New Zealand Law Society

Navigation menu

Fined for debiting fees in breach of rules

06 October 2017

Note: All names used in this article are fictitious.

A lawyer who debited money for fees from his trust account eight working days before issuing an invoice has been fined $1,500 by a lawyers standards committee.

The lawyer, Mr Mountjoy, acted for a couple who bought a section. He deducted his fee of $2,200 plus GST and disbursements from funds held in his firm’s trust account on behalf of one of the clients on 22 October 2015, in advance of settlement. The invoice for the fees was not provided to the clients until 4 November 2015.

The committee says that “clearly breached” regulations 9 and 10 of the Lawyers and Conveyancers Act (Trust Account) Regulations 2008 (Trust Account Rules), and consequently rule 9.3 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008.

Regulation 9 of the Trust Account Rules requires that an invoice is issued “before or immediately after the fees are debited”.

The standards committee said it considered that the words “immediately after” should be given their natural meaning, “and that this would indicate that an invoice must be issued on the day fees are deducted or as soon as possible thereafter. A delay of eight working days could not amount to ‘immediately after’ in the standards committee’s view.”

The committee was also satisfied Mr Mountjoy breached rule 9.3 by deducting his final fee in advance of the purchase settling.

The effect of the relevant part of rule 9.3 has been described as ensuring that a client’s money is protected, by being held in a lawyer’s trust account until the services have been provided, the committee observed.

While work on the purchase was close to completion when he debited his fees, there were “significant steps” to be taken before settlement could be achieved. That included all steps required to arrange the drawdown of the necessary funds, establishing the e-dealing for the transaction with Landonline, having the authority and instructions forms for the transaction and bank documentation signed, and attending to registration of the transaction.

The lawyer submitted that the failure to provide the invoice either before or immediately after the fees were deducted, was an oversight, and not done deliberately, or with contempt for the Trust Account Rules.

While that may have been the case, the committee said, it did not consider such an oversight was acceptable.

“It is imperative that all lawyers have procedures and checks in place for ensuring such breaches do not occur.

“Further, [he] was aware at the time the fees were deducted that settlement was not set to take place for at least a week. There was nothing to indicate that [he] intended to provide the invoice for the fees in advance of settlement. To do so would be unusual in a conveyancing matter, when invoices are usually provided when the lawyer reports to the client following settlement, which is what Mr [Mountjoy] in fact did.”

The committee found Mr Mountjoy had engaged in unsatisfactory conduct. As well as the fine, he was ordered to pay $1,000 costs.

Last updated on the 6th October 2017