QB v VN [2024] NZLCRO 115 (5 September 2024)

Last Updated: 6 September 2024

LEGAL COMPLAINTS REVIEW OFFICER

ĀPIHA AROTAKE AMUAMU Ā-TURE

	[2024] NZLCRO 115 Ref: LCRO 68/2023
CONCERNING	an application for review pursuant to section 193 of the Lawyers and Conveyancers Act 2006
AND
CONCERNING	a decision of the [Area] Standards Committee
BETWEEN	QB Applicant
AND	VN Respondent

DECISION

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

Introduction

[1] Mr QB has applied for a review of a decision by the [Area] Standards Committee.

Background

[2] Ms VN is the Director and shareholder of the company, [Company A].

[3] Ms YR was employed by the company as an assistant [employee].

[4] Ms YR entered into an employment agreement with the company on 2 December 2021.

[5] Around mid-June 2022 and 2 July 2022, Ms YR suffered a wrist injury. She considered the injury to be work-related.

[6] Ms YR obtained a medical certificate and took time off work.

[7] A meeting between Ms YR and her employer was organised for 12 July 2022. Prior to that meeting, Ms YR had visited her doctor. Her doctor had recommended that Ms YR should not, due to a tendon strain she had suffered, engage in work which required her to [redacted] for at least one to three months.

[8] On 13 July 2022, Ms YR’s employment was terminated.

[9] Ms YR instructed Mr QB.

[10] On 29 July 2022, Mr QB wrote to Ms VN raising a personal grievance on behalf of Ms YR.

[11] Mr QB’s correspondence provided a background to the circumstances which had prompted the employment dispute.

[12] It was submitted for Ms YR that the company had, in terminating Ms YR’s employment, not acted in good faith. It was contended that the company had breached its obligations to ensure that the work environment was safe.

[13] At paragraph 20 of his correspondence of 29 July 2022, Mr QB said this:

If this matter does not settle, these issues will also be reported to the WorkSafe NZ for their criminal investigation.

[14] Mr QB submitted a settlement proposal for the company’s consideration. His client was prepared to settle the employment dispute on the basis of payment being made by the company in the sum of $10,000, that sum comprised of $8,000 compensation, and $2,000 as a contribution to legal costs.

[15] The dispute was settled on the terms proposed by Mr QB. It was Ms VN’s position that her preparedness to settle was not to be construed as indication of her acceptance of argument that the company had acted in bad faith, but rather was a purely commercial decision made to ensure that the dispute was promptly resolved.

The complaint and the Standards Committee decision

[16] Ms VN lodged a complaint with the New Zealand Law Society Complaints Service (Complaints Service) on 29 September 2022. The substance of her complaint

was that Mr QB had, in his correspondence of 29 July 2022, acted unprofessionally by threatening her with being reported to WorkSafe NZ for criminal investigation if she did not make payment in the sum demanded. Ms VN said that she had been advised by her lawyer that Mr QB’s demand, framed in the fashion it was, was tantamount to blackmail.

[17] Mr QB responded to the complaint on 20 October 2022.

[18] He submitted that:

• (a) Ms VN had been represented throughout and at no time had her lawyer raised concern that his client was been subjected to inappropriate pressure; and
  
• (b) his correspondence, whilst assertive, was neither abrasive nor unnecessarily aggressive; and
  
• (c) reference to the potential involvement of WorkSafe NZ was appropriate, as the employment dispute legitimately raised issues relating to health and safety practices in the workplace; and
  
• (d) the complaint presented as an attempt to relitigate the employment dispute.
  

[19] Ms VN responded to Mr QB’s reply to her complaint on 25 October 2022.

[20] She submitted that:

• (a) when she first met with her lawyer, the paragraph in Mr QB’s correspondence which had caused concern was immediately discussed, and her lawyer had expressed the view that he considered that Mr QB’s indication of possible intention to refer the matter to WorkSafe NZ was tantamount to blackmail; and
  
• (b) her lawyer had advised her that it fell to her to file a complaint with the Complaints Service; and
  
• (c) her lawyer had recommended that she complete settlement then file her complaint; and
  
• (d) her objective was not to relitigate a dispute but rather to ensure that Mr QB was held accountable for his actions.

[21] The Standards Committee issued the parties with a notice of hearing dated 1 December 2022.

