Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Council of the Law Society of New South Wales v Martin [2015] NSWCATOD 13 Hearing dates: 16 September, 2014 Decision date: 09 March 2015 Jurisdiction: Occupational Division Before: S Hale, Senior Member M Riordan, Senior Member S Hayes, General Member Decision: The Tribunal orders that: 1. The Solicitor is found guilty of professional misconduct. 2.Pursuant to section 562(2) of the Legal Profession Act 2004 the name of the Respondent Solicitor is to be removed from the Local Roll 3.The Respondent Solicitor is to pay the costs of the Applicant as agreed or as assessed. Catchwords: Solicitor-disciplinary proceeding- professional misconduct – misappropriation -–breaches of provisions relating to trust accounts – breach of rule 12 solicitors conduct rules – fitness to practise Legislation Cited: Legal Profession Act 2004 Solicitor's Professional Conduct and Practice Rules Cases Cited: Allinson v General Council of Medical Education and Registration [1894] 1 QB 750 The Law Society of New South Wales v. Jones, Unreported, NSW CA 333 of 1977, 27July, 1978 New South Wales Bar Association v. Hamman [1999] NSWCA 404 Category: Principal judgment Parties: Council of the Law Society of New South Wales (Applicant) Cameron David Charles Martin (Respondent) Representation: Solicitor: L Pierotti, Council of the Law Society of New South Wales (Applicant) C Martin (Respondent in person) File Number(s): 132023 REASONS FOR DECISION 1. By Application filed on 22 November, 2013, the Council of the Law Society of New South Wales ("the Applicant") claimed that Cameron David Charles Martin ("the Respondent") was guilty of professional misconduct on the following grounds: * Gertrud Lina Wilhelmine Elly Sievert – matter no. 09115528 1. Breached Section 255 of the Legal Profession Act, 2004 ("the Act") 2. Misappropriated the complainant's monies. * Beverley Fay Tyack – matter no. 08114147 and 10116321 1. Transferred monies from trust without authority. 2. Breached Section 254 of the Act. 3. Breached Section 255 of the Act. 4. Misappropriated trust monies. * Kahlefeldt Securities Pty Ltd – matter no. 101165572 1. Breached Rule 12 of the Solicitors' Rule. * Ross and Kathleen Barby – matter no. 8114170 1. Breached Section 255 of the Act. 2. Misappropriated trust monies. * Beverley Anne Kennewell – matter no. 8114172 1. Breached Section 255 of the Act. 2. Misappropriated trust monies. * Carolyn Barby – matter no. 8114171 1. Breached Section 255 of the Act. 2. Misappropriated trust monies. * Estate of the late Terry Paul Jones – matter no. 8114164 1. Breached Section 255 of the Act. 2. Misappropriated trust monies. * Estate of John Thomas McCurdy – matter no. 08114319 1. Breached Section 255 of the Act. * Neil John Turner and Karen Marie Davidson – matter no. 07112824 1. Breached Section 255 of the Act. Particulars 1. The particulars relied upon in the Application are as follows: Gertrud Lina Wilhelmine Elly Sievert – matter no. 09115528 1. In or about May 2011, Ms Sievert engaged the services of the Solicitor to act on the sale of her home located at 14 Stuart Street, Delegate, New South Wales. 2. On 1 June 2011, the sum of $126,699.79 was deposited into the trust account of the Law Practice described as "Settlement Monies" in matter no. 09115528 "Ms Gertrud Lina Wilhelmine Elly Sievert – Sale". 3. Ms Sievert instructed the solicitor in respect of the settlement monies to "Put the money into a trust fund of the company until such time as I am able to afford to by another property in Wagga Wagga." 4. Without Ms Sievert's knowledge or authority on 22 August 2011, the sum of $126,699.79 was withdrawn from trust and paid to "Jacamar Trust" described as "Settlement Monies". 5. The Solicitor is the trustee for the Jacamar Trust. 6. On 16 August 2011, the Solicitor as trustee for the Jacamar Trust, opened an account with the National Australia Bank, account number 11 743 7089 ("Solicitor's account") with a nil balance. 7. On 23 August 2011, the sum of $126,699.79 was deposited by way of cheque into the Solicitor's account. 8. On 29 August 2011, the sum of $125,000 was withdrawn from the Solicitor's account, leaving a credit balance of $1,699.79. The money was paid to the Australian Taxation Office in reduction of a tax debt of the Law Practice. 9. In or about 3 September 2012, the Solicitor attended Ms Sievert at her home and said to her in words to the effect "Do you want your money kept safe, I am going to set up my own law practice and I will look after your interests. I have a trust known as Jacamar Trust. If you sign this authority I will put your money into the Jacamar Trust. It is a personal trust of my own and it is a superannuation fund." 10. During the course of their meeting, the Solicitor requested and Ms Sievert signed a declaration addressed to Friedlieb Byrne Solicitors stating "You are hereby authorized and directed to pay the net proceeds of the sale of my property at Delegate to the Jacamar Trust." 11. On 12 September 2012, the Solicitor attended on Ms Sievert at her home and Ms Sievert requested and the solicitor signed, a declaration stating "I herewith declare that I will immediately return the sum of $128,012.50, held until now in my trust account, to its rightful owner Mrs Gertrud Sievert of Unit 3, 143 Docker Street, Wagga Wagga, NSW, 2650. Signed this day, September 12 (sic) Cameron Martin Solicitor" 1. By 3 October 2012, Ms Sievert had, without success, demanded the return of her funds from the Solicitor. 2. In a letter from the Solicitor's then legal representative, Mr Matthew Hogg of Counsel, to the Society dated 31 October 2012, it was relevantly stated: "7. On settlement, the net proceeds of sale totaled (sic) $126,699.79…Those proceeds of sale were paid into the firms trust account on 1 June 2011 and thereafter drawn from the firm trust account to an accou9nt styled "Jacamar Trust" on the 22 August 2011, which is an account that Mr Martin held for my (sic) personal family trust. 