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Client charged a non-existent tax

09 November 2018

The name used in this article is fictitious

A lawyer who charged clients a “Land Transfer Tax” as a disbursement when no such tax exists had engaged in unsatisfactory conduct, a lawyers standards committee has found.

The lawyer, Darnay, noted a $100 disbursement for either a “Land Transfer Tax”, “Land Transfer Tax Statement” or “Land Transfer Tax Statement for LINZ” for about 22 months, during which time some 240 invoices had been issued.

The committee ordered Darnay to reduce his fee by $100 (including GST) for any clients he had charged for a “Land Transfer Tax”, “Land Transfer Tax Statement” or “Land Transfer Tax Statement for LINZ”.

Darnay accepted that there had not been any payment to a third party for a land transfer tax or completion of a land transfer tax statement, and that he had been wrong to record them as such on his invoices, the committee noted.

Darnay claimed the charge had been introduced to recover the extra time spent on the establishment of identity steps required by the introduction of anti-money laundering legislation.

However, by charging a $100 “Land Transfer Tax” when no such tax existed, Darnay breached rule 11.1 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (RCCC). Rule 11.1 states: “A lawyer must not engage in conduct that is misleading or deceptive or likely to mislead or deceive anyone on any aspect of the lawyer’s practice."

The committee also found unsatisfactory conduct by Darnay for:

  • failing to adequately disclose to clients in his letter of engagement that he would charge extra fees to cover additional overhead costs; and
  • failing to adequately disclose to clients in his letter of engagement that he would charge them separately for recovery of office expenses such as forms, postage and communication.

The committee found that those failures breached RCCC rule 3.4(a). Rule 3.4(a) states “A lawyer must, in advance, provide a client with information in writing on the principal aspects of client care service including the following: (a) the basis on which the fees will be charged …”

The committee also found unsatisfactory conduct by Darnay in that he failed to provide adequate GST invoices to his clients.

Darnay’s invoices failed to identify whether there was a GST component in the office expenses and did not include a narration that the charges were GST inclusive unless otherwise specified.

The committee conducted an own motion investigation after receiving a report from a Law Society inspector who had reviewed the trust account of the firm where Darnay was the trust account supervisor.

As well as the order to reduce his fee, the committee ordered Darnay to pay $500 costs.

Last updated on the 9th November 2018