The Legal Services Tribunal of New South Wales CITATION : Stephen Martin Freeman [1993] NSWLST 4 PARTIES : Stephen Martin Freeman FILE NUMBER(S) : of CORAM: Mr G B Molloy (Presiding Member) - Mr J.W. Brennan - Rear Admiral G. Griffiths CATCHWORDS: Professional Misconduct - conviction for offences of dishonesty - Professional Misconduct - fail to act honestly - Professional Misconduct - prepare false documents :- LEGISLATION CITED: CASES CITED: Fraser v The Law Society (1992) 5LPDR 12 per Kirby P at 16 DATES OF HEARING: 06/11/92 - 05/02/93 DATE OF JUDGMENT: 02/05/1993 Mr L. Pierotti LEGAL REPRESENTATIVES: Mr G.C. Lindsay Messrs Lloyd and Lloyd JUDGMENT: The Legal Profession Disciplinary Tribunal In the matter of Stephen Martin Freeman Determination and Orders Before: Mr G.B. Molloy (Presiding Member), Mr J. Brennan and Rear Admiral G. Griffiths. Solicitor altering contract for sale of land so as to avoid payment of penalty stamp duty Tribunal considers role of solicitors in conveyancing transactions Finding of professional misconduct Solicitor fined $8,000. Appearances: Mr L. Pierotti, solicitor, for the Law Society of NSW and Mr G.C. Lindsay, instructed by Messrs Lloyd and Lloyd, for the Solicitor. Hearing date: 6 November 1992. With the intent of avoiding a stamp duty fine on an exchanged contract for the sale of land, the solicitor substituted a fresh page on the front of the contract, the effect of which was to indicate that the contract was exchanged on 22 November 1990 rather than the actual date of exchange, 22 October 1990, and presented that altered contract to the Stamp Duties Office and paid the duty as assessed as if the exchange of contracts had taken place on 22 November 1990. The effect of the solicitor's action was that a stamp duty fine or penalty in $853.00 was not paid and avoided. In October 1991 the contract was rescinded. In order to obtain a refund of stamp duty for the purchasers, the client of the solicitor, the solicitor prepared a Statutory Declaration for completion by the purchasers which indicated that the contract was dated 22 October 1990. Upon execution of that Statutory Declaration by his clients, the solicitor compounded his difficulties by placing on the stamped contract the correct date of exchange (22 October 1990) and lodged the Application for Refund and the stamped contract with the Office of State Revenue. This was his undoing. On 20 December 1991 he was interviewed by officers of the Stamp Duties Office at Parramatta and questioned over the discrepancy between the date on the stamped contract as lodged with the Application for Refund and the date stated in the original Application form lodged when the contract was originally lodged for stamping, which form showed the date on the contract as being 22 November 1990. On 23 December 1991, the solicitor brought the circumstances of his action to the attention of the Law Society. Why did the solicitor, a solicitor of considerable experience, having been admitted on 9 March 1973, having been articled to a well-known firm in January 1971, having had legal experience overseas for over three years, having obtained a Master of Laws degree at the University of London and being the second-ranking senior partner in a well known firm of Sydney city solicitors, carry out such an extraordinary series of actions? The solicitor candidly admitted that his action in altering the contract was done without either proper reasoning or integrity, was stupidly made and that his actions were completely reprehensible. It appears that the solicitor wrote to the proposed purchasers, his client, on 12 October 1990, a letter, but failed to inform the purchaser, in that letter, of the stamp duty payable on the contract after exchange. Indeed, it can be fairly said that the purchasers were not aware, at any time, prior to exchange, of the stamp duty payable on the contract. It is regrettable to note that this appears to have been the solicitor's practice and it is, in the view of this Tribunal, a practice that is, to say the least, quite inappropriate. It is important, in our view, that a purchaser of land be informed prior to exchange of contracts of the extent of stamp duty that will need to be met by the purchaser as a consequence of exchange. It is not unreasonable to assume that the solicitor may not have got into the difficulty that brings him before this Tribunal had he informed the purchasers prior to exchange of their stamp duty obligations and the amount thereof. The purchasers returned the proposed contract duly executed and formal exchange of contracts took place on 22 October 1990. On 24 October 1990 the solicitor wrote by facsimile transmission to the purchasers (addressed to the male purchaser at his place of business) simply advising that contracts had been exchanged. (The evidence shows that the letter stated the contract was exchanged on 19 October 1990 this may be a misprint and nothing hangs on it). One might be forgiven for asking why it was that the solicitor, at that point of time, did not request the stamp duty from his clients. It is regrettably not uncommon in solicitors offices that, at some point of time during the course of a conveyancing transaction the conduct of the transaction is handed over to a non-qualified person. It is common to describe those non-qualified persons as para-legals or conveyancing clerks or some other appropriate appellation. Clients of solicitors do not expect their legal affairs to be handled by persons who are not legally qualified. Conveyancing transactions are vitally important matters for clients, involving considerable legal obligations and consequences. The responsibility for conveyancing