Council of the Law Society of New South Wales v Carr

Evidence

1. The evidence before the Tribunal comprised: 1. affidavits of Anne-Marie Foord sworn 15 October 2018 [as well as Annexure AMF1 to that affidavit] and 5 December 2018; those affidavits being Exhibits A1 and A2 in the proceedings; 2. a letter of the Solicitor to Mr Nenadic dated 21 November 2014 - being Exhibit A3; 3. affidavits of the Solicitor affirmed 21 January 2019 [as well as Annexures MDC1, MDC2 and MDC3 to that affidavit]; 9 April 2019 [other than paragraph 5] and 9 May 2019 [other than paragraphs 4, 5 and 7], Exhibits R1, R2 and R3 respectively; and 4. oral evidence of the Solicitor.

Structure of these Reasons

1. For each of Application Grounds 1(a), 1(b), 2 and 3 we set out: 1. facts asserted by the Law Society and the Solicitor's response; 2. evidence and submissions, and; 3. our consideration and findings.

Ground 1(a) - Attempting to mislead re no funds held in trust

1. The Law Society contends that the Solicitor is guilty of unsatisfactory professional conduct in attempting to mislead Mr Nenadic's new solicitor, Mr Maait, by advising on 17 March 2015 that no funds owing to Mr Nenadic were held in the Solicitor's trust account to meet costs and/or counsel fees when in fact such monies were held.

Facts asserted and the Solicitor's response

1. Other than as specifically stated, the following facts referable to this Ground asserted by the Law Society in its Application are admitted by the Solicitor in his Reply: 1. the Solicitor was admitted on 11 July 1980 and in the period July 2010 to October 2018 (when the Application was filed) was the sole principal/practitioner of the law practices referred to in paragraph 2 of the Application, on the dates referred to in that paragraph. They include Malcolm Carr Solicitor, MC Solicitor Pty Limited, Metro Lawyers Wollongong and Metro Lawyers; 2. the Law Society contends that from about 2012 to February 2015 the Solicitor acted for Mr Nenadic. By his Reply, the Solicitor contends that he commenced acting for Mr Nenadic on or about 11 December 2011; that his retainer was terminated on or about 11 March 2015, and that he acted for Mr Nenadic continuously between 11 December 2011 and 11 March 2015. He admits the Law Society's contention that in the course of acting for Mr Nenadic a number of files were opened; those files being described in paragraph 4 of the Application and included three "Sale" files, a file described as "Estate General - s66G Application", a "Supreme Court Litigation" file and a "Supreme Court Appeal" file; 3. the "Supreme Court Litigation" file, being matter number 12173 related to proceedings between Mr Nenadic and his brother, Milan Nenadic (Milan) in the Equity Division of the Supreme Court of New South Wales (Equity Division Proceedings). In those proceedings the Law Society contends that Mr Sweet of counsel was briefed by the Solicitor to appear on behalf of Mr Nenadic. The Solicitor admits that Mr Sweet was briefed to appear in those proceedings but also alleges that he was briefed to advise, and that it was pursuant to a retainer dated about 5 July 2013. He further pleads that the barrister's retainer was terminated on or about 11 March 2015; 4. Young AJA heard the Equity Division Proceedings and delivered his Reasons on 12 March 2014. His Honour delivered further reasons on 2 September 2014, and on 30 September 2014 the Solicitor filed a Notice of Intention to Appeal from the 2 September 2014 decision; 5. the Law Society pleads that the Solicitor briefed Mr Sweet to provide a memorandum of advice and submissions concerning the Appeal Proceedings. In his Reply the Solicitor says that on or about 13 October 2014 in accordance with instructions from Mr Nenadic he instructed Mr Sweet to prepare a memorandum of advice on the prospects of a successful appeal of the 2 September 2014 orders of Young AJA; that on or about 24 October 2014, in accordance with instructions from Mr Nenadic, the Solicitor instructed Mr Sweet to cease preparing the memorandum of advice, and that on or about 21 November 2014, in accordance with instructions from Mr Nenadic, he instructed Mr Sweet to resume preparation of the advice. He further pleads that on or about 1 December 2014, again in accordance with instructions from Mr Nenadic, he instructed Mr Sweet to prepare a Notice of Appeal and submissions in support. He then pleads that on or about 5 March 2015, he instructed Mr Sweet to cease work on the Appeal Proceedings; 6. on 3 November 2014 - the Law Society alleges - the Solicitor withdrew all funds held on trust for Mr Nenadic totalling $221,608.02 from the trust account of the Solicitor's law practice, and paid that sum to Mr Nenadic. By his Reply, the Solicitor says that in or about early November 2014 he was instructed by Mr Nenadic to transfer to him all monies held on trust on Mr Nenadic's behalf. He says he complied with that instruction on or about 3 November 2014; 7. Mr Sweet issued a tax invoice in the amount of $6,037.50 on 4 November 2014 in respect of work undertaken for the Appeal Proceedings in the period 13 October to 24 October 2014; 8. the Law Society alleges that the Solicitor asked Mr Nenadic to provide funds in respect of Mr Sweet's fees, and filing fees for the Appeal; further, that on 26 November 2014 Mr Nenadic deposited $7,900 cash into the Solicitor's office account (Office Account - being CBA account ending in the numbers 579) in accordance with the Solicitor's request; the deposit - the Law Society contends - being paid by Mr Nenadic in respect of Mr Sweet's fees in the Appeal Proceedings. The Law Society further says that the Solicitor had no entitlement to the $7,900 as he had agreed to act on a pro bono basis. It further alleges that on 28 November 2014 the Solicitor transferred the sum of $5,000 to Mr Sweet in partial payment of Mr Sweet's 4 November 2014 tax invoice; 9. in answer to the allegations in (h) above the Solicitor by his Reply says: 1. in about late November 2014 he was advised by Mr Sweet that Mr Nenadic intended to file an appeal from the 2 September 2014 judgment of Young AJA; the appeal was required to be filed by 2 December 2014; the Solicitor owed Mr Sweet $6,037.50 in outstanding fees in relation to Mr Nenadic's matter; Mr Sweet would not be prepared to draft a draft Notice of Appeal unless his outstanding fees were paid; he required an additional $1,500 including GST, plus typing costs, to complete the draft advice and draft Notice of Appeal; 2. in about late November 2014 during a telephone conversation with Mr Nenadic, the Solicitor informed him of the matters referred to in (i) above, and that the filing fee that would ordinarily be payable in relation to an appeal was $3,750; 3. he admits that on 26 November 2014 Mr Nenadic deposited $7,900 in cash into the Office Account of the practice; 4. he denies that he had no entitlement to the sum of $7,900; 5. he admits that he had agreed to act for Mr Nenadic in relation to the Appeal Proceedings on a pro bono basis, in that he agreed to perform work for Mr Nenadic without charging Mr Nenadic any professional fees in relation to that work. He says that a Standard Costs Agreement entered into with Mr Nenadic in about October 2013 contained an express term that Mr Nenadic would pay all counsel's fees that were billed to the Solicitor. He was entitled to no less than $6,037.50 out of the $7,900 deposited because Mr Sweet was retained by him and not by Mr Nenadic; that he was liable for Mr Sweet's outstanding fees and that accordingly by reason of him having incurred a liability of $6,037.50 to Mr Sweet on behalf of Mr Nenadic, pursuant to the Costs Agreement Mr Nenadic had become liable to the Solicitor in the same amount. The Solicitor therefore says that of the $7,900 deposited, $6,037.50 was deposited in satisfaction of the liability that Mr Nenadic had incurred to him; 6. the Solicitor further pleads that he paid $5,000 to Mr Sweet in order that Mr Sweet would complete the draft Notice of Appeal; further, that he did not pay the balance of the money owed to Mr Sweet at that time because he intended to pay Mr Sweet on completion of the work which Mr Sweet was instructed to perform; 7. a Notice of Appeal and an Affidavit of the Solicitor (sworn 15 December 2014) were filed by the Solicitor in the Appeal Proceedings on 17 December 2014. The Solicitor was named as the legal representative of Mr Nenadic on the Notice of Appeal. He deposed in paragraph one of his December 2014 Affidavit that he was Mr Nenadic's Solicitor. He further certified on the Notice of Appeal that he advised Mr Nenadic that court fees would be payable during the Appeal Proceedings and those fees may include a hearing allocation fee; 1. On 17 December 2014, upon the filing of the Notice of Appeal, the Law Society alleges that the Supreme Court issued invoice number 8036414 for the filing fee for the Notice of Appeal in the amount of $3,127 to Mr Nenadic care of the Solicitor. As to that assertion, the Solicitor admits that the invoice was issued by the Court but says that the invoice ought not to have been issued by the Court because he had agreed to act for Mr Nenadic on a pro bono basis and pursuant to Rule 12 of the Civil Procedure Regulation 2012 (NSW) filing fees were not payable by a pro bono party until judgment was given in the proceedings. Accordingly, the Solicitor contends, as at 17 December 2014 no filing fee was payable by Mr Nenadic in respect of the Appeal Proceedings. The Solicitor further says that when he filed the Notice of Appeal on 17 December 2014 the Registrar of the Court agreed not to charge a filing fee on the basis of Rule 12 of the Regulation; 2. Mr Nenadic deposited $3,127 cash into the Office Account of the Solicitor's practice on 19 December 2014. The Law Society pleads that this deposit was in respect of filing fees on the Notice of Appeal and was made at the request of the Solicitor. By his Reply the Solicitor says that he did not request that Mr Nenadic deposit $3,127 into the Office Account, and that the deposit was made without notice to him. He says that he was first notified that the $3,127 deposit had been made when he received a copy of the relevant deposit receipt under cover of a facsimile from Mr Maait dated 17 March 2015; 3. the Law Society pleads that Mr Nenadic, on 2 March 2015, signed an authority for the transfer of all documents and files held by the Solicitor, or under his direction, to Mr Maait; further, that on 5 March 2015 Mr Maait sent a letter by facsimile to the Solicitor notifying him that Norris Somers Maait acted for Mr Nenadic and enclosed a copy of the signed 2 March 2015 authority. The Solicitor admits that Mr Nenadic signed an authority to the effect alleged on or about 2 March 2015. He says that he first received that authority under facsimile sent by Mr Maait on or about 5 March 2015, and that in accordance with the authority he caused all documents and files held by him or under his direction to be delivered by Mr Maait by courier on or about 18 March 2015; 4. On 16 March 2015 Mr Maait sent a letter by facsimile to the Solicitor stating inter alia: "our 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 submission." 1. On 17 March 2015, Mr Maait received a letter by facsimile from the Solicitor stating inter alia: "we are holding no funds on trust because Mr Nenadic 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, by his Reply, admits receipt of the 16 March email, and the forwarding of the 17 March email. 2. The Law Society pleads that the $7,900 deposited into the Solicitor's Office Account was trust money within the meaning of s 243 of the Legal Profession Act 2004 (2004 Act). By his Reply, the Solicitor admits that, to the extent that he was not entitled to the $7,900, it was trust money within the meaning of that section. He says that of the $7,900 deposit he was not entitled to: 1. $1,862.50 being the balance owing to Mr Sweet pursuant to his invoice dated 4 November 2014, or alternatively 2. $2,900 being the balance of the $7,900 not remitted to Mr Sweet. 1. He further says that as at November 2014 he operated 3 Commonwealth Bank accounts, which, in his Reply, he describes as office accounts; the first of which having the last 3 account numbers "579" (the Office Account), the second having the final 3 account numbers "005", and the third having the final 3 account numbers "738". He says that each of the office accounts was subject to the Commonwealth Bank's Business Transactions and Savings Account Terms and Conditions (Bank T&C) and that: 1. pursuant to these Bank T&C, in relation to each of the office accounts the bank was obliged to pay to the Solicitor any positive balance in the account and - if the positive balance of the account was exhausted - any amounts withdrawn by the Solicitor to the agreed overdraft limit (if any) on the account; 2. in the premises, the effect of the $7,900 deposit was that the $7,900 in cash deposited by Mr Nenadic became the property of the bank; but in consideration of the deposit the bank credited the amount of $7,900 to the Office Account and thereby agreed to pay that amount to the Solicitor on demand (subject to the Bank T&C) and that accordingly the $7,900 ceased to exist as a cash amount and instead existed as a chose in action held by the Solicitor against the bank pursuant to the Bank T&C; 3. at the time when the $7,900 deposit was made the chose in action held by the Solicitor against the bank included not only the Office Account into which the money was paid but each of the office accounts referred to earlier. 1. In the premises, to the extent that the $7,900 constituted trust money, at the time that the deposit was made the trust of which the Solicitor was trustee was constituted by a chose in action against the bank pursuant to the Bank T&C, and the nature of Mr Nenadic's interest was an equitable charge in the amount of his beneficial interest over the whole of the Solicitor's chose in action against the bank being constituted by the aggregate total of the amounts that from time to time the bank was liable to pay the Solicitor in relation to the accounts referred to earlier. 2. The Law Society contends that following payment of $5,000 to Mr Sweet, the balance of funds, held by the Solicitor in the Office Account, was $2,900. By its Reply, the Solicitor says that following the payment of $5,000 to Mr Sweet he was obliged to pay the remaining $2,900 either to Mr Sweet or as otherwise directed by Mr Nenadic. 3. The Solicitor was aware, the Law Society contends, as at 26 November 2014 that Mr Nenadic had deposited $7,500, or alternatively at least $5,000 into the Office Account for the payment of Mr Sweet's 4 November 2014 invoice. The Solicitor admits the allegation although contends he became aware on or about 28 November. 4. The Law Society then pleads that as at the date of the facsimile letter to Mr Maait, being 17 March 2015, the Solicitor was aware that Mr Nenadic had deposited into the Office Account of the Solicitor's practice the sum of $7,900 or in the alternative a sum of money of at least $5,000 for the payment of Mr Sweet's invoice dated 4 November 2014. The Solicitor, by his Reply, denies the allegation. The Law Society says, in the circumstances, the Solicitor attempted to mislead Mr Maait by his letter of 17 March 2015. The Solicitor again denies the allegation but says that, in the alternative if he is found to have intended to mislead Mr Maait by his letter of 17 March, any misrepresentation had been corrected by no later than 10 am on 18 March, and that, in the circumstances, his conduct did not fall short of the standard of competence and diligence that a member of the public is entitled to expect of a reasonably competent Australian legal practitioner.

