Council of the Law Society of New South Wales v Clifton

NCAT Occupational|2021-05-25

Introduction

On 19 November 2020 the Council of the Law Society of New South Wales (the Law Society) made application to the Tribunal for disciplinary findings and orders against the respondent solicitor, David Vincent Clifton (Mr Clifton). Mr Clifton is a sole practitioner and has been since 1 March 2013 the sole principal of the legal practice known as Clifton Legal, now Clifton Legal Pty Limited (the Law Practice).
The Law Society asserted that Mr Clifton is guilty of professional misconduct in that, without authority, he applied money in his trust account to pay the debts of the Law Practice and that in so acting he breached the trust accounting provisions in the Legal Professional Uniform Law (NSW) (the Uniform Law). The application also alleged that Mr Clifton caused false tax invoices to be prepared in relation to the trust transfers. The Law Society sought an order recommending that Mr Clifton's name be removed from the roll and costs. The proceedings were set down for hearing on 25 May 2021.

The Law Society's Amended Application

The Law Society filed an Amended Application on 22 February 2021. The only amendment of substance in that pleading was that the Law Society now asserts that Mr Clifton authorised, rather than caused, funds in his trust account to be used for the payment of the Law Practice's debts, and that he authorised the preparation of the false tax invoices. The grounds and particulars in the Amended Application set out that Mr Clifton, without authority, authorised the following amounts from the Law Practice's trust account to be paid into his office account: 1. 21 May 2018: $8,892 2. 31 May 2018: $6,208 3. 19 July 2018: $8,533 4. 10 August 2018: $4,725 5. 29 August 2018: $6,010 6. 31 August 2018: $10,735 7. 20 September 2018: $6,200

Liability

Before we come to the question of penalty, and notwithstanding Mr Clifton's admissions, the Tribunal must first consider the evidence and make its findings in relation to the allegations set out in the Amended Application. The Law Society relied on an affidavit from its Trust Account Investigator, Chee Kit Thong which annexed his report dated 26 July 2019 following the inspection that he had carried out at the Law Practice commencing on 9 July 2019 (Trust Report). It also relied on the affidavit of Anthony James Lean, its Director, Legal Education which annexed correspondence between the parties in relation to the Law Society's investigation of the allegations.
Mr Clifton relied on his affidavit sworn 21 January 2021 and on a supplementary affidavit sworn on 23 February 2021. He also tendered an affidavit from Mr Warrick sworn on 21 January 2021. Each of these affidavits was admitted into evidence without objection. Mr Clifton and Mr Warrick were cross examined on their affidavits. Mr Warrick's cross examination was conducted by audio visual link.
There was also a number of character affidavits filed on Mr Clifton's behalf, as well as an affidavit from a medical practitioner. We will refer to these affidavits in our consideration of the appropriate penalty to be imposed. There are also parts of Mr Clifton's first affidavit which are relevant to this issue, and we will refer to them in that context.
Lastly, there was an Agreed Chronology and a document headed "Applicant and Respondent's breakdown of payments", both tendered by consent.

Mr Clifton's affidavit evidence

In his first affidavit Mr Clifton said that: 12. By the start of January 2018, Clifton Legal was behind on meeting its day to day liabilities. As at 1 January 2018 the firm had approximately 65 files. The work in progress was $104,569 and debtors were approximately $71,114. … The practice had two fully drawn loans from NAB with a total owing to NAB of approximately $258,000. … 15. By March 2018 the firm had significant accumulated debts for overheads including rent, searches, barristers' fees and utilities. On 19 March 2018 I applied to the NAB for a bank overdraft for the Office Account, however, it took about 3 months for the overdraft with a limit of $50,000 to be approved. It was finally approved in about June 2018. However by the time the overdraft was drawn down it only helped to meet some of the immediate liabilities, being approximately $15,000 in unpaid rent and approximately $40,000 of other outstanding debts as referred to in the preceding paragraphs.
In relation to his interactions with Mr Warrick he said that: 18. In or about May 2018, I was becoming extremely stressed and anxious feeling sick meaning that I was becoming increasingly worried and the worry was making me feel sick about the cash flow problems in the practice… 19. Mr Warrick was running the financial side of the practice and I was busily trying to generate work and bills and keep the funds going. I was not getting paid at the time because there were not enough funds in the account to pay me. Also as I have stated above this meant that I could not pay our mortgage or credit card bills. I thought that the practice was in serious risk of being wound up. 20. At about this time in May 2018 Mr Warrick came to me and we had a conversation to the following effect: Mr Warrick: We are getting more and more behind and there are payments we have to make and cannot wait. If we don't do something, I am not sure what the consequences will be, particularly with the ATO. I said: I'm worried the practice could be wound up. Mr Warrick: How about we borrow some funds from the Tregurtha account until we've got some funds to put back in there? I will just need to generate an invoice for it. Feeling sheer desperation I replied: Yes, okay do that. 21. I have no recollection of any further conversations with Mr Warrick regarding the other transfers from trust although I believe that he would have told me that he intended to borrow further funds from trust and repay those funds once we had sufficient cash flow. I believe that he would also have told me each time he had repaid funds to trust. 22. I am now aware, but I was not at the time aware of the number and amount of borrowings from the trust account. I first became aware of the extent of the borrowings when I read the Trust Report. I recall feeling stunned.

