PR v KG [2024] NZLCRO 140 (12 November 2024)

Last Updated: 7 February 2025

LEGAL COMPLAINTS REVIEW OFFICER ĀPIHA AROTAKE AMUAMU Ā-TURE

[2024] NZLCRO 140 Ref: LCRO 86/2022

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 [X]

BETWEEN PR

Applicant

AND KG and

VW

Respondents

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

Introduction

[1] Mrs PR has applied for a review of the determination by [Area] Standards Committee [X] to take no further action on her complaints about Mr KG and Mr VW.

Background

[2] Mrs PR and her former husband, Mr LF, owned a property in Suburb A.

[3] In 2008, they settled the property on the LF Family Trust. Mrs PR and her husband were both trustees and beneficiaries of the Trust.
[4] Subsequently, Mrs PR and Mr LF became exposed to business creditors and established the XN Family Trust (the XN Trust) to distance themselves from any beneficial interests in the property.

[5] This was achieved by not including either of them as beneficiaries of the Trust. The trustees were Mr LF and Mrs PR’s brother, Mr DB.
[6] This resulted in difficulties when Mrs PR claimed a share in the property after she and Mr LF separated.
[7] Mrs PR had come into contact with Mr KG when he availed himself of assistance and advice provided by the Chamber of Commerce, where Mrs PR worked. She and Mr KG maintained contact and in approximately September 2017, Mr KG discussed with her a new venture that he was establishing. The name of the company was [Limited Company 1] (LC1).
[8] Mr KG was the sole director of LC1 and controlled the shareholding of the company.
[9] In approximately February 2018, Mrs PR was engaged by Mr KG (LC1) to work for the company on a contract basis.
[10] Mrs PR was aware that Mr KG was a practising lawyer and at that time asked if he could help her with her relationship property issues. She also wanted to oppose an application for dissolution of the marriage by her former husband. She wanted to have the date of separation being claimed by Mr LF in the application changed as there were financial implications flowing if the incorrect date was as recorded.
[11] Mr KG proceeded on the same basis which Mrs PR had commenced, which was to oppose the application for dissolution. This was unsuccessful and the Court made an award of costs against Mrs PR.
[12] Mrs PR later found out that she did not need to oppose the application for dissolution of the marriage to have the date corrected and that she could have consented on the basis that the date was amended.
[13] Mr LF was wanting to have the Suburb A property sold and this was opposed by Mrs PR who was living in it with her partner and two children.
[14] On the same day as the order dissolving the marriage was made, Mr KG lodged a Notice of Claim pursuant to the Property (Relationships) Act 1976 (PRA) against the title to the property.
[15] The registered proprietors of the property were Mr LF and Mr DB as trustees of the XN Trust. The Notice of Claim registered by Mr KG was against the interest of Mr LF. His interest as a trustee did not fall within the ambit of the PRA.

[16] Mr LF was also not a beneficiary of the Trust. Consequently, there could be no claim against a beneficial interest held by him in the property.
[17] In the judgment, Associate Judge CC reviewed the provisions of the Trust Deed and noted the rights of the settlors, either together or alone, to bring forward the vesting date of the Trust and to vest one half of the property in such of the beneficiaries as the settlor or settlors nominated.
[18] The Associate Judge determined that if Mr LF had that right, then Mrs PR had a similar right. Following through with that logic, the Associate Judge held there was no need for the Notice of Claim to remain.

• [19] Mrs PR was ordered to pay costs on a category 2 basis.
  

[20] The overall effect of the lodging of the Notice of Claim and the litigation to have it removed was to delay a possible sale of the property at a cost to Mrs PR of Mr KG’s fees and the costs ordered against her.
[21] Following on from the judgment of Associate Judge CC, Mr KG then prepared various Deeds to effect the process which had been identified by the Judge. He subsequently lodged a caveat against the title to the property to protect the interest thereby acquired by Mrs PR.
[22] The trustees instructed Mr FP to act on their behalf, and commenced an action in the High Court for removal of the caveat. Mr KG filed a notice of opposition supported by an affidavit from Mrs PR.
[23] During this time (on 24 August 2018) Mr KG terminated Mrs PR’s position in LC1. Mrs PR asserted that this amounted to unjustified dismissal,1 and claimed eight weeks pay in lieu of notice.
[24] Shortly thereafter, Mr KG terminated the lawyer-client relationship with Mrs PR on the basis that a conflict of interests had arisen. He advised Mrs PR:2

...

There is a huge conflict of interest in me being your lawyer while you are suing me. Therefore it is necessary for you to find another lawyer. Please do this ASAP or file a Change of Representation (just copy KG’s one) and represent yourself.

Since I am no longer your lawyer, I have finished my work for you and my account is now due and owing.

1 Mrs PR maintained she was an employee and not an independent contractor.

2 Email KG to PR (19 September 2018).

You owe me $68,121.40 for all matters to date

...

Probably the best way to handle it is to offset this amount from what I owe you and ER thereby now leaving a balance of $49,984.29 owing.

[25] This email was sent from the email address of KG@[limitedcompany1].co.nz. Mr KG did not render an invoice to Mrs PR.
[26] A series of emails followed on the following day:

8:57 am – Mrs PR to Mr KG:

...my Employment Problem with you is between you and I, not the loan you owe ER or my relationship property...

9:33 am – Mr KG to Mrs PR:

If you do not find another lawyer or change to be self represented I will apply to the High and Family Courts to be released as it is part of my ethical obligations to you as a client not to act where I cannot act in your best interests.

Please check this with the Law Society or VW from [Limited Company 2] but quite simply you cannot force me to keep being your lawyer in these circumstances.

With regard the rest please proceed to file whatever claims you wish. Thanks

KG

12:53 pm – Mr KG to Mr MS (Company 3) - withdrawing consent for his recommendation of Mrs PR to remain on the company’s website.

1:38 pm – Mrs PR to Mr KG:

KG

WITHOUT PREJUDICE

As a lawyer you are bound by professional and ethical standards, to not threaten me about my legal representation based on an unpaid Employment Dispute.

Please note as follows:

1. I have instructed JP to act for me on all matters. Please forward files to JP’s office, [Address X] immediately;
2. I dispute your fees owing below as I have never been invoiced and you are requesting amounts for legal from your [Limited Company 1] email;
3. You have asked me to contact VW so I am copying him in on this email so he is aware of the dispute;
4. I did not think it professional conduct that you have contacted the Company I am a Business Advisor for to remove a valid reference you supplied me

back in 2015. I had hoped that you would act in a professional matter to resolve matters. I have asked you to be professional and may make claim on you for any further adverse or intended adverse action by you for losses. This includes any person you ask to act for you.

I am emailing you to your [Limited Company 1] email given this is where you have been emailing me from.

JP will address you from herein. PR

1:58 pm – Mr KG to Ms JP:

Dear JP,

I have received an email from Mrs PR that she has instructed you to appear on the High Court caveat matter (14 November) and the several pending Family Court matters.

Please would you be good enough to send through an authority for uplift and your filed copy of Change of Address when you are ready.

Please find attached my invoice for services rendered to PR to date. Please advise when this will be paid.

...

6:25 pm – Mr KG to Mr VW:

Hi VW,

Thank you for your meeting today. I have reflected on the situation.

I am very open to resolving all matters with PR (both legal and outside). I think it is a good idea her new lawyer calls a meeting at which time we can step through each thing.

If at the end of that PR is still unhappy then I would encourage her to specify to you which parts of my legal service I have provided she is unhappy with and you can investigate.

I think it is a good idea PR gets a new lawyer as she will no longer have trust and confidence in me.

Happy to follow your direction on this. Cheers

KG

[27] Further emails followed between Mrs PR, Mr KG, Ms JP and Mr VW.

27 September

1:56 pm – Mr VW to Ms JP and Mrs PR:

Hi JP and PR,

I have discussed the matter with KG. Please refer to his below email.

I recommend having a meeting and resolve, JP you can have meeting in your office or outside and KG can attend. I understand that KG was employer, friend and lawyer.

If the matter is not resolved and PR has any issues regarding legal presentations of KG, she can raise to me in writing and I will look into the matter.

Hope you guys will be able to resolve it. Thanks

2:45 pm – Ms JP to Mr VW and Mr KG:

Dear VW and KG Thanks for your email.

