The Legal Services Tribunal of New South Wales CITATION : Robert John Brand [1994] NSWLST 2 PARTIES : Robert John Brand FILE NUMBER(S) : of 1993 CORAM: Mr J.W. Brennan (Presiding Member) - Vice Admiral I Knox - Mr A. Edgar CATCHWORDS: Competence and diligence - Professional Misconduct - fail to keep accounts - Professional Misconduct - misappropriate trust moneys/moneys :- LEGISLATION CITED: Legal Practitioners' Act 1898 Legal Profession Act 1987 Re: Hodgkiss(1962) SR (NSW) 340 at 353; CASES CITED: Society of NSW v Bannister (1993) 4 LPDR 24.; Wakim (1988) LPDR 14, Austin-Woods (1992) 2 LPDR 2, Baumann (1992) 5 LPDR 3, Conn (1993) I LPDR 7 and McAneny (1992) 6 LPDR I. DATES OF HEARING: 15 December 1993 DATE OF JUDGMENT: 04/19/1994 LEGAL REPRESENTATIVES: Mr D. Hipsley (instructed by Mr L. Pierotti) appeared on behalf of the Law Society of New South Wales. Mr R.S. Cuddy (of Messrs Stewart Cuddy & Mockler) appeared for and with the Solicitor. JUDGMENT: In this matter the Council of the Law Society of New South Wales ("the Society") made a complaint to the Tribunal pursuant to Section 135 of the Legal Profession Act 1987 against Robert John Brand ("the Solicitor"). The Society alleges that the Solicitor wilfully breached Sections 41 and 42 of the Legal Practitioners Act 1898 (as amended) and Section 61 of Legal Profession Act. The Society seeks the removal of the name of the Solicitor from the roll of solicitors and an order for costs. The complaint relates to financial aspects of the conduct of the Solicitor in twenty one separate conveyancing transactions. The Solicitor was born on the 20th March 1940 and admitted to practice as a solicitor on the 21st August 1964. The Solicitor sold his practice in early 1988 and did not renew his practising certificate after 30th June of that year. He is now a Company Director involved in real estate development in Sydney and China, building materials in China and real estate and mining in the Philippines. He is married with two sons. On 22 August 1991 the Society appointed Mr Garry Napper to investigate the affairs of the Solicitor and the complaint was filed with the Tribunal on 2nd July 1993. The evidence before the Tribunal included two very detailed reports from Mr Napper with copies of a large number of documents from the Solicitor's trust account records and files. The conduct of the Solicitor in relation to the twenty one matters in the complaint followed the same basic pattern in almost every case. Nineteen of the matters related to the purchase of homes or home sites, one involved a sale and in the remaining matter the clients were involved at the same time in a purchase and a sale. In the course of the purchase transactions the Solicitor wrote to the clients concerned requesting moneys, including costs and disbursements, preparatory to completion of the transaction. Typically this was done in the form of a letter - detailing price, deposit, mortgage advance, rate adjustments and particulars of costs and disbursements. These moneys when paid by the client were deposited to the credit of the Solicitor's trust account and the receipt recorded in a trust ledger for the transaction. In the purchase/sale matter, moneys exceeding the sum required were received by the Solicitor and in the isolated sale transaction rate adjustments were received from the purchasers' solicitors and paid to the Solicitor's trust account following settlement. The individual trust ledgers record dealings with the moneys relative to completion, though in each of twenty matters the moneys transferred to the Solicitor's general account do not correspond with the statement to the client and in each instance there remained after the apparent transfer of the Solicitor's costs and disbursements a balance on each trust ledger. After settlement of each matter the Solicitor sent letters to the individual clients advising of the completion of the transaction. The Solicitor subsequently signed individual cheques for the balance of moneys held in the respective trust ledgers. In each case the ledger entry shows a refund of that balance to one or both of the clients involved in the transaction. These entries correspond with the Solicitor's requisitions to his bookkeeper and with the entries on the cheque butts and most of the cheques. Twenty of the "refund" cheques were drawn in favour of the client or clients and the remaining cheque was drawn in favour of the State Building Society. Each of these cheques was then paid either into an account in the name of the Solicitor in trust for the client or into an account in the name of the Solicitor. Each of the clients made statements in the course of Mr Napper's investigation that they had no knowledge that any refund was due to them or that moneys have been placed into an account in trust for them and that they had not received any of the proceeds of those accounts and had not authorised any of the payments made from those accounts. There were different circumstances surrounding the "refund cheque" in the final matter involving Mr Michael Whitehead and Miss Shirley Willis. In his settlement letter in which he accounted for the moneys received the Solicitor detailed an allowance to the purchasers of $255 for water rates. About six weeks