Evidence and submissions

1. Page 50 of AMF1 [being the Annexure to the affidavit of Ms Foord - Exhibit A1 in the proceedings] records the Commonwealth Bank receipt into the Solicitor's Office Account of $7,900 on 26 November 2014. The Solicitor concedes in his 31 January 2019 affidavit [Exhibit R1 in the proceedings] at [24] and [27] that the Office Account was one of a number of accounts operated by him; further, he says at [28] that statements in relation to what he describes as the "579 Account" (Office Account) are at pages 306 to 324 of AMF1. When one goes to page 308 of AMF1 there is recorded a $7,900 credit in the account by way of cash deposit at the St Mary's branch of the bank on 26 November 2014. The Solicitor concedes in his letter to the Law Society of 19 September 2016 [paragraph 7 - page 248 of AMF1] that he had asked Mr Nenadic for funds in trust for counsel.
2. The Solicitor deposes in Exhibit R1 [at 63] that at some stage after 15 November 2014 whilst speaking to Mr Nenadic, he referred to the barrister having to be paid and that it was going to be "…about $7,900 all up". He deposes to Mr Nenadic responding "OK, I'll put it into your account". He further deposes [at 67] to Mr Nenadic depositing the $7,900 cash. He says that he does not know why the money was deposited into the Office Account but had he been asked he would have given Mr Nenadic details of the trust account. He then deposes [at 68] to paying from that account $5,000 to Mr Sweet on 28 November 2014. He concedes [at 69] that he "…saw the money in [his] account … at the time of paying Mr Sweet." He also concedes [at 70] that it was an error on his part not to transfer the remaining $2,900 [of the $7,900 paid] into his trust account. He says that he did not leave the money in the Office Account because he had any intention of spending Mr Nenadic's money, and that it must have slipped his mind not to transfer the money into this trust account.
3. The Solicitor concedes in his Reply receipt of Mr Maait's email of 16 March 2015, and the forwarding of the 17 March 2015 email to Mr Maait where he says, inter alia, "we are holding no funds on trust …". As stated earlier, the Solicitor concedes in his Reply that to the extent that he was not entitled to the $7,900 it was trust money within the meaning of s 243 of the 2004 Act.
4. The Law Society in their submissions contend that as at the date of the Solicitor's 17 March 2015 facsimile letter he was aware that: 1. he had agreed not to charge Mr Nenadic for the Appeal Proceedings; 2. he had requested Mr Nenadic "… for funds in trust for counsel and filing …"; 3. Mr Nenadic had deposited $7,900 into the Office Account on 26 November 2014; 4. by 28 November 2014 Mr Nenadic had deposited $7,900 into the Office Account; 5. on 28 November 2014 the Solicitor paid $5,000 of the $7,900 to Mr Sweet in part payment of Mr Sweet's 4 November 2014 invoice; 6. Mr Nenadic had not instructed the Solicitor to disperse the remaining $2,900, and; 7. the Solicitor had access to records such as bank account statements for the Office Account showing the deposit which would have informed him of the true position in relation to the deposit of $7,900.
5. The Law Society also points to the Solicitor's concession in his affidavit at [169] that at the time of its swearing he accepted that the $7,900 deposited by Mr Nenadic "… did in fact constitute 'trust money'" pursuant to s 243 of the 2004 Act.
6. The Solicitor in his submissions contends that all of the relevant circumstances surrounding the 17 March 2015 facsimile must be looked at to establish what he intended by the representation. He says that Mr Maait's facsimile also: 1. demanded an explanation from the Solicitor as to what funds had been transacted through his trust account; 2. demanded an explanation as to why Mr Sweet had not completed submissions; 3. demanded that all files be made available within one day; 4. accused the Solicitor of breaches of his contract with Mr Nenadic; 5. accused the Solicitor of negligence in the conduct of Mr Nenadic's case; and 6. threatened to commence legal proceedings against the Solicitor for damages for negligence and breach of contract.
7. The submissions also point to the fact that Mr Maait was accusing the Solicitor of serious misconduct concerning non receipt by Mr Maait of the documents.
8. The Solicitor denies any intention to mislead Mr Maait and says that the impugned representation was referring to 3 November 2014 when Mr Nenadic instructed him to release all of the money that he was then holding for him.

