The Legal Services Tribunal of New South Wales CITATION : Philip John Pollack [1993] NSWLST 10 PARTIES : Philip John Pollack FILE NUMBER(S) : of CORAM: Ms A Plotke (Presiding Member) - Mr A. Edgar - Dr U. Gault CATCHWORDS: Professional Misconduct - breach of s. 61 of the Legal Profession Act - Professional Misconduct - fail to act honestly - Professional Misconduct - misappropriate trust moneys/moneys :- LEGISLATION CITED: Legal Profession Act 1987 CASES CITED: DATES OF HEARING: 27/07/93 - 01/09/93 DATE OF JUDGMENT: 09/01/2001 Mr I. Wales Mr F. Smith LEGAL REPRESENTATIVES: Mr J.R. Young Barkell & Peacock JUDGMENT: The Legal Profession Disciplinary Tribunal In the matter of Philip John Pollack Reasons for determination and orders Before: Ms A. Plotke (Presiding Member), Mr A. Edgar and Dr U. Gault. Appearances: Mr I. Wales (instructed by Mr F. Smith) appeared for the Law Society of New South Wales Mr J.R. Young (instructed by Barkell & Peacock) appeared on behalf of the Solicitor. Hearing date: 27 July 1993 This complaint was made under Section 135 of the Legal Profession Act 1987 ("the Act") by the Council of the Law Society of New South Wales ("the Law Society") against Philip John Pollack ("the Solicitor"). Particulars of the complaint were that the Solicitor wilfully contravened Section 61 of the Act. The Law Society in the complaint requested the making of the following orders: 1. Such orders as to the Tribunal seems appropriate. 2. That Philip John Pollack pay the costs of the complainant of these proceedings. Attached to the complaint were further particulars pursuant to Section 135 of the Act. These further particulars asserted that the Solicitor wilfully contravened Section 61 of the Act in relation to the matters of Graham Martin, D. Ferrara, C. Moss and Whitehouse. The Law Society tendered a Statutory Declaration of Frederick John Smith made 11 February 1993 which was admitted as Exhibit "A". In his declaration Mr Smith declared that on 28 January 1993 the Law Society resolved that the Solicitor may be guilty of professional misconduct and that a complaint be made to the Tribunal pursuant to Section 135 of the Act. Annexed to Mr Smith's declaration was a copy of a memorandum addressed to Mr Smith by Mr John Mitchell, Chief Trust Account Inspector of the Law Society, dated 14 September 1992. This memorandum stated that on 2 December 1991 George Thomson carried out an inspection of the Solicitor's practice. This inspection revealed a number of debit balances in the Solicitor's Trust Account, two of which were still current at the date of the inspection. These were summarised in Mr Thomson's report dated 12 December 1991 which was appendix 1 to the memorandum. The G. Martin matter debit balance came about when the Solicitor drew costs and disbursements of $300.00 on 8 August 1991 and $200.00 on 12 August 1991 against a cheque which was dishonoured on 14 August 1991. Mr Thomson made the following comment on page 2 of his report: "I have requested the Solicitor to inform me when the current debit balances have been cleared." Mr Mitchell wrote to the Solicitor on 9 March 1992 requesting him to advise whether the debit balance had been rectified. As no reply was received to that letter, a second letter was sent to the Solicitor dated 30 April 1992. As no reply was received to that letter, a third letter was sent to the Solicitor on 1 June 1992. No reply was received. Mr Mitchell stated that as there was no reply to the letters, he directed Mr Sofiak to conduct an inspection of the Solicitor's trust account and report. Mr Mitchell stated that on 6 August 1992 and 25 September 1992, Mr Sofiak carried out an inspection of the Solicitor's practice. The inspection revealed that in relation to the matter of Martin, the debit balance noted in the previous inspection had been rectified on 5 August 1992 being one day prior to Mr Sofiak's inspection. At the time of Mr Thomson's inspection the debit balance had existed for approximately 112 days and remained in existence for a further 247 days despite Mr Thomson's requests and Mr Mitchell's correspondence. Mr Mitchell's memorandum further stated that Mr Sofiak's report (which was appendix 5 to Mr Mitchell's memorandum) disclosed a number of further debit balances. One of these, namely Whitehouse ($700.00) was created on 10 January 1992 and was not corrected until 5 August 1992 which was one day prior to Mr Sofiak's inspection. This was a period of approximately 207 days. Appendix 1 to Mr Mitchell's memorandum of 14 September 1992 disclosed with respect to three matters as follows: (a) G. Martin The sum of $1,000.00 showed as a debit in the trust account for a period of 232 days. The sum of $300.00 showed as a debit in the trust account for three days The sum of $500.00 showed as a debit in the trust account for a period of 112 days and was current at the date of the inspection, 12 December 1991. (b) D. Ferrara The sum of $691.50 showed as a debit in the trust account for a period of 52 days The sum of $1,106.50 showed as debit in the trust account for a period of 154 days and was still current as at the date of inspection. (c) C. Moss The sum of $1,000.00 showed as debit in the trust account for a period of 41 days but was reimbursed prior to the date of inspection. Counsel