after the Solicitor had reported to his clients on completion of the sale of their home he received the sum of $255 from the solicitors for the purchasers of that property, which is recorded in the trust ledger as "rate adjustments". Subsequently a cheque was drawn in favour of Mr Whitehead for $255 and signed by the Solicitor. It was paid not to the client but to an Incentive Saver Account with the State Building Society in the name of the Solicitor in trust for the client. Subsequently those moneys and interest accrued were withdrawn in cash by the Solicitor. There is no question of these moneys or any of the other moneys referred to as "refunds" having been paid to the clients, as the Solicitor's trust account records indicate. Mr Whitehead and Miss Willis did not know of the Building Society account nor did they authorise or know of payments from the account. These facts were not disputed by the Solicitor. The account into which the "refund" was paid in the tenth matter (Mr & Mrs Ibarra) was an account in the name of the Solicitor. In that matter the refund of $1,000, although shown on the cheque butt against payee as "I Ibarra" was, in fact, drawn in favour of the State Bank signed by the Solicitor and paid into his personal account at State Bank, Ingleburn. In the 18th matter (Mr & Mrs De Leon) the butt of the "refund" cheque for $404.54 shows payment to D & T De Leon, while the cheque itself was drawn in favour of D De Leon and paid to the credit of an account in the Solicitor's own name with St George Building Society Limited. The two reports of Mr Napper admitted into evidence comprised over 570 pages. The Tribunal has read and considered this material, which has been a great help in assessing the Solicitor's explanation for his conduct. There was particularly significant evidence in the first of the matters complained of which related to the Solicitor's dealings with clients' monies in the purchase by Mr & Mrs Anklesaria of a home at St Clair. The statement of Mr Anklesaria admitted into evidence before us as part of Mr Napier's Report draws attention to a letter from the Solicitor dated 25 July 1986 which included a charge for "mortgage insurance premium $705". Mr Anklesaria phoned the Solicitor and pointed out that the insurance premium was included in his loan payments and that he had "been charged twice for it". The Solicitor's response was "You are right I will adjust the account for you. It's just human error". Mortgage insurance premiums featured frequently amongst the statement letters sent by the Solicitor to his clients in the matters before the Tribunal. In the case of Mr Anklesaria an amended letter was sent omitting the charge for the premium. Mr Anklesaria also complained about the Solicitor's charges and they were reduced in that amended letter from $950 to $686. The experience in the one transaction of complaints of an incorrect charge and of overcharging, with both complaints being remedied by the Solicitor, is not one which could be readily forgotten or overlooked by a solicitor. The prior inclusion of a charge in an account that was not payable by the Solicitor and was, in fact, paid directly by the client to the lending body, in the view of the Tribunal, is a matter that would impact and be readily recalled by a solicitor when preparing subsequent accounts in similar matters. The documents from the Solicitor's file from the State Building Society addressed to the client state clearly "a once only mortgage insurance premium of $705 will be charged to your account". There is clear evidence of the Solicitor personally calculating the figures involved in the various letters and of his provision for those payments to be made to him by his client. The third matter concerned a purchase by Mr Barra and Ms Guerrero and in that instance the mortgage insurance premium of $597 on a State Building Society loan was included in the Solicitor's letter to his clients detailing moneys required for settlement which was dated 31 October 1986. The premium was not paid by the Solicitor and so remained in his trust account until the "refund" cheque of $790.25 was drawn by the Solicitor. The cheque was paid into an account in the name of the Solicitor in trust for Mr Barra at St George Building Society without the knowledge of the Solicitor's clients and subsequently withdrawn by the Solicitor for his own purposes. It is noted that a period of about three months had elapsed between the presettlement letter in this matter and the Anklesaria pre-settlement letter. These were not isolated incidents. In the ninth matter (Mr & Mrs Hill) the State Building Society mortgage insurance premium of $219 is included in the pre-settlement letter from the Solicitor of 11 August 1986. This amount was not paid by the Solicitor and so remained in his trust account until the "refund" cheque of $862.06 was signed by him to clear his trust ledger. That trust account cheque was paid by the Solicitor into an account in his name, in trust for his clients, with the then St George Building Society Limited and later paid out for the Solicitor's own purposes as if it was his own money. The evidence established that in the four further matters State Building Society mortgage insurance premiums were included