Law Society of New South Wales -v- Barwick & Dechnicz [2001] NSWADT 104

CITATION: Law Society of New South Wales -v- Barwick & Dechnicz [2001] NSWADT 104 DIVISION: Legal Services Division APPLICANT Council of the Law Society of New South Wales PARTIES: RESPONDENTS Ross Garfield Barwick Roman Alexander Dechnicz FILE NUMBER: 002018; 002019 HEARING DATES: 30/05/01 SUBMISSIONS CLOSED: 05/30/2001 DATE OF DECISION: 05/31/2001

BEFORE: Needham CA - (Deputy President) at 1; Mattila J - Judicial Member at 1; Mahon D - Member at 1 APPLICATION: Hearings - application for separate hearings MATTER FOR DECISION: Preliminary matter LEGISLATION CITED : Legal Profession Act 1987 CASES CITED: APPLICANT G Lindsay SC REPRESENTATION: RESPONDENT - Barwick R Allaway QC RESPONDENT - Dechnicz N Cassidy QC ORDERS: 1 Each of the applications in matters 002018 and 002019 is dismissed; 2 Question of costs reserved

1 Applications were made yesterday by each of the respondents for an order vacating the order made 19 April 2001 for a joint hearing and for the two matters 002018 and 002019 to be heard separately. No notice of the proposed applications was given. The applications are apparently motivated by certain admissions made by the respondent in matter 002018 late on the Friday before the hearing commenced the following Monday 28 May 2001. The applications were made and heard on 30 May 2001. Submissions concluded at 4.30p.m. These reasons were delivered orally at 10a.m. the following day. 2 In support of the application in matter 002018, counsel for the respondent Mr Barwick have provided an outline statement of the grounds upon which the application is made, and that statement is annexed to the application dated 29 May 2001 and filed 30 May 2001. Ms McCallum, who appears with Mr Allaway Q.C. for that respondent, also made oral submissions to the Tribunal. 3 In matter 002019, an affidavit of Mr Dechnicz sworn 29 May 2001 was filed in support of his application, and that affidavit is exhibit RD1 on this application for separate hearings. Mr Cassidy Q.C. who appears for Mr Dechnicz made oral submissions to the Tribunal. 4 Mr Lindsay SC who appears for the Law Society in both matters, provided both written and oral submissions to the Tribunal. 5 The Tribunal has carefully considered all of the written and oral submissions and has taken into account each of the matters put to us. 6 On 19 April 2001, a differently constituted Tribunal presided over by me heard an application by the Law Society in both matters that the two sets of proceedings be joined. That application was granted, and reasons were delivered on 29 May 2001. The Law Society opposes these applications for a separate hearing 7 The respondents submit in support of their applications that recently Mr Barwick and Mr Dechnicz have each made admissions in relation to the matters alleged in the Informations It is said that by reason of these admissions, there no longer remain sufficient reasons for the proceedings to be heard together. The admissions on the part of Mr Barwick appear from correspondence which is included in exhibit A in the proceedings, and the admissions which have been made by Mr Dechnicz appear from the correspondence which is exhibit B in the proceedings. 8 The applications were heard at a time when the Law Society had served and filed Amended Informations which reflected the position of the Law Society appearing from the correspondence in exhibit A and B. Neither of the respondents has filed a Reply to the Amended Informations. It was common ground that the Tribunal should proceed to hear the applications on the basis that each of the respondents proposed to file a Reply to the Amended Information which would adopt the admissions set out in the correspondence. It was also accepted that the Tribunal was at liberty to refer to the Replies which had been filed in relation to the original Informations, and I have done so. 9 In relation to Information 002018, which I will call the "Barwick Information", the recent admissions go broadly to the following matters. The respondent now admits professional misconduct on grounds 1 to 4, 5A, and 7(b) of the particulars to the Information and to the corresponding grounds in the Amended Information, with the exception or qualification that in relation to grounds 1 and 2, whilst the respondent admits that the loan was for his personal benefit in the sense that it enabled Mr Dechnicz - his former partner in their practice - to discharge certain of Mr Dechnicz's debts or obligations but for which their partnership would have been in jeopardy, Mr Barwick does not admit that he used any of the assets from the Wilkinson estate to meet a personal obligation owed by him to Mr Dechnicz. 