28 March 2014

Professional misconduct: Withers v. NZ Law Society

Canterbury barrister and solicitor Murray Ian Withers was disbarred from practice after being found guilty of professional misconduct when he acted for both buyer and seller in the subdivision of a property on Taylors Mistake Road, Scarborough.  His failure to disclose a personal interest in the purchasing company amounted to a serious conflict of interest.
Withers appealed unsuccessfully to the High Court, arguing suspension from practice followed by work under supervision was a more appropriate penalty.
The Scarborough sale concerned over 8200 square metres of land which could be subdivided into between three to eight lots.  The court was told a sale agreement was completed in late March 2007 at a price of $1.4 million between the SCK Family Trust as vendor with the potential purchaser left open.  Withers signed on behalf of a named purchaser “or nominee”.   The required deposit of $200,000 was not paid.  Within days, Withers was attempting to renegotiate the contract, supposedly on behalf of the named purchaser.  After some discussions, the SCK Family Trust agreed to receiving a reduced sum in cash by taking one of the proposed sections valued at $400,000 in part payment with a further sum of $375,000 left in on mortgage.  They then learnt that the nominated purchaser was now a development company called Clifden Holdings Ltd.   Unbeknown to them, Wither’s family trust was part owner of Clifden.  Withers did not get their consent to his acting for both vendor and purchaser.
Evidence was given that Withers failed to act in a professional manner: he did not disclose the conflict of interest when the original contract was signed, he did not disclose the conflict of interest when the contract was renegotiated and he did not protect the SCK Family Trust in respect of the $375,000 left in - no loan agreement was prepared, no mortgage was registered and no personal guarantees were obtained from the directors/shareholders of Clifden as the borrower.
In addition to SCK Family Trust’s complaint to the Law Society, Christchurch City Council also laid a complaint.  Council had agreed that a $117,900 development contribution payable following the subdivision could be delayed, after Withers promised that payment would be made from the sale proceeds of lot six in the subdivision.  That personal undertaking was not honoured after lot six was sold.
Confirming that Withers should be disbarred, the High Court said he had failed to act with fairness and openness towards the SCK Family Trust.  He deliberately deceived his client by pretending to act as a go-between with the purchaser.  He discouraged the Family Trust from getting independent legal advice.
The High Court did not consider a period of suspension and supervision would be an appropriate penalty given Wither’s disciplinary record.  Evidence was given that Withers had been subject to Law Society complaints in the past for sloppy conveyancing practice and for charging excessive fees.  In one instance he had been ordered to reimburse a deceased estate $1500 after he contracted his son’s touch rugby team to clean up a house prior to sale rather than engaging professional house cleaners.  The amount paid to the rugby team was more than cleaners had quoted for the work
Withers v. NZ Law Society – High Court (28.03.14)
14.013