Administrative Decisions Tribunal New South Wales Medium Neutral Citation: Council of the Law Society of NSW v Butt [2012] NSWADT 47 Hearing dates: 6 February 2012 Decision date: 06 February 2012 Jurisdiction: Legal Services Division Before: The Hon G Mullane (Judicial Member) Ms M Riordan (Judicial Member) Ms J Butlin (Non-Judicial Member) Decision: 1.The Respondent is guilty of professional misconduct particulars of which are set out in the Instrument of Consent filed 14 November 2011. 2.The Respondent is publicly reprimanded. 3. The Respondent must pay a fine of $5,000. 4.The Respondent must pay the Applicant's costs as agreed or assessed. Catchwords: Solicitor-disciplinary proceedings - dealing with funds of deceased estate when not instructed by executor and contrary to executor's instructions. Legislation Cited: Legal Profession Act 2004 Category: Principal judgment Parties: Council of the Law Society of NSW (Applicant) Trevor William Roland Butt (Respondent) Representation: Counsel M G Lynch (Respondent) Council of the Law Society of NSW (Applicant) R K Heinrich (Respondent) Legal Services Commissioner (Intervenor) File Number(s): 112012 LEGAL SERVICES DIVISION The Hon G Mullane (Judicial Member), Ms M Riordan (Judicial Member), Ms J Butlin (Non-Judicial Member) REASONS FOR DECISION INTRODUCTION 1These were disciplinary proceedings against the Respondent Solicitor commenced by the Application of the Law Society filed in the Tribunal on 20 April 2011. The Application sought orders that the Solicitor's name be removed from the Roll, the Solicitor pay the Society's costs, and such orders as to the Tribunal seems fit. 2Although in its Application the Law Society sought a striking off order against the Respondent, when further evidence became available from the Respondent, the Law Society decided not to seek a striking off order. The Instrument of Consent signed by the Respondent and also on behalf of the Law Society and the Legal Services Commissioner seeks a reprimand, a substantial fine, and an order that the Solicitor pay the Law Society's costs. The parties agreed at the hearing that the fine should be a fine of $5,000. THE EVIDENCE 3The evidence before the Tribunal comprised: (1)The Application for original decision filed 20 April 2011; (2)The Reply of the Respondent filed 29 June 2011 contesting the proposed order for removal from the Roll, but admitting the particulars in the Application. (3)The Affidavit of Anne-Marie Foord, Manager of the Professional Standards Department of the Law Society of NSW, sworn 4 April 2011. (4)The affidavit of the Respondent sworn 3 September 2011; (5)The Affidavit of the Respondent sworn 29 September 2011; (6)Character references from the following: Mr Justin John O'Donnell, The Hon Brad Hazzard, MP,Mr David Legg, Mr Richard Legg, Mr Luke Adamson, Mr Kenneth William Davenport,Mr Steven M Spillane, Mr Rodger S Cripps, Mr Glenn Coyne, Mr Stephen Doyle, Mr Tom Webster, Mr Guy Dawson, Mr Tony Suters, Mr Julian Malnic, Mr Robert James Kirby, Mr Stuart Latham, Mr Woljciech Kural, and Ms Mary Bova. (7)Exhibit A, copy of letter from TressCox Lawyers to Estate Services, ANZ Trustees, dated 23 August 2011 forwarding cheque for $65,040.62. AGREED FACTS 4The following is the agreed statement of facts contained in the Instrument of Consent signed by the parties and the Legal Services Commissioner. Trevor William Roland Butt ("the Solicitor") is guilty of professional misconduct,on the following grounds: 1. Depositing cheque to trust account without authority of the payee, the Estate of the Late Eva Michelle Anderson. (Refer to particulars 1 - 13) 2. Disbursing funds from trust account without the authority of the entity entitled to same, the Estate of the Late Eva Michelle Anderson. (Refer to particulars 1 - 27) Particulars of Grounds of Complaint In these particulars: "ANZ Trustees" means ANZ Executors & Trustee Company Limited of Level 4,100 Queen Street, Melbourne in the State of Victoria "The deceased" means the late Eva Michelle Anderson. "the Estate" means the Estate of the late Eva Michelle Anderson. "the firm" means Avalon Law, an incorporated legal practice within themeaning of Part 2.6 of the Legal Profession Act 2004 (NSW). "the Solicitor" means Trevor William Roland Butt 1. At all material times, the Solicitor was the Principal of the firm. 2. The deceased (date of death 30 January 2007) was a member of the ClearView Retirement Plan. 3. On 22 February 2007, David Sidney Lockhart Anderson, the former spouseof the deceased completed a ClearView Retirement Plan Death NotificationForm ("DNF"). 