Council of the Law Society of New South Wales v Evans

NCAT Occupational|2016-03-30

Introduction

The Council of the Law Society of New South Wales ("the Society") lodged an "Application for Disciplinary Findings and Orders" with the Tribunal on 17 September 2015 ("the Application"). The Society claimed in the Application that the solicitor, Mr Philip Charles Evans, had engaged in professional misconduct, and sought an order that his name be removed from the Roll.
The Application was heard on 30 March 2016. Mr L Pierotti appeared for the Society. Mr Evans appeared for himself.
The Society tendered the following affidavits, all of which were admitted without objection and none of the deponents were required to attend for cross examination: 1. Mr Geoffrey Charles Moynihan affirmed 8 September 2015 (Exhibit "A1"); 2. Ms Jill Milburn sworn 10 September 2015 (Exhibit "A2"); 3. Mr Peter Leslie Edwards sworn 2 September 2015 (Exhibit "A3"); 4. Ms Anne-Marie Foord sworn 17 September 2015 (Exhibit "A4"); and 5. Mr Hugh Charles Thomas sworn 8 September 2015 (Exhibit "A5").
Mr Evans filed a reply to the Application on 16 December 2015. He subsequently tendered an affidavit sworn on 23 February 2016 (Exhibit "R1"). Mr Evans was cross examined on his affidavit at the hearing.
For the reasons that follow we found that the conduct particularised in the Application amounted to professional misconduct within the meaning of s 497 of the Legal Profession Act 2004 (NSW). In addition, we ordered that Mr Evans's name be removed from the Roll of local practitioners.

Grounds and Particulars of the Society

The Application contained the following "grounds for application": Philip Charles Evans is guilty of professional misconduct as set out below: 1. The Solicitor misappropriated trust funds. 2. The solicitor attempted to mislead a Trust Account Investigator. 3. Misappropriating monies 4. Intermingling monies 5. Misleading the complainant about the progress of the matter 6. Failing to carry out instructions 7. The Solicitor misappropriated trust funds 8. The Solicitor failed to comply with section 309 of the Legal Profession Act 2004 9. The Solicitor failed to comply with section 254 of the Legal Profession Act 2004 10. The Solicitor failed to comply with section 260 of the Legal Profession Act 2004 11. The Solicitor failed to comply with section 264of the Legal Profession Act 2004 12. The Solicitor attempted to mislead a Trust Account Investigator.
Mr Pierotti pointed out there was some duplication in these grounds because the Society maintained three files which formed the basis of the Application. From examination of the affidavit of Ms Anne-Marie Foord, solicitor for the Society, it was clear that grounds 1-6 related to the Moynihan matter and grounds 7-12 to the Buddy Warner Matter. Grounds 1-2 arise from the notification made by Ms Milburn on 20 October 2013. Grounds 3-6 arise from a complaint made by Mr Moynihan to the Legal Services Commissioner on 18 November 2013, which was referred to the Society for investigation. Grounds 7-12 arise from the report of Mr Hugh Thomas of 19 December 2013.
For ease we have framed the issues arising from the grounds as follows: Moynihan matter Did Mr Evans misappropriate Trust funds? (Grounds 1 and 3) Did Mr Evans mislead the Trust Account Investigator? (Ground 2) Did Mr Evans intermix Trust money with other money? (Ground 4) Did Mr Evans mislead the client about progress of the matter? (Ground 5) Did Mr Evans fail to carry out the client's instructions? (Ground 6) Buddy Warner Matter Did Mr Evans misappropriate Trust funds? (Ground 7) Did Mr Evans fail to comply with the requirements as to disclosure of costs to the client? (Ground 8) Did Mr Evans fail to deposit Trust money into a general trust account? (Ground 9) Did Mr Evans mix trust money with other money? (Ground 10) Did Mr Evans fail to keep compliant trust records? (Ground 11) Did Mr Evans attempt to mislead a Trust Account Investigator? (Ground 12)

Mr Evans's reply

Neither the Reply lodged with the Tribunal on 16 December 2015 ("the Reply"), nor Mr Evans's Affidavit sworn 23 February 2016 addressed the grounds or particulars relied upon by the Society. Rather, each set out Mr Evans's account of the events which gave rise to the Application. The Reply largely addressed the Moynihan matter.
In cross examination Mr Evans sought to challenge a number of the allegations made by the Society reflected in the particulars. These challenges are addressed below.

Transitional provisions

The Legal Profession Act was repealed as from 1 July 2015 by s 167 (a) of the Legal Profession Uniform Law Application Act 2014 (NSW) ("the Application Act"). Schedule 2 to the Legal Profession Uniform Law Application Legislation Amendment 2015 (NSW) ("the Uniform Law Amendment Act") made a range of consequential amendments as from 1 July 2015, including to the Civil and Administrative Tribunal Act 2013 (NSW) ("the NCAT Act") reflecting the commencement of the Legal Profession Uniform Law 2015 (NSW) ("the Uniform Law") from 1 July 2015.
This Tribunal has such jurisdiction and functions as may be conferred or imposed upon it by or under the NCAT Act, or any other legislation (s 28 NCAT Act). Further, the Interpretation of Legislation Act 1984 (VIC) ("the Victorian Interpretation Act") must be applied in the interpretation of the Uniform Law, including the transitional provisions (s 7 (1) of the Uniform Law).
There are transitional provisions in Sch 4 of the Uniform Law and generally speaking, these do not affect or take away from the Victorian Interpretation Act, unless the contrary intention appears (Sch 4 cl 2 (1)).
The repeal of the Legal Profession Act does not affect any rights, privileges, obligations and liabilities acquired, accrued or incurred under it. Remedies are preserved and legal proceedings may be continued (see: s 30 (1) (c) (e) Interpretation Act 1987 (NSW); and NSW Bar Association v Meakes [2006] NSWCA 340 at [107]. There is no contrary provision in the Victorian Interpretation Act.
As the complaints in this matter were made under Ch 4 of the Legal Profession Act, but were not disposed of before 1 July 2015, it must continue to be dealt with under the Legal Profession Act: cl 26 of Sch 4 to the Uniform Law. The Uniform Law and the resulting amendments to the NCAT Act do not apply to this matter and the Tribunal's power to make orders, having made a finding of professional misconduct, is found in s 562 of the Legal Profession Act.

