The Legal Services Tribunal of New South Wales CITATION : Joseph Bouhabib [1996] NSWLST 3 PARTIES : Joseph Bouhabib FILE NUMBER(S) : of 1995 CORAM: Mr A. Martin (Presiding Member) - Mr M. Megna - Ms M Taylor Professional Misconduct - mislead Court/Tribunal - Professional Misconduct - mislead Law Society/Bar Association/LSC - Professional Misconduct - breach of s. 61 of the Legal Profession Act - Professional Misconduct - practice as a Solicitor/Barrister without a practising :- Wilful Contravention of Section 61(1)(a) and (b) CATCHWORDS: 61(2)(a) and 62 of the Act The Wilful Contravention of Parts 2 and 3 of the Regulation LEGISLATION CITED: Legal Profession Act 1987 Legal Profession (Trust Accounts and Controlled Money) Regulation 1988 Police -v- Hassan Safwan and Mohammad Arhmad ; CASES CITED: re Hodgekiss (1962) NSW LR ; Law Society -v- Foreman 4 LPDR (1994) DATES OF HEARING: 27 October 1995 DATE OF JUDGMENT: 03/01/1996 LEGAL REPRESENTATIVES: Mr N Nicholls appeared for the Law Society. No appearance for the Solicitor JUDGMENT: Disciplinary Reports The Society alleged a number of breaches of section 61 and 62 of the Act and breaches of the Legal Profession (Trust Accounts and Controlled Money) Regulation 1988, misleading of the Society in the solicitor's application for his practising certificate for the year ended 30 June 1994 in that the solicitor indicated he had not held trust moneys when in fact he had conducted an undisclosed trust account, and acted as a solicitor without holding a current practising certificate in making an appearance in Court and informing another party that he was a solicitor, and misled the court in that he informed the Court that he had been issued with a restricted practising certificate when no such certificate had issued. The Tribunal found the breaches of section 61, 62 of the Regulation to be wilful, that the solicitor misled the Law Society and his conduct amounted to professional misconduct, that the solicitor acted as a solicitor without holding a current practising certificate and the conduct was found to constitute unsatisfactory professional conduct. The Tribunal was not comfortably satisfied that the solicitor was in fact the person referred to in the Court transcript tendered and dismissed the grounds of complaint relating to the solicitor's appearance in Court. There was no appearance by the solicitor. Order for the solicitor's name to be removed from the roll and costs. On 25 May 1995 the Professional Conduct Committee of the Law Society of New South Wales resolved that the Committee is satisfied that there is a reasonable likelihood that the legal practitioner Joseph Bouhabib ("the Solicitor") will be found guilty by the Tribunal of professional misconduct and that proceedings be instituted in the Tribunal pursuant to Section 155(2) of the Legal Profession Act 1987 ("the Act"). By an information of the same date the Law Society Council informed the Tribunal of a complaint against the Solicitor. The grounds on which the complaint is made are wilful contraventions of Sections 61(1)(a) and (b), 61(2)(a) and 62 of the Act, wilful contraventions of Parts 2 and 3 of the Legal Profession (Trust Accounts and Controlled Money) Regulation 1988 ("the Regulation") misleading the Law Society, acting as a solicitor without holding a current Practising Certificate and misleading the Court. The Solicitor appeared at the first mention of these proceedings on 26 June 1995. However he did not appear at a further mention on 24 July 1995 or 21 August 1995 when the matter was set down for hearing. The Law Society advised the Solicitor in writing on two occasions of the date of hearing, but the Solicitor did not appear at the hearing before this Tribunal. Furthermore, the Solicitor failed to file a reply to the allegations in the information as required by Section 167(3) of the Act. On 7 October 1993 the Solicitor's application for a practising certificate for the year ended 30 June 1994 was refused by resolution of the Law Society Council. This resolution followed inspections on 2 July 1993 by Mr Garry Napper, a Law Society Trust Account Inspector ("the Inspector") and on 6 August 1993 and on subsequent days. On 8 October 1993 David John Frank Lombe was appointed receiver to the property of the Solicitor pursuant to Section 92 of the Act ("the Receiver"). The reports of the Inspector and the Receiver of their investigations into the books, records and affairs of the solicitor were tendered in evidence by the Law Society. Wilful Contravention of Section 61(1)(a) and (b), 61(2)(a) and 62 of the Act Wilful Contravention of Parts 2 and 3 of the Regulation Section 61(1) of the Act states:- "if a solicitor, in the course of practising as a solicitor, receives money on behalf of another person, the solicitor shall: (a) hold the money exclusively for the other person; and (b) ensure that subsection (2) and the regulations are complied with in relation to the money." Section 61(2):- "Money received on behalf of another person by a solicitor, in the course of practising as a solicitor: (a) shall, except where the person on whose behalf the money is received otherwise directs, be paid, within the prescribed time, to the credit of a general trust account at a bank in New South Wales and be held in accordance with such regulations as may be in force in relation to trust money; (b) shall, where the person on whose behalf the money is received directs that it be paid otherwise than to the credit of a general trust account and the money is to be held under the direct or indirect control of the solicitor for less than the prescribed period, be paid as directed; or (c) shall, in the case of money referred to in paragraph (b) that is to be held for the prescribed period or a longer period, be paid as directed and held in accordance with such regulations as may be in force in relation to controlled money, and, in any case shall be disbursed as directed by the person on whose behalf it is held." Section 62(1) states:- "A solicitor shall keep:- (a) in the case of trust money (within the meaning of Section 61) – accounting records; or (b) in the case of money other than trust money such accounting records or other records (if any) as may be required by the regulations, that disclose at all times the true position in relation to money received by the solicitor on behalf of another person." Section 62(2) states:- "The accounting records referred to in sub-section (1) shall be kept in a manner that enables them to be conveniently and properly audited." Section 61(4) states:- "Money received by a solicitor on behalf of another person is not: (a) available for payment to a creditor of the solicitor; or (b) liable to be taken in execution of an order or process of a Court at the instance of a creditor of the solicitor, unless the creditor is the person on whose behalf the money is held by the solicitor." Clause 7 of the Regulation stated:- "(1) A solicitor who is required to maintain a trust ledger or a controlled money ledger shall furnish to each person for whom, or on whose behalf, money is held or controlled by the solicitor, a separate statement of account in respect of each ledger account maintained for the person. (2) A statement of account shall be furnished under sub-clause (1) as soon as practicable after- (a) the solicitor receives a written request for the statement; (b) completion of the matter to which the ledger account relates; (c) the closure and removal of the account from the relevant ledger; and (d) except as provided by sub-clause (3) – 31 March and 30 September in each year." Clause 8(3) of the Regulation stated:- "8(3) A solicitor shall not withdraw trust money or controlled money in satisfaction of any costs or disbursements unless- (a) the person for whom the money is held has authorised the withdrawal and the solicitor has delivered to the person as outline bill; (b) the solicitor has delivered to the person an outline bill together with written notice that, unless the person objects, the solicitor intends to withdraw the money and apply it toward payment of the bill at the expiration of one month, and the month has expired without any objection being made; or (c) the solicitor, having received from the person an objection to an outline bill delivered under paragraph (b), has served on the person a bill of costs, or an account, in a form which will enable it to be taxed under the provisions of an applicable act, rule or regulation and the person has not, within the time limited by the provisions, applied for taxation of the bill or account." Clause 10(1) of the Regulation stated:- "10(1) A solicitor, as soon as practicable after receipt of trust money (not being a transfer by journal entry,) make out, or cause to be made out, a receipt that complies with sub-clause (2)." Clause 12 of the Regulation stated:- "12(1) A solicitor shall keep a record of daily receipt and payment transactions. (2) The record shall be in the nature of a cash book, the pages of which are consecutively numbered and on the respective pages of which are shown the consecutive numbers of receipts issued or cheques drawn. (3) The solicitor shall- (a) in respect of receipt of money – enter in the cashbook the particulars required by clause 10(2) to be entered in the receipt for the money together with the date of deposit of the money to the trust bank account and the amount of the deposit; and (b) in respect of a payment of money – enter in the cashbook the particulars required by clause 11(3) to be recorded for a cheque. (4) At the end of each day month, the solicitor shall balance the cashbook and - (a) carry forward the balance at the commencement of the next month; or (b) carry