The Legal Services Tribunal of New South Wales CITATION : Lesley Elizabeth Mayo (a clerk) [1992] NSWLST 21 PARTIES : Lesley Elizabeth Mayo a (clerk) FILE NUMBER(S) : of CORAM: Mr D E Hunt (Presiding Member) - Mr C. Robison - Dr U. Gault CATCHWORDS: Professional Misconduct - misappropriate trust moneys/moneys :- LEGISLATION CITED: Legal Profession Act 1987 CASES CITED: DATES OF HEARING: 09/12/92 - 22/12/92 DATE OF JUDGMENT: 12/22/1992 Mr L.W. Pierotti LEGAL REPRESENTATIVES: Mr F. Smith Mr B. Gubbay, Solicitor of Vaughan Barnes JUDGMENT: The Legal Profession Disciplinary Tribunal In the matter of Lesley Elizabeth Mayo a clerk Reasons for Determination and Orders Before: Mr D.E. Hunt (President), Mr C.J.G. Robison and Dr U. Gault. Legal Profession Disciplinary Tribunal considers question of allegations of misappropriation against Clerk Tribunal considers that although facts admitted, dependent evidence of the allegations made by the Society are required The Tribunal being satisfied as to the misappropriation by the Clerk, order that pursuant to section 120(4) of the Legal Profession Act 1987, that solicitors be prohibited from employing or paying in connection with their practice, the Clerk. Appearances: Mr L.W. Pierotti, Solicitor, instructed by Mr F. Smith for the Law Society of NSW, and Mr B. Gubbay, Solicitor of Vaughan Barnes, for the Clerk. Hearing date: 9 December 1992. At its meeting on the 8 October 1992 the Council of the Law Society of New South Wales the Society resolved that it was of the opinion that Lesley Elizabeth Mayo the Clerk, the subject of these proceedings, had been guilty of conduct which if she were a solicitor, would have constituted professional misconduct within the meaning of Part X of the Legal Profession Act 1987 the Act and that pursuant to section 120(4) an order be sought before this Tribunal. On 28 October 1992 the Council of the Society through its solicitor made application for orders under section 120(4) the orders sought being: 1. that the Tribunal order that solicitors be prohibited from employing or paying in connection with their practice the Clerk; and 2. that the Clerk be ordered to pay the costs of the applicant of and incidental to these proceedings. As pointed out by the Tribunal towards the conclusion of the hearing the application as framed by the Society was not in strict accordance with the previous resolution of its Council. The resolution of the Council of the Society was, strictly speaking, pursuant to its powers under section 120(2)(b) of the Act. The application as framed was made under section 120(2)(a) rather than under (b). After the discrepancy raised by the Tribunal with the solicitor for the Society and, without objection the application was amended to cast it under section 120(2)(b). The Particulars of the Complaint were: 1. that the Clerk misappropriated monies from Messrs Shailer Dawson & Hickey, solicitors; and 2. the Clerk misappropriated monies from Datacal Pty Limited. Those particulars were covered in more detail under the heading Further Particulars forming part of the application. The Complainants case was comprised of the following: 1. the said application together with particulars and declaration of Mr Frederick John Smith declared 28 October 1992 (exhibit A) 2. a document marked Schedule A (exhibit B) 3. a three page extract from a report of Mr G. St Quintin (exhibit C) 4. a document headed Schedule F (exhibit D) 5. a letter of Mr Shailer to the Law Society together with a letter written by Mrs Mayo to Messrs Shailer Dawson & Hickey (exhibit E) 6. report of Mr Bruce Webster trust account inspector dated 31 August 1992 restricted to item commencing general accounts deficiencies (exhibit F) 7. oral evidence by John Henry Shailer, solicitor 8. oral evidence by Bruce Webster, trust account inspector with the complainant. The Clerk's case consisted of oral evidence provided by her only. In his opening address, Mr Gubbay, for the Clerk, admitted the matters contained in the complaint and was prepared to make such admissions in oral form. The Tribunal was concerned to ensure that some evidence should be taken to lay some factual basis for the complaint and the Tribunal further formed the view that the material to which the Clerk was admitting should be admitted before the Tribunal in an evidentiary form. Accordingly, the matter proceeded on that basis with each particular of the complaint later being put to the Clerk for her response. According to the evidence, the Clerk was employed as an office manager, book-keeper in the firm of Messrs Shailer Dawson & Hickey, solicitors. In his evidence, Mr Shailer, a principal of that firm said that he was concerned as to the wage levels which were coming through on the monthly figures and had asked for a dissection of wage payments before arranging a meeting with the Clerk to discuss those matters. Mr Shailer was also concerned that it appeared to him that there had been a substantial overpayment made pursuant to a Bonus Scheme conducted within his office (T 8.11). According to Mr Shailer, the meeting commenced with the Clerk saying to him I have done something dreadful. I have been deliberately overpaying myself and there is about $6,000.00 involved. It seems that the Clerk had a number of problems at the time and these problems seems to have consisted of a failing business and personal problems the Clerk had at her home. Mr Shailer also raised the matter of the Bonus Scheme payments. At that meeting, the Clerk stated I don't know about that. I have never fully understood the scheme and it must have been a mistake. I certainly did not do it deliberately. Indeed, the Clerk