CITATION: Law Society of New South Wales v Hill [2005] NSWADT 31 DIVISION: Legal Services Division APPLICANT PARTIES: Council of the Law Society of New South Wales RESPONDENT John Frederick William Hill FILE NUMBER: 042023 HEARING DATES: 24/01/2005 SUBMISSIONS CLOSED: 01/24/2005 DATE OF DECISION: 02/18/2005 BEFORE: O'Connor K - DCJ (President); Durbach A - Judicial Member; Dyster B - 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 - Professional Misconduct - mislead Court/Tribunal - Professional Misconduct - swear false affidavit - Professional Misconduct - transfer money without authority MATTER FOR DECISION: Principal matter LEGISLATION CITED : Legal Profession Act 1987 Barwick v Law Society of New South Wales (No. 2) [2003] NSWADTAP 4 Barwick v The Council of the Law Society of New South Wales [2004] NSWCA 32 Dupal v Law Society of New South Wales (unreported, NSWCA, 26 April 1990) In re a Practitioner [1941] SASR 48 CASES CITED: In re a Practitioner (1982) 30 SASR 27 Law Society of New South Wales v Bannister (1993) 4 LPDR 24 (CA) Law Society of New South Wales v Foreman (1991) 24 NSWLR 238 Law Society of New South Wales v Jones (unreported, NSWCA, 27 July 1978) Re Nelson [1991] ACTSC 111 Nelson v The Law Society of the Australian Capital Territory, ACTSC, 5 June 1992 (unreported) APPLICANT REPRESENTATION: L Pierotti, solicitor RESPONDENT In person ORDERS: ORDERS MADE 24/01/2005; 1. That the name of John Frederick William Hill be removed from the roll of Legal Practitioners.; 2. That John Frederick William Hill pay the Council's costs of and incidental to these proceedings to be agreed or, in default of agreement, as assessed. ORAL REASONS (Revised) REASONS FOR DECISION [Note. The Tribunal delivered its reasons for decision orally at the conclusion of the hearing. There has been a request for written reasons. The main addition to the oral reasons is to be found at paras [3]-[15]. The remaining text substantially replicates the oral reasons.] 1 The Tribunal has before it an Information laid by the Council of the Law Society under the Legal Profession Act 1987 (the Act) against Mr John Frederick William Hill, a solicitor, charging him with professional misconduct in various respects. The twelve grounds of complaint are set out in the Information. Mr Hill's practising certificate was cancelled in May 2002, so since that time he has not practised. 2 Mr Hill has appeared here today in person. Mr Pierotti has appeared on behalf of the Law Society. 3 The matters addressed by the Information concern essentially five events of misappropriation affecting three estates, all events occurring in 1999. Then there are - what might be described as - further ancillary matters including one that occurred in 2002. 4 The material text of the Information is as follows: 'The Council of the Law Society of New South Wales informs the Tribunal that as a result of the Council's investigation of complaints made under Part 10 of the Legal Profession Act 1987 against JOHN FREDERICK WILLIAM HILL, a Legal Practitioner within the meaning of S.128 of the Act, the Council claims that JOHN FREDERICK WILLIAM HILL, while practising as a Solicitor, was guilty of professional misconduct. Grounds of Complaint: 1. Wilful breach of Section 61 of the Legal Profession Act, 1987 arising from the withdrawal of $18,250.00 from the funds of Estate Late LE Dunlop and $10,000.00 from trust moneys held for the Estate of the Late Karel Kalman Florsheim. 2. Misappropriation of $18,250.00 from the funds of Estate Late LE Dunlop and $10,000.00 of the trust moneys held for the Estate of the Late Karel Kalman Florsheim. 3. Wilful breach of Section 62 of the Legal Profession Act, 1987 deriving from the drawing of a cheque for the sum of $18,250.00 described as "Malcolm's Library" and the drawing of a cheque for $10,000.00 described as "Option Fee for Purchase at Auction." 4. Swearing an affidavit containing a statement known to the solicitor to be false. 5. Misleading the Court. 6. Procuring a person to swear an affidavit containing a statement known to the solicitor to be false. 7. Procuring a person to mislead the Court. 8. Wrongfully instructing a broker to sell 1,000 shares in the Commonwealth Bank, the property of Doris Wallace. 9. Misappropriation of the proceeds of that sale. 10 Wilful breach of Section 61 of the Legal Profession Act, 1987 (derived from the Land Tax matter the subject of Miss Sayer's report dated 5 August 2003). 11. Wilful breach of Section 62 of the Legal Profession Act, 1987 (derived from the Land Tax matter the subject of Miss Sayer's report dated 5 August 2003). 