Background 

Mr Z acted for Ms A following her separation from Ms B. The retainer involved a dissolution of marriage, separation agreement, sale of property and new will. Letters of engagement were not provided to Ms A. However, Mr Z had previously acted for both parties in relation to joint property transactions.  

Ms B separately held a family trust (the trust) with a company appointed as an independent trustee. Mr Z was the director and shareholder of that company. This was not disclosed to Ms A. 

Issues 

Ms A complained that Mr Z failed to advise her about Ms B’s family trust and its assets. She asserted that he failed to inform her that she could have a valuation completed on the property she purchased from Ms B. It was also alleged that Mr Z offered to prepare a will but, after some disagreement about whether it would be free of charge, did not complete those instructions.  

Risk of conflict of interest and compromising interests 

The Committee considered whether Mr Z had compromised his independence by acting in the separation matter while also being director and shareholder of a trustee of Ms B’s trust. Mr Z explained that Ms A was aware of the trust prior to her separation from Ms B and claimed that he did not know if the trust owned any assets. He could confirm that the trust owned no land. Mr Z alluded to discussions with Ms A about the trust and asserted she had no interest in making a claim. He did not submit any documentation to prove this.   

The Committee pointed to the separation agreement and the fact that the trust was listed as Ms B’s separate property. It was concerned that Mr Z did not know what assets the trust held given his position as director and shareholder of the trustee. The Committee found that Mr Z’s independence was compromised by acting on behalf of Ms A as he simultaneously owed a duty of loyalty to the trust. Advising Ms A about whether she should make a claim in relation to the trust was improper, given his position. The matter was “clearly capable of becoming contentious” as he was not independent and free from compromising loyalties.  

The Committee concluded that Mr Z acted for Ms A when there was a conflict, or risk of conflict, between his role as director and shareholder of the trustee and the interests of Ms A. This was a breach of rules 5 and 5.4 of the RCCC and amounted to unsatisfactory conduct.  

Failure to follow instructions and complete retainer 

Ms A believed that Mr Z agreed to prepare a will for her free of charge. The Committee noted that there were minimal file notes related to the will but accepted that instructions must have been received as a draft was prepared by one of Mr Z’s employees. Ms A later followed up to confirm whether the will would be prepared at no cost. Mr Z and his employee advised that the will would not be completed for free and no further work appeared to be carried out. Ms A followed up once more, and the Committee could not locate a response from Mr Z in the file. It was clear to the Committee that Mr Z had failed to act in accordance with instructions and did not complete the retainer. 

The Committee was mindful that Mr Z had delegated the preparation of the will to his employee. However, it noted that he also had a duty to ensure adequate supervision of his staff. The Committee also noted that Ms A did not continue to follow up with the firm and raised the issue after six years had passed. In the circumstances, the Committee viewed this as a “lower-level” breach of rules 3 and 4.2 of the RCCC. It exercised its discretion not to make a finding of unsatisfactory conduct as the failure was not sufficiently serious to warrant disciplinary action.

Providing adequate advice  

Ms A claimed that she knew little of Ms B’s finances and that she was not adequately advised by Mr Z on her rights to make claims in relation to Ms B’s assets. Mr Z was of the view that Ms A clearly instructed him to settle the agreement on mutual grounds, and referred to a clause setting out the separate property and assets that both parties wanted to retain.  

The Committee did not consider that Mr Z adequately explained what property was held by both parties. The final separation agreement did not have details of the assets listed, meaning he could not have properly advised on the effects of entering into the agreement. The Committee could not point to any letter of advice from Mr Z to Ms A about the separation agreement and was concerned about his ability to do this as he claimed not to know what assets the trust held. It was clear there would be limitations to his advice and that he did not have full disclosure of the assets.  

The Committee found that Mr Z did not discharge his obligation to competently advise Ms A in the separation agreement and that this was a breach of rule 3 of the RCCC. This amounted to unsatisfactory conduct.

Failure to provide terms of engagement and client care information 

Ms A did not receive terms of engagement or client care information regarding the separation matter or new will. Mr Z relied on rule 3.6 of the RCCC, explaining that Ms A was a previous client and had already been provided with terms of engagement, which remained accurate. However, he did not provide evidence of those terms of engagement to the Committee.  

The Committee was of the view that the will was clearly a new instruction, distinct from the other work Mr Z had undertaken for Ms A. It also noted that there was a lack of clarity about whether the will would come at a cost, which an engagement letter would have addressed. The Committee concluded that Mr Z could not rely on rule 3.6 in this instance, as he had not provided any proof of the earlier terms of engagement. Even if he had, this was the exact situation where a fresh letter should have been provided.  

As for the separation agreement, Mr Z provided minimal recording or billing reports. From the information before it, the Committee assumed that the matter proceeded based on a fixed fee arrangement. It was concerned that Ms A would have been unable to assess the value of the work completed without being aware of the scope of the engagement or billing arrangements and concluded that Mr Z could not rely on rule 3.6 in this instance either.  

The Committee considered that the separation matter and will were two new instructions, that both required their own letter of engagement. In failing to provide these, Mr Z was in breach of rules 3.4 and 3.5 of the RCCC and engaged in unsatisfactory conduct.

Penalty 

The Committee determined that Mr Z’s conduct was on the “upper moderate level” of seriousness and considered a censure and fine of $5,000 were appropriate. Mr Z was also ordered to pay costs.  

The Committee considered that anonymous publication of this decision would serve as a reminder for lawyers to be free of compromising influences and loyalties when providing legal services to clients. The decision is also a reminder of the importance of issuing a new letter of engagement for each set of instructions, covering the scope of the retainer and the basis on which fees will be charged.  

The Committee noted that Mr Z provided his full files, which contained a lack of documentation. It considered his limited record-keeping hampered his ability to defend some of the allegations. Had he maintained more complete files, the outcomes of the complaint may have been different. The decision reinforces the importance of proper record-keeping.