asserted in her evidence and continued to maintain that she did not fully understand the scheme, which was apparently an incentive scheme for some employees based upon the degree of performance of the solicitor's office at the time. Mr Shailer asked the Clerk if that was all that was involved and she replied in the affirmative. She stated that her involvement in relation to misappropriation had only been in the area of overpaying her wages. Mr Shailer contacted his accountant and his management consultant who was a chartered accountant, Graham St Quintin. Both of these accountants conducted enquiries in respect to the accounts and Mr St Quintin was requested to complete a review of the wages for the last 3-4 years to see if there were any other irregularities. On 2 July 1992 Mr Shailer had a conversation with the Clerk who indicated that Mr St Quintin may possibly discover <169>something else up in the wages area but she really did not have any recollection of any other matters. Mr Shailer subsequently asked the Clerk to execute a mortgage to secure an amount which was outstanding, together with an amount which had been previously advanced to her. In his evidence Mr Shailer indicated that the Clerk agreed to sign a mortgage, being a second mortgage on her property, to cover that amount and the other amounts discussed. Annexed to this mortgage was a hand written schedule by the Clerk described as Schedule A (exhibit B). This schedule described the total principal sum of $24,000.00 constituted by an advance of $12,000.00 to Accessory Imports, a figure for overpayment of wages and profit share, together with duplications of holiday pays from 25 October 1989 to 9 January 1992. The schedule gave credit to the sum of $98.20 being an amount paid by the Clerk to her employers. In her letter to Shailer Dawson & Hickey dated 21 August 1992 (exhibit E) she indicated she had repaid a total sum of $3,035.20. This was not disputed by the complainant. The report from Mr St Quintin (exhibit C) referred to, inter alia, certain overpaid holiday payments made to the Clerk between 25 October 1989 and 14 March 1991. Further reviews and examinations of the records were carried out and it became clear to Mr Shailer that certain additional misappropriations had occurred and in the result, Mr Shailer took the decision that he would have to terminate the Clerk's employment and he did so on 24 July 1992 by giving her one months notice. Prior to the one month period expiring, Mr Shailer telephoned the Society and requested a trust account inspection to be totally assured that there had been no problem in that area. Under cross-examination, Mr Shailer was asked specific questions about the profit sharing scheme. The amount alleged to have been misappropriated by the Clerk in this scheme was $3,389.50. It is important to record what Mr Shailer said in evidence in relation to this scheme: Q. Chairman: Mrs Mayo said to you on one of your interviews that she didn't understand the profit sharing scheme? A. Yes. Q. Did you understand that the miscalculation of that was a mistake or not? A. Well, I am not totally convinced in my own mind but the fact that the other matters have been volunteered to me and consistently Lesley stated that it was a mistake, I have got no proof that it wasn't. Q. But so far as what Mrs Mayo said to you she didn't put the amount involved in the could I refer you to Schedule A. She didn't put the amount of $3,389.00 being the overpayment of the profit share, she didn't put that into the same category as an overpayment of wages? A. No. Certainly in her mind it was a mistake. Datacal Pty Limited was a service company conducted by Mr Shailer. It was noted from the evidence that this company was the vehicle by which the incentive scheme was administered. In his evidence, Mr Shailer said that the Clerk had at all times, put this particular misappropriation in a separate category from the others. Mr Bruce Webster, trust account inspector referred to his report dated 31 August 1992 (exhibit F) and said that he spoke to the Clerk concerning the matters in his report. He further said that the Clerk indicated to him that his report was an accurate record. He also indicated that on one occasion the Clerk indicated how sorry she was for what had happened. The Clerk was taken through each particular contained in the complaint and her response was sought. The Clerk freely admitted each particular of misappropriation with the exception of two items. The particulars admitted by her were as follows: 1. on 27 August 1991 she drew a cheque for $1,000.00 which was recorded on the cheque butt as being $450.00 for the solicitor and $550.00 for stationary, but she misappropriated the sum of $550.00 for her own use. 2. on 17 March 1992 she drew a cheque for $950.00 which was recorded on the cheque butt as being for drawings and petty cash but she misappropriated $300.00 for her own use. 3. on 2 April 1992 she drew a cheque for $150.00 which the cheque butt recorded as personal LM, but she misappropriated the monies for her own use. 4. on 9 June 1992 she drew a cheque for $257.00 which the cheque butt recorded as Reimb.M/V-LM, but she misappropriated the monies for her own use. 5. over a period of 12 months the Clerk drew a total of $1,680.00 which was recorded as the solicitors monthly petrol allowance but she misappropriated these monies for her own use. 6. the Clerk misappropriated a total of $6,095.10 from Datacal Pty Limited for her own use by drawing wages cheques in excess of the required amounts. The Clerk indicated that she had no clear recollection of the following allegation of misappropriation from Datacal