The Legal Services Tribunal of New South Wales CITATION : David Ronald Lewarne and Russell John Goldsmith [1992] NSWLST 12 PARTIES : David Ronald Lewarne and Russell John Goldsmith FILE NUMBER(S) : of CORAM: Ms A Plotke (Presiding Member) - Mrs B Ingold - Mr D Patten CATCHWORDS: Professional Misconduct - mislead client - Professional Misconduct - misappropriate trust moneys/moneys - Professional Misconduct - prefer own interests to those of others :- LEGISLATION CITED: Legal Practitioners' Act 1898 CASES CITED: DATES OF HEARING: 04/11/91 - 15/04/92 DATE OF JUDGMENT: 04/15/1992 Mr R. Stitt QC Mr G. Lindsay LEGAL REPRESENTATIVES: Mr P.M. Donohoe QC Mr P.R. Garling Messrs Ebsworth & Ebsworth. JUDGMENT: THE LEGAL PROFESSION DISCIPLINARY TRIBUNAL IN THE MATTER OF DAVID RONALD LEWARNE AND RUSSELL JOHN GOLDSMITH DETERMINATION AND ORDERS BEFORE: Miss A. Plotke (Presiding Member), Mrs B. Ingold and Mr D.L. Patten APPEARANCES: Mr R. Stitt QC and Mr G. Lindsay for the Law Society of New South Wales; Mr P.M. Donohoe QC for D.R. Lewarne Mr P.R. Garling for R.J. Goldsmith. Solicitors for both Solicitors, Messrs Ebsworth & Ebsworth. HEARING: 4 to 7 November 1991. This matter comes before the Tribunal upon the complaint of the Council of the Law Society of New South Wales (the Law Society) against the Solicitors. The complaint particularised five (5) grounds viz. wilful breaches of Section 41(1) of the Legal Practitioners Act 1898 gross negligence in failing to protect client's interests, conflict of interest in preferring the interests of certain clients over those of other clients, preferring their own interests to those of their clients and dereliction of duty and obligations as solicitors. When the matter was called on for hearing Mr Stitt QC, Senior Counsel for the Law Society informed the Tribunal that his client did not press the fourth ground of complaint nor did it seek findings upon certain matters particularised in the other grounds. In the result the issues before the Tribunal exclusively concern dealings which the solicitors had with a Mrs Margaret Malcolm and the relationship which she and they had with a Mr Head and his company and a Mr Compton and his company. The Solicitors have practised in partnership at Parramatta under the name Lewarne & Goldsmith since 1983. Previously both of them had been partners in the Parramatta firm Donald Storey & Partners which was dissolved at the end of 1982. Mrs Malcolm had been a client of Storey & Partners and Mr Lewarne had met her whilst he was with that firm although apparently he did not regard her as his client. Mr Goldsmith had also met Mrs Malcolm whilst a partner at Storey & Partners and he had acted for her in the purchase of a property about 1970 or 1971. However it appears that after the dissolution of Storey & Partners Mrs Malcolm became a client of Storey & Gough, a firm constituted by two more of the former partners of Storey & Partners. At least in part this was because a Mrs Abel with whom she had had extensive dealings as an employee of Storey & Partners continued employment with Storey & Gough. In any event it is clear that Mrs Malcolm had no contact with Lewarne & Goldsmith until about August 1984. According to her Statutory Declaration (exhibit "E") Mrs Malcolm in November 1984 instructed Mr Lewarne to invest some monies on her behalf. Later in the Statutory Declaration she said that between early 1984 and late 1985 she delivered to the firm of Lewarne & Goldsmith a total of $449,500.00 made up of various individual payments. Annexed to the Declaration was a letter to Mrs Malcolm signed by Mr Lewarne on the letterhead of Lewarne & Goldsmith dated 6 December, 1984 which omitting formal parts was in these terms: "This is to confirm as at the date of this letter we hold the sum of $315,000.00 on registered first mortgage investment on your behalf". There were also annexed to Mrs Malcolm's Declaration copies of eight (8) documents on the letterhead of Lewarne & Goldsmith one of which bore the heading "receipt" and each of which acknowledged receipt from Mrs Malcolm of varying sums of money. The first of them was dated 19 December 1984 and the last 1 October 1985. The documents apart from that dated 19 December 1984 merely acknowledged receipt of a sum of money but the 19 December 1984 document signed by Mr Lewarne was in these terms: "I hereby acknowledge receipt of $10,000.00 from Margaret Malcolm on account of first mortgage investment monies on the 19 December 1984". As to the circumstances in which Mrs Malcolm first came to Mr Lewarne when he was practising in the partnership Lewarne & Goldsmith her evidence commencing at page 36 of the transcript was: "Q. Subsequently did