Up against an old boys' network

When David Watt appeared in court his appearance had changed dramatically from the clean-shaven, upright-looking man Valda Hoare remembered. Picture / Kenny Rodger

When your lawyer overcharges, who you gonna call? The case of David Watt, convicted of fleecing an elderly widow, raises questions about the law profession's ability to police itself.

On a wall in Valda Hoare's lounge is a painting of North Piha, from the vantage point of the beachfront home she shared for 10 years with Len, her second husband. The painting conveys something of the west coast's untamed atmosphere, a brooding sky over boiling surf and bushclad Te Waha Pt.

When Len died in 1994 his ashes were scattered on the point. Events since his funeral have lent the painting even greater poignancy.

The Piha home was to be Valda's security in later life. Len's will stated that Valda, now 83, could stay on or sell the home and use the proceeds to buy elsewhere. Any money left over would go into an interest-earning account with the BNZ. If she remarried, or when she died, the assets would pass to Len's five sons from his first marriage.

The apparently straightforward will was drawn up in 1988 by lawyer David Watt, of Collinge, Watt, Henare. When Len died, Watt, by then a sole practitioner, became trustee of the estate. He had a reputation as conscientious and capable. He didn't come cheap, charging $250 an hour plus GST from his office in the old district court legal belt. But he was "charming, upright, clean-shaven", Valda recalls.

Three years after Len's death, she decided to move to Picton to be near one of her daughters. The sale of the Piha property for $347,500 and purchase of a house in Picton left a $100,000 nest-egg to go into the BNZ.

But when, in March 2001, Valda's family moved to Hamilton she decided to go with them. She contacted Watt to find out how much was available. He told her there was nothing left. He had spent the $100,000 surplus from the Piha sale on "estate administration" and had taken out a $60,000 mortgage against Valda's Picton home without her knowledge and used it to pay himself. He had never opened a BNZ account, instead lodging the money with his own bank.

He sent no accounts or statements - Valda says after she was settled in Picton all he sent her was a Christmas card. "He'd seemed such a charming, upstanding man. I suppose they think when you get old you get senile and they can do anything."

More than seven years after the offending began, Watt was sentenced this week to 15 months' jail, with leave to seek home detention, after offering to repay $60,000. He was found guilty in February of defrauding the trust. Judge Rod Joyce described him in his written verdict as "artful". Len Hoare's sons call him the artful dodger.

For more than three years, Watt found excuses to create work for himself and charge enormous amounts of time for doing very little. He charged for writing reports which no one saw. He would consult other lawyers, charge the estate for their fees, and bill for his time mulling over their advice.

Most disconcertingly, he was able to fleece the estate despite repeated complaints to the Auckland District Law Society - and the Hoare beneficiaries were not the only ones complaining about David Watt's fees. His mother-in-law went to the society after he charged her $14,000 for conveyancing on a $330,000 house sale, then threatened her with the Small Claims Tribunal when she refused to pay. A bank officer also complained of overcharging for conveyancing. When the society upheld the complaint and reduced the bill, Watt appealed, unsuccessfully, to the High Court.

There may have been other over-charging complaints but the law society cannot confirm or deny, for privacy reasons.


Complained


With the Hoare estate, Watt's antics might have been nipped in the bud when, well before the Piha sale, he sent Valda Hoare a bill for $5800 (even though her husband had paid for his funeral) and she complained to the society. But she found the complaints system daunting and ended up paying.

The episode at least alerted Len Hoare's five sons from his first marriage - Murray, Greg, Steve, Darren and Brendan. Auckland-based Greg and Brendan began to ask questions. They engaged veteran trusts lawyer Brian Kennedy, who found the will poorly drafted and unclear about what would happen to interest earned on the surplus from the Piha sale. They sought a copy of the trust deed and the accounts but little information was forthcoming.

The sons, who range in age from 56 to 42, were brought up by their school teacher father to respect professionals. He also taught them that, if they believed in something, to persevere.

"Dad had always wanted to live on the coast," says Greg. "To see virtually half his life's work stolen ... I guess we set out to restore Dad's honour."

They were embarking on a seven-year campaign that would strain marriages, test brotherly bonds and distract them from careers. They were up against not just a crooked lawyer but a professional body which appeared impotent - or indifferent.

