CITATION: Law Society of New South Wales -v- Paton [2002] NSWADT 282 DIVISION: Legal Services Division APPLICANT PARTIES: Council of the Law Society of New South Wales RESPONDENT Debbie Jane Paton FILE NUMBER: 012031; 022014 HEARING DATES: 11/11/2002 SUBMISSIONS CLOSED: 11/11/2002 DATE OF DECISION: 12/30/2002 BEFORE: Molloy GB - Judicial Member; Mattila J - Judicial Member; Kirkby E - 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 client MATTER FOR DECISION: Principal matter LEGISLATION CITED : Legal Profession Act 1987 CASES CITED: Allinson v. General Council of Medical Education and Registration [1894] 1 QB750 APPLICANT REPRESENTATION: P R Boyd, solicitor RESPONDENT In person ORDERS: 1. The name of Debbie Jane Paton be removed from the Roll of legal practitioners; 2. The practitioner pay the costs of the Law Society of and incidental to these proceedings as agreed or as assessed; 3. Costs may be assessed under the Legal Profession Act 1987; 4. Orders 2 and 3 above will be final unless the practitioner applies to this Tribunal for an order vacating Orders 2 and 3 above and files Written Submissions in support of such an application and in support of the Order for costs that she would seek in lieu, such application supported by those Written Submissions both to be filed with the Tribunal within twenty-one (21) days of the date of these Orders; 5. The practitioner is ordered to comply with the Section 152 Notice dated 5 October 2001 and served upon her personally on 16 October 2001, within twenty-one (21) days of the date of these Orders; 6. The practitioner be fined $500.00 for her failure, without reasonable excuse, to comply with the Council of the Law Society of New South Wales requirement under Section 152(1) of the Legal Profession Act, 1987. The Law Society of NSW ("The Law Society") has by Information filed 12 November 2001 made certain allegations alleging serious professional misconduct and also unsatisfactory professional conduct against a Debbie Jane Paton (the "practitioner"). 1 The practitioner was admitted to practice on 30 June 1989 as a solicitor and practised as a sole practitioner from 4 November 1994 until 30 June 1995. She was then an employed solicitor until 28 July 1998 since when she has practised as a sole practitioner under the firm name "Paton Lawyers". It is important to make those observations early in this Judgment simply because it throws into stark relief the conduct of the practitioner. 2 The hearing of the Information has been postponed on a number of previous occasions. The practitioner has been represented by various lawyers, all of whom were at pains to point out their respective limited retainers, effectively in each case to seek an adjournment. On each occasion the Tribunal was minded, in the interests of fairness and justice, to grant to the practitioner the various adjournments sought but always subject to specific terms. It is not unfair to point out that on all occasions the practitioner has not complied with the terms of the granted adjournments and on the last occasion indicated that she would not contest the allegations but rather would seek to put before the Tribunal exculpatory and/or character evidence. There are two filed Informations. Matter 012031 deals with the primary allegations of alleged breaches of Sections 61 and 62, Legal Profession Act, and associated matters, and matter 022014 deals with an alleged breach of Section 152. 3 Both matters come before us on 11 November 2002, the practitioner representing herself. The filed evidence for the practitioner deals with exculpatory and character material and fails to traverse, or even comment upon, the factual material alleged against her. In oral evidence the practitioner conceded the facts alleged and her wrongdoing. Consequently, the Tribunal has before it the unchallenged evidence led by the Law Society. Before embarking upon a short analysis of that evidence it is important to recognise that although the Investigator's Report was tendered it was admitted into evidence only in relation of those parts of the Report which pertained to the matters alleged. 4 Ms Jean Sayer was appointed by the Law Society Council on 30 June 1999 Investigator into the affairs of the practitioner pursuant to Legal Profession Act 1987, Section 55. Pursuant to her appointment she provided to the Law Society a detailed Report dated 9 December 1999 and the relevant portions of that Report, duly sworn and admitted into evidence, are before us, together with numerous annexures being documentation obtained by Ms Sayer in the course of her investigation. 5 The Tribunal now proposes to deal shortly with the various allegations made against the practitioner. Watts Watt Pty Limited: 6 The practitioner acted for this company on the purchase of a property at Potts Point. Prior to completion she requested from the company certain funds in order to settle the purchase. She did this by facsimile message 6 May 1999 in which she sought the sum of $125,688.29 for the following conveyancing purposes: Westpac $85,377.75 Office of State Revenue $34,180.91 South Sydney Council $248.31 Owners Strata Plan $3,338.30 Paton Lawyers $1,800.00 Property Enquiry Services $ 743.00 $125,688.20 In her facsimile she asked the client to "transfer funds today to Paton Lawyers ..." at a nominated bank account. At the outset it is important to understand that the practitioner did not operate a trust account. At various times she kept various accounts but at no time did she ever keep a trust account. She must have been aware, having regard to her relatively long period of time in legal practice, that the Legal Profession Act Section 61(1) requires a solicitor who, in the course of practising as a solicitor in NSW, receives money on behalf of another person, must pay that money into a general trust account in NSW. To pay trust moneys (ie moneys received on behalf of another person) into an account which is not a trust account is an obvious breach of Section 61. Suffice it to say that the moneys received from the client in accordance with the practitioner's requests were not paid into the practitioner's trust account, rather into her general or office account. That in itself is a clear breach of Section 61(1), it was clearly wilful and the Tribunal has no difficulty in finding the practitioner guilty of professional misconduct in that respect. 