New Zealand Law Society - Lawyer’s breach of rule 5.11 and failure to properly advise and manage client file found to amount to unsatisfactory conduct

Lawyer’s breach of rule 5.11 and failure to properly advise and manage client file found to amount to unsatisfactory conduct

A lawyer’s conduct was found to have been unsatisfactory where he failed to advise a client to seek independent legal advice in relation to a settlement agreement concerning the lawyer in question. In addition, the lawyer’s conduct of his client’s affairs was also found, following a review by the Legal Complaints Review Officer (LCRO), to have amounted to unsatisfactory conduct. The lawyer was censured and ultimately ordered to pay a fine of $4,000.


The client (Mr NM) approached the lawyer (Mr LK) for advice in recovering a debt. Following default judgment against the debtor and a charging order being made, the debtor applied to have the charging order set aside on the grounds that service had not been effective. When that application came before the Court, no lawyer was present to represent Mr NM and the judgment and charging order were set aside. Mr NM was also ordered to pay substantial costs to the debtor.

Following the conclusion of proceedings, Mr NM owed significant outstanding legal fees. Mr LK, therefore, proposed that Mr NM enter into a settlement agreement with himself, his firm and another lawyer. The agreement proposed, amongst other things, that Mr LK (and others) would not require Mr NM to pay the outstanding fees in return for him not pursuing any complaints against Mr LK and others. Mr NM signed the agreement without taking any independent legal advice.

After signing the agreement, Mr NM obtained a copy of the Court file and became concerned about the conduct of his proceedings and the requirement to enter into the settlement agreement at all. He subsequently complained to the Lawyers Complaints Service (LCS).

The complaint raised, amongst other issues, allegations that Mr LK had failed to act competently and take reasonable care in relation to service of documents and court proceedings, had failed to advise Mr NM about seeking independent legal advice prior to signing the settlement agreement and failing to charge fair and reasonable fees for work undertaken.

Standards Committee decision

In relation to whether Mr LK had failed to act competently and take reasonable care in relation to service of documents, the Committee found that at the time of service, Mr LK was not the instructing lawyer or the lawyer responsible for service. Additionally, the Committee noted that several junior lawyers, had worked on Mr NM’s file. But whilst the Committee said that counsel should have attended the hearing on behalf of Mr NM, it was unable to conclude that Mr LK, having subsequently become the instructing solicitor, was the person responsible for the failure to attend. The Committee did not, therefore, conclude that Mr LK had failed to act in a competent and timely manner in respect of Mr NM’s case.

The Committee did, however, conclude that Mr LK had breached rule 5.11 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (RCCC) by not advising Mr NM to seek independent legal advice before signing the settlement agreement. Mr LK’s representatives argued that the circumstances were not sufficient to give rise to a conflict of interest because there was never a potential claim against Mr LK. The Committee, however, considered that the express purpose of the settlement agreement was to put an end to any potential claim, and therefore, r 5.11(a) imposed a clear obligation on Mr LK to advise Mr NM to seek independent legal advice regardless of whether he continued to act for him. The Committee considered no actual conflict need arise, but that the rule acts as a precautionary measure.

In relation to the issue of whether Mr LK had charged fair and reasonable fees, whilst the Committee considered the fees charged appeared to be greater than a fair and reasonable amount, particularly taking into account the results achieved and having to pay the debtor a further significant sum in costs, it determined that it was not Mr LK or his firm that charged those fees. Nevertheless, the Committee remained concerned about the over-charging and resolved to refer the matter to the LCS for allocation to the National Standards Committee for it to consider an own motion investigation.


The Committee determined that the lawyer’s breach of rule 5.11 of the RCCC amounted to unsatisfactory conduct. It concluded that a fine of $3,000 was appropriate in addition to a contribution towards the costs of the New Zealand Law Society | Te Kahui Ture o Aotearoa of $2,000. The Committee determined to take no further action on all other issues.

LCRO review

Mr LK subsequently applied for a review of the Committee’s decision.

Upon considering all materials afresh, the LCRO considered that it would’ve been immediately apparent to Mr LK when Mr NM raised his complaint about the manner in which his case was handled, that it might give rise to the possibility of a claim being made against him. The LCRO considered this would’ve been sufficient to trigger the obligation to advise his client of the need to seek independent advice, in accordance with r 5.11 of the RCCC, and consequently, his failure to do so constituted a clear breach. The LCRO, therefore, confirmed the Committee’s finding of unsatisfactory conduct.

The LCRO also determined to reverse the Committee’s decision to take no further action on the complaint that Mr LK had failed to act in a competent manner.

The LCRO considered that it was compellingly clear that the failure of any lawyer involved in Mr NM’s file to provide clear supervision or oversight of it was significant in contributing to the problems that beset it. The LCRO noted that within the Authority to Act and the Terms of Engagement documents provided to Mr NM, Mr LK was recorded as counsel and as having general charge of Mr NM’s file. Mr LK was also the client’s first point of contact and the person who took Mr NM’s instructions. Further, Mr LK was also recorded within the Notice of Claim filed with the Court as counsel acting for Mr NM. The LCRO considered there to be no doubt that Mr LK had responsibility for Mr NM’s file, particularly when he subsequently became the instructing solicitor (following his change of practice from barrister to barrister and solicitor). Finally, the LCRO questioned the need for Mr LK to enter into a settlement agreement which purported to offer him protection for any professional failings if he only considered his role to be peripheral, with no responsibility for oversight of Mr NM’s file.

The LCRO considered that there was a failure by Mr LK to manage his client’s file in a competent fashion. He had responsibility for overseeing the file and so, carried a degree of responsibility for the problems that arose as a consequence of so many lawyers being involved. The LCRO considered that this failure fell short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent lawyer, and merited a finding of unsatisfactory conduct, together with an order for censure.

As a result, the fine of $3,000 imposed by the Standards Committee was increased to $4,000 to reflect the additional finding of unsatisfactory conduct. The lawyer was also ordered to pay additional costs of $1,200 to the New Zealand Law Society | Te Kahui Ture o Aotearoa.