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Censure and fine for ‘serious failures’

20 June 2016

Peter Jefferies has been censured and fined $10,000 by a lawyers standards committee for “serious failures” in meeting his professional and trust account obligations.

In determining that there had been unsatisfactory conduct by Mr Jefferies, the committee found that:

  • he had accepted instructions when there was more than a negligible risk that he would be unable to discharge his obligations to all of the parties;
  • even if he did consider he was able to discharge his obligations, he failed to obtain the prior informed consent of the parties;
  • he continued to act when it became clear he was no longer able to discharge his obligations to all the parties, when he should instead have informed all his clients he could no longer act for them;
  • he provided an undertaking containing terms that were unable to be carried out, and when he found the terms could not be carried out did not communicate with clients in an attempt to resolve the matter; and
  • he breached Trust Account Regulations and the Lawyers and Conveyancers Act 2006 by failing to give a client a complete and understandable statement of all trust money handled for a client.

The committee said it considered Mr Jefferies’ conduct was at the “higher end of the spectrum of unsatisfactory conduct”.

The facts

In 2005 two married couples – Mr and Mrs A, and Mr B and Ms C – decided to purchase a section and instructed Mr Jefferies to act in relation to the purchase. Mr Jefferies had previously acted for Mr and Mrs A.

It was intended that Mr A and Mr B would work together to build a house on the section that would ultimately be sold and the profits shared.

The parties decided the title of the property would be held by Mr A and Ms C as tenants in common in equal shares. Mr Jefferies recommended and drafted a partnership agreement, but the parties later instructed him that they did not want to go ahead with the written agreement.

The purchase was completed and the building commenced.

In March 2008 Ms C and Mr B separated. In July 2008 Mr B placed a Notice of Claim over the property. In September 2008 he stopped paying towards the costs of the building and in November 2008 he stopped working there.

Mr and Mrs A completed the build in consultation with Ms C.

The property was sold. Mr and Mrs A and Ms C instructed Mr Jefferies in relation to the sale. They also instructed him that they had reached agreement in relation to how the sale proceeds should be divided.

In order to settle the sale, Mr B has to consent to the Notice of Claim being released.

Mr Jefferies provided an undertaking to Mr B’s lawyer. This provided for distribution of some sale funds and to: “hold the balance of the sale funds:

  • until the relationship property issues between [Ms C] and [Mr B] are concluded; but
  • if an agreement is not reached by [date] then the division of the balance of the sale proceeds will be submitted for determination by the President of the Waikato Bay of Plenty Law Society whose decision shall be binding.”

In the interim, Mr and Mrs A became disillusioned and wanted to change the agreement they reached with Ms C in relation to the division of sale proceeds. In particular, they sought to retain all the interest accrued on the funds held in the trust account.

Ms C stated that to complete the final division of relationship property, the Family Court required confirmation of the funds held by Mr Jefferies. Ms C’s counsel provided Mr Jefferies with a draft affidavit to swear, setting out the agreement reached with Mr and Mrs A. Mr and Mrs A instructed Mr Jefferies not to swear it and so he had not.

Despite a number of requests, Ms C did not receive any trust account statements or Resident Withholding Tax (RWT) certificates. Ms C did finally receive a statement, but Mr Jefferies still refused to provide her with copies of the RWT certificates on the basis that the trust ledger was in the name of the partnership and Mr and Mrs A had instructed him not to provide them to Ms C.

Should not have acted

“On the information provided it is questionable whether Mr Jefferies should have agreed to act for the parties in the sale of the property,” the standards committee said.

He was aware that “there was always the potential for a dispute between the parties, given the background.

“Accordingly, in the committee’s view there was at the outset more than a negligible risk that Mr Jefferies would be unable to discharge the obligations owed to all of the parties and he should not have agreed to act in the first place.”

Even if he did consider he was able to discharge his obligations to all parties, it did not appear that he complied with Rule 6.1.1 of the Rules of Conduct and Client Care by obtaining the prior informed consent of all the parties.

When it became clear that he was no longer able to discharge his obligations to all the parties “Mr Jefferies should have immediately informed the parties of this fact and terminated the retainer with all the parties.

“However, he did not do so and continued to follow Mr and Mrs [A]’s instructions for a period of time, to the detriment of Ms [C], who was also a client of his in the transaction.”

That was unsatisfactory conduct, the committee said.

Undertaking

Mr Jefferies gave an undertaking that if agreement was not reached … the division of the balance of the sale proceeds would be submitted for determination by the President of the Waikato Bay of Plenty Law Society. That was not, in fact, a procedure that was available.

“In the committee’s view, Mr Jefferies should have ensured that any undertaking given by him was capable of being complied with. In providing the undertaking that Mr Jefferies did, he placed himself in a situation where he was unable to honour it.

“It is also clear that if there is an inability to perform an undertaking because of some supervening events, the practitioner is required to immediately inform the party to whom the undertaking was given.”

It appeared that Ms C was told that the process had changed which made the undertaking unenforceable. “This is not entirely accurate as the process contained in the undertaking had never existed in the first place,” the committee said.

“When [Mr Jefferies] found out it was incapable of being performed, he should have communicated properly with [Ms C’s lawyer] and [Ms C] in an attempt to resolve the matter.

“The committee considers that the provision of an unenforceable undertaking is conduct that falls short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent lawyer and amounts to unsatisfactory conduct.”

The committee said that information about the funds held on trust should have been disclosed upon request to Ms C. “Mr Jefferies should also have been providing statements to Ms [C] at regular intervals of no more than 12 months from October 2010 to date.”

The fact that he did not do this was unsatisfactory conduct.

As well as the censure and fine, Mr Jefferies was ordered to pay $2,500 costs.

Last updated on the 20th June 2016