Solicitor Removed from Roll for Professional Misconduct

The Tribunal found the solicitor guilty of professional misconduct for wilfully breaching trust fund regulations and misappropriating client funds, leading to removal from the roll of legal practitioners.

CITATION: [COMPANY] -v- [NAME] [2001] NSWADT 211 DIVISION: Legal Services Division APPLICANT PARTIES: Council of the [COMPANY] RESPONDENT [NAME]: 012006 HEARING DATES: 25/10/2001 SUBMISSIONS CLOSED: 10/25/2001 DATE OF DECISION: 12/12/2001

BEFORE: [NAME] Member; Officer D QC - Judicial Member; Klika D - Member APPLICATION: Professional Misconduct - breach of s. 61 of the Legal Profession Act - Professional Misconduct - misappropriate trust moneys/moneys MATTER FOR

DECISION: Principal matter LEGISLATION CITED : Administrative Decisions Tribunal Rules (Transitional) Regulation 1998 Legal Profession Act 1987 [NAME] v. General Council of Medical Education and Registration (1840) 1 QB 750 [NAME] v. The Council of the Incorporated Law Institute of New South Wales (1939) 13 ALJ 563 CASES CITED: Re [NAME] (1962) 79 WN NSW 340 Re Mayes and Legal Practitioners Act 1974 1 NSWLR 19 [COMPANY] v. [NAME] (unreported Court of Appeal NSW, 27 July 1978) [NAME] v. [COMPANY] (unreported Court of Appeal NSW, 26 April 1990) APPLICANT REPRESENTATION: [NAME], solicitor RESPONDENT No appearance ORDERS:

1. That the name of [NAME] be removed from the Roll of Legal Practitioners in New South Wales;

2. That [NAME] pay the costs of the Applicant of and incidental to these proceedings.

Background 1 [NAME] (the Solicitor) was admitted as a Solicitor in New South Wales on 2 May 1975. In response to various complaints, the [COMPANY] appointed [NAME], on 1 May 1998 as receiver of the trust property of the Solicitor. On 27 July 2000, the Solicitor's application for a Practising Certificate for the year ended 30 June 2001 was refused. 2 On 9 November 2000, the Professional Conduct Committee of the [COMPANY] passed a resolution pursuant to s.137(2)(b) of the Legal Profession Act 1987 (the Act) and resolved pursuant to s.134(2)(a) of the Act to make a complaint against the Solicitor in accordance with the particulars referred to in the said resolution. On 5 April 2001 the Committee resolved, it being satisfied there was a reasonable likelihood the Solicitor would be found guilty by the Tribunal of professional misconduct, that proceedings be instituted pursuant to s. 155(2) of the Act. The Tribunal will return to the detail of the grounds alleged but for present purposes its sufficient to record that the alleged grounds of professional misconduct were: (1) The Solicitor wilfully breached s.61 of the Legal Profession Act 1987. (2) The Solicitor misappropriated clients' funds. (3) The Solicitor grossly delayed in the stamping of documents. (4) The Solicitor altered or permitted to be altered contracts for the sale of land for the purpose of avoiding or reducing penalty duty. (5) The Solicitor wrote letters which were misleading. (6) The Solicitor contravened the orders of the Supreme Court dated 1 May 1998. (7) The Solicitor failed to forward to [NAME] for the Australian Capital Territory files and funds as requested. (8) The Solicitor failed to respond to correspondence. (9) The Solicitor failed to disclose to the receiver the receipt by him of trust moneys or to hand those trust moneys to the receiver. (10) The Solicitor failed to pay third party fees. 3 The Solicitor neither attended nor was represented at the Tribunal hearing in Sydney on 25 October 2001. The Tribunal is satisfied, on the evidence before it, that the Information was personally served on the Solicitor and is satisfied of the other matters referred to in Rule 29 of the Administrative Decisions Tribunal Rules (Transitional) Regulation 1998. It is clear that the Solicitor was fully aware of the hearing date. Issues 4 To firstly decide whether the Solicitor was guilty of professional misconduct as constituted by a wilful breach of s.61 of the Act. 5 Section 127 of the Act provides: "(1) For the purposes of this Part, professional misconduct includes: (c) conduct that is declared to be professional misconduct by any provision of this Act." 6 The relevant sub-sections of s.61, as at the time, provided: "61(1) If a Solicitor, in the course of practising as a Solicitor, receives money on behalf of another person, the Solicitor shall: (a) hold the money exclusively for the other person; and (b) ensure that subsection (2) and the regulations are complied with in relation to the money. (2) Money received on behalf of another person by a Solicitor, in the course of practising as a Solicitor: [redacted] … and, in any case, shall be disbursed as directed by the person on whose behalf it is held. (7) A wilful contravention of subsection (1) is professional misconduct." 