Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Council of the Law Society of New South Wales v Koops [2021] NSWCATOD 38 Hearing dates: 10 March 2021 Date of orders: 10 March 2021 Decision date: 08 April 2021 Jurisdiction: Occupational Division Before: D Fairlie, Senior Member G Ulman, Senior Member B Thomson, General Member Decision: (1) The Respondent is reprimanded; (2) The Respondent be fined in the sum of $5,000; (3) The Respondent pay the Applicant's costs as agreed or assessed; (4) The disclosure of the name of any client of the Respondent referred to in the pleadings and evidence and Instrument of Consent filed by the parties, or any material fact or information that could identify those clients, is prohibited; and (5) The Respondent is to undertake further education as follows: (i) at his own expense, complete within 12 months of the date of these orders an appropriate course in trust accounting (Course), as approved by the Director, Legal Regulation of the Law Society of New South Wales (Director), and therein achieve a pass mark of not less than 50% (Pass Mark); (ii) within 7 days of the receipt of notification of the result of his participation in the Course, provide the original or a legible copy of such notification to the Director; (iii) should the Respondent fail to achieve the Pass Mark, he must complete a further course as approved by the Director until he achieves the Pass Mark in any further nominated course; and (iv) should the Respondent not achieve the Pass Mark within the period prescribed in (i) above, any practising certificate then held by the Respondent shall be suspended (or if not holding a current practising certificate, no such certificate shall be issued to him) until such time as he achieves the Pass Mark. Catchwords: OCCUPATIONS — legal practitioners — misconduct and discipline — unsatisfactory professional conduct and professional misconduct — instrument of consent — reprimand — fine — costs Legislation Cited: Civil and Administrative Tribunal Act 2013 (NSW) Legal Profession Uniform Law (NSW) Legal Profession Uniform Law Application Act 2014 (NSW) Cases Cited: Carr v Council of the Law Society of New South Wales [2020] NSWCA 276 Texts Cited: Nil Category: Principal judgment Parties: Council of the Law Society of New South Wales (Applicant) Harland Sebastian Koops (Respondent) Representation: Counsel: T Power (Respondent) Solicitors: Law Society of NSW (Applicant) Bartier Perry (Respondent) File Number(s): 2020/00150187 Publication restriction: Nil REASONS FOR DECISION Procedural history 1. On 20 May 2020 the Council of the Law Society of New South Wales (the Law Society) filed an Application in the Tribunal alleging that the respondent solicitor, Harland Sebastian Koops (Mr Koops) is guilty of professional misconduct by misappropriating trust funds and wilfully breaching sections 136, 137, 146 and 147 of the Legal Profession Uniform Law (NSW) (the Uniform Law). The Law Society sought an order that Mr Koops' name be removed from the Roll. 2. The Application alleged that Mr Koops had received significant amounts of money from two of his clients for the payment of costs and disbursements incurred or to be incurred on behalf of those clients. He also received additional funds from the first of those clients to enable Federal Court proceedings involving that client to be resolved pursuant to a deed of settlement. All the moneys were paid into his office account. At that time Mr Koops did not operate a trust account. 3. Mr Koops denied these allegations. In his further amended Reply, he said that in relation to the payments from the first client, there had been no misappropriation and no subjective or objective dishonesty. He admitted the breaches of the Uniform Law, but said that the breaches were not wilful due to his mistaken, but honest belief that the moneys in question were not trust moneys. He said that his conduct had fallen short of the required standard, but denied that he had acted disgracefully or dishonourably or that his conduct would justify a finding that he is not a fit and proper person to engage in legal practice. 