Mr Warrick's affidavit evidence

In his affidavit Mr Warrick gave the following account of his May 2018 conversation with Mr Clifton: 6. To the best of my recollection on or about one Thursday, it was a pay day, in May 2018 the firm did not have enough money in the account to pay the wages. I knew that in the Tregurtha matter there were significant trust funds which had been sitting in the account for a very long time. I went to David Clifton and had a conversation with him to the following effect: I said: There is not enough money in the account to pay the bills and wages. We have to do something. Possibly one way of doing this would be to knock up an invoice in the Tregurtha matter and pay for it from trust and then reverse the whole thing as soon as we can. David said: Yes okay we'll do it. I said: I'll sort it out. I'll knock up an invoice and I'll do the trust transaction.
Mr Warrick then said that on 21 May 2018 he made the initial payment of $8,892 from the Tregurtha Estate trust funds, and then made the subsequent transfers between May and September 2018. He said that he did not discuss these later transfers with Mr Clifton, or certainly not the detail of the transfers. However he said that he may have said to Mr Clifton on one occasion, or possibly two occasions, words to the effect: "I just touched up the trust account again to pay the bills." Mr Warrick said that Mr Clifton did not reply to him. He just looked at him and walked straight past.
Mr Warrick also stated in his affidavit that he had created three invoices in the Law Practice's LEAP system in relation to the funds that he had transferred from the Tregurtha Estate trust monies. He said that he had done this on his own initiative and not at Mr Clifton's direction and had not shown them to Mr Clifton. He said that the invoices were not related to any work in progress on the file and that he had just made them up.
As for the three further transfers from the Law Practice's general trust account, Mr Warrick said he also did not discuss these transfers with Mr Clifton, "or certainly not the detail of them". He did not create any invoices for these trust transfers because "creating invoices just complicates things".
Mr Warrick then set out the dates on which trust transfers were repaid to the trust account. The May 2018 payments from the Tregurtha Estate were repaid on 28 September 2018 and the August and September payments on 25 October 2018. The other three transfers were repaid within a few weeks, or in one instance, two days after the initial payment from the trust account.

Mr Clifton's second affidavit

In his second affidavit Mr Clifton gave further evidence about the creation of the false invoices. He said: 4. At no stage during my conversation with Mr Warrick in or around May 2018 … did we ever discuss that the purpose of creating a tax invoice was to conceal the transaction. Nor did I have any such conversation with Mr Warrick at any other time. 5. It was my understanding that prior to transferring funds from trust it was a necessary procedural step to create a tax invoice in the LEAP software accounting system that was (and continues to be) used in my office … There was never any intention on my part to conceal the trust transactions.

Mr Warrick's cross examination

Mr Warrick was cross examined prior to Mr Clifton. He explained that the trust account withdrawals were made whenever the cash flow from the Law Practice was insufficient to meet its debts and other financial commitments. In relation to the three withdrawals from the general trust account, he believed that it would be possible to repay these amounts before the end of the months in which the withdrawals had been made (as in fact he was able to do), and for this reason it was not necessary for him to raise invoices.
He said the usual practice was for Mr Clifton or the other fee earners in the Law Practice to prepare tax invoices and then submit them to him and he would process the accounting entries. However in relation to the three tax invoices created for the Tregurtha Estate, having received the initial authorisation from Mr Clifton to proceed in this manner, he had prepared them himself and had not discussed their specific form and content with Mr Clifton. His recollection was that he had prepared the invoices after the moneys had been withdrawn, but may have backdated the invoices in each case to a date prior to the date of the withdrawals.
Mr Warrick was also asked whether it was an essential feature of the Law Practice's accounting system to raise a tax invoice before money could be withdrawn from the trust account. His answer was that this was not the case. Money could be withdrawn from the trust account without the need to create a tax invoice.

