The Legal Services Tribunal of New South Wales CITATION : David Bruce Peart [1995] NSWLST 4 PARTIES : David Bruce Peart FILE NUMBER(S) : of 1994 CORAM: Mr F Herron (Presiding Member) - Mr G B Molloy - Mr N. Reidy CATCHWORDS: Professional Misconduct - breach of s. 61 of the Legal Profession Act :- Solicitor improperly allowed a person to handle trust funds LEGISLATION CITED: Legal Profession Act 1987 CASES CITED: In the matter of Ian Gordon Dun (1994 3 LPDR 5 at 6-7) DATES OF HEARING: 9 June, 10 June and 13 December 1994 DATE OF JUDGMENT: 02/08/1995 LEGAL REPRESENTATIVES: For Law Society of NSW: Mr D. Hipsley instructed by Mr F. Riley. For the Solicitor: Mr G.C. Lindsay instructed by Messrs Lloyd and Lloyd. JUDGMENT: Finding of professional misconduct in that: 1. The solicitor improperly allowed a person to handle trust funds. 2. The solicitor allowed funds which should have been held in his trust account to be paid out contrary to instructions. 3. The solicitor breached Section 61. Finding of unsatisfactory professional misconduct in that the solicitor falsely certified that he had not held or disbursed trust money or controlled money within the meaning of Section 61(8). Ordered that the solicitor not be issued with a practising certificate until 1-7-95, the solicitor to undertake further legal education and thereafter be issued with a restricted practising certificate for five years. In 1990 the solicitor allowed himself to be so influenced by a Mr James Harding, a confidence trickster (more colloquially called a "con man") that he allowed moneys that were unarguably trust moneys to be passed through his office account and he allowed another person, a Mr Bill McKay, to have access to those moneys by providing Mr McKay with signed blank cheques. The solicitor obtained moneys (in total $100,000.00) from two clients and allowed those moneys to be disbursed in a manner contrary to the quite specific instructions of those clients. How did the solicitor get himself into this mess? The evidence before the Tribunal in this regard was effectively unchallenged. The Law Society has preferred a number of formal complaints against the solicitor but those complaints pertaining to this particular aspect, although clearly the more serious, occupied the least hearing time because there was really no effective answer that the solicitor had to the allegations. The solicitor knew Mr McKay from about 1986. He had been a business associate of the solicitor. In 1989 Mr McKay told the solicitor that he had met Mr Harding who could arrange overseas funds at lower than local Australian market rates and these funds would be lent and repaid in Australia in Australian currency. The solicitor was introduced to Mr Harding in late February 1990. It was the classic "sting": while the solicitor was talking to Mr Harding, Mr Harding apparently took telephone calls from a former State premier, a well-known overseas firm of solicitors and a high-ranking officer with the Federal Police. On one occasion he was actually collected by a Commonwealth car. Harding put it to the solicitor that he could arrange certain funds overseas provided that a collateral facility was set up overseas and for which a flat fee of $50,000.00 would be paid by the Australian borrower to acquire the overseas collateral. Harding seemed to the solicitor to be a decent and honest fellow - he stated that he would not require any borrower to pay the money until he had a commitment by the lender. The proposition was that the solicitor would be the stakeholder for the $50,000.00 and when that money, as a deposit, had been paid Harding would make sufficient disclosure to the individual borrowers to give them the confidence to go ahead. If they did not wish to go ahead then their respective $50,000.00 deposits would be refunded. As part of the fraud Harding told the solicitor that he had to go to Singapore and Europe but that at the same time he was supposed to go to the Philippines to negotiate a chromite mining joint venture contract and he wanted the solicitor to go in his stead. Harding told the solicitor that he had certain Asian associates who were talking about putting in US$10m. The Heap Fraud At the same time as Harding was arranging the Philippine contract he was attempting to structure a deal whereby Ilepaten Pty Limited would borrow something in the order of $8m-$11m from an overseas lender on the basis that Ilepaten put up the initial $50,000.00 for what was described as the "European collateral". Acting upon the instructions of Harding the solicitor wrote to Ilepaten a number of letters purporting to be loan approval letters subject to Ilepaten (through its director, Mr Colin Heap) executing the letters by way of acceptance. In the meantime, quite extraordinary arrangements were made between the solicitor and Mr Harding for the solicitor to go to the Philippines to negotiate the mining deal. Harding offered the solicitor five or ten per cent of the proposed deal for $25,000.00. Harding provided the solicitor with various mining venture precedents and the arrangement was that if the solicitor was satisfied as to the mining deal he would prepare documents for Harding to sign and that he, the solicitor, would pay Harding the $25,000.00 for a small share in the project. The solicitor had absolutely no experience in mining and little or no experience in negotiating the type of contract that was envisaged and little or no experience