINZ notice.

Mr ZI’s complaint was that Mr WS had not contacted him on receiving the LINZ notice. Mr ZI says he lost $600,000–$700,000 because of Mr WS’ failure. Mr ZI says when he contacted Mr WS after he discovered the Notice had lapsed, Mr WS said he would investigate the matter and get back to Mr ZI.

A large part of Mr ZI’s complaint is directed at NZLS for failing to police its “union member”, and because of this Mr ZI makes a claim of $600,000-$700,000 against the NZLS Lawyers Fidelity Fund.

On receipt of Mr ZI’s complaint, the Lawyers Complaints Service asked Mr WS to provide his file relating to the matter. Despite extensive searching, Mr WS could not locate his file. However, it was ascertained that on 28 March 2013, presumably initiated

by a request from Mr ZI, the Lawyers Complaints Service had sent Mr ZI a copy it had of the file. It is not clear why NZLS had Mr ZI’s file, or why he had requested it at that stage, nor are those issues relevant to the matter under review.1

The Committee understood Mr WS’ retainer had ceased some time in 2013.2 It was satisfied that he had not advised Mr ZI about the LINZ notice when it arrived in his post box in May 2017. It did not accept on the evidence before it that Mr WS had passed Mr ZI’s file to another solicitor when he had ceased practice.

The Committee determined that Mr WS’ conduct constituted unsatisfactory conduct pursuant to s 12(a) of the Act, imposed a fine of $5,000 and ordered Mr WS to pay costs in the sum of $1,000.

It came to the view that there was no basis on which to order Mr WS to pay compensation to Mr ZI because it could not be certain that the losses of $600,000–

Mr ZI applied for a review of the Committee’s determination. Much of Mr ZI’s language is inflammatory and provides no support for his application. He levels many accusations against NZLS that are not addressed in this review because this Office does not have jurisdiction to do so.

1 It is also unclear how Mr WS’ file came to be in the possession of NZLS although it seems that NZLS had only a copy of the file, and not the original.

2 The only work undertaken by Mr WS for Mr ZI was to lodge the Notice of Claim in 2011 and so this would seem to be an erroneous understanding.

Mr WS responded to the application for review and invites this Office to reverse the fine and costs orders.

The review proceeded by way of a hearing in Auckland on 14 May 2019 and was conducted by Mr Vaughan acting as a delegate duly appointed by the Legal Complaints Review Officer (LCRO) pursuant to cl 6 of sch 3 of the Act. The LCRO has delegated Mr Vaughan to report to me and the final determination of this review as set out in this decision is made following a full consideration of all matters by me after receipt of Mr Vaughan’s report and discussion.

Mr ZI commenced by applying for a “mishearing” because he had only just received the last communication sent to this Office by Mr WS and had not had an opportunity to consider same. He also took issue with the fact that the communication in question had been redacted by this Office.

The correspondence from Mr WS contained a significant amount of information about his health which he requested to be kept confidential. That was an appropriate request and consequently the copy of the correspondence sent to Mr ZI was redacted.

There was otherwise nothing in the correspondence from Mr WS that had not been raised (directly or indirectly) previously, whether with the Committee or on review. Consequently Mr Vaughan declined to adjourn the hearing. The reference by Mr ZI to a “mishearing” is not an appropriate term to use in the circumstances.

Mr ZI then read from prepared notes covering that which he had previously stated in correspondence.

Mr ZI said he had incurred costs in the sum of $13,000 pursuing claims against his former partner. He did not provide any invoices but offered to forward these to the Office after the hearing.

On 24 May 2019 this Office received a letter from Mr ZI to which he attached three trust account receipts, a letter and an invoice from [Law firm A]. The receipts related to a file that firm had opened for Mr ZI to deal with his “Relationship Property (2017)” matter. The receipts record three payments by cash and cheque made by Mr ZI to that firm:

The letter, dated 22 February 2019, refers to two invoices and is headed “Relationship Property & AML Verification”. It says the firm proposed to pay those from a “further $1,000 to be received from you”.

