New Zealand Law Society - Lawyers Complaints Service: Failure to obtain assignments of earthquake claims was negligent

Lawyers Complaints Service: Failure to obtain assignments of earthquake claims was negligent

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A lawyer, A, acting for purchasers of a property in Canterbury failed to obtain an assignment of insurance and EQC claims from the vendors. A standards committee held this to be negligent practice for property transactions in the region, following the recent earthquakes.

The standards committee also determined that A should be fined. The committee said there were too many factual uncertainties to award compensation, which the complainants had sought.

An explicit term in the sale and purchase agreement was that the vendors, upon request, provide an assignment to the purchasers of any insurance and EQC claims (or the proceeds of any such claims). The appropriate assignments were not obtained before settlement.

Such assignment clauses would be unusual in any other region, but in Canterbury since the earthquakes, such clauses had become common practice. The standards committee took account of this in its finding.

A and his firm acknowledged that it was an omission that they failed to secure the assignment before settlement. However, A said that he had not personally been responsible for the day-to-day management of the file. The standards committee noted that he was the partner responsible. As a result, the committee determined that A was accountable for the professional lapses.

The committee determined that, in terms of the Conduct and Client Care Rules, A’s conduct fell short of the required standard, and was negligent. The committee found that this was unsatisfactory conduct in terms of the Lawyers and Conveyancers Act 2006.

Extensive submissions were made by both the complaint and A about the impact of A’s actions on the complainants.

After considering the issues, the committee said that there were “too many factual uncertainties” in relation to the impact of A’s actions on the complainants to award any damages to the complainants for claimed losses.

The committee said that a “standards committee is not the correct forum to resolve matters of significant factual dispute such as arise in this complaint”. The complainants could still commence ordinary court proceedings if they wished.

The committee decided that it was appropriate to fine A $500 for the unsatisfactory conduct, and to impose a costs order of $250.

In reaching that decision the committee also took account of A’s significant efforts to obtain the assignment subsequent to settlement. This was despite the fact that these efforts were not ultimately successful.

Other remedies sought included an apology, and a refund of fees. The committee considered such remedies were unnecessary, in this case. A had apologised already and had not charged a fee in relation to the assignment.

The committee also considered A’s action in contacting the vendors directly. The committee considered whether this was a breach of Rule 10.2 of the Conduct and Client Care Rules. This rule provides that a lawyer acting on a matter must not communicate directly with a person when the lawyer knows the person is represented by another lawyer, as was the case here.

Rule 10.2.5 contains an exception to this rule, which was also considered. The exception requires that direct contact may take place where the person consents, and where the other lawyer has been given reasonable notice of the intended communication. In communicating with the client directly, the lawyer must act fairly towards the other lawyer’s client at all times.

A communicated several times with the vendors’ solicitor. In commenting on the correspondence, the committee noted that the other solicitor was not particularly forthcoming or helpful.

A contended he had acted in a manner that was compliant with the rule. In the particular circumstances, and considering how A handled the correspondence, the committee said it had some sympathy with A’s position. The committee said it was clear that he had certainly acted fairly in all respects towards the vendors.

The committee said that the communication represented a breach of the rule. Bearing the circumstances in mind, however, the standards committee chose to take no further action in respect of this aspect of the complaint.

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