Zhao v Otago Standards Committee of New Zealand Law Society

JurisdictionNew Zealand
CourtHigh Court
JudgeToogood J
Judgment Date17 August 2017
Neutral Citation[2017] NZHC 1971
Docket NumberCIV-2016-404-2469
Date17 August 2017

[2017] NZHC 1971





In the Matter of an appeal against

Richard Zhao
Otago Standards Committee of New Zealand Law Society

D Zhang and B Castelino for Appellant

J Shaw for Respondent

Law Practitioners — Appeal against a finding of misconduct under the Lawyers and Conveyancers Act 2006

The issues were whether Z had received disproportionate treatment within the regulatory system; whether the Tribunal's finding of misconduct should be quashed and substituted for one of unsatisfactory conduct; whether Z's belief that the client's documents were fraudulent was a valid ground for refusing to return them and whether the suspension was excessive.

Held: The Court found that Z had breached the trust account provisions of the LCA recklessly, his argument based on different cases failed. Disproportionality of outcome compared to other cases was not a recognised defence to a charge of misconduct.

The Tribunal had been justified in holding that Z's conduct contravened the obligations with such a reckless disregard for his duties as to amount to misconduct. Z had completed the Stepping Up and Trust Account Supervisors course and was well aware of the fundamental obligation to hold client funds on trust and earn interest. The fact that Z had only moved the funds after the lawyer-client relationship had broken down indicated that he was indifferent to his obligations until he realised there could be a possible complaint.

Although Tribunal made a favourable finding that Z's concern about the documents possibly being fraudulent was genuine, it had not needed to decide whether the documents were fraudulent in order to determine that, despite a genuine concern, Z's conduct was unsatisfactory. Z could have taken other steps regarding the documents. Z's lengthy inaction in the face of reasonable options justified the finding that he had breached r4.4.1 The Rules. The Tribunal had been correct to find that while that would only have been unsatisfactory conduct if a standalone charge, it formed part of the overall behaviour and aggravated the general seriousness of the conduct.

Z had been the subject of five previous disciplinary findings of unsatisfactory conduct at the Standards Committee level. The Tribunal had correctly concluded that Z's conduct combined with his prior disciplinary history rendered the breach serious and warranted suspension. The four month suspension was appropriate.

The appeals against the Tribunal's finding of misconduct and the penalty and costs appeals were dismissed.



Mr Richard Zhao is a solicitor practising in Auckland. The Otago Standards Committee of the New Zealand Law Society laid a charge of misconduct 1 against Mr Zhao, alleging:

  • (a) Failure to pay client money into a trust account in breach of s 110 of the Lawyers and Conveyancers Act 2006 (“the Act”);

  • (b) Failure to ensure client money earned interest in breach of s 114 of the Act;

  • (c) Personally earning interest from client monies; and

  • (d) Failure to act upon a request to uplift client documents in breach of r 4.4.1 of the Lawyers and Conveyancers Act (Lawyers: Conduct and Client Care) Rules 2008 (“the Rules”).


The New Zealand Lawyers and Conveyancers Disciplinary Tribunal was satisfied the particulars had been proved and found Mr Zhao guilty of misconduct on 19 August 2016 (the substantive decision). 2 On 23 November 2016, he was censured, suspended from practice for four months, ordered to undertake a trust account course and ordered to pay the prosecution's and the Tribunal's costs (the penalty decision). 3


Mr Zhao now appeals those decisions.

Background facts

Mr Zhao was admitted to practice law in late 2008 and commenced work as a junior barrister with no trust account experience. By late 2012, he was practising on his own account as a solicitor operating a trust account.


In March 2013 Mr Zhao was introduced to a prospective client, Ms L. After phone conversations and a meeting in China, Mr Zhao agreed to undertake legal work relating to family and immigration issues on Ms L's behalf, including applications in New Zealand.


On or about 11 April 2013, the agreed retainer of $50,000.00 was paid by Ms L into Mr Zhao's personal “Freedom” account with ANZ Bank (less a bank fee of $25.00), details of which Mr Zhao had previously given to Ms L. The same day most of those funds were transferred into a “Serious Saver” account in the name of Mr Zhao and his wife. These funds were held in a variety of Mr Zhao's personal accounts for a period of six and a half weeks.


