Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Council of the Law Society of New South Wales v Truong [2016] NSWCATOD 137 Hearing dates: 28 September 2016 Date of orders: 07 November 2016 Decision date: 07 November 2016 Jurisdiction: Occupational Division Before: S Westgarth, Deputy President M Riordan, Senior Member M Bolt, General Member Decision: (1) The Respondent is guilty of professional misconduct both at common law and under ss 497 (1)(b) and 498 (1)(a) of the Legal Profession Act 2004. (2) The matter is listed for directions on 7 December 2016 at 10.30 am. Catchwords: Solicitor – disciplinary proceedings – misappropriation – breach of trust account requirements – removal from Roll – 'exceptional circumstances' – order for costs Legislation Cited: Civil and Administrative Tribunal Act 2013 (No. 2) Interpretation Act 1987 (NSW) Interpretation of Legislation Act 1984 (Vic) Legal Practice Act 1996 (Vic) Legal Profession Act 2004 Legal Profession Uniform Law (NSW) No. 16a Legal Profession Uniform Law Application Act (NSW) 2014 No. 16 Legal Profession Uniform Law Application Legislation Amendment Act 2015 (NSW) Cases Cited: Law Society of NSW v Shehadie [2016] NSWCATOD 46 Council of the Law Society of NSW v Greenstein [2015] NSWCATOD 122 Council of the Law Society of New South Wales v Coombes [2015] NSWCATOD 108 Council of the Law Society of New South Wales v Clapin [2011] NSWADT 83 Brereton v Legal Services Commissioner [2010] VSC 378 NSW Bar Association v Meakes [2006] NSWCA 340 Peters v R [1998] HCA 7; (1998) 192 CLR 493 Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 Allinson v General Council of Medical Education and Registration [1894] QBD 750 Category: Principal judgment Parties: Council of the Law Society of New South Wales (Applicant) Albert-Edris Truong (Respondent) Representation: Solicitors: Council of the Law Society of New South Wales (Applicant) A Sullivan (Respondent) File Number(s): 1620127 Reasons for decision The Application 1. On 12 May 2016, the Council of the Law Society of New South Wales ('the Law Society') filed an Application in the Tribunal alleging that the Respondent solicitor, Albert-Edris Truong ('the Respondent"), was guilty of professional misconduct on six (6) grounds, namely that he: (1) breached s 659 of the Legal Profession Act 2004 ("the 2004 Act"); (2) Breached s 255 of the 2004 Act; (3) Misappropriated monies; (4) Breached s 264 of the 2004 Act; (5) Breached s 260 of the 2004 Act; and (6) Caused a deficiency in the Law Practice trust account. Particulars of the Application 1. The grounds of the application are particularised as follows: 1. Breach of s 659 of the Act 1. On 25 October 2012 Mr Garry Napper, Trust Account Investigator for the Law Society of New South Wales attended the Law Practice, produced evidence of his appointment and asked the Respondent to provide him with the trust account records for the purposes of an inspection. [Ref GTN at p 1 paras 1-2] 2. The Respondent was unwilling or unable on 25 October 2012 to produce the trust account records. [Ref GTN at p 1 para 2] 3. On 9 November 2012 Mr Napper: a. revisited the Law Practice and conducted a routine first trust account investigation; b. reasonably requested that the Respondent make available 12 matter files for review; c. reasonably requested details of 34 deposit transactions in sums exceeding $5,000.00 into the various office accounts [the Impugned Deposits]. [Ref GTN at p 1 para 3] 4. The Respondent was unwilling or unable on 9 November 2012 to provide the matter files or any details of the Impugned Deposits. [Ref GTN at pp 1-2 para 3] 5. On 23 November 2012 Mr Napper revisited the Law Practice. On that occasion the Respondent failed to provide: a. any of the 12 matter files that had been requested on 9 November 2012. The six files that were not provided included the files of Wu, Ma and Mock referred to in paragraphs 12, 22 and 32 respectively below; b. any details of the Impugned Deposits. [Ref GTN at p 2 para 4] 6. On 14 December 2012 Mr Napper revisited the Law Practice. On that occasion the Respondent failed to provide: a. any of the six outstanding matter files that had been requested on 9 November 2012; b. any details of 29 of the Impugned Deposits. [Ref GTN at p 2 para 5] 7. By letter dated 2 February 2013 [the 2 Feb 13 letter], posted and email to the Respondent, Mr Napper asked the Respondent to provide within one month of receiving the letter: a. the six outstanding matter files that had been requested on 9 November 2012; b. details of the outstanding 29 impugned deposits. [Ref GTN at p 2 para 6] 8. Mr Napper enclosed a routine trust account investigation letter dated 30 January 2013 [the TAI Letter] with the 2 Feb 13 Letter. [Ref GTN at p 2 para 7] 9. In the TAI Letter Mr Napper: a. documented the shortcomings of the trust account and its records; b. requested that the Respondent immediately provide copies of bank reconciliations and trial balances for the two months ending November 2012 and December 2012; c. requested that the Respondent provide copies of bank reconciliations and trial balances for the two months ending January 2013 and February 2013 within one month of each month's end, that is, by 28 February 2013 and 31 March 2013 respectively. [Ref GTN at p 2 para 7] 10. In breach of s659 of the Act, the Respondent failed to provide Mr Napper with the documents and information relating to the affairs of the Law Practice, specifically the: a. six outstanding matter files; b. Details of 29 Impugned Deposits; c. Bank reconciliations or trial balances for the months ending November 2012 to February 2013 inclusive. 