Carr v Council of the Law Society of New South Wales

Court of Appeal (NSW)|2020-06-30|Before: White JA, McCallum JA

Introduction These proceedings are concerned with the conduct of Mr Malcolm Carr (the Solicitor) in relation to funds received by him from a client, Mr Zvonko Nenadic (the Client). On 14 January 2020, in proceedings brought by the Council of the Law Society of New South Wales (the Law Society), the Civil and Administrative Tribunal of New South Wales (the Tribunal), for reasons published on that day, made an order that the Solicitor had been guilty of professional misconduct and unsatisfactory professional conduct in relation to the funds. The Tribunal also ordered that the matter be listed for further hearing on penalty. By notice of appeal filed on 25 March 2020, the Solicitor appeals to this Court from the orders made by the Tribunal on 14 January 2020.

The Solicitor and the Client

The Solicitor acted for the Client continuously between 11 December 2011 and 11 March 2015. In the course of so acting, the Solicitor acted in relation to proceedings in the Equity Division of the Supreme Court between the Client and the Client's brother in connection with the estate of their mother. The proceedings were heard by Young AJ and the Client was unsuccessful in the proceedings. On 30 September 2014, the Solicitor filed a notice of intention to appeal from certain of the orders made by Young AJ on 2 September 2014. The Solicitor agreed to act on a pro bono basis in respect of the proposed appeal.
Mr Russell Sweet of Counsel was briefed to appear on behalf of the Client in those proceedings. On 13 October 2014, in accordance with instructions from the Client, the Solicitor instructed Mr Sweet to prepare a memorandum of advice on the prospects of a successful appeal from the orders made by Young AJ. On 24 October 2014, in accordance with instructions from the Client, the Solicitor instructed Mr Sweet to cease preparing the memorandum of advice. On 21 November 2014, Mr Sweet emailed the Solicitor confirming that the Client had instructed the Solicitor to resume preparation of the advice.
The Solicitor subsequently asked the Client to provide funds for Mr Sweet's fees and filing fees for the proposed appeal. On 26 November 2014, the Client deposited the sum of $7,900 in cash to the credit of the Solicitor's office account with the Commonwealth Bank of Australia (the Office Account). On 28 November 2014, the Solicitor transferred the sum of $5,000 from the Office Account to Mr Sweet in partial payment of a tax invoice from Mr Sweet dated 4 November 2014.
On 17 December 2014, the Solicitor filed a notice of appeal on behalf of the Client and received an invoice from the Supreme Court for a filing fee in the sum of $3,127. However, because the Solicitor was acting pro bono, the Registrar of the Court of Appeal indicated that the filing fee would not be payable by the Client until judgment was given in the appeal.
It must be assumed that the Solicitor requested the Client to pay that sum, since, on 19 December 2014, the Client deposited the sum of $3,127 in cash for the credit of the Office Account. However, the Solicitor asserted that he did not ask the Client to pay that sum into the Office Account and that the deposit to the Office Account was made without notice to him. He asserted that he was first notified of the deposit when he received a copy of the relevant deposit receipt on 17 March 2015 in circumstances to which reference will be made below.
On 2 March 2015, the Client signed an authority for "all files and documents" held by the Solicitor, or under his direction, to be transferred to Mr John Maait of Norris Somers Maait Lawyers (Mr Maait). On 5 March 2015, Mr Maait wrote to the Solicitor by facsimile notifying that Norris Somers Maait Lawyers were then acting for the Client and enclosing a copy of the authority of 2 March 2015.
The Solicitor responded on the same day saying that submissions had been filed in the Court of Appeal on that day and that he would arrange for the files "in the current matter" to be sent to Mr Maait. He said that he would do his best to get all the files to Mr Maait as best he could but that older files belonging to the Client were currently in storage and that he would arrange for them to be sent to Mr Maait. The Solicitor said that he would inform Mr Sweet that he was no longer briefed in the matter.
At 5.20 pm on 5 March 2015, Mr Maait sent an email to the Solicitor requesting him to advise Mr Sweet that his retainer was not being terminated by the Client, despite his decision to change solicitors. The email said that the Client had already paid for completion of certain advices by Mr Sweet and wanted him to see it through and that Mr Maait expected that he would be continuing to brief Mr Sweet in the matter.
On 10 March 2015, Mr Maait sent an email to the Solicitor, saying he could do nothing about the matter until he had the files from the Solicitor and "the moneys information" that he had requested. The Solicitor responded on the same day attaching a trust account ledger for the Client. The Solicitor said that he believed fees of about $3,000 were owed to Mr Sweet but that he had not been able to contact Mr Sweet to verify the outstanding amount. The Solicitor said that he had agreed not to charge the Client any further fees when he indicated that he wanted to appeal from the orders made by Young AJ.
On 16 March 2015, Mr Maait sent a letter by facsimile to the Solicitor, saying that the Client had paid into the Solicitor's "trust account" all fees due and payable to Mr Sweet, specifically to complete an advice on the prospects of his appeal as well as the submissions for the appeal. On 17 March 2015, the Solicitor sent a letter to Mr Maait by facsimile relevantly saying as follows: "We are holding no funds in trust because [the Client] directed us to transfer the balance of all monies held on trust to him, which we did. If you require any further specific information on the trust statement do not hesitate to contact us." It is relevant that, on 3 November 2014, on instructions from the Client, the Solicitor had transferred the sum of $251,608.02 to the Client. That was the balance standing to the credit of the Client in the Solicitor's trust account at that time.
At 4.23 pm on 16 March 2015, Mr Maait sent a letter to the Solicitor complaining that he had received no reply or acknowledgement about the availability of the Client's files for collection. Mr Maait said in the letter that he had telephoned the Solicitor's office earlier in the afternoon and left an extremely urgent message for the Solicitor to call back. Mr Maait's letter then relevantly said as follows: "… 2. [The Client] instructs us that he has paid into your trust account all fees due and payable to Mr Sweet specifically to complete an advice on the prospects of his appeal, as well as the submissions; 3. Mr Sweet has advised that there are fees due to him but unpaid by you as his instructing attorney; 4. Mr Sweet is yet to complete what he has sent to us as being partially completed submissions which we understand will not be completed by him until his fees are paid. You have recently provided to us a trust account statement showing transactions totalling some $111,223.66, with a zero balance of funds in trust. The statement shows numerous credits and debits and reversal of those debits on the same days. We seek an explanation for what funds have been transacted through your trust account and the purposes of those transactions. More importantly, we require your confirmation by return that [the Client] did pay you sufficient funds for payment to Mr Sweet and whether those funds have been so applied or will be applied to enable completion of the submissions by Mr Sweet. We seek an explanation specifically as to why Mr Sweet has not completed the submissions, if indeed payment or assurance of payment of his fees have been made or given by the Client to you and by you to Mr Sweet. Please make available [the Client's] files for collection as a matter of urgency, hopefully no later than midday tomorrow, including also the foregoing information and disbursement of all funds provided by [the Client] to you, [c]opies of all invoices rendered by you to date and copies of all counsel fees and other disbursement invoices paid by you for or on behalf of [the Client]."
At 11.33 am on 17 March 2015, the Solicitor sent a facsimile letter to Mr Maait in response to his letter of 16 March 2015, which, the Solicitor said, had not been received until 17 March 2015. The Solicitor's letter relevantly said as follows: "You have made a number of serious allegations to which I will respond as follows: 1. You first requested that we return [the Client's] files on 5 March 2015. Since having relocated offices, we advised you that some of [the Client's] files would need to be recovered from storage. All the files have been ready for collection since 13 March 2015. 2. [The Client's] instructions were on a start-stop-start basis subject to frequent doubts about wanting to proceed with the appeal. Counsel, Mr Sweet who has been drafting the submissions for the Court of Appeal says he found that [the Client's] indecisiveness very frustrating. 3. The trust account transactions are explained in the itemised document attached, which was also provided to [the Client]. We attach copies of our invoices together with Counsel's invoices as you required. … There were multiple entries which arose as a result of a bookkeeper, who transferred the entries from my old system into the new … database. The accounts have been audited several times and no issues have arisen. … We are holding no funds in trust because [the Client] directed us to transfer the balance of all monies held in trust to him, which we did. If you require any further specific information on the trust statement do not hesitate to contact us. 4. Mr Sweet was provided with all necessary documentation to finalise the submissions for appeal. However, Mr Sweet became extremely frustrated with [the Client] who has never been entirely committed to his instructions. We understand that you are in communication Mr Sweet [sic], and you may clarify exactly this with Mr Sweet. Mr Sweet says he provided you with his outstanding account and we assume you will arrange for [the Client] to pay this. 5. We agreed not to charge [the Client] in relation to commencing his Appeal. You have advised us in writing that [the Client] will look to us for any damages for loss, and accordingly we have notified Law Cover."
At 11.50 am on 17 March 2015, Mr Maait sent a facsimile letter to the Solicitor saying, relevantly, as follows: "We refer to your facsimile of today and reply to your number paragraphs as follows: 1. Despite the known urgency in our several faxes to your office, we were not notified until this letter from you today that the files were available for collection; 2. We are yet to obtain [the Client's] instructions about those allegations. What we can say at this stage is that they are at odds with what Mr Sweet has advised us to date regarding the history of his involvement in the matter; 3. [The Client] has instructed us previously that at least two amounts had been deposited by him into your trust account between 20 November 2014 and 19 December 2014 totalling $11,027.00 (see attached copies of receipts) for which he has received no accounting from you. Indeed we cannot see those 2 amounts appearing anywhere in the trust account statement you have provided. Can you kindly provide some explanation or any indication as to whether those funds were or were not received by your firm. In any event we are yet to discuss the accounting and other issues with [the Client]. … As to the serious allegations we have made, we assure you they were made on express instructions from [the Client] arising from his many concerns about the delay and lack of diligence and failures to follow his instructions during your firm's engagement as his lawyers[.]" Attached to that letter were copies of deposit receipts showing credits to the Office Account of $7,900 on 26 November 2014 and $3,127 on 19 December 2014.
An employee of the Solicitor responded in a letter sent by facsimile dated 17 March 2015. The letter is time stamped 5.26 pm but appears to have been sent earlier than that as Mr Maait responded to it at 3.05 pm stating that he had received it at "14:52 today". As to the two amounts deposited into the trust account, the Solicitor said that the sum of $3,127 had been used for the commencement of the appeal including the filing fee. He said that he was investigating the payment of $7,900, which he said appeared to have been sent to him on "20 November 2011" [sic].
On 17 March 2015, the Solicitor arranged for a contractor whom he employed as a process server and filing clerk to deliver the Client's files to Mr Maait's office on the following morning. The files were delivered on that morning.
Mr Maait's response sent at 3.06 pm on 17 March 2015 relevantly said as follows: "The receipt for $7,900.00 relates to a payment made on the date we indicated in our earlier letter today. The original receipt in our possession clearly shows the date 26 November 2014, not 2011 as you assert. It is our firm instructions from [the Client] that those funds and the $3,127.00 deposited by him on 19 December 2014 were paid into your account on the express request of [the Solicitor] to cover court filing fees and fees payable to Mr Sweet to finalise his submissions. We attach a copy of a text message sent by [the Solicitor] to [the Client] on 8 December 2014 expressly stating that $7,500 was required for Mr Sweet 'for his professional opinion on appeal.' On 12 March 2015, Mr Sweet wrote to us dealing at some length the history of the matter. … Please advise the following by return: 1. Did your firm or anyone on its behalf appear before the [C]ourt of [A]ppeal [R]egistrar on 18 February 2015; 2. Were the appellant's submissions to be filed by 5 or 18 March 2015; 3. Were the funds deposited by [the Client] on 26 November 2014 and 19 December 2014, requested by you? If so, what were those funds requested for, and were they received as [the Client] has confirmed, and if so, what became of those funds; 4. If the funds referred to were obtained by you, at least partly on account of Mr Sweet's fees, has the latter been paid those fees and in what amount and when? If not, why not? 5. If the funds are held by your from [sic] [the Client] for Mr Sweet's fees, we request that you pay Mr Sweet immediately those fees, with a request that he finalise the submissions due by tomorrow (according to his own advice to us). 6. When did you advise us that our client's files are to be made available at Wolli Creek as opposed to your office, to where we had dispatched an urgent courier to collect them immediately on receipt of your earlier letter via fax? 7. Do you intend in the circumstances to immediately dispatch your own courier to deliver our client's files to us? If not, why not?"
