Former Dunedin lawyer John Milne has been found guilty of professional misconduct over his handling of almost $3 million of missing client funds, and has been struck off the Register of Lawyers.
The New Zealand Law Society labelled his actions as ''reprehensible'' and having ''grossly abused'' clients' trust. Mr Milne remains the subject of a separate Serious Fraud Office investigation, which could result in charges of dishonesty.
Mr Milne (77) took a total $2.86 million funds from 35 clients over about 20 years, ranging from $10,000 up to almost $1 million from individuals, mainly from Otago.
Law Society president Chris Moore said, ''Misuse of clients' money on this scale by anyone is reprehensible. This offending is compounded by the fact that, as a lawyer, he has totally failed in his duties to his clients, to the justice system and to the rest of the legal profession.''
The offences came to light in June 2012, when Mr Milne's then employer, Craig Paddon Law, advised clients he had ''ceased employment'' because he had ''borrowed money from clients'', which was not known to the law firm and in contravention of Law Society rules.
Since then, Mr Milne had not renewed his practising certificate, had placed himself in voluntary bankruptcy and his only income is the superannuation payment. The Official Assignee has control of any assets.
Although the Law Society has vigorously pursued the charges, it appears the affected clients may have a legal battle ahead in trying to claim any funds from its two fidelity (compensation) funds.
The misconduct charges were laid in late November by the standards committee of the Dunedin branch of the Law Society, prosecuted by Christchurch solicitor Gerald Nation, on behalf of the Law Society, which was unsuccessful in having the public hearing held in Dunedin.
Mr Milne yesterday appeared before the New Zealand Lawyers and Conveyancers Disciplinary Tribunal in Christchurch, facing charges of professional misconduct, relating to receiving and dealing with clients' funds.
Convener of the standards committee of the Otago branch of the Law Society, David More, said when contacted after the half-day hearing, Mr Milne admitted to two misconduct charges, and was subsequently struck off.
''He breached the trust and fiduciary obligations to clients, causing stress ... ,'' Mr More said of Mr Milne's many elderly, former clients.
Mr More said in commenting on the tribunal's oral decision, Mr Milne had argued the money was lent to him personally by clients, and not in his position as a lawyer.
''The tribunal said it was satisfied the loans were made [to Mr Milne] while he was practising as a solicitor,'' Mr More said.
The Law Society had made ''no submissions on whether [Mr Milne's] actions were criminal'', as the SFO was still investigating and could possibly decide to prosecute such a charge, Mr More said.
The tribunal's finding of Mr Milne being a solicitor accepting loans; as opposed to personal loans, ''does not rule out'' clients making claims against the Law Society's two fidelity funds, but they had a hurdle to overcome, Mr More said.
Key to any compensation claims is the need for a legal decision on whether Mr Milne received the money from clients as an investment, as a personal loan. Further complicating potential claims is that two Law Society fidelity funds cover different time frames under differing legislation.
''It will be up to individuals to decide whether to pursue claims on the [fidelity] fund,'' Mr More said.
Mr Milne's only income was now superannuation, and while he had some sections in coastal Otago, their value was less than the mortgage held over them. Mr Moore said Mr Milne's action could harm the image of lawyers and the society would not hesitate to act against any lawyer not meeting their obligations.
• Mr Milne had a legal practice in Dunedin for several decades before it was bought by Dunedin law firm Craig Paddon Law almost six years ago. Following a break, Mr Milne then went to work for that firm in Christchurch from July 2008 until the allegations surfaced in June last year.
