Tauranga lawyer David Small has been fined $14,500 and censured by the Law Society for "unsatisfactory conduct" after he acted for a couple in a property deal he was a party to.
The Society's Lawyers Standards Committee imposed the fine after it found there had been an "irreconcilable" conflict of interest when Mr Small acted for his clients and their investment company in a property deal.
Mr Small, a partner in Jackson Reeves Lawyers, was one of the buyers and the property was to be leased to his law firm.
According to the latest edition of Law Society's Law Talk magazine in which the committee's censure decision was published, the conflict of interest centred around Mr Small offering his clients the chance to buy a half-share of a Tauranga property in 2003, while the other half was bought by him and several other people.
A mortgage for some or all of that half share was secured over the property, and a further advance under this mortgage was spent on improvements payable by all the parties.
The client husband who personally guaranteed the mortgage owned half of the shares, Mr Small and his lawyer partner owned 19 per cent each, and the other four buyers the remaining 12 per cent.
The clients' investment company loaned more than $780,000 to the buyer company, but this loan was not documented or secured.
Mr Small not only acted as lawyer on the property purchase, but also for the bank loans, the lease of the property to his firm, the formation of the buyer company and on a shareholders' agreement.
However the later agreement was not concluded or signed.
He also acted for the client husband for a bank advance for the buyer company and the advanced funds enabled Mr Small to buy out two of the other shareholders. His clients complained to the Lawyers Complaints Service.
Their complaint specified that Mr Small had not offered them legal advice and had wrongly used their power of attorney.
Mr Small confirmed that he had indeed acted on the purchase, lease and other transactions, but claimed he used the client's power of attorney because he had understood they were overseas.
The Lawyers Standards Committee found that not only had there been an irreconcilable conflict of interest in this case, but said it was "surprising and reprehensible" that Mr Small had not to insisted on his clients getting independent legal advice and facilitated them getting it.
The committee found it was also "seriously reprehensible" that Mr Small had arranged a further loan as attorney so that he could buy out other shareholders.
Mr Small had made a commitment to the bank on the clients' behalf without their approval and also without facilitating them getting independent advice.
Mr Small had continued acting for the couple until December 2010.
The committee found Mr Small's pre-August 2008 actions had amounted to "misconduct" and after that date he was guilty of "unsatisfactory conduct" under the Lawyers and Conveyancers Act 2006 which came into force on August 1, 2008.
Mr Small had "abused his clients' trust and confidence" and failed to act in their interests and provide them with competent, independent advice.
For his conduct up to August 2008, the committee fined Mr Small $2000 - the maximum penalty under the Act - and censured him for the later conduct, ordered him to apologiseand fined him $12,500.
Mr Small was also ordered to pay $1500 costs to the Law Society.
His clients claimed compensation. The committee said it was difficult to quantify their loss until the property was sold and their loan was repaid and considered the courts would be the proper forum to deal with that matter.
Mr Small would not comment when contacted by the Bay of Plenty Weekend.