for the Law Society then traced the origin of the debit balances. He referred to a copy of the ledger account relating to Mr Martin (page 16) headed "Card No. 2". He then pointed out entries for the 9th and 12th August 1991 which showed that amounts of $300.00 and $200.00 respectively were paid by the Solicitor from the trust account on account of his own fees when there were insufficient funds in trust. On 9 August a cheque for $500.00 was deposited in the trust account which was not met and was returned unpaid on 14 August. Counsel also referred to the fact that Card No. 2 showed that a cheque for the same amount of $500.00 had been deposited on 1 July but was returned unpaid on 15 July. The ledger card showed that a cheque for $1,080.00 from the same client was deposited on 12 April 1991 but was returned unpaid on 16 April and that a replacement cheque for $1,000.00 was deposited on 13 June and this cheque was finally honoured. Counsel then referred to the matter of Ferrara which was dealt with on the ledger sheet on page 18 of the complaint. This ledger sheet showed a drawing from the trust account by the Solicitor on account of fees and disbursements in the sum of $691.50 on 10 May 1991. That drawing apparently left a credit of $440.00 but in fact on 16 May the cheque for $1,131.50 previously deposited to cover the drawings was dishonoured and that led to there being a shortfall of $691.50 in the trust account. A similar situation occurred on 1 July when a replacement cheque for $1,131.50 was banked apparently leaving a credit of $440.00. On the strength of that cheque, on the same date $415.00 was withdrawn in favour of the Solicitor being "reimbursement of Survey". Prima facie that left a credit of $25.00 in trust but on 9 July the replacement cheque for $1,131.50 was returned unpaid. The result of all this was that the figure of $1,106.50 shown at the bottom of the ledger card was in fact a debit figure. Counsel then dealt with page 28 of the complaint being the memo from Mr Sofiak which referred to the fact that this debit balance was rectified soon after Mr Thomson's visit of 2 December 1991. Counsel then referred to the matter of Moss, the ledger card for this matter being shown at page 19 of the complaint This revealed that on 30 March 1990 the sum of $1,000.00 was banked on account of fees, leaving an apparent credit of $1,000.00 in trust. On the same date, the funds not having time to clear, the Solicitor withdrew 1,000.00 on account of fees. Again on 7 May 1991 page 20 shows that a cheque for $1,000.00 was received and banked but on 10 May the Solicitor drew a cheque for fees of $1,000.00. However, on 13 May the cheque was returned dishonoured. This cheque was re-presented and dishonoured a number of times but finally a replacement cheque for $1,008.00 was banked on 20 June, this figure representing the original $1,000.00 and $8.00 bank fee. The final matter in the complaint was one of Whitehouse, the ledger card for which was shown on page 36 of the complaint. This card shows that as at 13 December 1991 there was a credit balance in the trust account of $81,584.95. On 16 December 1991 the Solicitor paid himself fees of $1,000.00 and then on 24 December 1991 drew a cheque for the Australian Tax Office for $80,703.95. This in fact left a debit of $119.00 in the trust account. On 10 January 1992 when there was already a debit balance in the trust account the Solicitor paid himself a further $581.00 on account of disbursements which left a shortfall of $700.00 in the trust account. That $700.00 was not deposited to rectify the shortfall until 5 August 1992 being the day before Mr Sofiak's inspection. Counsel then tendered Statutory Declarations of James Sofiak dated 5 March 1993, John Mitchell dated 8 March 1993, Terry Copas dated 5 March 1993 and George Thomson dated 5 March 1993 all of which were admitted as exhibit B. In the Solicitor's case, Counsel for the Solicitor tendered a Statutory Declaration of the Solicitor dated 10 May 1993. This was admitted as exhibit 1. The following statutory declarations and one character reference were tendered and admitted as exhibit 2: 1. Statutory Declaration of John Denis Maguire made 6 July 1993 2. Statutory Declaration of Brian Martin Quilty made 22 July 1993 3. Statutory Declaration of Phillip John Rowland made 22 July 1993 4. Statutory Declaration of Glenn Michael Coyne made 21 July 1993 5. Statutory Declaration of Lloyd Clive McDermott made 22 July 6. Statutory Declaration of Shouman Mukerjee made 16 July 1993 7. Statutory Declaration of Clive Andreas Evatt made 14 July 1993 8. Statutory Declaration of Michael William Concannon made 19 July 1993 9. Statutory Declaration of Michael Lawrence Haddad mad 22 July 1993 10. Statutory Declaration of John Francis White made 23 July 1993 11. Statutory Declaration of Patrick Joseph Kerr made 26 July 1993 12. Statutory Declaration of Ian David Rolfe made 23 July 1993 13. Statutory Declaration of Robert Gordon Minards made 26 July 1993 14. Character Reference by Brian Hallett dated 23 July 1993. The Solicitor admitted the breaches of Section 61 detailed in the complaint but there was an issue about whether the breaches were wilful. The Solicitor then gave sworn evidence firstly in relation to the litigation