Administrative Decisions Tribunal New South Wales Medium Neutral Citation: Council of the Law Society of NSW v Ross [2013] NSWADT 106 Hearing dates: 4 March 2013 Decision date: 15 May 2013 Jurisdiction: Legal Services Division Before: Hon G Mullane, Judicial Member J Wakefield, Judicial Member S Hayes, Non-Judicial Member Decision: 1) The solicitor is reprimanded. 2) Prior to applying for any Practicing Certificate entitling the solicitor to hold an unrestricted Practising Certificate and/or to become a solicitor/director of any incorporated legal practice, the solicitor must: a) At his own expense undertake and successfully complete with a pass mark of not less than 50% a course approved by The Manager, Professional Standards Department, on Trust Accounting ["the Course"]; and b) Provide The Manager, Professional Standards Department, with the original result notification from the provider of the Course at the time the solicitor applies for the said Practising Certificate. 3) The Solicitor must pay a fine of $5,000.00. The Solicitor must pay the costs of the Law Society as agreed or assessed. Catchwords: Solicitor - Disciplinary proceedings - Trust Account - breaches of Act Misappropriation - Dishonesty Grounds not duplicitous Legislation Cited: Legal Profession Act 2004 Cases Cited: Law Society of NSW v Shalovsky [2008] NSW ADT 14 NSW Bar Association -v- Hawin [2008] NSWADT 148 Council of the Law Society of NSW v Autore [2012] NSW ADT139 Peters v R (1998) 192 CLR 493 Harle v Legal Practitioners Liability Committee (2004) 13 ANZ Insurance Cases - 61-605 Brereton v Legal Services Commissioner [2010] VSC 378 Legal Services Commissioner V Brereton[2011] VSCA 241 R v Lawrence [1977]1 VR 459 at 466 Daly v Sydney Stock Exchange Ltd(1986) 160 CLR 371 at 380 Legal Practitioners Board V Jones [2010] SASCFC 51 Law Society of NSW -v- Jones (29 July 1978) NSWCA (unreported) Dupal -v- Law Society of NSW (1990) NSWCA (unreported - delivered 26 April 1990) Law Society of NSW -v- Moltoun [1981] 2 NSWLR 736 The Council of the Law Society of NSW -v- Doherty [2010] NSWCA 177 Council of the Law Society of NSW -v- Pizzinga [2012] NSWADT 211 Category: Principal judgment Parties: Council of the Law Society of NSW (Applicant) Graeme John Ross (Respondent) Representation: Council of the Law Society of NSW (Applicant) T A Williams (Respondent) File Number(s): 122023 reasons for decision INTRODUCTION 1This was a hearing of disciplinary proceedings commenced by the Law Society's Application filed 25 September 2012. 2The Applicant alleges the Respondent solicitor breached sections 255 (2 grounds), 260 (2 grounds) and 264 of the Legal Profession Act 2004, and also alleges that on 2 occasions he misappropriated trust money. 3In his reply filed 7 November 2012, the Respondent admitted the allegations in relation to sections 255 and 264, but claimed that the allegations of a breach of section 260 were "duplicitous and accordingly, bad in law". The Respondent also denied the allegations of misappropriation of trust money. 4The Applicant sought the following orders in its Application: 1) The solicitor is reprimanded 2) Prior to applying for any Practicing Certificate entitling the solicitor to hold an unrestricted Practising Certificate and/or to become a solicitor/director of any incorporated legal practice, the solicitor must: a) At his own expense undertake and successfully complete with a pass mark of not less than 50% a course approved by The Manager, Professional Standards Department, on Trust Accounting ["the Course"]; and b) Provide The Manager, Professional Standards Department, with the original result notification from the provider of the Course at the time the solicitor applies for the said Practising Certificate. 3) The solicitor must pay the costs of The Society as agreed or assessed. 5The Respondent in his Reply admits that the Grounds he concedes constitute professional misconduct and does not oppose the orders sought in the application. 6At the hearing orders were made for the parties to provide the Tribunal with a document listing agreed facts and with written submissions by the parties. The Tribunal asked that those submissions also address the question of whether the Tribunal should impose a fine. 7In its submission, the Law Society argued for a fine to be imposed, but did not suggest an amount. In the Respondent's submissions the imposition of any fine was opposed. THE EVIDENCE 8The evidence comprised: (1)The Application for Original Decision filed 25 September 2012; (2)The Affidavit of Anne-Marie Foord sworn 6 September 2012; (3)The Affidavit of Gregory William Livermore (Trust Account Investigator) sworn 29 August 2012; (4)The Reply of the Respondent filed 7 November 2012; (5)The Affidavit of the Respondent sworn 21 November 2012; (6)The Agreed Statement of Facts signed by the solicitors for the parties and dated 6 March 2013; (7)Submissions by the Applicant filed 6 March 2013; (8)Submissions for the Respondent filed 11 March 2013. RELEVANT STATUTORY PROVISIONS REGARDING THE CONDUCT 9Section 255 of the Act provides: 255 Holding, disbursing and accounting for trust money (1) A law practice must: (a) hold trust money deposited in a general trust account of the practice exclusively for the person on whose behalf it is received, and (b) disburse the trust money only in accordance with a direction given by the person. Maximum penalty: 50 penalty units. (2) Subsection (1) applies subject to an order of a court of competent jurisdiction or as authorised by law. (3) The law practice must account for the trust money as required by the regulations. Maximum penalty: 50 penalty units 10Section 260 of the Act provides: 260 Intermixing money (1) A law practice must not, otherwise than as permitted by subsection (2), mix trust money with other money. Maximum penalty: 100 penalty units. (2) A law practice is permitted to mix trust money with other money to the extent only that is authorised by the Law Society Council and in accordance with any conditions imposed by the Law Society Council in relation to the authorisation. 11Section 164 of the Act provides: 264 Keeping trust records (1) A law practice must keep in permanent form trust records in relation to trust money received by the practice. Maximum penalty: 100 penalty units. (2) The law practice must keep the trust records: (a) in accordance with the regulations, and (b) in a way that at all times discloses the true position in relation to trust money received for or on behalf of any person, and (c) in a way that enables the trust records to be conveniently and properly investigated or externally examined, and (d) for a period determined in accordance with the regulations. Maximum penalty: 100 penalty units. GROUND 1 - BREACH OF SECTION 255 12On 18 October 2010 the Respondent drew $9,900.00 of trust moneys of the Estate of the Late Vera Jean Burnett, and deposited those funds in his General Account. He says it was in payment of costs and disbursements. The Respondent had not rendered any bill for costs and disbursements. Prior to the deposit of the trust account cheque, his General Account was over-drawn by $14,244.01. He had an overdraft limit of $10,000.00 but had exceeded it. The Respondent admits that he had no authority or direction from the client Executor to transfer the trust money. 