10 In matter 002019, which I will call the "Dechnicz Information", the respondent now admits or concedes that he committed unsatisfactory professional conduct but does not admit professional misconduct. As well as the matters appearing from exhibit B and in the Reply to the Amended Information handed up before these reasons were given, Mr Dechnicz says broadly that in relation to the contributory mortgage dated 20 March 1992 from Mrs Roberts, it was not his responsibility to document that loan or mortgage or to attend to obtaining any necessary independent legal advice for the lenders, but that it was Mr Barwick's responsibility to attend to those matters. Mr Dechnicz admits the allegation made in the Information that the loan moneys of approximately $85,000 were on-lent from Mrs Roberts to Mr Barwick and, further admits the allegation that Mr Barwick used those moneys to discharge personal obligations owed by him to Mr Dechnicz. However, Mr Dechnicz denies that he had actual notice of the misconduct of Mr Barwick in relation to this transaction. 11 I take as the starting point the formulation in the Legal Profession Act, section 167(5)(b), which provides that in proceedings instituted in this Tribunal against a legal practitioner the Tribunal has power to order, if it is in the interests of justice to do so, the joinder of: (a) more than one Information against the same solicitor or barrister, or (b) an Information against one or more barristers and an Information against one or more solicitors if all Informations are founded on the same, or closely related, acts or omissions. 12 We have, therefore, considered whether the Barwick Information and the Dechnicz Information are "founded on the same, or closely related, acts or omissions". We have also considered whether it is "in the interests of justice" for the proceedings to be heard together. In addition, we have considered whether procedural fairness requires that there be a separate hearing of the two Amended Informations and whether a joint hearing of the Amended Informations might, or would, be likely to allow prejudicial or highly prejudicial evidence to be admitted against one or other of the respondents in circumstances where such evidence would not have been admissible in separate proceedings. 13 We should say that on 29 May, which was the first day of the hearing, we heard an opening from Mr Lindsay, SC, on behalf of the Law Society, and also an opening on behalf of Mr Allaway, QC, for Mr Barwick. Mr Cassidy, QC, who appears for Mr Dechnicz, deferred his opening until after these applications had been determined, so we have not yet heard any opening in relation to the Dechnicz Information. 14 In considering whether the Informations are founded on the same or related acts or omissions, it is necessary to compare the allegations in the Barwick Amended Information against the allegations made in the Dechnicz Amended Information. This task has taken a little time because of the circumstance that, although there are substantially identical allegations in both Informations, the paragraph numbering is not the same. I will therefore set out again in general terms, the extent to which the allegations in the Informations correspond to each other. I will do that by referring first to the Barwick Information and then comparing or contrasting those allegations with the Dechnicz Information. 1. In the Barwick Information particular 1(b) alleges delay in the administration of the Wilkinson estate. There is no corresponding particular in the Dechnicz Information. 2. Particular 1(c) in the Barwick Information alleges that the respondent lent $38,000 from the Wilkinson estate upon a contributory mortgage dated 20 March 1992 without having authority to do so either: (a) under the will, or (b) under a lending authority from the beneficiaries given before the loan was made. In the Dechnicz Information corresponding allegations are contained in ground 6, with this qualification, that the allegation is put on the basis that appears in particular 6(h), namely, that the respondent knew, or ought to have known, that his partner, Mr Barwick, was acting in the way alleged. 3. Particular 1(c)(ii) in the Barwick Information alleges that the respondent used the $38,000 from the Wilkinson estate for his personal benefit. This particular is echoed in to the allegations in particulars 1(d) and 1(e), which allege that the respondent, as executor of the Wilkinson estate, lent the sum of $38,000 ostensibly to his sister, Mrs Roberts, but in substance for his own benefit in order to use those funds to meet personal obligations that he owed to Mr Dechnicz arising from his entering into partnership with Mr Dechnicz. Those allegations are mirrored in ground 6 of the Dechnicz Information, with this qualification, that the allegations against Mr Dechnicz are, again, made on the basis that he knew, or ought to have known, of Mr Barwick's misconduct as alleged. 