Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Law Society of NSW v Shehadie (No 2) [2016] NSWCATOD 151 Hearing dates: 22 August 2016 Date of orders: 05 December 2016 Decision date: 05 December 2016 Jurisdiction: Occupational Division Before: K P O'Connor, AM, ADCJ, Deputy President R Dawson, Senior Member J Schwager, General Member Decision: 1. The respondent's local practising certificate be cancelled, and that any new certificate not be issued to the practitioner before the end of 12 months from the date of this order. 2. The respondent be fined $25,000. 3. The respondent pay the applicant's costs of, and incidental, to these proceedings, as agreed or assessed. Catchwords: PROFESSIONAL DISCIPLINE – Legal Profession - Finding of Professional Misconduct – Misappropriation - Appropriate disciplinary order Legislation Cited: Legal Profession Act 2004 Cases Cited: A Solicitor v Council of the NSW Law Society [2004] HCA 1; 216 CLR 253 Dupal v Law Society of NSW (unreported, 26 April 1990) Ex Parte Lenehan [1948] HCA 45; (1948) 77 CLR 403 Kumar v Legal Services Commissioner [2015] NSWCA 161 New South Wales Bar Association v Cummins [2001] NSWCA 28 New South Wales Bar Association v Evatt [1968] HCA 20; (1968) 117 CLR 177 New South Wales Bar Association v Maddocks (23 August 1988, unreported) New South Wales Bar Association v Murphy [2002] NSWCA 138 Prothonotary of the Supreme Court of New South Wales v Ritchard (31 July 1987, unreported) Southern Law Society v Westbrook [1910] HCA 31; (1910) 10 CLR 609. Stanoevski v The Council of the Law Society of NSW [2008] NSWCA 93 The Council of the Law Society of NSW v Doherty [2010] NSWCA 177 The Law Society of New South Wales v Walsh [1997] NSWCA 185 Category: Principal judgment Parties: Law Society of New South Wales (Applicant) Michael John Shehadie (Respondent) Representation: Counsel: B Tronson (Applicant) C Webster SC (Respondent) Solicitors: Foulsham & Geddes (Respondent) File Number(s): 1520115 REASONS FOR DECISION 1. The Tribunal has decided that the respondent, a legal practitioner, is guilty of professional misconduct: Law Society of NSW v Shehadie [2016] NSWCATOD 46 (20 April 2016) (the liability decision). This decision deals with the issue of the appropriate disciplinary orders. 2. We dealt in our liability decision with four charges laid by the Council of the Law Society pursuant to the Legal Profession Act 2004, the applicable law at the relevant times ('the Act'). The offences came to light as a result of an investigation completed in April, 2013 stimulated by the regular trust account inspection that took place in 2012. The respondent has been in practice for almost 40 years and for most of that time has practised as a principal. Prior to the matters the subject of these proceedings he had no adverse disciplinary record. Background 1. The respondent's firm (Michie Shehadie & Co) has had a long involvement in conveyancing and mortgage lending. All four charges the subject of our earlier proceedings related to that area of the firm's practice, and had a connection to lending transactions. The first three concerned breach of statutory provisions binding solicitors in relation to mortgages. In the case of charge 1, the Taouk/Ayoub matter, the respondent admitted that in 2011 he had acted as a solicitor in respect of regulated mortgage, and thereby breached s 479(1) of the Legal Profession Act 2004 (the Act). In the case of charge 2 (the Zappia matter), he admitted that he had failed in his obligation to give written notice to a client of the fidelity insurance risk she might face if she entrusted money to the solicitor, with a view to becoming a lender or contributor under a run out mortgage, thereby breaching cl 6 of sch 8 of the Act. 2. Charges 3 and 4 related to the one series of events. 3. The respondent was the solicitor for a vendor of real estate. The vendor company's principal, Mr Ellis, was at the time in debt to the respondent under a personal loan made to him by the respondent. As explained in our liability decision, the respondent directed the estate agent to whom the deposit for the sale had been paid to transfer the money to his practice's trust account, and the respondent then transferred the money to his cash management account. The account was a general practice account not the statutory trust account. 4. In doing so, the respondent breached the purchaser's right to have the deposit monies held in trust pending settlement, and to receive the benefit of any interest earned in the period prior to settlement. He made no use of the money during the time it was under his control. After settlement he accounted to his client for the deposit and the balance less the amount of the personal loan which was then acquitted. The respondent later recompensed the purchaser for the amount of interest which would have been earned during the period the money was under his control. 5. The respondent admitted the first of the two charges relating to these events, Charge 3, namely that he breached s 255 of the Act in that he failed to hold trust money in a general trust account of the practice and disbursed it without a direction from the person on whose behalf it was received. 