The Legal Services Tribunal of New South Wales CITATION : Michael John Baumann [1992] NSWLST 2 PARTIES : Michael John Baumann FILE NUMBER(S) : of CORAM: Mr D Patten (Presiding Member) - Ms A Plotke - Dr U. Gault CATCHWORDS: Professional Misconduct - misappropriate trust moneys/moneys :- LEGISLATION CITED: Legal Practitioners' Act 1898 CASES CITED: DATES OF HEARING: 26/03.92 - 14/07/92 DATE OF JUDGMENT: 07/14/1992 Mr P.R. Garling LEGAL REPRESENTATIVES: Mr A.P. Whitlam QC Mr P.G. Mahony JUDGMENT: In the Legal Profession Disciplinary Tribunal In the matter of Michael John Baumann Reasons for Determination and Orders Before: Judge D.L. Patten (Presiding Member), Miss A. Plotke and Dr U. Gault Appearances: Mr P.R. Garling for the Law Society of New South Wales and Mr A.P. Whitlam QC and Mr P.G. Mahony for the Solicitor. This matter has had a regrettable history. It was initiated by a complaint of the Law Society of New South Wales (the "Law Society") dated 31 July 1989 a copy of the complaint and particulars are annexed hereto marked "A". [Note: Complaint and particulars are not attached to this publication.] The complaint was heard before a Tribunal comprising Mr A.J. Mitchell (Chairman), Dr U. Gault and Mr D.L. Patten on 26 and 27 March 1990. At the conclusion of the hearing the Tribunal reserved its decision. Before judgment could be given Mr Mitchell died. Thereafter the progress of the matter was again delayed for reasons which need not be further enumerated. Suffice to say that by consent of the parties the record of the previous hearing was tendered as an exhibit before a Tribunal differently constituted and on 18 May 1992 the new member of that Tribunal, Miss Plotke, questioned the Solicitor on oath, he was further cross examined by Mr Garling, Counsel for the Law Society and re examined by Mr Whitlam QC, Senior Counsel for the Solicitor. Thereafter some further evidence was given in the Solicitor's case, both Counsel addressed the Tribunal and it then reserved its decision. It is convenient to deal with one aspect of the case at the outset namely, the allegation that in relation to a number of estates the Solicitor without authority opened accounts with the State Building Society and deposited to those accounts monies which should properly have been credited to his trust account. In relation to each of the matters the Solicitor gave sworn evidence that he had the appropriate authority and in the light of that evidence the somewhat unsatisfactory quality of the evidence to the contrary given by witnesses called by the Law Society and the inherent likelihood that the executors of the estates would wish, in a time of high interest rates, to maximise the return on estate funds the Tribunal accepts the Solicitor's evidence that in each case authority to open a Building Society account was duly given. It follows that these matters of complaint are resolved in favour of the Solicitor. By way of background to a number of the remaining allegations by the Law Society the evidence established that sometime before 1987 the Solicitor established an account with the State Building Society at Tumut styled "Michael Baumann". The Solicitor and his partners were signatories to the account. It seems that at all material times the account contained some of the Solicitors own money but it was also used as a repository for funds belonging to clients and as a staging account for advances being made by State Building Society to clients of the Solicitor. The Solicitor's own explanation of the account appears at paragraph 15 of his Statutory Declaration exhibit "2" in these terms:- "The account held at the State Building Society styled `Michael Baumann' was established for the purpose of being a repository for deposits of funds forwarded from Head Office of that Society in Sydney by direct transfer prior to such funds being lent by the Society on Mortgage to borrowers. By agreement with the State Building Society I maintained a minimum balance of $500.00 of my own money in the account and the Society did not make any charges on the account in order to facilitate the ordering of its loan funds. From time to time my own money from other sources was also paid into this account." As will appear later in these reasons the account to which the Tribunal will hereafter refer as the "Michael Baumann Account" features in a number of the allegations made against the Solicitor. The Solicitor was the executor of and acted professionally in the estate of the late G.H.W. Power. One of the assets in the estate was some jewellery valued for probate purposes at $42,625.00. In his capacity as executor the Solicitor found difficulty in realising anything like the amount of the valuation when he came to sell the jewellery. On a visit to Sydney he left the jewellery with Fairfax & Roberts Limited for appraisal and apparently whilst the jewellery remained with that firm negotiated a sale to it. Sometime later on 13 February 1987 when the Solicitor again visited Sydney the jewellery having remained at Fairfax & Roberts in the meantime the Solicitor conducted further negotiations in person and as a consequence agreed to sell the jewellery to Fairfax and Roberts for $8,500.00. A cheque for that amount was paid to the Solicitor which he, whilst still in Sydney, paid into the Michael Baumann Account. He explained that he did this because he had the Building Society passbook with him at the time. This explanation is unconvincing as no valid reason was given why the cheque could not have been deposited to the credit of his firm's trust account, or why the cheque could not have been taken back to Tumut where he was returning within a day or so. Moreover as it