Law Society of New South Wales v McCarthy [2005] NSWADT 189

CITATION: Law Society of New South Wales v McCarthy [2005] NSWADT 189 This decision has been amended. Please see the end of the decision for a list of the amendments. DIVISION: Legal Services Division APPLICANT PARTIES: Council of the Law Society of New South Wales RESPONDENT Jennifer Anne McCarthy FILE NUMBER: 052002 HEARING DATES: 20/05/2005 SUBMISSIONS CLOSED: 05/20/2005 DATE OF DECISION: 08/11/2005

BEFORE: Greenwood J - Judicial Member; Cox R - Judicial Member; Dyster B - Non Judicial Member APPLICATION: Application for order prohibiting barrister or solicitor from employing specified person (s.48I) MATTER FOR DECISION: Principal matter LEGISLATION CITED : Legal Profession Act 1987 CASES CITED: Law Society of New South Wales v ET [2003] NSWADT 41 Law Society of New South Wales v Ross [2003] NSWADT 204 APPLICANT REPRESENTATION: D Barton, solicitor RESPONDENT No appearance ORDERS: ORDERS MADE: 20/05/2005; 1. That Jennifer Anne McCarthy is prohibited from being employed or paid in connection with any barrister's or solicitor's practice without approval under s49K of the Legal Profession Act 1987; 2. That Jennifer Anne McCarthy pay the costs of the Law Society as agreed or assessed; 3. That the Registry of the Tribunal take out these orders as soon as practicable to be provided to the Law Society for registration purposes

REASONS FOR DECISION APPLICATION 1 The Council of the Law Society of New South Wales (the Society) applies to the Tribunal for the following orders pursuant to s48I and s48L(2) of the Legal Profession Act 1987 (the Act) that: Jennifer Anne McCarthy (the Respondent) is prohibited from being employed or paid in connection with any barrister's or solicitor's practice (without approval under s48K of the Act ); The Respondent pay the Society's costs of and incidental to the proceedings, as agreed or as assessed under Division 6 Part 11 of the Act or on such other basis as the Tribunal may determine. 2 The Respondent did not appear at the hearing nor was she represented. The Tribunal was satisfied that the Respondent was duly served with all relevant documents in the proceedings and evidence of service was tendered by the Law Society in the form of an Affidavit of Service of Peter McRae, sworn 2 March 2005. The Tribunal was also satisfied that the Respondent was duly informed of the date for the directions hearing on 16 March 2005. Subsequently the Respondent wrote to the Law Society by letter dated 28 March 2005, a copy of which is an annexure to the Affidavit of Donald Keith Barton, affirmed 31 March 2005, wherein the respondent informed the Society that she does not wish to partake in the proceedings any further and that she had no objections to the orders being sought by the Law Society in its Application. It is noted that whilst no formal Reply was filed by the Respondent, she did complete and sign the form of reply sent to her by the Society in which she consents (without admissions) to the orders sought by the Society. Notwithstanding this she does, in her letter, refer to rectifying "her past wrongs" and she does admit her conduct. LEGISLATION 3 Section 48I of the Act relevantly provides: (1) This section applies to a person who: (a) is not a legal practitioner or interstate legal practitioner, and (b) is or was a clerk to a barrister or solicitor (2) On application by a Council, the Tribunal may make an order prohibiting (without approval under section 48K) any barrister or solicitor from employing or paying in connection with his or her practice a specified person to whom this section applies if: (a) the Tribunal is satisfied that the person is not a fit and proper person to be employed or paid in connection with a barrister's or solicitor's practice, or (b) the Tribunal is satisfied that the person has been guilty of conduct which, if the person were a barrister or solicitor, would have constituted unsatisfactory professional conduct or professional misconduct within the meaning of Part 10. (2A) The prohibition imposed by an order made under this section extends to a prohibition on the employment or payment of the person against whom the order was made in connection with the legal services provided by an incorporated legal practice. (3) An order made under this section may be revoked by the Tribunal on application by a Council or by the person against whom the order was made. 4 The grounds upon which the Society seeks orders are that: A. The Respondent is not a fit and proper person to be employed or paid in connection with a barrister's or solicitor's practice, and, or in the alternative B. The Respondent has been guilty of conduct which, if the Respondent were a barrister or solicitor, would have constituted unsatisfactory professional conduct or professional misconduct within the meaning of Part 10. 