CITATION: Law Society of New South Wales v Kennedy [2006] NSWADT 153 DIVISION: Legal Services Division APPLICANT PARTIES: Council of the Law Society of New South Wales RESPONDENT John William Kennedy FILE NUMBER: 052030 HEARING DATES: 18/04/2006 SUBMISSIONS CLOSED: 04/18/2006 EXTEMPORE DECISION DATE: 04/18/2006 DATE OF DECISION: 05/25/2006 BEFORE: Karpin A - ADCJ (Deputy President); Pheils J - Judicial Member; Fitzgerald R - Non Judicial Member CATCHWORDS: Professional Misconduct - breach of s. 61 of the Legal Profession Act - Professional Misconduct - breach of s. 62 of the Legal Profession Act - Professional Misconduct - fail to pay third party - Professional Misconduct - misappropriate trust moneys/moneys - Professional Misconduct - mislead receiver - Professional Misconduct - practice without being holder of practising certificate MATTER FOR DECISION: Principal matter LEGISLATION CITED : Legal Profession Act 1987 Legal Profession Act 2004 CASES CITED: Briginshaw v. Briginshaw (1938) 60 C.L.R. 336 APPLICANT D Barton, solicitor REPRESENTATION: RESPONDENT In person ORDERS: i. The name of the Respondent be removed from the Roll of Local Lawyers; ii. The Respondent pay the costs of the Law Society as agreed or assessed REASONS FOR DECISION 1 On 24 November 2005 the Council of the Law Society of New South Wales filed an application seeking: i. That the name of the respondent be removed from the Roll of Local Lawyers; ii. That the respondent pay the costs of the Society as agreed or assessed. 2 The applicant sought to have the matter dealt with under Part 4.8 of the Legal Profession Act 2004; S. 155 (2) Legal Profession Act 1987; and Cl. 16(2) Schedule 9 Legal Profession Act 2004. 3 The respondent appeared in person and did not resist the orders sought. 4 The applicant relied upon the following material: i. Affidavit of Raymond John Collins dated 23 November 2005. ii. Affidavit of Jean Sayers dated 15 November 2005. iii. Affidavit of Donald Barton dated 18 April 2006. iv. Instrument of Consent dated 21 March 2006. 5 The particulars of the agreed facts are set out below: PARTICULARS of Agreed Facts re JOHN WILLIAM KENNEDY In respect of the following grounds, the Lawyer engaged in professional misconduct, and by reason of the professional misconduct, he is not a fit and proper person to have his name remain on the roll of Lawyers of the Supreme Court of New South Wales: Ground 1 The lawyer wilfully contravened the provisions of Section 61 of the Legal Profession Act, 1987; Particulars A – D & F. Ground 2 The lawyer wilfully contravened the provisions of Section 62 of the Legal Profession Act, 1987; Particulars A – D & F. Ground 3 The lawyer misappropriated trust funds of clients; Particulars A – D. Ground 4 The lawyer practised without a practising certificate; Particular E. Ground 5 The lawyer attempted to mislead and lied to the Receiver; Particular E. Ground 6 The lawyer failed to pay third parties; Particulars C & D. In these Particulars: "The Lawyer" means John William Kennedy. "Bonduel" means Bonduel Pty Limited. "Mr Tisdale " means Terence Roland Tisdale. "Mr Rose" means David Alan Rose. "the Receiver" means Jean Sayer, Chartered Accountant. "the Westpac Account" means Account Number 032-023 13-1966 held with the Westpac Bank at Surry Hills in the name " Mr John William Kennedy t/as Jensen's Law Firm – Sydney". "the Unicom Account" means the Account maintained by the Lawyer (member number 1050998) with the Unicom Credit Union Ltd. "the OSR" means the Office of State Revenue Introduction 1. The Lawyer is an Australian lawyer within the meaning of s.500 Legal Profession Act 2004, having been admitted to practice on 6 February 1976. 2. From 1 July 1999 until the appointment of Jean Sayer as Receiver on 12 December 2003, the Lawyer was a sole practitioner practising as Jensen's Law Firm. From 18 March 2003 to 30 June 2003 he also practised as W.R.M. Lawyers. 