Law Society of New South Wales v Krayem [2004] NSWADT 240

CITATION: Law Society of New South Wales v Krayem [2004] NSWADT 240 DIVISION: Legal Services Division APPLICANT PARTIES: Law Society of New South Wales RESPONDENT Ghaith Krayem FILE NUMBER: 042018 HEARING DATES: 07/09/2004 SUBMISSIONS CLOSED: 09/07/2004 DATE OF DECISION: 10/19/2004

BEFORE: Nader J QC - ADCJ (Deputy President); Durbach A - Judicial Member; Mahon D - Non Judicial Member APPLICATION: Professional Misconduct - alter date of document - Professional Misconduct - breach of s. 61 of the Legal Profession Act - Professional Misconduct - fail to provide accounts - Professional Misconduct - mislead client - Professional Misconduct - prepare false documents - Unsatisfactory Professional Conduct - delay MATTER FOR DECISION: Principal matter LEGISLATION CITED : Legal Profession Act 1987 Legal Profession Regulation 2002 CASES CITED: Mayes and the Legal Practitioners Act [1974] 1 NSWLR 19 APPLICANT REPRESENTATION: D Barton, solicitor RESPONDENT No Appearance ORDERS: 1. The legal practitioner's name be removed from the Roll of Legal Practitioners; 2. The legal practitioner pay the Law Society's costs of and incidental to the proceedings, as agreed or as assessed under Division 6, Part 11 of the Legal Profession Act 1987; 3. A copy of these reasons should be supplied to the Solicitor forthwith; 4. The matter also be re-listed in order to hear Mr Firth's claim.

1 These are proceedings on an Information laid on 23 April 2004 by the Council of the Law Society of New South Wales (the Council) against Ghaith Krayem (the Solicitor). The Council seeks findings of both professional misconduct and unsatisfactory professional conduct. 2 The Information also includes a claim for compensation by Mr Stephen Paul Firth, a Solicitor. That claim will be dealt with after this decision has been published. 3 The Council seeks orders: (i) that the Solicitor's name be removed from the Roll of Legal Practitioners. (ii) that the Solicitor pay the Council's costs of and incidental to the proceedings, as agreed or as assessed under Division 6, party 11 of the Legal Profession Act 1987 (the Act) or on such other basis as the Tribunal may determine. 4 Proceedings on the Information were heard on 7 September 2004. The Solicitor did not appear; he was not represented, nor did he file a pleading admitting facts. As a result, the material allegations in the Information had to be strictly proved. 5 The facts alleged to support the findings sought by the Council are dealt with below in the order in which they occur in the Information. 1 The Solicitor contravened clause 36 of the Legal Profession Regulation (the Regulation) 6 It is alleged that the Solicitor contravened clause 36 of the Legal Profession Regulation 1994 (the Regulation). Clause 36 provides amongst other things: "(5) The solicitor must, at the end of each named month, prepare a statement reconciling the balance of his or her trust bank account with the balance of the related cash-book." 7 In the course of his practice, the Solicitor operated a trust account. On 21 July 1998 he received into his trust account the sum of $2,340, being trust moneys within the meaning of the Act. 8 Between 1 July 1998 and 28 February 1999, the Solicitor prepared bank reconciliations and trial balances for the Trust Account as at: 17 September 1998, 30 September 1998, 30 November 1998 and 28 February 1999. 9 The Solicitor failed to prepare bank reconciliations and trial balances for the Trust Account for the months of July 1998, August 1998, October 1998, December 1998, January 1999, March 1999, April 1999, May 1999, June 1999, and July 1999, in contravention of clause 36 of the Regulation. 10 These failures considered together were a serious departure from the requirements of clause 36 of the Regulation. We regard them as unsatisfactory professional conduct involving a substantial and consistent failure to reach reasonable standards of competence and diligence within the meaning of section 127 of the Act and, therefore, as constituting professional misconduct. If ignorance of the requirement to prepare bank reconciliations and trial balances were a factor in determining whether such failures amounted to professional misconduct, and not mere unsatisfactory professional conduct, the fact that during the period of defaults the Solicitor did what was required on some occasions precludes the possibility of ignorance as a factor. 