13The Agreed Facts include the following: "The Respondent states he had the client's oral authority to transfer the moneys and to make other payments from funds held in trust. The Respondent did not confirm this oral authority in writing." 14But, in admitting the breach of section 255, with the benefit of legal advice and representation, the Respondent conceded that the use of the $9,900.00 was not in accordance with any direction or authority (oral or otherwise) of the client (per para 1.6 of the application). Indeed, in his Affidavit sworn 21 November 2012, he admits the breach of section 255 and later alleges: "In relation to the sum of $9,900.00, I did discuss it with the client and received verbal authority to transfer that sum". 15The absence of evidence of when such alleged authority was given and the failure to set out the statement in the first person are conspicuous. 16When on 26 November 2010, the Respondent issued the client a bill that included the costs already transferred on 18 October 2010, the Respondent did not disclose that the $9,900.00 had already been paid from the trust funds, although he did list under "Less amounts you have already paid", a smaller amount of $1,289.00 which was paid from the trust funds for court filing fees. 17Also, the authority that the Respondent had the client sign on 26 November 2010 was for the transfer of an amount of $22,774.56. But the funds he then transferred were only $12,874.56, being the balance of the $22,774.56 after allowing for the $9,900.00 he had taken in October, and the $1,289.00 that had been used for filing fees. 18The failure to disclose to the client in both the bill and the authority the prior transfer of $9,900.00 was not consistent with the Respondent's allegation that he had obtained oral authorisation from the client prior to transferring the $9,900.00. That allegation was also inconsistent with his admission of the Ground. 19The Tribunal is comfortably satisfied that contrary to para 255 (1)(a) of the Act, the Respondent did not obtain any authorisation or direction that authorised him to disburse the funds of $9,900.00 from his trust account and the disbursement of that amount was a breach of Section 255. GROUND 2 - SECOND BREACH OF SECTION 255 20When on 26 November 2010 the Respondent issued a bill to the Estate for costs and disbursements, the bill included a disbursement of $7,672.50 for Counsel's fees. He had not paid any of those fees and the amount was over-stated by $2,200.00. The actual amount of the Counsel's fees was $5,472.50. 21The client signed the authority for the use of $22,774.56 of the trust money for payment of the balance of costs and disbursements. The amount transferred was $12,874.56. 22The client had authorised the use of $7,672.50 of the trust money to pay counsel's fees, but in breach of para 255(1)(b) of the Act the respondent did not use the money for that purpose. GROUND 3 - BREACH OF SECTION 260 OF THE ACT 23On 18 October 2010 deposited the trust cheque of $9,900.00 into his General Account, which was over-drawn. Then and subsequently, in breach of the provisions of subsection 260(1) of the Act, he mixed the trust money with other money. GROUND 4 - SECOND BREACH OF SECTION 260 OF THE ACT 24On 26 November 2010, the Respondent deposited the Trust funds of $7,672.50, which the client had authorised him to use for barristers' fees, into his General Account, which was over-drawn. Then and subsequently, in breach of the provisions of subsection 260(1) of the Act, mixed the Trust money with other money. THE RESPONDENT'S ARGUMENT THAT THE GROUNDS UNDER SECTION 260 ARE DUPLICITOUS AND THEREFORE BAD IN LAW 25On behalf of the Respondent his legal representative raised the argument that the Grounds under section 260 are, having regard to the Grounds under section 255, duplicitous and accordingly bad in law. 26It should first be noted that these are not criminal proceedings. Although the Respondent is at risk of a reprimand, fine or other more severe sanction, these are not proceedings that are exposing the Respondent to risk of criminal sanctions provided in the Act for the offences created by sections 255, 260 and 264 of the Act. They are disciplinary proceedings in relation to the conduct of a lawyer. It is well established that the aim of the proceedings is not to punish the Respondent, but to protect the public and the profession. 27Although the Respondent's legal representatives have referred to three authorities of the High Court and one English authority, all of them are in relation to prosecutions for offences. And in none of them was there an issue as to whether the objection can apply in civil proceedings or proceedings such as these. 28In the submission on behalf of the Respondent, his legal representatives state: "The cases speak of indictments, charges, informations, presentments and so on. There is no reason to think that cases involving civil penalties or sanctions for statutory contraventions (or indeed, law misdemeanours or misconduct) do not attract the principles." 29However, there is no decision of a court cited for the Respondent that is authority for the proposition that the common law in relation to duplicitous proceedings applies in relation to civil proceedings or, specifically, proceedings such as these. It is not, however, necessary for us to decide whether it does, because we are not persuaded that either of the grounds under section 260 is duplicitous. 30The submissions for the Respondent on this issue rely upon the decision of Council of the Law Society of NSW v Shalovsky [2008] NSW ADT 14. In that decision the issue of whether the common law in relation to duplicitous complaints and charges applies in disciplinary proceedings such as these was not argued. It was assumed it does. 31The Tribunal said: "The Tribunal has noted that the particulars to establish the first allegation are subsequently relied upon to establish the second allegation. The Tribunal has formed the view that in view of the reliance on common particulars to establish two separate allegations, one of the two allegations is duplicitous and must fail. It is accepted that the particulars are not all the same in relation to each allegation. However, the Tribunal finds that the over-lap of particulars as relied upon the Society is such that only one of the allegations can be properly allowed to stand for determination." 