New Zealand Law Society - Lawyers Complaints Service: Fined for deliberately withholding information

Lawyers Complaints Service: Fined for deliberately withholding information

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A lawyer who deliberately failed to advise two sisters that they had not been appointed as trustees of the trust that administered the bulk of their mother’s estate has been found guilty of unsatisfactory conduct by the Legal Complaints Review Officer (LCRO).

The case involving a lawyer, F, came before the LCRO on appeal from a lawyers standards committee.

One of the sisters, Mrs A, had earlier complained to the Lawyers Complaints Service that F had not taken steps necessary to carry out the instructions of her mother’s will to appoint her as a trustee.

After the standards committee decided to take no further action, the LCRO found that there was “nothing to suggest any wrongdoing on [F’s] part in failing to have the applicant appointed as trustees [sic]”.

Second complaint

Mrs A then lodged a second complaint, alleging that F had deceived her into believing she was a trustee. The standards committee determined that the LCRO had “in effect made a finding that deals with [Mrs A’s] complaint”.

On review of the second complaint, the LCRO said that Mrs A’s second complaint was not addressed by the LCRO in its earlier decision.

It ruled that F’s conduct “constitutes unsatisfactory conduct pursuant to s 12(c) of the Lawyers and Conveyancers Act [2006] by reason of breaches of rules 7, 10, 11 and 11.1 of the Conduct and Client Care Rules”.

According to their mother’s will, drawn up by F, the two sisters were to be appointed as trustees of a trust to which she had left the bulk of her estate.

In fact the power to appoint trustees rested with the surviving trustee (the trust’s accountant) who declined to appoint the sisters, allegedly on the grounds that their appointment would jeopardise the smooth running of the trust.

Not informed

F, who was the trust’s lawyer as well as lawyer to the deceased’s estate, did not tell the sisters of this, or that the provision of the mother’s will appointing them as trustees could not be realised possibly due to F’s error in drafting the mother’s will.

Instead F treated them both as if they were trustees, including addressing communications to them and having them sign documents as such.

One of the sisters, Mrs A, discovered the true position two years later and laid a complaint about F’s conduct.

The standards committee decided that F had endeavoured to give effect to the provisions of the will, and that the failure to achieve this was not F’s responsibility. The committee decided to take no further action on the complaint.

Mrs A laid a fresh complaint which came before the LCRO on appeal, who decided that there was a case to answer and that he would hear the case himself rather than incur further delay by sending the matter back to the standards committee.

The LCRO found that F did not ever advise Mrs A that she was not a trustee of the trust.

A clause in Mrs A’s mother’s will provided that she was to be appointed a trustee of the trust. That could not be carried out because the accountant trustee declined to appoint her.

“It was incumbent upon [F] to advise [Mrs A] as Executor of the will that the clause in the will could not be effected,” the LCRO said.

“I find it impossible to accept [the submission of F’s lawyer] that [F] did not purposely withhold information. Over a period of some two years and in a multitude of communications, [F] had every opportunity to advise [Mrs A] that her understanding she was formally appointed as a trustee was incorrect.”

The LCRO agreed that whatever the consequences for the smooth operation of the trust, it was not up to F to deprive the sisters of knowledge about the true position.

Disturbing view

Later the parties made submissions on penalties, with F’s lawyer arguing that the complaints process had been arduous and was punishment enough given that F had not profited by the “misunderstanding” over the appointment.

F’s lawyer also submitted that F was upholding his duty to promote the interests of the accountant trustee, who was a client.

“The logic of this submission is that it is acceptable to breach a lawyer’s obligations and specifically the Conduct and Client Care Rules, provided it can be argued it was done to protect and promote the interests of a lawyer’s client.

“This submission exhibits a disturbing view of a lawyer’s obligations,” the LCRO said.

“It also continues to reflect the submission which I have described as ‘condescending’ that the failure to advise [Mrs A] of the situation was ‘for her own good’.”

The LCRO continued: “Although I have noted that deceit for the purpose of personal gain was absent, it is inescapable that [F] deceived [Mrs A] into thinking that she had been appointed a trustee.”

That lack of truthfulness “is the most serious aspect of [F’s] conduct and [I] therefore consider this must attract a reasonably significant response”.

The LCRO censured and fined F $1,500. It also ordered F to pay $1,600 costs, to apologise to Mrs A, and to pay her $5,000 for the anxiety and stress caused to her.

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