in which he was involved with the Deputy Commissioner of Taxation in 1991 and 1992. Counsel for the Solicitor tendered application for special leave to appeal to the High Court dated 13 December 1991 in such litigation and this application was admitted as exhibit 3. The Solicitor stated in the witness box that the litigation with the Deputy Commissioner of Taxation covered the period from approximately 27 March 1991 to 22 April 1992 when the proceedings were settled. The Solicitor was asked about his state of mind during the period in which the litigation was current. He said: "With the tax case it was a matter where the tax man was trying to bankrupt me. It was in court every six weeks and all the Attorney-Generals in Australia became involved because it involved a jurisdictional problem. That was my number one priority at the time." In relation to the matter of Ferrara the Solicitor admitted that the problem arose in May 1991 and was rectified shortly after Mr Thomson's visit on 2 December. When asked by the chairman as to how long it would have taken to rectify the matter, the Solicitor replied "Two minutes". The Solicitor was asked by his counsel whether he conceded that he drew upon the funds deposited by Mr Moss too quickly. The Solicitor replied: "Yes, I waited three days on that one. I had a look at the statement which I obtained on a Friday and it wasn't showing that the cheque had been returned. Normally they show up within one or two days. Three days, look, is too early. Yes, I agree with that." In the Whitehouse matter, when asked about the cheque drawn to the Taxation Office for $80,703.75 the Solicitor made the following comment: "The problem with that one is that my bookkeeper wasn't in the office on that day and I had to get a cheque off to the Tax Department because there was going to be - it was on Christmas Eve I think it was - and I had to get a cheque off to the Tax Office to stop interest running, which was running at 20 per cent against Mr Whitehouse, and everything was going to be closed over Christmas, so I did my own calculations without the books being written up and I miscalculated." When asked about the further cheque for $581.00 drawn on 10 January 1992, the Solicitor said at, "It was reimbursement for some disbursements." He later said "I drew the cheque on 10 January. Again the books hadn't been written up and I was going off my own calculations which turned out to be wrong." The Solicitor's counsel put the following question at, "But on the return of your bookkeeper it was pointed out to you wasn't it, that both of those sums had been paid in error and that there had been this miscalculation?" The Solicitor replied "There had been a miscalculation, there was $700.00 overdrawn." The Solicitor was then asked by his counsel "Why wasn't the matter remedied until August 1992?" The Solicitor replied "Again, I didn't treat it as a priority" at 19T. Counsel for the Law Society asked the Solicitor "Mr Pollack, you had drawn money for your own professional costs?" The Solicitor answered "Yes." Counsel then asked "In circumstances where the cheques which had been paid in to meet those costs had been dishonoured?" The Solicitor answered "Yes." The Solicitor stated in his statutory declaration that he was married with two children aged 16 and 15. He was born in Sydney on 28 February 1947. In 1970 he was admitted as a barrister having completed the Barristers Admission Board course of studies. In 1966 he entered employment with the Commonwealth Government and worked in the Official Receiver's Office subsequently in the Office of the Deputy Crown Solicitor. In 1972, he commenced work in the firm of Glasheen & Kerr and in 1975 he was admitted as a solicitor. From that time he worked as an employed solicitor in the office of P.J. Kerr Co. In 1980, he commenced practice on his own account under the title `P.J. Pollack & Co.' In 1982, he entered partnership in practice under the name `P.J. Kerr Pollack & Co.' Since 1984, he had practised on his own account. No evidence was given of the size of the Solicitor's practice. Counsel for the Law Society submitted to the Tribunal that the allegation of professional misconduct was made out. Counsel submitted that professional misconduct under Section 123 included conduct that is declared to be professional misconduct by any provision of the Act and that pursuant to Section 61(7), any breach of Section 61(1) was professional misconduct. Counsel further submitted that there had clearly been a breach of Section 61 and certainly to the extent that the fault remained unrectified, it was a wilful contravention of the Act. He did not submit to the Tribunal that the Solicitor had shown himself unfit to practise. However, from the point of view of the Law Society, he stated that the breaches of Section 61 were not trivial and that it was not one or two inadvertent drawings when there were insufficient funds, there being a number of occasions when the drawing of funds gave rise to a shortfall. Invariably, it was the Solicitor's drawings for his own costs or reimbursement of his own disbursements that caused the shortfall. He commented that the Solicitor in cross-examination advanced as a kind of justification or mitigation the fact that the trust account