The High Court has overturned a decision of the Legal Complaints Review Officer (LCRO) in which the LCRO stated that a lawyer should not make direct contact with the client of a conveyancing practitioner.
In LCRO 249/2014, the LCRO reviewed a case where a licensed conveyancing practitioner, C, complained about a lawyer, L. They were acting for the parties in a property transaction.
In accordance with the protocol for remote settlement recommended in the Property Law Section’s E-Dealing Practice Guidelines, L – acting for the purchaser – required the e-dealing to be released by C against his undertaking to remit the funds to her and declined to accept her undertaking to do so after receipt of payment from him.
C declined to settle on this basis as she stated that her client’s bank did not permit her to discharge the mortgage before receipt of the loan repayment funds.
Settlement did not take place at that stage because of the impasse between the parties.
Three days after settlement was scheduled, L issued a settlement notice and sent an email directly to C’s client. He also wrote to C’s client’s bank, which happened to be the same bank that was advancing funds to his client for the purchase.
In the email to C’s client, L advised that he had issued a settlement notice and that court proceedings would be issued against them if the settlement notice expired. He also advised that interest for late settlement was accruing.
In the letter to the bank, L advised that settlement had not proceeded. He also set out in detail the reasons why settlement had not proceeded and, in particular, the reason C advanced that she could not release the discharge of mortgage without receipt of funds from L.
L asked the bank to clarify its instructions to C and confirm that she could release the discharge of mortgage against L’s undertaking to remit the settlement monies upon receipt of the documents in the accordance with the PLS remote settlement protocol.
L advised settlement occurred in that manner and the transaction was settled.
C subsequently complained that L acted unprofessionally.
Standards committee
A standards committee determined to take no further action in respect of the complaints. The committee gave the following reasons:
- The lawyer’s letter to the vendor’s bank was entirely appropriate in that it made it clear to the recipient on whose behalf the lawyer was acting. It set out the situation factually, and proposed a reasonable resolution to enable the settlement to proceed.
- In order to protect and promote the interests of a client, a lawyer is entitled to communicate directly with any person, other than a person whom the lawyer knows is represented by another lawyer in that matter, for the purpose of advancing his or her client’s interests.
LCRO review
On a review of the standards committee decision, the LCRO considered that L’s conduct in contacting the bank could not be criticised. L was acting in his client’s interests in an attempt to resolve C’s objections to settlement in the manner L suggested.
However, the LCRO noted that L had communicated directly with C’s clients, and said that L should not have done this, in light of Rule 10.2 of the Rules of Conduct and Client Care.
Rule 10.2 states that “a lawyer acting in a matter must not communicate directly with a person whom the lawyer knows is represented by another lawyer in that matter except as authorised in this rule”.
“This principle is equally applicable to clients represented by a conveyancing practitioner, and I see no reason why the principle should not apply to all circumstances where a person is represented by a non-lawyer in a professional context,” the LCRO decision said.
“To excuse [L]’s conduct by taking the point that [C] was not a lawyer is adopting a particularly technical approach that does not recognise the general application of the principle behind Rule 10.2.”
High Court judgment
In [2015] NZHC 916, the High Court overturned the LCRO decision on two grounds.
Firstly, it found that the LCRO had denied L the opportunity to put his case. Secondly, Justice Karen Clark also found that the LCRO had interpreted rule 10.2 too widely.
“I am in no doubt that [L] did not breach r 10.2 and that the LCRO was in error when he determined that [L] should have complied with r 10.2 as if [C] were a lawyer,” Justice Karen Clark said in her judgment dated 6 May 2016.
The LCRO’s approach “is not justified by the plain and unambiguous language of a rule such as r 10.2” and “it is unnecessary and undesirable to have recourse to principles of ‘minimum standards’ in the face of such precise and certain language”.
Justice Clark referred to the comments of Justice Dobson in a similar disciplinary context: “It is desirable that rules of professional conduct be applied as specifically as possible, rather than requiring adherence to general standards that may be difficult to interpret and apply.”
Justice Clark also looked at the question of whether the LCRO had given L a fair hearing.
She noted that L had been led by C’s application for review to understand that the remedy C sought was a change in the Conduct and Client Care Rules. L concluded that his conduct was not at issue.
In his submission to the LCRO, L said “that the application is not an application for a review of the decision of the Hawkes Bay Standards Committee but an application to amend the Client Care Rules”.
“A fair hearing before the LCRO would have seen [L] being put on the ‘right track’ by the LCRO having regard both to the LCRO’s line of reasoning and that it passed [L]’s apparent understanding of the application like a ship in the night,” Justice Clark said.
“With minimal formality and without compromising expedition [L] could have been given an opportunity to say something relevant to the LCRO’s proposed approach and he should have been given that opportunity. To the extent he was not he was denied a fair hearing.
“The LCRO’s determination was reached in error. As well, [L] was denied a fair opportunity to put his case. That said there is little to be gained in subjecting the parties to the further expense and effort of a rehearing and I make no such order,” Justice Clark said.