32It is noted, too, that the finding of the Tribunal that one of the Grounds was duplicitous in that case, is followed by the following finding: "In the event that the Tribunal is in error in its finding on duplicity, then it would remain for the Tribunal to determine whether the conduct particularised and established in support of the second allegation amounted to professional misconduct at Common Law Accordingly, the Tribunal finds that had the second allegation been allowed to stand for determination in this matter that the Tribunal is not satisfied that professional misconduct at Common Law has been established and so would have dismissed the second allegation." 33There are other decisions of the Tribunal where the objection has been unsuccessful in similar situations. In NSW Bar Association v Hawin [2008] NSWADT 148 ["Hawin"] the Tribunal was dealing with Grounds of alleged professional misconduct (or unsatisfactory professional conduct) of failing to comply with a notice issued under section 152 of the Legal Profession Act 1987 requiring information to be provided and documents to be produced, and failing to comply with an undertaking given to the Bar Association to respond to any notice given to him under the section within 21 days of service of the notice upon his solicitor. The barrister raised (at para 52) the submission that there would : "plainly be duplication in finding both grounds of the complaint made out." 34The Tribunal held (at para 53): "We do not consider that there is any substance to this argument. This is not a case where one count contained in the Application embraces more than one instance of professional misconduct. Rather there are two separate counts containing separate allegations of professional misconduct. The fact that the allegations in each count are based upon the same factual circumstances is of no consequence. Indeed, it reflects a situation commonly encountered, that is, where one where particular conduct is alleged to be improper for two distinct reasons." 35Hawin was followed in the decision of Council of the Law Society of NSW v Autore [2012] NSW ADT139. There the Tribunal was dealing with a complaint touching a ground of failing without reasonable cause to comply with a requirement under a notice under section 660 of the Act, and another ground of failing to assist the Law Society with the investigation of a complaint. The Tribunal held (at para 42): "Finally, in this context, we observe that the joining of Ground 1 with Ground 2 did not in our opinion involve duplicity such as to require that the Law Society should have been required to elect between them. In so saying, we differ, with respect, from a decision of the Tribunal requiring election in comparable circumstances: namely Law Society of NSW -v- Shalovsky [2008] NSW ADT14. We prefer the passage from NSW Bar Association -v- Hawin that Ms Groenewegen cited to us." 36Here neither of the grounds under section 260 is duplicitous. It is unfortunate that the Law Society Application provides particulars in relation to each of the grounds under Sections 255 and 260 that are superfluous to establishing the particular ground. But the particulars that establish the breaches of Section 255 are quite different to those establishing breach of Section 260. Section 255 prohibits disbursement of Trust money without authority of the client or otherwise than in accordance with an authority of the client. Section 260 prohibits mixing Trust money with money of someone other than the client. 37This Tribunal rejects the Respondent's argument about duplicity. It is not necessary to decide whether the common law of duplicity has application in proceedings in this Division of the Tribunal. The grounds to which the objection was raised are grounds that apply to different aspects of the conduct of the practitioner and are not duplicitous. GROUND 5 - BREACH OF SECTION 264 OF THE ACT 38The Respondent on 23 March 2011, conceded to the Law Society Inspector, Mr Livermore, that his Trust Account records were up to date only to the end of October 2010. Mr Livermore also inspected various Trust Account records. Based on Mr Livermore's evidence and statements by the Respondent, on 23 March 2011 the following Trust Account records were up to date only till the end of October 2010: * Cash book * Trust ledgers * Monthly trial balances * Monthly bank reconciliation statements. 39The Respondent in March 2012 breached the requirements of section 264 of the Act in that he failed to keep the Trust Account records of his practice listed above: * in accordance with the Regulations (Regulations 69, 70 and 72); and * in a way that at all times disclosed the true position in relation to Trust Money received for or on behalf of any person; and * in a way that enabled the Trust records to be conveniently and properly investigated or externally examined; and * for a period determined in accordance with the Regulations (see Regulations 89 and 90). MISAPPROPRIATION - THE LAW 40In its submissions the Law Society submitted that in order to establish misappropriation: "It is not necessary to establish that the person knew or believed [or intended] that the actions concerned were dishonest. What must be established that the person subjectively intended to do the acts which are said to be objectively dishonest by ordinary standards of reasonable and honest people ..." 41The Law Society submitted that in order to succeed in disciplinary proceedings on the grounds of professional misconduct based on misappropriation it must: "i) prove an act of the Respondent; and ii) demonstrate the subjective intention of the Respondent to do the act; and iii) show that, inconsistent with the rights of another in the thing, the act amounted to the wrongful conversion of or dealing with the thing by the Respondent to whom it was intrusted; and iv) identify the knowledge, belief or intent which is said to render the act dishonest; and v) demonstrate that the Respondent had that knowledge, belief or intent; vi) show that the act was done by the Respondent in the context of their (sic) knowledge, belief or intent was thus objectively dishonest by the ordinary standards of reasonable and honest people." 42The Law Society concedes that conversion cannot be an act that is inadvertent. Nor can it be established by an act by an employee or agent without the knowledge of the Respondent. 43The Respondent relied upon various authorities and submitted that it is not sufficient for the Law Society to rely upon the following elements: * The solicitor personally was responsible for "transfers"; and * The "transfers" were of trust money in circumstances not permissible under the relevant Legal Profession Act provisions; and * It follows that objectively the conduct should be seen as dishonest. 