transpired, the cheque received from Fairfax & Roberts remained in the Michael Baumann Account until the Solicitor in November 1987 was reminded about it by his partner Mr Kelly. The Solicitor then, as he said, believing that the proceeds of the jewellery were $7,500.00 only drew that sum out of the Michael Baumann Account and paid it to the estate. Later in April 1988 the Solicitor drew a further sum of $1,842.90 from the Michael Baumann Account and paid that amount to the credit of the estate in the firm's trust account. This sum represented the balance of the $8,500.00 together with an amount for interest foregone. The Solicitor was cross examined at some length about this particular transaction. He said that one reason for him overlooking the matter after his return to Tumut was that he was waiting to receive further documentation from Fairfax & Roberts which never arrived. The cross examination included this exchange between Mr Garling and the Solicitor in relation to the cheque received from Fairfax & Roberts:- "Mr Garling: You acknowledge it was monies received by you in your capacity as a Solicitor for the estate? - And also as executor. I was also the executor of the estate. You acknowledge that it was monies which you did not account to the estate for some period of nine months or so? - Yes. And that when you did account you didn't account in full for those monies and that you accounted in full some four months after your original accounting? - Yes, I accept that. You acknowledge when you received the monies it was monies to which Section 41 of the Legal Practitioners Act applied so far as you were aware? - Yes. And your decision not to deposit the monies in the firm's trust account was a decision which you made consciously and deliberately? - I think it was probably also - when you say deliberately, I certainly made it consciously and voluntarily. I also saw my role as executor to which may have put a - I certainly did never intend to deprive the estate of $1.00. I think I put a considerable amount of effort into attempting to get the estate every possible dollar for the jewellery. You knew when you deposited the money in the building society account in February 1987 that you were doing so in breach of your obligations under Section 41 of the Legal Practitioners Act, didn't you? - It's probably not so if I was doing it in the capacity as executor but I accept certainly in the position of Solicitor." Accepting that the Solicitor eventually gained nothing more than a temporary personal benefit from the monies wrongly deposited to the Michael Baumann Account and accepting that he ultimately made full restitution, there is no doubt that there was a misappropriation of the estate's funds and that the Solicitor's conduct in relation to the sale of the jewellery amounted to professional misconduct. The Solicitor acted for the estate of the late G.H. Le Fevre in relation to which he took instructions from the executor Mr N.E. Le Fevre. Funds belonging to the estate were paid to the State Building Society Account No. 672688-7 styled "Luff Baumann & Gillespie T/f G.H. Le Fevre". On 29 June 1987 the Solicitor withdrew $37,560.00 from the estate's Building Society Account and deposited that sum in the Michael Baumann Account. Some months later on 16 October 1987 at the request of his partners, Messrs Gillespie and Kelly, the Solicitor provided them with a cheque drawn upon the Michael Baumann Account for $39,018.15 said to represent repayment of the sum of $37,560.00 together with interest calculated at 13 per cent per annum. In relation to the Le Fevre matter the Solicitor's explanation as set forth on Page 8 of his Statutory Declaration was as follows:- "On 27 February 1987 an interim distribution took place to the four beneficiaries of this estate, each receiving the sum of $36,000.00. Mr N.E. Le Fevre had previously instructed me to retain any monies due to him in the estate and to invest them on his behalf. Those instructions were not in writing. His entitlement of $36,000.00 was left in the State Building Society account for the estate of Le Fevre until 29 June 1987 when the sum of $37,560.00 was withdrawn, representing the dividend of $36,000.00 plus four month's interest. That amount was paid into the State Building Society account styled "Michael Baumann" and on the same day was transferred to the State Building Society account of estate of D. Crampton. At my partner's request on 16 October 1987 I paid the sum of $39,018.15 which represented the sum of $37,560.00 plus $1,458.15 being interest at 13 per cent for the period 29 June 1987 to 16 October 1987. The amount payable was calculated by Mr Gillespie and paid by me on the same day. It was paid into a Building Society account in the name of N.E. Le Fevre." The above explanation obviously begged many questions and the transaction was the subject of cross examination at Page 87 and following of the transcript. It is perhaps a fair assessment of the Solicitor's evidence on the subject that he was unable to provide any credible explanation for what he had done nor indeed was he able to categorise the legal consequences of his actions. His prime motive in withdrawing funds from the Le Fevre estate seems to have been the funding of the estate of D.C. Crampton so as to enable a distribution to take place in that estate. The Solicitor in using the Le Fevre funds for this purpose relied upon instructions received from Mr N.E. Le Fevre to invest his entitlement in the estate as to which Mr Garling fairly conceded that there was no contrary evidence. The situation is complicated by references in the transaction to the repayment of the principal and the payment