The invoice is for a fee of $500 plus GST for “Relationship Property” and is also dated 22 February 2019. The narration to the invoices records that the invoice is:

For our fee for all professional attendances rendered incidental to receipt of instructions, namely as solicitor on the record for proceedings in the Family Court from September 2017 to date”

It is inferred from that correspondence that Mr ZI instructed [Law firm A] shortly after he was last in contact with Mr WS, and after Mr WS had closed his practice down. It appears from the 2019 invoice that [Law firm A] instructed counsel to appear for Mr ZI in Relationship Property proceedings. It is assumed those are against the same former de facto partner who owned the property against which Mr ZI registered the Notice.

However, Mr ZI provided no invoices from counsel and no detail to link the money Mr ZI paid to [Law firm A] to any act or omission on the part of Mr WS. Regardless of outcome, it cannot be inferred from the fact that Mr ZI pursued claims against his former partner in the Family Court that Mr WS is responsible, or liable, for some or all of the costs Mr ZI incurred in choosing that path.

As those documents make no difference to the outcome of this review they have been effectively disregarded. No comment from Mr WS on the documents was necessary.

The Committee declined to make any order for compensation because it did not consider that it could be said with any degree of certainty that Mr ZI’s losses flowed from the failure by Mr WS to forward the LINZ notice to Mr ZI.

3 Lawyers and Conveyancers Act (Lawyers: Complaints Service and Standards Committees) Regulations 2008, reg 32.

Mr WS’ omission was of moment because failing to respond to the LINZ notice within 14 days would result in the Notice being removed from the public record. However, Mr WS’ omission would not have been terminal to Mr ZI’s ability to found a PRA claim.

A Notice of Claim does not prove an interest in relationship property exists or what its value might be. It provides security and leverage if such a property interest is found to exist. Lapse of a Notice of Claim does not extinguish a claim or the right to make one.

The most that can be said on the evidence available on review is that Mr WS’ omission deprived Mr ZI of early warning that his Notice would lapse in 14 days, which may have led to him seeking legal advice earlier rather than later. The evidence available on review does not prove a link between any losses Mr ZI claims to have suffered and Mr WS’ failure to advise him that he had received the LINZ notice. The alleged losses are therefore not compensable as an omission by Mr WS under s 156(1)(d) of the Act.

The only other type of loss that has been considered compensable under s 156(1)(d) of the Act is for anxiety or distress suffered by reason of an act or omission of a practitioner. As Mr ZI has sought compensation only for economic loss based on Mr WS’ omission, compensation on some other basis is not now available to him on review.

The finding of unsatisfactory conduct against Mr WS was made pursuant to s 12(a) of the Act. That section defines unsatisfactory conduct as meaning:

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.

“Regulated services” is defined in s 6 of the Act as “legal services”. The term “legal services” is defined as meaning “services that a person provides by carrying out legal work for any other person”. “Legal work” includes:

(e) any work that is incidental to any of the work described in paragraphs (a) to (d)

Preparing and registering a Notice of Claim appears to fall within the definitions of legal work in (a) and (b) because a Notice of Claim provides notice that a person claims to have a legal or equitable right to make a claim pursuant to the PRA.

Addresses for service are not confined to lawyers’ addresses. However, when Mr WS listed his office as the address for service of notices regarding Mr ZI’s Notice of Claim, he also accepted responsibility for communicating the receipt of notices for Mr ZI at that address. With that came the associated professional obligations to be diligent in his efforts to find Mr ZI in a timely way.

Communicating receipt of any notices to Mr ZI in the circumstances therefore was incidental to the legal work Mr WS had done for Mr ZI. On that basis Mr WS’ conduct appears to be captured by the definition of regulated services.

When the time came, six or more years after he registered the Notice, for Mr WS to contact Mr ZI, beyond looking for a file he could not find, Mr WS made no effort to find Mr ZI. He could and should have done more. The fact that there appears to have been no contact between the parties for several years after the Notice was lodged for registration is not a sufficient excuse, particularly given the 14 day timeframe before lapse. Mr WS’ failure to do more himself or through others, while perhaps understandable in the context of a practitioner on the brink of exiting practice, lacked diligence. He did not act in a timely manner.

Mr WS’ conduct was that of a lawyer that occurred at a time when he was providing regulated services and was conduct that fell short of the standard of diligence that Mr ZI, as a member of the public, was entitled to expect of Mr WS as a reasonably competent lawyer.

The finding of unsatisfactory conduct pursuant to s 12(a) is therefore confirmed.

