Civil and Administrative Tribunal New South Wales Medium Neutral Citation: Council of the Law Society of NSW v Gallego [2017] NSWCATOD 29 Hearing dates: 12 December 2016 Date of orders: 24 February 2017 Decision date: 24 February 2017 Jurisdiction: Occupational Division Before: Boland ADCJ, Deputy President D Fairlie, Senior Member E Hayes, General Member Decision: The Tribunal having found Mark Francesco Gallego (the respondent) guilty of professional misconduct orders that: 1. The application is stood over for hearing on penalty on 24 March 2017. 2. The Applicant is to give to the Respondent and the Tribunal any further material if any on which it relies in relation to penalty on or before 3 March 2017. 3. The Respondent is to give to the Applicant and the Tribunal any further material on which he relies in respect of penalty on or before 10 March 2017. Catchwords: PROFESSIONS AND TRADES – professional disciplinary proceedings under Legal Profession Act 2004 – whether solicitor is guilty of unsatisfactory professional conduct – whether solicitor guilty of professional misconduct – where it is asserted solicitor failed to deposit client funds into a trust account – where solicitor admits he did not comply with regulations in respect of controlled monies account – where solicitor admits he failed to make a costs disclosure to the client and to provide trust account statements in accordance with regulations. Legislation Cited: Civil & Administrative Tribunal Act 2013 (NSW) Legal Profession Act 2004 (NSW) (repealed) Legal Profession Uniform Law (NSW) 2014 Legal Profession Regulation 2005 (repealed) Legal Profession Uniform General Rules 2015 Cases Cited: Allinson v General Council of Medical Education and Registration (1984) 1 QB 750 Brereton v Legal Services Commissioner [2010] VSC 378 Briginshaw v Briginshaw (1938) 60 CLR 336 [1938] HCA 34 Council of the Law Society of NSW v Coombes [2015] NSWCATOD 108 Council of the Law Society of NSW v Greenstein [2015] NSWCATOD 122 Council of the NSW Bar Association v Breeze [2015] NSWCATOD 152 Griffin v Council of the Law Society of New South Wales [2016] NSWCA 364 Law Society v Jones (unreported Court of Appeal (NSW) 37 July 1978) Re Hodgekiss [1962] SR (NSW) 340 Category: Principal judgment Parties: Council of the Law Society of NSW (Applicant) Mark Francesco Gallego (Respondent) Representation: Solicitors: Council of the Law Society of New South Wales (Applicant) M F Gallego (in person) File Number(s): 1620128 Publication restriction: Nil REASONS FOR DECISION Introduction 1. The Council of the Law Society of NSW (the Society) has brought an Application for Disciplinary Findings and Orders in the Tribunal against a solicitor Mr Mark Francesco Gallego (the practitioner). 2. The Society asserts that the practitioner is guilty of both unsatisfactory professional conduct and professional misconduct. The Society asks that the Tribunal makes orders removing the practitioner's name from the roll of the Supreme Court of NSW. However, the Society notes that, if we determine removal from the roll is not an appropriate order, orders could be made that the practitioner practises as an employee only. 3. The Society asserts that the practitioner, who acted for a gentlemen, Mr Ranko Despot (the client), in an unsuccessful appeal to the NSW Court of Appeal, failed to place monies provided to him for counsel's fees and disbursements into a trust account, and withdrew certain funds from the monies received without written authorisation from the client. It is also asserted the practitioner failed to disclose his costs to the client and failed to provide trust account statements when requested to do so in writing. 4. The practitioner, who appeared on his own behalf before us, admits culpability to the application generally, but asserts "the breaches of the regulations, of which I am guilty, are of a technical nature rather than egregious". It is not in dispute that the practitioner placed initial funds of $100,000 received from the client into a National Australia Bank (NAB) account styled "Mark Gallego ITF Ranko Despot" without written authority to do so. He subsequently received the further sum of $25,000 from the client. The Society asserts the latter sum was placed into a general account rather than a trust account. Accordingly, the Society asserts the practitioner has failed to comply with s 243 of the Legal Profession Act 2004 (NSW) (the Act) in respect of both sums, and is guilty of professional misconduct. 5. We raised with the practitioner during the hearing the question whether we should deal with both liability and penalty in a single hearing, or whether he sought that we first publish our liability reasons, and fix a date for the penalty hearing. The practitioner sought that we adopt a two stage approach to the application. Ms Cora Groenewegen (Ms Groenewegen), who appeared for the Society, did not oppose that course. We indicated that we could conduct the penalty hearing on 24 March 2017, and provide a timetable for filing of any additional material by the parties after we published these reasons. 6. We have, for the reasons which follow, determined that the practitioner is guilty of professional misconduct, albeit at the lower end of the scale of such conduct. The transitional provisions 1. The proceedings in the Tribunal were commenced on 18 November 2016. 