8. At this time, Friedlieb Byrne Pty Limited, the company which owned and operated the firm at the time, was then subject to proceedings commenced by the Deputy Commissioner for Taxation with respect to an outstanding taxation debt. Regretfully, at the time the request came from Mrs Sievert and Mrs Gallagher to invest the proceeds of sale, Mr Martin chose to pay the moneys held on their behalf in the Jacamar Trust account to the Taxation Department, thereby securing an agreement to discontinue the proceedings and allow the firm to continue trading. 9. Mr Martin accepts that Mrs Sievert understood at all material times that the funds would be at call, and invested in a controlled monies account managed by him. To be clear Mrs Sievert knew the funds were invested, however she did not understand that the funds had been borrowed by Mr Martin and was a debt owed by him personally… 15. In sum, when Mrs Sievert and Mrs Gallagher approached Mr Martin to invest the funds, in all of the circumstances he found himself in, he made an inappropriate and unfortunate decision to accept the funds and deal with them in a manner not in keeping with his duties as a legal practitioner. 16 Mr Martin accepts responsibility for his actions, and is more than contrite. Mr Martin wishes to make amends to Mrs Sievert, and will do so as soon as possible. Mr Martin has instructed that Mrs Sievert will be repaid with moneys, with interest. 17. In addition the following matters are conceded: (a) Mrs Sievert was not made aware that Mr Martin had advanced the funds personally to an entity he controlled until after the request for the return of funds was made…" 1. The Solicitor has not repaid any money to Ms Sievert. Beverley Fay Tyack – matter no. 08114147 and 10116321 1. Around early 2004, Ms Tyack instructed the Solicitor to act on her behalf in respect of defending a claim commenced by her brother, Wayne Charles Bendall in the Supreme Court of New South Wales Proceedings No. 2392 of 2008 (the Proceedings). This matter was recorded in the Solicitor's records as file no. 08114147. 2. On 14 May 2010, judgment was handed down in the Proceedings. 3. My Tyack subsequently instructed the solicitor to file an appeal in respect of the decision made in the Proceedings (the Appeal Proceedings). This matter was recorded in the Solicitor's records as file no. 10116321. 4. Ms Tyack made the following cash payments to the Solicitor on account of costs and disbursements in relation to the Proceedings and the Appeal Proceedings: Date Amount Paid 16 February 2004 $980 8 March 2004 $1,200 18 May 2004 $1,100 23 June 2004 $2,000 5 September 2005 $1,000 5 September 2005 $1,000 10 May 2007 $500 8 September 2007 $10,000 1 August 2008 $300 14 August 2008 $500 14 August 2008 $3,000 15 August 2008 $300 September 2008 $5,000 20 May 2009 $10,000 30 April 2010 $500 18 May 2010 $2,000 30 April 2010 $20,000 15 July 2010 $3,000 7 October 2010 $2,000 30 December 2010 $2,600 7 February 2011 $2,600 24 November 2011 $2,000 16 December 2011 $3,000 Total $74,580 1. In addition to the monies referred to in paragraph 20 above, two further sums, being $4,000 on 20 June 2005 and $3,000 on 14 August 2008, were paid to the Solicitor on behalf of Ms Tyack by her son and nephew. 2. Save for the following 2 payments, all cash payments made by Ms Tyack were drawn from Ms Tyack's SGE Credit Union account (account number 671020): 1. $3,000 on 14 August 2008.I 2. $5,000 around September 2008. 1. On 5 August 2010, Ms Tyack also withdrew a cheque made payable to the Law Practice (being cheque no. 382502) in the sum of $10,000 on account of costs and disbursements. 2. In total, Ms Tyack paid to the Solicitor the sum of $84,580 on account of legal costs and disbursements. 3. No receipts were provided by the Solicitor or the Law Practice to Ms Tyack with the exception of the sum of $3,000 paid by Ms Tyack on 14 August 2008. 4. The Solicitor did not deposit into his trust account all of the cash received from Ms Tyack. 5. John Mitchell, Receiver of the Law Practice (the Receiver), was unable to access the accounting records of the Law Practice which was maintained on the software "Perfect Balance" for the period from around June 2004 to 21 August 2008. 6. For the period from 22 August 2008 to 31 December 2011, the only entries recorded in the office and trust records of the Law Practice and in respect of the Proceedings and the Appeal Proceedings were: 1. $10,000 paid on 5 August 2010 by cheque to the Law Practice from Ms Tyack. 2. $15,000 paid on 22 November 2011 pursuant to the orders of the Court made on 15 December 2010. 1. On 13 January 2012, the sum of $209,583.79 was deposited into the trust account of the Law Practice described as: "Received from: Geoffrey Phillip Reidy & Robert Moodie as Trustees for the Warren Downs Property. Reason: Settlement monies $209,583.79." 1. Without Ms Tyack's knowledge, authority or direction, the Solicitor withdrew the following amounts from the trust account: Invoice No. Date Withdrawn Paid To Reason Amount 3958 27/05/2011 Friedlieb Bryne Solicitors Costs $20,326.71 4668/3984 23/11/2011 Friedlieb Bryne Costs $14,810.70 4808 04/01/2012 Friedlieb Bryne Solicitors Costs $189.30 4944 15/02/2012 Craig Wilson Barristers fees $11,027.50 4944 20/02/2012 Friedlieb Bryne Solicitors Costs $20,245.83 5145 18/04/2012 Friedlieb Bryne Solicitors Costs $8,500 5189 02/05/2012 Friedlieb Bryne Solicitors Costs $2,150 5280 16/05/2012 Friedlieb Bryne Solicitors Costs $4,592.50 5538 18/07/2012 Friedlieb Bryne Solicitors Costs $3,685 1. In respect of the sum of $11,027.50 withdrawn from trust on 15 February 2012 to pay Craig Wilson of Counsel, such fees were included as part of tax invoice number 4944 dated 20 February 2015 in the sum of $20,245.83. 