BETWEEN DECISION. The names and identifying details of the parties in this decision have been changed.
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1 LCRO 71/2016 CONCERNING an application for review pursuant to section 193 of the Lawyers and Conveyancers Act 2006 AND CONCERNING a determination of the [Area] Standards Committee [X] BETWEEN ZB Applicant AND YA Respondent DECISION The names and identifying details of the parties in this decision have been changed. Introduction [1] Mr ZB has applied for a review of a decision by the [Area] Standards Committee [X] (the Committee) to take no further action in respect of his complaint concerning conduct on the part of Mr YA. Background [2] In July 2015, as well as being a lawyer, Mr YA was a director of [123 Limited], a company incorporated on 10 April 2015 (the company). [3] The company rented a residential property (the property) from another company (the landlord), of which Mr ZB was a director. [4] Mr and Mrs WD are specified as the occupiers on the application form, which also bore the name of the company with Mr YA as its director, as applicants. Mr YA appears to have signed the application form, although there seem to be differences between the handwriting that suggest the form was completed by more than one person.
2 2 [5] Mr ZB says the company s connection to Mr YA, and Mr YA s status as a lawyer, were significant factors in the landlord s decision to rent the property to the company. [6] The landlord ran into problems with the WDs occupancy and wanted to hold Mr YA responsible on the basis of his involvement before the tenancy agreement was entered into and during the tenancy. Mr ZB says Mr YA s conduct in his dealings with the landlord on behalf of the company demonstrates a lack of integrity on his part. [7] Mr ZB made a complaint to the New Zealand Law Society (NZLS) on 12 February The complaint and the Standards Committee decision [8] Mr ZB, who believes there has been serious subterfuge on Mr YA s part and prejudice to the landlord s rights, summarised his complaint in the following way: The [landlord] is the owner of substantial buildings in Auckland. Its business model is to retain ownership of buildings it constructs or purchases and to fit out each building to a high standard. The [landlord] then leases space in each of its buildings to tenants. The [landlord] is very focused on obtaining the right tenants for each of its buildings. In this case, the [landlord] had spent upwards of $1 million to renovate the upper stories of the building it owns [Address]. The company was looking for good quality tenants who could afford the rent and would provide minimum nuisance to the restaurant and office tenants in the floors below. The [landlord] engaged [real estate agents] to find suitable tenants. The [landlord] was attracted to the fact that the sole director and shareholder of the company which entered the lease was an established lawyer in Auckland and that the premises were being leased as part of an employee scheme. In fact, the premises were occupied by a struck off lawyer and his partner who ran a [GH business] from the premises. When we contacted Mr YA about this, he professed to know nothing about it, despite claiming to know the tenant very well. Also, within a short period of our first enquiry, rather than deal with this matter responsibly, Mr YA simply transferred his directorship and shareholding in the lessee company to the partner of the struck off lawyer. While technically Mr YA may not have done anything wrong, he has certainly brought your profession into disrepute. Wrongly, it seems the [landlord] placed weight on the fact that the lessee was to all intents and purposes a law firm renting the premises for an employee scheme. Instead it was for an [GH Business] Had the [landlord] known how the premises would be used, it would not have leased the premises to Mr YA. We believe there has been serious subterfuge here, and the [landlord] s rights have been seriously prejudiced. We also believe that Mr YA ought to have taken more/better steps to rectify the situation by having the tenants remove themselves once the actual activity was discovered, rather than simply resigning his responsibilities in the lessee company and walking away. [9] Mr ZB attached various documents to his complaint, including a statement of claim and supporting affidavit filed in a High Court proceeding seeking an injunction restraining the defendants, which included Mr YA and the company, from operating a [GH
3 3 business] or any other [GH business]-related activity from the apartment, and compensation. The causes of action included nuisance, breaches of the Fair Trading Act 1986, misleading conduct and unsubstantiated representations. Allegations against Mr YA included misleading conduct and making unsubstantiated representations or assisting others to mislead. [10] The affidavit in support filed by the landlord s property manager refers to Mr WD, who is said to have been a bankrupt former colleague of Mr YA. Mr WD s name features in the correspondence attached to the affidavit. The property manager says that Mr WD applied for the tenancy in July 2015 and included Mr YA s name in that application. It seems Mr YA s driver s license was attached and the property manager, when checking references, was reassured by Mr YA s involvement. When there were difficulties with the tenancy, the property manager contacted Mr YA, who made enquiries and gave assurances, apparently based on conversations he had with Mr WD who, it seems, denied operating a [GH business] from the premises. [11] The landlord arranged for a private investigator to monitor activity at the apartments. The investigator concluded that a [GH business] was being operated from the apartment rented by the company. Mr YA was contacted again. He again spoke to Mr WD, who is said to have assured him that he was not operating a [GH business] from the premises. Mr YA relayed that to the landlord, noting that he didn t live there himself, so he could not verify what he had been told. [12] The landlord advised Mr YA that he wanted the company to continue to rent the apartment as agreed in the lease, but was unwilling to tolerate the other activities. [13] In August 2015, Mr YA resigned as a director of the company and assigned his shareholding to Mr WD s wife. [14] The landlord claimed continuing problems, sought to recover its losses from the company, Mr YA and Mr WD s wife, and protected itself through the High Court process. The position advanced for the company was that it would not have been unlawful to operate a [GH business] at the property, but it was not doing that in any event. [15] Troubled by Mr YA s involvement, Mr ZB proposed he be censured and a full report published including his name. [16] NZLS dealt with the complaint through its Early Intervention Process (EIP). Mr YA was given the opportunity to respond and did not exercise his right to do so, having received an indication that the Committee had formed a preliminary view that it would take no further action and why.
