Donald Bruce Thomas has been censured by the New Zealand Lawyers and Conveyancers Disciplinary Tribunal after he allowed money held in trust to be applied to a property purchase, acting on instructions of only one of the two trustees.

In [2016] NZLCDT 5, the Tribunal also ordered Mr Thomas to pay the complainant $2,898.20 compensation for legal fees and disbursements he incurred.

Mr and Mrs A were the two trustees of a family trust (Trust A). They had separated and were negotiating division and settlement of relationship property through their respective solicitors. The home in which Mrs A and the children were living following separation was sold. Mr A agreed to half of the sale proceeds being held in trust for Trust A. The other half was paid to another family trust.

Mrs A then found a property for the family to move into and entered into an unconditional agreement to purchase it. Mr A refused to join in the authorisation required to use a portion of the funds in Trust A’s trust account with Mr Thomas’s firm to complete the purchase. His refusal put Trust A at risk of forfeiting the deposit on the property and other consequences for not proceeding with the purchase.

Court application

An application was made to the Family Court seeking an order for the release of the funds. The Court held that it did not have jurisdiction in respect of trusts and that the matter would have to be the subject of an application to the High Court. It accordingly dismissed the application and awarded $1,500 costs in favour of Mr A. The presiding judge observed that Mr A was “playing hardball”.

Mrs A gave instructions to the respondent to use the funds held for Trust A to complete the purchase of the home, the agreement for which had become unconditional and with settlement due imminently.

Mr Thomas then did so without obtaining the consent of the other trustee, Mr A.

Counsel for Mr Thomas submitted that Mr Thomas had acted with the best of motives but with a flawed methodology. He had convinced himself that where a trustee was acting in flagrant breach of his obligation as a trustee, for his own personal gain, he was disqualified from acting in that office as trustee in respect of the relevant decision. He proceeded to complete the purchase of the property on behalf of Trust A. By doing so Mr Thomas effectively took matters into his own hands. He has accepted that the proper course was to apply to the High Court for removal of Mr A as a trustee.

In reaching a decision not to impose a period of suspension, the Tribunal said it took into account a number of matters, including:

• his was a single event of misconduct carried out with no dishonesty or personal gain;
• there were no detrimental consequences to the parties involved;
• Mr Thomas admitted guilt from the outset and accepted that his name should be published so that the profession can be aware of the need to comply with the strict requirements of professional conduct;
• no necessity arises for the public to be protected from Mr Thomas; and
• his long career without otherwise significant blemish and the standing he has in the community.

Formal censure

The Tribunal recorded the following formal censure:

“Mr Thomas – your reckless conduct merits censure. It was by a fine margin that a period of suspension from practice was not imposed on you. You have significantly let yourself and the profession down. It is critical that in times of stress and pressure a practitioner remembers and acts in accordance with his duties and role. Your duty and role was clear, as you have properly acknowledged by your approach to the charges.

“You allowed your judgement to be clouded by your frustration at the stance being taken by the co-trustee. You were aware that the funds could not be paid out on the instructions of one trustee only, and sought orders from the Family Court in order for that to occur. In light of the jurisdictional issues noted by that Court, you were similarly aware that High Court orders would be required to enable payment. You chose not to go there. Instead you convinced yourself that you could legitimately proceed without the co-trustee’s authorisation. It was the Tribunal’s concern that you may have applied some ex post facto reasoning to justify the actions taken.

“In all the circumstances, your conduct amounted to a serious failing on your part for which you are properly censured.”

The Tribunal also ordered Mr Thomas to pay the Law Society $10,907.03 standards committee costs and $2,101 Tribunal costs.