PROCURATION FEES

New Zealand Times, Volume L, Issue 11664, 31 October 1923, Page 9

PROCURATION FEES

PRACTICE m AUCKLAND JUDGE SAYS SYSTEM IS OPEN TO OBJECTION. INTERESTS—AND DUTY. (Special to “N.Z. Times.”) AUCKLAND. October 29. Some interesting remarks on the practices of solicitors in connection with procuration fees were made by Mr Justice Stringer, in the course of a written judgment in respect of a solicitor’*? bill of costs. His Honour stated:— “With regard to the procuration fee, it was contended that this wne not a proper professional charge, and ought not therefore to appear in a solicitor’s bill of costs. I agree with this contention. A procuration fee is a reward for services rendered in procuring and arranging a loan, but such sendees, when rendered by a - solicitor, are so rendered by him as a commission agent or money broker, and should be the subject of an express agreement, as they do not come within the scope of ordinary professional work. “It appears from the affidavits filed, and from what was stated in the course of the argument before me, that it is the invariable practice for solicitors in Auckland to charge, as a matter of course. a procuration fee in addition to their ordinary legal charges for the preparation and completion of the mortgage deeds. If such is really the case, then I do not hesitate to express my opinion that there must be numerous instances where the fee has been Improperly exacted from the borrower, and where, if proper steps were taken, the solicitor could be compelled to refund tho amount of such fee. RAISING A LOAN. “Tak->, for example, a case, I suppose, of almost daily occurrence. An intending borrower applies for a loan to a person whom he knows to have money for investment. The capitalist agrees to lend the required amount provided the security offered is approved by a valuer who is appointed by him and whose fee for the valuation is paid by the borrower. The valuation is satisfactory, and the capitalist agrees to make the advance, and instructs his solicitor to prepare the necessary deeds and to complete the matter, which is duly done. In such circumstances what possible right, in reason or in justice, has the solicitor to exact from the borrower a procuration fee in addition to hia ordinary legal charges P OPEN TO OBJECTION. “The practice, as stated to exist, is open to the serious objection that it must frequently place the solicitor irt a position in which his personal interests may conflict with his duty to his clients. Assume the case, which, constantly occurs, of a solicitor who acts for clients who have entrusted him with moneys to be invested on their behalf on mortgage. An intending borrower submits a gilt-edged security, and the solicitor agrees on behalf of a client to lend the money provided a procuration fee is paid. The borrower declines to pay such fee, and consequently the loan is refused. Here tie client loses a desirable investment because the solicitor has been unable to impose a, special fee for his own benefit. “Again, in similar circumstances, the intending borrower submits dountfu! security, but agrees to pay the solcitor a procuration fee, and the loan is put through. Here the client is loaded with a doubtful security because the solicitor was more concerned to obtain a procuration fee than to protect his client’s interests. ONLY IN AUCKLAND.

“I do not wish to be understood to imply that in no cases, and under no circumstances, can a solicitor properly charge a procuration fee. If the solicitor [a employed to procure a loan, and bestows time and attention in doing so, no reasonable objection could be raised to his charging a fee as a reward for his services. In such a oase there is no express or implied agreement to pay a reasonable or customary fee. Hie practice, however, of charging a fee in such circumstances as I have already mentioned is, 1 think, not only improper, but as far as I know, prevails only in the Auckland district, and certainly is not countenanced by the profession in the Canterbury and Otago districts, with the conveyancing practice in which lam fairly familiar. I think the New Zealand Law Society, in the interests of the profession generally, should take this matter up, and should define when and in what circumstances it is proper for solicitors to change a procuration fee.” FEE PROVIDED FOR.

His Honour added that these observations liad no application to the case under review, for it had been found that the client concerned agreed to jy.y a procuration fee for the loan obtained through the instrumentality of a solicitor.