transactions in the office of a solicitor rest upon that solicitor. The applicable scale of professional costs or agreed costs anticipate that the solicitor will be carrying out the conveyancing transaction, and not handing over its conduct to a non-qualified person. A number of questions were put to the solicitor relating to the activities of the solicitor after the date of exchange. The reason for these questions was that it was not until 13 December 1990 that the solicitor sent a facsimile transmission to the male purchaser requesting a bank cheque for stamp duty and noting that the stamp duty had to be paid prior to 22 December 1990, otherwise penalties and fines may be applicable. The solicitor indicated that his procedure was for him to have all face to face communications with the client, negotiate the terms of the contract and then to pass the file to his conveyancing clerk, advising her what steps he expected her to undertake and not particularly to involve myself with her fulfilling those, what I consider to be somewhat mechanical functions, sending out the rate enquiries, getting in the stamp duty. The evidence is that the solicitor did not see this file again in terms of following through the relevant steps until the male purchaser wrote to the solicitor seeking access to the property over the Christmas period. In dealing with that request, the solicitor noted that the mechanical functions had not been done and the solicitor then took over the active conduct of the file. Although it is not an excuse, the solicitor did observe that the usual 6 8 week time frame in the normal conveyance did not apply to this particular conveyance because the instant conveyance involved a proposed subdivision with all the consequent delays. No charge is levelled against the solicitor for any delay or other conduct in the handling of the conveyancing transaction. However, it is appropriate to set his conduct out in some detail because it does offer some sort of explanation as to why the stamp duty was not paid within the statutory time limit. However, notwithstanding the fact that the solicitor by facsimile on 13 December 1990 requested from the purchaser the stamp duty so that duty could be paid by 22 December, no money or cheque was forthcoming. It appears, unfortunately, that the facsimile forwarded to the male purchaser at his place of employment was not received, one of the not uncommon incidents of facsimile transmissions. Unfortunately, although the solicitor had taken over the active conduct of the matter, and although he was aware that the time for payment of the stamp duty without fine would have expired on 22 December 1990, the solicitor failed to follow the matter up. Indeed, the solicitor did nothing further until 7 January 1991 when he wrote again, by facsimile transmission, to the male purchaser at his place of business referring to the previous letter of 13 December 1990, noting that the stamp duty had not been paid, that a fine was payable and requesting a bank cheque in the stamp duty plus the fine then payable of $853.00. The male purchaser telephoned the solicitor on the following day. He informed the solicitor that he had not received the previous facsimile and in the circumstances I do not feel that I should have to pay the fine referred to in your letter. The solicitor replied, Forward the amount of stamp duty to me now and I will attempt to resolve any fines applicable. The purchaser then forwarded to the solicitor a bank cheque for the stamp duty in an amount not including the fine. On 17 January 1991 the solicitor then substituted the front page of the contract in the manner stated above. Faced with the failure of the client to pay the fine, a number of options occurred to the solicitor: (a) to make a representation to the Commissioner to waive the fine. The solicitor rejected this option on the basis that he had had a prior experience with the Commissioner in a similar matter and the Commissioner had rejected the application for waiver or reduction (b) to substitute a false front page to the contract,the conduct which ultimately brought him before this Tribunal. It is curious that the solicitor, a person of considerable experience, did not consider other options available to him. Two spring to mind: either paying the fine himself (which he ultimately did after being found out by the Commissioner) or, insisting that his client pay the fine or any additional fines. The solicitor seemed to form the view that the Commissioner was not morally entitled to the fine and, furthermore, that (the solicitor) should not have to pay it. It is also curious that the solicitor, a person of considerable experience, appeared not to consider the advisability and propriety of discussing the problem with his partners. One of the advantages of a partnership is the ability to raise and resolve legal problem within the partnership and the solicitor could well have avoided the whole problem simply by adopting that option. The solicitor offered as a further explanation for his conduct the fact that, at the relevant time, he and his fellow partners, were under considerable pressure arising out of certain matters in the firm, including some very time-consuming litigation, difficulties with a major client, the opening of a branch office and, from the point of view of the solicitor personally, the commencement of the Gulf War and the fact that the solicitor had several relatives in Tel Aviv in Israel, which city had been the subject of certain attacks. The solicitor stated that these factors, and others, affected his ability to deal rationally and professionally with this matter. Such pressure cannot justify, but