4. In relation to the money received from his second client, he said that the money received was "transit money" within the meaning of s 128 of the Uniform Law. Alternatively, if and to the extent that there were breaches of the Uniform Law as alleged, the breaches were again the result of an honest but mistaken belief and the conduct amounted to unsatisfactory professional conduct only. 5. The proceedings had been set down for hearing on 12 November 2020. The day prior to that date, the Law Society was granted an adjournment in order that it could consider the effect on these proceedings of the NSW Court of Appeal's decision in Carr v Council of the Law Society of New South Wales [2020] NSWCA 276 ("Carr"), handed down on 4 November 2020. The proceedings were relisted for hearing on 10 March 2021 by audio visual link. 6. On 23 February 2021 a document headed Statement Regarding Instrument of Consent and Agreed Facts and signed on behalf of the parties (Instrument of Consent), was filed in the Registry pursuant to s 144 of the Legal Profession Uniform Law Application Act 2014 (NSW), (the Application Act). Attached to that document was the Instrument of Consent itself and an Agreed Statement of Facts. 7. The orders sought in the Instrument of Consent were that: "The NSW Civil and Administrative Tribunal having found that the conduct of the respondent particularised in the agreed Statement of Facts amounts to professional misconduct within the meaning of s 297(1)(a) of the Legal Profession Uniform Law (NSW) (Uniform Law) and unsatisfactory professional conduct within the meaning of s 296 of the Uniform Law makes by consent, orders that: 1 The Respondent be reprimanded; 2 The Respondent be fined in the sum of $5,000; 3 The Respondent pay the Applicant's costs as agreed or assessed; 4 Pursuant to section 64 of the Civil and Administrative Tribunal Act 2013 (NSW) the disclosure of the name of any client of the Respondent referred to in the pleadings and evidence and Instrument of Consent filed by the parties, or any material fact or information that could identify those clients, is prohibited." 1. The Tribunal was also provided with a document entitled Marked-Up Application for Disciplinary Findings and Orders (the Marked-Up Application), which was described as an aide-mémoire to assist the Tribunal if we were to make the orders sought in the Instrument of Consent. This document clarified that the Law Society had withdrawn the allegation that there had been a misappropriation of trust funds and that the breaches of the Uniform Law had been wilful. It also clarified that Mr Koops' conduct in relation to the funds received from his first client amounted to professional misconduct, but, in relation to the second client, the conduct amounted to unsatisfactory professional conduct only. 2. Mr Koops was first admitted to practice in 1992. In 2009 he established the legal practice of Hoffmann & Koops. At all material times he has been the sole principal of that practice. The Hearing 1. At the commencement of the hearing we were informed that a member of the press was attending by telephone link. We were asked to make an order in the terms of order 4 in the Instrument of Consent before submissions commenced. Neither of Mr Koops' clients was involved in any way in the allegations made against him in the Application. In the circumstances, having had regard to s 64 of the Civil and Administrative Tribunal Act 2013 (NSW), we were satisfied that it was desirable that the disclosure of their names be prohibited, and we made an order in the terms of order 4 at the outset of the hearing. 2. The Law Society's representative, Mr Pierotti, also informed us that the NSW Legal Services Commissioner had been provided with the Instrument of Consent and had raised no objection to it. 3. After considering the evidence, which we will refer to below, we made orders 1–3 in the Instrument of Consent and we continued order 4. The orders are set out at the end of these Reasons. We also foreshadowed that we were considering making an additional order requiring Mr Koops to undertake further education, and that we wished to receive evidence on this issue. Having considered that evidence, we made a further order requiring Mr Koops to undertake a course in trust accounting. The terms of this order are also set out below. We said that we would provide our Reasons as soon as possible thereafter. These are those Reasons. Our Findings and Reasons 1. The parties provided the Tribunal with an anonymised version of the Instrument of Consent in conformity with order 4. This anonymised version is reproduced in full at the end of these Reasons (annexed and marked "A"). 2. The Instrument of Consent complies with the requirements of s 144 of the Application Act. Section 144(10) of the Application Act also provides that, in deciding whether to make orders pursuant to an instrument of consent, the Tribunal may make such inquiries as it thinks fit and may conduct or complete a hearing in relation to the complaint, if it considers it to be in the public interest. Consistent with this provision, the Tribunal considered that it should also consider the affidavit evidence in addition to the material in the Agreed Statement of Facts. 