CITATION: Council of the Law Society of New South Wales v Halligan [2009] NSWADT 317 DIVISION: Legal Services Division Applicant: Council of the Law Society of New South Wales PARTIES: Respondent: Brenton Christopher Halligan FILE NUMBER: 082011 HEARING DATES: 21, 22 and 23 September 2009 SUBMISSIONS CLOSED: 23 September 2009 DATE OF DECISION: 18 December 2009 BEFORE: Chesterman M - Deputy President; Molloy G - Judicial Member; Bennett C - Non-Judicial Member CATCHWORDS: Solicitor – professional misconduct – wilful breaches of Legal Profession Act 1987, sections 61 and 62 – misappropriation – undue reliance on honesty of employed bookkeeper – failure to maintain system for checking withdrawals from controlled money accounts – failure to maintain accounting records – improper investment of client's funds Administrative Decisions Tribunal Act 1997 LEGISLATION CITED : Legal Profession Act 1987 Legal Profession Act 2004 Legal Profession Regulation 1994 Allinson v General Council of Medical Education and Registration [1894] 1 QB 750 Council of the New South Wales Bar Association v Einfeld [2009] NSWCA 255 CASES CITED: Law Society of New South Wales v Hansen [2004] NSWADT 183 Re Mayes and the Legal Practitioners Act [1974] 1 NSWLR 19 A Solicitor v Council of the Law Society of New South Wales (2003) 216 CLR 253 Applicant Representative: S Barnes, barrister REPRESENTATION: Respondent Representative: T Healey, barrister 1. The Respondent is guilty of professional misconduct by virtue of the matters alleged in Grounds 1 and 4 of the Amended Application and is guilty of unsatisfactory professional conduct by virtue of the matters alleged in Ground 5. 2. The Respondent is reprimanded. ORDERS: 3. Unless and until the requirement set out in Order 4 is satisfied, any practising certificate issued by the Applicant to the Respondent is to be subject to the following conditions:-(a) His right to practise is restricted to that of an employee of a solicitor holding an unrestricted practising certificate.(b) He is not to operate on the account of any solicitor which may contain trust funds. 4. The Applicant may remove any of the conditions stipulated in Order 3, but only if the Respondent has first demonstrated his knowledge of current trust account regulation by passing an appropriate examination on this subject. 5. The Respondent is to pay the Applicant's costs of and incidental to these proceedings as agreed or assessed within six months of these costs being agreed or assessed. REASONS FOR DECISION The Disciplinary Application 1 In this case, a solicitor, through relying unduly on assertions by a bookkeeper employed by him and failing to maintain any adequate system for checking on her work, allegedly gave scope for her, over a significant period of time, to misappropriate substantial sums held on behalf of clients in controlled money accounts. He also allegedly failed to maintain accounting records as required by regulations and invested funds held on trust for a client in an unauthorised investment, with the consequence that the funds could not be recovered. The principal questions to be resolved were whether the solicitor was guilty of professional misconduct and, if so, what consequential order or orders should be made. 2 In an Disciplinary Application initially filed in the Tribunal on 4 June 2008 and amended on 12 December 2008, the Council of the Law Society of New South Wales ('the Law Society') alleged that the Respondent solicitor, Mr Brenton Halligan, was guilty of professional misconduct on the following five grounds: (1) he breached section 61 of the Legal Profession Act 1987 ('the LP Act 1987'); (2) he breached section 62 of this Act; (3) he misappropriated trust funds; (4) he failed to account; and (5) he failed to invest estate funds in accordance with the terms of the will and failed to inform the beneficiaries of the loss of these funds. 3 The Particulars included in the Application described the relevant transactions in some detail. They occurred within the period from 1989 to 1998. 4 The Orders sought in the Application were (a) that Mr Halligan's name be removed from the Roll of Local Lawyers; (b) that Mr Halligan pay the Law Society's costs of the proceedings; and (c) such further and (sic) other orders as the Tribunal deems appropriate. The Reply filed by the Respondent 5 Mr Halligan filed a Reply to the Application, in its original form, on 5 September 2008. He filed no further Reply to the Law Society's Amended Application. 6 In the Reply, Mr Halligan admitted the alleged breaches of sections 61 and 62 of the LP Act 1987, but denied that they were wilful breaches. He denied any 'personal misappropriation' of any funds and any failure to account, stating that any misappropriation or failure to account that occurred resulted from the actions of a member of his staff, Ms Joanne McBeth. He admitted failure to invest estate funds in accordance with the will, but stated that such failure was not wilful, being the result of a mistaken interpretation of the power to invest conferred by the will. He stated also that to the best of his recollection he advised the father of the beneficiaries that the funds had been lost. 7 In the Reply, Mr Halligan also set out the consequential orders that he sought from the Tribunal. These are summarised below. Relevant statutory provisions 8 As already stated, the Disciplinary Application was filed on 4 June 2008. It related to a complaint made by Ms Belinda Turner, who was formerly a client of Mr Halligan, on 18 October 2002 and a complaint made by the Law Society on 18 November 2004. Both these dates precede the commencement of the Legal Profession Act 2004 ('the LP Act 2004'). 9 By virtue of clause 16 of Schedule 9 to this Act, the complaints are therefore governed by the now-repealed LP Act 1987, except in relation to the proceedings in the Tribunal. These proceedings are governed by Chapter 4 of the LP Act 2004, subject to the proviso that the Tribunal 'may not make any determination or order of a disciplinary nature' against Mr Halligan that is 'more onerous than could have been made' under the LP Act 1987. 10 Three sections within Chapter 4 of the LP Act 2004 deal with the concept of professional misconduct. So far as relevant, section 497 states:- (1) For the purposes of this Act: professional misconduct includes: (a) unsatisfactory professional conduct of an Australian legal practitioner, where the conduct involves a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence,… 11 Section 496 states:- For the purposes of this Act: unsatisfactory professional conduct includes conduct of an Australian legal practitioner 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 Australian legal practitioner. 