The Legal Services Tribunal of New South Wales CITATION : Steven Robert McAneny [1992] NSWLST 14 PARTIES : Steven Robert McAneny FILE NUMBER(S) : of CORAM: Ms A Plotke (Presiding Member) - Mr G B Molloy - Dr U. Gault CATCHWORDS: Professional Misconduct - gross overcharging of client - Professional Misconduct - breach of s. 61 of the Legal Profession Act - Professional Misconduct - misappropriate trust moneys/moneys - Professional Misconduct - prepare false documents :- LEGISLATION CITED: Legal Profession Act 1987 Dupal v Law Society (26 April 1991); Law Society of New South Wales v Jones, (unreported) 27 July 1978); CASES CITED: Jauncey v Law Society of New South Wales (1989 Supplement Law Society Journal); see Fraser v Law Society (1992); Allinson v General Council of Medical Education and Registration (1894) DATES OF HEARING: 23/06/92 - 08/09/92 DATE OF JUDGMENT: 09/08/1992 LEGAL REPRESENTATIVES: Mr B. Murdoch Mr R. Cuddy of Messrs Stewart Cuddy & Mockler JUDGMENT: The Legal Profession Disciplinary Tribunal In the matter of Steven Robert McAneny Judgment Before: Ms A. Plotke (Presiding Member), Mr G.B. Molloy, and Dr U. Gault. Appearances: Mr B. Murdoch, Solicitor for the Law Society of NSW; Mr R. Cuddy, Solicitor, of Messrs Stewart Cuddy & Mockler, for the Solicitor. Hearing date: 23 June 1992. At the commencement of this matter, the Solicitor conceded that he was guilty of professional misconduct and admitted the factual circumstances as pleaded by the Law Society in its Complaint filed with the Tribunal on 29 March 1992. However, during the course of the hearing, it became clear that, notwithstanding the admissions, one of the complaints (that relating to alleged overcharging and as set out in paragraph 1(b)(ii) of the Complaint) could not be supported and the Society withdrew that portion of the Complaint. The balance of the Complaint was properly admitted and is supported by appropriate evidence. Those complaints can be conveniently summarised as follows: 1. Arnold and Michel (a) The solicitor had the conduct of a mortgage advance from a building society to Arnold and Michel. During the course of that transaction, certain moneys were properly paid into a trust account opened in the name of those clients. (b) On 14 August 1990 the solicitor drew a trust account cheque on that account for $142.00 in favour of Mr Michel and caused that payment to be described in the trust ledger of his employer as "refund of balance trust account". (c) Thereafter, the solicitor caused that same cheque to be cancelled and for the amount of that cheque to be credited, on 13 March 1991, to a trust ledger account in the name of a Mr and Mrs Wilson who were not entitled to the money of either the building society, or Ms Arnold or Mr Michel. (d) The solicitor compounded this problem on 25 March 1991 by causing a further trust account cheque of $109.43 to be drawn on the funds in the Wilson account in favour of A. Leon who was not entitled to that $109.43 because he was not entitled to the building society money, or the moneys on the account of Arnold and Michel or the moneys on account of Mr and Mrs Wilson. The solicitor conceded that the actions that he took as set out above were wilful and it is clear that the actions amounted to breaches of Legal Profession Act 1987, Section 61 in that the solicitor, while holding money on behalf of another person, failed to hold that money exclusively for that other person. The solicitor, in a statutory declaration filed in these proceedings, stated that the problem arose because of the inability of himself or the accounts department in the firm in which he was employed to reconcile the Arnold and Michel account so that it could be removed from the firm's computer ledger and formally retired. The solicitor said: "The solution that I adopted, quite wrongly, was to move the credit balance into a separate St George account so that the file would be closed and the matter completed. From my examination of the accounts and the enquiries and investigations of the firm's then bookkeeper the client Michel did not appear to be entitled to the credit then in the trust account. Moneys were transferred from the St George account to satisfy demand made by Mr A.R. Leon and I expected that at some time in the future, the whole matter could be re-assessed and a financial accounting and reconciliation effected". The solicitor attempted to deal with the matter further when questioned about this by the Tribunal: Q: "Just finally...how did you expect the matter of Arnold and Michel to be sorted out ultimately, because you went to a lot of trouble didn't you, to transfer $142.00, which is not very much in the scheme of things, from one account to another and to draw from the other account that was not entitled to $142.00, $109.00 in favour of yet a third account, how did you expect all that to be tidied up in the end? A: I attempted to tidy it up on numerous occasions with the accounting lady there. We had problems in reconciling exactly where the money was from so just to get all the Arnold and Michel and St George matters off the trial balance and out of the system I transferred it to that other St George account which didn't have any funds in it. I just transferred to that and that got them all off the system, and I don't know what's happened to it now. Q: But all you did was to transfer the problem to another account, didn't you, the account of Wilson? A: Yes. Q: Then on to another account of Leon, do you know whether they have been tidied up? A: I don't, no." At all relevant times the solicitor was employed with a well known suburban firm of solicitors and, at least on a prima facie basis, it appears to the Tribunal that there was a lack of proper supervision by the firm, not only of this solicitor as an employee, but also of his activities and the way in which the trust account of the firm was conducted. 