of interest on a mortgage given by the Crampton estate to a Mr Bridgeman. The hopeless muddle in which the Solicitor thereby became involved is demonstrated by this exchange between himself and Mr Garling which appears at Page 88 of the transcript:- "Mr Garling Q. Is not the proper construction then to put on it if you meant this morning that you became personally liable that you in fact borrowed the money from Le Fevre and used it to discharge the obligation to the estate Crampton? - I don't think I saw it that way at the time and I certainly didn't - there are a number of transactions that are obviously interwoven around this time to do with the estate of Crampton and simply because of a mixture of pressures on me at the time I didn't take the time out, I didn't ask for help to take the time out to ascertain clearly what the position was in relation to the Crampton estate. Q. If you were not becoming personally liable by this flow of money through your account and so on why did you personally repay the funds to the estate Le Fevre? - To Mr Le Fevre? Because around that period the increased pressures were coming from my partners. Obviously the estate of Crampton had come to a head in as much as reconciling it. I was still not - the heart of the problem was that there were funds outstanding, when I say outstanding that they were not able to be accounted for and a substantial amount due to the estate of Crampton. They were in respect of the bank bills that are referred to in Miss Sayer's report. I accept that I panicked in relation to - on the one hand I was quite certain that there were monies somewhere due to the estate." Although in the outcome no client suffered any loss in relation to the withdrawal of funds from the Le Fevre estate, the Solicitor's conduct in paying estate monies into the Michael Baumann Account thereby mixing estate monies with his own was inexcusable. In relation to the Le Fevre estate the Law Society alleges misappropriation of funds, failure to keep appropriate accounts or records and gross negligence in failing to ensure that estate funds were adequately secured. All these allegations were in the opinion of the Tribunal established. Just as mystifying was the Solicitor's conduct in relation to the estate of the late J.W. Jamieson in which he acted or the executors Mr J.E. Jamieson and Ms P.J. Jamieson. The testator died on 8 June 1986 and probate of his will was granted on 19 December of that year. A Building Society Account in the name of the estate was opened on 25 February 1987 and into that account was paid as its opening balance $45,224.96 proceeds of the sale of a property owned by the testator in Lambie Street, Tumut. On 26 May 1987 the estate account at the Building Society was depleted by two cheques one for $29,626.50 payable to Deane Deane & Nutt Trust Account and the other for $373.50 payable to Luff Baumann & Gillespie. The Solicitor signed the form for the withdrawal of these funds. It seems plain on the evidence that the withdrawals were not in any way for the benefit of the Jamieson estate. The Solicitor attempted to explain the transaction at Pages 9 and 10 of his Statutory Declaration as follows:- "On 26 May 1987, the matter of State Building Society - loan B.W. and R.D. Bailey was to be settled, the funds for that transaction were directly transferred from the State Building Society Head Office in Sydney to the account styled Michael Baumann at the Tumut branch of the State Building Society. The sum of $30,000.00 was to be withdrawn from that account and paid as set out in paragraph C3 of the complaint. On the same day Mrs H.G. Kell was paid $90,000.00 as a partial distribution in the estate of Crampton. To facilitate that payment, and in view of the monies remaining outstanding on loans from the estate of Crampton, the monies were paid to Mrs Kell from the State Building Society account styled Michael Baumann. That money was comprised of the following:- (i) The balance of $30,433.19 which was transferred from the State Building Society account of the estate of D.C. Crampton. (ii) $30,000.00 withdrawn from the estate of Jamieson. (iii) The balance of monies paid to Mrs Kell comprised part of the balance of monies owing to me in respect of the property sold by me to Pheasant. That purchase was funded by the State Building Society advance of $35,000.00 which had been directly transferred from the Head Office of the State Building Society in Sydney to the Tumut branch of the State Building Society Account styled Michael Baumann. The sale of property from myself to Pheasant was settled that day. Rather than transfer funds from the State Building Society account of the estate of Jamieson to the account styled Michael Baumann and then pay both Mrs Kell and the payments for the loan of Bailey, the payments for Bailey were made directly from the estate of Jamieson account. The only reason that procedure was adopted was to simplify the number of transactions to be effected on that day through the Building Society accounts. The lack of clarity in the procedure is conceded, however, Mr and Mrs Bailey received the full benefit of the funds to which they were entitled which were properly secured in favour of the State Building Society. On 10 September 1987, I personally repaid the estate of Jamieson the sum of $30,536.50." The Tribunal finds the evidence quite incomprehensible, a finding borne out by the cross examination of the Solicitor on the subject which appears at Page 89A and following of the transcript. The following extract from the cross examination illustrates the problem:- "Mr Garling: Can I just ask you then about the estate of Jamieson? - Yes. This is simply this