PL v VD [2019] NZLCRO 86 (21 February 2019)

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	LCRO 158/2015
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	PL Applicant
AND	VD _Respondent

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

[1] Mr PL has applied for a review of a decision by the [Area] Standards Committee (the Committee) which, following its completion of a conduct inquiry, made a finding of unsatisfactory conduct against him.

[2] Mr VD acted for the plaintiffs in a contractual dispute. Proceedings were filed. Mr PL acted for two of the defendants in those proceedings.

[3] In the course of the proceedings, Mr VD was instructed to file an amended statement of claim, in which it was pleaded for the plaintiffs that there had been fraudulent conduct on the part of Mr PL’s clients.

[4] These allegations were met with considerable scepticism by Mr PL’s clients. They considered the allegations of fraudulent behaviour to be baseless and cynically

advanced by the plaintiffs in an attempt to circumvent a potential limitation problem with their claim.

[5] Mr PL subsequently filed, and then withdrew, an application to strike out the amended statement of claim.

[6] Mr VD advanced proposals for settlement. Mr PL’s clients were resistant to settling. They remained resolute in their view that the allegations made in the proceedings lacked substance.

[7] Following a judicial conference in [Date 1] Mr VD discontinued proceedings against the fourth defendant. Around [Date 2], the lawyers were in discussions concerning a proposal by Mr VD to file a discontinuance of the proceedings against Mr PL’s remaining client. Reaching agreement on costs formed part of those discussions.

[8] On [Date 3], Mr PL sent two emails to Mr VD. They were both sent at [Time]. I assume from the contemporaneous despatch of those emails that one or both were drafted prior to being sent, rather than being sent, as is commonly the case with email correspondence, immediately after the composition of the email.

[9] The email recorded below, which Mr PL advises was the second despatched, was the catalyst for the complaint that followed. That email reads:

Matters having got to where they are, I am instructed to raise a matter not mentioned before now.

Our clients are aware from my memorandum of [Date 4] (paragraph 6) that counsel owes a duty not to advance a claim in fraud unless there is a proper evidential basis for doing so. For the reasons stated in my letter [Date 5], our clients’ view is that that duty was not met. They are considering making a complaint to the Law Society. Their decision may depend on how much longer it takes to bring the proceedings to a close (inclusive of resolving costs), coupled with the additional costs they are forced to incur. Our clients take a dim view of the stress CS (in her 80s) has been and continues to be put under due to her having to endure baseless fraud allegations and the proceedings themselves, she having been the occupier at whom the fraud allegations are levelled. The complaint would seek compensation from you for any loss to them on costs they do not recover from your clients, including any costs they are required to pay to your clients.

[10] The lengthy email sent first in time traverses matters relating to the lawyers’ differing understandings as to the representations that had been made between them regarding costs issues. Mr PL’s email (above) makes it clear that in the event of Mr VD taking steps to discontinue the proceedings, it would be his intention to seek from the court a measure of increased costs on grounds that the claim filed by Mr VD, to the extent

that it made allegation of fraud when there was no evidential basis to support such a claim, justified an increased costs award for his client.

(a) the email of [Date 3] (as reproduced in paragraph [9] above) was a “transparent threat” by Mr PL to make a complaint to NZLS unless the costs issue was resolved to his clients’ satisfaction;

(c) this was “an especially insidious threat” because it appeared to be designed to create a conflict of interest between him and his clients;

(e) the email “invites him” not to disclose it to his clients, otherwise he can see no explanation as to why the second email would be sent separately to the first one.

[12] Mr VD considered that it was open to him on the facts of the case to plead fraud, and that Mr PL was, in turn, entitled to make a separate complaint about the pleading which could be dealt with on its own merits. It was his view that Mr PL could not use the threat of making a complaint to attempt to obtain an advantage for his clients.

[13] Mr PL responded to the complaint in correspondence dated [Date 7]. He provided with that response a detailed chronology of the litigation issues and events. He submitted that:

(a) the complaint must be considered in the context of the litigation between the parties;

(b) he had repeatedly asked Mr VD for an evidential basis to substantiate the allegations of fraud and this was not forthcoming;

(e) the email records that his clients were “considering” making a complaint to NZLS, not that they would make one, this was a distinction that was more than mere semantics;

(f) the reason for the two emails being sent separately was that the first one was focused on costs and was sent with a view to produce to the court if necessary; and

(g) he had taken advice from a senior partner in his firm before sending the emails.

[14] Further correspondence and submissions followed from both practitioners. [15] The Committee distilled the issues to consider as being:

(b) if so, whether it had been made for an improper purpose. [16] The Committee delivered its decision on [Date 8].