Relevant statutory provisions

"Professional misconduct" is defined in s 497 of the Legal Profession Act as follows: 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.

Relevant legal principles

In his submissions, Mr Pierotti helpfully summarised the relevant legal principles applicable to the Application with reference to authority. Mr Evans did not make any submissions as to the applicable legal principles.
We will outline the relevant legal principles when considering each of the grounds put by the Society and the determination of penalty.

The standard of proof and evidentiary rules

Given the serious nature of the grounds and the consequences for Mr Evans if established, the standard of proof discussed in the High Court in Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 applies to these proceedings. (See also Neat Holdings and Karajan Holdings Pty Ltd [1992] HCA 66; 67 ALJR 170).
The rules of evidence apply to these proceedings: cl 20 of Sch 5 to the NCAT Act.

Evidence and Consideration

As outlined earlier in these reasons, Mr Evans did not specifically challenge any of the grounds or particulars put to the Tribunal by the Society, either in the Reply or in oral submissions. Consequentially, the grounds and particulars, supported by affidavits tendered by the Society which were not contested, were not challenged.
Having said this, Mr Evans, in his evidence to the Tribunal during cross examination, did at times seek to put forward different factual circumstances to that contained in the affidavits filed in support of the Society. We have outlined such variations, where relevant, in relation to each ground.
The oral evidence given by Mr Evans was at times difficult to follow. He was at times evasive and parts of his evidence contradicted claims made in his affidavit. We generally did not find him to be a witness of credit.

Did Mr Evans misappropriate Trust funds? (Grounds 1 and 3)