7 The further issue is whether the Solicitor's conduct otherwise constitutes professional misconduct. It is clear that the statutory definition is an inclusive one and conduct that does not fall within the inclusive definitions of s.127 may nevertheless constitute professional misconduct as described, for example, by Lopes LJ in [NAME] v. General Council of Medical Education and Registration (1840) 1 QB 750: "If it is shown that a medical man, in the pursuit of his profession, has done something with regard to it which could be reasonably regarded as disgraceful and dishonourable by his professional brethren of good repute and competency, then it is open to the general medical council to say that he has been guilty of 'infamous conduct in a professional respect'." In [NAME] v. The Council of the Incorporated Law Institute of New South Wales (1939) 13 ALJ 563, [NAME] said: "… A charge of misconduct as relating to a Solicitor need not fall within any general definition of wrongdoing. It need not amount to an offence under the law. It is enough that it amounted to grave impropriety effecting his professional character and was indicative of a failure either to understand or to practise the precepts of honesty or fair dealing in relating to the courts, his clients or the [NAME]. The particular transaction the subject of the charge must be judged as a whole and the conclusion whether it be tokened unfitness to be held out by the court as a member of a profession in whom confidence could be placed, or on the other hand, although a lapse of propriety was not inconsistent with general professional fitness and habitual adherence to moral standards was to be reached by a general survey of the whole transaction." 8 The further issue, of course, also arises as to what consequence ought to flow from any finding adverse to the Solicitor. Evidence 9 The [COMPANY]'s evidence on the substantive complaints is that contained in the Affidavit of [NAME] sworn 26 April 2001, the Affidavit of [NAME] sworn 8 February 2001, the Affidavit of [NAME] sworn 4 April 2001, the Affidavit of [NAME] sworn 17 April 2001 and certain correspondence. 10 From this evidence, the Tribunal finds that the Solicitor breached s.61 of the Act in the following matters and to the following extent: (a) The Solicitor, on the following dates and in respect of the following clients deposited trust moneys, as listed, into his general account: (i) [NAME] – 2 June 1995 - $22,500.00 (ii) [NAME] – 15 April 1996 - $4,724.00 (iii) [NAME] – 14 December 1995 - $405.00 (iv) [NAME] – 30 July 1996 - $765.00 (v) [NAME] – 5 June 1996 - $5,284.00 (vi) [NAME] – 22 May 1995 – 4,759.00 (vii) [NAME] – 11 April 1995 - $4,584.00 (viii) [NAME] – 24 March 1999 - $38,750.00 (ix) [NAME] – 10 November 1998 - $1,924.00 (x) [NAME] – 29 March 1996 - $11,718.00 (b) [NAME] – on or about 20 October 1998, after the appointment of the receiver, the Solicitor received the sum of $2,000.00 and did not deal with those moneys in accordance with the provisions of s.61 of the Legal Profession Act, 1987. (c) [NAME] – On or about 28 November 1994 the Solicitor received a cheque in the sum of $2,180.52 on behalf of the [NAME]. The Solicitor failed to deal with the cheques in accordance with the provisions of s.61 of the Legal Profession Act, 1987. It remained on the file. On or about 16 March 1998, in relation to the [NAME], the Solicitor received from [NAME] a cheque in the sum of $11,544.75 which he failed to bank. On or about 13 May 1999, a replacement cheque for the same amount was sent to the Solicitor. The Solicitor failed to deal with both cheques in accordance with the provisions of s.61 of the Legal Profession Act, 1987. (d) The solicitor received from the following clients, the following sums in payment of [COMPANY]. building inspection fees previously incurred and did not pay those moneys to [COMPANY] nor did he retain those moneys in trust: (i) [NAME] - $520.00 (ii) [NAME] - $468.00 (iii) [NAME] - $370.00 (iv) [NAME] - $230.00 (v) [NAME] - $350.00 (vi) [NAME] – $425.00 (vii) [NAME] - $350.00. 11 The Tribunal is satisfied that this conduct by the Solicitor was wilful. As Hardie J said in Re [NAME] (1962) 79 WN NSW 340: "It is thus essential in an inquiry as to whether or not there have been wilful breaches by a Solicitor of the provisions of s.41 to examine the facts and circumstances relevant to his state of mind, knowledge and intention at the material dates." 12 As his Honour said in Re Mayes and Legal Practitioners Act 1974 1 NSWLR 19: "It is well settled law that there can be wilful failure within the meaning of the section without any positive intention to breach the law: breaches committed over a period of time can, in the light of the relevant circumstances, be so substantial and reckless and show such complete indifference on the part of the Solicitor to his important obligations to his clients and to the [NAME], as to amount to wilful failure." 