Mahvash Ikram
A father-and-son legal team from a small North Island city have been charged with misconduct after allegedly representing multiple clients from the same family in a complex property transaction, despite a clear conflict of interest.
The pair, who worked at the same law firm, had name suppression when they appeared before the Lawyers & Conveyancers Disciplinary Tribunal on Thursday for a penalty hearing.
According to the charges brought about by the General Legal Standards Committee, the father (now retired) acted for a couple and the husband’s parents in the purchase of a property but did not advise the wife about the ownership and mortgage implications.
Later, when he became aware of the husband’s diverging interests in terms of the property, the senior lawyer did not inform the wife and continued acting for the couple instead of terminating the retainer.
The committee alleged this amounted to misconduct due to a breach under s 4 (c) of the Lawyers and Conveyancers Act 2006. This states lawyers have “an obligation to act in accordance with all fiduciary duties and duties of care owed by lawyers to their clients”.
The lawyer has admitted an alternative charge of negligence laid by the committee.
Several years after the initial purchase, the son acted for the same family in a subsequent sale of the couple’s share of the property to the husband’s parents and its transfer to a family trust that included the couple’s son and the husband’s parents, but not the wife.
The committee has charged the younger lawyer with misconduct for engaging in a transaction where there was a clear conflict of interest and failing to inform the wife that she needed to seek independent legal advice.
He has admitted misconduct due to his reckless failure to manage a conflict of interest under s 241(a) of the Act.
At a hearing on Thursday, the standards committee’s lawyer, Ben Finn, said suspension needed to be on the table as a penalty for the younger lawyer, but the panel indicated that would be unlikely.
“I don’t wish to take issue with what the tribunal has said… [but] there may be a means of imposing the requisite penalty that captures the gravity of what’s occurred without suspending [the lawyer],” Finn said.
The tribunal indicated penalties for both lawyers could include censure, fines and apologising to the complainant(s).
The standards committee proposed a fine within a range of $5,000 to $10,000 for the retired lawyer, but his counsel, Michael Parker, argued the fine should not be no more than $5,000. A fine of $10,000 was proposed for the younger lawyer.
“These compensations are focused on addressing the emotional harm done to the complainant by the breaches. It’s not full recompense for financial loss,” Finn said.
The problem
The tribunal was told the couple at the centre of the transaction became clients of the firm in 2015. Three years later they engaged the firm to purchase a property in Lower Hutt, with the husband’s parents becoming joint purchasers with the couple.
The letter of engagement indicated that the younger lawyer would be completing the work alongside a legal executive. However, it was completed by his father, who acted for all the purchasers throughout the retainer but did not obtain prior informed consent from each of the buyers to do so. Nor did he provide sufficient advice to the wife and the husband’s parents about the implications of purchasing the property as joint tenants.
Part of the bank loan to purchase the property had been secured by a mortgage registered against the title of another property but the senior lawyer also failed to advise the parties of possible implications of that mortgage security.
Two weeks after the purchase, the lawyer wrote to the husband explaining that the ownership structure of the property was not a “satisfactory family arrangement”. But, again, he did not advise the other parties about the implications of owning the property as joint tenants.
The following month the lawyer noted that the couple’s interests were diverging because the husband wanted the wife’s name removed from the title, with the property then being transferred to a trust that included his parents and the couple’s son, but not the wife. The husband had also recently removed his wife as a shareholder of a company that operated his business.
“[The lawyer] was not in a position discharge his obligations to both clients. He was not able to disclose [the husband’s] plan to [the wife] as he needed to do it without compromising [the husband’s] interests,” the charging document says.
He should have terminated the retainers.
Two years later, the younger lawyer was engaged by the husband to sell his and his wife’s share of the property to his parents and then transfer it to the family trust (that did not include his wife). The lawyer wrote to the husband and said he was concerned about the wife’s position in relation to the trust and that “she will likely need independent legal advice”.
However, the sale and transfer was completed and the law firm acted on both sides of the transaction.
“Having accepted instructions to act for both [husband and wife], the lawyer failed to comply with his duty to explain and provide advice about the nature, effect and implications of the subsequent sale to the wife before it occurred,” the charging document says.
“He also failed to comply with his duty to advise the husband of the potential transfer of the property to a trust and/or the implications associated with that transfer (including the merits of seeking independent legal advice).”
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