in being able to carry out a professional assessment of technical reports and mining ventures. He was clearly out of his depth but did not realize it. Arrangements were made for the solicitor to fly out to the Philippines on 24 April 1990. Harding apparently paid for the ticket and gave the solicitor $1,000.00 cash for expenses. Of course, it all happened on 24 April 1990. The solicitor was supposed to fly out to the Philippines and, at the same time, Mr Heap was to pay the $50,000.00 for the overseas loan. The solicitor went to Harding's home where he gave to Mr McKay two undated cheques drawn on his office account with certain instructions to McKay to pay $25,000.00 to Mr Harding if the solicitor was satisfied in relation to the Philippine mining leases. The solicitor said that that $25,000.00 was covered by an arrangement reached with his banker. Also, on this fateful day, Mr McKay introduced the solicitor to Mr Heap. The solicitor, although he had written to Mr Heap (Ilepaten Pty Limited) on previous occasions, had never met him. Mr Heap had seen his own solicitors on the preceding day and had been advised by those solicitors not to sign the various loan approval letters. For some reason that was not explained, Mr Heap appeared willing to hand over the $50,000.00 without executing the form of acceptance of the loan offer. Mr Heap's solicitors prepared a form of acknowledgment and on 24 April that form was handed by Mr Heap to the solicitor, together with the $50,000.00 cheque drawn in favour of "D.B. Peart & Associates Trust Account" and the solicitor signed the form of acknowledgment. The form of acknowledgment signed by the solicitor acknowledged receipt of the $50,000.00, confirmed that it would be "held in trust pending settlement of the loan transaction and payment to you of the said loan proceeds" and contained an undertaking to refund the $50,000.00 upon demand if the loan transaction was cancelled or rescinded or the terms and conditions of the proposed advance were substantially different from those already advised. Pausing at this point, it is clear that the form of acknowledgment differs from the arrangement structured by Mr Harding. Harding structured it in such a way that the $50,000.00 would be used to purchase the "European collateral" and that purchase would pre-date the actual making of the loan because the purchase of the collateral was a pre-requisite for the loan moneys being transmitted. The acknowledgment of receipt, however, states that the $50,000.00 is to be held in trust pending settlement of the loan transaction and payment to the borrower of the loan proceeds, terms of which were at variance with the pre-purchase of the "European collateral". For reasons that were also unexplained the $50,000.00 cheque was stopped. On 4 May 1990 Mr Heap drew a further cheque on the same company account in favour of "D.B. Peart & Associates Trust Account" in $50,000.00. Mr Heap said that "by prior arrangement this cheque was handed to Mr McKay in exchange for another form of acknowledgment also signed by Mr Peart in similar terms. It would seem that arrangements had been reached between the solicitor and Mr Heap for the Ilepaten Pty Limited transaction to proceed in the absence of the solicitor while he was overseas in the Philippines. It would seem that the solicitor handed the first $50,000.00 cheque to Mr McKay and told Mr McKay that the cheque should be deposited into his trust account. McKay deposited the $50,000.00 cheque into the solicitor's general or office account. Mr McKay then completed one of the blank cheques the solicitor had left with him payable against the solicitor's general or office account and cashed the same for $25,000.00. That $25,000.00 McKay apparently delivered to Harding. It is obvious that the failure by the solicitor to ensure that the $50,000.00 was paid into his trust account left it open for McKay to draw on those funds and pay them to Harding. A couple of days later Harding apparently spoke to the solicitor (then in the Philippines) and told him that Mr Heap was going ahead with the overseas borrowing and that the $50,000.00 was to be paid to an account in Singapore. Mr Harding, according to the solicitor, read out to the solicitor words that he, Harding, said he read from a form of authority signed under the seal of Mr Heap's company Ilepaten Pty. Limited authorising the payment of the $50,000.00 from the trust account of the solicitor to a company associated with Mr Harding styled Acquisition Funding Pte. Limited. The solicitor relying on that telephone call and without sighting the alleged written authority then telephoned Mr McKay and gave directions for the payment out of the $50,000.00. Mr McKay told him that the funds had been placed into ,the solicitors office account and the solicitor apparently replied: "Take it out of my general account and I will fix it all up when I get back. Use one of the cheques I left with you". The solicitor says that he was not then aware of the first payment to Mr Harding of the $25,000.00 but it appears that on 27 April 1990 Mr McKay completed the other blank cheque and cashed it for $25,000.00 and gave the proceeds to Mr Harding. Mr Harding then told the solicitor, in writing, that his company had received the $50,000.00 from "Mr & Mrs Heap as per the instructions received by me (Harding) from them." The note to this effect advised that Harding would arrange for the money to be paid