The Legal Services Tribunal of New South Wales CITATION : Phillip Leslie Blake [1994] NSWLST 1 PARTIES : Phillip Leslie Blake FILE NUMBER(S) : of 1993 CORAM: Mr D E Hunt (Presiding Member) at 1 - Ms A Plotke - Mr E Barnum CATCHWORDS: Professional Misconduct - breach of s. 61 of the Legal Profession Act - Professional Misconduct - misappropriate trust moneys/moneys :- Instances of misappropriation of client funds paid on account of stamp duty - Wilful breaches of ss.61 and 62 of the Legal Profession Act 1987- Solicitor's name removed from the Roll. LEGISLATION CITED: Legal Profession Act 1987 CASES CITED: The Law Society of New South Wales v Jones unreported, C of A, 27 July 1978) DATES OF HEARING: 16/12/1993 DATE OF JUDGMENT: 02/09/1994 Mr I.M. Wales (instructed by Mr F.J. Smith) appeared for the Law Society of New South Wales. LEGAL REPRESENTATIVES: Mr P.L. Blake appeared on his own behalf. JUDGMENT: This complaint was referred to the Legal Profession Disciplinary Tribunal (the Tribunal) pursuant to a resolution dated 25 March 1993 of the Council of the Law Society of New South Wales (the Law Society) that a complaint be made to the Tribunal pursuant to section 135 of the Legal Profession Act 1987 (the Act). On 11 September 1992 the Law Society had resolved that in its opinion there had been or may have been a failure to account within the meaning of section 92 of the Act in relation to Phillip Leslie Blake (the Solicitor) practising at 9 Copeland Street Beecroft and on the same date the Supreme Court appointed Hugh Thomas, Chartered Accountant (the Receiver), as Receiver of the property of the Solicitor within the meaning of Part 8 of the Act. The evidence before the Tribunal consisted of the Complaint, the statutory declaration dated 8 July 1993 of Frederick John Smith Solicitor and Manager of the Professional Standards Department of the Law Society, a further statutory declaration dated 17 September 1993 of Frederick John Smith to which are annexed copies of the Receiver's reports and the statutory declaration dated 16 September 1993 of Francis Robert Christensen, Accountant, who was appointed by the Receiver as his assistant in respect of the Receivership. These statutory declarations were admitted into evidence by consent and the Receiver's assistant Mr Christensen did not give evidence viva voce as it was announced that he was ill and unable to attend court. Annexed to Mr Smith's statutory declaration dated 8 July 1993 are summaries in nine of the matters investigated by the Receiver in each of which is set out a statement as to the nature of the transaction, the receipt by the Solicitor from the client of money on account of stamp duty and disbursements, the non-payment of that stamp duty by the Solicitor and the misappropriation of the amount received for stamp duty by the Solicitor. Each of these summaries contains a statement in the following terms "I have read the above report and agree that the statements of fact contained therein are true and correct" and these statements are signed by the Solicitor. The modus operandi of the Solicitor in the matters referred to in the Receiver's reports are as follows. In each case the Solicitor acted for a client or clients in respect of the purchase of a property and requested from the client moneys on account of stamp duty. On receipt of these moneys the Solicitor would bank this into his office account and use the money for his own purposes. In some cases he would purport to account to the client for the moneys received for stamp duties and in other cases no mention was made of the moneys received for stamp duty. Although it was not apparent from the Receiver's reports, in a statement from the bar table the Solicitor conceded that when a demand was made upon him to produce the appropriate Title Deed of a client when he was without funds currently in hand to meet that obligation he would use funds that were available from another matter to pay the stamp duty or interest to a client when it was due where some funds had been misused. It is not proposed to examine in detail each of the matters that were before the Tribunal but by way of illustration the Tribunal will examine four of the matters where the Solicitor had misappropriated moneys which he received for stamp duty. In the first matter the Solicitor acted for Professor and Doctor Barnetson on the purchase of a property at 33 Albert Street Wagstaffe. On 31 January 1992 the Solicitor wrote to his clients enclosing the Contract of Sale and requesting a cheque for the deposit in favour of the agent and a cheque in favour of himself for the sum of $4,790 which included an amount of $4,440 stamp duty being the appropriate amount on the Contract for Sale for a consideration of $170,000. On 17 February 1992 the Solicitor wrote to his clients setting out the amount required for settlement of the purchase and requesting bank cheques in favour of certain parties as requested by the vendors solicitors. Attached to this letter was his memorandum of costs dated 17 February 1992 amounting to $1,176 including disbursements and no reference or accounting was made in this memorandum of costs for stamp duty. According to the Receiver's summary the Solicitor did not pay the sum of $4,440 received for stamp duty nor register the transfer of the title in the name of the clients although he received the signed transfer and original Certificate of Title when he settled the matter. On 1 October 1992 the Receiver wrote to the clients advising them of the position and inviting them to instruct another solicitor to complete the matter. As previously mentioned the Solicitor signed the Receiver's summary of this transaction acknowledging that he had received the sum of $4,440 on account of stamp duty on the Contract for Sale which he paid into his office account on 4 February 1992 and misappropriated these funds for his own purposes. In addition he failed to pay the sum of $79 for Land Titles Office Registration fees as charged in his memorandum of costs and this amount was also misappropriated for his own purposes. In another matter the Solicitor acted for Timothy and Robyn Robinson on the purchase of a strata unit at Port Macquarie from Rynagrow Services Pty Limited