[22] The Committee identified the following issues raised by the alleged conduct:

• (a) did Mr QB threaten expressly or by implication, to make an accusation against Ms VN and/or [Company A] or to disclose something about her or the company for any improper purpose, in breach of r 2.7 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (the Rules): and
  
• (b) did Mr QB’s statement go further than merely summarise views as to the likely consequences for Ms VN’s company in breaching his client’s employment agreement and breaching the Health and Safety at Work Act (WorkSafe NZ) unless a full and final settlement was reached, in which case his client would be precluded from making a claim or reporting to WorkSafe NZ, and was intended to procure an unrelated strategic advantage for his client?
  

[23] Ms VN responded to the Committee’s notice of hearing on 16 December 2022.

[24] It was Ms VN’s view that it was unequivocally clear that Mr QB’s reference to a potential WorkSafe investigation was referenced with deliberate purpose to assert pressure on her. It was her view that no small business owner would have appetite for their business to be subjected to a WorkSafe enquiry. Those enquiries were, says Ms VN, invariably time-consuming, costly, and emotionally distressing and demanding on an employer. She considered that any reasonable person would understand that Mr QB’s reference to a potential inquiry was clearly advanced with intention to assert pressure on her. Mr QB was endeavouring to achieve a strategic advantage for his client.

[25] Mr QB also provided a response to the Committee’s notice of hearing.

[26] Mr QB’s submission referenced a number of LCRO cases which had considered the application of r 2.7.

[27] He submitted that:

• (a) Rule 2.7 does not purport to prohibit conduct unless the conduct is associated with an improper purpose; and

(b) the “improper purpose” test entails both a subjective and objective analysis; and

(c) reference to a possible referral to WorkSafe NZ was not made to procure an unrelated strategic advantage, rather he was informing the company of a legal and “natural” consequence that would follow in the event that settlement was unable to be reached; and

• (d) the company had never disputed that it had breached the Health and Safety Act 2015.
  

[28] The Standards Committee delivered its decision on 6 April 2023.

[29] The Committee determined, pursuant to s 152(2)(b) of the Lawyers and Conveyancers Act 2006 (the Act) that there had been unsatisfactory conduct on the part of Mr QB. That conclusion was reached on the back of finding that:

• (a) Mr QB had threatened to make an accusation against Ms VN or her company or to disclose something about her when he stated that if the matter did not settle, the issues would be reported to WorkSafe NZ for their criminal investigation; and
  
• (b) Mr QB’s statement (amounting to a threat) was made for the improper purpose of procuring a strategic advantage in negotiating a settlement for his client in breach of r 2.7 of the rules.
  

[30] Mr QB filed an application for review on 19 May 2023.

[31] He submits that:

• (a) the Standards Committee had failed to consider the case law he had cited in support of his defence to the complaint; and
  
• (b) as a consequence, the Committee had failed to apply the correct test when concluding that the threat had been made for an improper purpose; and
  
• (c) the Standards Committee failed to apply the principles referenced in FZ v LS (LCRO 89/2017) in particular that the test should be subjective as well as objective; and

(d) the Committee had failed to consider the principles addressed in Deliu v Hong [2015] NZHC 492, SC v JT LCRO 382/2013 and B v HF LCRO 235/2017; and

• (e) the Committee had failed to consider the parallel between a reference of intention to refer a matter to WorkSafe NZ and those circumstances where indication is provided to a party in an employment dispute that increased costs and penalties would be sought if the dispute fell to be determined under the Employment Relations Act; and
  
• (f) the Committee had no factual foundation to conclude that his correspondence was directed to Ms VN in her personal capacity, the correspondence clearly being directed to the company.
  

[32] Ms VN was invited to comment on Mr QB’s review application.

[33] She indicated her support for the Committee’s decision.

Hearing

[34] An applicant only hearing proceeded on Wednesday, 14 August 2024.

Nature and scope of review

[35] 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.

1 Deliu v Hong [2012] NZHC 158, [2012] NZAR 209 at [39]–[41].

[36] 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.

[37] 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 of the available material afresh, including the Committee’s decision; and
  
• (b) Provide an independent opinion based on those materials.
  

Analysis

[38] Mr QB provided, both in his written submissions and in the submissions advanced at hearing, a comprehensive account of his position.

