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PRESS RELEASE
To: The News Editor
From: jcreser@i4free.co.nz
CC: Persons named in article.
Date: 11/17/04
Re: Johnston Lawrence & Co
SERIOUS FRAUD OFFICE TO INVESTIGATE LAW SOCIETY.
The Serious Fraud office has been asked to investigate the New Zealand Law Society after a complaint was laid about the administration of a solicitor’s trust account.
The Wellington District Law Society received a complaint last year about the administration of a family trust account by the Wellington law firm of Johnston Lawrence.
Over the last two years Mr Roger Chapman of Johnston Lawrence has refused to provide accounts or explain the deduction of over $100,000 of personal expenses from the trust fund.
A complaint was referred to the Law Society and rejected and now the SFO is now being asked to investigate because it is claimed that the society’s failure to follow its own complaint procedure clearly establishes this matter as being in the public interest
The complainant, a Wellington beneficiary said today that; “The failure of the society to abide by its own rules & statutory requirements to ensure solicitors trust funds are transparent & managed honestly, has enabled the trustees to avoid charges of false pretences and virtually clean out the income account; the apparent statutory safeguards appear to be little more than window-dressing, given that clearly defined procedural steps have not been observed.”
Serious Fraud- Today's letter
D J Bradshaw
Serious Fraud Office
P.O Box 7124
Wellesley St
Auckland
Dear Mr Bradshaw, Family Trust - Wellington District Law Society.
I refer to the complaint against the trustees of my late mother’s estate and the law firm of Johnston Lawrence in Wellington. This involved the deduction of the trustee’s personal costs of over $100,000 from the trust’s income account without the consent of the beneficiaries and the refusal of the solicitors & trustees to disclose financial records.
In discussions with your complaints officer, I was asked to refer to a specific statutory breach in respect of the parties subject to this complaint, which now include the Wellington District Law Society. I submit the failure of the society to observe its own complaint procedure clearly establishes this complaint as being in the public interest.
In my letter of 28 October 2004, I referred to the statutory requirement to refer my concerns to the Joint Audit Board of the New Zealand Law Society under s101(5) of the Law Practitioners Act 1982, as stated below.
(5) On completion of the inquiry, the District Council or committee shall—
(a) Notify the complainant and the person complained against of its conclusions and of any action taken or to be taken by it as a result of the inquiry; and
(b) Where the complaint relates to the operation of a solicitor's trust account or to the audit of any such account, notify the Joint Audit Board of the complaint, its conclusions, and of any action taken or to be taken by it as a result of the inquiry.
The District Law Society was given the opportunity to re-consider a complaint concerning the operation of the solicitor’s trust fund, however no action has been taken on the specific issues of disclosure & deduction of personal expenses. In discussions today with the society’s assistant executive director, I was advised the matter was dealt with as a complaint over the amount of costs and, as such, had not been referred to the Joint Audit Board. Please note, the solicitors’ rules of professional conduct clearly require practitioners to disclose documents to beneficiaries and there is substantial case law to support the application of this rule.
I have requested a specific response from the society concerning the solicitor’s refusal to disclose the accounts and the deduction of personal costs from the trust fund. However, you will note from the enclosed correspondence (posted) that the society has assiduously avoided any reference to the Joint Audit Board or the nature of the complaint, even though I have made several written requests for specific advice.
The society has deemed my complaint as one of “cost revision” rather than of disclosure and personal expenses taken from the trust’s income account. The Government however is considering the Lawyer’s and Conveyancers Bill, which when passed will give both beneficiaries and executors the right to make a complaint. It is obviously in the public interest that the society be held accountable for failing to ensure solicitors are required to abide their own Rules of Conduct, which in turn has aided & abetted a criminal act.
Given the proposed changes in the law, I would suggest that the society is simply providing the solicitors with a convenient smokescreen to delay the inevitable. The failure of the society to abide by its own rules & statutory requirements to ensure solicitors trust funds are transparent & managed honestly, has enabled the trustees to avoid criminal action for false pretences and virtually clean out the income account.
The law firm of Johnston Lawrence has avoided providing accounts for nearly two years and has deducted personal expenses from the trust account. I note that this matter was first brought to attention of the society 18 months ago, but unfortunately the apparent safeguards appear to be little more than window-dressing, given that clearly defined procedural steps have not been observed.
This in my view makes the New Zealand & Wellington District Law Societies complicit in this fraud given that prompt disclosure and proper referral would have identified the particular concerns and provided evidence to enforce the trust. Accordingly, I would request that your office consider prosecuting the breaches of the Law Practitioners Act.
Finally, I would request that you please take immediate steps to ensure a forensic audit of the trust’s accounts’ before making any further decisions in respect of this complaint.
Yours sincerely,
R J Creser
cc Paul Chisnall/ Gibson Sheat
Robin Crimp/ Official Assignee
Roger Chapman/Johnston Lawrence
Mary Ollivier/ Wellington District Law Society
New Zealand Law Society