3. The Law Society tendered an affidavit from Mr Lean, its Director, Legal Regulation, and from Mr Edwards, a team leader with the Law Society's trust account department. Mr Edwards' affidavit annexed a trust account investigation report dated 5 March 2018. Mr Koops' counsel tendered two affidavits from Mr Koops and another from one of his clients. 4. Mr Pierotti also informed the Tribunal that following the Court of Appeal's decision in Carr, the Law Society had come to the view that it could not make out the misappropriation allegations against Mr Koops. Mr Koops' counsel said that he had always denied, that is, before the decision in Carr had been handed down, that he had misappropriated any money or that his conduct was dishonest. Mr Koops' affidavit evidence and the pleadings support this submission. 5. More generally, we were satisfied from our consideration of the evidence and, in particular, from the trust account investigation report annexed to Mr Edwards' affidavit, that the Agreed Statement of Facts accurately reflects the relevant events and, in particular, that there had been no misappropriation of funds by Mr Koops, nor had his conduct been wilfully negligent. 6. Further, we were satisfied from this evidence that Mr Koops had failed to comply with ss 136, 137, 146 and 147 of the Uniform Law, as alleged. These sections relevantly provide that: (i) s 136(1) A law practice that receives trust money to which this Part applies (other than controlled money or transit money received in a form other than cash) must maintain a general trust account in this jurisdiction. … (ii) s 137 A law practice must deposit trust money (other than cash) into the law practice's general trust account as soon as possible after receiving it unless— (a) the law practice has a written direction by a person legally entitled to provide it to deal with the money otherwise than by depositing it in the account; or (b) the money is controlled money or transit money; or … (iii) s 146 A law practice must not mix trust money with other money unless authorised to do so by the designated local regulatory authority, and only in accordance with any conditions the designated local authority imposes in relation to that authorisation. … (iv) s 147(1) A law practice must keep in permanent form trust records in relation to trust money received by the law practice. … 1. The evidence confirms the contents of paragraphs 15 and 16 of the Agreed Statement of Facts — that between September 2014 and June 2017, Mr Koops received the amount of $2,277,926.49 from the first of Mr Koops' clients for costs and disbursements or as settlement monies. The moneys were trust moneys and Mr Koops did not have a written direction from his client pursuant to s 137(a) to deal with the money other than by depositing it in a trust account. Instead the funds were paid into Mr Koops' office account. This evidence supports our finding that Mr Koops has failed to comply with ss 136, 137, 146 and 147 of the Uniform Law. 2. Further, as is set out in paragraphs 22 and 25 of the Agreed Statement of Facts, in June and July 2016 Mr Koops withdrew the amount of $375,000 from his office account for business and investment related purposes, being purposes unrelated to the operation of his law practice. He could not have made those withdrawals but for the deposits received from his client before that date. This evidence also supports a finding that Mr Koops failed to comply with s 146 of the Uniform Law. 3. We were satisfied that Mr Koops' conduct in relation to these matters amounts to professional misconduct within the meaning of s 297(1)(a) of the Uniform Law, being unsatisfactory conduct where the conduct involves a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence. 4. In relation to the payment received from the second of Mr Koops' clients, we were also satisfied that the evidence supports the material in paragraphs 32–39 of the Agreed Statement of Facts — that on 10 April 2017 Mr Koops received the amount of $49,500 from this client and paid the money into his office account. These funds were provided to pay for a property valuation report. On 13 April 2017, $24,750 was paid by Mr Koops to the party commissioned to provide the report, but the remaining 50% balance was not paid until 10 July 2017. 