7 On completion, the practitioner drew a general account cheque in favour of the outgoing mortgagee. Why it was that the outgoing mortgagee was prepared to accept a general account cheque was never explained. The cheque was drawn by the practitioner on 8 June and completion took place on 9 June. The cheque was twice dishonoured upon presentation, namely on 11 June and 15 June 1999 and it was not until 28 June 1999 that the practitioner arranged for a further cheque to be drawn and presented. 8 Section 61(2) requires trust moneys to be held "exclusively for" the person on whose behalf it is held and the practitioner must disburse the moneys in accordance with the directions of "that person". It is plain from a consideration of the bank account records (Sayer Affidavit pages 50-54) that at no time after 8 June 1999 did the practitioner have in her general or office account sufficient moneys to pay the $85,926.07 cheque payable to the outgoing mortgagee until 24 June 1999. So, it must follow, that not only were the trust moneys (and they were trust moneys) not held by the practitioner exclusively for her client but in addition she used the trust moneys for purposes other than for the benefit of the client and not in accordance with the directions of the client. The bank account records clearly show the misuse of trust moneys for purposes other than the purposes of the client. The Sayer Report also demonstrates use of the moneys for the practitioner's own purposes. 9 There has been a clear and wilful breach of Section 61(2) and, although it was not pleaded as such, it would appear clear that there was in fact a misappropriation of part of the client's trust moneys for the purposes of the legal practitioner for the period referred to. 10 In addition, the Law Society pleads that of the moneys paid into trust $3,338.30 was to be paid to the Strata Plan Owners yet the amount actually paid was only $685.22 and the practitioner failed to account to the purchaser/client for the difference of $2,653.08; secondly, of the $743.00 requested and paid by the client for "Property Enquiry Services" only $241.00 was paid to the entity and the practitioner failed to account to the purchaser/client for the difference of $502.00. 11 The evidence is overwhelming. The Tribunal has no difficulty in finding the practitioner has wilfully breached Sections 61(1) and 61(2) and had misappropriated the moneys held by her in trust in the circumstances set out above. 12 Finally, it was alleged against the practitioner that in breach of Section 62 she failed to keep accounting records that disclosed at all times the true position in relation to the moneys received by her on behalf of this client. Indeed, no accounting records at all were kept by this practitioner in relation to this matter and the Tribunal has no difficulty in finding a wilful breach of Section 62. McCosker: 13 The practitioner acted for a Mr & Mrs McCosker in relation to a claim by them against the Campbelltown City Council and other parties. Again, the evidence is overwhelming and the Tribunal is appropriately satisfied. The client paid to the practitioner $1,000.00 on account of a District Court filing fee, she told the client that the Statement of Claim had been filed, she compounded this lie on numerous subsequent occasions as particularised in the Information, she then provided a District Court file number which was false in that it did not relate to the matter neither did it relate to any matter involving the practitioner, she told the client that she had made an appointment to see the Registrar with the client, the client attended the Registrar at the time and date nominated by the practitioner but was informed by the Registrar that no appointment had been arranged and no Claim had been filed. 14 It was also alleged that in relation to the McCosker matter the practitioner was guilty of unsatisfactory professional conduct in that she "delayed filing a District Court Statement of Claim". This Tribunal is not prepared to make a finding of unsatisfactory professional conduct in the circumstances as in evidence. Rather, the conduct of the practitioner amounts to professional misconduct - it was not a question of "delay"; rather the facts disclose that the practitioner simply failed to carry out her instructions to file the Statement of Claim - she never filed it at all and constantly told the client that she had. In those circumstances in our view her conduct amounts to professional misconduct having regard to the totality of the circumstances and the deliberate and continuing lies told to the client. 