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NR v WP [2018] NZLCRO 109 (30 October 2018)

Last Updated: 29 November 2018

DECISION

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

Introduction

[1] Mr NR has applied for a review of a decision by the [City] Standards Committee [X] (the Committee) to take no further action in respect of his complaint concerning conduct on the part of Mr WP.

Background

[2] Mr NR argues that Mr WP improperly lodged a caveat against dealings in relation to land that was subject to an agreement for sale and purchase (the agreement). He considers Mr WP’s conduct was unsatisfactory and he should pay for the inconvenience the caveat has caused to Mr NR and his interests.

[3] Mr WP acted for [Company A].

[4] Mr NR is connected with [Company B]. [Company B] became [Company A]’s nominee under the agreement pursuant to a Deed of Nomination signed 1 August 2016 (the Deed).

[5] [Company A] and [Company B] lodged caveats against the title to the land, and each applied to the High Court to preserve its caveat.1 The High Court allowed [Company A]’s caveat to lapse, but sustained [Company B]’s. Mr NR relies on the High Court decision as support for his complaint that Mr WP registered the [Company A]’s caveat without a lawful basis in contravention of r 2.3 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (the Rules).

[6] For the reasons set out in its decision, the Committee rejected Mr NR’s concerns and decided further action in relation to Mr WP’s conduct was inappropriate.

[7] Mr NR disagrees and has applied for a review.

Application for review

[8] Mr NR repeats his complaints in his application for review. He considers Mr WP’s conduct was reckless, irresponsible and unsatisfactory. On behalf of [Company B], he seeks costs.

[9] Mr WP denies professional wrongdoing, and adheres to the explanation he gave to the Committee, including that he sought advice from two senior counsel before registering the caveat.

Review Hearing

[10] Mr NR attended a review hearing in [City A] on 25 October 2018. Mr TT attended as counsel for Mr WP.

Nature and scope of review

[11] The nature and scope of a review have been discussed by the High Court, which said of the process of review under the Act:2

... 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

1 [Company A] v [Company B] [XXXX] NZHC XXX

2 Deliu v Hong [2012] NZHC 158, [2012] NZAR 209 at [39]–[41].

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.

[12] More recently, the High Court has described a review by this Office in the following way:3

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.

Discussion

[13] Although he sought to expand his complaint to encompass more general concerns on review, in his complaint Mr NR alleged specifically that Mr WP had breached r 2.3. Mr NR says Mr WP did not use the caveat process for a proper purpose and that he used that process for the purpose of causing unnecessary distress and inconvenience to [Company B]’s interests and occupation.

[14] That rule is at the centre of the complaint and this review. It says:

A lawyer must use legal processes only for proper purposes. A lawyer must not use, or knowingly assist in using, the law or legal processes for the purpose of causing unnecessary embarrassment, distress, or inconvenience to another person’s reputation, interests, or occupation.

[15] The footnote to the rule lists several examples of conduct that might breach the rule including:

...registering a caveat on a title to land knowing that (or failing to inquire whether) there is not a “caveatable interest” on the part of the client to be protected...

[16] The authors of Professional Responsibility in New Zealand refer to a comment by the Court of Appeal in Moevao v Department of Labour, a decision about abuse of a court process, for assistance in understanding the purpose of r 2.3. The Court of Appeal said:4

The concern is with conduct on the part of a litigant in relation to the case which unchecked would strike at the public confidence in the Court’s processes and so diminish the Court’s ability to fulfil its function as a Court of law. As it was put by Frankfurter J in Sherman v United States [1958] USSC 87; 356 US 369, 380 (1958): “Public

3 Deliu v Connell [2016] NZHC 361, [2016] NZAR 475 at [2].

4 Moevao v Department of Labour [1980] 1 NZLR 464 (CA) at 482.

confidence in the fair and honourable administration of justice, upon which ultimately depends the rule of law, is the transcending value at stake...”

[17] In considering whether a lawyer has complied with r 2.3 it is necessary to consider whether the conduct, in this case registering a caveat, was an abuse of a legal process and done for an improper purpose. As the rule implies, an understanding of the lawyer’s motivations for using the legal process concerned is likely to assist in ascertaining whether that conduct was an abuse of process.

