Administrative Decisions Tribunal New South Wales Medium Neutral Citation: Council of the Law Society of NSW v Adams [2011] NSWADT 177 Hearing dates: 4 March 2011 and 4 April 2011 Decision date: 22 July 2011 Jurisdiction: Legal Services Division Before: G Mullane, Judicial Member D Fairlie, Judicial Member C Bennett, Non-Judicial Member Decision: 1.The name of James Neil Adams is to be removed from the Roll. 2.James Neil Adams must pay the costs of the Council of the Law Society of NSW in the proceedings. Catchwords: Solicitor -Disciplinary Application -variation of ground by tribunal - professional misconduct -failure to file tax returns, failure to pay compulsory superannuation contributions & failure to remit PAYG deductions & GST. - Not fit and proper person to engage in legal practice. - Instrument of Consent seeks reprimand - Tribunal orders removal from Roll. Legislation Cited: Legal Profession Act, 2004; Superannuation Guarantee Charge Act 1992 (Cth); Income Tax Assessment Act 1936 (Cth); Cases Cited: Council of the Law Society of NSW v Bouzanis [2006] NSWADT 55; NSW Bar Association v Cummins [2001] NSWCA 284; Law Society of NSW v Vosnakis [2007] NSW ADT 42; Council of the Law Society of NSW v Somerfield [2008] NSW ADT 235; Law Society of NSW v Koffel [2010] NSWADT 149; Law Society of NSW v Gillroy [2010] NSW ADT 232; Council of the Law Society of NSW v Dalla [2011] NSW ADT 130; NSW Bar Association v Hammon [1999] NSW CA 404; NSW Bar Association v Somosi [2001] NSWCA 285; NSW Bar Association v Murphy [2002] NSWCA 138; Wardell v The Bar Association of NSW [2002] NSWSC 548; NSW Bar Association v Young [2003] NSWCA 228; Davison v NSW Bar Association [2007] NSWCA 227; Texts Cited: None Category: Principal judgment Parties: Council of the Law Society of NSW (Applicant) Legal Services Commissioner (Intervenor) James Neill Adams (Respondent) Representation: Counsel : A J McInerney (Respondent on 4 March 2011) A Matalani (Applicant Law Society of NSW L A Muston (Legal Services Commissioner) M F Callanan (Respondent) File Number(s): 102001 REASONS FOR DECISION LEGAL SERVICES DIVISION Before Mullane G - Judicial Member; Fairlie D -- Judicial Member; and Bennett C - Non Judicial Member . THE APPLICATION 1By its application filed on 28 January 2010 the Law Society sought orders as follows: (1)That the legal practitioner be publicly reprimanded; (2)That the legal practitioner pay the applicant's costs of the proceedings 2The grounds of the application were 3 counts of alleged professional misconduct: (1) That in the year ending June 2008 the legal practitioner whilst practising as the sole principal of a legal practice failed to make compulsory superannuation contributions in respect of five employees in a total of $21,824.84. (2) He failed to pay Goods and Services Taxes and PAYG deductions from his employees' wages in a total amount of $130,000. (3)That he "failed to lodge personal income tax returns for a period of some 10 years commencing in 1998". THE REPLY 3The legal practitioner filed his Reply on 2 March 2010. He admitted the jurisdiction of the Tribunal and all three of the grounds. He agreed with the orders proposed. INSTRUMENT OF CONSENT 4On 5 May 2010 an Instrument of Consent was filed by the parties incorporating the consent of the parties and of the Legal Services Commissioner to the order proposed in the Application and also incorporating the same particulars of the grounds as set out in the application. AMENDMENT OF GROUND BY TRIBUNAL 5The legal practitioner filed an affidavit in the proceedings on 3 February 2011 and in that affidavit gave evidence that he did not lodge any income tax returns in the period from July 1986 until shortly prior to him becoming bankrupt on 30 June 2008. The Application, however limited ground 3 (failure to file taxation returns) to the 10 tax years commencing 1998. 6The matter was listed for hearing before a differently constituted Panel of the Tribunal in May 2010 prior to it coming before this Panel on 4 March 2011. 7On 4 March Mr McInerney, then appearing for the Respondent, informed us that on the prior occasion the Presiding Member drew the attention of the Respondent to the Judgment of the NSW Court of Appeal in NSW Bar Association v Cummins [2001] NSWCA 284 [31 August 2001] and indicated that the Tribunal might reach a conclusion that the Respondent is not a fit and proper person to practice as a legal practitioner and might make a striking off order instead of an order for a reprimand. We were told that on the application of the Respondent, the hearing was then adjourned to 4 March. 8When the matter came before us on 4 March, we drew the attention of the Respondent and his Counsel to some of the affidavit evidence filed in the Respondent's case since the matter previously came before the Tribunal, and raised the issue of whether that evidence might itself be evidence supporting a finding that the Respondent is not a fit and proper person to practice as a legal practitioner. 9Mr McInerney for the Respondent told us that he had not considered that possibility, as he had been concerned since the previous adjournment to address only the issue regarding failure to lodge income tax returns. The Respondent sought a further adjournment to file additional material. That adjournment was granted and the matter resumed on 4 April and was completed that day. 10It was common ground that the failure to lodge taxation returns applied to a period of 21 years, not just the 10 years referred to in the application. At the hearing the tribunal was satisfied that amending the application so Ground 3 covered the whole 21 year period, to which all parties consented, would not affect the fairness of the proceedings and was reasonable. In exercise of its power under Subsection 555(1) of the Legal Profession Act 2004, the Tribunal amended Ground 3 of the Application on 4 April so that it is: The legal practitioner failed to lodge personal income tax returns for a period of some ten years commencing in 1998 and eleven years from 1987 to 1997. ORDERS SOUGHT 11On 4 April the Applicant and the Legal Services Commissioner when asked did not seek orders different to those in the Application filed on 28 January 2010. They sought orders that the legal practitioner be publicly reprimanded and that he pay the Applicant's costs of the proceedings. THE EVIDENCE 12The evidence before the Tribunal comprised: (1) The Application (2) The Affidavit of Raymond John Collins sworn 27 January 2010 (3) The Reply (4)The Instrument of Consent (5)The Affidavit of David Gregory Shaw sworn 21 January 2011 (6)Affidavit of the Respondent sworn 3 February 2011 (7)Affidavit of John Duncan Green sworn 3 February 2011 (8)Affidavit of Michael Cahill sworn 3 February 2011 (9)Affidavit of Silvana Mullins sworn 3 February 2011 (10)Character Reference of Kim Hennessy dated 3 March 2011 (11)Character Reference of Kim Stapleton dated 3 March 2011 (12)Reference of Victor Hamit dated 2 March 2011 (13)Reference of Anthony Hatzis dated 3 March 2011 (14)Affidavit of Respondent sworn 24 March 2011 (15)Affidavit of Kim Stapleton sworn 24 March 2011 (16)Affidavit of John Anthony sworn 24 March 2011 (17)Affidavit of Jozie Festz sworn March 2001 (18)Affidavit of Kimball Hennessy - undated but filed 25 March 2011 (19)Affidavit of Anthony Hatzis - undated but filed 25 March 2011 (20)Oral evidence of the Respondent. BACKGROUND 13The Respondent is 64 years of age. In about 1963 he commenced working as a clerk in the Local Court at Kogarah and other locations. Whilst working in the Local Courts he commenced studying for exams with the Solicitors' Admission Board. 14In 1972 or earlier he left the court system and began working for a firm of solicitors in Albury, while continuing his exams for the solicitors Admission Board. 15He married his first wife in 1972. He was admitted as a solicitor on 7 August 1974. He was 28 and was made a partner immediately in the firm which had employed him. 16In about 1976 he was divorced from his first wife. He married his second wife in 1982. 17In 1986 he acquired the licence and business of a hotel near Albury. 18It appears that by 1987 he had established the legal practice of "Adams Cameron McDonald" in Albury and was practising in litigation in the Local Courts and other Courts. 19In 1988 the Respondent and his family moved to Sydney. He sold the hotel licence for $100,000 and the interest in the law practice for $150,000. They also sold their home for $190,000. The Respondent and his second wife purchased a home in Blakehurst, Sydney for $340,000. The only borrowing for the purchase was $34,000 from a bank. From January 1989 he took up an unpaid position as the in-house solicitor for The Australian Hotels Association ("AHA") in Sydney. Meanwhile, by agreement with AHA he also conducted a law practice from that office as a sole practitioner. 20In early 1990 he and his wife purchased a leasehold hotel in Woolloomooloo. The purchase price was not disclosed in evidence, but the borrowed part of the funds by a loan secured on their home. The Respondent alleged that the equity they acquired was about $400,000. 21In about late 1990 the Respondent left the AHA and set up a legal practice specialising in liquor law under his own name. The hotel business was not successful. They decided to sell it and put it on the market. But there was no interest and eventually in 1992 the owner of the freehold took possession of the premises. 