15 In addition, after the client had terminated their instructions and instructed another solicitor, the practitioner wrote to the new solicitors advising that "on 2 May 1998 a cheque was forwarded together with a Statement of Claim for filing in the District Court ...". In the absence of production of the relevant cheque or some evidence that it had even been drawn, the Tribunal is not prepared to accept that statement as being a statement of fact and it only serves to fortify the finding of professional misconduct in relation to the McCosker matter. Ryan: 16 Finally, the Law Society alleges that the practitioner acted for J & M Ryan in relation to the recovery of moneys allegedly due to them in the course of their business. Subsequently, the Ryans instructed a new solicitor to act for them. He wrote to the practitioner closing an appropriate authority, requesting a Statement of Account, the file "and any moneys held". The practitioner did not reply to that letter neither did she reply to a previous letter which alleged that the alleged debtors of the client had in fact paid the debt moneys to her. There was some subsequent correspondence with the Law Society and the Legal Services Commissioner and ultimately the practitioner wrote to the new solicitors enclosing "a cheque for the sum of $1,800.00 payable to you for the account of the abovementioned clients. This is money payable for the debt (of the alleged debtor) ...". The cheque was not met upon presentation. No replacement cheque was provided by the practitioner. 17 The Investigator did not have sufficient information to establish details of the amounts paid to the practitioner by the alleged debtor. This is not surprising. The cheque for $1,800.00 was in fact drawn on one of the other general or office accounts of the practitioner and as the practitioner appears to have kept no trust records then it is not surprising that the Investigator has had so much difficulty. That lack of evidence relating to the payment into one of the practitioner's accounts of $1,800.00 should not deter this Tribunal from concluding that the letter enclosing the $1,800.00, framed in the way it was, amounts to an admission by the practitioner that in fact she received $1,800.00 on account of the Ryans from one of the alleged debtors. In those circumstances we have no difficulty in concluding that the practitioner has wilfully breached Sections 61(1) and 62 in relation to Ryan. Furthermore, it would seem plain that the practitioner has misappropriated the Ryans' moneys and the Tribunal finds accordingly. 18 Finally, with regard to Ryan it is alleged that the practitioner has been guilty of unsatisfactory professional conduct in failing to communicate and failing to transfer the debt collecting files to the new solicitors acting for Ryan. It was urged upon us by the Society that we should not transform what would otherwise be unsatisfactory professional conduct into professional misconduct, even when it is considered together with related conduct. In the case of McCosker (paragraphs 14-15 above) the Tribunal is unable in those circumstances to accede to that request, and the matter of Ryan seems to fall into the same category. It seems that having regard to the totality of the findings in Ryan there should be a finding of professional misconduct. It is difficult to dissect the various aspects such as to categorise some of the conduct as professional misconduct and other parts of the conduct of unsatisfactory professional conduct. It might be different if the failure to communicate and failure to transfer the files was something standing alone but in our view it is inseparably connected with the findings of professional misconduct relating to the other aspects and in those circumstances there should be an appropriate finding of professional misconduct. 19 The last matter that falls for determination is the allegation by the Society that the practitioner failed to respond to a Notice served upon her pursuant to Section 152(1) Legal Profession Act. 20 That Section relevantly provides that the Society, for the purpose of investigating a complaint, may serve upon a practitioner a Notice in writing seeking the provision of written information, by a date specified in the Notice and to verify the information in a Statutory Declaration. The Society had before it a large volume of material supplied by the practitioner relating to a matter of Perry. That volume included the practitioner's response to the complaint (in some detail) together with a considerable body of supporting documentation. The Council of the Society formed the opinion that the material produced raised more questions than it answered and as a consequence served the Section 152 Notice on the practitioner. 21 The practitioner's evidence relating to this aspect was to the effect that because of the personal issues and stress that affected her she looked upon the Section 152 Notice as "just another piece of paper from the Law Society". She thought that all matters had been covered by the detailed submissions and her failure to respond to the Notice was, she said, affected by her inability to deal with the matter. 22 Section 152(4) provides that a legal practitioner who, without reasonable excuse, fails to comply with the Section 152(1) Notice is guilty of professional misconduct. There is no half-way house - one is either guilty of professional misconduct or not at all. The question is: in the circumstances was there "a reasonable excuse for the non-compliance by the practitioner?" There was no dispute that the Notice was properly served and was a proper requirement of the Society as part of its investigations into the Perry matter. There was also no dispute that the practitioner had simply not complied with the Notice - indeed, even at the hearing, she did not offer to comply. 