New Zealand Law Society - Made threat for improper purpose

Made threat for improper purpose

This article is over 3 years old. More recent information on this subject may exist.

[Names used in this summary are fictitious]

Informing two real estate agents that his clients would complain about them to the Real Estate Agents Authority (REAA) unless they paid $50,000 compensation was unsatisfactory conduct by a lawyer, a lawyers standards committee has found.

The real estate agents acted for the vendor of an apartment which was experiencing issues with noise from a neighbour. The purchasers considered that the real estate agents were aware of these issues and failed to disclose them prior to the sale. As such, the purchasers consulted their lawyer, who referred them to Stiggins.

Stiggins wrote to the agents, setting out his clients’ concerns about the noise and alleged that the agents were aware, at the time the sale was negotiated, that there were issues in relation to unacceptable noise levels.

One paragraph of Stiggins’ letter stated that his clients had grounds to file a complaint with the REAA but as they were conscious of the time involved for both parties, they were prepared to refrain from complaining in return for a payment of $50,000.

On receiving Stiggins’ letter, the agents took advice and subsequently made a complaint to the Lawyers Complaints Service.

A lawyers standards committee conducted a hearing to determine whether Stiggins had breached rule 2.7 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 when he threatened to refer the agents to the REAA unless $50,000 was paid to his clients.

Rule 2.7 provides that: “A lawyer must not threaten, expressly or by implication, to make any accusation against a person or to disclose something about any person for any improper purpose”.

In his submission to the committee, Stiggins denied any improper conduct. He said his letter did not threaten to make an accusation against either agent or to disclose the agents’ actions for an improper purpose. His letter merely set out his clients’ enquiry of the agents, which was whether the agents would be open to settling their concerns without the need to make a complaint to the REAA.

Unsatisfactory conduct

The committee found that Stiggins had breached rule 2.7 and that was unsatisfactory conduct.

“While it is a legitimate course for lawyers involved in contentious matters to threaten civil litigation unless a financial settlement is reached, it is not appropriate for a lawyer to use a threat to refer another party to a professional standards authority as a lever to extract a benefit on behalf of a client,” the committee said.

“In doing so [Stiggins] acted with an improper purpose.”

As a lawyer, Stiggins had an obligation to uphold the rule of law and facilitate the administration of justice. If he had reached the view that the agents had breached their statutory obligations under the Real Estate Agents Act 2008, he should have referred his concern to the REAA.

“It was not for him to co-opt that public body’s own processes to advance his clients’ interests.

“That [Stiggins] was acting on the instructions of his clients is immaterial, when following a client’s instruction would lead to a breach of a lawyer’s professional obligations, he or she should decline to act rather than carry out that instruction,” the committee said.

As well as determining unsatisfactory conduct, the committee ordered Stiggins to pay a $5,000 fine and $1,000 costs.

On review

Stiggins applied to the Legal Complaints Review Officer (LCRO), saying he considered the committee erred in its decision. Even if it had not erred, he considered the fine to be excessive.

In LCRO 283/2014, the LCRO upheld the committee’s determination of unsatisfactory conduct by Stiggins.

“I agree with [Stiggins] that lawyers frequently make demands for compensation on behalf of their clients, accompanied by threat to commence proceedings if the compensation sought is not paid. He described this as a conventional and entirely appropriate approach, and I accept that to be the case,” the LCRO said.

However, Stiggins’ argument “pays insufficient regard to the fact that the threat made to the agents was a threat to subject them to a professional disciplinary inquiry. In advancing the threat, he was attempting to assert leverage over the agents by, as the committee described it, co-opting a public body’s processes to advance his clients’ interests.”

“The impropriety of the demand flows from the attempt to achieve financial compensation by threat of utilising a professional regulatory body as leverage to achieve the financial outcome sought.

“It is not, in my view, analogous to equate the threat of making professional complaint, to that of threat to file proceedings in a court,” the LCRO said.

However, the LCRO did consider that the $5,000 fine was excessive, and replaced it with a $2,000 fine, plus $1,200 costs.

Lawyer Listing for Bots