The names and identifying details of the parties in this decision have been changed. DECISION

Transcription

1 LCRO 121/2017 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 BETWEEN PT on behalf of MOH LTD Applicant AND BD Respondent The names and identifying details of the parties in this decision have been changed. DECISION Introduction [1] Mr PT, on behalf of MOH Ltd and as one of its directors, has applied to review a decision by the [Area] Standards Committee (the Committee) to take no further action in respect of MOH Ltd s complaint concerning the conduct of its former lawyer, Mr BD. 1 [2] MOH Ltd s complaint against Mr BD raised four issues. As the review has progressed in this Office, the issues have become narrowed with the result that only one remains for determination. [3] That issue has been summarised by Mr PT as follows: 12 days before the commencement of High Court proceedings in which MOH Ltd was involved (the EFI Ltd litigation), Mr BD said that he was no longer going to represent the company because outstanding fees had not been paid. Mr PT disputed that MOH Ltd owed fees 1 At the review hearings, MOH Ltd was represented by Mr PT, Mr CT and Ms DL. References in this decision to Mr PT are to Mr PT, as he made the complaint on behalf of MOH Ltd, and also lodged the application for review.

2 2 and said that it was in credit with Mr BD s law firm, by $4,000. Mr BD was not, therefore, entitled to withdraw as MOH Ltd s lawyer in the EFI Ltd litigation. [4] The trial of those proceedings took place on [date] July Ms L, a senior associate employed in Mr BD s law firm, represented MOH Ltd together with a junior lawyer from that firm, Mr B. Background [5] MOH Ltd s business involves printing, publishing and advertising. [6] In the early part of 2015 MOH Ltd was experiencing financial difficulties. Through its directors, MOH Ltd proposed a [settlement] with its unsecured creditors. One of those creditors was EFI Ltd. [7] EFI Ltd and others brought proceedings in the High Court to challenge the [settlement]. [8] Mr PT approached Mr BD in late June or early July 2015, and through Mr BD s law firm instructed him to act on behalf of MOH Ltd to defend the EFI Ltd litigation. [9] Mr BD advised MOH Ltd that grounds existed for it to file a counterclaim against EFI Ltd. [10] MOH Ltd and Mr BD agreed that Mr BD would review the evidence and prepare a statement of defence to the EFI Ltd litigation, and prepare a counterclaim to be filed and served on EFI Ltd. It was agreed that this work would be completed for a fixed fee of $30,000 plus GST (the fixed fee arrangement). [11] At that initial stage, it was anticipated that both the EFI Ltd litigation and the counterclaim would be heard together in one trial. [12] Mr BD advised MOH Ltd that legal fees for a full trial of that nature, potentially lasting several weeks in the High Court, could be as much as $500,000. [13] The initial fixed fee work was completed on or about 13 August Work completed after that date was invoiced, generally monthly. Requests were also made for the payment of fees in advance. 2 This is the date of Mr BD's invoice for the fixed fee work.

3 3 [14] The plaintiffs in the EFI Ltd litigation successfully applied to the High Court for separate trials in relation to the challenge to the compromise, and MOH Ltd s counterclaim against EFI Ltd. That order was made in late November [15] During 2016 Mr BD regularly wrote to MOH Ltd raising issues about late and non-payment of legal fees. Mr PT also raised queries about fees including the scope of the fixed fee arrangement. [16] The trial of the EFI Ltd litigation was set down to be heard in the High Court for two days, beginning on 11 July MOH Ltd s counterclaim against EFI Ltd was to be heard at some time after that. [17] On 3 May 2016, Mr BD informed Mr PT that because of the unsatisfactory position with MOH Ltd s legal fees, he would not be appearing as counsel for MOH Ltd in the EFI Ltd litigation. Mr BD advised Mr PT that Ms L would conduct the trial as counsel for MOH Ltd and he would provide oversight. [18] Mr BD also proposed a fixed fee for the EFI Ltd litigation, which included a requirement that MOH Ltd pay outstanding fees. The fixed fee and the outstanding fees were to be paid by MOH Ltd on nominated dates before the commencement of the trial. [19] There were also discussions about whether a litigation funder could assist MOH Ltd with its separate counterclaim trial. [20] MOH Ltd did not make all of the payments required by Mr BD. However, Ms L, with assistance from Mr B, conducted the trial of the EFI Ltd litigation. Mr BD also provided oversight to the two lawyers in the lead up to and during the trial. [21] The result of those proceedings was that MOH Ltd s creditors [settlement] was set aside by the High Court. 3 The complaint [22] On behalf of MOH Ltd, Mr PT lodged a complaint with the New Zealand Law Society Complaints Service (Complaints Service) on 31 August The complaint read: We feel we have been overcharged. We received a fixed fee proposal which we accepted but have been charged additionally. We received no terms and conditions with letter of engagement. When invoices were queried we were told we needed to pay or critical services would be withheld. We also asked for a 3 [High Court Decision].