2. However, the affidavit of Ms Anne-Marie Ford sworn 11 May 2016 in support of the application discloses the history of the complaints against the practitioner that eventually led to these disciplinary proceedings. It is unnecessary that we repeat all of the resolutions of the various Professional Conduct Committees made under delegation from the Society. We note however that this matter commenced on 6 November 2014 when the Professional Conduct Committee acting under a delegation from the Society resolved to make a complaint against the solicitor asserting breaches of s 254, s 256 (2) and (3), and s 264 of the Act and for a failure to disclose costs. On 15 January 2015 the Council made a similar resolution to that of the Professional Conduct Committee. Eventually, on 19 November 2015 the Professional Conduct Committee resolved that there was a reasonable likelihood that the practitioner would be found by the Tribunal to have engaged in professional misconduct and that proceedings should be instituted in the Tribunal under s 537 of the Act by reason of the practitioner having breached s 254 and s 264. Finally, on 28 April 2016, the Professional Conduct Committee resolved that it was likely that the practitioner would be found guilty of professional misconduct because of the practitioner's failure to provide trust account statements in respect of the trust monies he held under Cl 82 of the Legal Profession Regulations 2005 (until 30 June 2015) and Cl 52 of the Legal Profession Uniform General Rules 2015 (from 1 July 2015). 3. In a document headed "Applicant's Outline of Submissions", signed by Ms Foord and dated 18 November 2016, she submitted at [11] and [12] that by reason of transitional provisions the Act applies to these proceedings. In support of her submission Ms Foord quoted extensively from the Tribunal's decision in Council of the New South Wales Bar Association v Breeze [2015] NSWCATOD 152 at [41]-[50]. 4. Recently, the effect of the transitional provisions were considered by Sackville AJA, with whom Ward and Gleeson JJA agreed, in Griffin v Council of the Law Society of New South Wales [2016] NSWCA 364 at [57]-[74]. Adopting the reasoning in Griffin we are satisfied that notwithstanding some of the Council resolutions post-dated the introduction of the Legal Profession Uniform Law 2014 (NSW) (the Uniform Law) and the repeal of the Act, and rely in part on regulations made under the Uniform Law, that the Act applies. In this respect we note the applicability of the Act by reason of Cl 26 of Schedule 4 of the Uniform Law. Each of the complaints agitated was made under the Act and not disposed of prior to the commencement of the Uniform Law. Background 1. The relevant facts in this matter are not in dispute. 2. The practitioner was admitted to practice in 1981. He has engaged in practice as a sole practitioner since 1 July 2010. At all times relevant to the complaint he held an unrestricted practising certificate. 3. In 2011 the practitioner received instructions to act for the client in an appeal to the New South Wales Court of Appeal. The appeal was unsuccessful. A dispute between the practitioner and the client in respect of the practitioner's claim for legal fees and expenses remained unresolved at the date of the hearing before us. 4. In December 2011 the practitioner received the sum of $100,000 from the client as monies paid in advance for legal work including counsel's fees. The practitioner deposited the funds into an interest bearing bank account in the practitioner's name "ITF" (in trust for) the client. The practitioner asserts he believed this was the correct designation for a controlled monies account. He did not have written authorisation to place the funds into a controlled monies account, but says he received verbal instructions from the client, the client's daughter (who was authorised to act on his behalf) and "a representative". The representative is a solicitor who, at the relevant time, did not hold an unrestricted practising certificate and is the person who referred the client to the practitioner. For some months during appeal proceedings the representative was employed by the practitioner in his law practice and later took over the conduct of the client's matters. 5. In September 2012 the funds received, or part thereof, were transferred to another interest bearing account. The practitioner asserts this was done to achieve a higher rate of interest on the funds deposited. 6. In August 2012 a further sum of $25,000 was received by the practitioner from the client and placed into a general account. The practitioner asserts that he had verbal authority from the client to place each of the sums received into the accounts. 7. During the period 19 December 2011 to 18 June 2013 the practitioner made 23 withdrawals from the funds held on behalf of the client. The practitioner asserts that the majority of the withdrawals were authorised by emails from the client's representative. The practitioner, in his oral evidence, stated that the sums paid from the funds held were for court filing fees, counsel's fees and expenses associated with the litigation in the Court of Appeal. He concedes that withdrawals noted as MBE on bank statements were to reimburse him for stationery expenses incurred for the preparation of the appeal books. The practitioner asserts he accidently transferred $1,000 on 18 June 2013 by electronic transfer to an account in his name. This transfer was reversed some five months later when drawn to the practitioner's attention by a trust account inspector. 