If that is not correct and accepting responsibility for being an address for service was not legal work as defined in the Act, Mr WS still faces difficulties because of s 12(c) of the Act.

Section 12(c) of the Act defines unsatisfactory conduct as conduct which contravenes any of the provisions of the Act, the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (the Rules) or Regulations.

Section 107(1) of the Act says the Rules are binding on “former lawyers”. If a finding of unsatisfactory conduct pursuant to s 152(1)(b) is made against a former lawyer, then an order may be made against the former lawyer pursuant to s 156(1). Consequently, if Mr WS’ conduct is in contravention of any of the Rules then the finding of unsatisfactory conduct may be reinstated on that basis.

In providing regulated services to a client, a lawyer must always act competently and in a timely manner consistent with the terms of the retainer and the duty to take reasonable care.

In recording his office as the place where any notices in relation to the Notice of Claim were to be served, Mr WS assumed an obligation to Mr ZI to notify him if he received any such Notice. That was a duty to take reasonable care in terms of r 3.

In acting for a client, a lawyer must, within the bounds of the law and these rules, protect and promote the interests of the client to the exclusion of the interests of third parties.

It could be argued that by accepting the responsibilities associated with being listed as the address for service, Mr WS’ duty to Mr ZI as a client continued, notwithstanding that he had not been actively engaged on matters for Mr ZI for quite some years.

A lawyer must promote and maintain proper standards of professionalism in the lawyer’s dealings.

Mr WS received the LINZ notice but, beyond the fruitless search for Mr ZI’s file, took no steps to locate Mr ZI in a timely manner. That cannot be a “proper standard of professionalism” and contravenes r 10, and is also inconsistent with r 3. Those contraventions are unsatisfactory conduct pursuant to s 12(c) of the Act.

It is understandable that, not having been instructed by Mr ZI to pursue his claim, Mr WS would not have been expecting to receive a notice to lapse six years later. However, having received the LINZ notice, with a timeframe of only 14 days, Mr WS

should not have given up so easily. Finding Mr ZI’s file was less urgent than finding Mr ZI.

Mr WS did not personally have to locate Mr ZI. If that was beyond him, he could have delegated that responsibility to someone else. Even if his efforts, or those of his delegate, failed, he could at least have been satisfied that, over the course of at most two weeks, he had made diligent efforts, to a proper standard of professionalism, before he gave up.

The timing of Mr WS receiving the notice to lapse so close to the end of his time in practice, while deeply unfortunate, was unsatisfactory.

I am satisfied that Mr WS’ conduct was unsatisfactory pursuant to s 12(a) and s 12(c), although a single determination of unsatisfactory conduct adequately reflects the conduct.

For the reasons set out above and pursuant to s 211(1)(a) of the Lawyers and Conveyancers Act 2006 the finding of unsatisfactory conduct is modified to record that it is made pursuant to s 12(a) and (c) of the Act for breaches of the above Rules.

Section 156(1)(i) of the Lawyers and Conveyancers Act 2006 provides for a fine not exceeding $15,000.

The imposition of a fine would be of no financial benefit to Mr ZI, because fines are paid to NZLS.

The imposition of a fine, and the fixing of the amount of the fine is an exercise of discretion. In exercising its discretion, a Standards Committee must take note of all relevant factors. In this regard, the information provided by Mr WS as to his health must have some significance. The fact that he is no longer practising is also a factor to take note of.

In Canterbury Westland Standards Committee v Peters the Lawyers and Conveyancers Disciplinary Tribunal decided not to impose a fine at all following a finding of unsatisfactory conduct for the reason that it would be “unnecessarily punitive” to do so.4 In that case the Tribunal had censured Mr Peters for failing to pursue a convicted

payment of costs which it took particular note of when deciding not to impose a fine.

It is inappropriate to record here the health issues Mr WS is experiencing but he has provided significant details to this Office in the course of this review. In addition, he repeated the information verbally at the review hearing. This was information that Mr WS did not make known to the Standards Committee. When that information is taken into account, in conjunction with the fact that Mr WS is no longer practising, it is “unnecessarily punitive” to impose a fine.

In the circumstances the finding of unsatisfactory conduct is sufficient. The order for payment of costs remains.

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

ZI v WS [2019] NZLCRO 70 (30 May 2019)