13 The Tribunal is satisfied that the nature, extent and repetitive nature of the breaches clearly demonstrate that they were wilful. Indeed, the evidence goes further. In a letter dated 14 July 1997 to the Chief Trust Account Inspector, the Solicitor in respect of one particular breach said … " I can now see the wisdom in never drawing funds through the office account because this situation could and did occur ". In the same letter, the Solicitor said "My actions during those few years were aberrations and I ask that you consider my good record of the last 20 years". 14 The Tribunal does not accept that the Solicitor's actions were aberrations. As previously noted that letter was dated 14 July 1997 but it is clear from the evidence that further breaches occurred after that letter. The Tribunal finds that that further conduct reinforces, in the circumstances, what it finds to be the wilful nature of the earlier breaches. 15 The Tribunal finds that the Solicitor misappropriated his clients' funds in the following respects: (a) at the time of deposit of the funds in the following matters to the Solicitor's general account, that account was in debit, namely, [NAME] (b) [NAME] to the cheque there was a credit balance in the account to which the cheque was deposited but after a number of cheques were presented against the account it had a balance of $543.45. (c) [NAME] – At the date of deposit of the cheque the Solicitor's general account was overdrawn in the sum of $2,085.55. On the same day the bank reversed and credited to the account cheques drawn which had been dishonoured totalling $4,000.00. (d) [NAME] – The day prior to presentation of this cheque the balance of the general account was such when coupled with the dishonouring of the Solicitor's cheque for stamp duty resulted in this client's funds being dissipated. (e) The Solicitor deposited trust moneys to his general account in the matters of [NAME] and [NAME]. 16 The Tribunal finds that the Solicitor grossly delayed in the stamping of documents in the following matters: (a) [NAME] were exchanged in respect of the purchase on 2 June 1995 and settled on 21 July 1995 on which date settlement instructions were given by the solicitor that it was acceptable to accept an unstamped transfer. It may have been the Solicitor's intention to stamp the transfer in about November 1995 when he drafted but did not send a letter to the Commissioner of Stamp Duties. The client complained by letter to the Solicitor on 11 December 1995 about non-registration of the transfer. On 19 February 1996, the Solicitor gave instructions for the documents to be lodged for stamping on a non-urgent basis. There was thereafter a further delay in payment of a fine imposed by the Stamp Duties Office. (b) [NAME] – The Solicitor acted for this client in respect of a mortgage advanced to assist with a purchase that was settled on 22 December 1995. The client sent the Solicitor on 14 December 1995 a cheque for the stamp duty which the Solicitor deposited to his general account. He drew a cheque for the stamp duty on 14 December 1995 which was dishonoured on 18 December 1995. Notwithstanding advice to this effect, the stamp duty was not paid. The Office of State Revenue sent reminders (with increasing penalties) and that office wrote directly to the client. The client sent a facsimile to the Solicitor on 24 April 1996 and on that day the duty was paid. (c) [NAME] – The clients' purchase was settled on 16 August 1996. On 30 July 1996 the clients had given the Solicitor a cheque to cover stamp duty on a mortgage associated with the purchase. The Solicitor paid it to his general account. The mortgage documents were lodged for stamping on 8 August 1996 with a general account cheque which was dishonoured. The evidence would establish that as at 10 March 1997 the stamp duty (and fines) were still outstanding. (d) [NAME] – The client's purchase was settled on 12 December 1996 and the evidence would establish that the contract and transfer were lodged for stamping on or about 7 July 1997 and a fine (reduced) paid on 6 August 1997 and the documents lodged for registration on 11 September 1997. (e) [NAME] – The contracts were exchanged under date of 28 June 1996. On 1 July 1996 the Solicitor wrote to the client requesting a cheque for the stamp duty. It was sent by the client to the Solicitor on 12 August 1996 and notwithstanding the Solicitor's letter of 13 August 1996 to the client indicating more prompt action, the stamp duty was not paid until 18 October 1996. 