Auckland 356 Complaints Committee and Auckland No.1 Standards Committee v John Hardwick Sanders of Auckland
 NZLCDT 21
BEFORE THE NEW ZEALAND LAWYERS AND CONVEYANCERS DISCIPLINARY TRIBUNAL
Mr D J Mackenzie
MEMBERS OF THE TRIBUNAL
Ms S Gill
Mr C Rickit
Ms S Sage
Mr W Smith
IN THE MATTER of the Lawyers and Conveyancers Act 2006
Mr R Earwaker and Mr M Treleaven for the New Zealand Law Society
Mr H Fulton for the practitioner
Reasons of Tribunal for finding that the practitioner (“S”) was guilty of breaching r5.01 Rules of Professional Conduct for Barristers and Solicitors (practitioners required to observe Solicitors Trust Account Rules 1996) through breaching r5(7)(b) Solicitors Trust Account Rules 1996 (“Trust Account Rules” — solicitors only to disburse client's trust money on instruction of client) — reasons for penalties imposed on that charge and two charges of making false representations as to authority to disburse funds to other practitioners and a Complaints Committee respectively (“misrepresentation charges”) — whether a joint account of two clients in respect of trust monies may be treated as belonging to either client and that the instruction of either client to disburse monies was sufficient under r5 Trust Account Rules — whether misrepresentation charges were acts of innocent mistake — whether suspension from practice for 3 months appropriate penalty for all breaches
Held: Rule 5(1)(c) Trust Account Rules could not be used by S to establish his “defence” in relation to the first charge, as the reference to treating a joint account of two clients as a single client there was for the specific administrative purpose of that rule only. “Implied ostensible authority” had no application in these circumstances, as joint interests could be put at risk if a solicitor acted on the authority of only one joint owner, rather than both. The obligations imposed by r5(7)(b) were unequivocal and require a high standard of compliance — it was not sufficient for one owner of jointly held funds to give an instruction to disburse and to advise that it is on behalf of all owners. S was obliged to obtain SP's instruction and could not simply rely on RP's assurance.
As for the misrepresentation charges, even if S had not intended to mislead, he was reckless as to the accuracy of the information he had provided. Anyone reading the written authority would have expected the date which followed the signature of RP to denote its date of execution. S' conduct was further exacerbated by previous correspondence from both the other practitioners and the Standards Committee, which put him on notice that the adequacy of instructions to disburse the funds was at issue.
Ultimately, the Tribunal rejected the Law Society's submission that a three-month suspension for S was appropriate. It ordered that S was not to practice on his own account until authorised to do so by the Tribunal, censured him for his breaches, and in view of S' advanced age and straiten financial circumstances, ordered him to pay 50% of the Law Society's costs.
This is the Tribunal's full decision, with reasons, following its earlier oral decisions on the charges and penalty.
Mr Sanders faced five charges of professional misconduct;
[a] That on or about 3 November 2006 he breached Rule 5.01 of the Rules of Professional Conduct for Barristers and Solicitors by failing to comply with Section 89 Law Practitioners Act 1982 and/or Rules 3 and/or 5(7)(b) of the Solicitors Trust Account Rules 1996. This charge was laid by the Auckland Section 356 Standards Committee of the New Zealand Law Society. (“the Section 356 Charge”)
[b] That on a date unknown but in approximately July 2007 he wrote false details on a form with the title “Authority to Disburse Funds” (“the Authority”) which purported to authorise the payment of funds from his trust account in the name of Mr RV and Mrs SL Prasad to Mrs Ramkali. (“the False Detail Charge”)
[c] That on or about 16 August 2007 he made a false representation to Dawsons, solicitors, expressly or by implication, that the Authority was signed by Mr Prasad on 15 November 2006 with Mr Prasad signing on behalf of himself and Mrs Prasad. (“the Dawsons Representation Charge”)
[d] That on our about 11 December 2007 he made a false representation to Complaints Committee No.1 of the Auckland District Law Society, expressly or by implication, that the Authority was reduced to writing and/or signed by Mr Prasad on 15 November 2006 with Mr Prasad signing on behalf of himself and Mrs Prasad. (“the Complaints Committee Representation Charge”)
[e]That from, on, and after 23 June 2008, in breach of Section 101(6) of the Law Practitioners Act 1982, without lawful justification or excuse he refused or failed, and continued to refuse or fail, to comply with the lawful requirement of Complaints Committee No.1 of the Auckland District Law Society made by resolution dated 26 May 2008 that pursuant to Section 101(3)(d) Law Practitioners Act he produce certain books, documents, papers, accounts and records in his possession. (“the Statutory Charge”) The charges noted at (b) – (e) above were laid by Auckland Standards Committee No.1 of the New Zealand Law Society.
