AL v UT [2019] NZLCRO 8 (24 January 2019)

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	LCRO 219/2016 LCRO 224/2016
CONCERNING	applications for review pursuant to section 193 of the Lawyers and Conveyancers Act 2006
AND
CONCERNING	a determination of [Area]Standards Committee [X]
BETWEEN	AL Applicant
AND AND	UT Respondent
BETWEEN	UT Applicant
AND	AL _Respondent

[1] On 19 August 2016 [Area] Standards Committee [X] (the Committee) determined that Ms AL’s conduct when acting for Ms UT in a conveyancing transaction constituted unsatisfactory conduct pursuant to s 12(a) of the Lawyers and Conveyancers Act 2006 (the Act) and made the following orders pursuant to the relevant provisions of s 156(1) of the Act:

(b) Ms AL was directed to pay $12,407.66 by way of compensation to Ms UT; (c) Ms AL was directed to apologise to Ms UT;

(d) Ms AL was ordered to undergo a period of face-to-face supervision and mentoring by a senior practitioner; and

[2] Both Ms AL and Ms UT have applied for a review of the determination. Ms AL seeks to have the finding reversed. Ms UT seeks additional compensation and requests further orders to be made.1

[3] On 3 July 2012 Ms UT entered into an Agreement with Mr NC to purchase Mr NC’s property at [Town]. The Agreement “was entered into after a damaging sequence of earthquakes struck Canterbury, commencing on 4 September 2010”.2

The Vendor and Purchasers agree to the following if the property becomes (or already is) subject to an EQC claim or insurance claim relating to earthquake damage (The claim) prior to the settlement date.

(a) Advise the Purchaser of the particulars of the claim, including details of the damage, the claim number(s) and any relevant PIM;

(b) If the Vendors have not received payment for the claim by the settlement date, the vendors will assign their benefit in any such claim to the Purchasers including but not limited to executing a “Deed of Indemnity and Assignment of Claim” and a “Notice of Assignment of Claim” prior to the settlement and releasing it to the Purchasers immediately following settlement;

(c) The parties agree that the “Deed of Indemnity and Assignment of Claim” and “Notice of Assignment of Claim” will be prepared by the Purchasers solicitor at the Purchasers expenses and shall include a provision confirming that the Vendors obligation to lodge an insurance claim to assign the benefit of such claim to the Purchasers rights to cancel or make

1 For example, that Ms AL be ordered to undertake some form of “time and management training”.

3 The wording of the clause as inserted in the Agreement is accurately reproduced in this decision.

(d) If the vendors have received any proceeds from the Claim prior to the settlement but the work remains to be completed, it is agreed that the purchase price will be reduced by an amount equal to the proceeds received by the Vendors under the Claim;

(e) If the vendors claim is settled with EQC and/or the insurer prior to settlement and clause d) above does not apply, the vendors will, prior to the settlement date:

i) Provide the purchaser with all the documentation in relation to the claim(s) and the settlement of those claims; and

ii) apply the full proceeds of the claim towards the reinstatement and repair of the property to a tradesman like standard to the satisfaction of the Purchaser; and

(f) the Vendors agree that if the property has sustained earthquake damage or does sustain earthquake damage prior to settlement, that they will lodge a Claim with EQC prior to settlement and the provisions of the clause above will prevail.

[5] Ms AL received the Agreement “mid-late July” 2012. Settlement was scheduled for 17 August 2012. Funding for the purchase from the settlement of relationship property matters was not resolved until the day prior to settlement.

[6] No information pursuant to clause 18 of the Agreement was provided by the vendor’s solicitor and Ms AL made no inquiry as to whether or not the property had sustained any damage in the earthquakes and/or the vendor had lodged an insurance claim.

[7] Settlement proceeded on the full purchase price as provided in the Agreement.

$$12,407.66 to Mr NC’s mortgagee on [Date] 2012. This payment should have been disclosed to Ms AL and the purchase price should have been reduced accordingly pursuant to clause 18(d) of the Agreement.

