The Legal Services Tribunal of New South Wales CITATION : Kenneth Harry Long [1996] NSWLST 7 PARTIES : Kenneth Harry Long FILE NUMBER(S) : of 1995 CORAM: Mr A. Martin (Presiding Member) - Ms S. Hale - Mr G. Warwick-Smith CATCHWORDS: Professional Misconduct - charge fees for services never performed - Professional Misconduct - gross overcharging of client - Professional Misconduct - breach of s. 61 of the Legal Profession Act - Professional Misconduct - make false statement - Professional Misconduct - fail to act honestly - Professional Misconduct - misappropriate trust moneys/moneys - Professional Misconduct - prepare false documents :- LEGISLATION CITED: Legal Professional (Trust Accounts & Controlled Money) Regulation 1988 CASES CITED: Briginshaw v Briginshaw (1938) 60 CLR DATES OF HEARING: 8 and 9 May 1995 DATE OF JUDGMENT: 02/14/1996 LEGAL REPRESENTATIVES: Mr I Wales appeared for the Law Society Mr G.C. Lindsay SC for the Solicitor. JUDGMENT: The Society alleged that the solicitor was knowingly involved in a "deposit gapping" scheme in which materially false applications for finance were made to lending institutions, that the solicitor wilfully breached sections 61 and 62 of the Act, overcharged in making inflated charges for disbursements and, in acting for the purchasers in a conveyance in which the contract of sale understated the purchase price by $25,000, was knowingly involved in a fraud upon the Office of State Revenue and upon the vendor's wife as regards her entitlements pursuant to the Family Law Act. The solicitor's conduct in taking false statements and statutory declarations in four of the conveyancing matters was held to be both disgraceful and dishonest but as the conduct did not amount to evidence of knowing involvement in a "scheme" and as taking of false statements and declarations was not a separate ground of complaint this aspect of the matter was dismissed. The Tribunal found that the solicitor had wilfully contravened sections 61(1) and 62 of the Act, being professional misconduct, overcharged, being unsatisfactory professional conduct, and was knowingly involved in the fraud upon the vendor's former wife and the Office of State Revenue, being "serious professional misconduct". Order for removal of the solicitor's name from the roll and costs as assessed. On 4 August 1994 the Law Society ("the Law Society") resolved (inter alia) that there was a reasonable likelihood that the legal practitioner namely Kenneth Harry Long ("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"). This matter was heard before the Tribunal on 8 and 9 May 1995. The Tribunal for the purpose of conducting the hearing was constituted by Mr A Martin (presiding), Ms S Hale and Mr G Warwick-Smith. Mr G Warwick-Smith completed his term of office as a member of the Tribunal on 30 June 1995 and was not reappointed. Clause 6 of Schedule 6 of the Act provides by sub-clause 1 that "a member vacates office if the member: (b) completes a term of office and is not reappointed". Section 165(1) of the Act relevantly states: "(1) If one of the members (not being the presiding member) constituting the Tribunal for the purpose of conducting a hearing vacates office for any reason: (a) before the Tribunal has completed the hearing; or (b) before the Tribunal has made a determination in respect of the hearing, the hearing may be continued or a determination may be made, by the remaining members of the Tribunal". Accordingly Mr Warwick-Smith having vacated office as a member before the Tribunal had made its determination, the remaining members of the Tribunal (Mr A Martin (presiding) and Ms S Hale) have made this determination. The grounds on which the Complaint is made are: 1. The Solicitor was knowingly involved in a scheme by which materially false applications for finance were made to lending institutions. 2. The Solicitor wilfully breached sections 61 and 62 of the Act and the legal Profession (Trust Accounts and Controlled Money) Regulation 1988 ("the Regulation"). 3. Overcharging. 4. The Solicitor was knowingly involved in a fraud upon the Office of State Revenue and in a fraud upon a Mrs Roger Salama. The Law Society tendered in evidence the report of Mr T A Williams into his investigations of the affairs of the Solicitor. Mr Williams was appointed by the Council of the Law Society under section 55 of the Act to investigate the affairs of the Solicitor and to furnish to the Council a report. The Law Society also relied on the evidence of the admissions made by the Solicitor in his statutory declaration. The Solicitor made a statutory declaration in answer to the allegations made against him and he also gave oral evidence before the Tribunal. Further particulars of each of the grounds of the Complaint were contained in the Information and we refer to these further particulars in making our findings on each of the grounds of the Complaint as follows. Ground 1 1. The solicitor was knowingly involved in a scheme by which materially false applications for finance were made to lending institutions. The Solicitor had practised as a sole practitioner since 1981 and in 1989 he had a small clerical staff of 4, none of whom were legally qualified practitioners. He was located in Barrack Street, Sydney, his practice being substantially conveyancing work. The Solicitor regularly visited the offices of a real estate agent Mr Mendoza at Fairfield for the purpose of interviewing clients who were introduced to him by Mr Mendoza and members of his staff to act on the purchase of low cost residential units. For that purpose he would assist these clients in completing applications for loan finance. The majority of these clients were of Spanish origin and required an interpreter. At one time apparently the solicitor had a Spanish speaking secretary but he himself did not speak the Spanish language. The interpreter was invariably one of the real estate agent's salesmen. (i) Castro and Le Bon Cruise (a) On or about 22 November 1989, the Solicitor witnessed a statutory declaration affirming the correctness of statements made in an application for loan. (b) The statements made in the loan application included the statement that the applicants had $9,500 to their credit in a bank, building society or credit union. (c) That statement was, to the knowledge of the Solicitor, false. (d) The Solicitor was aware that the applicants, contrary to the statements in their loan application, were borrowing funds from Custom Credit to pay for their deposit. The Solicitor admits he witnessed the statutory declaration which included a statement that the applicants had $9,500 to their credit. He denies that statement was to his knowledge false. He denies that he was aware that the applicants were borrowing funds from Custom Credit. The Solicitor acted for the applicants on their purchase from Meriton Apartments Pty Limited of Unit 94, Equity Place, Canley Vale for the sum of $115,000. Finance was provided by City Central Co-Operative Building Society in the sum of $110,000, that society being the lender to which the application which was supported by the statutory declaration in question was made. On 19 October 1989 Custom Credit paid out a personal load of $5,910 to the clients by payments of $910 to Swann Insurance and as to the balance of $5,000 a cheque drawn in favour of "Long & Co solicitors trust account for and on behalf of Mr Le Bon Cruise". This cheque was endorsed by Mr Long in favour of Meriton Apartments and it is apparent that this cheque represented part of the deposit of $6,000 which was paid on 7 November 1989. The Solicitor in cross examination admitted that he had endorsed a number of cheques from Custom Credit to his firm to Meriton Apartments. When this particular cheque came into his hands he thought it was a cheque for the deposit on which to exchange the contract. When the Solicitor was asked whether he had any belief that the cheque represented a loan, or an interest payment or return of capital to the client or something else, he answered "No, I don't believe I addressed that issue." In answer to a further question as to whether it occurred to him to wonder how it was that the client was getting $5,000 from Custom Credit he stated that he was very busy at that time handling 65 matters a month and he was handling many, many cheques and that when he received this $5,000 cheque he did not turn his mind to the question of what it represented as far as his clients were concerned. The Solicitor admitted that he received a number of cheques from Custom Credit at about this time but that he did not direct his mind to what those cheques represented. He further stated that most of the cheques that came into his office he did not see as mail that came into his office was usually opened by one of his secretaries. In many cases where the cheques came through his office he did not see what the cheques were. The Tribunal is not satisfied that the statement as to $9,500 in the loan application was to the knowledge of the solicitor false. The Tribunal is also not satisfied the solicitor was aware that his clients were borrowing funds from Custom Credit to pay for their deposit. (ii) Cherboncich The Solicitor permitted an application for finance to be made to City Central Co-Operative Building Society for finance, such application containing, to the knowledge of the Solicitor, a statement that the client then held $3,600 to his credit with the Solicitor. This statement was false. The Solicitor did not hold $3,600. The Solicitor