to a firm of solicitors in Singapore for the collateral holder. It goes without saying that the payment by the solicitor to Harding via McKay was without the authority of Mr Heap or Ilepaten Pty. Limited, was contrary to the receipt and undertaking given by the solicitor to Mr Heap and his company, was arguably contrary to the statement made by Mr Harding to the solicitor in February 1990 and was clearly contrary to the various loan application letters that the solicitor sent to Mr Heap which, although apparently not signed, stated that the $50,000.00 would be paid to the solicitor "for payment to the European Collateral House for the purchase of such Collateral". It was not, of course. It was paid to Mr Harding. It is not clear why Mr Heap did not sign any loan application forms by way of acceptance and it is not clear why payment on the first $50,000.00 cheque was stopped. Consequently, it is not clear why the solicitor's Bank permitted a withdrawal against the $50,000.00 private company cheque when it had not been cleared. It is not an argument for the solicitor to say that he had made arrangements with his bankers - even on that evidence that would only cover $25,000.00 which was to be paid to Mr Harding if the solicitor was satisfied in relation to the Filipino mining joint venture. The fact is that the whole of the $50,000.00 was drawn on the solicitor's office account prior to the deposit of the second honoured $50,000.00 cheque. This second cheque was not drawn until 4 May 1990 and not given to Mr McKay until 7 May 1990. The second cheque was also deposited into the solicitor's office account, presumably by Mr McKay. This was permitted by the solicitor's bank although the cheque was clearly drawn in favour of the solicitor's trust account. This is not the first time that there has been evidence before this Tribunal which clearly shows that bankers are less than diligent in ensuring that cheques are paid into the accounts of the correct payees. This failure by Banks is a clear systems failure, amounts to negligence in a serious respect and permits fraudulent activities with other people's money. There is no need for us to refer further to the solicitor's dealings with Harding and McKay relating to Mr Heap nor to the solicitor's alleged negotiations in the Philippines. None of this impinges upon the plain fact that the solicitor permitted an unqualified person to have access to moneys that the solicitor clearly held in trust in his office account and in circumstances where those trust moneys were paid out contrary to instructions from the person on whose behalf the moneys were held. The Law Society also alleged that the moneys were withdrawn and used for the purposes of the solicitor. We do not understand how this allegation is supported by the facts because the facts in support of this allegation clearly show that the money was in fact paid to Harding. Perhaps it is suggested that the first withdrawal of $25,000.00 was intended to purchase the solicitor's interest in the mining venture. This, however, is contrary to the chronology and the evidence which shows this amount was withdrawn by McKay and paid to Harding on the same day as the first $50,000.00 was deposited. Consequently, we are not satisfied that this allegation has been made out. The Tzannes Fraud The second major allegation against the solicitor involved similar fraudulent activities by Mr Harding. Mr Theo Tzannes was introduced to the solicitor by Mr McKay in about mid-June 1990. Previously, earlier in that month, Harding had spoken to the solicitor about Mr Tzannes and stated: "Tzannes is not happy for me to hold the money unless he is satisfied we can do the loan. Will you hold the money? If he puts the money up I will make a full disclosure about how Acquisition (referring this time to another Harding company Acquisition Finance (Australia) Pty. Limited) obtains the moneys." Presumably the solicitor agreed. Mr Tzannes enquired as to the trust account of the solicitor and the solicitor said: "If the money goes into this account then it cannot be removed unless we get some authority." Mr Tzannes was a director of Gaderu Holdings Pty. Limited and, although the dates of the various conversations between Mr Tzannes and the solicitor are not entirely clear from the evidence, it would appear that Mr Tzannes subsequently spoke to the solicitor and sent to him a facsimile of a document which specified the conditions under which Gaderu Holdings would put the money into the solicitor's trust account. Whether that document was received from Mr Tzannes or his own solicitor is also not clear, but what is clear is that the solicitor was aware that Mr Tzannes and Gaderu Holdings had their own solicitor and the document sent to the solicitor by facsimile clearly spelled the conditions under which the solicitor was to hold the money. Curiously, again, the money was $50.000.00. The primary condition of the placement of the moneys into the solicitor's trust account by Gaderu Holdings was as follows: "These moneys will not be transferred out of your Trust Account or otherwise dealt with unless a written notice of such dealings has been forwarded to Gaderu Holdings Pty. Limited and consented to by Gaderu Holdings Pty. Limited." The solicitor told Mr Tzannes: "There is no problem with the terms of the letter that you sent to me. I will sign it and send it back to you"and he signed the letter by way of acknowledgment. On 