8. On four occasions between 1 November 2012 and 23 April 2013 the client's representative requested the practitioner, in writing, to provide her with trust account statements. The practitioner disputes the assertion that trust account statements were never provided. He asserts that copies of bank statements were provided to the client from time to time via his representative, or her partner, a former solicitor, Mr Joe Mannix (Mr Mannix). 9. The practitioner asserts that he relied on assurances from the representative that she was preparing a costs agreement during the period she was in his employ. Relevant principles and statutory provisions. 1. Despite s 38 of the Civil and Administrative Tribunal Act 2013 (NSW), the rules of evidence apply to these proceedings. It is well established, due to the protective nature of the jurisdiction and the seriousness of the complaints both for the practitioner, the courts and the public, that the standard of proof is on the balance of probabilities, but to the level of satisfaction described by the High Court in Briginshaw v Briginshaw [1938] HCA 34; 60 CLR 336. 2. The first complaint agitated by the Society relates to the asserted failure of the practitioner to comply with s 309 of the Act. Section 309 provides as follows: (1) A law practice must disclose to a client in accordance with this Division: (a) the basis on which legal costs will be calculated, including whether a fixed costs provision applies to any of the legal costs, and (b) the client's right to: (i) negotiate a costs agreement with the law practice, and (ii) receive a bill from the law practice, and (iii) request an itemised bill after receipt of a lump sum bill, and (iv) be notified under section 316 of any substantial change to the matters disclosed under this section, and (c) an estimate of the total legal costs if reasonably practicable or, if that is not reasonably practicable, a range of estimates of the total legal costs and an explanation of the major variables that will affect the calculation of those costs, and (d) details of the intervals (if any) at which the client will be billed, and (e) the rate of interest (if any), whether a specific rate or a benchmark rate, that the law practice charges on overdue legal costs, whether that rate is a specific rate of interest or is a benchmark rate of interest (as referred to in subsection (1A)), and (f) if the matter is a litigious matter, an estimate of: (i) the range of costs that may be recovered if the client is successful in the litigation, and (ii) the range of costs the client may be ordered to pay if the client is unsuccessful, and (g) the client's right to progress reports in accordance with section 318, and (h) details of the person whom the client may contact to discuss the legal costs, and (i) the following avenues that are open to the client in the event of a dispute in relation to legal costs: (i) costs assessment under Division 11, (ii) the setting aside of a costs agreement or a provision of a costs agreement under section 328 (Setting aside costs agreements or provisions of costs agreements), (iii) mediation under Division 8, and (j) any time limits that apply to the taking of any action referred to in paragraph (i), and (k) that the law of this jurisdiction applies to legal costs in relation to the matter, and (l) information about the client's right: (i) to accept under a corresponding law a written offer to enter into an agreement with the law practice that the corresponding provisions of the corresponding law apply to the matter, or (ii) to notify under a corresponding law (and within the time allowed by the corresponding law) the law practice in writing that the client requires the corresponding provisions of the corresponding law to apply to the matter. Note : The client's right to sign an agreement or give a notification as mentioned in paragraph (l) will be under provisions of the law of the other jurisdiction that correspond to section 304 (Part also applies by agreement or at client's election). (1A) For the purposes of subsection (1) (e), a benchmark rate of interest is a rate of interest for the time being equal to or calculated by reference to a rate of interest that is specified or determined from time to time by an ADI or another body or organisation, or by or under other legislation, and that is publicly available. (1B) The regulations may make provision for or with respect to the use of benchmark rates of interest, and in particular for or with respect to permitting, regulating or preventing the use of particular benchmark rates or particular kinds of benchmark rates. (2) For the purposes of subsection (1) (f), the disclosure must include: (a) a statement that an order by a court for the payment of costs in favour of the client will not necessarily cover the whole of the client's legal costs, and (b) if applicable, a statement that disbursements may be payable by the client even if the client enters a conditional costs agreement. (3) A law practice may disclose any or all of the details referred to in subsection (1) (b) (i)-(iii), (g), (i), (j) and (l) in or to the effect of a form prescribed by the regulations for the purposes of this subsection, and if it does so at the time the other details are disclosed as required by this section the practice is taken to have complied with this section in relation to the details so disclosed. 