2. L.J. Macdessi Pty Limited On 29 May 1991 the solicitor caused to be drawn on a trust account relating to this company a trust account cheque in favour of A.T. Parkes when the solicitor knew or ought to have known that the company was not liable for the payment of $500.00 to A.T. Parkes. It appears that Mr Parkes had complained to the solicitor for many years about the non-receipt by him of his proportion of rates arising out of a conveyancing transaction. The solicitor, having drawn the cheque, kept the cheque in the office overnight and, on the following day, deposited the cheque back into the trust account. Subsequently, the solicitor from his own funds paid the $500.00 to Mr Parkes. It appears that the $500.00 was properly due to Mr Parkes due to some mathematical mistake that the solicitor made some years back in doing the settlement calculations in relation to a conveyancing transaction. Again, the solicitor conceded that his actions were wilful and there is no doubt in the mind of the Tribunal that they amounted to a clear breach of Section 61. 3. False entries There is further no doubt that the solicitor caused false entries to be made in the trust account records relating to the above various transactions. There is no doubt that in relation to the matter of Arnold and Michel the solicitor's entry for the $142.00 ultimately transferred to the account of Mr and Mrs Wilson, being "refund balance trust a/c" was false. There is also no doubt that the entries made to credit the $142.00 in the account of Mr and Mrs Wilson "cancelling cheque refund - cancel cheque issued 14/8/90 `reversal'" and in relation to the transfer of $109.43 into the account of Leon as a "reimbursement trust cheque" and the entry into the account of Leon for the credit of the $109.43 as a "journal refund cheque drawn on...account Wilson" were also false and were in breach of Section 62(1) in that the accounting records for the trust moneys did not disclose at all times the true position in relation to the money received by the solicitor on behalf of another person. In addition, there seems to be a further breach of Section 62(2) in that the said trust accounting records were not kept in a manner that enabled them to be conveniently and properly audited. 4. Lying to a partner The solicitor conceded that on three separate occasions, on 30 and 31 May and 3 June 1991 he informed one of the partners of his employing firm that the cheque for $500.00 drawn on the trust account of L.J. Macdessi Pty Limited and payable to A.T. Parkes was in payment of a valuation fee owed by a Dominic Maisano and that the cheque had been drawn in error from the trust ledger account of L.J. Macdessi Pty Limited when, at the time of making those statements, the solicitor knew or ought to have known that those statements were untrue. 5. Making a false file note The solicitor conceded that he had made a false file note on 24 May 1991 to the effect that he had made an enquiry and then ordered a market appraisal valuation from Mr Parkes when the solicitor knew or ought to have known that he had not made such an enquiry nor ordered a market appraisal valuation from Mr Parkes. The solicitor, having made that false file note, included that file note in the records of his employer. There is no doubt that the breaches of Sections 61 and 62 as specified above and the actions taken by the solicitor in relation to the various trust accounts as specified above constituted professional misconduct. There is also no doubt that in the circumstances of this matter the telling of falsehoods to a partner of the firm in which the solicitor was employed and the making of a false file note and including that file note in the records of his employing solicitor individually constitute professional misconduct. The Tribunal is further comfortably satisfied that the whole course of conduct of the solicitor in relation to the various matters the subject of the Complaint constitute professional misconduct. The solicitor was born on 1 December 1960 and was admitted as a solicitor of the Supreme Court on 6 July 1984. He seems to have spent his professional life as an employee in various firms until June 1991 when he was dismissed from his then employment and has subsequently been employed as a casual tutor in the Faculty of Law in the University of Wollongong. It is indeed regrettable that this solicitor should come before the Tribunal. But that is the ultimate result of activities that amount to professional misconduct. It is appropriate for the legal profession to be aware that acts amounting to professional misconduct, however economically insignificant they may be in the scheme of things, will result in referrals to the Tribunal with the repercussions and expense associated therewith. Many matters come before the Tribunal that could have been avoided had the solicitor faced up to the problem, sought advice on what he/she should do and taken steps to rectify the problem. There is no doubt that the solicitor in this case appreciated the problems that had been created in the matters that he was handling and which are the subject of this Complaint. All he had to do, to avoid further difficulty was simply to face up to the problems, get some advice (either within the firm in which he was employed or from a fellow practitioner, the Professional Liaison Officer employed by the Law Society or from