position, is it not; Mr and Mrs Bailey were purchasers of a property and their purchase was funded by the State Building Society? - That's correct. The amount that was funded was $30,000.00? - That's correct. The estate Jamieson had nothing to do with Bailey or the estate of Crampton? - That's correct. Funds from the estate of Jamieson were used to pay Bailey for the balance of the purchase monies? - Yes. Why? - There really is no explanation in relation to why it occurred and how it occurred. The transaction should have been that the $30,000.00 came out of the State Building Society account where they had been deposited and gone and the two cheques drawn in favour of Bailey and the $30,000.00 from Jamieson gone into the account to be utilised for distribution to estate of Crampton. But why was it necessary to fund the distribution in the estate of Crampton by funds from the estate of Jamieson which had no connection with the Crampton estate? - I appreciate that. It was similar to again the pressure from Mrs Kell and the brother and that I hadn't taken the time out at that juncture to ascertain where the outstanding monies were due to the estate." In relation to the Jamieson Estate it is again clear that although no client ultimately suffered loss the Solicitor misappropriated the funds of the estate for purposes otherwise than for the estate's benefit. There is no doubt that these actions must constitute professional misconduct. Related to the allegations made against the Solicitor in respect of the Jamieson estate is the allegation that the Solicitor misappropriated the funds of his client State Building Society to the use of a Mrs Kell, she being a beneficiary in the estates of her parents D.C. and E.R. Crampton. The evidence reveals that on 26 May 1987 the Solicitor withdrew from the Michael Baumann Account $90,000.00 and paid that sum to Mrs Kell as a partial distribution of her entitlements in the estates. As at 26 May 1987 no funds belonging to either of the Crampton estates formed part of the amount standing to the credit of the Michael Baumann Account. Substantially the funds in the account belonged to State Building Society and had been paid into the account by the Society as part of a proposed mortgage transaction. As appears from the extract from the Solicitor's Statutory Declaration above quoted the money paid to Mrs Kell apparently included monies advanced by State Building Society as a mortgage loan to Pheasant the purchaser of a property owned by the Solicitor and also monies for a proposed mortgage from Bailey. The Solicitor says that before the funds deposited by State Building Society with the Michael Baumann Account were paid to Mrs Kell the mortgage or mortgages to the State Building Society had been completed and the Society was fully secured. If this be the case, as the Tribunal understands the Solicitor's evidence, he was in effect using, in part, his own monies to pay Mrs Kell. There is not enough evidence to satisfy the Tribunal that the Solicitor misappropriated the Society's funds in the manner alleged by the Law Society. Having said that however, the Solicitor's conduct in mixing the funds of clients with his own funds and in failing to provide records from which the true position can be ascertained is quite inconsistent with the standard of conduct required of a Solicitor. Of a somewhat different kind is the allegation made by the Law Society in relation to the estate of the late Reginald John Ferguson. The Solicitor acted for the executor of the estate, the testator having died on 7 May 1981 and probate of his Will having been granted on 17 March 1982. Again most of the financial transactions in the estate were conducted not through the Solicitor's trust account but through an account with State Building Society in the name of the Solicitor's firm as trustee for the estate. On 5 December 1986 four cheques were drawn out of the State Building Society Account as follows:- M.F. Matthews $10,000.00 H.J. Dean $10,000.00 L.C. Hampstead $20,000.00 J.R. Ferguson $8,725.40 The last mentioned cheque represented reimbursement to J.R. Ferguson of an advance made by him to the estate. It appears however that the cheque for $8,725.40 was not paid to or at the direction of J.R. Ferguson but was instead deposited to the credit of the Solicitor's personal account with Westpac Banking Corporation. A deposit slip to give effect to this was completed in the Solicitor's own handwriting. His explanation for what on the face of it constituted the misappropriation of his client's funds for his own benefit was set forth in paragraphs E1 to E4 of his Statutory Declaration as follows:- "E1. On 5 December 1986 the sum of $8,725. 40 was withdrawn from the State Building Society account styled `Luff Baumann & Co. T/F Estate R. J. Ferguson'. The monies were to be paid to Mr J. R. Ferguson's account at the State Bank. This represented reimbursement of monies owed by the Estate to J. R. Ferguson, he having paid other monies on behalf of the estate in relation to an account of the partnership between the deceased and himself. The sum of $8,725. 