Mr Clifton's cross examination

Mr Clifton said that the Law Practice's financial position had deteriorated in early 2018 following the closure of the Tenterfield branch and this had created an obligation to pay out long service leave entitlements to former employees. He had applied for an overdraft facility from the NAB but approval was not received until June 2018. He was asked why he had authorised Mr Warrick to make the withdrawals from the Tregurtha Estate in May rather than wait until the approval of the overdraft. He said that with hindsight he could not explain why he did not wait, but that he was not thinking very clearly at that time.
He repeated that the only conversation that he recollected having with Mr Warrick about taking money from trust was the conversation in May 2018. Counsel referred him to Mr Warrick's evidence, including the statement that Mr Warrick had made to the Law Society on 11 July 2019 (which formed part of the Trust Report), to the effect that he had one or two further conversations with Mr Clifton in July and August 2018 at the time that Mr Warrick made the withdrawals from the general trust account. Mr Clifton maintained that he had no specific recollection of these conversations, but accepted that they may have occurred. He then said: "In any event it's my trust account and I take full responsibility for what happened to it".
In relation to the false invoices, he said that the usual practice was for invoices to be prepared by him or other fee earners and then submitted to Mr Warrick for processing. He would approve the invoices generated by the other fee earners. He said that he did not approve the false invoices generated in respect of the Tregurtha Estate and presumed that Mr Warrick had approved them himself.
He maintained his position that the Law Practice's accounting systems required invoices to be created to enable money to be paid out of the trust account. However he conceded that their purpose was to facilitate the unauthorised withdrawals and to create a paper trail to conceal the true nature of the transactions.

The Law Society's submissions on liability

The Law Society filed written submissions, written submissions in reply to Mr Clifton's written submissions, and made further oral submissions on the day of the hearing. It said that the contents of the Trust Report, together with Mr Clifton's and Mr Warrick's evidence, enables the Tribunal to be comfortably satisfied that all the elements of the grounds and the particulars in the Amended Application had been made out. Although he did not personally withdraw the funds or create the false invoices, his general authorisation to Mr Warrick to take these steps enables the Tribunal to find that he is guilty of professional misconduct.

Mr Clifton's submissions on liability

Mr Clifton's counsel outlined in her written submissions that there are five areas where the Tribunal must make determinations in relation to the evidence because there is some variation between the Amended Application or the Law Society's submissions and Mr Clifton's evidence and what is admitted in the Reply.
The first issue is that the Tribunal should not find that Mr Clifton directed the withdrawal and disbursement of the relevant amounts from trust, in the sense that he gave specific directions on each occasion, only that he authorised that they be made. In its written submissions in reply, the Law Society said that the word "directed'' in its primary submissions was intended to convey only that Mr Clifton authorised and instructed Mr Warrick to make the withdrawals and to create the false invoices. This much had been admitted by Mr Clifton, so this point of difference raised by Mr Clifton's counsel falls away.
The second and third issues relate to the repayment of the relevant withdrawals from the trust account and the dates the repayments were made. These repayments were not referred to in the Amended Application (but they are readily identifiable from the Trust Report). Although it has no effect on our overall findings, the Tribunal accepts that the repayments were made on the dates set out in Mr Warrick's affidavit.
The fourth issue relates to the detail of the precise purpose to which the trust transfers were applied. There were some discrepancies between what was contained in the Amended Application and Mr Clifton's Reply. We will accept what is set out in the Reply as an accurate statement of these matters, but again nothing turns on this difference because the substance of the allegation is that the moneys were applied to pay for expenses and debts of the Law Practice and this was admitted by Mr Clifton.
The fifth issue concerns the creation of the false invoices. The Amended Application alleges that the purpose of the invoices was to conceal the amounts withdrawn from the Tregurtha Estate. Mr Clifton's counsel submitted that the evidence does not support a finding that Mr Clifton authorised Mr Warrick to create false invoices for the purpose of concealment. Rather he authorised the creation of the invoices because he believed that his accounting software required this to be done before monies could be withdrawn from the trust account.
In the Tribunal's opinion it is immaterial whether Mr Clifton authorised Mr Warrick to create the invoices specifically to conceal the withdrawals. Mr Clifton's evidence is that he authorised Mr Warrick to create the false invoices and he did this to create a paper trail to conceal the true nature of the transactions. That evidence is sufficient to make out this ground in the Amended Application.
Mr Clifton's counsel also stated in her written submissions that "on the pleadings and available evidence there is no basis that Mr Clifton acted dishonestly". We reject this submission. In relation to his authorising the transfers from the trust account and his authorising the creation of the tax invoices, Mr Clifton acted dishonestly. Furthermore, under cross examination he admitted that he knew at the time that what he had done was wrong, was contrary to his ethical and statutory obligations, and finally, that it was a dishonest thing to do.

Our findings on liability

We have made findings in relation to each of the matters raised by Mr Clifton's counsel in her written submissions. None of those findings detract from the overall case put forward by the Law Society in the Amended Application. The evidence and in particular Mr Clifton's own evidence enable us to conclude that we are satisfied, according to the Briginshaw standard: Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34, that all the allegations contained in the Amended Application, including all of the breaches of the Uniform Law and the Uniform General Rules, are made out and that Mr Clifton's conduct amounts to professional misconduct under the common law and under the statute.
We also accept Mr Warrick's evidence that in addition to the initial conversation with Mr Clifton in May 2018, he had at least two further conversations with him in July and August 2018 when he told him that he was proposing to take further money from the trust account. There is also Mr Clifton's evidence in his first affidavit which we have set out above, that the NAB overdraft, when approved in June 2018, only helped to meet some of the immediate liabilities of the Law Practice. For these reasons we also find it difficult to accept Mr Clifton's evidence that he only became aware of the extent of the borrowings when he read the Trust Report and that he felt "stunned".