12 Under section 498(1)(a), a list of types of conduct that are 'capable of being unsatisfactory professional conduct or professional misconduct' includes 'conduct consisting of a contravention of this Act'. 13 As already indicated, the Disciplinary Application alleged breaches of sections 61 and 62 of the LP Act 1987. So far as relevant, section 61 stated:- Money received by solicitor on behalf of another (1) A solicitor who, in the course of practising as a solicitor in this State, receives money on behalf of another person:… (a) must pay the money, within the time prescribed by the regulations, into a general trust account in New South Wales at an approved financial institution and must hold the money in accordance with the regulations relating to trust money, or… (c) if the person on whose behalf the money is received directs that it be paid otherwise than into a general trust account or to a third party, must pay the money as directed and (if the money is to be held under the direct or indirect control of the solicitor) must hold the money in accordance with the regulations relating to controlled money. (2) In any of those three cases, 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…. (8) It is professional misconduct for a solicitor to wilfully contravene subsection (1) or (2). (9) In this section: approved financial institution means a bank, building society or credit union that has an agreement with the trustees of the Public Purpose Fund relating to the payment of interest on general trust accounts (as referred to in section 69E). controlled money means money required to be dealt with in accordance with subsection (1) (c) that, while under the direct or indirect control of the solicitor by whom or on whose behalf it is received, is for the time being held otherwise than in a general trust account at an approved financial institution. trust money means money required to be dealt with in accordance with subsection (1) (a). 14 Section 62 provided as follows:- 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) in the case of money other than trust money—such accounting records or other records (if any) as may be required by the regulations, that disclose at all times the true position in relation to money received by the solicitor on behalf of another person. (2) The accounting records referred to in subsection (1) shall be kept in a manner that enables them to be conveniently and properly audited. (3) Without limiting the generality of subsection (2), the accounting records referred to in subsection (1) shall, if the regulations so require, be kept in such manner as the regulations prescribe. (4) A wilful contravention of subsection (1), (2) or (3) is professional misconduct. 15 In the LP Act 2004, provisions broadly equivalent to sections 61 and 62 of the LP Act are to be found in sections 254, 255, 256 and 264. 16 Some relevant clauses of the Legal Profession Regulation 1994 are referred to below. The nature of the evidence 17 Mr Halligan was admitted as a solicitor of the Supreme Court on 3 December 1976. He held a practising certificate between that date and 17 June 2004, except for a period of cancellation between 29 and 31 July 2003. 18 The evidence tendered by Mr Barnes on behalf of the Law Society and admitted without any objection from Mr Healey, representing Mr Halligan, comprised an affidavit by Mr Raymond Collins, the solicitor for the Law Society, and two affidavits by Ms Jean Sayer, a chartered accountant. 19 By order of the Supreme Court on 29 July 2003, Ms Sayer was appointed as Receiver of the practice of the firm of Roach & Halligan. This was the name under which Mr Halligan then practised in central Sydney as a sole practitioner, though he had also conducted a practice at St Marys until 2001. Annexed to Ms Sayer's affidavits were three reports, dated 30 March 2004, 14 April 2004 and 11 May 2004 respectively, that she prepared for the Law Society in her capacity as Receiver. 20 The evidence tendered on Mr Halligan's behalf included affidavits by himself, his wife (Ms Deborah Mary Halligan) and three of his former employees (Ms Christine Downing, Mr Salina Arain and Mr Pierre Safi). It also included a report by a clinical psychologist and eleven testimonials by persons who knew Mr Halligan through his work as a solicitor or in other contexts. Subject to some minor deletions, all this evidence was admitted. 21 Mr Halligan gave further oral evidence in chief and was cross-examined at some length. Mr Arain and Mr Safi were briefly cross-examined, as also was a solicitor and friend of Mr Halligan (Mr Richard Harvey) who had supplied a testimonial. 22 The Particulars in the Disciplinary Application and a Statement of Agreed Facts handed up at the hearing provided details of the many transactions – which chiefly comprised transfers of funds into and out of bank accounts – giving rise to the Law Society's claim that Mr Halligan committed professional misconduct. Much of this detailed material appears to have been drawn from Ms Sayer's reports. But even allowing for the principle that in misconduct proceedings the nature of the conduct alleged against the respondent practitioner must be fully made clear (see for example Council of the New South Wales Bar Association v Einfeld [2009] NSWCA 255 at [15 – 16]), we do not believe it necessary in this case to describe all these transactions. What matters most for the purposes of our decision is the pattern of behaviour in which Mr Halligan consistently engaged when these transactions were taking place. Significant features of this behaviour were in fact disclosed in the affidavit sworn by Ms Downing, a former employee of Roach & Halligan, and in Mr Halligan's own oral testimony. 23 The principal component of the Law Society's case against Mr Halligan was its allegation that, by virtue of this behaviour, funds held by him on trust for various beneficiaries were misappropriated. The Society alleged also that Mr Halligan failed to account for moneys held by him on trust. These funds had been deposited in controlled money accounts, with Mr Halligan as the sole signatory. 24 The Society did not allege that he applied any of this money for his own benefit. It acknowledged that all or virtually all of it was the subject of misappropriations to which Ms Joanne McBeth, who was his bookkeeper at Roach & Halligan, has admitted. The misconduct alleged against Mr Halligan took the form of 'wilful' failure (a) to conduct his own investigations in order to ensure that she was acting honestly in recommending that he authorise numerous dealings with the money and (b) to install any system whereby he or other members of his staff at Roach & Halligan would be alerted to any dishonesty on her part. 25 There were two subsidiary components to the Law Society's case against Mr Halligan. 