3. The Lawyer did not hold a Practising Certificate for the periods 1 July 2001 to 11 September 2001 and 30 June 2003 to 15 August 2003. 4. The Lawyer did not maintain a trust account but kept general accounts with Westpac and Unicom Credit Union Limited. The Lawyer did not keep any accounting records in relation to his general accounts. A. Bonduel Pty Limited Purchase of 3/41-43 Green Street, Botany. 1. The Lawyer was instructed by Mr Honess, a director of Bonduel, to act on the purchase of property by Bonduel of 3/41-43 Green Street, Botany for a consideration of $385,000 ("the first purchase"). Contracts on the purchase were exchanged on 9 May 2002. 2. To assist in the purchase Bonduel obtained a mortgage from the Commonwealth Bank. 3. Bonduel provided to the Agent a cheque in the sum of $38,500 by way of deposit. 4. On 13 August 2002 the Lawyer sent a facsimile to Mr Honess requesting payment of stamp duty in the sum of $14,819.00 into the Lawyer's Westpac Account. On the same day Mr Honess paid the sum to the Westpac Account. 5. Immediately prior to the transfer on 13 August 2002, the Westpac Account was overdrawn by $74.34. Following the transfer, debit of dishonour fees in the total sum of $75.00 and presentation of a cheque in the sum of $122.00 brought the balance at the end of the day to $14,547.66. 6. On 26 August 2002 a Notice to Complete was issued. 7. On 26 August 2002 the Lawyer arranged with the Lawyers for the Vendor, Messrs Staunton Beattie, to obtain from them the Transfer for payment of Stamp Duty. The Lawyer gave an undertaking to return the Transfer immediately thereafter. 8. The first purchase settled on 27 August 2002. 9. The Lawyer received his costs from the proceeds of the mortgage advance. 10. Between 13 August 2002 and 27 August 2002 cheques were drawn by the Lawyer on the Westpac Account and cash withdrawals made, until the credit balance at 27 August 2002 was $4,162.12. 11. On 27 August 2002 Cheque No. 201001 for $12,819.00 was drawn on the Westpac Account for payment of stamp duty. 12. When the cheque for $12,819.00 for stamp duty was presented on 27 August 2002 the account was overdrawn to the extent of $8,656.88 and the cheque was dishonoured on presentation. 13. The Office of State Revenue garnisheed the Westpac Account and that office received $2,465.37 on 25 October 2002 towards the debt for stamp duty. 14. By facsimile on 23 January 2003, the OSR informed the Lawyer of the then outstanding liability of $10,934.62 for unpaid stamp duty. 15. On 7 August 2003, Mr Honess became aware of the outstanding liability for payment of stamp duty, then standing in the sum of $11,647.60, following receipt of a facsimile from the OSR. On 15 August 2003, the OSR provided further details to Mr Honess as to the dishonoured cheque and payment pursuant to the garnishee order 16. Mr Honess made numerous phone calls and sent faxes to the Lawyer enquiring as to the situation with respect to stamp duty. The Lawyer informed him that stamp duty had been paid. 17. On 14 October 2003 the Office of the State Revenue served a Creditors Statutory Demand on Bonduel for the then outstanding sum of $11,843.83. 18. After receiving the Statutory Demand Mr Honess faxed the document to the Lawyer who informed Mr Honess on 27 October 2003 that the matter had been resolved. 19. On 29 October 2003 Bonduel paid the sum then due $11,853.83 to the Office of State Revenue. Purchase of 8/787 Kingsford Smith Drive, Eagle Farm, Queensland. 1. The Lawyer acted for Bonduel on the purchase of 8/787 Kingsford Smith Drive, Eagle Farm, Queensland ("the second purchase"). 2. Birch & Company Lawyers acted for the vendor and as agent to stamp and register the Transfer. 3. The purchase price for the property was $253,000. 4. On 8 May 2002 Bonduel paid a deposit of $10,000 on exchange of contracts. 