it may help to explain, my conduct, he said. The solicitor was the subject of fairly robust cross-examination. It is regrettable to note that, in the view of this Tribunal, the response of the solicitor to a number of questions showed an evasiveness on his part or a failure to be frank and honest in his answers. For example, the solicitor stated that in lodging the Application for Refund he was accepting that the act of amending the contract would be picked-up and I would be dealt with and when I got the phone call some months later I expected it. The solicitor seemed to be saying that when he applied for the stamp duty refund he knew that he would be found out and that he would suffer the consequences. This Tribunal does not accept that. This Tribunal is of the opinion that the solicitor in his subsequent actions was attempting to conceal his earlier conduct. The solicitor had earlier stated that he was no longer prepared to continue the falsehoods of the earlier documentation but he subsequently was forced to admit that his subsequent conduct was done in an attempt to again conceal my earlier conduct. In an initial submission to the Law Society, the solicitor submitted that his conduct did amount only to unsatisfactory professional conduct and not professional misconduct. Before the Tribunal, the solicitor admitted, correctly in our view, that his conduct amounted to professional misconduct. The solicitor was cross-examined about his original submission. In our view, no conclusion can be drawn from the fact that a solicitor submits that his conduct falls outside the definition of professional misconduct when, at all times, he had admitted the relevant facts. If there was a concealment of facts or a non-admission of subsequently proved or admitted facts, then an earlier submission that the conduct was only unsatisfactory professional conduct may have some effect upon the ultimate orders that are made by the Tribunal. It is not improper, and no negative inferences should be drawn against the solicitor, if the solicitor either himself or through his legal advisers, submits that his conduct as ultimately proved or admitted before the Tribunal does not amount to professional misconduct. The solicitor is entitled to make that submission and the finding on whether the conduct falls within one or other category is a conclusion of law. The Tribunal had before it some 15 statutory declarations, both from within and without the legal profession, all deposing to the good character of the solicitor and to the high regard in which the solicitor is held. There is no doubt that the solicitor's conduct was out of character and an isolated incident in his practice. The Law Society made no submission to the effect that there should be a protective order or that the solicitor was unfit to practice. There is no doubt, however, that the actions of the solicitor were fraudulent and were disgraceful and dishonourable. There is further no doubt that the solicitor continued with that conduct although he had the opportunity, at various stages during the course of the transaction, to face up to the position. He failed so to do and, in our view, thought he could get away with it and he would have got away with it if the fraud had not been picked up by the Investigating Officers at the Stamp Duties Office. There are cases where a single instance of professional misconduct may show, in particular circumstances, an unfitness to practice. In the light of the totality of the evidence before the Tribunal, and the submissions made on behalf of the Law Society and the solicitor, this is not such a case. We were referred to a number of prior decisions. However, in our view, none of those prior decisions throw any substantial light upon what should be done in the instant case. We agree with Mr Lindsay when he said that submissions about the comparative merits of prior cases are not really helpful because at the end of the day the Tribunal has to make a judgment about what the proper response is to the particular solicitor and his particular circumstances. Although prior decisions may give some guidance, each case has to be determined upon its own peculiar facts. The orders of this Tribunal are not made as much to punish the practitioner as such. They should go no further than is necessary to uphold proper standards and to protect the public interest. (See Fraser v The Law Society (1992) 5LPDR 12 per Kirby P at 16). The appropriate determination in this case involves the imposition of a fine serious enough to mark the Tribunal's strong disapproval of the solicitor's conduct. There is no doubt that the solicitor fully understands the seriousness of his conduct. Indeed, it is fair to point out that the solicitor invited the Law Society to undertake an audit or an inspection of the files of the solicitor and the Tribunal understands that such an inspection was subsequently carried out by the Law Society and no other matters requiring attention were discovered. The imposition of a fine will meet the demands of justice in this case and the amount of the fine should reflect the seriousness with which this Tribunal views the conduct of the solicitor. Orders The Tribunal therefore Orders: 1. The solicitor pay a fine of $8,000.00 within a period of 60 days from the date of this Order. 2. The solicitor be suspended from practice at the expiration of the said period of 60 days if the said fine shall not have been paid, until it has been paid. 3. 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. 4. 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. Dated this 5th day of February 1993. 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.