26 The first of these was an allegation that he failed to maintain accounting records as required by section 62 of the LP Act and the regulations thereunder. The Society alleged that some of these records had been destroyed, though not by Mr Halligan himself. It acknowledged that once again his default took the form of failing to monitor the conduct of Ms McBeth. 27 The second comprised allegations as follows: (a) that Mr Halligan invested funds held on trust for a client in an unauthorised investment, with the consequence that these funds were lost and (b) that he failed to advise the client of the loss. It would appear that Ms McBeth was not involved in this matter. 28 There was no significant opposition by Mr Halligan to these allegations by the Law Society. 29 It is convenient, when summarising the case against Mr Halligan, to deal with each of these three components in turn. Failure to prevent misappropriations 30 The misappropriated funds were held in eight controlled money accounts at various banks and over various periods of time. The account holder in each case was Roach & Halligan. Mr Halligan, being the sole practitioner in this firm, was the sole signatory. 31 Five of these accounts contained funds belonging to the estate of the late Nancy Josephine Walker, who died on 2 April 1989. The other three contained funds belonging to the estate of the late Joy Aurora Hawkins, who died some time before 14 April 1993. 32 The total of the funds misappropriated and the amount for which Mr Halligan failed to account was $355,549.49. 33 Misappropriations from Walker estate funds. By her will, Ms Walker bequeathed a legacy of $10,000 to Mr Hilton Frost and left the rest of her estate on trust in equal shares for her two granddaughters Jacqueline and Belinda Turner on their attaining the age of 25. They attained this age on 30 June 1996 and 1 November 2001 respectively. Probate of Ms Walker's will was granted on 3 July 1989 to Mr Halligan as sole executor. 34 During November 1989, the sum of $10,000 was transferred into an account in the name of Roach & Halligan on trust for Mr Frost. During December 1989, separate accounts in the firm's name on trust for Jacqueline and Belinda Turner respectively were opened and the sum of $57,195.85 was transferred into each account. Subsequently, additional accounts were opened for these two beneficiaries and additional sums were deposited. 35 Mr Frost was an intellectually disabled person, who was looked after by carers. From time to time, they would ask Mr Halligan or a member of his staff to have money released from the account held on trust for him in order to buy necessary items for him, such as a television set or a radio. From time to time, Ms McBeth asked Mr Halligan to sign withdrawal slips, saying that a request of this nature had come to her. He did so without asking to see any written request received from the carers or making any other attempt to satisfy himself that they had made any request. Ms McBeth used the signed withdrawal slips to take money out of the account for her own purposes. 36 Between 30 December 1990 and 31 March 1997, Ms McBeth effected about 19 misappropriations in this way, for amounts totalling $2,683.81. 37 Between 11 April 1991 and 6 May 1998, the funds held by Roach & Halligan in controlled money accounts on trust for Ms Belinda Turner were reduced by the following misappropriations:- 1. On 1 June 1991, $2,000 was withdrawn in cash from an account, but was not paid to Ms Turner or to anyone on her behalf. 2. Between 9 May 1994 and 9 September 1998, there were no less than 62 misappropriations from a single account, for amounts totalling $168,529.88. On each of two days within this period (24 November 1994 and 12 June 1997), three misappropriations occurred. On each of 13 further days, there were two misappropriations. 3. Between 8 October 1997 and 6 May 1998, there were misappropriations from another account totalling $14,900. One of these was a transfer of $4,200 into Mr Frost's account, made in order to remedy a deficit that had arisen because of the withdrawals from it that have just been described. 38 Between 7 July 1994 and 18 June 1996, the funds held by Roach & Halligan in a controlled money account on trust for Ms Jacqueline Turner were reduced by 14 misappropriations totalling $55,787.65. 39 Misappropriations from, and failure to account for, Hawkins estate funds. During the period of relevance to these proceedings, there was no executor of the will of Joy Aurora Hawkins. The assets of her estate formed part of the estate of her sister Vera Emily Jackson. The following misappropriations were effected from funds held in trust for the Hawkins estate in controlled money accounts for which Mr Halligan was the sole signatory:- 1. Between 25 November 1993 and 1 April 1996, there were 6 misappropriations from a single account, for amounts totalling $13,750. 2. On 27 April 1995, the sum of $20,000 was misappropriated from another account and paid to an account held on trust for Ms Jacqueline Turner. This was apparently done to cover a shortfall in Ms Turner's account resulting from the misappropriations described in the preceding paragraph of this judgment. 3. On 18 June 1996, six misappropriations, for amounts totalling $57,845.83, were made from another account. These included improper payments of $45,945.95 to Ms Jacqueline Turner and of $3,000 to Mr Frost. 40 There was also a failure by Roach & Halligan to account for an amount of $14,186.73 which, according to Ms Sayer's investigations, should have remained, following various withdrawals, in a bank account styled 'Roach & Halligan T/F Estate of the Late Joy Aurora Hawkins' and opened on 14 July 1993. 41 Ms Downing's evidence. Ms Christine Downing, a witness called by Mr Halligan and not required for cross-examination, stated in her affidavit that she worked for Roach & Halligan between May 1995 and June 2005, with some periods of maternity leave. She made the following observations about Mr Halligan's approach to his practice, the role played by Ms McBeth and the firm's dealings with Belinda and Jacqueline Turner:- 10…. If there was a problem, we advised Brent [Mr Halligan]. However, Brent would always look for the quickest and easiest way to do something. If he could cut corners, he would. He was just busy – he was looking after 2 offices – Sydney and St Marys – and had a lot of demands on his time as he was President of NSW Rugby. 