a member of the panel of senior solicitors) and rectify the problems. In all the cases the subject of the instant Complaint, it seems that the various problems could have been easily rectified and all the trouble and expense of a referral to the Tribunal could have been avoided. The solicitor, in evidence, stated that he had difficulties in discussing matters with his employers. That may well have been the case, but it is not an excuse for professional misconduct. Mr Cuddy in his careful and forceful address drew the attention of the Tribunal to a number of cases in which there had been findings of professional misconduct but the full force of the law had not been applied. Suffice it to say that every case has to be considered on its own peculiar facts and reference to other cases where there are findings of professional misconduct can only be of use by way of guidance as to the general principles to be applied to the peculiar circumstances of the instant case then before the Tribunal. Mr Murdoch indicated that his instructions were that the Law Society would not seek the removal of the solicitor's name from the roll of solicitors. It was pressed upon the Tribunal that the Judgment of the NSW Court of Appeal in the matter of Dupal v Law Society (26 April 1991) was a Judgment that would have a bearing on the ultimate findings in this matter. With respect, we can see little in that Judgment that is of assistance in the peculiar facts of this case. In Dupal there was a clear case of misappropriation of trust funds, categorised by the Court of Appeal as being "fraudulent" and being used by Mr Dupal for his own personal purposes. Mr Dupal was a practitioner in financial difficulties. The facts in Dupal were stark and obvious with the consequent result that Mr Dupal lost his Practising Certificate. And there is little or no doubt that a solicitor guilty of misappropriation for his own personal advantage from his trust account should have his name removed from the roll of practitioners. Bearing in mind the facts in Dupal involved a deliberate misappropriation by the solicitor for his own purposes in circumstances where the solicitor got himself into financial difficulties and succumbed to the temptation to use funds under his control in his trust account for the purposes of resolving his own financial difficulties, Kirby P (at page 60) observed: "The researches of neither counsel before the Court could produce a single case in which, following a finding of misappropriation of funds or wilful contravention of Section 41(1) of the (former) Act, the Court had not proceeded to remove the name of the practitioner from the Roll of Practitioners other than a decision of the Solicitor's Statutory Committee in the case of Peck on 23 April 1981 where the solicitor, who had inherited a practice, withdrew moneys from his trust account to "keep functioning" and there was a deficiency of some $2,750.00. In that case, the Statutory Committee found a breach of Section 41(1) of the former Act but reprimanded the solicitor and suspended him from practice for two years." Kirby P regarded the decision of Peck as wholly exceptional and stated "True, each case must depend upon its unique facts. But for the reasons that I have stated the normal consequences of misuse of entrusted funds by a solicitor, and a finding of wilful breaches of the statutory prohibition in that regard, is removal of the name of the solicitor from the roll" and "to the extent that Peck suggest otherwise, I dissent from its holding." With respect, such a statement of wide principle goes beyond the relevant facts in Dupal and fails to appreciate that there are circumstances where people simply get themselves into a tangle without being deliberately dishonest. The instant case before the Tribunal is, in our view, such a case. There has clearly been no misappropriation by the solicitor. His conduct in the matter of Arnold and Michel may well be categorised as wilful (as it no doubt was) and even "deliberate" and "stupid" but cannot, in all the circumstances, be categorised as sufficiently serious to result in the solicitor's name being removed from the roll. The solicitor was clearly a very nervous person and someone who required supervision and someone who sought the easy way out of a problem in endeavouring to close off a trust account that seemed to have a small asset surplus which was unexplained. The Tribunal, however, does not believe that the actions of the solicitor amounted to some type of deliberate dishonesty or personal misappropriation (stealing), in which circumstances the observations of Kirby P would clearly apply. In relation to the L.J. Macdessi Pty Limited matter it is clear that the solicitor recognised that he had done the wrong thing and, almost immediately, returned the cheque into the trust account. That, in itself is an indication to the Tribunal that the solicitor is an inherently honest person. There is no doubt that "reliability and integrity in the handling of trust funds are fundamental prerequisites in determining whether an individual is a fit and proper person to be entrusted with the responsibilities belonging to a solicitor" (vide, Court of Appeal in Law Society of New South Wales v Jones, (unreported) 27 July 1978). But, it seems to us, "the number and extent of the problems in the trust account" (vide, In the matter of David Keith Louis Raphael (1992) 4 LPDR 40 at 55) are the factors that determine whether a solicitor is or is not a fit and proper person to practise. It is significant that in Jones there were a series of irregular dealings in the trust account by the solicitor, including