2.The Solicitor contravened clause 39 of the Regulation 11 It is alleged that the Solicitor contravened clause 39 of the Regulation. Clause 39(1) of the Regulation provided that a solicitor must, within 21 days after the end of each named month, prepare a trial balance statement disclosing each account in his or her trust ledger (including an account for any trust money deposited by the solicitor with the Law Society in compliance with section 64 of the Act), effective as at the end of that month. 12 Between 1 July 1998 and 28 May 1999, the Solicitor prepared monthly ledger trial balance statements for the Trust Account as at: 17 September 1998, 30 September 1998, 30 November 1998 and 28 February 1999. 13 We find that, as alleged, the Solicitor failed to prepare monthly ledger trial balance statements for the Trust Account, within 21 days of the end of each month, or at all, for the months: July 1998, August 1998, October 1998, December 1998, January 1999, March 1999, April 1999, and May 1999, in contravention of clause 39(1) of the Regulation. 14 For the reasons expressed in par 10, above, we find that the failures to comply with clause 39 of the Regulation constituted professional misconduct. 3.The Solicitor wilfully contravened subsection 62(1) of the Act 15 The Council alleges that the Solicitor wilfully contravened section 62(1) of the Act. That subsection is in the following terms: "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) that disclose at all times the true position in relation to money received by the solicitor on behalf of another person." (Note: the quoted sections of the Act and Regulation in these reasons are as they were at the material times) 16 The wilfulness of the contravention is significant because, by subsection 62(4), a wilful contravention of subsection (1), (2) or (3) is professional misconduct. 17 In Re Mayes and the Legal Practitioners Act [1974] 1 NSWLR 19, at p.21, Hardie JA said: "It is well settled law that there can be wilful failure within the meaning of the section without any positive intention to break the law; breaches committed over a period of time can, in the light of the relevant circumstances, be so substantial and reckless and show such complete indifference on the part of the solicitor to his important obligations to his clients and to the public, as to amount to wilful failure". At p.26, Reynolds and Hutley JJA said: "Wilful misconduct can be established by evidence that a person acts with reckless carelessness, not caring what the results of his carelessness may be. "We understand the cases to say that recklessness to such an extent is, as it were, constructively wilful, and of a level of culpability comparable with actual wilfulness. 18 We are satisfied on the evidence that the Solicitor failed to keep accounting records, as alleged, and that the failure was wilful within the meaning of subsection 62(4). The evidence demonstrates complete indifference on the part of the Solicitor of his relevant obligations. He may not have had a "positive intention" to use the words of Hardie JA but his complete indifference to his obligations is "wilful contravention" by virtue of judicial authority. Therefore, we find that the failure amounted to professional misconduct. 4.The Solicitor wilfully contravened subsection 61(2)(a) of the Act 19 This is by implication an allegation of a wilful contravention of subsection 61(1) of the Act which, if established, amounts to professional misconduct by virtue of subsection 61(7). 20 The relevant parts of section 61 are as follows: "61 Money received by solicitor on behalf of another (1) If a solicitor, in the course of practising as a solicitor, receives money on behalf of another person, the solicitor shall: (a) ... (b) ensure that subsection (2) and the regulations are complied with in relation to the money. [Our emphasis] (2) Money received on behalf of another person by a solicitor, in the course of practising as a solicitor: (a) shall, except where the person on whose behalf the money is received otherwise directs, be paid, within the prescribed time, to the credit of a general trust account at a bank in New South Wales and be held in accordance with such regulations as may be in force in relation to trust money, ...." 