6. He contested Charge 4 alleging misappropriation. He admitted many of the factual particulars of charge 4, but denied that he had behaved dishonestly. We concluded, applying the relevant law, that the respondent's conduct amounted to misappropriation, on the basis, at the least, that the conduct in which he engaged in not holding the deposit pending settlement in a trust account would be seen by reasonably-minded objective observers as dishonest. It was not essential to the proof of misappropriation that the person charged be shown to have had a subjective belief that his actions were dishonest. We made no finding in relation to the issue of whether he was subjectively dishonest. Possible Disciplinary Orders 1. The Tribunal's order making power in this case is governed by s 562 of the Act, which provides: 562 Determinations of Tribunal (1) Orders generally If, after it has completed a hearing under this Part in relation to a complaint against an Australian legal practitioner, the Tribunal is satisfied that the practitioner has engaged in unsatisfactory professional conduct or professional misconduct, the Tribunal may make such orders as it thinks fit, including any one or more of the orders specified in this section. (2) Orders requiring official implementation in this jurisdiction The Tribunal may make the following orders under this subsection: (a) an order that the name of the practitioner be removed from the local roll, (b) an order that the practitioner's local practising certificate be suspended for a specified period or cancelled, (c) an order that a local practising certificate not be issued to the practitioner before the end of a specified period, (d) an order that: (i) specified conditions be imposed on the practitioner's practising certificate issued or to be issued under this Act, and (ii) the conditions be imposed for a specified period, and (iii) specifies the time (if any) after which the practitioner may apply to the Tribunal for the conditions to be amended or removed, (e) an order reprimanding the practitioner, (f) an order that the name of the practitioner be removed from the roll of public notaries maintained under the Public Notaries Act 1997. (3) Orders requiring official implementation in another jurisdiction The Tribunal may make the following orders under this subsection: (a) an order recommending that the name of the practitioner be removed from an interstate roll, (b) an order recommending that the practitioner's interstate practising certificate be suspended for a specified period or cancelled, (c) an order recommending that an interstate practising certificate not be granted to the practitioner before the end of a specified period, (d) an order recommending that: (i) specified conditions be imposed on the practitioner's interstate practising certificate, and (ii) the conditions be imposed for a specified period, and (iii) the conditions specify the time (if any) after which the practitioner may apply to the Tribunal for the conditions to be amended or removed. (4) Orders requiring compliance by practitioner The Tribunal may make the following orders under this subsection: (a) an order that the practitioner pay a fine of a specified amount, (b) an order that the practitioner undertake and complete a specified course of further legal education, (c) an order that the practitioner undertake a specified period of practice under supervision, (d) an order that the practitioner do or refrain from doing something in connection with the practice of law, (e) an order that the practitioner cease to accept instructions as a public notary in relation to notarial services, (f) an order that the practitioner's practice, or the financial affairs of the practitioner or of the practitioner's practice, be conducted for a specified period in a specified way or subject to specified conditions, (g) an order that the practitioner's practice be subject to periodic inspection for a specified period, (h) an order that the practitioner undergo counselling or medical treatment or act in accordance with medical advice given to the practitioner, (i) an order that the practitioner use the services of an accountant or other financial specialist in connection with the practitioner's practice, (j) an order that the practitioner not apply for a local practising certificate before the end of a specified period. Note. This subsection is not an exhaustive statement of orders that must be complied with by the practitioner. (5) Ancillary or other orders The Tribunal may make ancillary or other orders, including an order for payment by the practitioner of expenses associated with orders under subsection (4), as assessed or reviewed in or in accordance with the order or as agreed. (6) Alternative finding The Tribunal may find that a person has engaged in unsatisfactory professional conduct even though the complaint or disciplinary application alleged professional misconduct or may find that a person has engaged in professional misconduct even though the complaint or disciplinary application alleged unsatisfactory professional conduct. (7) Maximum fine The amount ordered by the Tribunal under this section to be paid by way of fines by any one Australian legal practitioner in connection with the Tribunal's findings about a complaint must not exceed in total: (a) $10,000 in the case of unsatisfactory professional conduct not amounting to professional misconduct, or (b) $75,000 in the case of professional misconduct. If the Tribunal finds that the practitioner has engaged in both professional misconduct and unsatisfactory professional conduct not amounting to professional misconduct, the amount must not exceed $75,000 in total. (8) Reprimands