The Legal Services Tribunal of New South Wales CITATION : Charles Edmund Giugni [1995] NSWLST 2 PARTIES : Charles Edmund Giugni FILE NUMBER(S) : of 1993 CORAM: Mr C. Vass (Presiding Member) - Mr R. Clisdell - Mr I. Ferguson CATCHWORDS: Professional Misconduct - breach of s. 61 of the Legal Profession Act :- Contravention of Section 61 and Section 62 Legal Profession Act 1987 LEGISLATION CITED: Legal Profession Act 1987 CASES CITED: DATES OF HEARING: 13 February 1995 DATE OF JUDGMENT: 04/10/1995 LEGAL REPRESENTATIVES: Mr I. Wales appeared for the Law Society of New South Wales Mr J. Sexton appeared for the Solicitor JUDGMENT: Charles Edmund Guigni - contravention of Section 61 and Section 62 Legal Profession Act 1987. Whilst overseas, leaving signed but otherwise blank trust account cheques in possession of staff. Failure to supervise staff. Failure to act in the best interests of clients. No funds were lost. The Tribunal found the allegations proved and ordered that a practising certificate not be issued to the solicitor prior to 1.7.95 and that for the years commencing 1.7.95, 1.7.96 and 1.7.97, any practising certificate issued is to be restricted to the solicitor being an employee. BY ITS COMPLAINT THE COUNCIL OF THE LAW SOCIETY OF New South Wales ("the Society") alleged that Charles Edmund Giugni ("the Solicitor") wilfully contravened Sections 61 and 62 of the Legal Profession Act; in that while overseas he left signed but otherwise blank Trust Account cheques in the possession of his staff; he failed to supervise staff so as to avoid contravention of Sections 61 of the Legal Profession Act; he failed to act in the best interests of his clients and endeavoured to mislead the Tribunal. The Society sought such order from the Tribunal as is appropriate and an order for costs. The allegation that the Solicitor endeavoured to mislead the Tribunal arose during the hearing and was the subject of an amendment to the original Complaint. The undermentioned further particulars of the Complaint were attached to the amended Complaint. Particulars of the Complaint 1. The Solicitor wilfully contravened Section 61 of the Legal Profession Act 1987. A. Eaton (i) On 6 September 1991, the Solicitor received $13,000.00 from P. & J. Eaton. (ii) Trust account receipts were issued. As to $10,000.00 receipt No. 209 was issued. As to $3,000.00 receipt No. 210 was issued. (iii) The sum of $10,000 was credited to the trust ledger account of P. & J. Eaton, account No. 901229. The sum of $3,000 was credited to the trust ledger account of Balcombe & Eaton, account No. 901230. (iv) Cheques totally $10,000.40 were paid out of trust ledger account No. 910229. Cheques totally $3,000 were paid out of trust ledger account No. 901230. (v) The $13,000 received from P. & J. Eaton was not in fact deposited to the trust account. It was deposited to the Solicitor's general account which was, on 6 September 1991, overdrawn by slightly in excess of $10,000. As a consequence, the trust account was in debit in the amount of $13,000 from 6 September 1991 until 1 May 1992 when the Solicitor deposited this amount to the trust account. B. Nowra Coaches Pty Ltd (i) On or about 8 April 1992 cheque no. 269487 in the sum of $100,000 payable to Nowra Coaches Pty. Ltd. was drawn on the trust account. (ii) Trust account cheque no. 269487 was presented against the bank account on 8 April 1992. As a result the trust bank account was overdrawn in the sum of $685.89. The cheque was dishonoured by the bank on 9 April 1992 and reversed to the bank statement. (iii) As at 8 April 1992 the credit balance in the Troy Finance Limited trust ledger account was $50,000. As a consequence of drawing cheque no. 269487 there was a debit balance in that trust ledger account of $50,000. C. Cass (i) The solicitor acted for Kevin Brian Cass who was the vendor to Geoffrey Robert Sim of a property known as 262-264 Keira Street, Wollongong, pursuant to an agreement dated 9 January 1992. (ii) Under the said agreement, a deposit of $10,000 was payable by the purchaser to the vendor and was to be held by the vendor as stakeholder until completion. (iii) The Solicitor received the deposit of $10,000 on or about 7 January 1992 and on that date paid that amount into his trust account and credited that amount to the trust ledger account of Mr Cass. (iv) The agreement was completed on 7 February 1992. (v) On 20 January 1992, the solicitor paid the sum of $3,000 from the trust ledger account of Mr Cass to his cost account and on 4 February 1992 transferred the sum of $4,004.89 