22 June 1990 Mr Tzannes deposited $50,000.00 into the solicitor's Trust Account. The clear evidence from Mr Tzannes was that on numerous occasions between June 1990 and May 1991 he had numerous telephone conversations with the solicitor and had numerous meetings with the solicitor and Mr McKay. On all occasions he was informed that the collaterals are not in place yet" and on no occasion was he informed that the $50,000.00 that he had deposited with the solicitor had been released. The solicitor says that on or about 24 or 25 June 1990 Harding told him: "I have given Tzannes details of the loan and they are happy to go ahead. They would prefer the money to be held by [a named solicitor]. The moneys which you have are now to come to me and I will forward them onto [the named solicitor] in Singapore." The solicitor says that at this time Harding showed to him a document which he read. He says that the document was addressed to himself and to Acquisition Funding (Australia) Pty. Limited, it was under the seal of Gaderu Holdings Pty. Limited and that it directed the solicitor to pay the $50,000.00 out of his trust account to Mr Harding on behalf of Acquisition so that Harding could forward the moneys to the solicitor in Singapore. The solicitor says that Harding never gave to him the written authority. It is worth noting again that Harding also did not give to him the Authority that he allegedly read out to the solicitor in relation to Mr Heap's money. So, on 25 June 1990 the solicitor withdrew the $50,000.00 from his trust account and gave it to Harding. The plain fact of the matter, however, is that by June 1990 the solicitor had been in practice for some 14 years and must be taken to have understood the axiomatic requirement to hold moneys exclusively on the account of the person paying those moneys and to only disburse those moneys in accordance with that persons directions. The direction from Gaderu Holdings was quite clear - the trust moneys were not to be transferred or otherwise dealt with unless a written notice of the dealings had been forwarded to the company and consented to by the company. Those were the precise terms upon which this solicitor held those specific moneys and in our view he dealt with those moneys contrary to those quite specific terms. Even if we believe the solicitor (and we make no finding either way) to the effect that, in the case of Mr Heap, Mr Harding read out from what appeared to be an alleged authority and in the case of Mr Tzannes Mr Harding showed the solicitor an authority under seal, in neither case did the solicitor hold any written authority from either of those persons and in both cases the moneys were paid out contrary to the quite specific terms under which they were originally deposited with the solicitor. It has been said time and time again that a solicitor who holds trust moneys must deal with those moneys strictly in accordance with the requirements of the Legal Profession Act and its relevant Regulations and also in accordance with the terms and conditions under which the moneys were originally deposited. It is not an argument to say that the solicitor was duped by a confidence trickster or fell into some fraudulent trap. The plain fact is that, whatever the surrounding circumstances, the solicitor allowed himself to be used in such a way that he failed to focus on his primary requirement not to disburse trust moneys (which are, after all, the moneys of somebody else) in a way contrary to the terms upon which those moneys were originally entrusted. We have no hesitation in regarding the solicitor's conduct in both circumstances as serious, grave and weighty and finding that it amounts to professional misconduct under the general law. In addition, in relation to the Tzannes' money there was a clear breach of Section 61(1) of the Legal Profession Act and we have no hesitation in finding that that sub-section was wilfully contravened by the solicitor so that his conduct in that respect amounts to statutory professional misconduct. Practising Certificate The Law Society further alleged that in his application for renewal of his Practicing Certificate for the year 1991/1992 the solicitor falsely certified that he had not held or disbursed trust money or controlled money within the meaning of Section 61(8) of the Act between 1 April 1990 and 31 March 1991. There is no doubt that that allegation is properly made out. The Application for Renewal was signed by the solicitor, dated 26 June 1991 and it is quite clear that the solicitor received various amounts in not insubstantial sums on five occasions between 4 May 1990 and 22 June 1990. The last transaction in which the solicitor held money on behalf of any other person was slightly over one year prior to the date on which he executed the Application for Renewal and it would seem that this was an oversight by the solicitor. That is not to say, of course, that the solicitor should not have been more diligent in completing the form properly - there is no question that it must be completed properly - but in all the circumstances and having regard to the last holding of trust or controlled money being over 12 months prior to his signing the document we are of the view that his conduct does not amount to professional misconduct but rather unsatisfactory professional conduct. Dalton All of the above complaints deal with events that took place after the commencement of the Legal Profession