Pty Limited: On 25 October 1989 the Clerk obtained $415.00 for holiday pay in excess of the amount to which she was entitled and misappropriated the monies for her own use. The allegation concerning the misappropriation under the incentive scheme was as follows: The Clerk drew $3,389.50 in excess of the amount due to her under an incentive scheme setup by the solicitor, which amount she misappropriated for her own use. The Clerk again maintained that she misunderstood the nature of the scheme and she described the process by which the scheme was administered. Insofar as the allegation of the misappropriation of $415.00 for holiday pay is concerned, the Tribunal finds that after taking into account all of the evidence tendered on behalf of the Society and, noting the absence of a satisfactory response from the Clerk, this allegation has been made out. However, insofar as the allegation of the misappropriation of the sum of $3,389.50 pursuant to the incentive scheme is concerned the evidence provided by the Clerk as to her role in its administration indicates that she had a fundamental lack of understanding and direction in respect thereto. Indeed, in response to a question from the bench, the Clerk indicated that in respect to the first of the two separate distributions she left her calculations in Mr Shailer's office and she did not know whether he looked at them or how thoroughly he looked through them. She said that on the strength of those I drew the cheques. She stated that she did not show the calculations to Mr Shailer in respect of the second distribution as he was apparently not available at the time. She also said that she conferred with the other two secretaries who were also involved in the scheme and on the strength of that the cheques were drawn. After carefully considering the evidence, the Tribunal finds that the Clerk misapplied (rather than misappropriated) the sum of $3,389.50 from the incentive scheme set by the solicitor, such application not being intentional and based upon a misconception of her responsibilities and duties to administer the scheme. The total of the misappropriations from the firm's general account and from Datacal Pty Limited alleged by the complainant was $12,830.60 with the sum of $9,032.00 being agreed to by the Clerk as being misappropriated by her for her own use. The Tribunal notes that the Clerk has made some repayments with the balance being secured pursuant to the second mortgage (with her husband) to Mr Shailer. The Tribunal also notes that in respect to this mortgage, the amount of the overpayment of the profit incentive scheme has been included in this mortgage thereby indicating the Clerk's acknowledgment of responsibility therefore. Notwithstanding the admissions made by the Clerk, it is unfortunate that she did not make full disclosure of the position at a much earlier point in time. It was not until Mr Shailer raised the initial concern about payments from the general account that some admission was made. Further admissions were made by the Clerk following the investigations conducted by the accountants. In other words, the Clerk concealed the misappropriations until these matters were put to her at various times on and from the initial interview. The Clerk is 49 years of age and spent most of her working life in legal offices. In her letter to Messrs Shailer Dawson & Hickey dated 21 August 1992 (part of exhibit E) she said: I believe that my foolish actions were occasioned by extreme domestic and financial pressures. I regret my actions most sincerely and appeal to you to view my situation with compassion so as to allow me to seek employment with other legal firms.<170> In summary, she made the following submissions in this letter: [] My misconduct was totally out of character and was motivated, not for personal gain, but by the need to help support my family; at no time were trust funds or controlled monies involved; I have done and continued to do everything possible to make reparation; I have experienced tremendous guilt and shame as a result of my misconduct to the extent that my health has suffered; I have lost my job, my self respect, and am in the process of losing my home. In her letter, she appealed for a second chance and gave her assurance that she will never again expose her loved ones or herself to such emotional distress her recent dishonest actions caused. It is clear from the evidence that the Clerk manipulated her position as office manager and book-keeper to her own benefit. She embarked on a course of deception and concealment to the detriment of her employer and Datacal Pty Limited. There can be no excuse for conduct of this nature. She was placed in a direct position of trust and responsibility which she, deliberately, breached. Accordingly the Tribunal finds that it should make the orders sought. However, notwithstanding these orders it should be noted, as pointed out to the Clerk's solicitor via the President during the hearing the making of the orders sought does not prevent any application to the Society for leave to employ the Clerk in the future. The Tribunal therefore orders: 1. pursuant to section 120(4) of the Act solicitors are prohibited from employing or paying in connection with their practice, Lesley Elizabeth Mayo. 2. that the costs of the Law Society be paid by Lesley Elizabeth Mayo, such costs to be assessed on a Solicitor/Client basis as if taxed in the Supreme Court. 3. if agreement cannot be reached between the parties as to the amount of such costs, either party shall have liberty to apply. Dated this 22nd day of December 1992. 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.