40 was paid into my account at the Westpac Bank in error. I have no recollection whatsoever of paying that amount into my account. It was not my practice to do my own banking at that time, rather it was usually done by the office staff. E2. Because of the various pressures on my time during 1987, I did not check my pass sheets for the account held by me at the Westpac Banking Corporation. I became aware that this money was in my own account in December 1987 when I was trying to finalise the estate. I had made enquiries of the State Bank and the State Building Society in order to ascertain the amount that had been withdrawn from the State Building Society account and the payee thereof. E3. I then calculated the amount of interest lost by the estate for the full period at prevailing building society rates and by arrangement between the four beneficiaries I arranged for bank cheques to issue to three of the four beneficiaries in equal shares of the amount outstanding plus interest. E4. I believed an explanation to the beneficiaries was appropriate and I visited two of them on 15 January 1988 when I was visiting Tumut. The third beneficiary was away at the time." In cross examination the Solicitor admitted completing the deposit slip and admitted that the sum of $8,725.40 out of the estate went into his personal account. His belief was that he did not physically deposit the cheque himself. There was this exchange during cross examination upon the subject between Mr Garling and the Solicitor:- "Q. You knew at the time you completed the deposit slip that the monies came from the estate of Ferguson, did you not? - No, I did not. Q. Where did you think the monies came from on 5 December 1986? - My understanding is that on that particular day I intended to make a withdrawal from the State Building Society to deposit funds to my personal cheque account with Westpac. It was... Q. Can I just stop you there? From which account did you intend to withdraw the funds at the State Building Society? - I had access I believe to my own and two of my mother's that I placed funds in and was able to withdraw. Q. The one of your own was not the account styled Michael Baumann about which you have earlier given evidence? - Yes, I am talking about that account. Q. So you had access to the mixed fund account and two accounts in your mother's name? - I believe two accounts. I don't have those passbooks either because they were all left at my old office. Q. Is your mother Truda Baumann? - That's correct. It was pre Christmas time. Things were always extremely hectic in the office at that time, in fact I would go to say almost chaotic. It was the practice of the firm to close for a three week period over that break, taking into account public holidays and inevitably clients just wanted everything done prior to Christmas. I certainly recall that on that day I was obviously - I had the estate file of Ferguson on my desk, I obviously had the estate passbook on my desk. I believe that I had obviously other passbooks either in my drawer or on my desk. I believe that I did intend to make a withdrawal from a State Building Society account for my own personal use and to go into my own personal account, that I completed the reverse side of a building society form at some stage of the day, that I also on the same day completed the withdrawal for the estate Ferguson distributions that were made that day to the three daughters of the deceased and I also intended to make a fourth withdrawal on behalf of the son of deceased which was not to be paid to him directly but was to be paid to the State Bank in a joint account that he and his father conducted and had conducted prior to death and that continued after for the amount of $8,725.40 and that the completion of those withdrawal forms was not done as one transaction. They could even have been done as two or three or four transactions." The Solicitor's explanation is not particularly convincing but having regard to the standard of proof required for such an allegation the Tribunal is not affirmatively satisfied that the conduct of the Solicitor constituted a deliberate theft of the estate's funds. On any view of the matter however he was grossly negligent. In relation to the Solicitor's conduct in acting in the estate of the late M.G. Seymour the Law Society alleged misappropriation of monies, wilful breach of Section 42(2) of the Legal Practitioners Act, failure to keep adequate records, gross negligence in failing to protect the estate's interests in relation to a loan to a Mr and Mrs Dunn and serious neglect, delay and inattention to the affairs of the client. In support of its contentions the Law Society relied primarily upon the report of Miss Jean Sayer dated 22 September 1989 and her oral evidence. Unfortunately by the time of Miss Sayer's first attendance at the office of the Solicitor in March 1988 the trust ledger account of the estate was missing, passbooks to Building Society Accounts kept in respect of the estate were missing and the file relating to the estate was also missing. As to this aspect of the matter the evidence is that the file and other records were last seen on the Solicitor's desk in December 1987 when he was confronted about the estate by his partner, or by then former partner, Mr Kelly. This was shortly before the Solicitor departed from the Tumut practice. The Solicitor in his evidence before the Tribunal was unable to provide any explanation as to the whereabouts of the missing file and other documents. Mr Kelly was not called to give evidence. In the absence of the file and the records to which reference has been made, Miss Sayer carried out a reconciliation from such sources as were available to her. The estate of which probate was granted on 25 October 1982 had a value of approximately $130,000.00. Apart from a few relatively small legacies the whole of the estate was bequeathed to the Australian Red Cross Society. Again an account was opened for the estate with the State Building Society and Miss Sayer's reconstructions of both the Solicitor's trust account ledger and of the Building Society Account were made up from accounts lodged with the Probate Registry bank records and material obtained from the State Building Society. It is