11. At this time, Joanne McBeth was employed 4.5 days per week doing the bookkeeping. If Brent wasn't around, the staff would take their problems to Joanne, whom we all considered the Office Manager… 14 … over the years Joanne would often comment that Belinda or Jacqueline Turner had called and needed money. Very rarely did Brent want to speak to them and Joanne would take the calls. It seemed Joanne had a good rapport with the girls. Often, during our lunchtime, Joanne would say one or the other of the girls had called and needed money for things. 15. As Joanne handled the bookkeeping, it was reasonable that she handle these types of matters. Joanne would fill in the Withdrawal Slips, take them into Brent and get him to sign same. She would tell him the reason the girls needed the money. As far as I was aware, all requests for payments by the Turner girls were met by Brent. 16. In fact, if any money was needed by members of the staff for various client files, we would go to Joanne who would then arrange the cheques. 17. Wednesdays and Fridays were always a rush in the office to make sure our Trust Cheques were signed. If I needed money from the Trust Account for a client's settlement on the purchase of a property, then I would tell Joanne and she would quickly write out the Trust cheque and Brent would sign. Sometimes, I would be engrossed in other work and then Joanne would yell out that Brent was going – I would then realise I needed Trust Cheques signed and Joanne and I would hover around Brent so he could sign them. Sometimes, Joanne would get Brent to sign blank cheques as we didn't have enough time to write them all out. We would show Brent the money was in Trust and he would sign the blank cheques so settlement could proceed. 18. On numerous occasions, I would witness Joanne asking Brent to sign various withdrawal slips. Usually they were the St George Bank withdrawal slips which had about 3 or 4 lines in which to complete Bank Cheque details. If Joanne only needed one cheque, no-one even thought to cross out the other two lines. It just wasn't thought of that someone would fill in the form after Brent left… 19. Brent, as any employer, trusted his staff… 25. Brent wasn't overly interested in the accounting side of his practice. If Joanne told him to sign something, he signed it… 42 During cross-examination, Mr Halligan expressly agreed with the following parts of this material from Ms Downing's affidavit, though with qualifying phrases such as 'from time to time' and 'in some instances': the extract from paragraph 10, all of paragraph 15, the last two sentences of paragraph 17 and the extract from paragraph 25. He did not dispute any other aspect of the evidence given by Ms Downing. 43 Mr Halligan's evidence. In his affidavit and his oral evidence, Mr Halligan, while acknowledging the inadequacy of his supervision of Ms McBeth and of his oversight of the Walker and Hawkins estate accounts, sought to provide some explanation of these matters. He made the following salient points. 44 During the relevant period, he was the sole practitioner in the firm of Roach & Halligan. Until 2001, he occupied the same position in a firm at St Marys. At Roach & Halligan, he did a great deal of court work for his clients, in fields such as criminal law, family law and personal injury. His undertaking of these responsibilities, combined with his involvement in the NSW Rugby Union (where he served for a time as President), caused him to rely heavily on his employees at Roach & Halligan to look after the funds that were held in trust for the firm's clients. A further reason for this was that he did not consider himself to be expert in financial matters or indeed computer-literate. 45 Ms McBeth took over the role of bookkeeper at Roach & Halligan from Mr Halligan's father in 1985. Mr Halligan viewed her as a friend. As Ms Downing testified, everyone working at Roach & Halligan trusted her. She was the godmother to Ms Downing's youngest child. 46 The matters conducted by Mr Halligan's employees at Roach & Halligan included a large number of conveyancing and personal injury matters in which clients' funds were handled. Most of these were 'active', in the sense that dealings with these funds were likely to occur relatively frequently. It had never been suggested that these funds had been mismanaged in any way. 47 By contrast, the controlled money accounts that were established to hold the funds of the Walker and Hawkins estates were 'dormant' over a number of years. Not many matters that were 'sleepers' in this sense were handled by the firm. Accordingly, there were few significant events, similar (for instance) to the settlement of a purchase of property, that would prompt Mr Halligan to call for and inspect a statement of the funds in these accounts. For these reasons, Mr Halligan did not ever look at the passbooks and bank statements relating to them, nor did he ask for monthly statements to be printed from the firm's computerised records of them. 48 The withdrawal forms that Mr Halligan signed in blank at Ms McBeth's request could be used by her to draw funds from his personal account at the relevant bank, as well as from one or more of the controlled money accounts. He did not sign any forms that could only be used to withdraw funds from a controlled money account. 49 With reference to the fact that on a number of occasions Ms McBeth made more than one withdrawal during a single day from one of the accounts maintained for Ms Belinda Turner (see [37] above), Mr Halligan suggested during cross-examination that Ms McBeth may have 'stockpiled' blank withdrawal forms signed by him, or forged his signature, or signed the forms in her own name. He pointed out that he never had an opportunity to check the signatures on withdrawal forms that she had used. He acknowledged, however, that he had not made these suggestions in his affidavit or during examination-in-chief. 50 Mr Halligan offered as a reason for assuming that Ms McBeth had carried out her bookkeeping duties honestly and capably the fact that a pre-requisite to the annual renewal of his practising certificate was an inspection of his firm's trust and controlled money records by one or more accountants. He said that this exercise usually took one or two days and that he assumed that these records were audited. He acknowledged in cross-examination, however, that according to the regulations then governing the renewal of practising certificates (see the Legal Profession Regulation 1994, clause 48 and Form 5), the 'limited examination' of these records that took place did not 'constitute an audit'. 