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New Zealand Legal Complaints Review Officer |
Last Updated: 9 August 2024
LEGAL COMPLAINTS REVIEW OFFICER
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Ref: LCRO 80/2022
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CONCERNING
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an application for review pursuant to section 193 of the Lawyers and
Conveyancers Act 2006
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AND
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CONCERNING
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a determination of the New Zealand Society of Conveyancers Standards
Committee
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BETWEEN
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NL
Applicant
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AND
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EF
Respondent
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The names and identifying details of the parties in this decision have been changed
[1] Ms NL has applied for the review of a determination by New Zealand Society of Conveyancers Standards Committee (the Committee) in which the Committee made a finding of unsatisfactory conduct against Ms NL and imposed orders.
Background
[2] Ms NL is the principal of [Firm A].
[3] Mr EF was1 a director of [Firm B]. The other director of the company at the time the events giving rise to Mr EF ’s complaints arose, was his brother, Mr VF.
[4] [Firm B] was the sole trustee of [Trust 1] (the Trust).
[5] The Trust was the owner of 54 sections in a subdivision.
[6] Mr EF and his two brothers, Mr VF and Mr OF, had been engaged in litigation relating to the estates of their parents, which incorporated the sections owned by the Trust.
[7] In March 2016, the brothers entered into a Settlement Agreement,2 which provided, inter alia, that the sections were to be sold. Mr EF was to receive 27.5 per cent of the net surplus and Mr VF was to receive 72.5 per cent of the net surplus.
[8] [Firm B] engaged [Firm A] to act for it in relation to the sales.
[9] On 25 May 2016, [Firm A] issued its Letter of Engagement. It identified the services to be provided as being to:
- Act as my conveyancing practitioner for the transaction to sell lots [Address 1].
- Attend to the registration of documents and to complete the transaction electronically.
[10] Notwithstanding settlement of the litigation, there was continuing disagreement between Mr EF and Mr VF, resulting in tensions between them and ongoing difficulties in implementing the terms of the Agreement.
[11] Ms NL agreed to act as the Chair of meetings between Mr EF and Mr VF as directors of [Firm B]. The meetings were held at the offices of [Firm A]. Ms NL also agreed to produce the Minutes of the meetings.
[12] After a number of sales were completed, an initial distribution was made to Mr EF and Mr VF in the proportions provided in the Agreement, with the approval of both.
[13] On 26 June 2020, Mr VF attended at the offices of [Firm A] without an appointment and demanded that Ms NL make a further distribution of $2 million.
[14] A payment of $1,450,0003 was made to Mr VF on that date.
[15] On 20 August 2020, Mr EF’s share of the distribution ($550,000) was transferred to a client account ledger opened for the [Trust 2].
2 The other parties were [Firm B] and the executors of the estate of Mr XF, their father.
3 Being 72.5 per cent of $2 million.
[16] Mr EF remained unaware of the payment to Mr VF and the transfer of funds to [Trust 2] until over a year later.
[17] After becoming aware of the payment, Mr EF made a number of requests for information from Ms NL. During the course of that correspondence, Ms NL advised4 that the payment to Mr EF had not been made at the same time as the payment to Mr VF because she was not sure of the correct bank account number for Mr EF and had been unable to make contact with him (by telephone only) to verify this.
[18] Mr EF confirmed his bank account number on 27 July 2021, and the payment was made into the account on 4 August.
Mr EF’s complaints
[19] In his complaint, Mr EF raised six issues:
[20] Mr EF referred to the distribution to Mr VF on 26 June 2020, made without his knowledge or consent.
[21] Mr EF complained that he was unaware of the payment for over a year and only discovered that it had been made when he asked for information from Ms NL after Mr VF had asked him to sign an addendum to the Settlement Agreement authorising distributions to be made when each sale was settled.5
[22] He asserted that he had been ‘left ... out of pocket to the amount of $1Million over the past year’.
[23] Mr EF complained that requests for information ‘had been constantly ignored and not responded to either in full or in a timely manner’. He pointed to the fact that whilst the firm’s interest-bearing deposit (IBD) account recorded funds being put on and taken off deposit, he could not identify interest being credited to him.
4 Email NL to EF (19 July 2021).
5 One of the disputes between Mr EF and Mr VF related to the interpretation of the Settlement Agreement i.e. whether distribution would take place after each sale was settled or after all sections had been sold.