22The Respondent, his wife and a friend in late 1990 purchased a leasehold hotel business in Goulburn. Borrowings of $750,000 for the hotel were secured on the Blakehurst home. Again that hotel business was not successful. The Respondent and his wife transferred their interest in the property to his co-owner in consideration of the co-owner taking responsibility for the balance of the bank loan used to provide funds for the business. However, those borrowings were also secured on the Respondent's home and subsequently the lender forced a sale of the home. It sold for $660,000. After payment of the legal costs, the bank debt and a family loan, they were left with only $6,000. 23The Respondent and his second wife separated in 1996 and were subsequently divorced. 24From 2000 to 2006 the Respondent lived in a de facto marriage with another woman. 25In November 2002, the Respondent established a legal practice by the name "Adams Molloy" which was a partnership between him and Mr Molloy, a former Chief Superintendent of Police (Licensing). 26That practice grew and by 2003 there were two employed solicitors and 4 other staff. Mr Molloy retired the following year. 27The Respondent's evidence is that changes to the Liquor Licensing laws in 2004 lead to the "collapse" of his workload in the practice. 28In 2004 the Respondent and his close friend, Mr Hicks, who was a publican, acquired the leasehold business of a hotel in Balmain. The Respondent left the management of the hotel to Mr Hicks. The Respondent's evidence is that by 2005 the annual gross fees of his law practice were $960,000, but he alleged the net profit was only about $50,000. 29The Respondent did not give evidence as to whether his gross fees were based upon fees billed or fees received. As a sole proprietor of the business he would have had the option of accounting on the basis of fees paid rather than fees billed. If he were using the less favourable basis, presumably he would have told us. It must be assumed then that his gross fees were fees paid, and not fees rendered. 30The Respondent and Mr Hicks also developed (and the Respondent funded) a concept for "a generic Australian Bar" for overseas locations. Before the tribunal the Respondent testified that he invested about "$100 to $200,000 in this venture. 31The law practice had done considerable legal work for Mr Hicks in relation to hotels and also in relation to litigation in which he had been involved. The Respondent's evidence is that Mr Hicks had not paid any of these costs and the amount owing was $250,000 to $300,000. 32By December 2006 the hotel business at Balmain had failed and the Respondent and Mr Hicks reached an agreement which involved: * the Respondent to transfer his interest in the hotel to Mr Hicks; * the Respondent to transfer to Mr Hicks his shares in the company LagerBar Pty Ltd, which owned the concept of the Australian Bar; * the Respondent to be released from the liabilities including the loans from the Westpac Bank for the Hotel and a loan for the Austrlian Bar Concept secured on the office furniture and equipment of the Respondent's law practice and indemnified by Mr Hicks; * Mr Hicks to pay the Respondent $365,000; in an initial payment of $65,000 and a subsequent payment of $300,000; and * this would extinguish any debt of Mr Hicks to the Respondent for legal costs. 33The "Australian Bar" concept did not succeed and Mr Hicks did not pay the Respondent any money. 34But in anticipation of receiving substantial funds from Mr Hicks, the Respondent had decided to obtain professional help to prepare to reach some settlement with the Australian Taxation Office ("the ATO"). He had not lodged an income tax return since 1986. 35In 2007 he was referred to Mr Green, an accountant, for Mr Green to attempt to "sort out" the Respondent's books for his law practice and for other entities he had established in his activities, sufficiently to lodge taxation returns for several recent years, so as to be able to propose to the ATO that in consideration of him lodging returns for a number of recent tax years and paying the tax assessed, the ATO would forego action in relation to the other years for which he had lodged no return. We find it more likely than not that the returns subsequently prepared were prepared on a cash accounting basis and included only fees paid; not fees (such as those for Mr Hicks' work) billed but not paid. 36He was, he says, intending to fund the payment of tax assessed from funds he expected to receive from Mr Hicks. It appears from a letter from the ATO of 31 July 2008 that the "other entities" included Jim Adams Family Trust, the Trustee of the partnership of the Jim Adams Family Trust and another Trust, a partnership of which he was a partner, and a companies called "LagerBar Balmain Pty Ltd", "HAS Gaming Pty Ltd", "Castyork Pty Ltd", and "Hospitality Solutions (Australia) Pty Ltd". 37In a statement provided by the solicitor to the Manager of the Professional Standards at the Law Society of NSW on 25 July 2008, provided under Section 67 of the Legal Profession Act, 2004 the practitioner said: "Mr Green examined my books and subsequently informed me that they were in such disorder that it was virtually impossible to accurately assess my tax liabilities." 38On 4 October 2007 the ATO commenced proceedings against the Respondent in the District Court for amounts he had failed to remit for Goods and Services Tax and PAYG deductions from his employees' wages. 39Mr Green made contact with the ATO and commenced negotiating with them on the Respondent's behalf regarding those matters and income tax. By then the Respondent had failed to lodge returns for 21 tax years. 40In August 2007 Mr Green advised the Respondent that he thought it was unlikely that Mr Hicks would pay him any money and that without those funds the Respondent would be unable to settle with the Australian Taxation Office. He told him: "From what I can see of your finances you will have no alternative other than to declare yourself bankrupt." Mr Green's evidence is that the Respondent agreed that Mr Hicks would not be paying him. 41The Respondent reconciled with his second wife in December 2007 and they resumed cohabitation. 42On 10 January 2008 the ATO served the Respondent with a final notice requiring lodgement of returns for the 1987 to 2007 tax years. But the Respondent still did not lodge any return. On 13 March 2008 the ATO issued to the Respondent a letter threatening prosecution for failure to lodge returns. 43But there was at some stage an offer by ATO that if the Respondent lodged returns for the 10 most recent tax years, the ATO would not pursue any claim in respect of the prior periods. The client, with the help of work already done by Mr Green, engaged an Accountant, Mr Guy Miller trading as "Tax Returns Online" to prepare tax returns for the 10 years. The Respondent's evidence is that the figures Mr Miller used to prepare the returns were "based on the records taken from Locus, our bookkeeping system. The figures were based on the records taken from earlier reports prepared by Therese Williams, amended by Mr & Mrs Freeman and 2 further bookkeepers." 44The Respondent read the returns and signed them. On 2 April 2008 personal tax returns for 10 tax years (1998 to 2007) were lodged with the ATO by or on behalf of the Respondent. The Respondent paid Mr Miller $3,000 for preparation of the returns. 45In the District Court proceedings in respect of unremitted GST and PAYG deductions, the ATO obtained a judgment against the Respondent on 9 April 2008 for $129,130.91. The ATO served a bankruptcy notice on the Respondent on 27 May in respect of this debt. The ATO assessed the income tax and penalties payable in respect of the 1998 to 2007 tax years at $552,268.27. 46On 30 June 2008 the ATO issued a further summons in the District Court claiming $552,268.27 for income tax and penalties for the 10 years for which returns had been lodged and a further sum of $50,496.71 for unremitted GST collections and PAYG deductions from his employees' wages. 47The same day the Respondent filed a Debtor's Petition and a sequestration order was made in respect of his estate. 48On 5 July 2008 the Respondent notified the Law Society by letter of a "show cause" event, namely his bankruptcy. 49In his statement of 25 July 2008 provided to the Law Society the Respondent said, "If permitted to act as a principal (without a trust account) I can earn funds and potentially enter into an arrangement for the benefit of creditors and seek an early discharge." He also said "During my bankruptcy I will be liable to pay to my trustee a contribution towards my creditors." 50By its letter of 31 July 2008 the ATO informed the Respondent that its amended proof of debt in the Respondent's bankruptcy would be approximately $843,670. 