2. Breach of s 255 of the Act 11. On the dates stated, the Respondent without authority transferred trust monies to the office account described, for the purpose stated in the table below. Date Account Sum $ Purpose Matter/s 14 Jun 12 Office Account No 1 35,000.00 Payment of stamp duty for another client Ruoxue Wu 20 Jun 12 Office Account No 1 19,000.00 Payment of stamp duty for another client Ruoxue Wu 10 Jul 12 Office Account No 2 55,000.00 Reimbursement of Wu Zhiyun Ma 16 Jul 12 Office Account No 2 44,500.00 Unknown Zhiyun Ma Entrusted monies of Ruoxue Wu 12. In or about May or June 2012 Ruoxue Wu retained the Law Practice to act for him/her on a purchase of a house and land package in Melbourne [the Purchase]. [Ref Ex AMFI at p 14] 13. Between 7 June 2012 and 13 June 2012 by way of six transactions, Mr/Ms Wu caused the sum of $35,000.00 to be deposited on his/her behalf into Trust Account No 1 as part of the sum required as a deposit or to settle the Purchase [the Wu Entrusted Monies]. [Ref Ex AMFI at p 81] 14. On 14 Jun 2012 the Respondent or his agent, without authority transferred by Internet on line banking, the Wu Entrusted Monies to Office Account No 1. [Ref Ex AMFI at pp 81, 203] 15. On 15 June 2012 the Respondent or his agent using Internet on line banking effected a BPay payment in the sum of $30,970.00 from Office Account No 1 to the Office of State Revenue for stamp duty payable on another client's purchase. [Ref Ex AMFI at p 203] 16. The payment of stamp duty on 15 June 2012 in another client's purchase was made with the Wu Entrusted Monies. 17. On 18 June 2012 Mr/Ms Wu caused the sum of $19,000.00 to be deposited on his/her behalf into Trust Account No 1 as part of the sum required as a deposit or to settle the Purchase [the Further Wu Entrusted Monies]. [Ref Ex AMFI at p 81] 18. On 20 June 2012, the Respondent or his agent, without authority, transferred by Internet on line banking, the sum of $19,000.00 of the Further Wu Entrusted Monies to Office Account No 1. [Ref Ex AMFI at pp 81, 203] 19. On 21 June 2012, the Respondent or his agent using Internet on line banking effected a BPay payment in the sum of $22,012.50 from Office Account No 1 to the Office of State Revenue for stamp duty payable on another client's purchase. [Ref Ex AMFI at p 204] The payment of stamp duty on 21 June 2012 in another client's purchase was made with the Further Wu Entrusted Monies. These transactions are not reflected in the Wu trust ledger. [Ref GTN at p 13] Entrusted monies of Ma In or about May or June 2012 Mr Zhiyun Ma retained the Law Practice to act for him on a purchase of land. [Ref Ex AMFI at p 14] 23. On 15 June 2012 the sum of $99,500.00 was deposited on his behalf into Trust Account No 2 as part of the sum required to pay a deposit, stamp duty, part of the settlement of the purchase and legal fees [the Ma Entrusted Monies]. 24. On 10 July 2012 the Respondent or his agent, without authority transferred by Internet on line banking the sum of $55,000.00 of the Ma Entrusted Monies to Office Account No 2 [Ref Ex AMFI at p 146] 25. On the same day a sum of $52,900.00 was transferred by Internet on line banking from Office Account No 2, allegedly to reimburse Ruoxue Wu. [Ref Ex AMFI at pp 14, 146] 26. On 16 Jul 2012 the Respondent or his agent, without authority transferred by Internet on line banking the sum of $44,500.00 of the Ma Entrusted Monies to Office Account No 2. [Ref Ex AMFI at p 150] 27. These transactions are not reflected in the Ma trust ledger. [Ref GTN at pp 15-16] 3. Misappropriation 28. In the circumstances described in paragraphs 11 to 27 inclusive above, the Respondent's misuse of Wu's monies to pay the stamp duty of two other clients and the Respondent's misuse of Ma's money to repay Wu comprised misappropriation of monies by the Respondent. 4. Breach of s 264 of the Act 29. The Applicant repeats paragraphs 21 and 27 above. 30. By 27 March 2014 Mr John Michalski, Trust Account Investigator of the Law Practice observed that: a. The last bank reconciliation and trial balance prepared on the trust account was as at 31 August 2013; b. The trust cash receipts book and cash payments book were written up only to 31 August 2013; c. The trust ledgers were not up to date. Neither the precise date to which the ledgers had been written up nor the monies currently owing to clients could be readily ascertained, [Ref Michalski at p 6 para 5] 31. The Respondent in the period June 2012 until 15 April 2014 and from 1 December 2014 to 13 February 2015 failed to keep trust records in accordance with the requirements of s264 of the Act. [Ref Mitchell at p 6 paras 25-37] 5. Caused a deficiency in the Law Practice trust account 32. As at 31 March 2014 the reconstructed trust records revealed a deficiency of trust money in the sum of $20,642.50. [Ref Mitchell at p 5 para 13] 33. The deficiency was caused by the Respondent. 