New Zealand Law Society - Liability


Liability of lawyer principals for loss by theft

All actively involved lawyers holding voting shares become personally liable for any pecuniary loss by a client resulting from theft by anyone in the law firm (s18).

Before a lawyer can hold shares (whether voting or non-voting) in an incorporated law firm, they must be entitled to practise on his or her own account (s30(2)).

Personal liability

Incorporating a law firm protects the directors and shareholders from personal liability for debts of the incorporated law firm. Section 17(1) makes it clear that just being a director or a shareholder does not make someone liable for:

  • any act or omission of any other director or shareholder; or
  • the debts or liabilities of the firm.

However, lawyer directors and shareholders will be liable for any theft that may occur (s18).

It will not be possible to negate tortious liability of a lawyer who is a director or shareholder, as this would be inconsistent with the provisions of s17(2). A lawyer who is a director or shareholder of an incorporated law firm is subject to all the professional obligations to which they would be subject if they were in practice on their own account.