17 The Tribunal finds that the Solicitor altered or permitted to be altered contracts for the sale of land for the purpose of avoiding or reducing penalty interest in the following cases: (a) [NAME] – The contracts were exchanged on 19 April 1995. In error, the year concerned was shown as 1994. The contract was submitted for stamping on 25 June 1995 and the date shown on the contract was 29 April 1995. The year concerned had been altered from 1994 to 1995 with a letter of explanation given to the Office of State Revenue in respect of this obvious alteration. However the correct date of 19 April 1995 had also been altered to 29 April 1995 avoiding the penalty for late payment which would have applied. (b) [NAME] – The contracts for purchase were exchanged on 22 March 1995. Stamp duty was paid by the Solicitor on 23 May 1995. The date of the contract for sale had been altered from 22 March 1995 to 23 March 1995 avoiding a penalty for late payment. (c) [NAME] were exchanged under date 28 June 1996. The stamp duty was paid on 18 October 1996. Page 1 of the contract which was stamped had been retyped and differs in several respects from the contract exchanged. The re-typed page is dated 18 August 1996 avoiding any penalty for late payment of the stamp duty. 18 The Tribunal finds that the Solicitor wrote letters which were misleading in the following matters: (a) [NAME] – The Solicitor's letter to the Office of State Revenue dated 19 February 1996 was misleading. It clearly states that the contract and transfer documents were misfiled and that the error had only recently been discovered after the client pointed out that the rate notices were still being issued in the name of the vendor. It was clearly stated that it was found after searching that the contract was unstamped. The evidence clearly establishes that the Solicitor knew as at the date of settlement, 21 July 1995, that the documents were unstamped. (b) [NAME] – The Solicitor's letter dated 12 April 1999 addressed to [NAME] of [COMPANY] as to the circumstances in which a cheque from the Solicitor was dishonoured does not correspond with the objective facts as the Solicitor must have known. 19 The Tribunal finds that the Solicitor contravened the orders of the Supreme Court of New South Wales dated 1 May 1998. That was the date upon which [NAME] was appointed receiver of the trust property of the Solicitor. Notwithstanding such appointment the Solicitor: [redacted] (b) In the matter of [NAME] – On 10 November 1998 deposited trust moneys in the sum of $1,924.00 into his general account. (c) In the mater of [NAME] – On 20 October 1998 the Solicitor received the sum of $2,000.00 in cash representing, as to part, stamp duty of $1,819.00. It appears on the evidence that no part of this $2,000.00 was deposited to a trust account. It appears that part of it was deposited to a general account and the balance appears to have been appropriated by the Solicitor as part payment of his costs. 20 Ground 7 alleges that the solicitor was guilty of professional misconduct in that he failed to forward to [NAME] of the Australian Capital Territory files and funds as requested in relation to the Estate of the late [NAME] who died on 8 February 1986. Letters of Administration of the [NAME] were granted to the deceased's sister, [NAME], in March 1989. [NAME] in the Australian Capital Territory was appointed manager of [NAME]'s estate in March 1994 owing to the latter's ill health. She subsequently died and [NAME] acted in relation to her estate although it is not clear in what capacity. The solicitor's father had apparently acted as such in relation to the [NAME]. Following his death, the solicitor in 1997 forwarded the estate papers to the Office of [NAME] (New South Wales). They were returned by that office on 16 March 1998 together with the funds representing the [NAME]. [NAME] asserted that it had no authority to act in the matter and that the retiring trustee or her legal representatives should attend to the estate. By letter dated 27 July 1998, [NAME] wrote to the Solicitor in respect of the [NAME]. It referred to previous correspondence which [NAME] says she cannot find. The letter asserts that as the solicitor would be aware the [NAME]) were acting for the [NAME] who was the executor of [NAME]' estate. The letter goes on to refer to advice from the [NAME]) that the estate file had been returned to the Solicitor and they requested that file be sent to the [NAME]). Although there is no express request for the funds representing the estate such a request is clearly implied. In the circumstances the Tribunal is satisfied that this ground is made out. The file was never sent as requested nor were the said funds. 