you have a conversation with Mr Lewarne? A. Before I ever went there I met Mr Lewarne, he tapped me on the shoulder and asked different ones in the office would I go into his office and talk to him several times. Q. When he took you into his office what was said? A. He said to me "I would like you to invest some money with me". He said, "It is a very secure thing". He said "The money from the interest would be paid monthly" and he said "You would not have to pay tax on it as long as it was kept between us". He said "It will be OK as long as you didn't tell anyone else about it" and he said "it will be all registered secured on first mortgage over real estate". Q. When he said that to you what did you say? A."Oh, I don't know about that" because I didn't know about it and I said I had no schooling. He said "you don't need any schooling Mrs Malcolm I will be trustee" and he said "your money will be all secured in first mortgage". The transcript then records this exchange: "Q. Did you then bring cash money in? A. Yes. Q. What was the method that you adopted in relation to that? A. He just told me it would be paid monthly, the interest would be paid on the first of the month, I think he said it would be. I did get a copy of the monthly interest. Q. When you brought money into the office of Mr Lewarne & Goldsmith was it in cash? A. Yes. Q. It would be counted is that right? A. Yes. Q. Who would do the counting? A. Sometimes Mr Bailey done it or Mr Lewarne had done it a couple of times whoever was in the office done it. Q. Did you also get a receipt? A. I got a receipt but no letterhead on the top just Lewarne and that on the bottom." Mrs Malcolm's daughter Mrs McGuire deposed as to a conversation which she said took place, early in 1984 in Mr Lewarne's office. According to Mrs McGuire at this meeting Mrs Malcolm said that she had money coming to her to which Mr Lewarne said: "How about sending the money overseas." According to Mrs McGuire her mother declined this suggestion and Mr Lewarne responded: "Give us a few days and I will see if I can make other arrangements with another client." Mrs McGuire said that a few days after that she and her mother went again to see Mr Lewarne and he then said: "I have a client, his name is Clive Head, he will be a super borrower for your money, Mr Head is building homes around Parramatta and he would be good for your money." Mrs Malcolm replied: "How safe will it be?" to which Mr Lewarne responded: "I have been dealing with Mr Head for years, he has always paid the money back." Mrs Malcolm said: "Okay I will lend the money to Mr Head." Mrs McGuire was then asked whether there was any conversation about how her mother would lend the money to Mr Head to which she replied: "I was picking up the money from Mrs Abel in large amounts and bringing it to Mr Lewarne and Mr Lewarne would take the money and re-invest it and that was how that was invested." Reference has already been made to Mrs Abel who at Storey & Partners was in charge of the firm's mortgage lending practice and continued in that capacity with Storey & Gough. The equivalent employee at Lewarne & Goldsmith became Mrs Carolyn Goldsmith wife of R.J. Goldsmith. It was part of Mrs Goldsmith's duties to liaise with Mrs Abel in relation to clients who had monies invested through Storey & Gough and who wished to transfer their business to Lewarne & Goldsmith. Mr Lewarne's evidence as to the commencement of his relationship with Mrs Malcolm whilst in the partnership of Lewarne & Goldsmith was that she commenced to come into his office about August 1984, as he said without any prior appointment or warning and invariably in the company of one of her daughters either Margaret Gillette or Mrs McGuire. In or about August 1984 Mr Lewarne said that he had a number of conversations with Mrs Malcolm in which she said words to the effect: "I have been repaid my money by Don Storey. Storey wanted me to put the money in my correct name with my proper address. I don't want to do it that way. Can you invest it for me? I don't want any record kept." Mr Lewarne deposed to the fact that on several occasions Mrs Malcolm pressed him to take money and invest it on her behalf otherwise than in her own name. He said according to his evidence: "Unless you come into the system like everyone else I won't give you a trust account receipt. To do that would be in breach of the Trust Account Regulations. I won't hold the money here because we don't have insurance for it if we put it in our safe. We could put it in a safe deposit box at the bank for you." To this Mrs Malcolm responded: "No I want to invest it." At the time according to Mr Lewarne a developer client Mr Clive Head