admitted the truth of these allegations. The Solicitor further admitted in cross examination that he had inserted in his own handwriting in the application for the loan "Long & Company $3,600" under the heading "Details of Assets". The Solicitor did not admit that he knowingly made this false statement in the application and stated that it was an error. When he wrote it down on the application form he did not know whether it was right or wrong. The Tribunal is satisfied that the allegations have been established. (iii) Fernandez (a) The Solicitor acted for Mr and Mrs F. Fernandez. (b) The Solicitor was aware that, in an application for a loan, Mr Fernandez was representing that he had $5,000 of savings with which to pay a deposit. (c) The Solicitor was aware, or became aware in the course of his acting for Mr & Mrs Fernandez, that that statement was false. (d) The Solicitor permitted the purchase to proceed to completion, knowing the falsehood referred to above. The Solicitor denies that he was aware or became aware in the course of acting for his clients that the statement Mr Fernandez had $5,000 of savings with which to pay a deposit was false. The Tribunal is not satisfied on the evidence that the Solicitor was aware or became aware the statement in question was false. (iv) Gallardo (a) The Solicitor acted for Mr & Mrs Gallardo. (b) The Solicitor assisted Mr & Mrs Gallardo to submit a loan application to the NSW Co-Operative Housing Society. (c) The application, to the knowledge of the Solicitor, asserted that the applicants had savings of $1,000 with St George, $3,000 with ANZ and $4,000 in cash. The Solicitor was also aware that the applicants had answered "no" to the question "Have you borrowed or do you intend borrowing, your deposit or additional finance to complete the purchase or building?". (d) At the time when the application was submitted, the Solicitor was aware that the above statements were false. In the alternative, the Solicitor became aware, while the loan application was being processed by the Building Society, that the statements were false. The solicitor denies that he was aware that the statements made by the client's in their application as to their assets and borrowings were false. The Tribunal is not satisfied on the evidence that the Solicitor was aware that the statements in question were false. (v) Machado (a) The Solicitor assisted Mr & Mrs Machado by preparing for their signature on an application for a home loan which was signed by them and dated 7 June 1989. (b) The application contained the question "Have you borrowed, or do you intend borrowing, your deposit or additional finance to complete the purchase or building?" This question was answered "No". (c) The Solicitor, between 9 June 1989 and 23 June 1989 received a cheque for $9,000 dated 9 June 1989 drawn by Custom Credit Corporation Limited in favour of "Ken Long & Co, trust account for account of J & M Machado". (d) The Solicitor deposited that cheque into his general account on 23 June 1989. (e) Completion took place subsequently. (f) The Solicitor was aware that, in the events which happened, the answer referred to in paragraph (b) was false. The Solicitor admitted the allegations contained in subparagraphs (a) to (e) as stated above but denied that he was aware that the answer referred to in paragraph (b) was false. The Solicitor had obtained an authority dated 21 June 1989 from Mr & Mrs Machado to bank the cheque for $9,000 into his general account. In cross examination the Solicitor agreed that it was likely at the time of his discussions with Mr & Mrs Machado that he was aware that the cheque which had come in was a Custom Credit cheque. The Solicitor denied that he was aware that this cheque from Custom Credit was a loan to his clients which had not been disclosed in the loan application. He stated he didn't realise the cheque represented a loan and he thought that the cheque represented funds that his clients were giving to him – the source of those moneys being from their own funds. The Tribunal is satisfied that the Solicitor was aware that the cheque for $9,000 was from Custom Credit. The loan application was dated 7 June 1989 and the date of the cheque from Custom Credit for $9,000 was 9 June 1989, this cheque being deposited to the Solicitor's general account on 20 June 1989. The Tribunal is not satisfied that the Solicitor was aware at the time he assisted Mr & Mrs Machado in completing their loan application on 7 June 1989 that they were borrowing $9,000 from Custom Credit to assist in their purchase. (vi) Rodriguez (a) The Solicitor assisted Mr & Mrs Rodriguez to prepare an application for home loan. (b) The application form contained the question "have you borrowed, or do you intend borrowing, your deposit or additional finance to complete the purchase or building". That question was answer "no". (c) Under the heading "Full Financial Position – Assets", the application form contained the statement "Long & Company – $8,000". (d) The answer referred to in paragraph (b) and the statement referred to in paragraph (c) above where, to the knowledge of the Solicitor, false. (e) The Solicitor prepared and witnessed a statutory declaration by Mr Rodriguez which stated, inter alia, "I have savings of $5,500 in case which has been paid to my solicitor". That statement was, to the knowledge of the Solicitor, false. (f) At the time when the above answer and statements were made, the Solicitor held no funds on behalf of Mr & Mrs Rodriguez. The Solicitor admitted all these allegations and stated in evidence that $9,000 was received on 20 July 1989 the day after he witnessed the statutory declaration. Whilst he did not seek to excuse his behaviour the statement was made on the basis he was expecting to get the money in. The Solicitor denied that he was aware that these moneys came from Custom Credit saying that he had no recollection of receiving the cheque and that even if he had seen the cheque it would not have been necessarily apparent to him that Mr & Mrs Rodriguez had borrowed the money. In cross examination the Solicitor denied that accompanying the cheque in question from Custom Credit there was a letter of 17 July, 1989 addressed to himself signed by Mr & Mrs Rodriguez containing (inter alia) the following words: "I/We hereby authorise and direct you to hold moneys on my/our behalf pending final settlement of the purchase of the abovementioned property but should settlement not take place, these moneys are to be returned direct to Custom Credit Corporation Limited, at 10 Bond Street, Sydney. This authority and direction is irrevocable without the prior consent in writing of the manager of the aforesaid Custom Credit Corporation Limited." In his report Mr Williams the investigator stated that the person who arranged the personal loans with Custom Credit on behalf of the various clients of the Solicitor was a Mr Bardella who had told him that a letter in the above terms accompanied all Custom Credit cheques made in favour of Mr Long the Solicitor. The Solicitor denied that he had ever received any such letter or authority, either in the matter of Rodriguez or any other matter. The Tribunal is satisfied that the allegations contained in paragraphs (a), (b), (c), (d), (e) and (f) have been made out. However the Tribunal is not satisfied that the Solicitor was aware that the $9,000 came from the Custom Credit or that he received the letter of 17 July 1989 signed by Mr and Mrs Rodriguez. (vii) Sencian (a) The Solicitor assisted his clients, Mr & Mrs Sencian to complete an application for finance to City Central Co-Operative Housing Society. (b) Under the heading "Assets", the application contained: "Deposit – $3,000, savings $3,000". (c) The application form contained a statutory declaration which was signed by Mr & Mrs Sencian and witnessed by the Solicitor which stated the answers to questions made in the application which were correct in every particular. (d) On 16 August l989, Mr Sencian made, and the Solicitor witnessed, a statutory declaration in which he has asserted that he had savings of $3,000 in cash which had been paid to Long & Co. (e) The above statements were false in that to the knowledge of the Solicitor no money had been paid to Long & Co at the lime that the statements were made. The Solicilor admitted all these allegations and stated in evidence "Mr Sencian was to bring the money to me and I was to receive it within a few days. In this case I think it transpired that I didn't receive the money until about 2 or 3 weeks later and, again, I acknowledge that what I did was wrong. There was no excuse for it. It was drafted incorrectly and shouldn't have been signed in that form. The Tribunal is satisfied that the allegations have been established. (viii) Soto (a) The Solicitor assisted Mr & Mrs Soto to complete an application for finance. Under the heading "Assets" the application form represented that, including a sum of $2,500 to be paid under the First Home Ownership Scheme, Mr & Mrs Soto had bank, building society or credit union account balances of $6,000. The application was accompanied by a statutory declaration affirming the truth and correctness of the application form. The declaration was made by Mr & Mrs Soto and witnessed by the Solicitor and dated 6 July 1989. (b) The application for finance was approved on or about 25 August 1989. (c) On or about 28 July 1989 the Solicitor received on behalf of Mr & Mrs Soto a cheque for $3,500 from Custom Credit Corporation