44The test of whether conduct is dishonest was discussed by Toohey and Gaudron JJ in Peters v R (1998) 192 CLR 493, and their Honours held (at par 18) that ordinarily the test of whether an act is dishonest is not a subjective test as to whether perpetrator recognised the conduct to be dishonest. It is to be decided by the standards of "ordinary, decent people". It is not necessary to prove the person who did the act knew it was dishonest. But the knowledge, belief and intent of the person is relevant in deciding whether the act was dishonest according to the standards of "ordinary decent people". 45It has also been held by the Victorian Court of Appeal that dishonesty: "embraces deliberate conduct which is considered to be dishonest by the standard of ordinary, decent people, or, put another way, the ordinary standards of reasonable and honest people. Whether particular conduct amounts to dishonesty involves the consideration of the mental state - the knowledge, belief or intention - of the person whose conduct is impugned." (per Chernov JA, Callaway & Buchanan JJA agreeing in Harle v Legal Practitioners Liability Committee (2004) 13 ANZ Insurance Cases - 61-605 at [29-30]). 46In Brereton v Legal Services Commissioner [2010] VSC 378, a decision of Bell J in the Supreme Court of Victoria, on Appeal from the Victorian Civil and Administrative Tribunal in respect of disciplinary proceedings against a legal practitioner, the Tribunal had found that the practitioner had misappropriated trust moneys. It was contended that the Tribunal erred in law by making a finding of misappropriation without finding that the practitioner had acted dishonestly. The following passage appears at paras 47-58: 47 A term like misappropriation can have a particular meaning depending on the context. In the present case the term was used in charge 5 by which the commissioner alleged that Mr Brereton, practising lawyer, had committed misconduct at common law in that he had 'misappropriated trust moneys'. Misappropriation has been used here to describe the legal character of conduct which, because it had that character, allegedly constituted misconduct at common law. The term is not used here in any special sense. No statutory definition of the term applies. Thus 'misappropriated' here refers to what would be misappropriation according to the ordinary meaning of that word. 48 The ordinary meaning of 'misappropriate' is to 'appropriate to wrong uses; chiefly, to apply dishonestly to one's own use (money belonging to another)" (OED). Likewise, 'misappropriation' is appropriation to wrong uses (OED). 49 The legal dictionaries define 'misappropriation' consistently with that ordinary meaning. According to Jowitt's Dictionary of English Law, misappropriation is: the misdemeanour which is committed by a banker, factor, agent, trustee, etc. who fraudulently deals with money, goods, securities, etc entrusted to him or by a director or public officer or a corporation or company who fraudulently misapplies any of its property. In Stroud's Judicial Dictionary of Words and Phrases, "misappropriate" is defined to mean "the wrongful conversion of or dealing with anything by the person to whom it was entrusted." 50 It follows that the word "misappropriation" in its ordinary sense involves a mental element. Misappropriation is dishonestly misapplying property, including money, held on behalf of another. In the criminal context, misappropriation by and to the trustee personally is not a crime at common law because the trustee already has the property; but it is conduct which, but for that, would be theft". It is 'stealing' in another guise because it is wrongful appropriation by the trustee of property being held for another. 51 Because dishonesty is a mental element of misappropriation in its common law sense, it is necessary to consider what dishonesty means, remembering here we will be doing so in a civil context. The Court of Appeal examined what dishonesty meant in that context in Harle v Legal Practitioners Liability Committee. At issue was whether a solicitor was entitled to indemnity under an insurance policy which did not cover the 'dishonesty or fraudulent act or omission of any insured". 52 As to the meaning of "dishonesty", Chernov JA (Callaway and Buchanan JJA agreeing) held: It seems clear enough that where, as here, dishonesty is not used in a special sense in relation to statutory offences, it is not a term of art and is to be given its ordinary meaning. It embraces deliberate conduct which is considered to be dishonest by the standard of ordinary decent people, or, put another way, the ordinary standards of reasonable and honest people. Whether particular conduct amounts to dishonesty involves the consideration of the mental state, the knowledge, belief or intention of the person whose conduct is impugned. 53 While an allegation of dishonesty requires consideration of the person's mental state, in neither the criminal nor the civil context is it necessary to establish that the person subjectively knew or believed that the actions concerned were dishonest. What must be established is that the person subjectively intended to do the acts which are said to be objectively dishonest by the ordinary standards of reasonable and honest people. Thus the course to be adopted in determining whether conduct is dishonest was explained by Toohey and Gaudron JJ in Peters v R as follows: In a case in which it is necessary for a jury to decide whether an act is dishonest. the proper course is for the trial judge to identify the knowledge, belief or intent which is said to render that act dishonest and to instruct the jury to decide whether the accused had that knowledge, belief or intent and, if so, to determine whether, on that account, the act was dishonest ... If the question is whether the act was dishonest according to ordinary notions, it is sufficient that the jury be instructed that that is to be decided by the standards of ordinary, decent people. 54 The steps involved in this formulation are: (1) identify the knowledge, belief or intent which is said to render the acts dishonest; (2) determine whether the accused (or defendant in the civil context) subjectively had that knowledge, belief or intent; and (3) determine whether, on that account, the acts were objectively dishonest according to the standards of ordinary and decent (that is reasonable and honest) people. 55 When applying these principles in a civil case, the civil standard of proof on the balance of probabilities applies. Of course, where the allegation in a civil case is of misappropriation, a high standard of probability is required, due to the gravity of the allegation. In a Criminal Case the criminal standard of proof beyond reasonable doubt applies. 56 This approach to identifying whether alleged conduct was dishonest was applied by the Court of Appeal in the civil insurance context in Harle v Legal Practitioners Liability Committee and by Layton J in the Supreme Court of South Australia in the lawyers' disciplinary context in Legal Practitioners Conduct Board v Jones. 