was completing some units in Betts Street Parramatta and he was a borrower under a contributory mortgage from clients of Lewarne & Goldsmith. Mr Lewarne knew that Mr Head had the habit of paying some building contractors in cash. He said that he had a conversation with Mrs Malcolm to this effect (exhibit "3a" page 6). "Mrs Malcolm: Is there any way I can invest my money in cash? Mr Lewarne: I can introduce you to someone who may be prepared to accept cash money from you for investment. He is the builder who is building the block of units behind your house. Mrs Malcolm: What is the security I want something that is safe? Mr Lewarne: We have a mortgage for the builder Mr Head. The building is being financed through our mortgage portfolio up to $925,000.00. At present we have only advanced $252,000.00 by way of progress payments. You would be secured if you became part of that mortgage and had your name registered on the deed of trust as a beneficiary. Without that you will have no legal protection." Mr Lewarne said that shortly afterward he told Mrs Malcolm that Mr Head was interested in borrowing money from her, that he could only pay it back when he sold the building and that in the meantime she would have no security. On or about 31 August 1984 Mrs Malcolm came to the offices of Lewarne & Goldsmith without an appointment with a large amount of cash in a brown paper envelope. She said to Mr Lewarne: "I want you to give this money to Clive Head. I want a receipt so that I have got proof that I have given it to him." To this Mr Lewarne replied: "As I have told you before unless you invest it in your own name through our contributory mortgage practice I won't give you a receipt." Mrs Malcolm then asked him to arrange for Mr Head to collect the money and Mr Lewarne agreed to this and made arrangements for Mr Head to call and collect the money having in the meantime instructed his office manager to count the cash in the presence of Mrs Malcolm. Mr Lewarne's evidence was that there was then this further conversation with Mrs Malcolm: "Mrs Malcolm: Is the investment safe? Mr Lewarne: You cannot be legally protected because you have no security. However since we already have an existing mortgage on the property which secures an advance up to $925,000.00 and I will be acting for Clive Head on the sale of the property I will be able to do my best to protect you from the proceeds of sale once the building is sold. Mrs Malcolm: I have further cash monies coming to me in the future. Can I increase the amount of the loan to Clive Head? Mr Lewarne: You should ask Mr Head whether he is willing to take additional monies in the same fashion." Thereafter Mr Lewarne said that he was aware that on a number of occasions Mrs Malcolm brought cash to the offices of his firm, the cash was counted by employees and then collected by Mr Head. These payments of cash are the subjects of the various acknowledgments annexed to Mrs Malcolm's declaration, most of which bear the signature of a Mr Bailey an employee of Lewarne & Goldsmith although as already indicated the documents dated 6 December 1984 and 19 December 1984 were signed by Mr Lewarne. On or about 13 September 1984 a somewhat different transaction involving Mrs Malcolm was entered into. On that occasion Mrs Malcolm as was her custom brought in cash but this time she indicated that she wanted the cash invested on a contributory mortgage in her own name through the firm. This instruction was carried out and $14,000.00 was invested on Mrs Malcolm's behalf through what was known as the Finianos Mortgage. In his Statutory Declaration Mr Lewarne recounted a further conversation with Mrs Malcolm which he said occurred about November 1984 and proceeded thus: "Mrs Malcolm: Is this safe? Mr Lewarne: We can't guarantee you protection for your cash advances to Mr Head because you are not prepared to be a beneficiary under the contributory mortgage. So far as we are aware the monies are being used by Mr Head in the construction of the building behind you and Mr Head has said he will repay the cash advances from the proceeds of sale. When completed the building should be sold for $1,300,000.00 in one line or more if sold individually. As you are aware the total sum that could be lent under the mortgage is $925,000.00. Clive Head will only require about $500,000.00 from us on the actual mortgage. Mrs Malcolm: Can I see the mortgage and the trust deed? Mr Lewarne: Yes (I then showed her the mortgage and the trust deed) you will see that you are not protected by it. Mrs Malcolm: I don't want my name shown anywhere." Mr Lewarne's evidence was that at first the monies lodged with his firm were collected promptly by Mr