If the Tribunal makes an order reprimanding the practitioner, the Tribunal is to publish the order and a statement of its reasons for making the order. (9) It is sufficient compliance with the requirement to publish an order under subsection (8) if the Tribunal provides to the Commissioner sufficient information to enable the Commissioner to exercise the Commissioner's powers or functions in respect of the Register of Disciplinary Action required to be kept under Part 4.10 (Publicising disciplinary action). (10) (Repealed) 1. Disciplinary orders have as their ultimate and most important purpose the protection of the public. They also serve several other purposes such as: denunciation of conduct that is unacceptable; informing and educating practitioners as to appropriate professional standards; setting of standards for the profession; deterrence of similar conduct by other members of the profession; and specific deterrence. See generally, Law Society of New South Wales v Walsh [1997] NSWCA 185 per Beazley JA at 40-44. Her Honour's observations related to the inherent power of the Court to strike off a practitioner, but apply equally to us in the exercise of our statutory power. She concluded at 44: - The Court's power is discretionary. - Subject to considerations which would compel the Court to impose a lesser penalty, the protective nature of the jurisdiction calls for removal of a practitioner's name from the roll when the practitioner has been found not to be of good fame and character, - The subjective considerations which might compel a different course are ones which themselves are relevant to and enhance the essential nature of the Court's jurisdiction, which is the protection of the public. An example is where the legal practitioner has reported the subject conduct to the Law Society or Bar Association. The relevance of mitigating conduct of that types is that it encourages practitioners guilty of misconduct to report it; - In general, mitigating factors, such as evidence of a respected reputation, no previously found misconduct, or service to the profession 'are of considerably less significance than in the criminal sentencing process: Law Society of New South Wales v Bannister at 13. 1. Further, as noted by Gleeson CJ in A Solicitor v Council of the NSW Law Society [2004] HCA 1; 216 CLR 253 at [21]: Professional misconduct may not necessarily require a conclusion of unfitness to practise, and removal from the roll. In that regard, it is to be remembered that fitness is to be decided at the time of the hearing. Proposed Orders in light of Liability Decision 1. After considering the findings in our liability decision, the applicant continued to press its original application that the respondent's name be removed from the local roll. 2. On the other hand, the respondent submitted that his misconduct should not be the subject of an order that would, in effect, end his career as a lawyer. He submitted that the protective function of the Tribunal would be satisfied by a reprimand, a fine if the Tribunal was so minded, and attendance at trust account courses as the Tribunal might direct, further to the action he has already taken in that regard, and an order for costs. 3. In support of his case, he relied on his affidavit for the first proceedings (sworn 18 September 2015) as supplemented by further affidavit for these proceedings (sworn 7June 2016). The second affidavit responded to the findings in our liability decision. The respondent gave oral evidence and was cross-examined. We have now had the opportunity to observe him give evidence at both hearings, six months apart. 4. In addition he placed before us affidavits from several experienced legal practitioners testifying to his character, and expressing the view that, despite his transgressions and the findings in our liability decision, he should be regarded as fit to continue in practice. The practitioners were: * Terese Z Messner, barrister, Sydney. She has a substantial background in family law including significant periods of services as a Family Court Registrar. She has known the respondent professionally for more than 20 years. He has had a busy family law practice. * Thomas Guy Radcliffe Parker, SC, barrister, Sydney. He has been regularly briefed by the respondent for more than 20 years in property and commercial matters. * Neil James Sullivan, solicitor, Sydney. Principal, Sullivans Solicitors. He referred to his close professional and personal relationship with the respondent over the last forty years. * Kym Pelham Livesley, solicitor, Sydney. Director, Gadens Lawyers. He has known the respondent for seven years in the capacity of solicitor adviser to publicly listed company of which the respondent was the chairman until recently (Corum Group Ltd). * Phillip Ross Clay SC, barrister, Sydney. He referred to a professional association going back more than 20 years, and his frequent professional contact with the respondent, who had briefed him in a wide variety of matters. * Donald Edward Grieve QC, barrister, Sydney, referring to his association with the respondent in a private matter where the respondent acted as his solicitor. 