New Zealand Law Society - Failure to remedy account errors leads to censure and compensation

Failure to remedy account errors leads to censure and compensation

The Lawyers and Conveyancers Disciplinary Tribunal has issued a censure and ordered compensation in response to misconduct by a now-retired lawyer who wrongly paid out money from his trust account, attempted to conceal his default, and failed to repay the money.

Mr McDonnell acted for a developer. A financier paid Mr McDonnell $125,000 to be applied to a deposit payment his client had to make. When only $100,000 was required for the deposit, Mr McDonnell retained the $25,000 in his trust account. His client then directed Mr McDonnell to use the $25,000 for other purposes relating to the development but contrary to the terms on which the financier had advanced the money. When the financier requested return of the money, Mr McDonnell could not pay. He prepared documentation designed to "smudge or conceals his error". Then, despite promises to do so, he continued to fail to repay the financier. 

The Tribunal found Mr McDonnell's initial payment of the $25,000 was an error not amounting to misconduct. But, in knowledge of that error, Mr McDonnell's failure to account properly and candidly, and failed to honour an undertaking to repay. These wilful contraventions of s 111 of the Lawyers and Conveyancers Act 2006 and r 10.5 of the Conduct and Client Care Rules amounted to misconduct.  

The Tribunal noted the conduct would ordinarily bring suspension "into play". It observed Mr McDonnell had eight adverse unsatisfactory conduct findings between 2011 and 2019. But Mr McDonnell was 83 years old, was unwell, had retired, and would not practice again. In the Tribunal's view there was no future need to protect the public, so the Tribunal declined to order that Mr McDonnell be prohibited from practising on his own account, which had been sought by the Standards Committee. The Tribunal censured Mr McDonnell, ordered him to pay $25,000 in compensation to the financier, and pay the costs of the Standards Committee and Tribunal.  

The Tribunal declined Mr McDonnell's application for name suppression noting among other factors the public interest in being able to scrutinise disciplinary proceedings, Mr McDonnell's "truculent failure to remedy his wrong", and the fact that publication would avoid mistaken suspicion falling on other retired lawyers. The names of other persons involved were permanently suppressed.  

Read the decision on the Tribunal’s website