[17] The Committee determined, pursuant to s 138(2) of the Lawyers and Conveyancers Act 2006 (the Act), that there had been unsatisfactory conduct, as defined in s 12(c) of the Act, by Mr PL.

(Lawyers: Conduct and Client Care) Rules 2008 (the Rules); (b) a threat had been made;

(c) the email was effectively a threat to use the complaints process to assist in negotiations and that was an inappropriate purpose;

(e) the email went further than being a robust response and threatened the making of a complaint against Mr VD personally.

[19] In respect to that aspect of Mr VD’s complaint which had contended that Mr PL’s email amounted to blackmail, the Committee concluded that allegations of that nature were matters best left for the Police.

[20] Mr PL filed an application for review on [Date 9]. He submits that the Committee erred, as it did not:

[22] Mr VD was invited to comment on Mr PL’s review application. He elected to not provide a response.

[24] At the conclusion of that hearing, I provided a summary to Mr PL of the arguments he had advanced at hearing and asked him to confirm that the summary provided an accurate account of the arguments advanced.

[25] 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.

[26] 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.

[27] 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:

[28] The Rules of relevance to consider are rr 2.7 and 2.10. [29] Rule 2.7 provides that:

A lawyer must not threaten, expressly or by implication, to make any accusation against a person or to disclose something about any person for any improper purpose.

A lawyer must not use, or threaten to use, the complaints or disciplinary process for an improper purpose.

[32] Conduct issues may arise if the threat to make accusation, or to utilise the complaints or disciplinary process, is perceived to be linked to an improper purpose.

[33] “Improper” has been defined as incorrect, unsuitable or irregular, fraudulent or

[34] If a lawyer has concerns that a colleague is in breach of their professional obligations, then they must pause to consider whether it is their obligation to file a complaint. If the conduct of which they have concern is perceived by them to be unsatisfactory, they may elect to file a complaint. If the conduct approaches conduct at the more serious end of the scale and may amount to misconduct, they must file a confidential report.4

[35] Importantly, in proscribing the circumstances in which either rule may be breached by imposing requirement that the threat to make accusation or to lay complaint must not be made for improper purpose, it necessarily follows that the rules are not at risk of being breached if it is determined that the threats were made for a proper purpose.

[36] What constitutes a proper or improper purpose will be determined by an objective appraisal of the facts of each individual case.

[37] It is well established that the purpose of discipline in the legal profession is the protection of the public and the maintenance of public confidence in the legal profession as an institution central to the administration of justice. That is consistent with ss 3 and

4 of the Act. The purpose of professional discipline is not the enforcement of a party’s perceived legal right. This point has been referred to in the past by the High Court, in the context of its jurisdiction over lawyers as officers of the court, but I consider that it applies equally to the complaints and disciplinary regime under pt 7 of the Act, including the jurisdiction of the LCRO:5

The jurisdiction is based upon the right of the Court to insist and require that its officers observe a high standard of conduct. It is a jurisdiction of a punitive and disciplinary nature and does not exist for the purpose of enforcing legal rights (Re Gray [1892] 2 QB 440).

3 Bryan A Garner Black’s Law Dictionary (9th ed, Thomson Reuters, St Paul, 2009) at 826.

4 Lawyers and Conveyancers (Lawyers: Conduct and Client Care) Rules 2008, rr 2.8 and 2.9.

[38] It was Mr PL’s contention that a proper appreciation of the purpose and intention of the offending emails could only be gained if the full context of the circumstances which prompted the dispatching of the emails was understood.

[39] If properly considered in context, Mr PL submitted that the emails carried no taint of threat or improper purpose.

[40] It was Mr PL’s view that Mr VD had, throughout the course of the litigation, deliberately sought to delay the proceedings. This tactic, said Mr PL, had particularly serious consequences for his elderly and infirm client, who was not well positioned to deal with the stress and inconvenience that is frequently the close travelling companion of parties engaged in litigation.

[41] The stress and anxiety suffered by Mr PL’s elderly client was exacerbated, he says, by Mr VD’s decision to file proceedings which alleged that Mr PL’s elderly client had engaged in fraudulent conduct.

[42] His view that Mr VD’s pleadings were entirely misdirected is supported says

[43] In his decision, the judge noted that r 14.6(3)(b)(i) of the High Court Rules provides for costs to be increased in circumstances where a party has taken an unnecessary step, or advanced an argument that lacks merit.

[44] The learned Judge noted that the plaintiff had been unable to provide, despite requests to do so, any evidence to substantiate the fraud allegations.

[45] It is clear that the judge’s decision to apply an uplift of 50 per cent on scale costs was attributable (at least in part) to the judge’s concern about the manner in which the plaintiff’s case had been pleaded.

