New Zealand Law Society

Navigation menu

Failure caused loss for client

29 March 2018

[Names used in this article are fictitious]

A lawyer’s failure to comply with the Lawyers and Conveyancers Act (Trust Account) Regulations 2008 caused direct loss to a client, a lawyers standards committee has found.

The committee ordered the lawyer to pay the client $8,500 compensation and $3,000 towards the client’s legal costs.

The lawyer, Leeford, acted for the client, Mr Wigsby, on the purchase of a property for the client and his mother.

The mother’s two cousins made separate contributions towards the purchase price.

Leeford’s firm initially advised Mr Wigsby that the funds from the cousins would need to be recorded as a gift to satisfy banking requirements. However, when the funds were paid in to the trust account, they were subsequently recorded as a loan.

A dispute arose between one of the cousins and Mr Wigsby over the amount of the contribution and whether the payment was a gift or a loan. That cousin then filed proceedings in the Disputes Tribunal against Mr Wigsby.

It was “not surprising” that confusion would arise as to whether the payment of $12,000 was a loan or a gift, the committee noted.

It was also not surprising that Mr Wigsby adopted the view that he did and relied on the advice Leeford’s firm had given him that the payment was a gift.

Leeford gave evidence at the Disputes Tribunal, and the referee noted that he “was unable to explain the inconsistency in the documents”.

The Disputes Tribunal considered that the sums were lent to Mr Wigsby, who was ultimately ordered to pay $12,000.

“All of these issues could have been avoided if the funds paid by [the cousin] had been properly and clearly recorded in [Leeford’s firm’s] trust account. They were obliged by the Trust Account Regulations to do so,” the committee said when finding unsatisfactory conduct on Leeford’s part.

The committee said it was appropriate to make an order requiring Leeford to pay $8,500 – the amount Mr Wigsby had to pay the cousin to satisfy her claim against him.

Mr Wigsby also made a claim for legal costs, and the committee said it considered a contribution of $3,000 towards Mr Wigsby’s costs of $7,404 to be appropriate.

Last updated on the 29th March 2018