LJ v TW [2024] NZLCRO 73 (19 June 2024)

Last Updated: 13 July 2024

LEGAL COMPLAINTS REVIEW OFFICER

ĀPIHA AROTAKE AMUAMU Ā-TURE

	[2024] NZLCRO 073 Ref: LCRO 9/2022
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 [X]
BETWEEN	LJ Applicant
AND	TW on behalf of THE TRUSTEES OF THE PQ and RQ FAMILY TRUST Respondent

DECISION

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

been changed

Introduction

[1] Ms LJ has applied for a review of a decision by the [Area] Standards Committee [X].

Background

[2] Ms LJ is a sole practitioner.

[3] At the time Mr TW filed his complaint, he was an account director with a debt recovery firm that traded under the name and style of ABC Limited (ABC).

[4] Mr TW and Ms LJ had a longstanding professional relationship.

[5] In correspondence to the Complaints Service of 6 September 2019, Mr TW explained that he had worked with Ms LJ for approximately fifteen years.

[6] When Mr TW faced difficulties in recovering debts for his clients, he would instruct Ms LJ to file proceedings in the District Court.

[7] It appears to have been common practice that on receipt of instructions, Ms LJ would prepare the proceedings, provide a copy of those to Mr TW together with her invoice. The invoice would cover both her fee, and disbursement costs incurred.

[8] Ms LJ says that she provided ABC with letters of engagement in December 2014 and December 2016. Mr TW denies having received any letters of engagement.

[9] The terms of engagement were identical. The terms of engagement identified ABC as Ms LJ’s client, and clearly were intended to provide the foundation for an arrangement where Mr TW would, from time to time, instruct Ms LJ on various matters.

[10] A significant number of instructions were, over a period of time, provided to Ms LJ.

[11] Around 2017, the relationship between Ms LJ and Mr TW began to deteriorate.

[12] Ms LJ was concerned that ABC was not paying its accounts.

[13] After completing a reconciliation of ABC’s accounts in March 2017, Ms LJ wrote to Mr TW to advise that ABC had in excess of $50,000 in fees outstanding.

[14] Mr TW made complaint that Ms LJ had, for some time, been providing ABC with poor service. He contended that his clients were making frequent complaints about Ms LJ. It was his view that Ms LJ was repeatedly failing to carry out instructions, representing that work had been undertaken when it hadn’t, and failing to manage the ABC files competently.

[15] In June 2017, Ms LJ wrote to Mr TW to inform him that she was no longer prepared to act for ABC. She was concerned that outstanding fees had not been paid. She considered that Mr TW had, on a number of occasions, misled her.

[16] It is not within the scope of this review to address the broader issues of disagreement between Ms LJ and Mr TW. The task of this review is to focus on the circumstances relevant to the specific complaint that Mr TW brought against Ms LJ.

[17] In May 2017, the PQ and RQ Trust (the trust) instructed ABC to recover a debt. Tenants of a commercial property owned by the trust had fallen behind with their rent. The instructions to ABC were to recover the outstanding rent.

[18] On 1 December 2016, Mr TW instructed Ms LJ to issue District Court proceedings against the trust’s tenants.

[19] On 23 January 2017, Ms LJ forwarded Mr TW the proceedings that had been prepared to advance the trust’s claim in the District Court. The proceedings included:

• (a) a statement of claim; and
  
• (b) a notice of proceeding; and
  
• (c) a list of documents.
  

[20] Ms LJ included with those proceedings, her invoice for work completed.

[21] An invoice numbered 3528 was issued to “the Directors, [ABC Limited]”, in the sum of $890. The invoice included the District Court filing fee of $200. In addition to the invoice number, a reference number for the client (XXXXXX) was provided.

[22] On 3 March 2017, ABC paid Ms LJ’s invoice. In making that payment, ABC recorded that the payment had been made for invoice XXXX, and referenced the client file number.

[23] Unfortunately, Ms LJ’s office had issued a second invoice, with reference number XXXX. This invoice engaged similar work undertaken for another of ABC’s clients (the BH proceedings), and was also issued in the sum of $890. This reflecting clearly, a standard approach Ms LJ had adopted when steps were taken to issue District Court proceedings for an ABC client.

[24] Ms LJ’s office mistakenly applied the payment made by ABC on 3 March 2017 for the trust proceedings, to the BH proceedings.