4 detailed breakdown of how our initial $30,000 deposit was spent and told no record had been kept. We asked for a printout of time spent and received spreadsheet which is not originating material. 4 Response by Mr BD [23] Mr BD provided an extensive response to Mr PT s complaint in his letter to the Complaints Service dated 17 October [24] Addressing the issue of his withdrawal as counsel, Mr BD said: (a) (b) (c) (d) (e) The firm carried out the entire trial [of the EFI Ltd litigation] without any funds up front and what s more MOH Ltd owed money on previous invoices. At the beginning of the retainer Mr BD told Mr PT that work would not carry on if MOH Ltd did not ensure that monies were held in [his law firm s] trust account to cover future accounts. Mr BD regularly called Mr PT to advise him of the work in progress and future work that needed to be done [and] would request further funds to be deposited to cover future invoices. Mr BD threatened to cease work on 1 October 2015 when MOH Ltd failed to pay fees. Mr PT did not question that stance or raise any queries about the invoices that had been issued. MOH Ltd was late with December 2015 and early 2016 fees payments but work continued as a matter of good faith. (f) In early March 2016 MOH Ltd owed outstanding fees of $19, Correspondence between Mr BD and Mr PT in late March and during April (including text messages) included Mr PT querying the scope of the fixed fee arrangement although at times Mr PT acknowledged that it was only limited to the preparation of the counterclaim and the filing of the initial defence pleadings. (g) Mr BD and Mr PT met on 22 April Mr BD offered MOH Ltd a discount both on fees that were owing and fees for future work including

5 5 the trial of the EFI Ltd litigation. Mr PT accepted this offer, which included dates by which the sums had to be paid. 4 (h) (i) The deadline dates were extended and Mr BD s law firm continued to do legal work for MOH Ltd. Mr PT continued to make promises about payment. MOH Ltd has still not paid all of Mr BD s legal fees. Further comments by the parties [25] Further correspondence was exchanged by the parties with the Complaints Service following Mr PT s initial complaint and Mr BD s response to it. [26] In large measure, that correspondence simply affirmed the position each had taken. Standards Committee decision [27] The Standards Committee delivered its decision on 30 May It identified the following issues for determination: 5 (a) (b) (c) (d) Whether Mr BD breached a fixed fee agreement. Whether Mr BD failed to provide MOH Ltd with the information he was required to by the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (the Rules) and the firm s standard terms of engagement (as referred to at (a) and (b) of the letter of engagement). 6 Whether Mr BD refused to carry out time critical work unless invoices were paid. Whether Mr BD failed to provide MOH Ltd with sufficient information about the work that was carried out in all with the invoices rendered. 4 In his further letter to the Complaints Service dated 25 January 2017, Mr BD said that at the 22 April 2016 meeting he suggested that Ms L (then a senior associate in his law firm) could conduct the trial of the EFI Ltd litigation and "that this would be much less costly", and that Mr BD "would lead the counterclaim hearing which was longer and more involved". Mr PT "welcomed the suggestion [and requested] a fee estimate for [Ms L] to appear alone. Mr BD confirmed this arrangement in writing to Mr PT in an dated 3 May Standards Committee determination, 30 May 2017 at [11]. 6 Mr BD provided MOH Ltd with a letter of engagement dated 3 July The letter referred to two attachments: terms of engagement and information for clients. Neither was attached to the letter of engagement.

6 6 [28] In relation to issues (a), (b) and (d), the Committee determined to take no further action, in each case pursuant to s 138(2) of the Lawyers and Conveyancers Act 2006 (the Act). 7 MOH Ltd has not applied to review the Committee s determinations in relation to those issues. [29] In relation to issue (c) whether Mr BD refused to carry out time critical work unless invoices were paid the Committee also determined to take no further action pursuant to s 138(2). 8 [30] The Committee held: 29. While lawyers have a duty to complete the legal services required by clients, that is subject to their right to terminate a retainer (the agreement to provide legal services) on the basis of non-payment of fees (under rr 4.2 and of the [Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008]. 30. It was reasonable, particularly in the circumstances, for Mr BD to expect payment in order to carry out the work. Mr BD asserted that there were many discussions with MOH Ltd regarding fees, that MOH Ltd made promises to pay and then did not honour them, and that [Mr BD and others in his law firm] nevertheless continued to work on the matter despite the pressure he was being put under by the rest of the partnership. He asserted that MOH Ltd carried on instructing him to proceed to the hearing, despite warnings that MOH Ltd was unlikely to succeed given by both Mr BD and [a liquidation specialist]. 31. MOH Ltd complained that Mr BD refused to attend the hearing and instead sent his junior solicitor instead, because the account had not been paid in full. MOH Ltd said it found that unacceptable. However, Mr BD asserted that that was discussed and agreed with Mr PT. Further, junior solicitor was not an apt description for [Ms L], who attended in Mr BD s place; she was in fact an Associate of the firm. Application for review [31] Mr PT filed an application for review on 29 June In relation to the single issue for determination now remaining, which is whether any conduct issues arise as a result of Mr BD withdrawing as counsel in the EFI Ltd litigation, Mr PT said: [Mr BD] had in fact refused to carry on where we had not paid in advance for services. We had supplied an where Mr BD had made this threat for the Committee s reference. And remember we were paying in advance in the majority of instances. At the time of this threat we had got to the end of a prepayment and had been asked to pay yet more. 7 Standards Committee determination, above n 5, at [26], [33], [51] and [56]. The Committee also identified a further issue of complaint in subsequent submissions that had been filed by MOH Ltd, which was that Mr BD may have had a conflict of interest between MOH Ltd and a litigation funder recommended by Mr BD. The suggestion was that Mr BD had a close personal relationship with that funder, however the Committee held that none existed. This issue has not been raised in Mr PT's application for review. 8 At [32].

