Fined for failing to provide adequate advice
All names are fictitious.
A lawyer has been fined $1,000 for failing to provide adequate advice about a loan.
A loan agreement, prepared by a law firm, recorded that Mr P would lend his brother a substantial sum of money in order to buy their late parents’ house.
Before the matter was finalised, the law firm referred Mr P to a sole practitioner, Tyneside, to provide independent advice in relation to the loan agreement. Mr P met with Tyneside and the loan agreement was subsequently signed.
Mr P then lodged a formal complaint against Tyneside, alleging that:
- Tyneside failed to advise him of the flaws in the agreement, namely that there was no provision for interest to be payable and that no timeframe for repayment was stipulated;
- the arrangement was rushed, and he was not informed of the potential consequences of trusting his brother; and
- his brother has only repaid about $13,000, which has caused him significant anxiety and financial difficulty.
When it considered the complaint, a lawyers standards committee noted at the outset that Tyneside’s dealings with Mr P were brief.
"Although Mr [P]’s general obligations were discussed, there was no evidence that Tyneside had raised the issues of interest or repayment with Mr [P]. Nor was there any evidence that Tyneside had taken sufficient steps to inquire as to Mr [P]’s personal financial circumstances or the impact that a substantial loan would have on Mr [P],” the committee said.
The committee considered that this was a failure on Tyneside’s part. “Whilst lawyers are not generally retained as financial advisers, all lawyers are required to provide fulsome advice and protect their clients’ interests. Where a significant financial transaction is involved, a lawyer’s role will necessarily require an assessment of their client’s financial circumstances and advice as to how to limit any potential adverse effects of the transaction,” the committee said.
“[Tyneside]’s failure to take these steps was exacerbated by the fact that the loan agreement was prepared at short notice.
“Mr [P] submitted that he felt under pressure by his brother to provide the loan before family members arrived for Christmas and that he felt uncomfortable doing this. In these circumstances, the committee was of the view that a prudent lawyer ought to have advised their client to wait and to consider the full ramifications of the loan agreement at a later date.”
The committee said Tyneside’s conduct in that regard fell short of the standard of competence and diligence that a member of the public was entitled to expect of a reasonably competent lawyer and was therefore unsatisfactory conduct.
As well as fining Tyneside $1,000 the committee ordered him to pay $500 costs.
Last updated on the 3rd April 2020