I will take instructions and come back to you in relation to proposed meeting.

In the meantime please courier the files today in relation to the High Court proceedings.

Please also send the files and any electronic documents on a USB stick in relation to all family court matters. I will also forward a signed Authority tomorrow.

3:02 pm – Ms JP to Mr KG and Mr VW:

I confirm I am instructed in relation to all Family Court matters as well. Please immediately courier all files to me today.

3:05 pm – Mr KG to Ms JP:

Hi JP, thanks for that.

I have undertaken substantial work this file [sic] and there is now a suggestion I will not be paid.

It is my understanding there is no money coming so an undertaking from you will not advance matters.

Unfortunately I require resolution on my account before I release my lien on the file.

[28] Mr KG continued to assert a lien over the files and further correspondence ensued. On 27 September, Ms JP sent a detailed letter addressed to [Limited Company 2], and emailed copies to both Mr KG and Mr VW referring to the following:

• On 27 September at 4:20 pm she had requested Mr KG to forward his Letter of Engagement.
• Ms JP records Mr KG’s reply:

Acknowledgement and receipt of TOE attached

No written engagement letter (as to scope and terms of engagement); Terms were “payment at the end” therefore no interim billing

A final account has not been rendered yet. Only work to date has been invoiced. I already provided time records...

• Ms JP raised issues about Mr KG’s terms of engagement:
  
  1. No letter of engagement, email or information for clients provided outlining the scope of work and what matters you were engaged in relation to;
  2. There is no indication of the hourly rate or rates on which it was agreed you would charge and for what work and when this would be billed;
  3. Any fee is “payable at the end”. Presumably this means at the end of the litigation matters either on settlement or once the litigation had ended either by one party withdrawing or on judgment in favour of one party, which has not yet occurred.
• The invoice and time records were lacking in detail to enable what time related to the High Court proceedings and what time related to other matters and what those matters were.
• She advises that Mrs PR disputed all fees.
  
• As the litigation had not been finalised, “legally speaking any invoice that was issued for fees are not due and owing and payable until the end of all litigation matters which has not yet occurred”.
• Ms JP challenges Mr KG’s claim to a lien on the files.
  

[29] Ultimately, Mr KG released the files to Ms JP on 12 October.3

3 At the review hearing Mr KG said that he had been advised he was unable to claim a lien over the files.

[30] Mr and Mrs PR met with Mr VW on 19 December. Matters were not resolved and Mrs PR followed up the meeting with an email to Mr VW on 21 December with a summary of the discussion and areas of dispute. Mr VW referred the email to Mr KG who responded in detail to Mr VW. Mr VW then forwarded this to Mrs PR on 18 February 2019.

• [31] Mrs PR lodged her complaint on 10 April 2019.
  

Mrs PR’s complaints

[32] I adopt here the summary of Mrs PR’s complaints by the Standards Committee about Mr KG and Mr VW:4

• Mr KG terminated the retainer without justification;
  
• Mr KG failed to issue regular invoices with the result that Mrs PR was unaware, until the termination of the retainer, of the level of legal fees she had incurred;
  
• Mr KG failed to charge a fee that was fair and reasonable;
  
• Mr KG was incompetent and/or provided incorrect advice;
  
• Mr KG acted without instructions;
  
• Mr KG acted unprofessionally;
  
• Mr VW failed to thoroughly and impartially investigate Mrs PR’s complaint about Mr KG.
  

[33] The outcomes sought by Mrs PR are:5

• – A review of Mr KG’s conduct.
  
• – A review of [her] bill and costs incurred due to KG KG’s termination.
  
• – A review of [her] email dated 21 December 2019 and Mr VW’s failure to address [her] legitimate concerns.
  

Mr KG’s response

[34] Mr KG responded to the complaint, enclosing a copy of his letter to Mr VW after Mr VW had received Mrs PR’s complaint earlier in the year.

4 Standards Committee determination (12 May 2022) at [65].

5 PR complaint (9 April 2019) Step 6.

Termination of retainer

[35] Mr KG says that it was only after, and because, Mrs PR had commenced a personal employment grievance against him and LC1 that he considered he was unable to act in Mrs PR’s best interests.

Invoicing

[36] Mr KG says that Mrs PR “was not given an update on fee level or time spent, but she was generally aware of the level it was at on several occasions we spoke that her ex-husband’s legal fees were consistently approximately double of hers to date (being my fee)”.
[37] He “had an express conversation with [Mrs PR] at that time (i) that we had omitted to record her legal expenses in her affidavit (probably as they had not been invoiced), and (ii) that her account was around $45,000 at that time”.

• [38] He says that Mrs PR did not take any exception to the level of costs at that time.
  

Fees

[39] Mr KG advises that time spent by him was recorded contemporaneously. He submits that his charge out rate of $300 per hour is “low for the level of skill required to handle a matter of this complexity and with the extreme level of opposition from 2 very senior counsel experienced in this field...”.
[40] He says that Mrs PR often provided information which had been requested late on a Sunday afternoon which required urgent work.
[41] He says that the suggested offset against what LC1 owed to Mrs PR became a non-issue when the proposal was rejected.

Incompetence

[42] Mr KG rejects allegations of incompetence. He acknowledges that he is “not a trust expert but [has] a good understanding of the principles”.6
[43] He advises that he had discussions with “Mr TQ who was the author of the trust deed used”. He advises that “Mr TQ agreed there were distinct gaps in the deed and it did not provide for the current deadlock situation”.7

6 KG response to complaint 8 June 2022 at [22].

7 At [23].

[44] Mr KG says that he “took full advice from an expert in the field of Trust Law and cannot be incompetent when following the suggested course of action”.8
[45] Mr KG says it was he who devised the “somewhat radical path of bringing forward Vesting Day that would wind up the Trust and distribute the proceeds. While this meant the property went to the 2 children (not what was wanted), with their consent/support, the property could be on-gifted to [Mrs PR] thereby indirectly achieving the end result, albeit via an unconventional path”.9
[46] Mr KG says he acted in accordance with Mrs PR’s instructions in opposing Mr LF’s application to dissolve the marriage.

Acting without instructions

[47] Mr KG says he acted at all times in accordance with Mrs PR’s instructions.

Unprofessionalism

[48] Mr KG denies that he has acted unprofessionally at any time. He says that he has not been involved with the alleged smear campaign against Mrs PR.

• [49] Mr KG summarises his response in the following manner:10
  

It is my view Mrs PR’s rights as a client have been fully protected, and withdrawing as her counsel was one of the way we ensured this was done. Multiple steps of a complicated and highly disputed matter were professionally handled and our account for services is very reasonable, especially when compared to the legal costs incurred by Mr LF in taking every similar step but on the other side.

Mr VW’s response

[50] Mr VW rejects Mrs PR’s complaint that he did not properly investigate her complaints and sets out the steps he took:

• On 27 September 2019 he sent an email to both Ms JP and Mrs PR recommending a meeting and if that meeting did not resolve matters for Mrs PR, to then contact him.
• He sought a reply from Mr KG and provided this as a formal response to Mrs PR on 18 February 2019.
  

8 At [25]. It is assumed that the expert that Mr KG refers to is Mr TQ.

9 At [26].

10 At [39].

• He agreed to meet with Mr and Mrs PR.
  
• On 18 December 2018, he travelled to Mr ER’s workplace to meet and discuss the situation.
• As he was not prepared to uphold Mrs PR’s complaint, he assumed that this is what had upset her the most.
  

[51] Mr VW concludes:

I consider it is clear I have listened to Ms [PR’s] complaint, investigated it with my staff, met with Ms [PR] and her support person to fully understand her concerns, then fully respond to her.

