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Lawyers Complaints Service: Censured for overdrawing trust account ledger

22 November 2013

Auckland lawyer Lavanya Dunraj has been censured by the New Zealand Lawyers and Conveyancers Disciplinary Tribunal for overdrawing her firm’s trust account ledger and failing to ensure accurate monthly certificates regarding that trust account were filed with the Law Society.

Ms Dunraj has been ordered not to practise on her own account, whether in a partnership or otherwise, until the tribunal authorises her to do so ([2013] NZLCDT 46).

The overdrawing on her firm’s trust account ledger while Ms Dunraj was in sole practice was identified by a New Zealand Law Society inspector on 12 March 2012.

That overdrawn position had continued over an extended period, from 1 April 2011 until 8 March 2012. The overdrawn amount during that period varied from a low of just over $1,700 to a high of just over $54,000.

During that period, Ms Dunraj continued to provide the Law Society the required certificates about her trust account. However the certificates were not accurate.

Just before the inspector visited she looked at her debit balances again and decided their cause was not going to be easily ascertained. Because of the impending audit, she decided to remedy the issue by paying in personal funds to her firm’s trust account.

In explanation, Ms Dunraj said she thought the overdrawing was the result of an “accounting glitch” and that the accounting system software was defective. She intended to get this looked at by an accountant, but did not get it done as a consequence of work and personal pressures.

As far as the incorrect certificates were concerned, Ms Dunraj said she did not consciously mislead the Law Society as she believed she had correctly reconciled the accounts and that the debit balances arose from “accounting errors” associated with the way her accounting system operated.

She also said in evidence that at no time was her trust account itself overdrawn, and she produced documents showing that fact.

(A firm’s trust account ledger includes all the individual trust account ledgers for each client. If the firm’s trust account ledger is overdrawn, that means money belonging to one or more clients has been used when it should not have been used. The firm’s trust account may not be overdrawn at the bank, however).

“We reached the view that she had been at least wilful or reckless in overdrawing her firm’s ledger in her trust account and filing inaccurate certificates as a consequence,” the tribunal said.

“[Ms Dunraj] clearly knew the account was overdrawn, but allowed that overdrawn account to continue for almost a year, certifying every month that all was well with her trust account.

“This certificate was given notwithstanding her knowledge that there were some unpermitted debit balances, which she dismissed in her own mind as a simple systemic problem with the way the accounting software operated.”

The tribunal also noted that Ms Dunraj had unduly delayed any effective investigation of what was happening in her trust account for an extended period “in a rather ostrich-like manner”.

Ms Dunraj had realised that the issue could not continue in the face of the impending audit. “She paid in personal funds to remedy the issue at that point, reflecting a different priority, which reinforced our view that she had been wilful and reckless in her approach to this issue up to that point,” the tribunal said.

However, it saw no evidence of Ms Dunraj having a deliberate plan to dishonestly extract funds from her firm’s ledger account. “Rather the picture was of a practitioner out of depth, who failed to seek advice and ensure corrective action for the issue appearing in the trust account reports.”

The tribunal found Ms Dunraj guilty of misconduct. She was ordered to pay $5,900 towards the standards committee costs. No order was made in relation to tribunal costs.

The tribunal declined an application for permanent name suppression. It said it did not consider the evidence in support of suppression outweighed the public interest in open proceedings.

Last updated on the 17th March 2016