During the course of 18 March 2015, several communications took place between the Solicitor and Mr Maait, both by telephone and facsimile. There is a question as to the terms of the telephone conversations between the Solicitor and Mr Maait. That question involves the use, if any, made by the Tribunal in making its finding as to the terms of the conversations, of a file note made by Mr Maait dated 18 March 2015 (the File Note). The File Note was admitted as evidence by the Tribunal over the Solicitor's objection. Reference will be made to that matter below.
In his affidavit sworn in the proceedings in the Tribunal, the Solicitor said that, on the morning of 18 March 2015, at about 9 am, he received a telephone call from Mr Maait and that his recollection as to the conversation was to the following effect: "Mr Maait: Thank you for the sending of the man up with the files, they have been received. I sent you a letter yesterday about Sweet's fees. He wants to be paid all of the money in advance. The Solicitor: Before we get into that I wanted to clear up a position in relation to the money that was deposited. [The Client] did pay $7,900 into our account on 26 November last year. I paid Sweet $5,000 for work he had done, and I still have the balance of $2,900. I haven't paid it to Sweet as he hasn't finished the work." The Solicitor said in his affidavit that, straight after that conversation, he spoke to Mr Sweet and then called Mr Maait again and had a second conversation to the following effect: "The Solicitor: I spoke to Sweet. He says I can't instruct him to finish the submissions as I no longer act for [the Client]. You need to instruct him to do that. Mr Maait: I still don't understand why you paid Sweet $5,000 [of the Client's] money. The way you've handled this appeal has been catastrophic for [the Client] … I don't understand why you would pay him $5,000 of [the Client's] money when he hasn't done them. [The Client] is extremely concerned about this. The Solicitor: As I said, Sweet wanted the money so he would complete the advice and the notice of appeal. He refused to do the work if we didn't pay him something. So I paid him the $5,000 so he would do the work. I said I would pay him the other $2,600 plus typing fees when it was finished. Mr Maait: Okay, well please confirm in writing what Sweet said to you, and also send the invoice from Mr Sweet and the receipt for the payment. The Solicitor: Okay, I'll get back to you on that. And I'm happy to send you the other $2,900 so you can pay it to Sweet when he's done with the submissions. Send me your trust account details and a written authorisation from [the Client] and I'll send you the money. Mr Maait: Okay, my trust account details are … . The Solicitor: No I won't take your details over the phone. Please send them to me in writing. I'm happy to send you the money and I will do that straight away, but I need your trust account details in writing and I need a written authority. Mr Maait: Okay I'll do that. And what about the other $3,000-odd that [the Client] also gave to you? The Solicitor: That was the filing fee for the appeal. Mr Maait: I don't believe that. That's far too much for a filing fee for an appeal. The Solicitor: Well that's what the filing fee was. I can send you the invoice. Mr Maait: Okay I'll wait to hear from you."
At 10.27 am on 18 March 2015, the Solicitor sent a facsimile letter to Mr Maait saying as follows: "I confirm that the $7,900.00 deposit was made into our account on 26 November 2014 St [sic] the St Mary's branch of the Commonwealth Bank. On 28 November 2014 I transferred $5,000.00 to Russell Sweet which was an advance payment for him to prepare submissions. I also advised you in our telephone conversation that in the circumstances I would transfer to you the money I am holding to pay Mr Sweet to complete the submissions and I now confirm that I will transfer to you the remaining $2,900.00."
At 11 am on 18 March 2015, the Solicitor sent a facsimile to Mr Maait attaching a copy of a facsimile that he had sent earlier in the day to Mr Sweet. The facsimile to Mr Sweet said as follows: "We refer to your Memorandum of Fees and Tax Invoice dated 12 March 2014. We attach our transfer receipt dated 28 November 2014 confirming that on 28 November 2014 we transferred to you the sum of $5,000.00 as an advance payment for your preparation of the submissions for [the Client's] appeal to the Court of Appeal. To date we have not received a receipt from you for this $5,000.00 payment. Please send us a receipt as a matter of urgency[.]" At 3.05 pm on 18 March 2015, Mr Maait sent a facsimile letter to the Solicitor relevantly saying: "We refer to previous correspondence and to the writer's several telephone conversations with you today. We have only been able to superficially review the files delivered by your courier to our office this morning containing 4 manila folders and 5 lever arch folders in varying sizes. … Mr Sweet had already advised us that he believes that the appeal was filed out of time and was (and may still be) incompetent. Please advise urgently whether that situation has been rectified. Most of these pressing questions were made in our letter faxed to your office late yesterday afternoon and to which we still do not have any, or any proper, reply. Have you in fact sent us your current file relating to the appeal, and indeed any file since the decision and orders below were made on 2 September 2014? We must have that file immediately if it exists, but at least must have your answers to the above questions by return, please." At 4.41 pm on 18 March 2015, the Solicitor sent a facsimile letter to Mr Maait responding to the facsimile of 3.05 pm. The Solicitor enclosed copies of various documents, including the notice of the intention to appeal dated 30 September 2014, the notice of appeal filed on 17 December 2014, an affidavit of the Solicitor filed on 17 December 2014 explaining the delay in filing the notice of appeal and a letter to the Registrar of the Court of Appeal seeking an adjournment of a directions hearing fixed for 18 February 2015.
On 19 March 2015, Mr Maait sent a facsimile letter to the Solicitor acknowledging the letter of the previous afternoon. The letter relevantly said as follows: "We trust that you appreciate that the Notice of Appeal filed by you was in fact filed out of time and, as such, is currently incompetent. Notwithstanding the matters deposed to by [the Solicitor] in his affidavit 15 December 2014, the defect in the filing of a Notice of Appeal is not thereby remedied and there is still a need for a formal Notice of Motion seeking leave to appeal out of time. Having received no such document from you or any indication that it had been filed, we shall assume that in fact no such Notice was filed. Any such Notice of Motion will need to be supported by evidence as to the reason of the delay. The affidavit of [the Solicitor] referred to deposes to several things which are or could be of doubtful validity. We wish [the Solicitor] to be on notice that he may need to provide us by return a fresh affidavit to address those matters which might be misstated in that affidavit of 15 December 2014. …." At 1.25 pm on 19 March 2015, Mr Maait sent another facsimile letter to the Solicitor requesting comment on statements made by Mr Sweet regarding fee arrangements with him and the payments made to him "or not made to him as the case maybe" [sic]. The letter included the following: "We are gravely concerned about the amount of costs that have been paid by you from [the Client's] funds to Mr Sweet for work in relation to some advice referred to by him and certain submissions, neither of which appear to have been completed. We certainly have not seen any advice in relation to the appeal by Mr Sweet, either on your files as provided to us or from him direct, yet [the Client] is now being pressed to pay to Mr Sweet far greater amounts than initially indicated to us by him and you, and all for work either not apparently done or not finished. …."
On 20 March 2015, Mr Maait wrote to the Solicitor saying that he was awaiting a reply to the facsimile of the previous day and to a number of other matters raised in other correspondence. The letter ended as follows: "We note for the record that you had assured us 2 days ago that you had $2,900 of [the Client's] funds in your trust account which you assured us would be deposited immediately into our trust account on account of Mr Sweet's fees. We still have not received any of those funds from you."
On 26 March 2015, the Solicitor sent a facsimile letter in response to Mr Maait's letter of 20 March 2015, relevantly saying: "We are not going to enter into detailed correspondence regarding [the Client's] complaints about us because obviously our professional indemnity insurers require us not to." Mr Maait responded by letter dated 26 March 2015 relevantly saying: "We also have no interest in dwelling in correspondence on [the Client's] numerous complaint [sic]. What we and [the Client] are interested in and what [the Client] is entitled to are the following which we have repeatedly requested but not yet received from you: 1. The balance of any files still held by you in connection with our Client's case, particularly those relating to the current appeal; … 5. In your letter of 18 March you stated in the last sentence 'I now confirm that I will transfer to you the remaining $2,900.00'. We are yet to receive those funds or an explanation for why that commitment has not been honoured to date."
On 11 April 2015, Mr Maait wrote to the Solicitor referring to his letters of 18, 20 and 26 March 2015. The letter relevantly said: "Whatever your view may be regarding the past history of your dealings with [the Client's] case, [the Client] is entitled to the information, the documents and funds we have sought on his behalf in numerous letters before now, particularly those referred to above. Please let us have by return your kind reply to each of the matters referred to. … We have your express undertaking in your letter of 18 March last to transfer $2,900 held in your trust account to our trust account which was also confirmed by you orally to the writer on or about that date. We are yet to receive those funds. We really have no wish and would find no pleasure in referring this matter to the Professional Standards Department of the Law Society. We invite you to please save us that unpleasant course and to please let us have by return information, documents and funds in question."
On 27 May 2015, Mr Maait wrote again to the Solicitor relevantly saying as follows: "We refer to previous correspondence and to draw your attention in particular to one of two letters received by facsimile from you on 17 March 2015 and the first of your two letters of 18 March 2015. … There are several matters flowing specifically from those two letters which cause us considerable concern and in respect of which we invite your further comments by return before we refer this matter to the Professional Standards Department of the Law Society and the Legal Services Commissioner, as in deed [sic] we must unless we receive a satisfactory explanation from you by return. 1. In the first letter referred to, you categorically state that you 'used $3,127.00 (out of funds of $7,900.00 paid into your trust account) for the commencement of [the Client's] appeal including paying the filing fees in the Court of Criminal Appeal'. Please clarify whether the reference to the Court of Criminal Appeal is intended to refer to the Appeal you lodged for [the Client] with the Court of Appeal. … 2. You provided us with a copy of the invoice from the NSW Court of Appeal for $3,127.00 and undertook in your letter of 18 March 'to locate the receipt' for the payment of same. Needless to say since then you have not communicated with us further about that issue. We have in the meantime received from Executive Collections a demand addressed to [the Client] for payment of the same fee for the same invoice that you maintain was paid from [the Client's] trust funds. … 3. In your letter of 18 March, you categorically state 'I also advised you in our telephone conversation that in the circumstances I would transfer to you the money I am holding to pay Mr Sweet to complete the submissions and I now confirm that I will transfer to you the remaining $2,900.00'. We view that statement as an express undertaking from you personally as a lawyer to transfer those funds within a reasonable time. We remind you that it is now approximately two and a half months since you gave that undertaking. 4. Despite our several requests and reminders to you about those undertakings and commitments referred to above and our repeated requests for itemised bills of cost and proper accounting to our Client for all funds received by you, you have failed to honour your undertakings or to provide the itemisation of your costs or the accounting for all funds as required. …"
The Solicitor did not respond to the letters from Mr Maait of 26 March 2015, 11 April 2015 and 27 May 2015. His justification for not doing so is addressed below.
On 8 September 2015, Mr Maait made a complaint about the Solicitor to the Legal Services Commissioner, alleging that the Solicitor had attempted to mislead the Client about funds in trust and the filing fees, had failed: to provide the Client's file in a timely manner; had failed to account to the Client and provide an itemised bill of costs; had failed to comply with an assurance to transfer funds and had failed to reply to correspondence from the Client's new solicitors. On 10 September 2015, that complaint was referred by the Legal Services Commissioner to the Law Society. From then until 10 April 2017, the Law Society investigated Mr Maait's complaint. On 25 May 2017, the Law Society notified the Solicitor of a new complaint initiated by it concerning alleged misappropriation of trust money. From then until 18 September 2017, the Law Society conducted further investigations into the complaints concerning the Solicitor.
On 24 June 2017, Mr Maait sent an email to the Solicitor attaching a letter and an authority signed by the Client dated 22 June 2017 requesting the transfer by the Solicitor to Mr Maait of monies owing to the Client. The Solicitor admitted that he received that email but asserted that it did not come to his attention until about 5 September 2017. On 5 September 2017, the Solicitor transferred to the trust account of Mr Maait's firm the sum of $6,027, comprising the sums of $2,900 and $3,127 referred to above.