[24] Mr EF had made it clear to Ms NL that ‘NO distributions were to be made to either Director until a large accounting bill and all Legal fees were paid’.
[25] Mr EF disputes Ms NL’s assertions that she tried to make contact with him to obtain his instructions at the time that the payment was made to Mr VF.
[26] Mr EF advised that a payment of $550,113.85 had been credited to his bank account subsequently without him being advised. He said that he did not know how the amount was calculated and asserted that he was still ‘short of $450,000 that the Trust’ owed him.
[27] He complained that he had ‘no visibility at all to the financial situation of the Trust’.
[28] Mr EF said that it appeared that Ms NL was acting for Mr VF personally and asserted that ‘her actions to date which clearly favour [his] brother’s financial situation that this situation is completely unlawful’. He considered that there was a clear conflict of interest.
[29] Mr EF argued that Ms NL had no ‘authority to make decisions in regard to fund distributions, without consultation with ALL trustees and a suitably qualified professional’.6
[30] The outcome sought by Mr EF was:
- ‘A full audit of all the Trust Accounts and Ledgers held by [Firm A].’ He again asserted that he had ‘a personal shortfall of $450,000 in distributions...’
6 When Mr EF refers to ‘all trustees’ I have assumed he means both himself and Mr VF as directors of [Firm B] which was the sole trustee of [Trust 1].
The Standards Committee determination
[31] The Standards Committee identified six issues to be addressed:7
- (a) Whether requests for information from Mr EF were not dealt with in a timely manner as required by Rule 16 of the Lawyers and Conveyancers Act (Conveyancing Practitioners: Conduct and Client Care) Rules 2008 [(Conduct and Client Care Rules)].
- (b) Whether funds were distributed from the trust ledger account reference 1015-15 in the name of [Firm B] without the relevant written authority from [Firm B] and/or the two directors of [Firm B], being Mr EF and Mr VF, and not in accordance with a Settlement Agreement dated 15 March 2016 and, if so, were in breach of Regulation 12(6)(b) of the Lawyers and Conveyancers Act (Trust Account) Regulations 2008 (Trust Account Regulations).
- (c) Whether there has been a lack of regular reporting to [Firm B] or [Trust 2] for transactions completed, funds held and if the reporting statements provided were in accordance with Regulation 12(7).
- (d) Whether the work undertaken by Ms NL in respect of [Firm B] was not detailed in the Letters of Engagement issued to the relevant parties and the work was outside the scope of the “provision of legal work for conveyancing services”, and if so, in breach of Rules 16, 17,18 and 20 of the conduct rules.
- (e) Whether invoices rendered to [Firm B] on matter 1015-15 or other matters had been sent to [Firm B] prior to the funds being taken from the trust ledger in payment of the invoice in accordance with Regulation 9.
- (f) Whether a Letter of Engagement had been issued in respect of the [Trust 2] as required by Rule 18 of the [conduct rules].
[32] Mr EF complained that Ms NL did not respond to requests for information in a timely manner and provided three specific examples:8
- (1) an email request dated 17 June 2021 which took 12 days to respond to.
- (2) an email request of 1 July 2021 which took 19 days to respond to: and
- (3) an email request of the 27 July 2021 which took 20 days to respond to.
[33] Whilst taking note of Ms NL’s responses, “the Committee was satisfied that there has been a breach of Rule 16 of the [Conduct and Client Care Rules] and in
7 Standards Committee determination (19 April 2022) at [6].
particular Rule 16(3) [of the Conduct and Client Care Rules] in that Ms NL has not provided information requested in a timely manner to the client”.9
Authority to pay and transfer funds
[34] The Committee referred to reg 12(6)(b) of the Regulations which provides:
(6) A practice may make transfers or payments from a client’s trust money only if—
...
(b) the practice obtains the client’s instruction or authority for the transfer or payment, and retains that instruction or authority (if in writing) or a written record of it; ...
[35] The Committee noted that Ms NL had made the payment to Mr VF on 26 June 2020 without authority from Mr EF. It then noted the transfer of funds into a trust ledger for [Trust 2] which had not been authorised by Mr EF.
[36] The Committee disagreed with Ms NL’s submission that authority to make the payment and transfer was inherent in the Settlement Agreement, and determined that the payment and transfer had been made without authorisation from Mr EF.