The Standards Committee determination11

[52] The Standards Committee identified seven issues to be addressed:12

• Whether Mr KG terminated the retainer with Mrs PR without justification, and if so, whether Mr KG breached his professional obligations under Rule 4.2 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 [(the Rules)] and/or any other Rule or enactment;
  
• Whether Mr KG failed to issue regular invoices, and if so, whether Mr KG breached the terms of engagement and/or the [Rules] or any other enactment;
  
• Whether Mr KG failed to charge a fee that was fair and reasonable and, if so, whether Mr KG breached his professional obligations under Rule 9 and following of the [Rules] and/or any other Rule or enactment;
  
• Whether Mr KG was incompetent and/or provided incorrect advice, and if so, whether Mr KG breached his professional obligations under Rule 3 of the [Rules] and/or any other Rule or enactment;
  
• Whether Mr KG acted without instructions, and if so, whether Mr KG breached his professional obligations under Rule 3 of the [Rules] and/or any other Rule or enactment;
  
• Whether Mr KG acted unprofessionally, and if so, whether Mr KG breached his professional obligations under Rule 10 of the [Rules] and/or any other Rule or enactment;
  
• Whether Mr VW failed to investigate Mrs PR’s complaint fairly and impartially, and if so, whether Mr VW breached his professional obligations under the [Rules] and/or any other enactment.
  

11 All references to the ‘Rules’ relate to the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008.

12 Standards Committee determination, above n 4, at [74].

Termination of retainer

[53] The Committee referred to r 4.2 which enables a lawyer to terminate a retainer for ‘good cause’. “Mr KG had reached the view that continuing to act for Mrs PR was a conflict of interest. From Mr KG’s perspective, the conflict in this case was between his duty as Mrs PR’s lawyer, to promote her interests, and his own interests, to the extent that there was a dispute between Mrs PR, and LC1”.13
[54] The Committee determined because of the employment dispute that had arisen between LC1 and Mrs PR that “he could no longer claim to be free from “compromising influences or loyalties” as was required of him under Rule 5. Nor could Mr KG protect and promote Mrs PR’s interests to the exclusion of the interests of third parties, as required under Rule 6; Mr KG now found himself torn between the interests of Mrs PR, as his client, and the interests of LC1 as a third party”.14
[55] The Committee determined that as a result of the situation which had arisen, Mr KG had good cause to terminate his retainer.
[56] Having reached this view, the Committee expressed a degree of sympathy for the situation in which Mrs PR found herself and sounded a caution to “those who might be contemplating mixing business relationships with lawyer-client relationships”.15

• [57] At paragraph [92] of its determination, the Committee says:
  

The reality, however, is that there was always a risk that something in the separate business relationship could go wrong and have an adverse effect on the lawyer-client relationship. It is fair to say that both parties probably now question the wisdom of allowing their interests to become intertwined.

[58] The Committee determined to take no further action on this issue.

Failure to issue regular invoices

[59] The Committee referred to paragraph [4] of the Terms of Engagement provided to Mrs PR. This reads:

Billing

[Limited Company 2] generally bill on a monthly basis. However, in certain circumstances this may be inappropriate and such cases will be discussed with you individually.

13 At [79].

14 At [87].

15 At [89].

[60] “The Standards Committee was satisfied that, in this case, Mrs PR and Mr KG agreed that [Limited Company 2] would not issue monthly invoices. Instead, billing would occur upon conclusion of the matter.”16
[61] The Committee observed that deferred fee arrangements “are not uncommon in relationship property disputes. In such cases, there will often be valuable assets like real estate in dispute, but the separating spouses have limited access to cash assets”.17
[62] The Committee determined that “there is nothing ethically improper about deferred fee agreements. In reality, they represent a significant concession by a lawyer which enables a client to access legal representation when they may not otherwise be able to afford it. Relationship property disputes can sometimes drag on for many years, meaning the lawyer goes unpaid for a long time. This means that not all lawyers are willing to enter into deferred fee agreement”.18
[63] The Committee “was satisfied that there was no requirement for Mr KG to issue monthly invoices. If he had done so, then such invoices would have been payable within 7 days as per the terms of engagement. This would have defeated the purpose of the deferred fee agreement. It should also be noted that Mrs PR did not, at any time before the retainer came to an end, request that Mr KG issue an invoice”.19
[64] “The Standards Committee did not consider that Mr KG’s approach to invoicing had breached any professional obligations. It nevertheless expressed the hope that this complaint has been a reminder to Mr KG that deferred fee agreements should be approached with care.”20

Fees

[65] The Committee commissioned a report from a costs assessor and was guided by his conclusions. However, it recorded that the determination of whether fees were fair and reasonable was a decision for the Committee to make taking into account all of the factors set out in r 9.1.21
[66] The Committee noted that the firm’s terms of engagement were ‘not particularly helpful’22 because of their generic nature.

16 At [97].

17 At [99].

18 At [100].

19 At [101].

20 At [105].

21 The r 9.1 factors are set out in paragraph [121] of the Committee’s determination.

22 Standards Committee determination, above n 4, at [124].

[67] The Committee “was satisfied that the parties had agreed to time and attendance as being the primary basis for charging. Time and attendance billing is a common practice in New Zealand law firms. However, the time and labour expended is only one of the reasonable fee factors which the Standards Committee is required to take into account when determining whether a fee is fair and reasonable”.23

Hourly rate

[68] “The Standards Committee considered that Mr KG’s hourly rate, of $300.00 (exclusive of GST and disbursements), was appropriate for a practitioner of his experience. The costs assessor reached a similar view.”24
[69] “The Standards Committee shared the conclusion of the costs assessor that the time and labour expended by Mr KG was reasonable.”25

Skill, specialised knowledge and responsibility

[70] “The Standards Committee shared the costs assessor’s view that Mr KG had the necessary experience to advance Mrs PR’s case.”26

Importance

[71] The Committee determined that the matters in respect of which Mr KG was engaged were of significant importance to Mrs PR.

Results achieved

[72] “While it is pleasing that Mrs PR was able to resolve her dispute after the engagement ended, the simple fact is that attempts to settle while Mr KG was acting were unsuccessful and Court proceedings resulted. The fact that Mrs PR was unsuccessful in respect of some of the litigation does not mean that the time Mr KG spent was not legitimately incurred. All litigation carries risk, and a lawyer can never guarantee a particular outcome. The fact a client may be disappointed about some aspects of the case does not mean the lawyer should go unpaid.”27
[73] “It is acknowledged that the lawyer-client relationship ended in unfortunate circumstances. Despite that, the Standards Committee considered that Mrs PR should

23 At [129].

24 At [130].

25 At [138].

26 At [140].

27 At [147].

not now underestimate the value of the work Mr KG undertook for her in terms of the value achieved.”28

Complexity

[74] The Committee observed that “there was a complex interplay between trust law and relationship property law, with proceedings in both the Family Court and the High Court. Mr LF was represented by senior practitioners who provided a high level of opposition at every stage”.29
[75] “The Standards Committee considered that Mr KG handled these complicating aspects of the instructions well. He was able to devise a number of different strategies to advance Mrs PR’s case and gain leverage over Mr LF. In particular, Mr KG was able to prevent Mr LF from selling Suburb A Road during the period he was acting.”30

Conclusion

[76] “After taking into account the relevant fee factors, the Standards Committee considered that the fee charged, having been calculated on a time and attendance basis, was fair and reasonable having regard to the work done. Mr KG undertook a significant amount of work on Mrs PR’s behalf over a period of almost a year.”31

Competence

[77] The Committee referred32 to the view of the authors of Ethics, Professional Responsibility and the Lawyer 33 where they say that “the duty of competence is, in reality, a duty not to be incompetent and is aimed at ensuring minimum standards of service”.
[78] The Committee observed that “different lawyers, when faced with the same facts, may have different views on how a particular matter should be handled. Their clients may, or may not, heed their advice”.34

• [79] A lack of success does not mean that the lawyer has lacked competence.
  

28 At [148].

29 At [150].

30 At [151].

31 At [152].

32 At [159].

33 Duncan Webb, Kathryn Dalziel and Kerry Cook Ethics, Professional Responsibility and the Lawyer (3rd ed, LexisNexis, Wellington, 2016) at 303.

34 Standards Committee determination, above n 4, at [162].

[80] The Committee also took note of the comments by the New Zealand Lawyers and Conveyancers Disciplinary Tribunal where it said that “it is not the role of a Standards Committee investigating a complaint about litigation to “closely analyse and second guess every move”4 that counsel made”.35

4 Auckland Standards Committee No 3 v Castles [2013] NZLCDT 53 at [177].

[81] The Committee then considered each of the issues addressed by Mr KG:

• Opposing the application for dissolution of the marriage.
  
• Suggesting that the trustee deadlock be referred to the ADLS for resolution.
  
• Decision to register notice of claim.
  
• Failure to attend the occupancy hearing.
  

