The New Zealand Law Society's fidelity fund may be of assistance to clients who loaned Dunedin lawyer John Milne money, for which he is to face charges.
The fidelity fund has two components. Some claims come under an "old fund" for pre-August 2008 theft offences.
Offences thereafter come under the "new fund".
Charges are going to be brought against Dunedin lawyer John Milne by the Otago branch of the Law Society before the Conveyancers Disciplinary Tribunal in coming weeks.
It has been reported he borrowed money from clients, which was unknown by his now former employer at the time.
The Serious Fraud Office, stating serious or complex fraud "may have been committed", is also investigating.
It is understood up to $2 million in loans over many years is being questioned, and there is one unconfirmed claim a southern client is owed more than $1 million.
Because of the complexity of any potential claims, it is understood investors will be encouraged to form a class action group to make submissions to the Law Society.
The fidelity fund of the Law Society, which can compensate a lawyer's client for proven theft, is now operating under new legislation.
The maximum amount payable to an individual claimant under the new fund is $100,000.
There was no limit in respect of claims made under the old fund.
Pertinent to any fidelity fund compensation, should charges against Mr Milne be proven, is whether the money was deemed as loaned personally to him, or given to be invested.
Like the old fund, the new fund has a provision there will be "no compensation in respect of money instructed to be invested", the Law Society states.
One legal source said the issue would be whether money lent to Mr Milne was in context of being within a formal client-lawyer relationship, or whether it was a transaction between friends.
Also, if a claim for theft before August 2008 was made, then that would come under the old fund and those clients could then potentially seek full compensation.
No agency will confirm how many investors are involved, but at least six are known about.
The Otago branch of the Law Society is to lay charges and prosecute Mr Milne before the higher New Zealand Lawyers and Conveyancers Disciplinary Tribunal.
This hearing could be two to three months away and the tribunal's findings will be made public.
The old fund, under the Law Practitioners Act 1982, will continue to operate for some time and "will continue to apply to thefts by lawyers occurring before 1 August 2008", the Law Society has stated.
• Contributions to the new fidelity fund, of $320 annually, per law firm partner, are payable by all lawyers who practise on their own account, other than those who do not operate a trust account.