Consideration and findings

1. We accept the Law Society's submissions and find Ground 1(a) established. Accordingly, we find Mr Carr guilty of unsatisfactory professional conduct.
2. 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.
3. 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. (*Briginshaw v Briginshaw (1938) 60 CLR 336)

Ground 1(b) - Attempting to mislead re payment of filing fees

Facts asserted and the Solicitor's response

1. Unless otherwise stated, the following facts are asserted by the Law Society in its Application and are admitted by the Solicitor in his Reply: 1. On 17 March 2015 at 11.33 am Mr Maait received a letter by facsimile from the Solicitor stating inter alia: "we agreed not to charge Mr Nenadic in relation to commencing his Appeal". 1. On the same day Mr Maait sent the following further letters to the Solicitor by facsimile: 1. at 11.49 am a letter enclosing receipts for two cash deposits made by Mr Nenadic into the Office Account being the amounts of $7,900 and $3,127; and 2. at 3.05 pm a letter seeking a response from the Solicitor regarding the monies paid by Mr Nenadic to the law practice. 1. The Law Society asserts that at 5.26 pm on 17 March 2015 Mr Maait received a letter by facsimile from the Solicitor stating inter alia: "in relation to your latest fax dated 19 March 2015 we confirm that we had used $3,127 for the commencement of Mr Zvonko Nenadic's Appeal including paying the filing fees in the Court of Criminal [sic] Appeal". The Solicitor does not admit receipt of Mr Maait's letter. He denies (Exhibit R1 [111] to [117]) that the 5.26 pm facsimile was from him. It was not signed by him. He was not shown a copy of it prior to it being sent, did not approve it being sent and was not aware of it having been sent (if in fact it was sent) until about 24 November 2015. 1. The Law Society pleads that contrary to the representation set out in the facsimile, the filing fee for the Notice of Appeal had not been paid. The Solicitor denies that this representation was made by him. He admits having received, as at 17 March 2015, the Appeal invoice; further, admits that at that time the fee had not been paid. 2. In about 2015 proceedings were commenced by the Department of Justice against the Solicitor in respect of the non payment of the filing fee for the Notice of Appeal. Those proceedings were discontinued on or about 26 May 2015. 3. The Law Society contends that as at 17 March 2015 the Solicitor was, or ought to have been, aware that he acted for Mr Nenadic in the Appeal Proceedings on a pro bono basis, as to whether filing fees were payable in relation to the filing of the Notice of Appeal, and that the filing fees were outstanding. The Solicitor, by way of Reply, refers to his position above i.e. that he did not send the letter, it does not bear his signature, and he did not authorise it being sent. 4. The Law Society pleads that by reasons of the matters set out in (a) to (f) above the Solicitor attempted to mislead Mr Maait by his 17 March 2015 facsimile that Supreme Court filing fees in the amount of $3,127 had been paid when in fact such fees had not been paid and remained unpaid. The Solicitor denies the allegation.

Evidence and submissions

1. The facsimile letter the subject of this ground of complaint is found at AMF1 [at page 45].
2. The letter does not bear the Solicitor's signature. It appears to bear a signature of a Ms Shah. The Solicitor's evidence is that he denies having sent the letter; further, that he was not in his office at the time of the letter being sent. He deposes to not recalling ever having seen the letter until it was provided to him in the context of the disciplinary complaint made by Mr Maait.
3. The Law Society submits that the denials made by the Solicitor in his Affidavit were not raised during the investigation process. It also submits that there is no explanation as to how the facsimile - using the letterhead of the Solicitor's law practice - came to be sent to Mr Maait. It says that the responsibilities of a Solicitor for the proper conduct of the practice of which he or she is proprietor extend beyond his or her own actions and work.
4. The Solicitor submits that the onus is on the Law Society, and not on him, to provide an explanation as to how the letter - using the letterhead of the law practice - came to be sent to Mr Maait. He submits that the Law Society bears the onus - to the Briginshaw Standard - of establishing that the Solicitor sent the letter. He submits that the Law Society has failed to discharge its onus.

Consideration and findings

1. We agree. Ground 1(b) is not established.
2. The letter does not purport to bear the Solicitor's signature and we accept his evidence that he did not send it nor authorise for it to be sent nor was aware of it being sent until much later.
3. If - as we find was the case - the Solicitor did not sign the letter, authorise its sending, nor was aware of it being sent, he could not be guilty of either misleading Mr Maait nor attempting to mislead him as to whether or not the filing fees had been paid.
4. Subsequent statements by the Solicitor during the investigation process that suggest a mistake on his part as to whether or not the filing fee had been paid do not materially add to the Law Society's case. We are required to be satisfied to the Briginshaw Standard that Ground 1(b) is established, and we are not so satisfied.

Ground 2 - Failing to Comply with undertaking re transfer of $2,900 held in trust