5. Again we were satisfied that this evidence supports a finding that Mr Koops failed to comply with ss 136, 137, 146 and 147 of the Uniform Law in relation to this deposit, and that the payment was not "transit money" within the meaning of s 128 of the Uniform Law. 6. We were also satisfied that Mr Koops' conduct in this instance amounts to unsatisfactory professional conduct, within the meaning of s 296 of the Uniform Law, being conduct that falls short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent lawyer. 7. In relation to the orders sought in the Instrument of Consent, Mr Pierotti said that the orders should not be regarded as punitive. A protective order was not warranted, but Mr Koops' conduct justified a reprimand. Also a fine of $5,000 should be regarded as "in the mid range". The costs order must follow Mr Koops' acceptance that his conduct amounted to professional misconduct. Overall, we were satisfied that the orders were consistent with prior decisions of this Tribunal where breaches of the trust account provisions of the Uniform Law had been established or admitted, and that they were appropriate in the circumstances. The further Order 1. In relation to the additional order requiring Mr Koops to undergo further education, s 299(1)(e) of the Uniform Law specifies that the Tribunal may make an order requiring a respondent lawyer to undertake training, education or counselling or be supervised. 2. In coming to the view that it may be appropriate for Mr Koops to undertake a course in trust accounting, the Tribunal had regard to paragraph 13 of the Agreed Statement of Facts. This paragraph states that: "The Respondent was of the incorrect view that all monies paid by Mr XY into the Office Account, including payments in advance for legal services, were not "trust money"." 1. Paragraph 16 likewise says: "The Respondent's belief (that the relevant payments were not trust monies) was based on a misunderstanding of the operation of the trust accounting requirements in NSW." 1. Counsel for Mr Koops said that she was instructed to oppose this additional order. She referred the Tribunal to the following paragraph in Mr Koops' affidavit dated 10 August 2020: "Hoffman & Koops has continued to operate the Trust Account in the three years since then and has been audited every year without issue. My assistant, Kate Pellegrino is very familiar with trust accounting matters and has assisted me with understanding and complying with the regulations. In addition, since the investigation, I have studied the material available on the NSW Law Society website: ("Accounting and Controls in law practices: Trust Money & Trust Records: Accounting and Support Staff", both the 2016 and 2020 editions) in order to ensure that I am familiar and up to date with the trust accounting rules and regulations incumbent on me as a solicitor practising in NSW." 1. We were also taken to the following paragraph in a letter from Mr Koops to the Law Society dated 24 May 2018, which was annexed to Mr Lean's affidavit: "Now that I am aware of the requirements, I have promptly opened a trust account as directed by the investigator and am taking steps to familiarise myself with trust accounting requirements including enrolment in a trust accounting course and studying the Law Society guidelines." 1. Counsel submitted initially that the Tribunal should accept these statements as evidence that Mr Koops now had the requisite level of knowledge of trust accounting requirements and that a further educative order was not necessary. However, subsequently, the Tribunal was informed by counsel that Mr Koops had not attended the course referred to in the preceding paragraph, as he had been overseas at the relevant time. Counsel then said that Mr Koops would accept the Tribunal's decision as to whether a course was appropriate. Mr Pierotti also left the issue for the Tribunal to determine, but said that any order we might make in this regard should follow the wording of the Law Society's current trust account educative order. 2. The Tribunal was of the view that Mr Koops should undertake a course in trust accounting, and we made an order to this effect at the conclusion of the hearing. The terms of the order are set out below. 3. There are three reasons why we considered it appropriate that Mr Koops undertake a course in trust accounting. Firstly, in relation to Mr Koops' evidence regarding his assistant Ms Pellegrino, a sole practitioner cannot rely on the familiarity of a staff member, however competent and experienced, for compliance with the trust accounting requirements. The obligation is upon the practitioner personally. 4. Secondly, the accounting material on the Law Society's website, which Mr Koops says that he has studied, is said to be for "Accounting and Support Staff", and is not necessarily adequate or appropriate for legal practitioners. 