A Standards Committee has held that a lawyer looking to get payment for his fees did not have the right to register a caveat against land owned by a debtor. The lawyer also had not issued an invoice for the unpaid fees.
The Committee observed that a caveat can only be registered in very limited circumstances. The caveator must first have a registrable interest in the affected land. An unsecured creditor does not have the right to register a caveat against land owned by a debtor.
The Committee made a finding of unsatisfactory conduct against the lawyer. The lawyer was ordered to pay a fine of $3,000 and costs of $1,000 to the New Zealand Law Society | Te Kahui Ture o Aotearoa.
Unpaid fees do not create a caveatable interest
The lawyer placed a caveat on the property of his client, ostensibly due to unpaid fees. It was held that this amounted to unsatisfactory conduct, and that the lawyer had breached Rule 2.3 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (RCCC).
The lawyer was instructed to act for the client in the sale and purchase of two properties. The purchase of the second property was dependent on the sale of the first. The client failed to find a buyer for her property and settlement on her new property was postponed several times. The sale agreement was ultimately cancelled by the vendors and the client lost her deposit.
On termination of the retainer the lawyer lodged a caveat against the title of the client’s home. The lawyer apparently lodged the caveat on account of unpaid legal fees but before he had even issued his invoice. After some negotiation, the fees were reduced to $15,000. The client paid that amount, and the caveat was lifted.
The client made a complaint to the Lawyers Complaints Service concerning the lawyer’s handling of the failed purchase of the new property, the lodging of the caveat and the reasonableness of the fees.
Standards Committee concerned that invoices had not been issued monthly
In its decision, the Standards Committee expressed concern that the lawyer, who had acted for the client over several months, had not issued invoices monthly, as contemplated by his own terms of engagement. The single invoice issued had very few details and gave little information as to how the total sum had been arrived at.
Unsecured creditor does not have the right to register a caveat
In considering whether the lawyer had acted improperly in filing a caveat, the Committee observed that a caveat can only be registered in very limited circumstances and the caveator must first have a registrable interest in the affected land. An unsecured creditor does not have the right to register a caveat against land owned by a debtor.
Terms of engagement did not create a caveatable interest
The lawyer had argued that he was able to lodge a caveat pursuant to a clause in his terms of engagement. The Committee examined the clause relied on by the lawyer. It did not accept that the clause, or any other clause in the terms of engagement, gave rise to a caveatable interest and was satisfied that the lawyer was an unsecured creditor.
The Committee determined that, by registering a caveat without any legal foundation and before he had even issued his invoice, the lawyer had used a legal process for an improper purpose which was a breach of Rule 2.3 of the RCCC.
Source: www.lawsociety.org.nz
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