Limited. (d) The Solicitor was aware that these moneys represented an advance by Custom Credit Corporation Limited to Mr & Mrs Soto and that the statement referred to in paragraph (a) above was false. The Solicitor admitted the allegations set out in paragraphs (a), (b) and (c) but denied that he was aware the cheque for $3,500 represented an advance by Custom Credit Corporation Limited to Mr & Mrs Soto and further denied that he was aware that the statement referred to in paragraph (a) above was false. In this matter the Tribunal is not satisfied on the evidence that the Solicitor was aware a cheque for $3,500 was a borrowing from Custom Credit by Mr & Mrs Soto or that when they made their statement of assets in their application for finance the Solicitor was aware that this statement was false. (ix) Trejos (a) The Solicitor assisted Mr & Mrs Trejos to prepare an application for a home loan from City Central Co-Operative Housing Society. (b) The application contained a question "Have you borrowed, or do you intend borrowing, your deposit or additional finance to complete the purchase or building?" The question was answered "No". That answer was, to the knowledge of the Solicitor, false. In the alternative, the Solicitor became aware of the falseness of the statement when, on or about 27 September 1989, the Solicitor received a cheque from Custom Credit in the sum of $5,271.03 which was endorsed by him to Meriton Apartments. (c) The application form also contained, under the heading "Full Financial Position – Assets" the words "Deposit paid – $6,000". This statement was false in that, to the knowledge of the Solicitor, no deposit had been paid. (d) The Solicitor prepared for signature by Mr Trejos a statutory declaration which said "2. I have savings of $6,000 in cash which has been paid to my solicitor". "3. This was not borrowed." These statements were, to the knowledge of the Solicitor, false. The Solicitor denies his knowledge of the falseness of the statements referred to in paragraphs (b), (c) and (d). The Tribunal is not satisfied on the evidence that at the time the statements were made the Solicitor had knowledge that they were false. The Tribunal is also not satisfied that at the time the Solicitor received the cheque from Custom Credit he became aware that Mr & Mrs Trejos had given a false answer to the question referred to in (b) above. (x) Vera (a) In or about October 1989 the Solicitor prepared for Mrs Vera, and witnessed his signature upon, a statutory declaration in which Mr Vera said that $2,000 had been paid to the Solicitor for the deposit on the proposed purchase and that this amount had not been borrowed. (b) The statements were, to the knowledge to the Solicitor, false and, at the time that the declaration was made, the Solicitor held no money on behalf of Mr & Mrs Vera. The Solicitor admitted that when the statutory declaration was made he knew that $2,000 had not been paid to him. The Solicitor denied that he was aware these monies were to be borrowed. The Tribunal is satisfied upon the evidence and the admissions of the Solicitor that the statement in the statutory declaration that $2,000 had been paid to the Solicitor for the deposit on the proposed purchase was false to the knowledge of the Solicitor at the time that the declaration was made. However the Tribunal is not satisfied on the evidence at the time the declaration was made the solicitor was aware that the $2,000 was to be borrowed by Mr & Mrs Vera. The investigator Mr Williams asked the following question in writing of the solicitors for the Solicitor of in the matter of Castro and Le Bon Cruz: "14.4 What steps did Mr Long take to satisfy himself that the contents of the application were correct in every particular, as appears in the Statutory Declaration?". The answer given by the Solicitor's solicitors was as follows: "As to the part completed by Mr Long the information was obtained from the client's instructions. It is not a matter for a person who witnesses statutory declarations to be satisfied that the contents are true and correct. In many cases the person witnessing the declaration has no knowledge of whether the information is true and correct nor has ever set eyes on the person swearing the declaration. The truth and veracity of the matters stated in the declaration were entirely for the deponent. Mr Long witnessed the document but was not required to satisfy himself of the truth of the material and only in the event that he knew that the material was not true did an onus fall upon him to take the matter further. Mr Long had no knowledge the information in any of the declarations were false and if he had he would not have witnessed the signature. The information in the statutory declaration was provided by the client only and they were Mr Long's instructions. We make this general statement in answer to this particular question which should be read as Mr Long's answer to every subsequent question where he is asked what steps were taken by him to ascertain the truth or otherwise of the matter deposed to in the declarations". The Solicitor was asked by the Tribunal the following question at the hearing: "When you came to take the declaration – when you personally took the declarations, what did you say to them as a matter of course?" The Solicitor answered: "That they were signing a sworn statement and they had to tell the truth, in many cases when I took – when I filled out the form and asked them about liabilities I would ask them two or three times, not just once, because I wanted them to be sure that they understood what they were doing on d in may cases they didn't. By the time you asked them the second time they understood you were talking about personal loans or whatever and often at first instance they didn't, but I would – that was generally my procedure, to ask clients two or three times if they had liabilities". These answers are difficult to reconcile and are inconsistent with the conduct of the Solicitor in the matters, in which he has admitted that he knew that certain of the statements in the statutory declarations which he witnessed, were to his knowledge at the time they were made, false. This ground alleges that the Solicitor was knowingly involved in a scheme by which materially false applications for finance were made to lending institutions. It is clear on the evidence and indeed upon the admissions of the Solicitor that in a number of cases he assisted clients in making false applications for finance in so far as assets were incorrectly stated and all liabilities were not shown. However the "scheme" involved not only the making of false applications for finance but also the obtaining of personal loans by the clients from Custom Credit Corporation Limited and not disclosing these personal loans in the applications for finance. There is no evidence that the Solicitor was involved in obtaining any such personal loans and it appears that these loans were obtained through the finance broker Mr Bardella. The question is did the Solicitor know that these personal loans were being obtained to assist in the funding of his clients' purchases without being disclosed in the applications for finance? The Solicitor denies that he saw all the cheques from Custom Credit Corporation Limited but he does not deny that he saw the cheques that he endorsed to Meriton Apartments. The Solicitor denies any knowledge that these cheques from Custom Credit Corporation were personal loans and says when questioned that he did not direct his mind to this issue when the cheques were received. All the cheques of course were made payable to E Long & Co Trust Account to the account of the particular client being in itself a clear direction to the Solicitor that these moneys were to be treated as trust moneys. The Solicitor denies that he had ever received an authority with any of the cheques in the form we have referred to above in the matter of Rodriguez. On the other hand Mr Bardella told Mr Williams the investigator that all the cheques were clipped or stapled to such an authority. The terms of the authority are entirely consistent with Custom Credit making a personal loan for the express and only purpose of assisting the client in completing his purchase. The Solicitor was questioned by counsel for the Law Society about the authorities accompanying the Custom Credit cheques. Q. Do you see, on the following page, a letter of 17 July addressed to yourself, signed by Mr and Mrs Rodriguez. A. . Yes. Q. And obviously in a standard form prepared by Custom Credit. A. I don't know who it is prepared by. Q. Well, do you say that you never, in mid-1989, in the course of your practice, saw documents of this kind? A. Yes, that is what I am saying. I haven't seen that document, I mean apart from in the context of this case. Q. The city office of Custom Credit was in Bond Street, Sydney? A. I don't know. Q. Did you have your staff pick up any cheques from Custom Credit? A. No. Q. Were Custom Credit cheques delivered by mail or otherwise to your office? A. Yes. Q. When they came in did them have with them a covering letter or other documentation? A. Not to my recollection, certainly not a letter of this nature, it that's what you're suggesting. Q. Did you say that when Custom Credit cheques came into your office they never had attached to them letters containing statements similar to those set out in the two paragraphs of the letter at page 508. A. Yes, that's what I am saying to you. And later: Q. The letter