The following matters are not disputed and are supported by the unchallenged evidence adduced by the Society: 1. On 21 May 2013, Mr Evans received into the Practice Account Trust monies ($74,855) from the Moynihans which was for the sole purpose of making payment of the stamp duty payable on the purchase of the Property. 2. On the day the Stamp Duty Monies were deposited into the Practice Account there was a balance of only $192.70. The balance of that account as at 1 May 2016 was $1.16 and never exceeded a balance greater than $3889 prior to the deposit of the Stamp Duty Monies. 3. Between 21 May 2013 and the settlement date of the Property purchase, 28 May 2013, Mr Evans made or permitted multiple withdrawals from the Practice Account. Those withdrawals were unrelated to the Property transactions, and included payment of utilities, multiple payments for Mr Evans's credit card accounts, and several transfers directly to his own personal account. 4. No deposits were made to the Practice Account between 21 May 2013 and 28 May 2013. Due to the withdrawals made or permitted by Mr Evans, as at the date of settlement there was a balance of only $35,689.52. Accordingly, $36,841.78 of the Stamp Duty Monies had been utilised for expenditure not related to the Moynihans and resulted in there being insufficient funds to make payment of the applicable stamp duty as at the date of settlement. 5. Apart from two days, 6 and 7 June 2013, from the time of settlement until the Stamp Duty Monies were provided to Ms Milburn, the balance of the Practice Account was insufficient to make payment of the stamp duty applicable to the Property purchase. 6. The Stamp Duty Monies were provided to Ms Milburn on or about 12 November 2013, after Mr Evans settled a sale transaction of his own personal real property.
We now turn to the factual matters challenged by Mr Evans.
Mr Evans claimed that whilst the Moynihans attended his office on 28 May 2013, the settlement date, and provided him with bank cheques for settlement, they omitted to provide him with a cheque for the applicable stamp duty. As a result, for expedition, they transferred the monies to his Practice Account. Mr Moynihan disputed that claim in his affidavit and pointed out that the letter from Mr Evans to the Moynihans, dated 20 May 2013, requested that they make the deposit to his nominated account. We accept the evidence of Mr Moynihan. We also note that the Practice Account bank statement for the relevant period (which was annexed to Mr Peter Edwards's affidavit) indicates that $74,855 was deposited into that account on 21 May 2015 with the descriptor "Miroslava Pamela Moy". We conclude that the monies were deposited to the account by the Moynihans at the explicit request of Mr Evans made in his letter of 20 May 2013.
In his affidavit, Mr Peter Edwards stated that during the course of his second visit to Mr Evans's office on 4 November 2013 he asked Mr Evans: Where is the Moynihan's money?
Mr Edwards goes on to state that Mr Evans provided the following response to his enquiry: I have spent the money
Under cross examination Mr Evans stated that Mr Edwards's evidence was a summarised version of his actual response, stating that what he had said was: I inadvertently, it seems, spent the money.
We accept the recollection of the exchange as provided in Mr Edwards's evidence. Mr Edwards was attending Mr Evans on the day in question in his role as a trust account investigator for the Society, a role requiring attention to detail as to statements made by practitioners under investigation. Mr Evans had the opportunity to seek to examine Mr Edwards on his evidence. He did not do so. He did not challenge Mr Edwards's evidence in either his affidavit or his Reply filed with the Tribunal. We reject Mr Evans's position that his statement of admission to Mr Edwards was a summarised version.
Under cross examination Mr Evans admitted that he had utilised the Stamp Duty Monies largely because of his expectation of there being sufficient funds in the Practice Account due to a deposit he was expecting from another client. He went on holidays overseas shortly after the settlement of the Property and said that he did not have the ability to regularly monitor the balance of the account. We reject these explanations.
Mr Evans did not present any evidence to lead us to conclude that his expectation of payment of a substantial invoice from another client was imminent. In fact, his own affidavit evidence suggested the contrary was the case: 9 On 25 June 2013 I took a holiday break overseas (which I had booked and paid for in 2012) and returned to the office on 3 August 2013. During my trip I did not have access to bank statements for transactions affecting the Philip Evans and Associates bank account. Prior to leaving on holiday my client in the litigation of Londish-v-Valofo Pty Ltd SC09/291621 advised me that part of the outstanding accounts in that matter of $98,724.23 would be transferred to my account pending resolution of the litigation. I had no reason to believe that the funds would not have been transferred to my account as promised whilst I was on holidays as I have acted for and personally known the Londish group for over 20 years. As I was later to learn funds had not been transferred as promised.
This evidence indicates Mr Evans was of the belief that while he was on holidays monies from another client would replenish his account. He commenced holidays on 25 June 2013. On his own evidence, he had no expectation of those funds being deposited into his account until on or after 25 June 2013, more than a full month after the Moynihans had deposited the Stamp Duty Monies into the general account.
As to the assertion that he was unaware of the insufficiency of funds in his account due to his being overseas and unable to monitor the account balance, Mr Evans provided contradictory evidence. Mr Evans informed the Tribunal that he engaged in electronic transfers whist overseas by way of internet banking on a mobile device, and that on each occasion this would show the current balance of all accounts.
This Tribunal recently considered the meaning of misappropriation in the context of disciplinary proceedings in the matter of Law Society of NSW v Shehadie [2016] NSWCATOD 46: 34 There was some debate as to what is meant by 'misappropriation', and whether, in particular, the term carries a connotation of dishonesty or purposeful misuse. The Macquarie Dictionary (4th ed. 2005) definition of 'misappropriate' is '1.to put to a wrong use. 2. To apply wrongfully or dishonestly to one's own use, as funds entrusted to one.' It will be seen that the first meaning merely speaks of an act where a thing is put to a 'wrong use', whereas the second focuses on use for one's own benefit, and introduces expressly the element of dishonesty. 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. 36 In Brereton v Legal Services Commissioner [2010] VSC 378 Bell J examined closely what is required by way of proof of dishonesty in a misappropriation case. His Honour emphasised that the general law (both civil and criminal) in dealing with proof of dishonesty does not go so far as to require that the defendant knew at the time of the conduct that what he did was dishonest. Proof of 'subjective' dishonesty in that sense is not required. Bell J said (some footnotes omitted): 53 While an allegation of dishonesty requires consideration of the person's mental state, in neither the criminal nor the civil context is it necessary to establish that the person subjectively knew or believed that the actions concerned were dishonest. What must be established is that the person subjectively intended to do the acts which are said to be objectively dishonest by the ordinary standards of reasonable and honest people. Thus the course to be adopted in determining whether conduct is dishonest was explained by Toohey and Gaudron JJ in Peters v R [1998] HCA 7; (1998) 192 CLR 493] as follows [503-504]: In a case in which it is necessary for a jury to decide whether an act is dishonest, the proper course is for the trial judge to identify the knowledge, belief or intent which is said to render that act dishonest and to instruct the jury to decide whether the accused had that knowledge, belief or intent and, if so, to determine whether, on that account, the act was dishonest ... If the question is whether the act was dishonest according to ordinary notions, it is sufficient that the jury be instructed that that is to be decided by the standards of ordinary, decent people. 54 The steps involved in this formulation are: (1) identify the knowledge, belief or intent which is said to render the acts dishonest; (2) determine whether the accused (or defendant in the civil context) 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. 55 When applying these principles in a civil case, the civil standard of proof on the balance of probabilities applies. Of course, where the allegation in a civil case is of misappropriation, a high standard of probability is required, due to the gravity of the allegation. (Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336, 361-363 per Dixon J). In a criminal case, the criminal standard of proof beyond reasonable doubt applies. 37 In disciplinary proceedings of the present kind, therefore, the three steps to which Toohey and Gaudron JJ refer, and reiterated by Bell J at para [54] apply. It will be seen that those steps draw a clear distinction between the understanding of the defendant when engaging in the conduct and the characterisation of that understanding. Commonly, evidence will establish a state of knowledge, belief or intent in relation to the conduct under notice, and the issue will then be (step three) whether the proven state of understanding can fairly and properly be found to be dishonest. In making that finding the tribunal of fact will look at the totality of the evidence, and apply the standards of the community to what has been put to it by the defendant in that regard. 38 The Tribunal recently approved and adopted Bell J's analysis in Council of the Law Society of NSW v Coombes [2015] NSWCATOD 108 at [36]- [43], and described the approach to be adopted as follows: We will therefore proceed on the basis that we need first consider whether the Solicitor intended to do the acts which are the subject to (sic) the complaint and secondly whether ordinary and decent people would regard these acts as dishonest.
In our view there can be doubt that Mr Evans intended to direct Mr and Mrs Moynihan to deposit trust funds to his Practice Account and then intended to withdraw or transfer funds from those trust funds for purposes not related to Mr and Mrs Moynihan.
Mr Evans has been in practice for over 20 years. His conduct in relation to the Stamp Duty Monies provided by the Moynihans indicates a lack of acceptance of the general law and regulatory rules that applied to him as a solicitor entrusted with Trust funds. A competent solicitor would have been aware that intermixing Trust funds with personal funds in the one account was wrong, and that then proceeding to make withdrawals or transfers from that account without ensuring there were sufficient funds in that account to prevent the dissipation of the client's funds was even worse.
We are also satisfied that ordinary and decent people would regard Mr Evans's actions in relation to the Stamp Duty Monies as dishonest. In reaching this conclusion we rely upon the following: Mr Evans had no right or authority to utilise the funds; he did not put in place any appropriate system to ensure the account from which the funds were drawn was of sufficient balance to prevent the dissipation of the funds; he took no steps to ensure there was sufficient balance in the account at the time he drew a cheque for the payment of the Stamp Duty applicable to the Property transaction; many of the transactions which led to the dissipation of the Stamp Duty Monies were personal in nature and for the benefit of Mr Evans; and as we have concluded in relation to ground 5 he sought to mislead the Moynihans as to the status of their funds.
Accordingly, we are satisfied that grounds 1 and 3 are made out, that Mr Evans misappropriated Trust Funds provided to him by the Moynihans in the sum of $74,855.