Act 1987. The events surrounding Mr & Mrs Dalton however, took place in 1982 and 1983. As this Tribunal pointed out in the matter of Ian Gordon Dun (1994 3 LPDR 5 at 6-7) where conduct occurs prior to 1 January 1988 in order for the complaint about that conduct to succeed the conduct must amount to professional misconduct under the general law. And it cannot amount to anything less if a finding is to be made against a solicitor because the concept of "unsatisfactory professional conduct" is a creature of statute and only came into existence at 1 January 1988. The ingredients of a finding of professional misconduct under the general law are also set out in considerable detail in Dun at 7-8. There is no need to repeat those ingredients other than to say that the conduct complained of must be serious, grave and weighty. And as was observed at page 8, "it is all a matter of degree looked at not with hindsight nor with a desire to right any perceived past wrong or deviation from what a Tribunal may now think should have been the case at the time of the act in question or what the Tribunal may wish the professional milieu to be at the time of hearing. Each case must be judged on its own facts." In September 1981 Mr Dalton consulted the solicitor in respect of certain committal proceedings which were pending in relation to his son. His son was apparently committed for trial and Mr & Mrs Dalton instructed the solicitor to represent their son at the trial. Counsel was briefed and, presumably, appropriate conferences held and estimates of costs and time were given. The Daltons were advised that the hearing would probably last one week and certain moneys were deposited with the solicitor with a view to meeting his professional costs and the fees of counsel. The trial took longer than expected. It went over to the second week. The solicitor become concerned about his costs and how he was going to meet the fees of counsel for the second week. The solicitor requested Mr & Mrs Dalton to sign a form of mortgage in his favour, which they did. They signed that mortgage form at Court at the commencement of the second week of the trial. The Law Society alleges that the taking of that security from the parents of his client was improper and amounted to professional misconduct. There are serious differences in the evidence given by Mr & Mrs Dalton and a Ms Robyn Taylor on the one hand and the solicitor on the other. The bulk of the hearing before us was occupied dealing with the Dalton matters. The Daltons say that the solicitor told them that they had to sign the mortgage form, that the solicitor would later "fill in any details", that he would keep the form and would show it to the barristers as evidence, presumably, that the Daltons were going to supply more money for the trial - otherwise "the barristers will not appear tomorrow morning without more money". In his Statutory Declaration Mr Dalton said that those words were said to him. In her Statutory Declaration Ms Taylor says that words to that effect were spoken to Mrs Dalton - indeed Ms Taylor alleges the solicitor said: "If the papers are not signed so that we can get the fees for the barristers then the boys (meaning the Dalton's son and another accused) will go in there unrepresented and they will be facing a life sentence." It is curious that Mrs Dalton in her Statutory Declaration makes no reference at all to these words being spoken in the context of signing the mortgage form. She alleges, on the other hand, that words to that effect were spoken to her, some days later after signing the form, in relation to obtaining certain moneys from the Brisbane Public Trust office. The solicitor denies the allegations - he says that he spoke to Mr Dalton on the last day of the first week of the trial and Mr Dalton informed him that he would be obtaining money from his mother's estate in Brisbane from the Public Trustee and he expected to receive that money before Christmas 1982. The solicitor suggested that Mr & Mrs Dalton provide a mortgage to cover his costs and there would be no need for it to be registered or interest to be payable if payment was not received and its only purpose was as security. The solicitor then says that on 5 October he had a further conversation with Mr & Mrs Dalton and as a result thereof he arranged with his secretary for her to prepare a mortgage document, an Acknowledgment and a Deed of Agreement. Mr & Mrs Dalton, on the other hand, deny ever having seen any Acknowledgment or Deed of Agreement. However, there was clear evidence from the solicitor's secretary that she in fact prepared all three documents and delivered those three documents to the solicitor at the District Criminal Court at Darlinghurst. There is no doubt that all three documents were prepared and delivered to the solicitor. There is also no doubt that Mr & Mrs Dalton signed the mortgage and, although their signatures appear on the Acknowledgment, they deny having signed that document. No signatures of theirs appear on the Deed of Agreement. The solicitor says that he showed all documents to Mr & Mrs Dalton. They deny that. The solicitor says that he also showed the Deed of Agreement to the other co-accused and to that person's defacto wife. Their signatures appear on that Deed, the signature of the co-accused being witnessed by the solicitor (that co-accused being in custody) and that the signature of his defacto wife being witnessed by an