at page 508 is clearly a document prepared by Custom Credit, is it not? A. I have no idea. I mean is this the actual photocopy of the document or an office copy of the document. I'm sorry to ask you question, but it may have a bearing on my answer because it certainly is not on Custom Credit letterhead and one may assume that, if it originated from Custom Credit, it may have a Custom Credit letterhead on it. And later: Q. According to Mr Williams, Mr Bardella said that an authority in the form of the one at point 6.16(g) accompanied all cheques sent to yourself. A. Yes, I see that. Q. Do you say that proposition is right or wrong. A. I can't really answer that question. All I can answer is that I didn't receive it. You seem to be forgetting one thing – that these cheques were not collected by me. I have no recollection or knowledge of them being posted to my office. The allegations made against the solicitor are extremely serious and if established can result in the Solicitor being struck off the Roll. "The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the Tribunal". In such matters "reasonable satisfaction" should not be produced by inexact proofs, indefinite testimony, or indirect references. (See Dixon J. at page 362 Briginshaw v Briginshaw (1938) 60 CLR 336). There is no direct evidence that the Solicitor was knowingly involved in the "scheme". The "scheme" was investigated by the police primarily in respect of the involvement of the real estate agent Mendoza. During the course of these investigations the police obtained written statements from a number of the clients of the Solicitor and these statements are included in Mr William's report. None of these statements implicate the Solicitor in that part of the "scheme" which involved the obtaining of personal loans from Custom Credit. In fact to the contrary in one of the statements the client states that he was told by one of the agents not to tell the Solicitor that a personal loan was being obtained from Custom Credit Corporation. The Solicitor in answering questions put to him by Counsel for the Law Society was evasive. This evasiveness gave rise to the suspicion of the Tribunal that it was likely that he was not telling the truth. The conduct of the Solicitor in taking statements and statutory declarations in the matters of Cherboncich, Rodriguez, Sencian and Vera, which were to the knowledge of the Solicitor at the time that they were made, false, was both disgraceful and dishonest. However, this conduct was not made a separate ground of complaint in the information and of itself is not evidence of the knowledge or involvement of the Solicitor in the "scheme". The Tribunal is not comfortably or reasonably satisfied on the evidence before the Tribunal that this ground of the complaint has been made out and accordingly the Tribunal dismisses it. 2. The Solicitor wilfully breached sections 61 and 62 of the Legal Profession Act ("the Act") and the Legal Professional (Trust Accounts & Controlled Money) Regulation 1988 ("the Regulation"). It is alleged that the Solicitor had in not less than nineteen matters wilfully breached the Act and the Regulation in respect of his trust account and trust moneys. The Solicitor in general terms admitted the breaches and says that the breaches occurred through negligence both in terms of not controlling his staff (although he does not in anyway seek to pass responsibility onto them) and not paying sufficient attention to detail or the requirements of the Act and the Regulation. On a number of occasions the Solicitor endorsed a cheque which should have had been banked to his trust account in favour of a third party. We refer to these occasions below. The Tribunal is of the opinion that a cheque which otherwise should have been banked to the trust account of a solicitor cannot be endorsed in favour of a third party without the authority of the client otherwise than in breach of the Act or the Regulation. As a result of the manner in which the Solicitor kept his trust account records no record was kept of cheques received from Custom Credit Corporation as these cheques were simply credited in the trust account as "deposit" or "settlement monies" with the name of the client in the trust account ledger card of the client. Consequently the name of Custom Credit Corporation was not recorded in his books as the payer of the cheques. Particulars of the breaches together with any qualifications made by the Solicitor to his admission of these breaches are summarised as follows: (i) Benitez and Mendoza – on 11 July 1989 the Solicitor received the sum of $1,460 and deposited that amount to his general account and not his trust account in wilful breach of section 61 of the Act. The Solicitor admitted this allegation. (ii) Bustamante – on 14 December 1989 the Solicitor received the sum of $3,364 and deposited this amount to his general account and not his trust account. Of that amount $805.16 ought to have been deposited to his trust account and not to his general account such deposit being a wilful breach of section 61 of the Act. The Solicitor admitted this allegation. (iii) Castro and Le Bon Cruise – (a) At some time following 19 October 1989 the Solicitor received from Custom Credit Corporation on behalf of Mr Le Bon Cruise a cheque in the sum of $5,000. (b) The Solicitor failed to deposit the said cheque into his trust account. (c) The Solicitor wilfully breached section 61 of the Act. (d) The Solicitor, in retaining the cheque between 18 October 1989 and 8 November 1989 wilfully breached Regulation 9. (e) The Solicitor wilfully failed to provide a receipt as required by Regulation 10. (f) In failing to provide sufficient particulars on the relevant trust ledger card with regard to a deposit of $2,000 on 7 November 1989 and the transfer of $1,212.00 on 15 November 1989 to the Solicitor's general account, the Solicitor failed to provide sufficient particulars of the transaction as required by Regulation 14(2) and in failing to do so was in breach of Section 61 of the Act. The Solicitor admitted the allegations in subparagraphs (a), (b) and (f). He denied the allegations in subparagraphs (c), (d) and (e) upon the basis that he acted upon the direction of the client when he endorsed the cheque in favour of Meriton Apartments. The Tribunal is not satisfied that these allegations have been made out although the evidence is not clear that a direction was given by the clients. (iv) Cherboncich – On 2 August 1989 a Custom Credit cheque for $15,000 was deposited to the trust account of the solicitor. This amount was described by the Solicitor in his trust account records as "settlement moneys". The Trust Cash Book and Trust Receipt Book described the transaction as a receipt from Mr and Mrs Cherboncich for settlement moneys. It is alleged that the Solicitor in his trust ledger entries in relation to this matter provided entries of insufficient particularity to comply with Regulation 14(2) and in relation to the trust records generally in effect misstated the source of funds in breach of the requirements of Regulation 10(2)(c), 12(3)(a) and 14(2)(b) and in so doing was in breach of section 62(1)(b), section 62(2) and section 62(3) of the Act. The Solicitor admitted these allegations. (v) F G and D Fernandez – On 3 August 1989 the Solicitor received from Custom Credit Corporation on behalf of his client a cheque in the sum of $15,000. The cheque was made out to "Long & Co Solicitors Trust Account for and on behalf of F G and D Fernandez" and it was endorsed "Not Negotiable – Account Payee Only". In the Trust Receipt Book and the Trust Cash Book the transaction was described as "F G and D Fernandez – Deposit". It is alleged that the Solicitor failed to provide particulars in the trust ledger sufficient to comply with Regulation 14(2)(b) and in so doing was in wilful breach of section 62(2) and section 62(3) of the Act. It is also alleged in relation to the same transaction that the Solicitor failed to provide particulars on the receipt required by Regulation 10(2)(c) and consequently was in wilful breach of section 62(1)(a) and section 62(2) of the Act. In providing an account dated 17 October 1989 it is alleged that in relation to this matter the Solicitor failed properly to account to his clients for moneys received in wilful breach of Regulation 7(5) and was consequently in wilful breach of section 62(3) of the Act. The account rendered failed to mention the deposit of $15,000, failed to mention the payment of debts totalling $4,813.47 nor was there any mention of the payment of $4,000 described as "settlement moneys" in fact represented by a cheque drawn in favour of "F and D Fernandez – Bank Cheque". The Solicitor admitted all these allegations. (vi) J and E Gallardo – On 21 June 1989 the Solicitor received the sum of $3,000 from Custom Credit Corporation on behalf of Mr and Mrs Gallardo. His Trust Receipt Book and Cash Book described the transaction as a receipt from "J and E Gallardo – Deposit Moneys". In failing to disclose on the receipt the name of the person from whom the moneys were received the Solicitor was in breach of the provisions of Regulation 10(2)(c) and was consequently in breach of Section 62(1)(a), Section 62(2) of the Act and Regulations 10(2)(c), 12(3)(a) and 14(2)(a) and (c). The Solicitor admitted these allegations. (vii) S H and A M Gelos – On or about 19 July 1989 the Solicitor received $1,000 on behalf of Mr and Mrs Gelos. That amount was deposited into the Solicitor's general