57 In the present case, the tribunal did not address the dishonesty issue. It did not identify the knowledge, belief or intent said to render the making of the payments by Mr Brereton dishonest. It did not determine whether he subjectively had that knowledge, belief or intent. It did not judge his actions in making the payments against the objective standard of dishonesty of reasonable and honest people. It found that Mr Brereton was guilty of misconduct at common law by having 'misappropriated trust moneys' and that he 'well knew (or ought to have known)' what his responsibilities were. It is the alternative state of mind - 'ought to have known' - that is the problem. 58 Generally, professional misconduct at common law is conduct which 'would reasonably be regarded as disgraceful or dishonourable by solicitors of good repute and competency ... Mere negligence, even of a serious character, will not suffice". Therefore the tribunal could not have found Mr Brereton guilty of misconduct at common law because he had failed to act in accordance with what he 'ought to have known'. There had to be more than that. Yet the tribunal did not base its misconduct finding only on what Mr Brereton 'well knew', but on that and the alternative finding about what he 'ought to have known'. 47On appeal from the decision of Bell J, in Legal Services Commissioner V Brereton[2011] VSCA 241, Tate J (with whom Nettle and Ashley JJA agreed) held (at par 69): However, and with great respect for the trial judge, it is unclear whether dishonesty is a necessary element of misappropriation in the common law sense. In my opinion, there is room for doubt whether dishonesty is always an integral element of misappropriation, within a professional disciplinary context. 48Their honours, in dismissing the appeal, found it was not necessary to decide the whether dishonesty needed to be proved to establish misappropriation in the case. But in Tate J referred to various dicta to support a view that it is not "always an integral element of misappropriation, within a professional disciplinary context" (R v Lawrence [1977]1 VR 459 at 466 per Galloway JA; Daly v Sydney Stock Exchange Ltd(1986) 160 CLR 371 at 380 per Gibbs CJ with whom Wilson and Dawson JJ agreed; Legal Practitioners Board V Jones [2010] SASCFC 51). 49In Law Society of NSW -v- Jones (29 July 1978) NSWCA (unreported), Street CJ with whom Reynolds and Samuels JJA concurred, said: "Reliability and integrity in the handling of Trust funds are fundamental prerequisites in determining whether an individual is a fit and proper person to be entrusted with the responsibilities belonging to a solicitor. Members of the public, many of them wholly inexperienced and unskilled in matters of business or of law, inevitably must put great faith and trust in the honesty of solicitors in the handling of moneys on their behalf. The Court must ensure that this trust is not misplaced." 50The Court of Appeal also expressed some further general views about this area in its unreported decision of Dupal -v- Law Society of NSW (delivered 26 April 1990 - unreported). Kirby P held at p1: "In an Appeal such as the present, the Court disposes of the case before it by reference to criteria of general application. They should be clear and simple. They should be such as to leave no doubt in the mind of a practitioner in financial difficulties, exposed to the temptation of using, without clear authority, the funds of another, the consequences that will flow for the right to practice when such misuse of funds is discovered." 51He also said that: "The normal consequence of the misuse of entrusted funds by a solicitor, and a finding of wilful breaches of the statutory prohibition in that regard, is removal of the name of the solicitor from the Role" (at pp2-3). 52In the same decision Handley JA, with whom Priestly JA agreed, said (at p12): "This Court would be departing from a long course of authority if it were to allow the Appeal and substitute a period of suspension for the order of the Tribunal removing the Appellant from the Role. Counsel were not able to refer us to any case where a solicitor found guilty of misappropriation or wilful contraventions of S.41(1) has not been struck off the Role. Any decision to the contrary would signal to the profession and the community that this Court was no longer insisting on solicitors maintaining the highest standards of personal honesty and integrity in their dealings with clients and the public, and in the handling of moneys entrusted to their charge." 53There is also authority that the failure of a solicitor to realise that conduct of the type involved in disciplinary proceedings was improper is no defence to proceedings for professional misconduct. In Law Society of NSW -v- Moltoun [1981] 2 NSWLR 736, Hope JA said (at 740-741): "A failure to understand and appreciate the care that must be taken by a solicitor who wants to make use of his trusting clients' money for his own purposes would generally show an unfitness to remain on the Role. In so far as Mr Moulton's ignorance should be treated as a lack of knowledge rather than a lack of standards, it was not ignorance of some esoteric or difficult corner of the law; it was an ignorance of general principals applicable to common activities of a solicitor in which, for the most part, Mr Moulton was regularly engaged, and it was an ignorance which he took no steps to remedy." 54In The Council of the Law Society of NSW -v- Doherty [2010] NSWCA 177, the Court of Appeal was hearing an appeal from a decision of this Division of the Administrative Decisions Tribunal. The Law Society appealed on the ground that the Tribunal should have ordered the name of the Respondent to be struck off the Role of lawyers, but failed to do so. The principal allegation against Mr Doherty was that he misappropriated a sum of trust money. 55Young J (with whom Tobias and Campbell JJA agreed) said: "39 The respondent says that he had a bona fide belief that he could use the money and that he had no fraudulent intent. 40 The Law Society accepted that it never alleged fraud. However, the transaction revealed that the respondent was commercially unsophisticated, motivated by greed, blind to his basic duties as a solicitor and to the risks of professional practice and inclined to prefer his own interests to that of his c1ienls. This is a prime example of its submission that the respondent even now has no proper appreciation of his duties as a solicitor. 41 There was discussion both before the Tribunal and before us as to the width of the word "misappropriation". The base meaning of the word is ·'wrongful conversion" (Stroud's Judicial Dictionary, 7th Ed, vol 12 at 1689). It must be noted that in most cases of appropriation of the property of another, claim of right is a good defence and to establish a claim of right, all the accused need show is that he or she had an honest belief in the claim and not also that that belief was based on logic or reason: R v Nundah (1916) 16 SR(NSW) 482, a proposition that has never been doubted. 