Peter Francis Aitken struck off
The New Zealand Lawyers and Conveyancers Disciplinary Tribunal has ordered that Peter Francis Aitken be struck off the roll of barristers and solicitors.
Mr Aitken admitted one charge of misconduct which related to his misappropriation of client funds and ongoing misuse and dishonest mismanagement of his trust account.
The Tribunal said in December 2018 Mr Aitken had used clients’ funds of $265,000 which were in his trust account. He had applied the funds towards the purchase of a personal property, without the clients’ authority.
From June 2019 Mr Aitken had also consistently overdrawn his firm’s Interest in Trust Ledger, using trust funds belonging to his clients to meet the financial obligations of his firm.
When the charge was laid in November 2019, the Tribunal made an interim order suspending Mr Aitken from practising, after which his attorney took over management of the practice. The attorney had helped the New Zealand Law Society to contact clients whose funds had been wrongly utilised and assisting them to make claims from the Fidelity Fund.
Under stress and overloaded
The Tribunal said it appeared that for some years leading up to his decision to take the $265,000, Mr Aitken had been under considerable stress and “professionally overloaded”.
“In addition it appears he advanced funds to a longstanding friend or associate who let him down shortly before the property purchase was due to settle. Mr Aitken referred to a number of other stressors, including the additional work involved in managing a former colleague’s practice after the sudden death of that colleague,” it said.
The Tribunal said this was helpful in providing some context which led to the misconduct admitted, but it did not, as accepted by Mr Aitken, provide any justification for his conduct.
The wrongful utilisation of his trust account also meant he had submitted untrue certificates of compliance to the Law Society for a number of months. The total deficit as a result of his misappropriations, as calculated at 6 March 2020, was $357,691.69.
“When confronted by the inspectors in November 2019, Mr Aitken acknowledged his actions and indeed volunteered the statement that this was ‘tantamount to fraud’,” the Tribunal said.
Strike-off almost inevitable
The Tribunal said it accepted the submission that dishonesty offending involving the use of client funds will almost inevitably lead to strike-off. “The trust reposed in practitioners by the public means that any breach of that trust must be met with the strongest possible response from the profession’s disciplinary body.”
“Mr Aitken crossed a boundary which must never be crossed by a lawyer.”
The Tribunal said the aggravating features of his conduct were firstly, the lengthy period of time (almost one year) over which it occurred, and secondly, he had two unsatisfactory conduct findings, in 2017 and 2018.
In terms of mitigation, until he came to notice for his conduct in 2017, he had conducted himself in a professional and blameless manner for almost 40 years. However, while he was given credit for his previous lengthy service, good conduct and community contribution, and for attending the hearing, conducting himself with dignity and responsibility, there was no response to this type of serious and dishonest misconduct which would be adequate, short of strike-off.
Finding that Mr Aitken was no longer a fit and proper person to be a practitioner, the Tribunal ordered that he be struck off the roll of barristers and solicitors and that he pay total costs of $18,842.
Holding a will doesn’t entitle lawyers to work
All names used are fictitious.
The mere fact that a solicitor holds a will for a client does not mean the solicitor is automatically entitled to act in the administration of the estate.
This was the conclusion of a lawyers standards committee when considering a complaint that a lawyer had failed to release a will and associated documents and had also claimed a lien over the files and deeds.
The lawyer, Lafeu, held the last will and testament of Mr F. The will named Mr F’s daughter, Mrs K, as the sole executor and trustee of her late father’s estate.
Mrs K indicated that she would like to instruct another firm to assist her with the administration of Mr F’s estate.
Mrs K then forwarded a completed authority to uplift to Lafeu. Having received no response, she telephoned Lafeu approximately two weeks later. Mrs K said that Lafeu told her he had a lien over the will and associated documents.
In his submissions to the standards committee, Lafeu acknowledged his firm held Mr F’s will and other documents relevant to his estate. Lafeu argued that the firm was entitled to do so because he had a lien over the file.
Although Lafeu conceded that Mrs K was the executrix named in Mr F’s will, he considered she was not yet the administrator of the estate and would not become so until the High Court had granted probate.
Refusal to release untenable
The committee considered it “untenable” for a law firm to refuse to release a will to an executor who wished to instruct another firm and “therefore hold the executor to ransom”.
“An executor has both the right and ultimately the duty to take steps to begin the administration of the deceased’s estate, beginning by applying for a grant of probate.
“It is wrong to suggest that an executor is not entitled to access the will by which they have been appointed.”
The committee determined that it was unsatisfactory conduct for Lafeu to refuse to release to Mrs K documents which, in the committee’s view, she was entitled to.
The committee also found that Lafeu had improperly claimed and continued to improperly claim, a lien over the will and deeds, and that this, too, constituted unsatisfactory conduct.
Lafeu “plainly had no proprietary interest in Mr [F]’s will and associated deeds, there being no suggestion that Mr [F] had failed to pay any invoice when they were originally drafted.
