A tribunal has found that two Nelson lawyers' handling of an estate case was a "serious failure". Stock photos / 123RF
A tribunal has found that two Nelson lawyers' handling of an estate case was a "serious failure". Stock photos / 123RF
Two Nelson lawyers have been found guilty of misconduct for their handling of a complicated family estate matter.
The New Zealand Lawyers and Conveyancers Disciplinary Tribunal has described the actions of Graeme Downing and Alexander Reith as a "serious failure" in a case brought by the Nelson Standards Committee.
The tribunal made findings of misconduct against each lawyer, and of unsatisfactory conduct against Downing.
Central to the case was a deed signed by a client without her proper understanding, which put her house at risk of mortgagee sale to recover debt for unpaid legal bills.
A tribunal has found that two Nelson lawyers' handling of an estate case was a "serious failure". Stock photos / 123RF
The $44,000 owed was said to be the firm's largest outstanding client debt.
The two lawyers charged with misconduct were the lawyer who acted directly for the client on her mother's estate, and the legal firm's partner who stepped in to assist.
The complainant had been left out of the estate's will and her sister, who was the personal representative of the estate, refused to apply for formal recognition as administrator.
It was made more complicated by the complainant's brother who had allegedly taken large sums from the estate by means of property that he and his mother, who suffered from Alzheimer's in her later years, owned jointly.
The complainant who was unable to afford legal fees initially made payments by borrowing from a friend.
In December 2016, a settlement offer of $20,000 was received from the lawyer acting for the complainant's sister, but it was rejected when Downing advised his client could look to recover around $100,000 based on the estate's worth which was in the region of $600,000.
It was later confirmed that the net value of the estate was a little under $250,000.
A meeting to review the complainant's affidavit in December 2018 included discussions about unpaid fees, and it was revealed her only asset was her home, that she had "very limited income" and debts of over $60,000.
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 in proceedings that were well underway.
The deed provided authority for the firm to not only lodge a caveat against her property but also take out a second mortgage against it.
"Ms L did not understand the implications of her granting authority for the registration of the mortgage or that could lead to the eventual sale of her property, in the event of default on her part," the tribunal noted.
It 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.
Reith 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.
A judicial settlement conference was fixed for the client to seek financial support from the will, through a Family Protection Claim in Wellington in November 2019.
The complainant was sent an email reminding her of unpaid fees which totalled $44,000.
She was asked to pay $30,000 within seven days, or find someone else to represent her.
When the complainant told Reith she couldn't make the payment, 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".
It also said Reith being "misinformed by gossip" over the client's actual financial position was "reprehensible".
The woman represented herself at the judicial settlement conference, but no settlement was reached. The complainant's friend then stepped in with a $5000 payment, to stave off threatened recovery action against the complainant's home.
The complaint that led to the charges against the lawyers was triggered by a legal notice over the property served on the woman the day after the payment.
The woman received legal aid for different lawyers who represented her on the family protection action matter.
She recovered only 10 per cent of the estate – about $23,000. A High Court appeal was unsuccessful, leaving her with costs that greatly exceeded the recovery.
In September last year, after the last charge against the lawyers was filed, the mortgage was discharged against the title on the complainant's home and the $5000 payment made by the woman's friend was refunded.
The tribunal found each lawyer guilty of misconduct on two of three charges, and Downing guilty on the third charge of unsatisfactory conduct, for his failure to recognise the client's eligibility for legal aid and his advice on litigation risk.
A decision on penalties had not yet been released.