unnecessary for the Tribunal to detail the reconstructions of the trust ledger and the Building Society account as effected by Miss Sayer. Suffice to say that she highlighted five cheques totalling $68,036.49 withdrawn from the Building Society account in July and August 1983 which were not shown in the probate accounts and as far as Miss Sayer could ascertain were not paid to any party at the authority or direction of the executrices of the estate or paid to the residuary beneficiary. Moreover according to Miss Sayer her reconciliation of the receipts as shown in the probate accounts with monies received into the Building Society account and the trust account indicated that a net amount received of $8,321.91 had not been brought to account. The Solicitor in his Statutory Declaration denied any misuse or misappropriation of the estate funds. As to the five cheques referred to above the Solicitor said at Page 12 of his Declaration:- "The five entries set out on page 8 of Miss Sayer's report between 22 July 1983 and 29 August 1983 represent transactions for which the cheques drawn by the Building Society on the estate's account have been destroyed by the society in the ordinary course of its business. Without access to those cheques and all records in the estate I am unable to state to whom they were paid. However, I deny that any amounts were paid to any person otherwise than on the authority or at the direction of the executrices of the estate. The administration of the estate of Seymour was a complicated matter and without access to all of the estate records I am unable to provide an explanation as to the payments of all funds from the estate. However, the Australian Red Cross Society received all monies owing to it as a residual beneficiary. I refer to annexure BB3 of the second report of Miss Jean Sayer. In the presence of both executrices the funds were handed over to the representative of the Tumut branch of the Red Cross Society in December 1983. Further upon finalisation of the estate I received a letter of thanks from one of the executrices on behalf of both of them." The allegation that the Solicitor jeopardised the estate in relation to an advance to Mr and Mrs Dunn is grounded upon the fact that a loan of $30,000.00 was made to them out of the estate's funds on or about 29 August 1983. No mortgage in favour of the estate was executed but a mortgage was executed by Mr and Mrs Dunn in favour of Mrs Kell as administratrix of the estate of Ernest Raymond Crampton. The mortgage is dated 29 August 1983, was not accepted by the mortgagee, was not registered and appears not to have been stamped. The Solicitor's explanation as appears at Page 16 of his Declaration is in these terms:- "The mortgage advance to Dunn was secured by unregistered mortgage executed by the mortgagors. The mortgage is dated 29 August 1983 (refer J.S.1, annexure "B"13, pp.7 and 8). It was only ever intended the mortgage be for a short period of four to six weeks and then to be taken over by the estate of Crampton. The estate received a higher rate of interest (15.5 per cent) than the interest otherwise earned on estate monies in the State Building Society account. The monies were repaid to estate of Seymour on 11 October 1983." There is no doubt in the Tribunal's mind that the Solicitor's conduct in relation to the Dunn mortgage alone, apart from what appears to be an extremely unsatisfactory state of affairs in relation to the keeping of records and dealing with estate monies constitutes professional misconduct. Moreover the Tribunal is unable to escape the suspicion that something more sinister than gross negligence and inattention to professional responsibilities was involved. However on the evidence the Tribunal is not affirmatively satisfied that in any aspect of the estate deliberate dishonesty by the Solicitor was proved. The final two grounds of the complaint of the Law Society were "gross negligence" and "serious neglect, delay and inattention to the affairs of his client". Under the ground "gross negligence" the matter of the loan from the estate late M.G. Seymour to Mr and Mrs R. Dunn was particularised, a matter which the Tribunal has already dealt with. Other allegations of gross negligence concerned the estates of the late G.H. Le Fevre and the late E.R. Crampton. The allegations concerned loans made by the Solicitor out of the two estates in circumstances where it was alleged that he did not have proper authority and/or failed adequately to protect the estates' interests. The Solicitor asserted that appropriate instructions were given to him in respect of all of the matters alleged and he denied in effect that in any case the estate was left unprotected. Certainly it was not in issue that none of the estates suffered loss. In the result although the Solicitor's conduct of the transactions was unsatisfactory and left much to be desired in the recording of what actually occurred the Tribunal does not regard the evidence as sufficiently cogent to warrant a finding of professional misconduct in respect of the complaint of "gross negligence". The complaint of "serious neglect delay and inattention to the affairs of his client" related to relatively minor matters and again the Tribunal is not persuaded on the evidence that this ground of the complaint was established having regard to the standard of proof required. As indicated above however the Tribunal has in a number of respects concluded that professional misconduct of a serious nature was established against the Solicitor. In order to determine the consequences of that finding it is relevant to consider some subjective elements pertaining to the Solicitor as well as the