23 The practitioner provided to the Tribunal a sworn affidavit 17 October 2002. She did not file a formal Reply but that is a mere technicality having regard to the concessions that she made at the commencement of the hearing. Her affidavit dealt in detail with personal matters which affected her such that it is her submission (as we understood it) that her name does not deserve to be removed from the Roll. Although no submission was made with regard to Section 152(4) in fairness we have regarded the general submission as also a submission under that sub-section. Exculpatory Factors 24 The practitioner filed an affidavit together with a report from Dr Wendy Louise Walker, a Clinical and Forensic Psychologist, dated 12 June 2000 and a statutory declaration by Mr Philip Graeme Walton, a solicitor, made 8 November 2000 which was a declaration made in support of an application to the Society to enable the practitioner to be employed as a clerk. This declaration is of marginal significance because in April 2000 the practitioner's Practicing Certificate was cancelled and the application to the Society to employ her as a clerk was rejected. It is, however, significant in this respect: Mr Walton makes it plain that he understood that at the time of the declaration that the conduct of the practitioner involved "a serious breach of the Legal Profession Act and indeed the misappropriation by her of Trust Account monies". 25 The material discloses that in about July 1998 the practitioner purchased her partner's interest in the firm called Callen Paton Lawyers. That firm also conducted a business called "Mr Mention". The practitioner admits that she was "not set up sufficiently to run many diverse areas" and she had inexperienced people employed in the office and that "the supervision (she) was unable to afford (her) staff including employed solicitors was not adequate". She gave some evidence about a secondment in relation to a Royal Commission and as a result was "physically and mentally exhausted" because she "attempted to meet all demands and found it hard to say "no"". 26 Her evidence was that in 1998 she moved premises and had changes in staff, employed two additional new solicitors that her practice "was growing rapidly and in hindsight we realistically had too much work in too many areas". This statement was not challenged and one might not have unreasonably thought that there would be a sufficient steam of income available to meet necessary obligations. In any event, she attributes the cancellation of her Practising Certificate in April 2000 to a number of personal issues that affected her and "were partially instrumental in influencing the conduct that led to" cancellation. Firstly, she gave detailed evidence about a violent and physical home invasion in June 1998 allegedly perpetrated upon a close relation. She said that this matter required her to travel weekly between country properties and Sydney "organising care, nursing homes, evidence, support, business and legal affairs, for the past 4 years". Secondly, she deposed that at the beginning of 1999 she took on a referral to act on behalf of a person who was charged with the importation of cocaine. She said that the "workload was massive … (involving) the arduous task of listening to 500 hours of Listening Device Material, reading a Brief, which was in excess of 40 volumes … (that she) became totally immersed in this case to the detriment of the matters before this Tribunal (that statement did not make much sense because the Information relating to the Sections 61 and 62 matters was not filed until 12 November 2001) (and, without going into all the details, she said that the) first six months of 1999 was totally immersed in this matter and upon reflection realised that other matters were being neglected". Thirdly, she deposed that her father in 1998 was diagnosed with cancer. As we understand the situation her father conducted a family property in the country and as a result of his diagnosis the evidence was that the practitioner found it necessary "to make all management decisions at the farm, organise contract workers at shearing time, assist (her) mother" and so on. The evidence shows that the practitioner would fly to the country property "most weekends to do work on the property" that was very demanding and required heavy work. The above is a short summary – there is no need to go through the details with precision – of the "personal stressors" that are said to have affected the practitioner. 27 The report from Dr Wendy-Louise Walker is dated 12 June 2000. There is no more recent report. The evidence shows that the psychologist was told by the practitioner that "her errors were unpremeditated and that she never had any intention to rob people. The moneys have been paid back." Pausing at this point it is plain from the material before us that the moneys have in fact not been paid back. The evidence indicates clearly that in the matter of Watts the practitioner has failed to account for $2,552.08 and $502.00 and in relation to Ryan the sum of $1,800.00. No offer was made in relation to those matters by the practitioner and indeed in evidence she admitted that after taking into account moneys allegedly due to her from Watts there was still an amount of $4,000.00 owing to Watts. It was not clear from the evidence precisely how this figure was arrived at but there is no doubt that the above enumerated moneys are still owing to Watts and Ryan. The psychologist's evidence is that the practitioner "is aware that she has to learn to prioritise and also that she needs to learn to take some care of herself. She is willing to come to me for counseling. (She) acknowledges that the monies should have been placed in a trust fund and she should not have used those monies as she did at the time." 28 The practitioner's real application to this Tribunal is that she should be allowed to retain her Practising Certificate with a view to obtaining employment and working under supervision. She made a personal and emotional, but well argued, submission to us to that effect. She submitted that she had suffered considerably, "professionally, financially, personally (and) psychologically". She concedes that there is a requirement for the protection of the public but she says that she has learnt her lesson, taken everything on board and that "even lawyers deserve some leniency" and that her name "does not deserve to be removed from the Roll". She submits, with quite some force, that she had "worked very hard for a long time and (has) cared very much for so many people." She says that she is "a good person and ….. that our professional body should again be proud to have me on the Roll and possibly there should be some light at the tunnel and I am remorseful … ". 