[37] The Committee determined that Ms NL had breached reg 12(6)(b) and that there had been unsatisfactory conduct on the part of Ms NL.
[38] The Committee referred to reg 12(7) of the Trust Account Regulations which provides for regular reporting at no more than 12 monthly intervals.
[39] Referring to the various reporting statements provided to the Committee by Ms NL, the Committee said:10
... These were generally print outs from the trust ledger which were not easy to follow, did not always have a running balance shown and did not appear to show every detailed transaction. The committee was not satisfied that these print outs provided a complete and understandable statement of all transactions in the trust ledger 1015-15.
[40] The Committee continued:11
Ms NL did not provide any evidence that annual reporting statements had been provided to [Firm B].
10 Standards Committee determination, above n 7, at [26].
[41] The Committee determined that Ms NL was in breach of reg 12(7) and that this amounted to unsatisfactory conduct on the part of Ms NL.
[42] The Committee noted that the Letter of Engagement provided to Mr EF “appeared to be a proforma sale conveyancing engagement letter in relation to the sale of the 54 sections”.12
[43] It said:
There was no additional Letter of Engagement issued in respect of the consolidation trust ledger 1015-15 covering the additional work that was undertaken in respect of matters arising beyond the basic conveyancing transactions and including dealing with and/or making payments to third parties.
[44] Having reviewed all of the material before it, the Committee determined that Ms NL had breached rr 16, 17 and 18 of the Conduct and Client Care Rules and made a further finding of unsatisfactory conduct against Ms NL.
[45] The Committee later referred to the fact that Ms NL had not provided a Letter of Engagement to [Trust 2] when transferring funds into the ledger for the Trust.
Deduction of costs from trust funds
[46] The Committee noted the provisions of reg 9:13
- (1) No trust account may be debited with any fees of a practice unless—
- (a) a dated invoice has been issued in respect of those fees, and a copy of the invoice is available for inspection by the inspectorate; or
- (b) an authority in writing in that behalf, signed and dated by the client, specifying the sum to be so applied and the particular purpose to which it is to be applied has been obtained and is available for inspection by the inspectorate.
- (2) If fees are debited under subclause (1)(a), an invoice must be delivered or posted to the person who has a legal or beneficial interest in the trust account to be debited before or immediately after the fees are debited.
[47] It said:14
Three invoices had been debited to matter 1015-15 on 16 March 2017, 20 September 2017 and 21 September 2020. Due to the lack of reporting to the client the committee was concerned that the funds relating to these invoices may
have been transferred to the business account prior to the invoice having been sent to the client.
[48] The Committee expressed concern that “many practice management systems transfer the fees to the firm’s interest in trust (FIT) account on the posting of the invoice”15 and that “if this this was the case the invoices should have been sent to the client immediately as the invoice was posted”.
[49] It also commented that the draft invoice prepared in November 2018 had not been provided to [Firm B] in a timely fashion.
[50] The Committee determined that these failures breached reg 9 and constituted unsatisfactory conduct.
Orders
[51] Having determined that Ms NL’s conduct in respect of the six issues amounted to unsatisfactory conduct, the Committee made the following orders:16
- (a) Ms NL shall pay the sum of $5,000.00 by way of a fine pursuant to section 156(1)(I) of the [Lawyers and Conveyancers Act 2006 (the Act)].
- (b) Ms NL shall pay the sum of $2,000.00 in respect of the costs and expenses incidental to the proceedings and the investigation pursuant to section 156(1)(n) of the [Act].
- (c) Ms NL is required pursuant to sections 156(1)(h) to rectify the omissions in respect trust account management and compliance with the Lawyers and Conveyancers Act (Trust Account) Regulations 2008 by appointing at her cost a person or entity, qualified to inspect or audit trust accounts and approved by the Committee, to review all systems and trust account management process to ensure compliance with the with the Lawyers and Conveyancers Act (Trust Account) Regulations 2008 and as appropriate implement any recommendations for improvement. For this purpose and in accordance with section 156(1)(j) of the [Act] she will make her practice available for inspection at 3 monthly intervals for a period of 12 months following the initial inspection. The initial inspection is to be completed and a report provided to the Committee within 3 months of the date of this decision. Thereafter each report shall be provided to the Committee within 20 working days of each 3 monthly inspection [sic].