51 The Law Society's submissions. On behalf of the Law Society, Mr Barnes argued that the conduct of Mr Halligan outlined above amounted to professional misconduct both under section 497(1)(a) (quoted above at [10]) and under the common law test derived from Allinson v General Council of Medical Education and Registration [1894] 1 QB 750. According to that test, conduct connected with legal practice that would 'reasonably be regarded as disgraceful and dishonourable by professional brethren of good repute and competency' is professional misconduct. 52 With reference to the terms of Ground 1of the Disciplinary Application, he submitted that Mr Halligan's failure, over a period of some eight years, to monitor the activities of Ms McBeth and to maintain an adequate system for ensuring that a number of controlled money accounts were not the target of dishonest conduct displayed 'reckless indifference' on his part and should for that reason be characterised as 'wilful'. 53 In so submitting, Mr Barnes relied on the Court of Appeal's decision in Re Mayes and the Legal Practitioners Act [1974] 1 NSWLR 19. In that case, the Court, constituted by Hardie, Reynolds and Hutley JJA, confirmed a decision of the Statutory Committee under the Legal Practitioners Act 1898 that a solicitor who failed to supervise the activities of his partner with regard to the firm's trust account, thereby enabling the partner to misappropriate substantial amounts of money belonging to the firm's clients, was guilty of professional misconduct. 54 All three members of the Court held that this behaviour involved 'wilful' contravention of provisions of the 1898 Act similar to subsections (1) and (2) of section 61 of the LP Act 1987 and was therefore statutory misconduct under a provision similar to subsection (8) of section 61. 55 On this matter, Hardie JA said (at 21-22):- It is well settled law that there can be wilful failure within the meaning of the section without any positive intention to breach 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:… It is true that the solicitor did have complete trust in his partner. However, in the special circumstances of this case, I am satisfied that the existence of that trust was accompanied by a complete indifference on the part of the solicitor as to the performance of his statutory obligations in relation to the trust account. The matters brought to his notice over a period of years were such that failure to inquire and ascertain what was happening in relation to the trust account was, under the circumstances, recklessly careless and properly found to constitute wilful failure within the meaning of the section. 56 In their joint judgment, Reynolds and Hutley JJA held that the solicitor was also guilty of professional misconduct at common law (this being a matter on which Hardie JA expressed no opinion). It is sufficient here to quote the following short extracts from the joint judgment, at 25-27:- It is no answer for the appellant to claim that he left the conduct of his financial affairs of the firm to his partner. It would be no answer generally and certainly not in this case where the appellant neglected his responsibilities despite warnings that all was not well. The overall disregard of the obligations to the Law Society of a solicitor, those obligations being laid down for the protection of the general public who deal with solicitors, is in this case in our opinion so gross as to amount to professional misconduct at common law. Wilful misconduct can be established by evidence that a person acts with reckless carelessness, not caring what the results of his carelessness may be. [The solicitor's] failure was wilful, despite his personal innocence. 57 Mr Barnes acknowledged that if Ms McBeth had maintained an 'elaborate scheme of deception' that 'could not have been detected on reasonable inquiry', Mr Halligan's failure to realise what she was doing might not have been 'wilful'. But he pointed out that neither Mr Halligan nor anyone representing him had claimed that this was the case. Her misappropriations could easily have been discovered if Mr Halligan had maintained relatively straightforward safeguards, such as inspecting the passbooks or bank statements associated with the controlled money accounts or calling for monthly printouts of the firm's own records relating to them. Because, as Mr Barnes expressed it, Mr Halligan 'had no system for checking what was happening' other than 'placing total reliance' on Ms McBeth, he failed over many years to discover misappropriations that could easily have been discovered. 58 Two further aspects of Mr Halligan's behaviour were the focus of particular attention in Mr Barnes's submissions. 59 First, Mr Halligan accepted the truth of oral assertions made from time to time by Ms McBeth that the beneficiaries of the two estates (Mr Frost, Ms Belinda Turner and Ms Jacqueline Turner) required funds to be withdrawn for particular reasons, and accordingly signed withdrawal forms as requested by her. He did not ask to see any written requests made by them or any other supporting documentation. 60 Secondly, Mr Halligan handed over to Ms McBeth signed withdrawal forms that he had left uncompleted, enabling her to withdraw any amounts that she pleased from the funds held on trust for these beneficiaries. 61 In this context, Mr Barnes relied on opinions expressed by two solicitors who had testified on Mr Halligan's behalf – namely, Mr Harvey and Mr Safi – to the effect that these practices adopted by Mr Halligan were distinctly unwise. 62 Mr Barnes maintained also that we should not place any weight on Mr Halligan's suggestions, made late in the proceedings and without supporting evidence, that Ms McBeth had forged his signature on withdrawal slips or had signed them in her own name. As to the latter suggestion, he pointed out that any signature by Ms McBeth would easily have been found by the bank to be improper, since the passbook contained a signature by the authorised signatory. 63 Mr Halligan's submissions. In his submissions on Mr Halligan's behalf, Mr Healey did not appear to contest seriously the proposition that Mr Halligan had engaged in professional misconduct. He argued however that Mr Halligan's failure to monitor Ms McBeth's conduct should be categorised as 'dilatory' rather than wilful, pointing out that in Mayes the Court of Appeal held only that 'reckless indifference' by a solicitor to the activities of a fellow-solicitor or employee could amount to professional misconduct, not that it necessarily did. Mr Halligan's only fault, in Mr Healey's submission, was that he placed undue trust in Ms McBeth. 