New Zealand Law Society - Lawyers Complaints Service: Three charges dismissed

Lawyers Complaints Service: Three charges dismissed

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The New Zealand Lawyers and Conveyancers Tribunal has dismissed three charges laid against Auckland lawyer Carole Smith ([2015] NZLCDT 40).

Ms Smith faced three charges laid in the alternative: misconduct, or negligence, or unsatisfactory conduct.

The charges alleged that Ms Smith had acted for a client and was involved in a breach of a High Court Charging Order by means of a share transfer.

The Charging Order was made in enforcement proceedings arising out of a property relationship dispute. Ms Smith represented the husband in relation to commercial interests and various trusts, but did not act in the property relationship proceedings and was only kept informed of their progress to a limited extent.

She was aware of the terms of the Charging Order, which charged the beneficial interests of the husband in various entities, set out in a schedule to the order.

“Ms Smith, who was the lawyer acting for the trusts, was perfectly well aware what beneficial interests were held by her client,” the Tribunal said.

“She and her client formed the view that a new trustee ought to be appointed to protect the beneficiaries’ interests. A company was formed for the purpose of acting as new trustee and was appointed.

“Trust law requires that the shares must be transferred to the new trustee, provided they were not the subject of the Charging Order.

No doubts

“We accept Ms Smith’s evidence that she had no doubts that changing trustees was not affected by the Charging Order.

“Since Ms Smith’s client was never the beneficial owner, nor even a discretionary beneficiary, and since the owner of the shares was not the debtor, the Charging Order could not apply to the assets which were transferred,” the Tribunal said.

“No evidence was ever produced by the wife to challenge the view of ownership. There is still no evidence to contradict the husband’s assertions. Thus it would appear his and Ms Smith’s evidence is correct.

“Certainly there was no information which would suggest Ms Smith was entitled to ignore her client’s clear instructions as to the transaction.”

There was “no element of subterfuge” in the transaction. Nor was Ms Smith “in cahoots” with her client to avoid responsibility.

“The husband has waived privilege to inform the Tribunal that Ms Smith actually urged him to simply pay his wife. Indeed, he did so not long after these events. Thus, there was no negative outcome for the wife, who is the complainant in this matter.”

The Tribunal noted that the onus was on the standards committee laying the charges to establish that there had been a breach of the order.

“We do not consider the standards committee has discharged that onus since we are unable to see how Ms Smith can be said to have breached the order at all.

“If we are wrong in this, we certainly do not consider this to be a deliberate breach, let alone a wilful or reckless one, which could reach the level of misconduct,” the Tribunal said.

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