7 [Ms L] may have been an associate of the firm but as far as we are aware had not had a court experience where she had taken the lead. This was not discussed with us and not our choice, it was a decision made by Mr BD, not us we were told we could not afford him so [Ms L] would stand in his place. 7 Response by Mr BD [32] In his response to the application for review dated 17 July 2017, Mr BD largely relied on the extensive material that had been put before the Committee. Nature and scope of review [33] The nature and scope of a review have been discussed by the High Court, which said of the process of review under the Act: 9 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. [34] More recently, the High Court has described a review by this Office in the following way: 10 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 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. [35] 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) consider all of the available material afresh, including the Committee s decision; and 9 Deliu v Hong [2012] NZHC 158, [2012] NZAR 209 at [39] [41]. 10 Deliu v Connell [2016] NZHC 361, [2016] NZAR 475 at [2].

8 8 (b) provide an independent opinion based on those materials. Statutory delegation and hearing in person [36] As the Officer with responsibility for deciding this application for review, I appointed Mr Robert Hesketh as my statutory delegate to assist me in that task. 11 As part of that delegation, on 15 November 2017, 27 February 2018 and 17 April 2018, Mr Hesketh conducted hearings at which Messrs PT and CT and Ms DL appeared on behalf of MOH Ltd, together with Mr BD. 12 [37] The process by which a Review Officer may delegate functions and powers to a duly appointed delegate was explained to the parties by Mr Hesketh. They indicated that they understood that process and took no issue with it. [38] Mr Hesketh has reported to me about the hearings and we have conferred about the application for review, and my decision. There are no additional issues or questions in my mind that necessitate any further submissions from either party. Analysis The issues: [39] During the course of the first two hearings before Mr Hesketh, there was considerable argument between the parties as to whether or not MOH Ltd owed fees or was in credit at the time that Mr BD withdrew as counsel. For the most part, the parties had diametrically opposed positions. [40] At the first hearing on 15 November 2017, Mr PT said that when Mr BD pulled out in July, MOH Ltd were in credit. [41] Mr PT also said that Mr BD s law firm had made an error in its trust account records as to what had been paid by MOH Ltd, what it related to and what was owing. [42] The parties agreed to meet and discuss the alleged errors. The hearing was adjourned for that to occur and it resumed on 27 February [43] At the resumed hearing Mr PT identified what he considered to be Mr BD s conduct breach: it was that 12 days before the EFI Ltd litigation were due to start, Mr BD said that he was no longer going to represent MOH Ltd, that it needed to find a new 11 Lawyers and Conveyancers Act 2006, sch 3, cl At the hearing on 27 February 2018, Mr BD s law firm s trust accountant, Miss RS, also appeared with Mr BD.

9 9 law firm and that the company would lose the EFI Ltd litigation and will have wasted money in doing so. [44] Mr PT said that MOH Ltd was in credit at that time by some $4,000. [45] As indicated, Mr PT said that this occurred approximately 12 days before the trial commenced. There is some doubt about that date, as I explain further below. [46] Once again, the parties indicated a wish to meet and discuss the issue of whether MOH Ltd was in credit at the time identified by Mr PT. The hearing was adjourned accordingly. [47] Shortly before the hearing resumed on 17 April 2018, Mr PT filed brief written submissions on behalf of MOH Ltd in which he said the following: RESOLUTION OF REVIEW 1. MOH Ltd requests that the LCRO validates MOH Ltd claims that, as of the date of the court hearing on July [11] 2015, with regards to invoice amounts issued for work rendered, that MOH Ltd was in fact in credit by $ MOH Ltd also requests the LCRO to rule on whether Mr BD s personal actions, which [included] cancelling the retainer all services rendered by [Mr BD s law firm], was justified in removing himself 12 days before a major court hearing. 3. Mr BD s defence of his choice of action relate specifically to invoiced amounts. MOH Ltd maintains the Law Society could not fairly rule on MOH Ltd s complaint when the financial information provided was incorrect. [48] At the resumed hearing before Mr Hesketh on 17 April 2018, Mr PT said that the issue to be determined was whether Mr BD had unreasonably withdrawn as counsel. He said that MOH Ltd was not a bad payer and that although from time to time it may have been in debit, this had been corrected. [49] At that hearing, Mr PT also conceded that when Mr BD withdrew as counsel, fees were owed. He said that the only issue left for consideration by this Office, was Mr BD s withdrawal as counsel. 13 [50] In subsequent written submissions, received by this office on 26 April 2018, Mr PT added further issues. In addition, he resiled from his earlier concession that 13 By "withdrawal from the case" I refer to Mr BD informing Mr PT that he would no longer be acting as counsel in the trial of the EFI Ltd litigation. As I understand it, Mr BD did not formally seek the leave of the court to withdraw as counsel. He was not required to as his law firm remained the solicitors on the record and another lawyer from that firm, Ms L, appeared as counsel at the trial.