1. The respondent provided a certificate of successful completion of a three day course in Legal Practice Management conducted by the College of Law in accordance with Law Society NSW Guidelines, dated 20 August 2016, together with the course timetable showing topics covered. He had booked into the course on 25 May 2016. Applicant's Submissions 1. The applicant's primary submission was that the Tribunal should adopt the usual approach taken where the legal practitioner's misconduct has involved the misappropriation of trust funds, and strike his name from the roll. 2. In Dupal v Law Society of NSW (unreported, NSW Court of Appeal, 26 April 1990, Kirby P emphasised there that in cases of misappropriation the usual order should be one of striking off: ... such as to leave no doubt in the mind of a practitioner in financial difficulties, exposed to the temptation of using without clear authority the funds of another, the consequences that will flow to the right to practise when such misuse of funds is discovered. 1. Handley JA, with whom Priestley JA agreed, said: Counsel were not able to refer us to any case where a solicitor found guilty of misappropriation or wilful contraventions of [applicable statutory provisions relating to holding of trust moneys in trust] has not been struck off the roll. Any decision to the contrary would signal to the profession and the community that this Court was no longer insisting on solicitors maintaining the highest standards of personal honesty and integrity in their dealings with clients and the public and in the handling of monies entrusted to their charge.. 1. The applicant submitted that the respondent's misappropriation, together with the breaches the subject of charges 1, 2 and 3 justified a prima facie finding that he is no longer fit to remain on the roll and, therefore, his name should be removed. 2. If the Tribunal agreed with that starting point, the applicant's submissions continued that it then became necessary to consider whether there are other matters which would cause a departure from this prima facie position. 3. In the applicant's submission there were no other matters that might justify a departure from that view. The applicant also disputed the respondent's claim made in both of his affidavits that he had fully co-operated with the investigation into his conduct. In our previous decision, we deferred to the present decision matters the raised by the applicant as to the adequacy of the respondent's co-operation with the investigation. The applicant submitted that the testimonials had little significance in a case of this kind, noting the observations of Beazley JA in Walsh, to which we have referred. 4. In further support of its case, the applicant referred to the several negative observations made by us in our liability decision about the respondent's conduct, for instance those relating to the gravity of giving an estate agent a direction to transfer the deposit to him, and the arrangement of his practice accounts in a way that did not adhere strictly to the principle that trust monies only be held in statutory trust accounts. The submissions emphasised our observations going to his motives, for instance: * he 'was motivated by the desire to protect his personal position as lender (at [56]; see also [61]-[62], [69])) * he 'demonstrated an indifference, at worst, or a limited appreciation, at best, of the risk that conflicts of interest present to proper practice, and to public confidence in the profession' (at [78]), where we were referring to the risks that attend on being a personal lender to a client and a solicitor for the client in other financial transactions undertaken by the client; and * '[h]e did not act in a disinterested and detached way ... [h]e acted in his own interest [and] deprived the purchaser of the usual protections that attach to deposit monies pending completion' (at [78]). 1. As to the respondent's co-operation with the applicant's investigation, the applicant conceded that the respondent had co-operated 'in a general way' with the applicant's investigation. However the applicant drew attention to the respondent's conduct at critical stages of the investigation which, in its submission, were unsatisfactory. 2. The applicant referred to the respondent's answers to questions addressed to him by its investigator in the period 29 October 2012 to 9 November 2012. 3. The respondent replied to these criticisms in his affidavit sworn 7 June 2016. The respondent accepted the key criticisms, especially that * he did not ever respond specifically to the investigator's email of 9 November 2012 (at 2.44pm) asking him to advise how the deposit amount was repaid to the vendor on settlement and the remittance details for the payment, and that * it was not accurate of him to have stated to the investigator that the deposit monies had been retained in his trust account (statements made 29 October 2012 and 6 November 2012). 1. The respondent also stated that he had provided the investigator with full access to the relevant records. 2. The applicant submitted that this was a narrow response, which did not amount to the full co-operation to be expected of a legal practitioner in these circumstances. The applicant submitted that the respondent should have, and did not, give frank and timely answers to questions raised by the investigator after the investigator had examined the records. The applicant submitted that his failure to respond to the email of 9 November 2012 was evasive, as were his responses of 29 October and 6 November 2012. 