account. The amount ought to have been paid into the solicitor's trust account. It is alleged that the Solicitor consequently wilfully breached section 61 of the Act. The Solicitor denied that the $1,000 ought to have been paid into his trust account but the entries in his general account on 19 July 1989 described the $1,000 as "deposits" which was paid by the clients with a cheque from the solicitors acting on a compensation for Mr Gelos. The Tribunal finds that this deposit was made in wilful breach of section 61 of the Act. (viii) J and C Machado – On 23 June 1989 the Solicitor deposited the sum of $9,000 received from Custom Credit Corporation on behalf of his clients in his general account and it is alleged that in so doing he wilfully breached section 61 of the Act. However the Solicitor did produce a written authority from the clients dated 21 June 1989 (that is one day after the deposit to the general account) which authority authorised the Solicitor pay these moneys into his general account. Although there is some doubt as to whether this authority was a property authority the Tribunal is not satisfied that the Solicitor breached section 61 of the Act. (ix) C and C Morales – On or about 11 August 1989 the Solicitor received the sum of $1,400 on behalf of his clients which amount was deposited to his general account. This amount was subsequently drawn by the Solicitor from his general account as part of the balance of purchase money on completion of the property being purchased by the clients. The amount of $1,400 should have been deposited in the Solicitor's trust account and the Solicitor wilfully breached section 61 of the Act. The Solicitor admitted this allegation. (x) R F and M A Prieto – On or about 16 September 1989 the Solicitor received on behalf of his client in relation to this matter the sum of $6,000 from Custom Credit Corporation. It appears that the cheque for this amount was endorsed by the Solicitor in favour of Meriton Apartments Pty Limited which the Solicitor says he did at the direction of his clients. The allegation is that the Solicitor failed to deposit the cheque in his trust account and consequently was in wilful breach of Regulations 9 and 10 and of Section 61 of the Act. There was no evidence of the clients' direction but nevertheless the Tribunal is not satisfied that the alleged breaches have been made out. On 23 November 1989 in the same matter the Solicitor received on behalf of his clients the sum of $2,000 and subsequently paid out the same sum on 30 November 1989. The allegation is that he failed to provide a statement of account for his clients in relation to those transactions and consequently he wilfully breached the provisions and Regulation 7 and section 62(3) of the Act. The Solicitor admitted these allegations. (xi) J C and D M Quinteros – On 31 August 1990 the Solicitor received on behalf of his clients the sum of $2,694 which he deposited in his General Account. At least as to the sum of $47 this amount ought to have been deposited to the solicitor's trust account. It is alleged that the Solicitor wilfully breached section 61 of the Act and the Solicitor admitted these allegations. (xii) M E and S Rodriguez – On or about 18 August 1989 the Solicitor transferred the sum of $1,204 from a controlled money account. Of that amount at least as to the sum of $204 to have been transferred to the Solicitor's trust account. The Solicitor stated that this was an error on his part and believed that the $204 was for disbursements payable which had already been incurred. On or about 21 July 1989 the Solicitor received a Custom Credit Corporation Limited on behalf of his clients the sum of $9,000 which was deposited to a controlled money account. The Solicitor admitted that the legal account did not contain details required by Regulation 21(3) and that he wilfully breached sections 61 and 62 of the Act. The Solicitor also admitted that he failed properly to account for moneys received and expended by him. (xiii) L I and J J Rojas – On or soon after 14 September 1989 the Solicitor received on behalf of his clients a cheque in the sum of $6,000 from Custom Credit Corporation, such funds being intended by the lender to be held in trust pending application to the purpose for which the loan had been drawn down, namely the purchase by the clients of a property from Meriton Apartments Pty Limited. This cheque was renegotiated by the Solicitor in favour of "Meriton Apartments". It is alleged that in failing to deposit the funds in a controlled money account or in the trust account the Solicitor was in breach of Regulations 9 and 10 and sections 61(1)(a), 61(1)(b) and 61(2) of the Act. The cheque in question was drawn in favour of "Long & Co Solicitors Trust Account L I and J J Rojas". The cheque was endorsed "Not Negotiable – Account Payee Only". The Solicitor says that he believed that the direction by the client allowed him to endorse the cheque to third parties. There is no evidence of the client's direction but nevertheless the Tribunal is not satisfied that the alleged breaches have been made out. It was further alleged that in acting in this matter the Solicitor failed to provide a statement to his clients in relation to trust moneys in conformity with Regulation 7 and in doing so was in breach of the provisions of sections 61(1) and 62(3) of the Act. The Solicitor admitted these allegations. (xiv) Paumd Sanchez – On or soon after 16 October 1989 the Solicitor received from Custom Credit Corporation a cheque in the sum of $2,000 on behalf of his clients, such being clearly intended, on the face of the cheque, by the lender to be held in trust and to be applied to the object for which the loan had been drawn down and in failing to deposit that cheque in his trust account the Solicitor was in breach of sections 61 and 62 of the Act. Once again the Solicitor relied upon his belief that a direction from his clients to endorse the cheque entitled him to do so. There was no evidence of such a direction but nevertheless the Tribunal is not satisfied that the Solicitor wilfully breached sections 61 and 62. The Solicitor admitted that: (a) the particulars provided on the relevant ledger card in this matter of the trust account were insufficient to meet the requirements of Regulation 14(2)(b) and represented a wilful breach of sections 61(1) and 62(3) of the Act; (b) he failed to provide a statement in relation to the trust account and trust moneys as required by Regulation 7 and was consequently in wilful breach of sections 61(1) and 62(3) of the Act and was further in breach of the requirements of section 62(3) of the Act. (xv) E R and M Sencian – In this matter the Solicitor received a Custom Credit Corporation cheque for $5,428.88 which the Solicitor deposited in his trust account on 6 September 1989 describing the deposit as deposit moneys". The Cash Book and Receipt Book record that the funds came from "E and M Sencian". It was further alleged that the Solicitor in paying the deposit and loan fees in relation to this transaction from his general account and transferring the sum of $2,580 from his trust account on 25 September 1989 failed to provide a sufficient description of the transaction, wilfully breaching Regulation 14(2)(b) and sections 61(1) and 62(3) of the Act. The Solicitor admitted all these allegations. (xvi) J and M P Soto – On 28 July 1989 the Solicitor deposited in his trust account a cheque from Custom Credit Corporation for $3,500. In his trust records he referred to this deposit merely as "deposit moneys". Nowhere in his records except by reference to the duplicate deposit slip could this cheque be identified as having been received from Custom Credit Corporation Limited. The Solicitor admitted that in failing to provide sufficient details he was in wilful breach of Regulations 10(2)(c), 12(3)(a) and 14(2)(b) and sections 62(1), 62(2) and 62(3) of the Act. (xvii) J C and A Trejos – On or soon after 27 September 1989 the Solicitor received on behalf of his clients a cheque from Custom Credit Corporation in the sum of $5,271.03. In failing to deposit that cheque in his trust account it is alleged that the Solicitor was in wilful breach of Regulations 9 and 10 and sections 61(1)(a), 61(1)(b) and 61(2) of the Act. On or about 14 December 1989 the Solicitor paid the sum of $7,251 into his general account and at least as to $1,307 (the Solicitor states this amount should be $1,300.07) that amount should have been paid into the solicitor's trust account. It is alleged that consequently the Solicitor wilfully breached section 61 of the Act. The Solicitor admitted all these allegations. (xviii) J E and E D C Vera – On 27 October 1989 the Solicitor received on behalf of his clients in relation to this matter a cheque in the sum of $5,000 from Custom Credit Corporation and on 4 December 1989 he received on behalf of his clients in relation to this matter a further cheque for $7,000 from Custom Credit Corporation. The first cheque for $5,000 was shown in the trust account ledger card as being "deposit" and the second cheque for $7,000 was shown in the same card as being "settlement moneys". The receipts in each case stated that these moneys were received from "J & E Vera" and it appears that the receipt for the cheque for $5,000 was written in the Solicitor's own handwriting. The Solicitor did not attempt to refute this aspect of the allegation. The Solicitor admitted all these allegations and that his entries providing particulars in the trust account ledger was in breach of the requirements of Regulation 10(2)(c) and his entries in the cash book and in the descriptions provided in the ledger was in breach of the requirements of Regulations 12(3)(a) and 14(2)(b), and was in breach of Section 62(1)(b), Section 62(2) and Section 62(3) of the Act. (ixx) E A & L I Villegas – On 19 October 1989 the Solicitor received on behalf of his clients in relation to this transaction a cheque drawn by Custom Credit Corporation Limited in the sum of $3,000 and deposited that cheque in his general account. In doing so it is alleged that the Solicitor was in breach of Regulations 10(2)(c), 12(3)(a) and 14(2)(b) and Section 62(1)(b), Section 62(2) and Section 62(3) of the Act. However this cheque was deposited to the solicitor's general account to cover his costs and disbursements and the balance of purchase money which had been previously advanced by the Solicitor on the day before the Solicitor received the cheque from Custom Credit Corporation Limited. Accordingly the Tribunal finds that the Solicitor did not breach the Regulations or the Act as alleged. The evidence establishes that the Solicitor wilfully contravened sections 61(1) and 62 of the Act. Under the Act a wilful contravention of section 61(1) or section 62 is professional misconduct and accordingly the Tribunal finds the Solicitor guilty of professional misconduct. 