Did Mr Evans mislead the Trust Account Investigator? (Ground 2)

The Society alleges that Mr Evans misled the Society's Trust Account Investigator, Mr Peter Edwards, when he attended the Practice of Mr Evans twice on 4 November 2013. In his affidavit, Mr Edwards, states: On Monday 4 November 2013 at 9.00am I attended at the offices of Mr Evans and interviewed him concerning the notification from Ms Milburn. He admitted that he had received trust money to his office account in the amount of $74,885.00 from the Moynihans pursuant to his written request to them and that this money had never been deposited to a trust account as he did not maintain one. He said that the problem arose when he had sent the contract to OSR together with his office account cheque for the stamp duty but OSR had lost his letter containing these items. I then asked Mr Evans "what have you done with the Moynihans' money?" He said that he had paid it to a term deposit in October 2013 together with other funds of his and this deposit matures on Friday 8 November 2013. I told Mr Evans that I would return later in the day to examine relevant documents, including confirmation of the whereabouts of the Moynihans' trust money. I returned to Mr Evans's offices that afternoon at which time he admitted to me that the money had not been paid to a term deposit but had remained in his office account and had been used by him to pay both personal and business outgoings. He attempted to mitigate this by arguing that the money was effectively "on deposit" as he was settling a property sale for $671,000.00 on 8 November 2013, that he was the vendor of this property, that the agent was holding the deposit of $67,100.00 in an interest bearing account and that this justified him telling Ms Milburn that the Moynihans' money was on a term deposit maturing on 8 November 2013.
Annexed to Ms Milburn's affidavit was a letter from Mr Evans to Ms Milburn dated 30 October 2013 in which he wrote: We have funds coming off term deposit next week on Friday 8 November 2013 when we have arranged for stamp duty to be paid on the Transfer and the Contract.
Mr Evans did not adduce any evidence to contradict the version of events described by Mr Edwards. We accept Mr Edwards's account of his interactions with Mr Evans on 4 November 2013. Mr Edwards's account that Mr Evans first informed him that the Stamp Duty Monies were invested in a term deposit is consistent with Mr Evans's prior admission to Ms Milburn.
The inescapable conclusion is that Mr Evans sought to mislead Mr Edwards. On the morning of 4 November 2014, he informed him that the Stamp Duty Monies were in a term deposit (together with other funds) due to mature on 8 November 2014. Later that afternoon he admitted there was no such term deposit. The explanation for the discrepancy given by Mr Evans to Mr Edwards, that the Stamp Duty Monies were in some way in a term deposit as the Vendor's deposit in respect of the sale of his property, is implausible.

Did Mr Evans intermix Trust money with other money? (Ground 4)

From our earlier findings, it is evident that Mr Evans intermixed the Stamp Duty Monies provided to him by the Moynihans with own personal funds. This intermixing commenced when the Moynihans, at the request of Mr Evans, deposited the Stamp Duty Monies into his Practice Account. He continued to intermix those funds with other money until 12 November 2013. Through his conduct, Mr Evans contravened s 260(1) of the Legal Profession Act. This ground of the Application is satisfied.

Did Mr Evans mislead the client about progress of the matter? (Ground 5)