[39] At hearing he summarised that position as follows:

• (a) the Standards Committee had, in reaching its determination, failed to consider the case law that had most relevance to the circumstances that underpinned the conduct which had prompted the complaint and had failed to apply correct principles when examining the issue of motive; and
  
• (b) the Committee’s indication of concern that his submissions lacked insight, was unfair as he was entitled to advance his argument; and
  
• (c) the Committee had neglected to give sufficient consideration to the Review Officers decision in B and A LT v HF LCRO 235/2017;3 and
  

(d) his correspondence had been addressed to the company, but the Committee had managed the complaint as a complaint advanced by Ms VN; and

2 Deliu v Connell [2016] NZHC 361, [2016] NZAR 475 at [2].

3 This submission whilst raised as a separate issue, fell within scope of general argument advanced that the Committee had neglected to consider disciplinary cases that had relevance to Mr QB’s case.

(e) the Committee had not established that the demand made had been made with an improper purpose; and

• (f) the penalty imposed was excessive and inconsistent with penalties imposed in cases with a similar factual matrix.
  

The Case Law

[40] Mr QB referred me to a number of cases in which the LCRO has considered r 2.7.

[41] It was his view that the case law referenced supported conclusion that the Committee had failed to apply correct principles when considering the test to be applied when addressing question as to whether a lawyer had breached r 2.7.

[42] I have carefully examined the cases referenced by Mr QB.

[43] With every respect to him, I see nothing in those cases (and I have attentively referenced the specific paragraphs in the cases he has referred me to) that assist him in the argument he advances.

[44] Mr QB argued that it was important, when examining his conduct, to consider his motivation. It was his view that when examining complaint that a lawyer had breached r 2.7, that the perspective of the lawyer must be considered, as well as the views of the decision maker.

[45] In his review application, Mr QB summarised his position as follows:

The Standards Committee failed to apply the principles under FZ v LS LCRO 89/2017 at [45], in particular that the test should be a subjective one as well as an objective one (“the lawyers motives must be discerned”) – see also Deliu v Hong [2015] NZHC 492 at [31]–[32] citing Orlov v New Zealand Lawyers and Conveyancers Disciplinary Tribunal [2004] NZHC 1987 at [112] and SC v JT LCRO 382/2013 (30 June 2017) at [35]–[37]. Therefore, it should be done by examining whether the lawyer’s explanation falls within the objectively reasonable range, rather than standing back and determining afresh whether the decision-maker thinks it was reasonable or not.

[46] When questioned on the apparent difficulties in imposing a legal test which provided opportunity for a lawyer’s conduct to be measured both subjectively and objectively, Mr QB acknowledged the difficulties with that approach.

[47] In providing further explanation of his position, Mr QB emphasised that it was his view that the Standards Committee should, when considering the reference to possibility of a referral to WorkSafe, have given consideration to the broader context of

his correspondence and, in particular, have recognised that the substantial body of his correspondence was devoted to explaining the circumstances that had arisen in the workplace which provided strong foundation for his client’s claim for unjustified dismissal.

[48] A number of the decisions relied on by Mr QB reinforce the oft repeated maxim in disciplinary cases, that every case must be considered on its particular facts.

[49] I do not consider that the cases relied on by Mr QB serve, in their conclusions reached, to undermine the Committee’s decision. To the contrary, the decisions reinforce the need for lawyers to exercise prudent caution when advancing argument for their clients that serious (potentially criminal) consequences will result if their client’s proposal for settlement of a dispute is not agreed to.

[50] I agree with Mr QB that the decision in LCRO 235/2017 is a decision that has at least partial alignment on its particular facts with the circumstances of his case. Mr QB notes that in that case, a lawyer’s indication of intention that his client would consider reporting a matter to the Companies Office if steps required by the lawyer’s client were not taken, was accompanied by advice that a breach of duties by a director, if established, would likely justify a prosecution under s 138A of the Companies Act 1993.

[51] In LCRO 235/2017, the Review Officer did not consider that the lawyers correspondence constituted a threat to report the directors to the Companies Office, rather, it was concluded that the correspondence of which complaint had been made, had fairly identified the potential legal consequences which could arise if the directors took the steps they were contemplating.

[52] But the lawyer had not, in the circumstances as described in LCRO 235/2017, issued threat of criminal consequences following, if his client’s wishes were not followed.

[53] In examining the statement made by Mr QB which had caused Ms VN concern, that examination is not cluttered by possibility that Mr QB’s statement was ambiguous or capable of being misconstrued.

