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Lawyer fined for 'serious' breaches

14 September 2015

A lawyers standards committee has fined a lawyer, W, $5,000 after making two findings of unsatisfactory conduct which it considered “were at the more serious end of the scale”.

The committee noted that “had it not been for [W]’s previously unblemished record [W’s] conduct may have warranted referral to the [New Zealand Lawyers and Conveyancers] Disciplinary Tribunal.”

W acted for Ms A and her former partner Mr B on a residential property sale. The property was owned by a company, C Ltd, of which Ms A and Mr B were joint directors and equal shareholders. W also acted for C Ltd.

Both the parents of Ms A and of Mr B had expressed an interest in purchasing the property. The parties agreed that in fairness to each other neither set of parents should acquire the property.

The property in question was sold and it subsequently emerged that the purchaser was acting as a “friendly buyer” on behalf of Mr B’s parents, information known to W who had not disclosed it to Ms A.

Complaints

Ms A made a number of complaints about W’s conduct, notably that W had not acted in Ms A’s best interests; that W had a conflict of interest in acting for the “friendly buyer”; that W had misled Ms A about the sale and that W had facilitated the transfer using a forged signature which W had then witnessed.

In relation to the latter matter, the standards committee noted that, if the signature was forged, there was no evidence before it that W played any part in that.

However, Ms A’s signature on the A & I form had not been witnessed when W certified the certificate and completed the transaction.

The committee concluded: “It is common ground between the parties that [W] wrongly certified and completed the e-dealing instrument when transferring title to the property on Landonline.

“The standards committee noted that it is incumbent on a lawyer in a conveyancing matter to take reasonable steps to verify the identities (preferably by using photographic ID) of the parties who have given their authority to lodge an e-dealing instrument and to ensure that their signatures are witnessed. Even where a lawyer has nominated another trusted person to undertake that function, the ultimate responsibility for properly verifying the parties’ identities lies with the practitioner.”

False certification

The committee also said that “[W]’s actions in falsely certifying the e-dealing gave the impression that [W] had taken the necessary steps to verify the both parties’ identities when this was not the case. In so doing, [W] clearly breached Rule 2.5 of the [Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (RCCC)] which prohibits a lawyer from certifying the truth of a matter except where there are reasonable grounds to believe that the matter is true after having taken appropriate steps to ensure the accuracy of a certification. The Standards Committee also noted a lawyer’s obligation under Rule 2.6 of the RCCC to immediately take steps to correct a certificate where it is discovered that a certificate provided was or has become inaccurate or incomplete.”

On the matter of the jointly owned property which Ms A and Mr B agreed should be sold as part of their separation, Ms A says that she signed an agreement to sell the property even though she thought the price was rather low, because Mr B had a lot of experience in the market and was trusted.

The price was later lowered further and Ms A found out that the property had been sold to Mr B’s parents and that W’s firm had acted for the “friendly buyer” which had nominated Mr B’s parents’ family trust as the ultimate purchaser. W had not disclosed this to Ms A. W also subsequently acted for Mr B in respect of the relationship break up.

Conflicts of interest

“The standards committee considered that, given the presence of at least two and potentially three conflicts of interest, there was no way that [W] would have been able to discharge the obligations owed to each of the various parties.”

It ruled that there was no evidence that W had informed the various parties of the conflicts, or of the need for them to seek independent legal advice in accordance with W’s obligations under Rules 6.1.1 and 6.1.2 of the RCCC.

“It seems unlikely that, had Ms [A] been fully apprised of the facts as the various dramatis personae involved in the sale, she would ever have agreed to allow [W] to continue to act after obtaining independent legal advice, as envisioned by Rule 6.1.3 of the RCCC.”

The standards committee took the view “that [W] actively assisted [Mr B] in facilitating what was a hopelessly conflicted sale and purchase process”. The committee did not accept W’s explanation that given Ms A was not W’s client in her personal capacity, W owned no duties to Ms A. Rather, “In [W’s] capacity as a solicitor, it was incumbent on [W] to reveal the full details of the transaction to Ms [A] as a joint director of [C Ltd]. Instead, [W] said nothing, failing to comply with the RCCC.”

The committee also considered it was possible that Ms A may have suffered some material loss as a result of W’s actions if, indeed, the house was sold below market valuation.

As well as imposing a fine, the committee ordered W to pay $1,500 costs.

Last updated on the 14th September 2015