[82] Having considered in some detail the steps taken by Mr KG on each matter, “the Standards Committee did not consider that Mr KG had, at any point during his representation of Mrs PR, failed to act competently or otherwise than in accordance with her best interests. He had not breached Rule 3 of the RCCC”.36

Acting without instructions

[83] Mrs PR alleged that Mr KG had agreed to pay Mr LF’s costs after the unsuccessful High Court hearing in respect of the Notice of Claim.
[84] The Committee accepted that Mr KG should not have agreed to this, but said:37

...the Standards Committee did not consider that Mr KG’s failure to seek instructions here was a cause of any identifiable prejudice to Mrs PR. However, Mr KG must act more cautiously in future.

[85] The Committee determined to take no further action on this issue.

Did Mr KG act unprofessionally?

[86] This issue relates to the alleged smear campaign which Mrs PR says Mr KG had played a part in.
[87] “The Standards Committee did not consider that Mrs PR had established, to the required standard, that Mr KG had commenced an online smear campaign against her.

35 At [165].

36 At [202].

37 At [209].

Her belief, while no doubt genuinely held, was ultimately based on speculation rather than objective evidence.”38

[88] The Committee determined to take no further action on this issue.

Mr VW’s investigation

[89] The Committee recounted the steps taken by Mr VW after her complaints were referred to him. It said:39

Although Mrs PR was entitled to make an internal complaint, Mr VW was not obliged to agree with everything she said or otherwise accede to her demands. Rather, it was for Mr VW to consider the respective positions of Mrs PR and Mr KG and reach his own view. While Mrs PR felt strongly that Mr KG had acted inappropriately, and that all legal fees should be waived as a result, Mr VW obviously reached a different conclusion.

[90] The Committee determined that Mr VW had acted appropriately and took no further action on the complaint about Mr KG.

Summary

Having addressed all issues identified, the Committee determined to take no further action on any of Mrs PR’s complaints.

Mrs PR’s application for review

Mr KG

[91] Mrs PR’s application for a review of the determination of her complaint about Mr KG is best understood from the outcome she seeks:

A stay on enforcement. A review of all the points I have raised in the attached document, including why no one has asked Mr KG why I was never provided options including vesting; why incurred costs with Ms JP are not taken into consideration; why the smear campaign and timing was not considered more thoroughly given Mr KG contacted another company I was contracted to at the same time to cause me harm; why no action was taken re; the offsetting – this is fraud. Why [Limited Company 2] did not offer me an alternative lawyer or discuss with me and allowed KG to terminate my retainer.

38 At [221].

39 At [229].

[92] Mrs PR asks for a stay on enforcement.40 Enforcement proceedings are stayed pending completion of this review.41 Payment of any fees outstanding will now need to be addressed.
[93] I can confirm that I have read all of Mrs PR’s supporting reasons and have taken all of these into account in conducting my review.
[94] Mrs PR asks a number of rhetorical questions as to why the Committee did not reach certain conclusions.

Mr VW

[95] Mrs PR’s application for review of the determination of her complaint about Mr VW is brief.
[96] She repeats her assertions that Mr VW was dilatory in addressing her complaints and asks why the Committee did not consider that Mr VW had an obligation to continue to act for her after Mr KG had terminated the retainer.

Mr KG and Mr VW’s response

[97] Neither Mr KG or Mr VW wished to add anything to the material and submissions made to the Standards Committee.

Nature and scope of review

[98] The High Court has described a review by this Office in the following way:42

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.

[99] This review has been conducted in accordance with those comments.

Process

[100] Mrs PR named Mr KG and ‘[Limited Company 2] – VW’ as the parties complained about.

40 Presumably a stay on enforcement action by [Limited Company 2] for payment of the outstanding account.

41 Section 161 of the Lawyers and Conveyancers Act 2006.

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

[101] [Limited Company 2] is an incorporated company.43 Although complaints may be made against an incorporated company,44 the Lawyers Complaints Service processed the complaint as being against Mr VW.
[102] The Committee determined the complaints about both Mr KG and Mr VW together.
[103] I initially advised the parties that the review would be processed separately against each of them. However, it became apparent that it would be difficult to separate out the issues affecting both of them. Accordingly, this review has proceeded in the same manner as dealt with by the Committee.
[104] The review proceeded by way of a hearing on 10 October 2024, attended by Mrs PR and her husband, and Messrs KG and VW.

Review

Mr KG

[105] Rules 3.4 and 3.5 of the Rules provide:

• 3.4 A lawyer other than a barrister sole must, in advance, provide in writing to a client information on the principal aspects of client service including the following:
  
  • (a) the basis on which the fees will be charged, when payment of fees is to be made, and whether the fee may be deducted from funds held in trust on behalf of the client (subject to any requirement of regulation 9 or 10 of the Lawyers and Conveyancers Act (Trust Account) Regulations 2008):
    
  • (b) the professional indemnity arrangements of the lawyer’s practice. This obligation is met if it is disclosed that the practice holds indemnity insurance that meets or exceeds any minimum standards from time to time specified by the Law Society. If a lawyer or a practice is not indemnified, this must be disclosed in writing to the client:
    
  • (c) the coverage provided by the Lawyers’ Fidelity Fund and if the client’s funds are to be held or utilised for purposes not covered by the Lawyers’ Fidelity Fund, the fact that this is the case:
    
  • (d) the procedures in the lawyer’s practice for the handling of complaints by clients, and advice on the existence and availability of the Law Society’s complaints service and how the Law Society may be contacted in order to make a complaint.
    

43 There is no indication in correspondence from the firm that [Limited Company 2] is an incorporated company. Mr VW is referred to s 25 of the Companies Act 1993.

44 Section 132(a)(ii) of the Lawyers and Conveyancers Act 2006.

3.5 A lawyer other than a barrister sole must, prior to undertaking significant work under a retainer, provide in writing to the client the following:

• (a) a copy of the client care and service information set out in the preface to these rules; and
  
• (b) the name and status of the person or persons who will have the general carriage of, or overall responsibility for, the work; and
  
• (c) any provision in the retainer that limits the extent of the lawyer’s or the practice’s obligation to the client or limits or excludes liability. The terms of any limitation must be fair and reasonable having regard to the nature of the legal services to be provided and the surrounding circumstances.
  

[106] Mrs PR acknowledged that she had received a copy of the firm’s standard Terms and Conditions of Engagement on 27 October 2017. These include the following sections:

Fees

[Limited Company 2] charge on a variable rate, but may provide a fixed rate to clients in special circumstances. Fees are charged according to the specialised knowledge, skills or responsibility required, the amounts involved, the importance of the matter, urgency and the results achieved. ...

Billing

[Limited Company 2] generally bill on a monthly basis. However, in certain circumstances this may be inappropriate and such cases will be discussed with you individually.

Terms of Payment

Our terms of payment are 10 days from the date the bill is rendered unless alternative arrangements with our Credit Manager have been made. ...

Professional Indemnity Insurance

We are covered by professional indemnity insurance.

Disputes and Complaints

... You may refer your concerns to VW, or the legal staff member acting for you, or you can contact the Office Manager by letter, phone and or email (as listed on our website). In addition, the New Zealand Law Society operates the Lawyers Complaints Service. To make a complaint to that service, phone [phone] to be connected to your nearest Complaints Service Office. ...

Client Care and Service Information

Whatever legal services we are providing, we will –

• Act competently, in a timely way, and in accordance with instructions received and arrangements made;
• Our response time will be 3 working days for an enquiry/status update;
• Protect and promote your interests and act for you free from compromising influence or loyalties;
• Discuss with you your objectives and how they should be achieved;
• Provide you with information about the work to be done, who will do it and the way the services will be provided;
• Charge you a fee that is fair and reasonable and let you know how and when you will be billed;

• Give you clear information and advice;
• Protect your privacy and ensure appropriate confidentiality;
• Treat you fairly, respectfully and without discrimination;
• Keep you informed about the work being done and advise you when it is completed;
• Let you know how to make a complaint and deal with any complaint promptly and fairly.
  

[107] In addition to Terms and Conditions, most law firms provide a separate Letter of Engagement to record details specific to the particular retainer.
[108] The Letter of Engagement provided by Mr VW following the hearing adds nothing in the way of the details required. The information was deficient in the following aspects:

• There is no summary of the work to be undertaken.
  
