Bankrupt Dunedin lawyer owes $2.9m

Insolvency agency the Official Assignee has found more than $2.9 million of funds was gleaned from clients of self-bankrupted Dunedin lawyer John Milne, who now faces four professional misconduct charges over the matter.

Mr Milne was charged by the standards committee of Dunedin branch of the Law Society in late November, and he will be prosecuted by Christchurch solicitor Gerald Nation, on behalf of the Law Society.

Mr Milne remains under investigation by the Serious Fraud Office, which does not comment on investigations until they are concluded.

Mr Milne, faces four charges before the New Zealand Lawyers and Conveyancers Disciplinary Tribunal, alleging professional misconduct, relating to receiving and dealing with clients' funds.

Mr Nation said when contacted he expected to know by early March when a date and venue would be set. The case could be heard in Dunedin.

Five months ago, Dunedin solicitor Alistair Paterson initiated a register of affected persons, for investors to identify themselves to, which could collectively look at issues surrounding the clients' legal rights and possibility of compensation.

Contacted on Friday, Mr Paterson said he had been contacted by only five of the total 38 claimants, who had notified their losses to the Official Assignee.

Mr Milne was adjudged bankrupt in the High Court at Christchurch last November.

Mr Paterson said public documents collated on his bankruptcy showed estimated claims stood at $2,960,224.

He estimated $137,497 was owed to banks and sundry creditors, while the balance of $2,768,727 were funds given to Mr Milne by clients, over a long period.

The three largest sums involved were $964,000, $315,000 and $240,000. Five were around $100,000 or more and 14 sums were $10,000 or less.

Convener of the standards committee of the Otago branch of the Law Society, David More, when contacted, said Mr Milne had been served with the four charges.

It appears that while few clients have come forward to join Mr Paterson's register, some could seek compensation from the Law Society's two fidelity funds.

However, key to any compensation claim is whether the clients lent money to Mr Milne, or whether they were expecting returns on an investment.

Asked if the disciplinary tribunal would be considering the compensation issue, Mr More said he understood that while the tribunal had the power to do so, with Mr Milne bankrupt it was now up to the Official Assignee, which controls Mr Milne's estate and assets, to determine what funds might be available.

Mr Nation understood the tribunal would not not be making any ruling on compensation.

Mr Milne, who no longer has a practising certificate, had his legal practice in Dunedin for several decades before it was purchased by Dunedin law firm Craig Paddon Law, about five and a-half years ago.

Mr Milne later worked for that firm in Christchurch, from July 2008, but ceased employment in June last year. The law firm had been unaware of claims Mr Milne borrowed money from clients.