[54] Mr QB’s statement is stark and unequivocal.

[55] It makes clear that steps will be taken that will result in Ms VN being the subject of a criminal investigation, if she refuses to settle the dispute on the terms proposed by Mr QB’s client.

[56] This constituted a direct threat.

[57] It was a threat made with an improper purpose.

[58] It was a threat made with intent to leverage Mr QB’s client’s position and achieve a financial settlement for his client.

[59] It was put to Mr QB at hearing that it would present as doubtful that the time and resources of WorkSafe would be expended in pursuing a criminal prosecution of an employer who had neglected to provide an employee with a wrist support. Mr QB agreed that would be unlikely.

[60] I agree with the Standards Committee that conclusion that the threat was made for an improper purpose is “inescapable”.

Lack of insight

[61] Mr QB objected to the Committee’s conclusion that the submissions filed by him indicated a lack of insight into the unsatisfactory nature of his correspondence.

[62] It was his view that he was entitled to defend his position. Expression of contrition was unnecessary if he believed that he had not breached any of his professional duties or obligations.

[63] I agree with him.

[64] But the comment was made by the Committee in relation to its deliberations on penalty.

[65] The comment had no consequence for the Committee’s consideration of the substantive issue.

[66] I have enjoyed the benefit not available to the Standards Committee of opportunity to hear directly from Mr QB.

[67] Mr QB presented at hearing as a thoughtful and conscientious practitioner who had reflected carefully on the implications of the adverse conduct finding. He emphasised that he has refined his approach to drafting settlement offers and now places great emphasis on presenting proposals in a manner that is unambiguously neutral and noncoercive.

The correspondence had been addressed to the company, but the Committee had managed the complaint as a complaint advanced by Ms VN

[68] Ms VN was a director and shareholder in Company A.

[69] Mr QB’s correspondence of 29 July 2022 had been addressed to “the director, VN”.

[70] Ms VN filed the complaint against Mr QB.

[71] There was no impediment to her doing so.

[72] She was the logical person to file the complaint.

[73] Section 132(1)(a) of the Act provides that any person may complain to the appropriate Complaints Service about the conduct of a practitioner or former practitioner.

The Committee had not established that the demand made had been made with an improper purpose

[74] In advancing this argument, Mr QB submitted that there was no proper basis for the Committee to conclude that the demand made was improper.

[75] He urged that consideration be given to the full body of his correspondence. He noted that the bulk of his correspondence had focused on providing context for the employment dispute, and proffering explanation as to why it had been concluded that Ms VN had unfairly terminated Ms YR’s employment with the company.

[76] Mr QB did not consider that Ms VN had been coerced into accepting a settlement proposal. He noted that his correspondence had concluded with inquiry as to whether, in the event his client’s proposal was not accepted, Ms VN would agree to attend mediation.

[77] I accept Mr QB’s submission that his correspondence, as drafted, provided opportunity for the parties to explore alternative means for resolution.

[78] But I am not persuaded that the “sting” of the threat to invoke a process which it was purported could expose Ms VN to risk of criminal prosecution, was ameliorated by the indication of a preparedness to attend mediation.

[79] Ms VN was not legally represented when she received Mr QB’s initial correspondence, although she promptly proceeded to engage counsel.

[80] Mr QB submits that the lawyer instructed by Ms VN raised no objection to the approach adopted in his correspondence of 29 July 2022.

[81] As noted, Ms VN says that her lawyer immediately, on reading Mr QB’s correspondence, signalled his concern to Ms VN concerning the threat to refer the

company to WorkSafe. Ms VN says that it was her lawyer’s view that Mr QB’s correspondence amounted to blackmail, and his advice to her was that she should file a complaint with the Complaints Service as soon as the dispute was settled.

[82] In many decisions of the LCRO which have considered r 2.7 (and Mr QB references a number of them) it has been emphasised that improper purpose is established when a demand/threat is made by a lawyer in an attempt to secure a collateral advantage for the lawyer’s client.

[83] Threatening possibility of criminal prosecution, with purpose to prompt a financial settlement, is transparently exercising a threat for an improper purpose.

Penalties imposed excessive

[84] Mr QB considers the penalties imposed by the Committee to have been excessive.

[85] When making a decision as to penalty, the starting point is to consider the seriousness of the conduct, then to address any aggravating or mitigating features. The penalty should properly be scrutinised as to whether it both accurately reflects the gravity of the conduct, and presents as the least restrictive available option to ensuring the purposes of disciplinary proceedings are met.