64 Our conclusions. In our opinion, the conduct of Mr Halligan described in this section of our judgment was indeed professional misconduct, for the reasons (generally speaking) advanced by Mr Barnes. His willingness to act on oral assertions made by Ms McBeth and to delegate to her a wide range of responsibilities relating to the management of funds held on trust for his clients would only have been excusable if he had established and implemented one or more systems for regularly checking whether these assertions by her were correct and whether she was discharging these responsibilities honestly and capably. His failure in these respects did, in our view, display reckless indifference both to his statutory obligations relating to the management of funds held on trust for his clients and to his fiduciary obligations at general law. For the reasons explained by the Court of Appeal in Mayes, his reckless carelessness may properly be characterised as 'wilful'. 65 It is true that in Mayes their Honours commented on the fact that the solicitor failed to take steps even though there were 'warnings that all was not well'. By contrast, it was not alleged in the present case that Mr Halligan failed to act after 'warnings' occurred. But Reynolds and Hutley JJA made it clear, in the passage quoted above at [56], that wholesale delegation by a solicitor of his or her financial responsibilities with regard to clients' funds, without any accompanying supervision or monitoring, could be characterised as wilful misconduct even if nothing happened to suggest to the solicitor that these responsibilities were being abused. 66 As Mr Barnes argued, Ms McBeth did not establish any 'elaborate system of deception' to conceal what she was doing. Simple and straightforward measures such as inspecting passbooks or bank statements from time to time or requiring regular printouts of transactions conducted by her would have quickly exposed her fraud. It would have been enough, for instance, for Mr Halligan (or indeed some member of his staff other than Ms McBeth) simply to cast an eye over one or more of the passbook or bank statement pages that showed two or three withdrawals being made in a single day from funds held on trust for Ms Belinda Turner (see [37] above). These irregularities would or should have been enough of themselves to awaken suspicions. 67 During the hearing, we drew the parties' attention to the Tribunal's decision in Law Society of New South Wales v Hansen [2004] NSWADT 183. In that case, the respondent solicitor, placing complete trust in the honesty and integrity of his managing clerk, provided scope for the clerk over a significant period of time to misappropriate large sums from his firm's trust account. At [29 – 41], the Tribunal identified the solicitor's 'principal derelictions' as follows: (a) he handed signed blank cheques drawn on the trust account to the clerk; and (b) he failed to check the firm's trust account records to satisfy himself that the clerk's handling of the funds was both honest and competent. In these circumstances, closely resembling those of the present case, the Tribunal, applying the principles stated in Mayes, held that the solicitor was guilty of statutory misconduct under section 61(8) (and also under section 62(4)) of the LP Act 1987 (see the decision at [49 – 59]). 68 In the Particulars to the Amended Disciplinary Application and at the hearing, it was claimed that Mr Halligan had authorised distributions from the Hawkins estate during a period where this was not lawful because no executor had been appointed. Mr Barnes did not however press this claim to any extent during his submissions. In these circumstances, we have considered it appropriate not to take any account of it in our decision on professional misconduct. 69 Our ruling that Mr Halligan's conduct was 'wilful' is enough to confirm that the Law Society's case under Ground 1 (wilful breach of section 61 of the LP Act 1987) is made out. Having regard, however, to the operation of the transitional provisions in the LP Act 2004 and the existence of provisions in this Act equivalent to the former section 61, the correct foundations for our decision that he was guilty of statutory misconduct are, we believe, that he engaged in unsatisfactory professional conduct involving 'a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence' (see section 497(1)(a) of this Act) and that he engaged in 'conduct consisting of a contravention of this Act' (see section 498(1)(a)). 70 In addition, we hold that his conduct alleged under Ground 1 would 'reasonably be regarded as disgraceful and dishonourable by professional brethren of good repute and competency' and was therefore professional misconduct at common law. 71 The conduct alleged under Ground 4 – that Mr Halligan 'failed to account' – is established by the following: (a) the admission contained in the Reply filed by Mr Halligan; (b) the evidence of a deficiency of $14,186.73 in the funds held on trust for the Hawkins estate (see [40] above); and (c) the evidence of Mr Halligan's failure to monitor the activities of Ms McBeth. For the same reasons as apply in relation to Ground 1, we hold that his conduct amounted to professional misconduct at common law. 72 On the other hand, Ground 3 – that Mr Halligan 'misappropriated trust funds' – is not made out. The Law Society conceded that he did not personally misappropriate funds held on trust for his clients. This Ground is not made out by proving that reckless indifference on his part enabled another person to misappropriate them. Failure to maintain accounting records as required 73 In the Particulars to the Amended Disciplinary Application, the Law Society alleged that Mr Halligan breached section 62 of the LP Act in two respects. 74 The first of these was that he could not produce to Ms Sayer any records relating to the affairs of A L Hawkins (who was the brother of Joy Aurora Hawkins), for whom trust moneys were held in controlled accounts. The Particulars referred to a specified page in one of the reports prepared by Ms Sayer. 75 We do not see how anything in Ms Sayer's reports establishes this allegation. It was not the subject of specific attention during the hearing. 76 Secondly, the Particulars alleged as follows:- (a) Mr Halligan was unable to produce to Ms Sayer any records relating to an Advance Bank account, containing funds of the Hawkins estate, which remained open until 29 May 1997. (b) When the balance held in 'an account with Advance Bank' was transferred to another account kept with the Bank in the name of this estate, there is 'no evidence of any such account appearing in the Controlled Money Records of the solicitor'. 77 With reference to these two allegations, the Particulars again referred to a page in one of Ms Sayer's reports. 