The Council of the Law Society of New South Wales v Smith [2004] NSWADT 225

CITATION: The Council of the Law Society of New South Wales v Smith [2004] NSWADT 225 DIVISION: Legal Services Division APPLICANT PARTIES: The Council of the Law Society of New South Wales RESPONDENT Lea Karen Smith FILE NUMBER: 042022 HEARING DATES: 11/08/2004 SUBMISSIONS CLOSED: 08/11/2004 DATE OF DECISION: 10/07/2004

BEFORE: Fox R - Judicial Member; Cox R - Judicial Member; Dyster B - Non Judicial Member APPLICATION: Professional Misconduct - breach of s. 61 of the Legal Profession Act MATTER FOR DECISION: Principal matter LEGISLATION CITED : Legal Profession Act 1987 CASES CITED: APPLICANT REPRESENTATION: P Boyd, solicitor RESPONDENT A Enright, counsel ORDERS: The solicitor is; (i) publicly reprimanded, and,; (ii) pay the costs of the Law Society (agreed at $3,000.00)

1 The Law Society claims (and the solicitor admits) that the solicitor "wilfully breached Section 61 of the Legal Profession Act". More precisely, the solicitor's failure was to not comply with Section 61 (2) which states in relation to money held on behalf of another person:- "….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." 2 Section 62 (8) renders a wilful failure to comply professional misconduct. 3 Before relating the facts it is appropriate to indicate that there is absolutely no suggestion of any dishonesty in the solicitor's actions. 4 The solicitor acted for a wife in a matrimonial property dispute. Involved (perhaps amongst other things) was a family home on a subdivisible parcel of land. The proceeds of sale of the subdivided lots appear to have been seen as the fund which would allow the wife to establish her separate residence, and the husband to continue in his business. The property was home to the wife and near-adult children of the family 5 The husband was separately represented in the Family Law matter, but, to save lawyer's expense, the solicitor acted for both husband and wife in the subdivision and some of the resulting conveyancing. The sales of the subdivided lots were effected by "off the plan" contracts dated 20 May 1999 and 29 June 1999, and were settled on 24 January 2000 and 4 February 2000. After discharge of the mortgages, payment of surveyor's subdivision fees, Council contributions etc, there remained as clear proceeds of the sales, two separate bank cheques in the sum of $118,393.00 and $51,466.22, payable to the husband and wife. A subsequent cheque in the sum of $7,900.00, being the balance of deposit, was received from a real estate agent. 6 The matrimonial property dispute had been the subject of the usual negotiations, and we accept that the difference between the parties was not great and that experienced observers would have considered that the matter would settle. However, no settlement had been reached, and, instead of paying the conveyancing settlement cheques into her trust account, the solicitor, with the full approval of the husband's solicitor (and so, lawfully) simply retained the cheques "pinned to the file". 7 The wife had found her new residence early in November of 1999, and the solicitor sought to make completion of that purchase conditional on settlement of the Family Law proceedings. The vendor refused, but did eventually agree to completion being conditional on the settlement of the wife's sale "within 28 days of the date of contract". That contract was effected on 22 December 1999 on a $500.00 deposit. 8 The contract for the sale of the former matrimonial home provided that the purchaser could take occupation prior to completion, and the purchaser did so on 8 December 1999. The wife had moved into temporary alternative accommodation, but by late January 2000 had arranged to take occupation of the new home, before completion. It was a condition of this occupation agreement that the deposit be increased from the $500.00 already paid to the full 10% and released to the vendor. The wife did not have the funds and we accept that she said to the solicitor words to the effect:- "You will have to help me". The solicitor did so by drawing $13,750.00 from the solicitor's own funds and paying these to the vendor on 3 February 2000. 9 All these things should be considered in light of the fact that there was clearly sufficient in the matrimonial assets pool to cover the wife's commitment and that, at a 14 January 2000 conference in the Family Court, the parties had been only 5% apart. The last offer had apparently been made by the solicitor on behalf of the wife, and she was awaiting a counter offer from the husband's solicitor. We also note that the 15 May 2000 conciliation conference resulted in a settlement which allocated to the wife all of the funds now in issue. 10 The completion date for the wife's purchase contract had been extended, but, on 22 February 2000, an apparently valid notice to complete was served, calling for completion on 10 March 2000. 