2. My Tyack did not authorize the withdrawal of funds referred to in paragraph 29 above. 3. My Tyack never received a Trust Account Statement from the Solicitor. 4. Ms Tyack was provided with a Trust Account statement from Matthew Fox, a principal of Friedlieb Byrne Solicitors, to whom the Solicitor sold the Law Practice, setting out a balance of $45,798.58 held on her behalf in the trust account. Kahlefeldt Securities Pty Ltd – matter no. 101165572 1. In or about 28 October 2010, the Solicitor requested from Mr. Brian Kahlefeldt (Mr. Kahlefeldt) a director of Kahlefeldt Securities Pty Ltd (Company) on behalf of the Law Practice a loan of $350,000 to pay the Australian Taxation Office. 2. On 28 October 2010, the sum of $350,000 was paid by the Company and deposited into the trust account of the Law Practice described as "Matter #10116572, Company Loan to Mr Cameron Martin" ("Loan"). 3. At the time of the Loan, the Company was a client of the Law Practice. 4. On 4 April 2011, the Company received an unsigned letter from the Solicitor by email stating: "…This letter confirms that Kahlefeldt Securities Pty Limited advanced the sum of $350,000.00 to Friedlieb Byrne Pty Limited and Cameron Martin on (sic). The purpose of the loan was for payment of an outstanding tax debt incurred by Friedlieb Byrne Pty Ltd. The loan is repayable by Friedlieb Byrne Pty Limited and Cameron Martin as a joint and several debt. Each is a borrower, as well as a guarantor of the other's obligations. The loan has been advanced on a short term basis. It is repayable as soon as practicable, or otherwise on demand. Whilst any amount remains outstanding, interest is payable on the whole of the initial advance by monthly instalments in arrears. A reasonable rate of interest shall be advised by Kahlefeldt Securities Pty Limited from time to time." 1. The following amounts were paid out of the trust account from the Loan: Date Description Amount Balance 28/10/2010 Paid To: Deputy Commissioner of Taxation $250,000 $100,000 Reason: Tax 22/11/2010 Paid To: Australian Taxation Office $45,205 $54,795 Reason: Tax 08/12/2012 Paid To: Friedlieb Byrne $15,000 $39,795 Reason: Company Loan 20/12/2012 Paid To: Friedlieb Byrne $14,886 $24,909 Reason: IAS PAYG Tax 04/01/2011 Paid To: Friedlieb Byrne $24,909 Nil Reason: Company Loan 1. On 5 April 2011, a letter was sent by the Company to the Solicitor demanding repayment of the loan including interest by 30 April 2011. 2. On 7 July 2011, a letter was sent by the Company to the Solicitor setting out a proposal for payment of the loan. 3. Tax invoice no. 4443 dated 20 September 2011 in the sum of $59,323 was issued by the Law Practice to the Company in matter no. 08114080. 4. On 26 June 2012, an email was sent by the Company to the solicitor stating relevantly: "We set out below the amount owing to us as at 30 June 2012… This amount has now been owing for nearly 2 years. Would you please make up your account to 30 June 2012 so that we can then get together and discuss the matter." 1. The loan (subject to any claim for an offset of tax invoice no. 4443 dated 20 September 2011) has not been repaid to the Company. Ross and Kathleen Barby – matter no. 8114170 1. The Solicitor acted for Ross and Kathleen Barby (Mr and Mrs Barby) as plaintiffs in District Court Proceedings No. 27/2003 (Proceedings) against Scott William Christoff (Mr Christoff). 2. Mr and Mrs Barby were the parents of Beverley Ann Kennewell (Ms Kennewell) and the grandparents of Robert and Courtney Kennewell. 3. Ms Kennewell died on 26 February 2000 when she was involved in a motor vehicle accident with Mr Christoff as the driver of the motor vehicle. 4. On 3 September 2004, the Court made orders in the Proceedings including: "3. That the sum of $150,037.11 be paid to the solicitor for the plaintiffs upon undertaking to disperse these moneys as follows: (a) in payment of the sum of $73,767.43 or so much thereof as shall be necessary to discharge the Commonwealth Bank mortgage secured over the property at 54 Mumford Street, Wagga Wagga. (b) in payment of the sum of $28,769.68 or so much thereof as shall be necessary to discharge the St George Bank mortgage secured over the property at 45 Mumford Street, Wagga Wagga. (c) in payment of the sum of $47,500.00 to the trust account of Friedlieb Byrne Solicitors, to be held in the name of the plaintiffs, pending agreement or assessment of the plaintiffs' costs and disbursements by the defendant, and (d) thereafter to account to the Public Trustee for New South Wales for any balance thereof, to be invested in accordance with the terms of settlement herein for Robert James Kennewell and Courtney Anne Kennewell." 1. The trust account ledger in matter no. 103397 that was retained in the Law Practice's file disclosed the following: Date Ref Paidto/Received from/Journaled to/from reason Withdrawal Amount Deposit Amount Balance 10/11/04 R10792 Registrar of the Local Court WW – Pers Chq settlement monies $150,037.11 $150,037.11 08/12/04 P1967 St George Bank Ltd settlement monies $28,5923.75 $121,444.36 08/12/04 P1968 Public Trustee NSW balance of settlement monies $176.93 $121,267.43 22/12/04 P2008 The Public Trustee balance of monies $472.32 $120,795.11 23/12/04 P2020 Friedlieb Byrne Pty Ltd tfr to office no.36 $47,027.68 $73,767.43 07/01/05 R10898 NRMA Insurance Pers Chq CTC payment $25,000 $98,767.43 15/02/05 P2116 Public Trustee payment re: Kennewell Estate monies $25,000 $73,767.43 14/05/08 P5161 B&R Kennewell mortgage payout $70,197.20 $3,570.23 1. On 31 May 2011, the sum of $3,730.27 was transferred from the trust account to the office account of the Law Practice with the narration "Invoice no. 2888 Trust to Office Transfer $3,730.27". Beverley Anne Kennewell – matter no. 8114172 1. The Solicitor acted for Ms Beverley Anne Kennewell (Ms Kennewell) on the sale of a property owned by Ms Kennewell and Richard Kennewell (Mr Kennewell) located at 43 Nixon Crescent, Wagga Wagga, NSW, 2650. 