Conduct unbecoming. Registration of security interest
This is a summary of a decision made by a Lawyers Standards Committee under the Lawyers and Conveyancers Act 2006. This summary was published in LawTalk 747.
Attempting to recover fees, a lawyer registered a security interest over the client’s vehicles, even though the terms of engagement allowed him only to register a mortgage over her real estate. A Standards Committee found the lawyer guilty of conduct unbecoming; he was fined and ordered to pay costs.
The lawyer had acted for the clients, a married couple, since 2002. In 2008-09, the husband had serious financial difficulties and incurred around $12,000 in legal fees defending a civil claim and going through bankruptcy proceedings. After being bankrupted in May 2009, the husband left for Australia.
The lawyer turned to the wife for the outstanding fees, relying on a “Terms and Conditions of Engagement” document she had signed in 2002. In July 2009, the lawyer registered security interests (“financing statements”) over two Mercedes cars owned by the wife, and two days later he demanded that she deliver one of the cars to him. The wife then complained to the New Zealand Law Society.
The Standards Committee decided that the issue of whether the complainant was liable for her husband’s legal costs might best be resolved in another forum. The Standards Committee therefore decided to take no further action on this issue.
However, the Standards Committee did consider whether the lawyer had acted improperly in the way he went about trying to recover his fees. In registering an interest over the complainant’s cars, the lawyer had relied on an “Agreement to Mortgage” clause in the terms of engagement document. This allowed him to secure a mortgage “over any of the client’s estate and interest in real estate” – the clause contained no reference to a chattel mortgage.
The Standards Committee said: “No reasonable practitioner could have concluded that the registration of the financing statement over the vehicles was justified by these provisions.” The Standards Committee found the lawyer guilty of unsatisfactory conduct in the form of conduct unbecoming.
The Standards Committee ordered the lawyer to cancel the financing statements, and fined him $1,000. It also ordered him to pay $1,000 in costs and expenses to the Law Society.