51According to a letter the Respondent wrote to the Law Society, in early September 2008 a company Adams Legal Pty Limited was incorporated to be the proprietor of a legal practice which would employ the Respondent. Also in September he re-married his second wife. 52The Respondent has since September 2008 practised as an employed legal practitioner in a law practice conducted by Adams Legal Pty Ltd. The legal practitioner/director of the company is a solicitor, Michael Noyce, who has not given evidence in the proceedings, but did write a letter to the Law Society on 20 March 2009. He is a former member of the "Best Practice Board" of the Law Society of NSW. 53The evidence of Anne-Marie Foord of the Law Society of NSW is that: 3 The Society's records indicate that James Neill Adams ("the Solicitor"): (a)has undertaken to the Society that for a period of five (5) years from 30 October 2008 (or as otherwise provided in ((iii)) below) he will: (i)Continue to meet his obligation to his Trustee and to carry out all reasonable requests which may be made by the Trustee; and (ii)Continue to meet his obligations with respect to the lodgement by him or any associated entity (within the requisite statutory period) of any tax returns and BAS to be lodged with the Australian Taxation Office (iii)Report to the Manager, Professional Standards Department of the Law Society of NSW on a quarterly basis [commencing 1 December 2008] as to his compliance or otherwise with his obligations to both the Australian Taxation Office and his Trustee - such reporting to continue until such time as he is discharged from bankruptcy and/or has meet all his outstanding reporting and payment obligations to the Australian Taxation Office. (b)Had the following condition placed on his Practising Certificate by the Law Society Council on 27 November 2008: (i) for a period of five (5) years, such period commencing forthwith, or for such longer time as James Neill Adams remains an undischarged bankrupt and/or has filed to meet his outstanding reporting and payment obligations to the Australian Taxation Office, his local practising certificate shall be restricted to such type as will only allow him to practise as a solicitor in the employ of a solicitor or solicitors holding a local practising certificate as a principal. (c)Currently (to 30 June 2011) has the following conditions placed on his Practising Certificate: (i) unrestricted; (ii) Non-Principal (in accordance with [3](b) above); (iii) MCLE Requirements; (iv)Undertaking (Bankruptcy); (v)Undertaking given at [3](a)(i)-(iii) above. 54Mr Noyce described the firm as a "boutique law firm providing specialist services to the hospitality industry. These specialist services basically centre around Mr Adams who has great experience and an excellent reputation in this area." He said in his letter that the firm employs three people and is growing. He said that it "now provide Mr Adams employment so that he can: (1) have a fresh start; and, (2) earn money to repay his creditors; and (3) follow his love of the law; and (4) provide his considerable skill and expertise to an increasingly large range of clients; and (5) rehabilitate himself financially and emotionally, so that he is not a burden on society." 55The Respondent in his letter of 1 March 2009 to the Law Society stated that the firm is staffed by himself, a full time secretary and a part time bookkeeper, operates from a small office at The Rocks, and "is a busy legal practice". He said, "It is likely that Adams Legal will require the services of a number of professionals, paralegals and others in the next 12 months. The growth of the company is welcomed given that in most cases the legal profession is struggling to find new work." In his oral evidence the Respondent testified that Mr Noyce does not work in the practice and is not present to provide supervision of the Respondent or the other staff. 56Mr Noyce asked that the Tribunal "show compassion" to the Respondent. RELEVANT LEGISLATIVE PROVISIONS 57The following are relevant sections of the Legal Profession Act, 2004: 25 Suitability for admission (1) In deciding if an applicant is a fit and proper person to be admitted, the Admission Board : (a) must consider each of the suitability matters in relation to the applicant to the extent a suitability matter is appropriate, and (b) may consider any other matter it considers relevant. (2) However, the Admission Board may consider a person to be a fit and proper person to be admitted despite a suitability matter because of the circumstances relating to the matter. 496 Unsatisfactory professional conduct For the purposes of this Act: "unsatisfactory professional conduct" includes conduct of an Australian legal practitioner occurring in connection with the practice of law that falls short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent Australian legal practitioner . 497 Professional misconduct (1) For the purposes of this Act: "professional misconduct" includes: (a) unsatisfactory professional conduct of an Australian legal practitioner , where the conduct involves a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence, and (b) conduct of an Australian legal practitioner whether occurring in connection with the practice of law or occurring otherwise than in connection with the practice of law that would, if established, justify a finding that the practitioner is not a fit and proper person to engage in legal practice . (2) For finding that an Australian legal practitioner is not a fit and proper person to engage in legal practice as mentioned in subsection (1), regard may be had to the matters that would be considered under section 25 or 42 if the practitioner were an applicant for admission to the legal profession under this Act or for the grant or renewal of a local practising certificate and any other relevant matters. 498 Conduct capable of being unsatisfactory professional conduct or professional misconduct (1) Without limiting section 496 or 497, the following conduct is capable of being unsatisfactory professional conduct or professional misconduct : (a) conduct consisting of a contravention of this Act, the regulations or the legal profession rules , (b) charging of excessive legal costs in connection with the practice of law, (c) conduct in respect of which there is a conviction for: (i) a serious offence , or (ii) a tax offence , or (iii) an offence involving dishonesty, (d) conduct of an Australian legal practitioner as or in becoming an insolvent under administration , (e) conduct of an Australian legal practitioner in becoming disqualified from managing or being involved in the management of any corporation under the Corporations Act 2001 of the Commonwealth, (f) conduct consisting of a failure to comply with the requirements of a notice under this Act or the regulations (other than an information notice ), (g) conduct of an Australian legal practitioner in failing to comply with an order of the Disciplinary Tribunal made under this Act or an order of a corresponding disciplinary body made under a corresponding law (including but not limited to a failure to pay wholly or partly a fine imposed under this Act or a corresponding law ), (h) conduct of an Australian legal practitioner in failing to comply with a compensation order made under this Act or a corresponding law . (2) Conduct of a person consisting of a contravention referred to in subsection (1) (a) is capable of being unsatisfactory professional conduct or professional misconduct whether or not the person is convicted of an offence in relation to the contravention. 58Under Subsection 9(1) of the Act "suitability matters" includes " whether the person is currently of good fame and character ". Failure to Comply With Obligation to Make Superannuation Payments in Respect of His Employees 59The Respondent failed to comply with the provisions of the Superannuation Guarantee Charge Act 1992 (Cth) requiring him to make compulsory contributions to the superannuation of his employees. The unpaid contributions of $21,824.84 were payable in respect of 5 employees for the period 1 July 2007 to 30 June 2008. As the number of employees declined, particularly after 31 December 2007, $14,379.88 of this debt had accrued before the end of 2007. 60The Trustee for the Respondent's bankruptcy eventually paid the contributions from funds in the bankruptcy received from clients of the Respondent in payment of outstanding bills. But it was not until February 2009, and there was no payment of interest or any other compensation to the employees for the loss they incurred because of the delay in the payment of the contributions to their superannuation. 61In his statement to the Law Society of 25 July 2008 the Respondent did not refer to his failure to make the compulsory superannuation contributions for his staff. He offered no explanation. Nor did he address this in his affidavit of 3 February filed in these proceedings. 62The Respondent relied upon an affidavit of Sylvia Mullins of 3 February 2011. It was prepared by his solicitors. She was an employee of the Respondent prior to his bankruptcy. He was his full time Personal Assistant from July 2006 until his bankruptcy. She swore in her affidavit, "During the time that Mr Adams has been going through his difficulties I can categorically state that he has always been open and honest with not only myself but with all of the staff of Adams Molloy." She also swore ,"At all times Mr Adams put his staff first, before himself. For example I know from working at the firm that Mr Adams often went without any drawings so that staff could be paid". 63She does not say that at any time prior to the bankruptcy the Respondent disclosed to her that he had not been paying the compulsory employer superannuation contributions to her superannuation. However, in a letter to the Law Society of 8 December 2008 which she and her fellow employee Paul Sharah signed it was stated that from about early 2007 they became aware that "the firm was experiencing financial difficulties" and "Additionally, through this time, Mr Adams kept the employees aware of the financial difficulties being experienced in the firm and was cognizant of the fact that superannuation payments had not been made." 64Another employee, David Saunders, in a letter he wrote to the Law Society on 5 December 2008 supporting the Respondent, said that he became aware that the payments for his superannuation had fallen into arrears. He raised the matter several times with the Respondent. (apparently despite the allegation that the Respondent had "kept the staff aware", Mr Saunders became aware after the payments had stopped. We therefore consider that the statement by Ms Mullins and Mr Sharah should not be taken as evidence that other staff were informed. Of course, the bookkeeper would have been aware that the superannuation payments were not being made. But it appears that like Mr Saunders, the other 2 employees were not kept informed. Mr Saunders said in his letter, "I remained patient and expected, on the basis of assurances given to me by Jim, that those arrears would ultimately be paid up. I continue to expect this to be the case." 65The Respondent relied upon various character references and affidavits of as to his character. None of the people who gave a reference or swore an affidavit stated that they were aware that the Respondent had failed to pay compulsory Superannuation contributions for any of his staff for a year. None of them stated that they were aware that his failure to comply with the obligation to submit income tax returns extended over 21 years or the amount of tax and penalties recently assessed in respect of the most recent 10 years. None of them stated that they were aware of the amounts of PAYG deductions and GST the Respondent had failed to remit. 