29 The difficulty that we have with these detailed submissions, put with considerable force by the practitioner, is that firstly, she has not repaid the moneys that are unarguably due to Watts and Ryan. Secondly, she makes no offer to repay those moneys. Thirdly, the Section 152 Notice was served upon her on 16 October 2002 and to date there has been no response, and no offer of a response. The practitioner's reliance upon the submissions initially made in detail 21 November 2000 does not answer the requirements of the Section 152 Notice and the failure to comply with the Notice coupled with the failure to repay the unargued amounts due to Watts and Ryan effectively misappropriated by the practitioner together with her failure to put before us any material of a convincing exculpatory nature subsequent to the date of the clinical and forensic psychologist's report 12 June 2000 and the absence of evidence that the practitioner has been actively seeking and obtaining appropriate counselling and psychological assistance, leaves this Tribunal inevitably to only one conclusion. Orders: 30 There is no need for us to refer to authority. This practitioner has been found guilty of professional misconduct in respect of serious breaches of the statute law, and has been found guilty of conduct that would be reasonably regarded as disgraceful or dishonourable by the practitioner's professional brethren of good repute and competency (see Allinson v. General Council of Medical Education and Registration [1894] 1 QB750). There are no exculpatory factors that would warrant an order being made that was not reflective of the seriousness of the conduct proved and the protective role of this Tribunal. There is no alternative but to order that the name of the practitioner be removed from the Roll and there must also be an appropriate order for costs. 31 The practitioner submitted that we should not make an order that she pay the costs of the Law Society without hearing from her on that aspect. There is little doubt (in our view) that the law requires a discrete submission on the question of costs where the circumstances are such that the requirements of natural justice would call for that course to be adopted. For example, where a Court or Tribunal makes an order that peculiarly relates to procedure, or where a party was less than fully successful, there may be an argument in favour of a discrete hearing on costs. However, the normal order in this Division of this Tribunal is that where the Society is successful in its application then costs will follow the event. Such orders are made consistent with the public duty role of the Society and are appropriate to be made where, as in circumstances like this, the name of the practitioner is to be removed from the Roll. However, in diffidence to the submission of the practitioner, the Tribunal proposes to make an order which is in effect self-executing in that there will be an order that the practitioner pay the costs of the Society in relation to both Informations, such Order to become final unless the practitioner applies to the Tribunal within twenty-one (21) days of this decision and files in this Tribunal within that twenty-one (21) day period Written Submissions detailing her reasons for submitting that an order for costs should not be made or, alternatively, that some form of restricted order should be made. Absent such application and the filing of such Written Submissions within that time limit, the order will become final. 32 In addition, the Tribunal accedes to the submission of the Society to the effect the practitioner should be ordered to comply with the Section 152 Notice and the Orders of this Tribunal will incorporate that Order. 33 The Orders of the Tribunal are:- 1. The name of Debbie Jane Paton be removed from the Roll of legal practitioners. 2. The practitioner pay the costs of the Law Society of and incidental to these proceedings as agreed or as assessed. 3. Costs may be assessed under the Legal Profession Act 1987 4. Orders 2 and 3 above will be final unless the practitioner applies to this Tribunal for an order vacating Orders 2 and 3 above and files Written Submissions in support of such an application and in support of the Order for costs that she would seek in lieu, such application supported by those Written Submissions both to be filed with the Tribunal within twenty-one (21) days of the date of these Orders. 5. The practitioner is ordered to comply with the Section 152 Notice dated 5 October 2001 and served upon her personally on 16 October 2001, within twenty-one (21) days of the date of these Orders. 6. The practitioner be fined $500.00 for her failure, without reasonable excuse, to comply with the Council of the Law Society of New South Wales requirement under Section 152(1) of the Legal Profession Act, 1987. Application For Compensation: 34 Mr & Mrs McCosker have applied for an order for compensation pursuant to Legal Profession Act Section 171D. The question of compensation must wait its separate determination upon a formal Application by Mr & Mrs McCosker. They can apply to the Tribunal for a hearing date as they may be advised. 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.