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Lawyers Complaints Service: Strike off follows taking $500,000 from clients

30 August 2013

Edward Errol Johnston of Auckland has been struck off the roll of barristers and solicitors of the High Court of New Zealand.

Mr Johnston was struck off by the New Zealand Lawyers and Conveyancers Disciplinary Tribunal ([2013] NZLCDT 30) after admitting charges of misconduct and breaches of the regulations governing law practitioners.

The specific charges arose when Mr Johnston provided legal advice to a family trust. The trustees and beneficiaries had been longstanding friends of his.

The clients gave Mr Johnston two payments of $250,000 each. Mr Johnston told them one payment was to buy shares but the purchase was never completed. The other payment, Mr Johnston told the clients, was for a loan to a company to allow the purchase of a property. The money was never used to fund any such purchase.

Ultimately the bulk of all of these funds has been lost to the clients, the tribunal noted. Although Mr Johnston has signed acknowledgments of debt in relation to each of the advances, he is now an undischarged bankrupt and is currently unable to meet his obligations.

“In undertaking these transactions and in his representation of these clients, Mr Johnston has broken almost every rule one could imagine in representing a client wishing to make a financial investment,” the tribunal said.

“He failed to obtain independent legal advice for them. He did not provide proper advice on the risks entailed in the investments. He failed to provide any or proper documentation. Furthermore he painted what has been described as a very rosy picture of the investment.”

There was no possibility of him repaying. As detailed in a report filed by a Law Society inspector, the monies had been committed elsewhere. “Mr Johnston expressed enormous regret at what had occurred, and furthermore expressed a determination to eventually put things right with his former clients,” the tribunal said.

“Mr Johnston accepted that strike off was inevitable given his repeated failures, particularly in the area of acting in conflict of interest both between clients, and between himself and clients.”

Since August 2008, when the new disciplinary legislation came into force, Mr Johnston has also had a finding of misconduct by the Legal Complaints Review Officer, and four findings of unsatisfactory conduct by Auckland standards committees.

In a previous decision before the tribunal, Mr Johnston had not been candid about his activities. This, the tribunal noted, had resulted in the tribunal being more lenient with him in the previous decision than he deserved, and had impacted on the circumstances leading to the current complaint. “Such blatant disregard of the strong professional obligation for openness in dealing with the institutions involved in the disciplinary process is absolutely unacceptable”, the tribunal said.

“The oft-quoted extract from Bolton v Law Society [1994] 2 All ER 486 that a client must be able to trust his lawyer ‘to the ends of the earth’ was never more apt than in the present case,” the tribunal said.

“Sadly, the now deceased and long-time friend of the practitioner trusted him implicitly. Mr Johnston did not well repay that trust. He breached the fundamental principle that a lawyer must always put the interests of his clients ahead of his own.”

As well as the strike off, the tribunal made an award of $14,689.73 costs against Mr Johnston, “notwithstanding his bankruptcy” and ordered him to pay the Law Society $3,320 tribunal costs.

Last updated on the 17th March 2016