CITATION: Law Society of NSW v Gill [2004] NSWADT 180 DIVISION: Legal Services Division APPLICANT PARTIES: Council of the Law Society of New South Wales RESPONDENT Stephen Ross Gill FILE NUMBER: 042004 HEARING DATES: 4/06/2004 SUBMISSIONS CLOSED: 06/04/2004 DATE OF DECISION: 08/24/2004 BEFORE: Chesterman M - ADCJ (Deputy President); Fox R - Judicial Member; Bubniuk L - Non Judicial Member APPLICATION: Professional Misconduct - breach of s. 61 of the Legal Profession Act - Professional Misconduct - breach of s. 62 of the Legal Profession Act - Professional Misconduct - misappropriate trust moneys/moneys MATTER FOR DECISION: Principal matter LEGISLATION CITED : Family Provision Act 1982 Legal Profession Act 1987 Law Society of New South Wales v Bannister [1993] 4 LPDR 24 CASES CITED: Law Society of New South Wales v Jones, Unreported, Court of Appeal, 27 July 1978 A Solicitor v Council of the Law Society of New South Wales [2004] HCA 1 APPLICANT REPRESENTATION: L Pierotti, solicitor RESPONDENT R Gulley, solicitor ORDERS: 1. That the name of the Solicitor be removed from the roll of legal practitioners; 2. That the Solicitor pay the Law Society's costs of these proceedings, agreed at $4,400 REASONS FOR DECISION Introduction 1 In this matter, the Applicant, the Law Society of New South Wales ('the Law Society') laid by its Council an Information against the Respondent, Stephen Ross Gill ('the Solicitor'), alleging that he was a legal practitioner within the meaning of the Legal Profession Act 1987 ('the Act') and that while practising as a solicitor he was guilty of professional misconduct on three grounds. 2 The Law Society requested in the Information that the Tribunal make an order that the name of the Solicitor be removed from the Roll of Legal Practitioners, an order that he pay the Law Society's costs and such further orders as the Tribunal deemed fit. 3 The Information set out three grounds, supported by Particulars, for a finding of professional misconduct against the Solicitor. They were that the Solicitor:- 1. Wilfully breached of ( sic ) Section 61 of the Legal Profession Act, 1987. 2. Wilfully breached of Section 62 of the Legal Profession Act, 1987. 3. Misappropriated trust monies. 4 The Solicitor is now 54 years of age. Between 1969 and 1973, he was an articled clerk. In 1979 he obtained employment in a solicitor's firm in Newcastle, Bruce O'Sullivan & Co, and commenced external law studies. Having completed these studies, he was admitted to practice on 5 August 1983. 5 After a short period of employment as a solicitor with Bruce O'Sullivan & Co, the Solicitor was a principal of that firm from 1 September 1983 until 1 May 1995. Between 1 May 1995 and 30 June 1997, he was a principal of a successor firm, O'Sullivan Borthwick. Between 1 July 1997 and 30 March 1998, he practised as a sole practitioner under the name of O'Sullivan Borthwick. 6 From 30 March 1998 until 27 August 2002, save for a period of seven days during August 1999, he was employed as a solicitor by Messrs Harris Wheeler. This firm took over the files of O'Sullivan Borthwick when the Solicitor became its employee. 7 On 20 September 2002, by order of the Supreme Court, Ms Jean Sayer, Chartered Accountant, was appointed Receiver of the trust property of the Solicitor. On the same day, his practising certificate was cancelled. He has not practised since. 8 In reports dated 9 July and 16 July 2003, prepared on the instructions of the Law Society, Ms Sayer concluded that the Solicitor, while a partner and subsequently a sole principal of Sullivan Borthwick, and also during his employment by Harris Wheeler, had misappropriated trust moneys in 18 matters involving clients of these firms. She found also that breaches of both s 61 and s 62 of the Act occurred during the conduct of all of these matters. Her reports, which were admitted into evidence, explained comprehensively the relevant transactions, while noting also that there were some gaps in the documentation, particularly with regard to the period up to and including the early months of 1997. 9 Mr Gulley, who appeared for the Solicitor, indicated at the hearing that his client did not contest the allegations made against him and, indeed, did not oppose the making of the orders sought by the Law Society. For this reason, it is unnecessary for us to set out in detail the material contained in Ms Sayer's reports. 10 The relevant provisions of ss 61 and 62 of the Act are as follows:- 61 Money received by solicitor on behalf of another (1) A solicitor who, in the course of practising as a solicitor in this State, receives money on behalf of another person: (a) must pay the money, within the time prescribed by the regulations, into a general trust account in New South Wales at an approved financial institution and must hold the money in accordance with the regulations relating to trust money, or (b) if the person on whose behalf the money is received directs that it be paid or delivered to a third party free of the solicitor's control, must ensure that the money is paid or delivered: (i) before the end of the next working day or, if that is not practicable, as soon as practicable after the next working day, or (ii) no later than the day allowed by the solicitor's authority or instructions (if that day is later than the day allowed under subparagraph (i)), or (c) if the person on whose behalf the money is received directs that it be paid otherwise than into a general trust account or to a third party, must pay the money as directed and (if the money is to be held under the direct or indirect control of the solicitor) must hold the money in accordance with the regulations relating to controlled money. (2) In any of those three cases, the solicitor must hold the money exclusively for, and must disburse the money in accordance with the directions of, the person on whose behalf it is held…. (8) It is professional misconduct for a solicitor to wilfully contravene subsection (1) or (2). 