[25] Ms LJ filed the BH proceedings in the District Court on 7 March 2016. The court acknowledged receipt of those proceedings on 15 March 2017.

The complaint and the Standards Committee decision

[26] Mr TW lodged a complaint with the New Zealand Law Society Complaints Service (NZLS) on 7 August 2019. The substance of his complaint was that Ms LJ had

been paid funds to commence proceedings in the District Court to recover the trust’s debt but had failed to file proceedings.

[27] Ms LJ responded to the complaint on 27 September 2019.

[28] Ms LJ submitted that:

• (a) she accepted that she had accepted instructions from Mr TW in 2017 to file proceedings for the trust; and
  
• (b) proceedings were not filed as Mr TW had failed to pay her invoice; and
  
• (c) unfortunately, two invoices had been issued numbered XXXX; and
  
• (d) one of those invoices engaged the trust proceedings, the other the BH proceedings; and
  

(e) payment received from Mr TW on 3 March 2017 had been applied to the BH proceedings; and

(f) the administrative error had been explained to Mr TW; and

• (g) Mr TW had been invited to pay the sum outstanding in respect to the second invoice; and
  
• (h) Mr TW had been invited to discuss the problem but had elected not to do so; and
  
• (i) Mr TW had been provided with lists of outstanding invoices (included amongst which was the trust invoice) but had taken no steps to settle outstanding fees; and
  
• (j) she had concerns that Mr TW was not acting ethically; and
  
• (k) she was owed in excess of $50,000 in outstanding fees from ABC; and
  
• (l) given Mr TW’s lack of response to her emails, she understood it to be the case that Mr TW had accepted that the proceedings prepared for the trust would be filed once the filing fee (and fee invoice) allocated to the BH matter, was paid; and
  

(m) a global letter of engagement was provided to ABC rather than individual letters each time a request was made to file proceedings.

[29] Mr TW provided a response to Ms LJ’s reply to his complaint on 15 October 2019. That response to a degree, traversed broader issues of disagreement between Mr TW and Ms LJ. To the extent the response directly addressed matters relating to complaint that Ms LJ had failed to file proceedings for the trust, Mr TW submitted that:

• (a) Ms LJ was working directly for ABC’s clients, not ABC; and
  
• (b) at no time had Ms LJ issued ABC with letters of engagement; and
  
• (c) the client’s name and reference number was clearly identified to Ms LJ when payment was made for the trust proceedings; and
  
• (d) request made of Ms LJ to confirm that proceedings had been filed had not been responded to; and
  
• (e) Ms LJ did not issue invoices to ABC for work carried out on behalf of ABC, Ms LJ was instructed to act for ABC’s clients.
  

[30] The Standards Committee issued the parties with a notice of hearing on 14 November 2019.

[31] The notice of hearing invited the parties to address the following issues:

• (a) did Ms LJ act competently and in a timely manner consistent with the terms of her retainer and her duty to take reasonable care, (r 3 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care)

Rules 2008 (the Rules); and

(b) did Ms LJ receive money from her client and fail to apply it as directed? (Section 110, Lawyers and Conveyancers Act 2006 (the Act)); and

(c) did Ms LJ fail to complete the regulated services required by her client under her retainer (without having grounds to do so under r 4.2 of the conduct rules and sub rules); and

(d) did Ms LJ fail to provide her client with the information required by rr 3.4 and 3.5?

[32] Ms LJ responded to the Committee’s notice of hearing on 19 December 2019.

[33] She reiterated her position that it was her belief that ABC was, at all material times, her client.

[34] She emphasised that:

• (a) instructions received (almost always by email) were directly from Mr TW; and
  
• (b) Mr TW had advised her that he had the “sole and absolute right” to collect debts lodged with his firm; and
  
• (c) it was Mr TW who provided instructions and made decisions regarding the collection of all settlement of debts, and
  
• (d) decisions made by Mr TW were made without consultation with third parties; and
  
• (e) her letter of engagement was not provided to any client/customers of ABC; and
  
• (f) it was rare for her to speak to ABC’s clients/customers; and
  
• (g) invoices were made out to ABC (never any client/customer of ABC); and
  
• (h) Mr TW operated multiple companies under the umbrella of ABC Limited; and
  
• (i) Mr TW had changed the name of ABC, to DEF Limited, prior to placing that company into liquidation; and
  
