The Legal Services Tribunal of New South Wales CITATION : Duncan Anthony Gilchrist [1991] NSWLST 4 PARTIES : Duncan Anthony Gilchrist FILE NUMBER(S) : of CORAM: Mr D E Hunt - Ms A Plotke - Ms N Keesing CATCHWORDS: Professional Misconduct - fail to keep accounts - Professional Misconduct - misappropriate trust moneys/moneys :- LEGISLATION CITED: Legal Profession Act 1987 CASES CITED: DATES OF HEARING: 28/02/81 - 31/05/91 DATE OF JUDGMENT: 05/31/1991 LEGAL REPRESENTATIVES: Mr Bilinsky JUDGMENT: The Legal Profession Disciplinary Tribunal In the matter of Duncan Anthony Gilchrist (solicitor) Determination and orders Before: Mr D.E. Hunt (Presiding Member), Ms A. Plotke and Ms N. Keesing This matter was referred to the Legal Profession Disciplinary Tribunal ("the Tribunal") by the Council of the Law Society of New South Wales ("the Law Society") by resolution dated the 15 November 1990 and the statement of complaint is dated the 5 December 1990. A copy of the grounds for complaint and particulars of grounds of complaint are annexed hereto and marked with the letter "A". The matter came before the Tribunal on the 28 February 1991 when Mr B. Murdoch, Solicitor, appeared for the Law Society and Mr Bilinsky, Solicitor, appeared for the Solicitor. The Solicitor was not present at the hearing although Mr Bilinsky stated that he was expecting him "later". He did not arrive and no explanation was given as to why he was not present other than that he lives out of Sydney. The Tribunal deprecates the fact that the Solicitor was not present at the hearing. At the commencement of the proceedings Mr Bilinsky indicated that he did not wish to oppose anything in relation to the matters referred to in grounds 1A and 2 but stated that he was putting the Society to strict proof in relation to grounds 1B and 1C which refer to matters of Gangemi Holdings Pty Ltd. The Tribunal will make its determination in relation to these grounds in the light of the evidence. The evidence before the Tribunal consists of the complaint which comprises reports from Jean Sayer Chartered Accountant dated 19 September 1990, 19 October 1990 and a further report dated 9 January 1991 which formed the subject of additional allegations against the Solicitor concerning Mr and Mrs Try, Mr and Mrs Odlum and Dairy Farmers Co-Operative Ltd. Particulars of these allegations are set out in a letter dated 14 January 1991 from the Law Society to Messrs Horowitz and Bilinsky Solicitors and Mr Bilinsky stated that he had no objection to these matters being included in the complaint against the Solicitor. Accordingly ground 1 of the particulars of grounds of complaint was amended by the addition of a further ground namely "1D" and annexed hereto and marked with the letter "B" is a copy of the letter dated 14 January 1991 setting out the particulars of this ground. The Society alleged that the Solicitor had been guilty of misappropriation of trust funds involving wilful breaches of s.61 of the Legal Profession Act (the Act), failed to keep proper accounting records that disclose at all times the true position in relation to trust monies received by the Solicitor thus constituting a wilful breach of s.62 of the Act and that the Solicitor's conduct constituted professional misconduct requiring that the Solicitor's name be removed from the Roll of Solicitors kept at the Supreme Court of New South Wales. Miss Sayer gave evidence that she had been appointed investigator of the Solicitor's practice on 17 September 1990 and following her first report dated 19 September 1990 she was appointed receiver of the Solicitor's trust property on 20 September 1990. In evidence before the Tribunal Miss Sayer stated that the Solicitor acted for Fagita Holdings Pty Ltd on a sale to F.C. Zadro (Management) Pty Ltd of Lot 5, Anella Avenue, Castle Hill and the amount of $120,000.00 was received by the Solicitor on or about 27 July 1990 on exchange of contracts being the deposit on the purchase price of $1.2 million and that the agreement for sale required that this deposit be invested with the State Bank. In fact the deposit was received by the Solicitor and banked to the credit of a company called Mandamus Investments Pty Ltd in which the Solicitor was one of two directors and a shareholder. Miss Sayer stated that there was no record of the deposit monies in the trust account and that the monies were subsequently disbursed for the personal expenditure of Mr Gilchrist and his company Mandamus Investments Pty Ltd. Miss Sayer was not cross examined concerning this transaction and the Tribunal is satisfied that the Solicitor misappropriated the amount of $120,000.00 to his own use and that ground 1A has been proved. In relation to the matter of Odlum (ground 1D3) Miss Sayer gave evidence that the Solicitor acted for Mr Odlum on a mortgage advance to Mackrell which was repaid on the 2 April 1985 when an amount of $29,615.33 was repaid by the mortgagor. The evidence is that there was no record of the transaction in the trust account but that Mr Odlum gave Mr Gilchrist a cheque for $25,000.00 and received a trust account receipt