• It does not specify who is to have the general carriage of the work.
  
• There was no detailed information about the basis on which fees would be charged, Mr KG’s hourly rate, when payment of fees was due, or whether fees could be deducted from any funds received.
  

[109] The only discussion and correspondence about fees was that they would be payable ‘at the end’.
[110] This lack of specificity about fees is a significant omission.

Discussion

[111] Breaches of rr 3.4 and 3.5 are often treated as ‘technical breaches’ and do not attract an adverse finding. This is often the case where the information is not provided ‘in advance’ of carrying out the work.45
[112] In ZN v CH,46 Review Officer Maidment declined to make an adverse finding where it could not be shown that the lawyer had provided the information required by the Rules. The complaint was that the complainant had not been made aware that disbursements would be added to the fee charged. This complaint could not be sustained as the complainant had bought and sold a number of properties in the past and was aware that disbursements were additional to the lawyer’s fee. She had also been told at an earlier stage the amount of the fee.

45 See for example McGuire v Manawatu Standards Committee and LCRO [2016] NZHC 1052.

46 ZN v CH LCRO 168/2014.

[113] Again, in National Standards Committee v Shand,47 the Tribunal said:

[34] We find that the breach does not invite a disciplinary sanction. Our reasons for that finding are that Mr Bligh had received oral advice as to fees, his contract with CRS was in place, he had been through the statement of claim and had paid the filing fee and there was a delay of only three weeks. One of the important functions of the letter of engagement is that clients know the work that will be carried out and the basis on which they will be charged; both these matters had been addressed with Mr Bligh and there is no suggestion he did not understand them.

[114] The circumstances which present here are somewhat different:

• Mr KG did not disclose his hourly rate.
  
• He did not advise that his fee would be calculated on a time and attendance basis.
• He did not define what was meant when he said the fee would be payable ‘at the end’.
• He did not make it clear that he would not be rendering monthly invoices, notwithstanding the statement in the terms and conditions that this would generally be done.
  

[115] There is no reason why monthly invoices could not have been rendered on the basis that they would not become payable until ‘the end’.
[116] In addition, Mr and Mrs PR have said that they both asked Mr KG on several occasions what level of costs had been incurred without receiving a satisfactory answer.
[117] Knowing what costs have been incurred to date is a critical factor for a client to weigh up when deciding how to proceed in litigation.
[118] This is not a case where the breach of rr 3.4 and 3.5 does not warrant a response.
[119] The failure to keep Mrs PR advised as to the level of fees accumulated would also amount to breaches of rr 7and 7.1 which provide:

7. A lawyer must promptly disclose to a client all information that the lawyer has or acquires that is relevant to the matter in respect of which the lawyer is engaged by the client.
   

• 7.1 A lawyer must take reasonable steps to ensure that a client understands the nature of the retainer and must keep the client informed about progress on the retainer. A lawyer must also consult the client (not being another
  

47 National Standards Committee v Shand [2019] NZLCDT 2.

lawyer acting in a professional capacity) about the steps to be taken to implement the client’s instructions.

[120] Mr KG’s conduct is unsatisfactory conduct as that term is defined in s 12(c) of the Lawyers and Conveyancers Act 2006 by reason of the breaches of rr 3.4, 3.5, 7 and 7.1.
[121] Paragraph 15 of the firm’s Terms and Conditions incorporate the words of the preface to the Rules as required by r 3.5A.
[122] These establish the duties of a lawyer whatever legal services are being provided:

• (a) Acting free from compromising influences or loyalties.
  
  1. Mrs PR was employed by/contracted to Mr KG’s company, LC1, and Mr ER (at some stage) advanced $100,000 to the company. In acting for Mrs PR, Mr KG was to receive one half of the fees billed to her,48 as distinct from a salary paid to him by [Limited Company 2].
  2. In short, the greater the fee charged to Mrs PR, the greater the return for Mr KG. Income earned by Mr KG could potentially be applied by him to LC1 to enable the company to meet its liabilities, which included the liabilities to Mrs PR and Mr ER.
  3. I fail to see how this can not be a ‘compromising influence’.
     
  4. This scenario can also amount to a breach of r 5.5 which requires that ‘a lawyer must not engage in a business or professional activity other than the practice of law where the business or professional activity would or could reasonably be expected to compromise the discharge of the lawyer’s professional obligations’.
• (b) Discuss with you your objectives and how they should best be achieved.
  
  1. There is no evidence as to what discussions took place between Mrs PR and Mr KG when she asked him to act for her. Her immediate objective was to prevent the sale of the Suburb A
     

48 As advised by Mr KG at the review hearing.

property by the trust, and ultimately to retain it as (part of) her share of relationship property.

2. Mrs PR has frequently referred to Mr KG failing to provide a roadmap, and says that Mr KG’s approach seemed to be a piecemeal approach according to whatever steps Mr LF was taking. I do not presume to say that the steps taken by Mr KG were of no benefit towards achieving those objectives, but the discussion of objectives and how they were to be achieved was missing.

(c) Provide you information about the work to be done, who will do it, and the way the service will be provided

1. The failure to provide this information has been discussed in terms of rr 3.4 and 3.5.

(d) Charge you a fee that is fair and reasonable and let you know how and when you will be charged.

1. The quantum of the fee is discussed in [37] above. The information about how and when the bills would be rendered and become payable is dealt with at [149] below.

(e) Keep you informed about the work being done and advise you when it is completed.

1. There is no indication that this requirement was not met.
   

[123] As discussed above, Mr KG has not met his obligations to Mrs PR. Taken together, these shortcomings constitute unsatisfactory conduct as that term is defined in s 12(c) of the Lawyers and Conveyancers Act 2006.

Conflict

[124] Mr KG terminated the retainer with Mrs PR after a dispute arose between them following Mr KG’s dismissal of Mrs PR from her position in LC1.
[125] The Committee addressed the issue in the context of whether or not Mr KG had ‘good cause’ to terminate the retainer. The Committee did not discuss whether or not

there was a conflict between Mr KG acting for Mrs PR, and employing or contracting with her.49

[126] The relationship between Mrs PR as client and with her as an employee or contractor of LC1 was somewhat unusual. The uncertainty around the arrangement was exacerbated by the lack of any completed documentation about Mrs PR’s role.
[127] The relationship was further compromised when LC1 borrowed $100,000 from Mr ER. There is no indication that Mr KG insisted, or at least advised, Mr ER that he should have independent advice before making the advance.50
[128] Rule 5.4 provides:

A lawyer must not act or continue to act if there is a conflict or a risk of a conflict between the interests of the lawyer and the interests of a client for whom the lawyer is acting or proposing to act.

[129] Rule 5.4.3 provides:

A lawyer must not enter into any financial, business, or property transaction or relationship with a client if there is a possibility of the relationship of confidence and trust between lawyer and client being compromised.

[130] Rule 5.5 provides:

A lawyer must not engage in a business or professional activity other than the practice of law where the business or professional activity would or could reasonably be expected to compromise the discharge of the lawyer’s professional obligations.

[131] The authors of Ethics, Professional Responsibility and the Lawyer,51 make a number of comments about a lawyer endeavouring to meet his or her fiduciary duties to a client at the same time as being engaged in a business arrangement with the client:

It is very difficult (if not impossible) to act in respect of a client in two different capacities, that is, as lawyer and as business person. The lawyer will continue to be the lawyer of the client, even if they choose to enter into business arrangements with them.

A wide range of interests may give rise to a breach of the duty of loyalty. Not only must lawyers be aware that indirect interests such as shareholdings, directorships, trusteeships, the relationship of debtor or creditor, or the like might give rise to a conflict of interest between them and their client...

49 Mr KG was the sole director of LC1. Although Mrs PR’s engagement was with LC1, it is appropriate for this discussion to refer to Mr KG as the person who engaged Mrs PR.

50 At the review hearing Mr and Mrs PR advised that Mr ER had been ‘on the board’ of the company. The term ‘on the board’ means being appointed as a director of the company. There is no evidence in the Companies Office register that Mr ER was a director at any time of [Limited Company 1]. [Limited Company 1] was incorporated on 27 April 2021.