The Law Society's submissions on penalty

The Law Society seeks an order that the Tribunal recommend that Mr Clifton's name be removed from the roll. In its written submissions, it said that this order reflects the Tribunal exercising its protective jurisdiction and should not be seen as a punitive response to Mr Clifton's conduct. The Law Society submits that the Tribunal should consider the effect of such an order on the understanding of the profession and the public as to the standard of behaviour required of legal practitioners. We were referred to the following passage in Law Society of New South Wales v Bannister (1993) 4 LPDR 24 ("Bannister") at [28] per Shellar JA: "When the jurisdiction of the Tribunal is invoked under Part 10 of the Act to conduct a hearing into a complaint of professional misconduct by a legal practitioner, the primary consideration is to protect the public by preventing a person unfit to practice from holding himself or herself out to the public as a legal practitioner in whom members of the public might repose confidence. The Tribunal must also act so as to deter the offender in the future and any other practitioner minded to behave in like manner."
The Law Society also referred to Dupal v Law Society of New South Wales (Court of Appeal (NSW), 26 April 1990, unrep) ("Dupal") where the Court of Appeal reviewed a decision of the Disciplinary Tribunal (a predecessor of the Legal Services Division in this Tribunal) which had found that a solicitor had misappropriated trust monies and paid them to his sister. The solicitor's counsel argued that his right to practise should be suspended, but that his name should not be removed from the roll. Kirby P said: "… the normal consequence of the misuse of entrusted funds by a solicitor, and a finding of wilful breaches of the statutory prohibition in that regard, is the removal of the name of the solicitor from the roll. There is no reason why that consequence should not follow in the present case." and "… leave no doubt in the mind of a practitioner in financial difficulties, exposed to the temptation of using without clear authority the funds of another, the consequences that will flow for the right to practise when such misuse of funds is discovered."
In the same decision Handley JA stated: "Counsel were not able to refer us to any case where a solicitor found guilty of misappropriation or wilful contravention of s 41(1) has not been struck off the roll. … The maintenance of those standards and the public interest require, in my judgment, that this appeal be dismissed."
We were also referred to the following comments of Hope JA in Law Society of New South Wales v Moulton (1981) 2 NSWLR 736 ("Moulton") at 740: "… in considering whether a solicitor has been guilty of professional misconduct in a dealing with a client … the fact that the client, in the ultimate event, suffers no loss is of little, if any, relevance. If the acts or omissions of a solicitor constitute professional misconduct, they do so at the time when they occur."
In relation to Mr Clifton, the Law Society said that: "The Respondent knew, at the time he authorised Mr Warrick, that it was unlawful for trust money to be dealt with in the manner he "authorised". This is not a case of the Respondent - a senior legal practitioner of 17 years' experience at the time - being ignorant of his obligations or the rules around dealing with trust money. This is more serious. The Respondent, in his conduct, has demonstrated a willingness to deliberately depart from his professional and statutory obligations, in this case, to ensure that his practice remained financially viable."
The Law Society said that an order recommending that Mr Clifton's name be removed from the roll is the most appropriate order in all the circumstances This was necessary to protect the community: (a) From future transgressions of the Respondent (which cannot be ruled out); (b) By deterring other practitioners from engaging in similar conduct; and (c) By demarcating the Tribunal's disapprobation of the Respondent's conduct and promoting public confidence in the integrity of the legal profession in New South Wales.