4. The DNF contained the following: The Trustee has the sole discretion to determine who is to receive this death benefit, how it is to be paid and if there is more than oneperson, the proportion to be paid to each person. The Trustee alsohas discretion in determining the method of payment of the benefit. 5. On 27 March 2007, a meeting was held between the Solicitor, David Anderson, Rosemary Anderson, David Stewart (NSW representative for ANZBank), Dominic Morabito, solicitor (then of the firm EakinMcCaffery Cox) anda representative of ANZ Melbourne. 6. At the meeting held on 27 March 2007 referred to at paragraph [5], it wasagreed that ANZ Trustees would apply for Probate and that RosemaryAnderson would reserve her rights in relation to that application. 7. Dominic Morabito represented ANZ Trustees in relation to the administrationof the Estate. 8. On 2 August 2007. the Supreme Court of NSW granted Probate of the last Will and Testament of the deceased to: ANZ Executors & Trustee Company Limited of Level 4, 100 Queen Street, Melbourne in the State of Victoria, one of the executorsappointed under the will. Leave is reserved to Rosemary Andersonthe other executor to obtain a grant. 9. By letter dated 29 August 2007, ClearView Retirement Plan wrote to "Mr. David Sidney L. Anderson, As Guardian for T I Anderson and L SandersonC/- 4/27 Old Barrenjoey Road AVALON NSW 2107". 10. The letter referred to at paragraph [9] above contained the following: " ...our decision is to pay the death benefit as follows: 100% to theEstate of the Late Eva Anderson. .. " 11. The letter referred to at paragraph [9] above also enclosed a cheque in the amount of $65,040.62, which was made out to the Estate. 12. The solicitor made an undated statement titled "Short history of the Estate ofthe late Eva Michelle Anderson Matter". Contained within that statement werethe following paragraphs: 9. The cheque was received with a letter from Clearview dated 29th August2007; 10. My Estate's Personal Assistant Caroline Smythe pointed out to me at the time that the cheque had been made payable to the Estate. I do not believethat either of us particularly read the letter it came with. 13. On 16 October 2007, the Solicitor paid the ClearView money ($65,040.62) intoTrust Account Ledger titled: Matter # 6061, Estates - Miscellaneous Mr. David Sidney Lockhart Anderson 14. The following amounts were then dealt with, as described in the relevantTrust Account Ledger: DATE AMOUNT DESCRIPTION Paid to: EakinMcCafferyCox Trust Account 23 October 2007 $11,000.00 Reason: Balance of deposit Paid to: Northern Beaches 11 December $5,117.50 2007 ChristianSchool Reason: School fees for Louis Anderson Paid to: Northern Beaches 11 December ($5,117.50) 2007 ChristianSchool Reason: ReversalSchool fees for Louis Anderson Paid to: Northern Beaches 11 December $5,117.50 2007 ChristianSchool Reason: School fees for Louis Anderson Journaled To: Matter # 6133, Mr. David Sidney Lockhart Anderson; 17 January 2008 $48,923.12 Wills Single Person Reason: Transfer monies to D. Anderson file as trustee for sons 15. By 17 January 2008, there was a nil balance in Trust Account Ledger Matter# 6061. 16. The following relevant amounts were then dealt with, as described in theTrust Account Ledger Matter # 6133: DATE AMOUNT DESCRIPTION 17 January 2008 $48,923.12 Journaled From: Matter #6061, Mr. David SidneyLockhart Anderson;Estates - Miscellaneous Reason: Transfer moniesto D. Anderson file as trustee for sons 10 January 2008 $3,750.00 Paid to AvalonLaw Reason: Fees &Disbursements 17 January 2008 $375.00 Paid To: Avalon Law GST Reason: GST 17 January 2008 $375.00 Paid To: Avalon Law GST Reason: Reversal GST 10 January 2008 $375.00 Paid To: Avalon Law GST Reason: GST Paid To: LEAPDisbursement 5 February 2008 $178.72 Management Reason: Payingdisbursements on sale 41 Hillcrest Paid To: National Australia 5 February 2008 $1,000.00 Bank Reason: First distribution to Louis Anderson Paid To: National Australia 5 February 2008 $1,000.00 Bank Reason: First distribution to Tomas Anderson Paid To: W & L Rogers 12 February 2008 $4,400.00 Reason: bond $2,200 rent to 11 March 2008 Paid To: David Anderson 20 February 2008 $2,242.46 Reason: Reimbursement of bills and accounts paid 11 March 