5 Particulars in support of the orders sought are set out in the Schedule to the Application which at various stages in these reasons are reproduced below. REASONS FOR DECISION Was the Respondent a "clerk" within the meaning of the Act? 6 This is a threshold question and in support of it's submission that the Respondent was so employed the Society referred the Tribunal to the decisions of Law Society of New South Wales v Ross [2003] NSWADT 204 and Law Society of New South Wales v ET [2003] NSWADT 41. The Society submitted that in Ross the duties and behaviour there considered were so close to the duties and behaviour of the Respondent that there shouldn't be any doubt that the Respondent in this case was employed as a clerk within the meaning of the Act. 7 In the matter of ET the meaning of the word "clerk" was considered in some detail (commencing at para 7 of the judgment and following) which included a review of the forerunner of the Act and the English Solicitors Act 1957, the Tribunal in ET said, commencing at para 18 – "We think that section 48I is included in Part 3A because of the nature of the work carried out by clerks. They are not barristers or solicitors but they may be closely connected with the legal work of practices and with the confidential affairs of clients. In the course of their duties, they may become privy to the confidences of clients of the practices. They may be required to do clerical work that involves skill and trust and which, if not diligently and honestly done and kept confidential, may cause damage to the clients concerned. But, because they are not solicitors or barristers they are not amenable to the discipline to which barristers and solicitors are subject. Because of the nature of the work a clerk may be required to do, s/he, to use the words of section 48I, must not be a person who 'has been guilty of conduct which, if the person were a barrister or solicitor, would have constituted unsatisfactory professional conduct or professional misconduct within the meaning of Part 10' of the Act. … Considering those matters it becomes clear that the Parliament had good reason to provide for the barring of such persons from legal practices in the circumstances of paragraphs (a) and (b) of subsection 48I(2). But, the other side of the same coin is that clerks referred to by section 48I is not just any employees, or even any employees who may perform occasional duties that could be described as clerical. By reference to his or her actual duties, the person must be a clerk, properly so called: a person who, by reason of some significant involvement in the legal practice, as such, is required to be a fit and proper person to be employed or paid in connection with a legal practice, and one who has not been guilty of the kind of conduct described in paragraph 48I(2)(b). A clerk may perform a considerable amount of non-clerical work. Especially is this so in a small practice. Indeed, a solicitor may perform much non-legal work in such a situation. If the clerical work done by a person is sufficient as to quality and quantity, that person may properly be called a 'clerk'." 8 Evidence of the nature of the Respondent's work was provided to the Tribunal in the statement of George Laliotis , dated 17 October 2003. Mr Laliotis is a Solicitor and the employer of the Respondent. Evidence was given and the Tribunal finds that the Respondent commenced employment with his firm as a part-time employee in 1997 and shortly after that was employed as a full time legal clerk in his firm. Relevantly he says that – "Jennifer McCarthy's day to day duties included carrying out banking for the firm and collecting mail from the firm's post box. I had supervised Jennifer McCarthy's work over many years and I was satisfied with her competence to carry out conveyance work on behalf of the firm. In early 2001 I was asked to handle the conveyance work for a large home unit development situated at 52-54 McEvoy Street, Waterloo. The developer was Pheonix Holdings Pty Limited, a private company of Simon Xistouris and Chris Xistouris and the project was called 'Soho Apartments'. The project consisted of 73 home units and 4 commercial units and the sales were to be effected through a number of real estate agents off the plan. Our vendor's initial instruction were that all sales contracts were to be exchanged on 10% paid or an equivalent deposit bond. I directed Jennifer McCarthy to carry out the day to day conveyance work in relation to the sale of the Soho Apartments. The front page of all the sale contracts for this development contained my name and Jennifer McCarthy's as the contact reference." 