• (j) her debts did not appear on the list of creditors for DEF Limited; and
  
• (k) she had, at all times, acted competently and in a timely manner; and
  
• (l) her terms of engagement recorded that she would not file court proceedings until payments of her invoices had been made; and
  
• (m) an invoice had been tendered to Mr TW in respect of the trust matter, after work preparing proceedings had been completed; and
  
• (n) ABC’s payment on 3 March 2017, made it possible to file proceedings in the BH matter; and
  
• (o) proceedings for the trust matter were not filed as the invoice had not been paid, and further information requested of Mr TW had not been provided; and
  
• (p) invoices were addressed to ABC; and

• (q) monies received were paid towards outstanding invoices; and
  
• (r) the disbursement component for invoice XXXX was subsequently paid to the District Court as a filing fee (when the BH proceedings were filed); and
  
• (s) the $890 paid on 3 March 2017 was paid against legal fees and therefore appropriately paid into her bank account; and
  
• (t) section 110 of the Act applies to payments which are required to be held for third parties and has no application for a client’s payment of legal fees/invoices; and
  
• (u) information required by rr 3.4 and 3.5 was provided to ABC; and
  
• (v) any error in respect to the invoices had been clarified in email correspondence to Mr TW of 23 March 2017.
  

[35] The Standards Committee delivered its decision on 2 December 2021.

[36] The Committee determined that:

• (a) Ms LJ had failed to comply with her obligations under s 110(1) of the Act, both to hold the filing fee of $200 in a trust account and to pay that filing fee to the District Court to issue the trust proceedings; and
  
• (b) Ms LJ had failed to act competently and in a timely manner consistent with the terms of her retainer and a duty to take reasonable care, in breach of r 3; and
  
• (c) Ms LJ had failed to complete the regulated services required under the retainer, and had effectively terminated her retainer without good cause in breach of r 4.2; and
  
• (d) Ms LJ had failed to comply with her obligations under rr 3.4 and 3.5 of the Act in failing to provide her client with information on the principal aspects of client service.
  

[37] The Standards Committee concluded that the breaches identified above each merited an unsatisfactory conduct finding.

[38] In reaching that decision the Committee concluded that:

• (a) funds received by Ms LJ for a District Court filing fee had not, as required, been paid into an appropriate trust account; and

(b) Ms LJ had failed to take sufficient care in managing the trust proceedings, and had compounded her errors by failing to take responsibility for them; and

(c) in failing to file proceedings, Ms LJ had breached her obligations to complete the retainer; and

(d) Ms LJ had failed to provide the trustees with information she was required to provide under rr 3.4 and 3.5.

Application for review

[39] Ms LJ filed an application for review on 13 January 2022.

[40] She submits that:

• (a) the Committee’s findings of unsatisfactory conduct were not merited on the facts; and
  
• (b) the plaintiff’s agent had capacity to resolve the issues in a timely and satisfactory manner but declined to do so; and
  
• (c) the extent of ABC’s outstanding fees had not been given sufficient consideration by the Standards Committee; and
  
• (d) she had not accepted unconditional instructions from Mr TW (in respect to any of his files); and
  
• (e) she considered she had good grounds to terminate her retainer with Mr TW; and
  
• (f) terms of engagement had been provided to Mr TW regularly and as he was acting in the capacity of agent for his clients, she had complied with the requirement to provide information; and
  
• (g) Mr TW was a difficult client and she was entitled to require that certain steps be taken before action would proceed on his files.
  

[41] Mr TW was invited to comment on Ms LJ’s review application and did so on 15 February 2022.

• [42] To a degree, matters addressed by Mr TW in his response traversed broader issues of dispute between ABC than the specific issues of complaint investigated by the Standards Committee. Ms LJ’s submissions also had a broader reach.
  
• [43] To the extent that Mr TW's response focused on matters directly impacting issues addressed by the Committee’s inquiry, he submitted that that:
  
  • (a) he was concerned at continued reference to himself as a party to the proceedings, the complainants being the trustees; and
    
• (b) Ms LJ had made accusations against ABC which had not been substantiated.
  

[44] Mr TW indicated that he took exception, indeed he described himself as “astounded” that he was continuously being referenced in the documentation as a party. Mr TW emphasised, that he was “only the agent” for Mr and Mrs Q (the trustees).

[45] That is the case, but Mr TW has been the active voice in advancing the complaint.