34. The Respondent rectified the deficiency on 2 May 2014. [Ref Mitchell at p 5 para 14] 6. Breach of s260 of the Act 35. In the table below, on the dates shown, the Respondent received into the office account nominated, for the purpose stated, sums of monies which were properly trust monies within the meaning of s243 of the Act. Date Account Sum $ Purpose Matter 16 Nov 11 Office Account No 1 48,000.00 Deposit of $47,500 plus legal fees Purchase of Unit C805 in Top Ryde 24 Nov 11 " 20,000.00 Part payment for stamp duty of $34,839.00 Unknown 25 Nov 11 " 14,954.00 Final payment for stamp duty of $34,839.00 Same matter as above 21 Dec " 20,000.00 Cash payment for Unknown 11 settlement of sale 22 Dec " 9,600.00 Cash payment for Same matter as above 11 settlement of sale 18 Jan " 42,731.15 Monies for settlement of Unknown 12 sale 1 Feb " 15,000.00 Deposit Bo Yu purchase of Unit A211 in Alora 12 6 Jul " 16,712.00 Settlement monies plus Unknown 12 legal fees 24 Sep " 81,500.00 Settlement monies Purchase of Unit 304 Vantage in Rhodes 12 24 Jul Office Account No 2 12,500.00 'No reason' Injoy Realty 12 27 Jul " 37,810.00 Stamp duty Maggie Mok purchase 12 Metro Grand Unit 35.05 27 Sep Office Account No 3 12,370.00 Stamp duty David Howe purchase in ACT 12 16 Jun " 52,800.00 Deposit monies Trust ledger 1066 Brett Willis & Emily Scott, Sale 14 1 Aug Office Account 7,047.50 Stamp duty Meijing Zhai Purchas 14 No 2 [Ref Ex AMF 1 at pp 11-12; Mitchell at p 6 paras 20,21] 36. The acceptance by the Respondent of trust monies into a Law Practice office account comprised an intermixing of trust money with other money in breach of s 260 of the Act. The Hearing 1. The matter was heard before us on 28 September 2016. Ms Groenewegen, Solicitor, appeared for the Law Society and Ms Sullivan, Solicitor, appeared for the Respondent. 2. Ms Sullivan applied for an adjournment on the grounds that the Respondent had instructed her shortly before the hearing date and his previous solicitors had not released their file to her. 3. However, the Tribunal noted that no Notice of Legal Representation had been filed on behalf of the Respondent and that he had indicated previously that he had been self-represented in the proceedings. 4. Ms Sullivan then stated that she wished to lodge an amended Reply, as the existing Reply did not properly respond to the application. However, in response, Ms Groenewegen observed that the Reply did not dispute the facts as particularised in the application and she submitted that the Tribunal was able to draw conclusions based upon the Reply. She also stated that when she served the application upon the Respondent under cover of her letter dated 12 May 2016, she provided him with a copy of the pro-forma Reply document and the Practice Direction so that he would be able to prepare his Reply. She tendered a file copy of this letter (Exhibit B). She also referred to Orders made by Boland ADCJ that required the Respondent to file and serve his Reply and any evidence in support by a specific date and stated that the Respondent failed to comply with those orders. 5. Further, the Respondent had also failed to comply with an order that he file and serve his submissions in relation to liability issues by 21 September 2016, and he had advised the Law Society that he did not intend to file submissions and that he intended to reply upon his Affidavit. 6. Ms Groenewegen also submitted that but for the stipulation set out in the Civil and Administrative Tribunal Act No. 2 ("the CAT Act"), this matter could be determined on the papers and without an oral hearing as the facts were not in dispute. She also submitted that it was her belief that the Respondent had sent his copy of the documents that the Law Society had served upon him to a Barrister whom he hoped would represent him in these proceedings. She provided Ms Sullivan with a duplicate copy of those documents. 7. After a short adjournment, the Tribunal refused the application for an adjournment (giving reasons orally) and the matter proceeded to hearing. The Respondent's Reply 1. On the 2 August 2016, the Respondent filed a Reply in which he admitted the alleged breaches of the Act and that he had misappropriated monies and caused a deficiency in the Law Practice's trust account. 2. In response to grounds 1, 2, 4, 5 and 6, the Respondent stated: The breach was not intended as I have always try my best to fufil (sic) the obligations to customers in conveyancing matters which must settle on time otherwise their properties will be affected and potential losses in a property conveyancing is frightening and also try my best to fufil (sic) and comply with the Law Society Investigator requests at the same time and (given my circumstances at the time) to the trust accounting which I have obligations as well. I was time poor, over worked, under staff due to high staff turnover and under a lot of stress. Since April 015 when the Law Society Trust Account department released me from supervision of the trust account I have been up to date with the trust account book keeping and the trust account had always been up to date. The annual trust account auditings for the two years 2015 and 2016 I have always requested the Law Society Trust Accounting department to audit my work in trust account keeping of records