[52] The Committee also censured Ms NL.
Ms NL’s application for review
[53] Ms NL seeks an “objective independent review and outlook on the issues, the complaint and the Orders made”.17
17 Application for review (1 June 2022) Step 7.
[54] She alleged that the Committee had breached the rules of natural justice. This was because there was an extant complaint about a conveyancing firm “for whom Ms DP was named as undertaking illegal contracting without the right to practice on her own account”.18 Ms DP was the convener of the Committee.
[55] Following my request for comment from the Society, the President advised that Ms DP had recused herself from the investigation of the complaint referred to, and that the Committee had not made any further contact with Ms DP.
[56] Ms DP confirmed that she had not been associated with the prior complaint or the Committee’s investigation and determination, and noted that the Committee’s determination of Mr EF’s complaint had been unanimous.19
[57] At the review hearing Ms NL confirmed that she was not pursuing this issue. In addition, Ms NL accepted that the “independent and objective consideration” would be provided by myself in this review.
Mr EF’s response
[58] Mr EF responded briefly, expressing support for the Committee’s determination. He also expressed scepticism of the reasons promoted by Ms NL in support of her application.
Nature and scope of review
[59] The High Court has described a review by this Office in the following way:20
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.
[60] This review has been conducted in accordance with those comments.
[61] As the High Court has said, a review involves me coming to my own view of the substance of the Committee’s determination. Consequently, notwithstanding that it is Ms NL who has applied for this review, I must consider the complaint afresh.
19 The President advised that the determination was a majority determination.
20 Deliu v Connell [2016] NZHC 361, [2016] NZAR 475 at [2].
[62] This is inherent in Ms NL’s request to come to an independent and objective view of the complaint.
Process
[63] Unfortunately, Mr EF passed away before this review was completed. If that had not occurred, the review would have proceeded with a hearing in person with both parties. It is a cause for regret that Mr EF could not be vindicated in person for his complaints.
[64] In the circumstances, a hearing with Ms NL in person took place in Auckland on 9 July 2024.
[65] Following the hearing, I requested the case manager to make contact with [Law Firm A], the law firm administering Mr EF’s estate, to ask whether the executor of the estate (Mr TI) was aware of the complaint and this review.
[66] Ms SC21 has advised that ‘Mr TI is aware, in general terms, of the complaint ... and wishes to be kept fully appraised of developments’.22
[67] At Mr TI’s request, Mr EF’s complaint, the determination of the Standards Committee, and Ms NL’s application for review has been provided to Ms SC for Mr TI.
[68] A copy of this decision is also provided to her.
[69] I have asked Ms SC to advise Mr TI of the restriction on disseminating any of the information or material to any other person.
Review
Was Ms NL providing conveyancing services?
[70] Section 6 of the Act defines a ‘conveyancer’ as “a person, not being a lawyer or a person acting under the supervision of a lawyer, who provides conveyancing services”.
[71] The term “conveyancing services” is extensively defined in s 6.
[72] Ms NL involved herself in the affairs of [Firm B] and the Settlement Agreement between the brothers. Her invoice dated 16 March 2017 included:
Arranging and attending directors meeting 2 October 2016 with accountants, drafting minutes of meeting and emailing.
21 Ms SC is the Director of [Law Firm A]
22 Email SC to LCRO 18 July 2024
[73] Ms NL was quite clearly undertaking work beyond the definition of “conveyancing services”.
[74] Mr EF and Mr VF were in dispute as to when the distribution of funds should occur. It seems that each of them consulted their own lawyers as to how the Settlement Agreement should be interpreted. Ms NL took it upon herself to go as far as suggesting that she would commission, and act in accordance with, a barrister’s opinion. She advised that she would deduct the cost of obtaining the opinion from company funds.
[75] Ms NL was venturing into territory that she should have been extremely careful to avoid. The Letter of Engagement did not include work of this nature. Mr EF’s complaints that Ms NL had involved herself in interpreting and ‘enforcing’ the Settlement Agreement were justified. It is likely that her involvement in these matters exposed her to consequences much more serious than the complaints and disciplinary processes established by the Lawyers and Conveyancers Act.