51 Ethics, Professional Responsibility and the Lawyer, above n 33, at ch 6.5.

One example (of many) is Farrington v Rowe McBride & Partners.52 The client had a sum of money to invest, which was the proceeds of a successful legal claim. The lawyers suggested investing in a certain company. Not only was the company a client of the firm (creating a potential conflict of interests between clients) but four of the firm’s partners were shareholders and two of the firm’s partners were directors of related companies.

This created a conflict between the interests of the lawyers and the client.

[132] The authors of the text also refer to a comment by the chair of the New Zealand Law Practitioners’ Disciplinary Tribunal:53

The Tribunal wishes to send a clear message regarding involvement of practitioners in commercial activity combined with their professional practice. Involvement in commercial activities can often impinge on the practitioner’s judgement and efficacy as a lawyer. Where a practitioner engages to a significant extent in commercial endeavours, particularly if those commercial endeavours are of an entrepreneurial nature, there is a real risk of the practitioner losing objectivity and judgment. There is also a very real risk of the public perceiving a conflict of interest, even if no conflict exists.

[133] Mrs PR was engaged to ‘fix the problem’54 of a lack of sales for LC1. Whilst Mr KG did not consider there was a conflict for him to act as Mrs PR’s lawyer, a risk of conflict existed from the beginning and became more apparent in July 2018 when all sales staff left giving the reason for their leaving as the way that Mrs PR was treating them.
[134] The Committee itself, recognised this risk, when it said:55

The reality, however, is that there is always a risk that something in the separate business relationship could go wrong and have an adverse effect on the lawyer – client relationship.

[135] In any contractual or employment relationship, there is always a risk that a conflict between the parties will arise. Rather than viewing the arrangement, and the difficulties which subsequently arose, as providing ‘good cause’ to terminate to retainer, Mr KG should have declined to act for Mrs PR from the outset.
[136] Mr KG has breached rr 5.4, 5.4.3 and 5.5. This constitutes unsatisfactory conduct as that term is defined in s 12(c) of the Lawyers and Conveyancers Act 2006.

Billing

[137] The firm’s terms of engagement provided that the firm generally issued invoices on a monthly basis.

52 Farrington v Rowe McBride & Partners [1985] NZCA 21; [1985] 1 NZLR 83.

53 Footnote 13, at 406.

54 Email KG to VW (21 January 2019).

55 Standards Committee decision, above n 4, at [92].

[138] The agreement between Mr KG and Mrs PR was that fees would be paid ‘at the end’. The lack of precision around the arrangement has been addressed above.56
[139] The Standards Committee proceeded on the basis that the arrangement that fees would be paid at the end meant that the default position of monthly billing was not applicable.57
[140] However, invoices could have been issued on the basis that they were not immediately payable. Alternatively, Mr KG could have advised Mrs PR on a monthly basis about the level of fees without issuing a formal invoice.
[141] There is no evidence that costs were discussed at every step of the way during the course of Mr KG’s engagement. Rule 7 of the Conduct and Client Care Rules provides:

A lawyer must promptly disclose to a client all information that the lawyer has or acquires that is relevant to the matter in respect of which the lawyer is engaged by the client.

[142] The footnote to that rule refers to an obligation to disclose a letter to the client. However, the Court did say in the quotation:

See McKaskell v Benseman [1989] NZHC 225; [1989] 3 NZLR 75 in which Jeffries J at 87 said, “The fiduciary must, in dealing with those to whom he owes such an obligation, reveal fully all circumstances that might affect their affairs, and is thus under a duty of disclosure not imposed on others.

[143] It is difficult to contemplate that it was not important for Mrs PR to know how much she was becoming indebted to [Limited Company 2] on a regular basis.
[144] Mrs PR does say that she and her husband asked on a number of occasions what level of fees had accrued. The only occasion when Mr KG responded (but seemingly in an offhand manner) was when discussing what should be included in an affidavit to be sworn by Mrs PR.
[145] The failure to keep Mrs PR advised of the level of fees being accrued constitutes a breach of r 7.

Fees

[146] At paragraph [121] of its determination, the Committee listed the various factors to be taken into account when assessing what a fair and reasonable fee would be. It referred again to the deficiencies in the terms and conditions provided to Mrs PR and the

56 At paragraphs [108]–[110].

57 Standards Committee determination, above n 4, at [97].

lack of a Letter of Engagement in which more specific information about the basis on which fees would be charged would be included. At paragraph [129], the Committee said:

Despite the casual approach to documenting the billing arrangements, the Standards Committee was satisfied that the parties had agreed to time and attendance as being the primary basis for charging. Time and attendance billing is a common practice in New Zealand law firms. However, the time and labour expended is only one of the reasonable fee factors which the Standards Committee is required to take into account when determining whether a fee is fair and reasonable. Other fee factors may be relevant, as discussed below.

[147] It then proceeded to discuss each of the relevant factors, concluding that fixing a fee on the basis of time resulted in a fair and reasonable fee.
[148] I acknowledge that billing on a time basis is commonly used by lawyers to fix a fee. However, this results in every activity undertaken by the lawyer being billed at the same hourly rate and I can not identify what the Committee has relied on to come to the view that “the parties had agreed to time and attendance as being the primary basis for charging”.
[149] The process of fixing a fair and reasonable fee requires something more than simply multiplying the time spent by the lawyer’s hourly rate.
[150] In Property and Reversionary Investment Corporation Ltd v Secretary of State for the Environment,58 the Court said:

The object of the exercise ...is an exercise in assessment, an exercise in balanced judgment – not an arithmetical calculation...

It is wrong always to start by assessing the direct and indirect expense to the solicitor, represented by the time spent on the business...

...not all time spent on a transaction necessarily lends itself to being recorded, although the fullest possible records should be kept.

[151] In a similar vein, Priestley J, in Chean & Anor v Kensington Swan,59 said:

It is very clear ...that ...the obligation, which is clear from a number of authorities, for a practitioner who is using time and attendance records to construct a bill, to take a step back and look at the fee in the round having regard to the importance of the matter to the client, in some cases the client’s means, the value to the client of the amount of work done, and proportionality between the fee and the interim, or final result of the work being carried out.

58 Property and Reversionary Investment Corporation v Secretary of State for the Environment

[1975] 2 All ER 436 at [441]–[442] – adopted in Gallagher v Dobson [1993] NZHC 1523; [1993] 3 NZLR 611.

59 Chean & Anor v Kensington Swan CIV-2006-404-001047 Jun 7, 2006, Priestley J, at [23].

[152] There is no indication that Mr KG undertook this process, particularly taking into account that he was terminating the retainer due to the fact that he had not taken the cautionary approach of declining to accept instructions from Mrs PR at the outset.
[153] Mrs PR argues that the need for Mr KG to terminate the retainer only arose because of the dispute which developed between them, and the fact that LC1 was unable to meet the liability to her and Mr ER, resulting in the suggestion by Mr KG to offset the fee against what was owed by LC1 to them.
[154] This meant that Mrs PR incurred additional fees by instructing Ms JP. Additional time was also spent by Ms JP to obtain Mr KG’s files.
[155] Rather than finding that Mr KG’s fee was not fair and reasonable, I have addressed this issue by way of compensatory orders. This reflects the comments made by Mr DW60 at paragraph [69] of his report,61 that it may be appropriate to consider the costs incurred as a result of the requirement for Mrs PR to instruct a new lawyer.

Competence

[156] Standards Committees, this Office, and the Lawyers and Conveyancers Disciplinary Tribunal, hesitate to make findings that a lawyer lacks competence when conducting litigation on behalf of a client, on the grounds that other lawyers would have adopted a different strategy. This is reflected in the comment of the Tribunal referred to in [165] of the Committee’s determination.62
[157] The Committee also referred63 to the comments made by the authors of Ethics, Professional Responsibility, and the Lawyer, that the duty of competence is aimed at ensuring minimum standards of service.
[158] Mrs PR’s complaint is more directed to the fact that Mr KG reacted to the steps being taken by Mr LF’s counsel, rather than establishing a clear strategy as to how her objectives were to be achieved.
[159] Judge UU was impliedly critical of Mr KG for continuing with the opposition by Mrs PR to Mr LF’s application to dissolve the marriage.