3. Overcharging The Solicitor admits that in nine matters he overstated the charges made for search fees. Paltonga Pty Limited ("Paltonga") was a company of which the Solicitor and his wife were the sole directors and shareholders and it was to this company the payments were made. The searches in question were made by an independent company Legal Liaison Services Pty Limited and the fees charged by that company were considerably less than those charged by Paltonga. Particulars of these matters are summarised as follows: (i) J Gallardo – $85.00 transferred from the client's trust ledger account to Paltonga – the search fees charged by Legal Liaison Services being $21.60; (ii) Jiminez – $90.00 paid to Paltonga on account of search fees and miscellaneous items. The search fee paid was $23.60; (iii) Martin – $90.00 paid to Paltonga being search fees of $60.00 and $30.00 for sundries. The search fees paid were $23.60. (iv) M E & S Rodriguez – $90.00 was transferred to Paltonga for sundries of $30.00 and search fees of $60.00. Search fees of $21.60 were actually paid; (v) L I & J J Rojas – $120.00 was transferred to Paltonga for miscellaneous disbursements of $40.00 and $80.00 search fees. The search fees paid did not amount to $80.00; (vi) E R & M Sencian – $90.00 paid to Paltonga of which $30.00 was for sundries and $60.00 for search fees. The search fees actually paid were $30.80; (vii) Tasaico – $90.00 paid to Paltonga for sundries of $30.00 and search fees of $60.00. Paltonga did not pay $60.00 in search fees; (viii) J & P Uribe – $90.00 paid to Paltonga for sundries of $30.00 and $60.00 for search fees. The actual search fees paid were $21.60; (ix) Villegas – $90.00 paid to Paltonga representing sundries of $30.00 and search fees of $60.00. The actual search fees totalled $21.60. The Solicitor sought to excuse his conduct by stating that it was an inadvertent failure on his part. Prior to the time that these overcharges were made it was his practice to obtain two searches – one at the beginning of the transaction and one at the end. When there was a change in the law, most of the initial information, the title search, the appropriate certificates were actually included in the contract and he failed to amend his practice. He knew the fee being charged was based on two search fees. He said he was very, very busy at the time and he should have paid more attention. It was just one of those things that got overlooked. The Tribunal finds that the Solicitor did overcharge in each of these matters and that his conduct amounted to unsatisfactory professional conduct. 4. The Solicitor was knowingly involved in a fraud upon the Office of State Revenue and in a fraud upon a Mrs Roger Salama The Solicitor acted for a Mr and Mrs Quinteros in respect of the purchase by them of a property at 1 Naman Close, Wetherill Park, from a Mr Roger Salama. The Contract of Sale showed the purchase price to be $160,000. The Solicitor was aware that the purchase price was understated by at least $25,000. To the knowledge of the Solicitor the Contract was stamped with ad valorem duty as upon a consideration of $160,000 whereas in fact and the Solicitor admits he was aware duty ought to have been paid upon the higher consideration of at least $185,000. In these circumstances the Solicitor admits that he was knowingly involved in a fraud upon the Office of State Revenue. The Law Society alleged that the purpose of the understatement by the vendor, Mr Roger Salama, was to perpetrate a fraud upon his wife who was entitled, pursuant to orders made by consent in the Family Court at date 7 March 1990, to one half the net proceeds of the sale and that at all material times the Solicitor was aware of Mr Salama's purpose and was, in the circumstances, knowingly involved in the fraud upon Mrs Salama. The Solicitor denied he knew of the fraudulent intentions of Mr Salama or that he was knowingly involved in the fraud. Mr Williams the investigator interviewed Mr and Mrs Quinteros and their daughter, Mrs Little. In his report Mr Williams states that in summary the clients alleged: 1. The true consideration for the purchase was $195,000 not $160,000 as appeared on the contract. 2. They were referred to the Solicitor by Mr Mendoza. 3. At the time of their purchase they owned a property at 7 Huie Street, Cabramatta which they wished to sell but had not sold at the time of their purchase. 4. They had approximately $15,000 in cash. It was their intention to seek a bank loan of $175,000 to purchase the property at Wetherill Park. 5. Mr Mendoza introduced them to the manager of the Fairfield branch of the National Australia Bank and assisted them to obtain their loan. He attended the interview and acted as interpreter and largely controlled the interview. In the course of the interview Mr Mendoza stated to the bank manager that the purchase price was $160,000. 6. Queried as to this point by Mr and Mrs Quinteros, Mr Mendoza stated that it was a condition of the sale that the price on the contract was to appear as $160,000 and that they had to pay the vendor $35,000 in cash "under the table". 7. Mr Mendoza said the Solicitor, Mr Long, would organise how the extra money could be paid. 8. Mr Mendoza told them the reason for understating the price was that the vendor, Mr Salama, was divorced and had to pay his wife half of the contract price and did not want to pay her half of the additional $35,000. 9. Mr and Mrs Quinteros objected to both Mr Mendoza and Mr Long. They were unhappy about the proposal. The bank would not lend them all the money they wanted on a mortgage because the bank would lend only a percentage of the purchase price shown on the contract. Mr Mendoza and the Solicitor, Mr Long, told them that they could not buy the property if they did not agree. 10. The Solicitor did not tell them that he also acted for the vendor, Roger Salama. 11. The Solicitor told them when they signed the contract that they would give a mortgage to Mr Salama for the $30,000 to secure the undisclosed consideration. The mortgage would be on their property at Huie Street, Cabramatta. The remaining $5,000 was paid at the offices of Mendoza Pty Limited in the presence of the Solicitor. They could pay the additional $30,000 by instalments, or if they sold the property at Cabramatta. The Solicitor wrote out an agreement to that effect and required them to sign it. This document was worded as follows: "We, Juan Carlos Quinteros and Delia Mirpa Quinteros agree to pay to Roger Salama or nominee the sum of $30,000 in the event that our purchase of 1 Naman Close, Wetherill Park exchanges. We agree to pay the loan over 2 years by quarterly payments of $3,750 the first payable 3 months from date of settlement. No interest is payable over the 2 years unless payment late, thereafter interest at 15% per annum. Late payments calculated at 15% interest. (Late payment is 14 days after due date). The loan is to be secured by mortgage over 7 Huie Street, Cabramatta." 12. Subsequently they asked the Solicitor for a further copy of this Agreement. They were given this copy and noticed that the reference to Mr Salama in the original had been "whited out". A copy of this later copy of the document was obtained by Mr Williams and confirms the name of Mr Salama had been "whited out". 13. Prior to settlement the Solicitor arranged for Mr and Mrs Quinteros to sign a mortgage in favour of Maria Milone. (A copy of this Mortgage was obtained by Mr Williams and states that the principal sum was $30,000 with no interest payments if the quarterly payments were made promptly and interest at 15% per annum if there were late payments. The principal sum of $30,000 or so much thereof as remained unpaid was to be paid on 30 August 1992 and provision was made in the Mortgage for the mortgagors to make early repayment of the principal sum with the interest accrued to the date of repayment. The signatures of Mr and Mrs Quinteros on this Mortgage were witnessed by the Solicitor and the Solicitor also signed the Mortgage on behalf of the mortgagee Maria Milone). 