The Legal Services Tribunal of New South Wales CITATION : Pauline Sheila Johns (a clerk) [1992] NSWLST 10 PARTIES : Pauline Sheila Johns (a clerk) FILE NUMBER(S) : of CORAM: Mr D E Hunt (Presiding Member) - Mr E Barnum - Mr G Williams CATCHWORDS: Professional Misconduct - mislead client - Professional Misconduct - misappropriate trust moneys/moneys - Professional Misconduct - prepare false documents :- LEGISLATION CITED: Legal Profession Act 1987 CASES CITED: DATES OF HEARING: 25/11/91 - 04/02/92 DATE OF JUDGMENT: 02/04/1992 Mr I.M. Wales LEGAL REPRESENTATIVES: Mr Frederick Smith Mr D.M. Geddes Messrs Woodgate & Morgan JUDGMENT: Legal Profession Disciplinary Tribunal In the matter of Pauline Sheila Johns (a clerk) Reasons for determination and orders Before: Mr D.E. Hunt (Presiding Member), Mr E. Barnum and Mr G.L. Williams on 25 November 1991. Appearances: Mr I.M. Wales, instructed by Mr Frederick Smith, appeared for the Law Society of New South Wales; Mr D.M. Geddes, instructed by Messrs Woodgate & Morgan, appeared for Pauline Sheila Johns. This is an application by the Law Society of New South Wales (the Society) for an order pursuant to Section 120(4) of the Legal Profession Act 1957 the Act) prohibiting any solicitor from employing or paying in connection with the solicitor's practice Pauline Sheila Johns the Clerk unless the Clerk has been given leave under Section 121 of the Act. The Society also seeks an order for payment by the Clerk of the Society's costs of and incidental to the proceedings. The Society is of the opinion that the Clerk is not a fit and proper person to be employed and paid in connection with a solicitor's practice in that: 1. The Clerk misled the Newcastle Permanent Building Society in relation to the purpose of two loans. 2. The Clerk failed to obtain valid securities in relation to such loans. 3. The Clerk fraudulently altered an Agreement for Sale of Land in order to obtain an advance of moneys. 4. The Clerk dealt with moneys in a manner contrary to the lender's belief and instructions. and 5. The Clerk dealt with moneys in a manner contrary to the provisions of the Legal Profession (Trust Account and Controlled Money) Regulation 1988 contrary to her employer's instructions. The Society's Counsel subsequently indicated that the fourth numbered particular would not be pressed or relied upon. The written evidence before the Tribunal was: (a) A statutory declaration of James Sofiak dated 30 October 1991. (b) Letter dated 15 November 1991 from Teal Corporation to the Society with a copy of a Due Diligence report attached. (c) Computer Folio Search dated 21 November 1991 of Folio Identifier 1/71282 (the Newcastle property). and (d) Computer Folio Search dated 21 November 1991 of Folio Identifier 15/SP19656 (the Epping Unit) and copy Mortgage Z931765 from Noel Emmanuel Hamer and Audrey Yvonne Hamer to Newcastle Permanent Building Society Limited. Oral evidence was given by the said James Sofiak who was a trust account inspector in the Society's employ and who had conducted enquiries of the firm of David Carr & Associates, Solicitors of Newcastle, where the Clerk had been employed as a clerk. The Society relied on the written and oral evidence to support its application and that evidence shortly was as follows. Particular No. 1 The First Loan The Clerk, as an employee of David Carr & Associates, had conduct of a purchase by Robert Burke of a property at 67-71 Hunter Street, Newcastle for the sum of $350,000.00 under an Agreement for Sale dated 10 May 1991: that agreement was varied on 11 July 1991 by removing a particular special condition and increasing the price to $475,000.00. The Clerk initiated an application to Newcastle Permanent Building Society for a loan for Mr Burke to complete the purchase the security being a first mortgage over the Hunter Street property and the Building Society approved a loan of $292,500.00 and instructed David Carr & Associates to act on its behalf in the matter. Subsequently that amount was remitted by the Building Society to David Carr & Associates to enable the purchase and mortgage to be completed but the purchase was not completed and the mortgage was never perfected and the Clerk caused the would-be mortgage moneys to be used for various other ventures and activities of Mr Burke. The Second Loan The Clerk, as an employee of Turnbull Hill & Associates, Solicitors of Newcastle had conduct of a transaction in which in or about September 1986 she lodged an application with the same Building Society on behalf of Mr and Mrs Noel Hamer for a loan of $50,025.00 on the security of a mortgage over a home unit they then owned at Epping. The loan was represented as being required by