60 Mr DW was commissioned by the Standards Committee to undertake an assessment of Mr KG’s fee.

61 Costs assessor’s report (7 April 2021).

62 The Tribunal observed that, even though other lawyers would have adopted a different strategy from that pursued by the lawyer complained about, it does not necessarily result in a finding that the lawyer complained about lacked competence.

63 Standards Committee determination, above n 4, at [159].

[160] The reason Mrs PR had filed the Notice of Opposition to the application, was that she disagreed with the date of separation deposed to by Mr LF.
[161] That reason seems to have been ignored, when Mr KG agreed with Mr LF’s counsel that the date of separation was irrelevant for the purpose of the application, and that all that was needed for the application to succeed, was for the Judge to be satisfied that the parties had been living apart for two years.
[162] That fact was agreed by Mr KG.

[163] At [16] of the judgment,64 in deciding that an award of costs against Mr ER was justified, the Judge said:

I do, however, consider that a costs award is justified. That is because once counsel had been instructed there was an opportunity from that date for reflection on the grounds that actually were available to defend this application and for there to be some communication between counsel in order to resolve matters.

[164] Mrs PR has become aware subsequently, that all that was required, was to consent to the application but argue the date of separation.
[165] It was necessary for Mrs PR to be firmly advised, that there were no grounds to oppose the application for dissolution and Mr KG conceded this point at the hearing.
[166] Mr KG did, however, indicate to Mrs PR that the application as it stood, would not succeed.65 He also asked Mrs PR if she was “willing to pay for the enjoyment of giving Mr LF grief or whether she was better off to take no steps and let it take its natural course”.
[167] What he did not advise her, was that she could consent to the application but ask that the date of separation be amended.
[168] There can be no certainty that request would have been agreed to by the Judge, as all that was relevant for the purposes of Mr LF’s application, was that he and Mrs PR had been separated for two years.
[169] The Notice of Claim against the property, was a claim against the interest of Mr LF. Mr LF was a trustee of the trust, but not a beneficiary. An interest as a trustee is not a property right, and Mr LF did not have a beneficial interest in the property.
[170] As decided by Judge CC, there was no interest held by Mr LF that would support a Notice of Claim. Costs were ordered against Mrs PR.

64 Judgment of Judge UU (15 May 2018).

65 Email KG to PR (7 November 2017).

[171] The next action undertaken by Mr KG, was to lodge a caveat against the property, in support of the interest acquired by Mrs PR following the exercise by her of the powers provided to her as a settlor. This was a process referred to by Judge CC in his judgment. Although Mr KG says that it was he who identified the possibility of exercising those rights, it was not implemented until after the Judgment was issued.
[172] Mr LF applied to lapse the caveat, and Mr KG filed an application in the High Court for an order that the caveat not lapse. That matter was scheduled for hearing on 14 November 2018.
[173] Mr KG terminated the retainer on 24 August 2018 and the outcome of the High Court proceedings is not known.
[174] The steps taken by Mr KG achieved the immediate objective of delaying the sale of the property and it can only be a matter of speculation as to how they affected and enabled the settlement eventually achieved by Mrs PR.
[175] Taking note of the hesitancy by the Tribunal to second guess what steps could have been taken by a lawyer engaged in litigation,66 it is appropriate in this instance to confirm the Committee’s determination to take no further action on this complaint.

Smear campaign

[176] Mrs PR alleges that Mr KG played a part in the pursuit of a campaign by a former LC1 employee to discredit her. She also objects to the fact that Mr KG withdrew his consent to a company continuing to post his recommendation of her on the company’s website.
[177] There is simply no evidence that Mr KG had any connections with the actions of Mr NJ.
[178] Mr KG had every right to withdraw his consent to his recommendation being published.
[179] The Committee’s determination to take no further action on this complaint was the appropriate decision to take.

Mr VW

[180] Rule 11.5 provides:

66 Referred to at [155] above.

A lawyer practising on their own account must ensure that the lawyer’s law practice establishes and maintains appropriate procedures for handling complaints by clients with a view to ensuring that each complaint is dealt with promptly and fairly by the law practice.

[181] As required by r 3.4(d), paragraph 14 of the firm’s terms of engagement provided, in part:

You may refer your concerns to VW, or the legal staff member acting for you, or you can contact the Office Manager by letter, phone and or email (as listed on our website). In addition, the New Zealand Law Society operates the Lawyers Complaints Service. To make a complaint to that service, phone [phone] to be connected to your nearest Complaints Service Office.

[182] Mr VW was copied into the series of emails between Mrs PR, Mr KG and Ms JP.

[183] Mr VW discussed the matter with Mr KG and suggested67 that Mr KG meet with Mrs PR and Ms JP with a view to resolving Mrs PR’s concerns. He advised that if Mrs PR remained dissatisfied after the meeting, she could then make her complaint to him in writing, and he would look into the matter.
[184] The meeting took place on 19 December 2018, but Mrs PR’s complaints remained unresolved.
[185] Mrs PR followed that meeting with an email68 in which she recorded her five main concerns.
[186] Mr VW sought a response from Mr KG who provided this on 21 January 2019. Mr VW sent this to Mrs PR on 18 February with no comments.
[187] Email correspondence continued between Mrs PR and Mr VW culminating in Mr VW’s email to Mrs PR on 23 February 2019 in which he advised Mrs PR that he could see no support for her grievances.
[188] Mr VW’s duty was to establish a procedure for handling complaints.

[189] The procedure was that dissatisfied clients could contact him. Beyond that, there is no direction as to what procedures a lawyer must follow after receiving a complaint, but in fairness to the person complained about, the complaint would necessarily need to be referred to that person.
[190] Mr VW did that and having received Mr KG’s response, advised Mrs PR that he could not see any support for her complaints.

67 Email VW to JP (27 September 2018).

68 Email PR to VW (21 December 2018).

[191] Clearly, a lawyer can not be required to ensure that the complaints process established by the firm will result in a satisfactory outcome or that it is mandatory to continue to investigate the complaint.
[192] Mr VW has met his obligations as required.

Rule 11.1

[193] Rule 11.1 provides:

A lawyer practising on their own account must take all reasonable steps to ensure that—

(a) the operation of the law practice (including separate places of business) is at all times competently supervised and managed by a lawyer who is practising on their own account; and

(b) the conduct of all persons engaged or employed by the law practice is at all times competently supervised and managed by a lawyer who is practising on their own account.

[194] In the course of corresponding with Mr VW, Mrs PR referred to a lack of supervision of Mr KG on Mr VW’s part. The Standards Committee did not refer to that complaint in its determination.
[195] The degree of supervision of employees of a law firm must necessarily diminish in proportion to the level of experience of the employee. Mr KG was a lawyer of some 20 years’ experience. The authors of Ethics, Professional Responsibility and the Lawyer

69 implicitly acknowledge that there is no requirement for principals (in this case, directors) of a law firm to supervise lawyers other than those who they describe as ‘junior lawyers’.

[196] However, Mr VW was unaware of Mr KG’s suggestion that the fees for his legal work could be offset against the amount owing by LC1 to Mrs PR and her husband. The proposal was made by Mr KG without reference to Mr VW and other than monitoring every phone call, it would not have been possible for Mr VW to be aware of Mr KG’s proposal.
[197] An unusual feature of Mr KG’s employment by [Limited Company 2] is that Mr KG was paid on the basis that he retained one half of the fees generated by him. I assume that this would be one half of fees recovered.
[198] The letter of engagement provided by Mr VW after the hearing, does not add the information which had not been included in the firm’s standard terms and conditions provided to Mrs PR.

69 Ethics, Professional Responsibility and the Lawyer, above n 33, at ch 4.3.6.

[199] In my view, it can not be called a ‘letter of engagement’. It is more in the nature of a general letter which thanks the client for her instructions and includes statements about the firm’s commitment to providing a quality service.
[200] The letter is signed by Mr VW. That indicates that Mr VW was aware that Mrs PR had instructed Mr KG to act for her. The fact that Mr VW does not include any reference to the arrangement for payment of fees indicates that he was unaware of the terms that had been agreed.
[201] This lack of information about fees was a serious shortcoming leading to one of the complaints made by Mrs PR. As the director of the firm, Mr VW had a duty to ensure that all clients of the firm were properly and fully provided with the information required by rr 3.4 and 3.5.
[202] Mr VW has failed to properly supervise Mr KG in this regard. However, Mrs PR’s complaints are principally made against Mr KG, and it is he who did not keep Mr VW advised as to arrangements that he had made with, and suggested to, Mrs PR about payment of fees.
[203] In the circumstances, it is appropriate that discretion be exercised not to make a finding against Mr VW.