independent person at the request of the solicitor. The solicitor says that he gave a signed copy of the Deed to Mr Dalton and asked he and his wife to go and see a Chamber Magistrate. It was suggested, in cross-examination, that there was in fact at that time no Chamber Magistrate at the Darlinghurst Court House simply because it was not a Local Court but a District Criminal Court. The solicitor says that Mr Dalton returned with the mortgage signed by he and his wife but their signatures had not been witnessed and Mr Dalton said: "We can't get an appointment to see the Chamber Magistrate." Pausing at this point it was suggested, strongly by counsel for the Law Society, that this Statement alleged by the solicitor to have been made by Mr Dalton shows that the solicitor was not telling the truth. But the solicitor says that he thought that there was a Chamber Magistrate at all Courts. By this stage the solicitor had been admitted for about six years, did not do a great deal of criminal law work and we accept his explanation. The statement alleged to have been said by Mr Dalton that he could not get an appointment to see the Chamber Magistrate is not inconsistent with the solicitor's explanation, and in any event, is denied by Mr Dalton. The solicitor then told Mr & Mrs Dalton that he could not witness their signatures and that they would need to get them witnessed by somebody else. And that is exactly what they did - they went away and executed the mortgage document before an independent witness. The mortgage document itself contains what appears to be two separate signatures of Mr Dalton and two separate signatures of Mrs Dalton. Neither of those persons could explain why there was more than one of their respective signatures on the document - they went to a lot of trouble in evidence to attempt to differentiate between the various apparent signatures. We, on the other hand, are comfortably satisfied with the solicitor's explanation. The four apparent signatures on the mortgage document cannot otherwise be explained other than in the way the solicitor has given evidence. Other differences in evidence were also apparent. Mr & Mrs Dalton said that the mortgage document was "blank". Mrs Dalton's recollection was that the document was simply a printed page without any typing on it at all. Ms Taylor said in her Statutory Declaration that to the best of her recollection there was nothing filled in on tne document other than the signatures of Mr & Mrs Dalton. In cross-examination she denied that it was even a printed page. She said she could not remember any of the writing on it at all - not even the printed word "Mortgage". The solicitor, on the other hand, states that it was a standard form of mortgage document as, indeed, it was and that his secretary had prepared it in such a way that it only required the solicitor to complete the given names of Mr & Mrs Dalton, its date of execution and the title details, the latter of which his secretary was not able to ascertain prior to preparing it and delivering it the solicitor at the Court house. This evidence is corroborated by his secretary. We have found the evidence of Mr & Mrs Dalton and Ms Taylor to be less than satisfactory and nowhere near the standard of proof that is required if this part of the Complaint is to be found proved against the solicitor. As always, the onus is on the Law Society and the standard of proof must be to the comfortable satisfaction of this Tribunal, particularly in a matter as grave and as serious as a charge of professional misconduct. We are not satisfied to the requisite standard of proof and this aspect of the Complaint must be dismissed. It was suggested in argument that requiring clients to sign a mortgage to secure one's fees during the course of a trial is improper conduct. Put so broadly there is no such principle. There is no doubt that, as a matter of law, a legal practitioner can secure his/her legal costs by the client executing in his/her favour a mortgage. The only question is whether in particular circumstances such a request by a legal practitioner is improper. One would need to look very carefully at each individual case to see whether the circumstances were such that the conduct could be regarded as improper and, if so, to what degree. It would be dangerous to attempt to express some opinion as to principle because one can conceive of circumstances where the granting of a mortgage by a client part way through a case to secure legal fees may well be quite proper. For example, the client may request it. Or, after proper explanation, in particular circumstances, it might be concluded that the granting of a mortgage was voluntary and given after proper disclosure and in the interests of the client. After all, a legal practitioner is entitled to be paid for his/her legal work and obtaining a mortgage from a client is more a matter of grace by the legal practitioner than one deserving of criticism. There is no doubt, in this case, that the solicitor could have dealt with the matter in a more appropriate way and thereby avoided the criticism that has been levelled against him. It is quite clear that the solicitor could see himself left in the lurch in relation to his fees. Indeed, this turned out to be the case. Other than his fees for the first week of the trial, his fees have never been paid and he was very much put out by this fact so much so that he formed the view, after a period of