2008 $2,200.00 Paid To: W & L Rogers Reason: Rent 24 The A venue, Newport 11 March 2008 $310.00 Paid To: Kennards Reason: Storage Shedfees 1 April 2008 $2.200.00 Paid To: W & L Rogers Reason: Rent for 24 TheAvenue, Newport 4 weeks 10 April 2008 $475.00 Paid To: Avalon Law GST Reason: GST 10 April 2008 $4,750.00 Paid To: Avalon Law Reason: Fees &Disbursements 29 April 2008 $1,100.00 Paid To: W & L Rogers Reason: 2 weeks rent 12 May 2008 $1,883.95 Paid To: David Anderson Reason: Reimbursementof expenses Paid To: W & L Rogers 20 May 2008 $3,000.00 Reason: Rent 24 The Avenue, Newport Paid To: Rental BondBoard 20 May 2008 $3,000.00 Reason: bond on 15 Lovering- Place, Newport Paid To: Andrew & TinaBracher 2 June 2008 $3,000.00 Reason: Rent 19.05.08 to 16.06.08 16 June 2008 $3,000.00 Paid To: A & T Bracher Reason: Rent - 4 weeks 30 June 2008 $3,000.00 Paid To: A & T Bracher Reason: Rent- 4 weeks Paid To: A & T Bracher 25 August 2008 $3,000.00 Reason: Rent 25.08.08 to 22.09.08 Paid To: A & T Bracher 22 September $3,000.00 2008 Reason: Rent Loverinq Place, 4 weeks Paid To: A & T Bracher 23 October 2008 $2,000.00 Reason: Rent 20. 10.08 to 20.11.08 17. By 23 October 2008, there was a balance of $57.99 remaining in TrustAccount Ledger Matter # 6133. 18. The transactions described in paragraphs [14] and [16] above were not authorised by ANZ Trustees; the executor to whom Probate was granted by the Supreme Court on 2 August 2007 (see paragraph [8] above). 19. By letter dated 4 February 2008 to the Solicitor, ANZ Trustees noted asfollows: 6. ClearView Superannuation Funds. We never agreed that you would hold these funds. Your retainer was specifically and only to act on the sale of the two New South Walesproperties which have been completed. We have been advised by the ClearView Trustees that the cheque was issued and payable to the Estate. Therefore it forms part of the Estatefunds. Accordingly, please ensure the funds are forwarded to us within the next seven days as previously requested. If the funds are notreceived within that time we will have no alternative than to report yourconduct to the Law Society". 20. On 5 February 2008, $2,178.72 was transferred as described in paragraph [16] above. 21. The Solicitor did not forward any of the ClearView funds to ANZ Trustees as requested in the letter dated 4 February 2008 quoted at paragraph [19] above. Instead, by letter dated 10 April 2008, the Solicitor made brief reference to that paragraph as follows: "We note in the one letter we have received from your office overrecent time some misguided threat of reporting the writer to the Law,Society. The appropriate comment on that is that we are more thanhappy for any matters to be ventilated including the behaviour of Mr.Morabito with the New South Wales Legal Services Commission andat the same time if it comes to that we would be asking whatever body oversees the activities of Trustee Companies to investigate yourcompany's performance in the matter." 22. On the same day (10 April 2008), the Solicitor transferred $5,225.00 (being $4,750 in fees & disbursements plus $475.00 in GST) to Avalon Law, asdescribed in paragraph [16] above. 23. By letter dated 8 October 2008, Dominic Morabito wrote to the Solicitor asfollows: "As detailed to your firm on several occasions, the funds received from Clearview Retirement Solutions ... are part of the estate funds and should be administered in the estate. Clearview has confirmed...that the cheque issued by them was payable "to the Estate of Late Eva Michele Anderson". There is nobasis to suggest that your firm can act on instructions from the ex-husband of the deceased in capacity as guardian of the infantchildren. The funds were clearly payable to the estate and must beadministered in the estate. Please forward the funds received from ClearView with all accruedinterest to the executor immediately.... " 24. By letter dated 22 October 2008, the Solicitor responded to Mr. Morabito's letter dated 8 October 2008 as follows: ".. .you appear to be pursuing a closed argument in respect of the"ClearView" monies. The simple fact is that these funds are those ofthe infant children, not the estate, regardless of how a cheque might have been made out." 25. On 17 December 2008, ANZ Trustees wrote to the Solicitor noting as follows: "Please note the enclosed Statement showing the sum of $620, 196.60 is owed at 8 th December. As you are aware, the Estate does not havesufficient funds to pay this liability. Advice was received from ClearView Retirement Solutions that its cheque was made payable to the Estate of Eva Michelle Anderson .... On this basis, the relevant funds should have been paid into theEstate and dealt with by the executor. During our recent telephone conversation, you seemed confident thatthese funds did not constitute an asset of the Estate and were disbursed properly. Please provide your reasons for holding this view.Alternatively, the return of these funds for deposit into the Estate is required." 