Council of the Law Society of New South Wales v Bouzanis

NCAT Occupational|2018-06-18

Solicitors: Law Society of New South Wales (Applicant) Foulsham & Geddes (Respondent) File Number(s): 2015/00383882

INTRODUCTION

This is the rehearing of an application for disciplinary findings and orders brought by the Council of the Law Society of New South Wales ("the applicant") against Peter Bouzanis ("the respondent"), ordered by the Court of Appeal on 15 December 2017.
The Court of Appeal ordered that the Tribunal be differently constituted to hear and determine the complaint. [See Council of the Law Society of New South Wales v Bouzanis [2017] NSWCA 330.]
The point at issue before the Court of Appeal was whether the proceeds of a cheque drawn by clients of the respondent were or were to be regarded as trust money. The first Tribunal held they were not. The Court of Appeal decided that they were.
By an amended application the applicant seeks findings that the respondent is guilty of professional misconduct by reason of breaches of ss 254 and 255 of the Legal Profession Act 2004 ("the LPA repealed") and is guilty of misappropriation of trust funds. It also seeks orders that the respondent's name be removed from the roll and that he pay the applicant's costs as agreed or assessed. It submits to any other order the Tribunal deems fit.

THE COMPLAINT

The amended complaint is as follows: The Solicitor means Peter Bouzanis. The Society means the Law Society of New South Wales. The Firm means Messrs Peter Bouzanis & Associates. 1. In about 2011 the Solicitor received instructions to act for Donald and Karen Setchell in defence of proceedings in the District Court of NSW (the Setchell proceedings). 2. On 7 May 2012 Mr & Mrs Setchell paid the sum of $27,400 into the Solicitor's trust account on account of costs and disbursements in the Setchell proceedings. 3. On 16 May 2012 Judgment in the Setchell proceedings was handed down. 4. As at 30 May 2012 there was a zero balance in the ledger relating to the Setchell proceedings within the Solicitor's trust account. This balance had resulted from the deduction that day of $7,768 paid to the Solicitor's firm on account of "Balance fees". 5. On or about 23 May 2012 the Solicitor rendered his memorandum of costs and disbursements (of that day) to Mr & Mrs Setchell (the account). 6. The account included disbursements totalling $31,064.75, inclusive of GST. The disbursements (inclusive of GST) included: $22,068.75 payable to Mr Richard Parsons of Counsel $5,329.50 to BSPR Pty Limited (expert report and witness expenses). 7. Accounting for the $27,400 referred to in paragraph 2 above in the account, the Solicitor required payment of $19,504.75 (the balance) from Mr & Mrs Setchell. 8. On 21 June 2012 the Solicitor received a cheque from Mr & Mrs Setchell in payment of the balance (the balance cheque). 9. On 21 June 2012 the balance cheque was paid into the Solicitor's office account (the office account). 10. On 21 June 2012, immediately prior to the deposit of the balance cheque into the office account, the balance of the office account was $1,766,29. That balance then increased to $21,271.04. 11. By 22 June 2012 the balance of the office account was $10,185.73, an amount less than the balance cheque. By this date the Solicitor had not yet paid either of the disbursements referred to in paragraph 6 above. 12. On 26 June 2012 the Solicitor drew a cheque (No. 010572) on the office account and in part payment ($12,068.75) of Mr Parsons' outstanding fees. Cheque 010572 was presented on 4 July 2012. A balance of $10,000 was then payable to Mr Parsons in satisfaction of his fees for the Setchell proceedings. That sum has not been paid to Mr Parsons. 13. On 4 July 2012, after cheque 010572 was presented. The office account then had a balance of $178.48. 14. By complaint received by the Office of the Legal Services Commissioner on 20 May 2013 BSPR Pty Limited complained that the Solicitor had failed to pay its outstanding account(s). 15. The fees due to BSPR were compromised at $4,050.00. This sum was paid by the Solicitor to BSPR and in January 2015 the complaint was withdrawn.
Since the decision of the Court of Appeal was handed down, there has been much agreement between the parties and a statement of agreed facts has been placed before the Tribunal.