14. Mr and Mrs Quinteros were required to take a personal loan to complete the purchase because of the shortfall in available borrowings from the bank because of the understatement of the consideration in the contract. 15. Almost immediately after settlement Mr Salama came to their house demanding "his money" (the $30,000), notwithstanding that it was not then due. The Solicitor Mr Long refused to help. 16. Shortly after the settlement Mr Quinteros lost his job. Mr and Mrs Quinteros were in difficulty in meeting their commitments and went to see Watson Stafford Wilmot Klimt solicitors and arranged borrowing on a second mortgage from AVCO Finance. These solicitors were instructed to negotiate on behalf of Mr and Mrs Quinteros with the Solicitor for a reduction in the commitment to Salama (Maria Milone) and to pay their debt from the AVCO Funding. 17. Mr and Mrs Quinteros were also upset with the Solicitor for other reasons associated with the National Australia Bank Loan. They refused to pay his account believing that he had placed them in financial hardship because of the combination of their personal loan, the bank loan and the debt to Salama. They instructed Watson Stafford Wilmot Klimt they would pay only $25,000 to Salama and the Solicitor would have to pay all of the costs and release them from the claim for his own costs and disbursements. 18. The Solicitor agreed with this proposal provided that Mr and Mrs Quinteros signed and undertaking prepared by him not to complain to the Law Society but they refused to sign this undertaking. The proposed undertaking addressed to Messrs Long & Co was worded as follows: "RE: Purchase of 1 Naman Close, Wetherill Park We confirm that we will not make any complaint or statement to the Law Society in respect of any aspect of this transaction." 19. Settlement was then negotiated along the above terms without Mr and Mrs Quinteros giving the undertaking requested by the Solicitor. The Solicitor did not act for Salama the vendor on the sale of the property. Redmond & Partners of Kogarah acted for Salama. These solicitors had no knowledge whatsoever that the selling price of $160,000 shown on the Contract was not the true price. Indeed the commission paid by these solicitors after completion was $3,300 which was consistent with that price. The net proceeds of sale were distributed by these solicitors in accordance with the Family Court order which provided that one half of the net proceeds of sale was to be paid to Mrs Salama. When Mr Williams the investigator put the substance of the allegations of Mr and Mrs Quinteros to the Solicitor, the Solicitor gave written answers through his own solicitors to the questions posed by Mr Williams. The relevant statements of response that he made were as follows: (1) Agreed that the Contract understated the true consideration but asserts that the understatement was $25,000 and not $30,000. (2) The difference of $5,000 represented capitalised interest on the principal sum of $25,000 over 2 years. (3) The Solicitors understanding of the understated amount was that Quinteros did not want a second mortgage registered upon the property he was purchasing. (4) He did not know prior to settlement the purpose of the understatement was to conceal the true price to the disadvantage of the vendor's wife. (5) The Mortgage entered into reflected the agreement reached between the parties before the Solicitor was first instructed and was entirely consistent with those initial instructions that a mortgage was not to be registered upon the title of the property purchased. These steps were not taken "to permit the concealment". He acknowledged that Maria Milone was a nominee of Mr Salama, Mr Salama having stated to him that he owed Maria Milone $30,000. (6) The Solicitor suspected for the first time after settlement that Mr Salama may not pay his former wife her entitlement to one half of the concealed sum of $25,000. (7) The Solicitor obtained legal advice on 6 February 1991 and as a result of such advice he anonymously paid the stamp duty on the undisclosed $25,000 and sent to Mrs Salama the sum of $12,500. (8) Upon the discharge of the loan on or about 25 March 1991. Mr Salama collected the cheque for $25,000. At that meeting the Solicitor said to Mr Salama: "I hope that you are going to give one half of this to your wife." "Mr Salama replied: "She got enough already, I am not going to give her anymore." "The Solicitor then said to Mr Salama words to the effect: "Well if you don't pay her then I will. I feel bad about this." The Solicitor stated in this response that until this answer was given by Mr Salama he did not realise with certainty that Mr Salama had no intention of paying his wife and that the probable purpose of the consideration in the Contract being understated was to avoid meeting his legal obligations to pay one half of the proceeds of the sale to his wife. In cross-examination the Solicitor was asked why he allowed himself to be party to a transaction by which the amount of consideration was wrongly stated. His answer was as follows: "In saying what I'm saying I don't want you to get the impression that I am trying to make excuses. I am not. I accept what I did was wrong, foolish and it was improper. Basically, the agent Acosta came to me and said that the people didn't want to get a second mortgage on their own property and it was on that basis that the transaction was structured in that way. Look, I can't give you any rational reason for it. I accept that it is wrong. I tried to answer that question of this whole transaction in my own mind and the only answer I can come up with is that I had a brain explosion. It was just stupid. I really just can't give a rational answer." The following questions were put and answers given in further cross-examination. Q. Do you tell the Tribunal that it was Mr and Mrs Quinteros who were the moving parties in this transaction? A. It was my understanding that they wanted instruction in this fashion. Certainly I was a party to it. I am not denying that and they couldn't have done it without my assistance and that - Q. Just answer the question. Do you say to the Tribunal that Mr and Mrs Quinteros were the moving parties so far as you could tell to this transaction? A. Yes. Q. They were the ones who wanted the consideration understated? A. They wanted the transaction structured in this manner which resulted in the understatement, Yes. Q. Do you see at page 115, Mr Williams asserts that Mr and Mrs Quinteros told him that they both objected to the proposal, weren't happy about it and said that they were told they couldn't buy the property if they didn't agree? A. Certainly I didn't say that to them. Q. In the course of the conveyance you became aware that there had been a Family Law dispute between Mr and Mrs Salama. A. Yes. In the Contract there was a request which indicated that there had been some family dispute. Q. Was there a reference on the title itself to orders made by the Family Court? A. I don't recall but they may be correct but I don't recall it. Q. You knew what was being sold was the Salama's former matrimonial home? A. I didn't – well, I didn't know what it was. It was Mr Salama's property. I didn't know that it was their matrimonial home. Q. In any event, it was likely, was it not, that the proceeds of sale of that property might well form part of the orders of the Family Court? A. Yes, that was probable. Q. What did you do to ascertain whether that was so or not? A. I really didn't do anything. Q. Do you say that shortly after completion you began to suspect that Mrs Salama might not receive her share of the additional $25,000? A. No, I didn't suspect. What happened that this document was registered on title and I can't quite remember what it was. In the settlement figures there was some sort of release of it. If it was a caveat, then it was a withdrawal of a caveat. If it was a request, then I think it was perhaps a request to remove the request. What happened was that in viewing the file after settlement – sorry, my secretary worked out the settlement figures, there was an allowance made for the removal of that thing, whatever it was, and then in viewing the file after settlement I actually found out what it was because the solicitor for the vendor had faxed a copy of it through to our office to show that it had been removed and it was at that point that – I didn't suspect I felt fairly certain that that – I suppose I suspected but I felt certain that that was what was going to happen, that he wouldn't account to her for the money. Q. Did this take place then after settlement? A. I can't put my finger on the date exactly but it was probably in the few weeks after settlement I would say. Q. Did you speak to Salama at all before exchange or completion? A. Yes, I spoke to him before exchange. Q. About what? A. Well, they wanted to discuss how to structure the loan arrangement and that was discussed. Q. You understood that Mr Salama had his own solicitor? A. Yes. Q. What were you doing having discussions with Mr Salama? A. Well initially it was because I went to Mendoza Real Estate and he happened to be there. I suppose that is how it occurred originally. I didn't ask him to be there or anything like that. I accept that I shouldn't have. Again, it was one of those things I have no explanation. It is wrong, I know that. Q. Before settlement in the Quinteros transaction you spoke to Mr and Mrs Quinteros? A. Yes, I would have. Q. Do you say they led you to believe that they wanted to understate the purchase price in order