The uncontested evidence provided to the Tribunal in the affidavits tendered by the Society leads us to make the following findings of fact in relation to this ground of the Application: 1. Mr Moynihan emailed Mr Evans on 10 September 2013, stating that the Vendor of the Property had advised him that he was still receiving bills for the property, most recently an account from Sydney Water. The next morning Mr Evans sent an email in reply providing a copy of the water rates assessment to assist Mr Moynihan in changing the records of Sydney Water; 2. Later on 11 September 2013, Mr Evans called Mr Moynihan. During that call Mr Moynihan expressed concern that title to the Property might not as yet been transferred. Mr Evans assured Mr Moynihan that this was not the case and it can take up to four to five months to update title deeds; 3. On 18 September 2013, Mr Moynihan made enquiry of NSW Land and Property Information and was advised that the property remained registered in the name of the Vendors. He immediately emailed Mr Evans and advised him of this. After receiving no response Mr Moynihan emailed Mr Evans again on 26 September 2013. He then called Mr Evans on 30 September 2013. At this point Mr Evans informed Mr Moynihan that he was searching his office for the transfer documents; 4. Twice on 24 October 2013, and again on 26 October 2016, Ms Milburn, on behalf of the Moynihans, emailed Mr Evans, and among other things, asked him to confirm that the Stamp Duty Monies were retained in his trust account. Mr Evans did not respond to this question; 5. On 28 October 2013, Mr Moynihan called Mr Evans and said that he wished to collect the transfer documents and the Stamp Duty Monies. Mr Evans responded that he had been unable to locate the certificate of title to the Property, but had sent the contract for sale necessary statutory declarations to seek a replacement title) and the Stamp Duty Monies to SAI Global; 6. Ms Milburn contacted SAI Global on 28 October 2013 and was advised that Mr Evans had placed an electronic request for stamping earlier that day but they had not yet received any documents or payment for stamp duty. She followed up SAI Global on 31 October 2013 and was told that they had still not received any payment of stamp duty; 7. Mr Evans emailed Ms Milburn on 30 October 2013, attaching a copy of a general office cheque drawn in favour of the Office of State Revenue dated 17 October 2013, for the sum of $74,855. He wrote that he had funds coming off term deposit on 8 November 2013 and he had arranged for the stamp duty to be paid on that day; 8. On 4 November 2013, Mr Evans informed Mr Edwards that he was waiting for the proceeds of the sale of his own property at Cremorne, scheduled for 8 November 2013, to attend to payment of the stamp duty.
The following exchange between Mr Pierotti and Mr Evans during the hearing also bears upon this ground: Mr Pierotti: and you say in your affidavit, that on the 25th of June, you went on a holiday? Mr Evans: yes Mr Pierotti: and you returned on the 3rd of August? Mr Evans: Yes Mr Pierotti: and you didn't look at things between the 25th of June and the 3rd of August. Did you look afterwards? Mr Evans: yes Mr Pierotti: and what did you think, of the funds in the account? Mr Evans: that's when I thought, oh hell's bells what's going on here; it wasn't too long after I had gone back on holidays that I went and saw the agent and said this needs to be rectified immediately, put this property on the market Mr Pierotti: you weren't told by Mr Moynihan there was an issue until over a month later. Sorry, he didn't contact you until the 11th of September. Mr Evans: 11th of September? Mr Pierotti: yes Mr Evans: and so? Mr Pierotti: but you said, a minute ago, sir, that you came back and you saw the account balance and said hell's bells, I'd better go to the agent Mr Evans: oh yeah, no, the first time I sort of got onto it was probably…I've got to work backwards here, the contract of the sale of the property occurred on the 28th of September with a reasonable lead up period of marketing and that would probably bring it somewhere in to August. Mr Pierotti: are you telling me that before Mr Moynihan contacted you, you knew that there had been a problem? Mr Evans: yes Mr Pierotti: and you didn't contact Mr Moynihan? Mr Evans: well at that time…and you went back to the same point, did I tell the Moynihans or did I tell… Mr Pierotti: in August, sir, you said you knew there was a problem; that the stamp duty hadn't been paid? Mr Evans: yes Mr Pierotti: how did you know that? Mr Evans: …I think because the balance was down and I had a look at that and the other thing that got me was I couldn't understand why the (inaudible) office was taking so long to do the transfer and for the Council to be advised of a transfer of ownership
Mr Evans needed to sell his own property in Cremorne to enable payment to be made of the stamp duty on the Moynihans' purchase. In evidence, Mr Evans said he was aware of the shortfall in the Practice Account which prevented payment of the stamp duty after he returned from a holiday on 3 August 2013. He stated he engaged an agent to sell his property probably "somewhere in August". This accords with the fact that the sale contract for his property was entered into on 28 September 2013. This account contradicts the claim made by Mr Evans in his affidavit, which indicates that he only put in train the sale of his own property after being contacted by Mr Moynihan on 10 September 2013.
We find that Mr Evans was aware that he had not attended to transferring the title to the Moynihans' property, requiring the presentation of the Stamp Duty Monies, prior to being contacted by Mr Moynihan on 10 September 2013. Instead of informing Mr Moynihan of the true state of affairs on that day, he engaged in a pattern of conduct which was evasive and deceptive. He first suggested to Mr Moynihan that the records of Sydney Water were erroneous. He then moved to assert that transfer of title can take four or five months and was not a matter of concern. Only after Mr Moynihan made his enquires of NSW Information and Property did Mr Evans concede that he was searching his office for the necessary documents. He then proceeded to evade direct queries seeking confirmation that the Stamp Duty Monies were secured in a Trust account. He then suggested the monies were invested in a term deposit.
Mr Evans misled the Moynihans. He did so to avoid informing them that he had dissipated the Stamp Duty Monies. We are satisfied that this ground of the Application is made out.

Did Mr Evans fail to carry out the client's instructions? (Ground 6)

We find that the Moynihans provided Mr Evans with the Stamp Duty Monies for the sole purpose of attending to payment of the applicable stamp duty on the purchase of the Property. It is self-evident that he failed to carry out those instructions for many months. This ground is established.

The Buddy Warner Matter

Mr Pierotti conceded that the alleged conduct relating to the Buddy Warner Matter was less serious in nature than the alleged conduct relating to the Moynihan matter. He contended however that each matter involved the misappropriation of trust funds and illustrated a pattern of conduct on the part of Mr Evans.
The evidence put by the Society in this matter was contained within the affidavit of Mr Hugh Thomas dated 8 September 2015. In a report attached to his affidavit, Mr Thomas summarised his findings: On or about 9 September, 2011 Mr. Evans received bank cheque No. 173913 in the sum of $150,000 from the Commonwealth Bank in respect to a "mutual client of KRTZ Pty Ltd" which was banked into a National Australia Bank Account styled "Philip Evans & Associates - Business Management" BSB 082-302 Account No. 45-360-6590 Statement page 174, Page 2 (Annexure 23). The proceeds related to client monies and pursuant to Section 254 of the Legal Profession Act should have been deposited into a General trust Account. They were not. The sum of $150,000 was expended by 4 payments leaving a balance of $59,211.01 as at 31 January, 2012. There was only 1 payment authorisation on the client file by Buddy Warner dated 25 January, 2012 in respect to the sum of $14,770.40. It is noted that the balance of the Solicitor's NAB Business Account at 31 January, 2012 is $88.13 credit. The client file does not disclose documentation addressed to the client providing an accounting of the funds of $150,000. I am of the opinion that there is evidence that a breach of the Legal Profession Act 2004, or the Regulations has been committed or evidenced that a default (within the meaning of Part 3.4) has occurred in relation to the Law Practise whose affairs are under investigation. In respect to the client matter, Buddy Warner of the sum of $150,000 received into the Solicitor's office account, a total of $90,788.99 was expended on "client matters" and the balance $59,211.01 applied in payment of the Solicitor's Tax Invoices. In response to the Investigator's request for a copy of written authorisation/approval by client to pay the tax invoice, Mr. Evans responded - Annexure 12 "authorisations were primarily verbal and at either conferences or via telephone conversations'. The Investigator has not sighted any authorisation.
Mr Evans made only limited submissions on this matter (see his Reply at [24] and [25] which corresponds with [25] and [26] of his affidavit): On 18 November 2013 my office was attended by Mr Thomas on behalf of the Law Society who undertook an investigation of random client files. During the course of his attendance I provide client lists and provide costs agreements as requested (sic). Costs Agreement (sic) were held as part of the client invoice file for accounting purposes. Mr Thomas selected a file concerning the sale of the business of CMS Construction Marketing Services and associated matters pertaining to the Managing director, Mr Warner and his employee Mr Propst. Both Mr Warner and Mr Propst have been clients of mine both jointly and individually for at least 10 years. In 2011 I was requested to handle the sale of the business from Mr Warner, as he wished to retire, to Mr Propst, who wish to carry on the business who both decided that in order to save costs that I would act for them both. I advised them that I did not have a trust account but they were agreeable that I would be a suitable stakeholder while the matter was finalised. Precise details of time costs, transaction invoices and information undertaken for the above were provided to Mr Thomas and his office as requested. The above matter was concluded in 2011 and Mr Warner and Mr Propst continued to use my services on other matters from time to time thereafter. At no stage has either party made a complaint on the handling or outcome of the matter.

