New Zealand Law Society - Payment should not have been made

Payment should not have been made

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All names used in this article are fictitious

A lawyer who made a payment which he acknowledged should not have been made, has been censured and fined $3,500 by a lawyers standards committee.

The lawyer, Blackpool, acted for Mr and Mrs Claypole on the sale of their property, which they owned as tenants in common in equal shares.

After settlement, there was a surplus in funds from the sale. A legal executive working for Blackpool attempted on settlement day to obtain instructions from Mr Claypole as to how to deal with the surplus. The legal executive could not reach him, but also spoke to Mrs Claypole who instructed the firm to pay the balance to Mrs Claypole’s personal bank account, and the money was paid to her.

The committee noted that “despite inquiries, it is not clear where the money is now held.” “Mrs [Claypole] has (apparently) refused to account to Mr [Claypole] for his share of the money”.

Blackpool acknowledged to the standards committee that he was aware the property was held in equal shares and said the legal executive dealing with the transaction was aware of this but did not refer the payment authorisation to him.

However, Blackpool subsequently provided the committee a copy of the requisition authority for direct credit. This showed that Mrs Claypole was the payee of the balance of the proceeds of sale and purchase, and that Blackpool had signed as the responsible partner authorising the payment.

The committee noted that Blackpool “appears to accept that it was not appropriate to make payment to Mrs [Claypole] only, without the authority of both clients”.

“Written instruction or authority ought to have been obtained from both Mr and Mrs [Claypole] before the transfer payment to Mrs [Claypole] alone”. The committee noted that the failure to obtain that authority constituted a breach of regulation 12(6)(b) of the Lawyers and Conveyancers Act (Trust Account) Regulations 2008.

Blackpool’s initial response to the committee was that the legal executive responsible for the transaction had not referred to him, and had he been aware, the payment would not have been made.

“Even if that were the case, the committee would have found that [Blackpool] was responsible for the payment, as partner in charge of the trust account transaction.”

It is of “some concern” that Blackpool made a statement to the committee that was factually wrong. “The requisition authority for the direct credit was signed by [Blackpool], and (presumably having checked the document) [Blackpool] now accepts that he did, in fact, authorise the payment.

“His initial answer to the standards committee was incorrect, and misleading,” the committee said.

The committee found Blackpool’s actions amounted to unsatisfactory conduct.

As well as the censure and $3,500 fine, the committee ordered Blackpool to pay Mr Claypole’s external legal costs of $2,600 and to pay $1,000 costs.

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