Lawyer found liable for unsatisfactory conduct

Legal oversight in trust case draws regulatory action

Lawyer found liable for unsatisfactory conduct

A lawyer, referred to as Mr D, has been found liable for unsatisfactory conduct following an investigation by a Standards Committee (the Committee). The inquiry revealed delays, inadequate advice, and inappropriate invoicing related to Mr D’s handling of trust matters for a client and her family.

Delay in acting on instructions

The issues began when Mr D’s firm was instructed by a client to remove two trustees of her trust and replace them with another individual. The firm was unable to locate the trust documentation, wrongly assuming the client had taken it. For eight months, the documentation remained missing, only to later be found within the firm’s possession. By the time the documents were located, the client had lost legal capacity, making it impossible to carry out her instructions. Despite this, the firm invoiced the client $640 for the work undertaken.

After the client’s passing, her son, Mr C, who was appointed a trustee under her will, approached Mr D for advice about the trust. Mr C opted to restructure the trust so that he and his brother, Mr F, would become trustees, with all other trustees retiring. This option was presented to Mr C as requiring minimal effort and not precluding other options in the future.

Misstep in legal advice

After the restructuring documents were prepared, Mr C identified a clause in the trust deed referring to a “restricted period.” This clause would take effect if the trust had only two discretionary beneficiaries as trustees, requiring a third independent trustee to avoid restrictions on distributions. Mr C queried the issue with Mr D, who confirmed that a third trustee would need to be appointed, contradicting the initial advice given.

The Committee found that Mr D’s advice failed to adequately account for the trust deed’s provisions, and his follow-up advice compounded the problem rather than resolving it. Dissatisfied with the advice, Mr C halted the process and sought assistance from another solicitor.

Committee’s findings

The Committee determined that Mr D’s delay in acting on the client’s initial instructions and the misplacement of trust documents amounted to incompetence. While some responsibility for the lost documentation was attributed to administrative errors during a merger of Mr D’s firm, the delay was deemed a breach of rule rules 3, 3.2, and 6 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (RCCC).

The advice given to Mr C regarding the restructuring of the trust was also found to be deficient. The Committee concluded that a thorough review of the trust deed should have been the first step in providing advice and that the subsequent omissions breached rules 3 and 6 of the RCCC.

Penalties

The Committee ordered Mr D to:

  • Apologise to Mr C.
  • Refund the $640 invoiced for the incomplete trustee changes.
  • Pay a $3,000 fine to the New Zealand Law Society.
  • Cover $2,500 in costs to the Law Society.

After a review by the Legal Complaints Review Officer (LCRO), the penalties were extended to cancel the $1,517 invoice for the inadequate advice provided to Mr C.