from the trust ledger account of Mr Cass to his cost account. (vi) At both dates referred to in sub-paragraph (v) above, no bill of costs had been provided to Mr Cass, no authority had been given by Mr Cass to transfer the money from the trust account, and no authority had been received from the purchaser to release the deposit. Further, the amount transferred exceeds the amount of costs ultimately due. (vii) On or about 5 March 1992 the Solicitor provided Mr Cass with a memorandum of costs and disbursements which totalled $6,427.80. D. Curtis (i) On 25 June 1992, the Solicitor withdrew the sum of $2,500 from the trust ledger account of Mr John Hamblin, a client. (ii) No bill had been provided to justify that withdrawal. 2. The solicitor wilfully contravened Section 62 of the Legal Profession Act 1987. A. Eaton (i) The particulars in paragraph 1A above are repeated. B. Nowra Coaches Pty Ltd (i) The particulars in paragraph 1B above are repeated. (ii) Trust account cheque no. 269487 in the sum of $100,000 dated 8 April 1992 was not entered in the trust account records of the solicitor and, consequently, the trust ledger account of Troy Finance Australia Ltd. did not disclose the true position in relation to moneys received and disbursed in that account. 3. Withdrawn. 4. The Solicitor, while overseas, left signed but otherwise blank trust account cheques in the possession of his staff. (i) This allegation is self-explanatory. 5. The solicitor failed to supervise staff so as to avoid contraventions of Section 61 of the Legal Profession Act 1987. (i) The matter set out in paragraphs 1B and 1C are repeated. 6. Withdrawn. The Society relied upon the evidence of Frederick John Smith contained in his Statutory Declaration which was sworn on 26 April 1994. Annexed to that Statutory Declaration were three reports of Jean Sayer the first dated 9 June 1992, the second dated 14 September 1992 and the third dated 24 September 1993. Certain parts of the reports were objected to by Mr Sexton and as a result of the objections certain parts of the reports were either not read by Mr Wales or rejected by the Tribunal. The Statutory Declaration of Frederick John Smith confirms that on 7 May 1992 Miss Jean Sayer was appointed to investigate the activities of the Solicitor and that on 2 December 1993 the Society resolved that the Solicitor may be guilty of professional misconduct and a Complaint was made to the Legal Profession Disciplinary Tribunal pursuant to Section 135 of the Legal Profession Act 1987. This Tribunal was empowered to hear the Complaint pursuant to the transitional provisions contained in the Act. The Society also relied upon the Statutory Declaration of John King which was not dated but was filed on 15 November 1994 and the Statutory Declaration of William Henry Stephens which was sworn on 14 November 1994. The Solicitor relied upon the Statutory Declaration of himself dated 7 October 1994 and his further Declaration dated 10 February 1995 and the Declarations of Robert Montgomery sworn on 9 February 1995 and James William Olson sworn on 10 February 1995. The Solicitor's Statutory Declarations included his response to each of the Complaints other than the Complaint in relation to the allegations of misleading the Tribunal. Much of what was alleged against the Solicitor was admitted by the Solicitor. In relation to each of the Further Particulars of the Complaint the Tribunal makes the following findings: 1A. Eaton The allegation is that the sum of $13,000.00 although drawn against was not paid into the Trust Account of the Solicitor but paid into the General Account with the result that the Trust Account was in debit to the sum of $13,000.00 from September 1991 to May 1992. The Solicitor says that the funds were incorrectly deposited into the Office Account by an employed Solicitor. He first became aware of the mistake when he received a bank statement for the month of September and he wrote to the Bank and pointed out the error and that the Bank then transferred the money from the Office Account to the Trust Account. The result was that the Solicitor's Office Account was then overdrawn and the Bank transferred the funds back from the Trust Account into the Office Account. The Solicitor said that he was not in a position to repay the $13,000.00. The Solicitor did admit when cross-examined that he had a cash flow and he could have put a few dollars into the Trust Account from time to time. He made no effort to do so nor did he make any effort to notify the Society of the problem. The Tribunal concluded that the breach was wilful and, therefore, Particular 1A was proved. 