Mrs Hamer for her personal use. It was duly approved with the Clerk being shown as a guarantor. The mortgage moneys were subsequently remitted to Turnbull Hill Associates to enable the mortgage to be completed but the Clerk caused the mortgage moneys to be paid to another person without any authority from the Building Society or Mr and/or Mrs Hamer. A mortgage was signed by Mr and Mrs Hamer and by the Clerk but was not stamped or registered until September 1991. The accuracy of Mr Sofiak's report as to these matters was not disputed by the Clerk and the Tribunal finds the Particular proved in respect of both transactions. Particular No. 2 It follows from the matters reported in relation to the two loans that valid securities were not obtained as in the first case the purchase was not completed and in the second the mortgage was not stamped or registered until some five years after the loan moneys were advanced. Accordingly the Tribunal finds the Particular proved. Particular No. 3 The first loan transaction referred to in Particular No. 1 related to a property at 67-71 Hunter Street, Newcastle which was the subject of a purchase agreement at a price initially of $350,000.00 but later varied by consent to $475,000.00. In addition to the application to the Building Society the Clerk also initiated an application to Euroasian Equities Limited for a loan of $3,500,000.00 or $4,000,000.00 on the security of a mortgage over the Hunter Street property. To support that application the Clerk sent to that company a Report which included what purported to be a copy of the purchase agreement showing a price of $1,000,000.00 and not $350,000.00 or $475,000,00. Although it seems the contemplated loan may have been to assist not only on the purchase but also the redevelopment of the property the Clerk admitted to Mr Sofiak that she had given as a copy purchase agreement a document she knew to be wrong: there could have been no other purpose for this but to obtain approval for the loan sought. The Tribunal finds the Particular proved. Particular No. 4 It is noted that the Society does not press or rely upon this Particular. Particular No. 5 Whilst in the employ of David Carr Associates the Clerk acted for Christopher David Hamer on the sale of a property at Belmont North and following completion of the sale she caused the sum of $58,000.22 being the proceeds of sale or part thereof to be placed to the credit of an account with Newcastle Permanent Building Society of which account she was the sole signatory. When questioned by Mr Sofiak about her being the sole signatory to controlled money accounts the Clerk said she had done this on previous occasions but the employer David Carr had told her he was aware of what she was doing and asked her not to do so. The Clerk's action is obviously in breach of the Regulation mentioned and the Particular is found proved. Orders The Tribunal noted that the Clerk's Counsel did not dispute the accuracy of Mr Sofiak's report and consented to a Section 120(4) order being made but did pass some comment on the apparent lack of supervision of the Clerk's work. The Tribunal did not have the benefit of any evidence of the Clerk's experience or the supervision she was given by her employers and, in the absence of any evidence from her employers, is bound to express its serious concern that the behaviour complained of could occur. The Clerk's Counsel also submitted that, as the order the Tribunal may make under Section 120(4) is not really an order against the Clerk but an order against any solicitor, the Tribunal should not in the light of Section 156 make an order for costs against the Clerk. It is not considered by the Tribunal that this stands in the way of its power to make an order for costs against the Clerk under Section 120: were the position otherwise sub-section 5 of Section 120 would be a nonsense. The Tribunal is left in no doubt that the Clerk is not a fit and proper person to be employed or paid in connection with a solicitor's practice and makes the following orders: 1. All solicitors are prohibited from employing or paying in connection with their practices or practice Pauline Sheila Johns unless she has been given leave under Section 121 of the Legal Profession Act 1987 2. The said Pauline Sheila Johns pay the costs of the Law Society of and incidental to this application such costs to be assessed on a solicitor and client basis as if taxed in the Supreme Court 3. If agreement cannot be reached between the said Pauline Sheila Johns and the Law Society as to the amount of the costs either party to have liberty to apply. Dated this 4 day of February 1992. 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.