dated 4 April 1985 detailed as being mortgage for L.J. O'Brien. However the money did not go into the trust account and Miss Sayer's evidence is that she sighted a copy of the paid cheque for $25,000.00 which was drawn payable to Duncan A. Gilchrist and was negotiated at the ANZ Bank Stockton Mall at Baulkham Hills and apparently then sent to an ANZ Bank account at North Bankstown. Miss Sayer stated that she has not been able to ascertain what happened to the money thereafter. Mr Murdoch stated that so far as this transaction is concerned the allegation is that there has been a breach of s.61 of the Act as the monies were trust monies and should have been paid to the Solicitor's trust account but that there is no evidence of misappropriation. In the absence of any evidence as to the ultimate recipient of the sum of $25,000.00 received from Mr Odlum the Tribunal does not make a finding of misappropriation but finds wilful breaches of sections 61 and 62 of the Act. In the matter of Dairy Farmers Co-operative Ltd (ground 2D4) the Solicitor acted for the Co-operative through A.J.I. Services Pty Ltd a debt collection company and obtained judgment against Mr W.C. Cameron in respect of a debt outstanding to Dairy Farmers Co-operative Ltd. The Solicitor issued a bankruptcy notice on 14 March 1990 in the amount of $4,975.28 and a cheque for this amount was forwarded to the Solicitor by Messrs P.J. Kerr and Co the solicitors acting for Mr Cameron. The cheque was drawn in favour of Duncan A. Gilchrist Pty Ltd dated 30 April 1990 and was not deposited to the trust account or the office account. Miss Sayer gave evidence that she had not been able to trace the cheque but that it was not in the trust account. In cross examination Mr Bilinsky on behalf of the Solicitor suggested that costs where payable to the Solicitor and these had not been deducted from the amount in question. Miss Sayer stated that she had not seen any bill of costs in the file but the Tribunal accepts that the Solicitor was entitled to costs of acting in this transaction had he rendered an account. Nevertheless there has been a failure to comply with s.61 of the Act as the cheque for $4,975.28 was not paid into the trust account. In relation to the matter of Gangemi Holdings Pty Ltd the evidence from Miss Sayer is that the Solicitor acted for this company on the sale of Lots 6, 7, and 8 to N.E. Christie (NSW) Pty Ltd for the sum of $4.6 million. There was a deposit in the sum of $230,000.00 paid to the agent Norwest Industrial Real Estate Pty Ltd which was invested pursuant to the contract of sale. Mr Gilchrist told Miss Sayer that he received the deposit and banked it into one of his accounts. The Solicitor told Miss Sayer "He used it personally as part of his debt to the late Mr Gangemi." After settlement the settlement monies, excluding the deposit, were paid into a money market account with the State Bank. The amount involved was $4,268,894.98. Mr Gilchrist admitted to Miss Sayer that the deposit of $230,000.00 less commission of $90,000.00 and interest of $2,555.42 in the total of $142,555.42 were received by him from the agent and used for his own purposes. Furthermore Mr Gilchrist admitted to Miss Sayer that the following amounts withdrawn from the money market account of Gangemi Holdings Pty Ltd were used by him for his own purposes and form part of his indebtedness to the estate (Mr Gangemi died on 11 August 1990): $120,000.00 "31.05.89 $ 65,000.00 02.06.89 $ 60,000.00 02.06.89 $ 79,580.07 Paid to State Bank in respect of the indebtedness of D.A. Gilchrist 08.06.89 Purchase monies paid in respect of the purchase of property at Galston by Jaluit Pty Ltd, a company owned by Mr Gilchrist $ 438,822.25 15.06.89 Purchase monies paid in respect of the purchase of property at Terrigal by Jaluit Pty Ltd $100,000.00 26.06.89 $863,902.07" Annexed to her report of 19 January 1991 Miss Sayer shows details of the account number 077-0497898 kept with the Royal Bank styled Duncan A. Gilchrist in trust for Gangemi Holdings Pty Ltd which discloses that the funds of Gangemi Holdings Pty Ltd which were deposited in that account covered a series of cheques drawn by Mr Gilchrist in cash for personal expenditure and expenditure relating to his companies. According to Miss Sayer there has been a failure to account to Gangemi Holdings Pty Ltd by Mr Gilchrist as follows: $ 142,555.42 Sale Proceeds - Lots 6, 7 and 8 $4,268,894.98 Balance of Deposit $4,411,450.40 Balance of Purchase Monies Less: $4,018,958.13 Paid to the Estate $ 392,491.27 Plus: Purchase monies - Lot 5 as per Notice of Sale (subject to any necessary adjustments for rates etc.) $1,790,000.00 Deposit to State Bank - 23.1.80 Balance $ 250,000.00 $2,432,491.27 So far as the sum of $250,000.00 referred to above the accountant to the estate, Mr R.P. Dunlop, informed Miss Sayer that this was advanced to Mr Gilchrist on the 23 January 1990 and that Mr Gangemi had told him that at the time the payment was made Mr Gilchrist required this sum of money to be placed on deposit at the State Bank to enable him to be placed on the panel of solicitors