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Fined for lack of record keeping

17 August 2015

An Auckland lawyer, B, has been fined $2,000 and ordered to pay costs of $1,000 for lack of record keeping. A lawyers standards committee made a determination that there had been unsatisfactory conduct by B, following a second hearing of the matter directed by the Legal Complaints Review Officer (LCRO).

In 2005, a client organisation, C, engaged a debt recovery company to recover money from parties who had defaulted on their obligations.

In 2008, C authorised the debt recovery company to engage solicitors where C had given authority to the debt recovery company to commence legal action. B was the solicitor engaged by the debt recovery company for this purpose.

In 2009, C terminated the arrangement with the debt recovery company. The debt recovery company then filed proceedings against C, with B acting for the debt recovery company in those proceedings.

The proceedings were settled in July 2010, but a dispute then arose over files. C requested that B provide it with complete files of all litigation commenced on C’s behalf. B maintained that he held no such files.

In April 2011, C complained to the Lawyers Complaints Service that B would not “substantially engage” with C on the matter. The standards committee decided to take no further action, and instead requested that the NZLS issue a practice note or opinion for guidance.

Reconsidered

C then took the matter to the LCRO, who directed in March 2014 that the committee should reconsider the whole matter. The LCRO considered that B owed professional duties to C, given that B was the solicitor on record for proceedings issued in C’s name. The LCRO also considered the issues involved were wider than C’s original complaint about record keeping.

An issue of jurisdiction arose. B’s conduct before 1 August 2008 was covered by the transitional provisions of the Lawyers and Conveyances Act 2006. The committee concluded that the higher threshold for examination of complaints under the Law Practitioners Act 1982 (being the governing legislation for conduct before 1 August 2008) had not been met and it therefore declined jurisdiction and took no further action on those issues.

In terms of the conduct that took place after 1 August 2008 and under a new contract between C and the debt recovery company, the committee conducted a further hearing. The issues under consideration included the range of issues raised by the LCRO.

B made written submissions, but C did not add to the submissions it had already made, because it now considered that the matters under examination were well beyond the scope of its original complaint about record keeping.

The committee considered a key preliminary issue was who B was acting for. It concluded that B was ultimately acting for C (rather than the debt recovery company), particularly as B was signing court documents as the solicitor for the plaintiff, C.

B conceded that he owed a duty to C even though he was not instructed directly by it, but he also argued that he did not owe all the normal duties because he reported to the debt recovery company rather than to its client, C.

Duties of care

The committee did not agree. It said:

“As a matter of principle, a lawyer owes the same duties of care to his client, whether or not there is a direct contractual relationship. These include, for example, obtaining informed instructions from the client and general competence. The committee did not consider that a lawyer could properly assert that a direct contractual relationship with another party (such as the client’s agent) altered those duties.”

It also found that B’s lack of record keeping fell “short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent lawyer”.

It had been B’s practice to keep full records only on the few defended matters in which he had acted, and not on non-defended hearings, on the claimed basis that full records were always available to him from the debt recovery company. “This was a particular concern for the LCRO and was the whole basis of the original complaint made by the client.”

The committee found this was unsatisfactory conduct. It agreed with the LCRO and C that “record keeping was a basic professional obligation”. The committee said that this duty is not abrogated where the client (or, as in this case, the client’s agent) said files need not be kept.

Last updated on the 17th August 2015