Facts asserted and the Solicitor's response

1. Unless otherwise stated, the following facts are asserted by the Law Society in its Application and are admitted by the Solicitor in his Reply: 1. On 18 March 2015, the Solicitor and Mr Maait had a telephone conversation. The Law Society contends that during the conversation the Solicitor made the following representations: 1. that Mr Nenadic paid $7,900 into the Law Practice bank account on 26 November 2014; 2. from the sum of $7,900, the Solicitor paid $5,000 of that money to Mr Sweet; and 3. the remaining balance of $2,900 was held in the Law Practice trust account. Whilst the Solicitor admits that the telephone conversation occurred and that, during the conversation, he made representations to the effect set out in (i) and (ii), he denies that during the conversation he made representation to the effect of (iii) above. 1. On 18 March 2015, the Solicitor and Mr Maait had a subsequent telephone conversation (Second Telephone Conversation) in which the Solicitor made the following representations: 1. that, upon provision of the trust account details of Mr Maait's firm, the Solicitor would transfer the sum of $2,900 "now"; 2. the Solicitor would check the amount of the filing fee and the amount owed to Mr Sweet; and 3. 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. The Solicitor admits that the Second Telephone Conversation occurred and says that immediately after it concluded he sent to Mr Maait the facsimile letter dated 18 March 2015 (received by Mr Maait's firm at about 10.27 am on that day and appearing at page 81 of AMF1) (Confirmation Letter) which accurately set out the effect of the Second Telephone Conversation. He further admits that, during the Second Telephone Conversation he made the representations consistent with the Confirmation Letter. He otherwise denies the Law Society's contention. 1. On 18 March 2015 at 10.27 am, Mr Maait's firm received a facsimile from the Solicitor (being the facsimile referred to in the preceding sub-paragraph) stating inter alia: "I confirm that the $7,900 deposit was made into our account on 26 November 2014 [Sic] the St Mary's branch of the Commonwealth Bank on 28 November 2014 I transferred $5,000 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." 1. The statement made by the Solicitor in the facsimile referred to above, "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 submissions and I now confirm that I will transfer to you the remaining $2,900" constituted an undertaking by the Solicitor to Mr Maait to transfer the sum of $2,900 (Undertaking). The Solicitor admits that the quoted representation was made but denies that it constituted an undertaking. Alternatively if (which he denies) the representation did constitute an undertaking, he says that as at 18 March 2015, to the actual or constructive knowledge of Mr Maait, the Solicitor had no authority to pay the $2,900 to any person other than Mr Sweet, unless the Solicitor received instructions from Mr Nenadic to do so. He says that, in the premises, the Undertaking was to pay $2,900 to Mr Maait subject to the receipt by the Solicitor of instructions from Mr Nenadic to do so. 2. The Law Society contends that the Solicitor was bound to personally comply with the Undertaking. The Solicitor denies that. 3. On 20 March 2015, Mr Maait sent a further letter to the Solicitor regarding non receipt of the $2,900 in accordance with what the Law Society contends was the Solicitor's Undertaking [the letter being found at pages 126 and 127 of AMF1]. The Solicitor admits receipt of the letter, further admits that it referred in part to the non receipt of the $2,900 by Mr Maait, but says that it predominantly concerned what the Solicitor contends were "serious and baseless allegations" against him of negligence and misconduct, unrelated to the $2,900. 4. On 26 March 2015, at 9.45 am the Solicitor forwarded a further facsimile to Mr Maait in answer to Mr Maait's 20 March 2015 letter. 5. On 26 March 2015 at 10.37 am the Solicitor received a further facsimile from Mr Maait seeking an explanation for why he had not transferred the sum of $2,900 to Mr Maait in accordance with what the Law Society contends was the Solicitor's Undertaking. The Solicitor, admits receipt of the letter; admits that it sought an explanation for why the Solicitor had not transferred the $2,900 to Mr Maait, but says that the majority of the letter sought explanations of various matters unrelated to the non payment of $2,900 and related instead to various other allegations that Mr Maait was making. 6. On 11 April 2015, Mr Maait sent a further letter to the Solicitor regarding the Solicitors breach of what the Law Society contends was the Undertaking. The Solicitor admits receipt of the letter but otherwise denies the Law Society's contention. 7. The Solicitor admits that he did not reply to Mr Maait's 11 April 2015 letter. 8. On 27 May 2015, Mr Maait sent a further letter to the Solicitor, regarding the Solicitor's breach of what the Law Society contends was the Undertaking. The Solicitor admits receipt of the letter but otherwise denies the Law Society's contention. He admits that he did not reply to the letter. 9. On 2 June 2017, the Solicitor sent a letter to the Law Society (a copy of which is at page 263 of AMF1) saying in part: "I am waiting to receive an instruction from Mr Nenadic to transfer the $2,900 from my trust account. Without an instruction from Mr Nenadic I would be breaching trust account regulations if I transfer the money to Mr Maait and I would be breaching the "no contact" rule if I write to Mr Nenadic directly. …. similarly, I am willing to pay $3,127 to Mr Nenadic but I will need his authorisation to do this. This is not an admission I have to pay $3,127 but a bonafide attempt to resolve the complaint." 1. On 13 June 2017, the Law Society sent a copy of the Solicitor's 2 June 2017 letter to Mr Maait. 2. On 24 June 2017, Mr Maait sent an email to the Solicitor attaching a letter of the same date and an authority signed by Mr Nenadic dated 22 June 2017 requesting the transfer of monies owing to Mr Nenadic from the Solicitor to Mr Maait. The letter appears at pages 445-447 of AMF1. 3. The Solicitor admits the receipt of the email but says that it did not come to his attention until about 5 September 2017. 4. On 31 July 2017, the Solicitor transferred the sum of $3,127 from his Office Account to the trust account of the Law Practice to the order of Mr Nenadic. On 5 September 2017, he transferred the sum of $6,027, comprising the sums of $2,900 and $3,127 to the trust account of Mr Maait's firm. The transfer of the sum of $6,027 was recorded in the trust ledger for matter number 12173 (appearing at pages 448-450 of AMF1). 5. As at the date of what the Law Society contends was the Solicitor's Undertaking, namely 18 March 2015, the New South Wales Professional Conduct and Practice Rules 2013 (Rules) applied to the Solicitor's conduct. The Solicitor admits that the Rules applied to his conduct as at 18 March 2015 but otherwise denies the Law Society's allegation. 6. The Law Society says that the Solicitor's failure to comply with the Undertaking was in breach of Rule 6 of the Rules. The Solicitor denies that. He says that, in the alternative, if he is found to have given, been bound by, and breached the alleged Undertaking (which he denies), then on a proper construction of the Undertaking it was complied with by him on or about 5 September 2017 and was not otherwise breached. 7. The Law Society contends that by reason of the matters set out in (a) to (r) above the Solicitor has failed to comply with an undertaking given to Mr Maait to transfer the amount of $2,900 being held in trust for Mr Nenadic. The Solicitor denies that assertion. He says that, in the alternative, if he is found to have given, been bound by, and breached the alleged Undertaking: 1. by letter to the Law Society dated 14 April 2016 he stated that he would hold the $2,900 in his Office Account pending the resolution of his fee dispute between himself and Mr Sweet; 2. he transferred the $2,900 to his trust account on 22 June 2016; 3. by letter to the Law Society of 19 September 2016 he stated that he was willing to return the $2,900 to Mr Nenadic if Mr Nenadic wanted to deal with Mr Sweet directly; 4. by letter to the Law Society dated 21 March 2017, he stated that he would transfer the $2,900 on receipt of an authority by Mr Nenadic; 5. by letter to the Law Society dated 5 June 2017, he repeated that he was not obliged to pay the monies until he received an instruction from Mr Nenadic; 6. by email dated 24 June 2017 Mr Maait provided to him a written authority signed by Mr Nenadic to transfer the monies to Mr Maait's firm; 7. the email of 24 June 2017 came to his attention on or about 5 September 2017; 8. immediately after the 24 June 2017 email had come to his attention he transferred the monies to Mr Maait's firm; 9. in the premises, his conduct; (A) did not involve a substantial or consistent failure to maintain a reasonable standard of competence and diligence; and (B) would not justify a finding that he is not a fit and proper person to engage in legal practice. 1. The Solicitor says, further or alternatively, that if he is found to have given, been bound by, and breached the alleged Undertaking: 1. it was not obvious in the circumstances that his words amounted to an undertaking, and this was a matter of construction on which reasonable minds may differ; and 2. accordingly, the adoption by him of a different construction of the legal effect of his words from that adopted by the Law Society and the Tribunal did not and could not amount to unsatisfactory professional conduct or professional misconduct.