Law Society's Complaints in the Tribunal

By its application for disciplinary findings and orders filed on 17 October 2018 (the Application), the Law Society applied to the Tribunal for an order recommending the removal of the Solicitor's name from the Roll. The grounds for the Application were as follows: 1. the Solicitor is guilty of unsatisfactory professional conduct in attempting to mislead Mr Maait by advising on 17 March 2015 that no funds owing to the Client were held in the Solicitor's trust account to meet costs or counsel's fees when in fact such monies were held; 2. the Solicitor is guilty of professional misconduct in failing to comply with an undertaking given to Mr Maait to transfer an amount of $2,900 being held in trust for the Client; and 3. the Solicitor is guilty of professional misconduct in that he: 1. misappropriated $2,900 of trust money; and 2. misappropriated $3,127 of trust money. A further allegation of unsatisfactory professional conduct was made by the Law Society, namely, attempting to mislead Mr Maait by advising him that Supreme Court filing fees in the amount of $3,127 had been paid when they had not been paid. That allegation was rejected by the Tribunal and is not the subject of the proceedings before this Court.
In the Application, the Law Society particularised the relevant charges against the Solicitor as follows:

Ground (1) 1. On 16 March 2015, Mr Maait sent a letter by facsimile to the Solicitor stating: "[The Client] instructs us that he has paid into your trust account all fees due and payable to Mr Sweet specifically to complete an advice on the prospects of his appeal, as well as the submissions." 1. On 17 March 2015, Mr Maait received a letter by facsimile from the Solicitor stating, relevantly: "We are holding no funds on trust because [the Client] directed us to transfer the balance of all monies held on trust to him, which we did. If you require any further specific information on the trust statement do not hesitate to contact us." 1. The Solicitor asked the Client to transfer funds in respect of Mr Sweet's fees and filing fees for the notice of appeal; 2. On 26 November 2014, the Client deposited the sum of $7,900 cash into the Office Account; 3. The deposit was made by the Client in respect of Mr Sweet's fees in the appeal proceedings; 4. The Solicitor had no entitlement to the sum of $7,900 as he had agreed to act for the Client on a pro bono basis; 5. On 28 November 2014, the Solicitor transferred the sum of $5,000 to Mr Sweet in partial payment of Mr Sweet's tax invoice of 4 November 2014; 6. The sum of $7,900 deposited into the Office Account was trust money within the meaning of s 243 of the Legal Profession Act 2004 (NSW) (the 2004 Act); 7. Following the payment of $5,000 to Mr Sweet, the balance of funds paid by the Client on 26 November 2014 held by the Solicitor in the Office Account was $2,900; 8. The Solicitor was aware as at 26 November 2014, that the Client had deposited into the Office Account the sum of $7,900 or a sum of at least $5,000 for the payment of Mr Sweet's invoice dated 4 November 2014; 9. As at the date of his letter of 17 March 2014, the Solicitor was aware that the Client had deposited into the Office Account the sum of $7,900 or a sum of money of at least $5,000 for the payment of Mr Sweet's invoice dated 4 November 2014.

Ground (2) 1. (a) On 18 March 2015, the Solicitor and Mr Maait had a telephone conversation in which the Solicitor represented that: 1. the Client paid $7,900 into a bank account of the Solicitor on 26 November 2014; 2. from the sum of $7,900, the Solicitor paid $5,000 of that money to Mr Sweet; 3. the remaining balance of $2,900 was held in the Solicitor's trust account. 1. (b) On 18 March 2015, the Solicitor and Mr Maait had a subsequent telephone conversation in which the Solicitor made the following representations: (i) upon provision of the account details of Mr Maait's trust account, the Solicitor would transfer the sum of $2,900 "now"; (ii) the Solicitor would check the amount of the filing fee and the amount owed to Mr Sweet; (iii) the Solicitor would send to Mr Maait's firm the sum of $2,900 and confirm his conversation with Mr Sweet first and before sending a copy of the receipt for the filing fee and Mr Sweet's account to Mr Maait's firm; (c) On 18 March 2015, Mr Maait received a letter by facsimile from the Solicitor stating: "I confirm that the $7,900.00 deposit was made into our account on 26 November 2014 St [sic] the St Mary's branch of the Commonwealth Bank. On 28 November 2014 I transferred $5,000.00 to Russell Sweet which was an advance payment for him to prepare submissions. I also advised you in our telephone conversation that in the circumstances I would transfer to you the money I am holding to pay Mr Sweet to complete the submissions and I now confirm that I will transfer to you the remaining $2,900.00." (d) The statement referred from the previous paragraph constituted an undertaking by the Solicitor to Mr Maait's firm to transfer the sum of $2,900; (e) The Solicitor was bound personally to comply with that undertaking; (f) As at the date of the undertaking, the New South Wales Professional Conduct and Practice Rules 2013 (Solicitors' Rules) applied to the conduct of the Solicitor; (g) The Solicitor's failure to comply with the undertaking was in breach of r 6 of the Solicitors' Rules; (h) The Solicitor did not respond to correspondence from Mr Maait from 26 March 2015 to 27 May 2015; (i) On 22 June 2016, the Solicitor transferred the sum of $2,900 from the Office Account to his Trust Account; (j) On 24 June 2017, Mr Maait sent an email to the Solicitor attaching a letter of the same date and an authority signed by the Client dated 22 June 2017 requesting the transfer of monies due to the Client from the Solicitor to Mr Maait's firm; (k) On 31 July 2017, the Solicitor transferred the sum of $3,127 from the Office Account to the Solicitor's Trust Account to the order of the Client; (l) On 5 September 2017, the Solicitor transferred the sum of $6,027 comprising the sums of $2,900 and $3,127 to Mr Maait's trust account.

Ground (3)(i) (a) The sum of $7,900 deposited into the Office Account by the Client on 26 November 2014 was trust money within the meaning of s 243 of the 2004 Act; (b) The balance of the Office Account prior to the deposit of $7,900 by the Client on 26 November 2018 was a credit of $4,373.09; (c) But for the deposit of $7,900 by the Client on 26 November 2018 into the Office Account, the Solicitor could not have paid the sum of $5,000 to Mr Sweet on 28 November 2014; (d) On 18 December 2014, the Office Account became overdrawn in the sum of $160.72; (e) The Solicitor intended to make or in the alternative authorise the making of the transactions on the Office Account in the period 28 November 2014 to 18 December 2014; (f) The transactions made on the Office Account in that period involved the use of the sum of $2,900: (i) without the authority of the Client; (ii) for purposes unrelated to the appeal proceedings; and (iii) for the benefit of the Solicitor's law practice or the Solicitor personally;

Ground (3)(ii) (a) On 19 December 2014, the Client deposited the sum of $3,187 into the Office Account; (b) The deposit was in respect of filing fees for the notice of appeal and made at the request of the Solicitor; (c) The sum of $3,127 was trust money within the meaning of s 243 of the 2004 Act; (d) The balance of the Office Account prior to the deposit of $3,127 by the Client was $7,572.03 credit; (e) On 29 January 2015, the Office Account became overdrawn in that the balance was $12,231.67 in debit; (f) The Solicitor intended to make, or further in the alternative, authorise the making of the transactions on the Office Account in the period 19 December 2014 to 29 January 2015; and (g) The transactions made on the Office Account in the period 19 December 2014 to 29 January 2015 involved the use of the sum of $3,127: (i) without the authority of the Client; (ii) for the purposes unrelated to the appeal proceedings; (iii) for the benefit of the Solicitor's law practice or the Solicitor personally.

Reasons of the Tribunal

The Tribunal dealt separately with each ground of the Law Society's complaints. It is therefore convenient set out separately the Tribunal's treatment of each of the grounds.

Ground (1)

The Law Society contended that, following payment of the sum of $5,000 to Mr Sweet, the balance of funds held by the Solicitor in the Office Account was $2,900 and that, following the payment of $5,000 to Mr Sweet, the Solicitor was obliged to pay the remaining sum either to Mr Sweet or as otherwise directed by the Client. The Solicitor accepts that he became aware on 28 November 2014 that the Client had deposited the sum of $7,900 to the credit of the Office Account. He admitted that, to the extent that he was not entitled to the sum of $7,900, it was trust money within the meaning of s 243 of the 2004 Act.
The Tribunal considered that the facsimile of 17 March 2015 sent by the Solicitor was not confined to monies being held in the Solicitor's trust account but referred to "what funds were being held on trust". The Tribunal found that the Solicitor was aware that the sum of $7,900 had been received and either appreciated at the time of becoming aware of its receipt, or "ought to have appreciated", that, whilst the money was not deposited into a trust account, it was nevertheless trust money as defined in s 243 of the 2004 Act. The Tribunal concluded that, since the Solicitor had asked the Client for "funds in trust for Counsel", the Solicitor ought to have appreciated and checked, before sending the facsimile of 17 March 2015, that there remained $2,900 still held on trust.
The Tribunal was satisfied that, by informing Mr Maait in the facsimile of 17 March 2015 that "he was at that point holding no funds in trust", the Solicitor misled Mr Maait into believing that no funds owing to the Client were held on trust by the Solicitor "to meet costs and/or counsel's fees when in fact such monies were held". The Tribunal concluded therefore that Ground 1 had been established and found the Solicitor guilty of unsatisfactory professional conduct.

Ground (2)

The Law Society contended that, on 18 March 2015, the Solicitor and Mr Maait had a telephone conversation (the first conversation) during which the Solicitor made the following representations:

the Client paid the sum of $7,900 into the Office Account on 26 November 2014;
the Solicitor paid the sum of $5,000 from that money to Mr Sweet, and
the remaining balance of $2,900 was held in the Solicitor's trust account. The Solicitor admitted making the first two representations but denied making the third representation.

The Law Society also contended that, on 18 March 2015, the Solicitor and Mr Maait had a further telephone conversation (the second conversation), in which the Solicitor made the following representations:

upon provision of the trust account details of Mr Maait's firm, the Solicitor would transfer the sum of $2,900 "now";
the Solicitor would check the amount of the filing fee and the amount owed to Mr Sweet; and
the Solicitor would send to Mr Maait's firm the sum of $2,900 and confirm his conversation with Mr Sweet first and before sending a copy of the receipt for a filing fee and Mr Sweet's account to Mr Maait.