5. Thirdly, whilst the Tribunal accepts that Mr Koops may have acquired relevant knowledge from his private study, in order to ensure that he is familiar and fully compliant with the trust accounting rules and his obligations as a solicitor in relation to these matters, we believe that he needs to participate in a formal course, and demonstrate to an external examiner a level of competence that justifies a pass mark in that course. Orders 1. Having found Mr Koops guilty of professional misconduct and unsatisfactory professional conduct, the orders that we made are as follows: 1. The Respondent is reprimanded; 2. The Respondent be fined in the sum of $5,000; 3. The Respondent pay the Applicant's costs as agreed or assessed; 4. The disclosure of the name of any client of the Respondent referred to in the pleadings and evidence and Instrument of Consent filed by the parties, or any material fact or information that could identify those clients, is prohibited; and 5. The Respondent is to undertake further education as follows: 1. at his own expense, complete within 12 months of the date of these orders an appropriate course in trust accounting (Course), as approved by the Director, Legal Regulation of the Law Society of New South Wales (Director), and therein achieve a pass mark of not less than 50% (Pass Mark); 2. within 7 days of the receipt of notification of the result of his participation in the Course, provide the original or a legible copy of such notification to the Director; 3. should the Respondent fail to achieve the Pass Mark, he must complete a further course as approved by the Director until he achieves the Pass Mark in any further nominated course; and 4. should the Respondent not achieve the Pass Mark within the period prescribed in (i) above, any practising certificate then held by the Respondent shall be suspended (or if not holding a current practising certificate, no such certificate shall be issued to him) until such time as he achieves the Pass Mark. ANNEXURE "A" STATEMENT REGARDING INSTRUMENT OF CONSENT AND AGREED FACTS (Section 144 of the Legal Profession Uniform Law Application Act 2014 (NSW)) NSW Civil and Administrative Tribunal – Occupational Division Proceedings no. 2020/150187 (Proceedings) The Council of the Law Society of New South Wales (Applicant) and Harland Sebastian Koops (Respondent) agree to the facts set out in the Agreed Statement of Facts in the attached Instrument of Consent (Instrument), subject to the Tribunal making the orders sought by the parties in the Instrument. The terms of the orders sought by consent are as follows: The NSW Civil and Administrative Tribunal, having found that the conduct of the Respondent particularised in the Agreed Statement of Facts amounts to professional misconduct within the meaning of s 297(1)(a) of the Legal Profession Uniform Law (NSW) (Uniform Law) and unsatisfactory professional conduct within the meaning of s 296 of the Uniform Law, makes by consent, orders that: • The Respondent be reprimanded; • The Respondent be fined in the sum of $5,000; • The Respondent pay the Applicant's costs as agreed or assessed; • Pursuant to section 64 of the Civil and Administrative Tribunal Act 2013 (NSW) the disclosure of the name of any client of the Respondent referred to in the pleadings and evidence and Instrument of Consent filed by the parties, or any material fact or information that could identify those clients, is prohibited. If the Tribunal determines that it will not make the orders sought by consent the Applicant and the Respondent reserve their rights to maintain their respective positions both generally and as stated in: • the Application for Disciplinary Findings and Orders filed by the Applicant in the Proceedings on 20 May 2020; and • the Further amended Reply filed 2 November 2020. The agreed facts are for the purposes of the Proceedings only and are filed in accordance with section 144 of the Legal Profession Uniform Law Application Act 2014 (NSW). The Applicant and the Respondent do not, by agreeing to the agreed facts or consenting to the filing of this statement, agree to any facts or make any admission in favour of any other person. The Applicant and the Respondent agree to the filing of the Instrument on the terms set out in this statement. Signed on behalf of the Applicant: _____________________________________ Date: February 2021 Signed on behalf of the Respondent: _____________________________________ Date: February 2021 NCAT NSW Civil & Administrative Tribunal March 2017 INSTRUMENT OF