66Accordingly we cannot accept that the opinions of such witnesses such as that the Respondent "has been open ....about his bankruptcy and the proceedings taken by the Law Society" are valid. Indeed, this issue of lack of evidence of disclosure to the character witnesses of details of the grounds was raised in comments by a Tribunal Member when the matter was before us on 4 March, but not satisfied by affidavits subsequently filed. In the circumstances it appears that the Respondent has been less than open, frank or honest with his character witnesses by procuring references and affidavits from them without making proper disclosure to them of the seriousness of the grounds he was admitting in the proceedings. 67Similarly we cannot accept that opinions of such witnesses that the Respondent is "a diligent and competent legal practitioner", that he is "honest, honourable, trustworthy, and of good character", that he is "honest and trustworthy", that he is "a man of good character; an upright practitioner" that he is "a highly principled" solicitor and "completely professional", and that he is "honest, honourable, trustworthy and of good character" would have been expressed if the Respondent had properly informed the witnesses. Indeed there are other reasons that we will refer to that also lead us to conclude that the Respondent is not honest or trustworthy. 68In his affidavit of 24 March 2011 the Respondent says "My failures have been circumstantial not deliberate obfuscation." And, "I apologise to the Tribunal and the legal profession for my lack of investment judgment and failure to place myself in a financial position to pay all my taxes." 69In that affidavit he later says: "My letters to the Applicant and agreed facts record my repeated acknowledgment of my serious and significant failures The background evidence previously filed on my behalf is not by way of excuse but explanation. I did not, but should have, had systems in place to have the records prepared by our bookkeeping staff audited externally and signed off. Again any decision was prefaced on our financial capacity which for many years I have simply failed to muster." 70Of course, the failure to pay the superannuation amounts for his staff was not about a failure of him to have systems in place, or a failure to have external audits, or a failure of his bookkeeping staff. There is no suggestion that he did not know his legal obligation to make the payments. And he knew for a year that the payments were not being made and his staff were being denied their entitlements. His decision was to prefer the continuing conduct of his business and his finances, over the legal rights and interests of his staff. 71In Council of the Law Society of NSW v Bouzanis [2006] NSWADT 55 (22 February 2006), a practitioner who failed to make superannuation payments for one employee for a period of nearly 3 years was found to be guilty of professional misconduct. The amount involved was $9,532.51 and related to only one employee. The employee, and later his solicitor, requested payment of the amounts from August 2003 and the solicitor paid the full amount on the 12 March 2004. Prior to paying the amount in question, the solicitor had discussions with a Trust Account Inspector and conceded that he had not paid the superannuation contributions, but said he would do so in the next few weeks. The decision records: "the solicitor conceded that he had required the funds for other purposes". 72The Tribunal referred to the decision of the Court of Appeal in NSW Bar Association v Cummins [2001] NSWCA 284 (31 August 2001) and held (at Par 18) that the failure to make the superannuation payments was professional misconduct. 73The Tribunal held (at par.22): "The Tribunal accepts as does the Society, that the solicitor is genuinely contrite and no question arises as to the necessity of the protective order such as striking the solicitor off the roll or suspending his right to practice." 74The Tribunal (at par.25) distinguished the facts from "a systematic failure to comply with revenue responsibilities" which it said could warrant, "a significantly more severe penalty", and imposed a public reprimand and a fine of $10,000. 75The decision of the Tribunal in Law Society of NSW v Vosnakis [2007] NSW ADT 42 (23 January 2007) involved numerous grounds, including misappropriation. He delayed in paying his superannuation guarantee levies in respect of four employees. He informed the Tribunal at the hearing, and the Law Society accepted, that he had paid all of the outstanding superannuation contributions. The delays in respect of some of those were considerable, including nine years for one employee and eight years for another. The Tribunal (at par.33 of the Reasons) said: "The Respondent's failures to pay moneys due for employees' superannuation contributions, PAYG tax, and GST also, in this context, constitute professional misconduct. As Spigelman CJ with whom Mason P and Handley JA agreed, said in NSW Bar Association -v- Cummins [2001] NSW CA 284: 'This failure was an inexcusable pattern of illegal conduct in complete defiance of his civic responsibilities.'." 76In the Tribunal decision of Council of the Law Society of NSW v Somerfield [2008] NSW ADT 235 (22 August 2008), the solicitor was bankrupt. He had failed to pay employee superannuation. It was held there was no dishonesty involved. The amount of unpaid superannuation contributions was about $56,000 for 25 employees over a period of 4 years. The Tribunal adopted agreed facts and made orders in accordance with a Consent Instrument. 77It was held that the failure to pay the contributions arose from the legal practitioner's lack of financial resources "flowing from the poor financial performance of his practice". He had undertaken to pay the superannuation contributions, intended to do so, but ultimately did not have the financial resources to meet his undertaking. 78The Tribunal accepted that the conduct was professional misconduct, fined the legal practitioner $5,000, publicly reprimanded him, and ordered him to attend a trust account course and pay the costs of the applicant. There was also an order that in default of him complying with any of the other orders, his practising certificate was suspended until such time as he complied. 79The Tribunal considered the conduct of a solicitor principal who over a period of two years had failed to pay $123,998.97 by way of superannuation contributions for 33 of his employees in Law Society of NSW v Koffel [2010] NSWADT 149 (15 June 2010). The practice was placed into voluntary administration about 10 months into that period and at that time there was already $22,272.86 in superannuation payments unpaid. The solicitor personally guaranteed the payments of all debts of the practice company. When he had experienced initial financial difficulties in 2005 the solicitor had met with his staff and sought their agreement for him to attempt to trade out of those difficulties. They were informed that the practice might not be able to pay their superannuation contributions as they fell due, but accepted and relied upon his guarantee. 80By the time of the hearing before the Tribunal in May 2010 the solicitor had personally paid almost all of the unpaid superannuation contributions. The Law Society Investigator recommended no further action. The law Society sought a finding that the failure to pay the superannuation amounts was professional misconduct and although the reasons do not clearly state the orders sought, it appears the Law Society also sought an order that the solicitor be struck off. 81In deciding that the conduct of the practitioner was not professional misconduct, the Tribunal said that there was not a systematic course of conduct, it was not conduct that extended over "a long period of time", that it was not "of such gravity as to constitute professional misconduct". The Tribunal in reaching that conclusion relied also on the fact that the solicitor had voluntarily acknowledged responsibility to pay any superannuation amount unpaid and had largely honoured this. 82The Tribunal distinguished the decision in Council of the Law Society -v- Vosnakis (referred to above) because the solicitor there did not act to pay the outstanding amounts until such time as receiving demands from a lawyer acting for one of the employees and the intervention of the Law Society, and his failure also was "a systematic failure to comply with revenue responsibilities". Instead the Tribunal found: "Certainly the solicitor, as principal solicitor, should have kept a more careful eye on his office/general account, his income and his expenditure and his statutory obligations, especially in circumstances where there was a substantial decline in income. However, when the issue of outstanding superannuation came to his attention, he directed his mind to it and dealt with it. The Tribunal concludes that the solicitor's conduct was that he accepted his fiscal/revenue responsibilities." 