Head or by someone on his behalf. However Mr Head began to defer these collections for several days and because of his concern about the money being on his premises for a period Mr Lewarne instructed his firm's accountant to place Mrs Malcolm's money in a safe deposit box at the firm's bank. He said that in or about December 1984 he had this conversation with Mrs Malcolm: "Mr Lewarne: I am not prepared to be the link between you and Head any longer. You will have to deal with him yourself. Go and see Clive Head and make your own arrangements. Mrs Malcolm: I want some evidence of what monies I have already paid him. Mr Lewarne: We can lend Head under our first mortgage up to $925,000.00. This is the estimated cost of the building. We have lent him up to August 1984 $252,000.00. He has now been increased to $418,000.00 since that date. The monies you are lending to Head will obviously go towards making up total construction costs. Clive Head has told me that he can only repay you from the sale of the building. He is negotiating a sale in one line for over $1.2 million. Mrs Malcolm: I want something from you to show how much I have lent Clive Head for the building. According to Mr Lewarne during this conversation the letter dated 6 December 1984 was prepared by Mrs Goldsmith, signed by Mr Lewarne and given to Mrs Malcolm. He readily conceded that the contents of the letter were incorrect in that at no time did Mrs Malcolm have the sum of $315,000.00 invested by the firm on registered first mortgage. Not surprisingly Mr Lewarne was cross examined with some vigour as to the circumstances under which he came to sign a letter which was not only false and misleading but was quite inconsistent with what, according to Mr Lewarne, was the whole basis of all his transactions with Mrs Malcolm other than the transaction involving the Finianos Mortgage. The explanation given by Mr Lewarne in cross examination was that the error came about through inadvertence in that the letter was put before him whilst he was on the telephone and he signed it without looking at it. Under further questioning Mr Lewarne said that he could not remember the precise circumstances under which the letter came into existence. However, as it transpired, Mrs Malcolm's investment with Mr Head was not at risk as the Betts Street property was sold by Mr Head in February 1985 and everything owed to Mrs Malcolm was repaid out of the proceeds of sale. After this repayment Mrs Malcolm said that she had a further conversation with Mr Lewarne in which she said referring to her money: "What am I going to do with it now?" to which he replied: "I have another client for you, a Mr Compton." When asked further about this conversation she said: "He told me it was to be - the money would go on cattle and I said no I didn't want the money on cattle. It was too risky or something to that effect, I did say. And he said: "There is no need for you to be worried" because he said: "I have been trustee", that Mr Compton was a multi-millionaire and he had plenty of collateral, that he had big buildings going on and he had these special cattle, all prime cattle and all that sort of thing and he said: "Your money is safe as in the bank, Mrs Malcolm". He said you can guarantee I will look after you." Mrs Malcolm said that in reliance upon what Mr Lewarne told her she invested money with Mr Compton. She was asked whether she saw a form of stock mortgage and this exchange ensued (transcript page 41): "Q. Did you see a form of stock mortgage? A. Yes I did have that stock mortgage. Q. Tell us about that and how that came about. A. Just one day Mr Lewarne, we was in the office there and Mr Lewarne said, "you better take that home because it is a stock mortgage paper" and I had written on - I didn't want any more cattle and I took it and wrote 360 on it, the side of the document." Mrs Malcolm identified a document in the form of a stock mortgage dated 20 April 1985 such mortgage being expressed to be given by Folly Lodge Pty Limited at the request of Terence Peter Compton and Jeanette Compton as guarantors in favour of Mr Lewarne. The document does not appear to have been registered but it bears the common seal of Folly Lodge Pty Limited and the unwitnessed signatures of Mr and Mrs Compton as guarantors. The mortgage also has annexed to it a list of stock which it secures. Mrs Malcolm recounted subsequent conversations with Mr Lewarne when the subject of transferring the security for her advances to Compton from cattle to real estate was discussed but it appears that she was also having direct dealings with Compton and his employees and as late as March 1986 paid $10,000.00 to "Folly Lodge" which bore