42 Mr Lindsay complains that the respondent cannot both not cross appeal against the finding of misappropriation and take the view on "penalty" that there was no real misappropriation. He submits that the respondent's submissions are a collateral attack on the Tribunal's findings on "liability" which should not be permitted in the deliberate absence of a cross appeal. 43 I do not sustain that complaint. It seems to me that the respondent is saying that whilst he accepts the finding, it is wrong to class every finding of misappropriation in the same light when considering the proper order to be made and that that is within his rights. As the word "misappropriation" has a wide ambit of meanings, this must be correct. 44 As the Tribunal points out, there have been a number of cases where "misappropriation" has been found, but no striking off order has been made. Although some of these decisions may be a tad suspect, others are not." 56Later in the Judgment it was said: "65 Complaint (B) involved a finding of misappropriation. As noted earlier, the authorities establish that in the "ordinary case", where a solicitor has been found to have been guilty of misappropriation, the result is an order for striking off the roll absent exceptional circumstances. 66 It seems to me that as good an approach as any to the proper order is to look at the hypothetical "ordinary" case and examine whether the present case is more or less serious than such a case and then consider whether the Tribunal's order was "within the range" for such a case. 67 The factors indicating that this is worse than the ordinary case are that there are complaints (A) and (C) in addition to (8). Further, there is material to suggest that the respondent even now does not fully appreciate the seriousness of his breaches of professional standards." 57It is accepted that the fact that ultimately the clients of the Respondent solicitor suffered no loss (of capital) is irrelevant in determining whether the conduct constitutes professional misconduct (Council of the Law Society of NSW -v- Pizzinga [2012] NSWADT 211 (16 October 2012)). 58In applying the law in this area regarding misappropriations, another panel of this Division of the Administrative Decisions Tribunal held in Council of the Law Society of NSW -v- Pizzinga [2012] NSWADT 211 (16 October 2012): "We agree with the following argument on this question advanced by Ms Groenewegen: a) The solicitor knew that his duty with regards to the funds in the Trust Account was to retain them and, in due course, to distribute them among, or at the direction of, the beneficiaries; b) To his knowledge, his undisclosed withdrawal of the sum of $118,452.46 and his use of most of this sum for his own benefit constituted breaches of this duty; c) Even though he intended to repay the money that he had withdrawn to its rightful owners, his appropriation of it without obtaining their consent would be regarded as dishonest by 'ordinary and decent' people. 99 We accordingly find that this important allegation of misappropriation made by the Law Society has been established." GROUND 6 - MISAPPROPRIATION OF $9,900 59The Tribunal finds that the Respondent intentionally wrongfully converted the $9,900 in trust money to his own use. He had no authorisation or direction from the client to draw the trust money. He had no bill to refer to in drawing the trust cheque. He knew that he had not rendered a bill. The tribunal does not accept his evidence that he thought he was at the time of the conversion entitled to the money for his costs. He knew he wasn't. 60He also knew that his general account overdraft limit had been substantially exceeded and in all probability this was why he drew the funds without rendering a bill - in order to quickly reduce his debt to the bank and provide himself with liquidity. 61The Tribunal finds that he intended to later render a bill for $9,900 for costs and disbursements and intended that the client ultimately not suffer any loss. Given his nearly 27 years in practice and his considerable experience with trust money in conveyancing and estates without any other detected breach of section 255, the Tribunal is comfortably satisfied that he was well aware that the disbursement of the $9,900 without authorisation by the client was prohibited by the Act. 62The Respondent deposited the client's trust money of $9,900 into his own account thereby reducing his debt to his bank. The Tribunal finds that such unauthorised use of the client's money, with the knowledge and beliefs we have found he had, was conversion of the client's money and dishonest according to the standards of ordinary decent people. This ground of misappropriation is proved. GROUND 7 - MISAPPROPRIATION OF $7,672.50 63The Tribunal finds that the Respondent wrongfully converted the $7,672.50 in trust money to his own use. He had no authorisation or direction from the client to draw the amount except to pay barristers' fees. He knew that he had not paid the barristers. He did not draw trust or office cheques to pay the barristers. He put the money into his Office account. He had the use of it for more than 5 months. 64The Trust Account Inspector discovered what he had done and asked him when he was going to pay the barristers and pay back the $2,200 to the client. One would have expected him to immediately pay the amounts, but he paid neither, even though he was able to finance a holiday. This conduct reflects particularly poorly on his credit and integrity. 65Once he deposited the trust funds in the Office Account on 26 November 2010 the Respondent was able to avoid exceeding the overdraft limit of $10,000, but from 11 January 2011 to 31 March 2011 the Office Account was in overdraft again. Given his nearly 27 years in practice and his considerable experience with trust money in conveyancing and estates without any detected previous breach of section 255, the Tribunal is comfortably satisfied that he was well aware that his use of the funds was contrary to the client's authority and was prohibited by the Act. 66The Tribunal is comfortably satisfied that the Respondent knew when he deposited the cheque in his Office Account that he was not complying with the authorisation from the client, which was for the money to be used for payment of counsels' fees. 67The Tribunal does not accept his evidence that he thought he was entitled to the money because he was personally liable for the barristers' fees. Nor does it believe his evidence that he did not recognise the $7,672.50 was trust money. The Tribunal is comfortably satisfied that he knew the money was trust money of the client and the Act prohibited such conduct, but he gave priority to his need for funds over his duty to his client and his legal obligations. For 5 months he withheld from