forward the balance to a ledger account provided for the purpose. (5) The solicitor shall, at the end of each named month, prepare a statement reconciling the balance of his or her trust bank account with the balance of the related cashbook." Clause 14(1) of the Regulation stated:- "14(1) A solicitor shall maintain a separate ledger account for each matter for each client in respect of trust money." Clause 15(1) of the Regulation stated:- "15(1) A solicitor shall within 21 days after the end of each named month, prepare a trial balance statement of all ledger accounts effective as at the end of the month." Before the Tribunal refers to the Statement of Particulars in the information in respect of the alleged breaches of the trust account statutory provisions, it is apt that the Tribunal refers to the following parts of the report of the Receiver and of the opening address of counsel for the Law Society. At page 3 of his Report of 22 November 1993 the Receiver stated: "From my discussions with the solicitor, he advised me that he had failed to mention the prescribed books and records as required by the Legal Profession Act 1987 and that he had failed to disclose the existence and operation of his trust account on the renewal of his 1993/1994 practising certificate. Further, he advised that he failed to disclose this to a trust inspector for the Law Society of New South Wales. The solicitor further advised me that while he believes there to be no deficiency in respect to the transactions that occurred in the trust account, there was no accounting records for the transactions. The solicitor advised he had not found time to write up the trust account records, although it was his intention to do so and that over a period of time it simply got beyond him and as a result he attempted to conceal the existence of the trust account". In his opening address Counsel for the Law Society said:- "Could I just indicate a broad outline of the reasoning adopted by both accountants in their reports and that is this: could I indicate at the outset that Mr Bouhabib was not a solicitor who set out to deliberately misappropriate or defraud his clients. However, the findings of both accountants and the evidence contained in their report demonstrate that Mr Bouhabib showed a total and reckless disregard to the requirements of the trust accounting provisions contained in the Act and his obligations as solicitor to keep separate trust funds held on behalf of clients to those funds to which he may have been entitled by way of fees in the course of conducting matters on behalf of the clients who were referred to in the reports. The ultimate finding which the accountants come to is that there was no deficiency in the trust account but what had happened was that the solicitor used trust moneys to which he believed he was entitled as costs and as fees in the various matters to pay his own personal expenses. In other words, rather than taking the necessary steps required, or the necessary two steps required, that is, firstly, in respect of each matter to render the client a bill and then to transfer fees from trust to general with the client's authority, trust funds simply remained in the trust account that were appropriated by him from time to time to pay expenses relating to his own practice and other personal items of expenditure." Particulars of the payments that the solicitor made from the trust account for his own use are as follows: (a) Registration services $800.00 (b) Telecom $484.05 (c) Prospect Electricity $300.00 (d) P Cottaris (Secretary) $510.00 (e) E M Salem (Wife) $500.00 (f) Commonwealth Business Equipment $400.00 $2,994.05 The Receiver found that as at the date of his appointment the trust account had a credit balance of $8.25 which was made up as follows: Trust Account Balance $ Credit/(Debit) S Single $130.00 J Saad $456.00 N Ishak $123.50 Ayoub — Algha 1,122.80 L El Cheikh $830.00) Diamond Water Systems 2,000.00 Non Trust Disbursements $2,994.05) Reconciled Trust Account 8.25 Balance as per bank statement 5 October 1993 .95 Add bank fees deducted 7.30 Cash at bank 8.25 The Statement of Particulars of the alleged contraventions of the trust account requirements are as follows:- Stephen Single Trading As "SS Electrics" The Solicitor acted for this client in relation to a debt recovery. On or about 23 April 1992, the Solicitor received from the client the sum of $130.00 on account of anticipated disbursements and deposited the said sum to the trust account. The Solicitor did not disburse this sum of $130 from the trust account on behalf of his client. He appropriated this amount to his own use as part of the payments totalling $2,994.05 as set out above. The Tribunal finds that in contravention of Section 61(1)(a) and (b) and Section 61(2) of the Act the Solicitor without any lawful authority: (a) Failed to hold the moneys received exclusively for the use of the client; (b) Failed to disburse the moneys received as directed by the client; (c) Appropriated the moneys to his own use. Joseph Sasaad – Purchase of 10/26 Fletcher Street, Bondi The Solicitor acted for this client in relation to the purchase of a property at 10/26 Fletcher Street Bondi. On 23 April and 5 June 1992 the Solicitor received from the client $250.00 and $1,270.00 respectively which moneys were deposited to the trust account. On or about 26 May 1992 the Solicitor rendered an account for legal services including a sum of $1,064.00 and withdrew from trust moneys held for the client that sum in payment thereof leaving a balance to account of $456.00. The Solicitor appropriated this sum of $456.00 to his own use as part of the payments totalling $2,994.05 as set out above. The Tribunal finds that in contravention of Section 61(a) and (b) and 61(2) of the Act the Solicitor without any lawful authority: (a) Failed to hold the moneys received exclusively for the use of the client; (b) Failed to disburse the moneys received as directed by the client; (c) Appropriated the moneys to his own use. Nakil Ishak and Nouhed Ishak The Solicitor acted for these clients in relation to the sale of a property at 31 Minna Street, Burwood. The sale of the property was settled on 23 April 1992 when the Solicitor received the sum of $4,000.00 disbursed as follows: (a) $3,200 on account of professional fees; (b) $48.50 for registration fees; (c) $628 refunded to the client being balance of settlement moneys; (d) Leaving a balance of $123.00 The Solicitor appropriated the sum of $123.00 to his own use as part of the payments totalling $2,994.05 as set out above. The Tribunal finds that in contravention of Section 61(a) and (b) and Section 61(2) of the Act the Solicitor without any lawful authority. (a) Failed to hold the moneys received exclusively for the use of the client; (b) Failed to disburse the moneys received as directed by the client; (c) Appropriated the balance of $123.00 to his own use. The Solicitor transferred his professional fees and the registration fees to his general account without delivering an outline bill and without the authority of the clients. The Tribunal further finds that in contravention of 61(1) of the Act the solicitor unlawfully appropriated the said moneys as costs and disbursements without: (a) having first obtained the authority of the client; and/or alternatively, (b) having delivered an outline bill. Ghassan El Chikh The Solicitor acted for this client in relation to the sale of a property a 2 Hyacinth Avenue, Macquarie Fields. On 12 June 1992 the Solicitor received from the client the sum of $830.00 on account of anticipated costs and disbursements. The Tribunal finds that in contravention of Section 61(a) and (b) and Section 61(2) of the Act the Solicitor failed to deposit the said sum to the credit of the trust account and deposited it directly to his general account. The Tribunal further finds that in contravention of Section 61(1) the Solicitor on 29 June 1992 withdrew from the trust account $830.00 in payment of professional costs when such sum was not then standing to the credit of the client in trust and without: (a) Having first obtained the authority to client; and/or alternatively (b) Having delivered an outline bill. John Alagha The Law Society withdrew this ground of complaint. Accordingly the Tribunal dismisses it. Diamond Water Systems Pty Limited The Solicitor acted for this client in relation to certain litigation. On 15 October 1992 the Solicitor received from the client two payments of $3000 on account of anticipated costs and disbursements. The Solicitor on 30 October 1992 appropriated to himself the sum of $1,000 on account of professional fees and on 2 December 1992 the Solicitor paid counsel fees of $3,000. The Tribunal finds in contravention of Section 61(1) the Solicitor wilfully appropriated the said moneys as costs and disbursements without: (a) having first obtained the authority of the client; and/or alternatively, (b) having delivered an outline bill. The Solicitor appropriated the balance of $2,000 after allowing for the payments of $1,000 on 30 October 1992 and $3,000 on 2 December 1992 referred to above. This balance of $2,000 was part of the payments totalling $2,994.05 which the Solicitor appropriated to his own use. The Tribunal in respect of this sum of $2,000 finds in contravention of Section 61(1)(a) and (b) and 61(2) of the Act the Solicitor without any lawful authority: (a) Failed to hold the moneys received exclusively for the use of the client; (b) Failed to disburse the moneys received as directed by the client; (c) Appropriated the moneys to his own use. Misleading the Law Society of New South Wales The grounds of this complaint was that in his application