CONSENT (Section 144 of the Legal Profession Uniform Law Application Act 2014) OCCUPATIONAL DIVISION File number (for office use only) 2020/150187 INSTRUMENT OF CONSENT This is an instrument of consent pursuant to section 144 of the Legal Profession Uniform Law Application Act 2014 (NSW). PARTIES Applicant Council of the Law Society of New South Wales Respondent HARLAND SEBASTIAN KOOPS ORDERS Having found that the conduct of the Respondent particularised in the Agreed Statement of Facts below amounts to professional misconduct within the meaning of s 297(1)(a) of the Legal Profession Uniform Law (NSW) (Uniform Law) and unsatisfactory professional conduct within the meaning of s 296 of the Uniform Law, the NSW Civil and Administrative Tribunal makes the following orders by consent: • The Respondent be reprimanded; • The Respondent be fined in the sum of $5,000; • The Respondent pay the Applicant's costs as agreed or assessed; • Pursuant to section 64 of the Civil and Administrative Tribunal Act 2013 (NSW), the disclosure of the name of any client of the Respondent referred to in the pleadings and evidence and Instrument of Consent filed by the parties, or any material fact or information that could identify those clients, is prohibited. AGREED STATEMENT OF FACTS DEFINITIONS A means ACN yyy - Pty Ltd (in liquidation) (formerly AX Pty Ltd) C means ACN zzz - Pty Ltd (in liquidation) (formerly CX Pty Ltd) Law Practice means the law practice of Hoffmann & Koops (FN: 20561) located at Level 9, 185 Elizabeth Street Sydney NSW 2000 Office Account means the Commonwealth Bank of Australia Business Transaction Account in the name of "Harland Koops trading as Hoffman & Koops Lawyers" - [account details redacted] Trust Account means the Commonwealth Bank of Australia account in the name of "Hoffman & Koops Trust Account - [account details redacted] Uniform Law means the Legal Profession Uniform Law (NSW) FACTS • Since 29 January 2009, the Respondent has been the Principal of the Law Practice. • The Office Account was used by the Respondent for the business transactions of the Law Practice. • At all relevant times the Respondent maintained and used a separate savings account for his day-to-day personal expenses and transactions. • From time to time, the Respondent made withdrawals from the Office Account that were in the nature of personal drawings. • The Trust Account was opened by the Law Practice on 20 July 2017. XY Litigation Matters • In or about 2014, the Respondent was retained to act for Mr XY, members of Mr XY's family, and associated XY family companies in various proceedings in the Federal Court of Australia, including proceedings brought by or against the Commissioner of Taxation, the liquidators of: XYZ1 Pty Limited; XYZ2 Pty Limited; XYZ3 Pty Limited; and XYZ4 Pty Limited (the XY Litigation Matters). Mr XY and his family resided overseas. The Payment Conversation and Mr XY's Instructions • In the second half of 2015, shortly after Mr XY's engagement of the Respondent and at an early stage of the XY Litigation Matters, Mr XY had a conversation with the Respondent (the Payment Conversation) during which Mr XY: • informed the Respondent that he wished to pay the Law Practice lump sum payments in advance for the legal work relating to the XY Litigation Matters (Upfront Payments); • directed the Respondent not to hold any the Upfront Payments on trust for him and not to deposit the Upfront Payments into a trust account; • informed the Respondent that he would pay the Upfront Payments directly to the Law Practice's Office Account. (Mr XY's Instructions). • During the Payment Conversation, Mr XY advised the Respondent that one of the reasons for Mr XY's Instructions was that he feared that the Australian Taxation Office might freeze money held on his behalf in his solicitor's trust account, which would stultify his ability to defend the XY Litigation Matters. This was notwithstanding that, at an early stage of the XY Litigation Matters, Mr XY had provided voluntary undertakings to maintain a minimum level of assets both in Australia and overseas, the terms of which expressly included a carveout which permitted Mr XY to pay his reasonable legal expenses. • Mr XY's Instructions as per the Payment Conversation were not ever the subject of a written direction pursuant to s 137(a) of the Uniform Law to the effect that the Respondent was to deal with the Upfront Payments otherwise than depositing them into a trust account. • During the Payment Conversation, the Respondent: • informed Mr XY that the Law Practice did not operate a trust account; and • agreed to accept