The Solicitor accepted that, immediately after the second conversation, he sent to Mr Maait the facsimile letter dated 18 March 2015 and that that accurately set out the effect of the second conversation. He accepted that, during that telephone conversation, he made representations consistent with that letter. He otherwise denied the representations.
The Law Society asserted that the facsimile of 18 March 2015 constituted an undertaking by the Solicitor to Mr Maait to transfer the sum of $2,900. The Solicitor denied that it constituted an undertaking. He said, in the alternative, that, if the facsimile did constitute an undertaking, as at 18 March 2015, he had no authority to pay the $2,900 to any person other than the Client unless he received instructions from the Client to do so. The Solicitor contended, therefore, that any undertaking was to pay $2,900 subject to the receipt by the Solicitor of instructions from the Client to do so.
The Tribunal concluded that the Solicitor's facsimile of 18 March 2015 "contained an unqualified undertaking that the Solicitor would transfer the remaining $2,900 that had been held on the [the Client's] behalf to Mr Maait". The Tribunal considered that, while the facsimile did not use the word "undertaking", the words used "were clear and unequivocal" and were chosen by the Solicitor himself. The Tribunal considered that it was significant that the qualifications that the Solicitor contends were discussed with Mr Maait were not recorded in the Solicitor's facsimile.
The Tribunal found that, knowing the level of urgency and importance involved, or in circumstances where the Solicitor ought to have realised such urgency and importance, the Solicitor ought to have appreciated that, by giving "the unconditional Undertakings" [sic], Mr Maait would have expected an immediate honouring of it or, if the Solicitor was unable to honour the undertaking, Mr Maait would have expected that he would have received a further communication asking to be relieved from compliance, specifying that the transfer could not take place until Mr Maait forwarded his trust account details and a written authority from the Client.
The Tribunal considered the language used by the Solicitor would suggest to its recipient that the transfer of the money would take place "forthwith". The Tribunal therefore rejected the Solicitor's submission that the ultimate payment of the sum of $2,900 in 2017 meant that there was no failure to comply with any undertaking.
The Tribunal observed that, despite receiving further written communications from Mr Maait in late March 2015, mid-April 2015 and late May 2015, which used language such as "you had assured us" and "your express undertaking", the Solicitor did not seek to be relieved of what the Tribunal found was his undertaking. It observed that the Solicitor did not raise with Mr Maait in writing the matter that he contends that he discussed on the telephone on 18 March 2015, namely, the provision of trust account details and an authority from the Client. The Solicitor contended that the failure to respond to Mr Maait's communications of March, April and May 2015 was understandable in circumstances where he had given notification to LawCover Pty Ltd and had been advised that he was not to communicate further with Mr Maait in relation to the allegations that were being made.
The Tribunal found that what was said in the facsimile of 18 March 2015 constituted "an unconditional and unequivocal undertaking to transfer the $2,900 to Mr Maait's trust account". The Tribunal did not accept that the qualifications or conditions that the Solicitor asserted had been made were in fact made. The Tribunal said that "the weight of the evidence" led it to be comfortably satisfied that the conditions and qualifications deposed to by the Solicitor were not the subject of discussion with Mr Maait. The Tribunal referred, in particular, to the letter of 18 March 2015 by which the earlier telephone conversations were purportedly confirmed, but which failed to record the qualifications or conditions, and to the subsequent letters from Mr Maait of March, April and May 2015, to which there was no response.
The Tribunal held that the failure to honour an undertaking fits within the common law test of professional misconduct as well as constituting professional misconduct as defined by s 297(1) of the Legal Profession Uniform Law 2015 (NSW) (the Uniform Law). The Tribunal held that it is of considerable importance to the administration of justice, and in the conduct of affairs and trusted practitioners, that practitioners can rely upon their colleagues to honour undertakings. The Tribunal accepted the proposition that undertakings will be enforced by the Court because legal practitioners are officers of the Court and because, without enforcement, undertakings would be worthless, persons and courts would be unable to rely on the word of a legal practitioner and that aspect of legal practice, that demands compliance for legal efficacy, would collapse.
The Tribunal found that failing to honour an undertaking was conduct in the pursuit of professional activities that would be regarded as disgraceful or dishonourable by professional colleagues of good repute and competency. The Tribunal found that it was also conduct that involved a substantial failure to reach or maintain a reasonable standard of competence and diligence. The Tribunal found that the Solicitor's conduct was a consistent failure to reach or maintain a reasonable standard of competence and diligence and that the test for professional misconduct in s 297(1) of the Uniform Law was satisfied. The Tribunal therefore found that Ground 2 was established.

Grounds (3)(i) and (3)(ii)

The Solicitor accepted, and the Tribunal found, that the deposits into the Office Account of $7,900 on 26 November 2014 and $3,127 on 19 December 2014 were each deposits of trust money within the meaning of s 243 of the 2004 Act. The Tribunal found that the Solicitor intended to make each of the withdrawals from and deposits to the Office Account in the period 28 November 2014 to 29 January 2015 in that he either made each "withdrawal or transaction" himself or authorised the making of each "withdrawal or transaction".
The Tribunal found that the Solicitor was aware, by no later than 28 November 2014, when he caused $5,000 to be paid to Mr Sweet, that the Client had deposited $7,900 into the Office Account. The Tribunal found that the Solicitor was either aware or with reasonable diligence ought to have been aware, of the deposit of the sum of $3,127 into the Office Account on or shortly after 19 December 2014.
The Tribunal found that the transactions recorded on the Office Account in the period 28 November 2014 to 18 December 2014 involved the use of the sum of $2,900, which was trust money. The Tribunal found that the Solicitor used that trust money without the Client's authority for purposes unrelated to the appeal proceedings and for the benefit of either the Solicitor personally or his law practice. The Tribunal found that the transactions made on the Office Account in the period of 19 December 2014 to 29 January 2015 involved the use of the sum of $3,127, which was trust money. The Tribunal found that the Solicitor used that money without the Client's authority, for purposes unrelated to the appeal proceedings and for the benefit of either the Solicitor personally or for the benefit of his law practice.
After 28 November 2014, the Office Account had a credit balance of $5,133.15. After various withdrawals were made after 28 November 2014, the account balance dropped to below $2,900 on 3 December 2014, returned to a balance in excess of $2,900 on 5 December 2014 and again dropped below a balance of $2,900 on 16 December 2014. The account fell into debit on 18 December 2014.
The Tribunal found that the Solicitor either intended to make withdrawals or otherwise conducted transactions on the Office Account in the period 19 December 2014 to 29 January 2015. Trust money belonging to the Client in the Office Account as at 19 December 2014 totalled $6,027. The balance of the Office Account fell below that amount on 9 January 2015 and on 29 January 2015, the Office Account was $12,231.67 in debit.
The Tribunal found that the Solicitor made or authorised the making of the transactions on the Office Account in the period 28 November 2014 to 18 December 2014 and in the period 19 December 2014 to 29 January 2015. The Tribunal found that the Solicitor's known lack of entitlement to either the sum of $2,900 or the sum of $3,127 and his appropriation of those amounts by the making of or authorising the making of the transactions, when unauthorised by the Client, rendered the knowledge, belief or intent of the Solicitor dishonest. The Tribunal found that the Solicitor's knowledge, belief or intent were dishonest since he had requested funds from the Client for Counsel's fees and filing fees, had agreed not to charge the Client for work on the appeal proceedings, he was aware that the Office Account was not a trust account, he was aware that the sum of $7,900 had been deposited into the Office Account, he was aware or ought to have been aware of the deposit of the sum of $3,127 and, being so aware, or in circumstances where he ought to have been aware, the Solicitor nevertheless made withdrawals on the Office Account "utilising" the monies that the Client had deposited. The Tribunal therefore concluded that there was misappropriation by the Solicitor as alleged by the Law Society.
The Tribunal found that the Solicitor's conduct in relation to "the use" of the monies in the Office Account constituted professional misconduct both within the meaning of s 297 of the Uniform Law and under the common law. The Tribunal held that the fact that the Solicitor ultimately repaid the monies in September 2017 did not deprive the conduct of its characterisation as professional misconduct.
The Tribunal concluded that the conduct of the Solicitor more appropriately fits the description of professional misconduct because of the Solicitor's awareness, certainly in relation to the sum of $7,900, that the money had been placed into the Office Account as opposed to his trust account. Yet the Solicitor failed to take steps to ensure that the money was immediately transferred to a trust account in accordance with his statutory obligation for the keeping of trust monies. The Tribunal found that the Solicitor made or caused to be made various withdrawals from the Office Account at a time when the balance of the Office Account was relatively modest and when there must have been at least an appreciable risk that, by making various withdrawals, the Client's monies may have been dissipated. The Tribunal considered that, after it had become apparent that the Client had deposited the sum of $7,900 into the Office Account, there was at least a substantial prospect that the Client would pay the sum of $3,127 into the Office Account. The Tribunal concluded that, in those circumstances, the Solicitor ought to have been diligent in checking the Office Account so as to ensure that, if the sum of $3,127 was deposited into that account, he could take steps to transfer it immediately to his trust account.

Grounds of Appeal

In his notice of appeal, the Solicitor relies on some 26 grounds. It is convenient to restate them as follows:

Attempt to Mislead 1. the Tribunal made no finding that, when he sent the facsimile of 17 March 2015, the Solicitor had attempted to mislead Mr Maait and, accordingly, the Tribunal erred by finding that Ground 1 of the Application was established; 2. the Tribunal failed to ask itself whether the Solicitor had attempted to mislead Mr Maait; 3. in the alternative, the Tribunal failed to take into account whether any evidence established that the Solicitor had an intention to mislead Mr Maait; 4. the Tribunal took into account the following considerations, which are irrelevant: 1. whether the Solicitor ought to have appreciated that the sum of $7,900 that had been received was trust money as defined in s 243 of the 2004 Act; 2. whether the Solicitor ought to have appreciated and checked before sending the 17 March facsimile that there remained $2,900 held on trust of the $7,900 that had been received; 3. whether Mr Maait was in fact misled into believing that no funds of the Client were held on trust by the Solicitor.

Breach of Undertaking 1. the Tribunal erred by admitting the File Note into evidence and permitting the Law Society to rely on the truth of its contents and ought to have found that the File Note was inadmissible under s 59 of the Evidence Act 1995 (NSW) as hearsay and was not relevant for a non-hearsay purpose; 2. the Tribunal erred by permitting the Law Society to cross-examine the Solicitor about the File Note in circumstances where: 1. the File Note had been admitted only as evidence of the fact of a representation having been made and not the truth of its contents; 2. the File Note ought not to have been admitted at all; and 3. the Solicitor was denied procedural fairness when the author of the File Note was not called to give evidence. 1. the Tribunal erred in finding that the weight of the evidence indicated that the Solicitor did not, in his telephone conversation with Mr Maait on 18 March 2015, discuss with Mr Maait the conditions and qualifications that the Solicitor asserted he had specified to Mr Maait; 2. the Tribunal erred by failing to take into account the fact that the Solicitor's evidence regarding his telephone conversation with Mr Maait was uncontested, the fact that the Tribunal did not find the Solicitor to be an unreliable or untruthful witness, the fact that the Law Society did not call Mr Maait to give evidence and the fact that permitting the Law Society to rely on the File Note was a breach of the Solicitor's entitlement to natural justice; 3. the Tribunal erred by failing to find that, in the second conversation of 18 March 2015, the Solicitor requested Mr Maait to provide him with trust account details and a written authority from the Client and said that he would not accept the trust account details over the telephone and required them to be sent in writing; 4. the Tribunal erred by finding that the Solicitor's facsimile communication of 18 March 2015 contained an unqualified undertaking that the Solicitor would transfer to Mr Maait's firm the remaining $2,900 that was held on behalf of the Client; 5. the Tribunal erred by failing to take into account a relevant consideration, namely, that the alleged undertaking would not have been capable of being complied with because the Solicitor could not have transferred the monies to Mr Maait unless he knew the details of the account into which the monies were to be paid and the Solicitor was prohibited by s 255(1)(b) of the 2004 Act from dispersing the monies unless and until he received a direction from the Client; 6. alternatively, the Tribunal erred by failing to find that any undertaking was qualified by the conditions that before the monies were transferred, Mr Maait was required to provide the Solicitor with trust account details in writing and a direction from the Client to transfer the monies, in circumstances where the statement alleged to constitute the undertaking included the words "I also advised you in our telephone conversation that in the circumstances I would transfer to you the money" and the Solicitor gave uncontradicted evidence that, in the telephone conversation to which that statement referred, he had requested written details of Mr Maait's trust account and a direction from the Client. 7. the Tribunal erred by failing to consider, or make any findings concerning, the Solicitor's subjective awareness of the alleged undertaking and the reasons for not complying with the alleged undertaking; 8. the Tribunal erred by failing to find, in accordance with the Solicitor's uncontradicted and unchallenged evidence, that: 1. the reason that the Solicitor did not transfer the sum of $2,900 was that he had received neither the details of the account into which the funds were to be transferred nor a direction from the Client to transfer the funds; 2. the Solicitor did not understand himself to have given an undertaking to transfer the sum of $2,900; 3. the reason that the Solicitor did not respond to Mr Maait's letters after 26 March 2015 was that he understood himself to be complying with advice from LawCover Pty Ltd and did not give consideration to the merits of each individual allegation that Mr Maait was making. 1. the Solicitor did not knowingly or deliberately breach the undertaking if one were given; 2. the Tribunal erred by finding that the conduct alleged in Ground 2 was professional misconduct and ought to have found that the conduct, if made out, was unsatisfactory professional conduct because: 1. the Solicitor did not understand himself to have given a binding undertaking; 2. it was not unreasonable for the Solicitor not to have understood himself to have given a binding undertaking; 3. the Tribunal did not find, and it was not open to the Tribunal to find, that the Solicitor had knowingly or deliberately breached the undertaking; and 4. the Solicitor's conduct was not such that it amounted to professional misconduct nor conduct that would reasonably be regarded as disgraceful or dishonourable by professional colleagues of repute and competency. 1. Alternatively, the Tribunal erred by finding that the Solicitor's conduct was professional misconduct under the common law because the conduct was no more than mere negligence and mere negligence is not sufficient to satisfy that test;

