A Solicitor v Council of the Law Society of New South Wales

Judgment 1By summons filed on 5 July 2013, the plaintiff Mr Berger, a 69 year old solicitor, appealed a decision made by the Council of the Law Society of New South Wales, under s 548 of the Legal Profession Act 2004, to suspend his practising certificate. On giving the usual undertaking as to damages, Mr Berger sought a stay of the Council's decision on the basis of further undertakings, pending the hearing of the appeal. 2At the hearing of the stay application on Tuesday afternoon, it was common ground between the parties that the Court had power to order such a stay . It was also common ground that the circumstances were such that the hearing of the appeal should be expedited. Steps were taken and directions made, so that the appeal can be heard on 19 July 2013. 3The Law Society still opposed the short stay which Mr Berger sought, despite the expedition granted; the reasons given for the Council's decision to suspend his practising certificate not having referred at all to Mr Berger's explanation for his admitted breaches of certain requirements of the Legal Profession Act; the steps he had taken to redress those breaches, which included repayment of all the funds which the Law Society considered he had misappropriated; and no finding having been made that Mr Berger had been dishonest. 4That position was maintained, notwithstanding the undertakings which he proffered to the Court as to the basis of a stay, undertakings which it was not disputed, were undertakings which might be imposed on Mr Berger, if the Law Society pursues the steps it has resolved to take, to make a complaint about him under s 504 of the Legal Profession Act. 5After hearing the parties I decided that the stay sought should be granted on the undertakings given. These are the reasons for that decision. 6The Law Society's decision to suspend Mr Berger's practising certificate was made under s 548 of the Legal Profession Act which provides: "548 Immediate suspension of local practising certificate (1) This section applies if the Commissioner or the relevant Council considers it necessary in the public interest to immediately suspend a local practising certificate on the ground of the seriousness of the conduct in respect of which a complaint has been made in relation to the holder of the certificate. (2) The Council may immediately suspend the practising certificate. The Commissioner may direct the Council to immediately suspend the practising certificate, and, if so directed, the Council must immediately suspend the practising certificate. (3) The suspension operates until the earliest of the following: (a) the complaint is withdrawn or dismissed, (b) the suspension is revoked, (c) the subject-matter of the complaint is finally dealt with by the Tribunal, (d) the suspension is successfully appealed. (4) The Council must give written notice of the suspension to the holder of the practising certificate and that notice must: (a) include an information notice about the suspension, and (b) indicate the period of operation of the suspension as provided by subsection (3), and (c) state that the practitioner may make representations about the suspension. (5) The suspension takes effect on the day that notice of the suspension is given to the holder. (6) The holder may make written representations to the Commissioner or the Council about the suspension, and the Commissioner or the Council must consider the representations. (7) The Council may revoke the suspension at any time (unless the suspension was directed by the Commissioner). The Commissioner may at any time direct the Council to revoke the suspension (even if the suspension was not at the direction of the Commissioner). (8) A decision to revoke a suspension need not be in response to any written representations made by the holder. Note. Section 80 (Return of local practising certificate) provides for the Council to require the return of a local practising certificate that has been suspended." 7Affidavit evidence was given by Mr Berger and by Ms Groenewegen, a solicitor employed by the Law Society. Neither was required for cross-examination. It was Ms Groenewegen who outlined the process which the Law Society had pursued. Her evidence suggested that s 548 had not been entirely adhered to. In one respect that favoured Mr Berger, because he was given an opportunity to make representations to the Law Society, before the Council made its decision. There was no evidence, however, that those representations were put before the Council or were considered by it, in coming to its decision, although it was submitted for the Law Society that his representations had been put before the Council. 8At the time he was suspended Mr Berger, who was admitted to practice in March 1969, was practicing as sole principal of Milne Berry Berger, with the assistance of one employed solicitor, a conveyancer, a bookkeeper and other administrative staff. Mr Berger deposed that his ongoing practice there involved 400 active files, some 30 of which required certain attention. 9Mr Berger had formerly practised in partnership with Mr Harry Freedman and Ms Mittu Gopolan. That partnership was dissolved in June 2013, after a dispute which led, amongst other things, to an application by Mr Berger to this Court, to restrain a particular accountant from conducting an external examination of the partnership's accounts. Mr Berger obtained injunctive relief in those proceedings. 10On 29 May Ms Gopolan made a complaint about Mr Berger to the Law Society. Mr Berger was then in hospital. He was discharged on 4 June. On 19 June he was advised by the Law Society that a Law Society Inspector, Mr Sofiak, who had attended the offices of the partnership on 31 May, had made an adverse report about him as to his dealings with certain trust funds. He was invited to reply by no later than 25 June. 11On 21 June, Mr Berger sought an extension of time to respond and took steps to pay the sum in question, totalling some $205,258.86, into the partnership's trust account. He responded to Mr Sofiak's report on 25 June, disputing various factual matters, but acknowledging certain deficiencies. Mr Berger deposed that he had not had an adequate opportunity to respond in the timeframe. 