inspector in December 1991 somehow hadn't underlined the seriousness of the offence. The Tribunal agrees with Counsel's submission that it is a matter any solicitor must be aware of without having to be told. Counsel further submitted that the fact remained that a number of the shortfalls were not rectified until 5 August 1992, that being the very day before the trust account inspector was due to make another inspection. Against a background of letters from the Law Society urging the Solicitor to report about the rectification of the shortfalls, the offences had been established and they were serious and not trivial. Counsel for the Solicitor did not dispute that the Solicitor had contravened Section 61 of the Act. He submitted that the question of whether the contraventions were wilful was not as clear as the Law Society had suggested in relation to the whole of the complaint. He stated that in his submission the Tribunal would not be satisfied that the drawings constituted wilful contravention of Section 61 although the drawings were made in circumstances that do contravene Section 61. He conceded that in relation to the matter of Martin, the real failing of the Solicitor was that he did not remedy the deficiency until 5 August 1992, the day before the further inspection and almost a year after the initial transactions on 9 August 1992. In terms of the Solicitor's own position, he conceded there was recklessness. In not remedying the Martin matter and in not notifying the Law Society of rectification in the Ferrara matter, it became virtually inevitable that the Solicitor would find himself before the Tribunal. He submitted that the taxation litigation had become an obsession with the Solicitor and he was totally distracted by it. He submitted that in the matter of Moss, the failure to clear the cheque from a longstanding client before drawing his fees would, in his submission, not be a matter of wilful contravention of Section 61. In the matter of Whitehouse, Counsel maintained that this was different in that it did not involve a dishonoured cheque but arose through arithmetical errors while the Solicitor's bookkeeper was on holidays. In his submission, the real error was not the arithmetic error but rather the failure to remedy the deficiency until 5 August 1992. He allowed himself to become the victim of a self-imposed tomorrow, next week syndrome. Counsel submitted that as the testimonial material in the statutory declarations made clear, the action or inaction by the Solicitor was something quite out of character in that he allowed the course of conduct, or course of sins of omission, to occur in the course of his distraction or obsession with the other matters. He further submitted that the transgressions of the greater significance, mainly the inaction in remedying the deficiencies, and the background which caused the Solicitor to be preoccupied with other matters, would encourage the Tribunal to exercise some leniency in relation to the relevant penalty. In this regard, he referred the Tribunal to two other matters which had recently been before the Tribunal, namely Munro and Conn where fines of $4,000.00 and $5,000.00 respectively were ordered by the Tribunal. In his submission the circumstances of the case of the Solicitor and the fact that the major failing was in the time it took him to remedy deficiencies would incline the Tribunal to the view that the matter was less serious than either Munro or Conn and that the appropriate order was a fine of a lower order than in either of those cases. Counsel for the Law Society made one final submission on the question of wilfulness. He submitted that it is a wilful contravention of Section 61 when cheques were drawn against funds known, by the Solicitor to be uncleared at the time when the cheques were drawn. He submitted that in the matter of Whitehouse, it was not a wilful contravention at the time the cheque was drawn but it became so when there was a considerable delay between the Solicitor becoming aware of the shortfall and rectifying same. This delay made the contravention wilful. Findings In considering the issue as to whether or not the Solicitor's conduct was wilful, the Tribunal has had regard to the principles relating to "wilful failure" dealt with in the case of Re Hodgekiss (1962) 62 SR(NSW) 340. In that case Hardie J reviewed a number of English authorities including in Re Vickery (1931) 1Ch 572 where Maugham J (as he then was) stated at page 583: "...a person is not guilty of wilful neglect or default unless he is conscious that, in doing the act which is complained of or in omitting to do the act which it is said he ought to have done, he is committing a breach of his duty, or is recklessly careless whether it is a breach of his duty or not." Hardie J in applying this principle to the statutory equivalent of Section 61 of the Act said: "Applying those principles, I am of the opinion that the section deals with personal breaches of the statutory provisions in question on occasions when the solicitor knew or believed that he was committing such breaches or was recklessly careless in that regard. It is thus essential in an enquiry as to whether or not there have been wilful breaches by a solicitor of the provisions of ss.41 and 42 to examine