in the funds transferred by the Solicitor in the same manner as follows:- Matter Number Client Mortgage Insurance Premium Date of pre settlement letter Cheque Drawn to clear Trust ledger 10 Ibarra $577 12 March 1986 $1,000.00 11 Janicska $463 28 October 1986 $ 704.05 13 Lopez $652 19 August 1986 $ 749.47 14 Lysle $475 26 June 1986 $1,011.96 There was a clear pattern both before and after the complaint by Mr Anklesaria of the Solicitor receiving and retaining for his own benefit amongst other moneys, mortgage insurance premiums. The Tribunal finds the documentary material in relation to those mortgage insurance premiums inconsistent with any explanation of error or mistake and indeed the material justifies in our view a finding more serious than one of recklessness. The Legal Profession Act 1987 came into effect on 1 April 1988. The complaint against the Solicitor relates to conduct both before and after that date so that the Legal Practitioners Act 1898 (as amended) applied to certain issues and the current Act to other aspects of the matter. The Solicitor acknowledged breaches of Section 41 of the former Act and Section 61 of the present Act. Although there does not appear to have been an express concession by the Solicitor of a breach of Section 42 of the Legal Practitioners Act the Tribunal is satisfied, in fact, that Section 42(2) has clearly been breached. That sub-section read:"Every solicitor shall keep accounts of all moneys received by him and required to be dealt with in accordance with the provisions of Section 41(1) in such a manner as to disclose the true position in regard thereto and to enable the accounts to be conveniently and properly audited." There is overwhelming evidence throughout the twenty one conveyancing matters referred to in the complaint that the Solicitor's records failed to disclose the true position in relation to clients' monies which, although paid for the Solicitor's benefit, appeared to have been refunded to the client. The ledgers of the Solicitor's trust account give no suggestion that the moneys had been paid other than to the clients concerned. The cheques and cheque butts are misleading. We are comfortably satisfied that the Solicitor's accounts did not disclose the true position as far as the entries recorded as "refunds" are concerned and that the accounts were not kept in such a way as enabled convenient and proper audits to be carried out. Under the Legal Practitioners Act,Section 43 provides that wilful failure to comply with any provision of Section 41, 42(2) or 42A shall be professional misconduct. Under the Legal Profession Act Section 61(7) provides that a wilful breach of Section 61(1) is professional misconduct. The "failure to comply" and "breach" elements are established to the comfortable satisfaction of the Tribunal by the material outlined so far in this Judgment. The Solicitor's explanation in relation to the transfer of moneys which were described in his records as "refunds", was that at the time of the transfer, they were moneys to which he considered himself entitled. Subsequently having seen Mr Napier's Reports the Solicitor acknowledged that he was in error and the Solicitor then acknowledged on the basis of the Reports that some moneys were owing to and were refunded to some of the clients. The Solicitor agreed that the use of the word "refund" in relation to the cheques drawn to close his various trust account ledgers was incorrect and when pressed for a proper description suggested "maybe costs and disbursements, balance of costs and disbursements" but said that was "an alternative to what I used". The Solicitor agreed that the alternative he used "refund to client" was incorrect, but he denied that this was part of an intention to disguise the true nature of the purpose for which such a "refund" cheque was drawn. In the course of cross-examination the Solicitor sought for a time to cast some responsibility for the cheques drawn upon his bookkeeper. The bookkeeper's statement formed an important part of Mr Napier's Report as she identified many important cheques and other entries. The Tribunal finds that the Solicitor's conduct throughout, including his handwritten notes, his signature on cheques and dealings with the moneys in the various Building Society accounts, to which he transferred client's moneys, negates any suggestion that the bookkeeper had some responsibility for the Solicitor's actions. The Solicitor acknowledged that the cheque made out in the tenth matter (Mr & Mrs Ibarra) was drawn in favour of the State Bank and did not accord with the cheque Butt, which indicated a refund payment to Mr Ibarra. The cheque for $1,000 was paid into the Solicitor's personal account with the State Bank. The Solicitor acknowledged that the cheque itself would have had to be located to establish that it was not drawn in favour of the client and he further agreed that he should not have charged these clients with a mortgage insurance premium. The Solicitor's explanation in relation to the rate adjustments in the matter of Whitehead was that the cheque he drew was "because Mr Whitehead still owed me money". The Solicitor acknowledged there was nothing on the trust ledger or in the trust account records to suggest other than