[76] Looking objectively at the situation Ms NL found herself in, it would have been preferable for her to distance herself from the disputes between the two brothers and insist that after settlement of each sale the net proceeds be paid into a bank account for [Firm B]. She should not have involved herself with the affairs of the company or the Settlement Agreement. They were matters beyond the provision of conveyancing services.
[77] The seriousness with which the Legislature and the Lawyers and Conveyancers Disciplinary Tribunal view the protection of Trust funds bears reinforcing.
[78] Section 110(1) of the Lawyers and Conveyancers Act 2006 provides:
110 Obligation to pay money received into trust account at bank
(1) A practitioner who, in the course of his or her practice, receives money for, or on behalf of, any person—
- (a) must ensure that the money is paid promptly into a bank in New Zealand to a general or separate trust account of—
- (i) the practitioner; or
- (ii) a person who, or body that, is, in relation to the practitioner, a related person or entity; and
- (b) must hold the money, or ensure that the money is held, exclusively for that person, to be paid to that person or as that person directs.
...
[79] As recently as July this year, the New Zealand Lawyers and Conveyancers Disciplinary Tribunal has reinforced the “sacrosanct nature of client funds” in Waikato Bay of Plenty Standards Committee 2 v Robyn Annette Leach.23 The Tribunal said:
- [13] The importance of adherence to s 110 can not be overstated. It is a fundamental obligation of all lawyers to ensure the safe and proper use of client funds.
- [14] We accept Mr Collins’ submission that the relatively small amount “ought not to obscure the fact that this is a fundamental failing”. We also accept the submission that these sorts of trust accounting breaches have always been regarded as very serious by the Tribunal.
- [15] Client funds held in a trust account are separately identified and protected and may only be disbursed in particular circumstances.
[80] Ms NL needed to be extremely careful to ensure she had proper authority for dealing with the company’s funds.
Authority for payments and transfer of trust funds
[81] Mr EF and Mr VF were the directors of [Firm B].
[82] Ms NL says that Mr VF came into her office on 26 June 2020 demanding that she distribute $2 million from the funds held for the company.
[83] Rule 12(6) of the Trust Account Regulations provides:
A practice may make transfers or payments from a client’s trust money only if—
(a) the client’s ledger account has sufficient funds and they are available for that purpose; and
(b) the practice obtains the client’s instruction or authority for the transfer or payment, and retains that instruction or authority (if in writing) or a written record of it; and ...
[84] Apart from the need for caution, there were legal matters to be considered and complied with, including:
- The requirements of the Companies Act 1993.
- The need for a directors’ resolution.
- The requirements of the company’s constitution (if any).
- Was the payment a ‘distribution’ in terms of the Act?
23 Waikato Bay of Plenty Standards Committee 2 v Leach [2024] NZLCDT 19.
[85] It is clear that Ms NL was not aware of the need to have regard to these, and potentially other, requirements. The situation she found herself in, arises from the fact that she had involved herself in matters that were beyond her expertise.
[86] Without addressing the niceties of the matters to be considered, the Committee’s conclusion that the payment had been made without the full authority of [Firm B] which constitutes a breach of r 12(6) of the Trust Account Regulations, is confirmed.
[87] The subsequent transfer of Mr EF ’s funds into a ledger opened for the [Trust 2] was also done without authority.
[88] Rule 12(7) of the Trust Account Regulations provides:
Each practice must provide to each client for whom trust money is held a complete and understandable statement of all trust money handled for the client, all transactions in the client’s account, and the balance of the client’s account,—
(a) in respect of ongoing investment transactions, at intervals of not more than 12 months; and
(b) in respect of all transactions that are not completed within 12 months, at intervals of not more than 12 months; and
- (c) in respect of all other transactions, promptly after or prior to the completion of the transaction.
[89] Ms NL did not do this. Apart from her failure to do so at the time the various transactions were made, it would also appear that Ms NL did not have appropriate processes in place to identify the presence of client funds for a considerable period of time which she should have been aware of much earlier than the required reporting period.
[90] Ms NL has breached r 12(7) in a number of respects.
[91] Mr EF complained that Ms NL had not responded promptly, or at all, to requests for further accounting information.
[92] Rule 16(3) of the Conduct and Client Care Rules provides:
A conveyancing practitioner must respond to inquiries from the client in a timely manner.
[93] As noted in [32] above, Mr EF identified three specific requests for information which he considered had not been responded to in a timely manner.