[18] The authors of Ethics, Professional Responsibility and the Lawyer propose the following test:5

When it is clear the action taken is intended not to affect any legal rights, but to achieve some collateral purpose, the action is inappropriate and an abuse of legal process. A lawyer should never be a party to such an abuse.

[19] The House of Lords in Ridehalgh v Horsefield say of the lawyer’s duty:6

It is ... one thing for a legal representative to present, on instructions, a case which he regards as bound to fail; it is quite another to lend his assistance to proceedings which are an abuse of the process of the court. Whether instructed or not, a legal representative is not entitled to use litigious procedures for purposes for which they were not intended, as by issuing or pursuing proceedings for reasons unconnected with success in the litigation or pursuing a case known to be dishonest, nor is he entitled to evade rules intended to safeguard the interests of justice, as by knowingly failing to make full disclosure on ex parte application or knowingly conniving at incomplete disclosure of documents.

[20] In determining whether something is an abuse of legal process lawyers should not necessarily fixate on the merits of an action. That position is consistent with the following statement of Lord Bingham MR in Ridehalgh v Horsefield:7

A legal representative is not to be held to have acted improperly, unreasonably or negligently simply because he acts for a party who pursues a claim or defence which is plainly doomed to fail.

[21] Dr Webb suggested the lawyer need only:8

turn his or her mind to the utility in the wider sense of the course of action proposed... a lawyer will never be guilty of misconduct for following a client’s instructions merely on the ground that the evidence put before the tribunal was not believable, or the argument made was wholly untenable... It is only where there is an aggravating factor over and above the hopelessness of the case that such actions will become misconduct.

5 Duncan Webb, Kathryn Dalziel and Kerry Cook Ethics, Professional Responsibility and the Lawyer (3rd ed, LexisNexis, Wellington, 2016) at 352.

6 Ridehalgh v Horsefield [1994] Ch 205 (CA) at 234.

7 At 233.

8 Duncan Webb “Conflicts of Interest” (paper presented to New Zealand Law Society Ethics for Litigators, July 2011) 27 at [41].

[22] Mr WP says he formed a view that [Company A] had a caveatable interest, checked that view with two senior counsel who agreed, and proceeded. Caveats may be lodged pursuant to s 137(1) of the Land Transfer Act which says that:9

Any person may lodge a caveat against dealings in any land or estate or interest under this Act if the person—

(a) claims to be entitled to, or to be beneficially interested in, the land or estate or interest by virtue of any unregistered agreement or other instrument or transmission, or of any trust expressed or implied, or otherwise; or

(b) is transferring the land or estate or interest to any other person to be held in trust.

[23] The basis on which the caveat was said to be lodged was that [Company A] had entered into an agreement for sale and purchase with the vendors and that was sufficient to support registering the caveat at the time it was registered. However, other dealings between [Company A] and [Company B] gave rise to some uncertainty as to [Company A]’s position so Mr WP checked with two senior lawyers. He says that, having checked the legal position, he acted in accordance with his client’s instructions and registered the caveat.

[24] Mr NR disagrees with Mr WP’s view of the law and that of the other two lawyers he consulted, and is critical of Mr WP for what he says are changes of position from that stated in the caveat, to reliance on clause 1.4(2) of the agreement which limited [Company A]’s ability to avoid liability to the vendor under the agreement, then to reliance on a buy-back agreement between [Company B] and [Company A].

[25] At its heart, Mr NR’s complaint is that Mr WP’s conduct is unjustifiable on any basis and adversely affected [Company B]’s interests.

[26] The Committee’s view was that Mr WP’s conduct was justifiable even if it did adversely affect [Company B]’s interests.

[27] Mr NR emphasises s 137(2)(b) of the Land Transfer Act 1952 which lists the information that a caveat registered under s 137(1) must contain, including that:

the nature of the land or estate or interest claimed by the caveator, which must be stated with sufficient certainty.

9 Land Transfer Act, s 137(1).

[28] The caveat was lodged by Ms EO of Mr WP’s office, and Mr WP accepts that he is responsible for its lodgement on [Company A]’s instructions on 16 November 2016. The estate or interest claimed by [Company A] is said to arise:

pursuant to an agreement for sale and purchase of real estate dated 1 August 2016 where the registered proprietor is the vendor and the caveator is the purchaser.