All five charges were set down for hearing in Auckland on 22 July 2010. At the hearing on that day the Standards Committee sought, and was granted, leave to withdraw the False Detail Charge and the Statutory Charge. That left the Section 356 Charge, the Dawsons Representation Charge, and the Complaints Committee Representation Charge to be dealt with at the hearing. Mr Sanders admitted the latter two charges, but denied the Section 356 Charge.
After hearing argument on the Section 356 Charge, and receiving representations on the Dawsons Representation Charge and the Complaints Committee Representation Charge, the Tribunal retired to consider its decision on these matters.
The Tribunal found that Mr Sanders was guilty of misconduct in his professional capacity on the section 356 Charge.
The Tribunal was satisfied that Mrs Prasad had a joint interest in the money in the Prasads' trust account with Mr Sanders. Mr Prasad had instructed Mr Sanders to transfer $174,000 of that money to Mr Prasad's mother. Mr Sanders made the transfer without obtaining instructions from Mrs Prasad. The Tribunal found that Mr Sanders had to have Mrs Prasad's consent or authority to properly make the transfer. In making the transfer without Mrs Prasad's consent or authority Mr Sanders breached both the Law Practitioners Act and the Solicitors Trust Account Rules.
The Dawsons Representation Charge and the Complaints Committee Representation Charge were both admitted by Mr Sanders.
After delivering its substantive decision on the Charges, the Tribunal requested submissions on penalty from the parties, who both indicated a willingness to provide them at that point with a view to finalising the disciplinary process.
After a short adjournment submissions on penalty were made by the parties. After considering those submissions the Tribunal delivered its decision on penalty. The decision of the Tribunal provided that;
[a] Pursuant to Section 112(2)(c) Law Practitioners Act 1982 and Section 242(1)(g) Lawyers and Conveyancers Act 2006, Mr Sanders was not to practise as a solicitor on his own account, whether in partnership or otherwise, until authorised by the Tribunal to do so;
[b] On each charge Mr Sanders was censured;
[c] Mr Sanders was to pay 50% of the New Zealand Law Society's total costs of $14,361;
[d] Mr Sanders was to reimburse 50% of the New Zealand Law Society's total costs of $9,333 fixed under Section 257(3) Lawyers and Conveyancers Act 2006.
The Tribunal confirmed at the hearing that it would issue a decision in writing, with its reasons, in due course. This written decision now sets out the reasons for the Tribunal's decisions on the charges and penalty.
This matter arose as the result of a transfer of funds held on trust by Mr Sanders, a sole practitioner, in the names of Mr RV and Mrs SL Prasad. The funds were transferred by Mr Sanders to Mr Prasad's mother, Mrs Ramkali, to assist Mrs Ramkali to purchase a property at Abelia Place, Auckland. The transfer was made on the instruction of Mr Prasad. The Law Society position was that Mrs Prasad's authority had not been obtained, and that no written record had been retained of Mr Prasad's instruction. The first issue we considered was whether Mrs Prasad's authority was necessary and obtained.
The funds held by Mr Sanders on trust represented the proceeds of sale from three properties sold by Mr and Mrs Prasad. Mr Sanders had acted for Mr and Mrs Prasad on those sales. On or about 3 November, Mr Sanders, acting on the verbal instructions of Mr Prasad, transferred approximately $174,000 of the funds held on trust for Mr and Mrs Prasad to Mrs Ramkali's account, to facilitate her purchase of the property at Abelia Place. The sum transferred was said to represent funds held following sales by Mr and Mrs Prasad of properties at...
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