11 The solicitor's evidence was that she did not believe that the vendor would extend the time for completion, but we were given no reason why the solicitor drew this conclusion. The solicitor's further evidence is that during the day of 10 March 2000:- "faced with the Notice to Complete expiring on 10 March I banked those three cheques to my trust account and posted those amounts to the trust account ledger for the wife" and proceeded to draw settlement cheques from that ledger to, later on that same day, effected completion of the wife's purchase conveyance, and on the following working day drew cheques to pay stamp duty and other minor disbursements to complete the conveyance. There were funds left over in trust sufficient to repay the solicitor the $13,700.50 which she had personally paid out (and whatever might have been the cost of the conveyance) but she did not do so. 12 We note the evidence of Anne Kinnear, an experienced Newcastle Family Law solicitor who was familiar with the wife's circumstances. She deposed that the various requirements for an urgent application to the Newcastle Family Court to seek to have the funds released were such that they would not have placed the matter before an appropriate Judicial Officer within the available time. However, we are offered no evidence of any steps taken by the solicitor after 3 February 2000 and before 10 March 2000, either by way of approach to another Court, or to the husband's solicitor to authorise the release, or to seek to delay the due date of the notice to complete for three (3) working days from 10 March 2000 to 15 March 2000, that being the day after the next scheduled Family Court conciliation conference. We draw the conclusion from the absence of any such evidence, and from the medical evidence (to which we refer later), that the solicitor took no such steps. 13 It is clear that the solicitor did fax a note to the husband's solicitor canvassing a number of outstanding issues between the husband and the wife and stating the solicitor's intention. There was a word-processing error which lead to the fax being dated "22 February" instead of 10 March 2000, but we are satisfied that this was an innocent error. The fax was sent in the early afternoon of 10 March 2000, less than an hour before the actual settlement, too late to be anything other than notice to the husband's solicitor of the events which were happening. Even if intended as a request for permission, it was too late for that. 14 The solicitor's evidence was that on 24 February 2000 "I consulted my general practitioner Dr Justin Smith at Raymond Terrace because of symptoms of extreme tiredness, difficulty with personal organisation and a tendency to burst into tears for no reason". The doctor prescribed anti-depressants and counselling, but after the events of 10 March 2000 referred the solicitor to Dr Antonio Aguado, consultant physiatrist who, despite subsequent retirement, is best regarded as still treating the solicitor to this day. Dr Aguado's report was before us. It is clear that in early March 2000 the solicitor was in the first stage of diagnosis and treatment a psychiatric condition described as "atypical depression". Treatment was by way of medication and counselling, which continues, in a limited form, to this day, and has been successful. We accept Dr Aguado's observation. "Mood disorders affect the judgment and I am sure that it was her condition of 'atypical depression' that resulted in feeling of excessive responsibility for the client and identifying with her helplessness". 15 The Tribunal is satisfied that the conditions and personal circumstances which led the solicitor to take the action now complained of have been substantially resolved, and that there is no likelihood of a repetition of the behaviour which appears to best described as an aberration. 16 The solicitor voluntarily disclosed her actions by telephone call to the Law Society, shortly after a strident complaint by the husband's solicitor on 14 March 2000, at the failed family law conciliation conference. She has had the clear prospect of these proceedings hanging over her head for more than four years. 17 The Law Society, properly, sought Orders for reprimand, fine and costs. Despite that, it is clear, our statutory task being of a protective nature, that the Tribunal is not limited in the orders which it might make different to those sought by the informant, and there was always a possibility that the Tribunal would take a different and more stringent view, and so impose a harsher penalty. 18 We accept that the mood disorder explained the solicitor's inaction, and possibly excused it, but we cannot accept that it excused a positive action by the solicitor which struck at the very heart of one of the most basic tenets of the rules of the profession – trust monies are only to be dealt with in accordance with the instructions of the client or clients on whose behalf they are held. 19 At the time of the hearing it appeared that the appropriate range of orders which the Tribunal might make fell within the range sought by the Law Society – fine, reprimand and costs. The solicitor had a clear prior record, and placed relevant, excellent and impressive references before us. The solicitor is obviously competent and well regarded by those in a position to know and assess. Further, we cannot lose sight of the fact that these proceedings have been pending, and so causing the solicitor concern, for the last four years, nor can we lose sight of the fact that, virtually from day one, she acknowledged the impropriety of her actions. 20 We accept the solicitor's remorse, and note her description of her actions, in March of 2000, in her words "I have been a b….. fool", a description which she, in oral evidence before us, acknowledged still to be accurate for her actions. 21 Subsequent to the hearing, Section 171 of the Legal Profession Act was amended, with immediate effect, and so our choice of orders was expanded to include a private reprimand (without the resultant public reporting) and we considered the application of that particular leniency. However, we have earlier in these reasons adverted to the fact that there has been a breach of a very fundamental trust money tenet, and consider that publicity is appropriate, but financial disincentive over and above a costs order is not. 22 The solicitor is publicly reprimanded, and is to pay the costs of the Law Society which we note have been agreed at $3,000.00.