[86] That exercise must be undertaken with recognition of the importance, for the public, that disciplinary breaches be met with an adequate disciplinary response.

[87] The primary purpose of disciplinary proceedings is to protect the public and to maintain professional standards.4

[88] In Daniels v Complaints Committee 2 of the Wellington District Law Society the High Court observed that:5

... The public are entitled to scrutinise the manner in which a profession disciplines its members, because it is the profession with which the public must have confidence if it is to properly provide the necessary service. To maintain public confidence in the profession members of the public need to have a general understanding that the legal profession, and the Tribunal members that are set up to govern conduct, will not treat lightly serious breaches of standards.

4 Z v Dental Complaints Assessment Committee [2008] NZSC 55; [2009] 1 NZLR 1; [2008] BCL 787; [2008] NZSC

55 at [97].

5 Daniels V Complaints Committee 2 of the Wellington District Law Society [2011] NZHC 1359; [2011] 3 NZLR 850 at [34].

[89] The function of a penalty in a professional context was recognised in Wislang v Medical Council of New Zealand6 as being to punish a practitioner, to act as a deterrent to other practitioners, and to reflect the public’s and the Profession’s condemnation or disapproval of a practitioner’s conduct. It is important to mark out the conduct as unacceptable and to deter other practitioners from failing to pay due regard to their professional obligations.

[90] It is desirable that there be consistency in the imposition of disciplinary penalties, but in the assessment of appropriate penalty, context is critical, and dependent on the facts and circumstances of the individual case.

[91] The starting point is to consider the conduct.7

[92] LCROs are reluctant, in circumstances where a decision of a Standards Committee has been upheld, to interfere with the Committee’s decision on penalty. It is only in those relatively rare circumstances where the LCRO considers that the imposed penalty is clearly at odds with penalties imposed in comparable cases, or it is concluded that there are particular aspects of the lawyer’s situation that merit a reconsideration of the penalty imposed, that the LCRO will intervene.

[93] Mr QB helpfully alerted me to the decision of the LCRO in HTO v AG LCRO 8/2014, where a breach of r 2.7 had attracted a penalty sanction of a fine in the sum of

$1,000. It was Mr QB’s submission that the circumstances of the earlier case decided had a degree of comparableness to the circumstances of his case.

[94] The Law Society has prepared, for the guidance of its Standards Committees, a comprehensive set of guidelines to assist Committees in the process of determining appropriate orders following a finding of unsatisfactory conduct being entered against a practitioner.8

[95] In circumstances where the conduct engages a one off and/or inadvertent breach of the lawyers’ obligations, where there have been no material consequences as a result of the practitioner’s actions, the guidelines suggest that a low-level fine in the range of $1,000–$3,000 will typically be warranted.

[96] In my view, the fine imposed by the Committee was appropriate and proportionate, when the circumstances of the breach are considered.

6 Wislang v Medical Council of New Zealand [2002] BCL 393; [2002] NZCA 39; [2002] NZAR 573.

7 Refer RK v ZW [2023] NZLCRO 28 at [211]–[217].

8 Penalty Guidelines for Lawyers Standards Committees (February 2022).

[97] Rule 2.7 is conduct rule of significant disciplinary consequence.

[98] Penalty orders play an important role in ensuring public confidence in the profession.

[99] The penalty imposed by the Committee was consistent with those imposed by Committees when addressing comparable infractions.

[100] I see no grounds which could persuade me to depart from the Committee’s decision.

Costs

[101] Where an adverse finding is made, costs will be awarded in accordance with the Costs Orders Guidelines of this Office. It follows that Mr QB is ordered, pursuant to s 210(1) of the Act, to pay costs in the sum of $1,200 to the New Zealand Law Society within 30 days of the date of this decision.

Enforcement of costs order

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

Anonymised publication

[103] Pursuant to s 206(4) of the Act, I direct that this decision be published so as to be accessible to the wider profession in a form anonymising the parties and bereft of anything as might lead to their identification.

Decision

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

DATED this 5TH day of SEPTEMBER 2024

R Maidment

Legal Complaints Review Officer

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

Mr QR as the Applicant Ms VN as the Respondent Ms JM as a related person

[Area] Standards Committee New Zealand Law Society