Evidence and submissions

1. The Law Society relies on a file note of Mr Maait dated 18 March 2015 [appearing at AMF1 page 82] evidencing, it says, the Undertaking relied upon in Ground 2. The opening paragraph refers to a person from the Solicitor's office delivering a box containing Mr Nenadic's files. The second paragraph commences "Shortly thereafter … I called Mr Carr…". The author then records in the note his discussion with Mr Carr. It records the Solicitor saying: "… I have the balance of $2,900 in my trust account which I will transfer to your trust account straight away".
2. Further in the note there is reference to the Solicitor agreeing to telephone Mr Sweet then receiving a further telephone call from the Solicitor. The note records the Solicitor saying: "He called me a short time later saying 'I have spoken to Sweet. He won't do any more work on my instructions because he says I am not instructing the matter [sic] and he will accept instructions from me. Give me your trust account details and I will transfer the $2,900 into your trust account now'. I then gave Mr Carr our trust account details".
3. The file note then records further discussions about the filing fee on the Appeal, and clarifying an issue with Mr Sweet. It then says: "He [which the Tribunal takes to mean the Solicitor] said I'll check the fee to the court and I will check the amount to 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".
4. The letter of complaint to the Office of the Legal Services Commissioner of 8 September 2015 of Norris Somers Maait attaches a number of documents including what is described as "our file note of telephone discussions with Mr Carr made on 18 March 2015". [Page 5 of AMF1]. Neither the 8 September 2015 complaint letter nor the file note itself records who was having the conversation with the Solicitor. The Law Society's Application, however, in referring to the 18 March 2015 telephone conversation at paragraph 45, refers to a conversation between the Solicitor and Mr Maait. The Solicitor, by his Reply, does not dispute the telephone conversation with Mr Maait. The Solicitor in his 31 January 2019 Affidavit (Exhibit R1 at [118]) concedes the telephone discussion was between he and Mr Maait. There is no evidence from the Solicitor that a file note of the conversation, taken by him, exists.
5. The second telephone conversation relied upon by the Law Society on the same day, 18 March, is also recorded in the same file note seen at pages 82 and 83 of AMF1. The file note records that during this 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". It further records the trust account details being given to the Solicitor and concludes as indicated above with the Solicitor saying that although he would check the court fee and the account for Mr Sweet he needed to "send you the money first".
6. The Solicitor's evidence concerning the second conversation is recorded in Exhibit R1 at [120]. By his Reply the Solicitor concedes that this second telephone conversation was also between he and Mr Maait. He says that the relevant part of the conversation concerning payment of the $2,900 was him saying to Mr Maait: "… 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 Zvonko and I'll send you the money."
7. The Solicitor then deposes to Mr Maait commencing to provide his trust account details but the Solicitor saying to him: "No, I won't take your details over the phone. Please send them to me in writing. I am 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."
8. There is, similarly, no evidence tendered by the Solicitor of a file note taken by him of this second conversation.
9. The Law Society relies upon the Solicitor's letter to Mr Maait of 18 March 2015 which appears at page 81 of AMF1, a facsimile letter the Solicitor admits sending. The facsimile, as indicated earlier, does record the Solicitor saying that he "would" transfer the $2,900 that he was holding, and concludes with a confirmation that he "… will transfer to [Mr Maait] the remaining $2,900". The letter does not place any condition on the payment of $2,900. It does not record what the Solicitor says was specifically discussed with Mr Maait, namely that he required Mr Maait's trust account details and an authorisation from Mr Nenadic before the money could be sent.
10. The Law Society relies upon further correspondence of Mr Maait to the Solicitor of 26 March 2015 (page 133 of AMF1), 11 April 2015 (page 134) and 27 May 2015 (page 135). In the 26 March letter Mr Maait refers to the Solicitor's 18 March letter and quotes back to the Solicitor his earlier statement "I now confirm that I will transfer to you the remaining $2,900". He says that he was yet to receive those funds or an explanation of why the commitment had not been honoured.
11. In his letter of 11 April 2015, Mr Maait refers to the Solicitor's "express undertaking" in his letter of 18 March to transfer $2,900 and the fact that was confirmed orally. He again states that the funds were yet to be received. He indicates a desire not to have to refer the matter to the Professional Standards Department of the Law Society and invites the Solicitor to save Mr Maait "that unpleasant course". He asks to have by return "… the … funds in question".
12. In Mr Maait's further letter of 27 May 2015 he again refers to the Solicitor's 18 March letter and the Solicitor's statement in that letter that he would transfer to Mr Maait the money that he was holding. Mr Maait says: "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 2 1/2 months since you gave that undertaking."
13. Mr Maait refers to the Solicitor having failed to honour the undertakings and again concludes his letter by mentioning the referring of the matter to the Professional Standards Committee of the Law Society and the Legal Services Commissioner.
14. In Exhibit R1 the Solicitor does not agree that the statement in his facsimile that he would transfer the $2,900 was of the character of an undertaking. He deposes to having said to Mr Maait during the telephone conversation that he would send the money when he received the written authority and the trust account details. He deposes to an assumption that it would go without saying that he would not transfer the money until he received the trust account details in writing and a written authority from Mr Nenadic. He says [at 130] that he did not pay the $2,900 to Mr Maait that day as he said he would because he had not received the details of Mr Maait's trust account nor the written direction. He further admits receiving further letters from Mr Maait concerning the non payment of the $2,900. He deposes at [135] that although the letter referred to the $2,900 that he was still holding on Mr Nenadic's behalf, on reading Mr Maait's letter his principal concern was Mr Maait's aggressive tone and threats to bring proceedings against him. He deposes to having spoken to Lawcover and having being advised by them that he should stop corresponding with Mr Maait in relation to the matters the subject of the action that he was threatening to bring against him. He says that after receiving Mr Maait's 20 March 2015 letter he determined to follow Lawcover's advice.
15. At the conclusion of his earlier facsimile to Mr Maait of 17 March 2015, which refers to Mr Maait's 16 March 2015 letter, the Solicitor says: "you have advised us in writing that Mr Nenadic will look to us for any damages for loss, and accordingly, we have notified Lawcover".
16. This was in response to the penultimate paragraph of Mr Maait's 16 March 2015 letter where he says: "please be on notice that our client will be looking to you for all loss and damage sustained by him by reason of repeated breaches of your contract with him as his lawyers and by reason of your negligence in the conduct of his case, including your ongoing failure to deliver his files to us in a timely manner."
17. There is no evidence tendered by the Solicitor as to the content of his notification to Lawcover, nor written evidence (i.e. file note or other communication) as to the advice of Lawcover referred to.
18. When giving oral evidence the Solicitor deposed to rarely agreeing to receive bank account details over the phone in case the details provided were incorrect; further, because he could not be sure who he may be talking to. He conceded that in his 26 March 2015 letter to Mr Maait (appearing at page 132 of AMF1), in response to Mr Maait's 20 March 2015 letter (at page 126) in which, amongst other things, Mr Maait referred the Solicitor to the assurance that he had given two days previously concerning the transfer of $2,900, he could have - in writing - requested Mr Maait to provide his trust account details, but didn't. Nor did he, in that letter, ask for the former client's authority.
19. In cross examination the Solicitor conceded that during this period of time he took no steps to obtain Mr Maait's trust account details or the authority referred to. He maintained, however, that he could not transfer the $2,900 without receiving both.
20. The Law Society submits that the words used by the Solicitor in his 18 March 2015 facsimile letter were clear and unequivocal; further, that there is no reason to believe that Mr Maait was not entitled to rely upon the words used. It says that the use of the word "undertaking" is not essential; the construction of the undertaking depending not on the understanding of the Solicitor, but upon the legal effect of the words used.
21. The Law Society further submits that the recipient of an undertaking is entitled to assume that the solicitor giving it has taken all steps necessary to ensure that he or she will be in a position to comply with it when the time arises to do so. It further says that the question of authority of a client is irrelevant to determining whether an undertaking is given, and that the absence of instructions from a client is no excuse for not complying with an undertaking. The Law Society cites Legal Professional Complaints Committee v Detata [2012] WASCA 214 at [52] and [54] where Martin CJ said: "It is therefore vital that legal practitioners perform their undertakings, regardless of whether the undertaking was proffered in error or oversight, irrespective of any change in circumstances, no matter how radical and irrespective of any hardship of any legal practitioner concerned…"
22. For these reasons, the Law Society says the obligation of a legal practitioner to perform his or her undertaking is a solemn obligation of the utmost importance. Failure to perform that obligation will generally be regarded as professional misconduct, and depending on the circumstances, will often be regarded as serious professional misconduct.
23. The Law Society submits that the undertaking here by the Solicitor was that he "… will transfer" [to Mr Maait] the remaining $2,900. It cannot be read - the Society contends - subject to a qualification that the Solicitor will transfer the money only on to the provision of Mr Maait's trust account details and a written authority from Mr Nenadic. It points to Mr Maait raising the Solicitor's non compliance with the undertaking in the March, April and May letters; further, it points to there being nothing in the contemporaneous correspondence from the Solicitor to Mr Maait to the effect that the transfer of the $2,900 was contingent upon provision by Mr Maait of the trust account details and a written authority. The first reference by the Solicitor to any such requirement appears, the Law Society says, in the Solicitor's letter to it dated 21 March 2017 - 2 years later.
24. The Solicitor says that the statement in the 18 March 2015 facsimile letter cannot be construed as an undertaking but, in the alternative, if an undertaking was given then it was to transfer the money on receipt of written instructions to do so.
25. The Solicitor also submits by way of further alternative that if an undertaking was given he did not knowingly breach it.
26. The Solicitor contends that one needs to examine the circumstances surrounding the alleged Undertaking and that the terms of the facsimile was confirmation of what was said in the earlier telephone conversations of the same day. The Solicitor submits that his evidence of a request to Mr Maait to send the trust account details and the written authority of Mr Nenadic is uncontradicted, as is the Solicitor's evidence of declining to take Mr Maait's trust account details over the phone and that those details needed to be provided in writing. His submission also point out that the Law Society has not called Mr Maait to give evidence.
27. The Solicitor says that what was said in the 18 March facsimile did not constitute an undertaking; rather, it had the character of an assurance or an expression of intent rather than an undertaking. He further submits that in any event the 18 March written facsimile was qualified by the earlier telephone conversation where - on the Solicitor's evidence - he asked for trust account details, and a written direction from Mr Nenadic.
28. The Solicitor says that in order to be enforced an undertaking must be capable of being performed ab initio. He contends that transferring $2,900 to Mr Maait without authority from Mr Nenadic would have been a breach of his professional obligations.
29. Accordingly, the Solicitor submits that when viewed objectively if the 18 March facsimile statement constituted an undertaking it was necessarily qualified by the requirement that he first be provided with an authority from Mr Nenadic and details for Mr Maait's trust account.
30. Finally, the Solicitor submits that he did ultimately transfer the $2,900 to Mr Maait in 2017.