3. In addition, the applicant claimed that the respondent advised the investigator that the instruction to the agent to transfer the deposit was given in writing when it was oral. The respondent contested this assertion, and drew the Tribunal's attention to the statements made in the course of the investigation as recorded in the material filed by the applicant. They simply spoke of there being an instruction and the question of whether the instruction was oral or written was not canvassed. We agree, and do not adopt the submission of the applicant on this point. 4. The applicant also noted that in his reply given at 3.18pm on 9 November to the 2.44pm email from the investigator, previously mentioned, the respondent chose simply to forward a letter from the respondent to his client, the vendor, summarising the settlement and the action taken in relation to the deposit payment and the balance, together with the relevant trust ledgers. This reply did not engage with the specific questions asked by the investigator, and left it to the investigator to go through the documents to find the answer. 5. The applicant's submissions then referred to the inadequacies of the respondent's insight into the gravity of his misconduct from the viewpoint of the community or in its impact on the standing of the profession. This, the applicant, submitted was plainly apparent in the respondent's evidence for the liability hearing and the way he conducted his case then. The applicant contended that his insight, in the senses explained, had shown little improvement in the evidence contained in the affidavit prepared for the present hearing that purported to take account of the outcome of the liability hearing, especially our ruling in relation to misappropriation. The applicant contended that the respondent had simply acknowledged his personal sense of shame, and embarrassment over his conduct, but had not reflected at any point on the wider impact of his conduct on others. He remained in the applicant's view self-absorbed. The applicant considered that he still did not accept that his conduct in diverting the deposit payment to his control was dishonest viewed by the standards of the community and practitioners of good standing, and appeared to remain reluctant therefore to acknowledge that the conduct constituted misappropriation. 6. The applicant submitted that little weight should be given to the character evidence provided by the testimonials. The material, the applicant submitted, merely showed that the deponents who remained favourably disposed to the respondent before the liability hearing retained that view after the decision had been handed down and reading it. The applicant submitted that the Tribunal was in the best position to determine the real level of the respondent's honesty, and should not be guided by general endorsements given by the respondent's character witnesses. 7. The applicant questioned the weight to be given to the respondent's commitment to mending his ways through education. There was no evidence that he had taken any special steps in that regard since the investigator's report had been completed in 2013. The only action that he can point to in that regard is his participation in the practice management course held 18-20 August 2016. Respondent's Submissions 1. The respondent contested the applicant's submissions as to his present fitness, and in particular in relation to his remorse, his insight into his actions, the adequacy of his testimonial evidence and as to his commitment to undertaking any further education. 2. In his affidavits, and his oral evidence at our August hearing, the respondent referred to his long career in the law and the shame he felt over our findings. He accepted that his conduct in relation to the deposit money was wrong. He saw what he had done as an isolated lapse. He said that he had held hundreds of purchasers' deposits on sales of properties in his trust account, and that presently he was holding thirty deposits. He accepted that it had been wrong of him to have given the direction to the estate agent. He acknowledged at several points of the second affidavit and in his oral evidence the wrongfulness of his conduct. 3. He noted that he had had no complaint from his vendor client, Mr Ellis, over the steps he took in relation to the deposit money, and had since acted for Mr Ellis in another matter. He advised that he had ceased to conduct a mortgage lending practice. He had closed down that side of the practice. He also referred to arrangements he had made for his wife, a qualified practitioner, to take over the practice. He referred the steps he was taking to update his knowledge of trust account and related obligations, and provided evidence that he had booked into the course ultimately held on 18-20 August 2016. He pressed the view that he had co-operated with the investigation appropriately, while acknowledging some shortcomings. He reiterated in reply to the comment we made at para [77] of our reasons that he had believed that the law at the time allowed solicitors to lend to relatives. We will not respond to this point in detail. The law, we accept, including qualifications that did allow some lending of that kind, but the transaction in issue did not fall within the scope of those qualifications, a point conceded by the respondent. Assessment 1. In our view the respondent is continuing to have some difficulty in acknowledging his offences, and the risk to which they exposed others. He, in our view, continued to see what he had done as simply the function of a misunderstanding on his part of the appropriate way to manage funds in a busy office, dealing regularly on the one hand with conveyancing transactions and with clients who were had an interest in financing purchases on mortgage. He, as the evidence in this case reveals, was also an active lender. He attached weight in his submissions to the fact that no actual financial losses had been incurred by his client, Mr Ellis. Nor had any loss been incurred by the purchaser other than the interest component which ought to have been earned while the funds were in the office account, later reimbursed. 