New Zealand Law Society - Oversight didn't warrant disciplinary action

Oversight didn't warrant disciplinary action

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Names used in this article are fictitious

A lawyer’s oversight, where he did not notice an overpayment to his client, did not warrant a disciplinary response, the Legal Complaints Review Officer (LCRO) has found.

The lawyer, Grueby, acted for the vendors of a residential property purchased by Mr Tulkinghorn and his family trust.

The agreement for sale and purchase provided a sale price of $1,115,000, with a 10% deposit ($111,500) and the balance on settlement.

Mr Tulkinghorn paid the real estate agents $115,000, which represented an overpayment of $3,500.

When Grueby received the real estate agents’ commission statement, it showed two payments totaling $115,000, but did not draw particular attention to the overpayment of $3,500.

Settlement took place based on Grueby’s unamended settlement statement, which credited Mr Tulkinghorn and his family trust with a payment of $111,500, not the actual combined payment of $115,000.

Nearly a year later, after Mr Tulkinghorn’s accountant discovered the overpayment, Mr Tulkinghorn’s lawyer made enquiries on his behalf of Grueby about the overpayment.

Mr Tulkinghorn complained to the Lawyers Complaints Service. He sought the return of his $3,500 overpayment from Grueby.

The substance of his complaint was that:

  • Grueby’s statement incorrectly showed a deposit of $111,500 has been paid, whereas $115,000 had been paid;
  • Mr Tulkinghorn and his family trust paid $3,500 more than the purchase price; and
  • Grueby informed him that he had “forwarded all funds to the vendors” but had “offered no assistance in attempting to reclaim” the overpayment, which the vendors stated they did not receive.

A lawyers standards committee determined that no further action on the complaint was necessary or appropriate. The committee noted that:

  • there was “no evidence that [Grueby] had any knowledge at the time, that the deposit paid was other than provided for in the contract”;
  • Grueby “no longer had instructions from the vendors”, he had “made efforts to contact his [vendor] clients direct but [had] received no instructions to act further”;
  • Mr Tulkinghorn had been in contact with the vendors directly; and
  • Grueby was “not holding any funds from the sale”.

Mr Tulkinghorn sought an LCRO review.

“In my view, [Grueby]’s oversight does not warrant a disciplinary response,” the LCRO said in LCRO 54/2018.

“In reaching that conclusion I am assisted by a decision from this office in which the view was expressed that ‘an honest mistake is not a proper basis for disciplinary action’.”

Grueby’s oversight in not noticing Mr Tulkinghorn’s overpayment “falls into that category of mistakes or errors”.

The LCRO also noted that the professional duties owed by a lawyer, who acts for one party in a transaction, to the other party are limited – particularly where, as was the case here, the opposing party was separately represented.

As well as confirming the standards committee decision, the LCRO ordered anonymised publication of its decision.

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