[46] From this context, Mr PL argues that his emails were not reflective of an attempt on his part to obtain any tactical advantage or pecuniary reward for his client, but rather a genuine attempt on his part to encourage Mr VD to settle.

[47] It was readily apparent from the manner in which Mr PL advanced his submissions at hearing, that Mr PL’s concerns for his client were genuine and strongly held.

[48] However, in focusing on the broader context, Mr PL, deflects attention from the issue which is at the heart of this review, namely whether Mr PL, in writing to Mr VD in terms which suggested that consideration would be given to lodging a conduct complaint if proceedings were not promptly brought to conclusion (with costs issues being settled) was, in signalling the possibility of a conduct complaint, threatening to use the complaints process for an improper purpose.

[49] It is accepted that Mr PL was acutely sensitive to his elderly client’s situation and anxious to have the proceedings concluded.

[50] However, it is, in my view, compellingly clear that Mr PL was, in writing to Mr VD in the terms he did, using the threat of lodging a conduct complaint as leverage to assert pressure on Mr VD to settle the proceedings.

[52] Mr PL’s second email commences by advising Mr VD of counsel’s obligation to

not advance a claim in fraud unless there is a proper evidential basis for doing so. [53] Mr PL correctly articulated counsel’s obligation.

[54] Rule 13.8.1 of the Rules provides that a lawyer must not be a party to the filing of any document in court alleging fraud, dishonesty, undue influence, duress, or other reprehensible conduct, unless the lawyer has taken appropriate steps to ensure that reasonable grounds for making the allegation exist.

[55] Mr PL, having unsuccessfully sought explanation from Mr VD as to the evidential basis for the fraud claim pleaded, and armed with knowledge of his client’s position, was entitled to conclude that the fraud allegation lacked foundation.

[56] It would have been open to Mr PL to file a conduct complaint alleging breach of r 13.8.1 and to let the inquiry precipitated by the lodging of that complaint take its course.

[57] In giving indication that consideration would be given to lodging a complaint, Mr PL makes it clear that a decision whether to proceed or not “may” depend on “how much longer it takes to bring the proceedings to a close (inclusive of resolving costs), coupled with the additional costs they are forced to incur”.

[58] Further, Mr PL cautions that if his client proceeds to lodge a complaint, his client would “seek compensation from you for any loss to them on costs they do not recover from your clients, including any costs they are required to pay to your clients”.

[59] This is not, as Mr PL would have it, a simple attempt on his part to ameliorate

his client’s anxiety through effort to persuade Mr VD to bring the proceedings to an end.

[60] Whilst the indication of intention to file a complaint is framed in the language of the possible rather than the definite, Mr PLs purpose is clear. Mr VD is being put on notice that if Mr VD fails to discontinue the proceedings, a conduct complaint will likely follow which will have professional and pecuniary consequences for him.

[61] In framing his correspondence in this fashion, Mr PL brings a transactional element to the threat of lodging complaint.

[62] In SC v JT, the Review Officer observed that there would be occasions when a practitioner could signal intention to file a complaint if a reasonable request was not complied with, without the request reflecting an improper purpose.7

[63] In that case it was noted that “it is not the case that a threat to make complaint, as opposed to taking steps to lodge a complaint, must inevitably carry a hint of possible or actual impropriety”.8

It is also unreasonable, and unrealistic, to expect that a legitimate threat of a complaint will be entirely devoid of some motive. After all, the lawyer’s chief concern is the interest of his or her client. However, the threat to make complaint must not, on any objective analysis, give indication that the practitioner was using threat of complaint to achieve a strategic advantage with his or her client, or indication that the complaint is being used as leverage in the underlying matter. It is the element of leverage which is a misuse of the complaints procedures, and which makes a threat improper. The hallmark of an improper purpose is the use of a complaint to secure an advantage, rather than to ensure compliance with professional standards.

[65] But in the current case, Mr PL is using the threat of lodging complaint to achieve leverage in the proceedings. The threat of lodging complaint is advanced in an attempt to secure an advantage for his client. Neither his conviction as to the merits of his client’s case, nor his desire to achieve prompt resolution, ameliorate or justify the attempt to threaten to invoke the complaints process. Mr PL is using threat of complaint as a

[66] As noted above, if Mr PL considered that Mr VD had committed a conduct breach, it was open to him to recommend to his client that a complaint be made alleging that Mr VD had breached r13.8.1 of the Rules.

[67] It is difficult to escape conclusion that the threat of complaint was also being raised as a means to persuade Mr VD to settle costs issues on terms favourable to Mr PL’s client. In signalling that any complaint filed would seek compensation for loss to his clients of costs not recovered from Mr VD’s client, Mr PL is indicating that the complaints process will be commenced, if necessary, as a means to recover any perceived shortfall in costs awarded by the court. Litigation strategy is being interwoven with the process of threat of possible professional conduct complaint.