Like many professions, lawyers like to regulate themselves - risking public perception of a cosy club lacking objectivity. In the case of David Watt, the society failed to join the dots. Ironically, it blames the law for its lack of robustness - arguing that the 1982 Law Practitioners Act limits its ability to discipline members.

With negligence claims, lawyers must be found guilty in court before the disciplinary process kicks in. With fee complaints, the society appoints a volunteer cost reviser (a lawyer with specialist knowledge of the field) to assess whether the fee seems reasonable compared to the work done. But under the 1982 act, revisers cannot investigate the legal basis of the fees.
"It's incredibly hard to determine what constitutes a proper fee," says the Auckland society's president, Gary Gotlieb.

The society's 2004 annual report points to the struggle facing clients alleging overcharging. Of 208 complaints about fees, bills were reduced in only 20 per cent of cases (although about 30 cases were unresolved).

When, a year after asking, the sons' lawyer Brian Kennedy was finally supplied with the accounts, he complained to the society, which launched a review of Watt's fees. At a three-hour hearing in December 1998, reviser Janice Urlich examined nine bills amounting to $43,050. Seven months later, she released a decision reducing the total by $8300, to $34,750.

Looking at Watt's records, she found that perhaps a third of his time was put down to the sons' queries and dissatisfaction with the will. "It appears clear from the firm's files that [the sons] have in effect been the author of their own misfortune," she concluded.

It took another seven years for the sons to be vindicated. Judge Joyce found Watt was recording "astonishing amounts of time for little, if any, useful return" and had "created problems to supposedly solve".

In thinly veiled criticism of the law society, Judge Joyce said Watt was lucky to "get off so lightly" at the cost revision. "A perusal of the bill narratives, a noting of the surprising amounts of time allocated to even simple or menial tasks, and the recognition of what had actually been going on in the estate, might well have justified the observation that Mr Watt was already making a real meal of things."


After the cost revision, Kennedy tried another route to have the law society deal with Watt. Kennedy was an old-school lawyer: tenacious, colourful and sharp as a tack - the polar opposite of Watt. He was not a fan of time recording but billed by an old legal maxim, "The feel of the file".

He clearly upset Janice Urlich at the December 1998 hearing. She found his estimate that Watt's work "could have been done for $5000" (bills totalling $43,000 were then up for review) to be "most unhelpful, if not mischievous". Estate experts contacted by the Weekend Herald back Kennedy's ballpark estimate.

Kennedy wrote three times to the society between October 1999 and February 2000, complaining that Watt's preparation of the will was negligent and that his handling of the estate had brought the profession into disrepute - both grounds for disciplinary proceedings. But society investigating officer Neil Horne replied that a disciplinary tribunal hearing usually followed adverse court findings and the district court was the place to pursue a negligence claim.

Horne wrote that the overcharging issue was "not in percentage terms within the parameters for concern from a professional standards point of view". He restated Urlich's conclusion that the sons were the authors of their own misfortune.

After Kennedy's third letter, the case was referred to the society's complaints committee which found the matter was "not as clear-cut as you suggest" and closed the file.


A lie


The beginning of the end came in March 2001 when Valda Hoare notified Watt of her intended move to Hamilton. She wondered how much the Piha surplus, which she believed to be clocking up interest in the BNZ, had grown. "He told me that the boys had taken him to court and he had drawn it out to pay them. The boys had never taken him to court - it was a lie. I felt sick. I didn't speak to him after that."

She engaged Blenheim firm Gascoigne Wicks, which laid a complaint with the New Zealand Law Society and demanded a full refund. When the sons heard what had happened, they went to the police. Watt, meanwhile, took the defensive measure of asking the Auckland society to undertake a second cost revision. Only he appeared at the October 2004 review; neither the beneficiaries nor their lawyers were aware of it.

Reviewer David Rishworth examined 11 bills totalling $71,550. He criticised the time spent on estate administration and Watt's reluctance to make the most basic decisions without seeking advice. But, with the sons and their lawyer absent, Rishworth fell back on Janice Urlich's acceptance of Watt's line that he was protecting himself against the "aggressively antagonistic attitude" of the beneficiaries and their solicitors.

He knocked $17,000 off the bills, leaving $54,500 charged to the estate for the June 1998-February 2001 period.