4. Particulars 1(f), (g) and (h) in the Barwick Information, upon which further light is thrown by particular 1(a)(iv), contain allegations that the contributory mortgage was not registered or protected by a caveat and that the subject property at Mosman was already subject to a first mortgage to the National Australia Bank. Those particulars, when read in light of particular 1(k)(iv), are apparently intended to allege that it was the respondent's obligation to ensure that the mortgage was suitably protected by registration or otherwise and that he failed to do so. Those allegations are mirrored in ground 6 of the Dechnicz Information, again on the basis that Mr Dechnicz knew, or ought to have known, of Mr Barwick's misconduct. 5. Particulars 1(i) and 1(k)(v) in the Barwick Information allege that the respondent failed to ensure that interest was paid under the contributory mortgage. In the Dechnicz Information there is no corresponding ground. 6. Particulars 1(j) and (k) in the Barwick Information contain various allegations falling under the compendious description in ground 1 of "neglect, delay and incompetence" in the administration of the Wilkinson estate, of which the respondent was the executor. These allegations include: (a) a failure to keep Mrs Fulton as a residuary beneficiary fully informed concerning estate matters; (b) failure to disclose to Mrs Fulton that the loan of $38,000 from estate funds was intended to be made or had been made; (c) failure to obtain Mrs Fulton's consent to that loan prior to the loan advance being made or to obtain her fully informed consent to the loan; (d) failure to advise Mrs Fulton concerning the details of the contributory mortgage transaction; (e) failure by Mr Barwick to disclose to Mrs Fulton his personal interest in the proceeds of the mortgage advance; (f) failure to promptly pay to Mrs Fulton the moneys due to her under the will (presumably caused in part by the loan of the $38,000 to the sister, Mrs Roberts); (g) failure to respond promptly to inquiries from Mrs Fulton. Related to these allegations is ground 2 in the Barwick Information, which repeats similar allegations but puts them on the legal basis that the respondent preferred his own interests to the interests of Mrs Fulton. There are no corresponding grounds or allegations in the Dechnicz Information. 7. Ground 3 in the Barwick Information and the particulars relating to that ground, allege that the respondent misled Mrs Fulton, a residuary beneficiary of the Wilkinson estate concerning: (a) the use of estate moneys and by obtaining from Mrs Fulton an authority to invest estate moneys after the loan had been made and by representing that the document was to enable a release of the estate moneys to her; (b) by failing to inform Mrs Fulton that the estate moneys had been lent on the security of a mortgage which was not registered or protected by a caveat. There is no corresponding allegation in the Dechnicz Information. 8.Ground 4(a) in the Barwick Information and the particulars relating to this ground allege that the respondent was in breach of Regulation 27(2) of the Legal Profession Regulation 1987, in that he allowed an "associate" as defined (being his sister, Mrs Roberts) to borrow $85,000, that is, the loan made on the contributory mortgage, from three groups of clients of the firm, that amount including the $38,000 from the Wilkinson estate, which is the subject of ground 1. The particulars in paragraph 4(a) further allege that Mr Barwick was in breach of that regulation, in the sense that he was the "true borrower" under the mortgage, although this allegation appears less clearly (if it be alleged) from the particulars In the Dechnicz Informations, the second allegation is mirrored in ground 1. 9.There is a further allegation in ground 4(a) that Mr Barwick, in breach of Regulation 27(2)(c), failed to ensure that his client(s) obtained independent legal advice or a certificate to that effect before making the loan and without disclosing to his clients that Mrs Roberts was his relative. Although it is not entirely clear from the particulars, it seems that this allegation refers to a failure to obtain independent legal advice for the clients as lenders, rather than for Mrs Roberts as the borrower. In the Dechnicz Information corresponding allegations are contained in particulars 1(d) and 1(e). 