4 4 [17] The Committee delivered its decision on 2 March The Committee s view was that Mr ZB s complaint was a matter between landlord and tenant that was properly subject to the jurisdiction of the Tenancy Tribunal. The Committee referred to the Residential Tenancies Act 1986 (RTA) and decided it had no jurisdiction to consider the complaint. The Committee determined the complaint on the basis that Mr ZB had an alternative and appropriate remedy pursuant to the RTA, and that it would take no further action pursuant to s 138(1)(f) of the Lawyers and Conveyancers Act 2006 (the Act). Application for review [18] Still troubled by Mr YA s involvement, Mr ZB filed an application for review on 8 April He says the Committee missed the point of his complaint. His complaint is against the conduct of Mr YA as a barrister and solicitor when measured against the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (the Rules) and the Act. He refers to rr 11, 11.1 and 12. He contends that Mr YA has failed to ensure the reputation of the legal profession is preserved, engaged in conduct that is likely to mislead or deceive, and failed to conduct his dealings with the landlord with integrity. [19] The underlying theme of Mr ZB s complaint is that Mr YA s involvement in the company lent it an unwarranted air of legitimacy. Mr ZB s concerns include Mr YA having held himself out as trustworthy and responsible, and supported those propositions with references. Mr ZB says Mr YA clearly put Mr WD s interests ahead of his. He says that under cross examination before the Tenancy Tribunal Mr WD freely admitted that an [GH business] was being operated from the apartment. Mr ZB says Mr YA obviously knew something was amiss and describes Mr YA s responses to enquiries about what was going on at the property as lacking integrity, disingenuous and not dealing with the issues that were raised with him. He says Mr YA should have properly investigated his concerns. [20] Mr ZB says that if he had known any of the following, the landlord would not have leased the property to the company: Mr YA represented to me that the apartment would be used as a residential dwelling for [the WDs], with the provision perhaps of legal consultancy services and some modelling advisory services, there was also in fact a [GH business] being operated from the apartment. Further it transpires Mr WD was an undischarged bankrupt, and had also been struck off the role of barristers & solicitors, and so he could not have been an employee of [Law Firm A], as represented by Mr YA. [21] Mr ZB is critical of Mr YA for having distanced himself from the tenancy and the company by resigning as a director and transferring his interests to Mrs WD. He wanted
5 5 Mr YA to admit there was a [GH business] operating at the property and to try and justify that position. Mr ZB believes Mr YA should have told him he was resigning as a director and transferring his shares to Mrs WD. [22] Mr YA says that Mr ZB s application for review is, in effect, a completely new and different complaint. Shortly before the review hearing in August 2018, Mr YA supplied copies of correspondence in a civil proceeding brought by the landlord against the company in the High Court. Mr YA s position is that full and final settlement of all claims against him in that proceeding were settled by agreement in November As the settlement proposal included any complaints, Mr YA s position is that the settlement agreement should include Mr ZB s application for review, if he is still pursuing that. Review Hearing [23] Mr ZB attended a review hearing in Auckland on 21 August Mr YA was not required to attend and did not exercise his right to do so. Nature and scope of review [24] The nature and scope of a review have been discussed by the High Court, which said of the process of review under the Act: 1 the power of review conferred upon Review Officers is not appropriately equated with a general appeal. The obligations and powers of the Review Officer as described in the Act create a very particular statutory process. The Review Officer has broad powers to conduct his or her own investigations including the power to exercise for that purpose all the powers of a Standards Committee or an investigator and seek and receive evidence. These powers extend to any review the power of review is much broader than an appeal. It gives the Review Officer discretion as to the approach to be taken on any particular review as to the extent of the investigations necessary to conduct that review, and therefore clearly contemplates the Review Officer reaching his or her own view on the evidence before her. Nevertheless, as the Guidelines properly recognise, where the review is of the exercise of a discretion, it is appropriate for the Review Officer to exercise some particular caution before substituting his or her own judgment without good reason. [25] More recently, the High Court has described a review by this Office in the following way: 2 A review by the LCRO is neither a judicial review nor an appeal. Those seeking a review of a Committee determination are entitled to a review based on the LCRO s own opinion rather than on deference to the view of the Committee. A review by 1 Deliu v Hong [2012] NZHC 158, [2012] NZAR 209 at [39] [41]. 2 Deliu v Connell [2016] NZHC 361, [2016] NZAR 475 at [2].