Misappropriations 1. (and part of (19)) the Tribunal erred by finding that the Solicitor subjectively had the knowledge, belief or intent that his actions were dishonest in circumstances where subjective dishonesty had not been alleged in the Law Society's application or submissions and it was not put in cross-examination of the Solicitor that he knew or believed that his actions were dishonest; 2. (and part of (18)) the Tribunal erred by finding that, by conducting transactions on the Office Account in the period from 28 November 2014 to 29 January 2015, the Solicitor had acted dishonestly and had misappropriated sums of $2,900 and $3,127 belonging to the Client because, in order to find that the Solicitor misappropriated the funds or acted dishonestly, it was necessary for the Tribunal to find that he had actually known that he was causing the Client's monies to be dissipated and the Tribunal did not find that the Solicitor had actual knowledge that by making the transactions he was causing the Client's monies to be dissipated. 3. the Tribunal erred by rejecting the Solicitor's evidence that, since December 2014, the Office Account had an overdraft limit of $20,000 and finding that there was no documentary evidence that the Office Account had an overdraft limit of $20,000; 4. the Tribunal ought to have accepted the Solicitor's evidence as to the overdraft limit because there was documentary evidence of the overdraft limit, the Solicitor's evidence as to its existence was uncontradicted, the Law Society did not put to the Solicitor that his affidavit evidence was unreliable or should not be accepted and the Tribunal did not find that the Solicitor was an unreliable or untruthful witness; 5. the Tribunal erred in rejecting the Solicitor's submission that the Client's funds had not been appropriated from the Office Account but remained in that account so long as the Solicitor had a right to payment from his bankers on demand of a sum equal to the Client's funds; 6. the Tribunal erred by finding that the transactions on the Office Account in the period 28 November 2014 to 29 January 2015 involved the use of the sums of $2,900 and $3,127 belonging to the Client and ought to have found that those transactions did not involve the use of the Client's funds; 7. the Tribunal erred by failing to find that Ground 3 had not been made out; 8. the Tribunal erred by finding that the conduct comprising Ground 3, if established, was professional misconduct and ought to have found that, in the circumstances of the case, the conduct was unsatisfactory professional conduct where: 1. the Tribunal did not find that the Solicitor had actually intended to misappropriate the Client's monies or that he had acted recklessly in that regard but found only that he ought to have been aware that there was a risk that his actions caused the monies to be dissipated; 2. during the period from 28 November 2014 to 31 January 2015, monies sufficient to pay the Client were always available in the Office Account save for 17 December 2014 and 18 December 2014. 1. the Tribunal erred by finding that the Solicitor's conduct was professional misconduct in circumstances where it was no more than mere negligence and mere negligence is not sufficient to satisfy the common law test.

The File Note

As indicated above, a question in the appeal is the extent, if any, to which the Tribunal had regard to the File Note, a copy of which was tendered by the Law Society and admitted into evidence by the Tribunal. Mr Maait, the author of the File Note, was not called to give evidence on behalf of the Law Society. No explanation was proffered by the Law Society as to why he was not called.
The File Note purported to record a telephone conversation between Mr Maait and the Solicitor at 9.43 am on 18 March 2015 and included the following: "… I called [the Solicitor] and I said to him '… thank for [sic] the files [in relation to the Client] which have just been delivered to my office. Late yesterday I sent to your office a letter with a copy of one page of a receipt from Mr Sweet and I wanted to talk to you briefly about that.' He said 'I want to firstly tell you [the Client] did pay into our account $7,900.00 on 26 November 2014. I paid Mr Sweet $5,000.00 of that money for work he had done and I have the balance of $2,900.00 in my trust account which I'll transfer to your trust account straight away. I had not paid it to Mr Sweet as he has not completed the job. I would not be paying unless he finishes the submissions which he agreed to do. As you would know you would not pay counsel unless he has completed the work.' … He called me a short time later saying 'I've spoken to Sweet. He won't do any more work on my instructions because he says I'm not instructing the matter and he will not accept instructions from me. Give me your trust account details and I will transfer the $2,900.00 into your trust account now.' I then gave [the Solicitor] our trust account details and I said 'would you please speak to your employed Solicitor who had been writing to me yesterday or anyone in your office and come back to me with an answer about why Mr Sweet was paid $5,000.00 out of my Client's money when he says to me that he had agreed to do the work for $2,600.00 plus typing expenses and also what happened to the 3 odd thousand dollars that was paid by [the Solicitor] into your trust account.' He said Mr Sweet had requested the money for his work at the time and we paid it to him. The $3,000.00 plus was the court filing fee on the appeal. I said '… please confirm in writing the discussion you have had with Mr Sweet this morning. Are you sure that the filing fee on the appeal was in excess of $3,000.00. It seems much too high for an individual filing of a summons for appeal. I would like you to please send me as soon as you can the invoice for Mr Sweet for the $5,000, a receipt from him for that money and a receipt from the Court for the filing fee.' He said 'I'll check the fee to the Court and I will check the account for Mr Sweet. I need to send you the money first and confirm my conversation with Mr Sweet, as you have asked and I'll do the second part about the money a bit later.' I said: 'That's fine but I need this moved today.'"
The File Note was admitted on the basis that it, together with other documents, was relevant to establishing the Tribunal's jurisdiction and, in particular, to establish that the investigation process required by the 2004 Act had been undertaken, following the complaint by My Maait. The Tribunal ruled that the File Note and the other documents were admitted as to the fact of "certain representations" having been made and not as to the truth of the representations. In the circumstances, the reference to the making of "certain representations" must refer to "representations" made by Mr Maait and not to "representations" made by the Solicitor. The Tribunal also said that the documents were admitted "for completeness". It is unclear what the Tribunal intended by its reference to "completeness". Curiously, the Tribunal then went on to say that the documents, including the File Note, were admitted "subject to the [Solicitor's] objection, and as to relevance", and that, "given that finding", it proposed to admit the documents in question, including the File Note.
Against that background, the question that arises is the extent to which the Tribunal in fact had regard to the File Note. The Solicitor complains that the Tribunal improperly placed some weight on the File Note in reaching its conclusion that, in the letter of 18 March 2018, the Solicitor gave an undertaking in the terms alleged by the Law Society, without conditions or qualifications, as alleged by the Solicitor. The Law Society, on the other hand, contends that the Tribunal did not place any evidentiary weight on the File Note in reaching its conclusion to that effect.
The Solicitor says that the terms of any alleged undertaking given in the letter of 18 March 2018 must be considered in the light of the oral statements that he asserted he made to the effect that he required details of Mr Maait's trust account in writing and a written authority from the Client. The Solicitor said in his affidavit that he was careful to avoid taking down Mr Maait's bank details over the telephone as it was his practice not to do so because it was "insecure". He said that he always made sure that he received bank details in writing before making a bank deposit. He also said in his affidavit that Mr Maait agreed to his request to provide bank details and a written authority from the Client to transfer the funds. The Solicitor said that he did not think that that would be controversial and assumed that Mr Maait would provide the details and the authority. He said that, in his experience, it was standard procedure in such situations for a practitioner to provide trust account details in writing and a signed authority from a client to transfer the funds, similarly in form to the authority and a direction for the Solicitor to transfer the client's files that Mr Maait had sent to him on 5 March 2015. The Solicitor said that his impression from his conversations and correspondence with Mr Maait was that Mr Maait was punctilious about procedure and that he therefore expected that Mr Maait would follow that procedure as well.
In its reasons, the Tribunal referred to Mr Maait's letter of complaint to the Office of the Legal Services Commissioner dated 8 September 2015, which attached a number of documents, including the File Note. The Tribunal observed that the Solicitor did not dispute that he was a party to two telephone conversations with Mr Maait on 18 March 2015. The Tribunal also observed that there was no evidence from the Solicitor that he made a file note of the conversations or that such a file note exists.
The Tribunal then referred to the fact that the second telephone conversation on 18 March 2015 relied upon by the Law Society was also recorded in the File Note, which recorded that, during that second telephone conversation, the Solicitor asked for Mr Maait's trust account details and said, "I will transfer the $2,900 into your trust account now". The Tribunal observed that the File Note further records the trust account details being given to the Solicitor and concludes with the Solicitor saying that, although he would check the court fees and the account for Mr Sweet, he needed "to send you the money first".
The Tribunal found that what was said in the facsimile letter of 18 March 2015 constituted "an unconditional and unequivocal undertaking to transfer the $2,900 to Mr Maait's trust account". [1] The Tribunal did not accept that the qualifications or conditions that the Solicitor described in his affidavit actually occurred. It said that "the weight of the evidence" led the Tribunal to be comfortably satisfied that the conditions and qualifications deposed to by the Solicitor were not the subject of discussion with Mr Maait. The Tribunal referred "in particular" to the following:

the contemporaneous 18 March 2015 letter by which the earlier telephone conversations were purportedly confirmed;
the failure on the Solicitor's part to record the qualifications or conditions subsequent to his 18 March 2015 facsimile;
Mr Maait's letters of March, April and May 2015. While the Tribunal did not, at that point, refer to the File Note, it is significant that the particular matters just described were not stated by the Tribunal to be exhaustive as to the evidence "the weight" of which led it to be comfortably satisfied as stated. Having regard to the earlier reference to the File Note, the inference is almost inescapable that the Tribunal had regard to its contents in reaching a conclusion as to whether the Solicitor did in fact state the qualifications and conditions deposed to in his affidavit.

In the course of his cross-examination by counsel for the Law Society, the Solicitor was asked about the File Note, and specifically whether, to his recollection, Mr Maait spoke the words "would you please speak to your employed Solicitor who had been writing to me yesterday". The Solicitor's response was that he could not assist because he just did not know. He was asked whether the Client asked him to act "on a pro bono basis". He responded that the Client would not know what a "pro bono basis" was but that the Client did press him to act for him on an appeal from the judgment in the Equity Division. He said that he told the Client that there was no way that an appeal would succeed and that he did not want to take money from him because he did not want to be associated with the appeal.
In the course of cross-examination, the Solicitor was asked to look at the File Note and was asked whether it was a document that purported to be a file note in relation to a telephone conversation. His counsel then objected on the ground that the document was admitted on the basis that it was evidence only of a representation for the purpose of establishing jurisdiction. The Solicitor's counsel observed that it was his understanding that the document was admitted on the basis that it would not be put to the use that counsel for the Law Society was then attempting to put it. The presiding member of the Tribunal confirmed that it was admitted as to the fact of the representations being made but not as to the truth of the representations.
Counsel for the Solicitor then raised an objection under s 44 of the Evidence Act in relation to cross-examining a witness on a previous representation made by someone else. Counsel accepted that a witness may be cross-examined on a previous representation, if the evidence of the representation has been admitted but the File Note had been admitted on a very specific basis, namely, just to establish jurisdiction and to establish that the Law Society had conducted an investigation. Counsel submitted that it had not been admitted as proof of anything to do with the actual conversation or anything to do with its contents. Counsel for the Law Society argued, on the other hand, that it was envisaged that the File Note was admitted to prove that "the statement" had been made, without identifying the "statement". The Tribunal then allowed the question.
Counsel for the Law Society then continued to cross-examine the Solicitor as to his recollection of the conversations that were the subject of the File Note. It was put to the Solicitor that it was perhaps the case that Mr Maait had in fact given him his trust account details over the telephone, to which the Solicitor replied "no". When asked whether it could be the case that perhaps he had not asked for written authority from the Client from Mr Maait, the Solicitor replied, "certainly not". The Solicitor was then asked whether his recollection of the conversation may be incorrect and responded, "I don't think so, no". He said that he could be sure that his recollection was correct.
The only basis upon which the File Note was admitted into evidence was to establish that the Law Society had conducted an investigation and the Tribunal therefore had jurisdiction to entertain the Application. In those circumstances, it is clear that counsel for the Law Society was cross-examining the Solicitor on statements made by Mr Maait in the File Note, contrary to the provisions of s 44 of the Evidence Act. Against that background, it is almost inescapable that "the weight of evidence" to which the Tribunal referred included the File Note as evidence of the truth of the statements made in it by Mr Maait, recording the statements he recorded as having been made by the Solicitor.