78 Ms Sayer's reports do contain material verifying these allegations: for example, it is indicated that the transfer mentioned in the second allegation occurred on 19 May 1995. 79 At the hearing, Mr Halligan was cross-examined in general terms about his inability to produce all relevant records relating to the Hawkins estate accounts to Ms Sayer. He stated that he delegated to Ms McBeth the tasks of archiving and destroying the files kept by Roach & Halligan to the extent permitted by the regulations then current and admitted that he did not supervise her execution of these tasks. He indicated that he believed that solicitors were required to keep records for a minimum of seven years. He also admitted that Roach & Halligan did not, or may not have, maintained other records that the regulations required to be kept for controlled money accounts. 80 Under clause 28(4) of the Legal Profession Regulation 1994, the period for which a solicitor who had 'maintained, or caused to be maintained' or 'lawfully acquired possession of' a controlled money record was required to retain it for not less than six years after it was made. 81 Ms Sayer was appointed receiver of Roach & Halligan in July 2003. This date is more than six years after the two dates (29 May 1997 and 19 May 1995 respectively) referred to in the allegations that we are now discussing. 82 In these circumstances, we are not satisfied, despite the significant admissions made by Mr Halligan, that the breaches of section 62 of the LP Act alleged in Ground 2 of the Disciplinary Application and the accompanying Particulars have been proved. Unauthorised investment of funds held on trust 83 Ground 5 of the Disciplinary Application alleged that Mr Halligan failed to invest estate funds in accordance with the will of Nancy Josephine Walker and failed to inform the beneficiaries of the resulting loss. The accompanying Particulars did not refer to the latter failure. 84 The will empowered Mr Halligan, as executor, to invest estate funds in any investment authorised by trustee legislation. After probate had been granted, Mr Halligan signed a General Lending Authority. This included a provision stating that any investment involving real property as security for a loan should take the form of a registered first mortgage and that the amount of the loan should not exceed 66% of the value of the property. 85 Despite this provision, a loan of $32,000 was made on 14 February 1990 from the funds of the estate held by Roach & Halligan on the security of a second mortgage over property owned by the borrowers. On 3 April 1992, the first mortgagee, Citibank Ltd, sold the property in exercise of its power of sale. The proceeds of sale were insufficient to permit any repayment of principal or interest due under the mortgage to the estate. Ms Sayer stated in her report on the matter that the beneficiaries were not advised of this loss until after Ms Belinda Turner had made her complaint against Mr Halligan. This occurred in October 2002. 86 In his Reply, Mr Halligan acknowledged that the investment was not in accordance with the terms of the will. He maintained, however, that his failure in this regard was not wilful, but was the consequence of his misinterpreting the terms of the will. He stated in his affidavit that he took proceedings against one of the borrowers to recover the amount lost, but was unsuccessful. He stated also that he recalled advising Mr Rodney Turner, who was the father of the beneficiaries, about the loss and suggesting that a claim in negligence be made against Lawcover. 87 The allegation that Mr Halligan did not inform the beneficiaries of the loss occasioned by this investment has not been proved to our comfortable satisfaction. But the more significant allegation that he failed to comply with the terms of the will, thereby causing loss to the beneficiaries, is admitted. 88 In our judgment, this failure warrants a finding of unsatisfactory professional conduct only, not professional misconduct. In accordance with the definition set out in section 496 of the LP Act 2004, it was conduct that 'falls short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent Australian legal practitioner'. We are authorised by section 562(6) of the Act to record this lesser finding in place of that sought in the Disciplinary Application. Consequential orders 89 The Law Society's submissions. As indicated above, the principal order sought by the Law Society in the Disciplinary Application was that the name of Mr Halligan be removed from the Roll of Local Lawyers. 90 In arguing that we should make this order, Mr Barnes placed emphasis on the length of time during which Mr Halligan failed to monitor the activities of Ms McBeth and on the scale of the losses thereby occasioned to clients of his firm. He also argued that Mr Halligan's willingness to accept oral assertions by her that beneficiaries had requested funds to be distributed and his conduct in giving her withdrawal forms signed in blank, coupled with his failure to check easily available records to ensure that she behaved honestly, displayed reckless indifference to his responsibilities to an extreme degree. 91 He argued further that Mr Halligan had not brought forward evidence sufficient to displace the presumption that the unfitness to practise demonstrated by his past misconduct was still continuing. In so arguing, Mr Barnes acknowledged that the criterion to be applied in deciding whether a practitioner found guilty of professional misconduct should be struck off was 'present unfitness to practise" (see eg A Solicitor v Council of the Law Society of New South Wales (2003) 216 CLR 253). 92 In this connection, Mr Barnes made two specific points as follows:- 1. Mr Halligan's unsubstantiated claim, made late in the proceedings, that Ms McBeth may have forged his signature on withdrawal slips or signed them in her own name showed that he remained unwilling to accept full responsibility for his own past failings. 2. Although he tendered numerous testimonials from witnesses who considered that the misconduct alleged against him was at odds with his good character and reputation, it was apparent that some at least of these witnesses had not been fully informed of the nature of this misconduct. 93 As an alternative to removing Mr Halligan's name from the Roll, Mr Barnes indicated towards the end of his address to us that the Law Society would not oppose the imposition of a lesser 'penalty', being an adaptation of a set of orders suggested in the Reply to the Disciplinary Application. We will return later to this aspect of his submissions. 