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Fined on four unsatisfactory conduct counts

12 September 2016

A legal executive who gave inadequate advice and also acted in a “hopelessly conflicted situation” has been censured and fined $2,000 by a lawyers standards committee.

The legal executive, B, acted for a Mr C’s estate and on matters relating to Mr C’s family trust. In his will, Mr C appointed his wife, Mrs C and his daughter from an earlier relationship, Ms C, as his trustees and executors.

At the time Mr C died, Mrs C was living with him and their infant daughter at their marital home.

Mrs C complained about the following alleged conduct of B:

  • that following Mr C’s death, B provided her with inadequate advice regarding her right under s 61 of the Property (Relationships) Act 1976 (PRA) to either elect to make an application for a division of relationship property (option A) or choose to accept Mr C’s will as it stood (option B);
  • that having provided Mrs C with what she considered to be inadequate advice regarding her options under s 61 of the PRA, B then failed to offer her an opportunity to seek independent legal advice on the issue, instead inviting her to sign a document by which she agreed not to contest the will – thus unwittingly choosing option B without the benefit of independent legal advice;
  • that B may have had conflicting duties in advising Mrs C in her personal capacity (regarding her options under s 61 of the PRA) while at the same time advising both her and Ms C (in their joint capacity as Mr C’s executors) on the administration of Mr C’s estate; and
  • that B had, by his actions, effectively deprived Mrs C of potential remedies under the Family Protection Act 1955 (FPA) and the PRA.

The committee found that B had provided Mrs C inadequate advice regarding her right under s 61 of the PRA to elect either option A or option B. The committee determined that was unsatisfactory conduct on B’s part.

The committee found that B had failed to provide Mrs C with an opportunity to seek independent legal advice on the issue, and determined that was unsatisfactory conduct on B’s part.

The committee found that B had conflicting duties, in that he had been advising Mrs C in her personal capacity while at the same time advising both Mrs C and Ms C in their joint capacity as Mr C’s executors, and determined that was unsatisfactory conduct on B’s part.

The committee said it wished to emphasise that, even if the written consents of the various clients had been obtained, “this would not have been enough to remedy what was a hopelessly conflicted situation”.

Both B and the firm that employed him were conflicted “in a manner and to an extent that it was impossible to remedy,” the committee said, determining that there had been unsatisfactory conduct on B’s part.

The committee determined that B’s actions in effectively depriving Mrs C of remedies under the FPA and the PRA has been unsatisfactory conduct.

Sharp difference

At the heart of the complaint was a factual dispute about what took place during a meeting at the offices of the firm that employed B, attended by B, Mrs C and Ms C, the committee said. The accounts of the two parties “differed sharply” as far as what advice was provided regarding the election to be made under s 61 of the PRA.

Mrs C, on the one hand, claimed no mention was made of option A and option B. Before engaging B’s firm, she was totally unaware that she had the right to apply for a division of relationship property on her husband’s death and was simply asked to sign a piece of paper indicating she would not contest Mr C’s will.

B, on the other hand, contended that Mrs C was made aware of her right to make an election and that a partner of his firm also explained option A and option B to her. B said that Mrs C willingly elected to proceed with option B and that she was happy to accept the provision made for her under Mr C’s will.

The committee said B had an “active duty” to ensure Mrs C made an informed decision and that “any practitioner advising a client who is required to make a significant decision, such as the election under s 61 of the PRA, should provide comprehensive written advice”.

Rather, the decision “appears to have been made ‘on the hoof’ in the course of a meeting that lasted little more than an hour and in circumstances where [Mrs C] did not have the benefit of comprehensive, independent legal advice regarding her election”.

On the question of failing to give Mrs C an opportunity to seek independent legal advice, the committee said that B “ought never to have even attempted to advise [Mrs C] in her personal capacity as surviving spouse in the first instance.

Referral necessary

“Rather, [Mrs C] ought to have been immediately referred to an independent lawyer with adequate experience in the area of relationship property so that she could take comprehensive advice under s 61 of the PRA and make a properly informed decision.”

In terms of B having conflicting duties, the committee said it was of the view that B and his firm “were acting in respect of matters which were the very definition of contentious”.

The firm should have refused to advise Mrs C on election under the PRA and to advise Mrs C or Ms C on possible claims under the FPA.

The committee said it accepted Mrs C’s contention that she was deprived of her right to make an application for a division of relationship property, and acknowledged that Mrs C’s potential losses were impossible to quantify.

As well as four findings of unsatisfactory conduct, the committee ordered B to pay a $500 fine on each finding (a total of $2,000) and $1,000 costs.

The committee agreed that “unsatisfactory conduct of this nature should be denounced and accordingly decided to censure” B. It also ordered B to pay Mrs C $5,000 reparation for her emotional suffering and a $3,000 contribution towards her legal costs.

Last updated on the 12th September 2016