9 Taking into account the description of the Respondent's duties by her then employer, Mr Laliotis, what the Tribunal said in both ET and Ross, and the submissions of the Society, this Tribunal finds, as a matter of fact, that the Respondent was, at the relevant time, a "clerk" within the meaning of s48I of the Act. We do not consider there is any substantial difference between the duties undertaken by the Respondent found to be a clerk in the matter of Ross and the duties undertaken by the Respondent in the proceedings before us. Is the Respondent a fit and proper person to be employed as provided in s48I(2)(a) of the Act? 10 For convenience the following is noted from the Particulars that - 4. At material times, the Firm maintained the following controlled moneys accounts: (i) account styled Laliotis & Co ITF George Silos & Tracey Buehner at St George Bank, account No 153 948 193 ("the first account") (ii) account styled "Laliotis & co ITF the Late W.J. McCarthy" at St George Bank, account No 107 011 210 ("the second account"). The Clerk opened this account on 27 December 2001 without authority by tracing over Mr Laliotis's signature on the application to the Bank to open the account. 5. The Firm also maintained a Trust Account at the Marrickville Branch of Westpac Bank, styled, "Laliotis & Co Trust Account" ("the Trust Account"). 6. Mr Laliotis maintained an American Express ("Amex") business credit card Account, account no. 3760 113314 41009, in the name of "George Laliotis" ("the Amex Account"). The Amex Account had been dormant for a year or more prior to June 2001. 11 Turning now to the specific cases particularized by the Society in the Schedule to its Application noting that the Respondent in the proceedings is referred to as "the Clerk". Christofi, purchase of Unit No. 10 a) The purchasers, Michael Christofi & Carol Christofi, acted for themselves in relation to the conveyance of a strata unit at 10/52-54 McEvoy Street, Waterloo. They provided a bank cheque dated 29/6/01 issued by the Commonwealth Bank in the sum of $26,500.00 drawn in favour of "Laliotis Trust Account" by way of deposit on exchange of contracts on 10 July 2001. (b) The bank cheque was issued on 29 June 2001 by the Commonwealth Bank in the sum of $26,500.00 in favour of "Laliotis Trust Account". (c) The Clerk deposited the bank cheque to the first account. (d) From time to time the clerk drew on the moneys so deposited until they were exhausted. (e) The vendor required a cheque in the sum of $55,780.00 drawn in favour of Pheonix Ventures P/L to be provided on settlement, which occurred on or about 29 August 2003. (f) In relation to the same matter, the Clerk provided directions as to payment of settlement moneys which included the following bank cheques issued by Laiki Bank on 28 September 2003; $5,000.00 no 121196 drawn in favour of Alvaro Edwards Trust Account $5,997.60 no. 121195 drawn in favour of GNL Management P/L $44, 780.55 no 121197 drawn in favour of Pheonix Ventures P/L (g) the cheque in the sum of $5,997.60 drawn in favour of GNL Management P/L was paid to the credit of the Amex Account. (h) The cheque in the sum of $5,000.00 drawn in favour of Alvaro Edwards Trust Account was used to complete a purchase by the Clerk's cousin, of which the Clerk had carriage. (i) The Clerk placed an altered photocopy of the cheque no 121197 on the file. The sum shown on the altered cheque was $55,780.55. 