Mr Clifton's further evidence in relation to penalty

Mr Clifton gave an account of his career in his first affidavit. He said that he was 72 years of age and had been admitted to practice in April 2001 at the age of 50. Prior to commencing his career in the law, he had been the Managing Director of a family business from 1980 until 1992. The business was known as the Clifton Automotive Group, which operated a Toyota dealership and a spare parts business in Tamworth. His wife was the other director. The dealership was sold in 1991, but his companies were left with significant tax debts. In 1992 the ATO commenced winding up proceedings. His bank also foreclosed on the family home. He said that he was left with just his household contents and a small amount of superannuation.
He said that he could recall "feeling as though everything was falling apart and as though the bottom card had been pulled out of the pack" and that he "felt traumatised by the whole experience and devastated for my family".
In May 1993 he obtained a position at the School of Health at the University of New England (UNE) in Armidale. His wife and one of their three children remained in Tamworth living with his parents. Eventually his wife also obtained a position at UNE and the family was able to rent a house there and to live together again.
Whilst working at UNE Mr Clifton enrolled in an arts degree which he later converted into an arts/law degree. He graduated in 2000 and after completing the College of Law course, was admitted as a solicitor in April 2001.
Initially he was employed by a firm in Glen Innes. He became a partner in that practice in May 2003. In March 2013 that partnership was dissolved and Mr Clifton set up his own practice, Clifton Legal, with offices in Armidale and Tenterfield. Mr Clifton said that the previous practice had left him with significant partnership debts, so that when he commenced Clifton Legal, he was approximately $235,000 in debt.
Mr Warrick was first employed by the Law Practice in May 2016 when Mr Clifton advertised for a bookkeeper. Mr Warrick had been a senior partner in an accounting firm and he had known Mr Clifton personally for some years. Mr Clifton said that he was relieved to have Mr Warrick's assistance and he delegated the day-to-day accounting of the Law Practice to him.
The Tenterfield office was not profitable and at the end of 2017, Mr Clifton made the decision to sell it. However the office's liabilities exceeded the sale price and Mr Clifton's indebtedness increased.
Currently the Law Practice (which was incorporated on 1 January 2020) is trading profitably. His past indebtedness to the ATO was paid out in full by 31 March 2021. Since November 2020 the Law Practice has generated sufficient work to warrant the employment of three full-time solicitors, including Mr Clifton, and three part-time staff, including a new bookkeeper. Mr Warrick left the Law Practice on 30 September 2020.
Mr Clifton also set out in his affidavit his significant involvement in the local community in Armidale over the past 30 years.
In relation to the matters the subject of the Law Society's Amended Application, he said: 32. I have had time to reflect since the events in 2018 when the trust transfers occurred. I have asked myself many times why I allowed the trust transfers to take place and why I did not reach out and seek help from family and friends. With the benefit of hindsight, I should have reached out to family and friends and spoken to my GP. However at the time I was not thinking clearly. I felt sick and panic stricken. The spectre of a repeat of the disaster that I had been through with the ATO and the bank foreclosing on our family home in 1992 was weighing heavily on me at the time. I felt depressed, anxious and desperate to avoid losing our family home for a second time. When Mr Warrick made the suggestion to borrow funds from Trust, I went along with it out of desperation as at the time I could not see any other way out of the cash flow problems. I deeply regret my conduct and am extremely remorseful for it. 33. I now understand these concerns are no justification for taking funds from the trust account on the assumption that that [sic] such funds would be repaid (which they were). Nonetheless, reflecting on why I acted as I did has helped me to understand the cause of the conduct that has led to these proceedings so that I will never again act in such a manner. I now understand how failing to adhere to the highest standards of professional conduct has (and will if repeated) risk my professional reputation, my livelihood and my ability to contribute to my community in my role as a solicitor. It is deeply regrettable that it took these proceedings for me to learn that lesson.
Lastly, Mr Clifton said that in 2019 he had decided to look to selling the Law Practice, with a view to his working there as a full or part-time solicitor for the next five years. Discussions with a prospective purchaser had stalled in December 2020, but he was hopeful that they could recommence shortly.
Mr Clifton also tendered an affidavit dated 25 January 2021 from Dr Robert Fisher, a consultant psychiatrist, which attached his report dated 26 October 2019 following his consultation with Mr Clifton on 27 September 2019. Dr Fisher said in his report that: "The most likely diagnosis of his condition at the time he illegally purloined money from his trust account, was that he was suffering from an Adjustment Disorder with Anxious and Depressed Mood in the context of financial stress," and that he found no clear evidence of any other psychiatric disorder.
Also tendered were affidavits from Gerard Kelly sworn 18 January 2021, Philip Theobald sworn 12 January 2021 and Samuel Notley sworn 22 January 2021. Each deponent attested to Mr Clifton's good character.
Mr Kelly is a solicitor. He said that he had first met Mr Clifton 20 years ago when he was a student in Mr Kelly's property law class at UNE. He now has a sole practice in Armidale. He said that in his dealings with him, he had always found Mr Clifton to be obliging, straightforward, honest, and trustworthy to deal with. Mr Kelly said that Mr Clifton had first disclosed to him the conduct the subject of these proceedings on 16 August 2019 when he showed him the Trust Report. He said that at that time Mr Clifton was ashamed and remorseful. Mr Kelly said he would be confident that Mr Clifton would not traverse such behaviour again, particularly having witnessed first-hand Mr Clifton's expression of regret on 16 August 2019, which he believed to be sincere.
Mr Theobald is a barrister. He said that he had known Mr Clifton professionally for 15 years. Mr Clifton had briefed Mr Theobald in a number of complicated matters. When he was briefed to appear in Armidale for the Law Practice, he shared a number of meals and formed a close relationship with Mr Clifton. Mr Clifton had first informed him of the issues raised in the Trust Report on 20 August 2019 and said that he had acted as did because he was under extreme cash flow stress. Mr Theobald said that he was shocked and appalled by what Mr Clifton had done, but formed the view, from what Mr Clifton had said to him at that time, that he was remorseful and clearly devastated by his actions. Mr Theobald concluded that he considered that his actions were an exception in particular circumstances and not likely to be repeated.
Mr Notley is a chartered accountant. He said that he knew Mr Clifton professionally in that he had referred many of his clients to him for legal advice. He has also acted as Mr Clifton's business and personal accountant for the past 15 years. In or about August 2019, Mr Clifton had informed him of the results of the Trust Report. He said that he was shocked by what he had been told and found Mr Clifton's actions to be completely out of character and "at absolute odds with his impeccable history in the context of our professional relationship." He said that he continues to hold Mr Clifton in the highest regard, and, despite his error in judgment, he has no hesitation in continuing to engage Mr Clifton's services for the benefit of his existing and future clients.
Mr Notley also confirmed Mr Clifton's evidence that the principal reason for the Law Practice's cash flow issues in 2018 was the poor performance of the Tenterfield office. He also said that he believed that there was a general downturn in the legal market in 2018 due to the significant drought conditions in the New England region. He said that the Law Practice had not undergone any cash flow issues since 2018.
Supplementary affidavits from Mr Kelly, Mr Theobald and Mr Notley dated 2 March 2021 were tendered, in which each said that they had been provided with the Law Society's Amended Application and Mr Clifton's Reply, and that nothing in those pleadings caused them to alter the opinions that they had given in their principal affidavits.