the $255 was paid back to Mr Whitehead. In cross-examination the Solicitor denied that his purpose in drawing cheques in this manner was to ensure there would be great difficulty in tracing the true receiver of the moneys. He admitted it was his intention to draw the moneys in the name of the clients without any intention of paying the moneys to the clients. This was, because, he said "that was money that belonged to me, moneys due and owing to me as I considered it at that time". Apart from his own statutory declaration and oral evidence the Solicitor tendered statutory declarations from two other Solicitors who had acted for him in recent times, as well as a declaration from his accountant. One of the solicitors based his views upon an understanding that the Solicitor had been entitled to the costs and disbursements that he had drawn. On having the procedures explained the witness accepted that the practice of the Solicitor was not a proper one but, in the belief he had made restitution and the amount involved was "not great", his view was that the conduct did not justify the Solicitor being struck off. This witness stated that he was aware of "but may not agree with" the decision of the Court of Appeal in The Law Society of NSW v Bannister (1993) 4 LPDR 24. The second solicitor displayed a lack of familiarity with trust account requirements and indicated that he did not personally conduct a trust account. He displayed a limited knowledge of the matters which were the subject of complaint and relied upon his own knowledge of the Solicitor as his client over recent years. He in turn did not assist the Tribunal materially in assessing the critical issue of the Solicitor's state of mind at the relevant times. The Solicitor's contact with his three witnesses in relation to these matters was very limited and did not give them any real opportunity of assessing the Solicitor's explanation. The Solicitor's accountant having had the course of conduct explained, felt that while the moneys should have been accounted for and the client told, it would depend on what the Solicitor had done for all those clients over the years and that the taking of $500 by the Solicitor would not bother him personally. The three witnesses called by the Solicitor shared with him an obvious lack of appreciation of the seriousness of the Solicitor's conduct. Their evidence did not assist in throwing any light upon the Solicitor's state of mind or his beliefs, nor did they provide any assistance on the question of the Solicitor's fitness to remain on the Roll. His Honour Mr Justice Hardie in Re: Hodgkiss(1962) SR (NSW) 340 at 353 said in relation to wilful failure within the meaning of Section 43 of the Legal Practitioners Act as follows:"Applying those principles, I am of 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 under 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." The course of conduct of the Solicitor involved his collecting moneys from his clients for the purpose of settlements without properly accounting for those funds. In twenty of the matters the settlement letters at best reflected an approximate position but in reality some of the letters were manifestly wrong and we find the Solicitor knew them to be wrong. By way of example we find that the Solicitor had ample warning from the Anklesaria matter that State Building Society mortgage protection insurance was not an item which he should include in his calculations. However, he persisted in including that charge in later matters and clearly made no effort to refund at that time, or indeed until after the investigation, the mortgage insurance premiums he had collected and not expended about a month earlier from Mr Mrs Lysle and a few months earlier from Mr & Mrs Ibarra. Put at its lowest, in the purchase transactions, the sending of letters requesting moneys to settle by the Solicitor followed by settlement of the transaction and a letter to the client advising the matter had been completed was certainly "recklessly careless" within the terms of Mr Justice Hardie's comments in Re Hodgkiss (supra). After it had considered all of the material the Tribunal could find no basis for the Solicitor to hold the view that at the time the payments described as "refunds" were made from his trust account he had a basis for believing the moneys represented the balance due to the Solicitor for costs and disbursements. His deceptive conduct in dealing with those moneys, typified by the discrepancies between the cheques, cheque butts and entries in the ledger, are totally inconsistent with such a belief or the possible existence of such a belief. The Solicitor has totally failed to satisfy the Tribunal that he had such a belief. The course of conduct of the Solicitor goes well beyond recklessness or lack of care. Cheques were drawn by the Solicitor purporting to be in trust for the client yet paid into an account of which the client had no knowledge. The Solicitor drew cheques contrary to the information shown on at least one cheque butt and recorded cheques as if they were refunds to the client concerned. The Solicitor then used the moneys for his own purposes. The Tribunal finds that the fact that in some instances money taken by the Solicitor was money