21 The evidence supports the allegation of the Council that the Solicitor received trust moneys, within the meaning of the Act, on the dates and for the persons named hereunder: 20 Oct 1998 - $200 cash - for Sidaoui 20 Oct 1998 - $2900 cash - for Yalda 2 Feb 1999 - $200 cash - for Halabi 2 Feb 1999 - $902.15 cash - for Merhi 2 Feb 1999 - $200 cash - for Halabi 22 None of these amounts were paid into the Solicitor's Trust Account. The failure to comply with subsection 61(2)(a) involved contravention of subsection 61(1)(b). Being either actually wilful or, at least, wilful as demonstrating a reckless disregard by the Solicitor of his relevant obligations, it was professional misconduct by virtue of subsection 61(7) if for no other reason. 5.The Solicitor wilfully breached section 61(1)(a) of the Act 23 This is an allegation of contravention of section 61(1)(a) of the Act which if proved, by virtue of subsection (7), referred to above, is professional misconduct. The relevant parts of subsection (1) are in the following terms: "61 Money received by solicitor on behalf of another (1) If a solicitor, in the course of practising as a solicitor, receives money on behalf of another person, the solicitor shall: (a) hold the money exclusively for the other person, and ..." 24 On 3 December 1998, the solicitor withdrew from his trust account an amount of $1,920.00 leaving a deficiency in the trust account of $1,920.00. The money was used to pay the Solicitor's office rent. The Solicitor explained the transaction in a letter dated 31 March 1999 to 'Chief Trust Account Inspector of the NSW Law Society' in these words: "The amount of $1,920 is very close to the rental for the office, which at that time was $1926. I recall that about that time I did not have my chequebook on one occasion and needed to withdraw money to pay the rent. I attended the bank and ask them to organise a counter cheque. Because I did not have the chequebook with me the teller looked up the account number on the computer. I suspect that she has placed the wrong account number and rather than withdrawing money from the office account it was withdrawn from the trust account. I have asked the bank to provide a copy of the Withdrawal slip so that I can check the signature and see if the handwriting is recognizable, because on the occasion that I am recollecting the teller filled out the details and I signed the authority. There was approximately $2,300 in the office account at that time." 25 This was a failure to hold trust money in accordance with section 61(1)(a) of the Act. Knowing that he had a trust account as well as a general account in his bank when he asked for a counter cheque, we think it showed negligence with respect to his duty under subsection 61(1)(a) not to have ensured that the cheque was not drawn against his trust account. However, we do not think that it has been established that the failure amounted to a wilful contravention of the subsection in the actual or constructive sense. We would not categorize the failure as necessarily showing a reckless disregard. The evidence does not satisfy us to the Briginshaw standard of reckless disregard as distinct from mere carelessness. There was a quite serious infringement of subsection 61(1)(a), but on the evidence we are unable to say that it amounted to professional misconduct. It was of course unsatisfactory professional conduct as defined by section 127 of the Act which includes conduct (whether consisting of an act or omission) occurring in connection with the practice of law that falls short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent legal practitioner. 6.The Solicitor wilfully contravened section 61(2) of the Act in failing to comply with clause 33 of the Regulation 26 The following table shows amounts of money received on behalf of the clients specified, the date on which the money was received and the date on which it was paid into the Solicitor's trust account. Date Received Amount Received On behalf of Date deposited 20/10/1998 $200.00 Fadi Sidaoui 09/03/1999 20/10/1998 $2,900.00 Ihsan Zuher Yalda 09/03/1999 18/01/1999 $765.00 Joseph Nheme 09/03/1999 18/01/1999 $600.00 Osama Abdulqader 09/03/1999 02/02/1999 $400.00 Maha Halabi 09/03/1999 02/02/1999 $902.15 Hatem Merhi 09/03/1999 03/02/1999 $400.00 F & N Dasouqi 09/03/1999 22/02/1999 $400.00 M & M Chuna 09/03/1999 23/02/1999 $400.00 Elias Nakhle 09/03/1999 25/02/1999 $730.00 Charif Chafei 09/03/1999 26/03/19999 $350.00 Ghassan Aboud 06/04/1999 26/03/1999 $1,000.00 Nabil Milaki 06/04/1999 29/03/1999 $400.00 H & N Ibrahim 06/04/1999 30/03/1999 $400.00 M, W & M Dadoun 06/04/1999 30/03/1999 $350.00 H & N Ibrahim 06/04/1999 30/04/1999 $13,700.00 A K Moralli 10/05/1999