AGREED FACTS

It is convenient to set out the facts which have been agreed. 1. As at 2011 - 2012 the Respondent was a legal practitioner in sole practice. 2. In 2011 Mr. and Mrs. Setchell retained the Respondent in connection with legal proceedings arising from a home building contract. 3. The Respondent briefed a counsel, Mr. Parsons, to appear in the proceedings. 4. The Respondent also engaged a consulting engineer, Mr. Art Candarakis, who operated through a company BSPR Pty Ltd ('BSPR'). 5. The hearing took place before Bozic DCJ in May 2012. 6. After the hearing, on 23 May 2012, the Respondent sent the clients an invoice headed 'Memorandum of Costs and Disbursements'. The invoice sought payment of $46,904.75: (i) Professional fees owing to the Respondent - $15,840.00 (ii) Fees owed to Mr. Parsons - $22,068.75 (iii) Fees owned to BSPR for report - $1,540.00 (iv) Fees owed to BSPR for Court - $5,329.50 (v) Fees to Vekta Pty Ltd - $1,369.50 (vi) Office disbursements - $757.00 7. The Respondent failed to include earlier invoices for Mr. Parsons totalling $9,212.50. The total sum owing to Mr. Parsons should have been $31,281.25. 8. As at 7 May 2012 the Respondent held $27,400.00 in trust. The Memorandum of Costs and Disbursements recorded that this sum be transferred to meet some of the outstanding amount. This left the total amount payable as $19,504.75. 9. The $27,400.00 in rust was transferred as follows: (i) Professional fees of Respondent - $15,840.00 (ii) 23/5/2012 - (P8039) Part fees to Mr. Parsons - $8,525.00 (iii) 23/5/2012 - (P8040) Fees owed to BSPR for report - $1540.00 (iv) 23/5/2012 - (P8041) Fees owed to Vetka [sic] Pty Ltd - $1,369.50 (v) 30/5/2012 - (P8042) - Part fees to Parsons - $125.50 10. On or about 21 June 2012 the Respondent received a single cheque for $19,504.75 form Mr. and Mrs. Setchell. 11. On 21 June 2012 the 'Setchell' cheque for $19,504.75 was deposited into the general office account (5738) along with two other unrelated deposits (5739) $1,000.00 and (5740) $2,961.15. 12. The abovementioned cheques were deposited in the Respondent's general account and intermixed with other monies. Monies were subsequently transferred from this account and used for payment of various expenses. 13. On 26 June 2012, the Respondent drew a cheque no 010572 from the office account for the sum of $12,068.75 in part payment of the monies owed to Mr. Parsons. At that time the Respondent did not pay the outstanding sum of $5,329.50 to BSPR. 14. On or about 9 March 2017 the Respondent paid that outstanding balance to BSPR Pty Ltd. At or around thus [sic] time the outstanding sum owed to Mr Parsons was paid. 15. The sum of $19,504.75 received from the Setchells was 'trust money'. The money should have been deposited in the trust account. 16. The Respondent's conduct amounts to a breach of sections 254 and 255 of the Legal Profession Act.