evidence of his personal and professional character tendered on his behalf. The Solicitor completed a Bachelor of Laws degree at the Australian National University at the end of 1973. At the beginning of 1974 he commenced Articles of Clerkship with Mr Lyle Luff, Solicitor of Tumut but unfortunately the day prior to the Solicitor commencing his Articles Mr Luff became ill and as a result of hospitalisation and subsequent convalescence was away from the practice for some months. The Solicitor said that in consequence he received no training in the procedures of office administration including the keeping of trust and office accounts and the keeping of records of attendances upon and instructions received from clients. In February 1975 the Solicitor was admitted as a Solicitor of the Supreme Court of New South Wales and in February 1976 he acquired Mr Luff's practice. Although Mr Luff was thereafter employed by the firm on a part-time basis he continued to suffer ill health and died in 1980. Between 1976 and 19 January 1985 the Solicitor practised as a sole practitioner in Tumut under the name Luff Baumann & Company. He said that within two or three years of 1976 the volume of work had more than doubled and it continued to increase throughout the time he was there. Whilst in practice at Tumut the Solicitor was for seven years a member of the Tumut Lions Club and served as Assistant to the Secretary and Treasurer. He became the Secretary of the Tumut Rugby Club, the Secretary of the Tumut Turf Club and during 1986 and 1987 President of that club. He also became a Vice President of the Tumut Performing Arts Society and a Trustee of the Tumut Recreation Reserve. He became a member of the South West Slopes Regional Law Society and involved himself in the Society's affairs regularly travelling to Wagga Wagga for meetings or conferences. He participated in the Society's introduction of Mandatory Continuing Legal Education and the debate within the legal profession on advertising. He also served as an adjudicator in the school's moots competition. In 1984 and 1985 he was Vice President of the South Western Slopes Regional Law Society and President from October 1986 until 1987, resigning that office upon the complaints which are the subject of these proceedings coming to his notice. The Solicitor said that despite many attempts he was unable to attract Solicitors to join the practice at Tumut. For a time his wife a qualified Solicitor worked in it prior to the Solicitor and his wife starting a family. It was not until 1984 that Mr C.S. Gillespie joined the firm, becoming a Partner in January 1985. Mr A.R. Kelly joined the partnership in July 1986. Mr Kelly had particular expertise in probate and estate matters and it was intended that he would provide special assistance in that area. The Solicitor in anticipation that adverse findings might be made against him in these proceedings asked the Tribunal to take the matters summarised above into account and he also asked the Tribunal to take into account his domestic circumstances which were a source of considerable stress and worry during 1986 and 1987. He said that his wife having borne two sons was extremely anxious to have a daughter and this anxiety produced considerable tension in the marital relationship exacerbated when a third son was born in January 1987. Evidence as to the Solicitor's professional standing and competence was given by Mr M.L.D. Einfield Barrister-at-Law, Mr P.J. Watson who from 1982 to 1986 was Manager of the Tumut Branch of the RSL Premier Building Society which in mid 1982 changed its name to the State Building Society, Mr. J.R. Marsden Solicitor presently President of the Law Society of New South but previously for some years a member of the Council of the Society, Mr F.J. Commins a Solicitor of Junee and Mr R.H. Vanderberg a Solicitor of the Australian Capital Territory. All of these witnesses furnished Statutory Declarations but Mr Einfield and Mr Vanderberg additionally gave oral evidence. They all paid tribute to the competence and conscientiousness of the Solicitor and indicated that the matters complained of by the Law Society were out of character with their own experience of him. The Tribunal finds the evidence of Mr Einfield particularly useful as he established a professional relationship with the Solicitor some 17 years ago which became as well a personal friendship. Mr Einfield summarised his attitude towards the Solicitor in paragraphs 12 to 14 of his Statutory Declaration of 25 March 1990 in these terms:- "12. As to the matters before the Tribunal, I am unreservedly convinced that the conduct of which complaint is made was not motivated by dishonesty or by any desire for personal gain. Firstly, Mr Baumann was at the time of the subject transactions in comfortable circumstances financially. He owned the building in which his offices were located, owned his family home and had another residential property in Tumut leased out, had other property in investments and had made advances from which he was receiving repayments. At the same time, I know that his financial affairs were very much disorganised. When he sold an interest in a rural property at Wagga Wagga to his partner in the property he simply allowed the purchaser to pay the purchase price bit by bit whenever he was able to do so. In other words, I believe that Mr Baumann tended to be far less rigorous and particular in his attention to the detail of his financial matters than one might have otherwise expected. 