not to have a second mortgage on the property being purchased?: A. Yes. Q. After settlement you promptly became aware that Mrs Salama may miss out on her half share of the difference? A. Yes. Q. Surely the obvious thing was to tell Mrs Salama what had happened? A. Yes, I could have done that. Q. You could have simply written her a letter saying that the true purchase price was an extra $25,000 or $30,000 and that she was entitled to some more money? A. As I said to you, when you make a mistake, you don't always think rational. The Solicitor admitted that he recalled signing the Mortgage as the solicitor for Maria Milone. Q. Do you know who Ms Milone was? A. No, it was a person I had never met. Again it is one of these silly things, I really don't understand. Salama said he owed this lady some money and foolishly I believed him and foolishly acted and put the Mortgage on that basis. Q. Do you know now whether or not Ms Milone was Mr Salama's friend or girlfriend? A. I don't know, all I can say is that the cheque in the ultimate was endorsed in her favour, it wasn't endorsed to Salama. Q. In any event, the situation was that you signed as her solicitor when in fact you had never taken instructions from her? A. That's correct, I accept that what I did was wrong, I have admitted that. Counsel for the Law Society put to the Solicitor in cross-examination that before he made the anonymous payments (in March 1991) he was in dispute with Mr and Mrs Quinteros who had instructed other solicitors. The following questions and answers are relevant. Q. It was apparent to you then that your conduct would quite probably come before the Law Society? A. That was a possibility, yes. Q. And it was only then that you resolved to make the anonymous payments to which you referred to in your declaration? A. No, that is not correct. That resolution had been taken some 6 weeks prior to this, or 4 or 5 weeks at least, when I went to see Mr Henderson. The Solicitor agreed in cross-examination that he had stated in the correspondence with the Law Society that after the transaction was completed he felt deep remorse and that within a matter of weeks of it occurring he consulted Mr Henderson. He went on to agree that that was a little misleading because it wasn't weeks it was several months before he saw Mr Henderson. The Tribunal has no difficulty in finding on the evidence and the admissions of the solicitor that he was knowingly involved in a fraud upon the Office of State Revenue. The conduct of the Solicitor was deceitful in acting for Mr Salama without telling his clients or Mr Salama's solicitors and acting for someone named Maria Milone as a mortgagee when he had never met that person and when he was still acting for the mortgagors Mr and Mrs Quinteros. In answering the questions put to him by Counsel for the Law Society the solicitor was evasive and the Tribunal is more than comfortably satisfied that the solicitor was no telling the truth when he stated that it was Mr and Mrs Quinteros who wanted the transaction structured in the manner which resulted in the understatement of the purchase price. No rational explanation has been given by the solicitor for the understatement of the purchase price in the Contract. It is clear on the evidence that the purpose of this understatement in the price was to enable Mr Salama to defraud his former wife of her proper entitlement under the Family Court Orders. The Tribunal is comfortably and reasonably satisfied that the Solicitor was aware of this purpose of Mr Salama and accordingly was knowingly involved in the fraud upon Mrs Salama. The Tribunal further finds contrary to the evidence given by the Solicitor that the purchase price agreed was $195,000 as to which $5,000 was paid in cash, $160,000 on settlement leaving a balance owing of $30,000 not $25,000 as asserted by the Solicitor. The balance of $30,000 was reduced to $25,000 as a result of negotiations between the solicitors for Mr and Mrs Quinteros and the Solicitor in February and March 1991. The Tribunal finds the conduct of the Solicitor under this ground of the Complaint to be serious professional misconduct. The Solicitor is 41 years of age and graduated from the University of New South Wales, as a Bachelor of Commerce in 1977 and as a Bachelor of Laws in 1978. He was admitted as a Solicitor of the Supreme Court of New South Wales on 14 July 1978. Following his admission the Solicitor was employed by Johns Brand & Co in 1979 entered into partnership with Robert Brand until 1981. In 1981 he commenced practice as a sole practitioner under the firm name of "Long & Co". He has practised, as a sole practitioner, under that firm name since 1981. He has not employed any solicitors to assist him in the conduct of his practice and at the present time he employs clerical staff which presently number 3 in total. The professional work that he has undertaken has been conveyancing. The Solicitors is married but has no children. He and his wife have been lifelong active members of the Seventh Day Adventist Church. The Solicitor has held and does hold positions as a member of various committees and boards within the Church. The Solicitor submitted no less than 14 character declarations including 5 declarations from practising solicitors one of whom was Mr Henderson, the senior Solicitor from whom he sought advice in February 1991 regarding the Quinteros/Salama matter. These declarations are impressive and the Tribunal agrees with the suggestion of the Counsel for the Solicitor that these declarations paint a picture of the Solicitor which suggests that the misconduct which he has admitted and which has been alleged against him is on any view entirely out of character. Whilst these declarations do carry some weight with the Tribunal, the Tribunal determines the conduct of the Solicitor on the evidence and the demeanour of the Solicitor in the witness box. The declarations therefore are of some assistance to the Tribunal but as the Counsel for the Solicitor correctly points out the character declarations do not of course bind the Tribunal and the Tribunal must form its own view. The Tribunal has found the Solicitor guilty of serious professional misconduct on the ground that the Solicitor was knowingly involved in a fraud upon the Office of State Revenue and in a fraud upon a Mrs Roger Salama. In Allinson -v- General Council of Medical Education and Registration (1894) 1QB750 Lopes LJ said that professional misconduct would be something done by a person in pursuance of his profession "which would be reasonably regarded as disgraceful or dishonourable by his professional brethren of good repute and competency". The Tribunal is of the view the conduct of the Solicitor would be reasonably regarded as disgraceful or dishonourable by his professional brethren of good repute and competency. The Tribunal has also found that the Solicitor wilfully breached trust account provisions of the Act and the Regulation such wilful breaches under the Act constituting professional misconduct. The Tribunal has also found under the third ground the Solicitor guilty of unsatisfactory professional conduct in respect of overcharging. The consequence of these findings 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 Solicitor has urged upon the Tribunal that the appropriate order would be a substantial fine and an order for costs. In making this submission Counsel does so on the basis that the evidence does not support an adverse finding under ground one. The Tribunal rejects the submission of Counsel for the Solicitor and considers that the imposition of a substantial fine is not appropriate. The jurisdiction of the Tribunal is protective not punitive and on the question of a penalty Shellar JA in the Law Society of NSW -v- Bannister (1993) 4LPDR24 at page 28 said "when the jurisdiction of the Tribunal is invoked under Part 10 Division 7 of the Act to conduct a hearing into a complaint of professional misconduct by a legal practitioner, the primary consideration is to protect the public by preventing a person unfit to practice from holding himself or herself out to the public as a legal practitioner in whom members of the public might repose confidence. But the Tribunal must also act so as to deter the offender in the future and any other practitioner minded to behave in like manner. In the case of a Solicitor these elements together or separately may call for the removal of the solicitor's name from the roll or the imposition of a substantial fine." The Tribunal has found the Solicitor guilty of being knowingly involved in fraud and serious professional misconduct. It is necessary and proper that the Tribunal gives an order which accords with the seriousness of the professional misconduct and in the relevant sense leaves no doubt as to the standards to be observed by practitioners. The Tribunal is of the view in these circumstances the only order that it should make is one to remove the Solicitor from the Roll. The Tribunal therefore orders that: 1. The practising certificate of Kenneth Harry Long be cancelled. 2. The name of Kenneth Harry Long be removed from the Roll of Legal Practitioners. 3. The said Kenneth Harry Long pay the costs of the Law Society as if assessed by a Supreme Court Costs Assessor. 4. If agreement cannot be reached as to the amount of such costs, either party shall have liberty to apply to the Tribunal for assessment of those costs under Section 171E of the Act. 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