The complainant (Complainant) and X were business associates. X owned certain intellectual property (IP), including registered trade marks associated with brands used by his business. The Complainant was X’s distributor. When X was facing bankruptcy, X and the Complainant entered into an agreement on X’s IP being transferred to a trust created by the Complainant (Trust). They later disputed aspects of their agreement and X obtained advice from a lawyer (First Lawyer), which included recommendations on how X could regain control over the IP.

After being discharged from bankruptcy, X commenced steps to recover the IP, which they considered to be rightfully theirs. The Complainant disputed X’s right to do so and took steps including applying to register certain trade marks (Trade Marks) in their own name, applying for an order against X under the Harmful Digital Communications Act 2015 (HDC Act) and commencing defamation proceedings against X.

X then instructed a different lawyer, B, to act for them in the IP dispute. X also instructed another law firm in respect of the defamation proceedings. X provided B with the advice of the First Lawyer and, ultimately, B acted for X in trade mark opposition and invalidity proceedings before the Intellectual Property Office of New Zealand (IPONZ Proceedings).

In the IPONZ Proceedings, B filed documents alleging the Complainant had engaged in fraudulent conduct. Those documents included documents prepared by B as well as affidavits of X filed in the separate, HDC Act, proceedings (Affidavits). In the Affidavits, X alleged conduct by the Complainant that included fraud in relation to the Trade Marks and the Trust, theft, hacking, tax evasion and embezzlement.

The Complainant then complained to the Lawyers Complaints Service about B’s conduct, claiming B had breached rr 13.8 and 13.8.1 of the Conduct and Client Care Rules:

Reputation of other parties

13.8    A lawyer engaged in litigation must not attack a person’s reputation without good cause in court or in documents filed in court proceedings.

13.8.1 A lawyer must not be a party to the filing of any document in court alleging fraud, dishonesty, undue influence, duress, or other reprehensible conduct, unless the lawyer has taken appropriate steps to ensure that reasonable grounds for making the allegation exist.

…

In the Conduct and Client Care Rules, “court” is defined to mean “a court or tribunal before which a lawyer may appear”.

Jurisdiction

The first issue the Standards Committee considered was jurisdiction. B claimed the Standards Committee had no jurisdiction to consider the complaint because, B said, rr 13.8 and 13.8.1 did not apply to them acting in the IPONZ Proceedings. B said the IPONZ Proceedings were “not litigation”, they had not filed documents “in court” and they had not held themselves out to be a lawyer in those proceedings.

The Standards Committee was not persuaded. It considered that the IPONZ Proceedings were litigation and that IPONZ is a court for the purposes of rr 13.8 and 13.8.1.  To support that conclusion, the Standards Committee noted: IPONZ “describes itself as a ‘specialist tribunal’”; that “evidence before [IPONZ] is taken by affidavit or statutory declaration”; there is a power to award costs and that IPONZ decisions “can be appealed to the High Court”; and:

… noted that in a judicial review of a Legal Complaints Review Officer … decision, the High Court had noted that the parties had accepted that the ACC review forum constituted a “court” for the purposes of the [Conduct and Client Care Rules].[1] The Committee was satisfied that IPONZ should also be considered a “court” for the purposes of the [Conduct and Client Care Rules].

The Committee therefore concluded it had jurisdiction and was the appropriate forum to consider the complaint.

Rules 13.8 and 13.8.1

In considering rr 13.8 and 13.8.1, the Standards Committee noted various judgments and commentary on the matter.[2] It quoted that “while lawyers are advocates for their clients, they are expected to exercise independent judgement in accepting the assertions made”.[3]  It referred to the need to have evidence to support the allegations.

The Committee “... agreed that the more serious and extreme the allegation, the less likely it is to have occurred. ... it considered that the evidence which can be safely relied upon by a practitioner to support serious allegations should be more compelling that that required for more mundane allegations.”[4]

With this in mind, the Committee considered it was “clear” the documents filed by B “did attack” the Complainant’s reputation. There “was no doubt in the Committee’s mind that these allegations were bound to affect the reputation of [the Complainant] in the decision-maker's eyes and, if disclosed, in the eyes of the public.”

The Standards Committee then considered whether B had good cause and/or had taken steps to ensure reasonable grounds existed for making those allegations.

The allegations were “of an extreme and scandalous nature” and the lawyer were, ultimately, also not relevant to the proceedings before IPONZ. They had been filed by B to support claim of bad faith under s 17(2) of the Trade Marks Act 2003 (TMA); however, the Standards Committee considered the documents filed went well beyond supporting such an allegation in that jurisdiction and did not seem relevant to establishing bad faith under the TMA.

B advised they had based much of their decision making on the advice of the First Lawyer (which recommended X take steps to regain control of the IP) and matters of public record. The ‘matters of public record’ were essentially gaps in or inconsistencies in the documentary trail, which B said gave them “cause to believe that [X’s] version of events was plausible”.

However, the Standards Committee considered there were “significant factors, including a number of red flags” that should have made B “question the evidential foundation for the allegations” made by X against the Complainant. Those “red flags” included a lack of documentary evidence, the extreme nature, “breadth of the allegations and the hyperbolic tone in which they were expressed” and information about X’s mental health. Further, B was aware that the Affidavits had been filed in X’s defence of the Complainant’s application for an order against him HDC Act, in which the Complainant was successful in obtaining an order barring X from repeating online accusations against the Complainant. Further again, B was also aware that X had been sued in defamation by the Complainant; if B had asked (and the Committee considered it “surprising” that he had not asked) he would have found out that X subsequently apologised to the Complainant and retracted his comments that led to the defamation proceedings.  

Determination

Ultimately, the Committee considered that B gave “no or no adequate consideration” to whether there was any proper evidential foundation for the allegations or whether the allegations were relevant to establishing bad faith in the context of trade mark litigation. Accordingly, it concluded that:

• B had attacked the Complainant’s reputation without cause in breach of Rule 13.8; and
• B had filed documents in the IPONZ Proceedings alleging fraud, dishonesty and other reprehensible conduct, without taking appropriate steps to ensure that reasonable grounds for making the allegations existed, in breach of Rule 13.8.1.

The Standards Committee noted that, in litigation, a lawyer’s overriding duty is to “the court concerned”, overriding the lawyer’s duties to their client. It said the “fundamental nature of a lawyer’s duty to the court cannot be overstated.”

The Committee determined that B’s breaches amounted to unsatisfactory conduct under s 12 of the Lawyers and Conveyancers Act 2006. It censured B, fined B $5,000 and ordered B to pay costs of $1,000. The Standards Committee also directed publication of an anonymised summary of its decision “in order to maintain professional standards through deterrence.”

[1] Q v Legal Complaints Review Officer [2013] NZAR 69 (HC).

[2] Matthew S Palmer (ed) Professional Responsibility in New Zealand (LexisNexis, Wellington, 2019); Duncan Webb, Kathryn Dalziel and Kerry Cook Ethics, Professional Responsibility and the Lawyer (3rd ed, Lexis Nexis, Wellington 2016); Rondel v Worsley [1969] 1 AC 191 (HL); Clyne v New South Wales Bar Association (1960) 104 CLR 186 (HCA); Re H (Minors) [1996] AC 563 (HL); Z v Complaints Assessment Committee [2007] NZCA 91, [2008] 1 NZLR 65.

[3] Webb, Dalziel and Cook, above n 1.

[4] Re H (Minors), above n 1.