83The Tribunal in Koffel distinguished the facts of that matter from those in the decisions of Vosnakis and Somerfield referred to above. The tribunal found that the conduct of the solicitor was not professional misconduct and the law society had not established that he was not a fit and proper person to practice as a solicitor. 84Also in the decision of Law Society of NSW -v- Gillroy [2010] NSW ADT 232, the Tribunal found that failure to pay employee superannuation contributions of $34,101.81 amounted to professional misconduct. 85In Council of the Law Society of NSW -v- Dalla [2011] NSW ADT 130 (29 April 2011), the Tribunal found that the practitioner was guilty of professional misconduct. He was publicly reprimanded and ordered to pay the costs of the Law Society. The conduct held to be professional misconduct involved failure to pay superannuation contributions for one employee in respect of five tax years. The total amount of the superannuation contributions that the practitioner failed to pay was $11,283.85, a relatively small amount compared with some of the other decisions. The conduct was held to be professional misconduct, but a more severe outcome than a reprimand was not considered appropriate because the practitioner gave evidence, and the Tribunal accepted, that at all material times he believed the employee was in fact an independent contractor and that he was not liable to make superannuation payments for her. In addition, the Law Society, the Respondent and the Legal Services Commissioner had filed an Instrument of Consent in which they agreed on the outcome being an order for a reprimand and an order for costs. 86At the time of the hearing the practitioner was 72 years of age, in receipt of a Commonwealth pension on account of ill health, had an income of only $50-$100 per week providing legal services, had a debt of more than $80,000 to the ATO and was bankrupt. 87We find that the Respondent's failure to comply with his legal obligation to pay the superannuation contributions was done knowingly over a period of 12 months and for the purpose of preferring his desire to continue the conduct of his business. He preferred his own financial and other interests over the interest of his employees. We conclude that this behaviour indicates that he is not of good fame and character. Failure to Remit GST and PAYG Deductions 88The evidence does not establish the precise amount of GST or the precise amount of PAYG deductions that the Respondent failed to remit to the ATO. However, from the ATO letter to the Respondent of 31 July 2008, it appears that the amounts unpaid came to a total of $170,819.03. The GST amounts relate, of course, only to the period since the introduction of that tax. 89In his statement to the Law Society of 25 July 2008, the Respondent said in relation to the failure of the Riverview Hotel at Balmain: "The demands of my practice resulted in me leaving the management of the hotel to Mr Hicks, and I now acknowledge unwisely, [sic] trusting him to discharge the statutory duties and financial propriety of the company. I am now aware of Hicks having taken substantial funds from the operating account of the hotel." 90He also said: "Further, I was also mislead by Hicks in a number of transactions." 91He alleged: "My book-keeper and office manager had left my employ in October 2006 and thereafter I had left the book-keeping/accounting to Ms Bernice Freeman who informed me that as at early 2007 I was in fact in credit with respect to BAS. I believe my income tax liability was also limited (as a consequence of the money I had expended on the ventures with Hicks)." 92However, the letter from ATO to the Respondent of 31 July 2008 which he provided to the Law Society indicated that as at October 2006, before Ms Freeman took responsibility for the book-keeping/accounting, the BAS statements for the December quarter of 2005 and the March quarter of 2006 had been lodged one and two months late respectively. 93The BAS statement for April 2007 was due on 22 May 2007. Ms Freeman died on 31 May 2007. That statement was not lodged until 22 August 2007. Then the subsequent monthly statements due from August 2007 through to January 2008 were not lodged until 19 May 2008. Subsequent statements for February, March, April and May 2008 were not lodged at all. Obviously Ms Freeman was not responsible for lodgement of the statements due from August 2007 to May 2008. 94In his statement to the Law Society, the Respondent stated: "Mr Green examined my books and subsequently informed me that they were in such disorder that it was virtually impossible to accurately assess my tax liabilities. It eventually became evident that the disorder was the result of Ms Freeman's inadequacies and attempts to cover those inadequacies up, inter alia, it came to light that she had not lodged BAS returns since the date of her employment. Ms Freeman died on 31 May 2007." 95This statement is misleading. Ms Freeman did not assume responsibility for the book-keeping until October 2006 and the only BAS statement that fell due and was not lodged on time appears to have been the statement for April 2007, which was due on 22 May 2007. 96In addition, the evidence of the disorder in the Respondent's financial records does not just apply to the period after October 2006. He certainly claims that the same applies in respect of the whole of the 10 years in respect of which he lodged tax returns (1998-2007 tax years). Clearly Ms Freeman could not be responsible for all of that disorder. She was not employed until October 2006, in the last of those tax years. 97Indeed, it was the Respondent who was the proprietor of the business and was the person responsible for the lodgement of the BAS statements. It is not a responsibility that he could abdicate to an employee. He does not say that between May 2007 and June 2008 he did not know that the statements were not being lodged. 98He has made exaggerated claims by way of blaming Ms Freeman, an employee who is now deceased. This reflects very poorly on the Respondent's credit and character. 99He persisted with such blaming of Ms Freeman in subsequent documents. When he wrote to Mr Collins, the Manager of the Professional Standards Department of the Law Society on 9 September 2008, he said: "So far as BAS payments are concerned, I am now informed by our new book-keeper Melissa Shaw that returns were not lodged even though there were funds at that stage to pay outstanding amounts. The book-keeper to whom I referred in my summary of my position which I forwarded through to you some time ago was involved in a number of irregularities which should not have occurred. It was Ms Freeman who passed away suddenly and unexpectedly, whilst employed by my firm and the extent of the irregularities were discovered upon her death." 100Ms Freeman started with the law practice in October 2006. In their letter to the law Society Ms Mullins and Mr Sharah said that when Ms Freeman started work there she told them "these accounts are in a shambles". That is consistent with the opinion that Mr Green himself gave the Respondent after he had some time to see what could be done with the financial records to prepare tax returns. The Respondent told the law Society that Mr Green told him the records were "in such disorder that it was virtually impossible to accurately assess his tax liabilities". 101It appears from his affidavit evidence, that the first occasion Mr Green had dealings with Ms Freeman was 16 April 2007 and on that occasion Ms Freeman told him: "I consider the financial records are in disarray. I am still in the process of correcting them in order to reflect an accurate financial position and allow the preparation of the firm's taxation returns." 102Mr Green testified in his affidavit that Ms Freeman at that time showed him a draft of Management Balance Sheet and Operating Statements. He testified that these: "... did not, even on a cursory review, reflect a financial position that could in any way relied upon. Simple examples were disclosed by fluctuations from profits in excess of $350,000 to losses over an 8 year period." 103Of course, Ms Freeman had only been employed since October 2006 and her role ceased when she died on 31 May 2007. She certainly was not responsible for the disarray in the financial records "over an 8 year period" or prior to October 2006. 104In his affidavit Mr Green also expressed an opinion about Ms Freeman: "However, after initially being trusting of Ms Freeman, I later began to doubt her ability and integrity. My investigation of the accounts since have lead me to believe Ms Freeman may have been a book-keeper who was presented with poorly constructed records and a computer system which was beyond her ability. This resulted in the accounts being manifestly wrong." 105This opinion has not been justified by Mr Green, given that Ms Freeman had responsibility for the book-keeping only for the period from October 2006 to May 2007. She was not responsible for financial statements prepared for the 2007 financial year. 106Mr Green's evidence was that he thought the business because it produced its income on hourly charge rates and was a busy practice, should display more consistent results. He also identified serious errors in the Management Report for the 2007 financial year, which he said were produced by Ms Freeman. 