New Zealand Law Society - Censured for incompetent advice and estate administration

Censured for incompetent advice and estate administration

Published on 4 October 2019

Former lawyer Jennifer McDonnell has been censured and fined $8,000 by a lawyers standards committee.

The committee found Ms McDonnell had provided negligent and/or incompetent advice to the beneficiaries of an estate which contributed to delay. This constituted unsatisfactory conduct.

In late 2014, Ms McDonnell took instructions to prepare wills for Mr W and his wife Mrs W. Mr W appointed three of his children, including Ms K, as executors and trustees.

Mr W died a short time later. His will provided for his estate to be distributed to his five children after payment of debts and/or expenses.

At the time of his death Mr W’s estate consisted of assets worth approximately $250,000 and household chattels. He also owned assets jointly with his wife, including a licence to occupy a property, bank accounts and a number of investments. In accordance with the principle of survivorship, any jointly owned property, would pass automatically to Mrs W.

However, although not set out in Mr W’s will, Ms McDonnell submitted Mr W had instructed her that he wanted one half of the property he and Mrs W owned jointly to pass to his children on his death. Ms McDonnell provided the executors with a schedule of assets claiming the estate was entitled to half the assets that were jointly held by Mr and Mrs W.

Dividing the assets in accordance with Ms McDonnell’s schedule increased the amount available to the estate but reduced the amount which would have belonged to Mrs W. One of the aims of the suggested division was so that Mrs W could receive a residential care subsidy.

The executors initially agreed to an equal division of the assets. However, when Ms K, who had been appointed by Mrs W as her attorney, sought to maximise Mrs W’s position, this created friction in the family. Ms K then sought independent legal advice in relation to her and Mrs W’s position.

A revised schedule of assets was then provided by Ms McDonnell. This reflected Mr W’s will and took into account that any jointly owned assets would pass to Mrs W by survivorship, with any other assets remaining part of Mr W’s estate for distribution to his beneficiaries.

“In the committee’s view, Ms McDonnell incorrectly applied the law of survivorship and the provisions of the [Property (Relationships) Act 1976], which set this matter off on the wrong track right at the outset,” the committee said.

“There is nothing to indicate that Ms McDonnell had ever advised the executors of the correct legal position or of how the estate should have been distributed in accordance with that position.

“Even if all the executors and beneficiaries had agreed that the estate was to be distributed in a different manner, that should have been dealt with by a Deed of Family Arrangement, with all relevant parties receiving independent legal advice.

“The committee considered that the inadequate advice provided at the outset has contributed to the disharmony between the executors and had been a cause of delay in the matter,” the committee said.

The committee also noted that Ms McDonnell had failed to identify a “clear conflict between her duties to Mrs [W] and her duties to the estate”. That breached rule 6.1 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008.

The committee said it considered that Ms K “would have suffered significant stress and anxiety because of the way in which Ms McDonnell handled the matter” and it ordered Ms McDonnell to pay Ms K $1,500 compensation. The committee also ordered Ms McDonnell to pay $1,200 costs.

On review, the Legal Complaints Review Officer confirmed all the orders made by the committee (in LCRO 3/2017 and LCRO 148/2017). The LCRO also ordered Ms McDonnell to pay an additional $1,200 costs.