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Fined for deceiving clients and his firm

14 July 2016

The New Zealand Lawyers and Conveyancers Disciplinary Tribunal has fined a lawyer, B, $10,000 for failing to ensure that discovery obligations were fully complied with by his client.

That failure breached Rule 13.9 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008.

Rule 13.9 states that: “A lawyer who acts for a party in a proceeding must, to the best of the lawyer’s ability, ensure that discovery obligations are fully complied with by the lawyer’s client and that the rules of privilege are adhered to.”

B was a partner of his law firm and head of the litigation department. He received instructions from a Mr I to act in a claim brought before the Weathertight Homes Tribunal by a body corporate. Mr I was the elected representative of the body corporate.

The claim related to units in a development, CC. The documents that were not discovered related to a joint venture to redevelop CC between a company controlled by Mr I and the owner of seven of the CC units, and another entity.

The case of the body corporate before the Weathertight Homes Tribunal proceeded on the basis that CC was to be remediated, whereas the joint venture agreement provided for its redevelopment.

Material difference

That material difference between remediation and redevelopment might require the Weathertight Homes Tribunal to adopt a different approach to the assessment of damages.

In its decision, the Weathertight Homes Tribunal heavily criticised Mr I, particularly because of his failure to make discovery of the joint venture of which it only became aware after its determination of the claim.

In [2016] NZLCDT 6, the Tribunal found by a majority decision that B was guilty of unsatisfactory conduct.

B defended the charges, accepting that there had been no disclosure of material records relating to the joint venture. The bases of B’s defence were:

  • he had a limited role in the discovery and delegated responsibility for those tasks to other counsel in the litigation department of his firm; and
  • he had no knowledge of the joint venture, and was therefore not responsible for discoverable documents in relation to the joint venture not being disclosed.

The Tribunal noted that B did not have any reason not to discover the joint venture documents. B had been involved initially in a meeting with Mr I at which a joint venture was discussed.

He was distracted from it, however, when a member of his firm’s property team did not keep him informed of the progress and finalisation of the transaction.

“It would have been reasonable for him to expect to be advised of its completion and to be given a copy. Nevertheless he should have made his own enquiry given the importance of the documents to the claim before the WH Tribunal. It was an enquiry he could have easily carried out in that the discoverable documents were in the offices of his firm.”

Further enquiries

The Tribunal also noted that a reasonable lawyer in B’s shoes would have pursued further enquiries.

“We have found that his failure did not amount to misconduct or recklessness,” the Tribunal said. “His conduct was not negligent or incompetent to the degree required to reflect on his fitness to practise or bring his profession into disrepute. He was negligent however.”

In its penalty decision, [2016] NZLCDT 12, the Tribunal said that it accepted that “in legal practice generally, and in this client’s practice particularly, the burden of making discovery is a task that could properly be delegated”. However, it observed that “this case illustrates that delegation is always subject to the need for supervision, the competence of which is a matter of degree by context including the complexity of the subject matter; the number of records; and the knowledge of the participants in that process as to the content of those records and the issues arising in the proceedings”.

The Tribunal accepted the following mitigating factors:

  • no dishonesty or improper motive or personal gain on B’s part;
  • B was found to be honest and diligent with a properly organised office employing professional and competent staff;
  • B was entitled to delegate “discovery” responsibilities to trained and responsible staff;
  • his error was unintentional;
  • the situation in which B found himself was exceptional in that the client had lied to staff and the Weathertight Homes Tribunal despite being properly advised of his discovery obligations and despite knowing the relevance of the transaction to the proceedings before that Tribunal and of the discovery orders;
  • the complainant, Mr I, was the primary author of any misfortune he suffered;
  • B had no reason to fail to make discovery of the relevant transaction and that it was reasonable of him to expect that staff would keep him informed of the status of that transaction; and
  • B showed good intentions by instructing his staff to make enquiry of other staff and did not ignore the possibility that the transaction may have proceeded to completion.

As well as fining B, the Tribunal ordered him to pay the Law Society costs of $29,124.27 and two-thirds of the Tribunal costs of $17,535, being $11,690.

The Tribunal suppressed publication of the names of any party in the proceedings.

Last updated on the 18th July 2016