107Those figures are dated 9 August 2007. That and the fact that Ms Freeman died on 31 May 2007, before the end of the financial year, persuaded us that Ms Freeman did not prepare those figures and did not supply them to Mr Green. 108In his affidavit sworn 24 March 2011, the Respondent appears to have treated the amounts of GST and PAYG that he failed to remit as "taxes". The GST was taxes that he collected on payment of his bills but failed to remit to the Commonwealth. The PAYG deductions were deductions he was by law required to have made from the gross wages of his employees and remitted to the ATO. Instead, he paid the employees the net amount but failed to pay the balance of their wages. His conduct in relation to GST and in relation to PAYG amounts were breaches of the law. 109In his affidavit, he said in paragraph 6: "Given the poor financial management of my practice, for which I take ultimate responsibility, there were payments of BAS due but unpaid in the order of $103,000. The practice had been paying its taxes until cash flow proved problematic." 110He also retreated from his previous statement that he intended to try to make payments to his Trustee in Bankruptcy for the purpose of contributing to payments of part of the amounts which are the subject of these proceedings. 111He said in paragraph 8: "I am embarrassed and sorry that I now find myself in this position, living week to week without an ability to offer to pay back the taxes that have now accrued over this period or require a modest dwelling for my wife and me in retirement." 112He also said in paragraph 14: "I have not deliberately shunned my obligations and accounted to myself for large sums of income without paying tax and deliberately not paid taxes or lodged returns and derive personal benefit for my own self-aggrandisement and indulgence." 113And, in paragraph 19: "I apologise to the Tribunal and the legal profession for my lack of investment judgment and failure to place myself in a financial position to pay all my taxes." 114He did not appear to recognise that his use of the GST he collected was a misappropriation of public funds. Nor did he seem to recognise the consequences for his staff of his failure to pay their PAYG deductions to the ATO. 115In paragraph 20 of his affidavit he blamed his failure to have proper systems in place in the practice, "was prefaced on financial capacity which for many years I had simply failed to master". 116However, the failure to remit GST he collected and the tax deductions from his employees' wages were not caused by financial mismanagement but by his decision to prefer his own interests over those of the taxpayers and his employees. 117Despite his earlier expressed intentions to contribute to his bankruptcy so that some of these funds might be recovered, the bankruptcy was probably discharged after 3 years on 30 June 2011, and there is no evidence that the Respondent has paid any amount at all to his Trustee in Bankruptcy, even in the period of more than 2 years since he has been in full time employment as a solicitor. There is no evidence that the bankruptcy has provided any payment of any part of the GST, PAYG deductions and income tax he failed to pay. 118We find that the Respondent's conduct in failing to comply with his legal obligations to remit GST collections and pay PAYG entitlements of his employees to a total of approximately $170,819.03 was done knowingly and for the purpose of preferring his own financial and other interests over the interest of his employees and the government and taxpayers. We conclude that this behaviour indicates that he is not of good fame and not of good character. Failure to Lodge Tax Returns in Respect of 21 Tax Years 119For each of the 21 tax years 1987 to 2007 the Respondent pursuant to Section 161 of the Income Tax Assessment Act 1936, and gazetted notices, was required to lodge an income tax return, but he breached that requirement by failing to do so. 120In NSW Bar Association v Hammon [1999] NSW CA 404 at [85] Mason P said: "I emphatically dispute the proposition that defrauding 'the revenue' for personally gain is of less a seriousness than defrauding a client, a member of the public or a corporation. The demonstrated unfitness to be trusted in serious matters is identical. Each category of 'victim' is a juristic person whose rights to receive property are protected by law including the Criminal Law in the case of dishonesty and deception. 'The revenue' may not have a human face, but neither does a corporation. But behind each (in the final analysis) are human faces who are ultimately worse off in consequence of fraud. Dishonest non-disclosure of income also increases the burden on tax payers generally because rates of tax inevitably reflect effective collection levels. That explains where there is no legal or moral distinction between defrauding an individual and defrauding 'the revenue'." 121Spigelman CJ (with whom Mason P and Handley J A agreed) in NSW Bar Association v Cummins [2001] NSW CA 284 (31 August 2001) said in paragraphs 19 and 20 after adopting the above quotation from Mason P: "19 Honesty and integrity are important in many spheres of conduct. However, in some spheres significant public interests are involved in the conduct of particular persons and the State regulates and restricts those who are entitled to engage in those activities and acquire the privileges associated with a particular status. The legal professional has long required the highest standards of integrity. 20 There are four interrelated interests involved. Clients must feel secure in confiding their secrets and trusting their most personal affairs to lawyers. Fellow practitioners must be able to depend implicitly on the word and the behaviour of their colleagues. The Judiciary must have confidence in those who appear before the courts. The public must have confidence in the legal profession by reason of the central role the profession plays in the administration of justice. Many aspects of the administration of justice depend on the trust by the Judiciary and or the public in the performance of professional obligations by a professional people." 122Spigelman CJ also said (at [22]): "Neither the relationship of trust between a legal practitioner on the one hand and his or her clients, colleagues and the Judiciary on the other hand, nor public confidence in the profession, can be established or maintained without professional regulation and enforcement." 123Mr Cummins had failed for 38 years to lodge taxation returns and to pay tax. The Court of Appeal found that he was guilty of professional misconduct and he was struck off. 124The Court of Appeal (Spigelman CJ, Sheller JA, and Giles JA) in NSW Bar Association v Somosi [2001] NSWCA 285 dealt with a barrister who had failed to file income tax returns or pay income tax for 17 years. He had also been convicted on 17 counts of failing to comply with a notice from the ATO requiring him to file the 17 returns. He was fined a total of $68,653.01. 125The Chief Justice, with whom the other appeal Judges agreed, held: "The facts that are critical for the determination of these proceedings are not in issue. Mr Somosi did not file a taxation return in any of the 17 years ending 30 June between 1978 and 1994. Accordingly he paid no income tax for any of those years. This was deliberate conduct which had the effect of concealing his income and ensuring he paid no tax. No inadvertence or accident could conceivably explain such a sustained period of conduct over such a long period. The only inference is that he deliberately and intentionally evaded tax." 126He had had 3 marriages, had contracted meningitis, had suffered adverse effects on his memory, and suffered mental fatigue and confusion for several years, but their Honours held that this did not explain or excuse his failure to lodge his tax returns. The Chief Justice referred to the Cummins decision and said that although the period of default there was 38 years, and said at [66]: "The position of Mr Somosi involved a shorter period of time, but not a materially different length of time." 127Their Honours found Mr Somosi guilty of professional misconduct and declared he was not a fit and proper person to remain on the Roll of Legal Practitioners. Mr Somosi did not oppose such orders. 128There is also the decision of the Court of Appeal (Spigelman CJ, Giles JA and Ipp JA) in NSW Bar Association v Murphy [2002] NSWCA 138. Mr Murphy, a barrister, had his practising certificate cancelled by the Bar Association because the Bar Association had decided that Mr Murphy was not a fit and proper person to remain on the Roll. He appealed to the Supreme Court and was successful. The Bar Association appealed that decision to the Court of Appeal. The Appeal was dismissed. The Court of appeal distinguished cases such as Cummins and Somosi (at [172]). The Practitioner had become bankrupt because of a debt for unpaid income tax. It was a situation that arose when he delayed lodgement of some returns hoping to thereby be able to secure a reduction in the provisional tax assessed, but within 3 tax years he reached a situation from which he could not recover financially. 