2. Sheekey Williams Lawyers (Sheekey Williams) acted on behalf of Mr Kennewell. 3. Mr Kennewell died on 26 February 2000. 4. The matter was initially conducted when the Law Practice maintained its trust account records with the "Perfect Balance" accounting software system. This occurred from around 14 March 1997 to 17 April 2000 with matter code 99464. A final credit balance of $5,908.52 remained in the trust account when the Law Practice changed its accounting software system and transferred the amount from the "Perfect Balance" system to the "Leap" system. 5. The trust account records transferred to the Law Practice's "Leap" accounting software system records the following transactions for the matter: Date Ref Paid to/Received from/ Journaled to/from reason Withdrawal Amount Deposit Amount Balance 21/08/08 Rec012817 Received from: Perfect Balance – Trust Balances Reason: Trust balances from previous accounting system $5,908.52 $5,908.52 31/05/11 Pay7937 Paid to: Friedlieb Byrne Solicitors $5,908.52 Nil Reason: Invoice #4001 Trust to Office transfer 1. A letter dated 9 September 2008 from the law Practice to Sheekey Williams relevantly stated: "The assets of the deceased would appear to be as follows:- a. one half interest in 54 Mumford Street, Wagga Wagga jointly owned as tenants in common with Ross Barby. b. $5,908.52 held in trust in respect of the balance of proceeds for sale of 43 Nixon Crescent, Wagga Wagga. c. $15,999.29 held in trust being in respect of the proceeds from insurance on the motor vehicle that was written off in the subject accident. …it was proposed when Robert turned 18, he being born on 3 August 1998, that he would apply for Letters of Administration. However, it came to our attention around that time that Richard was still in this vicinity but we were unable to locate him at the time until we were able to locate Richard we were not able to proceed with applying for Letters of Administration. It was proposed that Beverley's estate go to her two children…" 1. As at 30 May 2011, the office account was in debit in the sum of $177,879.92. 2. Tax invoice no. 4001 dated 31 May 2011 in the sum of $5,908.52 was allegedly issued to "Ms BA Kennewell c/- 99 Peter Street, Wagga Wagga, NSW, 2650". Carolyn Barby – matter no. 8114171 1. The solicitor had a trust ledger account in matter no. 8114171 described as "Estates – Miscellaneous Ms Carolyn Barby 2 Marshall Street, Wagga Wagga NSW 2650" ("Matter no. 8114171"). 2. The trust ledger for Matter no. 8114171 from 21 August 2008 records the following: Date Ref Paid to/Received from/ Journaled to/from reason Withdrawal Amount Deposit Amount Balance 21/08/08 Rec012817 Received from: Perfect Balance – Trust Balances Reason: Trust balances from previous accounting system $15,999.29 $15,999.29 31/05/11 Pay7937 Paid to: Friedlieb Byrne Solicitors $15,999.29 Nil Reason: Invoice #4000 Trust to Office transfer 1. Tax invoice no.4000 dated 31 May 2011 addressed to "Mc C Barby" at 2 Marshall Street, Wagga Wagga, records the disbursements being claimed as "Opening balance of Cost Recoveries blfwd from PB including GST". 2. On 31 May 2011, the office account of the Law Practice was in debit in the sum of $177,879.92. 3. On 31 May 2011, the Solicitor transferred the sum of $15,999.29 from trust to office. Estate of the late Terry Paul Jones – matter no. 8114164 1. The Solicitor acted for Timothy John Hay, the Executor of the Estate of Terry Paul Jones (Executor). The matter was recorded in the trust account ledger as matter #08114164 "Estate Administration Mr Timothy John Hay". 2. The balance in the trust account ledger in matter # 08114164 as at 3 November 2008 was $3,744.85. 3. On 6 July 2010, the sum of $3,744.85 was transferred from the trust account and paid into the Solicitor's office account with the narration "Paid To: Friedlieb Byrne Solicitors. Reason: Invoice #2747 Trust to Office Transfer". 4. Tax invoice no. 2747 dated 6 July 2010 in the sum of $3,744.85 was addressed to "Mr TJ Hay" at 16 Bapaume Street, Cootamundra, NSW, 2590. The description recorded on the tax invoice is dated 6 July 2010 and states "To our costs of searching, administering and finalizing the Estate." 5. The Executor did not receive tax invoice no. 2747 dated 6 July 2010 in the sum of $3,744.85. 6. The Executor did not authorise the transfer of the sum of $3,744.85 from the trust account to the Solicitor's office account on 6 July 2010 or at any other time. 7. The Executor did not receive any Trust Account Statement from the Solicitor. Estate of John Thomas McCurdy – matter no. 08114319 1. The Solicitor acted for Gregory Thomas McCurdy as Executor of the Estate of the late John Thomas McCurdy (Executor), being matter no. 08114319. 2. As at 23 April 2009, the balance of the trust account ledger in matter no. 08114319 was $12,532.20. 3. On the following dates, a total sum of $12,532.20 was withdrawn from trust leaving a nil balance in the trust account ledger Date Reference Reason Withdrawal amount 23/02/2011 Pay 7671 Paid To: Friedlieb Byrne Solicitors $1,980 Reason: Invoice #3609 Trust to Office Transfer 13/07/2011 Pay 7995 Paid To: Friedlieb Byrne Solicitors $3,173.50 Reason: Invoice #34183 Trust to Office Transfer 05/01/2012 Pay 8407 Paid To: Friedlieb Byrne Solicitors $1,045 Reason: Invoice #4184 Trust to Office Transfer 11/04/2012 Pay 8633 Paid To: Friedlieb Byrne Solicitors $6,333.70 Reason: Invoice #5123 Trust to Office Transfer Total $12,532.20 1. The Executor did not receive any of the tax invoices referred to in paragraph 73 above. 2. The Executor did not authorise the transfer of any of the amounts referred to in paragraph 73 above from the trust account to the Solicitor's office account. 