10 10 fees were owing when Mr BD withdrew as counsel and repeated what he had said in the written material lodged shortly before the hearing on 17 April 2018, in which he maintained that MOH Ltd was in credit in the amount of $ as at 11 July [51] The other issues that Mr PT raised in his 26 April 2018 submissions included: (a) (b) (c) a finding as to whether Mr BD followed his terms and conditions with regards to the invoicing and pre-payment process ; a finding as to whether the correct financial information was provided by Mr BD to the Complaints Service; and a finding as to whether Mr BD was entitled to use a portion of the fees paid in the EFI Ltd litigation, for the employment matter. [52] None of the matters referred to in [51] above were raised as issues of complaint by Mr PT on behalf of MOH Ltd, when he made his complaint to the Complaints Service. [53] The emphasis throughout and by that I refer to the progress of this application for review has been firmly on whether Mr BD was entitled to withdraw as counsel for MOH Ltd. A significant part of Mr PT s argument has been that MOH Ltd was in credit and so Mr BD was obliged to continue acting and appear as counsel at the trial. [54] At the hearing on 17 April 2018, Mr PT acknowledged that MOH Ltd owed fees; his submissions dated 26 April 2018 say that MOH Ltd was in credit by $ [55] For reasons which follow, whether MOH Ltd was in credit in the amount now claimed by Mr PT ($856.93) on or about the date on which Mr BD withdrew as counsel in the EFI Ltd litigation, or owed fees as is alleged by Mr BD, is largely irrelevant. [56] The issues for me to determine are as follows: (a) (b) (c) When did Mr BD withdraw as counsel for MOH Ltd in the EFI Ltd litigation? In withdrawing as counsel, did Mr BD terminate a retainer with MOH Ltd? If so, do any disciplinary consequences follow?

11 11 (d) If the retainer was not terminated, was Mr BD otherwise entitled to withdraw as counsel for MOH Ltd? [57] I will deal with each issue in turn. When did Mr BD withdraw as counsel for MOH Ltd? [58] There is no dispute that MOH Ltd approached Mr BD in about June 2015 about acting for the company in the EFI Ltd litigation. There is also no dispute that Mr BD did extensive work on behalf of MOH Ltd in those proceedings until at least the end of the trial. [59] It was also clearly intended that Mr BD would appear as counsel on behalf of MOH Ltd at the trial of the EFI Ltd litigation. [60] At all relevant times, Mr BD was a partner in his law firm (and remains so). Naturally, when working on the EFI Ltd litigation other lawyers in the law firm had input into and otherwise carried out certain work, including Ms L who was then an associate in the law firm, and Mr B who was a more junior lawyer in the firm. 14 [61] It is also clear that Mr BD did not appear at the trial of the EFI Ltd litigation and informed MOH Ltd in advance that he would not be appearing as counsel. The trial was conducted by Ms L with assistance from Mr B. [62] Mr PT s complaint is that Mr BD breached his professional duties to MOH Ltd by refusing to appear as counsel at the trial of the EFI Ltd litigation. [63] Mr PT said that Mr BD withdrew as MOH Ltd s counsel 12 days before those proceedings were due to commence. In identifying that date, he is referring to an from Mr BD to him dated 30 June I deal with that further below. [64] Mr BD submitted that throughout the retainer MOH Ltd had a history of being behind with the payment of fees. He referred a number of instances when he raised this with Mr PT. [65] Piecing together the timeline of events provides the answer as to when Mr BD withdrew as MOH Ltd s counsel. 14 Another lawyer in Mr BD s law firm also did work for MOH Ltd in relation to an employment matter, which was peripherally connected to the EFI Ltd litigation and MOH Ltd s counterclaim. That lawyer provided MOH Ltd with a separate letter of engagement, dated 23 July 2015.

12 12 [66] That exercise requires me to set out in some detail several exchanges of correspondence between Mr PT and Mr BD, beginning in approximately March [67] Examples include: (a) Mr BD s to Mr PT dated 9 March 2016 in which he said: Please can you from sources other than MOH Ltd immediately clear our accounts totalling $19, You must tell me please if there is an issue in keeping up-to-date on the bills. (b) A series of text messages exchanged between Mr BD and Mr PT on 30 and 31 March 2016 including one from Mr BD as follows: PT I have just received a serious dressing down from our managing partner. Unfortunately it is now compromising my own security in the firm. Please make payment immediately. We are going to stop work also. I can t afford to lose my job and am worried. I have underestimated the strength of feeling that had now built up. I sure hope you can come through. (c) Mr PT s response to that text message was: okay I understand. I m out of town today. I m waiting to see what money is free today. I will let you know sorry to put you in this position can you please pass on any communications. (d) Mr BD s to Mr PT dated 18 April 2016 in which he said: please advise if you intend paying the outstanding invoices and if so when. If you do not intend paying and/or cannot pay please inform us now so we know where we stand. I think this is a fair request. We are unable to commit our resources further to MOH Ltd s case even the possible loss we are now facing on unpaid work and unbilled work. This was interposed with and responded to an from Mr PT to Mr BD, in which Mr PT said:. We intend to pay, we know we are late and we know that you have supported us. (e) Mr BD s to Mr PT dated 19 April 2016 in which he said: As advised (and which I warned you of repeatedly for some time) we have ceased work due to non-payment. You state that you intend to pay. Please advise when? You told me in a conversation about three weeks ago you were selling assets to pay our invoices and put us in funds. (f) An dated 22 April 2016 sent by Ms L to Mr PT in which the following was said:

13 13 The firm is prepared to offer a discount to the current outstanding fees on the proviso that you make the promised $5000 repayment towards costs by 5 p.m. next Thursday and it is to the balance that the 12.5% discount will be applied, which in turn will be open provided that balance payment is made within 10 working days after (being 12 May 2016). [68] I note that in his response dated 26 April 2016, Mr PT did not dispute that there were outstanding fees. [69] A critical was sent by Mr BD to Mr PT on 3 May 2016 (the 3 May ). In that Mr BD said that he had: prepared a fixed price for work on the compromise claim (i.e. not the counterclaim) from here on to the end of the trial to be conducted by [Ms L] (with me giving oversight but not appearing as counsel at the trial). [70] The 3 May provided that the fixed price was to be paid in two instalments, by no later than 24 May [71] Mr PT appears to have replied to the 3 May , in his to Mr BD dated 5 May He said: Ok thanks Changing lawyers from you in court to [Ms L], we respect her a lot and she knows the detail, does she do cases on her own in court? I will struggle to clear next week s outstanding amount and pay upfront at the same time. [72] Replying in two s dated 5 May 2016, Mr BD: (a) (b) (c) noted that [Ms L] does do cases on her own and wins them ; renewed an earlier offer he had made to discount outstanding fees if paid by 13 May 2016; and said: Our fixed fee involves [Ms L] alone attending the two-day hearing, preparation before hearing (including reviewing the plaintiffs evidence and drafting cross-examination questions) preparing additional briefs, drafting submissions, legal research and preparing a casebook. Can we proceed on this basis? If you do not have the funds please let us know because we will have to stop work. We are already doing the work in good faith now including extra discovery work. [73] On 16 May 2016, Mr PT ed Mr BD noting that MOH Ltd still owed:

14 $16.4k from the last few months and on top of that is the $42k that you require to be paid up front over the next week or so. This is just too much for us to pay in such a short time. We now don t even have you on the case, which is disappointing. 14 [74] Mr BD responded to Mr PT in an dated 18 May It is important to set this out in some detail: [Y]our issues over what MOH Ltd were charged was settled. We shook hands on it. We gave you a discount on the then outstanding balance on the basis that you paid by a certain date. We then extended that date so you could take advantage of it. But still no payment of the discounted amount. You have told me over the phone variously that you were selling property and refinancing and that we would get paid. On the strength of this and because we have not wanted to leave you in the lurch we have kept working in good faith. The matter is very much within [Ms L s] experience level and you have been very happy with her performance and she will do a great job. But [now] it seems apparent that we are unlikely to get paid at all. We cannot afford to work for free. We have written off a lot of time. I am not sure what else I can tell you. Please can you make payment of the outstanding amount. We are not prepared to keep incurring more costs to our own business. If you can clear the balance then we can reduce the funds on account requirement from $42k to $22k. [75] On 25 May 2016, Mr BD s PA forwarded MOH Ltd a breakdown of invoices sent and payments received, which showed a balance outstanding on the EFI Ltd litigation of $15,571.24, and the balance outstanding in the employment matter of $6, [76] On 21 June 2016 Mr BD ed Mr PT and said: [O]ur records show that, on the EFI Ltd matter, $18, is outstanding. There has been no payments since 3 June While we have assisted MOH Ltd [with further work], we are reluctant to undertake further work [unless] our outstanding accounts are paid or security provided. The hearing is on 11 July Before that date, we will need to prepare cross-examination questions and submissions. Please can you advise your plan to clear our account and secure payment for the trial. [77] On 22 June 2016, Mr BD ed Mr PT and said we would like you to clear all of our account please this week. Please also let us know how you plan to secure fees for ongoing work. [78] On 30 June 2016, Mr BD ed Mr PT and said: You have not returned calls I have made to you.

15 As foreshadowed before we are not prepared to do further work until we have comfort over our fees. If you can sort this tomorrow then [Ms L] has kindly offered to give up her weekend to try and get your case prepared for her to appear as counsel at the trial. We have asked you many times to address fees and have offered MOH Ltd discounts and written off time. We will cease work officially on Monday at which point you will need to find new lawyers and seek an adjournment. MOH Ltd will in all likelihood fail in getting an adjournment. This means the case would proceed against MOH Ltd and you would need to appear as a litigant in person. A company however cannot appear by its director. Please can you address the position. 15 [79] On 1 July 2016, Mr PT organised the payment of some fees and asked will that give you some comfort, to which Mr BD replied Yes it will. Thank you very much. [80] On 4 July 2016, Mr BD ed Mr PT and said that: both [Ms L and Mr B] worked the full weekend in view of what was advised on [1 July 2016]. Further work is ongoing. Can you tell me what you can do to provide assurance our work will be paid for on time. [81] On 5 July 2016, Mr BD ed Mr PT and said we are still working on your case. [82] On 16 July 2016, Mr PT ed Mr BD and said: it was disappointing that you decided not to continue representing us [Ms L] was placed in a difficult position, one which pushed her out of comfort zone. She worked very hard. You offered after withdrawing yourself to fix her fee at 22k that seems to have gone up over the last few days by 20k. [83] The above examples of correspondence between Mr PT and Mr BD are by no means a complete record of their correspondence about fees and the EFI Ltd litigation generally. During the course of progressing his complaint and application for review, Mr PT provided copies of correspondence and in responding to the complaint Mr BD also provided copies of correspondence (as well as a chronology summarising all of the correspondence). [84] I acknowledge that I have not referred to every piece of correspondence that passed between the parties. I accept that Mr PT raised queries about fees with Mr BD over the course of that correspondence. Most of those queries concerned the fixed-fee arrangement, which is not the subject of review. Other queries sought clarification about fees.