time, that the Daltons were not going to pay him. The solicitor was very angry. He formed the view that the Daltons had fraudulently misrepresented to him that they were the owners of their home which was unencumbered and that they were entitled to grant a mortgage as security for their son's costs and fees (whereas in fact their home was owned by the Housing Commission) and that they had deliberately misrepresented to him that they intended to pay to the solicitor $10,000.00 which Mr Dalton was to obtain from the Public Trustee in Queensland. The solicitor laid criminal charges against Mr & Mrs Dalton in the Sutherland Local Court. He was represented by counsel. The Society has alleged that those criminal proceedings were instituted by the solicitor in order to try to recover his fees. In support of that allegation the Society alleges that at the hearing at Sutherland Court counsel for the solicitor said to Mr & Mrs Dalton's solicitor: "This does not have to proceed today. We can settle by your clients paying the amount."No evidence was called from the solicitor's counsel nor from the solicitor for Mr & Mrs Dalton. Although it is true that the Sutherland Local Court dismissed the charges and subsequently Mr & Mrs Dalton succeeded in certain Supreme Court proceedings against the solicitor for malicious prosecution, we are not comfortably satisfied that the solicitor instituted those criminal proceedings in order to try to recover his fees. In our view, the evidence against the solicitor is lacking and from observing the solicitor and hearing his evidence and the evidence of Mr Butt, a solicitor of considerable experience who has known the solicitor since 1971, we are not comfortably satisfied that this ground has been established. As Mr Butt explained, the solicitor was then relatively inexperienced in the legal profession, his clients had not paid the costs that they should have paid and apparently acknowledged in the Supreme Court that they should have paid, and that with the benefit of hindsight and experience in the legal profession "you should not walk anywhere near a Court until you have twice as many costs as you need and you are covered. If you try and do the right thing by people - I have got a cupboard full of people and I could retire for a year and a half if they all paid me the money they owed me. Ten years ago I might have taken them to Court, these days I have better things to do with my time...I would not contemplate embarking on proceedings (today) but I might have tried to chase them through the Courts ten or so years ago...I think all of us in the profession suffer that problem and I don't just speak from my own experience...I speak as the President of a Regional Society where we sit around and talk about these problems and the profession has changed and the way you deal with things has changed...and I am sure David Peart has changed in 12 years too. I am sure there is no question of that. I am confident of that." Counsel for the Society pressed upon us that there was something improper in the solicitor not appearing before His Honour Needham J. to respond to the malicious prosecution proceedings. There was, of course, no obligation on the solicitor to appear. He was represented by a legal practitioner. The proceedings were heard in 1990, some 8 or so years after the original criminal trial. It is quite likely that the solicitor had simply had enough of the whole business and left it to Mr Butt to try and sort the matter out. The proceedings were, of course, private proceedings in a civil Court and there is no obligation on a legal practitioner, or any other citizen, to respond to civil proceedings - if they do not, of course, then they must accept whatever the result is, and the solicitor will simply have to accept the findings of Needham J. and the damages orders that were made against him. This Tribunal is not prepared to make any adverse finding or comment against the solicitor in this respect. Summary We have found the solicitor guilty of professional misconduct in the following respects: 1. That he improperly allowed a person (Mr McKay) to handle trust funds.2. That he allowed funds which should have been held in his trust account to be paid out contrary to instructions from Mr Heap or Ilepaten Pty. Limited.3. That in the course of practicing as a solicitor he received money on behalf of Gaderu Holdings Pty. Limited and failed to hold such moneys exclusively for that company in contravention of Section 61(1) Legal Profession Act 1987. It is also clear that the solicitor allowed the trust funds of Ilepaten Pty. Limited to be deposited to his general or office account and failed to exercise proper control over those funds, and it is also clear that the solicitor paid out the trust moneys of Gaderu in a way contrary to the terms upon which those moneys were held. We have found the solicitor guilty of unsatisfactory professional conduct in falsely certifying that he had not held or disbursed trust money or controlled money within the meaning of Section 61(8) Legal Profession Act between 1 April 1990 and 31 March 1991. We are not satisfied that the solicitor allowed funds (the Heap moneys) which should have been deposited in his trust account and which were deposited in his office account to be withdrawn and used for the solicitor's own purposes, or that he improperly took security from Mr & Mrs Dalton or that he obtained the signatures of Mr & Mrs