6 the LCRO is informal, inquisitorial and robust. It involves the LCRO coming to his or her own view of the fairness of the substance and process of a Committee s determination. 6 [26] Given those directions, the approach on this review, based on my own view of the fairness of the substance and process of the Committee s determination, has been to: (a) (b) consider all of the available material afresh, including the Committee s decision; and provide an independent opinion based on those materials. Discussion Contracting out of the Act [27] It is not accepted, as Mr YA s correspondence suggests, that a lawyer can avoid regulatory scrutiny by negotiating a settlement agreement on terms that include a release from complaints. Without determining the point, this review has been conducted on the basis that position is probably not correct and it is open to regulators, such as the Committee and this Office, to consider and determine complaints made pursuant to the Act, even where the parties seem to have reached agreement otherwise. That is primarily because the Act s protective nature extends beyond individuals involved in civil disputes, to the public more broadly. Mr YA s Conduct [28] Mr ZB alleges that Mr YA s conduct breached rr 11, 11.1 and 12 which say: 11 A lawyer s practice must be administered in a manner that ensures that the duties to the court and existing, prospective, and former clients are adhered to, and that the reputation of the legal profession is preserved A lawyer must not engage in conduct that is misleading or deceptive or likely to mislead or deceive anyone on any aspect of the lawyer s practice. 12 A lawyer must, when acting in a professional capacity, conduct dealings with others, including self-represented persons, with integrity, respect, and courtesy. [29] Rules 11 and 11.1 are not engaged because Mr ZB s complaints do not relate to Mr YA s administration of his practice or any aspect of it. [30] Rule 12 would be engaged if Mr YA were acting in a professional capacity. To the extent that Mr YA was acting in any respect, his conduct was as a director and shareholder of a company rather than as a lawyer. Rule 12 does not extend to the conduct Mr ZB holds up as demonstrating a lack of integrity on Mr YA s part.
7 7 [31] What is lacking on review, and was lacking in the complaint process, is evidence of dubious conduct that can be tied back with any degree of certainty to Mr YA. There is some evidence of Mr WD s involvement and little evidence of Mr YA s. Such evidence as Mr ZB has been able to produce does not support the proposition that Mr YA s conduct was connected with him providing regulated services to another person. [32] Mr ZB says he does not allege Mr YA is not fit to practice law, only that he was lacking in integrity in his dealings over the property. Suspicion is not enough to support allegations of unsatisfactory conduct or misconduct, either of which can have serious implications for a lawyer. More serious allegations require more compelling evidence. The information Mr ZB has provided is lacking in that regard. For example, it is not possible to attribute knowledge or conduct on the part of Mr WD to Mr YA. [33] It is not accepted that there is an evidential foundation, or a logical basis, on which to argue there may have been misconduct or unsatisfactory conduct on the part of Mr YA. In the circumstances there is no basis on which to reverse or modify the Committee s decision. That is confirmed. Decision Pursuant to s 211(1)(a) of the Lawyers and Conveyancers Act 2006 the decision of the Standards Committee is confirmed. DATED this 23rd day of August 2018 D Thresher Legal Complaints Review Officer In accordance with s 213 of the Lawyers and Conveyancers Act 2006 copies of this decision are to be provided to: Mr ZB as the Applicant Mr YA as the Respondent [Area] Standards Committee [X] New Zealand Law Society
CONCERNING CONCERNING BETWEEN. DECISION The names and identifying details of the parties in this decision have been changed.
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