Consideration and findings

1. 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.
2. 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.
3. Despite the Solicitor receiving further written communications from Mr Maait in late March 2015, mid April 2015 and late May 2015, each of which specifically referred to what the Solicitor had said in his 18 March facsimile, and used language including "… you had assured us …" and "… your express undertaking …", the Solicitor did not seek to be relieved of what we find was his Undertaking, nor to even raise with Mr Maait in writing what he contends he discussed with him over the phone on 18 March, namely the provision of the trust account details and the authority. He concedes in his evidence that he could have done so but did not.
4. We reject the Solicitor's submission that ultimate payment of the $2,900 in 2017 meant that there was no failure to comply with the Undertaking given. The Undertaking by its express terms used language that would suggest to its recipient that the transfer of the money would take place forthwith.
5. We also reject the Solicitor's submission that the failure to respond to Mr Maait's March, April and May letters was understandable in the circumstances, given his earlier notification to Lawcover and the advice that he had allegedly received from Lawcover. This for the following reasons: 1. there is no evidence of the nature of the notification made by the Solicitor to Lawcover; 2. the advice - on the Solicitor's evidence - was that he ought not communicate further with Mr Maait in relation to the allegations that Mr Maait was making. The Solicitor did not suggest the Lawcover advice included he ought not comply with undertakings given and in particular undertakings as to payment of trust monies; 3. the claim that triggered the notification, on the Solicitor's evidence, was Mr Maait's 16 March 2015 letter. That letter referenced loss and damage sustained by Mr Nenadic by reason of what was asserted to be repeated breaches of the Solicitor's contract with him as his lawyers and by reason of negligence in the conduct of his case. It made no reference to the transfer of trust monies and was submitted prior to the Solicitor's 18 March facsimile by which the undertaking the subject of Ground 2 was made.
6. 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.
7. The Law Society pleads that the failing by the Solicitor to comply with the Undertaking constitutes professional misconduct. "Professional misconduct" is defined in s 297(1) of the Uniform Law as: 1. unsatisfactory professional conduct of a lawyer, where the conduct involves a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence; 2. conduct of a Lawyer whether occurring in connection with the practice of law or occurring otherwise in connection with the practice of law that would, if established, justify a finding that the lawyer is not a fit and proper person to engage in legal practice;
8. A finding of professional misconduct may also be made on the common law test enunciated in Allinson v General Council of Medical Education and Registration [1894] 1 QB 750 being conduct in the pursuit of professional activities that would reasonably be regarded as disgraceful or dishonourable by professional colleagues of good repute and competency. We agree with the Law Society's submission that 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). (*Citing Law Society of New South Wales v Hinde [2005] NSWADT 199)
9. This Tribunal, in a recent decision of Council of the Law Society of New South Wales v Konstantinidis [2019] NSWCATOD 104 said: "The importance of practitioners complying with undertakings given cannot be understated. It is of considerable importance to the administration of justice, and in the conduct of affairs entrusted to practitioners, that practitioners can rely upon their colleagues to honour undertakings; ..."
10. In Vincent Cofini [1994] NSWLST 25, the Court said: "… [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 this aspect of legal practice, that demands compliance for legal efficacy would collapse".
11. Failing to honour an undertaking given, especially in circumstances where there were subsequent repeated references by the recipient of the undertaking - a fellow legal practitioner - to the fact that the undertaking given had not been complied with is, we find, conduct in the pursuit of professional activities that would be regarded as disgraceful or dishonourable by professional colleagues of good repute and competency. It is also conduct that, we find, involved a substantial failure to reach or maintain a reasonable standard of competence and diligence. In light of the March, April and May 2015 letters it was also, we find, a consistent failure to reach or maintain a reasonable standard of competence and diligence. The test for professional misconduct in s 297(1) of the Uniform Rules is also satisfied.
12. Ground 2 is established.

Facts asserted and the Solicitor's response

1. Unless otherwise stated, the following facts are asserted by the Law Society and admitted by the Solicitor: 1. the sum of $7,900 cash deposited into the Solicitor's Office Account by Mr Nenadic on 24 November 2014 was trust money within the meaning of s 243 of the 2004 Act. The Solicitor by his Reply admits that the money was trust money within the meaning of s 243; 2. the balance of the Solicitor's Office Account prior to the deposit of $7,900 in cash by Mr Nenadic on 26 November 2014 was $4,373.09; 3. the Law Society contends that but for the deposit of $7,900 in cash by Mr Nenadic on 26 November 2014 into the Office Account the Solicitor could not have paid the sum of $5,000 to Mr Sweet on 24 November 2014. The Solicitor denies that allegation. 4. On 18 December 2014 the Office Account became overdrawn in that the balance was $160.72 in debit. 5. The Solicitor intended to make and/or further or in the alternative, authorised the making of the transactions on the Office Account in the period 28 November 2014 and 18 December 2014. 6. The transactions made on the Office Account in the period 28 November 2014 to 18 December 2014 involved the use of the sum of $2,900: 1. without the authority of Mr Nenadic; 2. for purposes unrelated to the Appeal Proceedings; and 3. for the benefit of: (A) the law practice conducted by the Solicitor; and/or (B) the Solicitor personally, By his Reply the Solicitor denies that the transactions made on the Office Account in this period involved the use of any money belonging to Mr Nenadic. 1. The Law Society contends that by reason of the matters set out above the Solicitor has misappropriated $2,900. The Solicitor denies that he has done so and says further that between 26 November 2014 and 22 June 2016 the aggregate total of the amounts that from time to time the Commonwealth Bank of Australia was liable to pay to him in relation to his various office accounts was sufficient to satisfy the charge held by Mr Nenadic over the balance of those accounts. 2. The sum of $3,127 cash deposited into the Office Account by Mr Nenadic on 19 December 2014 was trust money within the meaning of s 243 of the 2004 Act. The Solicitor admits that this deposit was trust money within the meaning of s 243 but says that the effect of the deposit was that the $3,127 became the property of the Commonwealth Bank of Australia and that, in consideration for the deposit of $3,127, the bank credited that amount to the Office Account and thereby agreed to pay that amount to the Solicitor on demand, subject to the Bank T&C. Accordingly, the Solicitor contends that this deposit ceased to exist as a cash deposit and instead existed as a chose in action held by the Solicitor against the bank pursuant to the Bank T&C. He further says that at the time of this deposit being made, the chose in action held by him against the bank included not only the Office Account, but each of his other office accounts. He pleads that, in the premises, at the time when the deposit of $3,127 was made: 1. the trust of which he was trustee was constituted by a chose in action against the Commonwealth Bank pursuant to the Bank T&C; and 2. the nature of Mr Nenadic's interest was an equitable charge in the amount of $3,127 over the whole of the Solicitor's chose in action against the bank being constituted by the aggregate total of those amounts that from time to time the bank was liable to pay the Solicitor in relation to his various accounts. 1. The balance of the Office Account prior to the deposit of $3,127 cash by Mr Nenadic on 19 December 2014 was $7,572.03 credit. 2. On 29 January 2015 the Office Account became overdrawn in that the balance was $12,231.67 debit. 3. The Solicitor either intended to make or in the alternative authorised the making of, the transactions on the Office Account in the period 19 December 2014 and 29 January 2015. 4. The transactions made on the Office Account in the period 19 December 2014 and 29 January 2015 involved - the Law Society contends - the use of the sum of $3,127: 1. without the authority of Mr Nenadic; 2. for purposes unrelated to the Appeal Proceedings; 3. for the benefit of the Solicitor's law practice or the Solicitor personally. The Solicitor by his Reply denies that the transactions made on the Office Account between 19 December 2014 and 29 January 2015 involved the use of any money belonging to Mr Nenadic. 1. The Law Society pleads that, by reason of the matters set out above, the Solicitor has misappropriated $3,127. The Solicitor denies that allegation and further says that between 19 December 2014 and 31 July 2017 the aggregate total of the amounts that from time to time the bank was liable to pay to him in relation to his various accounts was sufficient to satisfy the charge held by Mr Nenadic. The Solicitor says that, in the alternative, if he is found to have misappropriated the $3,127: 1. he had no notice of the $3,127 deposit by Mr Nenadic until 17 March 2015; 2. as at 17 March 2015 he had received the appeal invoice; 3. over the course of 2015 the Department of Justice took enforcement action against him in relation to that amount; 4. by email dated 24 June 2017 Mr Maait provided to the Solicitor a written authority signed by Mr Nenadic to transfer the monies to Mr Maait; 5. the $3,127 was transferred by the Solicitor to Mr Maait from the Office Account; 6. in the premises, his conduct did not involve a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence, and would not justify a finding that he is not a fit and proper person to engage in legal practice.