1B. Nowra Coaches Pty Ltd The Solicitor acted for a company Troy Financial Services which was a firm based in Wales in the United Kingdom and Troy Finance Australia Limited was incorporated in February 1992 to carry out the company's operations in Australia. The Solicitor was a shareholder in that company. Troy Financial Services was to arrange large blocks of offshore funds for loans in Australian Dollars for a term of 10 years and applicants for loans were required to pay an upfront commitment fee of 10% of the loan which amount was then added as an additional loan to the principal sum borrowed so that the commitment fee is refunded. Nowra Coaches Pty Ltd entered into arrangements in about October 1991 to borrow an amount of $2,000,000.00 from Troy Financial Services. The Solicitor was not involved in the arrangements. A commitment fee of $200,000.00 was remitted to Troy Finance by Nowra Coaches Pty Ltd in December 1991. Apparently part of the commitment fee namely the sum of $100,000.00 was borrowed by Nowra Coaches Pty Ltd and that money was due to be repaid in the early part of 1992. As time progressed Nowra Coaches Pty Ltd could not wait for the finance arrangement to be finalised and the company demanded a return of their fee. Due to a lack of funds the Solicitor had to wait and use the commitment fee of another prospective borrower in order to make the refund to Nowra Coaches Pty Ltd. The Solicitor says in his Declaration that he was due to travel to England at the time which was early April 1992 and that $50,000.00 had arrived as part of the $100,000.00 to be returned to Nowra Coaches and a remaining $50,000.00 was due to arrive. The Solicitor admits that he left with his Secretary a signed Trust Account cheque, however, it is clear from the evidence that the cheque while signed by the Solicitor was in fact not made out to Nowra Coaches Pty Ltd. The particular Trust Account cheque was dated the 8 April 1992 and was cheque number 269487 and when it was presented to the Bank it was dishonoured. As at the 8 April 1992 there was only a sum of $50,000.00 in credit in the Trust Account and, therefore, by drawing cheque number 269487 there was a debit balance in the Trust Ledger of $50,000.00. Clearly then there is a wilful breach of Section 61 of the Legal Profession Act. Ms Jean Sayer in her report sets out the detail of the entries in the Solicitor's Trust Account records as follows: , +, Debit, Credit, Balance 20.3.92, Balance, , , 50,000.00 Cr. 6.4.92, Receipt No. 251, , 50,000.00, 100,000.00 Cr. 10.4.92, Cheque No. 269488, 100,000.00, , Nil Miss Sayer points out that the actual position was as follows: , +, Debit, Credit, Balance 20.3.92, Balance, , , 50,000.00 Cr. 8.4.92, Cheque No. 269487, 100,000.00, , (50,000.00) Dr. 9.4.92, Cheque No. 269487 Reversed, , 100,000.00, 50,000,00 Cr. 9.4.92, Receipt No. 251, , 50,000.00, 100,000.00 Cr. 10.4.92, Cheque No. 269488, 100,000.00, , Nil The Solicitor was cross examined in relation to these entries and seemed to try and convey the impression that the problem was one created by the computer. He said in evidence that he didn't think his system allowed for the firm to generate a debit cheque. There was also another mistake in the actual records kept by the Solicitor. The $50,000.00 came into his Trust Account until 9 April 1992 and not 6 April 1992 as appears on the Trust ledger. The obligation to keep Trust Account records which properly reflect the transactions which take place is imposed upon the Solicitor by Section 62 of the Legal Profession Act and clearly the Solicitor was in breach of that Section. The Tribunal finds Particular 1B proved. 1C. Cass In this matter the Solicitor acted for Kevin Brian Cass who was the vendor to Geoffrey Robert Sim of a property known as 262-264 Keira Street, Wollongong. The allegation against the Solicitor is that the Solicitor was holding the deposit of $10,000.00 and on 20 January 1992 transferred from the Trust Ledger Account of Mr Cass the sum of $3,000.00 and on 4 February 1992 transferred from the Trust Ledger Account of Mr Cass the sum of $4,004.89 to his cost account. The transfer of funds was not authorised by Mr Cass and the Solicitor had not rendered an account to Mr Cass. The Solicitor in his Statutory Declaration admitted that he had transferred the moneys from the Trust Ledger Account of Mr Cass to his own General Account prior to settlement. The Solicitor gave no acceptable explanation for taking those steps other than to suggest that the matter was not progressing quickly and he was under extreme pressure financially. The Tribunal finds Particular 1C proved. 