129In Wardell v The Bar Association of NSW [2002] NSWSC 548 a barrister sought to have the Supreme Court reverse a decision of the Association to cancel his practising certificate for failure to pay his income tax assessed , leading to his bankruptcy. Cripps AJ held at [45] that the barrister knew that the money he spent on his lavish lifestyle would not be available to pay his taxes and showed "such a reckless disregard for his obligations as to amount to an intention to avoid them". His Honour held (at [42]: "... it is generally recognised by most right thinking members of the community that people have an obligation to meet their debts, if they can, and failure to do so over a long period of time without any exculpating features other than that the money was spent elsewhere would promote in the minds of right thinking people in our community that that person was not a fit and proper person to hold a practising certificate. " 130In NSW Bar Association v Young [2003] NSWCA 228 Mr Young was a barrister who failed to file an income tax return for 17 years. He did not pay any tax for 20 years. The Court of Appeal (Meagher JA, Ipp JA and Foster JA) held that he had dealings with an accountant at one stage and later an ATO officer, but held at [9]: "They are irrelevant because they do not alter the essential facts of the case. They are, quite simply, that for years and years Mr Young failed to file income tax returns when he knew he should have. Deliberately to ignore one's obligations in this manner speaks of a lack of integrity, particularly if one is not ignorant of the consequence, and a lack of integrity justifies removal of Mr Young's name from the roll." 131Meagher JA, with whom the others agreed, found that Mr Young had not enjoyed a lavish lifestyle, did not have high levels of discretionary expenditure, did not accumulate assets, was personally generous, had become destitute and bankrupt , had never deliberately understated his income, had always helped the poor and the ignorant, had provided his services free of charge, was not motivated by greed and had no convictions. But at [11] he said : "However, all these facts together do not derogate from the fact that non-filing of the tax returns is incompatible with that degree of integrity, which the public is entitled to expect in a barrister." 132Their Honours declared that Mr Young was not a fit and proper person to remain on the Roll of Legal Practitioners and ordered his name be removed. 133In Davison v NSW Bar Association [2007] NSWCA 227, the NSW Court of Appeal said at [110] that the failure by Mr Cummins to lodge returns was more serious professional misconduct than that committed by Mr Davison, who minimised his tax by disclosing less than all of his income for each year by holding "cheques in the drawer " until the next tax year. The Court said that failure to lodge returns could mean that the lawyer's existence and income was concealed from the ATO. That is what happened with the Respondent. 134We do not know the actual tax assessed for the 10 years for which tax returns were submitted. The tax office assessments, including penalties were for $552,268.27 when assessed but with interest and costs the part of the judgment relating to those assessments was considerably greater. 135In his 7 page statement to the Law Society of 25 July 2008, the Respondent said, "I acknowledge my failure to lodge tax returns is an extremely serious matter and that the Law Society had a duty to act in the public interest so far as professional standards are concerned." However, he did not acknowledge that the issue is one of integrity and he did not offer an explanation as to why he could not or did not lodge the returns as he was required to do. He said in relation to the period around December 2006 , "Had I the funds, and were I in a position to prepare accounts in connection with the Hicks activities and Hicks companies, and take up personal losses due to the failed investments associated with those activities my taxation position would present as far different position." But the evidence does not establish that at any time during the relevant 21 tax years he could not have afforded to ensure proper records were kept for his practice and his investment activities and annual tax returns prepared and lodged as required. 136The Law Society in its letter of 30 July 2008 asked the Respondent, "For what years were tax returns not lodged and what was your total taxable income for each such year? What is your explanation for failing to lodge each such return?" He responded in his letter of 9 September 2008. He did not attempt to answer the first question. He said that returns had recently been lodged for "1997 to 2007" (in fact it was 1998 to 2007). He did not acknowledge that prior returns had not been lodged, although he had on 22 August sent the Law Society a 7 page letter from the ATO that included a statement that "There is no record that you have lodged any income tax returns prior to that of 1998.". He did not provide an estimate of total taxable income for any year. 137He then said in that letter: "I have no explanation for the failure of the tax returns other than the fact that I had hoped that the matter of Mr Hicks and I be resolved, that the approach by Mr Green and the ATO to comprise(sic) my outstanding tax liability would result in a compromised position which would have enabled me to bring my returns up to date and settle my outstanding tax liabilities" 138He had no explanation for not lodging his returns when they were required to be lodged. 139But in his affidavit of 3 February 2011 he swore: "Throughout those periods from 1998 to 2008 I tried to do something about obtaining the funds to be able to lodge my returns and pay tax by becoming involved in various business ventures but my attempts were unsuccessful." 140This is untrue. We consider these propositions that he didn't lodge his returns because he couldn't afford to pay to have the returns prepared, and his purpose in entering various business "ventures" outside his legal practice was to obtain funds to pay for his tax returns to be done, are nonsense. The evidence indicates that he often had substantial funds available, but complying with his obligation to lodge tax returns and pay tax was never a priority until the ATO threatened prosecution. 141In his affidavit of 3 February 2011 the Respondent also sought to rely upon a series of unfortunate family and personal events to explain his failure to lodge his returns for 21 years including: * His mother fell and injured herself at her home in Sydney in 1986 and from then through to early 1988 he was "constantly travelling from my practice in Albury to Sydney" (presumably to visit her); * He had to arrange care assistance for her for weekdays; * In 1988 while he was living in Albury, after he acted in a murder trial a death threat was made against his wife and their children and that was one of the reasons the family moved to Sydney; * In 1988 before he moved from Albury he was hospitalised for an undisclosed period with exhaustion and pericarditis; * In 1993 his son contracted meningitis and was hospitalised for several weeks in Sydney; * I n 1995 his wife was diagnosed to be suffering "Bronchioextasis" and for more than 6 months could not work; * In 1996 he separated from his wife and his mother developed Alzheimer's disease and amnesia and was admitted to a nursing home in Sydney; * In 1997 his daughter, who it appears was living with her mother since the parents' separation, was diagnosed with Anorexia Nervosa and her treatment included a period of hospitalisation in Sydney, then after returning home she was subsequently readmitted for a further 3 months. Her subsequent treatment involved the Respondent often attending meetings with health professionals for two and a half years; and * In 2004 he suffered blood clots on a lung and received treatment at 2 hospitals. He was unable to work full time for the 6 months it took to recover. 142We do not make light of any of these matters, but we are mindful of the Somosi decision as discussed above. There were often times when the Respondent was not labouring under any of these crises and he generally had the financial resource to have lodged his tax returns, but chose not to. These events do not explain or excuse his sustained failure to lodge these tax returns. 143The Respondent's evidence is that he earned an average of about $50,000 per annum in profits from his various practices since 1986. That seems to have been the basis of the 10 tax returns submitted to the ATO. The Respondent more recently claims that the amounts of profits disclosed for purposes of those tax returns were erroneous in that they were substantially greater than what he says the real figures were. But there is no satisfactory evidence to prove that. On the contrary there is evidence that suggests that an average profit of $50,000 per annum is a serious understatement, including: * His evidence that by 2005 the annual gross fees of the practice were $960,000. He says the net profit for the practice from that was only $50,000. That would be a profit of only 5.2% of turn-over; an extraordiarily low profitability for a legal practice. The proposition that the profit was only $50,000 is very unlikely. It was not supported by any other evidence and we do not accept it. * The tax returns and the figures they contained were produced from the combined work of people who did the bookkeeping before October 2006, Mr & Mrs Freeman, 2 other bookkeepers, other staff in the law practice, Mr Green, the Respondent and Mr Miller and were read and signed by the Respondent before being submitted to the ATO. * His evidence that he paid Mr & Mrs Freeman $46,300 in the 7months from October 2006 to May 2007 to try to sort out the financial records of the practice, when Ms Freeman was working only 3 days per week and Mr Freeman did not start till abut November 2006 and attended only irregularly; * His evidence that there were 4 employed solicitors with Adams Molloy from 2001 to 2005 and subsequently the 2 employed solicitors at Adams Molloy were each paid $80,000 to $100,000 per annum; * Mr Green's attempts to support the Respondent's claims that he overstated his income in the 10 tax returns submitted are only half hearted and to some