New Zealand Law Society - Lawyers Complaints Service: Misconduct for actions relating to client funds

Lawyers Complaints Service: Misconduct for actions relating to client funds

This article is over 3 years old. More recent information on this subject may exist.

Vinay Deobhakta, a former lawyer, was charged with misconduct for actions taken while acting for a client in a dispute with IRD. The New Zealand Lawyers and Conveyancers Disciplinary Tribunal found the charge proven in its decision at [2013] NZLCDT 55, given on 18 December 2013.

Four of Mr Deobhakta’s actions were the subject of the charge. The first was a request by Mr Deobhakta that his client exchange a cheque for $25,000 (for a proposed settlement with IRD) for a cheque for $21,000 and $4,000 in cash. Mr Deobhakta denied requesting the exchange, and denied receiving the cash. However the tribunal preferred the evidence of the client, who had produced documentary evidence supporting the allegations.

The second action was a later request by Mr Deobhakta that he be permitted to apply the funds for a different, unrelated purpose. When it became clear that it was unlikely that IRD would agree to the settlement proposal, he asked his client if he could use the funds to assist him to obtain evidence against a corrupt immigration official. Mr Deobhakta claimed he was working to assist the New Zealand government in this regard. He suggested that if the client co-operated, the government would be advised, and it would help the client in his dealings with IRD.

The tribunal considered this was an “unusual” request. The only evidence before the tribunal of the agreement with the government was from Mr Deobhakta. The tribunal said it was difficult to see how such an agreement would have assisted the client in the manner suggested. It involved the diversion of funds the client wanted to use to settle his dispute with IRD to a matter which was not the client’s concern, and which was of no real value to the client. The tribunal noted that this request was, in the circumstances, a significant failure in Mr Deobhakta’s duty to his client. The client had “sensibly” declined the request (more than once), the tribunal noted.

The third action was a refusal to refund a retainer of $15,000 under the terms of a contingency fee agreement. The agreement was entered into after the client became concerned that his position did not appear to have been advanced with the IRD.

In the agreement, the retainer was refundable if certain “aims” were not “sought”. This included, in particular, the avoidance of criminal charges being laid by IRD, and the achievement of a satisfactory settlement agreement. Mr Deobhakta claimed that this was not a guarantee of success and that he was only required to seek the required outcomes, not necessarily achieve them.

The tribunal, however, said that there was “no real contingency” in the agreement at all. The client “clearly was misled, as he thought he would get his fees back unless Mr Deobhakta could achieve a settlement and he escaped prosecution,” the tribunal said. The client could not reach agreement with IRD and he was prosecuted and convicted.

The tribunal noted that the client had been misled in another way. Mr Deobhakta signed the agreement four days before he was adjudicated bankrupt. The tribunal said that as a result, the agreement was worthless as a means of the client protecting his right to recover fees paid. Mr Deobhakta admitted that he was well aware of this at the time.

Fourthly Mr Deobhakta admitted that he had sent a number of abusive text messages to the client when the client decided to consult another lawyer.

Considering all the circumstances, the tribunal decided that Mr Deobhakta’s actions amounted to misconduct.

The tribunal considered a preliminary matter concerning the scope of the charges.

Mr Deobhakta said that the charges went beyond the matters complained of by his former client and this was unfair. The tribunal rejected this contention, and determined that the charges were properly laid. Charges before the tribunal were not necessarily limited to the issues raised by complainants.

The tribunal had regard to the provisions of the Lawyers and Conveyancers Act 2006 and recent case law.

Given that a standards committee may investigate a complaint, including conducting a hearing, “we cannot see how the scope of any charge arising from that investigation and hearing could be limited by the content of the complaint,” the tribunal said.

“The very purpose of the investigation and hearing is to decide whether there is anything arising out of the complaint that warrants a charge being considered by the tribunal. The person making the complaint causes the process to start, but pending an investigation by the standards committee, what may come out of that complaint can never be certain. The complainant’s concerns could not themselves limit the charges that may result from the investigation and hearing undertaken by the committee.”

The tribunal also noted that it would be wrong in principle to limit charges in the manner Mr Deobhakta contended. Not all clients may appreciate a professional offence had occurred in certain circumstances. A standards committee is limited to laying an “appropriate” charge. The tribunal said the charges “may well extend further than what was said in the complaint itself”, depending on the outcomes of the committee’s investigation and hearing.

In this case the tribunal found that the charges were appropriate. They were within the ambit of the conduct considered by the committee during its investigation and hearing of the complaint. The charges made it clear what allegations Mr Deobhakta faced.

A further hearing to determine penalty had not been held when LawTalk went to print.

Lawyer Listing for Bots