“Consequently [Lafeu] ought to have released them immediately upon receiving the authority as signed by Mrs [K],” the committee said.
The committee also found that Lafeu had continued charging Mrs K fees after the lawyer-client relationship was terminated, leading to a fee that was not fair and reasonable, and that this also constituted unsatisfactory conduct.
LCRO review of decision
Lafeu applied to the Legal Complaints Review Officer for a review of the decision. While the LCRO agreed that it was inappropriate for Lafeu to withhold the will, it considered there was no need to make two separate findings of unsatisfactory conduct, one for withholding the will and another for claiming a lien without justification. It considered that a single finding of unsatisfactory conduct was sufficient.
The LCRO also reversed the finding of unsatisfactory conduct in respect of fees. It was of the view that the total fee charged was fair and reasonable when having regard to the work done by Lafeu up until the termination of the retainer.
Lafeu was ordered to pay a fine of $1,000 for the single finding of unsatisfactory conduct and pay costs of $1,000 to the New Zealand Law Society | Te Kāhui Ture o Aotearoa. He was also ordered to release to Mrs K the original of Mr F’s will and any associated trust deeds or documents.
Deducted fees without valid charging clause
All names used are fictitious.
It was unsatisfactory conduct for a lawyer, acting as sole executor of an estate, to deduct their fees from funds held on trust in the absence of a valid charging clause in the will, a lawyers standards committee has found.
The children of the late Mr A complained to the Lawyers Complaints Service that the beneficiaries were overcharged for the work the law firm undertook in administration of Mr A’s estate.
The firm, of which Parolles was a director, undertook various litigation on behalf of Mr A’s estate. This included relationship property and Family Protection Act 1955 proceedings.
Mr A’s estate was administered by a fellow director of Parolles’ firm and a Mr B, who were named in the will as executors. Mr B was subsequently removed as an executor, on Parolles’ application, some 30 months after Mr A died.
The standards committee which considered the complaint appointed a costs assessor, who identified that approximately $10,000 had been overcharged in the estate administration. Following the cost assessor’s report this has since been repaid to the estate.
The rule in Cradock v Piper
The standards committee noted that common law “has long held that trustees and executors cannot charge for their services” unless there is express provision allowing for that in the instrument of trust, or the trustee was a solicitor and the payment was recognised under the rule in Cradock v Piper (1850) 1 Mac & G 664.
The rule in Cradock v Piper is that a solicitor-trustee or their firm may charge fees for work related to court proceedings on behalf of the trustees provided that the solicitor-trustee’s work does not increase the usual expenses. The rule does not apply where a solicitor-trustee is the sole trustee.
The standards committee noted that Parolles took up the position of executor and later became the sole executor. The court proceedings referred to above were undertaken when Parolles was sole executor.
Parolles’ counsel submitted that a clause in Mr A’s will was effectively a “charging clause”, which gave the executors and trustees the power to “take an action upon the opinion of a barrister and/or solicitor practising in New Zealand or in any other jurisdiction whether in relation to the interpretation of this will, any statute, or as to the administration of my estate without being liable in respect of any act done by them in accordance with such opinion, and to make any application to the Court as trustees may think fit. All expenses of any opinion or application shall be paid out of my estate.”
The committee was of the clear view that the clause was not a charging clause.
On making a finding of unsatisfactory conduct by Parolles, the committee ordered Parolles to pay $2,500 costs to the New Zealand Law Society | Te Kāhui Ture o Aotearoa.
The committee also ordered Parolles, in the absence of an application to the High Court to authorise the deduction of fees by Parolles, to refund a significant proportion of the fees charged to the estate of Mr A.
Failed to protect client’s interests
All names used are fictitious.
A lawyer and a legal executive have each been fined for failing to protect the interests of a client who bought an apartment subject to the Unit Titles Act 2010.
A lawyers standards committee fined the lawyer, Bertram, $3,000 and the legal executive, Lavache, $1,000 and ordered each to pay $500 costs.
With Bertram’s assistance, Mr A entered into an agreement for sale and purchase of the apartment. The agreement was conditional on Mr A undertaking a due diligence investigation.
The Unit Titles Act requires that a pre-contract disclosure statement must be provided to a purchaser. However, Mr A was not provided with such a statement before he entered into the agreement. It was provided some five days later.
The disclosure statement included the following: “The body corporate has identified a problem with roof deflection and is currently working through a remedial solution. Proceedings have been issued against liable parties pending the extent of remedial works being clarified.”
The disclosure statement was provided to Mr A along with a letter containing very general advice. There was no specific mention in the letter about the roof deflection issue identified. Nor did the letter provide much in the way of guidance, commentary or advice relating specifically to the apartment.
A year after Mr A became the apartment’s registered proprietor it became apparent that the apartment complex was subject to significant defects that would be costly for the body corporate and, ultimately, the owners of the apartments to repair.
