New Zealand Law Society - Lawyer should have sought confirmation

Lawyer should have sought confirmation

Published on 6 March 2020

[All names used in this article are fictitious.]

A lawyers standards committee has found the conduct of a lawyer acting for joint owners on the sale of a property was unsatisfactory.

The firm of the lawyer, Radnorshire, acted for both Mr K and Mr J on the sale of their jointly owned property.

Mr K left New Zealand after separating from his then partner, Mr J. Before leaving the country, Mr K appointed Mr J his attorney in relation to property matters.

Nearly 11 years later, Mr J contacted Mr K to advise he was terminally ill. A few months later, Mr J decided to sell their jointly owned property.

An authority to transfer funds specified that the proceeds of the sale were to be transferred solely to an account nominated by Mr J. That authority was signed by Mr J for himself and on behalf of Mr K, by Mr J as Mr K’s attorney.

A lawyer working under Radnorshire’s supervision, Ms C, was handling the matter, and expressed her concern in relation to the power of attorney.

Radnorshire contacted a New Zealand Law Society inspector, who advised that Mr K’s half share of the sale proceeds should be held in trust by Radnorshire’s firm until proof was received that the firm was authorised to transfer funds to Mr J’s bank account.

Following that, Mr K emailed Radnorshire confirming the power of attorney. The email also said that if anything more was required not to hesitate in contacting him. Neither Ms C nor Radnorshire had taken steps to contact Mr K; the email received must have therefore been prompted by Mr J.

Radnorshire forwarded Mr K’s email to Ms C. When she asked if Radnorshire was “happy we can rely on this email for settlement,” Radnorshire responded “all systems go”.

Authorisation should have been sought direct

The standards committee said it considered that authorisation to transfer all the proceeds of the sale solely to an account nominated by Mr J, “should have been sought from Mr [K] direct. Otherwise the concerns leading to [Radnorshire] taking advice from [the inspector] have not been fully addressed.”

The committee also noted that when Ms C met with Mr J, he appeared to react badly to the prospect of her contacting Mr K to confirm his instructions.

That, the committee said, “should have rung alarm bells, which should have resulted in [Radnorshire] insisting [his firm] received direct confirmation from Mr [K] as to the disbursement of the sale proceeds.

“Mr [K] was clearly contactable via email, and it would not have taken a lot of effort to confirm instructions to disburse all net sale proceeds to his attorney, a situation which is out of the ordinary.”

Mr K had, in fact, invited further contact if anything further was required of him, the committee noted.

The committee found that Radnorshire did not competently manage and supervise Ms C, in relation to the file, in breach of Rule 11.3 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (RCCC), and that was unsatisfactory conduct.

In addition, the committee found that Radnorshire had a duty to both clients and while he took some steps to address concerns around the use of the power of attorney, he did not go far enough to ensure those concerns were addressed or to ensure Mr K was kept informed, in breach of Rule 7.1 of the RCCC.

The instruction from Mr J to pay the full net sale proceeds to him created a potential conflict of interest, as the interests of the two vendors diverged at that point.

“This potential conflict could have been resolved by confirming instructions as to disbursement of funds direct with Mr [K],” the committee said.

The committee reprimanded Radnorshire, fined him $2,000, and ordered him to pay $1,000 costs to the NZLS.

On review, the Legal Complaints Review Officer (LCRO) confirmed the committee’s decision and also modified it to record an additional finding of a breach of Rule 6.1 of the RCCC, such as to constitute unsatisfactory conduct.

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