1D. Curtis In this complaint it was established that the Solicitor did withdraw the sum of $2,500.00 from the Trust Ledger Account of Mr John Hamblin on 25 June 1992. The Solicitor contends that an account was sent to Mr Hamblin but there is no copy of the account in the file. The Tribunal is of the opinion that the Society has not discharged its onus of proof in relation to Particular 1D. 2. The Solicitor wilfully contravened Section 62 of the Legal Profession Act. A. Eaton The Tribunal finds that this Complaint is proved and the reasons are stated above. B. Nowra Coaches Pty Ltd The Tribunal finds that this Complaint is proved and the reasons are stated above. 3. Withdrawn. 4. The Solicitor while overseas, left signed but otherwise blank Trust Account cheques in the possession of his staff. The Tribunal finds that this offence was proved for the reasons stated above. 5. The Solicitor failed to supervise staff to avoid contraventions of Section 61 of the Legal Profession Act 1987. The Society then repeated the allegations in relation to Nowra Coaches Pty Ltd. For the reasons already stated the Tribunal finds this offence proved. The Society in addition again pleaded the matters set out in Particular 1C which related to the matter of Cass. The Tribunal believes that that particular paragraph is probably incorrect. The Tribunal finds that the offence is not proved in relation to the matter of Cass. 6. Withdrawn. 7. The Solicitor failed to act in the best interests of his clients. A. Estate of Cassells The circumstances surrounding this allegation are that the Solicitor sold two blocks of land owned by him to a client John Colin Bartlett for a total consideration of $120,000.00 and arranged for Mrs Barr the Executrix of the Estate of Cassells to advance to Mr Bartlett the total consideration of $120.000.00. The Solicitor gave evidence that in his opinion the land was worth considerably more than the sum of $120.000.00. No Valuation was obtained and it is clear that the Executrix, Mrs Barr was not independently advised. The Tribunal finds that there was a conflict of interest between the Solicitor and his client, Mrs Barr, the Executrix of the Estate and the Tribunal also finds that the Solicitor has not acted in the best interests of his client. B. Loan to Curtis The Solicitor admitted that the Transfer had not been signed and had not been registered and the Solicitor also admitted that the Mortgage was not stamped or registered. The Tribunal finds this Complaint proved. 8. The Solicitor endeavoured to mislead the Tribunal. The allegation is that the Solicitor in his Declaration sworn on 7 October 1994 and in particular in paragraph 2(d) swore that he had left a signed cheque payable to Nowra Coaches Pty Ltd in the possession of his secretary. The evidence clearly establishes that the cheque was signed by the Solicitor but was otherwise blank. The Society contends that the Solicitor by alleging that the cheque was made payable to Nowra Coaches Pty Ltd was attempting to mislead this Tribunal. Mr Wales conceded that the Society bore the onus of proving this allegation and that the test was that laid down in the decision of the High Court of Australia in Briginshaw v Briginshaw. In that case Dixon J said: "The truth is that, when the law requires the proof of any fact, the Tribunal must feel an actual persuasion of its occurrence or existence before it can be proved. It cannot be found as a result of a mere mechanical comparison of probabilities independently of any belief in its reality. No doubt an opinion that a state of facts exists may be held according to indefinite gradations of certainty; and this had led to attempts to define exactly the certainty required by the law for the various purposes. Fortunately, however, at common law no third standard of persuasion was definitely developed. Except upon criminal issues to be proved by the prosecution, it is enough that the affirmative of an allegation is made out to the reasonable satisfaction of the Tribunal. But reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved." Before the Complaint was amended to include this particular allegation the Solicitor was vigorously cross examined by Mr Wales and in that cross examination he was asked whether he prepared the Declaration himself and he answered that he gave the information to his Solicitor, Mr Ford. He was then asked questions as to