5. On 28 May 2002 the Lawyer, by facsimile dated 29 May 2002, requested Mr Honess to deposit the sum of $7,830.00 into the Westpac Account for stamp duty. Mr Honess then deposited the sum of $7,830.00 in the Westpac account that same day. This brought the balance of the Westpac Account to $9,413.67 6. By letter dated 4 June 2002 Birch & Company requested that the sum of $250,920.99 be sent by telegraphic transfer to that firm's Trust Account for settlement of the second purchase, for payments as follows: Settlement moneys $243,335.39 Stamp Duty $7,330.00 Registration Fees $255.60 7. On 5 June 2002 Mr Honess paid $250,921.00 to the account of Birch & Co and informed the Lawyer that he had done so. Receipt was confirmed by Birch & Company. 8. By 17 June 2002 the Westpac account was overdrawn as to $733.43 and the bank dishonoured a cheque presented on that day to bring the account back into credit. 9. The Lawyer did not refund the sum of $7,830.00 to Bonduel which he had received on account of stamp duty in respect of the second purchase. B. Terence Roland Tisdale 1. The Lawyer acted for all parties in a transfer by Mr Tisdale to Mr and Mrs Gardner of 4/2-4 Bowden Street, Guildford ("Bowden Street") and 3/20 Stimson Street, Guildford ("Stimson Street"). 2. The stamp duty payable on the respective transfers was $8,290.00 for 4/2-4 Bowden Street, Guildford, and $6,015.00 for 3/20 Stimson Street, Guildford. 3. On or about 18 September 2002 Mr Tisdale provided to the Lawyer two cheques in the total sum of $8,859 and $6,931 in cash, a total of $15,790.00, for stamp duty on both transfers. 4. The cheques totalling $8,859.00 were deposited to the Westpac Account on 18 September 2002, being part of a deposit of $9,611.65. Before this deposit the Westpac Account was in credit to the sum of $375.96. 5. On 9 October 2002 a cheque which had been drawn on the Westpac Account in the sum of $8,693.52 payable to LawCover was presented. After presentation of that cheque the balance in the Westpac Account was $1,154.87. 6. On 29 October 2002 the Lawyer drew cheque No. 201055 in the sum of $8,290.00 payable to the OSR on the Westpac Account for stamp duty on Bowden Street. At the time, the balance of the Westpac Account was $977.50. The cheque was dishonoured on presentation. 7. On 4 November 2002 the Lawyer drew cheque No. 201054 in the sum of $6,015.00 on the Westpac Account for payment of stamp duty in respect of the transfer of Stimson Street. At the time, the balance of the Westpac Account was $1,401.62. The cheque was dishonoured on presentation because there were insufficient funds in the Westpac account. 8. The Westpac Account was overdrawn on 11 December 2002 and remained overdrawn until the date of Receivership. C. Fees paid for Mr Richard Scruby 1. The Lawyer acted for Mr Tisdale in litigation and briefed Mr Richard Scruby of Counsel. 2. Mr Tisdale gave the Lawyer a cheque in the sum of $3,000.00 for the payment of Mr Scruby's fees. The cheque for $3,000.00 was deposited into the Unicom Account on 21 February 2003 and used mostly by the Lawyer for personal expenses. 3. Mr Scruby forwarded fee notes to the Lawyer on 5 March 2003 in the sum of $825.00, on 17 April 2003 in the sum of $2,027.50 and on 10 June 2003 in the sum of $660.00, totalling $3,512.50. 4. The Lawyer did not pay Mr Scruby the fees due to him. 5. On 25 August 2003 Mr Tisdale paid Mr Scruby the sum of $3,512.50 by cheque drawn by T & M Industries (Aust) Pty Limited. D. Peter Nigem 1. The Lawyer acted for Peter Nigem in litigation concerning a claim against Poortere. 2. Mr Vince Stefano of Counsel was briefed by the Lawyer and the proceedings went to a hearing on 12 May 2003. 3. On 13 May 2003, Mr Stefano forwarded a fee note to the Lawyer in the sum of $7,150.00 4. Mr Nigem gave the Lawyer a cheque for $7,150.00 for Mr Stefano's fees. The cheque was not deposited to either the Westpac or Unicom account. 