the Upfront Payments on the basis that, in accordance with Mr XY's Instructions, the Upfront Payments would: • not be held on trust or deposited into a trust account; and • be paid directly to the Office Account • The Respondent and Mr XY intended that the Upfront Payments would be treated as the Respondent's property to deal with as he saw fit, subject to the following conditions: • The Respondent would keep a written record of: (a) credits or payments received by or on behalf of Mr XY; (b) debits or payments from that money for associated legal fees and disbursements; and (c) the balance at any given time; • The Respondent would keep Mr XY apprised or: (a) future estimated legal costs and disbursements; and (b) presently payable legal costs and disbursements, at regular and appropriate intervals; and • With Mr XY's authority, the Respondent would manage and pay all costs associated with the XY Litigation Matters as and when they became due. (the Conditions). • The Respondent considered that: • his ethical and legal obligations to his client would be discharged in the event that: • he paid legal costs and disbursements for the XY Litigation Matters as and when they fell due; and • he complied with Mr XY's Instructions and the Conditions; and • he was at liberty to treat the Upfront Payments from Mr XY as payments to which he was presently entitled, and Mr XY shared that understanding (which he did). • The Respondent was of the incorrect view that all moneys paid by Mr XY into the Office Account, including payments in advance for legal services, were not "trust money". Upfront Payments made by Mr XY and the Respondent's handling of them • During the period 24 September 2015 and 15 June 2017, 31 deposits totalling $2,377,926.49 were made by or on behalf of Mr XY directly into the Office Account in respect of the XY Litigation Matters. • The Respondent did not understand that $2,277,926.49 of the $2,377,926.49 deposited by or on behalf of Mr XY into the Office Account was, by reason of s 129(1)(a) of the Uniform Law, deemed to be trust money on the basis that, although it was not money "entrusted" by Mr XY to the Respondent to hold for him on trust, it was "money received by the law practice on account of legal costs in advance of providing the services". • The $2,277,926.49 deemed to be trust money comprised: • $1,427,926.49 for legal costs and disbursements in advance of the services being provided by the Law Practice; and • $850,000 (paid in two tranches of $100,000.00 and $750,000.00 on 14 March 2017), being part of the sum of $1,000,000.00 payable by Mr XY to A and C on 23 March 2017 pursuant to a Deed of Settlement in Federal Court of Australia proceedings xxx of 2016. • At all relevant times the Respondent held the mistaken belief that the sums referred to in paragraph 16 above were not trust moneys. • The Respondent's belief was based on a misunderstanding of the operation of the trust accounting requirements in NSW. • In the period 21 September 2015 to 27 June 2016: • Seven deposits totalling $1,040,070.09 were made by or on behalf of Mr XY in connection with the XY Litigation Matters into the Office Account (and not a trust account) and the Respondent was aware of this; • $940,070.09 of the sum of $1,040,070.09 deposited by or on behalf of Mr XY was for legal costs and disbursements in advance of the Law Practice providing those services and had been deposited into the Office Account, in accordance with Mr XY's Instructions, and the Respondent was aware of this; • The Respondent was aware that the Office Account was not a "trust account" (as per s 128 of the Uniform Law); and • $624,546.03 was disbursed by the Law Practice from the Office Account to the following people or entities associated with the XY Litigation Matters: • Law Practice: $388,162.33; • AB SC: $130,000.00; • CD (of counsel): $60,000.00; and • VWZ Solicitors: $46,383.70. • In the absence of a written direction from Mr XY pursuant to s 137(a) of the Uniform Law confirming the terms of Mr XY's Instructions, the Respondent was required to deposit the Upfront Payments received from Mr XY (specifically, those identified at paragraph 19(b) above) into a trust account and disburse them strictly in accordance with the provisions of the Uniform Law. • As at 27 June 2016 the balance of the Office Account was $391,263.33. • The Respondent made the following withdrawals totalling $375,000.00 from the Office Account in the period 28 June 2016 to 14 July 2016: • $200,000.00 on 28 June 2016; • $125,000.00 on 5 July 2016; and • $50,000.00 on 14 July 2016. (the Withdrawals). • At the time of the