Lawyer Ronald Bruce Johnson was suspended from practice for three months after failing to give full advice to ill-informed trustees of a Samoan family trust as part of a referral from another lawyer who as fellow trustee was selling property to the trust.
The Hunt Family Trust was established in 2009. Mrs Hunt’s home in the Auckland suburb of Grey Lynn was to be sole Trust asset. Nominated as trustees were Mrs Hunt, her daughter and a trustee company controlled by their then family solicitor, Mr Ed Johnston. He has since been struck off. The High Court was told Mrs Hunt and her daughter never sighted a trust deed. Son Maurice acted as intermediary bringing only the signature page to them for signing. They had never met Mr Ed Johnston.
Two months after the Trust was established, Mr Johnson received from Mr Ed Johnston an email referral asking him to advise the Hunts on a proposed transaction: Mr Ed Johnston was selling to the Hunt Family Trust a property he owned in Ranui, west Auckland. Mr Johnson was then a salaried partner in a west Auckland law firm. The stated price of $297,000 was a few thousand dollars below current rating valuation. Six years later, Mrs Hunt’s son Matthew complained to the Law Society about the advice given.
Justice van Bohemen confirmed a three month suspension from practice. He ruled Mr Johnson was negligent, having provided inadequate advice. His duty as legal adviser went beyond explaining the mechanics of a property sale. Trustees Mrs Hunt and her daughter were unsophisticated and inexperienced in business. The consequences for the Trust of raising a mortgage for the Ranui purchase should have been canvassed. Consideration of how the purchase would benefit the Trust and its beneficiaries should have been discussed. The fact Mrs Hunt’s daughter as trustee expressed discomfort at the meeting about the proposed purchase should have triggered the need for an in-depth discussion lasting beyond a twenty-minute meeting. Sons Matthew and Maurice also attended the meeting.
The son’s complaint to the Law Society triggered an audit of Mr Johnson’s trust account. Inspectors found irregularities in its operation. Accounting records were not kept up to date. No client funds had been misappropriated.
Johnson v. Canterbury/Westland Standards Committee – High Court (28.03.19)
19.069