the name of Terry and Jeanette Compton on its letterhead. It appears that during 1986 Mrs Malcolm was informed by Mr Cocks an employee of Compton that Mr Compton was in some financial difficulty and that he was also having a matrimonial dispute. She said that she then went to see Mr Lewarne in his office accompanied by her daughter Mrs McGuire. The transcript at page 43 records this exchange: "Q. You wanted to transfer the security from the cattle to the units. A. Yes. Q. What did Mr Lewarne say when you said that? A. He said it would be very good security. Q. Did he discuss what security it was? A. I really couldn't answer that, Rhonda might, I was a bit sick that day myself. Q. Was there talk of how this security would be given? A. It was always first mortgage, that is what I understood. Q. Is that what he said? A. Yes of course. Q. Did you subsequently, get some mortgage documents? A. Yes, from Valley (Folly) Lodge Pty Limited. Q. What happened after you signed those mortgage documents? A. Mr Cocks said that he would give us one and the rest would go in Mr Lewarne's office for safe keeping so he would send them back to Mr Lewarne but they were taken over to Rhonda's place when I was away on holiday. Q. Was there a later time when Mr Compton didn't pay interest under those mortgages? A. Not until the very end, he just went broke. Mr Lewarne's evidence as to these matters as set forth in his Statutory Declaration was to the effect that about March 1985 Mr Compton told him that he had spoken to Mrs Malcolm and arranged to borrow $420,500.00 in cash from her and indicated that the only security he could offer was over cattle on his farm at Bowral. Mr Lewarne said that by appointment Mrs Malcolm called to see him on 10 April 1985 and the following conversation took place: "Mrs Malcolm: I am going to lend Terry Compton $420,500.00 in cash. He is going to give me a stock mortgage. Is that safe? Mr Lewarne: I would not recommend it because there may be a drought, the cattle could all die, or he could sell the cattle without you knowing it. He could give you a stock mortgage over the cattle but I have no idea what the cattle would be worth. Mrs Malcolm: Can I still have the stock mortgage. Mr Lewarne: Your name will have to go on it. Mrs Malcolm: I don't want my name on it. Mr Lewarne: If your name is not on it the mortgage cannot be registered. Mrs Malcolm: I don't want it registered. Mr Lewarne: Then the mortgage has no legal effect, the best place for your money is in a safe deposit. Mrs Malcolm: I don't want to put it there I want to be able to earn interest, I still want to go on with it. Mr Lewarne: The stock mortgage will not be worth the paper that it is written on." Mr Lewarne said that on 11 April Mr Compton brought him a blank stock mortgage apparently printed for use by Elders IXL Limited. At Mr Compton's request Mr Lewarne typed the name of Folly Lodge Pty Limited as mortgagor and the names of Mr and Mrs Compton as guarantors. Mr Compton then took the document away. He returned it on 19 April executed under seal by Folly Lodge Pty Limited and by Mr and Mrs Compton although their signatures were not witnessed. Mr Lewarne had a further conversation with Mrs Malcolm during April 1985 when he showed her the executed stock mortgage but drew her attention to the fact that her name was not on it and said that he gave this advice: "All a stock mortgage is to give an acknowledgment of a debt to Folly Lodge with a personal guarantee from Terry and Jeanette Compton. You will have to deal with Terry Compton so far as interest is concerned. Be careful if you want to lend him more money. Do you want to hold the stock mortgage?" According to Mr Lewarne Mrs Malcolm responded: "No I don't want it, you hold it in your safe." Thereafter Mrs Malcolm until November 1985 on a monthly basis brought amounts of cash to Mr Lewarne's office which after counting by an employee of Mr Lewarne were collected by Mr Compton or his employee Mr Cocks. Mr Lewarne said that it was not necessary for any member of his firm to telephone Mr Compton to arrange for collection of the cash. He assumed that Mrs Malcolm made these arrangements direct with Mr Compton. Mr Lewarne recalled that at some time during this period Mrs Malcolm asked for and was given a copy of the stock mortgage. On 3 June 1986 Mrs Malcolm informed Mr Lewarne that there had been default by Mr Compton in the payment of interest and a short time later there was a meeting in Mr Lewarne's office attended by Mr Compton, one of his employees, Mrs Malcolm and her daughters. Some discussion ensued as to whether Mrs Malcolm could be protected by a transfer to her of two units in a project at Merrylands