Are grounds 7 - 12 established?

It is appropriate that we consider grounds 7 to 12 as a group. We have already set out part of the evidence relied on by the Society to support these grounds, being that found in the report of Mr Thomas dated 19 December 2013 and the relevant parts of Mr Evans's Reply. The gist of the particulars set out in the Application are that, on 14 September 2016, when Mr Evans transferred $150,000 he had received on 12 September 2016 on behalf of his clients to his personal account, that sum was his clients' monies and the transfer caused the funds remaining in the Practice Account to fall to $104,025.29. This resulted in a shortfall of approximately $46,000. In short, the particulars in the Application are to the effect that Mr Evans misappropriated the shortfall.
Mr Evans's evidence that he did not maintain a trust account is not disputed, and that his clients were apprised of this fact and agreed he could act as stakeholder pending settlement. Nor is it in dispute that Mr Evans held a costs agreement in respect of the Buddy Warner matter signed by the clients dated 9 March 2011.
Mr Thomas's criticisms of Mr Evans's conduct in this matter may be summarised as follows: 1. Mr Evans obtained funds from the client which were not deposited into a general trust account; and 2. From the funds received and placed in Mr Evans's Practice Account, four payments were made but authorisation for only one payment was on the client file.
Those criticisms do not correlate precisely with the particulars pleaded in the Application. Mr Evans denied he had dissipated funds. Although his evidence was vague he explained he "could" have transferred the $150,000 received from his clients into a term deposit and although Mr Evans did not provide any corroborative evidence of term deposits, his evidence in this respect was not seriously challenged. Further, he explained that the transaction had occurred some five years previously and accordingly it was difficult for him to recollect precise details.
We pause to note that no complaint has been received from Mr Evans's clients in respect of this matter. Nor it is alleged that the funds received were not paid to those entitled to be paid, rather the grounds centre principally on timing issues.
In a letter dated 28 November 2013 to Mr Thomas, Mr Evans explained: The net balance of sale proceeds after payments to National Australia Bank (motor vehicle leases) BDO (liquidation expenses) and KRTZ Pty Ltd (vehicle lease) totalled $59,211.01. As per the schedule of time costs attached to my email of 22 November 2013 you will note on page 10 that total legal costs totalled $63,374.19 (incurred over 18 months) to complete this matter and after deduction of $59,211.01 the shortfall of funds ($4,163.18) was paid by Buddy Warner and Wendy Proust to finalise their account. Attached is the ledger account of Buddy Warner.
The ledger discloses that Mr Evans received $150,000 on 12 September 2009 and a payment on 4 October 2011 to KRTZ Pty Ltd of $20,000 was made. A payment of $29,700 was made to the liquidator on 7 November 2011 as well as payouts to the NAB in respect of leases. Six entries disclose payments "B Warner" and a final credit was made to the account on 22 August 2012 for the sum of $4,163.18. These latter entries correlate to the invoices rendered by Mr Evans.
Mr Thomas noted in his report that Mr Evans had provided invoices for fees totalling $63,374.19 and that after payments from the client funds of $150,000 there was a shortfall of $4,163.18. That is, Mr Thomas's report does not depart from Mr Evans's assertions supported by tax invoices and his ledger.
However, Mr Thomas recorded as follows: In the event that the Buddy Warner deposit of $150,000 did not occur the bank account balance would have been $104,025.29 and accordingly not sufficient to enable "excess personal funds transfer" of $150,000. It would appear that the client funds of $45,974.71 were transferred to Mr Evans's personal account.
The bank statements annexed to Mr Thomas's report are the Practice Account, not Mr Evans's personal account.
Mr Pierotti's cross-examination of Mr Evans was directed to page 2 of Mr Evans's Practice Account statement and that the asserted "shortfall" on 14 September 2011 was a misappropriation of funds.
Mr Evans's first tax invoice to the client was dated 20 September 2011 in the sum of $16,978.00 and covered work for the period from 7 March 2011. The Practice Account does not disclose a transfer for this amount to Mr Evans's personal account.
We are conscious that the onus to prove grounds 7 to 12 lies with the Society and must be established to the Briginshaw standard. Applying such standard we are satisfied that grounds 9, 10, and 11 are established.
From Mr Evans's own evidence, he did not operate a trust account and received trust money in relation to the Buddy Warner matter into his Practice Account. There was no evidence before us that Mr Evans received written authority from the clients to deal with the trust money other than to deposit it into a general trust account. It is clear to us that Mr Evans failed to deposit the trust money received in this matter to a trust account, and by permitting the funds to be received into his Practice Account, he mixed trust money with other money, hence satisfying us that grounds 9 and 10 are established.
The evidence provided by Mr Thomas, unchallenged by Mr Evans, also makes it clear to us that Mr Evans failed to keep accurate and contemporaneous records for the trust money received in the Buddy Warner matter in breach of the legislative requirements. We are satisfied that ground 11 is established.
We now turn to grounds 7, 8 and 12. Mr Thomas's evidence, which was not challenged in cross-examination, is that there was only one written authorisation given by the clients to Mr Evans to transfer funds to himself for fees rendered. The Practice Account does not reveal when payment of the first invoice of $16,978 was obtained by Mr Evans but we infer that it was paid from the $150,000 transferred to Mr Evans's personal account on 14 September 2015. Prima facie, if the $150,000 was not placed on a term deposit and was applied to fees before the invoice dated 20 September 2011 was rendered and payment authorised, there was a breach of the Legal Professional Act.
The evidence establishes that at least one other payment relative to this transaction ($29,700 payable to the liquidator) was credited to the Practice Account from Mr Evans's personal account on 7 November 2011. We infer Mr Evans paid the sum due to the liquidator from funds he held in his own personal account on 7 November 2011. That payment, and the fees to which Mr Evans had an entitlement after 20 September 2011, account for the "shortfall".
At its highest, the evidence establishes that Mr Evans may have had the benefit of his fees for not more than six days prior to his entitlement to do so. But the evidence falls short of establishing this was the case. Again, there is no dispute that the liquidator was paid on 7 November 2011 and after that sum was transferred by Mr Evans from his personal account to the Practice Account. The funds transferred to the Practice Account to pay the liquidator may have been, as asserted by Mr Evans, from a term deposit.
While we have some doubts about the veracity of Mr Evans's oral evidence, we are conscious of the time that has elapsed since this transaction occurred and, if his evidence is correct, no breach occurred. The state of the evidence adduced by the Society is such that we could not be satisfied to the requisite civil standard on that evidence that grounds 7 and 8 are established.
Mr Evans was not challenged in cross-examination to the effect that he had misled the Society's trust account inspector (ground 12) insofar as that ground relates to the Buddy Warner matter. We are not satisfied that particular is established.