and I have been up to date with my trust accounting records to date. I have improved markedly. I have not caused any client to lose any of their money entrusted to me. 1. In response to ground 3 of the application, the Respondent stated: I am deeply embarrassed when the term of misappropriation of monies in plain English terms involved theft as I have never took any client money. I have not cause any client to lose any of their money entrusted to me. The breach was not intended as I have explained in details in my response to the Law Society Trust account investigators and had been assuring the trust inspectors in my explanations that there will not be a repeat despite mounting pressures on me and it was never to be repeated. Which is true… The Evidence 1. The Law Society relied upon affidavits that were sworn by the following deponents on the dates indicated: Ms Anne-Marie Foord, its solicitor, dated 11 May 2016 (with an Exhibit "AMF1") and 12 May 2016; Mr John Michalski dated 27 April 2016; Mr John Mitchell dated 29 April 2016; and Mr Garry Napper dated 30 April 2016. These affidavits were admitted without objection and no deponents was required to attend for cross-examination. Ms Groenewegen also tendered a Chronology. 2. The Respondent relied upon an affidavit that he affirmed on 2 August 2016. He was not required for the purposes of cross-examination. Relevant Legislation 1. The Act was repealed as from 1 July 2015 by s 167 (a) of the Legal Profession Uniform Law Application Act 2014 (NSW) ("the Application Act"). Sched 2 of the Legal Profession Uniform Law Application Legislation Amendment Act 2015 ("the Uniform Law Amendment Act") made a range of consequential amendments as from 1 July 2015, including to the Civil and Administrative Tribunal Act (No. 2) 2013 ("the CAT Act") reflecting the commencement of the Uniform Law from 1 July 2015. 2. This Tribunal has such jurisdiction and functions as may be conferred or imposed upon it by or under the CAT Act or any other legislation (s 28 CAT Act). Further, the Interpretation of Legislation Act 1984 (Vic) ("the Victorian Interpretation Act") must be applied in the interpretation of the Uniform Law, including the transitional provisions (s 7 (1) of the Uniform Law). 3. There are transitional provisions in sch 4 of the Uniform Law and generally speaking, these do not affect or take away from the Victorian Interpretation Act, unless the contrary intention appears (sch 4 cl 2 (1)). 4. The repeal of the Act does not affect any rights, privileges, obligations and liabilities acquired, accrued or incurred under it. Remedies are preserved and legal proceedings may be continued (see: s 30 (1) (c) (e) Interpretation Act 1987 (NSW) and NSW Bar Association v Meakes [2006] NSWCA 340 at [107]). There is no contrary provision in Sch 4. 5. Cl 26 of Sch 4 of the Uniform Law provides: 26 Current complaints and investigations This clause applies to – (a) a complaint made under old Chapter 4 but not disposed of before the commencement day; or (b) an investigation referred to in old Chapter 4 that had begun but had not been completed before the commencement day. (2) On and after the commencement day – (a) the complaint or investigation is to continue to be dealt with in accordance with the provisions of the old legislation; and (b) for that purpose, the complaint or investigation is to continue to be dealt with by the entity responsible for dealing with it under those provisions (the current entity). (3) Subclause (2)(b) does not apply if a local regulation or other legislation of this jurisdiction directs that another entity referred to in this Law (the substituted entity) is to deal with the complaint or investigation instead of the current entity. (4) The substituted entity may have regard to anything done by the current entity before, on or after the commencement day but before the direction takes effect. 1. As the complaint in this matter was made under Chapter 4 of the Act, but was not disposed of before 1 July 2015, it must continue to be dealt with under the Act. We are satisfied that the Uniform Law and the resulting amendments to the CAT Act do not apply to this matter and that this Tribunal's statutory power to make orders, having made a finding of either unsatisfactory professional conduct or professional misconduct, is found in s 562 of the Act. 2. The relevant provisions of the Act are as follows: 1. S 243, which provides defines 'trust money' as: 'money entrusted to a law practice in the course of or in connection with the provision of legal services by the practice, and includes: (a) money received by the practice on account of legal costs in advance of providing the services, and (b) controlled money received by the practice, and (c) transit money received by the practice, and (d) money received by the practice, that is the subject of a power, exercisable by the practice or an associate of the practice, to deal with the money for or on behalf of another person. 1. S 255 (1), which provides: Holding, disbursing and accounting for trust money 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. S 260, which provides: 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 authorized by the Law Society Council and in accordance with any conditions imposed by the Law Society Council in relation to the authorization. 