[94] The facts speak for themselves – Ms NL’s responses were not provided in what can be termed ‘a timely manner’.
Rule 17 – Conduct and Client Care Rules
[95] Rule 17 provides:
All information that a conveyancing practitioner is required to provide to a client under these rules must be provided in a manner that is clear and not misleading given the identity and capabilities of the client and the nature of the information.
[96] The information Mr EF was asking for was straightforward. He needed to know how much interest [Trust 2] had accrued for the year ending 31 March 2021.
[97] Mr EF should have received statements following the sale of each section which recorded the net amount payable to [Firm B], and the balance transferred to ledger 1015- 15 to be placed on interest-bearing deposit.
[98] Each withdrawal from the IBD account should only have been made with instructions from both directors and the amount of interest earned reported to them.
[99] This should have made for a simple exercise in providing the information Mr EF was requesting.
[100] In addition to the breaches of r 16(3) identified by the Committee, Ms NL has breached r 17.
[101] I have concerns with regard to the firm’s Trust transaction reports provided to Mr EF and to the Committee. These concerns do not form part of Mr EF’s complaints and I mention them only to register the need for the Orders made by the Committee with regard to the firm’s trust account management and compliance be strictly complied with.24
[102] Not every entry in the Reports is readily identified as relating to [Firm B]. I refer for example to:
24 Standards Committee determination, above n 7, at [49](c).
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09/08/2018
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From: [Bank 1]
Correction account closed
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15/11/2018
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–
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From: [Bank 2]
Payment returned invalid account
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24/02/2021
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–
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[Trust 3]. [Trust 4], Sale of [Address 2] (1023.27)
For: Payment of Account – followed by a cancelled error for the same
amount.
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13/06/2018
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–
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To: Mr HA & Mrs WA, Sale of [Address 3] (2040.1)
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[103] A copy of this decision is to be provided to the person engaged by Ms NL to comply with paragraph [49](c) of the Committee’s determination.
[104] In his complaint, Mr EF referred to the fact that he could not identify the amount of interest earned on funds that should have been paid to him.
[105] Mr EF may have had cause for concern.
[106] The payment to Mr VF was made on 26 June 2020. The payment due to Mr EF was credited to [Trust 2] on 10 August 2020. The funds were placed on deposit on 19 October 2020 and withdrawn from deposit on 4 August 2021.
[107] In the first instance, there was a delay of approximately four months before the funds were placed on deposit. More significantly, however, the net interest credited to [Trust 2] on 4 August 2021 was $113.85. Even at 2% p.a, monthly interest on $550,000 would amount to $916.66 gross. There are questions to be asked.
[108] In addition, I note that an administration fee was charged to [Trust 2] on interest earned. There is no reference to this in the statements or invoices issued to Mr EF.
[109] These inconsistencies again reinforce the need to confirm the order imposed by the Committee.
[110] Reg 9 of the Trust Account Regulations provides:
- (1) No trust account may be debited with any fees of a practice (except commission properly chargeable on the collection of money and disbursements) unless—
- (a) a dated invoice has been issued in respect of those fees, and a copy of the invoice is available for inspection by the inspectorate; or ...
...
[111] The Committee expressed concern that “many practice management systems transfer the fees to the firm’s interest in trust (FIT) account on the posting of the invoice”.
[112] It continued:
If this was the case the invoices should have been sent directly to the client immediately as the invoice was posted.
[113] I concur with those comments, but rather than expressing ‘concern’ I consider that the invoice must be sent either before or immediately after the fees are transferred into the firm’s interest in trust ledger account.25 Having been transferred out of the client’s ledger, they then rest in the ledger for the Practice, and available to be transferred into the Practice bank account when required.
[114] The requirements before fees can be deducted from funds held for a client must be carefully and specifically followed, reflecting, again, the sacrosanct nature of funds held for a client.
[115] In Heslop v Cousins26 the Court observed:
It is clear from [s110] that a client’s direction is fundamental and must be obeyed. Regulation [9] is subordinate to that requirement and cannot override it. Thus even if an account is rendered a solicitor is not entitled to deduct his or her costs from funds held in the trust account if the deduction would be contrary to the client’s direction.