12. Misappropriation (derived from the Land Tax matter the subject of Miss Sayer's report dated 5 August 2003).' 5 The material upon which the Law Society relies is set out principally in Exhibit B, which includes, in particular, the affidavit of Jean Sayer, Chartered Accountant, who investigated Mr Hill's trust property after being appointed Receiver by order of the Supreme Court made 26 February 2002. There was a further affidavit filed today by the Law Society, which has been marked as Exhibit D, seeking to clarify one of the points made by Mr Hill in his reply. 6 The events that gave rise to the 12 allegations are set out, in summary, in Particulars A, B and C annexed to the Information. 7 Particular A refers to the Estate of the late Lois Ellen Dunlop. Mr Hill was a co-executor of this estate, the subject of probate on 23 February 1999. On 3 September 1999 Mr Hill drew a cheque from the trust account relating to the estate payable to Westpac Banking Corporation in the sum of $18,250 described as 'Malcolm's Library'. One of the beneficiaries of the estate was Mrs Dunlop's son Malcolm. The money was in fact used to purchase a bank cheque drawn to American Express in payment of Mr Hill's personal American Express account. The money was reimbursed to the Account by Mr Hill on 25 February 2002. 8 Particular B refers to the estate of the late Karel Kalman Florsheim. In this instance Mr Hill was sole executor of the estate, the subject of probate on 15 November 1989. The ultimate beneficiary was Gal Florsheim, the son of a niece of the deceased. He was entitled to the residue of the estate upon attaining the age of 18 years, which occurred on 10 August 2003. Until then his mother's claims (and after her death in 2001, his guardian's claims) in respect of his maintenance were dealt with by Mr Hill on request from their accountant, Mr Polak. 9 On 3 March 1998 Mr Hill withdrew the sum of $16,600 from the trust account relating to the estate, and the estate accounting records described the monies as being used to pay land tax. The estate mainly consisted of five strata units. The monies were not used to pay any land tax liability of the estate. The monies were payment to the Office of State Revenue, but in respect of stamp duty. There is no further clarification of what that stamp duty related to. 10 Mr Hill occupied one of the units from 17 April to 2 May 1999. The shortfall of rent not paid by him, less the rates and levies paid by him, amounted to $16,057.88. Mr Hill reimbursed this sum to the estate on 19 September 2000. Mr Hill charged commission for the years to 1993 totalling $24,327.00. The total amount charged for the subsequent period to 30 December 1999 was $19,890.62. In calculating the commission for the 6 month period to 30 December 1999, Mr Hill's then law partner proceeded on the basis that rent had been paid by Mr Hill in respect of the unit he had occupied when it had not been. 11 In February 1999 Mr Hill drew the sum of $10,000 from the bank account of the estate by cheque payable to Westpac describing it as 'Option Fee for Purchase at Auction'. No such liability had been incurred in relation to the estate. Mr Hill has admitted that he used the cheque for his own purposes. Mr Hill reimbursed this amount on 25 February 2002. 12 On several occasions from 7 November 2001, Mr Hill failed to respond to requests from Mr Polak for the accounts covering the years ending 30 June 2000 and 30 June 2001. 13 Particular C concerns Mr Hill's dealings with a client, Mrs Doris Margaret Wallace, who died on 3 February 2002. She had entered a nursing home on 18 March 1999. At that time Mr Hill was responsible for handling the affairs of Mrs Wallace when so instructed by her niece Mrs Jennifer Mathias. On or about September 1999, without instruction, Mr Hill arranged to sell 1000 shares from among 1530 shares held by Mrs Wallace in the Commonwealth Bank. The proceeds of sale were banked to Mr Hill's bank account. The 1000 shares were restored by a purchase made by the solicitor on 6 January 2000. There are other matters recited in Particular C referring to other conduct by Mr Hill including: registering on 25 January 1999 a lapsed power of attorney, and subsequent to Mrs Wallace's death in 2002 without justification renouncing the probate of her estate. 