26. The letter referred to at paragraph [25] above enclosed a statement with account name Ms. Eva Michelle Anderson Deceased. That statement showed the balance as being in the negative (-620196.60) as at 8 December 2008. 27. By letter dated 21 April 2009 to the Law Society, ANZ Trustees stated that Mr Butt has never been authorised by us to retain these funds or to disburse anyof them". 5It is also common ground that the Respondent in August 2011 personally repaid the sum of $65,040.62 which had been received from the ClearView Retirement Plan. BACKGROUND - DISCUSSION 6The conduct of the Respondent Solicitor complained of is that he misappropriated a cheque payable to the Estate of the Late Eva Michelle Anderson. The Solicitor and his law practice acted for the former spouse of the deceased and surviving parent of her children. The Will of the deceased appointed her sister Rosemary Anderson and ANZ Trustees as Executors of the Will. 7The Solicitor attended the meeting in March 2007 where it was decided that only ANZ Trustees would apply for Probate and Rosemary Anderson would reserve her rights. 8Although the father of the Deceased's children applied on their behalf to have the ClearView Retirement Plan pay the Deceased's entitlements to the children, her Trustee of the retirement plan determined to pay the funds to the Estate of the Deceased. 9Apparently the cheque was sent to the office of the Respondent Solicitor in the mistaken belief that his law practice was acting for the Estate, whereas ANZ Trustees, to whom Probate had been granted, had instructed other solicitors. 10The evidence of the Respondent Solicitor is that he presumed that the money was paid to him in response to the application made on behalf of the children of the Estate for Trustee of the Superannuation fund to exercise the discretion in favour of the children. The funds were then paid out at the direction of the father of the children for expenses in relation to the children, their accommodation and, to a limited extent, legal costs of the law practice in that regard. 11A significant part of the funds was still held in the Trust Account of the Respondent's law practice when the solicitor for ANZ Trustees wrote to him on 4 February 2008, claiming the funds as belonging to the Estate. THE RESPONDENT'S CASE 12The Respondent was admitted as a solicitor in 1974 and since 1988 has been a sole practitioner or principal/partner in a legal practice. He has practised law in the Avalon area for more than 20 years. He has had extensive involvement in community organisations including the surf club, school P & C, school council, and school band. He is the Honorary Solicitor for the Palm Beach RSL Club, the Palm Beach War Memorial Kindergarten, the Avalon Bowling Club, the Avalon Historical Society, the Avalon Craft Cottage, and the Avalon Surf Life Saving Club. For 9 years during the 1990's he was the President of the regional branch of the Law Society ("The Northern Beaches Solicitors' Association"). 13He has a history of playing competition squash and touch football. He has served as a Judiciary Member of the Appeals Tribunal of the NSW Squash Racquets' Association. 14His evidence is that when he deposited the cheque: "4. I was under the erroneous belief that by acting for Rosemary Anderson (who was an Executor under the Deceased's Will) I had been instructed to act for the Estate and therefore had the authority to treat the 'ClearView' cheque in the manner I did. 5. I now recognise and acknowledge that whilst Rosemary Anderson had reserved her right to apply for Probate, she had not actually done so and was not therefore in any capacity to instruct me on behalf of the Estate and that I consequently did not have the authority to bank the 'ClearView" cheque and that what I did was wrong." 