to which he subsequently established at least a partial entitlement by calculation after the investigation, does not affect the nature of the initial conduct of the Solicitor. The Solicitor's conduct throughout the twenty one matters was simply to transfer the balance of moneys retained in his trust account to accounts under his own control, without any reference to the client and to use the funds without any reference to the client. It is no excuse for the conduct of the Solicitor to suggest that on a proper accounting after Mr Napier's reports were available, that some part of the overall moneys belonged to the various clients and some to the Solicitor. After the completion of his instructions in the twenty one matters each trust account ledger showed a credit balance even after there had been a transfer of costs and disbursements to the Solicitor's general account. In this case there is no isolated error or oversight in the transfer of costs and disbursements. Here the Tribunal is confronted with twenty one such transfers that are disguised as refunds which were paid to the Solicitor in a devious manner. On the evidence the Tribunal finds that the conduct of the Solicitor, confirmed by a very considerable number of documents in his handwriting and/or signed by him, cannot be explained as an error or the result of recklessness. There is no suggestion of the Solicitor making any calculation before the "refund" cheques were signed, the moneys were there and he took them and dealt with them in a most deceptive way. We are satisfied that his conduct was dishonest. We find that the conduct of the Solicitor was "wilful" within the meaning of the Legal Practitioners Act and the Legal Profession Act and that it constitutes professional misconduct involving dishonest misappropriation of clients' moneys. Mr Cuddy on behalf of the Solicitor referred the Tribunal to a number of authorities in relation to penalty, including the matters of Wakim (1988) LPDR 14, Austin-Woods (1992) 2 LPDR 2, Baumann (1992) 5 LPDR 3, Conn (1993) I LPDR 7 and McAneny (1992) 6 LPDR I. In Wakim the Tribunal found that a fine was appropriate as the conduct was recklessly careless with no dishonest intent and no deliberate intention to mislead. In Austin-Woods the Section 61 matter related to a transfer from his trust account of $383 which the Solicitor had received on account of stamp duty and registration fees on a lease that did not proceed. The Solicitor failed to satisfy the Tribunal that he had an honest belief as to his entitlement to transfer the money and the breach was found to be wilful, but the Tribunal found it was not necessary to strike the Solicitor off or to suspend him. This single fact situation is quite different from the pattern of behaviour evident before the Tribunal in this present matter. In Conn a fine was imposed, for while the conduct alleged was found to be wilful, there was no evidence of dishonesty and no allegation of dishonesty. In Baumann the Tribunal was not satisfied that deliberate dishonesty had been proved although because of the total confusion and mixing of moneys involved, the Tribunal withheld the Solicitor's practising certificate for six months and restricted him for three years to an employment situation. The conduct of McAneny was found not to involve deliberate dishonesty or personal misappropriation and was described by Kirby P at p.60 as "wilful, even deliberate and stupid but it cannot be categorised as sufficiently serious to result in his name being removed from the roll." The Tribunal has considered the authorities referred to us on the issue of penalty. The Solicitor has made it clear that he has no intention of ever practising again as a solicitor and offered an undertaking not to apply in the future for a practising certificate. On behalf of the Solicitor it was submitted that if adverse findings were made in this matter, it would be appropriate for the Tribunal, rather than striking the Solicitor's name from the Roll, to order that a practising certificate not be issued to the Solicitor in the future. In The Law Society of NSW v Bannister (supra) Sheller JA, with whom Gleeson CJ and Handley JA agreed, said at p.28:"The exercise of the power to remove from the roll, suspend or fine a Solicitor is directed to protecting the public by ensuring that those unfit to practise do not continue to hold themselves out as fit to practise and that high standards are maintained. The maintenance of such standards involves deterring the offender from repeating the offence and deterring others who might be tempted to offend." The Tribunal, taking into account that the Solicitor has been found guilty of professional misconduct involving deliberate dishonesty, finds that in the circumstances of this matter it is proper for the protection of the public and the maintenance of proper standards of the profession that the name of the Solicitor be removed from the Roll of Solicitors. The Tribunal therefore orders: 1. That the name of Robert John Brand be removed from the Roll of Solicitors in New South Wales. 2. That the Solicitor pay the costs of the Law Society including the costs of the investigation on a solicitor/client basis. 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.