1. The Society asserts that the practitioner breached s 254 of the Act. That section provides: 254 Certain trust money to be deposited in general trust account (1) Subject to section 258A, as soon as practicable after receiving trust money, a law practice must deposit the money in a general trust account of the practice unless: (a) the practice has a written direction by an appropriate person to deal with it otherwise than by depositing it in the account, or (b) the money is controlled money, or (c) the money is transit money, or (d) the money is the subject of a power given to the practice or an associate of the practice to deal with the money for or on behalf of another person. Maximum penalty: 100 penalty units. (2) Subject to section 258A, a law practice that has received money that is the subject of a written direction mentioned in subsection (1) (a) must deal with the money in accordance with the direction: (a) within the period (if any) specified in the direction, or (b) subject to paragraph (a), as soon as practicable after it is received. Maximum penalty: 100 penalty units. (3) The law practice must keep a written direction mentioned in subsection (1) (a) for the period prescribed by the regulations. Maximum penalty: 50 penalty units. (5) A person is an "appropriate person" for the purposes of this section if the person is legally entitled to give the law practice directions in respect of dealings with the trust money. 1. It is also asserted that the practitioner breached s 264 of the Act. That section is in the following terms: 264 Keeping trust records (1) A law practice must keep in permanent form trust records in relation to trust money received by the practice. Maximum penalty: 100 penalty units. (2) The law practice must keep the trust records: (a) in accordance with the regulations, and (b) in a way that at all times discloses the true position in relation to trust money received for or on behalf of any person, and (c) in a way that enables the trust records to be conveniently and properly investigated or externally examined, and (d) for a period determined in accordance with the regulations. Maximum penalty: 100 penalty units. 1. Because the practitioner asserts the funds, or at least the initial sum of $100,000 were placed into a controlled monies account, albeit wrongly designated as "ITF" rather than "Controlled monies account" or "CMA" as required by the regulations, it is relevant we set out s 256 of the Act. 2. Section 256 provides as follows: (1) As soon as practicable after receiving controlled money, a law practice must deposit the money in the account specified in the written direction relating to the money. Maximum penalty: 50 penalty units. (2) The law practice must hold controlled money deposited in a controlled money account in accordance with subsection (1) exclusively for the person on whose behalf it was received. Maximum penalty: 50 penalty units. (3) The law practice that holds controlled money deposited in a controlled money account in accordance with subsection (1) must not disburse the money except in accordance with: (a) the written direction mentioned in that subsection, or (b) a later written direction given by or on behalf of the person on whose behalf the money was received. Maximum penalty: 50 penalty units. (4) The law practice must maintain the controlled money account, and account for the controlled money, as required by the regulations. Maximum penalty: 50 penalty units. (5) The law practice must keep a written direction mentioned in this section for the period prescribed by the regulations. Maximum penalty: 50 penalty units. (6) The law practice must ensure that the controlled money account is used for the deposit of controlled money received on behalf of the person referred to in subsection (2), and not for the deposit of controlled money received on behalf of any other person, except to the extent that the regulations otherwise permit. Maximum penalty: 50 penalty units. (7) Subsection (3) applies subject to an order of a court of competent jurisdiction or as authorised by law. 1. The regulations relied on by the Society in this matter are clauses 75, 76 and 80 of the Legal Profession Regulation 2005. Cl 75 deals with the maintenance of controlled money accounts, and Cl 76 deals with receipt of controlled money. Cl 75 imposes the following requirements: 75 Maintenance of controlled money accounts-section 256 (4) of the Act (1) For the purposes of section 256 (4) of the Act, a controlled money account must be maintained under an account name that includes the following particulars: (a) the name of the law practice concerned, (b) the expression "controlled money account" or the abbreviation "CMA" or "CMA/c", (c) such particulars as are sufficient to identify the purpose of the account and to distinguish the account from any other account maintained by the law practice. (2) This clause does not apply to an account established in this jurisdiction before 1 October 2005. 