the client and the barristers the money that they were entitled to, and that he was obliged to pay them. 68The Respondent deposited the client's trust money of $7,672.50 into his own account such funds being in the client's authority for payment of the barristers' fees but did not pay the barristers fees. He drew money by electronic transfers from the office account for his own expenses and by January the account was in debit. The Tribunal finds that his unauthorised use of the client's money, with the knowledge and beliefs we have found he had, was conversion of the client's money and was dishonest according to the standards of ordinary decent people. This ground of misappropriation is proved. UNSATISFACTORY PROFESSIONAL CONDUCT AND PROFESSIONAL MISCONDUCT 69Sections 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) 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. OTHER FACTS REGARDING THE SERIOUSNESS OF THE GROUNDS ESTABLISHED 70Some of the Respondent's evidence about Ground 1 is of particular concern to the Tribunal: * At the time of the conduct in question the Respondent had been practising as a solicitor for more than 26 years; * He had been a partner or principal of a law practice and maintained a Trust Account for account 20 years; * He did not render a bill for the costs and disbursements for which he purported funds were drawn until 26 November 2010; * He did not testify that he did not know that he had not rendered a bill. Indeed his statement in his affidavit that "My actions in transferring funds from trust before rendering a bill to the client were thoughtless and careless" implies that he did; * He says in paragraph 13 of his Affidavit that at the time of the conduct: "I was aware that I was entitled to the fees, however, I should have rendered a bill first." This suggests an ignorance of the requirements of sections 255 and 261 of the Act and Clause 88 of the Legal Profession Regulation 2005. He had no entitlement to any fees or to use the trust money until he had the authority or direction of the client, or he had complied with the requirements of section 261 of the Act and Clause 88 of the Legal Profession Regulation 2005. 71He made light of his conduct when he said in clause 13 of his Affidavit that his conduct, "in transferring funds from trust before rendering a bill to the client were thoughtless and careless", and, "I believe it was a failure of attention to process rather than any intentional or reckless failing of a substantive nature." 72The evidence of the Respondent is that at the time of the disbursement of the $12,874.56: * He made a mistake in the calculations which resulted in the over-statement of Counsel's fees by $2,200.00; * Because of his belief that it was his personal obligation to pay Counsel's fees, he believed he could transfer the trust money received from the client for that purpose to his General Account, notwithstanding that he had not yet paid the Counsel's fees and (apparently) notwithstanding that the Office Account had a debit balance and the deposit of the Trust Account cheque would leave a balance less than the amount required to pay Counsel's fees; and * He said in his Affidavit: "I did not recognise the money as trust money". 73In January 2011 Mr Livermore, the Trust Account Inspector, was assigned to carry out a routine Trust Account inspection of the Respondent's practice. He discovered the failure of the Respondent to pay barrister's fees and his failure to refund the over-payment of $2,200.00 to the Estate. He asked the Respondent on 29 March whether he had paid the barristers their fees. He said he had not. He asked the Respondent if he was able to either immediately pay them or return the money to the Trust Account. He reported: "Mr Ross said he couldn't because he could not afford it at the present time but hoped to be able to do so in the near future when money came in for the payment of his fees in other matters." 74Mr Livermore asked the Respondent if he knew that he would not be able to pay the barristers' fees immediately when he transferred the money on 26 November 2010. He reported: "Mr Ross said he had hoped he would be able to pay the barristers around the time of transferring the money from Trust to the Office Account." 75He also reported: "Mr Ross said he did not pay out any of the money to the barristers in late November and December 2010, (despite the Office Account being in credit during this time) because it is an expensive time of the year and that January is always quiet for conveyancing, so he wanted to see this period through prior to paying the barristers. He said he hoped to be able to be able to pay them and Mrs Burnett their money in the first half of 2011." 76On 7 April 2011, Mr Livermore issued the Respondent with an investigation letter requesting him to: "Ádvise in writing when you have been able to make the following payments to the persons listed below and/or you return the money to the General Trust Account." It listed the two barristers and the client and the amounts owing to them. The Respondent did not reply. 77On 2 May 2010 the Respondent closed his office and went for a vacation in Thailand. On 5 May the Council of the Law Society suspended the Respondent's Practising Certificate and appointed a Receiver to the practice. The Respondent on 6 May became aware of the Law Society's actions. He ended his vacation and returned home on 11 May. He then paid the Counsel's fees and the refund to the Estate of $2,200.00. 78At the time the Respondent deposited the $12,874.56 of trust money to his general account, the Respondent was aware that the General Account was over-drawn by more than $8,000.00. The deposit of the Trust Account cheque left a credit balance of only $4,686.17 in the General Account. At the time he also knew that he had not paid the barrister's fees. 79The practitioner had been practising for a long period. He had more than 20 years of experience with trust accounts. He had many years of experience with trust money for conveyancing and estates without any allegation of breach of the relevant requirements. 80There were then 2 occasions where because of financial difficulties he without authorisation drew trust money and deposited it into his office account. Both occurred when his practice was providing a poor return and his overdraft limit had been exceeded or was within $2,000 of being exceeded. 81Even after he deposited the $9,900 of trust money in his office account he failed to render a bill for that amount for more than a month. Then he produced to the client a misleading bill and a misleading authority that did not disclose the fact that he had already taken the $9,900. 