New Zealand Law Society - Lawyers Complaints Service: LCRO comments on trust account breaches

Lawyers Complaints Service: LCRO comments on trust account breaches

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The Legal Complaints Review Officer (LCRO) has confirmed a lawyers standards committee’s determination that a lawyer D’s “conduct in relation to various trust account irregularities constituted unsatisfactory conduct”.

The LCRO’s review was confined to addressing the standards committee’s determination as to penalty and publication as the LCRO had declined jurisdiction to review the substantive decision. The LCRO confirmed a fine of $1,000 and an order for $750 costs. It also ordered D to pay a further $900 in costs for its review. The LCRO confirmed the order of the standards committee that D’s practice was to be inspected at three monthly intervals for a period of 12 months to ensure D “brings his trust account practices into line with the requirements of the Regulations”.

The decision noted that under the Financial Transactions Reporting Act 1996 (FTRA), financial institutions, including law practices, are required to report all suspicious transactions to the Police Financial Intelligence Unit. The decision affirmed a Law Society inspector’s action to report alleged FTRA breaches to the Police but noted it was not the standards committee’s role to consider and determine whether the FTRA had been breached. The LCRO said: “It is not the role of a standards committee to prosecute a lawyer in a different forum for an alleged breach of the FTRA, and to seek alternative penalties for the breach”.

The standards committee had not made any adverse finding based on the alleged breach of the FTRA but it did find D breached regulations 11, 12(7), 14 and 17 of the Trust Account Regulations and ss 114 and 337 of the Lawyers and Conveyances Act 2006.

On review counsel for D’s arguments included the submission that there should be no penalty and no publication because the breaches were minor. D’s counsel noted that the inspector advised he would not have reported the other breaches but for the alleged breach of the FTRA.

However the LCRO considered that the standards committee, as it did in this case, was able to take a different view. The LCRO noted it was the role of standards committees, the LCRO and the Tribunal to establish policy as to whether or not breaches of the various rules and regulations constituted unsatisfactory conduct.

The LCRO noted that the protection of the public is one of the main purposes of the Act and this necessarily includes protection of client funds. The LCRO sounded the following cautionary note:

“If the profession indulges in excusing non-compliance with the rules and regulations this can only serve to undermine the protections established by the Act. It also does little to reinforce the positive conduct of the majority of lawyers who take care to know and understand and comply with rules and regulations.”

“Whilst therefore there will be circumstances when non-compliance with the rules and regulations may not result in an adverse finding, the overall approach must be to enforce strict compliance.”

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