for his 1993/94 Practising Certificate the solicitor misled the Law Society of New South Wales in failing to disclose that he held trust moneys during the preceding year. In his application which he declared to be true and correct he stated "I have not since my last application for a practising certificate received, held or disbursed trust money or controlled money within the meaning of Section 61(8) of the Legal Profession Act 1987 on behalf of any other person". It is abundantly clear from the reports of the Inspector and the Receiver that this statement was a false statement. The Tribunal finds that the Solicitor did mislead the Law Society and that his conduct in so doing amounted to professional misconduct. Acting as a Solicitor Without Holding a Current Practising Certificate Under this ground of complaint it was alleged by the Law Society that on or about 16 December 1993 the Solicitor appeared at Lidcombe Children's Court in the matter of Police -v- Hassan Safwan and Mohammad Arhmad and: (a) Informed the Court that he was a solicitor; and (b) Appeared on behalf of the accused and sought an adjournment of the matter. The Law Society tendered in evidence a transcript of the Children's Court proceedings and sought to establish by that transcript that the Solicitor was the person named Mr Bouhabib in the transcript and who appeared on behalf of the accused. The Law Society did not call any other evidence and submitted that the Tribunal could draw an inference that the person referred to as Mr Bouhabib in the transcript was the Solicitor. The Tribunal is not comfortably satisfied on the evidence that the Solicitor was in fact the person referred to and the Tribunal therefore dismisses this ground of complaint. The Law Society further alleged that on 22 November 1993 the Solicitor telephoned Michael James Sloane, a law clerk employed by Peter Bruce Richardson, solicitor. At the time Mr Richardson had the carriage of a prosecution by the Real Estate Services Council against one Kenneth Cullen pursuant to the provisions of the Property, Stock and Business Agents Act, 1941. During the telephone conversation, the Solicitor: (a) Informed Mr Sloane that he, Bouhabib, was a solicitor; and (b) On behalf of Kenneth Cullen, indicated a plea, sought to make submissions on a question of law and sought an undertaking from the prosecution. The Law Society in support of this allegation tendered in evidence a statutory declaration by Mr Sloane. The Solicitor at the time was employed by a Mr Alan R Brawn, solicitor of Wentworthville and in a letter of 26 October 1994 to the Law Society Mr Brawn confirmed that the Solicitor while employed by him as a law clerk had the carriage of the matter for Kenneth Cullen involving the Real Estate Services Council. The Tribunal is satisfied that the Solicitor did so act as a solicitor without holding a current practising certificate and finds that in the circumstances his conduct, although not amounting to professional misconduct, constituted unsatisfactory professional conduct. Misleading the Court The Law Society alleged that on 16 December 1993 the Solicitor informed the magistrate at Lidcombe Children's Court that he had been given a restricted practising certificate, when no practising certificate has been given to him by the Society at any time, after the refusal on 7 October 1993 of his application for a practising certificate for the year ended 30 June 1994. The Tribunal has already found under the previous ground of complaint that it is not satisfied on the evidence that it was the Solicitor who appeared at the Lidcombe Children's Court on 16 December 1993 as alleged and accordingly the Tribunal dismisses this ground of complaint. The contraventions by the Solicitor of Section 61(a) and (b), 61(2)(a) and Section 62 of the Act and contraventions of Parts 2 and 3 of the Regulation are alleged by the Law Society to be wilful. Under the Act a wilful contravention of any of these sections or regulations is professional misconduct. In re Hodgekiss (1962) NSW LR 340 the Full Court in considering whether certain breaches of Sections 41 and 42 of the Legal Practitioners Act 1898-1954 (these statutory provisions were replaced by Sections 61 and 62 of the Act) held (per Hardie J) that to establish the statutory professional misconduct contemplated it is necessary to prove personal breaches of either Section 41 or Section 42 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 statutory provisions to examine the facts and circumstances relevant to his stage of mind, knowledge and intention at the material dates. The Solicitor advised the Receiver that he believed there was no deficiency in the trust account and that all transactions had been accounted for correctly. He did however advise the Receiver that he had not written up a trust account ledger or trust account