whether he read the Declaration and understood it before signing it and he answered substantially yes. He was then taken sub-paragraph 2(d) of the Declaration and was asked whether the statement was accurate or not accurate and he answered "no it is not accurate". In fact the Solicitor went on to admit that the words which are used in that particular paragraph of the Declaration are misleading. The Solicitor's explanation is that what he had in his mind was the fact that he had left cheques for Nowra Coaches Pty Ltd and that he believed that was what he was saying. He also said that he did not check the Declaration carefully enough before he signed it. The Tribunal formed the view that the Solicitor did not deliberately set out to mislead the Tribunal. The Tribunal finds that this Complaint was not proved. Determination The Tribunal having found that the Complaints as particularised have, apart from Complaint 5 re Cass and 8, been made out find the Solicitor guilty of professional misconduct. History of Solicitor The Solicitor was admitted in July 1984 as a Solicitor of the Supreme Court of New South Wales and had practised with the firm Gordon Garling & Giugni from mid 1986 to mid 1988 at Young in New South Wales and in Sydney when that firm acquired the practice McKimm & Associates. The Solicitor commenced practice as a sole practitioner under the firm of Kennedy Ford & Giugni on 1 January 1989. Apparently Messrs P.H. Kennedy, Gordon Giugni and Andrew Ford were consultants to the firm. For a short period from September 1991 until the end of October 1991 Andrew Ford was a partner with the Solicitor in that firm. Subsequent to 1991 the partnership was dissolved and the Solicitor continued to practise under the firm name of Charles Giugni & Associates. The Solicitor was not a practising Solicitor as at the date of the hearing and the Tribunal was informed that the Solicitor had not applied to renew his practising certificate since the 1 July 1993. In cross examination the Solicitor indicated that he was currently managing a business on behalf of some friends. Two Statutory Declarations which provide evidence of the Solicitor's good character were tendered. One is the Declaration of Robert Montgomery sworn on the 9 February 1995. Mr Montgomery is a Barrister. Mr Montgomery indicates that the Solicitor is a close friend of himself and his wife and he knows the Solicitor to be a person "worthy of our trust and affection". He says that in 1991 or 1992 he received from the Solicitor a Brief to advise the New South Wales Rugby Union and also a further Brief to advise the same client regarding a personal injury claim and he said that with respect to those Briefs the Solicitor displayed an excellent skill for focusing on the issues of law and questions of fact to be tried. Mr Montgomery in the final paragraph of his Declaration said, "now that I am aware of the nature of the Complaint by the Law Society against Mr Giugni, it is still my opinion that Mr Giugni is a person of honesty and integrity, and that he is a competent lawyer although it appears that his administrative skills in relation to conducting a legal practice have been inadequate". The other Declaration is that of Jame William Olson and that Declaration was sworn on the 10 February 1995. Mr Olson is a Chemical Engineer and prior to undertaking that profession he had been in the Royal Australian Navy and had risen to the rank of Lieutenant Commander. He says in the Declaration that he acknowledges that the Complaint and circumstances surrounding each matter, "now demonstrate that Charles Giugni's practice management at the time of the events outlined was poor. I would only note that I was aware of the difficulties that he was experiencing at the time and can state that he was under enormous pressure". He then went on to say, "nevertheless Charles Giugni is now managing a metal refining business for myself and a partner. I have found him to be competent and reliable in that position and a person whose advice has been invaluable". Submission on behalf of Solicitor Counsel for the Solicitor put the following submission to the Tribunal in relation to penalty. "Firstly, no money has been lost as a result of any admitted breaches by Mr Giugni. None of the matters complained of, except possibly two, involved any attempt by Mr Giugni to obtain any benefit for himself. Certainly none of these matters involves any deliberate attempt to obtain funds on a totally unjustified basis by Mr Giugni for his benefit. The two matters on which exception can