Breach of Undertaking

There was no dispute that the Solicitor sent the letter of 18 March 2015 to Mr Maait in which he stated the following: "I confirm that the $7,900.00 deposit was made into our account on 26 November 2014 St [sic] the St Mary's branch of the Commonwealth Bank. On 28 November 2014 I transferred $5,000.00 to Russell Sweet which was an advance payment for him to prepare submissions. I also advised you in our telephone conversation that in the circumstances I would transfer to you the money I am holding to pay Mr Sweet to complete the submissions and I now confirm that I will transfer to you the remaining $2,900.00." The statement was a response to the earlier facsimile from Mr Maait the terms of which are set out above. The question is whether the statement constituted an undertaking by the Solicitor to transfer forthwith to the trust account of Mr Maait's firm the sum of $2,900.
The Solicitor denies that the statement was "an undertaking". Secondly, he says that the statement was made in a context where Mr Maait knew, or ought to have known, that the Solicitor had no authority to pay the sum of $2,900 to any person other than Mr Sweet unless he received instructions from the Client to do so. Thirdly, he says, the statement must be considered and construed in the light of the terms of the telephone conversation referred to in the letter.
In his affidavit evidence, the Solicitor also said that, at the time of making the statement in the facsimile of 18 March 2015, he did not have written details of the trust account of Mr Maait's firm and that he had asked for those details to be provided to him in writing. Thus, the Solicitor contended, as at 18 March 2015, when he sent the facsimile, it was not possible for him to transfer to Mr Maait or Mr Maait's firm the sum of $2,900 being the balance of the sum of $7,900 that had been paid into the Office Account by the Client on 26 November 2014.
The Solicitor contends that the other matters that were said by the Tribunal to constitute the evidence to which it gave weight are capable of being explained. While the Solicitor, in his response, accepted that the letter of 18 March 2015 was consistent with the allegations made by the Law Society, he says that that is equivocal. Further, he says, his failure to make a file note does not of itself lead to the conclusion that the conversation deposed to by him did not occur. Finally, the Solicitor explained his failure to respond to Mr Maait's letters of March, April and May 2015 as justified by advice from LawCover that he should not enter into any correspondence with Mr Maait in respect of any complaint made on behalf of the Client.
Quite apart from the question of whether the qualifications or conditions deposed to by the Solicitor were expressed by him, a further answer to the Law Society's allegation is that, until the Solicitor received authority from the Client, whether or not in writing, it was impermissible for him to make a payment, to a third party, of the monies that he had received on trust. Even if the Solicitor had been informed orally of the details of Mr Maait's trust account in the course of the conversation, he had not received any authority from the Client to pay the monies held on trust for the Client to Mr Maait or to his firm.
It was not suggested by the Law Society that the authority provided to the Solicitor by Mr Maait requiring the Solicitor to deliver up his files to Mr Maait extended to authorising the payment of monies held on trust. There is no evidence that the Solicitor received any authority, much less a written authority, from the Client to pay the monies that had been paid into the Office Account prior to a letter of 4 June 2017 from Mr Maait to the Solicitor enclosing a written authority from the Client to transfer the trust monies to Mr Maait. That letter was delivered while the Solicitor was on leave and not noticed by him until 5 September 2017 when the Solicitor transferred the sum of $6,027 from his trust account to Mr Maait's trust account.
In the circumstances, the Tribunal erred in concluding that the Solicitor's letter of 18 March 2015 constituted an unconditional and unequivocal undertaking to transfer the funds forthwith, such that the failure to do so, in the absence of authority from the Client, constituted professional misconduct. The finding in relation to the second charge relied upon in the Application should be set aside.

Attempt to Mislead

The Tribunal was required to determine the allegations made by the Law Society as formulated and particularised in the Application. The Application alleged that the Solicitor had attempted to mislead Mr Maait. That necessarily entails an element of deliberate conduct on the part of the Solicitor. [3] That is to say, for the allegation to be made out, it was necessary for the Tribunal to find that the Solicitor actually intended to mislead Mr Maait. However, there was no allegation in the Application that the Solicitor intended to mislead Mr Maait by sending the facsimile in question. More significantly, the Tribunal was not asked by the Law Society to make a finding that the Solicitor intended to mislead Mr Maait. Finally, the Tribunal made no finding that the Solicitor intended to mislead Mr Maait. Indeed, there was no direct evidence that the Solicitor intended to mislead Mr Maait and the Solicitor denied that he had that intention.
Nevertheless, the Tribunal found that the Solicitor ought to have known that the statement in the facsimile was misleading notwithstanding that that was not alleged by the Law Society. Further, the Tribunal found that Mr Maait was in fact misled, notwithstanding that there was no allegation that Mr Maait had been misled or any evidence that he was in fact misled.
The Solicitor gave affidavit evidence that, when he wrote the facsimile of 17 March 2015, he had in his mind the payment to the Client of the balance of the funds that had been held in his trust account prior to 3 November 2014, which were held in trust in relation to the estate of the Client's mother. He did not turn his mind to the funds that had been deposited into the Office Account. He said that, when he sent the facsimile, he honestly believed that he held no monies on trust for the Client.
In the circumstances, the Tribunal erred in dealing with the allegation of attempt to mislead. In the absence of any allegation of intention to mislead and in the absence of any finding of intention to mislead, it was not open to the Tribunal to find that the Solicitor had attempted to mislead Mr Maait. The Tribunal's finding in relation to attempting to mislead should be set aside.

Misappropriation of $2,900

It is clear enough that the Solicitor was aware that the Client had paid the sum of $7,900 into the Office Account. That must follow from the fact that the Solicitor paid the sum of $5,000 to Mr Sweet. The Solicitor did not deny that he was aware of the payment of the sum of $7,900 into the Office Account. He may be the subject of criticism for having failed to transfer that sum to his trust account in circumstances where he acknowledged that the funds did not belong to him. He accepted that the funds belonged to either the Client or to Mr Sweet. To that extent, it must be accepted that he is aware that he had a balance of $2,900 that he had received from the Client on trust.
The Solicitor's primary answer to the allegation of misappropriation in relation to the sum of $2,900 is that, while it may well have been a breach of the practice requirements for him not to have transferred the funds to the trust account immediately upon becoming aware that they had been paid in cash to the credit of his Office Account, he did not dishonestly appropriate the funds for the benefit of his practice or for his personal benefit. He contends that, once the funds had been credited to the Office Account, they were transformed into a chose in action owing by his bankers to himself, being intermingled with his own funds since, at the time of payment in, the Office Account was in credit. It may well be that the failure, immediately upon becoming aware of the credit to the Office Account, to transfer the sum of $7,900 to the trust account was a breach of trust. However, that has not been alleged by the Law Society. It may well be that, in some sense, the Solicitor should have made clear to the Client that, in paying monies for counsel's fees, the payment should not have been made in cash to the Office Account. Again, that is not a complaint made by the Law Society, notwithstanding the apparent finding by the Tribunal. The Solicitor accepts that the monies paid by the Client to the credit of the Office Account in November 2014 were received by him on trust. Nevertheless, there was no separate fund that could have been identified as trust property, although, clearly enough, the Client would have been entitled to trace the cash paid by him in November 2014 into the Office Account into any other asset of the Solicitor.
However, upon the cash being received by the Solicitor's bankers, the cash ceased to be the property of the Client and became the property of the bankers, it being transformed into a debt owed by the bankers to the Solicitor. In the circumstances, whatever other breach or transgression of which the Solicitor might have been guilty, it could not be said that he misappropriated any property of or any money of the Client. The Client, for whatever reason, paid cash into the Office Account. The Law Society and the Tribunal did not explore the circumstances in which that payment occurred and no complaint is made in the Application in relation to those circumstances. It follows that the Tribunal erred in concluding that the Solicitor had misappropriated a sum of $2,900 belonging to the Client. The Tribunal's finding to that effect should be set aside.

Misappropriation of the Sum of $3,127

While no allegation of dishonesty was made in the Application, the Law Society alleged that the Solicitor intended to make the transactions on the Office Account in the period 19 December 2014 to 29 January 2015. There was no allegation that the Solicitor knowingly appropriated the sum of $3,127 for purposes unrelated to the Client's appeal proceedings and for the benefit of his law practice or his own personal benefit. The Tribunal did not in fact find that the Solicitor knowingly appropriated the sum of $3,127. The Solicitor gave evidence that he did not become aware until 17 March 2015 that the sum of $3,127 had been deposited to the credit of the Office Account. It was not put to the Solicitor that he gave false evidence in that regard or that he in fact was aware of the deposit having been made in to the Office Account during the period from 19 December 2014 to 28 January 2015. Indeed, the Tribunal simply found that the Solicitor was either aware "or with reasonable diligence ought to have been aware" of the deposit of the sum to the credit of the Office Account. It follows that there was no basis for a finding by the Tribunal that the Solicitor knowingly appropriated the sum of $3,127 in the way alleged.
Rather, the Tribunal, at most, found that there was at least a substantial prospect that the Client would pay the sum of $3,127 into the Office Account and that, in those circumstances, the Solicitor ought to have been diligent in checking the Office Account so as to ensure that, if the sum was deposited into the Office Account, he could take steps to transfer it immediately to the trust account. The Tribunal found that he should have been diligent to ensure that the Client was appropriately advised in writing before November 2014 that any monetary deposits ought to be made to the trust account and should have given details of the trust account of the Client. However, that was not an allegation made by the Law Society and it was not a basis upon which the Tribunal could find that the appropriation of the sum of $3,127, if that occurred, was effected knowingly by the Solicitor. It follows that the finding in relation to the sum of $3,127 should be set aside.

Conclusion

While certain of the Solicitor's conduct leaves much to be desired, that conduct was not the subject of any complaint. The complaints made by the Law Society in the Application were not made out. The Tribunal erred in concluding that the Solicitor was guilty of professional misconduct and unsatisfactory professional conduct. Accordingly, the appeal should be allowed and the orders made by the Tribunal on 14 January 2020 should be set aside. In lieu of the Tribunal's orders, there should be an order that the Application be dismissed and that the Law Society pay the Solicitor's costs of the proceedings before the Tribunal. The Law Society should be ordered to pay the Solicitor's costs of the appeal.

