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Suspension follows mishandling client monies

31 March 2017

Auckland lawyer Richard Zhao was censured and suspended for four months from 1 December 2016 by the New Zealand Lawyers and Conveyancers Disciplinary Tribunal.

In [2016] NZLCDT 22, the Tribunal found Mr Zhao guilty of misconduct. The misconduct involved four different categories of default:

  • failure to pay client money into a trust account;
  • failure to ensure client money earned interest;
  • personally earning interest from client monies; and
  • failure to act upon a request to uplift client documents.

Mr Zhao received instructions to act for a client, Ms L, who lived in China and Mr Zhao travelled there to meet her.

Initial payment made

At Mr Zhao’s request, Ms L made an initial payment of $50,000 for fees, expenses and other payments to be used on her behalf.

Mr Zhao gave Ms L details of his personal bank account into which the $50,000 deposit was to be paid. The funds were eventually transferred to the trust account of Mr Zhao’s firm, Richard Zhao Lawyers Ltd, six and a half weeks after having been received from Ms L. During the intervening period the money was held in various personal accounts belonging to Mr Zhao and his wife and interest attributable to Ms L was not paid to her.

Ms L terminated the relationship with Mr Zhao in writing, and also requested the return of all of her documents and the return of her deposit.

About six days later, Ms L instructed a lawyer, Mr B, to act for her in recovery of her files and her funds. Mr B wrote to Mr Zhao enclosing an authority to uplift documents on Ms L’s behalf.

Refusal to return original documents

Mr Zhao responded by email in which he refused to return the original documents and said that “the balance of funds, if any, will be transferred” according to Ms L’s instructions, in two weeks’ time.

“The regulations and rules surrounding the handling of client funds are in place for important protective purposes,” the Tribunal said.

“Compliance is a fundamental obligation of legal practice. We consider that the particulars in support of this limb of the charge show sufficient disregard by Mr Zhao of his professional and fiduciary obligations, to be classified as ‘reckless’.”

The failure to promptly return the client’s full file “further exacerbates the overall conduct,” the Tribunal said.

Having regard to Mr Zhao’s willingness to recompense the complainant immediately, in the significant sum of $42,000 together with the costs orders “we are minded to impose the minimum period of suspension necessary,” the Tribunal said.


The censure contained in the Tribunal’s penalty decision, [2016] NZLCDT 32, states:

“Mr Zhao, you have been censured three times by a standards committee in a general way. The Tribunal takes the view that having found you guilty of misconduct, you need to be censured in terms that are more specific to your wrongful behaviour. The Tribunal has found and you have admitted that you knew the rules about the need to hold clients funds in a trust account and not your personal account.

“At the time of your offending you had not long completed the Trust Account Supervisor qualification and were well aware of your obligations yet you chose to ignore them as if the rules, for some reason, did not apply to you. You were of the opinion that as long as you tidied up at the time of billing, all would be well and there was no need to ensure client funds were held in trust.

“That attitude Mr Zhao, is unacceptable to the Tribunal and would be unacceptable to all practitioners and to informed members of the public. It is the Tribunal’s role to protect members of the public generally and your fellow practitioners from such wrong behaviour and to signal on behalf of those groups by way of censure, the Tribunal’s disapproval. It is to be hoped that you will reflect on this censure and the earlier general censures to encourage you to improve your practices.”

As well as the censure and suspension, the Tribunal ordered Mr Zhao to undertake the next available trust account supervisor course, pay $47,903 standards committee costs and $15,508 Tribunal costs.

Mr Zhao is appealing the Tribunal decisions to the High Court

Last updated on the 31st March 2017