1. The Society also rely on Cl 80 of the regulations which provides that a law practice that receives controlled monies must keep a register recording movements in the account. Regulation 82 requires a law practice to furnish to each person for or on whose behalf trust money is held or controlled by the law practice a trust account statement. Such a statement is to be furnished either as soon as practical after completion of the matter, or as soon as practicable after the person for whom, or on whose behalf the money is held or controlled, makes a reasonable request for the statement during the course of a matter, or subject to the funds being held for less than six months at 30 June, or as soon as practicable after 30 June each year. 2. Finally the Society rely on r 52 of the Legal Profession Uniform General Rules 2015 for the period 1 July 2015 to 17 September 2015. This rule is in substantially similar terms to Cl 82 of the 2005 Regulations. Discussion The costs disclosure 1. In a Reply filed on 8 December 2016 the practitioner admitted he did not, in accordance with s 309 of the Act, disclose his costs to the client. By way of excuse the practitioner asserts he relied on assurances from the representative that she would prepare the relevant costs agreement. The practitioner repeated his assertion that he relied on "numerous assertions" from the representative in his affidavit sworn 7 December 2016. 2. Ms Foord submits in her the Outline of Submissions filed by the Society that the effect of s 4 of the Act is to place an obligation on the law practice to disclose its costs to the client. That obligation fell to the practitioner as the sole principal of the law practice. Ms Foord points out that although the representative was employed by the law practice from 3 July 2012 to 1 November 2012, that the client retained the law practice in December 2011 when the practitioner was its only solicitor. Conclusions – costs disclosure 1. We agree with the submission made on behalf of the Society to the effect it was not reasonable for the practitioner to rely on the assurances of an employee made some seven months after the receipt of instructions to comply with s 309. We are satisfied the breach of s 309 set out in paragraph 3 of the application is established. Breach of s 254 1. The practitioner admits that in December 2011 he received the sum of $100,000 and later in August 2012 a further $25,000 to be held in trust. He further admits that he did not receive any written instructions from the client to deal with the sums received other than to deposit them in a general trust account. 2. In his Reply that practitioner states that "he did receive a verbal direction that at all times [the client], his daughter and his advisors knew the funds were in an interest bearing account with the National Australia Bank styled 'itf' [client's name]". He further concedes that the funds were transferred to other National Australia Bank accounts and says this was to attract a higher interest rate. 3. The representative made a statement on 20 June 2014. At [5] of her statement the representative states: [The practitioner] told me that he did not have a trust account but that he would open a controlled monies account on the agreed terms 1. The representative also stated at [9] of her statement that between December 2011 and about December 2012 the practitioner "disbursed monies from the controlled monies account when requested to do so to pay barristers' fees, court fees, and other associated fees". She further stated: On every occasion when I requested him to pay a bill [the practitioner] asked me for a written authority as well as an invoice referrable to the amount requested. 1. Although not relevant to our determination, we note that the representative disputed the practitioner's evidence to the Society's trust account inspector, Mr Gregory Livermore (Mr Livermore) that some instructions to pay funds from the account were given verbally by the client's daughter or herself. 2. The client's daughter in her statement relied on in the proceedings by the Society maintains that there was an agreement the practitioner would only be entitled to legal fees if the appeal to the Court of Appeal was successful. This assertion is disputed by the practitioner. The client's daughter in a statement made on 24 June 2014 referred, on numerous occasions, to funds in a controlled monies account. 3. Further evidence that supports the practitioner's contention that it was his belief the sums invested were in a controlled monies account (albeit without written authority to do so) is found in the client's letter to him dated 28 September 2012. In that letter the client requested three cheques be provided from the controlled monies account for collection the following day for counsel's fees for work done on the appeal, another cheque for counsel's fees for non appeal work, and for filing fees for the Supreme Court of NSW. Conclusions – breach of s 254 of the Act 1. As Mr Livermore notes in his report, notwithstanding the practitioner's asserted belief that the funds were invested in a controlled money account, there was a breach of s 254(1) because, as there was no written direction to invest the funds, they should have been deposited into a general trust account. Mr Livermore further notes the relevant regulation required the account be designed as either a controlled monies account or CMA. 2. We accept Mr Livermore's evidence which was unchallenged by the practitioner. We find that the practitioner failed to place the sums of $100,000 and $25,000 into a general trust account. Absent written authority from the client, or those authorised to on his behalf, the practitioner lacked the necessary authority to place the funds in a controlled money account. Consequently, we are satisfied that the complaint in respect of s 254 of the Act is established. In so finding we accept however that the funds were at all relevant times held in separate accounts and as we will later discussed, used for the client's benefit. Assertion that the practitioner's actions caused a deficiency in trust funds 1. Paragraph 8 of the application asserts that the practitioner, without written authority, made a number of withdrawals from the NAB account causing a deficiency in trust funds. The practitioner disputes this allegation, and says that most of the withdrawals were itemised and were authorised and directed by email either from the client's representative or his daughter. He concedes that he did not have authority to re-imburse himself for stationery expenses, nor should he have transferred the sum of $1,000 to his own account. 