Mr A then complained that Bertram and Lavache were negligent in that they failed to advise him of the issues identified in the pre-contract disclosure statement and had they done so he would not have completed the apartment purchase.
Failure was unsatisfactory conduct
The standards committee found that Bertram failed to raise with Mr A the significance of a pre-contract disclosure statement and to adequately ensure systems were in place to ensure the matters a pre-contract disclosure statement would disclose would subsequently be identified and brought to the attention of his client. That failure was unsatisfactory conduct.
In response to the complaint, Bertram said that Mr A was an experienced and sophisticated property investor who wished to, and was capable of, carrying out suitable due diligence investigation on his own.
Bertram submitted that including a due diligence condition in the agreement for sale and purchase adequately protected Mr A’s interests.
The committee was provided with a summary of matters where Bertram’s firm had provided services to Mr A, going back some 12 years. That summary “fails to substantiate that Mr [A] was either sophisticated or experienced in conducting due diligence investigations in relation to property transactions,” the committee said.
The committee found that Lavache failed to bring adverse information contained in both the pre-contract disclosure statement and pre-settlement disclosure statement to Mr A’s attention, and that was unsatisfactory conduct.
As part of his submissions, Bertram put before the committee an email from a real estate agent as “evidence of” the “trend as it relates to pre-contract disclosure statements”.
The committee said it was aware of some property professionals failing to properly advise their clients on compliance with the Unit Titles Act, but it did not accept there was a “trend” of non-compliance.
“In any event, it is difficult to see how any such ‘trend’ could somehow absolve a lawyer of their duties to their client,” the committee said.
Lawyer “lost all professional objectivity”
Yoon Lee has been censured and fined $9,000 after a lawyers standards committee found he initiated judicial review proceedings that were an “impermissible attempt to mount a collateral attack” on a High Court judgment.
“Mr Lee ought to have been aware that the application for judicial review was clearly an abuse of process,” the committee said.
“A lawyer has an overriding duty as an officer of the court, and Mr Lee’s conduct constituted a serious dereliction of his duty to the court.”
The committee conducted an own motion investigation into Mr Lee’s conduct after it considered the High Court costs judgment in [2017] NZHC 1481 relating to the judicial review proceedings.
In that judgment, the Judge was “extraordinarily critical of the applicant’s lawyer, Yoon Lee,” the committee noted.
As two examples, the Judge said:
- “it would have been obvious to any reasonably competent practitioner that there was absolutely no prospect of this court granting relief”, and
- “Mr Lee lost all professional objectivity in this matter long ago and he ought to have ceased acting”.
The judgment came towards the end of a litigation history of some seven years.
Five unsatisfactory conduct findings
The committee made five findings of unsatisfactory conduct against Mr Lee.
It considered that the initiation of the judicial review proceedings was in bad faith. It concluded that Mr Lee used the judicial review process for an improper purpose. This was a breach of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (“the rules”) and unsatisfactory conduct.
The Judge in [2017] NZHC 1481 said that the application for a review was a “serious dereliction of the duty owed to this court”.
The Judge also called the application “frivolous and vexatious and an abuse of the process of the court”.
The committee said it agreed with the court and determined that was both a breach of the rules and conduct that would be regarded by lawyers of good standing as being unacceptable, and therefore unsatisfactory conduct on the part of Mr Lee.
Noting that the High Court Judge had also said the application had “no prospect of success”, the committee concluded that in bringing the application for judicial review, Mr Lee’s conduct did not meet the required minimum standard of competence and diligence.
“He should have appreciated that the application had no prospect of success,” the committee said in finding unsatisfactory conduct by Mr Lee.
The committee also found that in the absence of any contradictory evidence (and Mr Lee did not respond to the committee’s provisional view on the matter) it was more likely than not that Mr Lee failed to obtain properly informed instructions from his client. “It seemed very unlikely that, had Mr Lee properly informed [his client] of the prospects of success, [his client] would have instructed him to proceed.”
That was also a breach of the rules and unsatisfactory conduct.
Failure to exercise independent judgement
The committee also said it agreed with the Judge that Mr Lee had lost his objectivity in the matter. He had failed to comply with the rules relating to exercising independent judgement.
“A particularly obvious example of this was the fact that Mr Lee’s application for review included [the Judge’s] minute referring Mr Lee to the New Zealand Law Society.
“There is no conceivable reason why [Mr Lee’s client] would be interested in a review of that ‘decision’,” the committee said.
That was also a breach of the rules and unsatisfactory conduct.
As well as the censure and fine, the committee ordered Mr Lee to undergo practical training or education and to pay $2,000 costs.
When ordering publication of Mr Lee’s name, the committee noted the seriousness of the offending.
The committee also noted a “consistent failure to engage reasonably with the standards committee, as well as the repetitive nature of the behaviour in conjunction with an apparent lack of objectivity, insight and self-moderation on Mr Lee’s part.”