14 Mr Hill's Reply is Exhibit C in the proceedings. The material text of the Reply is as follows: 'Allegations 1, 2 and 3 are admitted. Each of the sums of $18,250.00 and $10,000.00 have been repaid. Allegations 4, 5, 6 and 7 are admitted. Allegations 8 and 9 are admitted. The proceeds of sale of the 1,000 Commonwealth Bank shares has been repaid to Doris Wallace. Allegations 10, 11 and 12 are admitted. By agreement with the beneficiary through his independent legal advisor this matter was settled. As to the whole of the information I say: (1) Prior to the complaints contained in the information I carried on practice as a Solicitor with no adverse complaints against me since my admission on 13 February 1970. At the time I committed the acts the subject of the Information I was suffering from "abreaction" "adjustment disorder with mixed anxiety and depression mood" and further diagnosed as "a major depression". (2) I have not denied my wrongful behaviour. (3) I have fully reimbursed and/or satisfied all parties affected by my wrongful misappropriation. (4) I have been diagnosed as being "highly unlikely to re-offend". (5) Last but not least I have complete and unconditional remorse for my actions.' 15 Mr Pierotti noted that the Law Society's evidence was in accord with Mr Hill's statement in the Reply concerning allegations 1, 2 and 3, that the money had been repaid. As to allegation 9, Mr Pierotti entered a reservation. The Law Society did not regard as entirely accurate the statement that the 'proceeds of sale' of the shares had been repaid to Mrs Wallace. Its evidence is that the shares were repurchased. Mr Hill did not dispute this point. 16 In the Reply to allegations 10, 11 and 12, Mr Hill said that 'By agreement with the beneficiary through his independent legal adviser this matter was settled' (the diversion of the sum of $16,600). Mr Pierotti noted that at its highest the inference is that either the money was paid back or some other recompense was made. With leave, Mr Pierotti tendered an additional affidavit (of Anne Maree Siddons, Manager, Fidelity Fund of the Law Society). Ms Siddons explained that on 31 October 2003 the Fund received a claim from Gal Florsheim by the donee of his Power of Attorney, Peter Michael Bowen, in respect of Mr Hill. This claim was accepted by decision of 15 July 2004. 17 Mr Hill did not dispute the affidavit, but said that he had genuinely believed that the matter had been settled, the amount that he had misappropriated ($16,600) being treated as acquitting Mr Hill's claim for commission in respect of his administration of the Florsheim estate, a large one. He said that at no time had he been informed of a claim against the trust fund in respect of the $16,600. 18 Apart from the Reply - as at the commencement of the hearing today - Mr Hill had not put on any additional material. After some discussion and taking note of an objection from the Law Society, the Tribunal permitted Mr Hill to file today further material, being medical and psychological reports relating to the treatment that he has received in recent years. This material is found in Exhibit E. 19 We have had some regard, I should indicate, to the contents of Exhibit E but have taken note of the point that Mr Pierotti made that one of those reports post-dates the laying of the Information before the Tribunal. We acknowledge that we should exercise care in the weight we give to these documents given that the authors of the reports have not been made available for cross-examination and the Law Society did not have an opportunity to form a view as to whether it would request them for cross-examination ahead of today. 20 So that is the material that is before the Tribunal. 21 Mr Hill has fully admitted his behaviour and the Law Society has indicated that Mr Hill has been totally cooperative in his dealings with the Law Society in connection with their inquiries, though it was accepted by Mr Hill that in at least one instance that cooperation followed the allegation of misconduct being raised with him (the misappropriation of $16,600 from the Florsheim estate). He had not volunteered the information after making full disclosure in relation to earlier matters raised with him. His explanation for that omission was that he had no recollection of the event but once it was brought to his attention he responded fully. 22 The Law Society seeks an order of removal of Mr Hill's name from the roll of practitioners. Mr Hill's position is that an order short of removal of his name from the roll would be appropriate in the circumstances. 23 Mr Hill did draw our attention to one case, namely Nelson v The Law Society of the Australian Capital Territory, 5 June 1992 (unreported) where the ACT Supreme Court hearing an appeal from a decision of the Council of the Law Society permitted a disqualified practitioner to be employed as a law clerk in a practice - which we understand from the contents of the decision to be the practice of that person's wife - subject to certain conditions. 