[68] I am not persuaded that an examination of the context in which the emails were sent exculpates Mr PL from accusation that the offending email breached r 2.10. Close examination of that context reveals that the threat of filing complaint was clearly made with purpose to assert leverage in the litigation.

[69] Mr PL submitted that the complaint was fundamentally misguided in that it was his client who had given indication of the possibility of lodging complaint, not himself. He noted that both rr 2.7 and 2.10 of the Rules specifically direct that it is the lawyer who is constrained from issuing threats of complaint for an improper purpose, not the lawyer’s client.

[70] I reject that argument. It was Mr PL’s responsibility to understand the Rules and to advise his client if he would be potentially compromising his position by issuing a threat to make complaint in the manner he did.

[71] Mr PL has explained that his elderly client was suffering considerable anxiety and was not well positioned to cope with the stress of the continuing litigation. I think it probable that Mr PL played a significant role in raising the possibility of lodging a complaint as a means to encourage Mr VD to lay down arms.

[72] Mr PL argued that the Committee had misdirected itself in concluding that he had threatened to use the complaints process to assist in negotiations.10

[73] He was emphatic in his view that the email exchanges were not part of any negotiation process. If the emails were not part of negotiations between the parties, it could not reasonably be concluded, as the Committee had, that the correspondence was intended to influence Mr VD and his client.

[74] If the emails were not part and parcel of the parties’ negotiations, no improper purpose could be properly ascribed to them.

[75] I do not agree with Mr PL that the emails did not form part of any ongoing negotiations between the parties.

[76] On any conventional reading of those emails, it is clear that Mr PL and Mr VD were continuing to be engaged in the “to-ing and fro-ing” that commonly occurs when lawyers are attempting to settle a dispute.

[77] The email dispatched first in time commences with reference to Mr PL’s recollection as to where the parties had arrived at “on costs before the Christmas break”. Mr PL refers to the offers made to settle costs and the compromises made to try and achieve agreement.

[78] In the second email, Mr PL notes that his client’s decision as to whether a complaint would be filed was dependent on how long it may take to settle the proceedings and to resolve costs.

[79] The indication of possibility of complaint was clearly advanced to encourage Mr VD to withdraw his proceedings, and for him to settle costs on terms satisfactory to Mr PL’s client.

[80] Considered in context, the emails were another step along the path of the negotiations that the parties had been engaged in for some time.

[81] It was Mr PL’s contention that his emails lacked any degree of impropriety. He was not, he argues, attempting to achieve any transactional advantage. He was simply attempting to persuade Mr VD to bring the proceedings to an end.

[83] The threat to make complaint was issued with purpose to persuade Mr VD to withdraw and to encourage Mr VD to pay the increased costs sought by Mr PL’s client.

[84] As noted at [64] above, a threat to issue complaint must not, on any objective analysis, give indication that it was made with purpose to achieve a strategic advantage.

[85] Mr PL’s indication of the possibility that a decision as to whether the complaint would be lodged “may depend” on how quickly the proceedings were finalised and costs agreed, is a stark example of a lawyer issuing a threat of a conduct complaint as a means to achieve an outcome for the lawyer’s client.

[86] It is the attempt to secure an outcome for the client that brings the element of improper purpose to the threat of complaint.

[87] Mr PL’s conviction that Mr VD’s client’s claim lacked merit and should be withdrawn was understandable, but any concerns he had about deliberately delaying tactics on the part of opposing counsel could have been addressed by the court.

[88] I am required to bring a fresh, independent and robust view to the complaint, the Committee’s decision and the application for review. In doing so, I have carefully and comprehensively considered all of the material that was provided to the Committee and to this Office on review, and the submissions made at the hearing. I have paid particular attention to the areas in which the applicant has said that the Committee was in error.

[89] Nothing raised persuades me that the Committee’s conclusions on each of the

issues of complaint were wrong. The Committee’s decision is therefore confirmed.

[90] Where a finding of unsatisfactory conduct is made or upheld against a practitioner on review, it is usual that a costs order will be imposed. I see no reason to depart from that principle in this case.

[91] Taking into account the Costs Guidelines of this Office, the practitioner is ordered to contribute the sum of $1,200 to the costs of the review, to be paid to the New Zealand Law Society within 30 days of the date of this decision.

[93] Pursuant to s 215 of the Act, the order for costs made may be enforced in the civil jurisdiction of the District Court.

Pursuant to s 211(1)(a) of the Lawyers and Conveyancers Act 2006, the decision of the

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

PL v VD [2019] NZLCRO 86 (21 February 2019)