Was Mrs PR a client of [Limited Company 2] or Mr KG?

[204] Mrs PR says that her engagement was with [Limited Company 2], not Mr KG personally. She asks why [Limited Company 2]/Mr VW did not continue acting for her. Although this was not one of Mrs PR’s complaints to the Complaints Service, it does warrant comment, as it raises the question as to what the position of a law firm, which operates as an incorporated company, is, when a complaint is made about a lawyer within the firm.
[205] Much will depend on the facts.

[206] In QT v Righteous Law Limited,70 the client had complained about one director of the firm and the Standards Committee processed the complaint on that basis. However, there were several members of the firm who had been involved in the matter about which the client had complained. I formed the view that it was not correct that the lawyer about whom the client had complained should be the sole person to answer to the complaints.

70 QT v Righteous Law Limited LCRO 100/21.

[207] The option was to address the complaints as presented, and then rule out matters which others in the firm had attended to. This would have ruled out some of the complaints which I considered to have merit.
[208] The alternative would have been to advise the complainant that the complaint would need to be relodged as a complaint about the several members of the firm involved.
[209] Having discussed the matter with the complainant and the lawyer complained about prior to, and at, the review hearing, the determination of the Committee was amended, with the consent of the parties,71 to proceed as a complaint about the incorporated firm.
[210] In the present instance, Mrs PR made direct contact with Mr KG and asked him to act for her. [Limited Company 2] is not answerable for Mr KG’s failings as a lawyer, but Mrs PR’s submission does have some merit when she says that she contracted with [Limited Company 2] to provide the services required.
[211] That is not an issue which I need to determine finally in this decision as it would not have been appropriate for anyone else in the firm to continue to act for her. In the first instance, it would not have been in Mrs PR’s best interests to have a member of the same firm as Mr KG continue, as it would be difficult to protect the confidentiality of information which the replacement lawyer became aware of, and this could in some way have affected the issues between Mr KG and Mrs PR.
[212] It would also have been difficult for a member of the same firm to not be influenced by the fact that Mrs PR was in dispute with Mr KG about another matter.
[213] In general terms, it would not have been in Mrs PR’s interests for any other member of the firm to take over acting for her.

General

[214] I have formed the impression that Mr KG operated more in the nature of a contractor whereby he used the facilities of [Limited Company 2] but carried out work for clients independently of the firm and was remunerated accordingly. Any supervision by Mr VW was minimal, to the extent that Mr KG operated independently when it came to fees billed and collected.
[215] Even if my impression is not correct, Mr VW should have taken steps to ensure that such an impression could not be formed. This comment is intended to serve as a

71 The lawyer complained about was a director of the firm.

warning/suggestion to Mr VW to ensure a greater degree of supervision of staff than he seems to have taken with Mr KG.

Orders

[216] Having made four findings of unsatisfactory conduct against Mr KG for breaches of rr 3.4, 3.5, 5.4, 5.4.3 and 5.5, 7, and 7.1, it now remains to consider what orders should be made against each of Mr KG and Mr VW.

Mr KG

[217] As noted above, I propose to make an order that Mr KG compensate Mrs PR for the costs incurred by her following termination of the retainer. In G & P LN v Todd Whitcombe and RC,72 Mr Whitcombe and Mr RC were lawyers in the same firm, and acted for vendor and purchaser in the same transaction. When a dispute arose between the respective clients, Mr and Mrs LN were obliged to instruct a new lawyer.
[218] The firm should not have accepted instructions at the outset to act for both parties.
[219] I acknowledge that the relevant rule in those circumstances was r 6.2 which provides that lawyers in the same practice should not act for both parties to a transaction without prior informed consent.
[220] However, the underlying principles apply in this instance, namely that Mr KG should not have agreed to act for Mrs PR because of the distinct possibility that he and Mrs PR may become disaffected with each other at some stage during the contractor/employee relationship with LC1, resulting in conflict. In G & P LN v Todd Whitcombe, additional costs were incurred for initial attendances with the new lawyer, uplifting the complainant’s file, extensive review of the file by the new lawyer and subsequent attendances. In that review, I ordered that the complainants be reimbursed for the additional costs incurred.
[221] I see no reason to reach a different view in this instance.

[222] I have calculated that Ms JP’s costs to take instructions, uplift Mrs PR’s files and to review them, amount approximately to $10,000.

Accordingly, the following orders are made:

1. Pursuant to s 156(1)(d) of the Lawyers and Conveyancers Act 2006, Mr KG is ordered to pay Mrs PR the sum of $10,000. Payment is to be made within
   

72 G & P LN v Todd Whitcombe and RC LCRO 122/2020.

two working days of the date on which Mrs PR advises Mr KG of the account number into which payment is to be made.

If Mrs PR does not want to communicate this to Mr KG directly, she may forward the information to this Office.

2. One of the purposes of a penalty is to impose sanctions for breaches of the standards to be met by a lawyer.73 Section 156(1)(i) includes provision for the imposition of a fine. The maximum fine that can be imposed is

$15,000.74

Mr KG has not met the standards required of him in a number of respects.

Mr KG is clearly entrepreneurial, and has been, and is, involved in a number of business ventures. The Committee has cautioned against a lawyer mixing business relationships with lawyer-client relationships.75 This reflects the comments made in Ethics, Professional Responsibility and the Lawyer referred to above.76

Mr KG continues to practice as a principal of his own law firm.77

Mr KG remains a director and shareholder of LC1 and, given his entrepreneurial nature, is likely to be involved in further business ventures.

I consider the Committee’s caution, repeated in this decision, needs to be reinforced, and Mr KG reminded to pause and reflect in the future before entering into any other situation where the potential for conflict exists.

In the circumstances, and pursuant to s 156(1)(i), Mr KG is ordered to pay the sum of $5,000 by way of a fine to the New Zealand Law Society within one month of the date of this decision.

Costs

[223] This review has involved, as noted by the Committee, consideration of a particularly complex set of circumstances involving both Mr KG and Mr VW. It has taken considerable time and involved a hearing in person with all parties.

73 Daniels v Complaints Committee 2 of the Wellington District Law Society [2011] NZHC 1359; [2011] 3 NZLR 850.

74 Section 156(1)(i) of the Lawyers and Conveyancers Act 2006.

75 Standards Committee determination, above n [4], at [89].

76 At [131] of this decision.

77 At the review hearing, Mrs PR advised that Mr KG does not hold a current practising certificate. The New Zealand Law Society has been alerted to this.

[224] It also involves issues of some significance and uniqueness.

[225] In the circumstances, I consider Mr KG and Mr VW should contribute towards the costs of this review, rather than all costs falling on the legal profession.
[226] Pursuant to s 210 of the Lawyers and Conveyancers Act 2006 and the Guidelines issued by this Office, Mr KG is to pay the sum of $1,600 by way of costs to the New Zealand Law Society within one month of the date of this decision.
[227] Section 210(3) of the Act provides that without finding that there has been unsatisfactory conduct by a lawyer, the lawyer may nevertheless be ordered to contribute towards the costs of the review.
[228] Notwithstanding the fact that I have declined to make an adverse finding against Mr VW, Mrs PR’s complaints about Mr VW were justified.
[229] Accordingly, Mr VW is ordered to pay the sum of $800 by way of costs to the New Zealand Law Society within one month of the date of this decision.
[230] I confirm that the orders for payment of money as set out above, are enforceable in the civil jurisdiction of the District Court.

Decision

[231] Pursuant to s 211(1)(a) of the Lawyers and Conveyancers Act 2006, the determination of the Standards Committee is confirmed where indicated, but otherwise modified by this decision.

Anonymised publication

[232] Pursuant to s 206(4) of the Lawyers and Conveyancers Act, I direct that this decision be published in an anonymised format on the website of this Office.
[233] Mrs PR may provide a copy of this decision as written to Ms JP if she wishes.

DATED this 12TH day of November 2024

O Vaughan

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:

Mrs PR as the Applicant

Mr KG and Mr VW as the Respondents [Area] Standards Committee [X]

New Zealand Law Society