misapplication by the solicitor of trust moneys to meet the requirements of a company owned by the solicitor and his wife, coupled with a continuing attempt by the solicitor to deceive the Statutory Committee and deliberate attempts to perpetuate the initial deception. As Street CJ said at page 9: "The evidence in its entirety leads almost inevitably to the conclusion that the respondent cannot be regarded as a fit and proper person to be held out to the community as a solicitor. The nature of the defalcations and irregularities established against him, the length of time during which they continued, the lack of frankness in his dealings with the investigating accountant, and finally the perpetuation of his deception before the Statutory Committee itself, make it impossible for this Court to permit the respondent's name to remain on the roll and thus to be accredited to the public at large as a fit an proper person to practise as a solicitor." Those factors are not present in the case now before the Tribunal. Similarly, in Raphael there were numerous instances of misapplication of trust funds. The Tribunal there said (at page 55): "Whilst it is clear that the solicitor has not been guilty of any defalcation, his handling of his trust account was abysmal and not restricted to a few isolated instances". The solicitor Raphael was also put on notice some years before that his trust account was not in order. Similarly, those factors are not present in the case now before the Tribunal. The reason it is necessary to examine the above cases is because it was put to us that these cases imposed a "difficult hurdle" for the solicitor to overcome. It was suggested that the cases be "read as a whole and not in part". But when so read, it seems to us that the solicitor, in the particular circumstances of this case, has no difficulty in surmounting that so-called hurdle. The question ultimately before the Tribunal when there has been a finding of professional misconduct is whether the solicitor is fit to practise. The jurisdiction of the Tribunal is not to punish but is protective in its nature. See Jauncey v Law Society of New South Wales (1989 Supplement Law Society Journal at page 54, per Clarke JA p. 57, 1st col. at point 8). If the Tribunal is of the ultimate opinion that the solicitor is fit to practise then the Tribunal is able to impose appropriate restrictions and qualifications on that right so that the solicitor will be able to continue to practise albeit in a modified form and the public can be properly protected. It cannot be that every finding of professional misconduct must result in the ultimate penalty - otherwise there is no point in giving the Tribunal power to make protective orders other than an order removing a solicitor's name from the roll. The legislature has given the Tribunal wide powers and those powers ought to be exercised in appropriate circumstances. It is the view of this Tribunal that this is an appropriate circumstance and the orders will reflect the view of the Tribunal that this solicitor remains fit to practise but subject to certain restrictions. In the witness box the solicitor presented as a nervous person but as an essentially honest person, and one who, in our view, needs guidance and supervision in his practice at least for a period of time. A number of persons, including a leading Member of State Parliament, made Statutory Declarations speaking of the good fame and character of the solicitor, that he enjoys the respect of his peers and the confidence of his clients, that he is a person of high character and integrity, diligent and hardworking, and is a good listener and can take advice and correct mistakes and problems. The solicitor is a relatively young practitioner who has been in practice since only 1984. The Tribunal is of the view on the evidence that the matters the subject of the Complaint are isolated instances, and that the solicitor is unlikely to offend again. All of the above are factors to be taken into account in forming a conclusion of what orders should be made (see Fraser v Law Society (1992) 5 LPDR 12 per Kirby P at 16, and Handley JA at 18). The Tribunal finds the solicitor guilty of professional misconduct within the terms of paragraph (c) of the definition of "Professional Misconduct" in Section 123 of the Act and common law professional misconduct as formulated in Allinson v General Council of Medical Education and Registration (1894) 1QB 750. Orders The Tribunal makes the following Orders: 1. The solicitor pay a fine of $1,000.00 within a period of 30 days from the date of this Order. 2. The solicitor be suspended from practice at the expiration of the said period of 30 days if the said fine shall not have been paid until it has been paid. 3. The solicitor's Practising Certificate 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 Practising Certificate, the condition to apply for a period of three (3) years from the date the solicitor commences such employment so that the solicitor is employed for a cumulative period of three years subject to this condition. 4. The solicitor undertake and satisfactorily complete the Legal Practice Management Workshop conducted at the University of New England, the solicitor to attend such course within twelve months prior to the solicitor commencing employment pursuant to Order 3 above. 5. The costs of the Law Society assessed and agreed at $3,200.00, be paid by the solicitor. 6. In relation to Order 4, liberty to either party to apply to the Tribunal upon 7 days notice. Dated this 8th day of September 1992. 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