who acted for the bank. Miss Sayer examined a statement issued in relation to that account which showed that between the 24 January 1990 and the 13 February 1990 sums had been withdrawn leaving a balance with interest of $216.78 as at 1 March 1990. Mr Gilchrist told Miss Sayer that it was not intended that the money stay on deposit but that it was in effect an interest free loan made to him by the late Mr Gangemi and formed part of his general indebtedness to the estate. In her report of 9 January 1991 Miss Sayer refers to two amounts of $120,000.00 and $577,000.00 being monies withdrawn from the money market account of Gangemi Holdings Pty Ltd on 31 May 1989 and said to have been paid to or on behalf of Gangemi Holdings Pty Ltd. Miss Sayer traced the cheques covering these payments and ascertained that the cheque for $120,000.00 was deposited with the Royal Bank to an account styled Duncan A. Gilchrist in trust for Gangemi Holdings Pty Ltd and the cheque for $577,000.00 was deposited to an account in the name of Gangemi Holdings Pty Ltd/Dunlop at Westpac Banking Corporation Castle Hill. In her report of 19 September 1990 Miss Sayer stated that in her opinion the Solicitor had failed to account to Gangemi Holdings Pty Ltd for an amount of approximately $3,120,000.00. However in evidence before the Tribunal she stated that as set out in her report of the 9 January 1991 it appeared that the Solicitor's indebtedness to Gangemi Holdings Pty Ltd is reduced by an amount of $697,000.00 being the sum of two figures of $120,000.00 and $577,000.00 referred to above, and this reduction is reflected in the figures set out in this document above showing a failure to account by the Solicitor in the sum of $2,432,491.27. Furthermore Miss Sayer stated that it appeared that Fagita Holdings Pty Ltd, a company controlled by the Solicitor, had previously had transferred to it without cost by Gangemi Holdings Pty Ltd Lot 5, Anella Avenue, Castle Hill. It was put to Miss Sayer in cross-examination that although the original contract when Fagita purchased the property was $750,000.00 the company in fact was proposing to pay the whole of the proceeds of sale viz $1,790,000.00 to Gangemi Holdings Pty Ltd. Miss Sayer did not agree with this proposition as she had not discussed it with the Solicitor. Mr Gilchrist in a statement of affairs prepared for Miss Sayer showed that the property had been sold for $1.2 million and in the file dealing with the transaction Miss Sayer sighted a letter dated 19 December 1989 offering to purchase the property for $1.3 million. However a Notice of Sale of Lot 5 dated 5 June 1989 lodged with the Baulkham Hills Shire Council on 29 June 1989 shows the purchase price of the property as $1.79 million and this is the figure that Miss Sayer adopted in her report of 19 September 1990 as the sale price. In a letter dated 12 September 1990 to the accountant the Solicitor stated as follows:<R>"Rates were adjusted on Lot 6, 7 and 8 on a paid basis with the purchaser allowing $6,396.46 of the $9,376.00 rates for the year. A cheque was drawn for this amount and paid to the Council. Likewise water rates were adjusted on the basis of $1,980.00 with the purchaser allowing $352.60 We received a total of $4,506,753.90 which included the above plus $140,000 being the deposit less the agent's commission. "Of this amount we paid to Mr Gangemi directly cheques for $1,780,000, $500,000, $445,000 and $584,133.10. "The balance was lent to myself and Lester O'Brien on the same basis that you have borrowed your $500,000 plus because of the delays in settling Lot 5 Sam said we were to sell it and whatever it went for was to be added to the general debt. We are presently selling all of the land owned by the two of us to pay this money back as soon as possible. As you can appreciate if I am crunched for this money immediately it will be impossible to pay back because of the market. "As you are aware I had an excellent relationship with Sam for many years and at one stage he wanted to give you and me this money because he had had it with the family. "Because of the embarrassing situation I find myself I ask you to approach the family with my proposal to pay all of the money back within 6 months. If other solicitors are become involved then I would be obviously closed down, the money would be lost and I would be gaoled." However in the absence of direct evidence from the Solicitor on this matter the Tribunal is not prepared to make any finding reducing the amount of the Solicitor's indebtedness to Gangemi Holdings Pty Ltd by the amount of the sale price for Lot 5 as this money has not yet been paid to Gangemi Holdings Pty Ltd. Had the Solicitor wished he could have appeared before the Tribunal and given evidence. The evidence does not disclose precisely what amount is outstanding from the Solicitor to Gangemi Holdings Pty Ltd but it is clear that the Solicitor owes this company a substantial sum of money and that he has misappropriated certain monies belonging to this company to his own use. Accordingly the Tribunal finds that in terms of ground 1B in the