in which Mr Compton was involved. Some days later according to Mr Lewarne he had a conversation with Mr Compton in these terms: "Mr Compton: Maggie has been chasing me. I am prepared to transfer the stock mortgage to a second mortgage over Merrylands and a third mortgage over Carlingford. Mr Lewarne: I won't prepare the documents. You will have to do them yourself. I am not going to get involved." Although, according to Mr Lewarne, he did not thereafter prepare any mortgage documents, he did upon request supply some blank mortgage forms. Some time later in June 1986 Mrs Malcolm came to Mr Lewarne and after saying: "I have got these three mortgages from Terry Compton" produced three mortgages given by a company Charlish Holdings Pty Limited over properties at Merrylands, Carlingford and Eastwood. These documents all bore date 1 April 1986, were in favour of Mrs Malcolm and expressed to acknowledge principal sums respectively of $102,000.00, $250,000.00 and $150,000.00. They were unstamped and unregistered. Mr Lewarne said that the mortgages were not prepared by his firm and that upon being shown them he pointed out to Mrs Malcolm their dubious value having regard to the existence of prior encumbrances. Mr Lewarne said that Mrs Malcolm expressed concern that the mortgages were in her name and that if they were registered she would be shown on the title. Paragraphs 27, 28, 29 and 30 of Mr Lewarne's Statutory Declaration which concluded that part of the declaration dealing with the affairs of Mrs Malcolm were in these terms: "27. In April 1986 Terry Compton was under considerable financial pressures. He made unreasonable demands on my time. About Easter I collapsed from stress. At that time Terry Compton was pressing me to take action against Elders to obtain payment of the monies withheld by them following the sale of his cattle. I asked my partner John Goldsmith to handle this matter. 28. Mrs Malcolm requested that she be repaid the sum of $14,000.00 from our contributory mortgage practice. This was done on 1 October 1986. 29. About October 1986 Mrs Malcolm uplifted the mortgages over Terry Compton's properties at Carlingford, Eastwood and Merrylands and also the original unregistered stock mortgage. 30.In the period August 1984 to October 1986- (1) I regarded Mrs Malcolm a client of Lewarne & Goldsmith in relation to her investment of $14,000.00 through the firm's contributory mortgage practice in the Finianos Mortgage. (2) I did not consider Mrs Malcolm was a client of the firm in relation to any monies left with the firm in cash for collection by or on behalf of either Clive Head or Terry Compton. I did not open any file for or render any account to her or receive any payment for professional or management fees in respect of these monies. (3) I believed Mrs Malcolm remained a client of Storey & Gough and instructed that firm in relation to the sale of her house at 26 Thomas Street, Parramatta and the purchase of 29A Thomas Street Parramatta." By letter drafted by her Solicitors dated 29 September 1986 Mrs Malcolm complained to the President of the Law Society that her investment with Mr Compton had been entirely lost and that the securities which she had taken were worthless. Apparently the stock listed in the stock mortgage were subject to a prior mortgage in favour of Elders IXL Limited and on the sale of the stock the whole of the proceeds were taken by Elders IXL Limited. There was moreover apparently no equity in the unregistered mortgages granted by Charlish Holdings Pty Limited. The Tribunal was informed during the course of the proceedings that there is a pending civil action by Mrs Malcolm against the Solicitors. Thus far there has been no evidence directly implicating Mr Goldsmith in the transactions between his firm and Mrs Malcolm. His Statutory Declaration (exhibit "16") of 11 March 1991 said that he was aware that Mrs Malcolm brought cash to the firm, and that it was counted on one occasion by himself. His evidence was that he had no part in any of the arrangements. Mr Goldsmith did however have some direct involvement following the illness of Mr Lewarne at Easter 1986 as he then for a time assumed the conduct of Mr Compton's affairs. In one of those conversations Mr Compton said according to Mr Goldsmith's evidence: "That mortgage covers the monies loaned to me by Maggie Malcolm. I have got to protect her". Mr Goldsmith then amended the stock mortgage by deleting the name of Elders IXL Limited as Mortgagee and inserting Mr Lewarne's name in its place. He then made an addition in the schedule to the instrument and inserted an annexure. Apparently he later took advice from Counsel as to whether the prior unregistered