62 Keeping of accounts (1) A solicitor shall keep: (a) in the case of trust money (within the meaning of section 61)—accounting records, or (b) in the case of money other than trust money—such accounting records or other records (if any) as may be required by the regulations, that disclose at all times the true position in relation to money received by the solicitor on behalf of another person…. (4) A wilful contravention of subsection (1), (2) or (3) is professional misconduct. 11 In the Particulars to Grounds 1 and 2 of the Information, the Law Society alleged that the Solicitor wilfully breached these two sections during the conduct of all of the 18 matters listed by Ms Sayer. On the assumption, however, that on the proper interpretation of these sections only a sole practitioner or a principal of a firm is formally bound by the obligations that they impose, Ms Sayer stated that only in six of these matters did breaches occur while the Solicitor was practising in one or other of these capacities. In the remaining 12 matters, the breaches occurred during the period when the Solicitor was employed by Harris Wheeler. 12 Mr Pierotti, who appeared for the Law Society, stated at the beginning of the hearing that the Society might wish to submit that ss 61 and 62 were applicable to employed solicitors. He did not, however, pursue this submission further. Mr Gulley did not address the matter. 13 In view of the admissions made by the Solicitor, which include admissions to the misappropriation of large sums of trust monies, it is not necessary for us to determine this question. We shall assume in the Solicitor's favour that he cannot be held to have committed professional misconduct, pursuant to s 61(8) or s 62(4), by virtue of any of the breaches of s 61 or s 62 that occurred during his employment with Harris Wheeler. Outline of the case against the Solicitor 14 In 17 of the 18 matters investigated by Ms Sayer, the Solicitor was acting in the administration of a deceased estate. In the remaining matter, he was acting for a client claiming under the Family Provision Act 1982. He misappropriated funds by failing to deposit in the relevant trust account money that had been received for distribution to beneficiaries, or otherwise from or on account of a client, and through making unauthorised withdrawals from trust accounts. 15 The earliest of the misappropriations occurred in November 1994 and the latest in August 2002. The aggregate of all the individual amounts misappropriated was, in Ms Sayer's calculation, $1,883,007.95. The aggregate of the amounts misappropriated while the Solicitor was a principal or a sole practitioner (and was therefore, as just indicated, indubitably subject to the obligations set out in ss 61 and 62 of the Act) was $461,161.24. 16 In a number of instances, the Solicitor misappropriated funds held on account of one client in order to make good monies that he had improperly withdrawn from, or had failed to deposit in, the account of another client. In consequence, the net amount taken from clients was considerably less than the total of all the individual amounts misappropriated. According to Ms Sayer's calculations, this net amount was $461,596.00. 17 Ms Sayer recorded in her report that none of the misappropriations was discovered until August 2002. During that month, the executrix of the Estate of the late Margaret Henderson, the affairs of which had been handled by the Solicitor, expressed concerns to Harris Wheeler regarding a distribution to be made from the estate to a named charity. The matter was referred to the Law Society. The Solicitor then admitted to Harris Wheeler and to the Law Society that during his employment by Harris Wheeler he had misapplied trust moneys in certain matters. He stated that an investigation should be conducted into the Estate of the late Ms Henderson and into another estate whose affairs he had handled as an employee of Harris Wheeler. 18 As a result of these events, Ms Sayer was appointed as Receiver. On the instructions of the Law Society, she investigated relevant records of both Harris Wheeler and O'Sullivan Borthwick. Through so doing, she obtained evidence of the misappropriations that we have outlined. 19 Evidence was put before us indicating that since September 2002 the Solicitor, together with others making contributions on his behalf, had paid a total of $258,394 to Harris Wheeler. This constituted a partial reimbursement of payments that Harris Wheeler had made by way of restitution to its clients for the monies that the Solicitor had misappropriated. Harris Wheeler had lodged a claim for $73,856 with the Fidelity Fund, representing the balance of the amount that it had paid to clients. Other claims brought directly against the Fidelity Fund amounted to $129,346. In the outcome, there was a shortfall of $203,202 in the repayments that had been made by or on behalf of the Solicitor. An amount for interest and the Receiver's costs (which at 31 March 2004 amounted to $79,952.85 plus GST) were also outstanding. It was expected that this would be reduced by an amount of $48,096.77 that had been paid to the Receiver as a distribution to the Solicitor from a bankrupt estate. 