for the sum of $88,000. On 24 September 1984 the Solicitor wrote to the client requesting a cheque for $1,910 which included the sum of $1,760 for stamp duty being the appropriate stamp duty on a consideration of $88,000. On or about 21 October 1984 the clients paid to the Solicitor the sum of $2,000 which he then banked into his office account at the Westpac Banking Corporation corner of Liverpool and Castlereagh Streets branch. The matter was settled on 21 December 1984 and the Solicitor received the original Certificate of Title in the name of the vendor Rynagrow Services Pty Limited together with the signed transfer. The Solicitor did not stamp the contract and used the funds which he had received for stamp duty for his own purposes. On the 19 December 1984 the Solicitor prepared a memorandum of costs and disbursements amounting to the sum of $2,864.50 in which he showed the moneys received on account of stamp duty on the contract for sale and copy amounting to $1,761.50 and gave credit for the $2,000 previously received on account showing a balance due for costs of $864.50. The Receiver's summary of this transaction including the misappropriation of moneys received for stamp duty was signed by the Solicitor as true and correct and dated 28 January 1993. Subsequently the file and title documents were delivered by the Receiver to Mr B.E. Miller solicitor on the 23 October 1993 according to the clients authority. Subsequently the Solicitor acted for Timothy and Robyn Robinson when they transferred the Port Macquarie property to the parents of Timothy David Robinson and again the Solicitor wrote to the clients requesting a cheque for $1,290 for stamp duty on a purchase price of $80,000. Mr and Mrs Robinson paid the sum of $1,290 to the Solicitor who banked this on the 19 October 1990 to his office account and the Solicitor did not pay the stamp duty on the contract but used the funds for his own purposes. In this matter the Solicitor did not prepare a memorandum of costs and disbursements. Subsequently on the 23 October 1992 on the clients authority the file including the signed transfer was delivered to Mr B.E. Miller solicitor and the original Certificate of Title remained with the bank. Again the Solicitor agreed that there had been a misappropriation of $1,290 and he signed the Receiver's summary acknowledging this position. The final matter to which the Tribunal proposes to refer is the matter of Murray where the Solicitor acted for Mr John Laurence Murray of Kootingal Court Caravan Park on the purchase of a property at Bendemeer from A. & M. Collins for the sum of $52,500. On the 26 February 1987 the Solicitor wrote to the client enclosing a memorandum of costs requesting a cheque for $2,025.25 for costs and disbursements including $810.25 for stamp duty being the appropriate amount on the consideration of the purchase price of $52,500. The Solicitor received the sum of $2,025.25 on the 31 March 1987 which he banked to his office account. The matter had been settled on the 6 March 1987 when the Solicitor received the original Certificate of Title in the name of the vendors Mr & Mrs Collins along with a signed transfer. The Solicitor did not pay the stamp duty on the transfer and used the moneys for his own purposes. On the 18 November 1992 the Receiver wrote to Mr Murray advising him of the Solicitor's failure to pay the stamp duty and the failure to transfer the title of the property and the client authorised that the file and title deed be forwarded to Messrs Patterson Byfield & Bryen solicitors of Tamworth on 1 December 1992. As in the other matters the Receiver's summary of this transaction including the misappropriation of $810.25 has been agreed to by the Solicitor and he signed this summary on the 28 January 1993. On the uncontradicted evidence before the Tribunal the Solicitor has been guilty of misappropriation of clients' moneys in nine transactions amounting to approximately $37,000 in accordance with the schedule annexed hereto and there can be no doubt that the Solicitor's conduct must be categorised as disgraceful and dishonourable and that he is guilty of professional misconduct. The Tribunal finds that the Solicitor wilfully contravened section 61 of the Act. As the Solicitor failed to keep a proper accounting record which disclosed the true position in relation to the moneys received in the transactions referred to in the Complaint the Tribunal also finds that the Solicitor wilfully contravened section 62 of the Act. In the circumstances in failing to register the transfers of the titles of the properties the Solicitor was also guilty of gross negligence. The Solicitor did not give evidence but he acknowledged that in each of the matters dealt with by the Receiver he had read his reports and had signed these as to the truth of each report and acknowledged that his signature appeared on the summaries. The Solicitor stated that he did not intend to call any evidence in contradiction and that he was not opposing the orders sought in the complaint and that he stood ready to face the consequences of his actions. In a moving speech from the bar table the Solicitor stated:"I stand before the Tribunal racked with shame, guilt, remorse and deep regret that a long period of my life has come to a conclusion in this way. I went out on my own as a young solicitor in the mid 70s and had made some awful mistakes through naivety and youthfulness which I then attempted to cover up and, like all abominations, that I kept as a deep dark secret, it snowballed. It snowballed to the extent that by the mid 80s it had virtually ruined my marriage, broke up my family. In 1987 I separated from my wife and children. They continued to reside in the matrimonial home, which we jointly owned where I had conducted my practice from home since 1977."That not only was a grave dislocation but it also brought an unbearable and increased financial burden in both supporting that situation and finding new premises in which to live and to continue in practice. Unfortunately as time went by the financial problems simply worsened. Although this spans over a considerable period of time, it should be said that each matters were not fed into some need for gambling