16 16 [85] All of that correspondence has been read and taken into account in the course of preparing this decision. [86] The fairness and reasonableness of Mr BD s fees is not, however, an issue to be determined in this review. Indeed, it was not an issue of complaint before the Committee, other than complaint that the initial fixed fee arrangement was intended to cover a great deal more work than was actually done. [87] Mr PT was very clear when he said that the only issue to be considered was whether Mr BD was entitled to withdraw as MOH Ltd s counsel in the trial of the EFI Ltd litigation. [88] In my view, the correspondence strongly supports Mr BD s position that MOH Ltd was regularly behind with the payment of its legal fees and that pressure had to be put on that company to meet its contractual obligations to pay fees. 15 [89] Mr PT has consistently maintained that Mr BD withdrew as counsel for MOH Ltd in the trial of the EFI Ltd litigation, 12 days before those proceedings were due to commence. He is clearly referring to Mr BD s to him of 30 June [90] However, I regard the 3 May as establishing the date on which Mr BD withdrew as counsel to appear at the trial of those proceedings. In that , Mr BD referred to Ms L conducting the trial under his oversight. He repeated that in the second of his two s to Mr PT two days later, on 5 May [91] In my view also, Mr PT s to Mr BD on 16 July 2016 contained an acknowledgement by Mr PT that Mr BD withdrew as counsel on 3 May He said You offered after withdrawing yourself to fix [Ms L s] fee at 22k This is a clear reference to the 3 May . [92] Correspondence sent by Mr BD to Mr PT after the 3 May , and before the commencement of the trial on 11 July 2016, included confirmation that Mr BD would not be appearing as counsel for MOH Ltd during the trial, that Ms L would appear and that Mr BD would provide assistance before and during the trial. [93] Mr BD s to Mr PT of 30 June 2016 (a Thursday) does no more than repeat his, by then, regular concerns about unpaid fees. He asked Mr PT to provide comfort over fees by the following Monday (4 July 2016) or we will cease work 15 Further below I discuss the letter of engagement and accompanying documents, which set out MOH Ltd s contractual obligations.

17 17 officially on [Monday 4 July] at which point you will need to find new lawyers and seek an adjournment. [94] It is clear that MOH Ltd was not required to find new lawyers. Mr BD, Ms L and Mr B, all continued to do legal work after 4 July 2016 on behalf of MOH Ltd, in relation to the EFI Ltd litigation. [95] Moreover, the fees in advance that Mr BD had requested in his 3 May (and subsequently), were not paid by MOH Ltd. In addition, there were outstanding fees when the trial of the EFI Ltd litigation began on 11 July Termination of a retainer? [96] In withdrawing as counsel for MOH Ltd in the EFI Ltd litigation on 3 May 2016, did Mr BD terminate the retainer with that company? [97] Rule 4.2 relevantly provides: Duty to complete retainer 4.2 A lawyer who has been retained by a client must complete the regulated services required by the client under the retainer unless (a) (b) (c) the lawyer terminates the retainer for good cause and after giving reasonable notice to the client specifying grounds for termination Good cause includes (b) the inability or failure of the client to pay a fee on the agreed basis or, in the absence of an agreed basis, a reasonable fee at the appropriate time: A lawyer must not terminate a retainer wall withdraw from proceedings on the ground that the client has failed to make arrangements satisfactory to the lawyer for payment of the lawyer s costs, unless the lawyer has (a) (b) had due regard to his or her fiduciary duties to the client concerned; and given the client reasonable notice to enable the client to make alternative arrangements for representation A lawyer who terminates a retainer must give reasonable assistance to the client to find another lawyer.