10. In the Barwick Information particulars 4(b) and 4(c) allege that the respondent was in breach of Regulation 32(1) of the Legal Profession (Trust Accounts and Controlled Money) Regulation 1988 in that he failed to obtain from those three groups of clients the necessary written authorities before the loans totalling $85,000 were made. That allegation is mirrored in the Dechnicz Information as grounds 2 and 3. 11. In the Barwick Information, particulars 4(d) and 4(e) allege that the contributory mortgage was not properly recorded in the investment register maintained, or which ought to have been maintained, by the firm. Identical grounds are contained in the Dechnicz Information as grounds 3 and 4. 12. Ground 5A in the Barwick Information alleged that the respondent misled the Law Society in his response provided to the Law Society during the course of its investigation concerning the alleged consent of Mrs Fulton to the loan of $38,000 and concerning an alleged ratification of the loan by her after the event. In the Dechnicz Information there is no corresponding ground. 13. In the Barwick Information, particular 5B(f) alleges that the respondent misled the Law Society and the Tribunal by his statutory declaration dated 2 May 1997 concerning his knowledge of the first mortgage to the National Australia Bank which existed over the Mosman property the subject of the contributory mortgage. In the Dechnicz Information there is no corresponding allegation. 14. In the Barwick Information, ground 7(b), it is alleged that in relation to the Wilkinson estate the respondent misled the trust account inspector of the Law Society by supplementing and/or "reorganising" the file for the Wilkinson estate while the matter was under inquiry and knowing that it was under inquiry. There is no corresponding ground in the Dechnicz matter. 15. Turning now to the Dechnicz Information, particular 8(a) alleges that the respondent misled the Law Society's trust account inspector by failing to disclose to him the existence of the contributory mortgage to Mrs Roberts during his first inspection in August 1992. There is no corresponding allegation in the Barwick Information. 15 Looking at these categories of allegations, if I may call them that, it can be seen that particularly in relation to categories numbered 2 to 4, which relate to the amount of $38,000 lent to Mrs Roberts from the Wilkinson estate, they rest on a common factual basis. There are corresponding allegations in each of the Informations. The allegations are, of course, put somewhat differently in that in the Barwick Information where it is alleged that Mr Barwick took the loan for his own benefit under cover of an ostensible mortgage to Mrs Roberts, his sister, and used the loan moneys to discharge obligations which he owed to his partner, Mr Dechnicz, whereas in the Dechnicz Information the allegation is that Mr Dechnicz knew of Mr Barwick's misconduct. 16 It is common ground that the proceeds of the loan were applied to discharge debts of Mr Dechnicz to third parties or to make payments to those third parties. The allegations clearly concern the same transaction, being the loan transaction, and the underlying facts are essentially the same. 17 In order for the Tribunal to assess in relation to the allegations against Mr Dechnicz whether or not he had actual notice of Mr Barwick's misconduct and, if so, to what extent he had notice, the Tribunal must clearly consider the loan transaction as a whole and must be informed of what it was that Mr Barwick is said to have done or failed to do and of the circumstances in which he acted. It will also be necessary for the Tribunal to consider against that background of facts what role Mr Dechnicz played, if any, in relation to the loan transaction and in relation to documenting the loan, in order to assess whether or not he had actual notice of any or all of the matters which are alleged against Mr Barwick. 18 We should say that in the replies to the original Informations and as appears from the correspondence in exhibits A and B, Mr Barwick denies that the loan was for his benefit and says that Mr Dechnicz was the "true borrower" from Mrs Roberts/the estate, that Mr Dechnicz received the loan funds and applied them to pay debts of his own or to make payments that he wished to make to third parties. Mr Dechnicz, on the other hand, says in reply that it was Mr Barwick who was the "true borrower" from Mrs Roberts/the estate and denies that he had actual notice of Mr Barwick's actions. 19 Category numbered 1, which alleges delay by Mr Barwick in the administration of the Wilkinson estate, has no counterpart in the Dechnicz Information, but we do not expect that allegation would add substantially to the length of argument or to the hearings. Similarly for category 5. 