Conclusions - professional misconduct

The grounds we have found to be established lead us to the conclude that Mr Evans's conduct involved a substantial failure to maintain a reasonable standard of competence and diligence, and that he is not a fit and proper person to engage in legal practice. We are satisfied that his conduct constitutes professional misconduct as defined in the Legal Profession Act.

Order as to Penalty

Mr Pierotti submitted that the only appropriate order was an order to remove Mr Evans from the Roll of local practitioners, and that such order was warranted to protect the public. He submitted that the order sought was appropriate given the seriousness of the conduct, and given that Mr Evans provided no evidence that he understood the seriousness of his conduct, why it was wrong, or that it was unlikely to be repeated.
Mr Evans submitted that in determining this matter the Tribunal should take account of the following: that he had not had a complaint from any other client in over 20 years of practice; that he acted promptly in selling his own personal property once he became aware of the "temporary cash deficiency"; that the Moynihans suffered no financial loss; that the Professional Standards Committee of the Society had determined there was no requirement to make a monetary award to the Moynihans; that at age 65 the suspension on his ability to practice had caused him significant financial loss as well as devastating him, emotionally and physically; and that he had apologised to the Moynihans.
Mr Pierotti provided the Tribunal with this useful summary of the applicable legal principles: 25 On numerous occasions the Courts have highlighted this proposition and that the misuse of client funds (absent individual and extenuating circumstance) should warrant the removal of the practitioner's name from the Roll. 26 Kirby P, as he then was, made it abundantly clear in Dupal v Law Society of New South Wales [1990] NSWCA 56] that "(the) normal consequence of the misuse of entrusted funds by a solicitor, and a finding of wilful breaches of the statutory prohibition in that regard, is the removal of the name of the solicitor from the roll." [p.60] Similarly, Handley JA in Dupal put it thus: "This Court would be departing from a long course of authority if it were to allow the appeal and substitute a period of suspension for the order of the Tribunal removing the appellant from the roll. Counsel were not able to refer me to any case where a solicitor found guilty of misappropriation or wilful contraventions of s 41(1) has not been struck off the roll. Any decision to the contrary would signal to the profession and the community that this Court was no longer insisting on solicitors maintaining the highest standards of personal honesty and integrity in their dealings with clients and the public and in the handling of monies entrusted to their charge." (p. 64 ) 27 Reference should also be made to the oft cited words of Street CJ in Law Society of New South Wales v Jones [unreported Court of Appeal (NSW) 27 July 1978], a passage with which the other members of the Court agreed: "Reliability and integrity in the handling of trust funds are fundamental prerequisites in determining whether an individual is a fit and proper person to be entrusted with the responsibilities belonging to a solicitor." His Honour continued: "Members of the public, many of them wholly inexperienced and unskilled in matters of business or of law, inevitably must put great faith and trust in the honesty of solicitors in the handling of moneys on their behalf. The Court must ensure that this trust is not misplaced." 28 There have been some exceptions where, after a finding of misappropriation, the Solicitor in question has not had his name removed from the Roll [ for example see Council of the Law Society of New South Wales v Bharati [2010] NSWADT 159 and the cases cited therein]. However, these cases represent a conspicuous minority and rely on their peculiar and individual facts.
This Tribunal considered the principles derived from Bolster v Law Society of NSW, (Court of Appeal (NSW), 20 September 1982, unrep) (Bolster) as referred to in Council of the Law Society of NSW v Ginges [2016] NSWCATOD 7: 46 We note that in Bolster, the solicitor borrowed moneys from his clients placing them into a finance company in which he had an interest and which then made advances to himself and his family and companies in which he or they had an interest. He acted as solicitor for his clients in these transactions without making a full and proper disclosure of his interest and without advising his clients to take independent legal advice. The solicitor conceded that his conduct was "improper" but submitted that it was not unprofessional. He also submitted that, "after certain matters published in a Law Society Journal came to his notice in early 1979 … he became aware that his conduct in the investment of clients' money, so they were used for his benefit, was contrary to what appeared in the Journal (and that as a consequence) no further lending in the same fashion of clients' money occurred (and) that about two years later by the time the proceedings before the (Statutory) committee were pending, all clients moneys so lent had been repaid (such) that no client lost any money and that the transactions were not unfair to clients and that clients' investments were not at risk because he was a very wealthy man and his ventures were financially secure." 47 Moffit P stated: The more his case based on claims of ignorance is pressed in defence of him, as it has been in respect of the period up to 1979 and to some degree thereafter, to the point where the ignorance is of the elementary but critically important obligations of a solicitor and person in a position of trust in relation to his clients, the more his case establishes that he has such a lack of appreciation of his duty as a solicitor that he is unfit to be such... in so far as his case cannot be pressed that far so he did have the understanding of these elementary matters that one would expect of a solicitor, particularly one of thirty years standing, then he is left in a position that he must have knowingly disregarded the standards in order to serve his own financial interests by large sums of moneys of his clients being made available for his ventures, by such moneys being advanced to the finance company and then by it to him, his family and his companies without security at either step so that he as a borrower had a reservoir of money without being put to the expense of meeting the cost of providing proper securities or having the inconvenience and restriction of securities upon his assets or affairs. 