20 Mr Pierotti submitted that, even allowing for the partial restitution that had occurred, the number and scale of the Solicitor's misappropriations and the length of the period over which they had occurred in a consistent pattern were so substantial that his behaviour had to be characterised as 'gross' professional misconduct. There was no doubt also that the breaches of ss 61(1) and 62(1) of the Act that he had committed were wilful and for that reason amounted to professional misconduct under s 61(8) and s 62(4) respectively. 21 Mr Pierotti referred us to the following dictum of Street CJ in Law Society of New South Wales v Jones, Unreported, Court of Appeal, 27 July 1978:- Reliability and integrity in the handling of trust funds are fundamental prerequisites in determining whether an individual is a fit and proper person to be entrusted with the responsibilities belonging to a solicitor. 22 For these reasons, in Mr Pierotti's submission, we had no alternative but to make a finding of professional misconduct and to order, under s 171C(1) of the Act, that that the name of the Solicitor be removed from the Roll of Legal Practitioners. Matters put to us on behalf of the Solicitor 23 Mr Gulley drew our attention to the steps taken by the Solicitor to ensure, as far as possible, that the moneys misappropriated were repaid. We have already summarised these. 24 Mr Gulley tendered four affidavits providing character references for the Solicitor. One of them was sworn by the Solicitor's brother, Mr Michael Gill, and the remaining three by friends who were former clients. All of the four deponents were aware of the nature of the allegations made against him in the Information. They all expressed the opinion that the conduct alleged was not in line with any prior conduct on his part or with what they would have expected of him. They stated also that the Solicitor had a fine record of service to the community, chiefly in the context of sporting activities. 25 In all four of these affidavits, the existence of marital problems, leading to the breakdown of the Solicitor's marriage, was put forward as a major cause of his dishonest conduct. In a chronology handed up by Mr Gulley, these problems were shown as having commenced in 1993. In 1995, the Solicitor separated from his wife and in 1997 they entered into a property settlement. 26 Mr Michael Gill stated in his affidavit that in this settlement the Solicitor had given up 'virtually all his assets', including the family home, and had retained significant liabilities, including mortgage payments on this home and the payment of significant amounts, including private school fees, for the benefit of his three children. Mr Gill also said that the Solicitor 'would go to great lengths to satisfy even indulgent requests of his former wife and his children'. He expressed the opinion that the Solicitor was 'a poor manager of his business affairs'. 27 Mr Gulley also tendered a report by Dr John Ellard, a consultant psychiatrist. Dr Ellard interviewed the Solicitor on 26 May 2004 and was aware of the contents of the Information. He found that the Solicitor did not suffer from any 'substantially disabling disorder' such as would 'grossly upset his judgment'. 28 Dr Ellard believed, however, that two 'psychiatric issues' called for comment. First, it appeared to him that the Solicitor might suffer from Attention Deficit Disorder with Hyperactivity, which, in the absence of appropriate medication, could cause 'disorganisation' in a person of the Solicitor's age. Secondly, the Solicitor appeared to have a 'personality structure of denial', generated possibly by childhood experiences. In consequence, he avoided 'looking at major problems' and '[did] his best to push them aside'. 29 Dr Ellard noted a remark by the Solicitor at the end of their interview that 'he had never spoken to anyone about his difficulties before'. Dr Ellard added: 'I can believe that.' He stated also that the Solicitor responded positively to a suggestion that he should arrange a further meeting with a psychiatrist. 30 Mr Gulley relied on this material to support a submission that the Solicitor's behaviour in carrying out over many years a series of misappropriations – in many cases 'robbing Peter to pay Paul', to quote a phrase used by Mr Pierotti – was attributable chiefly to the impact of his marriage breakdown and to his inability to face up to problems and to seek help when this was necessary. 31 Finally Mr Gulley submitted that the Solicitor had shown himself willing to co-operate with the Law Society in the course of its investigation and in the present proceedings. Our conclusions 32 In considering the principles to be applied by us, we have taken due account of the statement by Street CJ in Law Society of New South Wales v Jones that Mr Pierotti cited to us. This emphasises the fundamental importance of integrity in the handling of trust funds by solicitors. 33 We note the established principle that the test to be applied in determining whether a practitioner should be struck off the roll is present unfitness to be on the roll, not unfitness at the time of the professional misconduct alleged and proved in the proceedings (see, for example, A Solicitor v Council of the Law Society of New South Wales [2004] HCA 1 at [21], [38]). 