WAS THERE MISAPPROPRIATION

In the earlier proceedings, the Tribunal dismissed the applicant's application, finding, as noted, that the money, identified in the application, and which was the subject of breaches of ss 254 and 255 of the LPA and of alleged misappropriation by the respondent, was not in fact trust money.
There is only one matter presently in dispute. That is whether the component of $19,504.75 paid into the general office account and used for payment of other expenses, amounted to misappropriation as alleged by the applicant or was done inadvertently and by mistake as contended by the respondent.
Part of the transcript before the Tribunal as earlier constituted is before us, together with affidavits of the respondent and of one Karen Cho, who worked as personal assistant of the respondent. There are other affidavits attesting to the respondent's good character, competence and standing in the community.
The respondent maintains that he inadvertently and mistakenly directed his personal assistant to bank the cheque in the office account. He says he inadvertently gave Ms Cho the wrong deposit book, namely that for the office account. His general practice was to give Ms Cho cheques and deposit books for banking on most days, though sometimes he would fill out a deposit slip himself. It is the fact that the deposit book for the office account and that for the trust account were different in shape and colour.
The respondent's evidence is that it was not until three days after the deposit that he became aware that the cheque had been paid into the wrong account and its proceeds been drawn upon. It was then, he says, that he turned his mind to the fact that the amount received was to be applied towards counsel's fees and the fees of an expert witness. However, because of withdrawals for other purposes, there were insufficient funds to pay both counsel's fees and those of the expert witness. Cheques had been drawn on the office account for payment of various expenses not related to the purpose for which the clients provided their cheque.
The evidence is that on 26 June 2012 the respondent realised that the cheque that had been banked in his office account. He then became aware that funds had been depleted. On the same day, he drew a cheque from the office account in the sum of $12,068.75 in part payment of fees owed to counsel who had appeared in the District Court proceedings.
At that time, because of the fact that other amounts had been paid, there was insufficient to pay the whole of the fees outstanding to counsel and to the expert witness. Before us it was accepted by the respondent that the money he received and deposited into his office account was trust money and ought to have been deposited in the trust account. As noted in the agreed facts, there is no dispute that the respondent committed breaches of ss 254 and 255 of the LPA.
It is appropriate to note that in 2012 the respondent was experiencing difficulties and stresses in his personal life. These included matrimonial and financial difficulties, as well as health related matters. These resulted in divorce, bankruptcy and a diagnosis of a pre‑cancerous condition.
In evidence in the initial proceedings the respondent said that on the day in question he had been away from the office for a long time, and directed the cheque be deposited, but handed his personal assistant the wrong deposit book.
We have many affidavits from members of the profession, clients and community leaders, testifying to the respondent's good character and to his diligence as a solicitor. Their content is not disputed and no deponent was required for cross-examination. These affidavits shall be taken into account in determining whether he is guilty of misappropriation. They shall also be taken into account when considering what orders should be made.
The question for our consideration is whether by failing to disburse funds coming to him with the client's cheque for $19,504.75 in accordance with their implicit direction to pay money to those identified on the invoice in respect of which the cheque was forwarded, amounted to misappropriation.
The applicant alleges and the respondent denies that he misappropriated the funds. In determining whether there was a misappropriation help is to be obtained from a number of decisions, to only two of which we shall refer.
In Peters v R [1992] 192 CLR 493 at 504, Toohey and Gaudron JJ said that the task was: 1. . . . to identify the knowledge, belief or intent which is said to render that act dishonest and . . . to decide whether the accused had that knowledge, belief or intent and, if so, to determine whether, on that account the act was dishonest.
In Brereton v Legal Services Commissioner [2010] VSC 378 at [53], Bell J said: 1. What must be established is that the person subjectively intended to do the acts which are said to be objectively dishonest by the ordinary standards of reasonable and honest people.
It is said on the respondent's behalf that he had no intention to act dishonestly. His depositing the trust funds into the office account was inadvertent and careless, but not done with a view to being dishonest. Nevertheless, the respondent accepts that his conduct fell short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent solicitor and he concedes breaches of ss 254 and 255 of the LPA.
In considering the consequences of the respondent's actions, we remind ourselves of the onus imposed on the applicant by the decision of the High Court of Australia in Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336. Unless we are comfortably satisfied that he acted dishonestly, we will be unable to determine that he did act dishonestly.
In determining whether the respondent's misapplication of the money amounted to misappropriation, we take into account that he was then in a situation of stress, that when the error of paying the cheque into the wrong account was noticed he paid a substantial amount of counsel's fees, that there is no evidence of other breaches either before or after that in respect of which admissions have been made, neither have inspections of his trust account revealed any irregularities. His assertion that what occurred was an error has not been contradicted. He made no attempt to conceal his activities and co‑operated fully with the ongoing investigation into them.
Having given the matter careful consideration, we are not satisfied that he dishonestly intended to apply the proceeds of the cheque to his own use. We are not satisfied he engaged in a dishonest act with the intention of benefiting from the funds deposited into the office account.
We have borne in mind that for some time now the respondent has worked only as an employed solicitor with no access to money. He intends that that situation, subject to the outcome of these proceedings, continue to obtain. We think his intention should be reflected in our orders.

ORDERS

The question now to be considered is what orders the Tribunal should make. It is important to remind ourselves that the jurisdiction of the Tribunal is not punitive but educative. It is important that such orders as we make remind the profession and the community that conduct of the type admitted is disapproved of strongly. It is important also that the reputation of the profession be maintained and that the community retain confidence in the profession.
It ought not be necessary to say that solicitors have a high obligation to handle money matters correctly and in accordance with the law and with professional standards and community expectations.
The respondent acknowledges that a reprimand is inevitable. We, however, are of the view that more is called for. Whilst not intending to be a punishment, but recognising that it may have that effect, we think a fine will make it apparent to the profession and to the community that the type of conduct engaged in by the respondent is not tolerated. Moreover, as earlier indicated, we are of the view that the intention of the respondent to practice only as an employed solicitor and without receiving trust money should be enshrined in our orders.
Section 562 (2) of the Legal Profession Uniform Law Application Act 2014 ("the Uniform Law") enables the Tribunal to impose specified conditions on a practitioner's practising certificate and to specify the time after which the practitioner may apply to the Tribunal for the conditions to be removed.
Section 47 (2) of the Uniform Law provides that a practising certificate granted to a practitioner in categories specified in subs (1) is subject to a condition that the holder is authorised or not authorised to receive trust money. One of the categories specified in subs (1) is an employee of a law practice.
As earlier noted, we bear in mind the plethora of affidavit evidence concerning the respondent's otherwise good character and attention to professional and personal obligations. It is unnecessary to recite the detail of the great tributes that have been paid to the respondent by people both in the profession and outside it who have had dealings with him. They are accepted by the applicant. We take all into account.
The applicant has conceded that without a finding of misappropriation a reprimand is sufficient.
In all the circumstances, we make the following finding and orders: 1. The respondent is guilty of professional misconduct. 2. The respondent is reprimanded. 3. The respondent is to pay a fine of $5,000. 4. Until further order of the Tribunal the respondent be permitted to apply for registration only as an employed solicitor and not be permitted to have access to trust money. 5. The respondent is to pay the applicant's costs as agreed or assessed.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 10 July 2018

At a glance

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Judgment (7 paragraphs)

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Cases Cited (4)