be made are the Cass matter, because he transferred funds from his Trust Account to his General Account, but as I said earlier in the circumstances where the costs ultimately were due or the overpayment was repaid promptly, and the second matter is in relation to the Estate where it can be said that ultimately the benefit of the loan was to Mr Giugni's benefit because it enabled the property to be purchased, but once again it was not a situation where there was a transfer of funds or any consideration of theft and there has been no suggestion that, as a result of any of these transactions, anyone is out of pocket. At the time that all of these breaches took place save for Particular 8, Mr Giugni had been in practice for something over 7 years. The transactions took place over a period of about 9 months when Mr Giugni was under considerable financial and personal stress and there has been no suggestion in cross examination that anything Mr Giugni said about his personal affairs at the time was wrong or overstated. We submit that the penalty imposed should take into account those matters and also the following matters: Mr Giugni has not practised since May 1993 which is a period of nearly two years. He presently continues to be in a parlous financial position, as he has deposed to in his most recent Statutory Declaration. There has been evidence which has not been challenged about his competence as a Solicitor in both litigious matters and in commercial matters and, while you could not make a submission of general confidence having regard to the matters which have been admitted, nevertheless it is submitted that Mr Giugni is capable of practising as a Solicitor in terms of general legal competence to advise clients and so on. Finally there is evidence of his general good character which should be taken into account by the Tribunal when imposing a penalty." It then remains to determine what are the appropriate orders to be made in all the circumstances. In Fraser v The Council of the Law Society of New South Wales LPD T10-82 the Court of Appeal quoted with approval the test as formulated by Lopes LJ in In Re Weare (1893) 2 QB 439 at 448; "...The question which the Court...ought always to put to itself is this, is the Court having regard to the circumstances brought before it, any longer justified in holding out the solicitor in question as a fit and proper person to be entrusted with the important duties and grave responsibilities which belong to a solicitor?" The Court also referred to the well-established principles that the function of the Tribunal is protective and not punitive. Handley JA in that case also commented that fitness of a solicitor to be restored to the Roll depended on the Court being satisfied that he fully understood his past error. The Tribunal has taken into account all the evidence which has been presented and when considering the appropriate penalty the Tribunal particularly noted that the transactions complained of took place over a very short period of time which is said to be about 9 months and that there is no evidence that as a result of any of those transactions that any of the clients or others involved in the transactions sustained any financial loss. The Tribunal was also satisfied that the Solicitor fully understood the errors that he had made. The Tribunal makes the following Orders: 1. A Practising Certificate be not issued to the Solicitor until 1 July 1995. 2. The Solicitor, prior to the issue to him of a Practising Certificate pursuant to Order 1. undertake and complete to a standard approved by the Council of the Law Society such course of further legal education pertaining to office administration and control of Trust Accounts as the said Council may approve. 3. Any Practising Certificate issued to the Solicitor pursuant to Order 1. and any Practising Certificate issued to the Solicitor for the years commencing 1 July 1996 and 1 July 1997 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. 4. The Solicitor pay the costs of the Law Society, such costs to be assessed on a Solicitor and Client basis as if taxed in the Supreme Court of New South Wales. 5. If agreement cannot be reached between the Solicitor and the Law Society as to the amount of such costs, either party shall have liberty to apply. 6. In the event that no suitable course is available in order for the Solicitor to comply with Order 2. above in sufficient time prior to 1 July 1995 either party have liberty to apply on 14 days' notice. 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