24 The text that Mr Hill provided appears not to be a complete text. Although it has got a substantial amount of material in it, it is not quite clear how, having made the original findings that were made, the Supreme Court reached the conclusion that it did. Nonetheless, on the limited material that we have, it appears to be a case where there was one finding of misappropriation but as to that occurrence the client appeared unconcerned and in fact agreed to a settlement which involved reimbursement of 50 per cent of the amount misappropriated. So it is a very odd case and is not, we think, to be compared with usual cases of misappropriation of funds. [Since making this statement we have read the full report of an earlier decision, Re Nelson [1991] ACTSC 111 (12 December 1991). It was at that hearing that the solicitor was struck off, with the Court expressing the view that he might be allowed to work as a law clerk during the period of three years that it considered he should be removed from practice. The Law Society subsequently decided not to permit him to work as a law clerk, and the decision of June 1992 is an appeal from that decision.] 25 The question for the Tribunal today is whether, given the seriousness of the misconduct alleged, there is sufficient compensating evidence or material to suggest that the Tribunal could safely reach the conclusion that Mr Hill remains fit to continue in practice. All misappropriations are matters of the greatest seriousness in terms of the trust which the community reposes in legal practitioners but even in that regard there must be degrees of gravity of misappropriation. This case is intrinsically serious but is not at the extreme end of the cases that the Tribunal has encountered. Nonetheless, it would be a very unusual decision for the Tribunal to take not to make the order that is usually made in these cases – removal of the name of the practitioner from the roll. 26 Mr Pierotti in his submissions referred to a number of well-known statements to support his contention that the normal consequence of the misuse of trust funds by a solicitor is removal of the solicitor's name from the roll, and that Mr Hill's name should be removed from the roll in this case: Law Society of New South Wales v Bannister (1993) 4 LPDR 24 (NSWCA); Law Society of New South Wales v Foreman (1991) 24 NSWLR 238; Dupal v Law Society of New South Wales (unreported, NSWCA, 26 April 1990); Law Society of New South Wales v Jones (unreported, NSWCA, 27 July 1978). 27 The matter of a practitioner misusing his trust account was considered by the Appeal Panel in Barwick v Law Society of New South Wales (No. 2) [2003] NSWADTAP 4. The Panel said at [200]-[202]: '200. … we emphasise the numerous serious transgressions admitted started with the taking of trust moneys without authority and in an irregular way (to put it at its best light). It is well accepted that the misuse of trust account funds is a matter that will ordinarily call for striking off. 201. The trust account is 'sacred': 'trust accounts should be sacred, so that moneys paid into the account should only be paid out to the persons to whom the money belonged, or as directed': In re a Practitioner [1941] SASR 48 at 51. 202. It is no reply that the practitioner intended to pay the money back, and did so. Conduct of this kind remains 'an affront to the sanctity of a practitioner's trust account': In re a Practitioner (1982) 30 SASR 27 at 31 per King CJ. King CJ went on to say at 31, responding to the circumstances of that case (short term holding of client funds before payment into the trust account): 'The public can feel confidence in legal practitioners and their handling of their money only if they know that there is involved no element of judgment on the part of the practitioner, and their money must remain in his Trust Account until it is disbursed in accordance with their direction; because no matter how good the intentions of a practitioner might be, no matter how confident he might be that the money can be made good, whenever a client's money is deliberately used for a purpose other than the purpose for which the client entrusts it to the practitioner, there is an act of dishonesty on the part of the practitioner and one which exposes the client to some risk as to his money. There are two aspects of such misuse of trust moneys held for clients (1) the clients are exposed to some risk, great or small, depending upon the situation, as to their money, and (2) there is a dishonest misuse by the practitioner of money which does not belong to him for his own purposes and, of course, free of interest.' To similar effect, see Dupal v Law Society of New South Wales (unreptd, [NSWCA], 26 April 1990) per Handley JA at 23: 'Sympathy for [the solicitor] and for the tragedy that he has brought on himself and his family by his inability to live up to the high standards which this Court and the profession demand of solicitors can not be allowed to deflect this Court from doing its duty': cited with approval by Sheller JA in Law Society of New South Wales v Bannister (1993) 4 LPDR 24 (CA) at 30.' 