Mr Clifton's cross examination in relation to penalty

Mr Clifton conceded that he had not voluntarily reported his conduct to the Law Society or to the Office of the Legal Services Commissioner (OLSC) before Mr Thong conducted his routine file verification investigation of the Law Practice commencing on 9 July 2019. Even at that stage Mr Clifton did not bring the transactions to Mr Thong's attention, but waited until Mr Thong had identified the transactions from his own investigations. Mr Clifton also said that he had not informed the executors and trustees of the Tregurtha Estate that payments had been made from the estate's trust funds to pay the debts of the Law Practice.
In relation to the sale of the Law Practice he said that there were now two interested parties, but that negotiations were stalled pending the resolution of these proceedings.

Mr Clifton's submissions on penalty

Mr Clifton's counsel relied on written and oral submissions. On his behalf she conceded that his conduct was seriously wrong and that it warrants a significant sanction. In this instance the appropriate protective order is a public reprimand. This sanction "will protect the public, ensure the continued maintenance of the profession's good reputation whilst also having a deterrent and denunciatory role." Counsel submitted that if the Tribunal were to make an order recommending that Mr Clifton's name be removed from the roll, it must find that Mr Clifton is presently and probably permanently, or at least indefinitely, unfit to practice: New South Wales Bar Association v Cummins [2001] NSWCA 279 at [26] per Spigelman CJ. Further, fitness to practice is to be determined at the time the decision recommending removal from the roll is to be made, not at the time the relevant conduct occurred. Where there is a time lag between the conduct and the hearing on penalty, a relevant consideration is whether the practitioner is able to demonstrate a genuine personal and professional change in the intervening period: Council of the New South Wales Bar Association v Sahade [2007] NSWCA 145.
Also relevant, in counsel's submission, is whether the practitioner fully appreciates and understands the wrongfulness of the conduct. In Law Society of New South Wales v Walsh [1997] NSWCA 185 ("Walsh"), Beazley JA said: "Another relevant factor will be whether the practitioner truly understands the error of his or her ways. … Whilst a practitioner's expressed intention not to reoffend is relevant to mitigation, it will have little weight unless accompanied by an understanding of the wrongfulness of the conduct which was the subject of the disciplinary charge."
Counsel drew the Tribunal's attention to the following matters which indicated that Mr Clifton was now fit to continue to practise: 1. In September 2019 the Law Society had asked the OLSC to make a recommendation under s 278(1) of the Uniform Law that Mr Clifton's practising certificate be immediately suspended but it declined to do so, because amongst other reasons set out in the OLSC's letter to the Law Society dated 24 September 2019, the conduct was relatively isolated and the unauthorised withdrawals had been restored to the trust account; 2. The Law Society allowed Mr Clifton to renew his practising certificate for the 2020-2021 year; 3. Mr Clifton's wrongdoing occurred in the context of his extreme personal and mental distress caused by a deep fear of losing his business, a circumstance not likely to occur again as the Law Practice is now trading profitably; 4. Mr Clifton had admitted the wrongfulness of his conduct and his admissions were not "late opportunistic admissions in the face of disciplinary proceedings"; 5. Mr Clifton's deep personal regret and remorse; and 6. Mr Clifton's good character as witnessed by his character references.
Counsel provided the Tribunal with a schedule summarising a number of decisions in the Tribunal and in the Administrative Decisions Tribunal where there had been findings of dishonesty against practitioners but orders had not been made recommending their removal from the roll, or in the case of proceedings commenced under the Legal Profession Act 2004 (NSW) (now repealed), they were not struck off. We will refer below to those decisions which we consider relevant to Mr Clifton's position.