5. The cheque for $7,150.00 was negotiated through the Surry Hills branch of the Commonwealth Bank on 30 July 2003 when cashed by the teller. 6. Mr Stefano was not paid the amount of $7,150.00. 7. Mr Stefano obtained default judgment against the Lawyer and issued a Bankruptcy Notice however, Mr Stefano's Lawyers were unable to serve the Notice on the Lawyer in the prescribed period and the Notice expired. E. Practising without a Practising Certificate 1. The Lawyer's Practising Certificate was cancelled on 12 December 2003. 2. The Lawyer was informed of the cancellation of his Practising Certificate on 12 December 2003. 3. On 15 December 2003 the Receiver reminded the Lawyer that he could no longer practise and further informed the Lawyer that he could not instruct any other party concerning settlements or in relation to Court proceedings relating to his former clients. 4. The Lawyer informed the Receiver that all current files were in his office. Those files were removed by the Receiver. The statement by the Lawyer to the Receiver was not true; files had been removed from the Lawyer's office prior to the Receiver's attendance on 15 December 2003. 5. Between 12 December 2003 and the commencement of the Christmas vacation period the Lawyer acted in a number of matters. Those matters included: (a) Purchase by Green of a property at Elizabeth Bay which settled on 19 December 2003. Trust documents and cheques drawn on settlement were later made available to the Receiver by the Lawyer. (b) The Lawyer instructed Sydney Legal Support to attend at Balmain Local Court on 15 December 2003 in the matter of NTT Australia Pty Limited -v- Bonouvrie. (c) In a purchase by L Bahagir the Lawyer exchanged contracts on 22 December 2003. The Receiver was unable to locate the file relating to the conveyance. (d) The Lawyer attended on Mr W F Van Bakel on 15 December 2003 to take instructions in relation to the preparation of a Power of Attorney and a Will. Mr Bakel attended on the Lawyer on 19 December 2003 and executed his Will, and handed the Lawyer a cheque made out to cash in the sum of $75.00 in payment of the Lawyer's fees. The Receiver was unable to locate any documents relating to the will or the power of attorney. (e)The Lawyer attended on exchange of Contracts on the purchase of a property by A P McIlwain and W F Van Bakel at Parkes. The Receiver was unable to locate any documents relating to the contract. F. David Alan Rose 1. Lawyer acted for Mr Rose, who was resident in the United Kingdom, on the sale of 4/15 Samora Avenue, Cremorne for a consideration of $390,000.00. 2. The contract nominated the Lawyer as the stake-holder. 3. On 29 June 2001 the sum of $39,000.00 was paid as deposit on exchange and was deposited to the Westpac Account on 30 July 2001. 4. Of the sale proceeds, $55,000 was payable to a Mr David Jenrick. 5. Mr Rose had instructed the Lawyer to deposit his share of the proceeds of the sale into his bank account. 6. On 31 July 2001 $5,000.00 was paid to David Jenrick from the Westpac Account. 7. Settlement occurred on 10 August 2001. 8. On settlement the Lawyer received a cheque in the sum of $16,000.00 drawn in favour of David Jenrick and a cheque in the sum of $12,503.25 drawn in favour of Mr Rose. 9. On 14 August 2001 $32,572.50 was drawn from the Westpac Account to pay the balance due to Mr Jenrick. This figure taking into account various costs payable to the Lawyer. 