94 Mr Halligan's submissions. Mr Healey placed at the forefront of his argument opposing a striking off order the fact that Mr Halligan had paid sums totalling $477,045 to the Law Society following the sale of his practice at Roach & Halligan. As detailed in his affidavit, he had paid $391,548.94 to reimburse the Fidelity Fund for amounts paid to claimants, $78,296.52 as reimbursement for Ms Sayer's fees as Receiver and Supreme Court costs of about $7,200. Mr Halligan claimed that these payments satisfied all the claims that the Law Society had made against him. Furthermore, he and his wife had been forced to sell their home and live in distinctly more limited accommodation. 95 Mr Healey pointed out also that Mr Halligan had admitted the factual allegations made against him and had displayed contrition. His reputation and self-esteem had suffered greatly. Although his misconduct had paved the way for substantial amounts to be misappropriated from some of his clients, it had not involved any dishonesty on his part and his firm's management of funds held on trust for numerous other clients over a long period of time had not been attended by any irregularities. Having been 'once bitten', he would not commit again the errors that gave rise to these proceedings. He had not practised as a solicitor since the sale of his practice, but had instead been employed as a licensed migration agent. As was indicated in the report of his consultant psychologist, his health had been adversely affected by the stress of this matter, but there was no reason to believe that any such consequences would impair his future capacity for legal practice. 96 As to the testimonials adduced by Mr Halligan, Mr Healey argued that even if not all the deponents knew in detail what had been alleged in the Disciplinary Application, they nonetheless were unanimous in the view that the alleged conduct was out of character and that Mr Halligan was an honest and trustworthy person who was entirely fit to engage in legal practice. 97 In addition to emphasising that the criterion to be applied in deciding whether a practitioner should be struck off was 'present unfitness to practise', Mr Healey pointed out that in the case principally relied on by the Law Society, Re Mayes and the Legal Practitioners Act [1974] 1 NSWLR 19, the respondent solicitor had not been struck off by the Statutory Committee. This is apparent from the judgment of Hardie JA at 22. 98 It is worth noting here that in Law Society of New South Wales v Hansen [2004] NSWADT 183 (described above at [67]) the Tribunal's decision that the respondent solicitor should be struck off was primarily based on matters other than his failure to supervise the activities of his managing clerk. At [194], the Tribunal said that this conduct, viewed in isolation, might not have justified such a severe sanction. 99 The 'alternative orders' suggested by the parties. In the Reply, as mentioned above, Mr Halligan suggested that two sets of orders were appropriate to the situation. The first comprised a public reprimand, an order for regular inspection of his trust and office accounts and a costs order. The second, put forward as an alternative, comprised (a) an order, operating over five years, that restricted his right of practice to that of an employed solicitor and prohibited him from operating any account of a solicitor containing trust funds and (b) a costs order. 100 The 'alternative orders' that Mr Barnes outlined near the end of his address (see [93] above) were a variant of the latter set of orders contained in the Reply. Mr Barnes indicated that the Law Society would not oppose an order containing the restriction and prohibition regarding his right of practise suggested in the Reply, provided (i) that it remained in operation until Mr Halligan had demonstrated his knowledge of current trust account regulation by passing an appropriate examination on this subject and (ii) that Mr Halligan also paid the Law Society's costs of these proceedings. 101 In the ensuing discussion at the hearing, two further suggestions were made. One was that Mr Halligan should also be required to attend a course on trust account regulation. The other was that when seeking employment as a solicitor he should be required to produce a copy of the Tribunal's orders to any prospective employer. Our conclusions 102 For reasons set out earlier, we have determined that Mr Halligan was guilty of professional misconduct, both at common law and under the LP Act 2004, as alleged in Grounds 1 and 4 of the Amended Application and that he was guilty of unsatisfactory professional conduct by virtue of the matters alleged in Ground 5. 103 We accept, in general terms, the submissions advanced by Mr Healey with regard to the consequential orders that we should make under section 562(2) of the LP Act 2004, and we note that the alternative position put to us by the Law Society does not greatly differ from a suggestion made by Mr Halligan in his Reply. 104 This is not, in our opinion, a case where a striking off order is warranted. The protection of the public will be sufficiently maintained if the following orders are made:- 1. The Respondent is guilty of professional misconduct by virtue of the matters alleged in Grounds 1 and 4 of the Amended Application and is guilty of unsatisfactory professional conduct by virtue of the matters alleged in Ground 5. 2. The Respondent is reprimanded. 3. Unless and until the requirement set out in Order 4 is satisfied, any practising certificate issued by the Applicant to the Respondent is to be subject to the following conditions:- (a) His right to practise is restricted to that of an employee of a solicitor holding an unrestricted practising certificate. (b) He is not to operate on the account of any solicitor which may contain trust funds. 4. The Applicant may remove any of the conditions stipulated in Order 3, but only if the Respondent has first demonstrated his knowledge of current trust account regulation by passing an appropriate examination on this subject. 105 Near the conclusion of the hearing, Mr Healey submitted that the matters relied on by him in opposing a striking off order also constituted 'exceptional circumstances' displacing the normal rule, stated in section 566 of the LP Act 2004, that a respondent found guilty of professional misconduct should pay the applicant's costs. We do not accept this submission, which Mr Barnes opposed. We accordingly make the following additional order:- 5. The Respondent is to pay the Applicant's costs of and incidental to these proceedings as agreed or assessed within six months of these costs being agreed or assessed. 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