28 These paragraphs were quoted in full by Ipp JA in Barwick v The Council of the Law Society of New South Wales [2004] NSWCA 32 at [117]. Ipp JA went on to say at [118]: "In my opinion the views expressed by the Appeal Panel [in those passages] are entirely correct. The trust and confidence which clients place in their solicitors are a basic element of the administration of justice in this country. Violations by legal practitioners of trust accounts betray that trust and harm public confidence in the legal system. This explains the sacrosanct nature of trust accounts and the acute concern that courts have when practitioners in breach of their fiduciary obligations misuse trust monies for their own benefit". 29 The Tribunal has reviewed during the short recess the material that Mr Hill put forward, especially the material in Exhibit E and the two older medical reports (those that pre-date the Information and were given to the Law Society during its investigation). We have also reviewed the personal history that is contained in the Law Society's affidavit and to which Mr Hill referred. 30 It is clear that Mr Hill has had a long and distinguished history of service to the community going well beyond his work as a lawyer and for that he is to be commended; and that even in recent times with all the difficulties that have surrounded him, he has gone on doing quite laudable voluntary work. Similarly, his cooperation with the Law Society's processes and his preparedness to admit his conduct and to give detailed assistance to the Law Society is a matter for which he is to be commended. 31 We see many cases in the Tribunal where practitioners affected by allegations of the kind with which Mr Hill has been faced have taken every technical and other objection to the proceedings against them when there is very little to be said as to the merits of the situation. The facts have often been overwhelmingly against those practitioners. Mr Hill has not responded in that way to these proceedings and some acknowledgement of that obviously must be afforded to him. 32 We have also seen the material, which we accept (and the Law Society, as Mr Hill asserts, would have had in its possession for some time), that goes to the end of Mr Hill's first marriage and then the difficulties that ensued, including the failed second marriage. We appreciate that pressures and difficulties may have arisen that caused Mr Hill to have the gross lapse of standards that occurred during that period. Nonetheless the Tribunal's view is that there is insufficient material before us at this point to form any view other than that Mr Hill is unfit to continue in practice as a solicitor in New South Wales. 33 Therefore, in the Tribunal's view there is only one order open to it and that is the order which the Law Society seeks that Mr Hill's name be removed from the roll of practitioners. 34 Having said that, we do not think this is the worst case of its kind. There are some aspects of this case which it seems to us ought not preclude the possibility that at some time in the future Mr Hill might be able either to be approved for employment in a law office under the provisions of 48K of the Act or to be re-admitted to practice. 35 It is the case that Mr Hill has not practised now for two and a half years. The effect of the order today is that he can no longer practise in the future. But we have heard what Mr Hill has said about his desire to re-enter a law office environment and it may be that this is a case where that course could properly be contemplated by the Law Society in due course. 36 This matter depends very much on the Law Society, or ultimately the Tribunal, being satisfied that Mr Hill has reached a state of emotional and mental health sufficient to permit re-employment under supervision; and that, obviously there are no other matters that come to attention or other factors that arise which might stand in the way of some limited favourable exercise of discretion. 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.