Two lawyers have been suspended and one fined after they admitted not complying with the rules governing the operation of solicitors’ nominee companies.

Timothy John Burcher was censured and suspended for nine months from 23 December 2015, David Gould Russell Short was censured and suspended for three months from 18 December 2015 and Ronald John Macdonald was censured and fined $8,000.

In [2015] NZLCDT 47, the New Zealand Lawyers and Conveyancers Disciplinary Tribunal noted that Messrs Burcher, Short and Macdonald were senior, respected lawyers formerly in partnership with each other. The partnership operated a nominee company that managed many millions of dollars worth of contributors’ funds.

The Tribunal noted lawyers are obliged to keep strictly to the professional requirements imposed on them by the rules governing the administration of nominee companies, which the partners in this case had failed to do.

The breaches of the rules resulted in two sets of charges, relating to two reports prepared by a New Zealand Law Society inspector.

“What makes the later charges more serious are that a number of the breaches occurred after the first report was delivered, when the partners ought to have been acutely aware of the need for scrupulous compliance,” the Tribunal said.

Serious offending

“The sheer volume of breaches and the period over which these breaches occurred made this serious offending.”

The Tribunal said it largely accepted that there was no dishonesty involved and certainly no intention for personal benefit.

However in Mr Burcher’s case “it has to be recognised that in signing monthly certificates certifying to the New Zealand Law Society that he was satisfied that the practice had complied with any practice rules relating to lawyers nominee companies, Mr Burcher represented to his professional organisation a position which was patently untrue”.

Mr Burcher accepted that he was primarily responsible for the daily management of the three lawyers’ nominee company. He admitted two charges of negligence of such a degree or so frequent as to tend to bring the profession into disrepute, and two charges of misconduct. In addition to the censure and nine-month suspension he was ordered to pay the Law Society costs of $36,000 and $7,159 Tribunal costs.

Mr Short, a retired lawyer, admitted four charges of negligence of such a degree or so frequent as to tend to bring the profession into disrepute. In addition to his censure and three-month suspension, he was ordered to pay the Law Society costs of $23,000 and $4,772 Tribunal costs.

Mr Macdonald, a litigation partner who the Tribunal said had “almost nothing to do with the company” only faced one set of charges, and also accepted he had “fallen short in his obligations” to ensure compliance with the rules. As well as the censure and fine, he was ordered to pay the Law Society costs of $6,000 and $2,386 Tribunal costs.

The censures

In censuring the three lawyers, the Tribunal said:

“Mr Macdonald, you were a partner in a firm that chose to incorporate a nominee company and through that company managed many millions of dollars worth of contributors’ funds. Of necessity you were a director of that nominee company but you did nothing that a company director should have done. In the firm you were the litigation partner but that role does not absolve your responsibility as a director of a company managing large sums on behalf of others to ensure that proper processes were followed and that the rules designed to give protection to those contributories were properly observed.”

“Mr Short, until about 15 years ago you had the primary role in the management of your nominee company. When you relinquished that role in favour of Mr Burcher your involvement diminished but was still active because many of the contributories and borrowers were your clients historically. You were aware of the rules because you had worked with them before Mr Burcher’s involvement yet you seem not to have followed those rules as a director responsible to do so, preferring instead to leave the management largely to Mr Burcher.”

“Mr Burcher, your guilty plea to two misconduct charges and two negligence charges marks you as the most culpable of the three defendants. That culpability is reflected in the level of the other penalties imposed compared to your co-defendants but nevertheless you, too, must be censured. You had the practical responsibility of the management of the

nominee company and thus the compliance with the relevant rules. Your compliance failures cannot be excused as occasional minor technical non-compliance because the number of failures was so great.”

The Tribunal declined to make compensation orders, noting that in this case a proper assessment of loss and causation would require significant evidence and was best left to the civil jurisdiction.