CLIENTS’ INDEMNITY

Sun (Auckland), Volume III, Issue 866, 9 January 1930, Page 8

CLIENTS’ INDEMNITY

SOLICITORS’ GUARANTEE FUND PROTECTION OF TRUST MONEYS Protection of the oublic aqainst loss of trust money through misappropriation by dishonest solicitors is the object of the Solicitors’ Fidelity Guarantee Fund, which came into force on January 1. IJROMOTED by the New Zealand lav Society, the legislation was one of the most important enacted during the last Parliamentary session. Under its provisions, clients whose moneys or property are stolen by solicitors, their servants or agents, will be reimbursed from the fund which the legal profession has voluntarilyundertaken to build up. In the opinion of Mr. A. Gray, K.C., president of the New Zealand LawSociety, other countries will probably emulate New Zealand's example. The fund to bo established under the Act is not to exceed £IOO,OOO, which will be administered by the New Zealand Law Society. The first committee to manage the guarantee fund is Mr. A. Gray. K.C.. president; Mr. C. H. Treadwell, vice-president; Mr. P. Levi, treasurer, of Wellington, and Mr. A. H. Johnstone, of Auckland, and Mr. C. 11. Gresson, of Christchurch. A levy of £5 5s has been fixed by the Law Society Council, to be made immediately on practising lawyers, for the purpose of the fund. At any time the fund is insufficient to cover liabilities, a special ievy not exceeding £lO may be made; but no solicitor will be required to contribute by levy more than £lO in any one year, or more than £SO during his whole term of practice as a solicitor. The fund will be protected under a provision permitting the employment of an accountant to audit solicitors’ trust accounts and render confidential reports concerning any irregularities which may be disclosed, or any other matter demanding investigation. This power is in addition to the existing provision by which every solicitor must have his trust account audited once a. year, and its object is to enable an investigation to be made where circumstances seem to demand it, and to enable steps to be taken to prevent the possible misuse of clients' moneys by solicitors who may happen to be in embarrassed circumstances. The accounts of the fund are to be audited annually by a registered accountant. The Act further requires that notice of a claim on the fund must be given in writing to the council or the management committee within 12 months after the claimant has become aware of the theft. There are various provisions regarding procedure, and claims for amounts not exceeding £SOO will be satisfied before claims exceeding that sum are satisfied. The establishment of the fund is the result of protracted discussions by the legal profession, and is welcomed by practitioners as a whole because it expresses their earnest desire to indemnify clients who are the victims of misplaced confidence, according to Mr. Gray. FEELING OF UNEASINESS Naturally, he says, the occasions—which happily have been infrequent—when a solicitor has “gone wrong” in this way, usually through lack of experience and proper training, have given rise to a feeling of uneasiness and mistrust, and have tended to create in the minds of some members of the public a certain amount of prejudice against lawyers in general. It is to counteract this element and restore confidence in the profession that the fund has been created. Although New Zealand is not the only country in which solicitors’ peculations have occurred, it is believed that this Dominion is the first in the Empire to attempt to restore confidence.

The idea of compulsory audit of solicitors’ trust accounts, as adopted in New Zealand in 1913, has attracted attention in some parts of Australia and England, and it is more than probable that the New Zealand system of compulsory audit will be adopted. The establishment of a solicitor’s guarantee fund in New Zealand has also created a great deal of interest in Australia, and the Hon. T. M. Wilford, K.C., the new High Commissioner for New Zealand, who had charge of the Bill during its passage through the House of Representatives, intends to take every opportunity of promulgating the provisions of the new Act among members of the profession in England. Solicitors not practising on their own account, such as those in Government employ, will not come under the provisions of the new Act. The first year of the fund’s existence, it is expected to amount to £6,000 or £7,000, and this will be repeated in the second and succeeding years, and if the number of practising solicitors continues to increase, the fund will grow proportionately. Mr. Gray expresses indebtedness of the profession to the Government for facilitating the passage of the meassure; the Prime Minister, Sir Joseph Ward; the Chief Law Draughtsman, Mr. James Christie: Sir Thomas Sidey, and to the Hon. Thomas Wilford, K.C., for their work in having the Bill enacted.