[9] Ms UT advises that she informed Ms AL of this fact as soon as she became aware of it. Ms AL sent a Deed of Assignment of the claim to Mr NC’s lawyers on

8 October 2012 and made follow-up requests for a response by letters on 24 October and 21 November.

[10] No replies were received and Mr NC’s lawyers subsequently advised that they had endeavoured by mobile phone and by letter to contact Mr NC but he did not respond to them. The file was closed on 4 December 2012.

[11] Mr NC died on [date] 2013. His Estate was fully administered and wound up. The solicitors acting in the administration of the Estate were unaware of Mr NC’s liability to Ms AL. The executors of the Estate subsequently executed the Deed of Assignment in 2015 and the Estate solicitors rendered an account for $172.50 which Ms AL was required to pay.4

[12] Ms UT has not received the credit for the EQC payment and incurred the additional cost of $172.50. She lodged her complaint against Ms AL on 28 September

[13] In her complaint Ms UT says she had received legal advice that Ms AL should have obtained the Deed of Assignment prior to settlement of the purchase. She says that she advised Ms AL as soon as she became aware of the fact that a claim had been paid out “but nothing was done”.

$172.50 rendered by the Estate solicitors. She also seeks compensation in the form of interest on the amount of the EQC payment for a minimum period of three years.

a. Whether Ms AL was negligent in not protecting the interests of Ms UT by taking the appropriate steps to arrange for the assignment of the EQC claims prior to settlement?

b. If there has been negligence in that regard, does this conduct constitute unsatisfactory conduct on Ms AL’s part?

[16] In addressing the first issue the Committee’s view was “that Ms AL should have been well aware of the process for lodging and assignment of claims when this matter

4 The account is addressed to the Estate NC c/- the firm of solicitors which acted for Mr NC on the sale of the property. The firm rendering the account was the Estate solicitors.

[17] It observed “that Ms AL made no enquiries of Mr NC (through his solicitor) as to the existence of any EQC claim(s) relating to the Property, nor did she prepare and forward to Mr NC’s solicitor, a Deed of Assignment” and noted:7

that it was standard conveyancing practice at that time for practitioners to make such enquiries, and forward deeds of assignment to vendors’ solicitors prior to settlement of property transactions. It was also standard practice to require execution of such deeds prior to settlement occurring.

[18] It concluded that Ms AL had breached her professional duties with regard to these obligations and determined that the breaches constituted unsatisfactory conduct pursuant to s 12(a) of the Act, being conduct that fell “short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent lawyer”.

[19] Having made this finding, the Committee imposed the penalties set out in [1]

[20] The issue addressed by the Committee was whether or not Ms AL “was negligent in not protecting the interests of Ms UT by taking the appropriate steps to arrange for the assignment of the EQC claims prior to settlement”.8

[21] The finding of unsatisfactory conduct by the Committee is premised on its view that:9

Ms AL had a professional duty to make enquiries regarding the existence of any EQC claim relating to the Property, and to prepare the deed of assignment of any such claim and have that executed prior to settlement.

[22] The second element of this finding (the obligation to prepare the Deed of Assignment) presupposes that having made enquiry of the vendor through his solicitor, Ms AL would have been advised of the existence of the claim and provided with details to enable her to prepare the Deed.

[23] That is an assumption that cannot be made. Mr NC did not respond to his lawyers’ queries when asked following settlement. There can be no certainty he would

have responded to any queries put to him prior to settlement and Ms AL would not have had any independent means of ascertaining this information.