15He also said in his Affidavit: "9. At the time I banked the 'ClearView' cheque I was also under the belief that superannuation death benefit funds are not ordinarily paid to the creditors of bankrupt Estates as such funds are protected from the creditors in these situations. Accordingly, I was also under the belief that I was able to distribute the proceeds directly to the beneficiaries (not the Estate) notwithstandingthat the 'ClearView' cheque was made out to the Estate." 16We accept that he was confused as to the issue of the decision and intention of the superannuation trustee in sending the cheque, and also the issue of the consequences of the superannuation payment not being available to meet claims of creditors of the insolvent estate (if that were the correct position at law). 17He acknowledged in his affidavit of 3 September 2011 that he had no authority to negotiate the cheque and stated that he had arranged a personal loan in order to pay the $65,040.62 to the estate. 18In his affidavit of 29 September 2011 he acknowledged that regardless of whether superannuation death benefits are protected funds, he should have returned the cheque to ClearView, explained that the estate was bankrupt and that accordingly he considered the superannuation death benefit proceeds to be protected funds, and requested that ClearView exercise its discretion as Trustee of the ClearView Retirement Plan Superannuation Funds and re-issue the cheque in the name of the beneficiaries of the Estate. 19He said if ClearView had refused that request, then the appropriate course of action would have been to send the cheque to the ANZ Trustees and requested that the Trustee ensure that the funds were paid to the beneficiaries in the event that they were considered protected funds. 20In that affidavit the Respondent said: "12. I am deeply sorry and express regret for all my actions in wrongfully negotiating the 'ClearView' cheque made out to the Estate of the Late Eva Michelle Anderson. 13. As raised in my earlier Affidavit, I have identified that my knowledge in Trust (and Office) accountingwas insufficient in this matter and have acknowledged that it would be beneficial in all the circumstances for me to engage in further professional education in this area. In this regard I have enrolled in a continuing professional development course to address this issue." 21The Respondent enrolled in a Trust Account course at the College of Law, which is to be the subject of an examination on 15 April. 22Submissions from Mr Pierotti for the Law Society and Ms Muston for the Legal Services Commissioner supported the order proposed in the Instrument of Consent. The figure of $5,000 for the fine was agreed. UNSATISFACTORY PROFESSIONAL CONDUCT AND PROFESSIONAL MISCONDUCT 23Sections 496, 497 and 498 of the Legal Profession Act 2004 provide: 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) aserious offence, or (ii) atax 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. CONCLUSIONS 24We find that the respondent's conduct in negotiating the cheque without instructions from the executor and, particularly, later resisting the executor's requests that he account for the money, was professional misconduct. 25The respondent has practised as a solicitor for about 38 years and so far as we are aware there have been no previous disciplinary proceedings against him. Based on that and the extensive evidence of good character, the subject conduct is out of character for him. 26The Respondent is genuinely contrite. We accept that the Respondent's conduct was not motivated by any fraudulent intent or personal gain and he did not make any significant personal gain from acting in the matter. We accept he made an honest error and has now paid the whole of the funds to the estate at considerable cost to him. 27We therefore adopted the orders proposed in the Instrument of Consent as appropriate in the circumstances in sanctioning the conduct and protecting the public and the reputation of the profession. ORDERS 28Accordingly the Orders we made on 6 February 2012 are as follows: 1. The Respondent is guilty of professional misconduct particulars of which are set out in the Instrument of Consent filed 14 November 2011. 2. The Respondent is publicly reprimanded. 3. The Respondent must pay a fine of $5,000. 4. The Respondent must pay the costs of the Law Society of NSW as agreed, or as assessed. ********** 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: 21 March 2012