2. We agree with the applicant's submission that he continued to lack full insight into the seriousness of his conduct. We are concerned that the first and only step of a formal kind that he has taken since 2013 to improve his understanding and knowledge of trust account disciplines was to enrol in May 2016 in the three day course that took place shortly before our resumed hearing. 3. We agree with the applicant that he did not deal as frankly and candidly as he should have with the investigator's questions and in the provision of information about what had occurred, especially in relation to the critical matter of the instructions given to the estate agent. There was, we accept, a level of co-operation. It is not a case of absolute disregard for the investigator. But nonetheless it was not of the degree to be expected of a practitioner. 4. On the other hand, the factors that stand against the applicant's submission that the respondent's name be removed from the roll include his unblemished disciplinary record over a career of more than 30 years until these events, his continued practice in the period since the offences came to notice which has not given rise to any further offence, and the strong support he has from those who provided testimonials. 5. We regard the testimonial evidence as of some value, mindful of Beazley JA's injunction in Walsh as to the relatively limited value of this type of evidence in disciplinary proceedings. The evidence was from experienced practitioners. With one exception, they have had regard not only to the original material filed but our liability decision findings. The respondent has worked in the field of family law with distinction over many years (see Messner's statement), and in property, commercial law and other areas (see the other statements). The practitioners describe a person who is normally careful and attentive, and a good and competent lawyer. Their evidence referred to the shame the respondent feels. 6. In their supplementary affidavits to our decision some of them emphasised our decision not to make any finding of subjective dishonesty. Counsel for the respondent also emphasised this point, in support of a case that this was not a misappropriation of the worst kind, and was an isolated instance in contrast with several of the precedent cases relied upon by the applicant that had given rise to an order for striking off. Those cases had, almost invariably, involved serial misconduct of various kinds over a considerable period of time, and actual conversions of trust money to the practitioner's benefit, sometimes involving very large sums. 7. We cannot accept the respondent's submission that an adequate, and appropriate response to the misconduct found is to issue a reprimand and a direction to attend remedial courses. 8. Ultimately we must decide, in the same way that the Supreme Court must in exercising its inherent jurisdiction, whether we are 'justified in holding out the [appellant] as a fit and proper person to be entrusted with the duties and responsibilities of a solicitor': Southern Law Society v Westbrook [1910] HCA 31; (1910) 10 CLR 609 at 612, cited with approval by Gleeson CJ at [12] in A Solicitor. 9. In our view the primary choice before us lies between an order for striking off, or an order for cancellation or suspension of his practising certificate. 10. The case of New South Wales Bar Association v Cummins [2001] NSWCA 28 concerned a barrister who had failed to lodge a tax return or pay any income tax in his 38 years in practice. In the course of his reasons Spigelman CJ considered the difference between an order of striking off and a lesser order such as cancellation or suspension of a practising certificate. 11. After referring to the importance of providing detailed reasons for an order for striking off, and setting out Kirby P's observations in that regard in Prothonotary of the Supreme Court of New South Wales v Ritchard (NSWCA, 31 July 1987, unreported, he continued: 26 I agree with the further observations of McHugh JA in Ritchard, when his Honour said: "In Ex Parte Lenehan [1948] HCA 45; (1948) 77 CLR 403 Latham CJ, Dixon and Williams JJ pointed out (at 422) that 'when a person, who has been struck off the Roll, applies for reinstatement he is in a more disadvantageous position than an original applicant because he must displace the decision as to probable, permanent unfitness which was the basis of his removal'. Nothing in the evidence in the present case provides any ground for supposing that the presumption of permanent unfitness for practice is not applicable to the Opponent. The jurisdiction of the Court to remove a practitioner from the Rolls is entirely protective: New South Wales Bar Association v Evatt [1968] HCA 20; (1968) 117 CLR 177 at 183-184. An order for the involuntary removal of the name of a practitioner from the Roll of solicitors is made only because the probability is that the solicitor is permanently unfit to practise. Unless the court is persuaded that the probability exists, the proper order to make will usually be one of suspension or fine instead of removal." 