3. The Executor did not receive any Trust Account Statement from the Solicitor. Neil John Turner and Karen Marie Davidson – matter no. 07112824 1. The Solicitor acted on behalf of Neil John Turner (Mr Turner) and Karen Marie Davidson (Ms Davidson) in respect of the sale of a property situate and known as 50 Andrews Avenue, Wagga Wagga, NSW ("Property"). 2. The sale of the Property settled on 2 November 2007. 3. On 5 November 2007, a letter was sent by the Solicitor to Mr Turner and Ms Davidson which stated relevantly: "We enclose our account for acting on your behalf in the matter, and note this amount was paid on settlement of your simultaneous purchase." 1. Tax invoice dated 5 November 2007 in the sum of $1,375 with the description "To our costs of and incidental to acting on your behalf with respect to your purchase and coordinating settlement with your Discharging Mortgagee, all related attendances" was attached to the letter from the Solicitor referred to in paragraph 79 above. 2. On 19 September 2008, the balance of the trust account ledger was $6,325. 3. On 11 January 2010, the sum of $1,711.70 was transferred from trust to office described as "Paid To: Friedlieb Byrne Solicitors Reason: Invoice #1995 Trust to Office Transfer", leaving a balance of $4,613.30. 4. On 3 May 2011, the sum of $4,613.30 was transferred from trust to office described as "Paid To: Friedlieb Byrne Solicitors Reason: Invoice #3998 Trust to Office Transfer", leaving a nil balance. 5. On 31 May 2011, the office account of the Law Practice was in debit in the sum of $177,879.92 6. Mr Turner did not receive any of the tax invoices referred to in paragraphs 82 and 83 above. 7. Mr Turner did not authorise the transfer of the amounts referred to in paragraphs 82 and 83 above from the trust account to the Solicitor's office account. 8. Mr Turner did not receive any Trust Account Statements from the Solicitor. Evidence 1. The evidence filed by the Applicant in support of the complaint was contained in the Affidavits of John Earnest Mitchell sworn on 1 November 2013, Anne-Marie Foord sworn 19 November 2013, Beverley Fay Tyack sworn 17 October 2013, Neil John Turner sworn 18 September 2013, Gabriel Chelsea Nicole Lang-Brown sworn 6 September 2013, Carolyn Barby sworn 17 October 2013, Gregory Thomas McCurdy sworn 16 September 2013 (paragraph 9 not read), Gertrud Lina Wilhelmine Elly Sievert sworn 23 April 2013 and Timothy John Hay (as executor of will of Terry Paul Jones) sworn September 2013 (affidavit undated). Correction to Application for Original Decision 1. At the commencement of the hearing the Applicant sought leave to make two amendments to the Application of a technical nature and leave was granted to the Applicant to make those amendments. In granting such leave, the Tribunal was of the view that no prejudice was caused to the Respondent by not having notice of the amendments given their nature. Notice to the Respondent 1. There was no appearance by or on behalf of the Respondent at the commencement of the hearing of these proceedings. The Tribunal sought information from the Applicant as to what action had been taken by the Applicant to advise the Respondent of the hearing date of the proceedings. 2. The Tribunal was informed that there had been no appearance by the Respondent or anyone on his behalf on any of the return dates of which there had been several, since the filing of the original Application on 22 November 2013, and of which the Respondent had been notified. The Respondent had been personally served on 7 February 2014 at a business address Phoenix Limousines, 56 Fitzmaurice Wagga Wagga and the Affidavit of Personal Service formed part of the evidence in these proceedings. In addition to personal service, correspondence had been forwarded to the Respondent at two different addresses being 50 Dunns Road, Wagga Wagga 2650 and also 56 Fitzmaurice Wagga Wagga 2650 advising that the Applicant would be seeking hearing dates but no reply had ever been received by the Applicant or filed. 3. The original hearing date was allocated for 14 August, 2014 but that date was subsequently changed to 16 September, 2014 and the Respondent was notified of that fact. 4. In the circumstances the Tribunal was satisfied that the Respondent had been given appropriate notice of the hearing date and the orders that would be sought on that hearing date and the matter proceeded without any appearance by or on behalf of the Respondent. Tribunal Composition 1. The composition of the Tribunal for the hearing of these proceedings comprised Senior Members Ms S Hale, Ms M Riordan and General Member, Ms E Hayes. Ms. Riordan had in fact formed part of the Panel in October 2008 when the Respondent was before the Tribunal on a different matter. On that occasion Riordan sat with Mr G Molloy and Ms Hayes but that Application was subsequently dismissed. The Applicant, by letter, notified the Respondent of the membership of the Panel for these proceedings pointing out that Ms Riordan had formed part of the panel for the earlier proceedings but that the Applicant did not intend to take that point. There was no objection taken by the Respondent and the matter proceeded to hearing with the allocated Panel. The Sievert matter 1. The Respondent breached S.255 of the Legal Profession Act, 2004 (the Act) when he withdrew the sum of $126,699.79 from the trust account of the Law Practice on 22 August, 2011 and paid it to 'Jacamar Trust' describing it as settlement moneys'. 2. Section 255 is in the following terms: a) "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. 1. Subsection (1) applies subject to an order of a court of competent jurisdiction or as authorised by law. 2. The law practice must account for the trust money as required by the regulations. Maximum penalty: 50 penalty units." 