trial balances or reconciled the account. Furthermore he advised that he had not found time to write up the trust account records, although it was his intention to do so, and that over a period of time it simply got beyond him and as a result he attempted to conceal the existence of the trust account. The Tribunal is comfortably satisfied that the solicitor was aware of his obligations to keep trust account records of his trust account in accordance with the statutory provisions of the Act and the Regulation. He did not do so as "it simply got beyond him". Whilst there is no evidence that the Solicitor intended to defraud any of his clients by not complying with these statutory provisions the evidence nevertheless establishes that he was recklessly careless in the sense of not caring whether his failure to comply with the statutory provisions was or was not a breach of his duty and not caring what the results of his carelessness might be. The Tribunal finds that these contraventions of the Act and the Regulation were wilful and therefore the Solicitor was guilty of professional misconduct. The Solicitor was admitted to practice as a solicitor on 9 July 1982. He was an employed solicitor from that time until he commenced practice as a sole practitioner on 9 March 1992 under the firm name of Bouhabib and Associates at Merrylands. The consequence of the findings of the Tribunal of professional misconduct and unsatisfactory professional conduct against the Solicitor is that the Tribunal has to determine what penalty should be imposed. Counsel for the Law Society submitted to the Tribunal that his was not a case which justified an order striking or removing the Solicitor from the Roll rather that the Tribunal should invoke its powers under Section 171C and require the Solicitor to complete a trust accounting course before being issued with any practising certificate and that an unqualified practising certificate not be issued to the Solicitor unless he had been gainfully employed as a solicitor for at least a period of 3 years. In the Law Society -v- Foreman 4 LPDR (1994) Giles AJA said: "The jurisdiction of the Tribunal and of this Court in disciplinary matters is exercised to protect the public, not to punish the solicitor. The object of protection of the public may require that a legal practitioner be removed from the roll, be suspended from practice, or only be permitted to practise under particular circumstances, where the practitioner is not fit to be held out to be entrusted, at all, for a time, or without qualification, with the heavy responsibilities intended upon the office. The public is protected by ensuring that those unfit to practice do not continue to hold themselves out as fit to practise. But the object of protection of the public also includes deterring the legal practitioner in question from repeating the misconduct, and deterring others who might be tempted to fall short of the high standards required of them. And the public, and professional colleagues who practise in the public interest, must be able to repose confidence in legal practitioners, so an element in deterrence is an assurance to the public that serious lapses in the conduct of legal practitioners will not be passed over or lightly put aside but it will be appropriately dealt with." The Solicitor did not appear at the hearing and apart from appearing at the first mention date of these proceedings he has not displayed any interest in the proceedings or the possible result. The Tribunal has no knowledge whether or not the Solicitor wishes to resume practice as a solicitor or whether he has abandoned any further intention of remaining a legal practitioner. Furthermore his absence shows a total disregard on his part of his professional responsibilities and the high standards that solicitors are required to observe particularly in relation to trust accounts. The Tribunal considers that an order suspending the Solicitor for practice until such time as he had undergone and completed to the satisfaction of the Law Society a course in trust account accounting – would be inappropriate in the circumstances and would not adequately protect the public or maintain the standards required of legal practitioners. Accordingly, the Tribunal has decided that the only order that it should properly make is to order that the name of the Solicitor be removed from the Roll. The Tribunal therefore orders that: 1. The name of Joseph Bouhabib be removed from the Roll of Legal Practitioners. 2. The said Joseph Bouhabib pay the costs of the Law Society/ as if assessed by a Supreme Court Costs Assessor. 3. If agreement can not be reached as to the amount of such costs, either party shall have liberty to apply to the Tribunal for assessment of such costs under section 171E of the Act. 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