27 Similarly in NSW Bar Association v Maddocks (NSWCA, 23 August 1988, unreported) Kirby P said: " ... normally, removal is taken to imply a judgment that a person is forever, or at least indefinitely, disqualified from practising. If this is not the conclusion which the Court has reached, it should stop short of removal." 28 In the present case, I am satisfied that the barrister's complete disregard of his legal and civic obligations with respect to the payment of income tax was such that he must be regarded, at the present time, as permanently unfit to practice. 1. The case of New South Wales Bar Association v Murphy [2002] NSWCA 138 concerned a barrister who had not complied with his tax obligations over some years because of personal financial difficulties. His failure to meet his tax obligations ultimately gave rise to an act of bankruptcy. Because of this, the Council of the Bar Association decided to cancel his practising certificate. He appealed against the decision of the Council of Bar Association to a single judge of the Supreme Court, who upheld the appeal against cancellation. The Council appealed to the Court of Appeal. The Court dismissed the appeal. The barrister submitted that his circumstances were not like those of some other cases where the practitioner had actively sought to conceal his financial position from the taxation authorities and conducted himself in a dishonest and deceitful way. 2. The Court of Appeal gave consideration to the difference between unfitness to remain on the roll and unfitness to retain a practising certificate. Spigelman CJ reviewed the disciplinary legislation as it then stood, and discussed the making of the choice between an order for striking off and an order for cancellation or suspension. The Chief Justice said: 25 These provisions indicate that a determination to cancel a practising certificate is not in the same position as an order removing a person from the roll, whether such an order is made in the inherent jurisdiction or pursuant to s171C(1)(a). An order of the latter kind is based on probable permanent unfitness. (See Prothonotary of the Supreme Court of New South Wales v Ritchard (NSWCA, 31 July 1987, unreported) per McHugh JA; New South Wales Bar Association v Maddocks (NSWCA, 23 August 1988, unreported) per Kirby P; New South Wales Bar Association v Cummins at [26]-[28].) 26 Section 38FF suggests that any long term effect of the cancellation of a practising certificate under Division 1AA on a person's right to apply for a new practising certificate, requires a distinct decision making process on the part of the relevant Council. Furthermore, in contrast to any presumption of permanence, the maximum period for which such an order may be made is expressed by statute to be five years. 27 This differentiation between the two schemes does suggest that where the conduct is sufficiently egregious to give rise to a contention that a person is permanently, or at least indefinitely, unfit for practice, it is not appropriate for Pt 3 to be invoked, save on an interim basis pending other proceedings. Such matters ought be determined by the more elaborate provisions for investigation and hearing set out in Pt 10 or by invoking the inherent jurisdiction of the Court. 1. In his judgment, Giles JA (with whom Priestley JA agreed) referred to the variety of circumstances that might justify refusal, cancellation or suspension of a practising certificate, and observed: 111. ...The difference between unfitness to hold a practising certificate and unfitness to be a legal practitioner may not be great in many cases. But the difference can not be overlooked. ... 113 ... Refusal, cancellation or suspension of a practising certificate upon determination of unfitness to hold a practising certificate is not punitive of the legal practitioner. It is protective of the public in the same manner as removal from the roll. Fitness to hold a practising certificate is to be assessed having in mind the high standards required of legal practitioners in the practice of their profession. The standards are required because the relationship between legal practitioner and client, between legal practitioners, and between legal practitioner and court is one of trust in the performance of professional functions, and because there must be confidence in the public and in those engaged in the administration of justice that legal practitioners will properly perform those functions. 1. We are not satisfied in the present case that the charges proven against the respondent demonstrate that the respondent is 'permanently, or at least indefinitely, unfit to practise' (to use the formulation adopted by Spigelman CJ in Murphy at [27]; see further, Stanoevski v The Council of the Law Society of NSW [2008] NSWCA 93; The Council of the Law Society of NSW v Doherty [2010] NSWCA 177 at [60] per Young JA). Until the occurrence of the events under notice in these proceedings, the respondent had an unblemished career. While the breaches admitted in relation to Charges 1, 2 and 3 were serious those breaches would not have justified an application for striking off. It is our finding of misappropriation in relation to Charge 4 that makes his fitness to remain a legal practitioner a very real issue. 