Dalton on a blank memorandum of mortgage in his favour in an attempt to secure payment of his fees or that he instituted criminal proceedings against Mr & Mrs Dalton in order to try to recover his fees. In relation to the Daltons, however, and perhaps with the benefit of hindsight and experience, the solicitor's conduct is open to criticism but is not such as would amount to professional misconduct. Solicitor's history The solicitor is aged 46, was admitted to practice in May 1976 was thereafter employed for about 12 months and from 1978 to 1984 he practised on his own in Sydney and later at Campsie. From 1984 to 1989 he practised on his own account at Oyster Bay and from 1989 to mid-1991 he practised at Albion Park. He closed down his practice entirely at that point and has worked on and off after that time but doing very little work as a solicitor. He is married and has three children. It is unfortunate to observe that his marriage fell on hard times in 1989 and in January 1990 he and his wife separated. However there now seems to be a reconciliation. It may well be that the difficulties with the solicitor's marriage contributed to the difficulties with his own legal practice and his approach to the Heap and Tzannes matters but bearing in mind the totality of the solicitor's practice the Dalton matter was one very early in his professional life and it appears no other matters have come to the attention of the Society until the solicitor fell into the fraudulent clutches of Mr Harding in 1990. In our view the solicitor showed a serious inability to resist the pressure put on him by Mr Harding (and perhaps also Mr McKay) and an inability to understand the need to strictly comply with the requirements of clients pertaining to trust money and also to strictly comply with the requirements of the Legal Profession Act and its Regulations pertaining to those trust moneys. Mr Butt, a solicitor of considerable experience and who has known the solicitor for a long time, gave written evidence and robust oral evidence of the high regard that he has for the solicitor and to the solicitor's legal experience. Mr Delaney, a solicitor of eighteen year's experience, speaks highly of the solicitor, whom he has known since the early 1970s speaks of his honesty and integrity and believes him to be an honourable person. This is not a case involving any dishonesty or conduct resulting in personal advantage to the solicitor. Neither did he seek deliberately to take advantage of the Daltons, Mr Heap or Mr Tzannes. It would appear that the Heap and Tzannes matters, although amounting to professional misconduct are isolated instances brought about by a lack of focus by the solicitor in the fraudulent milieu created by Harding. The view that we have formed is that the solicitor is, at least certainly in the short term, not suitable to be entitled to practice as a sole practitioner or as a partner but he should be entitled to practise as an employed solicitor under supervision. The findings of professional misconduct that we have made against the solicitor, viewed in their particular circumstances and from the perspective of the totality of his practising life, in our view do not entitle us to make a protective order other than ones that will assist the solicitor in understanding the need for strict compliance by legal practitioners of trust account responsibilities. Consequently, we have fashioned orders which reflect those conclusions and requirements. The intent of these Orders is to enable the Solicitor to re-enter the practicing profession subject to restrictions and to practice under those restrictions for five years before being granted an unrestricted practicing certificate. The solicitor must also pay the costs of the Law Society on a solicitor/client basis. Although a great deal of hearing time was taken up on the Dalton matter and although no professionally adverse finding was made against the solicitor in this regard, his conduct was less than satisfactory and the Society was justified in pursuing that aspect of the Complaint. Orders The Tribunal makes the following Orders: 1. A Practicing Certificate be not issued to the solicitor until 1 July 1995.2. The solicitor, prior to the issue to him of a Practicing Certificate pursuant to Order 1, undertake and complete to a standard approved by the Council of the Law Society such course of further legal education pertaining to office administration and control of trust accounts as the said Council may approve.3. Any Practicing Certificate issued to the solicitor pursuant to Order 1 and any Practicing Certificate issued to the solicitor for the years commencing 1 July 1996, 1 July 1997, 1 July 1998 and 1 July 1999 be endorsed with a condition restricting the solicitor from acting as a solicitor otherwise than in the course of employment by a solicitor holding an unrestricted Practicing Certificate.4. The solicitor pay the costs of the Law Society, such costs to be assessed on a solicitor and client basis as if taxed in the Supreme Court of NSW.5. If agreement cannot be reached between the solicitor and the Law Society as to the amount of such costs, either party shall have liberty to apply.6. In the event that no suitable course is available in order for the solicitor to comply with Order 2 above in sufficient time prior to 1 July 1995, either party have liberty to apply on 14 days' notice. 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.