18 18 [98] A lawyer may terminate their retainer with a client if fees are not paid. This includes interim invoices sent during a retainer that remain unpaid, as well as fees requested in advance. [99] However, before a lawyer terminates a retainer on the basis that their fees cannot be met, they must have due regard to [their] fiduciary duties to [their] client and give their client reasonable notice to enable [that] client to make alternative arrangements for representation. [100] As well, once a retainer is terminated a lawyer must provide reasonable assistance to [their] client to find another lawyer. [101] In Ethics, Professional Responsibility and the Lawyer, the learned authors say: 16 When the lawyer has a discretion to terminate the retainer, he or she must take into account the prejudice that will flow from the termination. Indeed, whenever a lawyer terminates a retainer, the lawyer must act to minimise the prejudice to the client. More explicit provision exists in respect of a lawyer who has terminated (or seeks to terminate) for non-payment of fees. In that case, the lawyer must show that he or she [has complied with the requirements of rule 4.2.3(a) and (b)]. If the client would be unable to obtain legal assistance before a hearing or other important event (such as a scheduled meeting) where assistance was required, the lawyer should refrain from terminating the relationship. The prejudice may be minimised when the lawyer assists the client by contacting and meeting with another lawyer and handing over and explaining documentation It goes without saying that it would be wholly inappropriate for a lawyer to threaten the termination of a retainer preceding some important trial date (or other date such as an arbitration or mediation) simply to ensure fees are paid. [102] In considering whether Mr BD terminated the retainer with MOH Ltd, it is important to consider the letter of engagement with that company, as well as the other documents referred to in that letter. The letter is dated 3 July [103] The letter of engagement is written on Mr BD s law firm s letterhead. The opening paragraph reads: We will be pleased to act for [MOH Ltd] in this matter. [104] Other relevant sections in that letter include: Services to be provided: 16 Duncan Webb, Kathryn Dalziel and Kerry Cook Ethics, Professional Responsibility and the Lawyer (3rd ed, LexisNexis, Wellington, 2016) at [5.8.3].

19 The following is a summary of the legal services we expect to be providing you: To defend legal proceedings brought by [EFI Ltd] s and others seeking to invalidate your company s compensation proposal; and 19 To bring a claim against EFI Ltd for business destruction; and Assist you with seeking litigation funding; All incidental attendances. Responsibility for services: The names and status of the people in our firm who will work on or have overall responsibility for the services we provide you are: [Mr BD] [Ms L] [Mr B] Partner Associate Solicitor [105] The letter of engagement refers to attachments, described respectively as information for clients and standard terms of engagement. However, due to a clerical oversight those attachments were not provided to MOH Ltd along with the letter of engagement. [106] As part of his complaint against Mr BD, Mr PT referred to Mr BD s failure to provide this additional information. [107] Mr BD s response to this issue of complaint was that its omission from the letter of engagement was an administrative oversight. He noted that MOH Ltd instructed another lawyer in his firm to act in a related employment matter (that lawyer being the firm s employment specialist) and that a separate letter of engagement including the two attachments was provided to MOH Ltd on 23 July 2016 approximately three weeks after Mr BD s letter of engagement. [108] The Committee accepted Mr BD s explanation and took no further action on this issue of complaint, and on behalf of MOH Ltd Mr PT is not pursuing the issue on review. He acknowledged to Mr Hesketh that MOH Ltd received the two attachments in the separate letter of engagement dated 23 July [109] I am satisfied that the terms of engagement and information for client attachments form part of contract of retainer described in the letter of engagement Mr BD provided to MOH Ltd on 3 July 2015, and which was signed by Mr PT on 10 July 2015.

20 20 [110] The 3 July 2015 letter of engagement refers to those attachments, and they were received by MOH Ltd three weeks later, on 23 July 2015, under cover of a separate letter of attachment in the employment matter. [111] MOH Ltd had not asked for copies of them before 23 July 2015, and it had copies after that date. It must have been apparent to Mr PT that those two attachments formed part of MOH Ltd contract of retainer in relation to the EFI Ltd litigation. [112] The standard terms of engagement contained information about fees, including the following: 2.9 Payment: Invoices are payable within 14 days of the date of the invoice, unless alternative arrangements have been made with us Pre-payment and deduction: We may ask you to pre-pay amounts to us for our fees, disbursements and expenses. You authorise us: a b to debit against amounts pre-paid by you; and to deduct from any funds held on your behalf in our trust account any fees, disbursements and expenses or disbursements for which we have provided an invoice. [113] As indicated, the letter of engagement was signed by Mr PT on 10 July [114] Mr BD s law firm is not incorporated; it is a partnership. Mr BD is a partner in the law firm. [115] Conventionally (but not exclusively), lawyers practising in partnership as a law firm comprise partners and other employed lawyers (be they associates, senior or junior solicitors or graduates), legal executives (if any) and support and secretarial staff. [116] The operation of lawyers in a partnership means that although a client may approach and instruct an individual within the firm to act for them on the basis (say) of the individual s reputation, in reality the resources of the firm as a whole get behind and support the client through the individual lawyer they have instructed. [117] A client will invariably have the benefit of a team, headed by a partner, working on their behalf. Within that team, individuals will have responsibility for aspects of the client s matter. [118] A feature of any partnership, be it a partnership of lawyers or otherwise, is that partners are jointly and severally liable. In practical terms, for a partnership of lawyers

