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Lawyers Complaints Service: Fined for breaching rules governing client funds

16 July 2015

Gang Chen, also known as Richard Chen, has been censured and fined $5,000 after he accepted money from a client and did not pay it into a trust account for some months.

In [2015] NZLCDT 2, the Tribunal also gave Mr Chen a “final warning” that if further conduct of the nature occurred “your status as a practitioner will be at risk”.

After Mr Chen had acted in the sale and purchase of a business, one of the clients involved, Mr B, made a payment of $5,000 to Mr Chen as remuneration for his services in the transaction.

Mr Chen directed Mr B to make the payment into a specified bank account, which was held by a friend or associate of Mr Chen, and Mr B did that.

Some time later, the friend or associate paid Mr Chen an amount equivalent to the payment in Chinese currency. Mr Chen withdrew $5,000 from a personal bank account and kept it in cash in his desk at the law firm where he worked.

Subsequently, Mr Chen deposited $5,000 into the trust account at the firm where he worked.

Provisions in s 110(1) of the Lawyers and Conveyancers Act 2006, regulation 10 of the Lawyers and Conveyancers Act (Trust Account) Regulations 2008 and rule 9.3 of the Lawyers and Conveyancers Act (Conduct and Client Care) Rules 2008 meant that Mr Chen had an obligation to ensure that the money was promptly paid into the trust account.

Admitted

Mr Chen admitted the charge of misconduct. Following that, his counsel and the lawyers standards committee that laid the charges agreed a level of penalty which they put to the Tribunal.

The Tribunal said it was prepared to endorse the agreed level of penalty, but it wanted Mr Chen to “listen carefully” to its reasons for the endorsement.

“The actions taken by Mr Chen in accepting money which was expressed to be a gift and then in not paying into the trust account for some months were most unwise,” the Tribunal said.

“In particular we refer to the reckless breach of the Trust Account Rules and s 110 of the Lawyers and Conveyancers Act 2006, which provide for the proper management of funds received from clients.

“We commend Mr Chen for his openness to the standards committee. He swore an affidavit in which he immediately accepted his misjudgement and took responsibility for his actions and it is clear that from the outset of receiving this money, having attempted to refuse it on a number of occasions from the client, that he was uncomfortable and aware that receiving the payment directly caused him professional ethical difficulties and that level of awareness is important.”

The Tribunal noted it was “somewhat concerned” that he had given a similar assurance some six years ago. However it accepted the submission made by Mr Chen’s counsel that the lesson was now well learnt and he would be extremely cautious in future.

Mr Chen had acted “unprofessionally and recklessly in breaching the Act and the Rules which govern the management of client funds.

“These rules are at the very heart of professional practice because the public are entitled to confidence that a professional adviser will treat their affairs and their property with the utmost care and good faith.”

As well as the censure and fine, the Tribunal ordered Mr Chen to pay the Law Society its costs of $14,750 and $1,587 Tribunal costs.

Last updated on the 30th July 2015