Withdrawals, the Respondent was the sole principal of the Law Practice. • The Respondent intended to make each of the Withdrawals. • Each of the Withdrawals were made by the Respondent: • for business and investment related purposes; • for purposes unrelated to the operation of the Law Practice; and • at the discretion of the Respondent. • Tax invoices corresponding with the disbursal of $624,546.03 to the people or entities referred to in paragraph 19(d) above were held by the Law Practice and the Respondent had sought and obtained approval from Mr XY in respect of those payments. • The Respondent was aware that but for the deposits made by or on the behalf of Mr XY in the period 21 September 2015 to 27 June 2016, the Respondent could not have made any of the Withdrawals. • The Withdrawals were made: • for investment purposes at the Respondent's discretion; • in circumstances where the Respondent believed that the money had been paid by Mr XY, subject to the Conditions and in accordance with Mr XY's Instructions, for the Respondent to use as his own and as he saw fit; and • consistent with the Respondent's practice to periodically withdraw (as drawings which he believed he was entitled to) surplus funds accumulating in the Office Account. Grounds 2-5 – XY Litigation Matters • The Respondent's errors, namely: • his misunderstanding of the relevant trust account provisions; and • his failure to obtain a written direction from Mr XY confirming the terms of Mr XY's Instructions, amounted to breaches of ss 136, 137, 146 and 147 of the Uniform Law in relation to the XY Litigation Matters. • The Respondent's breaches of the said provisions were not reckless, deliberate or wilful but were the result of his mistaken belief that the Upfront Payments were not trust moneys. • The Respondent's conduct as a whole in relation to the XY Litigation Matters fell substantially short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent lawyer and hence was professional misconduct within the meaning of s 297(1)(a) of the Uniform Law. M Matter • In about 2017, the Respondent was retained to act for M (M) in proceedings against the N Inc (M Matter). • On 10 April 2017, the Law Practice entered into an agreement with H Pty Ltd (H) to provide expert evidence in the form of a property valuation report for the M Matter (H Agreement) and: • It was a term of the H Agreement that H would provide the property valuation report for a fixed fee of $49,500.00 inclusive of GST. • It was a further term of the H Agreement that an upfront fee equivalent to 50% of the fixed fee (being $24,750.00 inclusive of GST) was required to be paid to H before commencing work. • On 10 April 2017, the Law Practice sent a tax invoice for legal costs and disbursements in the amount of $133,614.17 to M. That invoice included a disbursement of $49,500.00 described as "H" (the H Disbursement), which was the total amount sought by H under the H Agreement. • On 12 April 2017, M paid the 10 April 2017 invoice in full by depositing the sum of $133,614.17 into the Law Practice's Office Account by electronic funds transfer. • On 13 April 2017, the 50% upfront fee of $24,750.00 requested by H pursuant to the H Agreement was paid by the Law Practice by cheque drawn on the Office Account. • On 10 July 2017, the remaining 50% balance of $24,750.00 was paid by the Law Practice to H by cheque drawn on the Office Account. • The H Disbursement was "trust money" within the meaning of s 129(1) of the Uniform Law. • The Respondent at all times held the mistaken view that the H Disbursement was not trust money. Grounds 2-5 – M Matter • As a result of the Respondent's mistaken belief that the H Disbursement was not trust money, the Respondent breached ss 136, 137, 146 or 147 of the Uniform Law. • The Respondent's conduct as a whole in relation to the M Matter fell short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent lawyer and was hence unsatisfactory professional conduct within the meaning of s 296 of the Uniform Law. SIGNATURES Signed by Name Anthony Lean On behalf of The Council of the Law Society of New South Wales Date February 2021 Signed by Name Jennifer Shaw On behalf of The Respondent Date February 2021 REGISTRY DETAILS NCAT Administrative and Equal Opportunity Division and Occupational Division Postal address: PO Box K1026, Haymarket NSW 1240 DX 11539 Sydney Downtown Street address: Level 10 John Maddison Tower, 86-90 Goulburn Street, Sydney NSW 2000 Telephone: 1300 006 228 Email: aeod@ncat.nsw.gov.au Website: www.ncat.nsw.gov.au ********** I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 08 April 2021