1. S 264, which provides: 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 (iii) 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. 1. S 659, which provides: Requirement to provide access to documents and information relating to affairs of law practice (1) This section applies to the following activities: (a) trust account investigations, (b) trust account examinations, (c) complaint investigations, (d) compliance audits. (2) For the purpose of carrying out an activity to which this section applies in relation to a law practice, an investigator may, on production of evidence of his or her appointment, require the practice or an associate or former associate of the practice or any other person (including, for example, an ADI, auditor or liquidator) who has or has had control of documents relating to the affairs of the practice to give the investigator either or both of the following: (e) access to the documents relating to the affairs of the practice that the investigator reasonably requires, (f) information relating to the affairs of the practice that the investigator reasonably requires (verified by statutory declaration if the requirement so states). (3) A person who is subject to a requirement under subsection (2) must comply with the requirement. Maximum penalty: 50 penalty units. (4) A person who is subject to a requirement under subsection (2) is not entitled to charge the investigator for giving any such access or information. 1. S 497 of the Act, which provides: 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. 1. S 498 of the Act, which provides, relevantly: 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… (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. Submissions Law Society's Submissions 1. The Law Society relied upon detailed written submissions regarding the substantive issues and Ms Groenewegen also made oral submissions. These were to the effect that the Respondent's conduct, which is admitted, should properly be characterized as professional misconduct under s 498 (1) (a) of the Act. 2. Further, if the Tribunal determines that the Respondent's conduct is such as to justify a finding that he has demonstrated a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence, it constitutes professional misconduct under s 497(1) of the Act. 3. The Tribunal may also apply the common law test for professional misconduct. The primary statement of this test is found in Allinson v General Council of Medical Education and Registration [1894] QBD 750 at 758, where Lopes LJ stated: If it is shown that a medical man, in the pursuit of his profession, has done something with regard to it which would be reasonably regarded as disgraceful and dishonourable by his professional brethren of good repute and competency, then it is open to the General Medical Council to say that he has been guilty of "infamous conduct in a professional respect". 1. This Tribunal has adopted the Allinson test in numerous decisions, including Council of the Law Society of NSW v Greenstein [2015] NSWCATOD 122 at [37]. 2. The Law Society submitted that the Respondent's conduct demonstrates, at the very least, a consistent failure to maintain a reasonable standard of competence and diligence. 3. Further, the Respondent's contravention of s 255 of the Act amounts to misappropriation and the Tribunal is faced with conduct amounting to a breach of his fiduciary duties to his clients Wu and Ma and a failure to avoid a conflict of interest. It is the existence of this fiduciary duty (which includes a duty to avoid a conflict of interest) that sets a solicitor apart from business people engaged in ordinary trade and commerce. 4. In relation to misappropriation, Ms Groenewegen submitted that the Law Society does not allege that the Respondent stole entrusted monies, or that he intended to steal monies with the subjective intention to permanently deprive clients of their money. However, it alleges that his conduct was objectively dishonest by the standards of honest people. 5. In this matter, the Respondent caused deficiencies in the trust account of the Law Practice as a result of: (1) overpaying entrusted monies to a client; and (2) refunding the value of a cheque that had been deposited into the trust account before the deposited cheque had cleared. There were also occasions upon which he failed to ensure that trust monies were deposited into the trust account rather than the office account. 6. By breaching his fiduciary duties and being patently inadequate in his accounting for others' entrusted monies, the Respondent demonstrates that he is not a fit and proper person to engage in legal practice and that he has engaged in conduct 'which would reasonably be regarded as disgraceful or dishonourable' by other legal practitioners. 