stock mortgage now expressed to be in favour of Mr Lewarne operated in priority to a subsequent registered stock mortgage held by Elders IXL Limited. Neither his Declaration nor his evidence records the outcome of Counsel's advice but presumably it was not favourable to Mrs Malcolm's interests. Both Mrs Malcolm and her daughter were vague and unsatisfactory witnesses and although there were a number of curious features of Mr Lewarne's evidence, on the whole, the Tribunal prefers the evidence of Mr Lewarne to the evidence of Mrs Malcolm and her daughter where there is a conflict. Certainly the Tribunal would not regard the evidence of Mrs Malcolm and her daughter as sufficiently cogent to warrant of itself the making of adverse findings against the Solicitors having regard to the standard of proof appropriate to such findings. The evidence of Mr Goldsmith was not significantly in issue although again his explanation as to how and why he altered the stock mortgage in April 1986 seemed rather extraordinary. However the matter does not only turn on the credibility of witnesses. There is no doubt that large sums of money were lodged with Messrs. Lewarne & Goldsmith from August 1984 onwards and that those sums were not deposited to the credit of a trust account. Both the Solicitors of course contend as to this that there was no obligation upon them to deposit the monies into a trust account as in each case cash was lodged with them upon the express instruction of Mrs Malcolm that they hold it for collection initially by Mr Head and later by Mr Compton. The Solicitors also contend that in relation to the dealings with Mrs Malcolm which are the subject of the proceedings before the Tribunal she should not be regarded as a client of the firm with the consequence that obligations otherwise imposed upon them by the Legal Practitioners Act did not arise. The Tribunal does not however accept this submission. Although it is true that many of the incidents of the relationship between Mrs Malcolm and the Solicitors were not normal incidents of the relationship between Solicitor and client and although it is true that they rendered no account to her nonetheless there is no doubt that at least in relation to one matter namely the Finianos Mortgage there was a Solicitor client relationship. In the opinion of the Tribunal the dealings between the parties were such that when Mrs Malcolm sought and was given advice she was entitled to assume that it was given to her by the Solicitors in their professional capacity. Moreover in the opinion of the Tribunal the obligation to comply with Section 41(1) of the Legal Practitioners Act did not depend upon the existence of a Solicitor client relationship between the Solicitor and the person entrusting funds to him. The Tribunal is not however persuaded on the evidence that the conduct of the Solicitors in permitting Mrs Malcolm to lodge substantial sums of cash with them for collection by others, unwise as that conduct might have been, constituted a wilful breach of Section 41 of the Legal Practitioners Act. In the opinion of the Tribunal the obligation under Section 41(1) of the Legal Practitioners Act to deposit monies to the credit of a trust account did not arise in a situation where a Solicitor was handed a bundle of cash and expressly instructed to deliver that cash to a third party. As to the remaining grounds of complaint in the light of the Tribunal's findings as to the credibility of witnesses it is not persuaded to the requisite standard of proof that a finding of professional misconduct should be made. It may or may not be the case that Mr Lewarne failed to tender appropriate advice at the time Mrs Malcolm lent money to Mr Compton or that he failed to protect her interests by obtaining a properly executed, completed and registrable stock mortgage but they will be issues for determination in the civil proceedings between Mrs Malcolm and the Solicitors. Suffice for the Tribunal to say that it is simply not satisfied on the evidence that conduct sufficiently serious to warrant a finding of professional misconduct was established. In the result the Tribunal is of the opinion that the complaints against both Solicitors should be dismissed. The Tribunal does not however believe that this is a case in which costs should follow the event. It is of the opinion that it was entirely appropriate for the Law Society to bring the matter before the Tribunal and that the appropriate course is to make no order as to costs. Orders The formal orders of the Tribunal are therefore: 1. Complaints dismissed. 2. No order as to costs. Dated this 1st day April of 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.