13. My experience with Mr Baumann over the years, both professional and over the last decade or so as a close friend, leads me to suspect that it was this inability to appreciate the importance of accuracy and maintenance of precise records, which constitutes the root cause of the matters now before the Tribunal, rather than any desire to act contrary to his clients' interests or to prefer his own. 14. After the matters the subject of current complaint arose, I spent many hours with Mr Baumann considering the allegations and substance of the matters raised by Ms Sayer. It was noticeable to me that Mr Baumann was quite taken aback at the nature and substance of the complaints. He was really quite shocked that accusations were being made against him that he had not acted properly or in the interests of his clients, for he had always, as I had observed and learned from others, gone out of his way to ensure that his clients were well looked after and that their interests were being protected. Indeed, I had many times suggested to him that he was sometimes more beneficent towards clients than he might necessarily be, particularly as he commonly reduced his fees well below scale in circumstances where he felt the client might have financial constraints; so also was he over generous, in my view, in the time he afforded his clients and in the time he permitted clients to pay accounts simply on their suggestion that they would prefer to pay later than sooner. For all that, once Mr Baumann appreciated the significance of the matters raised by the Law Society against him, he repeatedly expressed to me his very serious concern to ensure that none of his clients had been disadvantaged, and concern at the damage that may have been occasioned by his conduct to his partners, to his branch of the profession which he served not only as a Solicitor but as a Regional President, and to his wife and family. I know that he unhesitatingly paid the sum which his partners asserted was payable to the firm or its clients, notwithstanding that he did not receive all the information he had requested in justification of those amounts. Moreover, he indicated to me a genuine desire to communicate with the Law Society to facilitate its enquiries and ensure that his conduct had not left any client or anyone else out of pocket. He was anxious to make himself available to officers of the Law Society and I am aware that he did attend at the offices of the Law Society in Phillip Street on more than one occasion to talk about the matters." The Tribunal was also much assisted by the evidence of Mr Vandenberg with whom the Solicitor has been employed since February 1991. Mr Vandenberg concluded his Statutory Declaration of 18 May 1992 with these two paragraphs:- "14. Mr Baumann, during the course of his employment, has assisted with two estate matters and has satisfactorily completed one of those matters. The matter was not without difficulty however was completed without delay, with professional expertise and accuracy and again, to the complete satisfaction of the beneficiaries of the estate. The other matter on which Mr Baumann is engaged is not yet finalised however the beneficiaries have indicated to me that they are quite satisfied with the progress of the matter. 15. I know from my personal friendship and close association with Mr Baumann that he has suffered great remorse and hardship as a result of the loss of his Practising Certificate and particularly for such a lengthy period of time. I firmly believe that if Mr Baumann has his Practising Certificate reinstated that he will fully, faithfully and absolutely comply at all times with his duties as a Solicitor." In the light of all the material before it the Tribunal has reached the conclusion that the public interest in this matter does not require that the Solicitor's name be removed from the Roll. He has not held a Practising Certificate in New South Wales since 30 June 1989 and has therefore effectively been suspended from practice in New South Wales for approximately 3 years. Although in the opinion of the Tribunal it was not established that the Solicitor's conduct involved deliberate dishonesty the professional misconduct established has led the Tribunal to the conclusion that it would be inappropriate for the Solicitor to hold an unrestricted Practising Certificate until he has gained further experience in New South Wales as an employee. For this purpose the Tribunal accepts the submission assented to by both Counsel that under Section 163 of the Legal Profession Act the Tribunal upon a finding of professional misconduct is entitled to make one or more of the orders provided for by Section 149(2) in addition to the orders provided for by 163(1) . The Tribunal makes the following orders:- 1. That a Practising Certificate not be issued to the Solicitor prior to 30 September 1992. 2. That the next Practising Certificate issued to the Solicitor 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 and that subsequent Practising Certificates be endorsed with a similar condition which condition shall cease to take effect as from the third anniversary of the date of the issue of the next Practising Certificate to the Solicitor. 3. That within 3 months or such longer period as the Council of the Law Society may approve the Solicitor undertake and complete such course pertaining to office administration and the control of trust accounts as the Council of the Law Society may prescribe. 4. That the Solicitor pay such costs of the Law Society of and incidental to these proceedings as may be assessed and agreed between the parties and in default of agreement then each party have liberty to apply to the Tribunal in respect of the Solicitor's liability therefor and the quantum thereof. Dated this 14th day of July 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.