[46] I can identify nothing on the file to give indication of Mr and Mrs Q playing any part in the advancing of the complaint against Ms LJ. The only involvement that Mr and Mrs Q have had with the complaint that I can identify, is the authorising at commencement of Mr TW to represent them in the complaint.

[47] Mr TW provided submissions to the Standards Committee and on review.

[48] The Standards Committee decision identifies the complaint as having been made and advanced by Mr TW, on behalf of the Q family trust. That accurately represents the circumstances in which this complaint has been advanced.

[49] But the issues, and the positions of the parties, are well understood.

[50] It is noted that there has been a regrettable delay in this review being determined.

[51] When I had opportunity to address this file, after reviewing the submissions filed I thought it appropriate to allow Ms LJ an opportunity to file a final submission if she wished to do so.

[52] Ms LJ instructed counsel. Her counsel, Ms YM, filed a further helpful submission. I did not require Mr TW to respond to that submission.

[53] It was clear from Ms LJ’s final submission that she had given further careful thought to the Committee’s decision. Having reflected on the matters, her position now is that:

• (a) she accepts that she had contravened the conduct rules in the way set out by the Committee; and
  
• (b) she does not step back from taking responsibility for those errors; and
  
• (c) she had acted in good faith and was conscious of her obligations to her clients, though at times confused as to how those obligations should be carried out; and
  
• (d) when failing to issue letters of engagement to each client, she had laboured under the genuine belief that it was sufficient for her to deal with ABC as agent for the clients; and
  
• (e) in hindsight she appreciates that it would have been appropriate to seek instructions from the clients directly; and
  
• (f) finding that she had failed to act competently and in a timely manner was unnecessary as the conduct engaged by that finding had been addressed by the Committee’s three other findings; and
  
• (g) if the Review Officer was to conclude that there were no grounds to disturb the Committee’s findings, consideration should nevertheless be given to reducing the level of fine imposed, as there was no evidence that Ms LJ was heedless of her obligations, rather she was mistaken as to how those obligations should be fulfilled; and
  

(h) she no longer accepts instructions in circumstances where she does not have a direct relationship with the client, she ensures that letters of engagement are provided to each client, and there is no risk of a repetition of the conduct that had precipitated the conduct complaints in this case.

Review on the papers

[54] This review has been undertaken on the papers pursuant to s 206(2) of the Act, which allows a Legal Complaints Review Officer (LCRO) to conduct the review on the basis of all information available if the LCRO considers that the review can be adequately determined in the absence of the parties.

[55] I record that having carefully read the complaint, the response to the complaint, the Committee’s decision and the submissions filed in support of and in opposition to the application for review, there are no additional issues or questions in my mind that necessitate any further submission from either party. On the basis of the information available, I have concluded that the review can be adequately determined in the absence of the parties.

Nature and scope of review

[56] 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.

[57] 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.

[58] 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
  

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

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

(b) Provide an independent opinion based on those materials.

Discussion

[59] The focus of this review has been narrowed as a consequence of the final submissions filed by Ms LJ.

[60] Ms LJ now accepts the Committee’s findings.

[61] She submits, as noted, that it would be appropriate for the LCRO to give consideration to reversing the Committee’s determination that her failure to act competently and in a timely manner merited an unsatisfactory conduct finding, as that finding was closely allied to the other conduct findings.

[62] The two conduct findings that require consideration when addressing that submission, are the finding that Ms LJ had failed to act competently and in a timely manner consistent with the terms of the retainer (r 3), and the finding that Ms LJ’s failure to file the (redacted) proceedings after having been instructed and paid to do so, amounted to a breach of r 4.2. That finding was accompanied by conclusion that Ms LJ had terminated the retainer without good cause.

[63] The r 4.2 breach was supported by a finding that Ms LJ’s conduct was “unsatisfactory conduct in terms of section 12(c) of the RCCC.”3

[64] Rule 3 provides that when providing regulated services to a client, a lawyer must always act competently and in a timely manner consistent with the terms of the retainer and the duty to take reasonable care.

[65] Rule 4.2 provides that:

A lawyer who has been retained by a client must complete the regulated services required by the client under the retainer unless—

(a) the lawyer is discharged from the engagement by the client; or

(b) the lawyer and client have agreed that the lawyer is no longer to act for the client; or

(c) the lawyer terminates the retainer for good cause and after giving reasonable notice to the client specifying the grounds for termination.