Endnotes

Council of the Law Society of New South Wales v Carr [2020] NSWCATOD 5 at [71].
See Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34.
See Kyle v Legal Practitioners' Complaints Committee (1999) 21 WAR 56; [1999] WASCA 115 at [6] (Ipp J) and at [58] (Steytler J). 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: 04 November 2020

Legal Profession Act 2004(NSW)ss 243, 255

New South Wales Professional Conduct and Practice Rules 2013(NSW)

Evidence Act 1995(NSW)ss 44, 59

Solicitors: Metro Lawyers (Appellant) Law Society of New South Wales (Respondent) File Number(s): 2020/94657 Publication restriction: Nil Decision under appeal Court or tribunal: Civil and Administrative Tribunal of New South Wales Jurisdiction: Occupational Division Citation: [2020] NSWCATOD 5 Date of Decision: 14 January 2020 Before: P Moran, Senior Member M Sindler, Senior Member B Thomson, General Member File Number(s): 2018/316912

Judgment

WHITE JA: The circumstances giving rise to this appeal are set out in the reasons for judgment of Emmett AJA. These reasons assume a familiarity with his Honour's reasons. I shall use his Honour's abbreviations.
Ground 1(a) of the Law Society's Application for Disciplinary Findings and Orders was that the Solicitor attempted to mislead the Client's new solicitor, Norris Somers Maait Lawyers, by advising on 17 March 2015 that no funds owing to the Client were held in the Solicitor's trust account to meet costs and/or counsel fees when in fact such moneys were held. As Emmett AJA says (at [120]) the allegation that the Solicitor attempted to mislead Mr Maait necessarily entailed an allegation of deliberate conduct by the Solicitor. In its written submissions before the Tribunal the Law Society contented itself with a submission that the Solicitor made a false and misleading statement to Mr Maait in his letter of 17 March 2015 (quoted by Emmett AJA at [56]) in saying that: "We are holding no funds in trust because [the Client] directed us to transfer the balance of all moneys held in trust to him, which we did."
On the other hand, counsel for the Solicitor submitted before the Tribunal that because the allegation was that the Solicitor attempted to mislead Mr Maait, the relevant question was what was the Solicitor's intention in making the representation. Counsel submitted that the Law Society was required to establish that when the letter of 17 March 2015 was sent the Solicitor turned his mind to whether he held moneys on trust for the Client, knew that he did hold moneys on trust for the Client, and notwithstanding that knowledge, deliberately misrepresented to Mr Maait that he held no moneys on trust for the Client with the intention of misleading Mr Maait. The Solicitor's evidence was that he did not intend to mislead Mr Maait and that he was intending to refer to prior instructions from the Client to release all the moneys held in trust which he directed a staff member to do. The Solicitor accepted that the $7,900 paid into his office account of which he was aware, ought to have been transferred to his trust account. He submitted that his failure to do so did not give rise to an inference that he intended to mislead Mr Maait. Rather, he acted defensively to accusations made by Mr Maait in Mr Maait's facsimile of 16 March 2015 (quoted by Emmett AJA at [55]).
The Tribunal did not grapple with the Solicitor's submission, except to note that he denied any intention to mislead Mr Maait. The Tribunal found: "23 We accept the Law Society's submissions and find Ground 1(a) established. Accordingly, we find Mr Carr guilty of unsatisfactory professional conduct. 24 The 17 March 2015 facsimile was not confined to monies being held in the Solicitor's trust account; rather 'what funds were being held on trust'. The Solicitor was aware that the $7,900 had been received and either appreciated at the time of becoming aware of its receipt, or ought to have appreciated, that whilst the money was not deposited into a trust account it was nevertheless trust money as defined in s 243 of the 2004 Act. The Solicitor concedes that he had asked his client for '… funds in trust for counsel'. He ought to have appreciated and checked before sending the 17 March email, that there remained $2,900 held on trust of the $7,900 paid. 25 The Tribunal is satisfied, to the requisite Briginshaw standard, that by informing Mr Maait in his facsimile letter of 17 March 2015 that he was at that point holding no funds in trust, the Solicitor misled Mr Maait into believing that no funds owing to Mr Nenadic were held on trust by the Solicitor to meet costs and/or counsel fees when in fact such monies were held."
The Tribunal's finding that the Solicitor misled Mr Maait into believing that no funds owing to the Client were held on trust by the Solicitor to meet costs and/or counsel fees, when in fact such moneys were held, was not a finding that the Solicitor attempted to mislead Mr Maait. The acceptance of the Law Society's submission did not amount to such a finding as the Law Society had not addressed the relevant question. It follows that the appeal in relation to ground 1(a) must be upheld. The more difficult question is whether it should follow that the charge should be dismissed, or whether the matter should be remitted to the Tribunal, differently constituted, for redetermination.
I agree with Emmett AJA that in the absence of any submission by the Law Society to the Tribunal of intention to mislead (and in the absence of a finding of such an intention) the matter should not be remitted to the Tribunal for a rehearing of the charge. It would not be just for the Law Society to be given the opportunity on a rehearing to address matters it failed to address before the Tribunal.
Ground 2 of the Law Society's application was that the Solicitor failed to comply with an undertaking given to the Client's new solicitor to transfer $2,900, being moneys held in trust for the Client. The undertaking relied upon was contained in the letter of 18 March 2015 (quoted by Emmett AJA at [63]). The words relied upon were: "I also advised you in our telephone conversation that in the circumstances I would transfer to you the money I am holding to pay Mr Sweet to complete the submissions and I now confirm that I will transfer to you the remaining $2,900.00."
Before the Tribunal the Solicitor relied upon his uncontradicted evidence of his telephone conversation with Mr Maait that preceded the sending of the facsimile letter of 18 March 2015 in which the Solicitor said that he asked Mr Maait to send his trust account details and a written authority from the Client, and Mr Maait said he would do so. The Tribunal relied upon Mr Maait's file note of the conversation. But that file note had not been admitted as evidence of the truth of its contents. The Solicitor was cross-examined on Mr Maait's file note over objection by the Solicitor's counsel. The objection to the cross-examination ought to have been upheld for the reasons given by Emmett AJA.
The Tribunal found: "66 We accept the Law Society's submissions that the Solicitor's facsimile letter of 18 March 2015 contained an unqualified undertaking that the Solicitor would transfer the remaining $2,900 that had been held on Mr Nenadic's behalf to Mr Maait. Whilst the facsimile did not use the word 'undertaking', the use of that word is not, we find, essential in determining the issue of whether or not what was given was an undertaking. The words used were clear and unequivocal. They were chosen by the Solicitor himself. Mr Maait did not ask the Solicitor to agree on a formulation of words of Mr Maait's choosing. The Solicitor authored the facsimile letter. As the facsimile was forwarded within a short period of time after the two earlier telephone conversations referred to in the evidence, and as the facsimile purported to confirm what was stated in those telephone conversations, if the qualifications that the Solicitor contends were discussed with Mr Maait, namely the provision of the trust account details and the client's authority, it is significant that those qualifications were not recorded in the Solicitor's letter. 67 As a solicitor of many years['] experience it must have been obvious that what was being discussed with Mr Maait, and what was the subject of the facsimile, were very serious and pressing matters given the necessity for Mr Maait to familiarise himself with the files that had been delivered, ascertain the position in relation to whether counsel had been paid, whether counsel was preparing submissions, and as to the filing of the Appeal. Knowing the level of urgency and importance involved (or in circumstances where the Solicitor ought to have realised such urgency and importance) he ought to have appreciated that, by giving the unconditional Undertakings that we find he gave by his 18 March 2015 facsimile, his fellow practitioner Mr Maait would have expected an immediate honouring of it or, if the Solicitor was unable to honour the Undertaking, that he would have received a further communication from the Solicitor asking to be relieved from compliance with and - instead - specifying in writing that the transfer of the monies could not take place until Mr Maait forwarded his trust account details and the written authority. ... 71 Whilst the Solicitor submits that the 18 March email ought be read in conjunction with, and in light of, the two earlier telephone conversations we find, firstly, that what was said in the facsimile letter of 18 March 2015 itself constituted an unconditional and unequivocal undertaking to transfer the $2,900 to Mr Maait's trust account. Secondly, we do not accept that the qualifications or conditions that the Solicitor described at [120] of his affidavit [Exhibit R1] occurred. The weight of the evidence, in particular the contemporaneous 18 March 2015 letter by which the earlier telephone conversations were purportedly confirmed, the failure on the Solicitor's part to record the qualifications or conditions subsequent to his 18 March facsimile; and in the face of Mr Maait's March, April and May letters leads us to be comfortably satisfied to the Briginshaw standard that the conditions and qualifications deposed to by the Solicitor were not the subject of discussion with Mr Maait."
The Tribunal's rejection of the Solicitor's evidence as to his conversation with Mr Maait on 18 March 2015 in para [71] of the Tribunal's reasons was not expressed to be based upon an acceptance of the contents of Mr Maait's file note. But it is clear that the particular matters referred to in para [71] were not the only matters that the Tribunal took into account in assessing the "weight of the evidence".
On appeal, the Solicitor submitted that the Tribunal ought to have found that the "undertaking" in the letter of 18 March 2015 was qualified by the matters the Solicitor deposed to having been said in the telephone conversation that preceded the sending of the letter. That would require a finding that the Tribunal should have accepted the Solicitor's evidence. It does not follow from the fact that one of the grounds upon which it can be inferred the Tribunal relied in rejecting the Solicitor's evidence was wrong, that the Tribunal could not properly have rejected that evidence, including for the more "particular" grounds referred to in para [71] of the Tribunal's reasons.
The Solicitor submitted that to be liable to disciplinary proceedings for failure to comply with an undertaking, the undertaking must be capable of being performed ab initio, citing Wade v Licardy (1993) 33 NSWLR 1 per Bryson J at 7-8. Bryson J was considering the summary jurisdiction of the Court, in clear cases, and as part of its inherent powers, to compel compliance by solicitors with undertakings or to order payment of compensation where enforcement of the undertaking is not possible. His Honour said (at 7-8): "The existence of such a jurisdiction in England is strongly borne out by case law, and there are recent significant cases. Re A Solicitor [1966] 1 WLR 1604; [1966] 3 All ER 52 per Pennycuick J at 1607-1608; 55 cited the following passage from Cordery on Solicitors, 5th ed (1953) at 159 and it would appear that his Lordship approved of it: 'Whether an undertaking given by a solicitor to the court, his client or a third party may be enforced against him personally depends upon the facts of each case, but the undertaking must be a personal undertaking and given by the solicitor professionally, ie, as a solicitor; it must be clear in its terms; the whole of the undertaking must be before the court; and the undertaking must be one which is capable of being performed ab initio … In enforcing undertakings the court is not guided by considerations of contract, but aims at securing honesty of conduct in its officers.'"
The authority relied upon for the above statement in the 5th edition of Cordery on Solicitors was Peart v Bushell (1827) 2 Sim 38; 57 ER 705.
In Udall v Capri Lighting Ltd (In Liquidation) [1988] QB 907, Balcombe LJ (with whom Neill LJ agreed) said of the statement in question in Cordery (at 918): "(7) Where it is inappropriate for the court to make an order requiring the solicitor to perform his undertaking, e.g. on the grounds of impossibility, the court may exercise the power referred to in paragraph (3) above and order the solicitor to compensate a person who has suffered loss in consequence of his failure to implement his undertaking: see John Fox v. Bannister, King & Rigbeys. It is stated in the text books (see Cordery on the Law Relating to Solicitors, 7th ed. (1981), p. 122; Halsbury's Laws of England, 4th ed., vol. 44 (1983), para. 255, pp. 193-194) that the court will not enforce an undertaking which is incapable of being performed ab initio. If this statement means no more than that the court will make no order in vain, then I would not quarrel with it. If, however, it is intended to suggest that the court will not order compensation for breach of an undertaking which is ab initio incapable of performance, then it is difficult to understand the principle on which it is based and I doubt whether it is an accurate statement of the law. It appears to depend on the authority of Peart v. Bushell, 2 Sim. 38 , and I agree with the criticism of that case made by Hamilton J. in United Mining and Finance Corporation Ltd. v. Becher [1910] 2 K.B. 296, 306. However, the point does not arise in the present case and I need not consider it further."
Peart v Bushell said nothing more than that an undertaking which was impossible to perform would not be enforced. The Vice Chancellor left open in that case the possibility that a claim for damages or compensation could be made on the undertaking, despite the impossibility of performance (at 39). In the current version of Cordery on Solicitors, now called Cordery on Legal Services the passage in the 5th edition has been replaced by the following: "The court still retains its inherent jurisdiction to discipline a solicitor and this includes power to strike a solicitor off the roll. Where it is no longer possible for the undertaking to be performed, then the court can direct the solicitor to pay compensation." (at E - 273)