2. The table set out in the application discloses payments made during the period 19 December 2011 to 18 June 2013. The entries in the table contain a cross-reference to withdrawals disclosed in bank statements exhibited to Mr Livermore's affidavit. 3. In his report Mr Livermore explains that the practitioner reimbursed himself for nine payments totalling $156.30. This sum was made up of a number of small withdrawals from the NAB account and disclosed on the statements as payment to MBE. Mr Livermore noted that the practitioner advised him that MBE is a stationery outlet located near his home and that the sums related to a reimbursement of stationery costs. The schedule discloses six entries described as MBE. The sums disclosed in Mr Livermore's report are not identical in all respects with the table. 4. The practitioner disclosed to Mr Livermore that he did not have a written authority to reimburse himself for stationery expenses. Doing the best we can on the evidence before us, we accept Mr Livermore's evidence that the practitioner caused a deficiency in trust funds by reimbursing himself the stationery expenses without the client's authorisation. But we accept the practitioner's oral evidence that these expenses were incurred in the necessary preparation of documents for the Court of Appeal and that he gained no personal benefit from the withdrawals. 5. Mr Livermore also highlights a payment of $9,102 to a barrister, Mr Andrew Martin, for his professional costs. He notes that the practitioner conceded to him that he did not have authority to pay these fees but did so because the barrister had obtained a costs order. However no claim is made in the application about this payment. 6. The other unauthorised payment highlighted by Mr Livermore in his report is a payment of $1,000 which the practitioner transferred to his own account by way of an internet transfer on 18 June 2013. The practitioner asserted to Mr Livermore on 1 November 2013 that the transfer was a mistake. The funds were re-credited by the practitioner to the relevant NAB account on 17 November 2013. 7. We have endeavoured to reconcile the table with the detailed information in the material exhibited to Mr Livermore's affidavit at pages 112 and following. We accept that no corroborative evidence was produced by the practitioner to Mr Livermore, or in his affidavit evidence relied on in these proceedings of written authority for a number of the withdrawals made. But it is relevant that we note the representative, who is the original complainant in this matter, in her statement is emphatic that many withdrawals were authorised, although she qualifies that statement by saying at [12] "there are more unexplained withdrawals than those allegedly authorised and properly vouched for". 8. We are satisfied that the withdrawal of funds for the Supreme Court filing fees from the NAB account was not carried out under written instructions from the client, his daughter or the representative. 9. We do not accept that the payment of counsel's fees to Mr Reynolds of $11,000 caused a deficiency in trust funds as this payment was authorised. Similarly we are satisfied that the two payments on 8 November 2016 to Mr Hewitt for his fees was authorised in writing by the client on 28 September 2012. 10. We find that, with the exception of the matters noted above, the withdrawals from the NAB account were not authorised and caused a deficiency in trust funds. Failure to provide trust account statements 1. Paragraph 9 of the application contains the assertion that, by email on 1 November 2012 addressed to the practitioner, the representative on behalf of the client requested he provide statements of account in respect of the entrusted monies. Although in his Reply the practitioner says he does not recall the receipt of the email, he does not deny that such an email was sent. 2. It is further asserted by the Society that further requests were made by email on 5 November 2012, 4 April 2013 and 23 April 2013 to the practitioner for statements of account. The practitioner does not dispute that he received the emails, but denies that "Trust Account Statements were never provided". He goes on to state that: Copies of bank statements, which showed all transactions, were provided to [the client] from time to time, either per [the representative] or Joe Mannix, her ex-partner, who was assisting [the client] in various matters. 1. It is not a matter of dispute that under s 237 of the Uniform Law that on 17 September 2015 Mr John Ernest Mitchell was appointed at the request of the practitioner as supervisor of trust money of the practitioner's law practice. The practitioner was not challenged about his statement that this occurred in circumstances where he "had a life-threatening cancer". 