Our decision on penalty

We cannot accept Mr Clifton's submission that a reprimand is the appropriate penalty. A more stringent sanction must be imposed as a protective measure. We have considered carefully the cases which Mr Clifton's counsel referred us to in her schedule of authorities, where, following findings of dishonesty, orders other than a recommendation of removal from the roll were made. As we had noted, in Dupal in 1990 Handley JA had said that counsel could not identify any decisions where a practitioner found guilty of misappropriation or wilful breach of the statute had not been struck off. That is no longer the case. However in the majority of these decisions to which we were referred, these orders followed findings of dishonesty which did not involve the misuse of trust monies. That conduct invariably involved serious shortcomings on the part of the practitioners concerned, but it did not involve the misuse of trust funds for personal gain.
We have identified five decisions listed in the schedule which concern the misuse of trust funds. In the first case, Law Society of New South Wales v McNamara [2007] NSWADT 162, the solicitor received $5,227 from firm clients and misappropriated the money for his own use, instead of paying the cheques into trust. He was suspended from practice for 12 months and thereafter was only entitled to be issued with a practising certificate as an employee for the following five years. In Council of the Law Society of New South Wales v Bharati [2010] NSWADT 159, the solicitor paid two cheques in the amount of $14,500 into his office account instead of his trust account. There were findings that his conduct was not premeditated and in part due to his ignorance. In addition to a reprimand, a condition was imposed on his practising certificate that he be permitted to practise only as an employee of another solicitor holding an unrestricted certificate.
In Council of the Law Society of New South Wales v Nasr [2015] NSWCATOD 70 there was a finding that the payments by the solicitor from his trust account were made under duress, that is, he had been threatened with violence if the moneys were not paid to a third party. Again the solicitor was reprimanded and the same restriction was placed on his practising certificate. In Council of the Law Society of New South Wales v Davidson [2020] NSWCATOD 71 the solicitor was found to have misappropriated $1,500 by paying into her own account money received for the payment of counsel's fees. Lastly, in Council of the Law Society of NSW v Thadsanamorthy [2019] NSWCATOD 96 the solicitor was found to have deposited moneys received for counsel's fees into her personal bank account. She received a reprimand, a fine and was ordered to undertake further education. The Law Society had not sought an order recommending the removal of her name from the roll.
Each of these five decisions of course depend on their particular facts and circumstances but as a general proposition we regard the findings that we have made in relation to Mr Clifton's misuse of trust account funds to be no less serious than the conduct established in these decisions, and in some respects it is more serious in that it involved multiple payments over a longer time period. In each of the decisions to which we have referred, except that in Thadsanamorthy, the practitioner's entitlement to practise was suspended or restricted.
Mr Clifton's counsel also referred to the Tribunal's recent decision in Council of the Law Society of NSW v Batalha [2020] NSWCATOD 158 ("Batalha") where, in relation to findings very different to our findings in these proceedings, the practitioner had received a reprimand and an educative order. In those proceedings the Law Society had withdrawn its allegation of misappropriation before the decision was published, but the Tribunal had commented that even if the misappropriation allegations had been pressed and established, it was unlikely that the Tribunal would have recommended that the practitioner's name be removed from the roll. However, the Tribunal had said that in that event, it would have given consideration to issuing the practitioner with a restricted practising certificate. We do not consider that the decision in Batalha assists us in determining the appropriate order in these proceedings.
More generally, whilst it is useful to consider prior decisions of this Tribunal and its predecessors, ultimately the Tribunal must look for guidance to the Supreme Court of New South Wales which retains its inherent jurisdiction over the legal profession in relation to disciplinary matters. In Bannister, Dupal and Moulton, which we have referred to above, and in many other decisions, the Court of Appeal has consistently stated that the appropriate standard for the Tribunal to adopt in matters of this kind is to recommend removal from the roll. The most recent statement by the Court to that effect is found in Council of the Law Society of New South Wales v Zhukovska [2020] NSWCA 163 where Leeming JA said, at [146], that a case of dishonesty or misappropriation will ordinarily result in removal from the roll. Leeming JA also referred to his earlier comments in Kumar v Legal Services Commissioner [2015] NSWCA 161 to the effect that even a temporary use of client's funds without approval amounts to serious and deliberate dishonesty.
The Tribunal has therefore come to the view that the appropriate sanction in these proceedings is a recommendation that Mr Clifton's name be removed from the roll. In coming to this decision we find that Mr Clifton is not currently fit to practise and that this is likely to be the case probably indefinitely. This is never an easy finding to make and we have not found it easy in this instance. However, to come to a different view, amongst other factors, we would first need to be certain that Mr Clifton "truly understands the error of his ways", to adopt the words of Beazley JA in Walsh, and we are not satisfied that this is the case.