12That evidence may well be accepted. Attached to Mr Sofiak's report was a letter addressed to Mr Berger, written by his former partners in terms adverse to Mr Berger. It was common ground in these proceedings that the letter had never been sent to Mr Berger. He disputes its factual basis. 13On 1 July the Council of the Law Society resolved: "FURTHER RESOLVED that pursuant to the provisions of Section 504 of the Legal Profession Act 2004 ["the Act"], the following complaint be made against Victor Berger [ MN 1091] ["the Solicitor"]: The Solicitor has misappropriated trust funds. FURTHER RESOLVED that, pursuant to the provisions of section 548 of the Act, the Council considers that it is necessary in the public interest to immediately suspend the local practising certificate of the Solicitor on the ground of the seriousness of the conduct in respect of which complaints have been made against the Solicitor and determines to immediately suspend the local Practising Certificate of the Solicitor. Reasons for Decision: The Council, having regard to the contents of the report prepared by Mr Jim Sofiak and dated 17 June 2013, is of the opinion that the Solicitor has misappropriated client trust funds. The nature of the Solicitor's alleged conduct is of such seriousness that the Council believes warrants the immediate cessation of the Solicitor's right to practice. FURTHER RESOLVED that the Law Society Council: 1. is of the belief that one or more of the circumstances referred to in Section 615(d) of the Act exist in relation to the law practice known as Milne Berry Berger & Freedman [FN 18534] ("the law practice"); 2. is aware that one of the principals of the law practice, Victor Berger [ MN 1091] has ceased to be an Australian legal practitioner; and 3. being of the belief set out in paragraph 1 and being aware as set out in paragraph 2 determines that, having regard to the interests of the clients of the law practice, external intervention is warranted. FURTHER RESOLVED that the Law Society Council, being of the opinion that the appointment is necessary to protect the interests of clients in relation to trust property, determines, pursuant to the provisions of Section 616(2)(b)(ii) of the Act, to appoint Richard Gerard Flynn (MN 10053), Solicitor, as Manager of the law practice known as Milne Berry Berger & Freedman for a period of two years and at a remuneration of $250 per hour plus GST; and 1. the Chief Executive Officer and/or the Secretary of the Society and/or the Manager of the Professional Standards Department be authorised to act as necessary in the matter of instructing the Society's solicitor and to make any decision necessary for the implementation of the foregoing resolutions; 2. the Manager be requested to furnish his first report within one month; and 3. the Secretary of the Society be authorised to sign any Notice of Appointment pursuant to Section 624 of the Act'" 14In the short reasons given for the suspension decision, no reference was made to Mr Berger's explanation, or why it was considered inadequate. 15The complaints related only to two former clients. As to Mrs Domabyl, for whom Mr Berger had long held a power of attorney, for example, Mr Berger explained that while he had issued two costs disclosures, one to her in relation to the sale of a property and another after her death, to his co-executor, as to probate and administration of the estate, he had not issued such a disclosure in relation to other work undertaken for her, prior to her death. He deposed: "31 At the time, I believed at the time that it was sufficient that: a. Ms Domabyl and her family (and, after she passed away, the executors of her late estate, being an accountant - Michael Green - and I) knew that I was carrying out work on her behalf or on behalf of the late estate; b. I issued an invoice or proposed invoice that set out in detail the work that had been carried out and that identified the fees that I proposed to charge, so as to provide the recipient with an opportunity to raise any objection that they had before the money was paid out." 16 Mr Berger explained how the sum of $154,000 came to be charged to the estate and funds transferred out of the estate, for those costs, before probate was granted, As to this he deposed: "59 Prior to reading Mr Sofiak's report, I believed that I could transfer the funds in question from the trust account to office prior to grant of probate. 60 Having read Mr Sofiak's report, and having read the advice I procured, which sets out the preparation of sections 44 and 61 of the Probate and Administration Act 1989 (NSW) (Tab 3 page 407 - 414 of Exhibit VB-1), I now realise that , until probate has been granted: a. The property of the estate is vested in the NSW Trustee pursuant to section 61; b. Section 44(1) cannot take effect to validate any payments. 61 I did not realise these matters at the time and honestly believed that it was common and permissible practice to charge to a late estate debts of the deceased (including legal fees owing) and fees incurred in the administration of the estate prior to grant of probate. I do not have any intention to, and undertake not to, make any future payment from trust funds held for a late estate prior to grant of probate." 17This evidence was not challenged in cross-examination, but was submitted by the Law Society to be inconsistent with documents annexed to Mr Berger's own affidavit. In the result, it was submitted, his explanations as to his approach and beliefs would not be accepted and that it would be concluded that he had been dishonest in his dealings with the trust funds in issue. 18That was not a matter which fell to me to decide on the stay application, but it seemed to me that such dishonesty would be established was not a foregone conclusion, given all of the evidence. 