1. The Respondent's conduct in depositing Ms Sievert's money into a NAB bank account in the name of the solicitor as trustee for the Jacamar Trust was deliberate. At that time, he was aware that his client's instructions were to "put the money into a trust of the company until such time as I am able to afford to buy a property in Wagga Wagga". He had not received any authorization from Ms. Sievert to deal with the money let alone use it for his own purposes. 2. The fact that some 12 months later, he obtained Ms Sievert's signed formal authority to pay that sum to the Jacamar Trust does not absolve his misappropriation in the first place. If anything, it compounds it as clearly, he understood that he needed Ms. Sievert's authority to deal with the money as demonstrated by his attendance at her home to arrange for an authority to be signed by her, albeit some 12 months after he had dealt with the money. 3. The Respondent then failed to return the money to Ms Sievert upon her request to do so and conceded in correspondence from his then legal representative, Mr Matthew Hogg of Counsel to the Society dated 31 October 2012 that "Mrs Sievert was not made aware that Mr Martin had advanced the funds personally to an entity he controlled until after the request for the return of funds was made…" 4. Ms Sievert was a 89 year old woman at the time the Respondent misappropriated her money for his own gain. She placed her trust in the Respondent as she was entitled to do. Sadly, that trust was misplaced. 5. On the evidence before us, the Tribunal is satisfied that this ground is made out. The Beverley Fay Tyack matter 1. The Respondent is said to have breached Sections 254 and 255 of the Act, as well as misappropriating trust monies and transferring monies from trust without authority in relation to Ms. Tyack. 2. Section 254 of the Act is in the following terms: "254 Certain trust money to be deposited in general trust account (1) Subject to section 258A, as soon as practicable after receiving trust money, a law practice must deposit the money in a general trust account of the practice unless: (a) the practice has a written direction by an appropriate person to deal with it otherwise than by depositing it in the account, or (b) the money is controlled money, or (c) the money is transit money, or (d) the money is the subject of a power given to the practice or an associate of the practice to deal with the money for or on behalf of another person. Maximum penalty: 100 penalty units. (2) Subject to section 258A, a law practice that has received money that is the subject of a written direction mentioned in subsection (1) (a) must deal with the money in accordance with the direction: (a) within the period (if any) specified in the direction, or (b) subject to paragraph (a), as soon as practicable after it is received. Maximum penalty: 100 penalty units. (3) The law practice must keep a written direction mentioned in subsection (1) (a) for the period prescribed by the regulations. Maximum penalty: 50 penalty units. (5) A person is an "appropriate person" for the purposes of this section if the person is legally entitled to give the law practice directions in respect of dealings with the trust money." 1. The Respondent received total payments in the sum of $84,580 on account of legal costs and disbursements from Ms Tyack. 2. No receipts were ever provided by the Respondent or the Law Practice to Ms Tyack with the exception of the sum of $3,000. 3. None of the payments made in cash on account of legal costs and disbursements were deposited into the Respondent's trust account as required by the terms of Section 254. 4. The Respondent also received the sum of $209,583.79 on behalf of Ms Tyack which was deposited into his trust account on 13 January 2012 in accordance with S254 of the Act. 5. Thereafter, the Respondent without Ms Tyack's knowledge, authority or direction withdrew various amounts for costs and barrister's fees. The Respondent's conduct in dealing with the money without the authority or direction of Mrs. Tyack and in failing to hold the money exclusively for the person on whose behalf the money was received was in breach of S255 of the Act. No tax invoices were ever received by Ms Tyack nor did she receive a trust account statement. 6. On the evidence before us, the Tribunal finds the grounds made out. The Kahlefeldt Securities Pty Ltd matter 1. Rule 12 of the Reviewed Professional Conduct and Practice Rules provides: "12.1 A practitioner must not borrow any money, nor assist an associate to borrow any money from a person: 12.1.1 who is currently a client of the practitioner, or the practitioner's firm; 12.1.2 for whom the practitioner or practitioner's firm has provided legal services, and who has indicated continuing reliance upon the advice of the practitioner, or practitioner's firm in relation to the investment of money; or 12.1.3 who has sought from the practitioner or the practitioner's firm, advice in respect of the investment of any money, or the management of the person's financial affairs; 12.2 This clause does not prevent a practitioner or an associate of a practitioner borrowing from a client, which is a corporation or institution described in the Schedule to this Rule, or which may be declared by the Council of the Law Society to be exempt from this Rule. 12.3 A practitioner must not maintain a private finance company and invite, directly or indirectly, the deposit of money with the company on the basis of a representation that: 12.3.1 the money is repayable at call, or on short notice, if that is not assured when the money is deposited; or 12.3.2 that the deposit of the money is, or will be secured, unless the money is specifically secured by an instrument identifying the lender, the amount deposited and the security. 