New Zealand Law Society - Lawyers Complaints Service: Lawyers must comply with Trust Account Regulations

Lawyers Complaints Service: Lawyers must comply with Trust Account Regulations

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A lawyer, B, has been fined $1,000 by a lawyers standards committee for charging a fixed “non-refundable” fee, which should have been paid into his trust account until he was lawfully entitled to the use of the client’s money to pay his invoice.

The Legal Complaints Review Officer, in LCRO 266/2012 and 269/2012, has upheld the fine, and the standards committee’s costs order of $500.

B accepted instructions from Mr C, on behalf of his wife, Mrs D, to regularise her immigration status.

Mrs D was in New Zealand on a temporary visa but she stayed longer than her visa permitted. B advised three specific courses of action; for Mrs D to obtain a passport from her country of citizenship, to obtain a visitor’s visa to enable her to go to Australia, and finally to apply for a work visa for New Zealand.

B requested $6,500 fees for his legal services. The clients paid in advance.

B obtained a full Chinese passport for Mrs D. He also assisted Mrs D in applying for an Australian visa. He was also to apply for a New Zealand work visa based on Mrs D’s marriage to Mr C.

“The stream of work relating to the off-shore work visa was not complete, although [B] gathered supporting documents and took a number of steps towards preparing the application,” the LCRO noted.

“It appears that [B]’s ability to complete those services was thwarted by [Mrs D] being arrested, detained and forcibly deported from New Zealand.”

Following her departure, Mr C approached B through friends, seeking a refund. B said he had expended considerable time and energy and that $6,500 was commensurate with his efforts. He had obtained a new Chinese passport and done all he could to help Mrs D apply for the Australian visa. He also repeated his view that Mrs D had frustrated his efforts by refusing to follow his advice to leave, instead choosing to stay and being forcibly removed.

When B refused to give a refund, Mr C complained to the New Zealand Law Society both about B’s advice and his fee.

The standards committee found that although B had provided a receipt for the money Mrs D had given him, he was unable to provide evidence that he had delivered or posted his invoice to Mrs D. The committee accepted that B had generated an invoice but noted that it was dated just over three months after the money was lodged.

The committee found B guilty of unsatisfactory conduct because he had breached Regulation 10 of the Trust Account Rules. This states that: “All money paid to a practice in respect of professional services for which an invoice has not been issued, whether described as a retainer or otherwise, must be retained in a trust account until is it (a) disbursed on the client’s behalf; or (b) applied in payment of fees in accordance with regulation 9”.

Both B and Mr C sought a review of the decision by the LCRO. Mr C sought a review because he wanted a refund. He claimed that B had guaranteed success in his endeavours, but had not been successful. B sought a review because he considered the committee had applied the RCCC and Trust Account Rules incorrectly.

“On balance, I consider it unlikely that a practitioner of [B]’s experience would have given the type of guarantee [Mr C] contends he was given. Taking into account the linguistic challenges [Mr C] faced throughout, I find it difficult to avoid the inference that [Mr C]’s understanding was the result of a miscommunication,” the LCRO said.

“I have seen no evidence that would justify any criticism of the quality of work [B] did, nor the services he provided.”

B’s evidence was that he “issued” an invoice for his fees, received $6,500 cash, receipted that cash directly into his general office account and provided Mrs D with a receipt. He claimed the standards committee had misinterpreted the word “issued” in Rule 9.3 of the Trust Account Regulations.

“His point is as his fee was not refundable, he was under no obligation to pay the cash into his trust account,” the LCRO said.

B’s interpretation “cannot be correct”.

“The effect of Rule 9.3 [of the Trust Account Rules] is to ensure that a client’s money is protected by being held in a lawyer’s trust account until the services have been provided.”

As well as confirming the standards committee’s fine and costs, the LCRO ordered B to pay $900 costs.

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