21 For similar reasons the Tribunal is satisfied that the ground alleging that the Solicitor failed to respond to correspondence from [NAME] for the ACT in July 1998 requesting from the Solicitor the moneys held by him on behalf of the [NAME] and the instruction files is made out. 22 The Tribunal is satisfied that the Solicitor failed to correspond adequately with the New South Wales [NAME] in relation to the [NAME]. The Solicitor's father obtained a grant of Probate in respect of this estate. The Solicitor was named as Executor of his father's Will but did not intend to apply for a grant of Probate. In July 1990, the balance of the funds held on behalf of the [NAME] were drawn from the Solicitor's trust account and placed into an account with [NAME]. No action was taken in relation to the estate file by the Solicitor until 27 June 1997 when he forwarded the instruction files of the estate and a cheque for the moneys held on behalf of the estate in the said Westpac account to [NAME]. It appears from the evidence before the Tribunal that [NAME] wrote to the Solicitor on 24 March 1998, 27 May 1998 and attempted to have telephone contact on 6 July and 7 July 1998. On 9 July 1998 [NAME] wrote and requested copies of the trust ledger and copies of the Solicitor's father's Death Certificate. The Solicitor failed to respond. On 5 [NAME] again wrote and threatened that if no response was received [NAME] would deliver back the papers and the cheque for the funds in the estate on the basis that it was under no obligation to accept any trust. The Solicitor did not respond. On 26 [NAME] wrote a further letter declining to accept the trust and returning the papers and a cheque representing the estate funds. The Solicitor failed to take any further action in relation to the estate and the cheque referred to remained in the file and had not been banked by the Solicitor. 23 The Tribunal finds that the Solicitor failed to disclose to the receiver the receipt by him of trust moneys or to hand those trust moneys to the receiver. [NAME] was appointed receiver on 1 May 1998. On or about 16 March 1998, the Solicitor had received in respect of the [NAME] a cheque in the sum of $11,544.75 which he failed to bank and which he failed to hand over to the receiver. A replacement cheque from [NAME] received by the Solicitor on 13 May 1999 was not banked and was not given to the receiver. The Solicitor failed to disclose to the receiver the receipt by him of the trust moneys or to hand the cheques representing those trust moneys to her. 24 The Tribunal finds that the Solicitor received the moneys referred to above from clients in the matters of [NAME] for payment of [COMPANY] for services provided by that company in respect of those clients' purchases of properties. The Solicitor failed to pay those moneys to that company. Conclusion 25 The Tribunal finds that the Solicitor's conduct has been disgraceful. It finds for the reasons expressed above that the breaches of s.61 of the Act and the misappropriation of the client's funds were wilful. There can be no other acceptable explanation for the conduct. Reliability and integrity in the handling of trust funds are a fundamental prerequisite in determining whether an individual is a fit and proper person to be entrusted with the responsibilities belonging to a Solicitor ([COMPANY] v. [NAME] (unreported Court of Appeal NSW, 27 July 1978). That trust in the present case was misplaced. Cf. [NAME] v. [COMPANY] (unreported Court of Appeal NSW, 26 April 1990). The nature and extent of the breaches amply demonstrate that the Solicitor is not a fit and proper person to be entrusted with the responsibilities of a Solicitor. He has, in the opinion of the Tribunal, fundamentally and consistently failed to maintain the standards of personal honesty and integrity in his dealings with his clients and in the handling of moneys entrusted to him. 26 The other proven grounds as detailed above demonstrate that the Solicitor on many occasions grossly neglected his duties and functions on behalf of his clients and that he was prepared to engage in misleading conduct involving the Commissioner of Stamp Duties and others. He was prepared to ignore orders made by the Supreme Court upon the appointment of the receiver. In other respects his conduct, the Tribunal finds, shows indifference on the part of the Solicitor to his obligations to his clients and members of the [NAME]. 27 The Tribunal finds that the Solicitor's conduct has been disgraceful and dishonourable and could not but otherwise reasonably be so regarded by his professional brethren of good repute and competency. The [NAME] would also conclude that the solicitor's conduct was disgraceful and dishonourable. 28 There was no evidence in mitigation of the Solicitor's behaviour. The Solicitor has shown a most reprehensible and callous disregard for his professional responsibilities such as would undermine [NAME] confidence in the standards of the profession. The Solicitor is not a person of good fame and character, has failed to adhere to the standards required of a legal practitioner and is guilty of professional misconduct. 29 The Tribunal orders that the name of [NAME] be removed from the role of legal practitioners in New South Wales. The Tribunal orders that [NAME] pay the costs of the Council of the [COMPANY] of and incidental to these proceedings.

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