[29] Mr NR says that [Company A] assigned the benefit of the sale and purchase agreement to [Company B] pursuant to the Deed. End of story.

[30] That, however is not the end of the story because the dealings between [Company A] and [Company B] continued after they had signed the Deed. On 19 September 2016 Mr NR and Mr [RJ] of [Company A] agreed that [Company A] could have two months in which [Company A] could exercise the right recorded in the buy- back agreement to buy-back “the land contract”. [Company A] would refund the deposit [Company B] had paid and give it some other money.

[31] [Company A]’s right to buy-back the land contract was still available to it on 16 November 2016 when Mr WP lodged the caveat.

[32] Mr TT submits that at worst Mr WP made an error in his description of the nature of the interest claimed by [Company A]. It could be argued that Mr WP’s description was too brief, but that is an argument for a different forum.10 From the perspective of whether Mr WP’s conduct fell below a proper professional standard, the point is that [Company A] did not abdicate every possible claim to any interest whatsoever in the land that could possibly be argued as even potentially caveatable by signing the Deed. That is consistent with the High Court’s comment that [Company A] could have based the caveat on the buy-back interest.11

[33] Mr NR is critical of Mr WP for not having double checked before lodging the caveat. That criticism is baseless because Mr WP did double check. He formed his own view that his client may have had an arguable case, and he checked that view with two senior counsel before submitting the caveat for lodgement.

[34] It is not sufficient for Mr NR to say that because [Company A]’s claims did not succeed they should never have been made. Even if Mr WP had doubts about the

10 Mr TT referred to s 146 of the Land Transfer Act 1956 which says that a person who enters a caveat without due cause is liable for damages.

11 [Company A] v [Company B], above n 1, at [90].

likely success of [Company A]’s claims, if his instructions were to proceed, proceed he must.

[35] [Company B] was not Mr WP’s client but was a third party outside that relationship. Mr WP’s primary obligations were to his client [Company A]; he was obliged to protect [Company A]’s interests. Mr WP owed no similar obligations to [Company B]. He was obliged to treat it with integrity, respect and courtesy. There is no basis on which to find that he did not.

[36] There is no basis on which to say that Mr WP registered the caveat knowing that there was not a caveatable interest on the part of [Company A] to be protected. There might have been, and it is reasonable to assume that the opinions of the two other lawyers Mr WP consulted did not conclusively resolve the uncertainty for him. Checking with other lawyers before registering the caveat tends to undermine the proposition advanced by Mr NR that Mr WP’s conduct was reckless or irresponsible.

[37] There is no evidence of any lack of integrity or courtesy on Mr WP’s part. There is no evidence that supports the view that Mr WP lodged the caveat for an improper purpose. Mr WP says he registered the caveat to protect [Company A]’s interests under the agreement. There is no sound evidential basis on which to conclude otherwise.

[38] While it is accepted that the caveat was an inconvenience to [Company B], and also probably to the vendors of the land under the agreement, there is no reason to suspect it was unnecessary. When it was lodged, [Company A] had an interest under the buy-back agreement to protect. The evidence does not support the proposition that Mr WP used the caveat process for the purpose of causing unnecessary embarrassment distress or inconvenience to [Company B]’s interests.

[39] [Company B] and [Company A] did not share identical interests. The buy-back agreement was current and the vendors had served a settlement notice on [Company A] leaving it exposed to potential liability pursuant to clause 1.4(2) of the agreement. It was very much in [Company A]’s interests to resolve its position in relation to the vendors and [Company B], to protect any interests it may have acquired by signing the agreement and not lost by signing the Deed and negotiating the buy- back agreement. In circumstances of some uncertainty about the nature of the interest [Company A] claimed to be entitled to, Mr WP lodged the caveat. There is no basis on which to conclude that by doing so he contravened r 2.3, or that his professional conduct fell below a proper standard in any other respect.

[40] There is no reason to reverse or modify the Committee’s decision and no reason to order costs in favour of Mr NR. The Committee’s decision 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 30th day of October 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 NR as the Applicant

Mr WP as the Respondent Mr X as a Related Person Ms Y as a Related Person

[City]Standards Committee [X] The New Zealand Law Society