2. The practitioner admits that he was in breach of the relevant regulation (Cl 82(6)(b) of the regulation) up to 1 July 2015, and that he failed to provide the relevant trust account statements from 1 July 2015 to 17 September 2015 under Rule 52 of the Rules. 3. In her submissions, Ms Foord highlights the fact that a failure to place funds in a trust account "does not entitle that solicitor to avoid his or her obligations in relation to accounting for those monies and producing a statement for them". 4. Ms Foord further submits that we would be concerned by the practitioner's assertion made in his Reply that "the sporadic furnishing of a bank statement to a client satisfies the requirements of either cl 82 of the regulations or r 52 of the rules". 5. We are satisfied that the practitioner failed to provide trust statements to the client. We accept his failure to maintain trust records meant that he did not, in a timely manner, discover that the sum of $1,000 was withdrawn from the monies held on behalf of the client and paid by electronic transfer into the practitioner's own account. While this transaction may have been accidental the practitioner's carelessness in relation to record keeping meant that the error was not discovered for some five months when it was identified by Mr Livermore. In considering this transaction we do not, on the evidence before us, find any subjective intent of the practitioner to act dishonestly (see Brereton v Legal Services Commissioner [2010] VSC 378 at [53]). 6. We agree with Ms Foord's submission that the practitioner's material in his Reply appears designed to seek to exculpate his failure to provide the statements when requested. However, we accept he has admitted non- compliance with the regulations. 7. Overall, we find that the practitioner's conduct demonstrates significant carelessness and disregard for the Act and regulations. Although he asserts he provided bank statements to the client, he has produced no evidence to support his assertion. We are satisfied that the breach of the regulation and rule is established. Breach of s 264 of the Act 1. Ms Foord submits that the practitioner was in breach of s 264 because he did not have written authority to place the funds in a controlled money account, nor was the account given the correct designation in accordance with the regulations. The submissions go on to note that: Beyond bank statements, [the practitioner] failed to keep any records required by the Act or the Regulations in relation to the [client] entrusted monies 1. The practitioner admits he did not have the requisite written authority and says he was "unaware" of the requirements of the regulation as to the designation of a controlled money account. Although he has provided no corroborative evidence, the practitioner asserts that he provided receipts (being a deposit stub) for the initial sum of $100,000 and that he acknowledged by email the subsequent receipt of $25,000. 2. For the reasons enunciated above we are satisfied the breach of s 264 of the Act is established. Unsatisfactory professional conduct or professional misconduct 1. In her oral submissions, Ms Groenewegen urged that we find the practitioner's conduct demonstrated a consistent and substantial failure to comply with the Act and regulations, and consequently we should find that the practitioner is guilty of professional misconduct. 2. Ms Groenewegen highlighted the fact that the practitioner in his affidavit referred to his belief that the client was "functionally illiterate in the English language". This, she submitted, placed a higher obligation on the practitioner to ensure that the client understood the basis on which he would be charged. 3. In the written submissions of Ms Foord relied by the Society, but prepared without the benefit of the practitioner's affidavit and oral evidence, she submitted at [65]: Regardless of whether [the practitioner] breached his fiduciary duties, he is patently inadequate at accounting for others' entrusted monies. If his conduct was not contemporaneously reflective of a person unfit to engage in legal practice, his Reply to the Application reflects that he is now. [The practitioner] has engaged in conduct 'which would be reasonably regarded as disgraceful or dishonourable" by other legal practitioners. Accordingly [the practitioner's] conduct can be characterised as professional misconduct either by virtue of s497 (1) (b) of the Act, the common law definition, or both. 1. In her submissions in support of finding of professional misconduct, Ms Foord points to the practitioner's poor record keeping and a failure to disclose costs. 2. By contrast, before us the practitioner emphasised that he had not engaged in misappropriation of the entrusted funds. He submitted that at all times he had acted in the client's best interest but had not followed the "mechanics" of the regulations. He sought that we characterise the admitted conduct to be unsatisfactory professional conduct not professional misconduct. 3. Unsatisfactory professional conduct is defined in s 496 of the Act as follows: 496 Unsatisfactory professional conduct For the purposes of this Act: "unsatisfactory professional conduct" includes conduct of an Australian legal practitioner occurring in connection with the practice of law that falls short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent Australian legal practitioner. 