7. Based upon the evidence in this matter, the grounds of the application are established and the Respondent's conduct can properly be characterised as professional misconduct either by virtue of s 497 (1) (b) of the Act, the common law definition, or both. Respondent's Submissions 1. The Respondent did not file written submissions and Ms Sullivan did not wish to make any oral submissions. However, she advised the Tribunal that the Respondent does not dispute the facts alleged in the Application and that he wishes to rely upon the terms of his letter to the Law Society, which is annexure "F" of Exhibit AMF1 of Ms Foord's affidavit. We note that this letter is undated, but that it was forwarded to the Law Society by Messrs Eakin McCaffery Cox, Lawyers, under cover of a letter dated 16 July 2015. Ms Sullivan also tendered the Respondent's affidavit dated 2 August 2016. 2. Ms Sullivan also advised the Tribunal that the Respondent did not wish to adduce any further evidence with respect to the issue of whether he is guilty of professional misconduct. The Respondent was not cross examined. Consideration 1. In view of the seriousness of the allegations and the gravity of the potential consequences for the Respondent, the evidence in support of a finding that a complaint is made out must be strong: Briginshaw v Briginshaw [1938] HCA 34 at p 11, in which Dixon J stated, relevantly: At common law two different standards of persuasion developed. It became gradually settled that in criminal cases an accused person should be acquitted unless the tribunal of fact is satisfied beyond reasonable doubt of the issues the burden of proving which lie upon the prosecution. In civil cases such a degree of certainty is not demanded. … … The truth is that, when the law requires the proof of any fact, the tribunal must feel an actual persuasion of its occurrence or existence before it can be found. It cannot be found as a result of a mere mechanical comparison of probabilities independently of any belief in its reality. No doubt an opinion that a state of facts exists may be held according to indefinite gradations of certainty; and this has led to attempts to define exactly the certainty required by the law for various purposes. Fortunately, however, at common law no third standard of persuasion was definitely developed. Except upon criminal issues to be proved by the prosecution, it is enough that the affirmative of an allegation is made out to the reasonable satisfaction of the tribunal. But reasonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters 'reasonable satisfaction' should not be produced by inexact proofs, indefinite testimony, or indirect inferences. Everyone must feel that, when, for instance, the issue is on which of two dates an admitted occurrence took place, a satisfactory conclusion may be reached on materials of a kind that would not satisfy any sound and prudent judgment if the question was whether some act had been done involving grave moral delinquency. … This does not mean that some standard of persuasion is fixed intermediate between the satisfaction beyond reasonable doubt required upon a criminal inquest and the reasonable satisfaction which in a civil issue may, not must, be based on a preponderance of probability. It means that the nature of the issue necessarily affects the process by which reasonable satisfaction is attained. When, in a civil proceeding, a question arises whether a crime has been committed, the standard of persuasion is, according to the better opinion, the same as upon other civil issues… But, consistently with this opinion, weight is given to the presumption of innocence and exactness of proof is expected. 1. The Tribunal notes that the evidence indicates that the Respondent was admitted as a Solicitor in 2002 and that in 2005 he became the Sole Principal of the Edrison Lawyers ("the Law Practice"). That Law Practice became incorporated on 9 September 2011 and the Respondent became its Solicitor Director. The Law Practice initially employed the Respondent's wife and one part-time staff member, but by 2012 it had expanded significantly and employed 13 staff. Ground 1 1. Mr Garry Napper, Trust Accounts Inspector for the Law Society, deposed that visited the Law Practice on 25 October 2012, for the purposes of performing a routine trust account investigation. This was the first inspection since the Law Practice was incorporated. He showed the Respondent his Notice of Appointment and requested access to the trust account records and 12 matter files. However, as the trust account records had not been written up since about March 2012, the Respondent asked him if he could return in one week. Mr Napper then arranged to revisit the Law Practice on 23 November 2012. 2. On 23 November 2012, the Respondent provided Mr Napper with 6 of the 12 matter files that were requested on 9 November 2012. He did not provide any explanation for any of the impugned deposits. In relation to the state of his trust account records, the Respondent stated: My work load is very high; I am putting in very long hours. I've had some staff leave and I'm not able to do it. We had to leave the other office at short notice and so the file storage is in chaos. The files are in my garage and they are dusty and there are cockroaches… Mr Napper then arranged to revisit the Law Practice on 4 December 2012. 1. On 4 December 2012, the Respondent provided Mr Napper with documents relating to 5 of the 34 impugned deposits, which left 29 impugned deposits unexplained, and he did not produce any of the 6 remaining matter files. 