6 Pursuant to the provisions of section 564 Legal Profession Act 2004 that document was signed by the applicant, the respondent and the Legal Services Commissioner. Section 564 provides: 564 Consent orders (1) The Tribunal may, with the consent of the Australian legal practitioner concerned contained in a written instrument, make orders under this Part without conducting or completing a hearing in relation to the complaint. (2) Consent may be given before or after the proceedings were commenced in the Tribunal with respect to the complaint. … (4) This section does not apply to consent given by the practitioner unless the practitioner, the Commissioner and (if applicable) the relevant Council have agreed on the terms of an instrument of consent. (5) Without limiting what may be included in the instrument of consent, the instrument is to contain an agreed statement of facts (including as to the grounds of complaint) and may contain undertakings on the part of the practitioner. (6) The instrument of consent must be filed with the Tribunal. … (9) The Tribunal is to be constituted in the same way as for the conduct of a hearing into the complaint. (10) In deciding whether to make orders under this Part pursuant to an instrument of consent, the Tribunal may make such inquiries of the parties as it thinks fit and may, despite any such consent, conduct or complete a hearing in relation to the complaint if it considers it to be in the public interest to do so. 7 The respondent consented to an order that he pay the costs of the applicant. Section 566 Legal Profession Act 2004 provides: 566 Costs (1) The Tribunal must make orders requiring an Australian legal practitioner whom it has found to have engaged in unsatisfactory professional conduct or professional misconduct to pay costs (including costs of the Commissioner, a Council and the complainant), unless the Tribunal is satisfied that exceptional circumstances exist. 8 The Tribunal, having perused the material relied upon by the applicant, was satisfied that it was appropriate to make orders in accordance with the Instrument of Consent. Accordingly, on 18 April 2006, the Tribunal made the following orders: 1. That the name of the Respondent be removed from the Roll of local lawyers; 2. That the Respondent pay the costs of the Society as agreed or assessed. The Tribunal reserved its reasons for making those orders. 9 The Tribunal is satisfied to the requisite standard enunciated in Briginshaw v. Briginshaw (1938) 60 C.L.R. 336 that in the matters of Bonduel Pty.Limited; Tisdale; Scruby; Nigem; & Rose, the respondent wilfully contravened the provisions of section 61 Legal Profession Act 1987. The Tribunal is satisfied that the Respondent's conduct constitutes Professional Misconduct. 10 The Tribunal is similarly satisfied that in the same matters, the Respondent wilfully breached the provisions of section 62 of the Legal Profession Act 1987. That conduct constitutes Professional Misconduct. 11 The Tribunal is satisfied that in each of the matters relied upon in ground 3 of the Agreed Facts, the Respondent misappropriated trust funds of those clients. The Tribunal is satisfied that conduct constitutes Professional Misconduct. 12 The Tribunal is satisfied that the conduct of the Respondent in continuing to act as a legal practitioner following the cancellation of his Practising Certificate, constitutes Professional Misconduct. 13 The Tribunal is satisfied that the Respondent untruthfully informed the Receiver that all files were in the office premises. That deception was exacerbated by the Respondent continuing to act in certain matters knowing that his Practising Certificate had been cancelled. The Tribunal is satisfied that the circumstances of the Respondent's untruthful representation to the Receiver constitutes Professional Misconduct. 14 The Tribunal is satisfied that the Respondent failed to pay monies received to third parties in the matters of Scrubby and Nigem. In the circumstances of those matters the Tribunal is satisfied that the Respondent's conduct constitutes Professional Misconduct. 15 The Tribunal orders: (i) The name of John William Kennedy be removed from the Roll of Local Lawyers; (ii) The respondent to pay the costs of the Society as agreed or assessed. 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.