12.4 A practitioner must not borrow any money, or permit or assist an associate to borrow any money, from a private finance company which is operated or controlled by the practitioner or the associate of the practitioner. 12.5 A practitioner must not cause or permit a private finance company to pay to any depositors of money to the company a rate of interest on their deposits which is less than the rate charged by the company to borrowers. The Schedule 1. A banker duly authorised to carry on banking business; 2. An insurance company duly authorised to carry on insurance business. 3. A company registered under the Life insurance act 1945 of the Commonwealth. 4. A building society registered under the Co-operation Act 1923 or listed in the Second Schedule of that Act. 5. A building society governed by the Financial Institutions Code 1992. 6. A credit union governed by the Financial Institutions Code 1992 7. A trustee company mentioned in the First Part of the Third Schedule to the Trustee Companies Act 1964. 8. The Public Trustee. 9. A non-bank financial institution which is governed by the Financial Corporations Act 1974 of the Commonwealth or the Financial Institutions Code 1992. 10.A company the securities in which are listed on a member exchange of the Australian Associated Stock Exchanges or a foreign company the securities of which are quoted for trading on a stock exchange or in a market for the public trading in securities. 11. A government, governmental body, agency, department, authority or instrumentality, whether foreign, federal, state or local. 12. A company having the majority of its issued share capital to which voting rights attach owned by any government, governmental body, agency, authority or instrumentality, whether foreign, federal, state or local. 13. A company related to any of the companies referred to above or a company in which any entity of a type described above has a substantial shareholding as defined in Section 708(i) of the Corporations Law. 14. A member of the immediate family of the practitioner or a corporation, partnership, syndicate, joint venture or trust in which, or in the shares in which, the whole of the beneficial interest is presently vested in one or more members of the immediate family 1. In breach of Rule 12, the Respondent as a director of the Law Practice caused the Law Practice to borrow $350,000 from an existing client of the Law Practice being Kahlefeldt Securities Pty Ltd, a company for whom the Respondent had carried out legal work for a considerable number of years. 2. At the time the loan moneys were paid to the Respondent's Law Practice, the Respondent placed himself in a conflict of the type that Rule 12 seeks to avoid. 3. On the evidence before us, the Tribunal finds the ground made out. The Ross and Kathleen Barby matter 1. On 10 November, 2004, the Respondent received the sum of $150,037.11 on trust as a result of District Court Orders on his undertaking to disperse those funds in a particular manner and priority. 2. Between 10 November, 2004 and 14 May, 2008 the Respondent dispersed the moneys but for the sum of $3,570.23. On 31 May, 2011 the Respondent transferred this sum from the trust account to the office account of the Law Practice. There were no documents retained in the Law Practice file which supported this transfer that is no direction from the person on whose behalf the trust funds were held. Without supporting documents, the transfer was in breach of S 255 of the Act and a misappropriation of funds in that the Respondent has failed to hold the money exclusively for the person on whose behalf the money was received. 3. On the evidence before us, the Tribunal finds the grounds made out. The Beverley Anne Kennewell matter 1. The Law Practice trust account records show a credit balance of $5,908.52 as at 21 August, 2008 at the time the Law Practice changed its accounting software from 'Perfect Balance' to the 'Leap' system. The funds were held on behalf of the Estate of the late Beverley Anne Kennewell. 2. On 21 May, 2011, the Respondent transferred the above amount from the trust account to the Law Practice office account in payment of 'Invoice #4001 trust to office transfer'. 3. There were no documents retained in the Law Practice file which supported this transfer, that is, no direction from the person on whose behalf the trust funds were held. Without supporting documents, the transfer was in breach of S 255 of the Act and a misappropriation of funds in that the Respondent has failed to hold the money exclusively for the person on whose behalf the money was received. 4. On the evidence before us, the Tribunal finds the grounds made out. In the matter of Carolyn Barby 1. On 21 August, 2008 the Law Practice trust account records for Carolyn Barby show a credit balance of $15,999.29 at the time the Law Practice changed its accounting software from 'Perfect Balance' to the 'Leap' system. 2. On 31 May, 2011 the Respondent transferred the above amount from the trust ledger to his office account in payment of 'Invoice #4000 trust to office transfer'. 3. There were no documents retained in the Law Practice file which supported this transfer, that is, no direction from the person on whose behalf the trust funds were held. Ms. Barby in her Affidavit evidence confirmed she had never received the tax invoice nor trust statements nor did she authorise the transfer of the funds from the trust account to the Law Practice office account. 4. Without supporting documents, the transfer was in breach of S 255 of the Act and a misappropriation of funds in that the Respondent has failed to hold the money exclusively for the person on whose behalf the money was received. 