MISUSE OF TRUST FUNDS.

Otago Daily Times, Issue 21827, 14 December 1932, Page 6

MISUSE OF TRUST FUNDS.

The number of cases in Avhich solicitors have recently been convicted of the theft of trust funds that were committed to their care can scarcely have escaped public notice. Mr Justice Smith, in passing sentence this week upon a solicitor in Auckland who had violated the confidence which had been reposed in him, said that he supposed the loss, amounting to a considerable sum, would in the ordinary course fall upon other practitioners. There is no doubt that this is what will actually happen. At the instance of the Law Societies of the Dominion, legislation was passed three years ago under which a fund, made up of annual contributions by practising lawyers, was established to provide for the reimbursement of those people who suffer the loss of moneys through the dishonesty of solicitors they have trusted. The public is thus afforded protection in the respect that its losses consequent upon the wrongful conversion of funds placed in the hands of lawyers for investment are made good out of the Fidelity Guarantee Fund which was then brought into existence. It was stated, when the Bill providing for the creation of this fund was before Parliament, that the average amount of defalcations by solicitors in the preceding ten years was about £3700 a year. The annual average since the Fidelity Guarantee Fund was created must have been considerably greater than that figure. There may be two possible explanations of this. One is that, the Fidelity Guarantee Fund having been established, the Law Societies are determined that, as far as possible, all cases of defalcations that occur and come under their notice shall be brought to' light with the result that dishonest practitioners shall be weeded out of 3 profession to which they are unworthy to belong. The other is that the existence .of the fund and the knowledge that, through the existence of it, the community is adequately protected may have had the effect of encouraging defalcations. The suggestion that the establishment of the guarantee fund might actually have this effect was, in fact, made when the legislation providing for the creation of the fund was under discussion in Parliament. It may at that time have seemed to be ah extraordinary and somewhat wild suggestion, but it is by .no means impossible that the protection which has been afforded to the public has induced laxity on the part of some lawyers in whom the moral sense had not been strongly developed. Certainly, however, it is matter for congratulation that, through the steps that were taken three years ago by members of the legal profession who were jealous of its honour, persons of small means are no longer exposed to the danger that they, may be impoverished through the dishonesty of lawyers in whom they have reposed an unmerited confidence.