2. While any misappropriation is a grave matter that warrants severe condemnation, we do not regard this as a where the conduct proven is so egregious as to require the ultimate order. 3. In saying this we should be not been thought to regard the act of misappropriation proven in this case as minor in degree or nature. As Leeming JA (with whom Basten JA and Sackville AJA agreed) stated in Kumar v Legal Services Commissioner [2015] NSWCA 161: 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. Kumar involved a series of transgressions in respect of several different matters. This case involved a single act of misappropriation. The respondent, as he has now conceded, was not the stakeholder for the deposit under the contract of sale. Yet he proceeded to take over as stakeholder for the deposit, and did so without the purchaser's knowledge. The estate agent complied mistakenly with his direction. He then applied the deposit to the repayment of the loan between him and the vendor's principal, Mr Ellis, immediately, as the ledgers show. He benefitted by preferring his own interest to that of the purchaser (who was ignorant of all of this) and put the purchaser at risk if the sale had gone off. 2. The respondent emphasised the following matters. He has acknowledged the wrongfulness of his action in giving the instruction to the agent and then not proceeding to hold the deposit in trust, but instead placing in a practice account. He has now closed the mortgage lending side of his practice. This is a positive step. He has taken steps to bring up to date his understanding of the rules governing the handling of money received in trusts, and how accounts are to be organised. While his submissions did not stress this point, we note that he has continued to practise over the last three years without any further complaint. 3. We are concerned that the respondent has, as yet, only taken limited steps to address the problems identified by his behaviour in this case. We have noted, positively, his action in closing the mortgage lending side of his practice and his taking of the course held in August 2016. 4. We agree with the submissions of the applicant that he still tends to see the misappropriation as a consequence of account arrangements in his practice that he innocently believed met trust account obligations. While he has expressed remorse, there are still issues as to his degree of insight into the harm his action has caused to the reputation of the profession and of the risk to which it exposed the purchaser. This is far more than a case of a practitioner failing to check for the contractual authority to give the direction to the estate agent, and of a practitioner making an innocent mistake as to which of his practice accounts was a statutory trust account, as the respondent sought to depict his actions at the investigation stage and at our liability hearing. 5. We also agree that the applicant was not as co-operative to the investigation as he should have been, but equally this is not the worst case of its type. There was a measure of co-operation. 6. While serious issues of fitness to practice are raised by this case, in our view this case falls on the lesser side of the line drawn by Spigelman CJ and Giles JA in the judgments to which we have referred. 7. We consider that the respondent's conduct should be met with the cancellation of his practising certificate for 12 months, together with a substantial fine. We are not satisfied that his unfitness is such that he should be regarded as probably permanently unfit to practice, and therefore have his name removed from the roll. He has not reached the point where it is in the public interest that he be expelled from the legal profession. 8. These sanctions will also act as a warning to all members of the profession of the consequences they face if they fail to be scrupulous in the management of trust funds. They are also intended to sound a warning of the risks legal practitioners run in having business relationships with clients that may impinge on the proper discharge of legal work done for those clients. Lawyers should maintain a disinterested relationship with clients. The failures identified by this case, connected as there are to conflicts of interest and the handling of trust money, go to the core of the public's confidence in, and respect for, the profession. 9. We will not seek to develop specific conditions to which he should adhere in that period of cancellation. It will evident from our reasons that we have continuing concern over the level of his insight into his misconduct, the need for stricter account keeping practices and the need for retraining in trust account practices and rules. 10. He will be free to reapply to the applicant after that period. The applicant will then make a decision whether to issue a new practising certificate, and can deal with the question of whether any special practice or personal conditions should be imposed. 11. We fix the amount of the fine at $25,000. Orders The Tribunal orders that: 1. The respondent's local practising certificate be cancelled, and that any new certificate not be issued to the practitioner before the end of 12 months from the date of this order. 2. The respondent be fined $25,000. 3. The respondent pay the applicant's costs of, and incidental, to these proceedings, 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: 05 December 2016