48 Moffit P also commented that the solicitor either, …lacked the most elementary knowledge and understanding of his duty as a solicitor or, being aware of it, he disregarded it because clients' money provided a convenient source of finance for his own ventures. Many decisions of this Court in recent years … make it clear that the solicitor's case is quite untenable, whatever way it be put and whatever be the precise conclusion proper to be come to as to the state of awareness of the solicitor of his duty… 49 His Honour also stated: …A solicitor cannot justify failure to perform his duty to his clients, including that not to intermingle his affairs with theirs, by claiming that he was ignorant of Harvey's decision or the elementary principles there stated or that he misunderstood or was unaware of the many warnings to solicitors by the Law Society in its publications since Harvey's case. A claim such as the solicitor makes, even if fully accepted, is a confession of ignorance of his fundamental duty as a solicitor and hence of his unfitness to be a solicitor. Any solicitor should acquaint himself concerning his duty as a solicitor. There is no excuse at all for not doing so for a solicitor so long as in practice as the solicitor in the present case, who has had such extensive dealings. A breach of duty does not cease to be such because the solicitor is ignorant of his duty. Lack of awareness of what he does is misconduct does not make it otherwise. And further: The fact that the solicitor did not act fraudulently or that clients did not lose money does not prevent the solicitor of being found guilty of professional misconduct. .. true it is that no client in fact lost his capital and that the risk of that occurring was small. … for reasons which earlier appear I am quite unpersuaded by the case sought to be made (by the solicitor) that the advances were in terms which the client would have accepted, if they had had independent advice". The President said that the solicitor "was guilty of a sustained course of conduct deliberately embarked on and pursued for his own advantage which was professional misconduct which rendered and renders him unfit to be a solicitor.
We have found that Mr Evans misappropriated Trust funds, specifically the sum of $74,855, which was provided to him by Mr and Mrs Moynihan for the sole purpose of the payment of stamp duty on their purchase of real property. This misappropriation continued for in excess of five months. In addition, we have been satisfied that Mr Evans actively engaged in misleading both the Moynihans and one of the Society's trust account investigators, as to the status of those funds.
Applying the principles outlined above, we are satisfied that these findings alone are sufficient to persuade us that Mr Evans's name should be removed from the Roll. Our findings in relation to other grounds of the application simply reinforce our conclusion.
With reference to the principles expressed in Bolster, we note that Mr Evans did not lead any evidence to suggest that he was aware of the gravity of his conduct. Quite the contrary. The main argument he put to the Tribunal was that the matter had been afforded greater significance by the Society than was warranted, that the Tribunal should focus upon how he sought to remedy the situation, and that his clients had not suffered financial loss.
This apparent lack of insight into the seriousness of his conduct leads us to conclude that without his name being removed from the Roll, there is a real and material risk that his conduct in future would not be to the standard demanded of a solicitor.
As was stated in Council of the Law Society of NSW v Mayo [2014] NSWCATOD 134 at [40]: The clients, the public, the courts and other members of the profession and are entitled to expect a solicitor to be a person of honesty, trustworthiness and integrity. They are also entitled to expect a solicitor to exercise due competence and diligence. Diligence, of course, involves maintaining ethical standards in complying with the law.
Our findings support the conclusion that Mr Evans has displayed a lack of diligence, a lack of trustworthiness, honesty and integrity. We find Mr Evans is currently not a fit and proper person to be entrusted with the responsibility belonging to a solicitor. Accordingly, we are satisfied that the order for removal from the roll, sought by the Society, is an appropriate one.

Costs

The Society seeks an order for costs against Mr Evans. Mr Evans made no submissions as to costs, either in his written submissions, or at the hearing.
We note that s 60 of the NCAT Act provides (relevantly): 60 Costs (1) Each party to proceedings in the Tribunal is to pay the party's own costs. The Tribunal may award costs in relation to proceedings before it only if it is satisfied that there are special circumstances warranting an award of costs. … (5) In this section: costs include: (a) the costs of, or incidental to, proceedings in the Tribunal, and (b) the costs of, or incidental to, the proceedings giving rise to the application or appeal, as well as the costs of or incidental to the application or appeal.
However, Sch 5, cl 23 of the NCAT Act provides: 23 Costs consequent of adverse conduct findings (1) Despite section 60 of this Act, the Tribunal must make orders requiring a respondent lawyer whom it has found to have engaged in unsatisfactory professional conduct or professional misconduct to pay costs (including costs of the Commissioner, a Council and the complainant), unless the Tribunal is satisfied that exceptional circumstances exist.
As we have determined that Mr Evans is guilty of professional misconduct and we are not aware of the existence of any exceptional circumstances contemplated by s 23(1) of the NCAT Act, we are satisfied that it is appropriate to order Mr Evans to pay the Society's costs, as agreed or assessed.

Orders The Tribunal orders that: 1. Mr Evans is guilty of professional misconduct. 2. The name of Mr Evans be removed from the roll of local practitioners. 3. Mr Evans is to pay the Society's costs as agreed or assessed. I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 06 October 2016

Legal Profession Act 2004(NSW)

Legal Profession Uniform Law Application Legislation Amendment Act 2015(NSW)

At a glance

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Judgment (20 paragraphs)

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Legislation Cited (5)

Cases Cited (12)