complaint the Solicitor has misappropriated from Gangemi Holdings Pty Ltd the sum of $142,555.42 for his own purposes. Furthermore the Tribunal finds that in respect of ground 1C the Solicitor has misappropriated from Gangemi Holdings Pty Ltd the sum of $863,902.07. As set out in ground 1D, the Solicitor acted for Maxwell Sidney Try and his wife in respect of certain mortgage transactions. At the Solicitor's suggestion Mr Try had obtained a credit provider's licence in 1983 and had advanced from time to time to the Solicitor monies amounting to $320,000.00 in respect of which the Solicitor had given to Mr Try Epitomes of Mortgage. Miss Sayer prepared a list showing the names of the mortgagors, the amounts advanced and the security on which the money was advanced and there are twenty transactions making up the total advances of $320,000.00. Miss Sayer inspected a number of receipts marked "trust account receipts" covering some of the monies paid to Mr Gilchrist but she was unable to find any of these monies deposited into the trust account of the Solicitor. Miss Sayer made searches of a number of the properties said to have been mortgaged to Mr Try but was unable to discover any registered mortgages in his favour, in some cases the properties were owned by one of the Solicitor's companies Jaluit Pty Ltd and in one case by Fagita Holdings Pty Ltd another company controlled by the Solicitor. There is no evidence whether any of the principal is outstanding in respect of Mr Try's investment in the sum of $320,000.00. In addition Mr and Mrs Try informed Miss Sayer that an amount of $37,500.00 was withdrawn from their account with the Royal Bank to cover an advance of $15,000.00 to Andrew Lytton Watson and Janice Beryl Edwards and $25,000.00 to Dabusa Pty Ltd less interest in advance of $2,500.00. Miss Sayer established that the sum of $37,500.00 was deposited on 8 September 1989 to an account kept with the Royal Bank number 042-0220952 in the name of Duncan A. Gilchrist. This money was disbursed for the Solicitor's own purposes. Miss Sayer subsequently ascertained that the security for the purported advance of $15,000.00 to Watson and Edwards being property at Galston in Certificate of Title Volume 11735 Folio 87 is owned by Jaluit Pty Ltd (one of Mr Gilchrists' companies) and the property has a registered mortgage to the State Bank of NSW. Miss Sayer also ascertained that the property at Terrigal in Certificate of Title Volume 10857 Folio 77 which purported to be the security for the advance of $25,000.00 to Dabusa Holdings Pty Ltd was also owned by Jaluit Pty Ltd and there was a registered mortgage to the State Bank of NSW. The Tribunal is satisfied that the Solicitor has misappropriated the sum of $37,500.00 from Mr and Mrs Try for his own use and that there has been a wilful breach of s.61 of the Act. In view of the fact that none of the payments in respect of the transactions relating to Mr Try or Mr and Mrs Try appeared in the trust account records the Tribunal is also satisfied that there has been a wilful breach of s.62 of the Act. The Tribunal is satisfied that the Solicitor has been guilty of professional misconduct constituted by blatant dishonesty and has misappropriated large sums of money from some of his clients. Miss Sayer gave evidence that claims on the fidelity fund at this stage total $1,114,675.00. As previously advised it is not clear precisely what monies are owing to Gangemi Holdings Pty Ltd but it is clear that the Solicitor owes this company at least the sum of $1,256,457.49 which he has misappropriated to his own use being the monies referred to in ground 1B and 1C (as amended) together with the deposit of $250,000.00 paid to the State Bank. Whilst Mr Bilinsky, who appeared for the Solicitor, stated that the Gangemi account was in dispute, in the Tribunal's opinion the evidence indicates that the only dispute is the amount of indebtedness and the Tribunal is comfortably satisfied and finds that the Solicitor has misappropriated the amounts referred to above. As previously noted the Tribunal deprecates the fact that the Solicitor was not present, and gave the Tribunal little assistance in ascertaining the true position in regard to his trust account and the extent of his defalcations. No explanation has been put before the Tribunal for the Solicitor's blatant dishonesty and he is clearly and unreservedly unfit to remain a Solicitor and his name will be removed from the Roll. The Tribunal therefore orders that: 1. The name of Duncan Anthony Gilchrist be and the same is hereby removed from the Roll of Solicitors of the Supreme Court of New South Wales. 2. The said Duncan Anthony Gilchrist pay the costs of the Law Society in connection with the complaint as if taxed by the Supreme Court on a solicitor and client basis. 3. If agreement cannot be reached on the amount of costs to be paid by the Solicitor to the Law Society either party to have liberty to list the matter before the Tribunal for a determination as to the amount of these costs. Dated this 31st day of May 1991. 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.