Nothing is known of Margaret Lynch's background or early life, nor of the circumstances which brought her to New Zealand. She may have arrived in New Zealand by free passage as a government-assisted immigrant. Young, single women were encouraged to emigrate in the 1860s and 1870s to overcome a serious shortage of paid domestic labour in the colony.
Margaret Lynch was employed as a servant in the household of Catherine Hale and her husband, Robert Hale, a baker, of Parnell, Auckland. In the smaller colonial homes it was difficult to maintain the traditional roles of mistress and servant, and personal antagonisms often developed. After a number of unpleasant incidents, an altercation took place in the Hale household on the evening of 28 April 1867 which resulted in Margaret Lynch's dismissal. When she returned the next morning to collect her belongings, Catherine Hale accused her of having stolen two handkerchiefs, a pair of gloves, and a gold ring valued at 30s., having hidden them in the pocket of a dress. Margaret Lynch strenuously denied the accusation, claiming that Catherine Hale had placed the articles there herself. As in a previous episode involving another employee, Robert Hale refused to lay charges.
Margaret Lynch then laid a complaint of using threatening language, assault, and non-payment of wages against her employer. Catherine Hale counter-charged with details of the alleged theft of her property. Margaret Lynch was arrested for larceny and on 6 May appeared in the police court before the resident magistrate Thomas Beckham. In spite of entirely circumstantial evidence and the prior charge of assault laid by her, Lynch was sentenced to one month's hard labour. The case against Catherine Hale was adjourned.
The magistrate had refused to accept that Catherine Hale would deliberately perjure herself with malicious intent. However, there was an immediate public outcry in support of Margaret Lynch, her conviction being seen as a miscarriage of justice. A petition for her release was signed by some 200 people, principally residents of Parnell. At a meeting in the Windsor Castle Hotel on 10 May a deputation led by Edwin Hesketh, a lawyer, was appointed to present the petition to Governor George Grey at his residence on Kawau Island. On Grey's order, Margaret Lynch was released on 12 May. A full pardon was officially recorded in 1868.
On 15 May 1867 Catherine Hale was charged with assault against Margaret Lynch. The case was settled with Catherine Hale's making a public apology in court, as demanded by the claimant, and agreeing to pay full costs.
As a domestic servant, Margaret Lynch is representative of a significant section of nineteenth century New Zealand society, whose lives have gone largely unrecorded. The circumstances by which she has survived in the historical record were unusual, and nothing is known of her later life. Her pursuit of charges against her employer, and the public sympathy aroused by her case, show Margaret Lynch to have been a young woman of strong character and personal appeal.