5. On the evidence before us, the Tribunal finds the grounds made out. 6. In the matter of Estate of late Terry Paul Jones 7. On 3 November, 2008 the Law Practice trust account records held in the name 'Estate Administration Mr. Timothy John Hay' showed a credit balance of $3,744.85. 8. On 6 July, 2010 the Respondent caused the sum of $3,744.85 to be transferred from the trust account ledger to the Law Practice office account with narration 'paid to: Friedlieb Byrne Solicitors. Reason: Invoice #2747 trust to office transfer.' 9. There were no documents retained in the Law Practice file which supported this transfer, that is, no direction from the person on whose behalf the trust funds were held and this fact was confirmed in Mr. Hay's Affidavit who deposed that he had never authorised the transfer, nor received the tax invoice nor was he aware the funds existed. Without supporting documents, the transfer was in breach of S 255 of the Act and a misappropriation of funds in that the Respondent failed to hold the money exclusively for the person on whose behalf the money was received. 10. On the evidence before us, the Tribunal finds the grounds made out. In the matter of John Thomas McCurdy 1. On 26 March, 2009 moneys were received into the Law Practice Trust Account for provision of legal services by the Law Practice in relation to the above Estate, the trust account records being held in the name of 'Matter Code 08114319, Probate, Mr. Gregory Thomas McCurdy'. The moneys were disbursed but for the sum of $12,532.20 which was the credit balance of the trust account as at 23 April, 2009. 2. Between 23 February, 2011 and 11 April, 2012 the Respondent caused the sum of $12,532.20 to be transferred from the trust account ledger to the Law Practice office account in payment of four (4) tax invoices issued by the Law Practice to the client. 3. There were no documents retained in the Law Practice file which evidenced the work completed to support the transfer of $12,532.20 to the Law Practice. 4. There were no documents retained in the Law Practice file which supported the transfers, that is no direction or authority from the person on whose behalf the trust funds were held. 5. There were no documents retained in the Law Practice file which indicated that the Tax Invoices or Trust Account statements had ever been sent to the client. 6. The Affidavit of Mr. McCurdy in evidence before us, confirmed the contents of paragraphs 131, 132 and 133 above. 7. On the evidence before us, the Tribunal finds the ground made out. Conclusion 1. The Respondent's conduct discloses three major areas of concern in relation to his professional activities. Firstly his dishonesty in misappropriating Mrs. Sievert's funds for his own personal gain and secondly his irregular practice of withdrawing moneys from his trust account and crediting them to his office account without authority. 2. In the case of Mrs. Sievert, the Respondent's conduct in using her funds to pay his Law Practice's debt to the Australian Taxation Office and to not disclose that conduct until over 12 months later, and only in circumstances when Mrs. Sievert asked for a return of her funds, was grossly dishonest in the view of the Tribunal. 3. Secondly in relation to his 'mopping up' of the various trust account balances as set out in these Reasons, the Respondent demonstrated a complete lack of proper regard for the fiduciary obligations owed by him to his clients whose money he held in his trust account. 4. As was stated by Street C.J. in the decision of The Law Society of New South Wales v. Jones, Unreported, NSW CA 333 of 1977, 27 July, 1978 '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 money on their behalf. The Court must ensure that this trust is not misplaced.....' 5. The Kahlefeldt Securities matter did not involve dishonesty in that it was a consensual transaction with full disclosure at the time the loan was made, however the conflict in which the Respondent placed himself resulted in a clear breach of Rule 12 as set out above. Orders sought by the Applicant 1. The Applicant seeks an order that the Respondent be removed from the Roll together with costs. 2. We have no hesitation in concluding that the Respondent's conduct in the Sievert matter would 'reasonably be regarded as disgraceful and dishonourable by professional brethren of good repute and competency' (to quote from Mason P's judgment in New South Wales Bar Association v. Hamman [1999] NSWCA 404 at [21], citing Allinson v. General Council of Medical Education and Registration [1894] 1 QB 750.) It therefore manifestly amounted to professional misconduct at common law. 3. As regards the matters of unauthorised transfers from trust to office as set out in these Reasons, we find the Respondent's conduct falls into the same category of 'disgraceful and dishonourable' conduct such that it amounted to professional misconduct. 4. The standards of the profession must be fully maintained at all times, particularly with members of the public who find need to use the services of the profession from time to time. The instances of professional misconduct show that at the time when the Respondent engaged in it he was not a fit and proper person to remain on the Roll. He has chosen not to defend the proceedings nor present any evidence or advance any submission suggesting that he recognises the wrongfulness of his past misconduct and is sorry for it or that he might now be a fit and proper person to practise law. In those circumstances, we make the orders set out below. Orders 1. The Orders are: 1. The Respondent Solicitor is found guilty of professional misconduct. 2. Pursuant to section 562(2)(a) of the Act the name of the Respondent Solicitor is to be removed from the Local Roll. 3. The Respondent Solicitor is to pay the costs of the Applicant as agreed or assessed. I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. 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: 09 March 2015