extent conjecture. * The ATO has obtained court judgements in respect of the amounts assessed plus penalties and interest. The Respondent did not at any time seek to amend the returns, seek any review of the assessments or defend the subsequent litigation. * Mr Green in his affidavit testifies that he prepared a reconstructed Balance Sheet from records of the practice. Subject to a qualification that the figures may be erroneous because some items treated as expenses might in fact be capital expenditures, (i.e. with a consequence that the profits may be understated), he arrived at an average annual profit over the 10 years of the tax returns submitted of "slightly less than $80,000 per year"; * Using the figures from the practice for drawings, which it seems on other evidence are probably unreliable and understate the drawings, Mr Green found the average annual drawings by the Respondent were "slightly less than $50,000 per annum", and there was accrual of a credit card debt of $50,000. Mr Green said that these figures, "indicate an average cost of living as $62,500 per annum"; not $50,000 as the Respondent alleges. * Although the Respondent swore in affidavit evidence that the whole of the profits of the legal practice were used for living expenses for himself and members of his family, this was not true. In answer to a question from one of us he conceded that he had invested "$100,000 to $200,000" to the Australian Bar concept. It was also not consistent with the wealth he had accumulated by 1988 when they moved to Sydney. They sold the hotel licence, the interest in the law practice and their home for a total of $440,000. He purchased a home in Sydney in Blakehurst for $430,000 and the only borrowing for the purchase and the expenses of the purchase, including stamp duty, was $34,000 borrowed from a bank. It is also not consistent with the borrowings and loan repayments for the purchase of interests in various hotels. It is not consistent with his capacity to invest in numerous hotels. It is not consistent with the evidence that he and his wife acquired an equity of about $400,000 in 1989 in the hotel business at Woolloomooloo. It is not consistent, too, with his statement in para 5 of his letter to the Law Society of 9 September 2008 that a debt in his bankruptcy of $40,000 was the balance of a loan secured against his office plant and equipment to provide funds to pay debts of LagerBar Pty Ltd and that the loan repayments were made from his office bank account "until such time as there were insufficient funds to continue to meet the loan repayments". 144The Respondent in his statement to the Law Society of 25 July 2008 told the Law Society: "If permitted to act as a Principal (without a trust account) I can earn funds and potentially enter into an arrangement for the benefit of creditors and seek an early discharge." On 18 March 2009 in another letter to the Law Society he said the right to practice was "pivotal" to him entering into an arrangement with his trustee, paying "my Trustee a sum which would be acceptable to my creditors" and "thus be discharged from my bankruptcy" . 145But in his affidavit of 3 February 2011 after, it appears, he had been in full time employment since September 2008, he did not repeat any commitment to contribute to his bankruptcy. Nor did he in his affidavit of 24 March 2011, only about 3 months before the discharge of his bankruptcy. The Respondent has not proposed any arrangement to his creditors or made any payment to his trustee. He did not contribute any funds at all. He paid no part of the income tax assessed or of the unremitted GST he collected or of the PAYG amounts he was required to pay. 146Generally we found the Respondent to be an unreliable witness. 147In para 190 of his affidavit of 3 February swore in relation to his failure to file returns and his financial affairs generally, "I was hopeless at looking after my financial affairs." In his Outline of Submissions provided on 4 March 2011, Counsel for the Respondent conceded on the Respondent's behalf that the Respondent was "hopeless at looking after his financial affairs" . We accept that evidence. It is illustrated by the state of the financial records for his practice, the failure to keep any reasonable records for his personal tax, his numerous failed investments in hotel businesses, the loss of his home through one such failure, his choices of Mr Hicks as a business partner, his failed investment in the Australian Bar Concept, his failure to file taxation returns over such a long period, and his bankruptcy. 148It is our conclusion that because of the disarray in his financial records and the evidence that contradicts his evidence that profits of the business were limited to about $50,000 per annum and only used for living expenses of himself and his family, the average annual profit of the business was in all probability much more than $50,000. 149The Respondent submits that he should be treated differently to lawyers who have been barred from practice for failure to lodge income tax returns and pay taxes. He seeks to be distinguished from the others on the basis that the tax avoided was less than that avoided by the others and he had no intention to avoid tax for the purpose of maintaining an affluent lifestyle. The defect in his character was that he preferred his own financial interests to those of the taxpayers and those of his employees. There was a purpose of him not lodging tax returns after 1986. That was to avoid payment of income tax and instead use the funds for other purposes. The tax avoided over 21 years is quite substantial. It was a systematic avoidance of his legal and civic duties over a very long period. There is no evidence that any of any of his tax assessed or any of the GST and PAYG instalments he failed to remit will be recovered. It appears that his bankruptcy has already been discharged without him making any contribution from his earnings. 150We find that he has much in common with those who have been barred from practice for failure to submit tax returns and failure to pay taxes. We are convinced that in addition to funds for living expenses for him and his family, significant other funds from the legal practice were devoted to investment, including in the numerous hotel businesses, and also used for payment of mortgage payments and other expenses in relation to those investments. 151We find that the Respondent's failure to submit taxation returns for the 21 years was done knowingly to avoid payment of income tax and for the purpose of preferring his own activities and financial interests over those of the taxpayers. We conclude that this behaviour indicates that he is not of good fame and not of good character. PROFESSIONAL MISCONDUCT 152We find each of the 3 grounds have been established. They are part of a pattern of behaviour from 1987 through to August 2008 that involved systematic failure to comply with legal obligations for the purpose of preferring his own financial interests over those of others. Each of the grounds is inconsistent with the Respondent being of good fame and character. Each is inconsistent with him being a person of integrity. Each of them constitutes professional misconduct. A FIT AND PROPER PERSON? 153The Respondent is not a fit and proper person to engage in legal practice. For protection of the public and the reputation of the profession there should be an order that he be removed from the Roll. The proposal in the Application and the Instrument of Consent that the Respondent be dealt with by only a reprimand and a costs order would have been an inadequate response to such serious professional misconduct. It would not have provided protection of the public and would not have addressed the need to protect the reputation of the profession. Similarly, a result that allowed the Respondent to continue to practice, but only as an employed solicitor, would not have addressed those needs. COSTS 154Subection 566(1) of the Legal Profession Act 2004 provides that where the Tribunal finds a legal practitioner guilty of professional misconduct, the tribunal should order the legal practitioner o pay the costs of the applicant Law Society or Commissioner in the proceedings, unless the tribunal is satisfied there are exceptional circumstances. The legal practitioner conceded that he should pay the costs of the Law Society. There was no evidence of an exceptional circumstance that might support any different order. CROSS EXAMINATION 155It was clear when the proceedings were before the previous panel that the Tribunal might consider the Respondent to not be a fit and proper person to remain on the Roll and make a striking off order. We certainly put the Respondent on notice on 4 March and again on 4 April that we would consider whether such an outcome was appropriate. 156We did not have assistance from the legal representatives of the Law Society or the Legal Services Commissioner by way of by way of cross examination of the Respondent to test his evidence, no doubt because the Law Society and the Legal Services Commissioner had agreed with the Respondent to an outcome that involved only a reprimand and an order for costs. But we consider that to be an inadequate response to the professional misconduct of the Respondent for the reasons above. Orders 1.The name of James Neil Adams is to be removed from the Roll. 2.James Neil Adams must pay the costs of the Council of the Law Society of NSW in the proceedings. I hereby certify that this is a true and accurate record of the reasons for decision of the Administrative Decisions Tribunal. Registrar ********** 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. Decision last updated: 23 August 2011