21 21 this means that if partner A is negligent, partners B, C and D can be held to account as a group or individually for partner A s negligence. [119] Conventionally, when a person instructs a lawyer who is either a partner in or employee of a law firm operating as a partnership, the contractual arrangement to pay fees is between the client and the law firm. Invoices are issued in the name of the partnership, and the fees are banked in the partnership s bank account. A partnership agreement will generally make provision for how income earned from fees is to be distributed between the partners. [120] If a client fails to pay their fees, and proceedings are issued, the plaintiff will be the partnership suing as a firm. [121] It follows from the above, that a retainer between a client and a lawyer in a law firm (operating as a partnership) is a contract between that client and the partners in the law firm. The terms of that contract of retainer will be contained in any or all of a letter of engagement, terms of engagement or information for clients. [122] It will generally be a term of that contract of retainer that named individuals within the partnership (including non-partner employees) will have responsibility for managing the client s file and carrying out the legal work on behalf of that client. [123] In a disciplinary context, however, it is the conduct of individual lawyers who have carried out work on behalf of the client that will be examined, rather than the conduct of other partners in the partnership who may not have had any involvement in the client s matter. 17 Complaints may only be progressed against a named lawyer and/or and incorporated law firm. 18 [124] The letter of engagement, terms of engagement and information for clients sent to MOH Ltd followed the above-described conventional approach for the contract of retainer. The references in the documents to the collective we and our (e.g. we will be pleased to act, the basis on which our fees will be calculated ) are clearly intended to be references to the law firm as a partnership. To put that issue beyond doubt, the information for clients contains the following: 5. Persons responsible for the work The names and status of the person or persons who will have the general carriage or overall responsibility for the services we provide for you are set out in our letter of engagement. 17 The exception is the requirement in r 11.3 that employees are properly supervised; this inquiry can extend to all partners as employers whether or not they had direct involvement in the client s matter. 18 Lawyers and Conveyancers Act 2006, s 132.

22 22 [Emphasis added] [125] The firm s standard terms of engagement said: 4.2 We may terminate our retainer in any of the circumstances set out in the Law Society s Rules of Conduct and Client Care for Lawyers. If we stop work because payment is not received by us within 14 days of issue of our invoice we will have no liability for any loss suffered by you when work is stopped for this reason. 4.3 If our retainer is terminated you must pay us all fees due up to the date of termination and all expenses incurred up to that date. [126] In my view, the contract of retainer to act in the EFI Ltd litigation was between MOH Ltd on the one hand and Mr BD s law firm on the other, with Mr BD, Ms L and Mr B to have the overall responsibility for the legal work. Termination of the retainer would result in Mr BD s law firm, and anyone who was a partner in or employed by that law firm, ceasing to act for MOH Ltd. [127] There is no dispute that the trial of the EFI Ltd litigation was conducted by Ms L with assistance from Mr B. Mr BD said, and I accept, that he provided oversight of and assisted Ms L and Mr B in the lead-up to and during the trial itself. [128] The difference between what was anticipated when the retainer commenced in July 2015, and what ultimately occurred, is that Mr BD did not appear as counsel at the trial of the EFI Ltd litigation. [129] However, for the reasons I have endeavoured to set out above, I do not consider that the contract of retainer between MOH Ltd and Mr BD s law firm was terminated when Mr BD withdrew as counsel for the trial of those proceedings. [130] I now turn to consider whether any conduct issues arise for Mr BD in withdrawing as counsel appearing in those proceedings. Does Mr BD s withdrawal as counsel for MOH Ltd raise conduct issues? [131] The contract of retainer between MOH Ltd and Mr BD s law firm appears to have come to an end on or shortly after 23 August On that date, Mr PT raised an issue with Mr BD s managing partner about the initial fixed-fee arrangement and indicated that unless that issue could be resolved a complaint to the New Zealand Law Society would follow. The Complaints Service received Mr PT s complaint on 31 August [132] In argument before Mr Hesketh, Mr PT referred to a calculation error in the Committee s determination. The error, which I acknowledge is clear, is found in the

23 23 Committee s summary of Mr BD s invoices to MOH Ltd between 13 August 2015 and 21 July [133] The Committee set out the details of all of Mr BD s invoices to MOH Ltd in a table, with columns for date, fee, GST, disbursements and a total for each invoice. The grand total was $228, [134] The line in the Committee s table setting out the details of Mr BD s third invoice, dated 30 September 2015, records a fee of $6,942; GST of $1,041.55; disbursements of $40.25 and a total of $40, [135] Clearly the total should have been $8, It would appear that the Committee has added the totals of Mr BD s first invoice ($34,672.23) and his second invoice ($5,522.30) and arrived at the figure of $40, [136] The difference between the two amounts is $32, This error produced an incorrect grand total. Instead of $228,902.20, the grand total of Mr BD s invoices to MOH Ltd over that period was $196, [137] As indicated, this is an obvious arithmetical error in the Committee s determination. [138] As well as pointing out the Committee s error, Mr PT argued that Mr BD s trust account records were also incorrect as to fees paid as against invoices rendered. [139] As I understand Mr PT s argument, he initially said that both errors are relevant to the question of whether MOH Ltd owed fees or was in credit as at 30 June 2016 being the date on which he says that Mr BD withdrew as MOH Ltd s lawyer. [140] At the hearing before Mr Hesketh on 27 February 2018, Mr PT said that MOH Ltd was then $4,000 in credit; on the other hand, Mr BD said that his firm s trust account records revealed that MOH Ltd owed fees of about $18,000. [141] However, at the hearing on 17 April 2018 Mr PT conceded that MOH Ltd owed fees at 30 June His written submissions on behalf MOH Ltd dated 26 April 2018 said that by the time the trial began on 11 July 2016, MOH Ltd was in credit in the amount of $ [142] It is clear to me that when Mr BD sent his to Mr PT on 3 May 2016 and indicated that he would not be appearing as counsel at the trial of the EFI Ltd litigation, 19 Standards Committee determination, above n 5, at [16].