"The Law Society effectively gave Watt approval to continue stealing," says Greg Hall (he changed his surname to spare his daughter from being bullied at school). But police were finally taking an interest. When two sons complained to the police in 1998 they were referred to the law society. But in mid-2001, Murray Hoare got a different reception when he spoke to forensic accountant Peter Preece of the Auckland fraud squad. When Preece and prosecutor Mike Heron obtained Watt's carefully scripted files they saw enough to bring a rarely used charge of criminal breach of trust.

"We would normally refer people to the law society if they were just complaining about fees. In this instance it was not just a question of fees but fees he should not have been charging the estate for," says Preece. "A lot of the work related to the preparation of the will when Watt was a lawyer, not a trustee. There was nothing to say the brothers were chasing the surplus. If they were not doing that, should the costs incurred be paid [by the estate]?"

It took nearly three years to bring a prosecution. In November 2004, just before depositions, Brian Kennedy died, aged 79. By then, says Greg Hall, the sons "didn't have much faith in [other] lawyers" and represented themselves.

In court, defence counsel Paul Davison QC portrayed Watt as a man who laboured over issues and saw criticism where none existed. An expert witness, Robert Eades, believed Watt had "rather lost his way" in sole practice. Judge Joyce described him as of "quite individual disposition".

He made a hesitant, unconvincing witness, offering little to explain his greed. It's known that a relationship developed between Watt, a father of three, and his secretary, and his marriage broke up, but he denied being under financial pressure when he took out the Picton mortgage.

When she saw him in court, Valda Hoare scarcely recognised the lawyer she remembered. "He looked as if he had shrunk - his clothes were big on him, and he had a beard."

Peter Preece told the Weekend Herald: "It's easy to jump to the conclusion he didn't have many clients, they had money, he decided he was going to have it."

Gary Gotlieb says the Watt case highlights acknowledged flaws in the system for dealing with complaints against lawyers. These flaws have been addressed in a law change ushering in a more robust, independent complaints process and doing away with cost revision. But the new system will take two years to introduce.

"The system probably was open to abuse. If [a lawyer] came along saying, 'I worked all those hours and they were really important' you had to accept what he was saying. It's not your role to make a judgment whether this person is a dishonest lawyer.

"In fairness to the cost reviser, she didn't have the greater picture we are now all aware of. Cost revisers are volunteers who approach it in good faith, expecting the lawyer to approach it in good faith."

Law Society executive director Margaret Malcolm says the fact that Watt's overcharging went to cost revision and the bills were reduced made the case difficult to deal with.

"To take a negligence matter to prosecution you have to be satisfied it is so gross it reflects on the lawyer's fitness to practise," she says.

"It is unfair to evaluate the 1998 cost revision with the benefit of hindsight after a police investigation," she adds, which is at odds with Judge Joyce's comment that the clues were there at the time.

Malcolm says the case also exposed ambiguity over the reporting requirements for trust solicitors. As for the second cost review - held without the sons or their lawyer - she says notification went to the wrong address.

Eight years after she sold her Piha waterfront home, Valda Hoare lives in a fibrolite cottage at the end of a right-of-way next to a vacant house in Te Rapa, behind the light industrial belt. Sitting staring out of the ranchslider, faraway eyes betray her despondency.

"It's like a nightmare - not that I will suffer so much. It's his family, the boys. Emotionally, it's very hard on you. You think about it all the time."

She is conscious of the quality and style of home she might have expected with the proceeds from Piha.

"You never know what's going to happen.

"You do wonder: who else? Or is it just old ladies they pick on?"

For Len Hoare's five sons, the sentencing reinforced their verdict that they were up against an old boys' network. The brothers regret the toll on their families and are bitterly disillusioned with the law profession.

They are angry, not just with Watt but with "those who knew and condoned his efforts".

"Watt dominates my physical, mental and emotional space at the expense of my family," wrote Brendan in his victim impact report. "I'm exhausted by it all. I have boxes of files, a computer folder full of letters, phone bills ... He really should not be in my headspace."

Greg Hall believes if the law society had "nipped it in the bud straight away it would have been cleared up. It appears that the lawyers' fee structure has to be protected at all costs."

But the brothers must go back to the law society to seek compensation from the lawyers' fidelity fund.

Hopefully, it will be decided not on the basis of a cost revision but on the feel of the file.