19In Doherty v The Law Society of New South Wales [2008] NSWCA 269, McColl J was dealing with an appeal from James J's refusal of a stay of a decision to suspend a solicitor's practising certificate, pending appeal. She observed in relation to New South Wales Bar Association v Stevens [2003] NSWCA 95 at [31] : "In that case Spigelman CJ (at [91]) (with whom Meagher and Sheller JJA agreed) emphasised authorities which indicated that the protection of the public was a matter entitled to significant weight on an application for a stay once it appeared a professional person had acted improperly to a substantial degree. His Honour referred with approval to Finn J's statement in Robb v Law Society of the Australian Capital Territory (Federal Court of Australia, Finn J, 21 June 1996, unreported): "... it must remembered that this is not the usual instance of civil litigation in which the question is whether a reason is there to hold a successful party out of the benefit of a judgment obtained until the appeal is heard. Here Mr Robb's 'reason' must be considered, not in the context of a judgment giving a benefit to a litigant, but rather as one designedly made to protect both the public and the reputation of the profession. The Supreme Court clearly regarded Mr Robb's professional misconduct as serious. Equally it found him to be ignorant of, or indifferent to, his fiduciary responsibilities. It is not for me to gainsay these conclusions. Notwithstanding the appeal lodged, to allow Mr Robb a stay in the face of such findings would require the demonstration of a reason of some cogency. I do not consider that the prejudice asserted, given as I will indicate the prospect of its mitigation in some degree, outweighs the very distinct prejudice to the public interest which could be sustained if the stay were granted. ... It is the case whenever an order for suspension is made and an appeal is lodged on arguable grounds, that the practitioner affected can assert that prejudice will be suffered if, the suspension having begun to run, the appeal is successful. This circumstance could not in my view justify, in effect, a stay as of right in all the circumstances. The decision to stay a suspension order subject to appeal on arguable grounds must in my view involve an instance specific question. There is a variety of factors of which account can or should properly be taken when considering a stay in such cases. Among these are (i) the seriousness of the misconduct found; (ii) the likely prejudice to public confidence both in the integrity of the disciplinary processes themselves and in the reputation of the profession if the practitioner is granted a stay; (iii) the means available to mitigate the prejudice alleged; and (iv) the expedition with which the appeal can be heard." 20McColl J accepted at [32] that the prospect of the mitigation of the order suspending the practising certificate by other conditions being imposed, also had to be considered. In this case that was addressed by the undertakings to the Court proposed by Mr Berger as to retention of an accountant approved by the Law Society, the furnishing of reports as to his compliance with statutory and regulatory requirements; the pursuit of a costs assessment in respect of work undertaken for Ms Domabyl; undertaking a course in Trust Accounting and Ethics; and participation in a Senior Solicitor's programme and mentoring by a senior solicitor nominated by the Law Society. 21McColl J was convinced to grant the stay sought in Doherty, explaining at [35]: "I am acutely conscious of the public interest in members of the legal profession faithfully discharging their obligations in relation to trust accounts. However I am also conscious of the fact that in this case, unlike for example in Robb, no finding has yet been made that the applicant has been guilty of professional misconduct. The proceedings are at a very early stage. The power conferred by s 548 is one available to be exercised in such circumstances. However the factors which troubled James J in his second judgment concerning the isolated nature of the transaction also trouble me. I am also conscious of the fact that before James J, the Law Society was prepared to entertain the proposition that the applicant be allowed to practice as an employed solicitor, a proposition from which it has since resiled." 22On all of the evidence in this case, I was also satisfied that Mr Berger's appeal was not hopeless and that he had established a basis for a stay on the undertakings which he proposed, for the short period prior to the hearing on 19 July. 23This was because I was not satisfied, on Mr Berger's unchallenged evidence, that a finding of dishonesty or misappropriation would necessarily be made against him, notwithstanding his admitted breaches of the Legal Profession Act. 24It was common ground that despite the absence of a costs disclosure document, he could have sought payment of the costs in question under the cost assessment regime provided by the Legal Profession Act. 25On the undisputed evidence as to the attitude of those who had responsibility for Ms Domabyl's affairs prior to her death and the close involvement of her family members, there does not appear to have been any dispute about Mr Berger's costs. Those who had responsibility for payment of the costs afterwards, out of the estate, who included his co-executor, also appear not to have had any dispute about those costs. In the result, it seemed to me, that it had to be concluded that Mr Berger has an arguable case on appeal. 26Further, the evidence was such that it must be concluded that given the harsh consequences of the exercise of its s 548 power by the Law Society, which in the circumstances appears to be that Mr Berger's practice and livelihood will be brought to an abrupt end, notwithstanding steps taken to repay the sums in issue, pending determination of the matters raised against him, that the balance of convenience clearly lay with granting the stay for the short period until his appeal has been determined. 27It was for those reasons that I made the order staying the Council's suspension of Mr Berger's practising certificate, on the basis of the undertakings given to the Court, pending further order of the Court.