Published on 6 March 2020
[All names used in this article are fictitious.]
A lawyers standards committee has found unsatisfactory conduct on the part of a lawyer who received a $3,000 cash payment from a client without placing the funds in trust.
The lawyer, Rutland, who had failed to raise an invoice or issue a receipt, was fined $2,000 by the committee.
Rutland acted for his client, Mr A, in protracted relationship property negotiations. Mr A and his former wife had previously entered into a contracting-out agreement that had identified a number of separate residential properties that Mr A had acquired before the marriage as his separate property.
However, during the marriage, Mr A sold those properties and, together with his wife, purchased a property which then served as the family home.
After the relationship broke down, Mr A instructed Rutland to pursue an unequal division of the relationship property relating to the family home, while Mr A’s former wife claimed a half interest. However, Rutland advised Mr A that the use of the proceeds from the sale of the properties described in the contracting-out agreement to purchase a new family home during the marriage might mean that his wife had a case for a 50/50 division.
After settlement was reached some two-and-a-half years later, Mr A lodged a complaint with the Lawyers Complaints Service alleging that Rutland had acted incompetently, adopted an inappropriate strategy, involved Mr A in unnecessary delays, had overcharged, and had requested and accepted a cash payment of $3,000 but failed to raise an invoice or issue a receipt.
While the committee accepted that Mr A was entitled to maintain the position he did, and that he genuinely believed his former wife was making an unfair claim, it did not follow that Rutland had acted incompetently or that the strategy adopted by Rutland was inappropriate. Neither did the committee consider that Rutland had caused unnecessary delays with the matter, or that Rutland’s fees were unfair and unreasonable. While Mr A may have been dissatisfied with the ultimate outcome, the committee considered that Rutland had at all times acted in accordance with instructions received.
With regards to the cash payment of $3,000, Mr A told the committee that this was made at Rutland’s request and that no invoice for that payment was raised. However, Rutland said that it had become clear that Mr A had limited funds available and that he agreed, at Mr A’s request, to offer a discount of $3,500 plus GST in consideration of a cash payment of $3,000.
The committee noted the while there was some factual dispute between the parties, it was common ground that Rutland had accepted a cash payment of $3,000 from Mr A.
It therefore fell to the committee to consider whether this transaction amounted to a breach by Rutland of his professional obligations under the Lawyers and Conveyancers Act (Lawyers: Trust Account) Regulations 2008 (TAR), which it considered “an integral part of the focus of the Act on consumer protection.”
Rutland said that while the transaction may technically have been a breach of the TAR, the monies were not paid for services into the trust account. He accepted that he had – “perhaps foolishly” and in trying to be helpful to his client – put himself in a very difficult situation.
It was the committee’s view that the transaction, which Rutland had admitted to and described as a “cashie”, was plainly incompatible with regulations 9 and 10 of the TAR.
”By failing to hold the $3,000 on trust, and instead accepting those funds in reduction of legal costs apparently incurred but in respect of which an invoice had not been raised and duly provided to the client, [Rutland] had failed to comply with both regulations 9 and 10 of the TAR,” the committee said.
As well as the $2,000 fine, the committee ordered Rutland to pay $500 costs.