Over this period the sum gained some interest, and on 30 April 2013 the bank credited the Serious Saver account with $767.75, a portion of which is attributable to Ms L's funds. This portion is estimated to be several hundred dollars. While Mr Zhao asserted he remained ready, willing and able to pay this interest to Ms L, he did not account to Ms L for any interest earned on the funds held. Despite making an offer to account for the interest in response to Ms L's complaint, a year after the funds were deposited, no interest was paid to Ms L. It was never accounted for in the firm's trust account statements, despite Mr Zhao being aware of the requirement under the Trust Account regulations for the firm to do so.


During the course of the lawyer-client relationship, Mr Zhao had received from Ms L various documents, including passports, birth certificates and identification cards relating to herself and her family. When Ms L arrived in New Zealand, she presented Mr Zhao with new identity information for her children which showed that the children were born in China with a different father. Mr Zhao interpreted the production of these documents as amounting to forgery and an attempt to defraud immigration authorities. He said he told Ms L that he would not help her. On 23 May 2013, Ms L terminated the relationship with Mr Zhao in writing and formally requested the return of all of her documentation, including those that related to her children and copies of anything held on file, as well as the balance of deposited funds after payment of Mr Zhao's reasonable expenses and costs.


On 27 May 2013, Mr Zhao wrote to Ms L saying he suspected her of

“criminal and/or immigration offences”. He refused to release her documents on the grounds that they may be evidence of such and said he was considering reporting Ms L to the authorities.


That same day, several transfers were made within Mr Zhao's personal accounts resulting in $49,975.00 being deposited back into the original personal Freedom account, and from there into the trust account of Richard Zhao Lawyers Limited (Mr Zhao's firm).


On or about 29 May 2013, Ms L instructed a solicitor, Mr B, to act on her behalf in relation to her documents and payments. An exchange of correspondence followed. Mr B requested that all documentation and the funds be accounted for, including seeking time records and invoices. Mr Zhao declined to return the documents on the basis of alleged attempted fraud, saying time would be needed to decide which documents could be returned, and stating that invoices and time records would be provided in due course.


On 12 June 2013, Ms L lodged a complaint against Mr Zhao with the New Zealand Law Society. On 17 June 2013, Mr Zhao released several of the requested documents but he retained others, including passports, birth certificates, household registers, wills and other Chinese legal documents.


On 27 June 2013, the $49,750.00 held on trust for Ms L (plus $25 credited to her) was transferred to the practice of Mr Zhao's firm in payment of fees.


At a meeting with Mr Maffey, the Committee's appointed inspector, on 27 November 2013, Mr Zhao produced an invoice dated 21 June 2013 in which Mr Zhao invoiced Ms L in the amount of $50,000.00. While the narration recites the work undertaken, there are no details provided for the basis on which the fee was calculated.


On 29 November 2013, Mr Zhao gave the investigator a document headed

“Time Sheet/WIP” which details the attendances to which the $50,000.00 related. $29,973.00 was included for barrister's fees which had not been invoiced previously.


Mr Zhao declined to act upon the repeated requests to return Ms L's documentation, over a period of around eleven months after Ms L first requested they be returned. On 11 April 2014, only three days before Mr Zhao's response to Ms L's complaint was due to be submitted to the Committee, he forwarded the documents to immigration authorities. There was no evidence that Mr Zhao's complaint was acted on by Immigration New Zealand.

Tribunal's decisions

The Tribunal's finding of misconduct is the only one of the five issues addressed by the Tribunal in its substantive decision that is the subject of this appeal. The penalty decision is challenged as to the order for suspension and costs.


After the hearing of evidence by the Tribunal, Mr Zhao made an unsuccessful application for a stay of the Tribunal's process. It was founded on a proposition that Mr Zhao was being treated differently from other practitioners in other cases without any proper basis. Although there is no challenge to the refusal of the stay in this appeal, Mr Zhao relies on points raised in that application in support of an argument that the Tribunal's misconduct finding was unjustified. It is convenient, therefore, to discuss the arguments and the Tribunal's findings on it first.

Practitioner X

The principal ground for the stay application was an assertion that the way in which a Standards Committee had dealt with a...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT