Council of the Law Society of New South Wales v Dlakic [2018] NSWCATOD 155 | Case summary

Council of the Law Society of New South Wales v Dlakic [2018] NSWCATOD 155 | Case summary | Zoe

[3]

Commencement of proceedings in the Tribunal and interlocutory steps

On 14 October 2015, and after affording Mr Dlakic the opportunity to make submissions and taking the other requisite steps, the Council lodged an application for disciplinary findings and orders in the Tribunal alleging that Mr Dlakic was guilty of professional misconduct in a number of respects arising out of the complaints referred to above.
At the first directions hearing in the Tribunal on 9 December 2015, there was no appearance by or on behalf of Mr Dlakic and the proceedings were stood over for further directions. At the next directions hearing on 10 February 2016, Mr Dlakic was represented by the firm Horowitz & Bilinsky, the solicitors who had made submissions on his behalf to the Council. On 6 April 2016, amongst other directions, Mr Dlakic was directed to file and serve: 1. his reply to the application for disciplinary findings and orders by 29 April 2016; and 2. all material on which he sought to rely by 20 May 2016.
Mr Dlakic did not file a reply or any material in the Tribunal in accordance with these directions.
On 31 May 2016, a day before the next directions hearing in the proceedings, Mr Dlakic sent a facsimile message to the Tribunal which included an email which contained the following: "Urgent This matter is in court tomorrow [sic] I'm mentally unfit to do anything I'm not fit to give instructions Please read the report I delivered to law society on Friday"
The message included a copy of a report from Dr Nielssen, a psychiatrist, to Lexus Lawyers dated 24 May 2016. The role of Lexus Lawyers was not explained. It was not clear whether Lexus Lawyers were acting for Mr Dlakic in these proceedings or for some other purpose. Horowitz & Bilinsky had, on 31 May 2016, sent to the Tribunal a notice indicating that they had ceased to act for Mr Dlakic in the proceedings.
Dr Nielssen reported to Lexus Lawyers that he had seen Mr Dlakic on 3 occasions in 2014, twice in March 2015 and once in March 2016. He had also spoken to Mr Dlakic on the telephone on the morning of 24 May 2016. Dr Nielssen's diagnosis was "[m]ajor depressive illness". He went on to offer the following under the heading "Opinion": "The diagnosis of major depressive illness is made on the basis of the symptoms reported by Mr Dlakic, and aspects of his presentation at the time of the recent interview. He reported insomnia, anxiety symptoms, fatigue, impaired concentration and loss of confidence. He was anxious and his underlying mood was assessed to be depressed at the time of the initial and recent interviews. Mr Dlakic's state of mind arising from his psychiatric disorder has resulted in significant impairment in intellectual function, which in turn affects his ability to provide coherent and reliable instructions to his legal representatives. His condition is chronic and his prognosis is guarded, and I am unable to say when he might recover sufficiently to be fit to provide instructions."
At the directions hearing on 1 June 2016, Mr Dlakic did not appear but his correspondence was noted. The Tribunal stood the matter over for further directions on 3 August 2016 and noted: "if [Mr Dlakic] seeks a further adjournment he is to provide an up to date medical report by any treating medical practitioner in support of such application."
On that occasion, the Tribunal made arrangements for the Law Society to provide Mr Dlakic's residential address to the Registry so that a notice of the directions made could be sent to him. Unfortunately, owing to a typographical error in the address provided by the Law Society, the Registry sent the notice to that incorrect address.
On 3 August 2016, the Tribunal granted the Council leave to amend its application and set a timetable for service of the amended application, the Council's evidence, Mr Dlakic's reply and evidence, the Council's evidence in reply, and written submissions by the parties. The proceedings were listed for a compliance check on 5 October 2016 and were fixed for hearing on 7 and 8 November 2016.
Mr Dlakic did not file a reply or any evidence or other material in accordance with the directions made on 3 August 2016.
At the hearing on 5 October 2016, there was no appearance by or on behalf of Mr Dlakic. On that occasion, orders and directions were made confirming the hearing dates of 7 and 8 November 2016, granting liberty to relist on 3 days' notice and making arrangements for a copy of the orders and directions to be sent to Mr Dlakic.
At about 1:04 pm on Friday 4 November 2016, the Registry received an email from Mr Dlakic, copied to the Council's representative. The proceedings had been listed for a two day hearing to commence on the following Monday. The email included the following: "The purpose of this letter and its attachment is to seek adjournment due to legal incapacity. Professor Ian Coyle has already emailed to this email address his report dated 4 November 2016. I enclose a copy for your records. My treating specialist Dr Olav Neilssen has also provided me with a letter dated 4 November 2016 supporting my request for adjournment. I also enclose an earlier report of Dr Neilssen dated 24 May 2016, delivered to the Registry a few days later. I ask that the hearing be vacated in chambers today. The reports speak for themselves about my disabilities and inability to comprehend, focus understand instruct and do anything. These proceedings will extremely adversely affect my health. Please email me any reply."
Accompanying Mr Dlakic's email were reports from Professor Coyle, a forensic psychologist, and from Dr Nielssen. Professor Coyle's report, dated 4 November 2016, was addressed to the Divisional Registrar of the Tribunal and contained the following: "I have been retained to assess Mr Dlakic in connection with psychological status. An outline of my involvement in this matter this matter [sic] follows: - 1. Interviewed Mr Dlakic for 2.5 hours and administered psychometric testing on 6 October 2016. I subsequently held discussions with his lawyer at Carroll & O'Dea, Mr Tom Felizi. Carroll & O'Dea are acting for Mr Dlakic in connection with an insurance claim wherein it is alleged that he has no capacity to work in the foreseeable future because of his psychological status. 2. I received 478 pages of documentation regarding Mr Dlakic yesterday from Carroll& O'Dea. Before completing my report I need to read and I [sic] digest this material. I do not know precisely how much of this material is relevant to the matter being considered by NCAT but there is no doubt that a significant portion is relevant. 3. I shall be in position to have a report prepared to properly assist the tribunal by 14 November 2016. I am mindful of my obligations in accordance with the Code of Conduct for Expert Witnesses contained in Schedule 7 of the Uniform Civil Procedure Rules. I cannot undertake to have a report prepared earlier than this and fully comply with this Code of Conduct. 4. Mr Dlakic is suffering from a Major Depressive Disorder with Anxious Distress in accordance with the nosology of the Diagnostic and Statistical Manual for Mental Disorders 5th Edition (DSM 5). He was showing signs of decompensation when I assessed him. He is also voicing suicidal ideation. 5. In my opinion Mr Dlakic is not fit to represent himself. Nor, for that matter is he fit to attend court in any capacity whether self-represented or not. His capacity to understand, fully comprehend and effectively respond to the allegations raised by the Applicant this matter [sic] is compromised to the point of being negligible. I am gravely concerned that should the matter proceed, as is mooted, on 7 November 2016 Mr Dlakic will commit self-harm."
Carroll & O'Dea have never appeared for Mr Dlakic in the Tribunal.
Dr Nielssen's report of 4 November 2016, addressed "TO WHOM IT MAY CONCERN", was as follows: "AMIL DLAKIC Mr Dlakic has previously been a patient under my care for treatment of a longstanding depressive illness. I last saw him in March, 2016. However, he reports by telephone that his symptoms have not improved, he has not been able to return to any form of work, and that he is hence not in a fit state to represent himself in a court hearing. He informs me that he does not have legal representation. I am unable to offer an opinion as to when he might recover to be fit enough to appear in court."
On 4 November 2016, the Registry informed Mr Dlakic by email, copied to the Council's representative, that his adjournment application was not able to be considered on that day, and would need to be made at the commencement of the hearing, which was on the following Monday, 7 November 2016.
As at 4 November 2016 Mr Dlakic had not filed a reply or any evidence or other material upon which he sought to rely. Nor has he provided to the Tribunal a reply or any other material since that time.

[4]

The adjournment application and Mr Dlakic's participation in the hearing

At the commencement of the hearing on 7 November 2016, Ms Tronson of counsel appeared for the Council. Mr Dlakic was present and noted that he appeared as a courtesy to the Tribunal and requested that the proceedings be adjourned. He relied upon his email of 4 November 2016 and the two reports that accompanied that email. The Council indicated that it was ready to proceed and did not consent to an adjournment. It relied upon the affidavit of Ms Groenewegen of 4 November 2016.
Mr Dlakic indicated to the Tribunal that he was seeking an adjournment until mid or late 2017, that is, a period of about one year. When asked what would happen at the end of such a period if the matter was adjourned, he responded that he did not know.
After hearing submissions on the adjournment application, we decided to refuse the application. Oral reasons were given at that time.
At this stage, the issue of the appropriateness of a two stage hearing was raised and the Council indicated that it did not have a preference one way or the other. When the Tribunal enquired of Mr Dlakic whether he wished to have the Council's witnesses available for cross examination, he indicated that he did not know. Similarly, he did not know whether he was going to give evidence himself in the proceedings. Having noticed that Mr Dlakic did not appear to have any of the Council's evidence or submissions with him, the Tribunal made arrangements for the Council to provide copies to him in the hearing room. Mr Dlakic had time to consider his position over the morning adjournment.
The Tribunal took the morning adjournment at about 11:15am. On resuming at about 11:45am, Mr Dlakic was not present. Ms Tronson informed the Tribunal that, immediately after the Tribunal adjourned, Mr Dlakic left the hearing room without taking the copies of documents that had been provided to him. Mr Dlakic took no further part in the hearing.
We decided to proceed with the substantive hearing. It appeared to us that Mr Dlakic would suffer no irremediable prejudice if we heard the Council's evidence in chief and submissions in the time available on 7 and 8 November 2016, provided that we allowed sufficient time before making any decision so that, if he decided to do so, Mr Dlakic could: 1. lodge an appeal against the decision to refuse his adjournment application; and 2. obtain whatever medical treatment or legal assistance he might need so as to be in a position to apply to the Tribunal to reopen the proceedings and put forward his defence.
Further, in our view there was unlikely to be any prejudice to the public or clients of legal firms if our decision was delayed by allowing this time to Mr Dlakic, since he could not practise in the meantime, not having a current practising certificate.
As far as we are aware, no appeal was lodged against our decision to refuse Mr Dlakic's adjournment application. No application has been made by Mr Dlakic to reopen the proceedings or otherwise to allow him to present his defence.

[6]

Evidentiary matters

The Council relied upon the following affidavits (including annexures and exhibits): 1. the affidavit of Ms Groenewegen of 4 November 2016; 2. the affidavits of Ms Foord of 30 September 2015 and 22 August 2016; 3. the affidavit of Mr Dunlop of 30 September 2015, exhibiting his report of 8 October 2014.
In addition, the Council relied upon: 1. the applicant's tender bundle filed on 20 October 2016; 2. documents produced in response to summonses to the National Australia Bank and the Commonwealth Bank; 3. Johnston Vaughan's file in relation to the Kiranawati matter produced in response to a notice under s 660 of the LP Act.
In proceedings in exercise of a function of the Occupational Division for the purposes of the Uniform Law (which, as we have noted, relevantly includes the LP Act), the Tribunal is to observe the rules of evidence - cl 20 of Sch 5 to the NCAT Act, by virtue of s 17(3) of that Act. These are civil and not criminal proceedings. Consequently, in considering whether the Council's case has been proved on the balance of probabilities in accordance with s 140(1) of the Evidence Act 1995 (NSW), we are required by s 140(2) to take into account: "(a) the nature of the cause of action or defence, and (b) the nature of the subject-matter of the proceeding, and (c) the gravity of the matters alleged."
The requirement in s 140(2) can be seen as reflecting the principles stated in Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-362; [1938] HCA 34 - see for example Saba v Plumb [2018] NSWCA 60 at [83] and El-Wasfi v State of New South Wales [2017] NSWCA 332 at [113] and note, in the legal professional disciplinary context, Kumar v Legal Services Commissioner [2015] NSWCA 161 at [60].
In considering the evidence and making our findings of fact, we have taken into account the matters referred to in s 140(2) and borne in mind the relevant strictures in Briginshaw v Briginshaw. Our findings as to what relevantly occurred are set out in the following paragraphs.

[7]

Breach of s 254 of the LP Act

On about 16 February 2012, Ms Henderson retained Mr Dlakic, as principal of Johnston Vaughan, to act on her behalf to obtain a divorce. On that day, she paid $1,855 to the firm by EFTPOS. Receipt 7460 from "Johnston Vaughan Office Account", issued on that date and signed or initialled by Mr Dlakic, records that that amount was received by the firm for "Legal fees + filing fee + costs of family law Divorce matter". On 20 February 2012, $1,855 was credited to a cash management call account in the name of "Amil Dlakic" with the Commonwealth Bank, as disclosed in the account statement for the period 17 February to 16 May 2012. Mr Dunlop, in his report, identified this account as the firm's "General Office Account (2)". Nonetheless, the statement for this account for the period 17 February 2012 to 21 February 2012 (and later statements) indicates that payments out of the account were primarily for personal expenses at cafes, pharmacies, liquor stores and grocers. In any event, there is no doubt that this cash management account was not one of the firm's general trust accounts.
Section 254 of the LP Act relevantly provided: "(1) Subject to section 258A, as soon as practicable after receiving trust money, a law practice must deposit the money in a general trust account of the practice unless: (a) the practice has a written direction by an appropriate person to deal with it otherwise than by depositing it in the account, or (b) the money is controlled money, or (c) the money is transit money, or (d) the money is the subject of a power given to the practice or an associate of the practice to deal with the money for or on behalf of another person. Maximum penalty: 100 penalty units."
In s 243(1) "trust money" is relevantly defined as meaning: "money entrusted to a law practice in the course of or in connection with the provision of legal services by the practice, and includes: (a) money received by the practice on account of legal costs in advance of providing the services, and …"
For the purposes of the LP Act, "legal costs" means: "amounts that a person has been or may be charged by, or is or may become liable to pay to, a law practice for the provision of legal services including disbursements but not including interest."
We are satisfied that the sum of $1,855 was entrusted to Johnston Vaughan in connection with the provision of legal services by the practice and that it was received on account of "legal costs" in advance of services being provided. Thus, it was "trust money". There was nothing in the evidence to suggest that any of the exceptions in s 254(1) of the LP Act applied. Consequently, those funds were required to be deposited into a general trust account of the practice as soon as practicable after receipt. This did not occur. Consequently, Mr Dlakic was in breach of s 254(1) of the LP Act.
Our conclusion is confirmed by the fact that in its letter of 31 March 2015, Horowitz & Bilinsky Pty Ltd stated to the Law Society's Professional Standards Department, in relation to Ms Henderson's complaint, that: "[f]rom the information that you have provided, our client [Mr Dlakic] believes he … [b]reached Section 254 of the [LP Act]".

[8]

Failure to provide costs disclosure to Ms Henderson in breach of s 309

Ms Henderson made a statutory declaration that she did not receive from Mr Dlakic a costs disclosure on payment of the $1,855 on 16 February 2012, nor did she subsequently receive any information concerning her divorce proceedings. In addition, in response to a notice under s 660 of the LP Act, Mr Michael Vaughan, a solicitor who was the principal of Johnston Vaughan before and after Mr Dlakic, made a statutory declaration stating that he had searched the file register of that firm for files beginning with "H", opened from 21 June 2010 to 11 March 2015, and had found no file in the name of "Henderson". Nor was such a file found in the spent file register for the period from 1 June 2010 to 11 March 2015. Copies of relevant extracts from the registers were attached to the statutory declarations and were consistent with Mr Vaughan's evidence. Further, Mr Vaughan stated in a letter dated 22 April 2015 that: "[w]e have searched the electronic records for the firm, the office server and individual computers and found nothing further in relation to the matter relating to Christine Henderson."
Horowitz & Bilinsky in their letter of 13 March 2015 stated that Mr Dlakic denied failing to provide a costs disclosure to Ms Henderson. Nonetheless, in the same letter, it was stated that: "As a direct result of the impairment that he suffered as a result of his mental illness, our client failed to carry out Ms Henderson's instructions and until this matter was raised by Ms Henderson through you, he had little or no recollection of what had occurred."
Despite requests for Mr Dlakic to produce a copy of the costs disclosure in relation to Ms Henderson's matter, at no point was a copy of such a costs disclosure produced by Mr Dlakic or his solicitors during the Society's investigation.
Having regard to all of the material before us, the absence of any copy of a costs disclosure, and accepting that there is no apparent reason why Ms Henderson and Mr Vaughan would be untruthful, we are satisfied to the requisite standard that Mr Dlakic did not provide any document to Ms Henderson in relation to her family law matter that disclosed anything in relation to the costs that she may incur in respect of that matter.
Consequently, Mr Dlakic failed to comply with s 309 of the LP Act, which required a law practice to disclose, in accordance with Div 3 of Pt 3.2 of the LP Act (including in particular s 311), the various matters in relation to costs set out in s 309(1).

[9]

Failure to carry out Ms Henderson's instructions

From the evidence referred to above, in relation to Ms Henderson's matter, her complaint letter, her statutory declaration, and her affidavit sworn on 3 February 2016 we accept that Ms Henderson retained Mr Dlakic as principal of Johnston Vaughan, on about 16 February 2012, to act for her in effecting her divorce. Mr Dlakic did not open a file in respect of this matter. Ms Henderson made inquiries to Johnston Vaughan about her matter in September 2012, on at least one occasion in 2013, and in June 2014. On about 15 June 2014, Ms Henderson attended Johnston Vaughan's office and spoke with Mr Dlakic and his secretary and enquired as to why she had not received a decree absolute. She was promised that action would be taken. Nonetheless, by November 2014, a divorce had not been obtained. Indeed, as at December 2014, Ms Henderson's former husband had not been contacted at all in relation to the family law proceedings, even though Ms Henderson had provided relevant contact details to Mr Dlakic. This was confirmed by a statutory declaration from Ms Henderson's former husband. There is no material to suggest that Mr Dlakic took any steps to carry out Ms Henderson's instructions.
We note that the accounts of Ms Henderson's actions, in following up on her matter with Mr Dlakic, differ slightly between her complaint letter and her affidavit. Nonetheless, we consider that nothing turns on these discrepancies.
In addition, Mr Dlakic's solicitors, Horowitz & Bilinsky, wrote to the Law Society on 13 March 2015 and stated: ""[f]rom the information that you have provided, our client [Mr Dlakic] … [a]ccepts that he failed to carry out Ms Henderson's instructions in circumstances where he was suffering from an undiagnosed depressive illness."
Having regard to all of the material, we are satisfied to the requisite standard that Mr Dlakic failed to carry out Ms Henderson's instructions in relation to her family law matter.
It also appears to us that Mr Dlakic's failure to open any file in respect of Ms Henderson's matter, or to take any steps to carry out the instructions received from her, breached rr 1 and 13 of the Revised Professional Conduct and Practice Rules 1995 (NSW) (the 1995 Rules), which applied to solicitors such as Mr Dlakic until 31 December 2013. Rule 1 required that a "practitioner must act honestly, fairly, and with competence and diligence in the service of a client". On our findings, Mr Dlakic failed to act with competence and diligence in the service of Ms Henderson.
Rule 13 required a practitioner: "must, as soon as practicable after receiving instructions to provide legal services to a person … record in a file assigned for the retention of documents and information on behalf of that person [certain information]".
Mr Dlakic failed to create such a file or record any information in that file.
The 1995 Rules were replaced by the New South Wales Professional Conduct and Practice Rules 2013 (the 2013 Rules) on 1 January 2014. In so far as Mr Dlakic failed to open or maintain a file in respect of Ms Henderson's matter, give her advice concerning that matter or to carry out her instructions after 1 January 2014, Mr Dlakic also breached the following provisions of the 2013 Rules: 1. r 7.1, which required a solicitor to "provide clear and timely advice to assist a client to understand legal issues and to make informed choices about action to be taken during the course of the matter …"; 2. r 8.1, which required a solicitor to "follow a client's lawful, proper and competent instructions"; 3. r 48.1, which required a practitioner "as soon as practicable after receiving instructions to provide legal services to a person … [to] record in a file assigned for the retention of documents and information on behalf of that person [certain information]".

[10]

Misappropriation of $1,855.00

We have already made findings above in relation to Mr Dlakic's receipt and banking of $1,855 in trust funds into a cash management account in Mr Dlakic's name, and findings that withdrawals from this account were primarily for personal expenses. There is no evidence that those funds were ever deposited into one of the firm's trust accounts. In addition, notwithstanding that Ms Henderson had paid $1,855 on account of legal costs in her matter, Mr Dlakic did not perform any services or incur costs in respect of that matter.
In the letter of 13 March 2015 from Horowitz & Bilinsky to the Law Society in relation to Ms Henderson's matter, after noting that Mr Dlakic accepted that he failed to carry out Ms Henderson's instructions, the solicitors stated: "Our client has taken steps to refund Mrs Henderson the monies that were received."
No documentation to support that assertion was provided at that time or thereafter. Nonetheless, the assertion should, in our view, be seen as involving an acknowledgement on Mr Dlakic's part that he should not have done what he did with the money, and that he was legally and morally bound to repay it. None of the correspondence from Mr Dlakic's solicitors, nor any other information before us, suggests that Mr Dlakic was not aware of his obligations as a solicitor in relation to trust money or the proper conduct of a legal practice. His being qualified and admitted as a legal practitioner and his experience since being admitted in 2000 provides a sufficient foundation to find, on the balance of probabilities, that he was aware of these obligations.
On 16 April 2015, Ms Henderson made a statutory declaration in which she stated: "I have not received from Mr Dlakic any correspondence to refund the monies I paid to him …".
There is no reason not to accept Ms Henderson's evidence. In the absence of any documentation indicating that the amount of $1,855 has been refunded, we find that the sum has not been repaid to Ms Henderson.
The concept of "misappropriation" in the context of legal disciplinary proceedings has been helpfully reviewed by the former Administrative Decisions Tribunal in Council of the Law Society of NSW v Ross [2013] NSWADT 106 at [41]-[68]. The base meaning of the word is "wrongful conversion" - The Council of the Law Society of NSW v Doherty [2010] NSWCA 177 at [41]. As the Tribunal held in Law Society of NSW v Shehadie [2016] NSWCATOD 46 at [35]: "It is accepted that the legal meaning of misappropriation carries the connotation of a wrongful, dishonest use. Further in disciplinary proceedings of the present kind, it is accepted that the prosecutor must show that the respondent knowingly engaged in the conduct of concern, and that the conduct was dishonest. There has been debate as to whether the prosecutor must show that the respondent knew that the conduct in which he or she had intentionally engaged was dishonest, or is it enough to show that regardless of his or her belief in that regard, it would be regarded as dishonest, viewed objectively."
In determining whether conduct is relevantly dishonest, the approach to be adopted is that to which the High Court referred in Peters v The Queen (1998) 192 CLR 493 at [18]; [1998] HCA 7, namely (1) identify the knowledge, belief or intent, which is said to render the acts dishonest; (2) determine whether the respondent subjectively had that knowledge, belief or intent; and (3) determine whether, on that account, the acts were objectively dishonest according to the standards of ordinary and decent (that is, reasonable and honest) people - see Brereton v Legal Services Commissioner [2010] VSC 37 as applied by the Tribunal in Shehadie at [37].
As to the remaining issue of the respondent's knowledge, the Tribunal has held in a number of cases that misappropriation may be found without requiring proof that the practitioner knew the conduct was dishonest - Law Society of NSW v Berger (No. 1) [2017] NSWCATOD 137 at [253].
Finally, we note the comment of the Court of Appeal in Kumar v Legal Services Commissioner [2015] NSWCA 161 at [61]: "Lest there be any doubt about it, even a temporary use by [the practitioner] of his client's funds without prior approval amounts to serious and deliberate dishonesty. That is precisely the sort of conduct which is antithetical to the trust and confidence which is required by a solicitor with custody of his or her clients' money."
On the basis of all the material concerning Ms Henderson's matter, and specifically the money paid to Mr Dlakic in respect of that matter, we are satisfied on the balance of probabilities to the requisite standard that: 1. the $1,855 was entrusted to Mr Dlakic, as principal of Johnston Vaughan, in connection with the provision of legal services by the practice, and that it was received on account of "legal costs" in advance of services being provided, and Mr Dlakic was aware of these matters; 2. the $1,855 was "trust money" within the meaning of the LP Act and should, as soon as practicable after receipt, have been deposited into the firm's trust account, and Mr Dlakic was aware of this; 3. by depositing the $1,855 into the firm's general account, leaving it there, and not doing any work in respect of Ms Henderson's matter or incurring any costs or expenses in respect of the matter, Mr Dlakic was using trust money, or allowing it to be used, for a purpose other than that for which it was entrusted, and Mr Dlakic was aware of this; 4. Mr Dlakic's actions in this regard were deliberate, in the sense of being done with knowledge of what he was doing, and were not the result of mistake or oversight; 5. Mr Dlakic has not repaid the funds to Ms Henderson; 6. Mr Dlakic's use of the funds was wrongful and amounted to conversion of those funds, and Mr Dlakic had knowledge of the relevant facts rendering his dealing with the funds wrongful; and 7. reasonable and honest people would regard Mr Dlakic's conduct in respect of the funds as objectively dishonest.
Accordingly, we conclude that Mr Dlakic misappropriated the $1,855 paid by Ms Henderson.

[11]

Characterisation of conduct in relation to Ms Henderson's matter

For the purposes of the LP Act, unsatisfactory professional conduct and professional misconduct are defined, by way of inclusive definitions, in ss 496 and 497 as follows: "496 Unsatisfactory professional conduct For the purposes of this Act: unsatisfactory professional conduct includes conduct of an Australian legal practitioner occurring in connection with the practice of law that falls 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. 497 Professional misconduct (1) For the purposes of this Act: professional misconduct includes: (a) unsatisfactory professional conduct of an Australian legal practitioner, where the conduct involves a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence, and (b) conduct of an Australian legal practitioner whether occurring in connection with the practice of law or occurring otherwise than in connection with the practice of law that would, if established, justify a finding that the practitioner is not a fit and proper person to engage in legal practice. (2) For finding that an Australian legal practitioner is not a fit and proper person to engage in legal practice as mentioned in subsection (1), regard may be had to the matters that would be considered under section 25 or 42 if the practitioner were an applicant for admission to the legal profession under this Act or for the grant or renewal of a local practising certificate and any other relevant matters."
Section 498 provides, in part: "(1) Without limiting section 496 or 497, the following conduct is capable of being unsatisfactory professional conduct or professional misconduct: (a) conduct consisting of a contravention of this Act, the regulations or the legal profession rules, … (2) Conduct of a person consisting of a contravention referred to in subsection (1) (a) is capable of being unsatisfactory professional conduct or professional misconduct whether or not the person is convicted of an offence in relation to the contravention."
In addition, we note that, under s 317(7) of the LP Act, failure to comply with Div 3 of Pt 3.2 of the LP Act, which includes s 309, is capable of being unsatisfactory professional conduct or professional misconduct on the part of any Australian legal practitioner involved in the failure.
Finally, we note that the inclusive definition in s 497 is not to be read as excluding the common law meaning of "professional misconduct", which was limited to "conduct which would reasonably be regarded as disgraceful or dishonourable by solicitors of good repute and competency" - Prothonotary v Comeskey [2018] NSWCA 18 at [13] citing Re Veron; Ex parte Law Society of New South Wales (1966) 84 WN (Pt 1) (NSW) 136 at 143 (Herron CJ, Sugerman and McLelland JJA), quoting Viscount Maugham in Myers v Elman [1940] AC 282 at 288-289.
Having regard to those principles, we regard the breaches of ss 254 and 309 of the LP Act, taken alone, as unsatisfactory professional conduct. We have no doubt that such conduct occurred in connection with Mr Dlakic's practice of law and fell 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.
Failure to carry out Ms Henderson's instructions or to take any steps to open a file or provide any services in relation to Ms Henderson's matter, as found above, should, in our view, even if considered alone, be characterised as professional misconduct. It involved a failure to comply with the 1995 Rules and 2013 Rules, as applicable. The conduct lasted over the whole period from February 2012 to when Mr Dlakic's practising certificate was cancelled. It was conduct that involved a substantial and consistent failure to reach or maintain a reasonable standard of competence and diligence. As the Tribunal held in Law Society of New South Wales v CQS [2016] NSWCATOD 100 at [21]: "The failures of attendance and preparation [in that case] involve breaches of the most basic kind of appropriate standards of competence and diligence."
Mr Dlakic's misappropriation of the $1,855, considered alone, was similarly conduct that involved breaches of the LP Act and a substantial failure to reach or maintain a reasonable standard of competence and diligence. In addition, it was conduct that, in our view, would reasonably be regarded as disgraceful or dishonourable by solicitors of good repute and competency. Thus, this aspect of Mr Dlakic's conduct should also be found to be professional misconduct.
Even if we are wrong in our characterisation of the failure to carry out instructions and the misappropriation, taken by themselves, and they should only be characterised as unsatisfactory professional conduct, we believe that considered together and with the breaches of ss 254 and 309, they amount to professional misconduct. Viewed as a whole, Mr Dlakic's conduct in relation to Ms Henderson's matter involved a substantial and consistent failure to reach or maintain a reasonable standard of competence and diligence. In addition, it would properly be regarded as disgraceful or dishonourable by solicitors of good repute and competency.
We should also note here that Mr Dlakic raised, through his solicitors' letter of 13 March 2015, his mental health as a factor affecting his conduct in relation to Ms Henderson's matter. The question of the relevance of mental health when determining whether a practitioner has engaged in unsatisfactory professional conduct or professional misconduct has been considered by the Supreme Court in BRJ v Council of the New South Wales Bar Association [2016] NSWSC 146. In that case, Adamson J said at [98] to [102]: "98 Each case must turn on its facts and the application of the statutory words. In endeavouring to draw some principles from these decisions, I am conscious of the warning given in New South Wales Bar Association v Cummins by Spigelman CJ (Mason P and Handley JA agreeing) who said: '[50] It has not generally been useful or necessary to distinguish the terminology of "professional misconduct" from other phrases such as a "fit and proper person", "good fame and character", "unprofessional conduct", "unsatisfactory professional conduct" etc. Statutory formulations differ from one jurisdiction to another. Some of the terminology, originally based on statute, has been adopted in cases decided under the inherent jurisdiction. In the exercise of this jurisdiction, it is not appropriate that the Court should indulge in the splitting of fine hairs on terminology. [51] The words "professional misconduct" are broad and general words. Their meaning may vary from one context to another.' 99 Having regard to the importance of context and the need to avoid pedantry (both of which are emphasised in the passage set out above), the following principles can be derived from the wording of the 2004 Act and the decisions referred to above. 100 The language of the definition of "unsatisfactory professional conduct" is apt to connote that the test is an objective one. In these circumstances the objective conduct, rather than the professional culpability of the practitioner, is of prime, if not sole relevance. Therefore, generally speaking, any mental affliction which the practitioner may suffer is irrelevant to the characterisation of conduct as unsatisfactory professional conduct. However, where the conduct contains a mental element (such as in Kay where the allegation in the complaint was that he had "wilfully" breached s 255 of the 2004 Act), the test is not entirely objective, since a mental condition may affect the question whether conduct is "wilful". 101 Where the question is whether certain conduct amounts to "professional misconduct", the relevance of a mental condition will depend on the species of professional misconduct. For example, where the conduct involves a substantial or consistent failure to reach or maintain a reasonable standard of competence and diligence (in s 497(1)(a)), the practitioner's mental condition may not be relevant. 102 The mental condition of a practitioner, if it is relevant to the conduct, will generally be relevant to the question what orders ought be made as a consequence of a finding of professional misconduct or unsatisfactory professional conduct."
Having regard to these principles, the nature of conduct under review in these proceedings and the very limited nature of the evidence concerning Mr Dlakic's mental health during the relevant period, we do not believe that there is any sufficient reason to characterise Mr Dlakic's conduct in respect of Ms Henderson's matter differently from what is set out above.

[13]

Failure to provide costs disclosure to Ms Kiranawati in breach of s 309

On 16 March 2015, a solicitor with the Law Society wrote a letter to Mr Vaughan noting that she had reviewed Ms Kiranawati's file but could not locate any bills issued to her or a copy of the costs agreement. She asked Mr Vaughan to: 1. provide a copy of the costs agreement and costs estimate provided to Ms Kiranawati; or 2. if there were no such documents, confirm that in writing.
After some further correspondence in which the solicitor from the Law Society specifically asked for confirmation that Mr Vaughan had also searched for electronic copies of documents, Mr Vaughan replied on 17 April 2015 stating: "…we have turned ourselves inside out looking for the requested material. We have asked Mr Dlakic to provide the material but we have not received anything from him. We have looked everywhere, made extensive searches but have found nothing."
During the period between 17 February 2015 and 7 May 2015, there was correspondence between the Law Society and Mr Dlakic's then solicitors, Horowitz & Bilinsky, about obtaining a copy of any costs disclosure, costs agreement and bills in relation to Ms Kiranawati's matter. In a letter dated 12 March 2015, Mr Dlakic's solicitors stated, among other things, that he denied failing to provide a costs disclosure to Ms Kiranawati. In their letter of 14 April 2015, Horowitz & Bilinsky wrote that they were: "instructed as follows:- 1. Our client believes there is a copy of the Costs Agreement on one of the computers that was used at the time. He needs access to the computers to find that copy but is certain a Costs Agreement was prepared and given to Ms Enny Kiranawati. 2. Likewise he believes a bill was prepared and instructions in relation to the disbursements that were given. Once our client checks the computers, he will respond further."
Notwithstanding those instructions, neither Horowtiz & Bilinsky nor Mr Dlakic has ever produced a copy of any costs disclosure, costs agreement or bill in respect of Ms Kiranawati's matter.
We have reviewed the certified copy of Ms Kiranawati's file, produced by Johnston Vaughan, and there is no costs disclosure, costs agreement, nor any bill on that file.
In the circumstances, we are satisfied to the requisite standard that Mr Dlakic did not provide to Ms Kiranawati written disclosure of the matters required under s 309 of the LP Act in accordance with Div 3 of Pt 3.2.

[14]

Breach of s 254 of the LP Act

On 17 April 2014, Ms Kiranawati paid to Johnston Vaughan $410 in cash, and was issued with an office account receipt stating that the amount had been paid for "family law Initiating Application & Financial Statement and Affidavit". On that same day, Mr Dlakic filed in the Federal Circuit Court of Australia the Initiating Application seeking interim and final orders. On the file was a receipt from the Federal Circuit Court noting that Johnston Vaughan, solicitors, had paid $305 for the Application for Final Orders and $105 for the Application for Interim Orders, totalling $410. These receipts are in the section of the file labelled "Accounts". No other documents were in that section of the file.
On 16 June 2014, consent orders, signed by the parties' solicitors, were filed in court in the Federal Circuit Court. Under orders 1 and 2: 1. the parties were to take all necessary steps to sell their real property located in Beverly Hills in New South Wales; 2. the net balance of the proceeds was to be divided between the parties, 70% to Ms Kiranawati and 30% to Mr Sigar.
In order 4, it was ordered that: "CMLayers [who acted for Mr Sigar] be instructed as the conveyancing solicitor to act on behalf of [Ms Kiranawati] and [Mr Sigar] jointly for the sale of the real property situated at … Beverly Hills, New South Wales …".
On the Johnston Vaughan file is: 1. an undated copy of a costs agreement between CMLawyers and Ms Kiranawati, signed by her, in relation to the conveyancing for the sale of the Beverly Hills property; 2. the letter from CMLawyers, dated 18 June 2014, under cover of which the costs agreement was sent.
On 8 September 2014, Mr Dlakic wrote to CMLawyers as follows: "RE: KIRANAWATI AND SIGAR We refer to the above matter and recent correspondence. We note settlement is to take place shortly and we enclose cheque directions for you to process. Please draw bank cheques as per the cheque directions."
The enclosed directions specified two cheques as follows: "1. Johnson Vaughan Solicitors $30,000.00 2. Enny Kiranawati, Balance."
On the file, there was no document signed by Ms Kiranawati authorising the payment of $30,000 to Johnson Vaughan nor was there any documentation indicating how the figure of $30,000 was calculated or justified. This is consistent with what Ms Kiranawati said in her complaint form: that Mr Dlakic "took his fees from my ex-husband lawyer who's hold for my property settlement without my Authorization or without I am knowing".
On 11 September 2014, CMLawyers replied to Mr Dlakic's letter of 8 September 2014. They noted that the settlement was scheduled for 22 September 2014 and: "All net proceeds of sale will be deposited into our firms' trust account pending finalisation of accounts before distribution between our respective clients in accordance with the Consent Orders granted 16 June 2014. We shall submit the final accounts to you for your client's confirmation in due course."
On the same day, Mr Dlakic responded to CMLawyers in the following terms: "We refer to the above matter and your facsimile of even date. We note pursuant to Orders our client, on settlement, must have settlement monies, we will attend settlement to collect our client's cheque together with our firms cheque in the sum of $30,000.00. We will not wait for a distribution of the settlement monies and note that these things are done within the body of the settlement figures. Should on settlement our client and this firms cheque not be ready we propose to relist the matter immediately due to your client's noncompliance. We note our client has no funds and is reliant upon these monies at settlement, if you have draft accounts please submit them to us now. Please have cheques ready at settlement."
On 12 September 2014, CMLawyers responded to Mr Dlakic's letter of 11 September and rejected his assertions concerning the effect of the Orders. Because the deposit was held by the real estate agent, CMLawyers proposed finalising the distribution of the net proceeds of sale within seven days after settlement.
On 16 September 2014, Mr Dlakic wrote again to CMLawyers as follows: "We refer to the above matter and note your letter of the 12th September 2014. We confirm settlement of this matter on the 22nd September 2014. Our client needs funds urgently and this firm is owed money in this case, we note you want to distribute the whole of the trust account monies once they are all received and we agree with that course on the following basis:- 1. You pay by way of bank cheque to Enny Kiranawati the sum of $30,000. 2. You pay by way of bank cheque to Johnston Vaughan Solicitors the sum of $30,000.)) Obviously the $60,000 will be taken off our family law entitlement which far exceed the sum above. Please advise the time and venue of the settlement on the 22nd September 2014 so that we can have our agent attend to collect the abovementioned cheques."
There was further correspondence from Mr Dlakic requiring that the two cheques for $30,000 be available on settlement.
The final version of the Statement of Account and Settlement Statement, provided by CMLawyers under cover of their letter of 5 November 2014 to Johnston Vaughan, records, among other things, that the two bank cheques for $30,000 were provided, as Mr Dlakic demanded, on settlement. We accept that this record is accurate.
From the material before us, we are satisfied that Mr Dlakic received a cheque in favour of Johnston Vaughan for $30,000, on about 22 September 2014, that was money entrusted to the practice in connection with the provision of legal services by the practice to Ms Kiranawati. As such, it was "trust money" as defined in s 243(1) of the LP Act.
The Commonwealth Bank statement for the period 1 September 2014 to 15 October 2014 for the business transaction account XXXX0354 in the name of Johnston Vaughan (which Mr Dunlop's report describes as "General Office Account (1)") records: 1. the account was overdrawn by small amounts (typically only hundreds of dollars) from time to time and an "overdrawing approval fee" of $10 was charged when this occurred and, in particular, the account was overdrawn between 20 and 25 September 2014, except on 23 September as a result of the deposit of the $30,000; 2. throughout the period, small deposits (typically only hundreds of dollars) were made from time to time, described in each case as a "top up"; 3. there was a deposit of $30,000 into that account on 23 September 2014; 4. there was a withdrawal of $30,000 on 24 September 2014, described as "Transfer to xx3621 NetBank top up".
As noted above, the account numbered XXXX3621 with the Commonwealth Bank was a cash management call account in the name of Amil Dlakic. Mr Dunlop described it as "General Office Account (2)". The statement for that account for the period 1 September 2014 to 16 November 2014 records: 1. this account was in credit throughout the period with balances ranging from $74,456.32 to $11,718.36; 2. throughout the period, there were many debits from the account and a substantial majority, if not more, appeared to be for household or personal payments, for example, transactions at Woolworths, restaurants and cafes, pharmacies, a hospital, liquor shops, a school and butchers; 3. there was a deposit of $30,000 into that account on 24 September 2014, described as "Transfer from xx0354 Netbank top up"; and 4. there was no withdrawal of $30,000 from that account.
The Commonwealth Bank statements, for the period 1 September 2014 to 18 December 2014, for Solicitors Trust Account (NSW) XXXX0370 in the name of Johnston Vaughan Law Practice Trust Account (which Mr Dunlop describes as General Trust Account (2)) record: 1. throughout that period there was a credit balance in that account of $123.84; and 2. there were no deposits or withdrawals from that account.
The National Australia Bank statements, for the period 30 August 2014 to 30 October 2014, for Statutory Trust Account XXXXX8807 in the name of Johnston Vaughan Solicitors Pty Limited Law Practice Trust Account (which Mr Dunlop describes as General Trust Account (1)) record: 1. throughout the period there was credit balance between $512,863.76 and $1,116,586.60; 2. there was no deposit of $30,000 or any other sum in the period from 22 September 2014 to 2 October 2014; and 3. there was no deposit of $30,000 at any other time during that period.
There was nothing before us to suggest that there were any other relevant trust accounts operated by Johnston Vaughan during September 2014.
The Law Society wrote to Mr Dlakic's solicitors, Horowitz & Bilinsky, on 17 February and 11 March 2015, concerning Ms Kiranawati's complaint. After noting that Mr Dlakic had been receiving treatment for depression, and that he had been hospitalised, the solicitors wrote: "In relation to the complaints set out in your letter of 17 February 2015, our client:- 1. Denies breaching Section 254 of the [LP Act]; …"
By letter dated 14 April 2015, Horowitz & Bilinsky informed the Law Society that Mr Dlakic was still receiving treatment but they had managed to speak to him and were instructed that: "… 2. Likewise he believes a bill was prepared and instructions in relation the disbursements that were given. Once our client checks the computers, he will respond further."
On 4 May 2015, the Law Society wrote to Horowitz & Bilinsky, referring to the correspondence concerning Ms Kiranawati's complaint. The letter included the following: "I note that no further material has been produced by Mr Vaughan and nor has any further material been produced by your client. Mr Vaughan states in his correspondence that his searches have extended to electronic searches for the costs agreement and bills sought."
No material has been provided to the Law Society or the Tribunal by or on behalf of Mr Dlakic that would establish that any bill of costs, in the sum of $30,000 or any other amount, had ever been prepared or sent in Ms Kiranawati's matter. Similarly, there was no material to support a finding that Ms Kiranawati provided any instructions to Mr Dlakic to obtain payment of Johnston Vaughan's fees in her matter by having CMLawyers pay directly to the firm part of the sum due to Ms Kiranawati under the consent orders. Indeed, Ms Kiranawati's statement in her complaint to the Office of the Legal Services Commissioner, quoted above, is to the contrary.
In the circumstances, we are satisfied to the requisite standard that there was no basis upon which Mr Dlakic, or Johnston Vaughan, was entitled to receive the cheque for $30,000 in favour of the firm on 22 September 2014 and not treat it as trust money to be dealt with in accordance with s 254 of the LP Act. In particular, there was no written direction from Ms Kiranawati that the cheque for $30,000 was to be dealt with otherwise than by depositing it into the firm's general trust account.
On the basis of the material and findings set out above, we are also satisfied to the requisite standard that Mr Dlakic did not, as soon as practicable after receiving that cheque deposit it in a general trust account of the practice and, consequently, he breached s 254(1) of the LP Act.

[15]

Misappropriation of $30,000.00

We have set out the principles in relation to misappropriation above. Likewise, we have made findings as to what occurred in relation to the $30,000 received by Mr Dlakic out of the funds due to Ms Kiranawati on settlement of the sale of the property at Beverly Hills, under the family law consent orders. As to Mr Dlakic's state of knowledge, we are prepared to infer this from the absence of material to support his denials, his training, qualifications and experience as a solicitor and principal of a firm and his failure to defend, or lead evidence to the contrary of, this aspect of Ms Kiranawati's complaint. Thus, we are satisfied to the requisite standard as follows: 1. Mr Dlakic was not authorised to receive the $30,000 and use it to discharge Ms Kiranawati's liability for fees due to the firm in relation to her matter as there was no costs agreement, no bill of costs and no written instruction from Ms Kiranawati directing that the $30,000 be dealt with in this way, and Mr Dlakic was aware of this; 2. the $30,000 was "trust money" within the meaning of the LP Act and should, as soon as practicable after receipt, have been deposited into the firm's trust account, and Mr Dlakic was aware of this; 3. Mr Dlakic deposited the $30,000, eventually, into the cash management account in his name, which was used, at least to a substantial extent, to fund personal expenses, and Mr Dlakic was aware of this; 4. Mr Dlakic's actions in this regard were deliberate, in the sense of being done with knowledge of what he was doing, and not the result of mistake or oversight; 5. Mr Dlakic's use of the funds was wrongful and amounted to conversion of those funds, and Mr Dlakic had knowledge of the relevant facts rendering his dealing with the funds wrongful; and 6. reasonable and honest people would regard Mr Dlakic's conduct in respect of the $30,000 as objectively dishonest.
For these reasons, we find the allegation of misappropriation of the $30,000 in Ms Kiranawati's matter has been proved to the requisite standard.

[16]

Engaged in legal practice when not holding a practising certificate

The affidavit of Sara Borg, sworn on 12 November 2014, formed part of the Applicant's Tender Bundle. Ms Borg was a Regulation and Compliance Team Leader at the Law Society and one of her tasks is to manage a team that processes applications by solicitors to renew their practising certificates. She gave evidence concerning Mr Dlakic's application to renew his certificate in mid-2014. Her evidence is inherently credible and we accept it.
Accordingly, we are satisfied that on 20 June 2014 the Law Society received an application dated 18 June 2014 from Mr Dlakic for renewal of his unrestricted principal practising certificate. Before issuing a renewed certificate of this type, the Society ensures that the solicitor has obtained appropriate professional indemnity insurance. Each day, Lawcover transmits to the Society details of solicitors who have obtained appropriate professional indemnity insurance. At no time, before 12 November 2014, did the Society receive notification that Mr Dlakic had arranged appropriate insurance to support his application for renewal of his certificate. On that basis, Mr Dlakic's unrestricted principal practising certificate had not been renewed, nor was there a refusal to renew it, as at 30 October 2014.
Section 43 of the LP Act deals with the duration of practising certificates and provides: "(1) A local practising certificate granted under this Act is in force from the date specified in it until the end of the financial year in which it is granted, unless the certificate is sooner suspended or cancelled. (2) A local practising certificate renewed under this Act is in force until the end of the financial year following its previous period of currency, unless the certificate is sooner suspended or cancelled. (3) If an application for the renewal of a local practising certificate as a solicitor has been properly made as required by this Act but has not been determined by the Law Society Council by the following 1 July, the certificate: (a) continues in force on and from that 1 July until the Law Society Council renews or refuses to renew the certificate or the holder withdraws the application for renewal, unless the certificate is sooner cancelled or suspended, and (b) if renewed, is taken to have been renewed on and from that 1 July."
On 30 October 2014 the Council resolved, in part, as follows: "FURTHER RESOLVED that, pursuant to the provisions of section 548 of the Legal Profession Act, 2004 (the Act) the Council consider that it is necessary in the public interest to immediately suspend the local practising certificate of Amil Dlakic (MN:34208) (the Solicitor) on the ground of the seriousness of the conduct in respect of which a complaint has been made and determines to immediately suspend the local Practising Certificate of the Solicitor".
At the same time, the Council decided that external intervention with respect to Mr Dlakic's law practice was warranted and appointed a manager to the practice under s 623(2) of the LP Act.
Notices concerning the suspension of his practising certificate and the appointment of the manager were sent to Mr Dlakic.
It does not appear that Mr Dlakic contested that the resolutions had been passed or the notices given. On 4 November 2014, Mr Dlakic swore an affidavit in support of his application to the Supreme Court in proceedings 2014/325141, seeking to be allowed to continue to practice. That affidavit referred to the Council's resolutions on 30 October 2014 suspending his certificate and appointing a manager, and annexed copies of the notices. It does not appear that those proceedings were pursued.
After 30 October 2014, Mr Dlakic did not hold a current practising certificate issued by the Law Society. It was not suggested that Mr Dlakic has ever held an interstate practising certificate. In January 2015, Mr Dlakic made an application to the Law Society for a new practising certificate. On his application form, dated 19 January 2015, Mr Dlakic ticked the "No" box in response to item 7 in section C which asks "Do you hold a current practising certificate in another jurisdiction as at the date of this application".
By operation of s 43(3)(a) of the LP Act, Mr Dlakic's unrestricted principal practising certificate continued in force on and from 1 July 2014 until it was suspended on 30 October 2014.
As a consequence, from 1 November 2014 Mr Dlakic was not an "Australian legal practitioner" for the purposes of the LP Act. That expression is defined in s 6(a) as: "an Australian lawyer who holds a current local practising certificate or a current interstate practising certificate".
Section 14(1) of the LP Act provides: "(1) A person must not engage in legal practice in this jurisdiction unless the person is an Australian legal practitioner. Maximum penalty: 100 penalty units."
The exceptions found in s 14(2) and (3) to the prohibition in s 14(1) are not relevant in the present matter.
Section 15 of the LP Act provides, in part: "(1) A person must not represent … that the person is entitled to engage in legal practice unless the person is an Australian legal practitioner. Maximum penalty: 100 penalty units. … (3) Subsections (1) and (2) do not apply to a representation or advertisement about being entitled to engage in legal practice of a kind referred to in section 14 (2) (Prohibition on engaging in legal practice when not entitled) by a person so entitled. (4) A reference in this section to a person: (a) representing … that the person is entitled to engage in legal practice, …, includes a reference to the person doing anything that states or implies that the person … is entitled to engage in legal practice."
On Johnston Vaughan's file in relation to Ms Kiranawati's matter, there are two letters addressed to CMLawyers, one dated 7 November 2014 and one dated 11 November 2014.
Both of these letters are headed: "JOHNSTON VAUGHAN SOLICITORS AND ATTORNEYS Amil Dlakic LL. B. ...".
Additionally, each letter refers to "our client", in relation to Ms Kiranawati, and ends with: "Yours faithfully JOHNSTON VAUGHAN Amil Dlakic Solicitor".
A record of the letter of 11 November 2014 having been successfully sent by facsimile at 10:57am to CMLawyers' facsimile number is also on the Johnston Vaughan file.
Those letters, in our view, contain representations, express or implied, that: 1. "Amil Dlakic LL. B." is a lawyer entitled to engage in practice as a solicitor under the name "Johnston Vaughan"; and 2. "Amil Dlakic" is a "Solicitor" entitled to engage in legal practice, including having clients and receiving, and acting in accordance with, instructions from clients in relation to existing legal proceedings.
Further, by sending these letters, Mr Dlakic can be seen to have engaged in legal practice in New South Wales.
Having regard to the matters and circumstances set out above, we are satisfied to the requisite standard that Mr Dlakic contravened the prohibitions in ss 14(1) and 15(1) by writing and sending the letters of 7 and 11 November 2014 when he did not hold a current practising certificate and, as a result, was not an Australian legal practitioner.
To the extent that the Council also alleged that Mr Dlakic had contravened s 15(1) by describing himself as a "legal practitioner" in his affidavit sworn on 4 November 2014 in the Supreme Court proceedings, we do not accept that his conduct should be found to breach that provision. The purpose of the proceedings and the affidavit was to seek orders from the Supreme Court that would have the effect of reinstating his entitlement to engage in legal practice. The suspension of his practising certificate was expressly referred to in his affidavit and a copy of the notice was annexed. Given the context and the content of the affidavit, read as a whole, Mr Dlakic was not representing or advertising that he was entitled to engage in legal practice. In this regard, he was not acting in breach of s 15(1).

[18]

The rent roll matter

By an agreement dated 27 April 2012, between D&B Project Marketing Pty Limited and Charlyn Holdings Pty Limited (as vendors), Mr Brett Ozanne (as covenantor), and Integral Property Pty Limited (as purchaser), the vendors agreed to sell a rent roll to the purchaser. Mr Ozanne was the sole director and shareholder of each of the vendors at this time. Johnston Vaughan acted for the vendors and the covenantor on the sale of the rent roll, and Jemmeson & Fisher, solicitors, acted for the purchaser. From the correspondence and other documents relating to this matter, it appears that both Mr Vaughan and Mr Dlakic were involved in the conduct of the matter on behalf of Johnston Vaughan.
Under cl 4.3 of the agreement, the purchaser was required to pay a deposit of 5% of the consideration payable by the purchaser if it entered into management agreements with all the relevant property owners. That clause provided, in part: "… The Deposit shall be held by the Vendor's Solicitor referred to in Schedule 1 Item (e) [Johnston Vaughan] in their trust account until completion of this Agreement and otherwise held in accordance with the provisions of this Agreement."
Under cl 4.4, the balance of the price payable on completion was to be calculated by reference to the management agreements actually entered into with the relevant property owners. Clause 19 also provided for adjustments to the deposit or settlement money if the purchase price for the rent roll was less than the estimate in Item (d) of Schedule 1 to the agreement.
In the agreement, the completion date was specified as 31 May 2012. Settlement on this date was not, however, achieved.
Clause 20 established a retention amount of 15% of the total consideration to be paid by the purchaser and this was to be held "by the Vendor's Solicitor [Johnston Vaughan] on behalf of the Vendor and Purchaser", for a retention period of 3.5 months from the date of completion.
Under cl 21, the maximum liability of the vendors for "Lost Managements" (also referred to as "Managements Lost" in the agreement) was not to exceed the retention amount.
Clause 22.1 specified how the retention amount was to be dealt with. The vendors and the purchaser, on the expiration of the retention period, were required to: 1. determine the management agreements that had been terminated by the relevant landlord prior to the end of the retention period (defined in the agreement as "Managements Lost"); and then 2. calculate the value of the Managements Lost, on the same basis as the original purchase price had been calculated, and refund, from the retention amount, that sum to the purchaser together with a proportionate share of any interest earned. The balance, if any, was to be paid to the vendors.
Clause 22.1.3 then provided: "such funds are only to be released by the Vendor's agent after receiving written authority form both the Vendor and the Purchaser or their solicitors, provided that the Vendor and the Purchaser or their solicitors shall deliver to the Vendor's agent the authority referred to within seven (7) days of agreement being reached between the Vendor and Purchaser concerning the disbursement of the Retention Amount."
It appears that the reference to the "Vendor's agent" in cl 22.1.3 should be a reference to the "Vendor's Solicitor" as cl 20 specified that the vendors' solicitor was to hold the retention amount on behalf of both parties.
On 16 April 2012, Jemmeson & Fisher had sent to Johnston Vaughan, to be held in escrow pending finance being finalised, a copy of the agreement signed by the purchaser together with a cheque for $21,188.41, "being 5% deposit payable under the agreement". As noted above, the agreement was signed on 27 April 2012. When banked, it appears that this cheque was dishonoured and a subsequent electronic transfer in the same amount was deposited into the Johnston Vaughan trust account on 28 May 2012.
For the purposes of settlement on 30 November 2012, the retention sum was calculated to be $43,382.43. By letter dated 29 November 2012, Mr Dlakic gave to Jemmeson & Fisher directions for the cheques to be provided on settlement. Relevantly, Mr Dlakic sought a bank cheque in favour of Johnston Vaughan Law Practice Trust Account for $21,188.41.
The amount of this bank cheque was explained in the settlement statement with adjustments as at 27 November 2012 as follows: "Bank cheque to Johnston Vaughan Solicitors $21,188.41 (On account of retention monies 15%) (NB: Vendors solicitors to retain deposit of $21,188.41 And add $1,005.61 on account of retention. Total retention $43,382.43)"
On 29 November 2012, a document headed "Undertaking to Integral Property Pty Ltd" was printed. It was signed by Mr Dlakic and was in the following terms: "Undertaking to Integral Property Pty Ltd I, Amil Dlakic, solicitor of Johnston Vaughan, solicitor for the Vendort [sic]. Undertake and agree to keep the deposit held in our Trust of $21,188.41 after completion of the Agreement of the Sale Rent Roll between Integral Property and D& B Project Marketing Pty Ltd. The deposit shall form part of the retention amount to be held in accordance with Clause 20 of the Agreement of the Sale of Rent Roll. [signature] Amil Dlakic Solicitor Johnston Vaughan"
Settlement occurred on 30 November 2012. A bank cheque in favour of Johnston Vaughan Trust Account for $21,188.41 was received by Johnston Vaughan on that date and was deposited into Johnston Vaughan Law Practice Trust Account (No. XXXX0370) on 3 December 2012.
Accordingly, from 3 December 2012, Johnston Vaughan held $43,382.43 (assuming the additional $1,005.61 referred to in the settlement statement is added as stated) as "trust money" as defined in s 243 of the LP Act, being "money entrusted to a law practice in the course of or in connection with the provision of legal services by the practice". Further, that money was to be dealt with in accordance with the sale of rent roll agreement and Mr Dlakic's undertaking.
There were difficulties with the transfer of electronically stored data but the data was eventually transferred on 22 February 2013. As a result, it was agreed that the retention period of 3.5 months did not commence until 22 February 2013.
On 15 April 2013, Johnston Vaughan prepared a memorandum of fees addressed to D & B Project Marketing Pty Limited in respect of the sale of the rent roll. The total amount of the bill was $32,003.04, of which $12,564.01 had already been paid, leaving a balance due of $19,439.03. Mr Dlakic sent this memorandum to Mr Ozanne, by email on 16 April 2013, noting that the amount outstanding was $19,439.03, but stating: "If a payment of $10,000 were made ASAP we would be happy to relinquish any claims to a higher sum such as in the tax invoice and we would be happy to see the matter through to the end for no further payment at all - a considerable discount to you. Please advise what can be done as we would prefer to have this issue resolved this week than waiting more time to resolve the retention monies issue, and its for that reason we are giving a substantially huge discount."
On 27 May 2013, Mr Dlakic emailed Mr Rabadi, of Jemmeson Fisher, asking Mr Rabadi to: "urgently get consent to release $10,000 from retention monies in trust to pay costs. I have urgent and pressing bills and this not a great compromise from your clients position We remain in your debt and thank your patience and forebearance Please advise by 4pm tommorrow [sic] that hopefully you have urgent consent".
On the following day, Mr Rabadi responded, attaching his client's email refusing to release any funds and stating "Do not release any funds from retention". Fifteen minutes later, Mr Dlakic confirmed receipt of Mr Rabadi's client's email and noted "No funds thereof will be released".
By letter dated 7 August 2013, Mr Rabadi sought a refund of $42,621.43 from the retention amount of $43,382.43 held by Johnston Vaughan on the basis of the "Lost Managements" set out in the schedule attached to the letter. By another letter of the same date, Mr Rabadi raised other issues relating to the rent roll and sought payment of a further sum in the order of $47,000.
By letter dated 9 August 2013, signed by Mr Vaughan, Johnston Vaughan sent a copy of Jemmeson & Fisher's letter concerning the retention amount to Mr Ozanne, reminding him that the firm was owed at least $10,000 in unpaid fees and seeking instructions to send a letter to Jemmeson & Fisher as follows: "We are instructed that our client will release the sum of the monies that is held in Trust less $15,000.00 and we note that our client's property is presently on the market, which is [address in Mascot], and has enough equity to pay any difference from that sale at settlement. We envisage the property being sold shortly and settlement within the next 6 to 8 weeks. Should you agree with that we can direct money to your client less $15,000.00."
By another letter of 9 August 2013, signed by Mr Vaughan, Johnston Vaughan enclosed two authorities for Mr Ozanne to execute and return, should Jemmeson & Fisher agree with the proposal set out in the letter referred to in the preceding paragraph. One authority consented to Johnston Vaughan withdrawing $10,000 and applying it towards payment of Mr Ozanne's professional costs and disbursements and the other consenting to $5,000 being paid to Mr Ozanne. There is no evidence to indicate that these authorities were ever signed.
By letter to Mr Ozanne dated 20 August 2013, signed by Mr Vaughan, Johnston Vaughan noted that they had not heard from him regarding the recent correspondence of 9 August 2013. As Mr Robadi was pressing for return of the retention money, Mr Ozanne was asked to contact Mr Vaughan urgently.
By emails of 27 August 2013, and 2 and 11 September 2013, Mr Rabadi continued to press Mr Dlakic for payment of the retention funds. On 11 October 2013 by email, Mr Dlakic asked Mr Rabadi to email the figure to be released from trust and to whom it was to be made payable. Mr Rabadi provided that information by return email, seeking $42,621.43 by way of cheque in favour of the Jemmeson & Fisher trust account.
On 14 October 2013, in respect of cheque number 001007, $42,376.82 was debited from Johnston Vaughan Solicitors Pty Limited Law Practice Trust Account (No. XXXXX8807), and the trust account ledgers indicate that the cheque was drawn in favour of Jemmeson Fisher Trust Account. There was no explanation in the material before us as to the difference between the amount sought by Mr Rabadi and the amount of the cheque actually provided. We note, however, that $42,376.82 equals two times $21,188.41 (this was both the amount of the deposit and the amount of the cheque provided by Jemmeson & Fisher on settlement, as requested by Johnston Vaughan. The additional $1,005.61 referred to in the settlement statement of 27 November 2012, mentioned above, does not seem to be accounted for in Johnston Vaughan's records).

[19]

Breach of undertaking

Mr Dlakic made the following withdrawals by internet transfer from the Johnston Vaughan Solicitors Pty Limited Law Practice Trust Account (No. XXXXX8807): 1. on 15 August 2013, $20,000.00 to Mr Dlakic's cash management call account with the Commonwealth Bank (which account was used for personal expenses), with the description "legal fees"; 2. on 4 September 2013, $10,000.00 to Mr Dlakic's cash management account, with the description "Cba pay"; 3. on 23 October 2013, $20,000.00 to Mr Dlakic's cash management account, with the description "payment", (the "Dlakic Cash Management Withdrawals").
From the evidence of Mr Dunlop, concerning his discussions with Mr Dlakic, and from the documents Mr Dunlop obtained from Johnston Vaughan on his inspection, we accept that there were a number of Kalamazoo ledgers created for trust ledger account number 015 in relation to Mr Ozanne's sale of the rent roll.
There was a Kalamazoo ledger, created by the firm's bookkeeper, in which the Dlakic Cash Management Withdrawals were not recorded. It recorded the dishonoured first cheque, two deposits totalling $42,376.82, and the withdrawal in favour of the Jemmeson & Fisher trust account of $42, 376.82 by cheque 1007, drawn on 11 October 2013. This was the original ledger for the Ozanne matter.
Mr Dlakic told Mr Dunlop that he wrote, in ink, another ledger for trust ledger account 015 (the Dlakic ledger) because that original ledger was not correct as it did not record the Dlakic Cash Management Withdrawals. The Dlakic ledger did not, however, accurately record all of the Dlakic Cash Management Withdrawals. It was subsequently amended in pencil by the firm's accountants to reflect correctly all of the Dlakic Cash Management Withdrawals.
Mr Dlakic had no written authority from either the vendors or the purchaser to make the Dlakic Cash Management Withdrawals.
We pause here to note that after his conversations with Mr Dunlop on 6 and 7 August 2014, Mr Dlakic provided to Mr Dunlop a document, which purported to be an "Authority to Debit Trust Account", which was in the following terms: "I, Brett Ozanne, gave authority to debit from trust account the following sums in payment of professional costs to Johnston Vaughan Solicitors 1. 14 August 2013 the sum of $20,000 2. 4 September 2013 the sum of $10,000 3. 23 October 2013 the sum of $20,000 [signature] 18 August 2014 Brett Ozanne".
Mr Ozanne was not called by Mr Dlakic to give evidence. No written authorities from Mr Ozanne, dated August, September or October 2013, were ever produced. No mention of these purported authorisations was made in Mr Dlakic's affidavit of 4 November 2014, as a justification or explanation for his conduct in relation to the Dlakic Cash Management Withdrawals. In addition, the terms of the rent roll sale agreement required authorisation for payment out of the retention amount to be given by both the vendors and the purchaser. We do not accept that any relevant authorisation for any of the Dlakic Cash Management Withdrawals was ever given.
As a result of the Dlakic Cash Management Withdrawal on 4 September 2013, at least part of the $21,188.41, received by Johnston Vaughan as the deposit paid by Integral Property Pty Ltd, was no longer held in the trust account and was not dealt with as part of the retention amount in accordance with the rent roll sale agreement.
In these circumstances, we find that Mr Dlakic breached his undertaking to Integral Property Pty Ltd "to keep the deposit held in our Trust of $21,188.41 after completion of the Agreement of the Sale Rent Roll between Integral Property and D& B Project Marketing Pty Ltd. The deposit shall form part of the retention amount to be held in accordance with Clause 20 of the Agreement of the Sale of Rent Roll."
We are confirmed in this conclusion by Mr Dlakic's admissions. In the letter of Horowitz & Bilinsky to the Law Society of 5 December 2014, the solicitors stated that they were instructed as follows: "… 2. As to the undertaking to Integral Property, our client breached the undertaking. The undertaking was breached in circumstances where our client did not intend to breach the undertaking. At the time, he was working under a misconception of what the position was and this apparently was affected by the depression suffered. As indicated, our client did not intend to breach the undertaking and he regrets what happened. Our client was not receiving treatment for depression at the time. He was not even aware that he was suffering from depression. …"
In his affidavit of 4 November 2014 in the Supreme Court proceedings referred to above, Mr Dlakic swore, at paragraph 29, as follows: "In relation to the breach of undertaking given to Integral Property Pty Ltd, at the relevant time, I thought I had sufficient funds available to draw the monies. I failed to check the relevant ledger sheets and in view of the pressure I was under, was not functioning properly. I appreciate that if I had checked the relevant ledgers, the breach would not have occurred and that my management of the trust account was unacceptable."
We accept Mr Dlakic's admission that he breached the undertaking. We cannot, however, accept the explanation for the breach given in his affidavit. Making the Dlakic Cash Management Withdrawals was unauthorised and inconsistent with the obligations in relation to money held by a solicitor on trust. Whether or not there were sufficient funds available to draw the monies was irrelevant; the withdrawals were impermissible. The position would have been no different whether or not Mr Dlakic had checked the relevant ledger sheets. His maintaining a different ledger from the original ledger, as mentioned above, indicates to us that Mr Dlakic was aware of what he was doing and that it was wrong.
We have already discussed the principles concerning whether mental health issues could, in a case such as the present, preclude a finding of unsatisfactory professional conduct or professional misconduct. We do not accept that Mr Dlakic's mental health, in this case, excuses or minimises the significance of his conduct in breaching his undertaking.

[20]

Causing a deficiency in the Law Practice trust account in breach of s 262

Section 262 of the LP Act provided: "(1) An Australian legal practitioner is guilty of an offence if he or she, without reasonable excuse, causes: (a) a deficiency in any trust account or trust ledger account, or (b) a failure to pay or deliver any trust money. Maximum penalty: 200 penalty units. (2) A reference in subsection (1) to an account includes a reference to an account of the practitioner or of the law practice of which the practitioner is an associate. (3) In this section: cause includes be responsible for. deficiency in a trust account or trust ledger account includes the non-inclusion or exclusion of the whole or any part of an amount that is required to be included in the account."
We have set out our findings, in relation to the trust ledger account 015, for Mr Ozanne and the sale of the rent roll matters, above. The Dlakic Cash Management Withdrawals had the effect of causing a deficiency in the trust ledger account 015 in that: 1. on 15 August 2013, $20,000.00, which was required to be included in the account, was withdrawn; 2. on 4 September 2013, $10,000.00, which was required to be included in the account, was withdrawn; and 3. on 23 October 2013, $20,000.00, which was required to be included in the account, was withdrawn.
As a result, from 15 August 2013, there was a deficiency of $20,000.00 in the trust account and trust ledger account 015. Similarly, after 4 September 2013, there was a deficiency of $30,000.00, and, after 23 October 2013, a deficiency of $50,000.00. These were all caused by unauthorised withdrawals by Mr Dlakic. The fact of the deficiencies was recorded in part by Mr Dlakic in his ledger for trust ledger account 015, written in ink, and in whole by the accountant's pencil amendments to that ledger (which had been shown to Mr Dunlop at his first inspection on 6 August 2014).
On this basis, we are satisfied to the requisite standard that Mr Dlakic breached s 262(1)(a) of the LP Act by making each of the Dlakic Cash Management Withdrawals.

[21]

Breach of s 255 of the LP Act

Section 255 of the LP Act provided: "(1) A law practice must: (a) hold trust money deposited in a general trust account of the practice exclusively for the person on whose behalf it is received, and (b) disburse the trust money only in accordance with a direction given by the person. Maximum penalty: 50 penalty units. (2) Subsection (1) applies subject to an order of a court of competent jurisdiction or as authorised by law. (3) The law practice must account for the trust money as required by the regulations. Maximum penalty: 50 penalty units."
Having regard to the facts and circumstances, already set out above, concerning Mr Dlakic's dealings with the funds in the trust ledger account 015, we accept that Johnston Vaughan, and its principal Mr Dlakic, did not hold trust monies deposited in its general trust account exclusively for the persons on whose behalf it was received; namely, the vendors and the purchaser in the sale of rent roll transaction. We also accept that Johnston Vaughan, and its principal Mr Dlakic, did not disburse the trust money in trust ledger account 015 only in accordance with a direction given by the vendors and the purchaser, or their agents authorised in that regard.
We note that Mr Dlakic has made admissions that he breached s 255 of the LP Act. In their letter of 5 December 2014, Horowitz & Bilinsky state, in the context of the Integral Property undertaking and trust account ledger in relation to the transaction involving Integral Property Pty Ltd, at numbered paragraph 4: "We again refer you to our client's Affidavit and confirm that our client admits breaching Section 255 of the Legal Profession Act". In his affidavit of 4 November 2014 in the Supreme Court proceedings, Mr Dlakic stated more generally at par 22 "I have breached Sections 255, 263 and 264 of the Legal Profession Act but say that I did not act dishonestly". This admission was in the context of Mr Dlakic responding to Mr Dunlop's report of 8 October 2014, which Mr Dlakic had exhibited to his affidavit at par 9. Mr Dlakic sought to explain how the problems occurred in pars 13 to 21 of his affidavit. Even if we accepted all of those matters, we cannot conclude that changes in bookkeepers or their taking leave, changing banks, being overseas for two weeks in June-July 2014, his father's illness or his own depression could justify the conclusion that making the Dlakic Cash Management Withdrawals from trust ledger account 015 was not dishonest. The fact the Mr Dlakic created a different ledger from the original ledger for trust ledger account 015, as mentioned above, indicates to us that Mr Dlakic was aware that what he was doing was wrong.
In the circumstances, we are satisfied to the requisite standard that Mr Dlakic breached s 255(1)(a) and (b) of the LP Act.

[22]

Breaches of ss 263 and 264 of the LP Act

Sections 263 and 264 relevantly provided: "263 Reporting certain irregularities and suspected irregularities (1) As soon as practicable after a legal practitioner associate of a law practice becomes aware that there is an irregularity in any of the practice's trust accounts or trust ledger accounts, the associate must give written notice of the irregularity to: (a) the Law Society Council, and (b) if a corresponding authority is responsible for the regulation of the accounts concerned - the corresponding authority. Maximum penalty: 50 penalty units. … 264 Keeping trust records … (2) The law practice must keep the trust records: … (b) in a way that at all times discloses the true position in relation to trust money received for or on behalf of any person, and (c) in a way that enables the trust records to be conveniently and properly investigated or externally examined, and … Maximum penalty: 100 penalty units."
Section 7 of the LP Act provided an explanation of who was a "legal practitioner associate" of a law practice. That section relevantly provided: "(1) For the purposes of this Act, an associate of a law practice is: (a) an Australian legal practitioner who is: (i) a sole practitioner (in the case of a law practice constituted by the practitioner), or (ii) a partner in the law practice (in the case of a law firm), or … (2) For the purposes of this Act: (a) a legal practitioner associate of a law practice is an associate of the practice who is an Australian legal practitioner, and …"
Mr Dlakic was, at the relevant times, an Australian legal practitioner and an "associate" of Johnston Vaughan. Consequently, he was a legal practitioner associate of a law practice for the purposes of s 263.
We think it is unnecessary to repeat our relevant findings in relation to the failure to record accurately the true position, in relation to trust money received for the vendors and the purchaser in the sale of rent roll transaction, in either the original ledger for trust ledger account 015 or the ink ledger kept by Mr Dlakic, before the pencil amendments by the accountants. In this regard, we also accept the evidence of Mr Dunlop, in his report dated 8 October 2014, concerning the irregularities in the ledgers and the failures of the ledgers to disclose the true position. Mr Dlakic did not challenge any aspect of that report in his affidavit of 4 November 2014, referred to above.
We note that Mr Dlakic admitted in par 22 of his affidavit that he breached ss 263 and 264 of the LP Act. In our view, he was correct to make those admissions. For the reasons already given, we do not accept, however, that he did not act dishonestly, as Mr Dlakic contended in par 22 of his affidavit.
In the circumstances, we are satisfied to the requisite standard that Mr Dlakic breached ss 263(1)(a) and 264(2)(b) and (c) of the LP Act.

[23]

Misappropriation of $50,000

We have set out the principles in relation to misappropriation above. Likewise, we have made findings above as to the background and what occurred in relation to the $50,000 received by Mr Dlakic as a result of the Dlakic Cash Management Withdrawals. We do not repeat them here.
From his preparation of the ledger, in ink, for trust ledger account 015, his making of the Dlakic Cash Management Withdrawals, his knowledge of his own cash management account, his involvement in the sale of rent roll transaction as evidenced by his communications with Jemmeson & Fisher and other relevant persons, his conversations with Mr Dunlop (recorded in Mr Dunlop's report), and his admissions made in his affidavit of 4 November 2014 in the Supreme Court proceedings, we are prepared to infer Mr Dlakic's relevant knowledge or awareness of what occurred in relation to the Dlakic Cash Management Withdrawals.
Thus, we are satisfied to the requisite standard as follows: 1. the rent roll sale agreement did not authorise the release of the deposit, held in Johnston Vaughan's trust account, prior to completion; 2. Mr Dlakic gave his undertaking to keep the deposit after completion so that it formed part of the retention amount held in Johnston Vaughan's trust account, and it was to be dealt with as part of the retention amount in accordance with the agreement; 3. the rent roll sale agreement did not authorise the release of the retention amount until "after receiving written authority from both the Vendor and the Purchaser or their solicitors" in accordance with cl 21.1.3; 4. at no time did Mr Dlakic have authority to withdraw from the trust account any part of the deposit or the retention amount, and deposit any such part in the cash management account in his name with the Commonwealth Bank; 5. Mr Dlakic made the Dlakic Cash Management Withdrawals without being authorised to do so, and the funds so withdrawn were used to meet withdrawals from his cash management account; and 6. Mr Dlakic was aware of all these matters.
Mr Dlakic's actions in this regard were deliberate, in the sense of being done with knowledge of what he was doing, and not the result of mistake or oversight.
As we have explained above, the document purporting to be signed by Mr Ozanne on 18 August 2014, stating that he had given authority for the Dlakic Cash Management Withdrawals, would not have authorised the disbursement of the retention amount held in trust ledger account 015. This was because, under cl 21.1.3, authorisation was required not only from Mr Ozanne's two vendor companies but also from the purchaser or its solicitors. There was no such authorisation in respect of the Dlakic Cash Management Withdrawals.
Mr Dlakic's use of the funds, deposited into his cash management account as a result of the Dlakic Cash Management Withdrawals, was wrongful and amounted to conversion of those funds, and Mr Dlakic had knowledge of the relevant facts rendering his dealing with the funds wrongful.
Reasonable and honest people would regard Mr Dlakic's conduct in respect of the $50,000 as objectively dishonest.
For these reasons, we find that the allegation of misappropriation of the $50,000 from trust ledger account 015 has been proved to the requisite standard.

[24]

Characterisation of conduct in relation to the rent roll matter

We have already set out above the relevant provisions of the LP Act and the principles concerning unsatisfactory professional conduct and professional misconduct.
As to Mr Dlakic's breach of his undertaking to Integral Property Pty Ltd, we note that in Law Society of New South Wales v Hinde [2005] NSWADT 199 at [38], the former Tribunal held that "failure to honour an undertaking falls within the common law concepts of professional misconduct" (and see also [41]). In the circumstances of the present case, we are of the view that failure to comply with the undertaking constituted a substantial failure to reach or maintain a reasonable standard of competence and diligence. In addition, it was conduct that, in our view, would reasonably be regarded as disgraceful or dishonourable by solicitors of good repute and competency. Thus, we conclude that Mr Dlakic's breach of his undertaking should be found to be professional misconduct.
The breaches of ss 255, 263 and 264 of the LP Act, in which Mr Dlakic was involved, was conduct that occurred in connection with Mr Dlakic's practice of law and fell 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. They were each at least unsatisfactory professional conduct. Taken together in context, however, and in light of our finding that they involved dishonesty, we are satisfied that they amounted to professional misconduct. They involved a substantial failure to reach or maintain a reasonable standard of competence and diligence. In addition, they would, as a whole, be properly regarded, by solicitors of good repute and competency, as disgraceful or dishonourable.
Similarly, the misappropriation of $50,000.00 involved a substantial failure to reach or maintain a reasonable standard of competence and diligence. In addition, they would, as a whole, be properly regarded as disgraceful or dishonourable by solicitors of good repute and competency. It amounted to professional misconduct.
For the reasons already set out above, we do not accept that Mr Dlakic's mental health issues justify characterising his conduct any less severely than we have done.

[26]

Breach of s 255A of the LP Act

Section 255A relevantly provided: "(1) A law practice must not withdraw trust money from a general trust account otherwise than by cheque or electronic funds transfer. Maximum penalty: 50 penalty units. (2) Without limiting subsection (1), the following are specifically prohibited: (a) cash withdrawals, (b) ATM withdrawals or transfers, (c) telephone banking withdrawals or transfers. (3) The regulations may make provision for or with respect to withdrawals by cheque or electronic funds transfer. (4) This section has effect despite anything to the contrary in any directions given to the law practice concerned, even if the directions are given by a person who is otherwise legally entitled to give the law practice directions in respect of dealings with the trust money."
The statement for the period 18 August 2013 to 17 September 2013 for the Johnston Vaughan Law Practice Trust Account number XXXX0370 with the Commonwealth Bank indicates that, on 30 August 2013, $8,674.33 was withdrawn at the Kogarah Branch. On the same day, the statement covering the period from 28 August 2013 to 1 September 2013, for the General account number XXXX0354 in the name of Johnston Vaughan General Account, records that $8,674.33 was deposited into that account with the description "Cash Dep Branch Kogarah".
Mr Dunlop records that on 11 August 2014 he asked Mr Dlakic about this transaction and received the response as follows: "[Mr Dunlop] said: My review of the trust account records indicates that you withdrew the balance of the Commonwealth Bank trust account of $8,674.33 in cash and deposited it into the practice's office account 354. Can you explain why you did this? [Mr Dlakic] said: I attended the CBA Kogarah to transfer the balance across to the NAB trust account. I didn't have the NAB account details with me, so I put it into the office account temporarily so that I could then transfer it to the NAB account. The delay in clearing this balance was unpresented cheques. I wasn't sure how to do it, so I left it there. I opened a ledger later and eventually paid $15,000.00 to the NAB trust account in January 2014".
Mr Dlakic, as we have already noted, exhibited Mr Dunlop's report to his affidavit of 4 November 2014 in the Supreme Court proceedings. He did not deny or challenge the material recorded in that report concerning this transaction on 30 August 2013. Further, the explanation of changing the trust account from the Commonwealth Bank to the National Australia Bank, in pars 18 to 19, is consistent with Mr Dunlop's report and Mr Dlakic's answer set out above.
Having regard to this material, we are satisfied to the requisite standard that Mr Dlakic, in his capacity as principal of Johnston Vaughan, did make a cash withdrawal of trust funds from the Commonwealth Bank trust account. In so doing he breached s 255A(1), by virtue of subs (2)(a).

[27]

Breaches of ss 262 and 263 of the LP Act

Sections 262 and 263 relevantly provide: "262 Deficiency in trust account (1) An Australian legal practitioner is guilty of an offence if he or she, without reasonable excuse, causes: (a) a deficiency in any trust account or trust ledger account, or (b) a failure to pay or deliver any trust money. Maximum penalty: 200 penalty units. (2) A reference in subsection (1) to an account includes a reference to an account of the practitioner or of the law practice of which the practitioner is an associate. (3) In this section: cause includes be responsible for. deficiency in a trust account or trust ledger account includes the non-inclusion or exclusion of the whole or any part of an amount that is required to be included in the account. 263 Reporting certain irregularities and suspected irregularities (1) As soon as practicable after a legal practitioner associate of a law practice becomes aware that there is an irregularity in any of the practice's trust accounts or trust ledger accounts, the associate must give written notice of the irregularity to: (a) the Law Society Council, and (b) if a corresponding authority is responsible for the regulation of the accounts concerned - the corresponding authority. Maximum penalty: 50 penalty units. …"
The trust ledgers in respect of Johnston Vaughan's trust account include a ledger headed "Adjustments on Bank Account" and the initial items are described as "Bank fees charged" and "Bank fees paid" as well as "Transferred in error". There are, however, nine entries all described as "Accidental transfer by Amil" and two described as "Repayment of transfers" and "Refund of money by Amil". We have no doubt that "Amil" refers to Mr Dlakic, whose first name is Amil.
The "accidental transfers" were recorded as follows: Date Amount 12 April 2012 $6,000.00 [Mr Dunlop records this as two transactions for $4,000 and $2,000] 17 April 2012 $8,000.00 18 April 2012 $3,900.00 27 April 2012 $4,100.00 1 May 2012 $1,320.00 1 May 2012 $2,640.00 1 May 2012 $5,353.00 1 May 2012 $550.00 3 May 2012 $2,400.00

[29]

As a result of the repayment and the refund, all of the amounts "accidentally transferred" had been repaid by 10 May 2012.
Mr Dlakic dealt with these "accidental transfers" in his affidavit of 4 November 2014 in the Supreme Court proceedings as follows: "15. I first began having problems with my trust account in April/May 2012. The matters relating to the payments from the general trust account in that period are referred to in [Mr Dunlop's] report and in particular, at page 41. 16. I was making withdrawals by electronic transfer by using my mobile phone whilst overseas. I made a number of errors and those errors were corrected when I returned to Australia. 17. I did not report the irregularities to the Law Society as required by Section 263 of the [LP Act] as I was not aware of that obligation."
The relevant portion of Mr Dunlop's report at page 41 was as follows: "(c) "Accidental" payments totalling $34,263.00 from general trust account: (i) On 10 occasions in the period April to May 2012, Mr Dlakic misused trust money totalling $34,263.00 held in the Commonwealth Trust Account. In doing so, Mr Dlakic breached s255 (1) (a) and (b) of the Act and caused a deficiency in the Commonwealth Trust Account in breach of s262(1) of the Act as this trust money should have been held exclusively for the persons on whose behalf it was received and disbursed only in accordance with a direction given by those persons. After Mr D'Apice questioned him about the transfers, $6,000.00 was repaid by transfer from the Dlakic Office Account into the Commonwealth Trust Account on 17 April 2012 and the balance of $28,263.00 was similarly repaid on 10 May 2012. (ii) These 10 withdrawals were made by electronic transfer via Mr Dlakic's mobile telephone, whilst he was overseas, to the General Office Account, the Dlakic Office Account or to two barristers. Mr Dlakic has admitted to me that the transfers to the practice's office accounts were for top-ups and those to the barristers were for costs. He also admitted to me that "I guess, I don't think they had anything to do with matters involving trust monies. I actually had issues involving bills and I had not necessarily received the funds prior to paying them." (iii) Having regard to the repetitive nature of these trust transfers over a period of one month and Mr Dlakic's admissions, I do not consider they were accidentally made by him from trust. (iv) At the time of the repayments on 17 April 2012 and 10 May 2012, Mr Dlakic was aware that there was an irregularity in this trust account and he failed to give written notice of the irregularity to the Law Society, in breach of s263(1)(a) of the Act. (v) Mr Dlakic has made no written representations to me concerning this matter."
Accepting Mr Dlakic's evidence in his affidavit, and Mr Dunlop's evidence of factual matters and admissions in his report at p 41, and having regard to the documents concerning these "accidental transfers", we are satisfied to the requisite standard that: 1. Mr Dlakic transferred in total $34,263.00 out of the Johnston Vaughan trust account without authorisation or justification; 2. by doing so, he caused a deficiency in the trust account because the amounts that were required to be included in that account were withdrawn and were no longer included in the trust account; 3. Mr Dlakic remedied the deficiencies within less than 3 weeks; 4. Mr Dlakic's causing these deficiencies was a breach of s 262(1) of the LP Act, and an irregularity falling within s 263(1), as Mr Dlakic implicitly accepted in his affidavit at par 17; 5. Mr Dlakic did not report the irregularity and consequently breached s 263(1) of the LP Act.

[30]

Attempt to mislead, hinder or obstruct a Law Society investigator in the course of his investigation

Mr Dunlop's report included evidence that in early August 2014 he examined Johnston Vaughan's file in the sale of rent roll matter and it did not contain: 1. any written costs disclosure to the vendors or to Mr Ozanne; 2. any written costs agreement between Johnston Vaughan the vendors or Mr Ozanne; nor 3. contemporaneous signed authorisation or authorisations to make the Dlakic Cash Management Withdrawals totalling $50,000.
On 11 August 2014, Mr Dunlop advised Mr Dlakic that he could make written representations and provide further documents concerning the matters investigated by Mr Dunlop. Mr Dlakic sent a letter dated 19 August 2014 to Mr Dunlop that enclosed a copy of: 1. a costs agreement, dated 7 February 2013, purportedly signed by Mr Ozanne; 2. a costs disclosure document, dated 7 February 2013; 3. the "Authority to Debit Trust Account", dated 18 August 2014, purportedly signed by Mr Ozanne, the contents of which have been set out above.
The Council contended that these documents and the circumstances of their provision were suspicious. It was also noted that the sale of rent roll matter had commenced in early 2012.
Having regard to all of those matters, it was submitted that we should be satisfied that Mr Dlakic had obstructed or misled an investigator without reasonable excuse in breach of s 674(1) of the LP Act.
Section 674 provided as follows: "(1) A person must not, without reasonable excuse, obstruct or mislead an investigator exercising a power under this Act. Maximum penalty: 100 penalty units. (2) In this section: obstruct includes hinder, delay, resist and attempt to obstruct."
We accept that the sale of rent roll matter commenced well before February 2013, the date of the costs agreement and costs disclosure produced by Mr Dlakic under cover of his letter of 19 August 2014. As we have noted above, the sale agreement was dated 27 April 2012 and the correspondence from Jemmeson & Fisher to Johnston Vaughan, concerning the agreement, dated from even earlier. Nonetheless, we note that the clients in that matter were not only Mr Ozanne but also the two vendor companies, D&B Project Marketing Pty Limited and Charlyn Holdings Pty Limited. The costs agreement, dated 7 February 2013, does not refer to the vendor companies or to an agreement for the sale of the rent roll but does identify the work Johnston Vaughan had been instructed to perform as including: "2. If necessary, attend to the preparation of all necessary to liase [sic] with all parties to enable settlement of rent rolls and all correspondence".
In our view, it is possible that this costs agreement relates only to limited aspects of the sale or rent roll matter or is a more general agreement concerning various businesses with which Mr Ozanne was involved. We do not have sufficient evidence to determine whether or not this is so.
The costs disclosure does not refer at all to an agreement for the sale of a rent roll or any other specific transaction or work. It does say, however, at numbered paragraph 7, that Michael Vaughan will be responsible for the matter and that other persons may assist him from time to time. No specific mention is made of Mr Dlakic. It is not clear to us what this document specifically relates to.
Further, and in any event, neither the costs disclosure, nor the costs agreement, nor the "Authority to Debit Trust Account", dated 18 August 2014, assisted Mr Dlakic to establish that he is not liable in respect of any of the matters raised in these proceedings. If the documents were not genuine and were intended to assist Mr Dlakic to mislead Mr Dunlop and escape liability, they were not well suited to that end.
In addition, we have not seen or heard Mr Dunlop, Mr Dlakic, Mr Vaughan or Mr Ozanne give evidence or be cross-examined concerning these documents, how they came into existence, how they were located, and what their significance was thought to be.
In the circumstances, we do not believe we can conclude on the balance of probabilities, having regard to the gravity of the matters alleged, the nature of the subject matter of the proceedings and the considerations referred to in Briginshaw v Briginshaw, that the documents were not genuine, or that, by producing the documents to Mr Dunlop, Mr Dlakic obstructed or misled Mr Dunlop, as an investigator exercising a power under the LP Act, in breach of s 674(1).

[32]

Conclusion

For all of these reasons, we are reasonably satisfied that, on the balance of probabilities, Mr Dlakic is guilty of professional misconduct in the respects set out in detail above.
Given the way in which Mr Dlakic chose not to participate in the proceedings after the morning adjournment on the first day of the hearing, we believe the best course is to allow the parties to consider this decision, and our reasons, and make submissions on the appropriate protective orders that should be made in the circumstances. To facilitate this we shall make directions as to the second stage of these proceedings.
Accordingly, the Tribunal finds that the respondent, Amil Dlakic, is guilty of professional misconduct. The Tribunal orders and directs that: 1. The applicant is to file and serve any evidence on which it relies, and any submissions concerning the appropriate protective and costs orders the Tribunal should make, and whether the Tribunal should dispense with an oral hearing on that issue, on or before 12 October 2018. 2. The respondent is to file and serve any evidence on which he relies, and any submissions concerning the appropriate protective and costs orders the Tribunal should make, and whether the Tribunal should dispense with an oral hearing on that issue, on or before 12 October 2018. 3. The applicant is to file and serve any evidence or submissions in reply on or before 19 October 2018. 4. The applicant is to use its best endeavours to serve on the respondent, at his last known residential address and at any address at which the respondent works, if known to the applicant, a copy of the Tribunal's findings and directions in this matter, together with the Tribunal's reasons for decision, on or before 21 September 2018. 5. The applicant is to file and serve an affidavit setting out the steps it has taken to comply with the preceding direction on or before 28 September 2018. 6. If the Tribunal determines that the determination of the appropriate protective and costs orders can be determined without an oral hearing, its decision in that regard is reserved. 7. In the alternative, if the Tribunal finds that the determination of the appropriate protective orders cannot be made without an oral hearing, the matter is to be listed on a date to be determined by the registry after 22 October 2018.

Council of the Law Society of New South Wales v Dlakic

At a glance

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Decision date

Source

Judgment (33 paragraphs)

Parties

Legislation Cited (5)

Cases Cited (15)

Cited By (1)