Two lawyers have been fined and censured after they asked a client to sign a deed without her proper understanding. Photo / 123RF
Two lawyers have been fined and censured after they asked a client to sign a deed without her proper understanding. Photo / 123RF
The professional failures of two Nelson lawyers have cost them a total of $66,000 in fines, compensation and costs.
Graeme Downing and Alexander Reith have also been censured for their treatment of a client, described as a "serious failure" during a complicated family estate matter which left her "stressed" and "bewildered".
Central to the case was a deed signed by the client, who cannot be named, without her proper understanding, which put her house at risk of mortgagee sale to recover debt for unpaid legal bills.
The $44,000 owed was said to be the firm's largest outstanding client debt.
The tribunal said failure to ensure the complainant received independent advice on the Deed of Acknowledgement of Debt, which enabled the registration of a mortgage to the firm, was among the most serious failures in the case.
It accepted it was a "one-off" situation, being the first time these practitioners had asked a client to complete such a deed. It also accepted that while serious, their action was neither dishonest nor malicious.
However, the breach of the duty to complete a retainer, and the professional failures to the client in respect of advice given, were also serious failings.
Downing acted directly for the client on her mother's estate and Reith, the legal firm's partner, stepped in to assist.
A client was left "stressed" and "bewildered" by the actions of two lawyers who have been fined and censured. Photo / 123RF
He did not take an active role in the matter until October 2019, by which time the complainant had left to live with family in Australia.
The complainant, who was unable to afford legal fees, initially made payments by borrowing from a friend.
Matters progressed until some time later security for the unpaid fees was sought.
A Deed of Acknowledgement of Debt was shown to the complainant who signed it on the understanding that it was the only way she could secure the ongoing services of her lawyer.
The client was said to have not understood the implications of this, nor that it could lead to the eventual sale of her property, in the event of default on her part.
The tribunal considered she had put her house at risk of mortgagee sale from the moment the deed was signed, which was incompatible with the lawyer-client relationship continuing.
When the complainant told Reith she couldn't make the payment after further reminders of the outstanding bill, he advised her to get a bank loan, but it was declined. Reith then withdrew his services.
The tribunal said the manner in which it was done constituted a "reckless, if not a wilful breach of the relevant rules concerning termination of a retainer".
While the tribunal accepted the Nelson Standards Committee's submission that the misconduct findings were serious, they were not however at a level that justified suspending the pair from practice or striking them off.
A "stern disciplinary response" was nevertheless warranted, and that a penalty should be focused on deterrence and compensation to the complainant.
There were two aggravating features in relation to Reith, including two previous unsatisfactory conduct findings against him in 2014.
While historical, and bearing no resemblance to the current situation, the tribunal did note they "demonstrated what might be described as a pattern, whereby various different aspects of Mr Reith's practice have now suffered from professional failings".
Reith declined to comment when approached by Open Justice. Downing did not respond to a request for comment.
The tribunal said Downing's previous finding of unsatisfactory conduct in October 2018 was similar to the latest case, in regard to his failure to provide balanced or "at worst" advice on the merits of the claim.
The second aggravating feature was the belated action to remedy the situation of the mortgage being held over the complainant's property.
It was only discharged, and a $5000 payment refunded, in late September 2021, in the face of these latest proceedings.
The third factor was his apparent lack of insight or remorse about his actions.
"We consider that Mr Downing's acceptances of [some of] the charges [and most of the facts] was somewhat begrudging.
"On the other hand, we considered that Mr Reith did sincerely regret his part in these actions and of course his involvement was for a much shorter period."
Points in the pair's favour included they had written off the balance of almost $40,000 in outstanding fees.
Downing was fined $10,000 and Reith $7000, and they were ordered to jointly pay a $10,000 compensation order for emotional harm caused to the client.
They were also ordered to jointly pay $30,000 towards the Standards Committee's costs plus reimburse just over $9000 to the New Zealand Law Society for the tribunal's costs.
In a strongly worded censure, the tribunal said Downing and Reith had let their client down in a serious manner, and that the disciplinary process had been a chastening experience for each of them.
"And this censure, which will remain on your permanent record, will be a reminder to ensure that your conduct is not repeated."