Evidence and submissions

1. The $7,900 cash deposit is evidenced in the bank statement for the Office Account at page 308 of AMF1. The statement records that immediately prior to the $7,900 cash deposit made on 26 November 2014 the balance of the Office Account was $4,373.09 credit and that with the $7,900 deposit the balance rose to $12,273.09 credit. Prior to the payment to Mr Sweet of $5,000 on 28 November 2014 the account does not record any further deposits in the period 26 to 28 November. There are some withdrawals recorded. Pages 308 to 312 of AMF1 show the transactions on the Office Account in the period 28 November 2014 to 18 December 2014. The page of the statement appearing at page 312 of AMF1 shows an 18 December 2014 debit balance of $160.72.
2. The same page of the account statement shows the cash deposit on 19 December 2014 of $3,127; further, immediately prior to that cash deposit being made the balance of the account was $7,572.03 credit. Pages 312 to 316 of AMF1 show the various transactions on the Office Account in the period 19 December 2014 to 29 January 2015.
3. The Solicitor in his affidavit (Exhibit R1 at [184] to [187]) concedes that the $2,900 and the $3,127 received from Mr Nenadic constituted trust money. He disputes, in his affidavit, misappropriation; deposing to never believing that the money belonged to him and never intentionally treating it as his own. He says that he always acknowledged that the funds belonged to Mr Nenadic and that he had an obligation to repay the monies to him.
4. He further deposes at [186] that at all times since the funds (which the Tribunal takes to be a reference to both the $2,700 and the $3,127) were deposited he had the means to repay them using the balance of his combined Commonwealth Bank office accounts. He says he did not at the time, and does not, consider it to be important which account he made the payment from. Accordingly, he maintains in his evidence that he continuously held the money for Mr Nenadic's benefit from the time it was deposited into his account until the time that it was paid to Mr Maait.
5. When giving oral evidence the Solicitor conceded an awareness that the $7,900 had been paid into his Office Account on 28 November 2014 because he withdrew $5,000 from that account to pay Mr Sweet; having received a $6,037 invoice from Mr Sweet previously. After that $5,000 was paid that left $2,900 in the Office Account.
6. The Solicitor in cross-examination was taken to a number of debits from the Office Account as they appear at pages 310 and 311 of AMF1, as well as to the debit balance in the account as at 18 December 2014 of $18.72. He conceded that between 28 November and 18 December 2014 he intended to make the various payments referred to in the Office Account statements; further, that he intended to make each of the payments referred to in the debit column of the account as disclosed in pages 312 to 315 of AMF1.
7. The Solicitor gave evidence of the moving of his office and his home in the December 2014 to mid January 2015 period. He said that his office staff may have been checking his Office Account during this period of time but that he was not, although he concedes that he was making drawings for different expenses on that account. He maintained in evidence that he was not aware as to what was in the account at the time. When he made the various transactions from the Office Account referred to by the Law Society he was not considering that money had been put into the account by Mr Nenadic and accordingly was not intending to spend the money deposited by him when making the various payments.
8. The Law Society in its submissions concedes that an allegation of misappropriation against a legal practitioner is not made out unless dishonesty is proved. It cites Bell J in Brereton v Legal Services Commissioner [2010] VSC 378 as giving an explanation of the concept of dishonesty where His Honour said: "While an allegation of dishonesty requires consideration of the person's mental state, in neither the criminal nor the civil context is it necessary to establish that the person subjectively knew or believed that the actions concerned were dishonest. 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 … "
9. The acts of the Solicitor relied upon are: 1. in relation to the sum of $2,900, the transactions that the Solicitor made on the Office Account in the period 28 November 2014 to 18 December 2014; and 2. in relation to the sum of $3,127, the transactions made by the Solicitor on the same account in the period 19 December 2014 to 29 January 2015.
10. The Law Society says that the knowledge, belief or intent of the Solicitor - to render the abovementioned acts dishonest - is twofold. Firstly, the Solicitor was not entitled to the amounts of $2,900 or $3,127. Secondly, any appropriation of those amounts by him was unauthorised. The Law Society points to the Solicitor having requested Mr Nenadic supply funds in trust for counsel and filing fees; had agreed not to charge Mr Nenadic for work on the Appeal Proceedings; was aware by 28 November 2014 that Mr Nenadic had deposited $7,900 into the Office Account; was aware that the purpose of the $7,900 deposit was for paying Mr Sweet's fees in the context of the Appeal Proceedings; and paid $5,000 of the $7,900 to Mr Sweet on 28 November 2014. So far as the $3,127 is concerned the Law Society points to the fact that the Solicitor had informed Mr Nenadic on 5 December 2014 of the amount payable for a Notice of Appeal.
11. The Solicitor's position is that no one was checking the accounts. The Law Society however refers to a number of transactions made on the Office Account in the 19 December 2014 to 29 January 2015 period including for the payment of wages, cash withdrawals from Commonwealth Bank branches, ATM withdrawals, and purchases from various retail outlets/businesses including Coles, Woolworths, Bunnings, Ikea, Roger David and Dan Murphys. The Law Society says that in relation to both the $2,900 and the $3,127 the Solicitor was not authorised by Mr Nenadic to use those monies for purposes unrelated to the Appeal Proceedings, or for the benefit of himself or his legal practice. It says that, in those circumstances, the Solicitor's conduct was objectively dishonest according to the standards of ordinary and decent (that is, reasonable and honest) people.
12. The Solicitor submits that the Law Society's case on Ground 3 ought fail for the following reasons: 1. The acts identified by the Law Society as constituting misappropriation of Mr Nenadic's funds are transactions on the Office Account between 28 January 2014 and 18 December 2014, and between 19 December 2014 and 29 January 2015. Throughout that period there were - the Solicitor submits - sufficient funds available in his various accounts to repay the full amount to Mr Nenadic. 2. The Law Society has not established the relevant nexus between the Solicitor's knowledge and the acts said to constitute misconduct. He had no knowledge that the $3,127 had been deposited into the account. 3. If the funds were dissipated then any such dissipation was fleeting and the result of ordinary cashflow in the Solicitor's practice, and consequent upon the funds being held in his Office Account which was a trading account on which credits and debits were made on a daily basis. 4. The allegation of dishonesty must be considered in view of the evidence as a whole. That establishes that the Solicitor is generally a person of honesty and integrity; he voluntarily did not charge fees to Mr Nenadic; that conduct being inconsistent with an intention to misappropriate. He may have made various errors which can be characterised as negligence or incompetence but not with dishonest intent. 5. The Office Account in question was subject to Bank T&C. Those terms, as applicable at the relevant time, entitled the Solicitor to an overdraft limit of $20,000. When the deposits of $7,900 and $3,127 were made by Mr Nenadic to the Office Account in cash, the effect was that the bank took possession of the cash and credited the Office Account with an equivalent amount. The bank was obliged to repay funds out of the Office Account until such time as the account balance was $20,000 in debit. It follows that the Solicitor was not holding any amount of cash in the Office Account on trust for Mr Nenadic. His deposits became part of a chose in action against the bank and it was that chose in action that the Solicitor held on behalf of Mr Nenadic. 6. The Solicitor had multiple accounts with the same institution. Accordingly, the chose in action referred to above over which Mr Nenadic held a charge comprised not only the balance of the Office Account, but the balance of his aggregated accounts with the bank. Additionally, the overdraft limit of $20,000 in respect of the Office Account needs to be considered.