82He failed to pay the barristers' fees after 28 November because of his own financial needs. He failed to pay the barristers' fees and pay the $2,200 to the client immediately upon the issues being raised with him by the Trust Account Inspector or even in the following month. He failed to pay it even though he subsequently was able to finance an overseas holiday. It was not till his practising certificate was suspended and a receiver appointed to his practice that he raised the money to pay the Client $2,200 and pay the barristers' fees. 83Much of this history of events reflects adversely on the Respondent's credit. His conduct after the issues were raised by the Trust Account Inspector was dishonest in that he knew he had used trust money he was not entitled to and he continued to use it and to not pay it to the persons entitled to it. 84In his Affidavit the Respondent testified that throughout almost 27 years of practice as a solicitor: "My professional conduct has not been called into question in relation to Trust Account matters or otherwise". He concedes in his Affidavit that his breaches of sections 255 and 264 constituted professional misconduct. He says that he now recognises that the amount of $6,672.50 for counsel's fees that he deposited into his Office account was Trust money. He said that since the appointment of a receiver for his practice, he has closed the practice and did not obtain other employment until July 2011 when he secured temporary employment. He does not have a Practising Certificate and no longer works in the field of legal practice. 85He said when the practice closed: "I was faced with substantial financial responsibilities for annual leave and long service owing to staff; the payment of rental on the premises from which the business was operating until such time as I could terminate the Lease; and other ongoing expenses associated with the business, without corresponding income therefrom." 86He said that as a result of this there were serious difficulties in his relationship with his partner and that also caused a corresponding "ill-health for both myself and my partner". He said that he had borrowed from family and friends in order to pay expenses since his Practising Certificate was suspended and also had extended the mortgage on his home to meet other commitments and debts. 87He said his health problems since the suspension of his Practising Certificate included stress, associated fatigue, depression, weight loss, and a diagnosis of prostate cancer. There were also considerable expenses involved with his treatment for prostate cancer and he has been dependent upon his partner for financial assistance. His present employment with the NSW Public Service remains temporary. In submissions on his behalf, the fact that he has had no other proven misconduct in a period in practice of almost 27 years is raised. 88Also, the Investigator appointed by the Law Society has reported that all of his files had been examined and found to be in order apart from the matter of Burnett Estate. On his behalf, his legal representatives submit that the suspension of the Respondent's Practising Certificate, the loss of his practice and his unemployment have resulted in severe consequences in terms of his health, his finances, and the disapproval of his conduct by the Law Society and by the Tribunal. It is submitted for the Respondent that the Orders proposed by the Applicant in the Application are appropriate and a fine would not be of any useful purpose. CONCLUSIONS 89The Tribunal finds that all seven of the Grounds are proved and each constitutes professional misconduct. 90In other circumstances, the appropriate outcome would have been for there to be a finding that the Respondent is not a fit and proper person to remain on the roll. However, the fact that these are the only occasions of misconduct by the Respondent in nearly 27 years of practice is an exceptional circumstance. The Tribunal also takes into account that the Respondent always intended to pay the barristers, the transfer of the additional $2,200 was an error, once he knew of it he intended to repay it, he ultimately paid the barristers and the client, and the Law Society does not suggest the professional fees he charged the estate were excessive. 91The Tribunal finds that the Orders proposed by the Law Society are appropriate, except for the issue of whether a fine should be imposed. 92Because there were seven instances of serious professional misconduct, the finding of the Tribunal is that it is an appropriate situation for imposition of a fine, because the sanction of reprimand and an order for the Respondent to complete a course, are not orders that sufficiently recognise the seriousness of the grounds proved and do not sufficiently protect the public and the reputation of the profession. Also without further sanction the orders do not provide the educative example that should be provided to other members of the profession. 93The Tribunal finds that it is a situation where a fine should be imposed to alert members of the profession to the seriousness with which the Tribunal views mishandling of Trust money, failure to make proper records and misappropriation, even in circumstances where a practitioner has for many years complied with the law in that regard. 94The Tribunal has concluded that in this matter in addition to the orders proposed in the Application, a fine of $5,000.00 should be imposed. COSTS 95Subsection 566(1) of the Legal Profession Act 2004 provides: (1) The Tribunal must make orders requiring an Australian legal practitioner whom it has found to have engaged in unsatisfactory professional conduct or professional misconduct to pay costs (including costs of the Commissioner, a Council and the complainant), unless the Tribunal is satisfied that exceptional circumstances exist. 96There has been no exceptional circumstance that would require the Tribunal to depart from the requirement for an order for the Respondent to pay the Applicant's costs. ORDERS 97The Tribunal therefore makes the following Orders: 1) The solicitor is reprimanded. 2) Prior to applying for any Practicing Certificate entitling the solicitor to hold an unrestricted Practising Certificate and/or to become a solicitor/director of any incorporated legal practice, the solicitor must: a) At his own expense undertake and successfully complete with a pass mark of not less than 50% a course approved by The Manager, Professional Standards Department, on Trust Accounting ["the Course"]; and b) Provide The Manager, Professional Standards Department, with the original result notification from the provider of the Course at the time the solicitor applies for the said Practising Certificate. 3) The Solicitor must pay a fine of $5,000.00. 4) The Solicitor must pay the costs of the Law Society as agreed or assessed. I hereby certify that this is a true and accurate record of the reasons for decision of the Administrative Decisions Tribunal. Registrar ********** Amendments 23 May 2013 - Paragraph numbering corrected Amended paragraphs: 69 to 97 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 May 2013