2. On 2 February 2013, Mr Napper wrote to the Respondent asking him to provide the 6 outstanding matter files and details of, or documents relating to, the outstanding 29 impugned deposits within a period of one month from receiving the letter. The letter was posted and emailed to the Respondent on 4 February 2013, together with a routine trust account investigation letter dated 30 January 2013. 3. In the Trust Account Investigation letter dated 30 January 2013, Mr Napper documented the shortcomings of the trust account found upon his review and asked the Respondent to immediately provide copies of bank reconciliations and trial balances for the 2 months ending November 2012 and December 2012, and the 2 months ending January 2013 and February 2013, within 1 month of each month's end (that is, by 28 February 2013 and 31 March 2013, respectively). However, the Respondent did not provide the requested information and documentation until 6 June 2013, after he was compelled to produce them pursuant to a Notice under s 660 of the Act dated 22 May 2013. 4. For these reasons, we are satisfied that Ground 1 has been made out. Ground 2 1. Based upon the admitted facts in this matter, the Tribunal is satisfied that the Respondent failed to hold the monies entrusted for his clients Wu and Ma in a general trust account of the Law Practice exclusively for the persons on whose behalf if was received and that he disbursed it otherwise than in accordance with a direction given by the persons on whose behalf it was held. He therefore contravened s 255 of the Act. 2. It follows that Ground 2 has been made out. Ground 3 1. In relation to this ground, the Tribunal notes that in his Affidavit the Respondent's deposed as follows: 4… I have not and never cause any client to lose any of their money entrusted to me. I have never called client's money as my own and that is stealing and I have never done that… 8. I am deeply embarrassed when the term of misappropriation of monies in plain English terms involved theft as I have never took any client money. I have not cause any client to lose any of their money entrusted to me. The breach was not intended as I have explained in details in my responses to the Law Society Trust account investigators and had been assuring the trust inspectors in my explanations that there will not be a repeat despite mounting pressures on me and it was never to be repeated. Which is true as I can never again experience such pressure and I would and has always kept client money as client's money which is always to be kept in trust for them. 1. In determining whether the Respondent's conduct constitutes misappropriation, the Tribunal refers to the decision in Kumar v Legal Services Commissioner [2015] NSWCA 161, in which the Court of Appeal relevantly held (at [61]): … Lest there be any doubt about it, even a temporary use by Mr Kumar of his client's funds without prior approval amounts to serious and deliberate dishonesty. That is precisely the sort of conduct which is antithetical to the trust and confidence which is required by a solicitor with custody of his or her clients' money. 1. This Tribunal, as was the case with its predecessor, has consistently held that in order to establish an allegation of misappropriation, it is necessary to demonstrate that there was some deliberate act that was objectively dishonest, applying the 'ordinary standards of reasonable and honest people', but without the need to demonstrate any intention to misappropriate or to identify any subjective dishonesty. This approach is based upon the decision in Brereton v Legal Services Commissioner [2010] VSC 378, per Bell J, who determined (relevantly): 24. There is a difficulty in the drafting of charges 4 and 5. On the conduct particularised, charge 4 alleges statutory misconduct constituted by 'wilful or reckless' contravention of s 174(3) of the Legal Practice Act. The state of mind alleged, rightly, is wilfulness or recklessness. Dishonesty is neither alleged nor necessary for that charge. On the same conduct, charge 5 alleges common law misconduct because Mr Brereton 'misappropriated trust moneys'. No state of mind is expressly alleged. Dishonesty is a necessary element of that charge. Wilful or reckless disregard is not sufficient. I think the tribunal erred with respect to charge 5 mainly because it failed to appreciate this distinction. 1. The decision in Brereton was considered by the Administrative Decisions Tribunal in Council of the Law Society of New South Wales v Clapin [2011] NSWADT 83, as follows: 226. Mr Lynch placed strong reliance on dicta in Brereton v Legal Services Commissioner [2010] VSC 378 to the effect that 'dishonesty' is a 'necessary element' in any charge of misappropriation (see the judgment of Bell J at [24], [31 - 33] and [47 - 59]). Having regard to these dicta and to our decision, explained above at [214 - 215], not to infer that the Solicitor's breaches of the statutory requirements occurred with full knowledge of the content of those requirements, we conclude that in this instance the necessary element of dishonesty was not made out. So to conclude is not, however, to suggest that the Solicitor's conduct in this and other similar cases was not seriously improper. 