Consideration and findings

1. The Solicitor concedes that the deposits into the firm's Office Account of $7,900 on 26 November 2014, and $3,127 on 19 December 2014 was in each case trust money within the meaning of s 243 of the 2004 Act. Even if such a concession had not been made we find that each deposit was trust money within the meaning of that section.
2. The Solicitor, we find, consistent with the concession that he made in oral evidence, intended to make each of the withdrawals and deposits from and to the Office Account in the period 28 November 2014 to 29 January 2015. Either he made each withdrawal or transaction himself or authorised the making of each.
3. The Solicitor was aware that Mr Nenadic had deposited $7,900 into the Office Account by no later than 28 November 2014 when he caused $5,000 to be drawn from that account in payment of Mr Sweet's fees. He was either aware or with reasonable diligence ought to have been aware of the $3,127 deposited into the Office Account on or shortly after 19 December 2014.
4. The transactions made on the Office Account in the period 28 November 2014 to 18 December 2014 involved the use of the sum of $2,900 that we find was trust money. The Solicitor did so - we find - without Mr Nenadic's authority, for purposes unrelated to the Appeal Proceedings, and for the benefit of either the Solicitor personally or his law practice. Similarly, 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 which we find was trust money. The Solicitor did so without Mr Nenadic'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.
5. After withdrawing $5,000 from the account to pay Mr Sweet on 28 November 2014 the Office Account had a credit balance of $5,133.15. After various withdrawals were made on the account after 28 November 2014 the account balance dropped to below $2,900 on 3 December 2014, returned to an account balance in excess of $2,900 on 5 December 2014, then again dropped below an account balance of $2,900 on 16 December 2014. The account fell into debit on 18 December 2014. At one point on 18 December the account balance was $160.72 debit.
6. In respect of the deposit of $3,127, the Solicitor either intended to make the withdrawals, or otherwise conducted the transactions on the account, in the period 19 December 2014 to 29 January 2015. Mr Nenadic's trust money sitting in the Office Account as at 19 December 2014 totalled $6,027. The account balance fell below that level on 9 January 2015 and on 29 January 2015 the account balance was $12,231.67 in debit.
7. We accept the Law Society's submissions that: 1. 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. 2. 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. 3. 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.
8. We reject the Solicitor's submission that there was sufficient monies in the other two office accounts to repay Mr Nenadic. The other two accounts referred to in the evidence were also with the Commonwealth Bank. The first ends in the numbers 005 and the other ends in the numbers 738. We describe those as the 005 account and the 738 account. So far as the 005 account is concerned that, we find, is irrelevant. It was not, on the evidence, an account that was opened until 1 July 2015. The transactions on the Office Account which we find constituted misappropriation were transactions occurring in the period November 2014 to January 2015. The misappropriation had already occurred by the time the 005 account was opened. Account statements for the 005 account are found in annexure MDC2 to the Solicitor's 31 January 2019 affidavit (Exhibit R1 in the proceedings). So far as the 738 account is concerned, statements for it appear within annexure MDC3 to the same affidavit. Those statements show that the account was in debit (in the amount of $69.90) at the time of opening on 1 November 2014 and remained in debit up until 29 January 2015. There were brief periods of credit however the credit balance during those periods at no stage exceeded $430.87. The 738 account during the relevant period, therefore, had insufficient funds to repay to Mr Nenadic the monies that he had deposited and which were held by the Solicitor on trust.
9. We also do not accept the Solicitor's submission that Mr Nenadic's trust monies of $2,900 and $3,127 could have been repaid to him by utilisation of an overdraft limit of $20,000 that the Solicitor alleges existed for the Office Account. This is for the following reasons: 1. Other than the Solicitor's assertion in Exhibit R1 at [33] that the Office Account had an overdraft limit of $20,000 in accordance with Bank T&C, there is insufficient documentary evidence of such an overdraft to enable us to conclude on balance of probabilities that such an overdraft existed. 2. Transactions on the Office Account the subject of the Application commenced on 28 November 2014 i.e. prior to the date when the Solicitor deposes to having had the benefit of the overdraft limit namely "since at least December 2014". 3. Because there is no documentary evidence as to the overdraft, we are not persuaded that, if it existed, it could have been utilised in the manner suggested by the Solicitor. 4. The evidence clearly discloses that the two sums deposited by Mr Nenadic into the Office Account, and the subject of the present Application, were monies that were utilised by the Solicitor without Mr Nenadic's authority. He made the various transactions on the Office Account referred to earlier in these Reasons not for purposes connected with the Appeal Proceedings, but for his own purposes or for the purposes of his law practice. The elements of misappropriation are established when those acts are committed. Whether a Solicitor who, having committed such acts and thereby engages in misappropriation, has the means available by way of calling on an overdraft facility, or otherwise being able to show that the monies - if called for - could have been repaid, is irrelevant. A Solicitor may, for instance, demonstrate an overdraft facility, may be able to prove that he or she had sufficient funds sitting in other accounts that could have been utilised; or may be able to demonstrate that he or she had assets that could be realised to make repayment of misappropriated funds.
10. Misappropriation of trust money is a serious breach of a solicitor's obligations. Street CJ (Reynolds and Samuels JJA agreeing) said in Law Society of NSW v Jones (Court of Appeal (NSW), 27 July 1978, unrep): "Reliability and integrity in the handling of trust funds are fundamental prerequisites in determining whether an individual is a fit and proper person to be entrusted with the responsibility belonging to a Solicitor. Members of the public, many of them wholly inexperienced and unskilled in matters of business or of law, inevitably must put great faith and trust and the honesty of Solicitors in the handling of monies on their behalf. The Court's must ensure that this trust is not misplaced".
11. Meagher JA in The Prothonotary of the Supreme Court of New South Wales v Dimitrious [2015] NSWCA 258 at [21] said: "Legal practitioners are expected to act and must act with scrupulous honesty when discharging their obligations generally, and specifically with respect to the receipt and payment of monies on behalf of clients. There is an unqualified expectation that they adhere to those standards".
12. We find that the Solicitor's conduct in respect of Ground 3 constitutes professional misconduct both within the definition in s 297 of the Uniform Law referred to earlier in these Reasons, and pursuant to the common law Allinson test. The fact that the Solicitor ultimately repaid the monies in September 2017 does not deprive the conduct of its characterisation as professional misconduct. We do not accept the Solicitor's submission that if Ground 3 is established his conduct does not rise above unsatisfactory professional conduct.
13. Whilst we accept that there is unchallenged evidence as to the Solicitor's good character and general diligence as a Solicitor, we are persuaded that the conduct more appropriately fits the description of professional misconduct primarily because of the Solicitor's awareness, certainly in relation to the $7,900, that the money had been placed into an office account of the practice as opposed to the trust account, yet he failed to take steps to ensure that the money was immediately transferred to a trust account in accordance with a solicitor's statutory obligation for the keeping of trust monies. He made (or caused to be made) various withdrawals on the Office Account at a time when the balance of the account was relatively modest and when there must have been at least an appreciable risk that by making various withdrawals Mr Nenadic's monies may have been dissipated. After it had become apparent that Mr Nenadic had deposited the $7,900 into the Office Account, there was at least a substantial prospect that Mr Nenadic would pay the $3,127 into the same account. The Solicitor in those circumstances ought to have been diligent in checking the Office Account so as to ensure that if the $3,127 was, equally, deposited into that account he could take steps to immediately transfer it to the trust account. He should also have been diligent to ensure that Mr Nenadic was appropriately advised in writing before November 2014 that any monetary deposits ought be made to the trust account, and given details of the trust account.

ORDERS 1. The Respondent, Malcolm Douglas Carr, is guilty of professional misconduct and unsatisfactory professional conduct. 2. The Registry is to list the matter for directions for a further hearing date on penalty.

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: 14 January 2020