1. Section 497 defines professional misconduct as follows: 497 Professional misconduct (1) For the purposes of this Act: "professional misconduct" includes: (a) unsatisfactory professional conduct of an Australian legal practitioner, where the conduct involves a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence, and (b) conduct of an Australian legal practitioner whether occurring in connection with the practice of law or occurring otherwise than in connection with the practice of law that would, if established, justify a finding that the practitioner is not a fit and proper person to engage in legal practice. (2) For finding that an Australian legal practitioner is not a fit and proper person to engage in legal practice as mentioned in subsection (1), regard may be had to the matters that would be considered under section 25 or 42 if the practitioner were an applicant for admission to the legal profession under this Act or for the grant or renewal of a local practising certificate and any other relevant matters. 1. The common law test of professional misconduct is explained in the often cited decision of Allinson v General Council of Medical Education and Registration (1894) 1 QB 750. The principles enunciated by Lopes LJ in Allinson are summarised in Ms Foord's submission which we have set out above. We accept the common law principle has been adopted in the Supreme Court of NSW and the Tribunal as applicable in relevant circumstances (see Re Hodgekiss [1962] SR (NSW) 340 at 351; Council of the Law Society of NSW v Greenstein [2015] NSWCATOD 122). 2. We have found that the practitioner placed funds into an interest bearing account in his name as trustee for the client without written authority to do so. We have also found that the practitioner on a number of occasions withdrew funds from the account without authority to do so. We have also found that the practitioner failed to ensure a proper costs disclosure was made to a vulnerable client who lacked at least written English language skills. The practitioner also consistently failed to provide trust account statements when requested to do so. 3. In each instance, the practitioner's conduct disclosed repeated carelessness by reason of his failure to know and comply with the Act and regulations. This occurred in circumstances where he was entrusted with significant funds by his client. Although we accept, with the exception of the $1,000 transferred in error to his account, funds were not misappropriated, in many instances he either did not have, or failed to retain, the necessary authority to draw on the entrusted funds for the purpose of the appeal litigation. He also failed to exercise proper responsibility in the conduct of the law practice by failing to ensure a proper costs disclosure to the client. His consistent failure to provide trust account statements when requested to do so breached the relevant regulation and rule. In reaching our conclusion we are satisfied on the evidence before us that the withdrawal of $1,000 and delay in its replacement would not have occurred if he had kept proper records. 4. A lack of awareness by the practitioner of the requirements of the Act and regulations does not provide an excuse for his conduct. A solicitor having the responsibility and privilege to be entrusted with a client's funds has a duty to ensure he or she is fully cognisant of the relevant provisions of the Act, regulations and now rules governing the holding and dispersal of such funds. This requirement is succinctly explained by Street CJ in Law Society of New South Wales v Jones [unreported Court of Appeal (NSW) 37 July 1978] Street CJ held: Reliability and integrity in the handling of trust funds are fundamental pre-requisites in determining whether an individual is a fit and proper person to be entrusted with the responsibilities belonging to a solicitor. … Members of the public, many of them wholly inexperienced and unskilled in matters of business or of law, inevitably must put great faith and trust in the honesty of solicitors in the handling of moneys on their behalf. The Court must ensure that this trust is not misplaced. 1. Having regard to the principles enunciated in Allinson, we do not find that the practitioner's conduct is of such a character that it would be regarded as "disgraceful or dishonourable" by other members of the profession. But we find the conduct engaged in by the practitioner both fell short of the conduct the standard of competence and diligence the public is entitled to expect and demonstrates a consistent failure to reach a standard of competence and diligence. Thus, we are satisfied the practitioner is guilty of professional misconduct. However, we find professional misconduct established is not of the most egregious type. We regard it to be at the lower end of the scale having regard to comparable cases (see Council of the Law Society v Coombes [2015] NSWCATOD 108). 2. As there is to be a separate penalty hearing, we have not addressed, at this point, Ms Foord's submissions on the orders the Society seek we should make. ORDERS 1. The application is stood over for a hearing on penalty on 24 March 2017. 2. The Applicant is to give to the Respondent and the Tribunal any further material, if any, relied on which it relies in relation to penalty on or before 3 March 2017. 3. The Respondent is to give to the Applicant and the Tribunal any further material on which he relies in respect of penalty on or before 10 March 2017. ********** 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: 24 February 2017