20 Categories 6 and 7 also have no corresponding allegations in the Dechnicz Information, and it is true that they may add to the length of the hearing. We expect that the hearing of those allegations in the Barwick Information may involve evidence in chief from Mrs Fulton, and Mr Barwick's counsel has indicated that he wishes to cross-examine her. However, on 28 May 2001 (transcript page 34) Mr Allaway Q.C., who appears for Mr Barwick with Ms McCallum, indicated that he hoped to be able to resolve certain of the factual issues presently in dispute without the need to call Mrs Fulton. Those allegations, again, concern the contributory mortgage to Mrs Roberts and, as such, they relate, we think, generally to the same factual matrix from which the issues grouped 2 to 4 arise. We consider that they are "founded" on the same or closely related matters within the meaning of section 167(5)(b) of the Legal Profession Act to which we have referred above. 21 Categories 8 to 11 all relate to the loans made from the three groups of clients of the firm, and the allegations contained in the Barwick Information are mirrored in virtually identical terms in the Dechnicz Information. 22 Categories 12 to 14 are unique to the Barwick Information. However, the alleged misleading conduct of Mr Barwick again relates to or is connected with his alleged conduct or failure to act in relation to the granting of the contributory mortgage and the making of the loans from clients' funds, which is the same factual area in which the allegations in the Dechnicz Information will be considered. 23 To the extent that category 14 goes beyond the area of common facts underlying the allegations in both Informations, we do not consider that this would add substantially to the length of the hearing. 24 Category 15 is unique to the Dechnicz Information. However, again, the alleged misleading statements concern the circumstances surrounding the grant of the contributory mortgage and the alleged delay in completing the administration of the Wilkinson estate, which, in turn, is said to be, at least in part, attributable to the grant of the contributory mortgage. We consider that in this sense the allegation concerns matters which are related to the matters which will be ventilated in hearing the Barwick Information. 25 So, by comparing the allegations made in each of the Informations by grouped categories, it is clear that the underlying facts giving rise to both proceedings "found on the same or closely related, acts or omissions" to use the words of section 167 (5)(b). Whilst not all issues are common to both proceedings, the conduct of each of the respondents falls to be considered in the light of that common factual basis or background. Essentially, the majority of the allegations in each of the Informations concern or relate in some way to the contributory mortgage dated 20 March 1992 and to the investigation or inspections by the Law Society arising from or related to that mortgage. 26 But despite the admissions which have been made very recently by Mr Barwick and the further admissions recently made by Mr Dechnicz, it is clear that there remain outstanding issues of fact in relation to each of the Informations. Those issues may well and perhaps inevitably will require this Tribunal to assess the credit of each of the respondents. In the Barwick Information, broadly, those outstanding issues are: (a) whether the respondent was the "true borrower" of the funds advanced under the contributory mortgage; (b) whether Mr Barwick owed a personal obligation or obligations to Mr Dechnicz for which he wished to borrow those funds and in discharge of which the funds were ultimately applied. (c) whether Mr Barwick was responsible for documenting the loan transaction and for obtaining any necessary authorities or advices from or for the clients as lenders. In the Dechnicz Information the outstanding factual issues include: (a) whether Mr Dechnicz was responsible for documenting the loan, et cetera; (b) whether Mr Dechnicz had actual knowledge of Mr Barwick's misconduct in relation to the Wilkinson estate, the contributory mortgage and obtaining any necessary authorities or advice from or for the clients as lenders. (c) whether it was Mr Dechnicz who was responsible for attending to the documentation of the loan and putting in place the contributory mortgage. (d) whether Mr Dechnicz had actual notice of Mr Barwick's misconduct in relation to the loans from clients of the firm. 27 In relation to both of the Informations there is an outstanding issue as to what orders this Tribunal should make, if any order is made at all. In this regard, Mr Barwick has admitted professional misconduct on certain of the grounds in the Information. Mr Dechnicz has not, but he has conceded unsatisfactory professional conduct on certain grounds.