[66] It is difficult to disagree with the Committee’s conclusion that Ms LJ had failed to act competently.

3 The Committee’s decision references the Rules, however it is likely that the Committee when referencing 12(c), was intending to reference the Lawyers and Conveyancers Act 2006.

[67] Her failure to establish clear terms of engagement, to sufficiently understand the need to have confirmed instructions from parties whom she was naming as parties in proceedings filed with the Court, her mismanagement of the numbering of invoices issued and failure, when problems arose, to identify the steps that needed to be taken to remedy the mistakes made (particularly her obligation to file proceedings in a matter where she had been paid to commence those proceedings), provided sound foundation for the Committee’s conclusion that she had breached her obligation to act competently.

[68] I would not be prepared to disturb the Committee’s finding that Ms LJ had failed to act competently.

[69] However, in examining the Committee’s reasons, and the obligations imposed by rr 3 and 4.2, I am satisfied that there is a degree of overlap in the Committee’s findings, and I consider that complaint that Ms LJ had failed to complete the services required under the retainer (the breach of r 4.2), is adequately addressed in this particular case, by the Committee’s finding that Ms LJ had failed to act competently.

[70] It is clear, when examining the Committee’s decision, that Ms LJ’s failure to file proceedings (grounds which had provided foundation for the r 4.2 breach), had also been considered when the competency issue was addressed.

[71] At paragraph [41] of its decision, the Committee noted that it was satisfied that Ms LJ had failed to issue proceedings, and that this had reflected a failure on her part to act in a competent and timely manner.

[72] The Committee observed that when Ms LJ became aware of the mix-up with the invoices and the payments received, she should have corrected the problem by filing the proceedings she had been retained to commence.

[73] There is then, a degree of understandable replication in the Committee’s consideration of the two conduct rules.

[74] It has frequently been emphasised that a consideration of context is critical when considering disciplinary conduct matters.

[75] All of the conduct issues in this particular case have their genesis in a failure on Ms LJ’s part to ensure that her longstanding arrangements with Mr TW were appropriately organised such as to ensure that her clients were properly identified, that letters of engagement were provided to those clients, and that her clients were alerted to the information that a lawyer is required to provide to their clients at the commencement of a retainer.

[76] I am satisfied that the Standards Committee’s concerns that prompted its decision to impose a finding of unsatisfactory conduct on the back of conclusion that Ms LJ had breached r 4.2, are adequately addressed by its findings that Ms LJ had both failed to act competently and to ensure that her clients were provided with the information required by the Rules.

[77] I am satisfied that Ms LJ’s decision to terminate the retainer was prompted by broader issues of disagreement between her and Mr TW than simply the argument over the confusion with the filing fees. The lawyer/client relationship had broken down.

[78] The finding that Ms LJ had breached r 4.2 is reversed.

[79] Whilst Ms LJ has succeeded in having one of the four adverse findings reversed, I am not persuaded that this reversal requires a reduction in the fine imposed by the Committee.

[80] The fine imposed appropriately reflected the gravity of the conduct breaches and presents as a fair and reasonable disciplinary response to what is now three unsatisfactory conduct findings.

Costs

[81] Ms LJ has had partial success on review, but the Committee’s decision has, in significant part, been upheld.

[82] Where an adverse finding is made, costs will be awarded in accordance with the Costs Orders Guidelines of this Office. It follows that Ms LJ is ordered, pursuant to s 210(1) of the Act, to pay costs in the sum of $900 to the New Zealand Law Society, those costs to be paid within 30 days of the date of this decision.

Enforcement of costs order

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

Anonymised publication

[84] 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.

ORDERS

(a) The determination that Ms LJ’s conduct had been unsatisfactory consequential on a finding that she had breached r 4.2 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care Rules) 2008 is reversed.

(b) In all other respects, the decision of the [Area] Standards Committee [X] of 2 December 2021 is confirmed.

(c) Ms LJ is to pay costs in the sum of $900 to the New Zealand Law Society, those costs to be paid within 30 days of the date of this decision.

(Sections 210(1), 211(1)(a) Lawyers and Conveyancers Act 2006)

DATED this 19TH day of June 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:

Ms LJ as the Applicant

Mr TW obo the trustees of PQ and RQ Family Trust as the Respondent Ms YM as the Applicant’s Representative

[Area] Standards Committee [X] New Zealand Law Society