[24] Ms AL received the Agreement for Sale and Purchase in “mid-late July” 2012. The EQC payment was made on 2 August 2012. It is reasonable to assume that Mr NC’s claim had been lodged at the time he entered into the Agreement with Ms UT on 2

[25] Clause 18 of the Agreement does not specifically impose an obligation on the vendor to “advise the Purchaser of the particulars of the claim, including details of the damage, the claim number(s) and any relevant PIM” but that is the logical interpretation of the clause, and it would seem this was the intended and accepted meaning.10

[26] Mr NC did not fulfil his obligations either through the real estate agent or through his lawyers. Whilst the Committee stated that it was “standard conveyancing practice at that time for practitioners to make such enquiries” it would be expected that a solicitor acting for a vendor would also make the same enquiries of his or her client, both at the time the Agreement was received and at the time the settlement statement was being prepared.11

[27] Whether or not this occurred is unknown and these comments are not intended in any way to amount to a criticism of the vendor’s solicitor. They are made from the perspective of what it was reasonable for Ms AL to have expected the vendor and his solicitor to have addressed in the course of the transaction.

[28] Mr NC breached the provisions of clause 18. It is reasonable to expect Ms UT

“negligent”. In his submissions to the Committee, ED (acting for Ms AL) says:

17. This is not a matter which engages the professional/disciplinary jurisdiction of the Standards Committee. It is simply a civil claim and ought properly to be considered and resolved by the ordinary courts. In particular it is noted that s 138(1)(f) of the Lawyers and Conveyancers Act 2006 provides that it is appropriate for the Committee to take no further action on the matter where:

there is in all the circumstances an adequate remedy or right of appeal, other than the right to petition the House of Representatives or to make

a complaint to an Ombudsman, that it would be reasonable for the person aggrieved to exercise.

[30] ED’s submissions are accepted. In the course of his submissions ED also referred to a previous decision of this Office where the LCRO said:12

Those seeking compensation based on negligence should look to the general law for a remedy. Standards Committees and this Office have many times stated that the complaints process is not to be considered an alternative to court proceedings

Standards Committees and this Office will not be drawn into acting as a de facto civil court when determining complaints about a lawyer’s standard of competence.

[31] Those observations are applicable in this instance. Any claim of negligence should be made through the courts. However, the Committee made its determination on the grounds that Ms AL had breached her “professional obligations”. That is not the same as being negligent.

[32] This complaint does not involve a consideration as to whether or not Ms AL was negligent. Allegations of negligence are to be addressed before the courts.

[33] Although it is accepted that it was standard practice by 2012 for a solicitor involved in a conveyancing transaction to make enquiries about any EQC claims, that standard practice presumably applied as much to the vendor’s solicitor as to Ms AL. It was reasonable for her to have expected the vendor’s solicitor to have addressed the requirements of clause 18 with Mr NC and to advise accordingly. Ms AL was unable to prepare the Deed of Assignment until she had the relevant information.

[34] A failure to specifically request information that a vendor is contractually bound to provide cannot amount to a breach by Ms AL of professional obligations.

[35] Finally, it was reasonable that Ms UT should pursue her claim against the executors of the Estate once she had ascertained that Mr NC had received the benefit of the EQC payment. That was an “adequate remedy” in terms of s 138(1)(f) of the Act.

[36] Taking all these factors into account, the appropriate determination of this complaint is to exercise the discretion to take no further action.

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

[38] In exercise of the discretion vested in this Office pursuant to s 211(1)(b) and the discretion provided by s 138(1)(f) of the Act, the Committee’s determination is modified to provide that there will be no further action in respect of Ms UT’S complaint.

On 20 December 2018, Ms AL was requested to provide her final submissions to this

Office by “no later than 21 January 2019”. These were received by email at 11.01 am on

21 January 2019. In exercise of the discretion provided by s 208(2) of the Lawyers and Conveyancers Act 2006, they have not been provided to Ms UT as they are repetitive of submissions made previously by Ms AL and ED, all of which have been provided to Ms UT.

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

Ms UT as the Applicant/Respondent Ms AL as the Respondent/Applicant [Area] Standards Committee [X]

New Zealand Legal Complaints Review Officer

AL v UT [2019] NZLCRO 8 (24 January 2019)