When giving his oral evidence and under cross examination, Mr Clifton said that he deeply regretted what he had done. He appeared to answer the questions put to him in an open and direct way, but the Tribunal was not satisfied from his evidence that he fully understands the seriousness of his conduct. It was put to him that he had only expressed regret and remorse for his conduct after he had received the Trust Report in September 2019, and that he did not self-report his conduct to the Law Society or to the OLSC before then, particularly as he now concedes that he knew at the time of the unauthorised transfers that what he did was wrong. Further, it was put to him that he did not self-report his conduct to Mr Thong before he commenced his trust account inspection, nor did he inform his client, the executors and trustees of the Tregurtha Estate, that he had misappropriated their funds. His response to these questions was simply to accept what was put to him as correct, but he was not able to give any explanation as to why he had not disclosed these matters at the relevant times and why he would now act differently in a similar situation. Also, the Tribunal was concerned that Mr Clifton continued to employ Mr Warrick throughout 2019 until September 2020, which suggests a continuing lack of insight by Mr Clifton into the nature of his misconduct.
We have given due weight to Dr Fisher's report from 2019. However, as the Law Society pointed out in its written submissions, Dr Fisher recorded Mr Clifton saying to him in September 2019 that "he admits he knew the utilisation of these funds was illegal", which to some extent contradicts Mr Clifton's own evidence that he understood this to be the case only after he had read the Trust Report. Dr Fisher concluded that Mr Clifton was suffering in 2018 from an Adjustment Disorder with Anxious and Depressed Mood in the context of financial stress, however no further report was tendered from Dr Fisher as to Mr Clifton's present state of health and Mr Clifton gave evidence that he has not undertaken any other mental health treatment since 2019. Dr Fisher's 2019 report does not assist us in determining whether Mr Clifton is presently fit to practise. We have also taken into account Mr Clifton's character referees but, given our findings about Mr Clifton's lack of insight and understanding, they alone cannot lead us to a different conclusion.
Lastly, in relation to present fitness, Mr Clifton's counsel referred us again to the decision in Batalha where the Tribunal considered it relevant when determining this issue to take into account that the Law Society had not taken any steps to curtail the practitioner's entitlement to practise from 2016, when the relevant conduct had taken place, until the hearing in 2020. The Law Society's response in these proceedings is not comparable. After it had received and considered the Trust Report, it made a detailed submission to the OLSC asking the Commissioner to immediately suspend Mr Clifton's practising certificate. The Commissioner declined to do so because he did not consider at that time that it was warranted in the public interest pending an investigation into the complaint and any resulting disciplinary action/proceedings. As soon as the Law Society became aware of the Commissioner's decision, it appointed a trust account supervisor to the Law Practice.
In her final oral submissions, Mr Clifton's counsel said that in addition to a reprimand, the Tribunal might also consider it appropriate to impose a restriction on Mr Clifton's entitlement to practise as a principal solicitor. However to permit Mr Clifton to continue to practise even on this restricted basis involves a finding that he is fit to practise, and for the reasons that we have set out above, we cannot make that finding.
We therefore propose to make an order under s 302(1)(f) of the Uniform Law that Mr Clifton's name be removed from the roll. We appreciate the consequences for Mr Clifton personally and for the Law Practice in making this order, but we do not believe that we have any alternative. As Handley JA in Dupal noted: "Sympathy for the appellant and for the tragedy that he has brought on himself and his family by his failure to live up to the high standards which this Court and the profession demand of solicitors cannot be allowed to deflect this Court from doing its duty."

Costs

Clause 23(1) of Schedule 5 to the Civil and Administrative Tribunal Act 2013 (NSW) provides that the Tribunal must make orders requiring a respondent lawyer whom it has found to have engaged in unsatisfactory professional conduct or professional misconduct to pay costs unless the Tribunal is satisfied that exceptional circumstances exist. Mr Clifton's counsel accepted that there are no exceptional circumstances to warrant displacing the usual rule that the Law Society be awarded its costs, and we will so order.

Orders

The Tribunal having found the Respondent guilty of professional misconduct: 1. Recommends that the name of the Respondent be removed from the roll of lawyers kept by the Supreme Court of New South Wales. 2. 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

Amendments 20 October 2021 - Replaced "$6,206" with "$6,208" at [3] and [9] 20 October 2021 - Added words "Mr Clifton said that" to the beginning of the fourth sentence at [50] 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: 20 October 2021

Legal Profession Act 2004(NSW)

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