12 The Tribunal has carefully considered the particulars recited above in conjunction with the documentation annexed to the Affidavit of Leo Sydney Gore sworn 1 February 2005 including copies of relevant parts of the Contract for Sale, cheque deposit slips, bank statements, settlement sheets, directions to pay, record of interview with the Respondent, and statements of George Laliotis and Ms Carol Christofi. The Tribunal is satisfied what is alleged by the Society has in fact been made out. It is noted that the admissions made by the Respondent in her record of interview appear to be frank and honest; there appears to have been no hesitation in her responses and she does so in a forthright manner. It shows, in our opinion, that what the Respondent was doing had been carefully thought out by her thus evidencing a deliberate intent to misappropriate the moneys in connection with the transactions and a systematic falsifying of documents. The Respondent in her record of interview says, in effect she was caught up in a scam sending money overseas for a couple of years as she understood she was to inherit millions from an uncle. She also says she intended to repay the moneys misappropriated moneys when her inheritance became available to her. This, of course, did not happen but we do not consider that the Respondent's intention to repay detracts in any way from the seriousness of the actions of the Respondent and we find that the Respondent is not a fit and proper person to be employed or paid in connection with a barrister's or solicitor's practice. Mudge, purchase of Unit No 65 (a) The purchaser, Fraser Neil Mudge, paid a deposit in the sum of $26,500.00 by bank cheque issued on 9 August 2001 by the Commonwealth Bank in the sum of $26,500 following exchange of contracts for the purchase of a strata unit at 65/52-54 McEvoy Street, Waterloo on 20 July 2001. Storey & Gough, solicitors, acted for the purchaser in relation to the conveyance. (b) The deposit was originally to be effected by a deposit bond but the purchaser changed his mind. The copy of the contract signed by the vendor was not amended to reflect the actual payment of the deposit. (c) The Clerk deposited the bank cheque to the first account on 18 September 2001. (d) The Clerk did nothing to cause the receipt to be recorded in accordance with the Act and Regulations. (e) From time to time the Clerk drew on the moneys deposited to the first account until the account was exhausted. The Clerk did so without authority and for her own benefit. She effected the withdrawals by forging Mr Laliotis' signature. (f) The transaction settled on 26 May 2003. (g) The Clerk amended the file copy of the settlement sheet to indicate that the deposit had been effected by deposit bond, rather than actual payment of a deposit, thereby concealing the fact that a deposit had been paid. 13 Again the Tribunal is satisfied that case of the Society has been made out and that the Respondent is not a fit and proper person to be employed or paid in connection with a barrister's or solicitor's practice. The Tribunal has carefully considered, in conjunction with the particulars recited in the application, similar documentation to that noted in the matter of Christofi. Additionally it has considered a Statement by the purchaser himself, Fraser Mudge and his solicitor, Donald Storey. Zhao, purchase of Unit No 9 (a) The purchaser, Mr Zhao, provided a bank cheque issued on 10 July 2001 by St George Bank in the sum of $28,000 by way of deposit on exchange of contracts for the purchase of a strata unit at 9/52-54 McEvoy Street, Waterloo on 12 July 2001. George Loupos & Associates, solicitors, acted for the purchaser. (b) The Clerk deposited the bank cheque to the second account on 28 December 2001. (c) Between 31 December 2002 and 31 May 2003, the Clerk withdrew moneys from the second account in the total sum of $28,036.70 (representing the deposit plus interest credited to the account by the Bank, less bank fees and TFN withholding tax) in various amounts in a number of withdrawals, until the account was closed, the final balance being $40.14. 14 After careful consideration of the particulars and relevant documentation annexed to the Affidavit of Leo Sydney Gore, including a Statement of Mr George Loupos, solicitor for the purchaser Mr Zhao the Tribunal considers that the case of the Society has been made out and finds the Respondent is not a fit and proper person to be employed or paid in connection with a barrister's or solicitor's practice Shackleton & Almeida, purchase of Unit No 13 (a) The purchasers, Owen William Shackleton and Maria Rosalina Almeida, provided a bank cheque no 414475 issued by Westpac Bank on 25 January 2002 in the sum of $41,500.00 made out to Raine & Horne Residential Investments on exchange of contracts for the purchase of a strata unit at 13/52-54 McEvoy Street, Waterloo on 20 December 2002. Raine & Horne, real estate agents, were the deposit holders nominated in the contract. Wicken & Goodsell, solicitors, acted for the purchasers and Gallilee & Associates, solicitors, acted for the incoming mortgagee. (b) The Clerk paid the cheque to the Firm's Trust Account on 6 September 2002. (c) The Firm also acted for the Clerk's sister and brother-in-law, L & A Ewers, in relation to the purchase of real property. (d) The Clerk credited the receipt of the sum of $41,500.00 to the trust ledger of L & A Ewers. That credit served to cover payment of similar sum by the Clerk's sister, which the Clerk had taken for her own benefit. 