[116] This requirement is reflected in the Trust Accounting Guidelines produced by the New Zealand Law Society, which are equally applicable to Conveyancing Practitioners.27 The Guidelines say:
- 6.13 You are not permitted to deduct fees from a client’s trust money unless you have provided that client with an account for the services carried out (Regulation 9(1) and the client has authorised the deduction (Section 110).
- 6.14 You must, prior to commencing work for a client, provide that client with information in writing or in acceptable electronic form (RCCC 1.7) on the
25 Referred to by Ms NL in her letter to Complaints Service (21 February 2022) as the ‘Trust float’.
26 Heslop v Cousins [2007] NZHC 2132; [2007] 3 NZLR 679 at [196].
27 The Lawyers and Conveyancers Act (Trust Account) Regulations 2006 are promulgated pursuant to s 115 of the Lawyers and Conveyancers Act and refers to ‘practitioners’. That term is defined in s 6 of the Act as ‘a lawyer or conveyancing practitioner’, as the case may be. These are the Guidelines which existed at the time the events giving rise to Mr EF’s complaints occurred.
A revised version of the Guidelines as at June 2024 is published on the New Zealand Law Society website.
principal aspects of client services including 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 for the client (RCCC 3.4(a)).
6.15 A practice may secure an authority to take fees by deduction through their client care and service (engagement) materials. For an authority conferment clause (to take your fees by deduction) to be sustainable, for example if challenged, it should be explicit. The greater the degree of client acceptance the more reliable the authority. The recommended wording is found in the Law Society template on the website...
[117] Ms NL’s Letter of Engagement referred only to the section sales. Consequently, there was no authority to deduct fees for other attendances. In addition, there is no evidence that invoices were sent to Mr EF for each sale.
[118] Ms NL has breached reg 9(1) of the Trust Account Regulations, and s 110 of the Act.
[119] For these reasons, and in addition to those provided by the Standards Committee, Ms NL’s conduct constitutes unsatisfactory conduct as defined in s 13(c) of the Act.28
Ms NL’s personal circumstances
[120] Ms NL says that the Committee did not take sufficient notice of her personal circumstances when making the findings of unsatisfactory conduct and the Orders which followed. She advised at the time the events complained about occurred, her father-in- law was in hospital after having suffered serious fall, which left him close to death.
[121] At the review hearing, she advised that Mr VF was a somewhat intimidating person and she did not have the strength at the time29 to refuse to comply with his demands and threats to issue legal proceedings against her if she refused to do so.
[122] She does not offer this up as an excuse for her conduct, but is disappointed that the Committee did not mention her circumstances and had taken a harsh view considering what she was going through at the time.
[123] In Therese Anne Sisson v The Standards Committee (2) of the Canterbury – Westland Branch of the New Zealand Law Society Complaints Service30 the Court of
28 The Standards Committee has made findings of unsatisfactory conduct with reference to s 13(b).
29 In addition to the events occurring in her personal life, Ms NL’s husband, who works in the office, was not present to give her support.
30 Sisson v Standards Committee (2) of Canterbury-Westland Branch of New Zealand Law Society Complaints Service [2014] NZCA 424.
Appeal noted the manner in which the Tribunal31 commented on a similar submission by Ms Sisson.
[124] It said:
[12] The Tribunal accepted that the applicant’s involvement in litigation with the Department of Inland Revenue had undoubtedly impacted seriously on her both personally and professionally and in her ability to carry out her work. So too, the ill health of a family member. However, the Tribunal considered those personal circumstances could not outweigh the obligation of the Tribunal to protect the public: a practitioner must either withstand personal pressures or step aside from practice.
...
[24] ... The Tribunal had rightly observed that while personal circumstances may be taken into account, they could not predominate in the exercise of the protective jurisdiction.
[125] That sets the standards to be followed and, again, reinforces the observation that Ms NL should not have become involved with the affairs of the brothers to the extent that she did.
Outcome sought by Mr EF
Removal as “practitioner” of Mr EF’s parents’ estates
[126] None of Mr EF’s complaints relate to administration of his parents’ estates, but it would appear from Mr EF’s request that Ms NL and [Firm A] may be acting to administer their estates.
[127] Following previous discussions with Ms NL, and decisions from this Office, it is to be hoped that the Conveyancers Society has given clear advice as to whether conveyancing practitioners should be undertaking work of this nature.
