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Agressive demand for payment breached rules

A lawyer, C, has been censured and fined $2,000 by a lawyers standards committee after he took what the committee described as “a very aggressive approach” to requiring payment of his fees.

C’s conduct, the committee said, was unsatisfactory, and breached rules 3.1, 10 and 11 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008.

Rule 3.1 provides that a lawyer must at all times treat a client with respect and courtesy. Rule 10 provides lawyers must promote and maintain proper standards of professionalism in their dealings. Rule 11 provides, among other things, that lawyers must administer their practices so duties to clients are adhered to and the reputation of the legal profession is preserved.

C acted for the trustees and executors of a deceased estate. The estate assets were a residential property and a motor vehicle. The vehicle was sold to pay the funeral account.

C sought payment of his account six months after being engaged. He said he withheld issuing his account allowing reasonable time for the property to be sold, but that did not eventuate.

The complainant alleged that C overcharged and also said that the fees were to include the ultimate sale of the property, while C was adamant that they were not.

The standards committee appointed a cost assessor to assess the reasonableness of the fees charged.

After discussions between the assessor and the parties, agreement was eventually reached that the fee should be reduced by about 30%. As a result of this agreement, the committee decided to take no further action on this aspect of the complaint.

The complainant alleged that C had acted in an unprofessional, threatening and intimidating manner. He had unreasonably given a deadline for payment of his account, failing which he was threatening to take legal action and to discredit the credit rating of the executors.

In response to the threat, the complainant emailed C. The email began: “I kindly and respectfully inform you that your account will be paid once the property is sold and the estate is finalised”.

C wrote back, saying “Your email of 11 March refers. Content noted. Proposal rejected.” He said that the house had not sold, and though he had held his bill back for six months, he could not be more considerate than that. C asked whether his plumber, who was doing work for him, would also be expected to wait until the house was sold before he got paid. He said that unless payment was made within a few days, that he would proceed to recover the debt through District Court proceedings. He went on to note that this would “add significantly to the cost” and would “potentially detrimentally affect your credit rating”.

The standards committee noted from the file that the mortgagee had placed the property under a mortgagee sale, but the auction was unsuccessful.

The committee then asked the parties to respond to the following questions:

  • Did the executors or C take any steps to ascertain whether the estate was solvent?
  • What, if any, advice did C give the executors about the process and options involved in administering an insolvent estate?
  • Was it clearly explained that the executors would be personally liable in the event that there were insufficient funds in the estate to pay the legal fees?

The complainant said it was anticipated that the estate, when sold, would be adequate to cover the costs. There was no discussion with C regarding the estate being insolvent. She also said the executors were never informed they would be personally liable for C’s fee until they received the account.

C said that the usual steps were taken at the outset to determine the extent and value of the property, and it was obvious there was equity. No advice was proferred about insolvent estates, as the numbers showed it was unnecessary. It was therefore not explained to the executors that they would be liable in their personal capacities, as an insolvent estate was not an expectation.

Had the executors followed his early advice about preserving the estate, C said, an insolvent estate would never have come to pass. “There would have been money to cover off all debts, the legal costs of the administration and a disbursement subsequently to the beneficiaries.”

The committee found that there was no direct evidence that C advised the complainant or her sister on their personal liability to pay his costs, the committee said.

“The committee further considers that it is clear that [C] took a very aggressive approach as to requiring payment.”

As well as the censure and fine, the committee ordered C to provide the complainants a written apology and to pay the Law Society $1,000 costs.

Last updated on the 3rd June 2015