Section 255(1)(b) of the Legal Profession Act 2004 (NSW) necessarily qualified the Solicitor's undertaking. Section 255(1)(b) provided: "255 Holding, disbursing and accounting for trust money (1) A law practice must: ... (b) disburse the trust money only in accordance with a direction given by the person. Maximum penalty: 50 penalty units."
On any view, the Solicitor could and should have responded to Mr Maait's later demands by asking for the Client's written authority. On his evidence, he could have reminded Mr Maait that Mr Maait had agreed to provide that authority. I agree with McCallum JA that the Solicitor's explanation of his advice from LawCover, namely that, according to the Solicitor, he was advised not to communicate further with Mr Maait, provided no proper basis for not reminding Mr Maait of the need for such an authority.
By the same token, Mr Maait ought to have appreciated that need.
But the Solicitor was not charged with failing to pursue Mr Maait to provide a written authority to enable him to comply with his undertaking. He was charged with breach of the undertaking. It would not have been lawful for him to have complied with the undertaking in the absence of a direction from the Client.
For these reasons, and those of Emmett AJA, the Tribunal erred in finding that the Solicitor's failure to transfer the funds forthwith was a breach of his undertaking and constituted professional misconduct.
A feature of this case is the narrowness of the charges and the grounds for the charges brought against the Solicitor. The charges did not include a charge that the Solicitor failed to pay into his trust account money he held on trust for the Client. Rather, ground 3 alleged that the Solicitor misappropriated the sums of $2,900 and $3,127. Moreover, it was common ground that the allegation of misappropriation required proof by the Law Society that the Solicitor acted dishonestly. In the written submissions of the Law Society before the Tribunal the Law Society accepted that: "An allegation of misappropriation against a legal practitioner is not made out unless 'dishonesty' is proved", citing Brereton v Legal Services Commissioner [2010] VSC 378 per Bell J at [50]-[51]).
This was so, notwithstanding the doubt expressed by Tate JA (with whom Nettle and Ashley JJA agreed) in Legal Services Commissioner v Brereton (2011) 33 VR 126; [2011] VSCA 241 at [69] and [74] as to whether dishonesty is always an integral element of a charge of misappropriation within a professional disciplinary context. Nonetheless, as in Brereton, in this case the Law Society assumed the task of establishing dishonesty in respect of ground 3.
There were two aspects to ground 3. The alleged misappropriations were of the sums of $2,900 and $3,127. The sum of $2,900 was the balance of the sum of $7,900 deposited in cash into the Solicitor's Office Account on 26 November 2014. The sum of $3,127 was cash deposited by the Client into the Office Account on 19 December 2014. The Law Society alleged that the misappropriation of $2,900 was effected by transactions on the Office Account between 28 November 2014 and 18 December 2014. The misappropriation of the sum of $3,127 was alleged to have been effected by transactions on the Office Account between 19 December 2014 and 29 January 2015.
In relation to the sum of $3,127, the Solicitor's evidence was that he was unaware of the deposit until 17 March 2015, which was after the period in which the sum was said to have been misappropriated. As the Law Society alleged dishonest misappropriation, and as there was no evidence, and it was not put to the Solicitor, that he was aware of the deposit of $3,127 prior to 29 January 2015, the allegation of dishonest misappropriation of that sum could not be sustained. I agree with the reasoning of Emmett AJA in respect of the allegation of misappropriation of the sum of $3,127.
I take a different view in respect of the allegation of misappropriation of the sum of $2,900. According to the bank statement for the Office Account, at the close of business on 27 November 2014 the Office Account was in credit in the sum of $11,958.30. This sum included the cash deposit of $7,900 made on 26 November. On 28 November there were debits to the account, including the transfer of $5,000 to Mr Sweet that, at the end of that day, left a closing credit balance of $5,183.15.
The bank statement for the period 1 December to 31 December 2014 shows a closing credit balance on 3 December 2014 for the Office Account of only $2,683.91. The account moved into a credit balance on 5 December of a sum of more than $2,900 as a result of various credits. The credit balance moved again to below $2,900 on 16 December and remained below $2,900 until 17 December. The bank statement shows that on 18 December there were three debit entries that put the account into overdraft of $160.72 (if processed chronologically). There was also a credit on the same day to that account in the sum of $8,000 putting the account in credit in the sum of $7,839.28. The bank statement does not show the time of the day on 18 December on which the debits and credits were processed by the bank. Nor was there evidence as to whether a running account for the Office Account was kept by the bank within the day or only at the end of the day. In the absence of evidence as to when the transfer of $8,000 was made to the account on 18 December, it cannot be inferred that the account ever moved into overdraft on 18 December.
It is true that on 1 January 2015 the bank debited the account with interest of eight cents which would appear to be only explicable with the bank's asserting that the account had gone into overdraft, but there was no evidence as to the basis upon which the bank was entitled to charge that interest.
Upon the Client's paying cash into the Solicitor's Office Account, the cash became the property of the Solicitor's bank and the debt owed by the bank to the Solicitor, represented by the credit balance of the account, was increased. It does not follow that subsequent transactions on the account that reduced the value of the Solicitor's chose in action against the bank to below $2,900 did not involve a misappropriation of the Client's money (In re Hallett's Estate (1880) 13 Ch D 696 at 711; Brady v Stapleton (1952) 88 CLR 322 at 337-338; Re French Caledonia Travel Service Pty Ltd (In Liq) (2003) 59 NSWLR 361; [2003] NSWSC 1008 at 381, [61]; 411, [153]).
Whilst the Office Account was in credit for more than $2,900, all withdrawals from the account would be treated as payment of the Solicitor's own money and not that of the Client. The Client had a charge over the debt owed by the bank to the Solicitor to secure the moneys owed to him. The Client's right to a charge and the Client's right to trace were not affected by the fact that the money was paid into a bank account.
The Solicitor gave evidence that he had an overdraft facility of $20,000. The Tribunal rejected that evidence, saying that there was "insufficient documentary evidence of such an overdraft to enable us to conclude on balance of probabilities that such an overdraft existed." (at 99). But there is nothing inherently improbable in the Solicitor's evidence. The bank statement for the period 1 January to 31 January 2015 records a statement that "your limit is now $20,000". The Solicitor submitted that even though the account had not gone into overdraft, because he had an overdraft facility available to him, he would be treated as having used his own moneys and not those of his Client in making the withdrawals from the account where the credit balance fell below $2,900. He submitted that the position was the same even if the account went into overdraft on 18 December 2014.
I do not agree. At the least, by reducing the balance of the account below $2,900, the Solicitor diminished the Client's charge over the account to secure the Client's entitlement to payment. On the account going into overdraft the right to trace, to which the charge is ancillary, would be lost (Re Global Finance Group Pty Ltd (In Liq) (2002) 26 WAR 385; [2002] WASC 63 at [129]-[135]; Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996] 1 AC 669 at 700, 706-707).
Moreover, even if in a dispute between the Solicitor and Client, or the bank and the Client, or a third party creditor and the Client, the Solicitor would be taken to have used his own money to meet the withdrawals from the account by drawing on the overdraft, rather than using the Client's money, that is not what happened. The Solicitor had the benefit of the Client's moneys in not incurring interest that would have been payable had the account been overdrawn on the occasions (set out above at [26]) where the credit balance fell below $2,900.
It was said in argument by counsel for the appellant that "the essence of the misappropriation is using the money to the detriment of the true owner".
I do not accept that that is necessarily so. Misappropriation at base means a wrongful conversion of or dealing with property, choses in action, or things belonging to another (The Council of the Law Society of NSW v Doherty [2010] NSWCA 177 at [41]-[43]; Jowett's Dictionary of English Law (Thomson Reuters 4th ed, 2015)). Whether that is to the detriment of the owner as opposed to the benefit of the wrongdoer, or a third party, is not determinative. It may be all three.
In any event, the misappropriation of the Client's funds was to the detriment of the Client by diminishing the value of the Client's charge over the credit balance of the account to secure repayment of the moneys appropriated.
I regard the payments from the Office Account that reduced the credit balance of that account below $2,900 as a misappropriation of the Client's moneys, although not on that account necessarily a dishonest misappropriation. The Law Society alleged only a dishonest misappropriation.
In cross-examination the Solicitor accepted that he "probably" would have intended to make each of the transactions that were represented by payments debited from the Office Account between 28 November and 18 December 2014.
However, there was no evidence as to whether the Solicitor knew that the credit balance of the account fell below $2,900 when those payments from the account were made. The Solicitor gave evidence in re-examination that he gave no consideration at the time of the transactions on the account to the deposit that had been made by the Client.
The Tribunal made the following finding: "97 We accept the Law Society's submissions that: (a) The relevant acts of the Solicitor were his making, or authorising the making of, the transactions on the Office Account in the period 28 November 2014 to 18 December 2014 in respect of the $2,900 deposit, and in the period 19 December 2014 to 29 January 2015 in relation to the $3,127 deposit. (b) The knowledge, belief or intent of the Solicitor to render the abovementioned acts dishonest were the Solicitor's known lack of entitlement to either of the $2,900 or the $3,127, and his appropriation of those amounts, when unauthorised, by the making of the transactions. (c) The Solicitor subjectively had the knowledge, belief or intent that his actions were dishonest as he had requested funds from Mr Nenadic for Counsel and filing fees, had agreed not to charge Mr Nenadic for work on the Appeal Proceedings, was aware that the Office Account was not a trust account, was aware that the $7,900 had been deposited into the Office Account and was aware or ought to have been aware of the $3,127 deposit. Despite being so aware (or in relation to the $3,127, in circumstances where he ought to have been aware) the Solicitor nevertheless made withdrawals on the account utilising the monies that Mr Nenadic had deposited. There was, accordingly, misappropriation as alleged."
As the Law Society alleged that the Solicitor was guilty of dishonest misappropriation of the sum of $2,900, it was incumbent of the Law Society to show that when withdrawals were made from the Office Account between 28 November and 18 December 2014, the Solicitor then knew that moneys standing to the credit of the account included the balance of $2,900 paid into the account on 26 November, and, with that knowledge, directed, or authorised, or knew of, the withdrawals from the account that reduced the balance of the account to below $2,900, and thereby acted dishonestly according to the standards of a solicitor (Peters v The Queen (1998) 192 CLR 493; [1998] HCA 7 applied to the circumstances of this case). The Solicitor's evidence was that he did not turn his mind to the deposit made by the Client to the account. The Tribunal was not bound to accept that evidence, but there was no evidence that the Solicitor knew that the withdrawals effected between 28 November and 18 December 2014 would reduce the balance of the account to below $2,900.
I conclude that the Law Society did not establish before the Tribunal that the Solicitor had dishonestly misappropriated the Client's payment into his Office Account of $2,900. Had the Tribunal rejected the Solicitor's evidence that when the withdrawals from the account were made, he did not consider the Client's deposit, and had there been evidence that the Solicitor knew of the balance of the account, then I would have upheld the Tribunal's finding on this count. However, there was no evidence as to the Solicitor's knowledge of the balance of the account, and the Tribunal did not address his evidence.
For these reasons I agree with the orders proposed by Emmett AJA.
McCALLUM JA: I agree with Emmett AJA. I wish only to add one remark. As his Honour has observed, aspects of the solicitor's conduct left much to be desired. One was his failure to respond to Mr Maait's repeated communications over several months pursuing release of the moneys held on trust. The solicitor's explanation was that he had given notification to LawCover of a potential claim and had been advised that he was not to communicate further with Mr Maait in relation to his allegations. If that was the solicitor's understanding of the effect of LawCover's advice, it was misconceived. No advice from LawCover could prevent him from complying with a request of that kind, concerning moneys held on trust for a former client. To the extent that he understood otherwise, the proper course was to revert to LawCover to assert the need to comply with that higher duty.
EMMETT AJA:

At a glance

Court

Decision date

Before

Catchwords

Source

Catchwords

Judgment (22 paragraphs)

Parties

Legislation Cited (3)

Cases Cited (18)

Cited By (13)