34 We have also obtained guidance from the Court of Appeal's decision in Law Society of New South Wales v Bannister [1993] 4 LPDR 24. In that case, the respondent solicitor obtained for a client a redemption award of $43,000 from the Compensation Court. He asked the client to pay him $3,000 on account of costs, knowing that he was not entitled to any such payment. At his request, the client endorsed the cheque for the redemption award, whereupon he paid it into his firm's trust account and, with written authorisation that he obtained from the client, drew two cheques in favour of his client, for $40,000 and $3,000 respectively. He then accompanied the client to the firm's bank, where the client cashed the cheque for $3,000 and handed the proceeds to the respondent. The respondent retained this amount for himself. 35 The respondent did not enter details of his receipt of the $3,000 into the trust account ledger and succeeded in concealing what he had done from his partners in the firm. The firm's costs in the matter were paid by the employer of the client. The matter did not come to light until more than a year later, following a complaint by the employer and a police investigation. After a further period of about six months, the respondent repaid the sum of $3,000 to the client. It was not until nearly two more years had elapsed that, in response to pressure, he made a further payment on account of interest. 36 On 27 August 1993, the Court of Appeal set aside an order of the Legal Services Tribunal imposing a fine of $10,000 on the respondent and ordered instead that he be struck off the roll. Sheller JA, with whom Gleeson CJ and Handley JA agreed, stated that he had no doubt that the respondent's conduct showed him to be unfit to practise. This was the case even though the respondent had no prior record of dishonest conduct and numerous witnesses had testified to his good character. 37 Sheller JA stated (at 29) that this was not 'an isolated or passing departure from proper professional standards'. Instead, the respondent had engaged in a course of dishonest and deceitful conduct which extended over a period of more than a year and which, in its inception and throughout this period, was deliberate and done in full knowledge of its wrongfulness, eloquently evidenced by its concealment. 38 The conduct to which the Solicitor has admitted in this case is similar in nature, but it was on a very much larger scale, it directly affected 18 clients – not merely one client – and it extended over a much longer period. Although in August 2002 he admitted having misapplied trust funds, this was only after one of these clients had raised concerns with his employer. He concealed his earliest act of dishonesty for as much as eight years. This period in fact represents about 40% of the total period (1983 to 2002) in which he practised as a solicitor. 39 We note also that the respondent in Law Society of New South Wales v Bannister was a partner of the Solicitor in the firm of Bruce O'Sullivan & Co at the time of the respondent's misconduct and, indeed, that the Solicitor gave evidence on his behalf (see [1993] 4 LPDR 24 at 24, 26). The Solicitor must have known of the order made by the Court of Appeal in August 1993 and of the Court's strong disapproval of his former partner's behaviour. Yet only 15 months later, he embarked upon the long course of dishonest theft that forms the subject of these proceedings. 40 Since the case of Bannister was not cited at the hearing before us, the Solicitor's involvement in it as a witness was not mentioned. It is, however, a matter of public record. 41 In our opinion, the evidence tendered by Mr Gulley seems to provide, as Mr Pierotti claimed, an explanation of the Solicitor's conduct, but no excuse for it. We note in particular (a) the absence of any testimonials from former professional colleagues; (b) the lack of evidence as to how far the Solicitor personally has contributed to the partial repayment of the money that he misappropriated; (c) that Dr Ellard did not discern any major psychiatric disorder; and (d) that the Solicitor's willingness to admit his wrongdoing was only manifest after a client had raised concerns with his employer. In addition, the evidence before us provides no reason for thinking that the evident unfitness to practise demonstrated during the period of his wrongdoing has been remedied by events since then. 42 We are comfortably satisfied that the course of conduct to which the Solicitor has admitted amounts to professional misconduct under all three of the Grounds stated in the Information. 43 Our findings, under Grounds 1 and 2, that he wilfully breached ss 61(1) and 62(1) respectively relate only to six matters of which he had the carriage, as a principal in Bruce O'Sullivan & Co or O'Sullivan Borthwick or as a sole practitioner under the name of O'Sullivan Borthwick. These comprised a matter conducted for Ronald James Morgan and matters for the estates of each of the following deceased: Linda Paabo, Caroline Busshart Smith, Lachlan James Usher, Muriel Philomena Davis and Edith Wrightson. 44 Our finding of misappropriation under Ground 3 relates to these six matters and to a further 12 matters of which the Solicitor had the carriage as an employee of Harris Wheeler. 45 We are comfortably satisfied also that by virtue of this misconduct he is not a fit and proper person to remain on the roll of legal practitioners and that he must accordingly be struck off. 46 The Law Society, as we have indicated, sought an award of costs under s 171E of the Act. Those costs have been agreed at $4,400. 47 Our orders are as follows:- 1. That the name of the Solicitor be removed from the roll of legal practitioners. 2. That the Solicitor pay the Law Society's costs of these proceedings, agreed at $4,400. 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