Woman's home put at risk of mortgagee sale to pay $44,000 in legal fees
The New Zealand Lawyers and Conveyancers Disciplinary Tribunal has found two Nelson lawyers guilty of misconduct for their handling of a complicated family estate matter.
Graeme Downing and Alexander Reith’s actions were described by the tribunal as a “serious failure” in a case brought by the Nelson Standards Committee.
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Central to the case was a deed signed by a client without her proper understanding, which put her house at risk of mortgagee sale for unpaid legal bills amounting to $44,000, which was said to be the firm's largest outstanding client debt, NZ Herald reported.
One of the two lawyers charged acted directly for the client on her mother’s estate, and the other was 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 estate’s personal representative, refused to apply for formal recognition as administrator. The matter was made more complicated by the complainant’s brother, who had allegedly taken large sums from the estate via the property that he and his mother, who suffered from Alzheimer’s in her later years, owned jointly, the report said.
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Unable to afford legal fees, the complainant initially made payments by borrowing from a friend.
In December 2016, the complainant received a settlement offer of $20,000 from the lawyer acting for her sister. The offer was rejected, however, when Downing advised his client that she could recover some $100,000 based on the estate’s worth, which was around $600,000.
It was later confirmed that the estate’s net value was just a little under $250,000.
In December 2018, a meeting was held to review the complainant’s affidavit, which included discussions about unpaid fees. Then, it was revealed that her only asset was her home and that she had “very limited income” plus debts of over $60,000.
Security was sought for the unpaid fees. The complainant was shown a Deed of Acknowledgement of Debt, which she signed on the understanding that only by doing so, could she continue to secure the services of her lawyer for the ongoing legal proceedings.
By signing the deed, the complainant provided the firm with the authority to lodge a caveat against her property and also take out a second mortgage against it.
The tribunal noted that “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,” NZ Herald reported.
The tribunal considered she had put her house at risk of mortgagee sale from the time she signed the deed, which was incompatible with the lawyer-client relationship continuing.
Reith only took an active role in the matter from October 2019. By that time, the complainant had already 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.
An email was sent to the complainant reminding her of the $44,000 she owed in unpaid legal fees. She was asked to pay $30,000 within a week, or find someone else to represent her.
When Reith was told by the complainant that she couldn’t make the payment, he advised her to get a bank loan, but it was declined. Reith then withdrew his services.
According to the tribunal, 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 was “reprehensible” for being “misinformed by gossip” over the client’s actual financial position, the report said.
The woman represented herself at the judicial settlement conference, but no settlement was reached. The complainant’s friend forked out $5,000 to ward off threatened recovery action against the complainant’s home.
What triggered the complaint against the lawyers was a legal notice over the property served on the woman the day after the payment.
The complainant received legal aid for different lawyers who represented her on the family-protection action matter. She recovered only 10% of the estate, worth about $23,000, but the unsuccessful High Court appeal left 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 $5,000 payment made by the woman’s friend was refunded, the report said.
The tribunal found both lawyers 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 is yet to be released, NZ Herald reported.