or consumption of alcohol in any great way, but simply to continue the cover of mistakes that I previously made and matters where funds had gone into my office account predominantly for the payment of stamp duty and that it was a cycle where, when a demand was made upon me to produce the appropriate title deeds of the client without funds currently in hand to meet that obligation, at a much later date than should have been the case, another matter would appear and those funds would predominantly be used to pay, either for that stamp duty or interest to a client where it was due where some funds had been misused."Unfortunately, a year or so ago when our family home was sold, my wife moved out of it with the remaining children at home. The funds that I obtained after payment of mortgages that were secured on the property, all went into the general account with a view to and, in fact, endeavouring to reduce with what assets I had received that had been converted to cash to reduce liabilities and these situations, any substantial amount, at that stage something like $80,000 was paid to particular clients, and unfortunately that was the only asset that I had that remained as part of the marriage break-up. Since then it is like I'm talking of almost another life. The last year or so has been a totally different life I've been leading. I live with a perpetual state of depression, but I must say that the uncovering of these matters as much as I am ashamed by them, lifted an enormous burden from my psyche and I now see the world in a different light. I deeply regret how my life unfolded, the expectations that I falsely believed were upon me, my inability to share problems, even through a period of counselling I wasn't able to share this deep seated secret of what was transpiring in the financial byways of my life and the business." In conclusion the Solicitor expressed his thanks to the Receiver Mr Hugh Thomas and particularly the Receiver's assistant Mr Frank Christensen for conducting their investigations "In such a dignified and gracious manner". He stated "They treated me with compassion and humanity". In answer to a question from the Chairman the Solicitor stated that the first error to which he had referred related to a mortgage transaction where he had given one client some mortgage documents to sign and to take away to be signed by a third person. When they were brought back to him they were executed, he believed correctly, but when the debt fell due for payment the third person, who was a party to the mortgage, indicated that he had never signed the document. The Solicitor then stated:"I made the incorrect decision of not notifying the various Society and the various departments of the Society with this problem. I raised the money myself to cover the repayment of those funds in the hope that it wouldn't be a matter that wouldn't [sic] occur after that." The second matter to which the Solicitor had adverted was a claim that had been made against him for failing to lodge an action within time on behalf of a client and that he had failed to submit this claim to the Indemnity Fund. The Solicitor said:"I also made the grave mistake of not dealing with that through the channels which have been set up and for which I have paid. I felt that I had no body really to talk to about that, and then I made, out of the process of various funds through the office account in this style, a settlement and paid that and came to a settlement in that matter." In conclusion the Solicitor stated:"This is the sort of thing that occurred in those two particular matters where matters that once done could never be undone, and with normal family commitments and a slackening of work, a continuing state of depression about my ability to work satisfactorily withholding those matters to myself, not even my wife knew about these things until September last year. I shared it with nobody and have lived with it for a long time."Those two matters that most brought the system call it what you will, into play and it was a treadmill that I couldn't get off, unfortunately." In the light of the Solicitor's explanation the Tribunal could not help feeling some sympathy for his predicament and although this does not and cannot affect the order that it proposes to make, the Tribunal notes that according to the Solicitor the two matters where he believed that he was financially responsible to his clients and which put him into substantial personal debt, were matters that he may have been entitled to indemnity under the Law Society's professional negligence scheme. The tragedy of the matter, as the Chairman commented during the hearing, is that the Solicitor felt unable to turn to his professional body for advice or assistance, whether through fear or ignorance, and when he was in debt commenced a course of conduct which resulted in misappropriation of client's funds. However as the then Chief Justice Sir Laurence Street said in The Law Society of New South Wales v Jones unreported, C of A, 27 July 1978):"Reliability and integrity in the handling of trust funds are fundamental prerequisites in determining whether an individual is a fit and proper person to be entrusted with the responsibilities belonging to a solicitor. Members of the public, many of them wholly inexperienced and unskilled in matters of business or law, inevitably must put great faith and trust in the honesty of solicitors in the handling of money on their behalf. The Court must ensure that the trust is not misplaced." The Tribunal adopts the above statement as appropriate to the case and finds that the Solicitor's conduct makes him no longer fit to practise as a solicitor. In the circumstances the Tribunal makes the following orders that:1. The name of Phillip Leslie Blake be removed from the Roll of Solicitors of New South Wales.2. The Solicitor pay the costs of the Law Society of New South Wales as if taxed in the Supreme Court of New South Wales on a solicitor and client basis.3. If agreement cannot be reached as to the amount of such costs either party to have liberty to apply for the costs to be determined under section 163(6)(b). Dated this 9th day of February 1994. 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.