New Zealand Law Society - Lawyers Complaints Service: Charges against lawyer dismissed

Lawyers Complaints Service: Charges against lawyer dismissed

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The New Zealand Lawyers and Conveyancers Disciplinary Tribunal has not upheld charges brought against a lawyer, B, in relation to the administration of an estate.

One of B’s clients, Mr C, appointed him the sole executor and trustee of the estate. Before Mr C died, he had been the sole director and shareholder of an Auckland-based company, D, which had few assets.

The assets of the estate were 100 shares in D and a life insurance policy worth about $30,000. In his will, Mr C left the shares in D to his two children, E and F. They were also named as residuary beneficiaries.

B undertook the standard estate administration tasks and oversaw the continued operation of D, which he endeavoured to sell. The company eventually sold for $1. The two residuary beneficiaries were 10% shareholders of the new business which acquired D.

The daughter of the deceased, E, had earlier requested that the shares in D be transferred to the beneficiaries, as provided for in the will. At that time B advised that as the company had been incorrectly named in the will, the gift of shares failed and fell into the residuary estate.

B rendered three accounts for the estate administration and for the sale of D. His fees totalled $37,739.01, which exceeded the value of the estate. The beneficiaries received nothing from their father’s estate.

The allegations of the lawyers standards committee, the Tribunal said in [2014] NZLCDT 80, fell under four headings:

  • B should have taken steps to rectify the error in the will about the correct name of the company (a fault that had originated in his firm) and the shares should then have been transferred to E and F as per the will;
  • B’s decision to continue running D while attempting to sell the company was imprudent;
  • B failed to provide information that was requested; and
  • B’s costs were neither fair nor reasonable.

B, when responding to a request from E about the fact that the company was incorrectly named in the will, advised that because of the error, the shares in D would form part of the residue of the estate. He went on to say that it would achieve the same end result because the residue of the restate was to be shared equally by E and F.

An appropriately-qualified barrister expressed the opinion that B could have made application to the High Court at his own expense to obtain an order correcting the will. He also suggested that B could have negotiated a settlement whereby the two beneficiaries agreed that the will would be read as if the correct company had been named.


In his response to that criticism, B noted that he had taken advice from a senior fellow practitioner, as a result of which he gave the advice he did. He also noted that E’s request for transfer of the shares was inconsistent with her earlier agreement to market D for sale and concerns that she had about her role in the company. The transfer of shares did not make any difference to the course adopted with E’s concurrence. He further noted that the proceeds of sale after expenses would have been equally distributed to E and F and that F had agreed with the process that he followed.

“The Tribunal’s finding is that the practitioner’s conduct cannot be criticised in respect of this issue,” the Tribunal decision states. It has taken into account that there were a number of courses which the practitioner could have adopted. It is the case that he had made a decision after careful deliberation, after checking with a professional colleague and against the background of his knowledge of the deceased and his wishes and the family dynamics.”

The Tribunal also noted that E developed with B a plan to manage the continued operation of the business and to market it for sale.

In terms of B’s decision to continue running the company, two lawyers with expertise in the area were critical of him. One said that he had embarked on an unrealistic programme of attempting to sell the company. He also questioned the prudence of continuing on for so long when it was questionable that there was any life in the business.

Another lawyer criticised B for not obtaining independent advice as to the value of D. He assessed that B’s judgment was flawed and therefore he was in breach of his duty as an executor.

In his response to the criticisms, B said he had an obligation as executor and trustee to act prudently in the best interests of the estate and all the beneficiaries. That obligation persuaded him to operate D until it was in a position to be marketed for sale.


Among the factors he took into account in making that decision were the wishes of the deceased, the fact that value could not be tested unless the business was properly marketed for sale, that to properly market the business, it needed to be a going concern and that his experience allowed him to consider that there was potential in the business of D.

Both E and F had also indicated that they wanted him to list the business for sale as a going concern.

“The Tribunal having considered all the evidence has reached the conclusion that the practitioner’s conduct in continuing to operate [D] while attempting to effect a sale of the business does not reach the threshold test for misconduct, unsatisfactory conduct or negligence or incompetence,” the decision says. The Tribunal said four important factors emerged from the evidence:

  • the wishes of the deceased as recorded by B;
  • the inability of the residuary beneficiaries to operate the business and their agreement to market it for sale;
  • the thoroughness with which B approached the sale of the business, albeit that the eventual sale did not produce a profitable result; and
  • the experience that B had in respect of small businesses.

The Tribunal also considered allegations that B had not responded to concerns expressed by E and her attorney. It said it was not satisfied that B had failed to respond to requests for information in a way that could lead to a finding that he was guilty of misconduct, unsatisfactory conduct, or of negligence or incompetence.

Evidence to back the allegations that B had rendered costs that were not fair and reasonable were largely based on the proposition that B should not have continued running the business.

“The Tribunal concluded that the charge of misconduct, or unsatisfactory conduct or negligence or incompetence in respect of the fees rendered was not established,” the decision says.

“It took into account that it was reasonable for the practitioner to carry on the business of [D] and try to sell it. His hourly rate was modest and there was a willingness to discuss the fees had an approach been made to do so.”

As well as finding that the charges against B had not been proved, the Tribunal made a final order prohibiting publication of B’s name.

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