[128] Even if that has not occurred, it is to be hoped that Ms NL has learned from her previous experiences.
[129] For completeness, I confirm that there is no jurisdiction to make the order requested by Mr EF.
31 The Lawyers and Conveyancers Disciplinary Tribunal.
Decision
(1) For the reasons discussed above and pursuant to s 211(1)(a) of the Lawyers and Conveyancers Act 2006 the decision of the Standards Committee is confirmed.
(2) The findings of unsatisfactory conduct for breaches of the Act, the Conduct and Client Care Rules, and the Trust Account Regulations are made as that term is defined in s 13(c) of the Act, and not s 13(b).32 The determination is accordingly modified where appropriate.
Orders
[130] The Committee ordered Ms NL to pay a fine of $5,000 and costs of $2,000. It made a detailed order that Ms NL appoint an appropriate person to conduct a review of the systems and account management of [Firm A] (the inspection orders).
[131] It also censured Ms NL.
[132] The findings against Ms NL relate to shortcomings in dealing with Trust funds. In Law Firm A v Standards Committee, the Review Officer said:33
There is ‘limited room to exercise a discretion when breaches [of the Trust Account Regulations and the Lawyers and Conveyancers Act] occur.
...
... by not adopting a reasonably stringent approach to breaches when they occur, the effectiveness of the protections which the Regulations and the Act were designed to achieve, is lessened.
[133] I have given careful thought as to whether or not a greater fine should be imposed. In this instance I have determined not to do so but Ms NL needs to be aware that any future breaches will attract more serious consequences.
[134] The orders made by the Committee are confirmed.
[135] At the review hearing, Ms NL expressed concern about the inspection order, and the costs that will be incurred.
[136] As I have referred to at times in this decision, I have concerns (as did the Committee) about Ms NL’s understanding of the Trust Account Regulations and Conduct
32 The Committee’s determination is made in terms of s 13(b) of the Lawyers and Conveyancers Act. A determination of unsatisfactory conduct for breaches of regulations and rules is made pursuant to s 13(c) and is modified accordingly.
33 Law Firm A v Standards Committee LCRO 319/2012 at [26] and [29].
and Client Care Rules. I consider the inspection order to be the most important and relevant of the Orders made by the Committee.
[137] At the Review hearing, Ms NL also indicated on a number of occasions that she was receptive to treating the Committee investigation and this Review, as a learning experience, and I urge her to do so. It may be of assistance for her to attend seminars on these subjects conducted by the New Zealand Law Society or the Law Association.
Costs
[138] As provided in the Costs Orders Guidelines issued by this Office, where a finding of unsatisfactory conduct is made or upheld against a practitioner, an order for payment of costs will usually be made.
[139] Pursuant to s 210 of the Lawyers and Conveyancers Act 2006, Ms NL is ordered to pay the sum of $1,200 to the New Zealand Society of Conveyancers within 30 days of the date of this decision.
[140] Pursuant to s 215 of the Act, the order for costs may be enforced in the civil jurisdiction of the District Court.
Publication
[141] Pursuant to s 206(4) of the Lawyers and Conveyancers Act, I direct:
- (a) That a copy of this decision be provided to the person appointed by Ms NL pursuant to paragraph [49](c) of the Committee’s determination. No further publication of this decision may be made by that person.
- (b) That a copy of this decision be provided to the Inspectorate of the New Zealand Society of Conveyancers with a view to making the Inspectorate aware of matters that may need to be addressed in the course of its duties.
- (c) This decision to be published in an anonymised format on the website of this Office.
[142] Although Mr TI is entitled, as the executor of Mr EF’s estate, to receive a copy of this decision, I make a specific order this may be done to avoid any uncertainty.
[143] I emphasise to Mr TI, that the complaint to the Society of Conveyancers, and this Review, is conducted in private pursuant to s 206 of the Lawyers and Conveyancers
Act 2006 and reg 25(5) of the Lawyers and Conveyancers Act (Conveyancing Practitioners: Complaints Service and Standards Committees) Regulations 2008.
DATED this 23RD day of July 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:
Ms NL as the Applicant
[Law Firm A] (Ms SC) for the executor of the Estate of Mr EF (Mr TI) New Zealand Society of Conveyancers Standards Committee
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URL: http://www.nzlii.org/nz/cases/NZLCRO/2024/94.html