15 After careful consideration of the particulars and relevant documentation annexed to the Affidavit of Leo Sydney Gore, including a copy of a cheque butt for the principal amount of $41,500, the payee noted as Raine and Horne Residential Investments, and a copy of the Westpac deposit form indicating that the cheque was deposited into the trust account in the name of Ewers, the Tribunal concludes that the case of the Society has been made out and finds that the Respondent is not a fit and proper person to be employed or paid in connection with a barrister's or solicitor's practice Transactions relation to the Amex Account (a) The Amex Account had been dormant for a year or more prior to June 2001. (b) The Clerk arranged for the address held by Amex for the Amex Account to be changed in order to have statements of account and a new card posted to a new address, being her residential address at 29 Gallipoli Street, Hurstville and, later, to her new residential address at 1 George Street, Hurstville. (c) The Clerk used the credit card facility relating to the Amex Account to purchase goods and services for her own benefit without authority. (d) In addition to the payment of the sum of $5,997.60 particularised above at 8(i)(g) [of the particulars to the Schedule], the Clerk paid moneys to the credit of the Amex Account from the First Account. Such payments included the following sums: $5,000.00 effected by bank cheque purchased with a withdrawal from the First Account, issued on 9 October 2001 and paid to the Amex Account on 11 October 2001; $1,900.00 effected by bank cheque purchased with a withdrawal from the First Account, issued on 16 November 2001 and paid to the Amex Account on 20 November 2001; $3,000.00 effected by bank cheque purchased with a withdrawal from the First Account, issued on 13 December 2001 and paid to the Amex Account on 20 November 2001. 16 The Tribunal has carefully considered the evidence put before us by the Society in relation to the Amex Account, the business credit card of Mr Laliotis. The evidence is contained in the Affidavit of Leo Sydney Gore, in particular in the Statement of George Laliotis dated 17 October 2003, which, among other things, records in detail various telephone conversations Mr Laliotis had with the Respondent during the course of the Society's investigation. The Respondent in answer to a number of questions put to her about her dealings with the Amex Account admits the matters referred to above; the fact that she caused to be changed on two occasions the account address so that the statements would be directed to her own address and not that of Mr Laliotis and the fact that she used and misappropriated the deposit moneys for her own purposes. We were also taken to copies of a number of statements of account from Amex highlighting some typical transactions entered into by the Respondent and tracking the deposit moneys used in payment of the account at various times. In relation to this aspect of the matter the Tribunal is satisfied that the Society has made out it's case and finds that the Respondent is not a fit and proper person to be employed or paid in connection with a barrister's or solicitor's practice. ORDERS 17 In view of the seriousness of the matter orders were made by the Tribunal at the conclusion of the hearing on 20 May 2005 with effect from that day. Reasons were to be delivered at a later date. 18 The orders were: - 1. That Jennifer Anne McCarthy is prohibited from being employed or paid in connection with any barrister's or solicitor's practice without approval under s49K of the Legal Profession Act 1987. 2. That Jennifer Anne McCarthy pay the costs of the Law Society as agreed or assessed. 3. That the Registry of the Tribunal take out these orders as soon as practicable to be provided to the Law Society for registration purposes.