1. This Tribunal also considered Brereton in the matter of Law Society of NSW v Shehadie [2016] NSWCATOD 46, as follows: 34. There was some debate as to what is meant by 'misappropriation', and whether, in particular, the term carries a connotation of dishonesty or purposeful misuse. The Macquarie Dictionary (4th ed. 2005) definition of 'misappropriate' is '1.to put to a wrong use. 2. To apply wrongfully or dishonestly to one's own use, as funds entrusted to one.' It will be seen that the first meaning merely speaks of an act where a thing is put to a 'wrong use', whereas the second focuses on use for one's own benefit, and introduces expressly the element of dishonesty. 35. It is accepted that the legal meaning of misappropriation carries the connotation of a wrongful, dishonest use. Further in disciplinary proceedings of the present kind, it is accepted that the prosecutor must show that the respondent knowingly engaged in the conduct of concern, and that the conduct was dishonest. There has been debate as to whether the prosecutor must show that the respondent knew that the conduct in which he or she had intentionally engaged was dishonest, or is it enough to show that regardless of his or her belief in that regard, it would be regarded as dishonest, viewed objectively. 36. In Brereton v Legal Services Commissioner [2010] VSC 378 Bell J examined closely what is required by way of proof of dishonesty in a misappropriation case. His Honour emphasised that the general law (both civil and criminal) in dealing with proof of dishonesty does not go so far as to require that the defendant knew at the time of the conduct that what he did was dishonest. Proof of 'subjective' dishonesty in that sense is not required. Bell J said (some footnotes omitted): 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 [1998] HCA 7; (1998) 192 CLR 493] as follows [503-504]: 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. (Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336, 361-363 per Dixon J). In a criminal case, the criminal standard of proof beyond reasonable doubt applies. 37. In disciplinary proceeding of the present kind, therefore, the three steps to which Toohey and Gaudron JJ refer, and reiterated by Bell J at para [54] apply. It will be seen that those steps draw a clear distinction between the understanding of the defendant when engaging in the conduct and the characterisation of that understanding. Commonly, evidence will establish a state of knowledge, belief or intent in relation to the conduct under notice, and the issue will then be (step three) whether the proven state of understanding can fairly and properly be found to be dishonest. In making that finding the tribunal of fact will look at the totality of the evidence, and apply the standards of the community to what has been put to it by the defendant in that regard. 38. The Tribunal recently approved and adopted Bell J's analysis in Council of the Law Society of NSW v Coombes [2015] NSWCATOD 108 at [36]- [43], and described the approach to be adopted as follows: We will therefore proceed on the basis that we need first consider whether the Solicitor intended to do the acts which are the subject to (sic) the complaint and secondly whether ordinary and decent people would regard these acts as dishonest. It will be seen that the Tribunal conflated the first two steps set out by Bell J at [54] of his reasons, and described his third step as the second matter to be considered. 1. The Respondent's submissions to the Law Society, which were submitted on his behalf by his Solicitors on 16 July 2015, demonstrate his knowledge and understanding of the facts at the times that the conduct occurred. On that basis, we are satisfied on the balance of probabilities that the Respondent engaged in deliberate acts, namely the transfers of sums totalling $153,500 and the disbursement of that sum, which wrongly converted the clients' property to the Respondent's own and/or his clients' use and which were dishonest by the ordinary standards of reasonable and honest people. 2. It follows that ground 3 has been made out. Ground 4 1. The evidence relevant to this ground of the application is found in the affidavits of Mr Napper, Mr Michalski and Mr Mitchell, which were admitted into evidence without contest by the Respondent. Based upon this evidence, we are satisfied that ground 4 has been made out. Ground 5 1. Based upon the evidence set out in Mr Mitchell's affidavit, which was admitted without contest by the Respondent, we are satisfied that ground 5 has been made out. Ground 6 1. The evidence relevant to this ground of the application is found in the affidavits of Ms Foord and Mr Napper. Based upon this evidence, we are satisfied that ground 6 has been made out. Characterisation of the Respondent's Conduct 1. We are satisfied that the solicitor's conduct is properly considered as professional misconduct, as defined in s 497 of the Act and at common law. We consider that his conduct in misappropriating entrusted monies and breaching ss 255, 264, s260 and 659 of the Act would reasonably be regarded as disgraceful or dishonourable by professional colleagues of good repute and competency. The matter is listed for directions on 7 December 2016 at 10.30 am so that the Tribunal may subsequently consider appropriate final orders. 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: 07 November 2016