Published on 1 November 2019
[All names used in this article are fictitious]
A lawyer who failed to act competently and who acted where there was a conflict of interest has been fined $2,500 by a lawyers standards committee.
Mrs Antrim and her granddaughter had seen the lawyer, Westmorland, about a proposed family arrangement.
This proposed that Mrs Antrim would sell her home to her granddaughter and use the funds to repay her existing lending and debts, complete some maintenance and upgrade the dwelling.
The proposal included the ability for Mrs Antrim to continue living at the property, together with her granddaughter.
Westmorland identified a potential conflict of interest between Mrs Antrim and her granddaughter and told Mrs Antrim her granddaughter would need independent advice. Ultimately, Westmorland referred the granddaughter to another practitioner within her firm and the transaction proceeded.
To record Mrs Antrim’s ability to continue living in the property, a memorandum of lease was executed, granting Mrs Antrim a lease for life. However, that lease was not registered against the title of the property.
On or around settlement date, the relationship between Mrs Antrim and her granddaughter broke down. The granddaughter began to run up debts against the property, and then stopped paying the mortgage instalments. The mortgagor bank subsequently issued proceedings for the sale of the property, with the result that Mrs Antrim would have nowhere to live.
“As borne out by what actually occurred subsequently, the committee considers that right at the outset of the retainer there was more than a negligible risk that [Westmorland] was unable to discharge the obligations owed to Mrs [Antrim],” the committee said.
“The fiduciary duties are owed to a client by the firm as a whole therefore the duty of loyalty demands that the firm (not just the lawyer) acts to promote the client’s interests, not work against them,” the committee said.
There was also no record of any advice given to Mrs Antrim relating to the potential problems that could arise. “In fact, Mrs [Antrim] claims that she was not aware of the possibility of the property being sold by her granddaughter or by the bank and that she could have to move out notwithstanding her life tenancy.
“A signed Acknowledgement of the Conflict and Waiver was not obtained but even if it had, the committee is of the view that such a waiver would not have remedied the conflict of duties to each of the clients,” the committee said.
In the circumstances, the committee determined that there had been a breach of rule 6.1 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (RCCC) and that this constituted unsatisfactory conduct on Westmorland’s part.
The committee also found that Westmorland failed to provide appropriate advice to her client concerning the proposed family arrangement, breaching rules 3 and 6 of the RCCC, which was also unsatisfactory conduct.
The committee noted that it was left with Mrs Antrim saying she was not advised of the risks of the proposed transaction and Westmorland saying Mrs Antrim was advised of the risks and elected to proceed regardless, but that advice was not recorded in writing.
“As a result, the conflicting claims are not easy for the committee to resolve.
“[Westmorland] speculates that Mrs [Antrim] would still have proceeded with the transaction even if she had been independently advised, and the full implications, alternatives and pitfalls of the proposed course of action been set out in writing to her.
“The committee respectfully cannot agree with that assertion,” the committee said.
“As the professional adviser it was incumbent on [Westmorland] to record in the clearest possible terms the pitfalls and alternative courses of action available to achieve her client’s desired outcome while at the same time protecting her client’s interests.
“If her advice was rejected it would have been usual to write to the client outlining the situation and obtaining a written acknowledgement of the explanation and the continued instructions,” the committee said.
As well as imposing the $2,500 fine, the committee ordered Westmorland to pay $1,000 costs.