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NZLS in fidelity fund furore

NZLS in fidelity fund furore

The New Zealand Law Society (NZLS) has been accused of being in breach of its fiduciary duty to the NZ public by a Waikato Bay of Plenty barrister as well as a member of the NZ Justice and…

The New Zealand Law Society (NZLS) has been accused of being in breach of its fiduciary duty to the NZ public by a Waikato Bay of Plenty barrister as well as a member of the NZ Justice and Electoral Committee.

The Lawyers and Conveyancers’ Bill, now before Parliament, provides for the NZLS to acquire approximately $6 million from the current Solicitors’ Fidelity Guarantee Fund, of which the NZLS is presently trustee.

Under the Bill, the NZLS can use two-thirds of the Fund balance in trust for carrying out representative functions for its members such as providing services and facilities for lawyers.

But these restrictions will cease under clause 337 as there will be no restrictions on the ownership and use of the funds by the NZLS. The remainder of the funds will become the new lawyers’ fidelity fund.

This has been criticised by Cheryl Simes, barrister and former editor of the Waikato Bay of Plenty District Law Society newsletter. Simes argued that “the NZLS has persuaded the government that lawyers think it’s a brilliant idea”.

In Simes’ view, the NZLS is acting against the interests of the beneficiaries of the fund for which it is trustee, being people who have had money stolen by lawyers. It is doing this by effectively lobbying to reduce the fidelity fund, remove the fidelity fund, or take it for its own purposes.

“These are the leading lawyers [in NZ] so if they didn’t know that there was a problem with that basic principle, then don’t they do trust law? Whether this was a conspiracy or a cock-up I don’t know but neither scenario is good,” she said

Supporting Simes’ position, Murray Smith, United Future MP and member of the Justice and Electoral Committee, said that the fund is “held by the Law Society as trustee on behalf of the public” and describes it as “ethically improper” to disburse the fund as proposed in the Bill “without the specific consent of the contributing members”.

The view of the NZ opposition, the Nationals, is that “the fidelity fund had a place when lawyers were actively involved in mortgage lending, but the current range of banking products has meant that lending by lawyers is rare”. As the Bill presently stands, there is still the potential for a special levy to be required if a claim arises that cannot be met under the new fund.

Andrea Ruffell is editor of NZ Lawyer.

Like this story? Read more:

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NZLS in fidelity fund furore
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