the facts and circumstances relevant to his state of mind, knowledge and intention at the material dates." Counsel for the Solicitor conceded in his submissions that the Solicitor's conduct was reckless. In the Martin matter the Tribunal finds that the contravention by the Solicitor of Section 61 of the Act, was a wilful contravention. The facts admitted by the Solicitor are that the Solicitor made withdrawals totalling $500.00 from the trust account of the client against a cheque which was not cleared and which had been banked, dishonoured and rebanked and was subsequently dishonoured again. He knew there was a history of dishonoured cheques in relation to this client. True it is that he rang Martin's bank manager and informed him he intended to bank a cheque for $500.00 and enquired whether it would be paid and was told that if the cheque was deposited that day, 9 August 1991, it would be paid. He banked it that day and drew against it the same date and again three days later. However, even if the overdrawing of the account did not amount to a wilful breach of Section 61 on 9 August, it certainly became a wilful breach when after Mr Thomson had drawn the matter to the Solicitor's attention he failed to remedy it. He continued with that failure notwithstanding that three letters relating to the matter were written to him by the Law Society and he allowed the breach to continue for the best part of a year until 5 August 1992 which was the day before an inspection was scheduled by a trust account inspector. In the Ferrara matter the Tribunal also finds that the Solicitor wilfully contravened Section 61. Here again there was a history of dishonoured cheques. The client's cheque was dishonoured no less than four times. The Solicitor made his first withdrawal between the dates of the first banking of the client's cheque and the first dishonour. The subsequent three instances of dishonour did not prompt him to remedy the situation. In fact he made a further withdrawal during that time. There was no suggestion that he was unaware of the dishonour. The breach was plainly wilful. In the Moss matter there was again a withdrawal against uncleared funds, followed by the cheque of the client being dishonoured twice and no action by the Solicitor to replace the money. Eventually the debit which had been in existence since 10 May 1991 was eliminated by a cheque from the client on 20 June 1991. This means of dealing with the matter by the Solicitor does not eliminate the breach of Section 61 and the Tribunal finds that it was a wilful breach, the Solicitor having knowledge of it and not having repaid the moneys on becoming aware of it. The last matter of Whitehouse involved a debit for the period from 10 January 1992 to 5 August 1992. Again the Solicitor was aware of it at least from the time his bookkeeper returned from vacation, that is he knew of if for some six months before remedying it and the Tribunal finds that this breach was wilful. It follows from these findings that the Solicitor having wilfully contravened Section 61(1) is guilty of professional misconduct within the meaning of Section 61(7) of the Act. The Solicitor sought to explain his dereliction by pointing to bankruptcy proceedings against him by the Deputy Commissioner of Taxation which were extremely time consuming and stressful. These took place between March 1991 and April 1992 when the matter was settled. However, there are many pressures which a solicitor has to face in the course of his practice and they do not relieve him of his obligation in relation to his trust account. The Tribunal has had regard to the statutory declarations and character reference filed on behalf of the Solicitor and notes that the persons giving these references have been made aware of the complaints against the Solicitor. They all speak highly of his good qualities and say that the matters in the complaint are out of character with the person they know and have dealt with in practice. The Solicitor was frank in his demeanour before the Tribunal and appeared to be a truthful witness in answering questions put to him in examination and cross-examination. There was no suggestion of concealment in relation to the Solicitor's conduct. His evidence was that he regretted the lapses and breaches of his professional duties and obligations as disclosed by the complaint and he asserted that they were out of character and that he would not repeat the conduct to which the complaint relates. The Tribunal regards the conduct of the Solicitor as serious. Whilst it does not consider that the fitness of the Solicitor to practise is in question, it is of the view that the seriousness of the conduct warrants a fine. At the same time, it expresses the warning that if there is a recurrence of such conduct and the Solicitor were to come before the Tribunal again at some future time, then the question of his fitness may be in issue. The Tribunal therefore orders that: 1. The Solicitor pay a fine of $2,000.00 within a period of thirty days from the date of this Order. 2. The Solicitor be suspended from practice at the expiration of the said period of thirty 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 the first day of September 1993. 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